land development

land development Sec. 201. (a) The National Housing Act is amended by adding at the end thereof the following new title: “TITLE X— MORTGAGE INSURANCE FOR LAND DEVELOPMENT “definitions “Sec. 1001. As used in this title— “(a) the term ‘mortgage’ means a lien or liens on real estate in fee simple, or on a leasehold (1) under a lease for not less than ninety-nine years which is renewable, or (2) under a lease having a period of not less than fifty years to run from the date the mortgage was executed; “(b) the term ‘first mortgage’ includes such classes of first liens as are commonly given to secure advances (including but not 79 Stat. 462limited to advances during construction) on, or the unpaid purchase price of, real estate under the laws of the State in which the real estate is located, together with the credit instrument or instruments, if any, secured thereby, and may be in the form of trust mortgages or mortgage indentures or deeds of trusts securing notes,bonds, or other credit instruments; “(c) the terms ‘mortgage’, ‘mortgagor’, and ‘State’ have the same meaning as in section 207 of this Act; “(d) the term ‘improvements’ means waterlines and water supply installations, sewerlines and sewerage disposal installations, roads, streets, curbs, gutters, sidewalks, storm drainage facilities, and other installations or work, whether on or off the site, which the Commissioner deems necessary or desirable to prepare land primarily for residential and related uses or to provide facilities for public or common use; but such term shall not include any building unless it is (1) a building which is needed in connection with a water supply or sewage disposal installation, or (2) a building, other than a school, which is to be owned and maintained jointly by the property owners; and “(e) the term ‘land development’ means the process of making, installing, or constructing improvements. “basic conditions fob insurance “Sec. 1002. (a) The Commissioner is authorized (1) to insure, upon such terms and conditions as he may prescribe, any first mortgage (including advances on such mortgage) in accordance with the provisions of this title, and (2) to make a commitment for the insurance of such mortgage prior to the date of execution of such mortgage or prior to the date of disbursement of the mortgage proceeds. No mortgage shall be insured under this title after October 1, 1969, except pursuant to a commitment to insure issued before such date. “(b) The mortgage shall— “(1) be executed by a mortgagor, other than a public body, approved by the Commissioner; “(2) be made to and held by a mortgagee approved by the Commissioner; and “(3) cover the land to lie developed and the improvements to be made with the assistance of the mortgage insurance under this title, except facilities intended for public use and in public ownership. “(c) The principal obligation of the mortgage shall (1) not exceed 75 per centum of the Commissioner’s estimate of the value of the property upon completion of the land development, and (2) not exceed the sum of 50 per centum of the Commissioner’s estimate of the value of the land before development and 90 per centum of his estimate of the cost of such development. The outstanding principal obligations of mortgages involving a single land development undertaking, as defined by the Commissioner, shall at no time exceed $10,000,000. “(d) The mortgage shall— “(1) have a maturity not to exceed seven years or such longer maturity as the Commissioner deems reasonable in the case of a privately owned system for water or sewerage, and contain repayment provisions satisfactory to the Commissioner; “(2) bear interest at a rate satisfactory to the Commissioner, and such interest shall be exclusive of premium charges for mortgage insurance and such service charges and fees as may be approved by the Commissioner; and 79 Stat. 463 “(3) contain such terms and provisions with respect to protection of the security, payment of taxes, delinquency charges, prepayment, additional and secondary liens, and other matters as the Commissioner may in his discretion prescribe. “(e) A property or project to be financed by a mortgage insured under this title shall— “(1) represent a good mortgage insurance risk; and “(2) involve improvements that comply with all applicable State and local governmental requirements and with minimum standards approved by the Commissioner. “land planning “Sec. 1003. (a) The land development covered by a mortgage insured under this title shall be undertaken pursuant to a schedule, conforming to such requirements and procedures as the Commissioner may prescribe, that will assure the use of the land for the purposes for which it is to be developed within the shortest reasonable period consistent with the objectives of sound and economic community growth or urban development. “(b) The land development shall be undertaken in accordance with an overall development plan, appropriate to the scope and character of the undertaking, which— “(1) has received all governmental approvals required by State or local law or by the Commissioner; “(2) is acceptable to the Commissioner as providing reasonable assurance that the land development will contribute to good living conditions in the area being developed, which area (A) will have a sound economic base and a long economic life, (B) will be characterized by sound land-use patterns, and (C) will include or be served by such shopping, school, recreational, transportation, and other facilities as the Commissioner deems adequate or necessary; and “(3) is consistent with a comprehensive plan which covers, or with comprehensive planning being carried on for, the area in which the land is situated, and which meets criteria established by the Housing and Home Finance Administrator for such plans or planning. “encouragement of small builders and moderate cost housing “Sec. 1004. The Commissioner shall adopt such requirements as he deems necessary in land development covered by mortgages insured under this title to encourage the maintenance of a diversified local homebuilding industry, broad participation by builders, and the inclusion of a proper balance of housing for families of moderate or low income. “water and sewerage facilities “Sec. 1005. After development of the land it shall be served by public systems for water and sewerage which are consistent, with other existing or prospective systems within the area, except that the Commissioner may approve an adequate privately or cooperatively owned system which will be regulated in a manner acceptable to him with respect to user rates and charges, capital structure, methods of operation, rate of return, and conditions and terms of any sale or transfer. 79 Stat. 464 “releases “Sec. 1006. The Commissioner may, on such terms and conditions as he may prescribe, consent to the release or subordination of a part or parts of the mortgaged property from the lien of the mortgage. “premiums and fees “Sec. 1007. The Commissioner shall collect reasonable premiums for the insurance of any mortgage under this title and make such charges as he determines are reasonable for the analysis of the land development plan and the appraisal and inspection of the property and improvements. On or before January 1, 1967, the Commissioner shall make a report to the Congress concerning the premium rates and other charges under this title that he estimates will be adequate to provide income sufficient for a self-supporting program. “insurance benefits “Sec. 1008. The provisions of subsections (e), (g), (h), (i), (]), (k), (l), and (n) of section 207 of this Act shall be applicable to mortgages insured under this title, except that as applied to such mortgages (1) any reference therein to section 207 shall be deemed to refer to this title, and (2) any reference to an annual premium shall be deemed to refer to such premiums as the Commissioner may designate under this title. “incontestability provisions “Sec. 1009. Any contract of insurance executed by the Commissioner under this title shall be conclusive evidence of the eligibility of the mortgage for insurance, and the validity of any contract of insurance so executed shall be incontestable in the hands of an approved mortgagee from the date of the execution of such contract, except for fraud or material misrepresentation on the part of such approved mortgagee. “rules and regulations “Sec. 1010. The Commissioner is authorized to make such rules and regulations and to require such agreements as he may deem necessary or desirable to carry out the provisions of this title. “taxation provisions “Sec. 1011, Nothing in this title shall be construed to exempt any real property acquired and held by the Commissioner under this title from taxation by any State or political subdivision thereof to the same extent, according to its value, as other real property is taxed. “cost certification “Sec. 1012. (a) The Commissioner shall adopt such requirements as he determines necessary to assure, at reasonable intervals of time during land development and upon completion of such development, that the amount of the mortgage loan outstanding at each such interval does not exceed with respect to that portion of the land remaining under the lien of the mortgage (1) 50 per centum of the Commissioner’s estimate of the value of such remaining land before development, plus (2) 90 per centum of the actual costs of the development allocated by the Commissioner to such remaining land. 79 Stat. 465 “(b) From time to time during, and upon completion of, the development, the Commissioner shall require the mortgagor to certify as to the actual costs of development of the land. “(c) Certifications required pursuant to this section shall be accompanied by such data and records as the Commissioner shall prescribe. “(d) A mortgagor’s certification approved by the Commissioner shall be final and incontestable except for fraud or material misrepresentation on the part of the mortgagor. “(e) As used in this section, the term ‘actual costs’ means the costs (exclusive of kickbacks, rebates, or trade discounts) to the mortgagor of the improvements involved. These costs may include amounts paid for labor, materials, construction contracts, land planning, engineers’ and architect’s fees, surveys, taxes, and interest during development, organizational and legal expenses, such allocation of general overhead expenses as are acceptable to the Commissioner, and other items of expense incidental to development which may be approved by the (Commissioner. If the Commissioner determines there is an identity of interest between the mortgagor and the contractor, there may be included an allowance for contractor’s profit in an amount deemed reasonable by the Commissioner.” (b) (1) Section 302(b) of the National Housing Act is amended by striking out “the term ‘mortgages’ ” in the last sentence and inserting in lieu thereof “the terms ‘mortgages’ and ‘home mortgages’ ”. (2) The first paragraph of section 24 of the Federal Reserve Act is amended by inserting before the next to last sentence the following new sentence: “Notwithstanding the foregoing limitations and restrictions in this section, any national banking association may make loans for land development which are secured by mortgages insured under title X of the National Housing Act.” (3) Section 5 (c) of the Home Owners Loan Act of 1933 is amended by adding at the end thereof the following new paragraph: “Without regard to any other provision of this subsection, any such association may, to such extent as the Federal Home Loan Bank Board may by regulation permit, invest in loans, and interests in loans, (1) secured by mortgages as to which the association has the benefit of insurance under title X of the National Housing Act or of a commitment, or agreement for such insurance, or (2) guaranteed by the President under section 224 of the Foreign Assistance Act of 1961, as amended. Investments under clause (1) of this paragraph shall not be included in any percentage of assets or other percentage referred to in this subsection. Investments under clause (2) of this paragraph shall not exceed, in the case of any association, 1 per centum of the assets of such association.” (4) Section 212(a) of the National Housing Act is amended by inserting at the end thereof the following new sentence: “The provisions of this section shall also apply to insurance under title X with respect to laborers and mechanics employed in land development financed with the proceeds of any mortgage insured under that title.”