HOUSING ACT OF 1961

MONDAY, APRIL 24, 1961

HOUSE OF REPRESENTATIVES,

COMMITTEE ON BANKING AND CURRENCY,

SUBCOMMITTEE ON HOUSING,

Washington, D.C.

The subcommittee met at 10 a.m., Hon. Albert Rains (chairman

of the subcommittee) presiding.

Present: Messrs. Rains, Barrett, Mrs. Sullivan, Mr. Ashley, Mrs. Griffiths, Messrs. Rutherford, McDonough, and Widnall.

Also present: Messrs. Scranton, Miller, Vanik, Derwinski, and Harvey.

(The bills H.R. 6028, H.R. 5300, H.R. 6423, and the possible amendments to H.R. 6028 are as follows:)

[H.R. 6028, 87th Cong., 1st sess.]

A BILL To assist in the provision of housing for moderate and low income families, to promote orderly urban development, to extend and amend laws relating to housing, urban renewal, and community facilities, and for other purposes

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That this Act may be cited as the "Housing Act of 1961".

TITLE I-HOUSING FOR MODERATE INCOME FAMILIES

FHA MORTGAGE INSURANCE

SEC. 101. (a) The National Housing Act is amended by inserting the following heading preceding section 221:

"HOUSING FOR MODERATE INCOME AND DISPLACED FAMILIES"

(b) Section 221 of such Act is amended by

(1) amending subsection (a) to read as follows:

"(a) This section is designed to assist private industry in providing housing for low and moderate income families and families displaced from urban renewal areas or as a result of governmental action.";

(2) striking out in subsection (b) "any mortgage" and inserting in lieu thereof "any mortgage (including advances during construction on mortgages covering property of the character described in paragraph (3) and (4) of subsection (d) of this section)";

(3) amending clause (A) in subsection (d) (2) to read as follows: "(A) not to exceed (i) $9,000 in the case of a property upon which there is located a dwelling designed principally for a single-family residence, (ii) $18,000 in the case of a property upon which there is located a dwelling designed principally for a two-family residence, (iii) $27,000 in the case of a property upon which there is located a dwelling designed principally for a three-family residence, (iv) $33,000 in the case of a property upon which there is located a dwelling designed principally for a four-family residence: Provided, That the Commissioner may increase the foregoing

amounts to not to exceed $15,000, $25,000, $32,000, and $38,000, respectively, in any geographical area where he finds that cost levels so require;";

(4) striking out the third proviso in subsection (d) (2) and the colon preceding the proviso;

(5) amending subsection (d) (3) to read as follows:

"(3) If executed by a mortgagor which is a public body or agency, a cooperative (including an investor-sponsor who meets such requirements as the Commissioner may impose to assure that the consumer interest is protected), or a limited dividend corporation (as defined by the Commissioner), or a private nonprofit corporation or association regulated or supervised under Federal or State laws or by political subdivisions of States, or agencies thereof, or by the Commissioner under a regulatory agreement or otherwise, as to rents, charges, and methods of operation, in such form and in such manner as in the opinion of the Commissioner will effectuate the purposes of this section, the mortgage may involve a principal obligation in an amount

"(i) Not to exceed $12,500,000;

"(ii) not to exceed for such part of such property or project as may be attributable to dwelling use (excluding exterior land improvements as defined by the Commissioner), $2,250 per room (or $8,500 per family unit if the number of rooms in such property or project is less than four per family unit), except that the Commissioner may in his discretion increase the dollar amount limitation of $2,250 per room to not to exceed $2,750 per room, and the dollar amount limitation of $8,500 per family unit to not to exceed $9,000 per family unit, as the case may be, to compensate for higher costs incident to the construction of elevator type structures of sound standards of construction and design, and except that the Commissioner may increase any of the foregoing dollar amount limitations contained in this paragraph by not to exceed $1,000 per room without regard to the number of rooms being less than four, or four or more, in any geographical area where he finds that cost | levels so require; and

"(iii) not to exceed (1) in the case of new construction, the amount which the Commissioner estimates will be the replacement cost of the property or project when the proposed improvements are completed (the | replacement cost may inelude the land, the proposed physical improvements, utilities within the boundaries of the land, architect's fees. taxes, interest during consrtuction, and other miscellaneous charges incident to construction and approved by the Commissioner), or (2) in the case of repair and rehabilitation the sum of the estimated cost of repair and rehabilitation and the Commissioner's estimate of the value of the property before repair and rehabilitation: Provided, That such property or project, when constructed, or repaired and rehabilitated, shall be for use as a rental or cooperative project, and low and moderate income families or families displaced by urban renewal or other governmental action shall be eligible for occupancy in accordance with such regualtions and procedures as may be prescribed by the Commissioner and that the Commissioner may adopt such requirements as he determines to be desirable regarding consultation with local public officials where such consultation is appropriate by reason of the relationship of such project to projects under other local programs; or";

(6) striking out in subsection (d) (4) "which is not a nonprofit organization" and inserting in lieu thereof “other than a mortgagor referred to in subsection (d) (3)";

(7) amending subsection (d) (4) (ii) to read as follows:

"(ii) not exceed, for such part of the property or project as may be attributable to dwelling use (excluding exterior land improvements as defined by the Commissioner), $2,250 per room (or $8,500 per family unit if the number of rooms in such property or project is less than four per family unit) except that the Commissioner may in his discretion increase the dollar amount limitation of $2.250 per room to not to exceed $2,750 per room, and the dollar amount limitation of $8.500 per family unit to not to exceed $9,000 per family unit, as the case may be, to compensate for higher costs incident to the construction of elevator type structures of sound standards of construction and design, and except that the Commissioner may increase any of the foregoing dollar amount limitations con

tained in this paragraph by not to exceed $1,000 per room without regard to the number of rooms being less than four, or four or more, in any geographical area where he finds that cost levels so require;";

(8) striking out in subsection (d) (4) (iv) the language preceding the second proviso, and ": And provided further," and inserting in lieu thereof the following: "not exceed 90 per centum of the sum of the estimated cost of repair and rehabilitation and the Commissioner's estimate of the value of the property before repair and rehabilitation if the proceeds of the mortgage are to be used for the repair and rehabilitation of a property or project: Provided," :

(9) striking out in subsection (d) (5) “but not to exceed forty years from the date of insurance of the mortgage" and inserting in lieu thereof "but as to mortgages coming within the provisions of subsection (d) (2) not to exceed forty years from the date of beginning of amortization of the mortgage";

(10) inserting a colon and the following proviso before the period at the end of subsection (d): "Provided, That a mortgage insured under the provisions of subsection (d) (3) shall bear interest (exclusive of any premium charges for insurance and service charge, if any) at not less than the annual rate of interest determined, from time to time by the Secretary of the Treasury at the request of the Federal Housing Commissioner, by estimating the average market yield to maturity on all outstanding marketable obligations of the United States, and by adjusting such yield to the nearest one-eighth of 1 per centum”.

(11) inserting the following at the end of subsection (f): "A property or project covered by a mortgage insured under the provisions of subsection (d)(3) or (d)(4) shall include five or more family units. The Commissioner is authorized to adopt such procedures and requirements as he determines are desirable to assure that the dwelling accommodations provided under this section are available to families displaced from urban renewal areas or as a result of governmental action. Notwithstanding any provision of this Act, the Commissioner, in order to assist further the provision of housing for low and moderate income families, in his discretion and under such conditions as he may prescribe, may insure a mortgage which meets the requirements of subsection (d)(3) of this section as in effect after the effective date of the Housing Act of 1961, with no premium charge, a reduced premium charge, or with a premium charge for such period or periods during the time the insurance is in effect as the Commissioner may determine, and there is hereby authorized to be appropriated, out of any money in the Treasury not otherwise appropriated, such amounts as may be necessary to reimburse the Section 221 Housing Insurance Fund for any net losses in connection with such insurance. No mortgage shall be insured under subsections (d) (2) and (d)(4) of this section after July 1, 1963, except pursuant to a commitment to insure before that date, or except a mortgage covering property which the Commissioner finds will assist in the provision of housing for families displaced from urban renewal areas or as a result of governmental action.";

(12) inserting the following paragraph after paragraph (2) in subsection (g):

"(3) as to mortgages meeting the requirements of this section that are insured or initially endorsed for insurance on or after March 29, 1961, notwithstanding the provisions of paragraphs (1) and (2) of this subsection, the Commissioner, in his discretion, may in accordance with such regulations as he may prescribe, acquire a mortgage loan that is in default and the security therefor upon payment to the mortgagee in cash or in debentures of a total amount equal to the unpaid principal balance of the loan plus any accrued interest and any advances approved by the Commissioner and made previously by the mortgagee under the provisions of the mortgage, and after the acquisition of the mortgage by the Commissioner the mortgagee shall have no further rights, liabilities, or obligations with respect to the loan or the security for the loan. The provisions of sections 204 and 207 relating to the issuance of debentures shall apply with respect to debentures issued under this subsection, and the provisions of sections 204 and 207 relating to the rights, liabilities, and obligations of a mortgagee shall apply with respect to the Commissioner when he has acquired an insured mortgage under this subsection, in accordance with and subject to

regulations (modifying such provisions to the extent necessary to render their application for such purposes appropriate and effective) which shall be prescribed by the Commissioner, except that as applied to mortgages insured under this section (1) all references in section 204 to the 'Fund' or 'Mutual Mortgage Insurance Fund' shall refer to the 'Section 221 Housing Insurance Fund', (2) all references to 'section 203' shall refer to this section, and (3) all references in section 207 to the 'Housing Insurance Fund', 'Fund', or 'Housing Fund' shall refer to the 'Section 221 Housing Insurance Fund'.";

(13) striking out in paragraph (3) of subsection (g) "this paragraph (3)" each place it appears and inserting in lieu thereof "this paragraph" and renumbering paragraph (3) to be paragraph (4); and

(14) striking out in the last sentence of subsection (h) "cash adjustments," and inserting in lieu thereof "cash adjustments, cash payments,”.

AMENDMENTS OF HOUSING ACT OF 1949

SEC. 102. Section 101 (c) of the Housing Act of 1949 is amended by

(1) striking out "under section 220 or 221" and inserting in lieu thereof "under section 220 or section 221(d) (3)";

(2) striking out "of section 220(d), or under section 221 of the National Housing Act, as amended, if the mortgaged property is in an area described in clause (3) of section 221(a) of said Act, or in a community referred to in clause (2) (B) of said section" and insering in lieu thereof "of section 220 (d) of the National Housing Act"; and

(3) striking out clause (iii) and renumbering clause “(iv)" to be clause “(iii)”.

TITLE II-HOME IMPROVEMENT AND REHABILITATION

HOME IMPROVEMENT AND REHABILITATION IN URBAN RENEWAL AREAS

SEC. 201. Section 220 of the National Housing Act is amended by

(a) striking out the provisos in subsections (d) (3)(A)(i) and (d) (3) (B) (ii) and inserting in lieu thereof in each subsection the following: "Provided, That in the case of properties other than new construction, the foregoing limitations upon the amount of the mortgage shall be based upon the sum of the estimated cost of rehabilitation and the Commission's estimate of the value of the property before rehabilitation rather than upon the Commissioner's estimate of the replacement cost:";

(b) striking out "mortgage insurance" in subsection (a) and inserting in lieu thereof "loan and mortgage insurance"; and

(c) adding the following subsection:

"(h) (1) To assist further in the conservation, improvement, repair, and rehabilitation of property located in the area of an urban renewal project as provided in paragraph (1) of subsection (d) of this section, the Commissioner is authorized upon such terms and conditions as he may prescribe to make commitments to insure and to insure home improvement loans (including advances during construction or improvement) made by financial institutions on and after the effective date of the Housing Act of 1961. As used in this subsection, 'home improvement loan' means a loan, advance of credit or purchase of an obligation representing a loan or advance of credit made for the purpose of financing the improvement of an existing structure (or in connection with an existing structure) used primarily for residential purposes; 'improvement' means conservation, repair, restoration, rehabilitation, conversion, alteration, enlargement, or remodeling; and financial institution' means a lender approved by the Commissioner as eligible for insurance under section 2 or a mortgage approved under section 203 (b) (1).

"(2) To be eligible for insurance under this subsection, a home improvement loan shall

"(i) not exceed the Commissioner's estimate of the cost of improvement, or $10,000 per family unit, whichever is the lesser ;

"(ii) be limited to an amount which when added to any outstanding indebtedness related to the property (as determined by the Commissioner) creates a total outstanding indebtedness which does not exceed the limits provided in subsection (d) (3) for properties other than new construction; "(iii) bear interest at not to exceed a rate prescribed by the Commissioner but not in excess of 6 per centum per annum of the amount of the principal

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obligation outstanding at any time, and such other charges (including such service charges, appraisal, inspection, and other fees) as may be approved by the Commissioner;

"(iv) have a maturity satisfactory to the Commissioner, but not to exceed twenty-five years or three-quarters of the remaining economic life of the structure, whichever is the lesser ;

"(v) be secured at the discretion of the Commissioner in such cases and in such manner as he may require;

"(v) contain such other terms, conditions, and restrictions as the Commissioner may prescribe; and

"(vii) represent the obligation of a borrower who is the owner of the property improved.

"(3) Any home improvement loan insured under this subsection may be refinanced and extended in accordance with such terms and conditions as the Commissioner may prescribe, but in no event for an additional amount or term in excess of the maximum provided for in this subsection.

"(4) There is hereby created a separate section 220 home improvement account to be maintained under the section 220 housing insurance fund and to be used by the Commissioner as a revolving fund for carrying out the provisions of this subsection. The Commissioner is authorized to transfer to such fund the sum of $1,000,000 from the war housing insurance fund established pursuant to the provisions of section 602 of this Act. Any premium charges, and appraisal and other fees received on account of the insurance of any home improvement loan accepted for insurance under this subsection, and the receipts derived from the sale, collection, deposit, or compromise of any evidence of debt, contract, claim, property, or security assigned to or held by the Commissioner in connection with the payment of insurance under this subsection, shall be credited to the section 220 home improvement account. Insurance claims under this subsection and expenses incurred in the handling, management, renovation, and disposal of any properties acquired by the Commissioner under this subsection shall be charged to the section 220 home improvement account. General expenses of operation of the Federal Housing Administration and other expenses incurred under this subsection may be charged to the section 220 home improvement account. Moneys in the account not needed for the current operation of the Federal Housing Administration under this subsection shall be deposited with the Treasurer of the United States to the credit of that account, or invested in bonds or other obligations of, or in bonds or other obligations guaranteed as to principal and interest by, the United States.

"(5) The Commissioner is authorized to fix a premium charge for the insurance of home improvement loans under this subsection but in the case of any loan such charge shall not be less than an amount equivalent to one-half of 1 per centum per annum nor more than an amount equivalent to 1 per centum per annum of the amount of the principal obligation of the loan outstanding at any time, without taking into account delinquent payments or prepayments. Such premium charges shall be payable by the financial institution in such manner as may be prescribed by the Commissioner and the Commissioner may require the payment of one or more such premium charges at the time the loan is insured, at such discount rate as he may prescribe not in excess of the interest rate specified in the loan. If the Commissioner finds upon presentation of a loan for insurance and the tender of the initial premium charge or charges so required that the loan complies with the provisions of this subsection, such loan may be accepted for insurance by endorsement or otherwise as the Commissioner may prescribe. In the event that the principal obligation of any loan accepted for insurance under this subsection is paid in full prior to the maturity date, the Commissioner is authorized to refund to the financial institution, all or such portions as he shall determine to be equitable, of the current unearned premium charges heretofore paid.

"(6) In cases of defaults in loans insured under this subsection, upon receiving notice of default, the Commissioner, in accordance with such regulations as he may prescribe, may acquire the loan and any security therefor upon payment to the financial institution in cash or in debentures of a total amount equal to the unpaid principal balance of the loan plus any accrued interest and any advances approved by the Commissioner made previously by the financial institution under the provisions of the loan instruments. After the acquisition of the loan by the Commissioner the financial institution shall have no further rights, liabilities, or obligations with respect to the loan or any security for the loan.