attached to our farm labor force and should not be excluded from housing on the basis of noncitizenship. It is recommended therefore that section 2(b) of S. 981 be deleted and the following subsections (b) and (c) substituted therefor: "(b) Section 501, as amended, of such Act is amended by adding at the end thereof a new subsection as follows: "'(e) As used in this title, the term "domestic farm laborer” means a citizen of the United States or a worker who has legally entered the United States and has resided in this country for at least one year and who receives a substantial portion (as determined by the Secretary) of his income as a laborer on a farm or farms situated in the United States.' "(c) Section 514(f) (3) of such Act is deleted." 4. Section 2(a) of the bill provides for loans and grants to domestic farm laborers to make essential repairs, etc., to the housing facilities they are occupying. This provision would transfer the responsibility for repairs and upkeep of housing from the owner to a temporary tenant. It could also burden the worker with debt the remainder of his life, while at the same time providing no assurance that he would be permitted to remain in the house after it was repaired at his expense. We strongly recommend that these loans and grants to farm laborers be limited to those cases where the worker is the owner of the property. TREASURY DEPARTMENT, October 15, 1963. Hon. A. WILLIS ROBERTSON, Chairman, Committee on Banking and Currency, DEAR MR. CHAIRMAN: Reference is made to your request for the views of this Department on S. 981, to amend title V of the Housing Act of 1949 to assist in the provision of housing for domestic farm labor. The Department has no independent knowledge as to the housing needs of domestic farm labor and consequently is not in a position to comment on the necessity for the proposed legislation. However, certain features of the proposed legislation are of interest to this Department and comments on those provisions are set forth below. Section 3 would extend the existing insured home loan program under section 514 of the Housing Act of 1949 to domestic farm laborers. This program presently authorizes not only the servicing of the insured loans by the Secretary of Agriculture but also their purchase by the Secretary at any time if not in default. This liquidity guarantee feature is considered particularly objectionable by the Department. In that connection, the President's Committee on Federal Credit Programs stated: "*** the Committee recommends against any guarantee of liquidity (or 'put') which gives the holder of an insured or guaranteed portion of a loan (or deferred participation) the right to shift the loan back to the Government without risk or cost whenever interest rates rise or alternative investment prospects improve. If, as a transitional device, any liquidity provision is deemed necessary, the liquidity should be provided only for short periods and should entail a significant actual or potential cost to the lender who enjoys the liquidity protection." In the circumstances, the Department would be opposed to the extension of the section 514 insured loan program to domestic farm laborers unless adequate safeguards are provided to assure that any repurchase agreements are in accordance with the recommendations of the President's Committee. Section 4 of the bill would authorize a new direct loan and grant program to provide housing for domestic labor. Section 516(b)(1), which would be added to title V of the Housing Act of 1949 by the bill, would authorize loans only if the applicant is unable to secure the necessary funds from other sources upon terms and conditions "equally as favorable" as the terms and conditions of loans provided by the proposed legislation. It is recommended that this provision be revised to provide that no financial assistance shall be extended unless financial assistance is not otherwise available on "reasonable 80-944 0-64- -7 terms" rather than on terms "equally as favorable." Similar provisions are included in other direct Federal loan programs and to authorize Federal loans where equally favorable terms cannot be obtained from private sources would mean that substantially all the loans would be made by the Federal Government. Section 516 (c), which would be added to title V of the Housing Act of 1949 by the bill, would establish the interest rate on loans at a rate not to exceed 4 percent per annum. It is the position of this Department that the interest rate on direct Federal loans should generally cover the cost of borrowing to the Treasury as reflected by prevailing market yields on Government obligations with maturities comparable to the term of the loans. Consequently, it is recommended that section 514 (c) be revised to establish the interest rate on loans at a rate determined by the Secretary of the Treasury taking into consideration current market yields on outstanding marketable obligations of the United States with maturities comparable to the term of the loans. If it is determined that subsidy interest rates are justified in this program, the Department recommends that such interest rates be at least related to the yields on comparable Treasury maturities. In this connection, the President's Committee on Federal Credit Programs stated: "*** the Committee recommends that in authorizing new direct loan programs or major expansions of present programs "(a) Future legislation should avoid requirements for rigid or relatively inflexible ceilings (or floors) on interest rates; and "(b) If for reasons of public policy it appears appropriate to charge interest rates below rates for comparable loans in private markets or below Government costs, the lending agency should be permitted to vary the rate charged new borrowers from time to time at least as much as market rates and current Treasury borrowing costs vary." Finally, the Department would like to note that the existing insured loan program under section 514 of the Housing Act of 1949 authorizes the Secretary of Agriculture to insure loans to State and local public bodies. In this connection, the President's Committee on Federal Credit Programs stated: "Guarantees of tax-exempt obligations tend to expand the volume of such securities issued. The Committee, therefore, recommends that no program in the future be authorized which involves guarantee of tax-exempt obligations because (a) the cost in tax revenues to the Federal Government would generally exceed the benefits of tax exemption received by borrowers, (b) such federally guaranteed tax-exempt securities would be superior to direct Federal obligations themselves, and their increasing volume would adversely affect Treasury financing, and (c) the availability of increasing amounts of high-grade tax-exempt issues would tend to attract funds from investors that should appropriately seek risk-bearing opportunities. "In addition to the substantial advantages from the tax exemption privileges available for State and local borrowing, two additional types of aid which do not involve guarantee of tax-exempt obligations could provide any additional necessary credit assistance: "(a) Any local community waiving its tax exemption privilege might be authorized to borrow for specific high priority needs with the aid of a Federal guarantee; and "(b) Local communities might be authorized to receive capital grants sufficient to permit borrowing the remainder in the market on reasonable terms." Thus, since section 3 of the bill would make a major change in the nature of the section 514 insured loan program, the Department recommends that the provisions with respect to insuring loans to State and local public bodies be amended to conform with the recommendations of the Credit Programs Committee. The Department has been advised by the Bureau of the Budget that there is no objection from the standpoint of the administration's program to the submission of this report to your committee. Sincerely yours, G. D'ANDELOT BELIN, General Counsel. 88TH CONGRESS 1ST SESSION S. 1170 IN THE SENATE OF THE UNITED STATES MARCII 21, 1963 Mr. CLARK (for himself, Mr. ENGLE, Mr. HUMPHREY, Mr. JAVITS, Mr. LONG of Missouri, Mr. MCINTYRE, Mr. MORSE, Mrs. NEUBERGER, Mr. RANDOLPHI, and Mr. WILLIAMS of New Jersey) introduced the following bill; which was read twice and referred to the Committee on Banking and Currency A BILL To assist in the provision of housing for elderly persons, and for other purposes. 1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 3 That this Act may be cited as the "Housing for the Elderly 4 Act of 1962." HOME IMPROVEMENT LOANS UNDER SECTION 220(h) OF THE NATIONAL HOUSING ACT 5 6 7 SEC. 2. (a) Subparagraph (iv) of section 220 (h) (2) 8 of the National Housing Act is amended by inserting im 2 1 mediately after "(iv)" the following: "subject to paragraph 2 (11) of this subsection,". 3 (b) Section 220 (h) of such Act is further amended by 4 inserting after paragraph (10) a new paragraph as follows: "(11) The Commissioner may, under regulations prescribed by him, insure a home improvement loan without regard to the requirements of subparagraph (iv) of paragraph (2) of this subsection, if— "(A) the borrower is an individual who has attained the age of sixty-two years, or if two or more individuals are jointly obligated as borrowers, each such individual has attained such age; "(B) the proceeds of the loan are to be used for the purpose of financing the improvement of an existing structure owned and occupied by such individual or individuals; "(C) the loan is subject to the condition that no part of the principal amount thereof shall become due and payable (except at the option of the borrower) for so long as each such individual is alive and continues to own and occupy the property; and "(D) the principal amount of the loan, together with accrued interest, if any, shall become payable within such period, as the Commissioner 1 2 3 4 5 shall by regulation prescribe, after (i) each such individual has become deceased or has ceased to occupy the property, or (ii) the property is sold or otherwise transferred, whichever shall first occur." 6 7 REPAIR AND REHABILITATION UNDER SECTION 221 OF THE NATIONAL HOUSING ACT 8 SEC. 3. (a) Paragraph (6) of section 221 (d) of the 9 National Housing Act is amended by inserting immediately 10 after "(6)" the following: "subject to subsection (i) of this 11 section,". 233 12 (b) Section 221 of such Act is further amended by in13 serting after subsection (h) a new subsection as follows: "(i) The Commissioner may, under regulations pre 14 15 scribed by him, insure a mortgage under this section without 16 regard to the requirements of paragraph (6) of subsection 17 (d) of this section, if "(1) the mortgagor is an individual who has attained the age of sixty-two years, or if two or more in dividuals are jointly obligated as mortgagors, each such individual has attained such age; "(2) the proceeds of the mortgage are to be used for the repair and rehabilitation of a residence owned and occupied by the mortgagor; "(3) the mortgage is subject to the condition that |