All of the provisions of Sec. 207.259 of this chapter relating to insurance benefits apply to multifamily project mortgages insured under this subpart, except as provided in this section:
(a) Method of payment. All of the insurance benefits provided by Sec. 207.259 (b) or (c) of this chapter shall be paid in cash unless the mortgagee files with the application a written request for payment in debentures. If such a request is made, payment will be made in debentures with a cash payment to adjust any difference between the total amount of the insurance settlement and the amount of the debentures issued.
(b) Below market interest rate mortgages. Where the mortgage has been finally endorsed and the special below market interest rate provided in Sec. 221.518(b) is applicable as of the date of default, the 1 percent deduction from insurance benefits prescribed in Sec. 207.259(b)(2)(iv) of this chapter shall not be applicable.
(c) Mortgages financed with section 11(b) obligations. Where the funds for a mortgage loan are provided by obligations that are tax-exempt under section 11(b) of the United States Housing Act of 1937 (24 CFR part 811), the one percent deduction from insurance benefits prescribed in Sec. 207.259(b)(2)(iv) of this chapter shall not be applicable to claims with respect to multifamily rental housing projects for which a firm commitment for mortgage insurance was issued on or after March 12, 1979. [36 FR 24587, Dec. 22, 1971, as amended at 44 FR 40890, July 13, 1979]