title I. This record demonstrates that the plan of the act is sound and practicable, and it is felt that the amendments to the act, which are contained in this bill, will maintain the soundness of its operations and at the same time stimulate a large amount of new construction, which is such an important concern of industry, labor, and Government alike. It should substantially increase the employment of labor, both in the work of direct construction and among the industries which manufacture and sell building materials, and thus create purchasing power which is necessary in order to bring about permanent

recovery.

Under the bill the cost of financing home ownership will be materially reduced and thus bring such ownership within the means of a large part of the people of the country.

In addition to the provisions covering the financing of new construction, the insurance of loans for the repair and alteration of buildings and the construction of small homes, both urban and rural, is revived under title I of the National Housing Act, which expired on April 1 last.

In addition to the amendments which broaden the scope of the National Housing Act there are a number of amendments which clarify the language of the original act and which have been found necessary as a result of the administration of the act.

PROVISIONS OF THE BILL

Section 1 contains the short title.

Sections 2, 3, and 4 clarify the act by restricting sections 201 and 202 to individual home mortgages, in accordance with amendments contained in later sections which establish a separate fund for the insurance of mortgages under section 207. Certain amendments to defini

tions are made.

Section 5: The present limit of $2,000,000,000 upon the aggregate amount of mortgage insurance is amended by eliminating the division of such amount into equal parts for new construction and for existing construction. Such amount is converted into a revolving fund with a maximum outstanding liability at any one time of such figure.

It is further provided that on and after July 1, 1939, only those mortgages may be insured which cover new construction, or construction commenced after June 27, 1934 and completed before July 1, 1939, or which refinance mortgages previously insured.

Section 7 clarifies the original act and also provides for the insurance of mortgages up to 90 percent of the appraised value of the property with respect to mortgages not in excess of $5,400, and up to 90 percent on the first $6,000 of the appraised value plus 80 percent of the balance with respect to property having an appraised value in excess of $6,000 but not in excess of $10,000, applicable only to owneroccupied homes and to properties accepted for insurance prior to the beginning of construction or to properties begun after January 1, 1937 and before the enactment of the bill, and which have not been sold or occupied.

Section 9 amends the insurance premium rate by requiring it to be computed upon the outstanding balance of the mortgage from time to time instead of on the original face value. The premium rate is

set at a minimum of one-half of 1 percent and a maximum of 1 percent on such reducing balance as the Administrator may determine, except that a premium of one-fourth of 1 percent on reducing balance is permitted in connection with 90 percent mortgages.

This section also amends existing law so as to give the Administrator the right to adjust a year's premium when the mortgage is paid off and a new mortgage insured covering the same property.

Section 10 clarifies section 204 (a) of the act with respect to the payment of the mortgage-insurance proceeds but does not substantially change it.

First, it is clearly stated that the title which will be accepted by the Administrator in the event the property is conveyed to him after default shall be such as conforms to the requirements of the administrative rules and regulations in force at the time the mortgage is insured.

The debentures to be issued in payment of the insurance are now to be dated as of the date foreclosure proceedings were instituted or the property otherwise acquired, and the provision is eliminated which now requires interest from the date foreclosure proceedings were instituted to the date of the conveyance of the property to be added into the principal amount of the debentures.

The Administrator is authorized to consent to the release of the original mortgagor in the event the Administrator is willing to accept a subsequent purchaser as a responsible mortgagor.

Provision is further made for the continuation of the mortgage insurance in the event that a default in the mortgage is cured.

Provision is made for the issuance of debentures in multiples of $50 and for the adjustment of odd amounts in cash, and for the inclusion in such debentures of redemption provisions.

All of these amendments correct minor deficiencies and discrepancies disclosed during the administration of the act.

Section 11: The provision of section 204 (b) of the act which restricts the Government guaranty of debentures to those issued in exchange for property insured prior to July 1, 1939, is eliminated.

It is further provided that all debentures issued under this section (and similar provision is made later with respect to section 207) shall be fully exempt from all Federal, State, and local taxation (except surtaxes, estate, inheritance, and gift taxes). It is felt that these provisions will induce lenders to extend lower interest rates.

This section further removes existing doubt as to the negotiability of the debentures and as to whether or not the Government guaranty is unconditional, caused by certain ambiguity in existing law.

Section 12 clarifies the provisions of section 204 (c) of the act with reference to the computation of certificates of claim, without changing the substance of existing law.

Sections 13 and 14 are simply clarifications of existing law.

Section 15 is a clarification of section 205 (a) with respect to classification of mortgages into groups, and provides for such classification in accordance with sound actuarial practice and risk characteristics. Sections 16, 17, 18, 19, and 20, are clarifications of existing law. A clause has been added in section 19 to remove any possible implication that any mortgagor or mortgagee may be subject to any liability arising out of the mutuality of the fund.

Section 21 amends section 206 to permit the Administrator to buy Federal Housing Administration debentures at a price which will provide an investment yield not less than the yield obtainable from investments in Government bonds. This change is in the interest of a sound financial operation and avoids a situation where the Administrator may be forced to pay 3 percent on outstanding debentures but may receive a lesser return on the investments of the fund. The change will also tend to stabilize the market for these debentures.

This section is further amended by striking out the requirement that the Treasury, as depository of the Administrator's idle funds, pay interest.

Section 22 entirely rewrites 207 of the act, which is presently entitled "Low cost housing insurance." The amendment changes the title to "Rental housing insurance," and changes the definition of the term "mortgage," in order clearly to permit the insurance of construction loans. The language of the present section 207, limiting insurance to private corporations "formed for the purpose of providing housing for persons of low income" is abandoned since it has been found impossible with any degree of accuracy to determine what loans come within this broad phrase. To accomplish the same result there has been substituted a limitation of the mortgage to $1,200 per room for that part thereof which is attributable to dwelling use. The section is broadened to include as eligible mortgagors, associations or trusts in order to permit such entities, principally in Massachusetts, to take advantage of the act. The maximum amount of a mortgage which may be insured is reduced from $10,000,000 to $5,000,000.

The insurance of mortgages under this section is entirely divorced from the insurance of individual home mortgages under section 203. It is felt the two are completely dissimilar and should not be joined since the fund is a mutual fund and it has been found impossible to classify large loans without seriously affecting the mutuality of the group. There is created a separate fund known as the housing fund, to be used by the Administrator as a reserve fund, and $1,000,000 of appraisal fees which the Administrator has heretofore collected is transferred to this fund.

The conditions under which debentures are issued in payment of the mortgage insurance contract is entirely changed. With respect to this section, as distinguished from individual home mortgages, debentures may be issued upon the assignment of the mortgage after default continuing for 30 days, rather than in exchange for the property itself after foreclosure by the mortgagee. It is felt that the reasons which would make such arrangement undesirable with respect to small loans are not present in connection with these loans and it is also believed that this arrangement will greatly encourage new construction under this section. It is further felt that it is undoubtedly to the interest of the Administrator to obtain control of these properties at the earliest moment after default in order to preserve them and the income derived therefrom without delay. As in the case of debentures issued under section 203, debentures issued under this section are similarly tax exempt. Numerous other provisions of the revised section follow closely the philosophy of similar sections concerning individual homes except as necessary to provide for the changes herein noted.

Sections 23 and 24 are clarifying amendments.

Section 25 adds a new section to the present act to be known as section 210, which authorizes the Administrator to insure mortgages, including advances during construction, covering property upon which there is to be constructed one or more multifamily dwellings or a group of not less than 25 single-family dwellings. It is provided that the property subject to such mortgages must be approved for insurance prior to the beginning of construction. Such mortgages must exceed $16,000 but not exceed $250,000, are limited to $1,000 per room, and may not be in excess of 80 percent of the Administrator's estimate of the value of the property when completed. They must mature within 21 years and can contain such other provisions as the Administrator shall approve. The debentures under this section are tax exempt and are issued upon foreclosure by the mortgagee and conveyance to the Administrator of the property in the same manner as is provided with respect to individual home mortgages but are obligations of the housing fund.

Section 26 amends section 301a of the act which provides for the establishment of national mortgage associations, in such manner as to permit such associations to make direct loans on mortgages insured under section 207 and to purchase, service, and sell (1) mortgages insured under title II, and (2) uninsured mortgages upon the condition that the purchase price with respect to such mortgages shall not exceed 60 percent of the appraised value of the property as of the date of purchase.

Section 27 amends section 301d of the act governing the matter of subscriptions to capital stock of such associations, to provide that such associations can commence business upon payment of 25 percent of their capital stock, but that they cannot issue debentures until full payment thereof. The amendment further permits payment of the capital stock to be in first mortgages taken at a value approved by the Administrator not exceeding, except for mortgages insured under title II, 60 percent of the appraised value of the property.

Section 28 amends section 302 of the act by increasing the limit upon the aggregate amount of debentures which may be issued from 12 to 20 times the aggregate par value of the outstanding capital stock but retains the proviso that in no event shall the aggregate amount of debentures issued exceed the current value of mortgages held by the association and insured under the provisions of title II plus the cash and investments in Government bonds of the association. The section is further amended by permitting such associations, if their bylaws so provide, to accept debentures issued by them in payment of obligations due them.

Section 29 amends section 303 of the act to permit national mortgage association to purchase debentures and other obligations issued under section 302.

Section 30 exempts national mortgage associations and the obligations issued by them from all Federal, State, and local taxation which exemption, however, does not extend to the real property owned by such associations. It is felt that unless these associations and their obligations have the same advantages in this respect as are granted to similar organizations marketing obligations to the public, these organizations will be unable to lend on mortgages at the low interest rate which it is hoped to attain.

Sections 31 and 32 amend the penal provisions of the act. Section 33 specifically makes applicable to the amended act all previous acts of Congress referring to the original act.

Sections 34 and 35 amend the act regulating life-insurance companies in the District of Columbia by permitting such companies to invest funds in insured mortgages and in obligations of national mortgage associations.

Sections 36 and 37 revive and extend until July 1, 1939, title I of the act, which provides for the insurance of loans for repairs, alterations, and additions upon improved real estate, except, however, that the insurance of loans covering installation of equipment and machinery is eliminated. The insurance is limited to 10 percent of the total amount of all loans made under this section and the $100,000,000 limitation contained in the original act is converted into a revolving fund in such amount in order not to require authorization for a further appropriation. Loans, not in excess of $2,500, for the erection of new structures are authorized to be insured.

Section 38 is a clarification of section 5136 of the Revised Statutes and provides that obligations of national mortgage associations held by national banks shall be classified by the Controller of the Currency as investment securities rather than as real-estate loans.

CHANGES IN EXISTING LAW

In compliance with paragraph 2a of rule XIII of the Rules of the House of Representatives, changes in existing law made by the bill are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italics, existing law in which no change is proposed is shown in roman):

NATIONAL HOUSING ACT

TITLE I-HOUSING RENOVATION AND MODERNIZATION

NOTE.-Section 2 (a) is amended by section 36 of the bill.

INSURANCE OF FINANCIAL INSTITUTIONS

SEC. 2. (a) The Administrator is authorized and empowered, upon such terms and conditions as he may prescribe, to insure banks, trust companies, personal finance companies, mortgage companies, building and loan associations, installment lending companies, and other such financial institutions, which the Administrator finds to be qualified by experience or facilities and approves as eligible for credit insurance, against losses which they may sustain as a result of loans and advances of credit, and purchases of obligations representing loans and advances of credit, made by them on and after [April 1, 1936, and prior to April 1, 1937] the date of the enactment of this Act and prior to July 1, 1939, or such earlier date as the President may fix by proclamation upon his determination that there no longer exists any necessity for such insurance in order to make ample credit available, for the purpose of financing alterations, repairs, and [additions upon improved] improvements upon urban or rural real property [and the purchase and installation of equipment and machinery upon such real property by the owners thereof or by lessees of such real property under a lease expiring not less than six months after the maturity of the loan or advance of credit. In no case shall the insurance granted by the Administrator under this section to any such financial institution on [the] loans, advances of credit, and purchases made by such financial institution for such purposes on and after [April 1, 1936, exceed] the date of the enactment of this Act exceed 10 per centum of the total amount of such loans, advances of credit, and purchases. The total liability [incurred by the Administrator for] which may be outstanding at any time plus the amount of claims