the United States and of States and municipalities and long-term corporate bonds), and after taking into consideration conditions in the building industry and the national economy, the President is hereby authorized, without regard to any other provision of law except provisions hereafter enacted expressly in limitation hereof, to establish from time to time

(1) the maximum rates of interest (exclusive of premium charges for insurance and service charges, if any) for various classifications of residential mortgage loans insured or guaranteed or made under the National Housing Act, as amended, or the Servicemen's Readjustment Act of 1944, as amended: Provided, That no such maximum rate of interest shall, at the time established by the President, exceed 21⁄2 per centum plus the annual rate of interest determined by the Secretary of the Treasury, at the request of the President, by estimating the average yield to maturity, on the basis of daily closing market bid quotations or prices during the calendar month next preceding the establishment of such maximum rate of interest, on all outstanding marketable obligations of the United States having a maturity date of fifteen years or more from the first day of such next preceding month, and by adjusting such estimated average annual yield to the nearest one-eighth of 1 per centum;

(2) the maximum financing charges for various classifications of loans as to which financial institutions are insured against losses under title I of the National Housing Act, as amended;

(3) the rate of interest for debentures issued under the National Housing Act, as amended, in connection with defaults upon mortgages insured thereunder: Provided, That no such rate shall, at the time established by the President, exceed the annual rate of interest determined by the Secretary of the Treasury in the manner set forth in numbered clause (1) of this section;

(4) the maximum fees and charges permitted to cover the costs of the origination of, including the costs of supervision of non-Government assisted construction loan disbursements in connection with, residential mortgage loans insured or guaranteed under the National Housing Act, as amended, or the Servicemen's Readjustment Act of 1944, as amended, and the maximum special service charges, if any, permitted in connection with those mortgages insured under section 203 of said National Housing Act for which such special service charges may be found to be appropriated by the President on the basis of the low original principal amounts of the mortgages or on the basis of other factors impeding an adequate flow of credit for the type of housing involved and in connection with mortgages insured under sections 220 or 221 of the National Housing Act, as amended; and

(5) the maximum ratios of loan to value and the maximum maturities with respect to residential mortgage loans eligible for assistance under the National Housing Act, as amended, or the Servicemen's Readjustment Act of 1944, as amended, and the maximum dollar amount limitation per room or per family unit with respect to such mortgage loans eligible for assistance under the National Housing Act, as amended: Provided, That no such maximum ratio of loan to value and no such maximum dollar amount limitation in the case of mortgages insured under the National Housing Act, as amended, shall be in excess of the applicable maximum ratio of loan to value or the applicable maximum dollar amount limitation per room or per family unit prescribed by that Act, and no such maximum maturity shall be in excess of the applicable maximum maturity prescribed by the National Housing Act, as amended, or the Servicemen's Readjustment Act of 1944, as amended: And provided further, That no action by the President pursuant to this section shall apply with respect to loans made, or loans with respect to which a contract of insurance or guaranty or a firm commitment to insure or guarantee has been entered into, under the National Housing Act, as amended, or the Servicemen's Readjustment Act of 1944, as amended, prior to such action.

SEC. 202. The Servicemen's Readjustment Act of 1944, as amended, is hereby amended by adding the following new section at the end of title III:

"SEC. 515. With respect to mortgage loans for the purchase or construction of residential property (not including farm homes) guaranteed, insured, or made pursuant to this title, the Administrator shall make such rules and regulations concerning (1) maximum rates of interest for such residential mortgage loans, (2) maximum ratios of loan to value and maximum maturities with respect to such residential mortgage loans, and (3) maximum fees and charges permitted

to cover the costs of the origination of, and of the supervision of construction loan disbursements in connection with, such residential mortgage loans as may be necessary to carry out limitations relating thereto established by the President pursuant to the authority vested in him by section 201 of the Housing Act of 1954."

SEC. 203. Section 504 of the Housing Act of 1950, as amended, is hereby repealed.

TITLE III—FEDERAL NATIONAL MORTGAGE ASSOCIATION

SEC. 301. Title III of the National Housing Act, as amended, is hereby amended to read as follows:

"TITLE III-FEDERAL NATIONAL MORTGAGE ASSOCIATION

"PURPOSES

"SEC. 301. The Congress hereby declares that the purposes of this title are to establish in the Federal Government a secondary market facility for home mortgages, to provide that the operations of such facility shall be financed by private capital to the maximum extent feasible, and to authorize such facility to

"(a) provide supplementary assistance to the secondary market for home mortgages by providing a degree of liquidity for mortgage investments, thereby improving the distribution of investment capital available for home mortgage financing;

"(b) provide special assistance (when, and to the extent that, the President has determined that it is in the public interest) for the financing of (1) selected types of home mortgages (pending the establishment of their marketability) originated under special housing programs designed to provide housing of acceptable standards at full economic costs for segments of the national population which are unable to obtain adequate housing under established home financing programs, and (2) home mortgages generally as a means of retarding or stopping a decline in mortgage lending and home building activities which threatens materially the stability of a high level national economy; and

"(c) manage and liquidate the existing mortgage portfolio of the Federal National Mortgage Association in an orderly manner, with a minimum of adverse effect upon the home mortgage market and minimum loss to the Federal Government.

"CREATION OF ASSOCIATION

"SEC. 302. (a) There is hereby created a body corporate to be known as the 'Federal National Mortgage Association' (hereinafter referred to as the 'Association'), which shall be a constituent agency of the Housing and Home Finance Agency. The Association shall have succession until disolved by Act of Congress. It shall maintain its principal office in the District of Columbia and shall be deemed, for purposes of venue in civil actions, to be a resident thereof. Agencies or offices may be established by the Association in such other place or places as it may deem necessary or appropriate in the conduct of its business.

"(b) For the purposes set forth in section 301 and subject to the limitations and restrictions of this title, the Association is authorized to make commitments to purchase and to purchase, service, or sell, any residential or home mortgages (or participations therein) which are insured under this Act, as amended, or which are insured or guaranteed under the Servicemen's Readjustment Act of 1944, as amended: Provided, That (1) no mortgage may be purchased at a price exceeding 100 per centum of the unpaid principal amount thereof at the time of purchase, with adjustments for interest and any comparable items; and (2) the Association may not purchase any mortgage if (i) it is offered by, or covers property held by, a Federal, State, territorial, or municipal instrumentality or (ii) the original principal obligation thereof exceeds or exceeded $12,500 for each family residence or dwelling unit covered by the mortgage.

"CAPITALIZATION

"SEC. 303. (a) The Association shall have nonvoting capital stock, to which the Secretary of the Treasury initially shall subscribe as provided in subsections (d) and (e) of this section. The stock of the Association shall have a par value

of $100 per share, and shall not be transferable except on the books of the Association. At the option of the Association such stock shall be retirable at par value at any time, except that retirements of stock (other than stock held by the Secretary of the Treasury) shall not be made if, as a consequence thereof, the amount remaining outstanding would be less than $100,000,000. With respect to such stock held by him, the Secretary of the Treasury shall be entitled to cumulative dividends for each fiscal year until such stock is retired, at rates determined by him at the beginning of each such fiscal year, taking into consideration the current average interest rate on outstanding marketable obligations of the United States as of the last day of the preceding fiscal year. The Secretary of the Treasury shall permit the retirement of the stock held by him in the manner provided in this section. Funds of the capital surplus and the general surplus accounts of the Association shall be available to retire the capital stock held by the Secretary of the Treasury as rapidly as the Association shall deem feasible.

"(b) The Association shall accumulate funds for its capital surplus account from private sources by requiring each mortgagor seller to make payments of nonrefundable capital contributions equal to not less than 3 percent of the unpaid principal amount of mortgages therein involved in purchases or contracts for purchases between such seller and the Association, or such greater percentage as may from time to time be determined by the Association. In addition, the Association may impose charges or fees for its services with the objective that all costs and expenses of its operations should be within its income derived from such operations and that such operations should be fully self-supporting. All earnings from the operations of the Association shall annually be transferred to its general surplus account. At any time funds of the general surplus account may, in the discretion of the board of directors, be transferred to reserves. All dividends shall be charged against the general surplus account. This subsection (b) shall not apply to the special assistance functions of the Association under section 305 of this title or to the management and liquidating functions of the Association under section 306 of this title.

"(c) Until such time as all of the stock held by the Secretary of the Treasury has been retired, the Association shall issue, from time to time, to each mortgage seller its convertible certificates (only in denominations of $100 or multiples thereof) evidencing any capital contributions made by such seller pursuant to subsection (b) of this section, which certificates shall not be transferable except on the books of the Association. Subject to such terms and conditions as may be prescribed by the board of directors, such certificates shall be convertible into capital stock of the Association having an equal par value, but no such conversion shall be permitted or made until such time as all of the outstanding capital stock of the Association held by the Secretary of the Treasury has been retired and the Secretary of the Treasury does not hold any of the obligations of the Association purchased under section 304 (c) of this title. After all of the stock held by the Secretary of the Treasury has been retired, the Association may effect the direct issuance of stock in lieu of and in the same manner as is provided in this subsection for the issuance of convertible certificates. Such dividends as may be declared by the board of directors in its discretion shall be paid by the Association to its stockholders, but in any one fiscal year the general surplus account of the Association shall not be reduced through the payment of dividends (other than to the Secretary of the Treasury) which exceed in the aggregate 5 per centum of the par value of the outstanding stock of the Association.

"(d) Within sixty days following the effective date of the Housing Act of 1954, as of the day following a cutoff date to be determined by the Association, the Association is authorized and directed to issue and deliver to the Secretary of the Treasury, and the Secretary of the Treasury is authorized and directed to accept capital stock of the Association having an aggregate par value equal to the sum of (1) the amount of $21,000,000 (being the amount of the original subscription for capital stock of $20,000,000 and paid-in surplus of $1,000,000 of the Association) and (2) an amount equal to the Association's surplus, surplus reserves, and undistributed earnings, computed as of the close of the cutoff date.

"(e) The capital stock of the Association delivered to the Secretary of the Treasury pursuant to subsection (d) of this section shall be in exchange for (1) the note or notes evidencing the aforesaid original $21,000,000 (upon which the accrued interest shall have been paid through the cutoff date referred to in subsection (d) of this section), and (2) the release to the Association of any and all rights or claims which the United States might otherwise have or claim

in and to the Association's capital, surplus, surplus reserves, and undistributed earnings, computed as of the close of the aforesaid cutoff date.

"(f) Notwithstanding any other provision of law, any institution, including a national bank or State member bank of the Federal Reserve System, trust company, or other banking organization, organized under any law of the United States, including the laws relating to the District of Columbia, shall be authorized to make payments to the Association of the nonrefundable capital contributions referred to in subsection (b) of this section, to receive stock or convertible certificates of the Association evidencing such capital contributions, and to hold or dispose of such stock or certificates, subject to the provisions of this title.

“(g) As promptly as practicable after all of the capital stock of the Association held by the Secretary of the Treasury has been retired, the Housing and Home Finance Administrator shall transmit to the President for submission to the Congress recommendations for such legislation as may be necessary or desirable to make appropriate provisions to transfer to the owners of the outstanding capital stock of the Association the assets and liabilities of the Association in connection with, and the control and management of, the secondary market operations of the Association under section 304 of this title in order that such operations may thereafter be carried out by a privately owned and privately financed corporation.

"SECONDARY MARKET OPERATIONS

"SEC. 304. (a) To carry out the purposes set forth in paragraph (a) of section 301, the operations of the Association under this section shall be confined, so far as practicable, to mortgages which are deemed by the Association to be of such quality, type, and class as to meet, generally, the purchase standards imposed by private institutional mortgage investors. In the interest of assuring sound operation, the prices to be paid by the Association for mortgages purchased in its secondary market operations under this section, should be established, from time to time, at or below the market price for the particular class of mortgages involved, as determined by the Association. The volume of the Association's purchases and sales, and the establishment of the purchase prices, sale prices, and charges or fees, in its secondary market operations under this section, should be determined by the Association from time to time, and such determinations should be consistent with the objectives that such purchases and sales should be effected only at such prices and on such terms as will reasonably prevent excessive use of the Association's facilities, and that the operations of the Association under this section should be within its income derived from such operations and that such operations should be fully self-supporting.

"(b) For the purposes of this section, the Association is authorized to issue, upon the approval of the Secretary of the Treasury, and have uotstanding at any one time obligations in an aggregate amount sufficient to enable it to carry out its functions under this section, such obligations to have such maturities and to bear such rate or rates of interest as may be determined by the Association with the approval of the Secretary of the Treasury, and to be redeemable at the option of the Association before maturity in such manner as may be stipulated in such obligations; but the aggregate amount of obligations of the Association under this subsection outstanding at any one time shall not exceed ten times the sum of its capital, capital surplus, general surplus, reserves, and undistributed earnings, and in no event shall any such obligations be issued if, at the time of such proposed issuance, and as a consequence thereof, the resulting aggregate amount of its outstanding obligations under this subsection would exceed the amount of the Association's ownership pursuant to this section, free from any liens or encumbrances, of cash, mortgages, and bonds or other obligations of, or bonds or other obligations guaranteed as to principal and interest by, the United States. The Association shall insert appropriate language in all of its obligations issued under this subsection clearly indicating that such obligations, together with the interest thereon, are not guaranteed by the United States and do not constitute a debt or obligation of the United States or of any agency or instrumentality thereof other than the Association. The Association is authorized to purchase in the open market any of its obligations outstanding under this subsection at any time and at any price.

"(c) The Secretary of the Treasury is authorized in his discretion to purchase any obligations issued pursuant to subsection (b) of this section, as now or hereafter in force, and for such purpose the Secretary of the Treasury is authorized to use as a public debt transaction the proceeds of the sale of any securities hereafter issued under the Second Liberty Bond Act, as now or hereafter in

force, and the purposes for which securities may be issued under the Second Liberty Bond Act, as now or hereafter in force, are extended to include such purchases. The Secretary of the Treasury shall not at any time purchase any obligations under this subsection if (1) all of the capital stock of the Association held by the Secretary of the Treasury has been retired; or (2) such purchase owuld increase the aggregate principal amount of his then outstanding holdings of such obligations under this subsection to an amount greater than $500,000,000 plus an amount equal to the total of such reductions in the maximum dollar amount prescribed by section 306 (c) as have theretofore been effected pursuant to that section: Provided, That such aggregate principal amount under this subsection (c) shall in no event exceed $1,000,000,000. Each purchase of obligations by the Secretary of the Treasury under this subsection shall be upon such terms and conditions as to yield a return at a rate determined by the Secretary of the Treasury, taking into consideration the current average rate on outstanding marketable obligations of the United States as of of the last day of the month preceding the making of such purchase. The Secretary of the Treasury may, at any time, sell, upon such terms and conditions and at such price or prices as he shall determine, any of the obligations acquired by him under this subsection. All redemptions, purchases, and sales by the Secretary of the Treasury of such obligations under this subsection shall be treated as public debt transactions of the United States.

("d") The Association may not purchase participations or make any advance contracts or commitments to purchase mortgages for its operations under this section, except that the Association may, in the discretion of its board of directors, issue a purchase contract (which shall not be assignable or transferable except with the consent of the Association) in an amount not exceeding the amount of the sale of mortgages purchased from the Association, entitling the holder thereof to sell to the Association mortgages in the amount of the contract, upon such terms and conditions as the Association may prescribe.

"SPECIAL ASSISTANCE FUNCTIONS

"SEC. 305. (a) To carry out the purposes set forth in paragraph (b) of section 301, the President, after taking into account (1) the conditions in the building indsutry and the national economy and (2) conditions affecting the home mortgage investment market, generally, or affecting various types or classifications of home mortgages, or both, and after determining that such action is in the public interest, may under this section authorize the Association, for such period of time and to such extent as he shall prescribe, to exercise its powers to make commitments to purchase and to purchase such types, classes, or categories of home mortgages (including participations therein) as he shall determine.

"(b) The operations of the Association under this section shall be confined, so far as practicable, to mortgages (including participations) which are deemed by the Association to be of such quality as to meet, substantially and generally, the purchase standards imposed by private institutional mortgage investors but which, at the time of submission of the mortgages to the Association for purchase, are not necessarily readily acceptable to such investors. Subject to the provisions of this section, the prices to be paid by the Association for mortgages purchased in its operations under this section shall be established from time to time by the Association. The Association shall impose charges or fees for its services under this section with the objective that all costs and expenses of its operations under this section should be within its income derived from such operations and that such operations should be fully self-supporting.

"(c) The total amount of purchases and commitments authorized by the President pursuant to subsection (a) of this section shall not exceed $200.000.000 outstanding at any one time: Provided, That, notwithstanding such limitation, the President pursuant to subsection (a) of this section may also authorize the Association to exercise its powers to enter into commitments to purchase immediate participations and to make related deferred participation agreements as hereinafter in this subsection provided, but only to the extent that the total amount of such immediate participation commitments and purchases pursuant thereto (but not including the amount of any related deferred participation agreements or purchases pursuant thereto) shall not in any event exceed $100,000.000 outstanding at any one time, and any such deferred participation agreements shall be made by the Association only on the basis of a commitment by it to purchase an immediate participation of a 20 per centum undivided interest