SECTION-BY-SECTION SUMMARY OF H. R. 6742, A BILL TO AMEND TITLES I AND II OF THE NATIONAL HOUSING ACT1 (As introduced by Congressman Spence on January 12, 1950) AMENDMENTS TO TITLE I OF THE NATIONAL HOUSING ACT (EXTENSION OF INSURANCE PROGRAM FOR MODERNIZATION AND REPAIR LOANS) Section 1 would extend on a permanent basis the program for insurance of modernization and repair loans under title I of the National Housing Act. Up to the present time, this program has operated on the basis of a series of extensions by the Congress, and under existing law would expire on March 1, 1950. Under the title I program, the individual loans are not insured but the lending institution is insured against loss up to 10 percent of the original amounts of all its eligible title I loans. This 10 percent (referred to as the title I insurance reserve of the institution) increases, of course, in dollar amounts as additional title I loans are made. As the bill would make the title I program permanent, provisions would be made for periodic adjustments in the dollar amount of each reserve in order to prevent it from becoming too large in relation to the outstanding balance of the loans as they are repaid. One-fifth of such reserve would be cut back at the expiration of each 6-month period, beginning January 1, 1953. For administrative convenience, reserve cut-backs would be made on July 1 and January 1 of each year. After March 1, 1950, the reserve would be based on loans made after that date. AMENDMENTS TO TITLE II OF THE NATIONAL HOUSING ACT (INCREASED AUTHORIZATION AND RENTAL-HOUSING AMENDMENTS) Section 2 would increase the mortgage-insurance authorization under title II of the National Housing Act by $1,250,000,000 immediately, and by an additional $1,500,000,000 upon the approval of the President. Title II provides the regular, permanent FHA mortgage insurance for sales and rental housing, and this title II authorization provides for a permanent revolving fund related to the outstanding obligations of insured mortgages. Sections 3 and 4 would make certain changes in section 207 of title II of the National Housing Act in order to provide a better method for the insurance of mortgages on rental-housing projects on the basis of permanent legislative authorization, as distinguished from the emergency temporary rental-housing authorization under section 608, which, under existing law, would expire on March 1, 1950. Section 3 would state expressly that the insurance of mortgages under section 207 is intended to facilitate particularly the production of rental accommodations of design and size suitable for family living and at rents within the means of families of moderate income. The Federal Housing Commissioner would be directed to take action which would make the benefits of mortgage insurance under section 207 available primarily to projects making adequate provision for families with children and in which every effort has been made to achieve moderate rental charges. Section 3 of the bill would impose penalty provisions (similar to those applicable to sec. 608 housing) for discriminating against families with children in the selection of tenants. At the present time, the amount of a rental-housing mortgage insured under section 207 may not exceed 80 percent of the value of the property, and such mortgage may not exceed $8,100 per family unit, except that in the case of certain mortgages on housing of cooperatives this dollar limitation may be $1,800 per room. Section 4 of the bill would substitute the following schedule of ratios of maximum loan-to-value: Not to exceed the sum of 90 percent of the first $7,000 value per family unit and 60 percent of the value between $7,000 and $10,000 per family unit. In addition, the maximum mortgage amount would be limited, as at present, to $8,100 per family unit with respect to projects averaging 42 or more rooms per family unit. However, for projects with fewer rooms per family unit this limit would be reduced to $7,500. This variable limitation is designed to encourage the production of rental accommodations of adequate size for families with children. (These maximums in sec. 207 may be compared to the mortgage ceilings of $8,100 per family unit and 90 percent of necessary current cost under sec. 608.) Special mortgage-insurance ceilings would be pro 1 Similar provisions are contained in Senator Maybank's proposed amendments of January 11, 1950, to S. 2246. vided for Alaska in view of the higher costs and other conditions peculiar to that Territory. Section 5 would change section 207 (d) of the National Housing Act to increase the maximum FHA charges for appraisal and inspection fees under section 207 from one-half of 1 percent to 1 percent. Sections 6, 7, and 8 would make certain technical changes in section 207 with respect to foreclosure in the event of mortgage default. SECTION-BY-SECTION SUMMARY OF H. R. 6618, COOPERATIVE HOUSING BILL1 (As introduced by Congressman Spence on January 6, 1950) SECTION 1-SHORT TITLE This section would provide that this act could be cited as the "Cooperative Housing Act." This section sets forth the major purpose of the act to provide a means whereby good housing can be produced and made available for families of moderate income by furnishing technical and other assistance to cooperative-ownership housing corporations or other nonprofit corporations authorized to provide housing and by facilitating investment of private capital in such housing. TITLE I-FEDERAL AID TO HOUSING COOPERATIVES SECTION 101-TECHNICAL AID TO COOPERATIVES This section would authorize and direct the Housing and Home Finance Administrator to furnish technical advice and assistance in the organization of nonprofit cooperative-ownership housing corporations and other nonprofit corporations authorized to provide housing, in the development and management of housing projects by such corporations, and in the development and use of practical means for members of cooperatives to acquire cooperative ownership of their individual dwellings. SECTION 102-PRELIMINARY ADVANCES OF FUNDS This section would authorize the Administrator to make preliminary advances of funds to nonprofit cooperative-ownership housing corporations and other nonprofit corporations authorized to provide housing, for planning and performing work preliminary to construction on proposed housing projects eligible for mortgage loans under this act. Such advances would be limited to the amounts required for necessary work preliminary to construction and in no event could exceed 5 percent of the development cost of the projects, would bear interest at the going Federal rate plus one-half of 1 percent, and would be repaid out of any subsequent loans for the projects. Subsection (a) SECTION 103-PROVISION OF FUNDS This subsection would authorize the Administrator, with the approval of the President, to obtain funds for preliminary advances by issuing notes and other obligations for purchase by the Secretary of the Treasury. The outstanding amount of such obligations could not exceed at any one time $25,000,000. Subsection (b) This subsection would provide that the form, denominations, maturities, and terms and conditions of the notes or other obligations to be purchased by the Secretary of the Treasury shall be determined by the Administrator with the approval of the Secretary of the Treasury. The interest on such obligations would be at a rate determined by the Secretary of the Treasury taking into consideration the then current average rate on obligations of the United States. Funds would be secured by the Secretary for such purchases by using, as a 1 Similar provisions are contained in Senator Maybank's proposed amendments of January 6, 1950, to title III of S. 2246. public-debt transaction, the proceeds from the sale of securities issued under the Second Liberty Bond Act, as amended. Subsection (c) This subsection would provide the methods to be used by the Administrator in handling funds made available to him under this act, and would authorize appropriations of funds for administrative expenses necessary for carrying out his functions and duties under the act. SECTION 104-POWERS OF THE ADMINISTRATOR This section would make the Housing and Home Finance Administrator responsible for the administration of this act and for the supervision of the National Mortgage Corporation for Housing Cooperatives created by the act. The Board of Directors of such Corporation would act as an advisory board to the Administrator in his performance of such responsibilities. This section would also set forth the general powers and duties of the Administrator in performing the functions which would be vested in him under the act. Among these would be the appointment of a Director to exercise the Administrator's powers, functions, and duties under this act subject to his direction and supervision, such Director to receive the same compensation as that established for the heads of the constituent agencies of the Housing and Home Finance Agency. TITLE II-NATIONAL MORTGAGE CORPORATION FOR HOUSING Subsection (a) COOPERATIVES SECTION 201-CREATION AND POWERS OF CORPORATION This subsection would provide for the creation of the National Mortgage Corporation for Housing Cooperatives, a mixed-ownership corporation, to make and service mortgage loans, to issue its obligations, and to exercise its other powers and duties under this act, and would give the Corporation the technical powers necessary for the performance of its functions and duties. Subsection (b) This subsection would give the Corporation power, with the approval of the Administrator, to select its officers and employees without regard to civil service and other laws covering officers or employees of the United States although rates of compensation would be comparable to those prescribed in the Classification Act of 1949. The Corporation would not be entitled to free use of the mails. The Corporation would be authorized to determine the necessity for and character of its obligations and expenditures, subject to the provisions of this act, provisions of law relating specifically to mixed-ownership Government corporations, and to the rules and regulations of the Administrator. Subsection (a) SECTION 202-CAPITAL STOCK This subsection would provide for the issuance of preferred capital stock of the Corporation for purchase by the Secretary of the Treasury in an amount not exceeding at any one time $100,000,000. Appropriation of funds for such purchases would be authorized. This stock would be entitled to cumulative dividends at a rate determined each year by the Secretary of the Treasury taking into consideration the probable term of the stock investment and the then current average rate received on outstanding marketable obligations of the United States. Subsection (b) This subsection requires that each nonprofit cooperative-ownership housing corporation or nonprofit corporation obtaining a mortgage loan under the act subscribe to capital stock of the Corporation. To assure direct participation by such nonprofit corporations, each corporation would be required, before securing a mortgage loan, to subscribe for such stock in an amount equal to 71⁄2 percent of the loan to be made. The method of payment for the stock so subscribed would be provided. Such stock would be required to be held by such borrower until the unpaid balance of the loan is reduced to an amount equal to the value of such stock. 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 (d) 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 21⁄2 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. |