usc 12 § 1747d
Excess earnings used for amortization of original investment (BANKS AND BANKING (12 U.S.C.))
Operative Text
For all of the purposes of any insurance contract made pursuant to this subchapter, 50 per centum of the excess earnings, if any, for any operating year may be applied, in addition to the minimum annual return, to return on the outstanding investment but only to the extent that such application thereof does not result in an annual return of more than 5 per centum of the outstanding investment for such operating year, and the balance of any such excess earnings shall be applied, in addition to the minimum annual amortization charge, to amortization of the outstanding investment: , That if in any preceding operating years the gross income shall have been less than the operating expenses, such excess earnings shall be applied to the extent necessary in whole or in part, first, to the reimbursement of the amount of the difference between such expenses (exclusive of any premium charges previously waived hereunder) and such income, and, second, to the payment of any premium charges previously waived hereunder. Provided
Under 12 U.S.C. § 1747d, when a housing project covered by a federal insurance contract generates earnings above a defined baseline in a given operating year, those excess earnings are split according to a specific formula: up to half may be used to boost the return on the outstanding investment, but only until that return reaches 5 percent of the outstanding investment for that year, while the remaining balance goes toward paying down (amortizing) the outstanding investment beyond the required minimum. If the project ran a deficit in any prior operating year, however, those excess earnings must first be used to cover that earlier shortfall, and then to repay any previously waived insurance premium charges, before the standard formula applies.
Plain English — not legal advice.
Operators of projects subject to a federal insurance contract under 12 U.S.C. § 1747d generally track excess earnings carefully each operating year, since the statute directs how those funds must be allocated rather than leaving full discretion to the owner. A compliant operator accounts for any prior-year income deficits and waived premium charges before applying the standard 50/50 split between return on investment and amortization. Maintaining clear year-over-year financial records helps demonstrate that allocations conform to the layered priority structure the provision establishes.
General guidance for property managers — not legal advice for your specific situation. Consult an attorney for advice on your case.
Residents in federally insured housing projects governed by 12 U.S.C. § 1747d may have an interest in how the project's finances are managed, since the provision constrains how owners can use surplus earnings and limits the annual return an owner may take to 5 percent of the outstanding investment. If tenants believe a project's finances are not being handled in accordance with federal insurance contract requirements, they can raise concerns with the relevant federal housing agency or consult a tenant-rights organization familiar with federally assisted housing. Understanding this provision can also be relevant when reviewing project financial disclosures or participating in any administrative proceedings related to the housing project.
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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