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1 terest which the debentures would have earned, computed to 2 a date to be established pursuant to regulations issued by the 3 Secretary. For the purposes of this section, the value of the 4 mortgage shall be determined by adding and deducting the 5 items specified herein from the original principal face amount 6 of the mortgage as follows:

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(1) Items to be deducted from the original principal

8 face amount of the mortgage shall be the sum of—

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(A) that part of the original principal obligation that has been repaid;

(B) 1 per centum of the unpaid balance of the original principal obligation, except that the Secretary may waive all or a part of the 1 per centum deduction, where the assignment is made at his request in lieu of foreclosure of the mortgage;

(C) net income received by the mortgagee from the property; and

(D) any balance of the mortgage loan not advanced to or for the account of the mortgagor and which is not delivered to the Secretary.

(2) Items to be added to the original principal face

22 amount of the mortgage shall be the sum of such amounts

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as the mortgagee may have paid for

(A) taxes, special assessments, and water rates,

which are liens prior to the mortgage;

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(B) insurance on the property;

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(C) reasonable expenses for the completion and

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preservation of the property; and

(D) mortgage insurance premium.

(c) At the option of the mortgagee, in the event of a 6 default under the mortgage, and in a period to be established 7 by regulations of the Secretary, the mortgagee may foreclose 8 on and obtain possession of or otherwise acquire the mort9 gaged property and convey title to the property to the 10 Secretary. The mortgagee shall also assign to him all claims 11 of the mortgagee against the mortgagor or others, arising out 12 of the mortgage transaction or foreclosure proceedings, ex13 cept such claims that may have been released with the con14 sent of the Secretary. Upon such conveyance and assignment, 15 the mortgagee shall be entitled to receive the benefits of the 16 insurance as provided in subsection (b), except that the 1 17 per centum deduction, set out in subsection (b) (1) (B), 18 shall not apply.

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(d) In lieu of the amount of insurance benefits com20 puted pursuant to subsection (b), the Secretary, in his dis21 cretion, may (with respect to a mortgage loan acquired by 22 him) compute and pay insurance benefits to the mortgagee 23 in a total amount equal to the unpaid principal balance of 24 the loan plus any accrued interest and any advances approved

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1 by the Secretary and made previously by the mortgagee 2 under the provisions of the mortgage.

3 (e) The certificate of claim issued under this section 4 shall be for an amount which the Secretary determines to be 5 sufficient, when added to the face value of the debentures 6 issued and the cash paid to the mortgagee, to equal the 7 amount which the mortgagee would have received if, on the 8 date of the assignment, transfer and delivery to the Secretary 9 provided for in subsection (a), or conveyance as provided 10 for in subsection (c), the mortgagor had extinguished the 11 mortgage indebtedness by payment in full of all obligations 12 under the mortgage and a reasonable amount for necessary 13 expenses incurred by the mortgagee in connection with the 14 foreclosure proceedings (or the acquisition of the mortgaged 15 property otherwise) and the conveyance thereof to the Sec16 retary or incurred by the mortgagee in connection with the 17 assignment of the mortgage to the Secretary. Each such cer18 tificate of claim shall provide that there shall accrue to the 19 holder of such certificate, with respect to the face amount of 20 such certificate, an increment at the rate of 3 per centum per 21 annum which shall not be compounded. If the net amount 22 realized from the final liquidation of the mortgage, and all 23 claims in connection therewith, so assigned, transferred, and

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delivered, and from the property covered by such mortgage

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and all claims in connection with such property and from any

mortgage taken in the sale of such property (after deducting

all expenses incurred by the Secretary in handling, dealing with, acquiring title to, and disposing of such mortgage and

property and in collecting such claims) exceeds the face

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value of the debentures issued and the cash adjustment paid

to the mortgagee plus all interest paid on such debentures, such excess shall be divided as follows:

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(1) If such excess is greater than the total amount payable under the certificate of claim issued in connection with such property, the Secretary shall pay to the holder of such certificate the full amount so payable,

and any excess remaining thereafter shall be retained by the Secretary and credited to the appropriate insurance fund.

(2) If such excess is equal to or less than the total amount payable under such certificate of claim, the Secretary shall pay to the holder of such certificate

the full amount of such excess.

MODIFICATIONS IN TERMS OF PROJECT MORTGAGES

SEC. 605. (a) The Secretary shall not consent to any

request for an extension of the time for curing a default under

any insured project mortgage or project mortgage held by

him or for a modification of the terms of such mortgage, ex

cept in conformity with regulations prescribed by the Secre

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1 tary in accordance with the provisions of this section. Such

2 regulations shall require, as a condition to the granting of

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any such request, that, during the period of such extension 4 or modification, any part of the rents or other funds derived 5 by the mortgagor from the property covered by the mortgage 6 which is not required to meet actual and necessary expenses 7 arising in connection with the operation of such property, 8 including amortization charges under the mortgage, be held 9 in trust by the mortgagor and distributed only with the con10 sent of the Secretary; except that the Secretary may provide 11 for the granting of consent to any request for an extension of 12 the time for curing a default under any project mortgage or 13 for a modification of the terms of such mortgage, without regard to the foregoing requirement, where an exemption from 15 such requirement does not (as determined by the Secretary) 16 jeopardize the interest of the United States.

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17 (b) Whoever, as an owner of a property which is secu18 rity for a mortgage described in subsection (a), or as a stock19 holder of a corporation owning such property, or as a bene20 ficial owner under any business organization owning such

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property, or as an officer, director, or agent of any such owner, (1) willfully uses or authorizes the use of any part

of the rents or other funds derived from property covered by such mortgage in violation of a regulation prescribed by the 25 Secretary under subsection (a), or (2) if such mortgage is