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Comparative digest: Pending legislation (S. 2938, H. R. 7839), President's Advisory Committee report, and Mortgage Bankers Association policy-Continued

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201. Authorizes the President to establish (1) maximum interest rates on FHA and VA nonfarm
residential mortgage loans, not to exceed by more than 22 percentage points the average
market yields on the Federal Government's marketable bonds of 15 years or more; these
rates could be set at different levels for different classes of mortgages; (2) interest rates on
FHA debentures to be issued in payment of mortgage insurance claims; (3) maximum financ-
ing charges for FHA property improvement and repair loans; (4) limits on fees and charges
for FHA and VA loans; (5) maximum maturities and maximum ratios of loan-to-value for
FHA and VA loans, within statutory limits; (6) maximum dollar limits per room or per unit
for FHA loans, within statutory limits. Direct VA loans or FHA and VA loans for which
commitments were made prior to the President's action would not be affected.
202. Technical amendment to Servicemen's Readjustment Act to implement carrying out of sec.
203. Repeals sec. 504 of the Housing Act of 1950 relating to fees and charges (see sec. 201 above).

301. Rewrites title III of National Housing Act as follows:
301. Purpose of facility is (a) to improve distribution of mortgage credit; and (b) to provide
assistance to (1) mortgages under special housing programs and (2) mortgages gen-
erally to retard a decline in home building activity which threatens the stability of
the economy.

302. Recharters FNMA as a constituent agency of HHFA, and authorizes it to purchase FHA and VA mortgages or participations not to exceed $12,500 per family unit.

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303. Capital and surplus of existing FNMA (estimated at $70 million) would be used to
capitalize new FNMA. Capital contributions of not less than 3 percent of the
mortgage or participation amount would be required of all sellers to the association
in connection with transactions noted under sec. 301 (a) above. In return, non-
refundable convertible certificates would be issued to the sellers, to be exchanged
for capital stock when Treasury stock is retired.

304. Establishes the general terms of the facility's operations with respect to activity under
sec. 301 (a) above. Volume of purchases and sales, prices, charges and fees would
be determined with the view that excessive use of the association's facilities should
be avoided. No mortgage participations may be purchased under this section, and
no advance commitments made except one-for-one contracts. Debentures could
be issued up to 10 times capital, surplus, reserves, and undistributed earnings. The
Secretary of Treasury is authorized to invest in such obligations up to $500 million,
plus an amount equal to reduction in FNMA present portfolio, but not more than
$1 billion, until Treasury stock in the Association is retired.
305. Establishes terms for special assistance functions under sec. 301 (b) above. President
could authorize advance commitments and purchases of mortgages and mortgage
participations of various types and classifications as a support for special housing
programs or to retard a serious market decline. Treasury would supply funds in
return for obligations of not more than 5 years maturity. President could authorize
not more than $200 million in purchases and commitments to be outstanding at any
1 time, but would have additional authority up to $100 million to enter commit-
ments for mortgage participation agreements for a fixed 20 percent undivided interest
in each mortgage, but with a deferred participation agreement to purchase the
remainder in the event of default.

306. To liquidate existing FNMA portfolio, the Association is authorized to issue to the
public nonguaranteed obligations against its assets. The funds so obtained would
be used to reduce the existing Treasury investment. The Treasury is authorized
to purchase the Association's obligations in sufficient amount to carry out the
Association's liquidation functions. Such obligations would have maturities of
5 years or less and the interest rate would be based on the average rate of outstand-
ing Government obligations. $300 million of the present authorization of FNMA
for mortgage purchases would be made available for the special-assistance program
under section 305 above.

307. Separate accountability would be maintained for the (a) secondary market operations,
(b) special-assistance functions, and (c) management and liquidating functions of
the rechartered FNMA.

308. Board of directors of the Association to have 5 members, with the HHFA Adminis-
trator to act as chairman and to appoint the other 4 members from among the Asso-
ciation, the office of the Administrator, or any other Federal Government agency.
309. Sets forth the Association's general corporate powers.

310. Provides for investment of the Association's moneys.

311. Association's obligations to be legal investments and may be accepted as security for
fiduciary, trust, and public funds under the Federal Government's control. Fed-
eral Reserve banks to act as fiscal agents for the Association.

312. Short title of title III: Federal National Mortgage Association Charter Act.
302. Body referred to in section 302 of the National Housing Act is the present FNMA.
303. Specifically applies to FNMA the authority of national banks to invest in obligations of
national mortgage associations without limit as to total amount.

304. Authorizes Federal home loan banks and Federal savings and loan associations to invest in FNMA obligations.

305. Repeals FNMA's authority to grant preferences to FHA mortgages in the Territories and to make direct FHA loans in Alaska.

306. Terminates FNMA's authority to make advance commitments on FHA cooperative housing.

authorized to purchase and sell FHA
and VA mortgages and mortgage
participations from eligible institu-
tions, which acquire stock up to 4
percent of the amount of mortgages
purchased. Stock to be redeemed
with accumulated dividends when
mortgages are sold by Corporation.
Purchase and sales prices would be
set by Corporation. Corporation
could issue debentures up to 12 times
capital and surplus. Corporation
would be required to create reserve
at 10 percent of annual net earnings
until reserve equaled 50 percent of
paid-in capital and surplus. New
5-man Home Loan Board to be cre-
ated to manage Corporation, Home
Loan Bank System, and FSLIC.
Corporation to have charge of liqui-
dating FNMA.

gages and to make advance commitments. Minimum stock requirement to be set at 2 percent. Corporation to have clear power to set standards of eligibility for members.


Report of President's Advisory

Policy of Mortgage Bankers Association

Comparative digest: Pending legislation (S. 2938, H. R. 7839), President's Advisory Committee report, and Mortgage Bankers Association policy-Continued

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411. All the amendments are designed primarily to broaden and redirect the present slum clearance
and redevelopment program so as to assist not only the communities in clearing their slums,
as is presently provided, but to prevent their spread by rehabilitating and improving
blighted, deteriorated, or deteriorating areas. The criteria, terms and definitions of title I
of the Housing Act of 1949 are changed in accordance with the broader scope of the program.
In these larger areas, known as urban renewal areas, there could be carried out (in addition
to the slum clearance and redevelopment now authorized) plans for voluntary repair and
rebabilitation of buildings, clearance of deteriorated structures, and reconstruction of streets
and other necessary improvements. Requirements with respect to local responsibility and
local action would be strengthened and increased.
The requirement that a commercial or industrial deteriorated area may be cleared with Federal
assistance only if the area be redeveloped for predominantly residential purposes is elim-
inated. In other words, a deteriorated commercial site can be redeveloped for commercial
purposes. However, there would be substituted a requirement that the project be in accord-
ance with an urban renewal plan to achieve "such community objectives for the establish-
ment and preservation of well-planned residential neighborhoods."

The 1% to 3% formula for Federal local grants now in the law would not be changed. However,
in the gross project cost might be included, in addition to those items now included, expendi-
tures for carrying out plans for voluntary repair and rehabilitation and acquisition of prop-
erty for the broader purpose indicated above, as well as the installation, construction, and
reconstruction of streets, utilities, parks, playgrounds and other improvements (which need
not be in a slum clearance area) necessary for carrying out the urban renewal plan.
412. Savings provision-technical amendment to permit continuance of contracts already entered
into under existing authority.

413. Repeal of appropriation act provisos-technical amendment to remove existing requirements
in respect to local law enforcement, now covered elsewhere.

414. Authorizes a special fund of $5 million for grants to localities to assist them in testing, developing, and reporting slum prevention and elimination techniques.


501. Extends preference in public housing, now limited to those displaced from public housing or slum clearance projects, to include also those displaced by other public actions, such as code enforcement and closing of structures, highway construction, etc.

502. Makes payment of 10 percent of shelter rents (unless State law prescribes, or local government agrees to, a lesser amount) in lieu of taxes mandatory for public housing projects, except where this would reduce local contribution to less than 20 percent of the Federal contribution. Permits localities to elect to charge full taxes, provided they make up in cash the difference between full taxes and 10 percent of shelter rents but not less than 20 percent of the Federal contribution. Requires that the governing body and the public be informed of total local contribution, including the difference between payments in lieu of taxes and amount that full taxes would require.

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503. Provides that after projects are fully amortized, that net revenues go proportionately to Fed-
eral and local governments on the basis of their contributions, in order that in time such
contributions may eventually be recovered as far as possible, and the projects be made self-

504. Repeals labor-reporting provisions by contractors..

505. Repeals requirement for PHA determination of salaries paid to architects and technical employees.


601. Provides method whereby Federal Savings and Loan Insurance Corporation may be served with notice of suit anywhere, and not just in the District of Columbia. Also bars enforcement of claim against the Corporation after 3 years from date of default, or, if the Corporation denies validity of the claim, after 2 years from the date of denial. 602-3. Increases maximum loan that a Federal savings and loan association may make (beyond exception already allowed) to $35,000, instead of the present $20,000. Makes comparable changes as to collateral acceptable by Federal home loan bank for advances. Also provides procedures for enforcement of regulations governing Federal savings and loan associations and for appointment of conservators and receivers.


701. Provides $5 million to Housing and Home Finance Administrator for planning grants up to 50 percent of estimated cost to State, metropolitan, and regional area agencies for metropolitan or regional planning, and to State planning bodies to assist municipalities under 25,000 in urban planning. 702. Provides $10 million to resume noninterest-bearing planning advances to local and State bodies for public works plans, repayable when construction is undertaken, in order that such works can be ready for construction if the economic situation should require it.


703. Provide for: Exemptions from preference provisions in disposition of unusual types of permanent Lanham Act projects; a consolidated report to Congress on the Agency's activities instead of assorted reports on various programs and activities; consideration to be given to the reduction of vulnerability of congested areas to enemy attack in carrying out housing programs; customary act-controlling and separability provisions.

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[NOTE.-Numbers refer to numbering in committee report]


4. The present basis for geographical allocation of funds should be modified to make one-third of the capital grant funds available to those cities showing the highest level of performance in a positive overall attack on urban decay. 9. A broadly representative private organization on a national scale should be formed outside the Federal Government with congressional and/or Presidential sponsorship to mobilize public opinion in support of vigorous action by the communities in slum prevention, neighborhood conservation, and other urban renewal activities.

10. The committee urges that this private national organization encourage inquiries into the ownership and operation of slum property and the failure of cities to compel compliance with their health and housing codes. These inquiries can be an important first step in activating public opinion in support of effective slum prevention and urban renewal programs.


6. Appropriate administrative steps should be taken by the Federal Housing Commissioner to permit wider use of the trade-in house program as a means of upgrading the existing inventory of housing.


11. An objective and independent long-range study of prospective foreclosure and loss experience of the Federal Housing Administration's insurance programs should be made.

12. An objective and independent long-range study of probable losses on Veterans' Administration guaranteed loans should be made.

13. The Federal Housing Administration and the Veterans' Administration should consider providing special assistance to mortgagees in small communities in the preparation of applications for the insurance or guaranty of loans.

14. The Veterans' Administration should seek advice of lending institutions in revising and simplifying its regulations, and committees of lenders should be formed to place applications for Veterans' Administration direct loans with private lenders wherever practicable.

15. Congress and the Appropriations Committees should be urged to return to the principles of Public Law 387, 81st Congress, or to develop another formula designed to achieve the objective of flexibility in the operating expense budget of the Federal Housing Administration. The Federal Housing Administration would be able to operate much more efficiently if the annual amounts it was authorized to spend for administrative expenses were based on a percentage of income rather than a fixed dollar ceiling.

18. The Treasury Department and the appropriate congressional committees should be requested to study whether there are tax inequities which deter private investment in rental housing, and, based on such findings, appropriate action should be taken. The committee is impressed with the need for such an inquiry. However, since the committee had neither the time nor the competence to carry out a study of this kind, it recommends that it be undertaken by the Treasury Department.


5. The Housing and Home Finance Administrator should study proposals for the establishment of a cooperative housing mortgage corporation to assist in the production and financing of cooperative housing projects.


5. Whenever feasible public housing should be built at lower densities, and the design of public housing projects should conform more closely to local dwelling patterns and construction practices. This recommendation is designed to avoid the institutionalized character of public housing and to facilitate the sale of public housing when no longer needed for low-income families.

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