usc 12 § 1715z–18
Shared appreciation mortgages for multifamily housing (BANKS AND BANKING (12 U.S.C.))
Operative Text
Notwithstanding any provision of this subchapter that is inconsistent with this section, the Secretary may insure, under any provision of this subchapter providing for insurance of mortgages on properties including 5 or more family units, a mortgage secured by a first lien on the property that (1) provides for the mortgagee to share in a predetermined percentage of the property’s net appreciated value; and (2) meets such other conditions, including limitations on the rate of interest which may be charged, as the Secretary may require by regulation. The mortgagee’s share of a property’s net appreciated value shall be payable upon maturity or upon payment in full of the loan or sale or transfer (as defined by the Secretary) of the property, whichever occurs first. The term of the mortgage shall not be less than 15 years, and shall be repayable in equal monthly installments of principal and fixed interest during the mortgage term in an amount which would be sufficient to retire a debt with the same principal and fixed interest rate over a period not exceeding 30 years. In the case of a mortgage which will not be completely amortized during the mortgage term, the principal obligation of the mortgage may not exceed 85 percent of the estimated value of the property or project. For purposes of this section, the term “net appreciated value” means the amount by which the sales price of the property (less the mortgagor’s selling costs) exceeds the actual project cost after completion, as approved by the Secretary. If there has been no sale or transfer at the time the mortgagee’s share of net appreciated value becomes payable, the sales price for purposes of this section shall be determined by means of an appraisal conducted in accordance with procedures approved by the Secretary and provided for in the mortgage. In the event of a default, the mortgagee shall be entitled to receive the benefits of insurance in accordance with , but such insurance benefits shall not include the mortgagee’s share of net appreciated value. The term “original principal face amount of the mortgage” as used in shall not include the mortgagee’s share of net appreciated value. The Secretary shall establish by regulation the maximum percentage of net appreciated value which may be payable to a mortgagee as the mortgagee’s share. The Secretary shall also establish disclosure requirements applicable to mortgagees making mortgage loans pursuant to this section, to assure that mortgagors are informed of the characteristics of such mortgages. Mortgages insured pursuant to this section which contain provisions for sharing appreciation or which otherwise require or permit increases in the outstanding loan balance which are authorized under this section or under applicable regulations shall not be subject to any State constitution, statute, court decree, common law, rule, or public policy limiting or prohibiting increases in the outstanding loan balance after execution of the mortgage. The number of dwelling units included in properties covered by mortgages insured pursuant to this section in any fiscal year may not exceed 5,000.
Under 12 U.S.C. § 1715z–18, the federal government may insure certain multifamily mortgages (covering five or more units) that include a 'shared appreciation' feature, meaning the lender receives a set percentage of the property's net increase in value when the loan matures, is paid off, or the property is sold. The mortgage must run at least 15 years, with monthly payments of principal and fixed interest, and unamortized loans cannot exceed 85 percent of estimated property value. State laws that would otherwise restrict rising loan balances do not apply to these federally insured shared appreciation mortgages.
Plain English — not legal advice.
Operators financing multifamily properties under 12 U.S.C. § 1715z–18 generally structure their loans to meet HUD's regulatory conditions, including interest-rate limits and the cap on the lender's share of net appreciated value. Compliant operators ensure that required disclosures about the shared appreciation feature are provided to borrowers as mandated by the Secretary's regulations. Because the lender's appreciation share is excluded from standard insurance benefits in a default scenario, operators typically account for that contingent obligation separately in their financial planning.
General guidance for property managers — not legal advice for your specific situation. Consult an attorney for advice on your case.
Residents in multifamily properties financed under 12 U.S.C. § 1715z–18 may find it useful to know that HUD requires lenders to make specific disclosures about how shared appreciation terms work, which can affect how a property owner manages the asset over time. If you believe disclosure requirements under this provision were not followed, tenant-rights organizations or a local housing agency may be able to explain available options. Consulting a housing counselor or attorney familiar with HUD-insured financing can help clarify how this provision may relate to your tenancy.
General guidance for tenants — not legal advice for your specific situation. Consult a tenant-rights organization or attorney for advice on your case.
Generated September 13, 2026 — auto-generated, not yet human-reviewed. See /transparency for methodology.
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