Under the National Housing Act, appropriations are authorized to cover any losses sustained by the Special Risk Insurance Fund. The Revised National Housing Act would authorize appropriations to cover losses to either the General Insurance Fund or the Special Risk Insurance Fund and would authorize loans to any fund from another fund ($20 million in loans from the General Insurance Fund to the Special Risk Insurance Fund are authorized under existing law). 31 - One additional insurance fund is presently being used under the National Housing Act the Mutual Mortgage Insurance Fund which covers obligations insured under several of the section 203 home mortgage programs. This fund is a "mutual" fund; that is, insurance premiums accumulated under these programs in excess of the Department's estimate of desirable reserve levels can be distributed to current mortgagors (after termination of insurance). The "Mutual Fund" would continue to be obligated for the mortgage insurance written under the National Housing Act but would not incur any additional obligations under the new Act. The absence of a segregated class of "low" risk home mortgages under the new Act would permit the establishment of uniform, reasonable premium levels for residential mortgages and the insurance of a substantial proportion of social purpose or "high" risk mortgage transactions without excessive losses. Under existing practice, the premiums on residential mortgages are uniform, but the mutuality provisions promise to some categories of "low" risk mortgagors the possibility of what is in effect a retroactive reduction in insurance premiums. These distributions, however, have been by necessity extremely erratic in timing and size. As a result, the homeowner who receives the benefit of a particular distribution accumulated over several years may not have been the original mortgagor whose premiums and good payment reward contributed to the surplus. The sporadic and uneven benefits which are characteristic of the mutual fund do not warrant the loss of significant amounts of insurance reserves which can bolster increasing efforts to meet the housing needs of all sectors of the population. Insurance Premiums, Charges and Fees Numerous provisions of the National Housing Act relating to insurance premiums, adjusted premiums (imposed where the mortgage is prepaid) and termination charges (imposed where the insurance contract is terminated), appraisal and other service charges are consolidated. However, the various minimum and maximum limitations on insurance premiums under existing law would not be contained in the new Act. This change is not premised on the need for any significant change in current premium charges but would result in a simple and more flexible statutory framework. Existing provisions requiring that the Secretary of Defense or Transportation pay the insurance premium on behalf of a serviceman are also contained in the new Act. This title would carry over, in a simplified form, the provisions of section 2 of the National Housing Act with a few substantive changes. One change would be the elimination of maximum interest charges and the substitution of flexible authority in the Secretary to establish maximum interest rates to meet the loan market. This change is necessary if the program is to continue to operate in any significant volume. The program has taken on additional importance with the addition in 1969 of the mobile home financing authority, which has the potential to give this increasingly important segment of the housing market a substantial boost. Another significant change has been to increase the maximum loan amount from $5000 to $6500 per dwelling and from $2,500 to $3,500 per unit in a multiunit structure. This increase is particularly needed since it is intended that title III of the proposed Act be the one vehicle for home improvement loans. Accordingly, two markedly unsuccessful existing home improvement programs have not been retained (section 203(k) home improvement loans and section 220(h) urban renewal area home improvement loans). These programs have attempted to assist the financing of substantial home repairs with unrealistic finance charges and terms and as a result have shown little activity. Types of Loans The Secretary would be authorized to insure financial institutions against losses in making, advancing credit in connection with, or purchasing property improvement and mobile home loans. Home improvement loans would be used for the purpose of repairing or improving existing structures or the building of new structures (including the repair or replacement of improvements damaged or destroyed by natural disasters) by the owner or a lessee under a lease expiring not less than six months after the maturity of the loan. Mobile home loans could be used for the purpose of financing the purchase of a mobile home to be used by the owner as his principal residence. Loan Terms A home improvement loan could not (1) involve an amount in excess of $6,500, except that where the structure to be repaired included two or more dwelling units the loan could not exceed $15,000 or an average amount of $3,500 per unit, and (2) have a maturity in excess of seven years and thirty-two days, except where the loan involved the construction of a new structure for use in whole or in part for agricultural purposes. A mobile home loan could not have an amount in excess of $10,000 and a maturity in excess of twelve years and thirty-two days (or $15,000 and fifteen years and thirty-two days in the case of a mobile home composed of two or more modules). Refinancing The Secretary would be authorized to refinance and extend the maturity of any loan insured under the title, provided that the additional amount or term of the loan did not exceed the statutory limitations. Prohibitions The Secretary would be required to prevent (1) the use of multiple loans which would result in outstanding loans, with respect to the same property, in an amount in excess of the statutory dollar limits for an individual loan, and (2) the insuring of home improvement loans involving new residential structures which have not been completed and occupied for at least six months. The Secretary would be authorized to waive the prohibitions in (2) above. Property Standards The Secretary would be directed to periodically declare products or repairs which do not improve the basic livability or utility of properties or are especially subject to selling abuses ineligible for financing under this title. The Secretary would also be directed (1) to prescribe minimum property standards for mobile homes and the sites on which they are to be located, and (2) to obtain assurances from the borrower that the mobile home will be placed on a site meeting standards prescribed by the Secretary and any local zoning or other local requirements. Contract Provisions The insurance obligation of the Secretary with respect to any lender could not exceed either (1) 10 percent of the total amount of loans made by the lender (under this title and under Bettdon 2f of the National Housing Act after July 1, 1939), or (2) 90 percent of the loss on any individual loan. Any payment for loss would be incontestable after two years in the absence of fraud or misrepresentation by the lender unless a demand for repurchase of the obligation on behalf of the United States had been made prior to the end of the two-year period. Waiver of Requirements The Secretary would be authorized to waive compliance with any regulation issued pursuant to this title if the lender has acted in good faith and enforcement would impose an injustice on him, but the waiver could not involve an increase in the amount of the Secretary's obligation. 86-138 - 71 - pt. 1 -- 26 |