of the enactment of the Emergency Home Ownership Act, the Association (except as provided in clauses (1), (2), and (3), and subject to the authority of the Association to set a limitation on the age of mortgages which it will purchase) shall purchase any mortgage (or participation therein) described in this subsection which is offered to it unless the loan is in default or in imminent danger of default or title to the property is defective".

SEC. 6. Section 302(b) of the National Housing Act is further amended by inserting before the period at the end thereof (and immediately after the clause added by section 5 of this Act) the following: "; and (5) during the one-year period beginning on the date of the enactment of the Emergency Home Ownership Act the Association may sell or otherwise dispose of any mortgage or participation therein only on a cash basis and only at a price which is not less than the acquisition price of such mortgage or participation (or the average of the acquisition prices when the transaction involves more than one mortgage), except that this clause shall not apply to assignments of mortgages or participations by the Association to the Federal Housing Administration".

SEC. 7. The first sentence of section 303 (b) of the National Housing Act is amended by inserting before the period at the end thereof the following: “: Provided, That with respect to mortgages which are purchased (or with respect to which commitments to purchase are made) by the Association during the one-year period beginning on the date of the enactment of the Emergency Home Ownership Act, such contributions shall be equal to 1 per centum of such unpaid principal amounts".

SEC. 8. The second sentence of section 305 (b) of the National Housing Act is amended by inserting before the period at the end thereof the following: "; except that with respect to any mortgage which is purchased (or with respect to which a commitment to purchase is made) during the one-year period beginning on the date of the enactment of the Emergency Home Ownership Act, the price to be paid by the Association shall be not less than the unpaid principal amount thereof at the time of purchase, with adjustments for interest and any comparable items".

SEC. 9. The third sentence of section 305(b) of the National Housing Act is amended by inserting before the period at the end thereof the following: "; except that with respect to any mortgage which is purchased (or with respect to which a commitment to purchase is made) during the one-year period be ginning on the date of the enactment of the Emergency Home Ownership Act, the charges of fees so imposed by the Association for its commitment and purchase shall not exceed 1 per centum of the unpaid principal amount of the mortgage, and (unless the commitment was issued before the beginning of such oneyear period) not more than one-fourth of such charges or fees shall be collected at the time of the issuance of the commitment with respect to the mortgage, with the balance of such charges or fees (whether the commitment was issued before or during such period) being collected at the time of purchase".

SEC. 10. Section 305 (g) of the National Housing Act is amended by inserting immediately after "$13,500” the following: “(or $13,500 per dwelling unit in the case of a mortgage insured under section 213)".

SEC. 11. Section 305 (g) of the National Housing Act is further amended(1) by striking out "Provided, That" and inserting in lieu thereof the following: "Provided, That the Association may by regulation increase such amount by not more than $1,000 in the case of mortgages covering property located in geographical areas where it finds that cost levels so require, and by such additional sum in the case of mortgages covering property located in Alaska, Guam, or Hawaii as may be necessary (because of the higher costs there prevailing) to permit the purchase under this subsection of mortgages covering housing in Alaska, Guam, or Hawaii which is comparable in construction and design to other housing covered by mortgages which may be purchased under this subsection: Provided further, That"; (2) by inserting after "shall not exceed $1,000,000,000 outstanding at any one time" the following: ", which limit shall be increased by $1,000,000,000 on the date of the enactment of the Emergency Home Ownership Act"; and (3) by adding at the end thereof the following new sentence: "The Association shall by regulation (1) allocate the assistance provided under this subsection in order to channel such assistance, to the maximum extent practicable, into geographic areas where the problems of excessive mortgage discounts and the shortage of mortgage credit are most severe, and (2) prevent any builder or mortgagee from obtaining a disproportionately large share of such assistance."

SEC. 12. Section 305 of the National Housing Act is further amended by adding at the end thereof the following new subsection:

"(h) Notwithstanding any other provision of this Act, the Association is authorized to make commitments to purchase, and to purchase, service, or sell, any mortgage (or participation therein) which is insured under section 203 (i); but (1) the Association shall not enter into any commitment or make any purchase under this subsection unless the property involved was approved for mortgage insurance prior to the beginning of construction, and (2) the total amount of purchases and commitments authorized by this subsection shall not exceed $50,000,000 outstanding at any one time. The Association shall not enter into any commitment or make any purchase involving a mortgage (or participation) insured under section 203 (i), under this subsection or any other provision of this section, if any service charge (other than the normal origination fee charged to the mortgagor) was imposed or collected in connection with the making of the loan."

SEC. 13. (a) Section 305 of the National Housing Act is further amended by adding at the end thereof, after subsection (h) (as added by section 12 of this Act), the following new subsection:

"(i) Notwithstanding any other provision of this Act, the Association is authorized to make commitments to purchase, and to purchase, service, or sell, any mortgage (or participation therein) which is insured under section 810; but the total amount of purchases and commitments authorized by this subsection shall not exceed $25,000,000 outstanding at any one time."

(b) Section 305 (f) of such Act is amended by striking out "title VIII of this Act" and inserting in lieu thereof "section 803 or 809 of this Act".

SEC. 14. With respect to any mortgage insured by the Federal Housing Administration or any loan guaranteed or insured by the Veterans' Administration, where the commitment of the Federal Housing Administration or the certificate of reasonable value of the Veterans' Administration was issued more than sixty days after the date of the enactment of this Act, the originating mortgagee shall report to the Federal Housing Administration or the Veterans' Administration, as the case may be, the amount of any fees, charges, or discounts (except for the normal origination fee charged to the mortgagor) paid by the builder, seller, broker, sponsor, or any other person in connection with or for the purpose of arranging the mortgage or loan.

SEC. 15. Section 809 of the National Housing Act is amended by adding at the end thereof the following new subsection :

"(g) A mortgage secured by property which is intended to provide housing for a person employed or assigned to duty at a research or development installation of the National Aeronautics and Space Administration and which is located at or near such installation, where such installation was a research or development installation of one of the military departments of the United States (on or after June 13, 1956) before its transfer to the jurisditcion of such Administration, may (if the mortgage otherwise meets the requirements of this section) be insured by the Commissioner under the provisions of this section. For purposes of this subsection, (1) the terms 'Armed Forces', 'one of the military departments of the United States', 'military department', 'Secretary or his designee', and 'Secretary' when used in subsections (a) and (b) of this section, and the term 'Secretary of the Army, Navy, or Air Force' when used in section 805, shall be deemed to refer to the National Aeronautics and Space Administration or the Administrator thereof, as may be appropriate, (2) the terms 'civilian employee', 'civilians', and 'civilian personnel' as used in this section shall be deemed to refer to employees of such Administration or a contractor thereof or to military personnel assigned to duty at an installation of such Administration, and (3) the term 'military installation' when used in section 805 shall be deemed to refer to an installation of such Administration."

Passed the House of Representatives April 28, 1960.

Attest:

RALPH R. ROBERTS, Clerk.

H.R. 10213

DIGEST OF BILL

Section 1.-Cites the bill as the Emergency Home Ownership Act.

Section 2.-Amends section 203 (b) of the National Housing Act (the regular home mortgage insurance program) to make it clear that FHA may insure mortgage loans made by individuals as well as those made by corporate lenders. Section 3.-Amends section 203 (c) of the National Housing Act to give discretionary authority to the FHA Commissioner to reduce the minimum annual premium charge for mortgage insurance granted under any of FHA's title II programs from one-half of 1 percent to one-fourth of 1 percent.

Section 4.-Amends title III of the National Housing Act to provide that it shall be one of the purposes of the Federal National Mortgage Association, in its secondary market operations, to aid in the stabilization of the mortgage market.

Section 5.-Amends section 302 (b) of the National Housing Act to require FNMA, during the 1-year period beginning on date of enactment, to purchase any mortgage which is offered to it regardless of the type of housing covered, so long as title to the property is good and the mortgage is otherwise eligible and not in default.

Section 6.-Amends section 302(b) of the National Housing Act to prohibit FNMA, during the 1-year period beginning on date of enactment, from selling or otherwise disposing of any mortgage which it may hold except for cash, and from selling or otherwise disposing of any such mortgage at a price less than its acquisition price. This prohibition would not apply to sales of mortgages to FHA. FHA can pay for mortgages with debentures and pay prices less than par, in accordance with present practice.

Section 7-Amends section 303 (b) of the National Housing Act to fix the amount of FNMA stock which a person is required to purchase when selling a mortgage to FNMA, during the 1-year period beginning on date of enactment, at 1 percent of the unpaid principal amount of the mortgage. Under existing law FNMA has discretion to fix this requirement at any point between 2 and 1 percent of such unpaid principal amount-present policy is 2 percent.

Section 8.-Amends section 305(b) of the National Housing Act to require that FNMA, in the performance of its special assistance functions during the 1-year period beginning on date of enactment, shall not pay less than par for any mortgage.

Section 9.-Amends section 305(b) of the National Housing Act to provide that the maximum charges or fees which FNMA may impose for its commitment and purchase of a mortgage under the special assistance program, during the 1-year period beginning on date of enactment, shall be 1 percent of the unpaid principal amount of the mortgage, with one-fourth being collected at the time of commitment and the remainder at the time of purchase. Under existing law, FNMA has full discretion to fix these charges and fees. (Under current regulations, these fees total 12 percent with one-half of this amount collected at the time of commitment.)

Section 10.-Amends section 305 (g) of the National Housing Act to make it clear that mortgages on cooperative housing insured by FHA under section 213 are eligible for purchase by FNMA under its program 10 special assistance operations. (See sec. 11.)

Section 11.-Amends section 305(g) of the National Housing Act to provide an additional $1 billion for FNMA's program 10 operations. This program was established by the Emergency Housing Act of 1958 under FNMA's special assistance functions for the purchase of mortgages on new construction. An additional amendment to section 305 (g) directs FNMA, by regulation, to channel program 10 assistance into areas where excessive mortgage discounts and credit shortages are creating especially severe problems, and to prevent any one builder or mortgagee from obtaining a disproportionately large share of the program 10 assistance which is made available. The bill retains the present ceiling of $13,500 per mortgage (or per dwelling unit in the case of sec. 213 mortgages) under program 10, but adds the further provision that FNMA may by regulation increase this ceiling by up to $1,000 in high-cost areas, and by additional sums in the case of mortgages covering property in Alaska, Guam, or Hawaii so as to permit the purchase of mortgages covering housing in those locations which is comparable in construction and design to housing on the mainland covered by mortgages which FNMA may purchase.

Section 12.-Amends section 305 of the National Housing Act to create a $50 million special assistance fund for the purchase by FNMA of mortgages which are insured under section 203 (i) and which cover new construction. It is specifically provided that no mortgage insured under section 203 (i) can be purchased by FNMA, either from the new fund or under any of FNMA's other special assistance operations, if any service charges other than the usual origination fee have been imposed. (Under current regulations, FHA permits a special service charge of one-half of 1 percent on the outstanding balance of the mortgage to be added to the monthly carrying cost on loans of $8,000 or less.)

Section 13.-Further amends section 305 of the National Housing Act to create a $25 million special assistance fund for the purchase by FNMA of mortgages insured under section 810 (the new FHA insurance program for defense housing in impacted areas). With the creation of this new fund for section 810 mortgages, the existing special assistance fund for the purchase of title VIII mortgages (in sec. 305 (f) of the National Housing Act) is specifically limited to mortgages insured under section 803 or 809.

Section 14.-Requires the originating mortgagee under an FHA-insured or a VA-guaranteed loan to report to the agency involved the amount of any fees, charges, or discounts paid in connection with such mortgage or loan.

Section 15.-Amends section 809 of the National Housing Act to extend the benefits of insurance under that section to mortgages covering housing for employees of the National Aeronautics and Space Administration at research or development installations which have been (or may be) transferred to such Administration from one of the military departments. Section 809 presently provides for the insurance of mortgages otherwise meeting the requirements of section 203(b) even though the property involved is not economically sound or an acceptable risk, where the Secretary of Defense or his designee certifies that the owner of the property is an essential nontemporary civilian employee of a military department and requires the housing. If the FHA Commissioner determines that insurance of the mortgage is not an acceptable risk he can require the Secretary to guarantee the fund against loss.

BOARD OF GOVERNORS OF THE
FEDERAL RESERVE SYSTEM,
OFFICE OF THE CHAIRMAN,
Washington, May 11, 1960.

Hon. A. WILLIS ROBERTSON,

Chairman, Committee on Banking and Currency,

U.S. Senate, Washington, D.C.

DEAR MR. CHAIRMAN: This is in response to your request of May 3, 1960, for a report from the Board of Governors on H.R. 10213, the Emergency Home Ownership Act. This bill has been passed by the House of Representatives and is now before your committee.

By the terms of this bill, the authority of the Federal National Mortgage Association to hold mortgages under the special assistance program, financed directly by the Treasury, would be increased by $1,075 million. Of this amount, $1 billion would be available for FHA-insured or VA-guaranteed mortgages not larger than $13,500 each (or $14,500 each in high-cost areas), $50 million would be available for mortgages, not larger than $8,000 each, insured by FHA under section 203 (i) of the National Housing Act, and $25 million would be available for FHA-insured mortgages on offbase defense housing in impacted areas.

In addition, the bill would limit the discretion of the Association in the management of its affairs by prohibiting sales of mortgages at less than acquisition cost; prohibiting further exchange of mortgages for Government securities; prohibiting purchase of mortgages under the special assistance program at less than par; prohibiting purchase of mortgages insured under section 203 (i) “if any service charge (other than the normal origination fee charged to the mortgagor) was imposed or collected in connection with the making of the loan"; prescribing the fees and charges the Association may impose for commitments and purchase, and the manner of their collection; and severely restricting the grounds on which the Association may refuse to purchase mortgages.

The bill would amend the National Housing Act by explicitly authorizing the Federal Housing Administration to recognize individuals as approved mortgagees,

eligible to hold FHA-insured mortgages, and by authorizing FHA to reduce the insurance premium from one-half of 1 percent to one-fourth of 1 percent. The bill would also require the mortgagee on any FHA-insured or VA-guaranteed mortgage to report any fees, charges, or discounts paid by any person (except the mortgagor) in connection with the arranging of the loan.

The Board believes that enactment of this bill would be detrimental to sound fiscal policy and would further complicate the Treasury's debt-management problems. The bill's restrictions on the Federal National Mortgage Association's management discretion would "lock in" the mortgages the Association already holds, and the addition of over $1 billion to the FNMA portfolio would require the Treasury to raise additional funds in the same amount. The Treasury is already faced with very difficult problems in view of the continued large refinancing of maturing debt and the limitation on the interest rate it may pay on any long-term securities it may offer. In these circumstances, the maintenance of a surplus is vital to a sound fiscal policy and to a lower level of interest rates generally.

The continued high level of mortgage lending without Government insurance or guarantee suggests that mortgage borrowing is being done on terms satisfactory to both lenders and borrowers. Perhaps if permissible interest rates on FHA-insured and VA-guaranteed mortgages were free to reflect market conditions, many of the difficulties the bill seems designed to remedy would disappear For these reasons, the Board does not favor enactment of H.R. 10213.

Sincerely yours,

WM. MCC. MARTIN, Jr.

VETERANS' ADMINISTRATION,

May 16, 1960.

Hon. A. WILLIS ROBERTSON,

Chairman, Committee on Banking and Currency,
U.S. Senate, Washington, D.C.

DEAR SENATOR ROBERTSON: The following comments are submitted in response to your request for a report by the Veterans' Administration on H.R. 10213, 86th Congress. This bill was passed by the House of Representatives on April 28, 1960.

The purpose of this measure, which would be cited as the Emergency Home Ownership Act, is to stimulate residential construction, and the bill contains several provisions designed to increase the availability of home mortgage financing.

Of particular interest from the standpoint of this agency are section 11(2), which would provide additional funds for Federal National Mortgage Association purchase of low-cost FHA and VA mortgages, and section 14 to require the reporting of the fees, charges, and discounts paid for arranging a loan insured or guaranteed by the FHA or the Veterans' Administration. As we are not directly concerned with the other provisions of the bill, we shall confine our comments to these two sections.

Section 11(2) would provide an additional $1 billion for the purchase by FNMA, under its special assistance functions, of mortgages on low-cost FHA and VA housing. We are, of course, interested in any proposal which will assure a reasonable flow of mortgage funds for GI loans so that the home-financing needs of veterans will be met. However, an increase in the special assistance authorization would not solve the problems which confront us in administering the GI loan program. Neither would it solve the problems of many veterans who would like to make use of their entitlement.

The amount proposed to be authorized for special assistance is now confined to new construction, and the maximum mortgage limitation is $13,500 with an authorization for a $1,000 increase in high-cost areas. Thus the veteran who would like to buy an existing house continues to be faced with a problem of financing. Furthermore, the average GI loan for the purchase of new homes in 1959 was in excess of $14,000. In many areas the moderate price range of new residential construction is considered to be $15,000 to $18,000. This would mean that veterans seeking financing in the moderate or upper price ranges in most areas will have to take their place with nonveterans in competing for alternative typs of mortgage financing.

It has been our experience that the GI loan program has operated most successfully during those periods when the mortgages were an attractive investment media to private investors. The relief afforded by Government funds is at best