lesser of the full principal, and interest, and insurance premium due under the mortgage or 60 percent of the mortgagor's homeownership expense. As a practical matter this deeper subsidy would always be 60 percent of homeownership expense rather than full principal, interest, and premiums. The 60 percent figure, under prevailing interest levels, excluded about two-thirds of the principal payments over the life of the mortgage or, stated another way, excluded about 20 percent of the monthly debt service payments.

The 1971 bill provides for no deep subsidy.

(b) Homeowner's contribution formula.-Existing law requires the homeowner, before receiving any subsidy, to contribute 20 percent of his income toward payments due under the mortgage for principal, interest, mortgage insurance premiums, taxes, and hazard insurance. The 1970 bill added to this list of expenses the estimated cost of utilities in the area and changed the percengage from a flat 20 to 20 percent of the first $3,500 of the homeowner's income and 25 percent of the homeowner's income over $3,500.

The 1971 bill retains the existing formula.

(c) Definition of income.-The 1970 bill rewrote the definition of income in an attempt to eliminate the statutory $300 per minor deduction and the administrative 5 percent deduction.

The 1971 bill would not change existing language affecting the definition of income which gives HUD some administrative discretion in allowing deductions other than those for minors.

(d) Income limits.-The 1971 bill would establish income limits at median income for the area as determined by the Secretary and would authorize the Secretary to establish income ceilings in any area higher or lower than the median income if he found it necessary because of prevailing construction costs, unusually high or low family incomes, or other factors.

The 1970 bill provided that 20 percent of the contract funds could be used in connection with median income limits, and the remainder in connection with income limits at 80 percent of median. In order to accommodate areas with unusually low income median income in any area was deemed not less than 60 percent of the national median.

"

(e) Existing housing allocation.-Existing law is 30 percent, 1970 bill is 15 percent. We propose to retain existing law in the 1971 bill.

(f) Owner-occupant rehabilitation.-The 1970 bill allowed owner-occupants of single-family homes in urban renewal and similar areas to rehabilitate and refinance with homeownership subsidy as part of an effort to curtail the 312 loan program.

The 1971 bill returns to existing law and contains to similar authority.

12. Rental assistance (sec. 502). The 1971 bill makes the same change in the income limits as for the homeownership program and retains existing law with respect to the rent-to-income ratio and the definition of income.

The 1970 bill attempted to consolidate the rent supplement program into the private rental program. The 1970 bill authorized a maximum subsidy of the full principal, interest, and premium with respect to all units in a "special" project and with respect to 20 percent of the units in a "standard" project. Special projects could be allocated no more than 20 percent of the contract funds. In special projects subsidy could be “aggregated", that is, if the maximum subsidy was not needed for one unit it could be applied to another unit.

The 1971 bill would not retain the 1970 categories of "standard" and "special" project and would parallel existing subsidy techniques by providing that up to 20 percent of the units in any assisted project could be further subsidized in the same amount that the rent supplement program would have provided.

13. Transition between National Housing Act and Mortgage Credit Assistance Act. The 1970 bill delayed the effective date of the MCAA by 180 days. The 1971 bill leaves the effective date to the Secretary. The Secretary would also be directed to provide for the orderly transfer from the National Housing Act to the new Act "in order to assure continuity of efficient program activity and to provide adequate opportunity for necessary administrative and legislative revisions."

In addition, the new Act would be cited as the "Revised National Housing Act" to enable State laws which merely refer to the National Housing Act (and not to specific section numbers) to be interpreted as also applying to the revised Act and to make it clearer to State legislators that they were dealing with basically the same Federal statutory authorities.

14. Other provisions of title I of the 1970 bill.-Provisions which would have imposed a rent-to-income ratio on existing 202 and 221(d) (3) projects are not retained.

Provisions in the 1970 bill exempting FHA and VA loans from State usury laws are not retained because of the drop in interest rates.

VOLUME OF INSURANCE ACTIVITY UNDER VARIOUS PROVISIONS OF THE NATIONAL HOUSING ACT

COMPARISON OF PROPOSED INCOME LIMITS BASED ON MEDIAN INCOMES WITH SECTION 235-236 INCOME

COMPARISON OF PROPOSED INCOME LIMITS BASED ON MEDIAN INCOMES WITH SECTION 235-236 INCOME

1 Cities selected at random from all sections of the country, subject to availability of median incomes and income limits. 2 For a 4-person family.

3 Source: HPMC-HFA 4400.30A, dated Sept. 1, 1970.

4 Source: FHA 4400.36, dated March 1970.

COMPARISON OF PROPOSED INCOME LIMITS BASED ON MEDIAN INCOMES WITH SECTION 235-36 INCOME LIMITS

DETAILED CROSS REFERENCE TABLE SHOWING PROVISIONS OF NATIONAL HOUSING ACT ADOPTED, CHANGED, OR OMITTED FROM PROPOSED REVISED NATIONAL HOUSING ACT

4.

Contained in sec. 201(d).

6. Contained in sec. 8.