Agency testified last year recommending to the Congress that it either vest this type of responsibility in it or else entirely eleminate the Housing Agency from the program; and (c) that the effect on other FHA housing (such as that built under the Wherry Act or title IX) ought not to be the one controlling factor in programing additional housing, but it ought to be a factor which should be considered among others.

Thus, where the military department needs onpost family housing for the use of airplane crews which are on a 24-hour alert, a large number of vacancies in other Wherry Act housing or title IX defense housing 10 miles away should not prevent the additional housing from being provided. However, where ordinary family housing is being proposed, the mere fact that it would be somewhat better in design or location does not justify disregarding the effect of the proposed new housing on the older housing, and on the Federal Government's contingent mortgage insurance liability.

Senator Sparkman, Chairman of the Housing Subcommittee of the Senate Committee on Banking and Currency, in a statement set forth on pages 22872288 of the February 16 Congressional Record, fully supports the position of the Housing Agency. He stated:

"Thus, we have this paradox: While there are increasing instances of default under the old Wherry program, there is an increasing demand for new housing units under the new military housing program.

"I think it is high time that someone issued a word of warning.

"I would caution the military that, to the widest extent possible, existing projects should be utilized. These projects were undertaken often at the request of the military and involved not only the investment by private citizens but also the contingent liability of the Government. We cannot afford to discard existing housing simply because we might be able to get something new.

"I would also caution the military to exercise the greatest care in locating new units, and in certifying to the need for them. While the Secretary of Defense is no longer required to certify that new units are to be located at permanent installations, we are all aware that Congress had no intention of locating new housing units at military installations which 12 months from now may be ghost towns.

"I would also caution the FHA that it is not required merely to rubber-stamp the demands of the military. It is true the military can override the FHA under certain conditions, but that does not relieve the FHA from the responsibility of reporting its own estimate of what the need is."

ANALYSIS OF HOUSING AMENDMENTS OF 1956

(S. 3302 and H. R. 9537, 84th Cong.)

TITLE I-FHA INSURANCE PROGRAMS

SECTION 101. FHA TITLE I HOME REPAIR AND IMPROVEMENT PROGRAM

This section would amend title I of the National Housing Act, which authorizes the Federal Housing Administration to insure qualified lending institutions against loss within prescribed limits on loans made to finance alterations, repairs, and improvements in connection with existing structures and the building of new nonresidental structures. FHA's liability is limited to 90 percent of loss on each individual loan and to 10 percent of all title I loans made by a lending institution. The proposed amendments would

(1) Eliminate the expiration date of the program and thus make title I a regular permanent authorization;

(2) Increase the maximum amounts of the loans which can be insured under the program; and

(3) Permit the Federal Housing Commissioner to increase the maximum term of loans (other than special loans on multifamily structures) which can be insured under the program.

(1) Removal of termination date of title I program

Under the existing provisions of title I of the National Housing Act the FHA has authority to insure home repair and improvement loans made by lending institutions up to September 30, 1956. This section would remove that termination date so that the authority to insure loans under title I would be on the

same permanent basis as the authority to insure home mortgages under title II of the Act.

Title I has been in operation more than 20 years and during that time has demonstrated its basic soundness. Approximately 19 million loans amounting to more than $8 billion have been insured, and the program is therefore a vital part of the Government's overall housing operations. It it an important element in the urban renewal program and an aid to the programs of private organizations aimed at preventing slums and blight.

The limited periodic extensions of title I in the past have caused a great deal of uncertainty and confusion among the lenders who participate in the program. A considerable amount of organizational and procedural planning by lending institutions is essential to their operations under the program. The FHA title I regulations require that lenders make extensive investigations of dealers from whom they intend to purchase home improvement notes and set up comprehensive files supporting their dealer approvals. Lenders also are required to have departmentalized facilities for investigating credits and making collections. When faced with recurring expiration dates of the title I program it is difficult for lenders to engage in long-range planning for such operations. On several occasions the passage of continuing legislation has been delayed until the expiration date was actually reached or close at hand and there was considerable confusion in the issuing of proper instructions from approved institutions to their participating branches and dealers. FHA has also found it extremely difficult to keep the 12,000 lenders participating in the program properly advised under such circumstances.

Legislation removing the expiration date and placing title I on the same permanent basis as the mortgage insurance authorizations in sections 203 and 207 of the National Housing Act (the regular FHA sales housing and rental housing programs) would assure the lenders of continuity of operations under the title I program and eliminate the confusion and expense which attend the expiration of the program.

(2) Increase in the maximum amounts of insured loans

The maximum amounts of loans which can be insured by the Federal Housing Administration under title I would be increased from $2,500 to $3,500 for home improvement and nonresidential loans, and from $10,000 to $15,000 for loans for the improvement of structures housing 2 or more families. A provision would also be added restricting the maximum amount of a loan for the improvement of 2-or-more-family structures to an average amount of $2,500 per family unit. This $2,500 average limit is the present limit for such loans under regulations issued by the Federal Housing Administration. As it applies to the overall structure rather than to the specific unit, the property owner may borrow, for example, $5,000 to improve a 2-family structure and expend $3,000 to improve 1 unit and $2,000 to improve the other.

These proposed increases in the maximum amounts of title I loans are needed to compensate in part for increases in labor and material costs since the time these limits were established (in 1939 for single-family homes).

(3) Increase in marimum term for home improvement and nonresidential loans The Federal Housing Commissioner would be authorized to increase the maximum term of title I home improvement and nonresidential loans from 3 years (the present limit) up to 5 years, if he determines that such increase is in the public interest after considering the general effect of the increase upon borrowers, the building industry and the general economy.

This increase in the term of the loans would permit, of course, smaller monthly payments by the borrowers. The repayment scheduled on a $2,500 loan for a term of 3 years (the present statutory limit) calls for a monthly payment of $79.85. It would generally be difficult for the home owner of average income to exceed this monthly payment to any great extent. It is proposed, therefore, that with the increase in the maximum amount of the loan to $3,500, the maximum term should correspondingly be permitted to be increased to as much as 5 years in order to keep the monthly payments within the financial capacities of families of average income. Under the maximum term which would be permitted by the proposed amendment, a homeowner who utilized the full amount of $3,500 would be able to repay the loan in monthly payments of approximately $72. The present maximum maturity of 7 years for loans to improve structures housing two or more families would not be increased even though the maximum amount of the loan would be increased from $10,000 to $15,000. No increase

is proposed in the maximum term of such loans because most of these properties are income producing and should provide sufficient income to liquidate a loan of this type within the 7-year maximum period presently provided. (4) Importance of title I amendments to homeowners and urban renewal program The amendments liberalizing title I and making it a permanent program, would result in more widespread lender participation in the program. Many homeowners would then be able to obtain loans for home repair and modernization which cannot now be financed. Also, in parts of the country where the title I program is not now in operation, new participants in the program would enable homeowners in general to obtain such loans at interest charges lower than now available. Reports received by FHA from retail distributors of home improvement materials and appliances indicate almost without exception that the lenders who make home repair loans which are not under the FHA title I program require higher interest rates than those charged under the title I program. In addition, many lending institutions which operate their home-repair loan programs without FHA insurance protection will not make such loans beyond a certain limited area.

Home repair and rehabilitation obviously constitute a major part of the urban renewal programs being undertaken by cities throughout the country. The more liberal terms proposed for title I should extend the effectiveness of these programs. The present $2,500 ceiling is not adequate for the thoroughgoing rehabilitation of homes contemplated by urban renewal. In addition to the importance of the improvements financed with the title I loans, the title I aid is important in the upgrading of neighborhoods where that is essential to FHA mortgage insurance under section 220 or other programs in urban renewal areas. Over 50 separate associations, organizations and companies are carrying out and planning coordinated programs to promote home rehabilitation and improvements and thus prevent slums and blight. The amendments to the title I program would make it more useful in all these efforts.

SECTION 102. HAZARD INSURANCE ON FHA ACQUIRED PROPERTIES

Section 102 would add a new section 10 to the National Housing Act which would authorize the Federal Housing Commissioner to establish a fire and a hazard loss fund for self-insurance purposes. The fund would be available to provide such fire and hazard risk coverage as the Commissioner determines to be appropriate with respect to real property acquired under foreclosures or otherwise and held by him under any of the FHA insurance programs. For the purpose of operating the fund the Commissioner would be authorized to transfer moneys from any one or more of the several FHA insurance funds. In addition, he could require payment of premiums or charges from any of such existing funds. The Commissioner would also be authorized to purchase additional insurance protection if he determined it necessary, and to provide for reinsurance of any risk assumed by the fire and hazard loss fund. This provision grows out of an informal suggestion of the General Accounting Office that the FHA should examine the possibilities of economy in developing a method of intra-Agency pooling of risks in lieu of commercial insurance against fire and hazard risks.

At the present time the FHA holds properties valued at more than $90 million. While the inventory of Commissioner-held properties is constantly changing by virtue of current acquisitions and sales, the value of such properties for the past 3 years has ranged upward from $60 million. From late in 1937 until September 30, 1955, FHA expended an aggregate of nearly $1.7 million in hazard premiums covering FHA-held properties. During the same period, claims aggregating $161,574 were paid under these insurance arrangements, or 9.5 percent of the amount of premium paid. During the 5 years and 10 months ending September 30, 1955, FHA hazard premium payments totaled $1,442,000 and losses paid aggregated $111,000-a loss ratio of under 8 percent.

While recognizing that the foregoing loss experience has been unusually favorable and that greater losses in FHA property ownership must be anticipated for the future, the creation of a system of self-insurance which would permit the spreading of hazard loss expenses among FHA-owned properties, without depending entirely on commercial hazard insurance arrangements, would accomplish a substantial economy.

Housing for the elderly-FHA mortgage insurance

To assist private enterprise in the provision and rehabilitation of housing for the elderly, the National Housing Act would be amended to grant more favor

able FHA mortgage insurance terms for both sales housing and rental housing for elderly persons.

SECTION 103. FHA SALES HOUSING FOR THE ELDERLY

Section 203 of the National Housing Act, which authorizes the regular FHA sales housing mortgage insurance program, would be amended to provide that in cases where the mortgagor is a person 60 years of age or older, a third party (a person or a corporation) satisfactory to the Federal Housing Commissioner may provide the downpayment required under that section. Combined with existing authority, a third party could then make the downpayment and become a cosigner of the mortgage note for an elderly person lacking adequate credit. This would be particularly helpful where the elderly mortgagor does not have reasonable prospects of an assured income over the term of the mortgage.

SECTION 104. FHA RENTAL HOUSING FOR THE ELDERLY

Section 207 of the National Housing Act, which covers the regular FHA rental housing mortgage insurance program, would be amended by adding two special provisions to help finance the construction or rehabilitation of rental housing for the elderly.

(1) An amendment would be added to provide liberal mortgage insurance for multifamily housing where at least 25 percent of the units in the project are expressly designed for the use of the elderly and a priority of occupancy for these units is given to the elderly throughout the life of the mortgage insurance contract. The maximum amount of the mortgage in these cases would be 90 percent (instead of the regular 80 percent) of value where the mortgage does not exceed $7,200 per family unit. Similar special mortgage terms are now available where the project meets these maximum amounts and, in addition, the units in the project average at least 2 bedrooms. Under the amendment, these special terms would be available for units built for elderly persons regardless of the average number of bedrooms.

This amendment is designed to enable private sponsors seeking to serve the low-rental market to obtain favorable financing terms on projects intended to integrate special housing for elderly tenants into regular housing for families of comparable incomes. Differentiation of design for the needs of the elderly would be provided, but would be held to a practicable minimum, consistent with costs, obtainable rentals, and the requirements of the elderly.

(2) A second amendment would be added to provide more liberal mortgage insurance for multifamily housing to be designed and held entirely for elderly persons by nonprofit organizations approved by the FHA as to financial responsibility. The maximum amount of the mortgage in these cases would be $8,100 per dwelling unit and the mortgage could be 90 percent of replacement cost instead of 90 percent of value. It is to be noted that $8,100 is 90 percent of a $9,000 cost per unit, which may be compared with the maximum mortgage of $7,200 (80 percent of $9,000 value per unit) permitted for projects averaging less than 4 rooms per unit in other section 207 projects.

This amendment would establish a new operation under section 207 which would provide more favorable financing terms for structures specifically designed for the elderly. The use of replacement cost in determining maximum mortgage amount is recommended in order to allow for the full cost of providing special features in housing for the elderly, such as small living units, central dining facilities and reading rooms, specially designed bathrooms, doorways, nonskid floors, lighting, etc. By providing that insured mortgages on such projects would be limited to financially responsible nonprofit sponsor organizations, FHA would look to the sponsor's total resources for payment of the mortgage and its ability to operate the property and not primarily to the income generated by the property nor the tenants occupying it. This would allow financially able associations and institutions to build housing for the elderly which they might provide to the individual without having that individual's income necessarily cover the full operating and amortization cost of the living unit. Thus a sponsoring organization could aid its elderly members without the operation being a subsidized project on the part of the Federal Government. Over the country a number of such organizations have undertaken projects of a similar nature but of limited scope due to difficulty in financing. This includes such organizations as fraternal groups, churches, labor unions, and retired teachers' associations. Projects under this section could

be in the form of elevator-type structures, row houses, and even separate dwellings if they are grouped in a contiguous project. The rehabilitation provisions of section 207 would provide for the remodeling of existing structures such as older apartment and hotel buildings.

This new FHA housing program for the elderly is not designed to foster communities for the elderly but rather to provide housing adapted for them within the communities where they would normally reside.

The potential market for housing on the part of elderly people has expanded tremendously in the last few decades and is headed for even greater expansion in the years ahead. There are approximately 13 million people age 65 and older in the population, and estimates are that the number will increase to over 26 million in the next 40 years, assuming no increase in average longevity. This, therefore, is a very conservative estimate of the expansion of this segment of the population. Single persons, rather than couples, make up a majority of those in the age group 65 years and older, and women considerably outnumber men. Just over 60 percent of urban families in which the head is 65 or more own their own homes, and four-fifths of these are without mortgage debt. The problem, therefore, of providing older people with privately owned homes is of much less importance, it would seem, than providing housing of the multifamily type with small units and special features adapted particularly to the needs of the older person.

SECTION 105. GENERAL MORTGAGE INSURANCE AUTHORIZATION

The general mortgage insurance authorization for FHA would be increased by this section to make available $3 billion of the authorization for the next fiscal year. The balance of the present authorization (estimated to be about $2 billion at the end of this fiscal year) would be included in that amount. The FHA general mortgage insurance authorization (contained in section 217 of the National Housing Act) covers all of the FHA mortgage insurance programs except the new military housing program under title VIII.

Budget estimates for 1957, excluding the effect of amendments contained in this bill, project a net usage of slightly over $2.7 billion. This results from estimated net increases in outstanding insurance in force and commitments to insure aggregating $3.1 billion-the most important increases occurring under section 203 ($2.2 billion) and sections 220 and 221 ($0.5 billion)—as partially offset by $0.4 billion in decreases in outstanding insurance under title VI and other miscellaneous programs which are not open for new business. The remaining margin within the proposed $3 billion authorization is estimated to be sufficient to care for increases in business attributable to the proposed amendments until more exact data can be presented to the Congress at its next session.

This section would also make it clear that the special insurance authorization for the new military housing mortgage insurance program authorized in 1955 (title VIII) of the National Housing Act, as amended, was not intended to include mortgages insured pursuant to the provisions of that title in effect prior to the enactment of the Housing amendments of 1955. This would conform to the intent expressed in the legislative history of those amendments in which it was made clear that the new title VIII authorization of $1,363,500,000 was intended to cover about 100,000 new units with mortgages averaging up to $13,500 per unit exclusive of the nonresidential facilities.

SECTION 106. LIBERALIZATION OF SECTION 221 LOW-COST HOUSING FOR DISPLACED

FAMILIES

This section would make the FHA section 221 program for the housing of displaced families more workable by increasing the maximum amount and maximum maturity of mortgages (for both single-family homes, and for multifamily structures of nonprofit corporations) eligible for FHA insurance under section 221 of the National Housing Act, as follows:

(1) The maximum dollar amount is now $7,600 per dwelling, except that the Federal Housing Commission may increase this amount up to $8,600 in any geographical area where he finds that cost levels so require. This section of the bill would increase these maximum amounts to $8,000 and $10,000, respectively. (2) The maximum ratio of loan to value is now 95 percent and, in the case of single family homes, 5 percent of estimated cost must be paid (in cash or its equivalent) by the mortgagor at the time of insurance. In place of that provision, this section of the bill would permit the mortgage to equal the value of