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The National Housing Agency- A descriptive analysis of the basic permanent housing functions being administered by its 3 constituent units under the general direction and supervision of its Administrator 1

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Federal Home Loan Bank Administration (adminis-
ters functions formerly in Federal Home Loan Bank
Board (FHLBB); Home Owners' Loan Corpora-
tion (HOLC); and Federal Savings and Loan Insur-
ance Corporation (FSLIC))

Federal Housing Administration

Federal Home Loan Bank Act (1932) (FHLBB) National Housing Act (1934) (titles I, II, and (FHLBanks);

Home Owners' Loan Act of 1933 (HOLC) (Federal savings and loan associations); Title IV, National Housing Act (1934) (FSLIC). To strengthen home-financing industry; assist in establishment on permanent basis of sound Nationwide home-financing structure; improve mortgage lending practices and operations; and place thrift and home ownership on broader and more secure basis.


To stabilize and strengthen home-mortgage market; stimulate flow of private capital into field of home financing; improve home-financing practices and procedures; place financing of home ownership and improvement on sound and economical basis; and stimulate employ



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Local agencies and institutions eligible for participation and assistance: (a) Types of local agencies and institutions eligible.

1. As FHLBank members and FSLIC insured associations: Federally (FHLBA) and State chartered savings and loan associations (term includes building and loan associations, cooperative banks, and homestead associations);

2. As FHLBank members: Insurance companies and savings banks making long-term home mortgage loans;

3. As nonmember borrowers from FHLBanks: FHA approved mortgage lending institutions (on security of FHA insured (title II) mortgages).

Title I: As insured lending institutions: Banks,
trust companies, personal finance companies,
mortgage companies, savings and loan asso-
ciations, installment lending companies, and
other such financial institutions.

Title II: (1) As insured mortgagees: Responsi-
ble lending institutions able to properly serv-
ice mortgages, such as commercial banks, in-
surance companies, mortgage companies, and
savings and loan associations. Federal and
State agencies are eligible.

(2) As mortgagors of rental projects: Statute
authorizes participation by (1) Federal or
State instrumentalities; (2) limited dividend
corporations; and (3) private corporations, as-
sociations, cooperative societies of owner-occu

pants, or trusts formed or created for the pur-
pose of rehabilitating slum or blighted areas,
or providing housing for rent or sale. Particl

The statute authorizes financial assistance to any State, county, municipality, or other governmental entity or public body authorized to engage in the development or administration of low-rent housing or slum clearance. To date, agencies assisted have been local public bodies called local housing authorities, set up by the local communities, under State law, in most cases as separate corporate entities from the city.

(b) Role of participating

local agencies or

Forms and measure of as-
sistance given by NHA
constituent to participat-
ing local agencies or insti-

To provide credit incident to home ownership from
funds primarily received by them in their character
as mutual financial institutions and as the result of
the encouragement of thrift.

1. To FHLBank members: 12 regional FHLBanks,
created by FHLBB and operating under FHLBA
supervision, provide permanent reservoir of credit
for home financing operations of bank members and
for meeting withdrawal demands of savers and inves-
tors in such institutions. These banks perform
substantially same function in field of home mort-
gage credit as Federal Reserve banks perform as
credit reservoir for commercial banks and Federal
land banks perform in field of farm finance.

FHLBank advances are made to members for
terms not exceeding 10 years at interest rates ranging
from 1 to 3 percent on the security of-

(a) Home mortgages not exceeding $20,000 in
amount or 20 years to maturity (up to lesser of 65
percent of unpaid principal or 60 percent of value of
property if original term of mortgage is 6 years or
more on an amortized basis; otherwise percentages
are 50 and 40 percent, respectively);

(b) FHA insured (title II and title VI) mortgage
loans (up to 90 percent of unpaid principal); and
(c) Federal or federally guaranteed obligations
(up to face value).

Unsecured advances up to 1 year are made to
members under certain conditions.

1 Statistical data in this chart are generally as of the end of 1943 or early 1944.

pants to date have been FHA regulated pri-
vate corporations formed for this specific pur-
(Title III: National mortgage associations char-
tered and supervised by FHA to provide ready
secondary market for mortgages against which
they would issue debentures in the open mar-
ket. Only one such association has been
created: The Federal National Mortgage As-
sociation, owned, operated, and staffed by

Title I: To make funds available to borrowers
at reasonable rates of interest and on moderate
terms of repayment to enable them to repair,
enhance the livability of, and, in certain cases,
own, their homes and to alter and improve
their places of business.

Title II: To make credit available, on the most
advantageous terms and adapted to meet
widely varying local conditions, for the financ-
ing of both home ownership and rental-project

Title I: Provides insurance against losses in-
curred on improvement and, to a limited ex-
tent, construction loans. Insurance is with
respect to aggregate of such loans made and
reported for insurance by participating insti-
tution and calls for FHA payment of losses in
an amount not exceeding 10 percent of aggre-
gate amount of such loans. Premium charge
is 34 of 1 percent per annum of net loan pro-
ceeds except for new residential construction
where charge is 12 of 1 percent.

Payment on losses is made by FHA in cash,
against assignment of debt, and security, if
any. (In case of new residential construction
loan, mortgagee must foreclose.)
Title II: Provides for insurance on first mortgage
loans made for (1) home construction, pur-
chase, or refinancing, and (2) construction of
rental projects. Premium charge (which may
be passed on to mortgagor) is 12 of 1 percent
per annum on outstanding balance.

In case of default, payment of loss is made
against conveyance of property to FHA (after
foreclosure by mortgagee) and takes the form

To construct, own, and operate low-rent
housing and slum clearance projects pro-
viding decent housing for the low-income
families in the community not being pro-
vided with such housing by private enter-
prise at rentals they can afford to pay.

3 forms of financial assistance are author-

1. Loans fully repayable with interest
(at 1⁄2 of 1 percent above "going Federal
rate" at time of contract) to finance not
more than 90 percent of capital cost of low
rent housing and slum clearance projects.
Period for repayment may not exceed 60
years. Most loan contracts are at a 211⁄2
percent interest rate. Under them,
FPHA has, on the average, been lending
33 of capital cost, to be repaid over 50 to
60-year periods.

2. Annual contributions to reduce
(together with required local contribu-
tions) rentals from amounts necessary to
meet annual expenses of project ("eco-
nomic rental") to amounts low-income
tenants can afford to pay ("social
rental"). These contributions are made
each year on a pay-as-you-go basis to
make possible the low-rent character of
project for that year; are subject to con-
tinuance of low-rent character of project;
are strictly limited to amounts and pe-


The National Housing Agency- A descriptive analysis of the basic permanent housing functions being administered by its 8 constituent units under the general direction and supervision of its Administrator- Continued


Forms and measure of as-
sistance given by NHA
constituent to participat-
ing local agencies or insti-

Federal Home Loan Bank Administration (adminis-
ters functions formerly in Federal Home Loan Bank
Board (FHLBB); Home Owners' Loan Corpora-
tion (HOLC); and Federal Savings and Loan Insur-
ance Corporation (FSLIC))

2. To FHA approved mortgagees: FHLBanks are
authorized to make advances to FHA approved
mortgagees who are not bank members upon secur-
ity of FHA-insured title II mortgages (up to 90 per-
cent of unpaid principal). These advances may be
for terms not exceeding 10 years and are at interest
rates 1⁄2 of 1 to 1 percent higher than for similar ad-
vances to bank members.

3. To savings and loan associations: (a) Chartering,
regulation, and supervision by FHLBA of progres-
sive locally owned and managed associations to pro-
vide sound home thrift and financing facilities to
their communities. Such associations may be
newly created in communities not previously served
by institutions of savings and loan type or they may
be State chartered associations converted to feder-
ally chartered status at shareholders' request and
contingent upon certain limitations.

(b) Subscription by HOLC to shares of FHL
Bank member or FSLIC-insured associations for en-
couragement of local home financing (but not, when
added to certain Treasury share investment, in
excess of 75 percent of total share capital of any

(c) Insurance by FSLIC of accounts (up to $5,000)
of shareholders of Federal- and State-chartered asso-
ciations. Such insurance is compulsory for federally
chartered associations. Insured institutions pay
FSLIC (1) an equitable admission fee based on
FSLIC reserves (present fee is 100 of 1 percent of
shareholders' accounts plus creditor liabilities); and
(2) an annual premium of 3% of 1 percent of share-
holders' accounts and creditor liabilities, subject to
an assessment of an additional 4 of 1 percent if neces-
sary to meet FSLIC losses and expenses. Resultant

Federal Housing Administration

(1) negotiable debentures in amount of
unpaid principal plus certain adjustments
for tax payments and other expenditures
made by mortgagee; dated as of date fore-
closure proceedings were instituted; bearing
interest, payable semiannually, at 234 per-
cent per annum; maturing 3 years after the
1st day of July following maturity date of
the mortgage; guaranteed as to principal and
interest by the United States; and callable
at 3 months' notice at par and accrued inter-
est; and

(2) a certificate of claim in the amount of
unpaid earned interest and expenses incurred
by mortgagee in connection with foreclosure
and conveyance; providing for an increment
of 3 percent per annum (not compounded);
and payable only if and to the extent that
the net amount realized by FHA on the
property exceeds all its expenses (including
principal and interest paid on debentures).
Mortgagees on rental projects may, if default
is in meeting payments, elect, in lieu of fore-
closing, to assign the mortgage to FHA, in
which case 2 percent of unpaid principal is
deducted from the amount of debentures

Federal Public Housing Authority (admin-
isters functions formerly in United States
Housing Authority)

riods necessary to assure low-rent charac-
ter (and in any event to 60 years); may
not exceed 1 percent above the "going
Federal rate" of interest at the time of
contract, applied against the cost of the
project; and are subject to periodic reex-
amination as to amounts necessary.
Under most contracts to date, maximum
annual contribution payable is 3 percent
of project cost.

3. Capital grants, as an alternative
method of assistance to annual contribu-
tions. The provisions with respect to
these grants have been entirely dormant.

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1. Statute requires local governmental con-
tributions amounting to at least 20 per-
cent of Federal annual contributions, in
form of cash or tax remissions or tax
exemptions. All local contributions to
date have been in form of tax exemptions.
2. To extent not carried out by local hous-
ing authority itself, local governmental
unit is required to eliminate unsafe or
insanitary dwellings in locality approxi-
mately equal in number to number of
new dwellings provided by project as-
sisted ("equivalent elimination").

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(b) By local agencies or
institutions participa-
ting or assisted.

To FHLBanks: Each bank member must subscribe
to bank stock to extent of at least 1 percent of aggre-
gate unpaid principal of its home mortgage holdings,
but in no event less than $500. Also, each member's
stock holdings must at least equal 12 of aggregate
amount of its outstanding advances from the bank.
Members' deposits also help provide banks with

(c) By private capital... 1. To FHLBanks: Operating funds are in part ob

tained by FHLBA's issuance to general financing
community (primarily banks and dealers) or con-
solidated debentures constituting joint and several
obligations of all 12 banks. It has been the policy
thus far to issue these consolidated debentures in
preference to debentures issued by the individual
banks, as being more economical and better suited
to the bank's needs.)

2. To savings and loan associations: Savings of indi-
viduals and organizations have contributed all but a
very small fraction of outstanding share capital of
both Federal- and State-chartered associations.

Participating lending institutions obtain their
funds through issuance of capital stock or
shares, acceptance of deposits, borrowings, col-
lections, and such other methods as are used
by institutions of the types involved to obtain
funds for operations.

1. "Temporary financing:
loans, made primarily by commercial
banks and investment houses at very
low interest rates, finance bulk of con-
struction cost of projects until definitive
long-term financing, which takes place
toward end of construction period. Re-
sulting savings in interest costs are re-
flected in a reduced development cost
and in smaller definitive loans and an-
nual contributions.
2. "Permanent financing": Statute requires
that at least 10 percent of project cost be
secured from sources other than FPHA.
General financing community (primarily
banks, investment houses, and insurance
companies) furnishes this portion of cap-
ital cost through purchase of definitive
long-term series A bonds issued by the
local authority. On many projects, pri-
vate capital has financed 25 to 85 percent
of project cost. Average for all projects
is over 33 percent.

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The National Housing Agency-A descriptive analysis of the basic permanent housing functions being administered by its 3 constituent units
under the general direction and supervision of its Administrator-Continued


Assistance given by partici-
pating local agencies or in-
stitutions to group ulti-
mately served.

Federal Home Loan Bank Administration (adminis-
ters functions formerly in Federal Home Loan Bank
Board (FHLBB); Home Owners' Loan Corpora-
tion (HOLC); and Federal Savings and Loan Insur-
ance Corporation (FSLIC))

I. Statutory provisions.-1. Federal savings and loan
associations: May make loans only on the security
of (1) their shares; (2) first liens upon "homes" or
"combination of homes and business property"
within 50 miles of home office, with a limitation of
$20,000 on any one property; and (3) first liens on
"other improved real estate" up to 15 percent of
assets (without limitation as to amount of individual
loan or location of property). State-chartered asso-
ciations converting to Federal status may continue
to make loans in territory served under State char-

2. FHLBank members and FSLIC insured asso-
ciations: Statute requires that such institutions
have home financing policy consistent with sound
and economical home financing and with the statu-
tory purposes. It further provides that the net cost
(on the basis of all charges made) to a home owner
borrowing from FHLBank members may not ex-
ceed maximum legal rate of interest, or lawful con-
tract rate applicable, or in case no such rates are ap-
applicable in excess of 8 percent per annum.

II. Actual operations.-Under Federal savings and
loan association operations (which also basically
indicate, for purposes of FHL Bank membership
and FSLIC insurance, what is considered as sound
and economical home financing and consistent with
the statutory aims), loans are made for home con-
struction, pruchase, refinancing, and repair and
reconditioning. Most loans are made under the
direct reduction plan of amortization calling for
monthly payments applied directly to reduction of
debt sufficient to retire it in not more than 20 years.

Federal Housing Administration

Title I: Loans up to $2,500 for alteration, repair,
or improvement, and up to $3,000 for construc-
tion, of residential, farm, and commercial
properties. Loans may be with or without
security, except for new residential construc-
tion where first lien, and 5 percent equity in
mortgagor, are required. Three years, 32 days, is
maximum term permitted by statute for all
loans except new residential or agricultural
construction. By regulation, maximum term
for new residential construction is 15 years, 5
months, and for agricultural construction, 10
years, 32 days (15 years, 32 days if secured by
first lien).

By regulation, maximum financing charge
(inclusive of insurance premium) is a $5 dis-
count per $100 (on a 1-year note of 12 monthly
payments) except for new residential construc-
tion, where maximum charge is a $3.50 dis-
count (or a 42 percent per annum interest rate
on outstanding principal, plus service charge
of 1⁄2 of 1 percent per annum of annual average
outstanding balance and insurance charge of
11⁄2 of 1 percent per annum of face amount.
Title II: First mortgage loans made to finance
construction, purchase, or refinancing of 1- to
4-family homes and construction of rental

Home mortgage loans may not exceed $16,000, or
80 percent of appraised value in amount, or
20 years in maturity. If property is single
family owner-occupied dwelling, is approved
for mortgage insurance prior to beginning of
construction, has an appraised value not in
excess of $10,000, and owner has made a 10
percent payment on the property, mortgage
may be up to 90 percent of first $6,000 of value
(and 80 percent of remainder). If, in addition,
the mortgage loan is not in excess of $5,400,

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