The term “
actual cost” has the following meaning: (i) in case the
mortgage is to assist the financing of new
construction, the term means the
actual cost to the
mortgagor of such
construction, including amounts paid for labor, materials,
construction contracts, off-site public utilities, streets, organizational and legal expenses, such allocations of general overhead items as are acceptable to the
Secretary, and other items of expense approved by the
Secretary, plus (I) a reasonable allowance for builder’s profit if the
mortgagor is also the builder as defined by the
Secretary, and (II) an amount equal to the
Secretary’s estimate of the fair market value of any land (prior to the
construction of the improvements built as a part of the project) in the property or project owned by the
mortgagor in fee (or, in case the land in the property or project is held by the
mortgagor under a leasehold or other interest less than a fee, such amount as the
mortgagor paid for the acquisition of such leasehold or other interest but, in no event, in excess of the fair market value of such leasehold or other interest exclusive of the proposed improvements), but excluding the amount of any kickbacks, rebates, or trade discounts received in connection with the
construction of the improvements, or (ii) in case the
mortgage is to assist the financing of repair or rehabilitation the term means the
actual cost to the
mortgagor of such repair or rehabilitation, including the amounts paid for labor, materials,
construction contracts, off-site public utilities, streets, organization and legal expenses, such allocations of general overhead items as are acceptable to the
Secretary, and other items of expense approved by the
Secretary, plus (I) a reasonable allowance for builder’s profit if the
mortgagor is also the builder as defined by the
Secretary, and (II) an additional amount equal to (A) in case the land and improvements are to be acquired by the
mortgagor and the purchase price thereof is to be financed with part of the proceeds of the
mortgage, the purchase price of such land and improvements prior to such repair or rehabilitation, or (B) in case the land and improvements are owned by the
mortgagor subject to an outstanding indebtedness to be refinanced with part of the proceeds of the
mortgage, the amount of such outstanding indebtedness secured by such land and improvements, but excluding (for the purposes of this clause (ii)) the amount of any kickbacks, rebates, or trade discounts received in connection with the
construction of the improvements: Provided, That such additional amount under (A) of this clause (ii) shall in no event exceed the
Secretary’s estimate of the fair market value of such land and improvements prior to such repair or rehabilitation, and such additional amount under (B) of this clause (ii) shall in no event exceed the
approved percentage of the
Secretary’s estimate of the fair market value of such land and improvements prior to such repair or rehabilitation. In the case of a
mortgage insured under section
1715k,
1715l(d)(3),
1715l(d)(4),
1715v,
1715x, or
1715z–1 of this title where the
mortgagor is also the builder as defined by the
Secretary, there shall be included in the
actual cost, in lieu of the allowance for builder’s profit under clause (i) or (ii) of the preceding sentence, an allowance for builder’s and sponsor’s profit and risk of 10 per centum (unless the
Secretary, after finding that such allowance is unreasonable, shall by regulation prescribe a lesser percentage) of all other items entering into the term
“actual cost” except land or amounts paid for a leasehold and amounts included under either (A) or (B) of clause (ii) of the preceding sentence. In the case of a
mortgage insured under section
1715k,
1715l(d)(3),
1715l(d)(4),
1715v,
1715x, or
1715z–1 of this title, where the
mortgagor is not also the builder as defined by the
Secretary, there shall be included in the
actual cost an allowance for sponsor’s profit and risk of the said 10 per centum or lesser percentage of all other items entering into the term
“actual cost” except land or amounts paid for a leasehold, amounts included under either (A) or (B) of the said clause (ii), and amounts paid by the
mortgagor under a general
construction contract.