as contained in section 207 (k) and section 207 (1) as to mortgages insured by the Commissioner and assigned to him under section 207 of this Act. "(h) There is hereby created a Section 221 Housing Insurance Fund which shall be used by the Commissioner as a revolving fund for carrying out the provisions of this section, and the Commissioner is hereby authorized to transfer to such Fund the sum of $1,000,000 from the War Housing Insurance Fund established pursuant to the provisions of section 602 of this Act. General expenses of operation of the Federal Housing Administration under this section may be charged to the Section 221 Housing Insurance Fund.

"Moneys in the Section 221 Housing Insurance Fund not needed for the current operations of the Federal Housing Administration under this section shall be deposited with the Treasurer of the United States to the credit of such fund, or invested in bonds or other obligations of, or in bonds or other obligations guaranteed as to principal and interest by, the United States. The Commissioner may, with the approval of the Secretary of the Treasury, purchase in the open market debentures issued under the provisions of this section. Such purchases shall be made at a price which will provide an investment yield of not less than the yield obtainable from other investments authorized by this section. Debentures so purchased shall be canceled and not reissued.

"Premium charges, adjusted premium charges, and appraisal and other fees received on account of the insurance of any mortgage accepted for insurance under this section, the receipts derived from the property covered by such mortgage and claims assigned to the Commissioner in connection therewith shall be credited to the Section 221 Housing Insurance Fund. The principal of, and interest paid and to be paid on debentures issued under this section, cash adjustments, and expenses incurred in the handling, management, renovation, and disposal of properties acquired under this section shall be charged to such Fund."

SEC. 124. Title II of said Act, as amended, is hereby further amended by adding at the end thereof the following new section to transfer to title II the mortgage insurance program in connection with the sale of certain publicly owned property as contained in section 610 of title VI; the insurance of mortgages to refinance existing loans insured under section 608 of title VI and sections 903 and 908 of title IX; and to authorize the insurance under title II of mortgages assigned to the Commissioner under insurance contracts and mortgages held by the Commissioner in connection with the sale of property acquired under insurance contracts:

"MISCELLANEOUS HOUSING INSURANCE

"SEC. 222. (a) Notwithstanding any of the provisions of this title, and without regard to limitations upon eligibility contained in section 203 or section 207 the Commissioner is authorized, upon application by the mortgagee, to insure or make commitments to insure under section 203 or section 207 of this title any mortgage

(1) executed in connection with the sale by the Government, or any agency or official thereof, of any housing acquired or constructed under Public Law $49, Seventy-sixth Congress, as amended; Public Law 781, Seventy-sixth Congress, as amended: or Public Law 9, 73, or 353, Seventy-seventh Congress, as amended (including any property acquired, held, or constructed in connection with such housing or to serve the inhabitants thereof); or

(2) executed in connection with the sale by the Public Housing Administration, or by any public housing agency with the approval of the said Administration, of any housing (including any property acquired, held, or constructed in connection with such housing or to serve the inhabitants thereof) owned or financially assisted pursuant to the provisions of Public Law 671, Seventy-sixth Congress; or

(3) executed in connection with the sale by the Government, or any agency or official thereof, of any of the so-called Greenbelt towns, or parts thereof, including projects, or parts thereof, known as Greenhills, Ohio; Greenbelt, Maryland; and Greendale, Wisconsin, developed under the Emergency Relief Appropriation Act of 1935, or of any of the village properties under the jurisdiction of the Tennessee Valley Authority; or

(4) executed in connection with the sale by a State or municipality, or an agency, instrumentality, or political subdivision of either, of a project consisting of any permanent housing (including any property acquired, held, or constructed in connection therewith or to serve the inhabitants thereof), constructed by or on behalf of such State, municipality, agency, instrumentality, or political subdivision, for the occupancy of veterans of World War II, or Korean veterans, their families, and others; or

(5) executed in connection with the first resale, within two years from the date of its acquisition from the Government, of any portion of a project or property of the character described in paragraphs (1), (2), and (3) above; or

(6) given to refinance an existing mortgage insured under section 608 of title VI prior to the effective date of the Housing Act of 1954 or under section 903 or section 908 of title IX: Provided, That the principal amount of any such refinancing mortgage shall not exceed the original principal amount or the unexpired term of such existing mortgage and shall bear interest at a rate not in excess of the maximum rate applicable to loans insured under section 203 or section 207, as the case may be, except that in any case involving the refinancing of a loan insured under section 608 or 908 in which the Commissioner determines that the insurance of a mortgage for an additional term will inure to the benefit of the applicable insurance fund, taking into consideration the outstanding insurance liability under the existing insured mortgage, such refinancing mortgage may have a term not more than twelve years in excess of the unexpired term of such existing insured mortgage: Provided, That a mortgage of the character described in paragraph (1), (2), (3), (4), or (5) shall have a maturity satisfactory to the Commissioner, but not to exceed the maximum term applicable to loans insured under section 203 or section 207, as the case may be, and shall involve a principal obligation (including such initial service charges, appraisal, inspection, and other fees as the Commissioner shall approve) in an amount not exceeding 90 per centum of the appraisal value of the mortgaged property, as determined by the Commissioner, and bear interest (exclusive of premium charges and service charges, if any) at not to exceed the maximum rate applicable to loans insured under section 203 or section 207, as the case may be. "(b) The Commissioner shall also have authority to insure under this title any mortgage assigned to him in connection with payment under a contract of mortgage insurance or executed in connection with the sale by him of any property acquired under title I, title II, title VI, title VIII, or title IX without regard to any limitation upon eligibility contained in this title II."

SEC. 125. Title II of said Act, as amended, is hereby amended by adding at the end thereof the following new sections:

"INTEREST RATES AND MORTGAGE TERMS

"SEC. 223. The Commissioner shall make such rules and regulations in connection with his functions under this Act as may be necessary to carry out limitations relating thereto established by the President pursuant to the authority vested in him by section 201 of the Housing Act of 1954.

"OPEN-END MORTGAGES

"SEC. 224. Notwithstanding any other provisions of this Act, in connection with any mortgage insured pursuant to any section of this Act which covers a property upon which there is located a dwelling designed principally for residential use for not more than four families in the aggregate, the Commissioner is authorized, upon such terms and conditions as he may prescribe, to insure under said section the amount of any advance for the improvement or repair of such property made to the mortgagor pursuant to an 'open-end' provision in the mortgage, and to add the amount of such advance to the original principal obligation in determining the value of the mortgage for the purpose of computing the amounts of debentures and certificate of claim to which the mortgagee may be entitled: Provided, That the Commissioner may require the payment of such charges, including charges in lieu of insurance premiums, as he may consider appropriate for the insurance of such 'open-end' advances: And provided further, That the insurance of 'open-end' advances shall not be taken into account in determining the aggregate amount of principal obligations of mortgages which may be insured under this Act."

ADDITIONAL AMENDMENTS RELATING TO FEDERAL HOUSING ADMINISTRATION SEC. 126. Title VI of said Act, as amended, is hereby amended by adding the following new section at the end thereof:

"SEC. 612. Notwithstanding any other provision of this title, no mortgage or loan shall be insured under any section of this title after the effective date of the Housing Act of 1954 except pursuant to a commitment to insure issued on or before such date."

44022-54- -2

SEC. 127. Title VII of said Act, as amended, is hereby repealed. The Housing Investment Insurance Fund established to carry out the purposes of said title shall be terminated as of the effective date of the Housing Act of 1954, at which time all of the remaining assets of such Fund shall be transferred to the National Defense Housing Insurance Fund. The amount remaining of funds appropriated to the Secretary of the Treasury by the Supplemental Appropriation Act, 1949 (Public Law 904, Eightieth Congress), to be made available to the said Housing Investment Insurance Fund shall be carried to the surplus fund of the Treasury. SEC. 128. Section 803 (a) of said Act, as amended, is amended by striking out "July 1, 1954" and substituting therefor "June 30, 1955".

SEC. 129. Section 104 of the Defense Housing and Community Facilities and Services Act of 1951, as amended, is hereby amended by striking out the material within the parentheses in clause (a) and substituting therefor "except pursuant to a commitment to insure issued on or before such date".

TITLE II—HOME MORTGAGE INTEREST RATES AND TERMS

SEC. 201. On the basis of reviews, which shall be made from time to time at the request of the President by officers of the Federal Government designated by him, of conditions affecting the mortgage investment market (including current market yields on comparable investments such as long-term obligations of the United States and of States and municipalities and long-term corporate bonds), and after taking into consideration conditions in the building industry and the national economy, the President is hereby authorized, without regard to any other provision of law except provisions hereafter enacted expressly in limitation hereof, to establish from time to time—

(1) the maximum rates of interest (exclusive of premium charges for insurance and service charges, if any) for various classifications of residential mortgage loans insured or guaranteed or made under the National Housing Act, as amended, or the Servicemen's Readjustment Act of 1944, as amended: Provided, That no such maximum rate of interest shall, at the time established by the President, exceed 21⁄2 per centum plus the annual rate of interest determined by the Secretary of the Treasury, at the request of the President, by estimating the average yield to maturity, on the basis of daily closing market bid quotations or prices during the calendar month next preceding the establishment of such maximum rate of interest, on all outstanding marketable obligations of the United States having a maturity date of fifteen years or more from the first day of such next preceding month, and by adjusting such estimated average annual yield to the nearest oneeighth of 1 per centum;

(2) the maximum financing charges for various classifications of loans as to which financial institutions are insured against losses under title I of the National Housing Act, as amended;

(3) the rate of interest for debentures issued under the National Housing Act, as amended, in connection with defaults upon mortgages insured thereunder: Provided, That no such rate shall, at the time established by the President, exceed the annual rate of interest determined by the Secretary of the Treasury in the manner set forth in numbered clause (1) of this section; (4) the maximum fees and charges permitted to cover the costs of the origination of, including the costs of supervision of non-Government assisted construction loan disbursements in connection with, residential mortgage loans insured or guaranteed under the National Housing Act, as amended, or the Servicemen's Readjustment Act of 1944, as amended, and the maximum special service charges, if any, permitted in connection with those mortgages insured under section 203 of said National Housing Act for which such special service charges may be found to be appropriate by the President on the basis of the low original principal amounts of the mortgages or on the basis of other factors impeding an adequate flow of credit for the type of housing involved and in connection with mortgages insured under sections 220 or 221 of the National Housing Act, as amended; and

(5) the maximum ratios of loan to value and the maximum maturities with respect to residential mortgage loans eligible for assistance under the National Housing Act, as amended, or the Servicemen's Readjustment Act of 1944, as amended, and the maximum dollar amount limitation per room or per family unit with respect to such mortgage loans eligible for assistance under the National Housing Act, as amended: Provided, That no such maximum ratio of loan to value and no such maximum dollar amount limitation in the case of mortgages insured under the National Housing Act, as

amended, shall be in excess of the applicable maximum ratio of loan to value or the applicable maximum dollar amount limitation per room or per family unit prescribed by that Act, and no such maximum maturity shall be in excess of the applicable maximum maturity prescribed by the National Housing Act, as amended, or the Servicemen's Readjustment Act of 1944, as amended: And provided further, That no action by the President pursuant to this section shall apply with respect to loans made, or loans with respect to which a contract of insurance or guaranty or a firm commitment to insure or guarantee has been entered into, under the National Housing Act, as amended, or the Servicemen's Readjustment Act of 1944, as amended, prior to such action.

SEC. 202. The Servicemen's Readjustment Act of 1944, as amended, is hereby amended by adding the following new section at the end of title III:

"SEC. 515. With respect to mortgage loans for the purchase or construction of residential property (not including farm homes) guaranteed, insured, or made pursuant to this title the Administrator shall make such rules and regulations concerning (1) maximum rates of interest for such residential mortgage loans, (2) maximum ratios of loan to value and maximum maturities with respect to such residential mortgage loans, and (3) maximum fees and charges permitted to cover the costs of the origination of, and of the supervision of construction loan disbursements in connection with, such residential mortgage loans as may be necessary to carry out limitations relating thereto established by the President pursuant to the authority vested in him by section 201 of the Housing Act of 1954."

SEC. 203. Section 504 of the Housing Act of 1950, as amended, is hereby repealed.

TITLE III-FEDERAL NATIONAL MORTGAGE ASSOCIATION SEC. 301. Title III of the National Housing Act, as amended, is hereby amended to read as follows:

"TITLE III-FEDERAL NATIONAL MORTGAGE ASSOCIATION

"PURPOSES

"SEC. 301. The Congress hereby declares that the purposes of this title are to establish in the Federal Government a secondary market facility for home mortgages, to provide that the operations of such facility shall be financed by private capital to the maximum extent feasible, and to authorize such facility to

"(a) provide supplementary assistance to the secondary market for home mortages by providing a degree of liquidity for mortgage investments, thereby improving the distribution of investment capital available for home mortgage financing;

"(b) provide special assistance (when, and to the extent that, the President has determined that it is in the public interest) for the financing of (1) selected types of home mortgages (pending the establishment of their marketability) originated under special housing programs designed to provide housing of acceptable standards at full economic costs for segments of the national population which are unable to obtain adequate housing under established home financing programs, and (2) home mortgages generally as a means of retarding or stopping a decline in mortgage lending and home building activities which threatens materially the stability of a high level national economy; and

"(c) manage and liquidate the existing mortgage portfolio of the Federal National Mortgage Association in an orderly manner, with a minimum of adverse effect upon the home mortgage market and minimum loss to the Federal Government.

"CREATION OF ASSOCIATION

"SEC. 302. (a) There is hereby created a body corporate to be known as the 'Federal National Mortgage Association' (hereinafter referred to as the 'Association'), which shall be a constituent agency of the Housing and Home Finance Agency. The Association shall have succession until dissolved by Act of Congress. It shall maintain its principal office in the District of Columbia and shall be deemed, for purposes of venue in civil actions, to be a resident thereof. Agencies or offices may be established by the Association in such other

place or places as it may deem necessary or appropriate in the conduct of its business.

"(b) For the purposes set forth in section 301 and subject to the limitations and restrictions of this title, the Association is authorized to make commitments to purchase and to purchase, service, or sell, any residential or home mortgages (or participations therein) which are insured under this Act, as amended, or which are insured or guaranteed under the Servicemen's Readjustment Act of 1944, as amended: Provided, That (1) no mortgage may be purchased at a price exceeding 100 per centum of the unpaid principal amount thereof at the time of purchase, with adjustments for interest and any comparable items; and (2) the Association may not purchase any mortgage if (i) it is offered by, or covers property held by, a Federal, State, territorial, or municipal instrumentality or (ii) the original principal obligation thereof exceeds or exceeded $12.500 for each family residence or dwelling unit covered by the mortgage.

"CAPITALIZATION

"SEC. 303. (a) The Association shall have nonvoting capital stock, to which the Secretary of the Treasury initially shall subscribe as provided in subsections (d) and (e) of this section. The stock of the Association shall have a par value of $100 per share, and shall not be transferable except on the books of the Association. At the option of the Association such stock shall be retirable at par value at any time, except that retirements of stock (other than stock held by the Secretary of the Treasury) shall not be made if, as a consequence thereof, the amount remaining outstanding would be less than $100,000,000. With respect to such stock held by him, the Secretary of the Treasury shall be entitled to cumuJative dividends for each fiscal year until such stock is retired, at rates determined by him at the beginning of each such fiscal year, taking into consideration the current average interest rate on outstanding marketable obligations of the United States as of the last day of the preceding fiscal year. The Secretary of the Treasury shall permit the retirement of the stock held by him in the manner provided in this section. Funds of the capital surplus and the general surplus accounts of the Association shall be available to retire the capital stock held by the Secretary of the Treasury as rapidly as the Association shall deem feasible. "(b) The Association shall accumulate funds for its capital surplus account from private sources by requiring each mortgage seller to make payments of nonrefundable capital contributions equal to not less than 3 per centum of the unpaid principal amount of mortgages therein involved in purchases or contracts for purchases between such seller and the Association, or such greater percentage as may from time to time be determined by the Association. In addition, the Association may impose charges or fees for its services with the objective that all costs and expenses of its operations should be within its income derived from such operations and that such operations should be fully self-supporting. All earnings from the operations of the Association shall annually be transferred to its general surplus account. At any time, funds of the general surplus account may, in the discretion of the board of directors, be transferred to reserves. All dividends shall be charged against the general surplus account. This subsection (b) shall not apply to the special assistance functions of the Association under section 305 of this title or to the management and liquidating functions of the Association under section 306 of this title.

"(e) Until such time as all the stock held by the Secretary of the Treasury has been retired, the Association shall issue, from time to time, to each mortgage seller its convertible certificates (only in denominations of $100 or multiples thereof) evidencing any capital contributions made by such seller pursuant to subsection (b) of this section, which certificates shall not be transferable except on the books of the Association. Subject to such terms and conditions as may be prescribed by the board of directors, such certificates shall be convertible into capital stock of the Association having an equal par value, but no such conversion shall be permitted or made until such time as all of the outstanding capital stock of the Association held by the Secretary of the Treasury has been retired and the Secretary of the Treasury does not hold any of the obligations of the Association purchased under section 304 (e) of this title. After all of the stock held by the Secretary of the Treasury has been ret red, thAssociation may effect the direct issuance of stock in lieu of and in the same manner as is provided in this subsection for the issuance of convertible certiticates. Such dividends as may be declared by the board of directors in its discre. tion shall be paid by the Association to its stockholders, but in any one fiscal year