101 STAT. 1900
PUBLIC LAW 100-242—FEB. 5, 1988
SEC. 406. LIMITATION ON USE OF SINGLE FAMILY MORTGAGE INSURANCE BY INVESTORS.
12 USC 1709.
(a) IN GENERAL.—Section 203 of the National Housing Act is amended by inserting the following new subsection before subsection (h): "(g)(1) The Secretary may insure a mortgage under this title that is secured by a 1- to 4-family dwelling, or approve a substitute mortgagor with respect to any such mortgage, only if the mortgagor is to occupy the dwelling as his or her principal residence or as a secondary residence, as determined by the Secretary. "(2) The occupancy requirement established in paragraph (1) shall apply only if the mortgage involves a principal obligation that exceeds, as appropriate, 75 percent of— "(A) the appraised value of the dwelling; "(B) the estimate of the Secretary of the replacement cost of the property; "(C) the sum of the estimates of the Secretary of the cost of repair and rehabilitation and the value of the property before repair and rehabilitation; or "(D) the sum of the estimates of the Secretary of the cost of repair and rehabilitation and the amount (as determined by the Secretary) required to refinance existing indebtedness secured by the property, and, in the case of a property refinanced under section 220(d)(3)(A), any existing indebtedness incurred in connection with improving, repairing, or rehabilitating the property. "(3) The occupancy requirement established in paragraph (1) shall not apply to any mortgagor (or co-mortgagor, as appropriate) that is— "(A) a public entity, as provided in section 214 or 247; "(B) a private nonprofit or public entity, as provided in section 221(h) or 235(j); "(C) an Indian tribe, as provided in section 248; "(D) a serviceperson who is unable to meet such requirement because of his or her duty assignment, as provided in section 216 or subsection (b)(4) or (f) of section 222; or "(E) a mortgagor or co-mortgagor under subsection (k). "(4) For purposes of this subsection, the term 'substitute mortgagor' means a person who, upon the release by a mortgagee of a previous mortgagor from personal liability on the mortgage note, assumes such liability and agrees to pay the mortgage debt.". (b) CONFORMING AMENDMENTS.—
(1) Section 203(b)(2) of the National Housing Act is amended— (A) in the first sentence, by striking "(whether" and all that follows through "purposes)"; and (B) in the second sentence, by striking the following: "to be occupied as a principal residence of the owner". (2) Section 203(b) of the National Housing Act is amended by striking paragraph (8). (3) Section 203(h) of the National Housing Act is amended by striking "is the owner and occupant and". (4) Section 203(i) of the National Housing Act is amended— (A) by striking the first proviso; and (B) by striking "further' the first place it appears. (5) The first sentence of section 203(o)(2) of the National Housing Act is amended by striking "occupant".
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