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(a) (1), the mortgage loan shall contain provisions requiring that such borrower have, to the extent permitted by State and local law, a priority for the purchasing of the interest of each of its members in the dwelling of such member in the event of the sale of such interest.

"(e) The borrower may, with the consent of the Corporation, pledge the contract or commitment of the Corporation to make a mortgage loan hereunder as security for a loan of construction funds from other sources.

"(f) The Corporation may charge to the borrower (in addition to any interest charges) an amount not exceeding 272 per centum of the principal amount of the mortgage loan for inspection and other services during the construction of the housing project. Such service charges may be included as a part of the development cost of the project and may be payable from the proceeds of any mortgage loan or advances thereon.

"OBLIGATIONS OF CORPORATION

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“Sec. 310. The Corporation is authorized to issue and have outstanding on and after July 1, 1950, notes or other obligations in an aggregate amount not to exceed $300,000,000 except that with the approval of the President such aggregate amount may be increased at any time or times on or after July 1, 1951, by additional amounts aggregating not more than $1,700,000,000 upon a determination by the President, taking into account the general effect of any such increase upon conditions in the building industry and upon the national economy that such increase is in the public interest: Provided, That the aggregate amount outstanding at any one time shall not exceed (1) fifteen times the aggregate par value of the Corporation's outstanding capital stock, reserves, and surplus, or (2) the unpaid principal of mortgage loans contracted for or held by it under this title (without regard to amounts or prior advances on such loans), plus the amount of its cash on hand and on deposit and the amount of its investments authorized herein. The notes and other obligations issued by the Corporation shall be fully and unconditionally guaranteed as to principal and interest by the United States, and such guaranty shall be expressed on the face of such notes or other obligations. In the event the Corporation fails to pay upon demand, when due, the principal of, or interest on, any obligations so guaranteed, the Secretary of the Treasury shall pay to the holders the amounts thereof which are hereby authorized to be appropriated, and thereupon to the extent of the amount so paid, the Secretary of the Treasury shall succeed to all the rights of the holders of such notes or other obligations.

"RESERVES, DIVIDENDS, AND INVESTMENT OF FUNDS “SEC. 311. The Corporation shall carry to a specific reserve account for losses semiannually from interest receipts on mortgage loans amounts equal to oneeighth of 1 per centum per annum of the then outstanding balance of such mortgage loans. The Corporation shall make such charge-offs on account of depreciation or impairment of its assets as the Administrator shall require from time to time. In addition to the specific reserve account for losses, the Administrator shall require the establishment and maintenance of, and the Corporation shall establish and maintain, such reserve or reserves as he deems necessary. No dividends shall be paid except out of net earnings remaining after all reserves and charge-offs required under this title have been provided for, and then only with the approval of the Administrator. Such reserves, and all other funds of the Corporation not invested in mortgage loans or operating facilities, shall be kept in cash or on deposit or invested in bonds or other obligations of, or guaranteed as to principal and interest by, the United States.

"TAXES "Sec. 312. All real property and tangible personal property of the Corporation shall be subject to State, county, municipal, or local taxation to the same extent according to its value as other similar property is taxed, and any real property shall be subject to special assessments for local improvements. Except as to such taxation of real property and tangible personal property, the Corporation, including but not limited to its franchise, capital, reserves, surplus, income, assets, and other property, shall be exempt from all taxation now or hereafter imposed by the United States or by any State, county, municipality, or local taxing authority. All notes and other obligations of the Corporation shall be exempt, both as to principal and interest, from all taxes (except surtaxes, estate, inheritance, and gift taxes) by any State, county, municipality, or local taxing authority.

"PENALTIES "Sec. 314. (a) Any person who induces or influences a borrower hereunder to purchase or acquire property or to enter into any contract, in connection with any housing project to be financed, in whole or in part, with a loan made under this title, and willfully fails to disclose any interest, legal or equitable, which he has in such property or such contract, or any special benefit which he expects to receive as a result of such contract, shall be fined not more than $5,000, or imprisoned for not more than one year, or both.

*(b) No individual, association, partnership, or corporation shall hereafter use the words 'national mortgage corporation for housing cooperatives', or any combination of such words as the name or a part thereof under which he or it shall do business. Any such use shall constitute a misdemeanor and shall be punishable by a fine not exceeding $1,000.

"(c) Whoever, for the purpose of obtaining any loan under this title, or any extension or renewal thereof, or the acceptance, release, or substitution of security therefor, or for the purpose of influencing in any way the action of the Corporation under this title, makes any statement, knowing it to be false, shall be punished by a fine of not more than $5,000, or by imprisonment for not more than one year, or both.

“(d) Whoever (1) falsely makes, forges, or counterfeits any obligation, in imitation of or purporting to be an obligation issued by the Corporation, or (2) passes, utters, or publishes, or attempts to pass, utter, or publish, any false, forged, or counterfeited obligation purporting to have been issued by the Corporation, knowing the same to be false, forged, or counterfeited, or (3) falsely alters any obligation issued or purporting to have been issued by the Corporation, or (4) passes, utters, or publishes, or attempts to pass, utter, or publish, as true, any falsely altered or spurious obligation issued or purporting to have been issued by the Corporation, knowing the same to be falsely altered or spurious, shall be punished by a fine of not more than $10,000, or by imprisonment for not more than five years, or both.

"PROTECTION OF LABOR STANDARDS

"SEC. 313. In order to protect labor standards

(a) any contract for a loan pursuant to this title shall contain a provision requiring (1) that not less than the salaries prevailing in the locality, as determined or adopted (subsequent to a determination under applicable State or local law) by the Administrator, shall be paid to all architects, technical engineers, draftsmen, and technicians, employed in the development, and to all maintenance laborers and mechanics employed in the administration, of the housing project involved; (2) that not less than the wages prevailing in the locality, as predetermined by the Secretary of Labor pursuant to the Davis-Bacon Act (49 Stat. 1011), shall be paid to all laborers and mechanics employed in the development of the housing project involved; and (3) that certification as to compliance with the provisions of this subsection be made prior to the making of any payment under such contract;

“(b) the provisions of title 18, United States Code, section 874, and of title 40, United States Code, section 276c, shall apply to any housing project financed in whole or in part with funds made available pursuant to this title;

"(c) any contractor engaged on any housing project financed in whole or in part with funds made available pursuant to this title shall report monthly to the Secretary of Labor, and shall cause all subcontractors to report in like manner, within five days after the close of each month and on forms to be furnished by the United States Department of Labor, as to the number of persons on their respective pay rolls on the particular housing project, the aggregate amount of such pay rolls, the total man-hours worked, and itemized expenditures for materials. Any such contractor shall furnish to the Department of Labor the names and addresses of all subcontractors on the work at

the earliest date practicable. “ (e) Whoever, being connected in any capacity with the Corporation, (1) embezzles, abstracts, purloins, or willfully misapplies any moneys, funds, securities, or other things of value, whether belonging to it or pledged, or otherwise entrusted to it, or (2) with intent to defraud the Corporation or any other body, politic or corporate, or any individual, or to deceive any officer, auditor, or examiner of the Corporation, makes any false entry in any book, report, or statement of or to the Corporation, or without being duly authorized draws any order or issues, puts forth, or assigns any note, debenture, bond, or other such obliga

tion, or draft, bill of exchange, mortgage, judgment, or decree thereof, shall be punished by a fine of not more than $10,000, or by imprisonment for not more than five years, or both.

“(f) All general criminal and penal statutes of the United States relating to public moneys, property, or employees of the United States shall apply to public moneys, property, and employees of the Corporation. No officer or employee of the Corporation shall participate in any matter affecting his personal interests or the interests of any corporation, partnership, or association in which he is directly, or indirectly interested.

“DEFINITIONS

“Sec. 315. As used in this title, the following terms shall have the meanings, respectively, ascribed to them below, and unless the context clearly indicates otherwise, shall include the plural as well as the singular number:

“(a) 'Eligible borrower' or 'borrower' shall mean (1) any private nonprofit cooperative ownership housing corporation the permanent occupancy of the dwellings of which is restricted to the members of such corporation, or (2) any private nonprofit corporation authorized to provide dwellings (i) the occupancy of which is to be permitted in consideration of agreed charges, or (ii) for sale to a corporation of the character described in clause (1) of this paragraph.

"(b) The term 'corporation' (except when used to designate the corporation created by section 306 hereof) shall mean either 'corporation' or 'trust and references to members of such corporations shall with respect to trusts mean the beneficiaries thereof.

(c) 'Family of moderate income' shall mean any family of two or more persons within the estimated middle one-third, according to total money income from all sources, of all such families in the locality.

"(d) 'Housing project shall mean a project (including all property, real and personal, contracts, rights, and choses in action acquired, owned, or held by a borrower in connection therewith) of a borrower designed and used primarily for the purpose of providing dwellings: Provided, That nothing in this title shall be construed as prohibiting the inclusion in a housing project of such stores, offices, or other commercial facilities, recreational or community facilities, or other nondwelling facilities as are necessary appurtenances to such housing project.

"(e) 'Development cost’ shall mean (1) the amount of the reasonable costs incurred by the borrower in, and necessary for, carrying out all works and undertakings for the development of a housing project and shall include the cost of all necessary surveys, plans and specifications, architectural, engineering, or other special services, land acquisition, site preparation, construction, and equipment, interest incurred during the development of the housing project up to the time of completion, initial working capital for the administration of the housing project, necessary expenses (including any initial operating deficit) in connection with thé initial occupancy of the housing project; and the cost of such other items as the Administrator or Corporation shall determine to be necessary for the development of the housing project, or (2) the cost, as approved by the Administrator or the Corporation, incurred by the borrower in, and necessary for, the acquisition of a housing project developed with a loan made under this title.

“(f) 'Mortgage' or 'mortgage loan' shall mean a first mortgage on real estate, in fee simple, or on a leasehold (1) under a lease for not less than ninety-nine years which is renewable or (2) under a lease having a period of not less than seventy-five years to run from the date the mortgage was executed; and the term 'first mortgage' shall mean such classes of first liens as are commonly given to secure advances on, or the unpaid purchase price of, real estate, under the laws of the State in which the real estate is located, together with the credit instruments, if any, secured thereby

(g) The term 'veteran' shall mean a person who has served in the active military or naval service of the United States at any time on or after September 16, 1940, and prior to July 26, 1947, or at any time on or after April 6, 1917, and prior to November 11, 1918, and who shall have been discharged or released therefrom under conditions other than dishonorable. The term 'serviceman' shall mean a person in the active military or naval service of the United States who has served therein on or after September 16, 1940, and prior to July 26, 1947, or at any time on or after April 6, 1917, and prior to November 11, 1918.

“(h) The term 'going Federal rate' shall mean the annual rate of interest (or, if there shall be two or more such rates of interest, the highest thereof) specified in the most recently issued bonds of the Federal Government having a maturity of ten years or more.

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(i) 'State' shall mean the several States, the District of Columbia, and the Territories, dependencies, and possessions of the United States. (j) 'Administrator' shall mean the Housing and Home Finance Administrator.

GOVERNMENT CORPORATION CONTROL ACT "SEC. 316. Section 201 of the Government Corporation Control Act is hereby amended by striking out the words 'and (4) Federal Deposit Insurance Corporation' and inserting in lieu thereof '(4) Federal Deposit Insurance Corporation, and (5) National Mortgage Corporation for Housing Cooperatives'.

Senator SPARKMAN. Our first witness is Mr. Raymond M. Foley, Housing and Home Finance Administrator. Mr. Foley, will you come around, please?

We are glad to have you with us, Mr. Foley.

STATEMENT OF RAYMOND M. FOLEY, HOUSING AND HOME

FINANCE ADMINISTRATOR

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Mr. FOLEY. Thank you, Senator.

I have a prepared statement that should not take too long, and if you permit I will read it through; and then Acting Commissioner Greene of the FHA has a brief statement which you might also want to have presented in advance of any questions.

Mr. Chairman and members of the subcommittee, I welcome this opportunity to discuss with you today the proposed new housing legislation which is before your subcommittee for consideration. you know, this legislation is in the form of proposed amendments to S. 2246, Senator Sparkman's bill on which your subcommittee held hearings last summer, and which was favorably reported to the Senate on August 11. My comments this morning are directed to the pending amendments to S. 2246. Of these, the first and most important is, in effect, a substitute for the present title III of S. 2246.

In our opinion, it offers a much improved and more workable system for encouraging the production and financing of additional housing within the means of middle-income families through cooperative and nonprofit corporations.

The other pending amendments relate to the FHA. One would provide for a sound and workable permanent mortgage insurance program for rental properties to take the place of the emergency section 608 program. We do not believe the latter should be continued beyond March 1, 1950, its presently scheduled expiration date. The other would place the Title I modernization, repair and home improvement program of the Federal Housing Administration on a sound permanent basis.

Now, as to the middle-income housing proposals and the Cooperative Housing Act. As members of the subcommittee will recall, when I testified before you during the hearings on S. 2246 last summer, I filed a detailed statement which I had previously presented to the House Committee on July 25, 1949, when I was testifying on H. R. 5631, Representative Spence's companion bill to S. 2246. In that statement I set forth our views on title III of the bill which would have established a new program of direct Federal lending to cooperative-ownership and other private nonprofit housing corporations for the construction of housing for middle-income families.

Senator MAYBANK. May I interrupt for a minute there?

I want to get before the committee another bill which I understand deals with subject matter included in S. 2246. It was called to my attention by Senator Anderson, who wrote me under date of January 9. I haven't read your prepared statement fully, but I understand you are not commenting on it in this statement. Would you comment on it at the end of this testimony so that we may have the bill before us, if the Chairman doesn't object?

Senator SPARKMAN. Yes.

Senator MAYBANK. I will put this bill in along with S. 2246 so it might be handled at this time.

Senator SPARKMAN. Certainly
(The bill referred to, S. 2570, follows:)

[S. 2570, 81st Cong., 1st sess.] A BILL To provide for the conveyance of certain property in the village of Deming, New Mexico, to such

village

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the Housing and Home Finance Administrator is authorized and directed, upon payment for the land as herein provided, to convey to the village of Deming, Luna County, New Mexico, all right, title, and interest of the United States in and to the land, and improvements thereon, constituting that part of the Florida Vista public-housing project designated as project numbered NM-29052, and located in the said village of Deming.

SEC. 2. The village of Deming shall as a condition to such conveyance pay to the United States an amount substantially equal to the cost to the United States of the land (including survey, title examination, and other similar expenses incident to acquisition but excluding the cost or value of all improvements thereto by the United States other than extraordinary fill).

Mr. FOLEY. I indicated to the subcommittee at that time my firm conviction that the development of a sound and workable method for further meeting the housing needs of middle-income families would clearly be desirable and in the public interest. Primarily because title III relied entirely on the use of direct Federal loans to accomplish its desirable objectives, I suggested to your subcommittee that there was a need for further careful study and analysis of the means of reaching those objectives.

In so stating, I had specifically in mind the provisions of the declaration of national housing policy contained in the Housing Act of 1949— that "governmental assistance shall be utilized where feasible to enable private enterprise to serve more of the total need." It was my belief that this policy declaration would be better implemented if it were possible to carry out the contemplated program through the investment of private capital, thus eliminating the necessity for direct Federal loans.

Since then the Housing Agency and several of the members of your subcommittee have given a great deal of careful thought and study to this matter. Out of that study and out of the many consultations which we have had, both within and without the Government, we have developed the proposal which is before you today. We think it represents a sound and workable approach, we are glad to be able to recommend it strongly to you. I am particularly pleased to be able to advise you that the enactment of this legislation would be in accord with the program of the President.

This proposal is designed, in fact, to carry out the President's recommendations in his state of the Union message when he said:

To aid middle-income families, I recommend that the Congress enact new legislation authorizing a vigorous program to help cooperatives and other non

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