‘‘(c) ELIGIBILITY REQUIREMENTS.—The Secretary
may insure a refinancing mortgage under this section only
if the mortgage complies with the following requirements:
‘‘(1) MORTGAGEE.—The refinancing mortgage
has been made to, and held by, a mortgagee ap-
proved by the Secretary as responsible and able to
service the mortgage properly.
‘‘(2) MORTGAGOR.—The mortgagor under the
refinancing mortgage—
‘‘(A) is the mortgagor under the underly-
ing mortgage being refinanced;
‘‘(B)(i) has made regular payments on a
timely basis on the underlying mortgage (and,
if applicable, any other previous mortgage on
the property), as required by the applicable
mortgage agreement, for a period of not less
than 36 months, or (ii) has been determined
under subsection (d) to be an acceptable credit
risk; and
‘‘(C) has a gross income that meets such
standards as the Secretary shall establish under
this section to ensure that the mortgagor will be
able (i) to make the periodic payments required
by the mortgage insured under this section, and
(ii) to meet other long-term obligations of the
mortgagor.
‘‘(3) UNDERLYING MORTGAGE.—The proceeds
of the refinancing mortgage are used for satisfaction
of the outstanding balance owed under an underly-
ing mortgage that—
‘‘(A) is a first mortgage on a dwelling that
is—
‘‘(i) designed principally for a 1- to 4-
family residence;
‘‘(ii) occupied by the mortgagor under
the refinancing mortgage who is also the
mortgagor under the underlying mortgage;
and
‘‘(iii) located in a real estate market
area that the Secretary has determined is
no longer subject to substantially decreas-
ing property values that will result in an
unreasonable risk of losses to the Federal
Government under mortgage insurance
provided under this section;
‘‘(B) is not delinquent;
‘‘(C) involves an outstanding principal obli-
gation (including such initial service charges,
appraisal, inspection, and other fees approved
by the Secretary) that exceeds 95 percent of the
appraised value of the property subject to the
mortgage, as of the date the refinancing mort-
gage is accepted for insurance under this sec-
tion, as determined by the Secretary;
‘‘(D) in the case of an underlying mort-
gage on a condominium unit in a project that
was converted from rental housing—
‘‘(i) was executed more than 1 year
after the conversion of the project;
‘‘(ii) 
has 
as 
a 
mortgagor 
or
comortgagor a tenant of the rental hous-
ing; or
‘‘(iii) covers a unit in a project for
which the conversion is sponsored by a
bona fide tenants organization representing
a majority of the households in the project;
and
‘‘(E) meets any other requirements as the
Secretary may provide.
‘‘(4) LIMITATION ON AMOUNT.—The refinanc-
ing mortgage involves a principal obligation in an
amount that does not to exceed—
‘‘(A) 125 percent of the appraised value of
the property subject to the mortgage; and
‘‘(B) the outstanding balance owed under
the underlying mortgage, plus such initial serv-
ice charges, appraisal, inspection, and other
fees as the Secretary shall approve.
‘‘(5) 
MONTHLY
PAYMENT
AMOUNT.—The
amount of each monthly payment due under the refi-
nancing mortgage is less than that due under the
underlying mortgage for the month in which the re-
financing mortgage is executed.
‘‘(6) INTEREST.—The refinancing mortgage
bears interest at such rate as may be agreed upon
by the mortgagor and the mortgagee.
‘‘(7) MATURITY.—The refinancing mortgage
has a maturity satisfactory to the Secretary that
does not, in any event, exceed 35 years from the
date of the beginning of the amortization of the
mortgage, and the Secretary may provide under this
paragraph for limitations on the maturity of refi-
nancing mortgages based on the unexpired terms of
the underlying mortgages being refinanced.
‘‘(8) OTHER
TERMS.—The refinancing mort-
gage has such terms regarding maturity, amortiza-
tion, periodic payments and application of such pay-
ments to principal, insurance, repairs, alterations,
payment of taxes, default reserves, delinquency
charges, foreclosure proceedings, anticipation of ma-
turity, additional and subordinate liens, and other
matters as the Secretary may provide.
‘‘(d) HARDSHIP PROVISIONS.—A mortgagor failing
to meet the requirements of subsection (c)(2)(B)(i) shall
be considered to be an acceptable credit risk for purposes
of subsection (c)(2)(B)(ii) if the Secretary determines
that—
‘‘(1) the failure was caused by circumstances
beyond the control of the mortgagor that rendered
the mortgagor temporarily unable to make such reg-
ular payments on the underlying mortgage;
‘‘(2) before such circumstances, the mortgagor
had made regular payments on a timely basis on the
underlying mortgage (and, if applicable, any other
previous mortgage on the property), as required by
the applicable mortgage agreement for such period
as the Secretary considers appropriate for purposes
of this subsection;
‘‘(3) the circumstances causing such failure
have been alleviated, or the income of the mortgagor
has increased, to the extent necessary to allow the
mortgagor to make regular payments under the refi-
nancing mortgage; and
‘‘(4) the mortgagor meets such other require-
ments as the Secretary may reasonably require to
ensure that the mortgagor will meet the obligations
under the refinancing mortgage.
‘‘(e) GENERAL INSURANCE FUND.—The insurance of
refinancing mortgages under this section shall be the obli-
gation of the General Insurance Fund established under
section 519.
‘‘(f) PREMIUMS.—
‘‘(1) ESTABLISHMENT.—The Secretary may fix
a premium charge for the insurance under this sec-
tion of refinancing mortgages, which shall be an
amount equivalent to a percentage per annum, de-
termined by the Secretary, of the amount of the por-
tion of outstanding principal obligation of the refi-
nancing mortgage that is insured under this section,
without taking into account delinquent payments or
prepayments. Any such premiums received shall be
credited to the General Insurance Fund.
‘‘(2) MANNER
AND
TIMING.—The premium
charges shall be payable by the mortgagee either in
cash or in debentures (at par plus accrued interest)
issued by the Secretary as obligations of the General
Insurance Fund, in the manner prescribed by the
Secretary, except that the Secretary may not require
‘‘(1) the sale of the insured property—
‘‘(A) at foreclosure, if such sale is for at
least the fair market value of the property (with
appropriate adjustments), as determined by the
Secretary; or
‘‘(B) by the mortgagor after default, if—
‘‘(i) the sale has been approved by the
Secretary;
‘‘(ii) 
the 
mortgagee 
receives 
an
amount at least equal to the fair market
value of the property (with appropriate ad-
justments), as determined by the Sec-
retary; and
‘‘(iii) the mortgagor has received ap-
propriate homeownership counseling, as de-
termined by the Secretary; and
‘‘(2) assignment to the Secretary of all claims
of the mortgagee against the mortgagor or others to
any proceeds of such sale in excess of the amount
equal to the portion of the unpaid principal balance
of the loan not insured under this section that arise
out of the mortgage transaction or foreclosure pro-
ceedings, except any claims that have been released
with the consent of the Secretary.
‘‘(h) PAYMENT OF INSURANCE.—
‘‘(1) IN GENERAL.—Upon the sale of insured
property and assignment of claims referred to in
subsection (g), the obligation of the mortgagee to
pay the premium charges for insurance shall cease
and the Secretary shall—
‘‘(A) pay to the mortgagee cash in an
amount equal to the value of the portion of the
mortgage insured under this section, as deter-
mined by the Secretary; or
‘‘(B) issue to the mortgagee debentures
having a par value equal to the cash amount
under subparagraph (A).
‘‘(2) CASH PAYMENTS.—If the insurance pay-
ment is made in cash, there shall be included in the
payment an amount equivalent to the interest that
the debentures would have earned if such payment
were made in debentures, computed to a date estab-
lished pursuant to regulations issued by the Sec-
retary.
‘‘(i) DEBENTURES.—
‘‘(1) EXECUTION.—Debentures issued under
this section shall be executed in the name of the
General Insurance Fund as obligor, shall be nego-
tiable, and, if in book entry form, transferable, in
the manner provided by the Secretary in regulations,
and shall be dated as of the date the insured prop-
erty is sold under subsection (g) and shall bear in-
terest from such date.
‘‘(2) TERMS.—Debentures issued under this
section shall—
‘‘(A) bear interest at a rate, established by
the Secretary pursuant to section 224, payable
semiannually on the 1st day of January and the
1st day of July of each year;
‘‘(B) have such maturity as the Secretary
shall provide;
‘‘(C) be exempt from taxation as provided
in section 207(i) with respect to debentures is-
sued under such section;
‘‘(D) be in such form and amounts, subject
to such terms and conditions, and include such
provisions for redemption, if any, as may be
prescribed by the Secretary of Housing and
Urban Development, with the approval of the
Secretary of the Treasury, and may be in book
entry or certificated registered form, or such
other form as the Secretary of Housing and
Urban Development may prescribe in regula-
tions;
‘‘(E) be paid out of the General Insurance
Fund, which shall be primarily liable therefor;
and
‘‘(F) be fully and unconditionally guaran-
teed as to principal and interest by the United
States, and, in the case of debentures issued in
certificated registered form, the guaranty shall
be expressed on the face of the debentures.
‘‘(3) OBLIGATION OF TREASURY.—In the event
the General Insurance Fund fails to pay upon de-
mand, when due, the principal of or interest on any
debentures so guaranteed, the Secretary of the
Treasury shall pay the holders the amount of the de-
bentures, which is hereby authorized to be appro-
priated, and upon such payment the Secretary of the
Treasury shall succeed to all the rights of the hold-
ers of such debentures, to the extent of the amount
paid.
‘‘(j) OTHER POWERS OF SECRETARY.—The provi-
sions of subsections (c), (d), and (h) of section 2 shall
apply to refinancing mortgages insured under this sub-
section and, for the purposes of this subsection, references
in subsections (c), (d), and (h) of section 2 to ‘this section’
or ‘this title’ shall be construed to refer to this section.
‘‘(k) PROTECTION
OF SECRETARY’S INTEREST.—
Notwithstanding any other provisions of this Act, the Sec-
retary may—
‘‘(1) make expenditures and advances out of
funds made available by this Act to preserve and
protect the interest of the Secretary in any security
for, or the lien or priority of the lien under, any
mortgage or other indebtedness insured by or owing
to the Secretary under this section; and
‘‘(2) bid for and purchase at any foreclosure or
other sale or otherwise acquire property pledged,
mortgaged, conveyed, attached, or levied upon to se-
cure the payment of any indebtedness owing to the
Secretary under this section.
The authority conferred by this subsection may be exer-
cised as provided in the last sentence of section 204(g).
‘‘(l) REFINANCING.—A refinancing mortgage insured
under this section may be refinanced and extended in ac-
cordance with such terms and conditions as the Secretary
may prescribe, but in no event for an additional amount
or term which exceeds the maximum provided for pursu-
ant to this subsection.
‘‘(m) DEFINITIONS.—For purposes of this section:
‘‘(1) The terms ‘mortgage’, ‘mortgagee’, ‘mort-
gagor’, and ‘first mortgage’ have the meanings given
such terms in section 201, except that the term
‘mortgage’ includes—
‘‘(A) a first mortgage given to secure the
unpaid purchase price of a fee interest in, or
long-term leasehold interest in, a one-family
unit in a multifamily project, including a
project in which the dwelling units are attached,
semi-detached, or detached, and an undivided
interest in the common areas and facilities
which serve the project; and
‘‘(B) a first lien given to secure a loan
made to finance the purchase of stock or mem-
bership in a cooperative ownership housing cor-
poration the permanent occupancy of the dwell-
ing units of which is restricted to members of
such corporation, where the purchase of such
stock or membership will entitle the purchaser
to the permanent occupancy of one of such
units.
‘‘(2) The term ‘underlying mortgage’ means,
with respect to a refinancing mortgage, the first
mortgage on the same dwelling that is subject to the
refinancing mortgage.
‘‘(3) The term ‘refinancing mortgage’ means a
subordinate lien on a dwelling securing a loan, the