89TH CONGRESS 2D SESSION S. 3215 IN THE SENATE OF THE UNITED STATES APRIL 13, 1966 Mr. SPARKMAN introduced the following bill; which was read twice and referred to the Committee on Banking and Currency A BILL To amend the National Housing Act to provide mortgage insurance, and authorize direct loans by the Housing and Home Finance Administrator, to help finance the cost of constructing and equipping facilities for the group practice of medicine or dentistry. 1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 3 That it is the purpose of this Act to assure the availability of 4 credit on reasonable terms to units or organizations engaged 5 in the group practice of medicine or dentistry, particularly 6 those in smaller communities and those sponsored by coopera7 tive or other nonprofit organizations, to assist in financing the 8 construction and equipment of group practice facilities. 2 1 cooperative corporation), (i), or (j) of such section and 2 remain the obligation of the general insurance fund) shall not exceed an amount equivalent to one-fourth of 1 per 4 centum per annum: Provided further, That any reduced 5 premium charge fixed and computed under the preceding 6 provisions of this subsection". THE SECRETARY OF HOUSING AND URBAN DEVELOPMENT, Subject: S. 3057, 89th Congress (Javits). Hon. A. WILLIS ROBERTSON, Chairman, Committee on Banking and Currency, U.S. Senate, Washington, D.C. DEAR MR. CHAIRMAN: This is in reply to your request for a report on S. 3057, a bill to amend the National Housing Act to reduce the premiums charged for the insurance of certain cooperative housing mortgages. The bill would reduce the premium charged by the Federal Housing Administration for the insurance of management-type cooperative housing mortgages. It would place a mandatory ceiling on the premium charged of one-fourth percent per annum of the amount of the principal obligation of the mortgage outstanding at any one time. Under present law, the ceiling is one-half percent per annum. The proposed ceiling of one-fourth percent on the mortgage insurance premium would place an unworkable restriction on the operation of the cooperative housing mutual mortgage insurance fund (the management fund). It could prevent the Federal Housing Commissioner from increasing the premium to the amount necessary to operate the insurance under the fund, and result in a loss in the insurance operations. The last calculation of funds in the cooperative management insurance fund, and the outstanding balance of insurance in force showed reserve funds of $7,304,485 against insurance in force of $315,583,523. (This was as of October 31, 1965.) Thus, the accumulated reserves are little more than 2 percent of the outstanding potential liability. Although the experience of management-type cooperatives has been good, the values of such properties are related to the values of other rental and after sales housing properties. Following the high level of multifamily rental housing construction of the past 5 years many local rental housing markets are overbuilt. This has been reflected in part in the declining volume of total housing starts. If other rental properties have to go through foreclosures and make units available at reduced rents, cooperative housing apartments become less attractive values and have to decline in value. Under those conditions as cooperative members move, it would become more difficult to sell such properties. The FHA has been acquiring properties and has had mortgage notes assigned to it under the section 213 multifamily housing program in an increasing volume in recent years. The numbers of such properties and mortgage notes acquired have been 6 in 1962, 10 in 1963, 12 in 1964, and 13 in 1965. At the end of 1965 the FHA held 41 properties and notes under section 213 multifamily contracts. The experience of recent years demonstrates that the section 213 cooperative program cannot escape the weaknesses of the multifamily housing market. Therefore, a reserve of about 2 percent against mortgage insurance in force is not excessive, and there should not be a reduction in the present one-half of 1 percent premium. If long-range experience should prove to be good, it must be borne in mind that management-type cooperative housing mortgages are insured on a mutual basis. This permits rebates to the mortgagors, in the form of dividend payments, whenever the cost of operating the management-type mortgage insurance program and providing reserves is less than the income received. The mortgagor in such case is therefore adequately protected against excessive premiums without the proposed reduction in the insurance premium. The Bureau of the Budget has advised that there is no objection to the presentation of this report from the standpoint of the administration's program. Sincerely yours, (Signed) ROBERT C. WEAVER. 89TH CONGRESS 2D SESSION S. 3058 IN THE SENATE OF THE UNITED STATES MARCH 8, 1966 Mr. JAVITS introduced the following bill; which was read twice and referred to the Committee on Banking and Currency A BILL To amend section 213 of the National Housing Act to permit the more effective operation of the cooperative management housing insurance fund. 1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 3 That the fourth sentence of section 213 (k) of the National 4 Housing Act is amended to read as follows: "The Commis5 sioner is directed to transfer to the management fund from 6 the general insurance fund an amount equal to the total of 7 the premium payments theretofore made with respect to the 8 insurance of mortgages and loans transferred to the manage9 ment fund pursuant to subsection (m) minus the total of 10 any administrative expenses theretofore incurred in connec 1 5 "(f) Each mortgage insured under this title shall con 2 tain an undertaking (in accordance with regulations pre3 scribed under this title and in force at the time the mortgage 4 is approved for insurance) to the effect that, except as 5 authorized by the Commission and the mortgagee, the 6 property will be used as a group practice facility until the 7 mortgage has been paid in full or the contract of insurance 8 otherwise terminated. 9 "(g) No mortgage shall be insured under this title 10 unless the mortgagor and the mortgagee certify (1) that 11 they will keep such records relating to the mortgage trans12 action and indebtedness, to the construction of the facility 13 covered by the mortgage, and to the use of such facility as 14 a group practice facility as are prescribed by the Commis15 sioner at the time of such certification, (2) that they will 16 make such reports as may from time to time be required 17 by the Commissioner pertaining to such matters, and (3) 18 that the Commissioner or any authorized officer or employee 19 of the Federal Housing Administration, or of any agency or institution employed or utilized by the Commissioner for 21 that purpose, shall have access to and the right to examine 22 and audit such records. 20. 23 24 "PREMIUMS "SEC. 1002. The Commissioner shall fix premium 25 charges for the insurance of mortgages under this title, but |