
From the U.S. Code Online via GPO Access
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[Laws in effect as of January 23, 2000]
[Document not affected by Public Laws enacted between
  January 23, 2000 and December 4, 2001]
[CITE: 42USC1487]

 
                 TITLE 42--THE PUBLIC HEALTH AND WELFARE
 
       CHAPTER 8A--SLUM CLEARANCE, URBAN RENEWAL, AND FARM HOUSING
 
                      SUBCHAPTER III--FARM HOUSING
 
Sec. 1487. Rural Housing Insurance Fund


(a) Authority to make and insure loans for housing and buildings on 
        adequate farms; amounts

    The Secretary may insure loans meeting the requirements of section 
1472 of this title, and may make loans in accordance with the 
requirements of such section to be sold and insured. The amount of such 
a loan to a low income person or family shall not exceed the amount 
necessary to provide adequate housing which is modest in size, design, 
and cost (as determined by the Secretary).

(b) Authority to make and insure loans for housing and related 
        facilities for domestic farm labor and elderly persons; transfer 
        of notes, contracts, and mortgages from Agricultural Credit 
        Insurance Fund; compensation

    The Secretary may insure loans in accordance with the requirements 
of section 1484 of this title (exclusive of subsections (a)(3), (a)(5), 
and (b) thereof), 1485 of this title (exclusive of subsections (a) and 
(b)(3) thereof), 1490d, and 1490f of this title, and may make loans 
meeting such requirements to be sold and insured. Upon the expiration of 
ninety days after the original capitalization of the Rural Housing 
Insurance Fund, created by subsection (e) of this section, no new loans 
shall be made or insured under section 1484 or 1485(b) of this title, 
except in conformity with this section. The notes held in the 
Agricultural Credit Insurance Fund (section 1929 of title 7) which 
evidence loans made or insured by the Secretary under section 1484 or 
1485(b) of this title, the rights and liabilities of that Fund under 
insurance contracts relating to such loans held by insured investors, 
the mortgages securing the obligations of the borrowers under such loans 
held in the Fund or by insured investors, and all rights to subsequent 
collections on and proceeds of such notes, contracts, and mortgages, are 
hereby transferred to the Rural Housing Insurance Fund and for the 
purposes of this subchapter and any other Act shall be subject to the 
provisions of this section as if created pursuant thereto. The Rural 
Housing Insurance Fund shall compensate the Agricultural Credit 
Insurance Fund for the aggregate unpaid principal balance plus accrued 
interest of the notes so transferred.

(c) Use of funds from Rural Housing Insurance Fund for loans; sale of 
        insured and guaranteed loans to public

    The Secretary may use the Rural Housing Insurance Fund for the 
purpose of making loans to be sold and insured under this section. Any 
loan made and sold by the Secretary under this section after April 7, 
1986 (and any loan made by other lenders under this subchapter that is 
insured or guaranteed in accordance with this section, is purchased by 
the Secretary, and is sold by the Secretary under this section after 
such date) shall be sold to the public and may not be sold to the 
Federal Financing Bank, unless such sale to the Federal Financing Bank 
is required to service transactions under this subchapter between the 
Secretary and the Federal Financing Bank occurring on or before such 
date.

(d) Authority to insure payment of interest and principal; liens; 
        assignability of notes evidencing loans; interest subsidy on 
        insured and guaranteed loans offered for sale to public; 
        protection of borrowers under loans sold to public

    (1) The Secretary may, in conformity with subsections (a), (b), and 
(m) of this section, insure the payment of principal and interest on 
loans made by lenders other than the United States, and on loans made 
from or otherwise acquired by the Rural Housing Insurance Fund which are 
sold by the Secretary. Any contract of insurance executed by the 
Secretary hereunder shall be an obligation supported by the full faith 
and credit of the United States, and shall be incontestable except for 
fraud or material misrepresentation of which the holder has actual 
knowledge. In connection with loans insured under this section, the 
Secretary may take liens running to the United States notwithstanding 
the fact that the notes evidencing such loans may be held by lenders 
other than the United States. Notes evidencing such loans shall be 
freely assignable, but the Secretary shall not be bound by any such 
assignment until notice thereof is given to and acknowledged by him.
    (2) Each loan made by the Secretary or other lenders under this 
subchapter that is insured or guaranteed in accordance with this 
subsection shall, when offered for sale to the public, be accompanied by 
an agreement by the Secretary to pay to the holder of such loan (through 
an agreement to purchase such loan or through such other means as the 
Secretary determines to be appropriate) the difference between the rate 
of interest paid by the borrower of such loan and the market rate of 
interest (as determined by the Secretary) on obligations having 
comparable periods to maturity on the date of such sale.
    (3) Each loan made by the Secretary or other lenders under this 
subchapter that is insured or guaranteed in accordance with this 
subsection shall, when offered for sale to the public, be accompanied by 
agreements for the benefit of the borrower under the loan that provide 
that--
        (A) the purchaser or any assignee of the loan shall not diminish 
    any substantive or procedural right of the borrower arising under 
    this subchapter;
        (B) upon any substantial default of the borrower, but prior to 
    foreclosure, the loan shall be assigned to the Secretary for the 
    purpose of avoiding foreclosure; and
        (C) following any assignment under subparagraph (B) and before 
    commencing any action to foreclose or otherwise dispossess the 
    borrower, the Secretary shall afford the borrower all substantive 
    and procedural rights arising under this subchapter, including 
    consideration for interest subsidy, moratorium, reamortization, 
    refinancing, and appeal of any adverse decision to an impartial 
    officer.

    (4) From the proceeds of loan sales under paragraph (2), the 
Secretary shall set aside as a reserve against future losses not less 
than 5 percent of the outstanding face amount of the loans held by the 
public at any time.

(e) Rural Housing Insurance Fund; creation; authorization of 
        appropriations; separate operation of guaranteed and insured 
        loan programs: transfer of funds

    There is hereby created the Rural Housing Insurance Fund 
(hereinafter referred to as the ``Fund'') which shall be used by the 
Secretary as a revolving fund for carrying out the provisions of this 
section. There are authorized to be appropriated to the Secretary such 
sums as may be necessary for the purposes of the Fund. The guaranteed 
loan program under this subchapter shall be operated separately from the 
insured loan program operated under this subchapter and no funds 
designated for one program may be transferred to another program.

(f) Investment of excess Fund moneys

    Money in the Fund not needed for current operations shall be 
invested in direct obligations of the United States or obligations 
guaranteed by the United States.

(g) Fund assets and liabilities; sale of loans; agreements for servicing 
        and purchasing loans

    All funds, claims, notes, mortgages, contracts, and property 
acquired by the Secretary under this section, and all collections and 
proceeds therefrom, shall constitute assets of the Fund; and all 
liabilities and obligations of such assets shall be liabilities and 
obligations of the Fund. Loans may be held in the Fund and collected in 
accordance with their terms or may be sold by the Secretary with or 
without agreements for insurance thereof. The Secretary is authorized to 
make agreements with respect to servicing loans held or insured by him 
under this section and purchasing such insured loans on such terms and 
conditions as he may prescribe.

(h) Issuance of notes; form and denominations; interest rate; purchase 
        by Secretary of the Treasury; debt transactions

    The Secretary is authorized to issue notes to the Secretary of the 
Treasury to obtain funds necessary for discharging obligations under 
this section and for authorized expenditures out of the Fund, but, 
except as may be authorized in appropriation Acts, not for the original 
or any additional capital of the Fund. Such notes shall be in such form 
and denominations and have such maturities and be subject to such terms 
and conditions as may be prescribed by the Secretary with the approval 
of the Secretary of the Treasury. Each note shall bear interest at the 
average rate, as determined by the Secretary of the Treasury, payable by 
the Treasury upon its marketable public obligations outstanding at the 
beginning of the fiscal year in which such note is issued, which are 
neither due nor callable for redemption for fifteen years from their 
date of issue. The Secretary of the Treasury is authorized and directed 
to purchase any notes of the Secretary issued hereunder, and for that 
purpose the Secretary of the Treasury is authorized to use as a public 
debt transaction the proceeds from the sale of any securities issued 
under chapter 31 of title 31, and the purposes for which such securities 
may be issued under such chapter are extended to include purchases of 
notes issued by the Secretary. All redemption, purchases, and sales by 
the Secretary of the Treasury of such notes shall be treated as public 
debt transactions of the United States. The notes issued by the 
Secretary to the Secretary of the Treasury shall constitute obligations 
of the Fund.

(i) Retention of annual charge; administrative expenses; merger of funds

    The Secretary may retain out of interest payments by the borrower an 
annual charge in an amount specified in the insurance or sale agreement 
applicable to the loan. Of the charges retained by the Secretary, if 
any, not to exceed 1 per centum per annum of the unpaid balance of the 
loan shall be deposited in the Fund. Any retained charges not deposited 
in the Fund shall be available for administrative expenses in carrying 
out the provisions of this subchapter, to be transferred annually, and 
become merged with any appropriation for administrative expenses of the 
Farmers Home Administration, when and in such amounts as may be 
authorized in appropriation Acts.

(j) Additional uses of Fund moneys

    The Secretary may also utilize the Fund--
        (1) to pay amounts to which the holder of the note is entitled 
    in accordance with an insurance or sale agreement under this section 
    accruing between the date of any payment by the borrower to the 
    Secretary and the date of transmittal of any such payments to the 
    holder of the note; and in the discretion of the Secretary, payments 
    other than final payments need not be remitted to the holder until 
    due or until the next agreed annual or semiannual remittance date;
        (2) to pay the holder of any note insured under this section any 
    defaulted installment or, upon assignment of the note to the 
    Secretary at the Secretary's request, or pursuant to a purchase 
    agreement, the entire balance outstanding on the note;
        (3) to pay taxes, insurance, prior liens, expenses necessary to 
    make fiscal adjustments in connection with the application and 
    transmittal of collections or necessary to obtain credit reports on 
    applicants or borrowers, and other services customary in the 
    industry, independent audits of project expenses, construction 
    inspections, commercial appraisals, servicing of loans, and other 
    related program services and expenses, and other expenses and 
    advances to protect the security for loans which are insured under 
    this section or held in the Fund, and to acquire such security 
    property at foreclosure sale or otherwise;
        (4) to make assistance payments authorized by section 1490a(a) 
    of this title;
        (5) after October 1, 1977, and as approved in appropriations 
    Acts, to make advances authorized by section 1471(e) of this title;
        (6) to make payments and take other actions in accordance with 
    agreements entered into under paragraphs (2) and (3) of subsection 
    (d) of this section; and
        (7) to provide advances and assistance required to carry out 
    paragraphs (4) and (5) of section 1472(c) of this title.

(k) Sale of loans as sale of assets

    Any sale by the Secretary of loans individually or in blocks, 
pursuant to subsections (c) and (g) of this section, shall be treated as 
a sale of assets for the purposes of chapter 11 of title 31, 
notwithstanding the fact that the Secretary, under an agreement with the 
purchaser, holds the debt instruments evidencing the loans and holds or 
reinvests payments thereon as trustee and custodian for the purchaser.

(l) Commitments to make or insure loans to lenders, builders, or 
        sellers; terms and conditions

    The Secretary may also, upon the application of lenders, builders, 
or sellers and upon compliance with requirements specified by him, make 
commitments upon such terms and conditions as he shall prescribe to make 
or insure loans under this section to eligible applicants.

(m) Transfer of assets, liabilities, and authorizations of Rural Housing 
        Direct Loan Account to Fund; abolition of Account; applicability 
        of provisions

    The assets and liabilities of, and authorizations applicable to, the 
Rural Housing Direct Loan Account are hereby transferred to the Fund, 
and such Account is hereby abolished. Such assets and their proceeds, 
including loans made out of the Fund pursuant to this section, shall be 
subject to all of the provisions of this section.

(n) Purchase of eligible residential properties

    The Secretary may guarantee and service loans made for the purchase 
of eligible residential properties under section 1441a(c) of title 12 in 
accordance with subsection (d) of this section and the last sentence of 
section 1490a(a)(1)(A) of this title.

(o) Rules to encourage rehabilitation or purchase of existing buildings; 
        regulations to facilitate marketability of insured or guaranteed 
        loans in secondary mortgage market

    (1) The Secretary shall promulgate rules which encourage the 
rehabilitation or purchase of existing buildings for the purpose of 
providing housing which is economical in cost and operation.
    (2) Not later than the expiration of the 90-day period following 
April 7, 1986, the Secretary shall issue regulations to facilitate the 
marketability in the secondary mortgage market of loans insured or 
guaranteed under this section. Such regulations shall ensure that such 
loans are competitive with other loans and mortgages insured or 
guaranteed by the Federal Government.

(July 15, 1949, ch. 338, title V, Sec. 517, as added Pub. L. 89-117, 
title X, Sec. 1003(a), Aug. 10, 1965, 79 Stat. 498; amended Pub. L. 89-
754, title VIII, Sec. 806, Nov. 3, 1966, 80 Stat. 1282; Pub. L. 91-78, 
Sec. 1, Sept. 30, 1969, 83 Stat. 125; Pub. L. 91-152, title IV, 
Sec. 413(a)-(e)(2), (f)(2), Dec. 24, 1969, 83 Stat. 398-400; Pub. L. 91-
609, title VIII, Sec. 803(d), Dec. 31, 1970, 84 Stat. 1807; Pub. L. 93-
117, Sec. 13(c), Oct. 2, 1973, 87 Stat. 423; Pub. L. 93-383, title V, 
Secs. 505(c), 509(b), 514(c), 516(b), 517, 519(b), Aug. 22, 1974, 88 
Stat. 694-696, 698, 699; Pub. L. 95-60, Sec. 4(c), June 30, 1977, 91 
Stat. 258; Pub. L. 95-80, Sec. 4(c), July 31, 1977, 91 Stat. 340; Pub. 
L. 95-128, title V, Secs. 501(c), 502(b), (c), 506, 509, Oct. 12, 1977, 
91 Stat. 1139-1141; Pub. L. 95-406, Sec. 7(c), Sept. 30, 1978, 92 Stat. 
881; Pub. L. 95-557, title V, Secs. 501(f), 506(b), Oct. 31, 1978, 92 
Stat. 2111, 2113; Pub. L. 96-71, Sec. 5(c), Sept. 28, 1979, 93 Stat. 
502; Pub. L. 96-105, Sec. 5(c), Nov. 8, 1979, 93 Stat. 795; Pub. L. 96-
153, title V, Secs. 501(g), 511, Dec. 21, 1979, 93 Stat. 1134, 1137; 
Pub. L. 96-372, Sec. 6(c), Oct. 3, 1980, 94 Stat. 1364; Pub. L. 96-399, 
title V, Secs. 501(c), 511, Oct. 8, 1980, 94 Stat. 1668, 1671; Pub. L. 
97-35, title III, Sec. 351(c), Aug. 13, 1981, 95 Stat. 421; Pub. L. 97-
289, Sec. 3(b), Oct. 6, 1982, 96 Stat. 1231; Pub. L. 98-35, Sec. 3(b), 
May 26, 1983, 97 Stat. 198; Pub. L. 98-109, Sec. 4(b), Oct. 1, 1983, 97 
Stat. 746; Pub. L. 98-181, title V, Secs. 511(c), 514, Nov. 30, 1983, 97 
Stat. 1244, 1247; Pub. L. 98-479, title I, Sec. 105(f), title II, 
Sec. 203(d)(5), (6), Oct. 17, 1984, 98 Stat. 2227, 2230; Pub. L. 99-272, 
title III, Sec. 3006, Apr. 7, 1986, 100 Stat. 103; Pub. L. 100-242, 
title II, Sec. 243, Feb. 5, 1988, 101 Stat. 1890; Pub. L. 101-73, title 
V, Sec. 501(e)(2), Aug. 9, 1989, 103 Stat. 394; Pub. L. 102-550, title 
VII, Sec. 707(g), Oct. 28, 1992, 106 Stat. 3839.)


                               Amendments

    1992--Subsec. (j)(3). Pub. L. 102-550 inserted ``independent audits 
of project expenses,'' after ``customary in the industry,''.
    1989--Subsec. (n). Pub. L. 101-73 added subsec. (n).
    1988--Subsec. (j)(7). Pub. L. 100-242 added par. (7).
    1986--Subsec. (c). Pub. L. 99-272, Sec. 3006(a), inserted provision 
requiring any loan made and sold after Apr. 7, 1986, to be sold to the 
public and not to Federal Financing Bank unless required to service 
transactions between Secretary and Bank occurring on or before such 
date.
    Subsec. (d). Pub. L. 99-272, Sec. 3006(b), (c), designated existing 
provisions as par. (1), and added pars. (2) to (4).
    Subsec. (j)(6). Pub. L. 99-272, Sec. 3006(d), added par. (6).
    Subsec. (n). Pub. L. 99-272, Sec. 3006(e), struck out subsec. (n) 
which restricted loans guaranteed under this section to borrowers with 
moderate or above-moderate incomes.
    Subsec. (o). Pub. L. 99-272, Sec. 3006(f), designated existing 
provisions as par. (1), and added par. (2).
    1984--Subsec. (h). Pub. L. 98-479, Sec. 203(d)(5), substituted 
``chapter 31 of title 31'' for ``the Second Liberty Bond Act, as 
amended'' and ``such chapter'' for ``such Act''.
    Subsec. (j)(4). Pub. L. 98-479, Sec. 105(f), inserted ``and'' after 
the semicolon at the end.
    Subsec. (k). Pub. L. 98-479, Sec. 203(d)(6), substituted ``chapter 
11 of title 31'' for ``the Budget and Accounting Act, 1921''.
    1983--Subsec. (a). Pub. L. 98-181, Sec. 514(a)(1), substituted 
provisions relating to amount of loan to low income person or family, 
for provisions designated as pars. (1) and (2) relating to restrictions 
on loans with respect to amounts, interest, etc., where the borrowers 
are persons of low or moderate income, and similar restrictions where 
the borrowers are other persons.
    Subsec. (a)(1). Pub. L. 98-181, Sec. 511(c), substituted ``September 
30, 1985'' for ``November 30, 1983''.
    Pub. L. 98-109 substituted ``November 30, 1983'' for ``September 30, 
1983''.
    Pub. L. 98-35 substituted ``September 30, 1983'' for ``May 20, 
1983''.
    Subsec. (b). Pub. L. 98-181, Sec. 514(a)(2), substituted ``(b)(3)'' 
for ``(b)(4)''.
    Subsec. (j)(6). Pub. L. 98-181, Sec. 514(b), struck out par. (6) 
which related to making expenditures under section 1479(c) of this title 
after Oct. 1, 1977.
    Subsec. (o). Pub. L. 98-181, Sec. 514(c), (d), added subsec. (o), 
and struck out former subsec. (o) which related to loans to persons of 
low income and to the minimum amounts available to such persons.
    1982--Subsec. (a)(1). Pub. L. 97-289 substituted ``May 20, 1983'' 
for ``September 30, 1982''.
    1981--Subsec. (a)(1). Pub. L. 97-35 substituted ``1982'' for 
``1981''.
    1980--Subsec. (a)(1). Pub. L. 96-399, Sec. 501(c), substituted 
``September 30, 1981'' for ``October 15, 1980''.
    Pub. L. 96-372 substituted ``October 15, 1980'' for ``September 30, 
1980''.
    Subsec. (n). Pub. L. 96-399, Sec. 511, inserted reference to 
moderate income borrowers.
    1979--Subsec. (a)(1). Pub. L. 96-153, Sec. 501(g), substituted 
``September 30, 1980'' for ``November 30, 1979''.
    Pub. L. 96-105 substituted ``November 30, 1979'' for ``October 31, 
1979''.
    Pub. L. 96-71 substituted ``October 31, 1979'' for ``September 30, 
1979''.
    Subsec. (o). Pub. L. 96-153, Sec. 511, redesignated existing 
provisions as par. (1) and added par. (2).
    1978--Subsec. (a)(1). Pub. L. 95-557, Sec. 501(f), substituted 
``September 30, 1979'' for ``October 31, 1978''.
    Pub. L. 95-406 substituted ``October 31, 1978'' for ``September 30, 
1978''.
    Subsec. (j)(4). Pub. L. 95-557, Sec. 506(b), substituted 
``1490a(a)'' for ``1490a(a)(2)''.
    1977--Subsec. (a)(1). Pub. L. 95-128, Sec. 501(c), substituted 
``September 30, 1978'' for ``September 30, 1977''.
    Pub. L. 95-80 substituted ``September 30, 1977'' for ``July 31, 
1977''.
    Pub. L. 95-60 substituted ``July 31, 1977'' for ``June 30, 1977''.
    Subsec. (e). Pub. L. 95-128, Sec. 502(b), required separate 
operation of guaranteed loan program and insured loan program and 
prohibited transfer of funds from one program to the other.
    Subsec. (j)(5), (6). Pub. L. 95-128, Sec. 506, added pars. (5) and 
(6).
    Subsec. (n). Pub. L. 95-128, Sec. 502(c), added subsec. (n).
    Subsec. (o). Pub. L. 95-128, Sec. 509, added subsec. (o).
    1974--Subsec. (a)(1). Pub. L. 93-383, Sec. 509(b), substituted 
``June 30, 1977'' for ``October 1, 1974''.
    Subsec. (b). Pub. L. 93-383, Secs. 516(b), 517, inserted reference 
to section 1490f of this title and provisions relating to transfer of 
notes from and compensation for the Agricultural Credit Insurance Fund.
    Subsec. (d). Pub. L. 93-383, Sec. 505(c)(1), struck out ``as it 
becomes due'' after ``principal and interest''.
    Subsec. (j). Pub. L. 93-383, Secs. 505(c)(2), (3), 514(c), 519(b), 
in cl. (1) substituted ``any payment'' for ``any prepayment'' and ``such 
payments'' for ``such prepayments'' and inserted provision relating to 
next agreed annual or semiannual remittance date, in cl. (3) inserted 
provisions authorizing other services customary in the industry, etc., 
and added cl. (4).
    1973--Subsec. (a)(1). Pub. L. 93-117 substituted ``October 1, 1974'' 
for ``October 1, 1973''.
    1970--Subsec. (j)(3). Pub. L. 91-609 authorized use of Fund moneys 
for expenses necessary to obtain credit reports on applicants or 
borrowers.
    1969--Subsec. (a)(1). Pub. L. 91-152, Sec. 413(a), substituted 
``October 1, 1973'' for ``January 1, 1970''.
    Pub. L. 91-78 substituted ``January 1, 1970'' for ``October 1, 
1969''.
    Subsec. (b). Pub. L. 91-152, Sec. 413(f)(2), inserted reference to 
section 1490d of this title.
    Subsec. (c). Pub. L. 91-152, Sec. 413(b), struck out provision which 
imposed a limit of not to exceed $100,000,000 on the aggregate amount of 
loans held by the Secretary at any one time.
    Subsec. (d). Pub. L. 91-152, Sec. 413(e)(2), inserted reference to 
subsec. (m) of this section and inserted ``or otherwise acquired by'' 
after ``loans made from''.
    Subsecs. (k) to (m). Pub. L. 91-152, Sec. 413(c)-(e)(1), added 
subsecs. (k) to (m).
    1966--Subsec. (a)(1). Pub. L. 89-754 substituted restriction against 
insurance or making of a loan under this par. after Oct. 1, 1969, except 
pursuant to a commitment entered into before that date for former clause 
(C) which provided that such loans shall not exceed in the aggregate of 
$300,000,000 of new loans made or insured in any one fiscal year.


                       Sale of Rural Housing Loans

    Pub. L. 99-509, title II, Sec. 2001, Oct. 21, 1986, 100 Stat. 1879, 
directed Secretary of Agriculture to take such actions as necessary to 
ensure that loans made under this subchapter are sold to public in 
amounts sufficient to provide a net reduction in outlays of not less 
than $1,715,000,000 in fiscal year 1987 from proceeds of such sales, 
specified procedures and terms of sales, required Secretary to report to 
specified Congressional committees not later than 20 days before initial 
sale estimating amount of discount at which loans will be sold at such 
initial sale and estimating such amount at each subsequent sale during 
fiscal year 1987 and periodic reports to such committees, the first not 
later than 60 days after Oct. 21, 1986, and subsequent reports each 60 
days thereafter, on Secretary's activities regarding such sales, 
authorized audits and evaluations of Secretary's activities by 
Comptroller General and reports on such audits and evaluations to 
Congressional committees, and excluded applicability of subsec. (d)(2) 
and (3) of this section to sale of loans.


                    Effective Date of 1981 Amendment

    Amendment by Pub. L. 97-35 effective Oct. 1, 1981, see section 371 
of Pub. L. 97-35, set out as an Effective Date note under section 3701 
of Title 12, Banks and Banking.

                  Section Referred to in Other Sections

    This section is referred to in sections 1472, 1490a, 1490j of this 
title; title 7 section 1933.
