HOUSING AMENDMENTS OF 1949

MONDAY, JULY 25, 1949

HOUSE OF REPRESENTATIVES,

COMMITTEE ON BANKING AND CURRENCY,

Washington, D. C.

The committee met, pursuant to call, at 10 a. m., the Honorable Brent Spence (chairman) presiding.

Present: Messrs. Spence, Brown, Patman, Rains, Buchanan, Multer, McKinnon, Mitchell, O'Hara, Gamble, Smith, Kunkel, Talle, McMillen, Cole, Hull, and Nicholson.

The CHAIRMAN. The committee will be in order.

We have met this morning to consider H. R. 5631, the National Housing Act amendments of 1949.

(The bill above referred to is as follows:)

(H. R. 5631, 81st Cong., 1st sess.]

A BILL To amend the National Housing Act, as amended, and for other purposes

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That this Act may be cited as the "Housing Amendments of 1949."

TITLE I-AMENDMENTS OF NATIONAL HOUSING ACT

SEC. 101. Section 2 of the National Housing Act, as amended, is hereby amended

(1) by striking out of the first sentence of subsection (a) thereof "September 1, 1949" and inserting in lieu thereof "July 1, 1952";

(2) by striking out the last sentence of subsection (a) and inserting in lieu thereof the following: "The aggregate amount of principal obligations of all loans, advances of credit, and obligations purchased with respect to which insurance may be heretofore or hereafter granted under this section and outstanding at any one time shall not exceed $1,250,000,000";

(3) by striking out of clause numbered (1) in subsection (b) “$4,500” and inserting in lieu thereof "$3,000";

(4) by striking out of clause numbered (2) in subsection (b) the words "residential or"; and

(5) by striking out of subsection (f) the word "title" in each place it appears therein and inserting in lieu thereof the word "section".

SEC. 102. Title I of said Act, as amended, is hereby amended by adding at the end thereof the following new section:

"INSURANCE OF MORTGAGES

"SEC. 8. (a) To assist in providing adequate housing for families of low and moderate income, particularly in suburban and outlying areas, this section is designed to supplement systems of mortgage insurance under other provisions of the National Housing Act by making feasible the insurance of mortgages covering properties in areas where it is not practicable to obtain conformity with many of the requirements essential to the insurance of mortgages on housing in built-up urban areas. The Commissioner is authorized, upon application by the mortgagee, to insure as hereinafter provided, any mortgage (as defined in section 201 of this Act) offered to him which is eligible for insurance as hereinafter provided, and,

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upon such terms as the Commissioner may prescribe, to make commitments for the insuring of such mortgages prior to the date of their execution or disbursement thereon: Provided, That the aggregate amount of principal obligations of all mortgages insured under this section and outstanding at any one time shall not exceed $500,000,000.

"(b) To be eligible for insurance under this section, a mortgage shall

"(1) have been made to, and be held by, a mortgagee approved by the Commissioner as responsible and able to service the mortgage properly;

"(2) involve a principal obligation (including such initial service charges, appraisal, inspection, and other fees as the Commissioner shall approve) in an amount not to exceed $4,750 and not to exceed 85 per centum of the appraised value as of the date the mortgage is accepted for insurance, of a property, urban, suburban, or rural upon which there is located a dwelling designed principally for a single-family residence, the construction of which is begun after July 1, 1949, and which is approved for mortgage insurance prior to the beginning of construction: Provided, That the mortgagor shall be the owner and occupant of the property at the time of insurance and shall have paid on account of the property at least 5 per centum of the appraised value in cash or its equivalent, or shall be the builder constructing the dwelling, in which case the principal obligation shall not exceed $4,250 and shall not exceed 85 per centum of the appraised value of the property: And provided further, That the Commissioner finds that the project with respect to which the mortgage is executed is an acceptable risk, giving consideration to the need for providing adequate housing for families of low and moderate income particularly in suburban and outlying areas;

"(3) have a maturity satisfactory to the Commissioner but not to exceed thirty years from the date of insurance of the mortgage;

"(4) contain complete amortization provisions satisfactory to the Commissioner requiring periodic payments by the mortgagor not in excess of his reasonable ability to pay as determined by the Commissioner;

"(5) bear interest (exclusive of premium charges for insurance and service charges, if any) at not to exceed 5 per centum per annum on the amount of the principal obligation outstanding at any time;

"(6) provide, in a manner satisfactory to the Commissioner, for the application of the mortgagor's periodic payments (exclusive of the amount allocated to interest and to the premium charge which is required for mortgage insurance as hereinafter provided and to the service charge, if any) to amortization of the principal of the mortgage; and

"(7) contain such terms and provisions with respect to insurance, repairs, alterations, payment of taxes, service charges, default reserves, delinquency charges, foreclosure proceedings, anticipation of maturity, and other matters as the Commissioner may in his discretion prescribe.

"(c) The Commissioner is authorized to fix a premium charge for the insurance of mortgages under this section, but in the case of any mortgage, such charge shall not be less than an amount equivalent to one-half of 1 percentum per annum nor more than an amount equivalent to 1 percentum per annum of the amount of the principal obligation of the mortgage outstanding at any time, without taking into account delinquent payments or prepayments. Such premium charges shall be payable by the mortgagee, either in cash or in debentures issued by the Commissioner under this section at par plus accrued interest, in such manner as may be prescribed by the Commissioner: Provided, That the Commissioner may require the payment of one or more such premium charges at the time the mortgage is insured, at such discount rate as he may prescribe not in excess of the interest rate specified in the mortgage. If the Commissioner finds, upon the presentation of a mortgage for insurance and the tender of the initial premium charge or charges so required, that the mortgage complies with the provisions of this section, such mortgage may be accepted for insurance by endorsement or otherwise as the Commissioner may prescribe. In the event that the principal obligation of any mortgage accepted for insurance under this section is paid in full prior to the maturity date, the Commissioner is further authorized, in his discretion, to require the payment by the mortgagee of an adjusted premium charge in such amount as the Commissioner determines to be equitable, but not in excess of the aggregate amount of the premium charges that the mortgagee would otherwise have been required to pay if the mortgage had continued to be insured until such maturity date; and in the event that the principal obligation is paid in full as herein set forth, the Commissioner is authorized to refund to the mortgagee for the account of the mortgagor all, or such portion as he shall determine to be equitable, of the current unearned premium charges theretofore paid.

"(d) The Commissioner may, at any time under such terms and conditions as he may prescribe, consent to the release of the mortgagor from his liability under the mortgage or the credit instrument secured thereby, or consent to the release of parts of the mortgaged property from the lien of the mortgage.

“(e) Any contract of insurance heretofore or hereafter executed by the Commissioner under this section shall be conclusive evidence of the eligibility of the mortgage for insurance, and the validity of any contract of insurance so executed shall be incontestable in the hands of an approved mortgagee from the date of the execution of such contract, except for fraud or misrepresentation on the part of such approved mortgagee.

"(f) In any case in which the mortgagee under a mortgage insured under this section shall have foreclosed and taken possession of the mortgaged property in accordance with the regulations of, and within a period to be determined by, the Commissioner, or shall, with the consent of the Commissioner, have otherwise acquired such property from the mortgagor after default, the mortgagee shall be entitled to receive the benefits of the insurance as provided in section 204 (a) of this Act with respect to mortgages insured under section 203 (b) (2) (D) of this Act. "(g) Subsections (c), (d), (e), (f), (g), and (h) of section 204 of this Act shall be applicable to mortgages insured under this section except that all references therein to the Mutual Mortgage Insurance Fund or the Fund shall be construed to refer to the Title I Housing Insurance Fund, and all references therein to section 203 shall be construed to refer to this section: Provided, That debentures issued in connection with mortgages insured under this section 8 shall have the same tax exemption as debentures issued in connection with mortgages insured under section 203 of this Act.

"(h) There is hereby created a Title I 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 directed to transfer immediately to such Fund the sum of $5,000,000 from the account in the Treasury of the United States established pursuant to the provisions of section 2 (f) of this title.

“(i) (1) Moneys in the Title I 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 the Title I Housing Insurance 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.

"(2) 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 Title I 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 the Title I Housing Insurance Fund."

SEC. 103. Section 203 (a) of said Act, as amended, is hereby amended by striking out of the proviso "$5,300,000,000" and inserting in lieu thereof "$5,500,000,000", and by striking out "$5,500,000,000" and inserting in lieu thereof "$7,000,000,000".

SEC. 104. (a) Section 203 (b) (2) of said Act, as amended, is hereby amended to read as follows:

"(2) Involve a principal obligation (including such initial service charges, appraisal, inspection, and other fees as the Commissioner shall approve) in

an amount

"(A) not to exceed $16,000 and not to exceed 80 per centum of the appraised value (as of the date the mortgage is accepted for insurance) of a property upon which there is located a dwelling or dwellings designed principally for residential use for not more than four families in the aggregate, irrespective of whether such dwelling or dwellings have a party wall or are otherwise physically connected with another dwelling or dwellings, or

"((B) Repealed.)

"(C) not to exceed $9,450 and not to exceed the sum of (i) 95 per centum of $7,000 of the appraised value (as of the date the mortgage is accepted for insurance) and (ii) 70 per centum of such value in excess of $7,000 and not in excess of $11,000, of a property, urban, suburban, or rural, upon which there is located a dwelling designed principally for a single-family residence the construction of which is begun after July 1, 1949, and which is approved for mortgage insurance prior to the beginning of construction: Provided, That with respect to mortgages insured under this paragraph the mortgagor shall be the owner and occupant of the property and shall have paid on account of the property at least 5 per centum of the appraised value, or such larger amount as the Commissioner may determine, in cash or its equivalent, or

"(D) not to exceed $6,650 and not to exceed 95 per centum of the appraised value (as of the date the mortgage is accepted for insurance) of a property, urban, suburban, or rural, upon which there is located a dwelling designed principally for a single-family residence the construction of which is begun after July 1, 1949, and which is approved for morgage insurance prior to the beginning of construction: Provided, That if the Commissioner finds that it is not feasible, within the aforesaid dollar amount limitation, to construct dwellings containing three or four bedrooms without sacrifice of sound standards of construction, design, and livability, he may increase such dollar amount limitation by not exceeding $950 for each additional bedroom (as defined by the Commissioner) in excess of two contained in such dwelling if he finds that such dwelling meets sound standards of design and livability as a three-bedroom unit or a four-bedroom unit, as the case may be, but the principal obligation shall not exceed, in any event, $8,550: Provided further, That with respect to mortgages insured under this paragraph the mortgagor shall be the owner and occupant of the property and shall have paid on account of the property at least 5 per centum of the appraised value in cash or its equivalent, or shall be the builder constructing the dwelling in which which case the principal obligation shall not exceed $5,950 for a one-bedroom unit or a two-bedroom unit, $6,800 for a three-bedroom unit, or $7,650 for a unit having four or more bedrooms, and shall not exceed 85 per centum of the appraised value of the property: And provided further, That the Commissioner may by regulation provide that the maximum dollar amount limitations in this paragraph (D) shall be fixed at lesser amounts where he finds, for any section or locality or for the country as a whole or at any time, that it is feasible, within such lesser dollar amount limintations, to construct dwellings for families of lower income without sacrifice of sound standards of construction, design, and livability."

(b) The repeal of section 203 (b) (2) (B) of said Act, as provided by subsection (a) of this section, shall not affect the right of the Commissioner to insure under said section any mortgage (1) for the insurance of which application has been filed prior to the effective date of this Act, or (2) with respect to a property covered by a mortgage insured under any section of said Act.

SEC. 105. Section 204 (a) of said Act, as amended, is hereby amended by inserting in the second proviso in the last sentence after the words "of this Act,' the following: "or under section 213 of this Act,".

SEC. 106. Section 207 (c) of said Act, as amended, is hereby amended

(1) by striking out the second proviso in paragraph numbered (2), and inserting in lieu thereof the following: "And provided further, That, notwithstanding any of the provisions of this paragraph numbered (2), a mortgage with respect to a project to be constructed in a locality or a metropolitan area where, as determined by the Commissioner, there is a need for new dwellings for families of lower income at rentals comparable to the rentals proposed to be charged for the dwellings in such project may involve a principal obligation in an amount not exceeding 90 per centum of the amount which the Commissioner estimates will be the value of the project when the proposed improvements are completed, and”; (2) by amending paragraph numbered (3) to read as follows:

(3) not to exceed $8,100 per family unit for such part of such property or project as may be attributable to dwelling use, except that with respect to mortgages insured under the provisions of the second proviso of paragraph numbered (2) of this subsection, the mortgage may involve a principal obligation not to exceed $6,300 per family unit for such part of such property or project as may be attributable to dwelling use."; and

(3) by striking out of the second sentence the words "date of the insurance" and substituting in lieu thereof the words "beginning of amortization".

SEC. 107. Section 207 (f) of said Act, as amended, is hereby amended by striking out "section 210" wherever appearing therein and inserting in lieu thereof "section 210 and section 213".

SEC. 108. Section 207 (q) of said Act, as amended, is hereby amended by inserting "and section 213 of this title," after the words "this section," and by inserting the words "and in said section 213" after the words "in said proviso". SEC. 109. Section 211 of said Act, as amended, is hereby amended by striking out the period and adding a comma and the following: "and in view of possible unemployment, economic conditions, or misfurtune beyond the control of the mortgagor, where the mortgage is insured under this title or title VI or section 8 of title I and covers a dwelling or dwellings designed principally for residential use for not more than four families, and notwithstanding any limitations contained in this title or title VI or section 8 of the title I with respect to the maximum maturity, the Commissioner is authorized and directed to issue rules or regulations shall permit provisions in the mortgage in form satisfactory to him with respect to the deferment of monthly payments and may, in his discretion, require such provisions: Provided, That any such deferments shall not in the aggregate result in an extension of the maturity of the mortgage for a period of more than three years."

SEC. 110. Section 212 (a) of said Act, as amended, is hereby amended by deleting the words "a mortgage" immediately after the words "effective date of this section," and by inserting in lieu of the words deleted the following: "or under section 213 of this title, or under title VII pursuant to any application filed subsequent to August 31, 1949, a mortgage or investment”.

SEC. 111. Title II of said Act, as amended, is hereby amended by adding at the end thereof the following new section reading as follows:

"COOPERATIVE HOUSING INSURANCE

"SEC. 213. (a) In addition to mortgages insured under section 207 of this title, the Commissioner is authorized to insure mortgages as defined in section 207 (a) of this title (including advances on such mortgages during construction), which cover property held by

"(1) a nonprofit cooperative ownership housing corporation the permanent occupancy of the dwellings of which is restricted to members of such corporation; or

“(2) a nonprofit corporation organized for the purpose of construction of homes for members of the corporation;

which corporations are regulated or restricted for the purposes and in the manner provided in paragraphs numbered (1) and (2) of subsection (b) of section 207 of this title.

"(b) To be eligible for insurance under this section a mortgage on any property or project of a corporation of the character described in paragraph numbered (1) of subsection (a) of this section shall involve a principal obligation in an

amount

"(1) not to exceed $5,000,000;

"(2) not to exceed $8,100 per family unit for such part of such property or project as may be attributable to dwelling use, except that if the Commissioner finds that the needs of individual members of the corporation could more adequately be met by per room cost limitations, the mortgage may involve a principal obligation in an amount not to exceed $1,800 per room for such part of such project to be occupied by such members: Provided, That the maximum dollar amount prescribed in this paragraph (2) shall be increased by $9 per family unit or $2 per room, as the case may be, for each 1 per centum of the membership of the corporation which consists of veterans of World War II; and

"(3) not to exceed 90 per centum of the amount which the Commissioner estimates will be the replacement cost of the property or project when the proposed improvements are completed, except that such maximum mortgage amount shall be increased by one-tenth of 1 per centum of such estimated cost for each 1 per centum of the membership of the corporation which consists of veterans of World War II: Provided, That the maximum mortgage amount shall not be increased as provided in paragraph (2) or paragraph (3) of this subsection unless evidence satisfactory to the Commissioner is furnished to assure that the benefit of such increase will accrue to the members of the corporation who are veterans of World War II.