INSURANCE OF EXISTING HOMES

SEC. 308. Section 203 (a) of the National Housing Act, as amended, is hereby amended by striking out the second and third provisos, and by striking out the colon at the end of the first proviso and inserting in lieu thereof a period.

ENCOURAGEMENT AND PROTECTION OF HOME OWNERSHIP

SEC. 309. Section 203 (b) of the National Housing Act, as amended, is hereby amended as follows:

(a) By striking out in paragraph numbered (3) the following: "of the character described in paragraph (2) (B) of this subsection" and inserting in lieu thereof the following: "on property approved for insurance prior to the beginning of construction".

(b) By adding at the end thereof the following new paragraph:

"(8) Contain notwithstanding any of the provisions of paragraph numbered (3) with respect to maximum period of maturity) provisions satisfactory to the Administrator for the extension of the period of amortization at any time the mortgagor, because of unemployment, economic conditions, or misfortune beyond his control, is unable to make a principal or interest payment due under or provided to be paid by the terms of the mortgage: Provided, That no single extension shall be for a period of more than one year nor the aggregate of all such extensions for a period of more than three years." SEC. 310. (a) Section 203 (c) of the National Housing Act, as amended, is hereby amended (1) by striking out in the last sentence the words "section or section 210" and inserting in lieu thereof the word "title"; and (2) by striking out in said sentence (i) the words "under this section", and (ii) the words "and a mortgage on the same property is accepted for insurance at the time of such payment,'

(b) Section 603 (c) of the National Housing Act, as amended, is hereby amended by striking out in the next to the last sentence the following: "and a mortgage on the same property is accepted for insurance at the time of such payment,".

TIME EXTENSION FOR VETERANS

SEC. 311. Sections 203 and 603 of the National Housing Act, as amended, are hereby amended by adding at the end of each such section a new paragraph, numbered (g) and (e), respectively, and reading as follows:

"In the case of any mortgage insured under this section upon property owned by a veteran or by the dependent of a veteran where monthly payments to principal have been deferred during such veteran's period of military service, or any part thereof, or where the mortgage is in default by reason of failure to make payments in accordance therewith during such period of military service, the Administrator is authorized to consent to such modification and extension of the terms of such mortgage as he may deem advisable and to the best interest of the mortgagor: Provided, That the extended maturity of the mortgage does not exceed the unexpired term of the mortgage plus a period equal to the veteran's period of military service and that such modification provides for the complete amortization of the mortgage debt within such extended maturity: And provided further, That such modification and extension shall not affect the amount of the annual mortgage insurance premium payable under the contract of insurance or increase the rate of interest prescribed in such mortgage."

MISCELLANEOUS AMENDMENTS WITH RESPECT TO HOME OWNERSHIP

SEC. 312. Section 203 of the National Housing Act, as amended, is hereby amended by adding at the end thereof the following new subsection:

"(h) No mortgage (i) covering a dwelling which is approved for mortgage insurance prior to the beginning of construction, or (ii) having as the mortgagor the initial occupant of the dwelling, shall be eligible for insurance under this section unless the principal contractor shall provide a warranty (and be liable for any breach of such warranty of which the contractor is notified within a period of one year following the completion of the dwelling), for the benefit of the mortgagor and of subsequent owners of the dwelling, at such time and in such form as shall be prescribed by the Administrator, against structural and other defects in construction, faulty materials, or workmanship, and any violation or breach of, or noncompliance with, any specifications, covenants, or conditions set forth in any of the construction contracts, or any technical standards of construction and design prescribed or approved by the Administrator: Provided, That the provisions

of this section shall not be applicable to mortgages the application for insurance of which has been made prior to the date of enactment of this subsection."

SEC. 313. Section 204 (a) of the National Housing Act, as amended, is hereby amended by striking out, in the last sentence, the following: "prior to July 1 1944,".

RENTAL HOUSING INSURANCE

SEC. 314. Section 207 (b) of the National Housing Act, as amended, is hereby amended by striking out the period at the end of the first sentence of paragraph numbered (2), inserting in lieu thereof a colon, and adding the following: "Provided, That, with respect to mortgages offered for insurance involving a principal obligation not in excess of $250,000, the mortgagor may be any person, corporation, or legal entity satisfactory to the Administrator, and the Administrator shall not be required to regulate or restrict rents or sales, charges, capital structure, rate of return, and methods of operation.”

SEC. 315. Section 207 (c) of the National Housing Act, as amended, is hereby amended by amending the first sentence to read as follows:

"(c) To be eligible for insurance under this section a mortgage on any property or project shall involve a principal obligation in an amount

"(1) not to exceed $5,000,000, or if executed by a mortgagor coming within the provisions of paragraph numbered (b) (1) of this section, not to exceed $50,000,000;

"(2) not to exceed 80 per centum of the amount which the Administrator estimates will be the value of the property or project when the proposed improvements are completed, including the land; the proposed physical improvements; utilities within the boundaries of the property or project; architects' fees; taxes and interest accruing during construction; and other miscellaneous charges incident to construction and approved by the Administrator: Provided, That, except with respect to a mortgage executed by a mortgagor coming within the provisions of paragraph numbered (b) (1) of this section, such mortgage shall not exceed the amount which the Administrator estimates will be the cost of the completed physical improvements on the property or project, exclusive of public utilities and streets and organization and legal expenses; and

(3) not to exceed $1,500 per room for such part of such property or project as may be attributable to dwelling use.

SEC. 316. Section 207 (d) of the National Housing Act, as amended, is hereby amended by striking out in the last sentence the words "one-half of".

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SEC. 317. Section 207 (h) of the National Housing Act, as amended, is hereby amended by striking out, in paragraph numbered (1), the words "paid to the mortgagor of such property", and inserting in lieu thereof the following: " tained by the Administrator and credited to the Housing Insurance Fund". TITLE IV-PRIVATELY FINANCED HOUSING FOR FAMILIES OF LOWER INCOME

PURPOSE

SEC. 401. This title is not designed to supplant or alter any of the existing systems of mortgage insurance under the National Housing Act, but rather to supplement them with special systems of mortgage insurance for families of lower income who require more favorable terms than such existing systems offer.

SUPPLEMENTAL MORTGAGE INSURANCE FOR HOME OWNERS OF LOWER INCOME

SEC. 402. Section 203 (b) of the National Housing Act, as amended, is hereby amended as follows:

(a) By striking out the period at the end of paragraph (2) (C), inserting in lieu thereof a comma and the word "or", and adding the following new paragraph:

"(D) not to exceed $5,000 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 which is approved for mortgage insurance prior to the beginning of construction: Provided, That the Administrator may by regulation provide that the principal obligation of any mortgage eligible for insurance under this paragraph shall be fixed at a lesser amount than $5,000 where he finds that for any section of the country

or at any time a lower-cost dwelling for families of lower income is feasible without sacrifice of sound standards of construction, design, and livability: And provided further, That with respect to mortgages insured under this paragraph the mortgagor shall be the owner and occupant of the property at the time of the 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 85 per centum of the appraised value of the property." (b) By striking out the period at the end of paragraph numbered (3), inserting in lieu thereof a comma, and adding the following: "or not to exceed thirty-two years in the case of a mortgage of the character described in paragraph (2) (D) of this subsection."

(c) By striking out the period at the end of paragraph numbered (5), inserting in lieu thereof a comma, and adding the following: "or not to exceed 4 per centum per annum in the case of a mortgage of the character described in paragraph (2) (D) of this subsection."

SEC. 403. Section 204 (a) of the National Housing Act, as amended, is hereby amended by inserting between the first and second provisos in the last sentence the following: “And provided further, That, notwithstanding any other provisions of this title, with respect to mortgages that are accepted for insurance under section 203 (b) (2) (D) of this Act, there shall be included in the debentures issued by the Administrator, in addition to the amounts hereinabove provided (but subject to the cash adjustment provided in subsection (c) hereof), (1) an amount which the Administrator determines to be sufficient, when added to the value of the mortgage as hereinabove determined, to equal the amount which the mortgagee would have received if, at the time of the conveyance to the Administrator of the property covered by the mortgage, the mortgagor had redeemed the property and paid in full all obligations under the mortgage and a reasonable amount for necessary expenses incurred by the mortgagee in connection with the foreclosure proceedings, or the acquisition of the mortgaged property otherwise, and the conveyance thereof to the Administrator, less (2) an amount equivalent to one-half of 1 per centum of the amount of the unpaid principal obligation on the date of default:".

MUTUAL OWNERSHIP AND RENTAL HOUSING

SEC. 404. Section 207 (c) of the National Housing Act, as amended, is hereby amended as follows:

(a) By striking out the semicolon and the word "and" at the end of paragraph numbered (2) as amended by this Act, inserting in lieu thereof a colon, and adding the following new proviso: "And provided further, That, notwithstanding any of the provisions of this paragraph numbered (2)—

"(A) a mortgage with respect to a project to be constructed in a locality or metropolitan area where, as determined by the Administrator, 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 which without the insurance provided hereby cannot adequately be met by privately financed new dwellings currently produced in such locality or metropolitan area, may involve a principal obligation in an amount not exceeding 90 per centum of the amount which the Administrator estimates will be the value of the project when the proposed improvements are completed; and

"(B) a mortgage with respect to (i) a project of a nonprofit mutual ownership housing corporation the occupancy of which is restricted to members of such corporation, (ii) a project constructed by a nonprofit corporation organized for the purpose of construction of homes for members of the corporation, or (iii) a project undertaken by a mortgagor coming within the provisions of paragraph numbered (b) (1) of this section to meet a need (that the Administrator finds would not otherwise be met) for new dwellings for families of lower income in the locality or metropolitan area at rentals comparable to the rentals proposed to be charged for the dweilings in such project, may involve a principal obligation in an amount not exceeding 95 per centum of the amount which the Administrator estimates will be the value of the project when the proposed improvements are completed; and".

(b) By striking out the period at the end of the second sentence, inserting in lieu thereof a comma, and adding the following: "except that with respect to mortgages insured under the provisions of the second proviso of paragraph numbered (2) of this subsection, which mortgages are hereby authorized to have a

maturity of not exceeding forty years from the date of the insurance of the mortgage, such interest rate shall not exceed 31⁄2 per centum per annum."

(c) By adding the following additional sentences at the end thereof: "Such property or project may include such commercial and community facilities as the Administrator deems adequate to serve the occupants. Notwithstanding any of the provisions of this section with respect to maximum maturity, mortgages insured under the provisions of the second proviso of paragraph numbered (2) of this subsection shall contain provisions satisfactory to the Administrator for the extension of the period of amortization at any time the mortgagor, because of unemployment, economic conditions, or misfortune beyond its control or the control of its members, is unable to make a principal or interest payment due or provided to be paid by the terms of the mortgage: Provided, That no single extension shall be for a period of more than one year nor the aggregate of all such extensions for a period of more than three years."

SEC. 405. Section 207 (g) of the National Housing Act, as amended, is hereby amended by striking out the period at the end thereof, inserting in lieu thereof a colon, and adding the following new proviso: "And provided further, That, with respect to mortgages insured under the provisions of the second proviso of paragraph numbered (2) of subsection (c), the mortgagee, in the event of any default which under the terms of the mortgage would entitle the mortgagee to foreclose on the mortgaged property and such default continues for a period of thirty days, shall, notwithstanding any other provisions of this title, be entitled, upon assignment, transfer, and delivery, as provided in this subsection (g), to the Administrator of all rights, interests, and assets held by the mortgagee under the mortgage, to debentures having a total face value in an amount equal to (1) the amount which the Administrator determines will be sufficient, together with the cash adjustment provided in subsection (j), to equal the amount which the mortgagee would have received, if, on the date of the assignment, transfer, and delivery, the mortgagor had extinguished the mortgage indebtedness by payment in full of all obligations under the mortgage, less (2) an amount equivalent to one-half of 1 per centum of the unpaid amount of the principal obligation on the date of default.'

SEC. 406. Section 207 of the National Housing Act, as amended, is hereby amended by adding the following new paragraph at the end thereof:

"(q) In order to assure an adequate market for mortgages on mutual ownership projects and rental-housing projects for families of lower income of the character described in the second proviso of paragraph numbered (2) of subsection (c) of this section, the powers of the Federal National Mortgage Association (pursuant to section 301 (a) of this Act) to make real-estate loans which are accepted for insurance or insured under this title, and to purchase, service, or sell any mortgages, or partial interests therein, which are insured under this title, may be utilized in connection with projects of the character described in said proviso." TITLE V-DIRECT PRIVATE INVESTMENT IN HOUSING FOR FAMILIES OF MODERATE INCOME

SEC. 501. The National Housing Act, as amended, is hereby amended by adding the following new title:

"TITLE VII-INSURANCE FOR INVESTMENTS IN RENTAL HOUSING FOR FAMILIES OF MODERATE INCOME

"AUTHORITY TO INSURE

"SEC. 701. The Administrator is authorized, upon application by the investor, to insure as hereinafter provided, and, prior to the execution of insurance contracts and upon such terms as the Administrator shall prescribe, to make commitments to insure, the minimum annual amortization charge and an annual return on the outstanding investment of such investor in any project which is eligible for insurance as hereinafter provided in an amount (herein called the 'insured annual return') equal to such rate of return, not exceeding 24 per centum per annum, on such outstanding investment as shall be fixed in the insurance contract or in the commitment to insure: Provided, That any insurance contract made pursuant to this title shall expire as of the first day of the operating year for which the outstanding investment amounts to not more than 10 per centum of the established investment: And provided further, That the aggregate amount

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of contingent liabilities outstanding at any one time under insurance contracts and commitments to insure made pursuant to this title shall not exceed $1,000,000,000.

"ELIGIBILITY

"SEC. 702. (a) To be eligible for insurance under this title, a project shall meet the following conditions:

"(1) The Administrator shall be satisfied that there is, in the locality or metropolitan area of such project, a need for new rental dwellings for families of moderate income, at rents comparable to the rents proposed to be charged for the dwellings in such project, which is not adequately met by privately financed new dwellings currently produced, without insurance under this title, in such locality or metropolitan area;

"(2) Such project shall be economically sound, and shall be acceptable to the Administrator from the standpoint of affording reasonable assurance of stability, and of economy in construction, operation, and maintenance consistent with the long-term investment therein;

"(3) The dwellings in such project shall be acceptable to the Administrator as to quality, design, size, and type, and shall be available for families of moderate income at rents within their capacity to pay.

"(b) Any insurance contract executed by the Administrator under this title shall be conclusive evidence of the eligibility of the project and the investor for such insurance, and the validity of any insurance contract so executed shall be incontestable in the hands of an investor from the date of the execution of such contract, except for fraud or misrepresentation on the part of such investor.

"PREMIUMS AND FEES

"SEC. 703. (a) For insurance granted pursuant to this title the Administrator shall fix and collect a premium charge in an amount not exceeding one-half of 1 per centum of the outstanding investment for the operating year for which such premium charge is payable without taking into account the excess earnings, if any, applied, in addition to the minimum annual amortization charge, to amortization of the outstanding investment. Such premium charge shall be payable annually in advance by the investor, either in cash or in debentures issued by the Administrator under this title at par plus accrued interest: Provided, That, if in any operating year the gross income shall be less than the operating expenses, the premium charge payable during such operating year shall be waived, but only to the extent of the amount of the difference between such expenses and such income and subject to subsequent payment out of any excess earnings as hereinafter provided.

"(b) With respect to any project offered for insurance under this title, the Administrator is authorized to charge and collect reasonable fees for examination, and for inspection during the construction of the project: Provided, That such fees shall not aggregate more than one-half of 1 per centum of the estimated investment.

"RENTS

"SEC. 704. The Administrator shall require that the rents for the dwellings in any project insured under this title shall be established in accordance with a rent schedule approved by the Administrator, and that the investor shall not charge or collect rents for any dwellings in the project in excess of the appropriate rents therefor as shown in the latest rent schedule approved pursuant to this section. Prior to approving the initial or any subsequent rent schedule pursuant to this section, the Administrator shall find that such schedule affords reasonable assurance that the rents to be established thereunder are (1) not lower than necessary, together with all other income to be derived from or in connection with the project, to produce reasonably stable revenues sufficient to provide for the payment of the operating expenses, the minimum annual amortization charge, and the minimum annual return; and (2) not higher than necessary to meet the need for new dwellings for families of the incomes proposed to be served.

"EXCESS EARNINGS

"SEC. 705. For all of the purposes of any insurance contract made pursuant to this title, 50 per centum of the excess earnings, if any, for any operating year may be applied, in addition to the minimum annual return, to return on the outstanding