Flexible Mortgage Amounts One of the more significant changes proposed is to eliminate the nationwide dollar limits on mortgage amount strewn throughout the National Housing Act (other than title III home improvement and mobile home loans). The principle of having dollar mortgage limits is retained (except for overall project limits), but the mechanism for establishing them would be transferred from a statutory amendatory process to a formal administrative process. The practical result of this change would be to permit the determination of limits on a relatively narrow geographical basis and on a time schedule more in conformity with actual swings in the costs of producing dwelling units. The amount of any mortgage under the subsidized homeownership and rental programs (sections 402 and 502) could not exceed by more than 10 percent the "prototype cost" established by the Secretary, at least annually, for the area in which the property covered by the mortgage is located. Unsubsidized residential mortgages (sections 401 and 501) could not exceed the prototype cost figure by up to 100 percent, unless a lower percentage was established by the Secretary. For multifamily structures, the limitation on mortgage amount would be based on the sum of the prototype cost figures applicable to the various sized units in the project and would be applicable only to that part of the mortgage attributable to the portion of the property to be used for dwelling use. (Existing law also exempts nondwelling portions of the project from per unit limitations on mortgage amount.) The prototype cost of different sized homes and multifamily dwelling units in each area would be determined by establishing for each area the total construction cost of a standard-sized new single-family home (and a standard-sized dwelling unit in a new multifamily structure) based on plans and specifications drawn for dwellings suitable for occupancy by persons receiving homeownership or rental assistance under section 402 or 502 of the Act. Construction costs could be determined separately for detached units, row houses, elevator structures, walk-up structures, or specially designed structures such as those for the elderly or handicapped. In determining prototype costs, the Secretary would be directed to take into account the extra durability required for economical maintenance of assisted housing, the provision of amenities which will provide safe and healthy home life, and good design and architectural standards. On the basis of these determinations of construction cost for the standardsized home (and standard-sized dwelling unit in a multifamily structure) the Secretary would establish the construction cost of dwellings of various sizes (i.e., more or fewer bedrooms). For example, if the estimated construction cost of a prototype unit in area "X" is $14,000 and the estimated land cost is 25 percent of the construction cost, the prototype cost would equal: Prototype cost construction cost x land cost ratio The maximum insurable subsidized (section 402) single-family home The maximum insurable unsubsidized (section 401) single-family home The proposed procedure for establishing mortgage limits should result in more realistic limits for subsidized mortgages in high-cost areas, so that the assistance programs could be fully operational in those areas. In addition, it is expected that the unsubsidized mortgage limits would, in many areas, be substantially increased over present levels. The anticipated increase in unsubsidized mortgage limits would result in a desirable expansion of the insured mortgage market, which has, since the earlier years of the mortgage insurance operations, actually shrunk in proportion to the total mortgage market. The potential for a larger insured market could be particularly useful during high interest, tight money periods, where this market has demonstrated a strong capacity to support housing production. However, the Secretary would be authorized to lower the unsubsidized mortgage limits in any area where mortgage credit was being diverted from moderate cost housing because of the availability of mortgage insurance for higher priced units. Interest Rates Another significant feature of the new Act would be the absence of the specified maximum interest rates which appear in the National Housing Act. The existing statutory maximums have been overridden since mid-1968 by temporary measures (Public Law 90-301 and amendments thereto) giving the Secretary authority to establish whatever interest rates are necessary to meet the market. The Revised National Housing Act, in effect, makes the existing temporary authority permanent and applicable to all insured mortgages and loans (this would include title III home improvement and mobile home loans not presently covered by Public Law 90-301). Another provision of the bill (section 102) would authorize the Secretary to insure mortgages under such sections as he deemed appropriate of the Revised National Housing Act at whatever interest rate was negotiated by the mortgagor and mortgagee, provided no discounts were collected. authority, which would provide an alternative to the administered interest rate, is intended to be experimental and would expire on July 1, 1973. Water and Sewer Facilities This The Act would continue the requirement contained in the National Housing Act that there be public or adequate private community water and sewerage facilities serving newly constructed housing except where it is determined that the establishment of a public or adequate private community tystem is not economically feasible and the Secretary determines that the absence of such a system will not create a significant environmental hazard. Approval of Technically Suitable Materials As under the National Housing Act, the Secretary would be required to adopt a uniform procedure for the acceptance of materials and products to be used in structures approved for mortgages and loans insured under the Act. Insurance Contract Incontestability The several provisions of the National Housing Act providing that insurance contracts are conclusive evidence of eligibility for insurance, except for fraud or misrepresentation, would be consolidated into one provision (except that a separate provision would be retained for title III home improvement and mobile home loans). Title II - Insurance Funds, Premiums and Charges Insurance Funds Three insurance funds would be used under the Act - the General Insurance Fund, the Special Risk Insurance Fund, and the Cooperative Management Housing Insurance Fund. These funds are used under the National Housing Act and would continue to carry existing obligations as well as new obligations incurred under the Revised National Housing Act. Mortgage transactions, except those involving unassisted cooperative projects, which are "insurable risks" would be obligations of the General Insurance Fund and mortgage transactions which are "special risks" would be obligations of the Special Risk Insurance Fund. The Cooperative Management Housing Insurance Fund would be used with respect to the unassisted cooperative projects. |