THE SECRETARY OF HOUSING AND URBAN DEVELOPMENT, DEAR MR. CHAIRMAN: This is in further response to your request for a report on S. 2652, a bill relating to the applicability of the 3-percent interest rate for loans to provide housing for the elderly or handicapped under section 202 of the Housing Act of 1959. Under section 202 of the Housing Act of 1959, the Secretary of Housing and Urban Development is authorized to make loans to private nonprofit or cooperative organizations or public bodies for the provision of housing and related facilities for elderly or handicapped families where such financing is not otherwise available on equally favorable terms. Under the 1959 legislation, the interest rate charged for such loans was established by adding one-quarter of 1 percent to the average annual interest rate on the Treasury debt. For fiscal year 1965, this formula produced a borrowing rate of 34 percent. Section 105(b) of the Housing and Urban Development Act of 1965 established a maximum interest rate for this program of 3 percent, effective with respect to loans made on or after the date of enactment (August 10, 1965). It has been our view that, as a matter of law, a loan is made under this program on the date of execution of the loan agreement between the applicant and Department. Accordingly, under existing law, projects for which loan agreements were executed prior to August 10, 1965, are legally precluded from receiving the benelt of the 3-percent interest rate. The subject bill would extend the application of the 3-percent interest rate to any loan made prior to August 10, 1965, if construction of the housing or related facilities assisted by the loan was not commenced prior to that date and not com pleted prior to the filing of an application for the benefits of the 3-percent interest rate. This Department does not favor the enactment of S. 2652. The subject bill would extend the application of the 3-percent interest rate by applying it retroactively to a number of projects for which loans were made prior to the enactment of the 1965 act. Further, the bill would draw a distinction between projects on which construction had commenced prior to August 10, 1965, and those on which construction had not yet commenced by that date. For the latter, the bill would make available the benefits of the 3-percent interest rate (provided that construction was not completed prior to filing an application for the 3-percent rate). despite the fact that the loan agreement providing for a different interest rate had already been executed. If construction had already begun, however, the 3-percent interest rate would not be available. We see no reason for differentiating between applicants, who have already committed themselves to a specified interest rate, on the basis of whether construction of the project had begun by the effective date of the 1965 act. In fact. such differentiation might serve to penalize applicants who have moved with dispatch in constructing projects for which leans had been made, as opposed to applicants who have been dilatory in commencing construction. We point out, also, that in both instances, the applicant, before the enactment of the 1965 act, had already signified its willingness to pay the stipulated interest rate and had already demonstrated a sufficient market for units in the project at rentals based, in large part, on the stipulated interest rate. We further believe that to the extent the 3-percent interest rate provided in the 1965 act is intended to encourage a greater volume of housing for lower-income elderly families, the subject bill, by extending that interest rate retroactively to projects where loan agreements had already been executed prior to the enactment of the 1965 act, would be inconsistent with that intent. 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, ROBERT C. WEAVER, 89TH CONGRESS 2D SESSION S. 2782 IN THE SENATE OF THE UNITED STATES JANUARY 18, 1966 Mr. BAYH introduced the following bill; which was read twice and referred to the Committee on Banking and Currency A BILL To authorize disaster loans under title V of the Housing Act 1 of 1949 and under section 325 of the Consolidated Farmers Home Administration Act of 1961. Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 3 That section 501 (a), title V of the Housing Act of 1949, 4 as amended, be amended by adding at the end thereof the 5 following new paragraph (4): 6 7 8 9 10 66 (4) to the owners of farms and other real estate in rural areas whose encumbered buildings or related facilities have been damaged or destroyed by a major disaster as determined by the President or a natural disaster for which the Secretary of Agriculture makes 2 1 2 3 4 5 6 7 8 9 assistance available pursuant to subtitle C of the Consolidated Farmers Home Administration Act of 1961 as now or hereafter amended, for temporary rent, debris removal, repair and replacement, and for financing existing encumbrances to the extent necessary to permit the scheduling of the prior indebtedness and a loan made under this title within the applicant's ability to repay." SEC. 2. Section 325 of the Consolidated Farmers Home 10 Administration Act of 1961 be amended by striking the 11 figure "(2)" and by inserting after the words "not general 12 to the area" a comma and the following: "(2) who have suffered property losses uninsurable at reasonable rates due to natural and other causesincluding, but not limited to, wildfire, explosion, flood from whatever cause, insurrection or invasion, "(3) whose needs for credit arise from losses in excess of the amount available under any Federal or State program and in excess of the amount of insurance available at reasonable rates, or "(4)". Hon. A. WILLIS ROBERTSON, EXECUTIVE OFFICE OF THE PRESIDENT, Chairman, Committee on Banking and Currency, DEAR MR. CHAIRMAN: This is in reply to your request for comments on S. 2782, 89th Congress, a bill to authorize disaster loans under title V of the Housing Act of 1949 and under section 325 of the Consolidated Farmers Home Administration Act of 1961. The provisions of S. 2782 provide for the liberalization of existing agricultural loan programs where farmers and rural property owners have suffered losses as a result of a disaster. The Office of Emergency Planning generally favors legislation which provides for the liberalization of existing Federal loan programs in the event of a disaster. However, as to the effectiveness and application of this legislation we would defer to the Secretary of Agriculture who has the responsibility for administering the loan programs. From the standpoint of the administration's program, the Bureau of the Budget advises that it has no objection to the submission of this report. Sincerely, (Signed) FARRIS BRYANT, Director. Hon. A. WILLIS ROBERTSON, DEPARTMENT OF AGRICULTURE, Chairman, Committee on Banking and Currency, U.S. Senate, Washington, D.C. DEAR MR. CHAIRMAN: This is in response to your request for a report on S. 2782, a bill to authorize disaster loans under title V of the Housing Act of 1949 and under section 325 of the Consolidated Farmers Home Administration Act of 1961. The Department does not recommend enactment of this bill. Section 501(a), title V, of the Housing Act of 1949, as amended, authorizes the making of loans to farmers and rural residents for building, repairing, or replacing damaged or destroyed houses as well as for purchasing buildings. Section 1 of S. 2782 would amend section 501 (a) by adding a new paragraph (4) authorizing loans to the owners of farms and other real estate in rural areas whose encumbered buildings or related facilities have been damaged or destroyed by a major disaster as determined by the President or a natural disaster for which the Secretary of Agriculture makes assistance available pursuant to subtitle C of the Consolidated Farmers Home Administration Act of 1961 as now or hereafter amended, for (a) temporary rent, (b) debris removal, (c) repair and replacement, and (d) financing existing encumbrances to the extent necessary to bring the refinanced prior indebtedness and other loans made under this title within the applicant's repayment ability. The Farmers Home Administration follows a policy under which rural housing loans under section 501(a) are made only to applicants who are unable to obtain the credit they need from other sources. Rural housing loans to repair or replace buildings lost or damaged as a result of a natural disaster bear 3 percent interest. The Small Business Administration makes disaster loans at 3 percent interest to rural residents to repair or restore homes damaged or destroyed by natural disasters. The need for this type of credit by rural residents who are not farmers generally is met by the Small Business Administration. The combined lending authorizations of the Farmers Home Administration are broad enough to meet the objectives of section 1 with regard to farmers. Therefore, there is not a need for new authorizations except it would be helpful to have authority to refinance debts against damaged or destroyed houses with loans under section 501 (a). This authority would be provided by S. 1850 for which this Department has made a favorable recommendation. Emergency loans are made by the Farmers Home Administration in areas designated by the Secretary of Agriculture upon his finding that a natural disaster has created a general need for agricultural credit which cannot be met by local sources, including the regular programs of the Farmers Home Administration. However, section 325 of the Consolidated Farmers Home Administration Act of 1961 authorizes the making of these loans without an area designation to eligible farmers and ranchers who have had severe production losses not general to the area. The legislative history shows that this authorization is related to losses caused by natural disasters affecting only a small number of farmers or ranchers. Damages to essential farm building are considered as qualifying losses under this authority. Section 2 of S. 2782 would amend section 325 of the Consolidated Farmers Home Administration Act of 1961 to authorize making emergency loans without area designations to farmers or ranchers who have suffered property losses uninsurable at reasonable rates due to natural and other causes, and whose needs for credit arise from losses in excess of the amount available under any Federal or State program and in excess of the amount of insurance available at reasonable rates. The Department does not believe this additional authority is needed because the Farmers Home Administration is presently authorized to meet such needs with rural housing loans or emergency loans pursuant to section 325 when the need results from a natural disaster. The Bureau of the Budget advises that there is no objection to the presentation of this report from the standpoint of the administration's program. Sincerely yours, ORVILLE L. FREEMAN, Secretary. THE SECRETARY OF HOUSING AND URBAN DEVELOPMENT, Subject: S. 2782, 89th Congress (Senator Bayh). Chairman, Committee on Banking and Currency, DEAR MR. CHAIRMAN: This is in further reply to your request for a report from this Department on S. 2782, a bill to authorize disaster loans under title V of the Housing Act of 1949 and under section 325 of the Consolidated Farmers Home Administration Act of 1961. |