Subsection (c)

This subsection would provide that after paid-in capital stock of subscribers other than the United States equals $50,000,000 the Corporation would retire dollar for dollar, out of such privately paid capital, the stock held by the Secretary of the Treasury at par plus accrued dividends, provided that no such stock could be retired if the net capital, reserves, and surplus of the Corporation would thereby be reduced to an amount less than $150,000,000.

Subsection (đ)

This subsection would provide that the preferred stock of the Government, in addition to its preferment as to dividends and assets, would upon liquidation of the Corporation, share with other stockholders in any distribution of profits.

SECTION 203-BOARD OF DIRECTORS

This section would provide that the Corporation would have a board of five directors with terms ending in successive years, each member after the first appointees to serve for a period of 5 years. The Administrator would appoint all directors, but after the first appointees two of the five directors would be appointed by the Administrator from members of stockholding corporations or other representatives of housing cooperatives. The Administrator would have the power to designate a chairman, and to remove directors for cause. Directors could receive reasonable compensation for services and necessary expenses.

Subsection (a)

SECTION 204-MORTGAGE LOANS

The Corporation would be authorized under this subsection to make mortgage loans (including advances during construction) to a nonprofit cooperativeownership housing corporation or other nonprofit corporation authorized to provide housing if the Administrator certifies (1) that the borrower is a bona fide corporation of this character, (2) that the proposed housing project will meet a need for housing for families of moderate income, (3) that the proposed project will meet sound standards of design, construction, livability, and size for adequate family life, and (4) that the development and management of the project will be such as to promote the economies contemplated under the act. The borrower must also agree to establish and maintain rent schedules, satisfactory to the Corporation, which will permit the dwellings to be made available to families of moderate income, and to comply with other prescribed terms and conditions. If the borrower is a nonprofit corporation proposing to rent the dwellings in the project, it must agree to give certain prescribed preferences to families displaced by low-rent public housing or slum-clearance projects and to families of veterans and servicemen of World War I or II.

Subsection (b)

This subsection would provide that the mortgage loan could not exceed the development cost of the housing project nor the amount which the Administrator determines to be the upper limit within which housing can be provided for families of moderate income in the locality at rentals or other charges within their means.

Subsection (c)

This subsection would require that the mortgage loan provide for complete amortization within 50 years by periodic payments, except that, in the case of projects refinanced within a period prescribed by the Corporation, the total period could be extended to 60 years. Interest would be at a fixed rate on unpaid balances, such rate to take into account the cost to the Corporation of its capital and borrowings plus its costs of operation and its reserves. Provisions could be made in the loan for deferment of principal and interest payments thereunder provided that such deferments could not extend the maturity of the loan for more than 3 years.

Subsection (d)

This subsection would permit the Corporation, subject to the provisions of this section, to determine the form, security, repayment, redemption, and other terms and conditions of the mortgage loan. In the case of a loan to a cooperativeownership housing corporation, the borrower would be required to have, to the extent permitted by State and local law, a priority in the purchase of the interest of each of its members in the event of sale of such interest.

Subsection (e)

This subsection would permit the borrower, with the consent of the Corporation, to pledge the contract or commitment of the Corporation to make a mortgage loan as security for a construction loan from private or other sources.

Subsection (f)

This subsection would authorize the Corporation to charge (in addition to any interest charges) up to 2% percent of the principal amount of the mortgage loan for inspection and other services rendered the project during construction.

SECTION 205-OBLIGATIONS OF CORPORATION

This section would provide for the issuance by the Corporation on and after July 1, 1950, of obligations, guaranteed as to principal and interest by the United States, in an amount not exceeding $300,000,000, which amount could be increased on or after July 1, 1951, with the approval of the President, by additional amounts aggregating not more than $1,700,000,000. The total outstanding obligations of the Corporation could not in any event, however, exceed 15 times its capital stock, reserves, and surplus or the amount of the unpaid balance of the mortgages contracted for or held by it plus its cash on hand and on deposit and its investments.

SECTION 206-RESERVES, DIVIDENDS, AND INVESTMENT OF FUNDS

This section contains provisions for the establishment of reserves, including payments to a special reserve account for losses equal to one-eighth of 1 percent per annum of outstanding mortgage loans; for the payment of dividends; and for the investment of reserves and other funds of the Corporation.

SECTION 207-TAXES

This section would provide that real property and tangible personal property of the Corporation would be subject to State and local taxes and real property of the Corporation would be subject to special assessments for local improvements. The Corporation itself and its other property of all kinds would be exempt from Federal, State, and local taxes. Obligations of the Corporation would be exempt both as to principal and interest from State and local taxes except surtaxes, estate, inheritance, and gift taxes.

TITLE III-MISCELLANEOUS

SECTION 301-PROTECTION OF LABOR STANDARDS

This section would require that not less than the salaries prevailing in the particular locality, as determined or adopted by the Administrator, be paid to all architects, technical engineers, etc., employed in the development, and to all maintenance laborers and mechanics employed in the adminisration, of the housing project. It would also provide that not less than the wages prevailing in the locality, as predetermined by the Secretary of Labor pursuant to the BaconDavis Act, should be paid to all laborers and mechanics employed in the development of the housing project, would make applicable the provisions of the KickBack statute, and would require that certain reports be made to the Secretary of Labor by contractors and subcontractors on the work.

302-PENALTIES

This section contains appropriate criminal and penal provisions in connection with operations under the provisions of this act.

SECTION 303-DEFINITIONS

This section sets forth the necessary definitions of terms.

SECTION 304-GOVERNMENT CORPORATION CONTROL ACT

This section would make the necessary change in the Government Corporation Control Act to include the National Mortgage Corporation for Housing Cooperatives as a mixed-ownership corporation thereunder.

SECTIONS 305 AND 306

These sections contain customary provisions concerning the act controlling and separability.

COOPERATIVE HOUSING

TUESDAY, JANUARY 31, 1950

HOUSE OF REPRESENTATIVES,

COMMITTEE ON BANKING AND CURRENCY,
Washington, D. C.

The committee met, pursuant to adjournment, at 10 a. m., the Honorable Brent Spence (chairman) presiding.

Present: Messrs. Spence, Patman, Rains, Buchanan, Multer, Deane, O'Brien, Mrs. Woodhouse, Messrs. McKinnon, Addonizio, Mitchell, O'Hara, Gamble, Kunkel, Talle, McMillen, Kilburn, Hull, and Nicholson.

The CHAIRMAN. The committee will be in order.

We will hear, now, from Mr. Richards on H. R. 6742.

Mr. NICHOLSON. May I ask Mr. Foley a question?

The CHAIRMAN. Mr. Richards will complete his statement, and Mr. Foley will then return to the stand. Will that be acceptable? Mr. NICHOLSON. Yes; that is all right.

STATEMENT OF FRANKLIN D. RICHARDS, COMMISSIONER, FEDERAL HOUSING ADMINISTRATION

Mr. RICHARDS. Mr. Chairman and members of the committee, I am Franklin D. Richards, Commissioner of the Federal Housing Administration. I am grateful for the opportunity to appear before this committee in order to present my comments on H. R. 6742. These remarks will be made in the order in which amendments to the National Housing Act are presented in the bill.

Section 1 proposes amending the National Housing Act by removing the expiration date for the insurance of loans under title I. This title, which authorizes the Commissioner to insure qualified lending institutions against loss on small loans made to finance the alteration, repair, improvement, or conversion of existing structures, expires March 1, 1950. Since the approval of the original National Housing Act of 1934, the authority to insure these repair loans has been extended or renewed 13 times. On each occasion there was considerable inconvenience and delay caused home owners as well as disruption in the operating procedure of insured lending institutions, local dealers, wholesalers, and suppliers.

Our experience of last summer, when title I expired on June 30, was renewed for 60 days, renewed a second time on September 1 for another 60 days, then again nearly expired on November 1, but was extended at the last minute to March 1 of this year, brought a plea from members of industry as well as the lending institutions in the

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interest of the consumer to place future operations on a permanent basis.

In establishing title I on a permanent basis, it is desirable that a provision be made whereby the insured lending institutions are not credited with excessive protection against loss. This is accomplished in the proposed amendment by authorizing the Commissioner to cut back the accumulated insurance protection by 20 percent each 6 months.

Section 2 would increase the title II revolving fund authorization from $6,750,000,000 to $9,500,000,000. One and one-quarter billion of this increase would be made available directly to FHA upon passage of this bill and the remainder of one and one-half billion would be subject to the approval of the President. This proposed increase is expected to be ample for anticipated insurance operations under title II until the end of the fiscal year 1951. The authorization of $6,750,000,000 now available will be exhausted by late February-about 3 to 4 weeks hence.

The size of the increase requested is based generally on a continuance of recent levels of applications under section 203 and on an expansion of rental housing operations under this title following the expiration of section 608 on March 1, 1950.

I would like to call your particular attention to the language recommended under section 3 which amends section 207 (b) of the National Housing Act. This is the section that sets out the eligibility requirements for mortgages on rental housing projects. In addition to requiring a mortgagor to certify that in the selection of tenants he will not discriminate against any family by reason of the fact that there are children in the family, it is further proposed that the Commissioner be authorized and directed in the administration of this section by regulation or otherwise to direct the benefits of mortgage insurance hereunder primarily to those projects which make adequate provision for families with children and to make every effort to provide such accommodations at moderate rental charges. These provisions clearly point out the intended direction of the 207 program, namely, providing adequate accommodations for families with children and to provide such accommodations at rents which better meet the abilities of families of moderate income.

In line with this objective, section 4 provides a sliding scale of ratio of loan to value somewhat similar to the pattern presently established under section 203 for single-family owner-occupied homes. These new provisions would permit a ratio of loan to value of 90 percent on that portion of the total value represented by $7,000 per unit and 60 percent on that portion of the value in excess of $7,000 per unit and not in excess of $10,000 per unit. This provision, we believe, will be very effective in encouraging sponsors to provide greater numbers of moderate rental accommodations.

To further implement the objectives set forth above, we are recommending that the maximum mortgage per unit of $8,100 be applicable only in those cases where the average number of rooms per unit in a given project is four and one-half or more. In those cases where the average number of rooms per unit is less than four and one-half, we recommend that the maximum loan per unit be reduced to $7,500.