AMENDMENTS OF OTHER ACTS

SEC. 11. (a) The sixth sentence of paragraph Seventh of section 5136 of the Revised Statutes, as amended (12 U.S.C. 24), is amended by inserting before the comma after the words "or obligations of the Federal National Mortgage Association" the following: ", or notes, debentures, or other obligations of the Federal Limited Profit Mortgage Corporation".

(b) Section 5200 of the Revised Statutes, as amended (12 U.S.C. 84), is amended by adding at the end thereof the following:

"(12) Notes, obligations, and debentures of the Federal Limited Profit Mortgage Corporation shall not be subject to any limitation based upon such capital and surplus."

(c) Section 201 of the Government Corporation Control Act (31 U.S.C. 856) is hereby amended by striking out the words "and (4) Federal Deposit Insurance Corporation" and inserting in lieu thereof "(4) Federal Deposit Insurance Corporation, and (5) Federal Limited Profit Mortgage Corporation".

TAXES

SEC. 12. All real property and tangible personal property of the Corporation shall be subject to State, county, municipal, or local taxation to the same extent according to its value as other similar property is taxed, and any real property shall be subject to special assessments for local improvements: Provided, That nothing contained herein shall be construed to prohibit any eligible borrower from contracting with any State, or political subdivision thereof, for the purpose of obtaining a complete or partial exemption from any taxation or assessments otherwise authorized by this section. Except as to such taxation of real property and tangible personal property, the Corporation, including but not limited to its franchise, capital, reserves, surplus, income, assets, and other property, shall be exempt from all taxation now or hereafter imposed by the United States or by any State, county, municipality, or local taxing authority. All notes, debentures, and other obligations of the Corporation shall be exempt, both as to principal and interest, from all taxation imposed by the United States, or any State, county, municipality, or local taxing authority.

PROTECTION OF LABOR STANDARDS

SEC. 13. In order to protect labor standards

(a) any contract for a loan pursuant to this Act shall contain a provision requiring: (1) that not less than the salaries prevailing in the locality, as determined or adopted (subsequent to a determination under applicable State or local law) by the Corporation, shall be paid to all architects, technical engineers, draftsmen, and technicians employed in the development, and to all maintenance laborers and mechanics employed in the administration, of the housing project involved; (2) that not less than the wages prevailing in the locality, as predetermined by the Secretary of Labor pursuant to the Davis-Bacon Act (49 Stat. 1011), shall be paid to all laborers and mechanics employed in the development of the housing project involved; and (3) that certifications as to compliance with the provisions of this subsection be made prior to the making of any payment under such contract;

(b) the provisions of section 874 of title 18, United States Code, and of section 2 of the Act of June 13, 1934, as amended (40 U.S.C. 276c), shall apply to any housing project financed in whole or in part with funds made available pursuant to this Act;

(c) any contractor engaged on any housing project financed in whole or in part with funds made available pursuant to this Act shall report monthly to the Secretary of Labor, and shall cause all subcontractors to report in like manner, within five days after the close of each month and on forms to be furnished by the United States Department of Labor, as to the number of persons on their respective payrolls on the particular housing project, the aggregate amount of such payrolls, the total man-hours worked and itemized expenditures for materials. Any such contractor shall furnish to the Department of Labor the names and addresses of all subcontractors on the work at the earliest date practicable.

PENALTIES

SEC. 14. (a) Any person who induces or influences a borrower hereunder to purchase or acquire property or to enter into any contract, in connection with any housing project to be financed, in whole or in part, with a loan made under this Act, and willfully fails to disclose any interest, legal or equitable, which he has in such property or such contract, or any special benefit which he expects to receive as a result of such contract, shall be fined not more than $5,000, or imprisoned for not more than one year, or both.

(b) No individual, association, partnership, or corporation (except the Corporation established under this Act) shall hereafter use the words "Federal limited profit mortgage corporation", or any combination of words which might reasonably lead to confuse with the Federal Limited Profit Mortgage Corporation as the name or a part thereof under which he or it shall do business. Any such use shall constitute a misdemeanor and shall be punishable by a fine not exceeding $1,000.

(c) Whoever, for the purpose of obtaining any loan under this Act, or any extension or renewal thereof or the acceptance, release, or substitution of security therefor, or for the purpose of influencing in any way the action of the Corporation under this Act, makes any statement, knowing it to be false, shall be punished by a fine of not more than $5,000, or by imprisonment for not more than one year, or both.

(d) Whoever (1) falsely makes, forges, or counterfeits any obligation, in imitation of or purporting to be an obligation issued by the Corporation, or (2) passes, utters, or publishes, or attempts to pass, utter, or publish any false, forged, or counterfeited obligations purporting to have been issued by the Corporation, knowing the same to be false, forged, or counterfeited, or (3) falsely alters any obligation issued or purporting to have been issued by the Corporation, or (4) passes, utters, or publishes, or attempts to pass, utter, or publish, as true, any falsely altered or spurious obligation issued or purporting to have been issued by the Corporation, knowing the same to be falsely altered or spurious, shall be punished by a fine of not more than $10,000, or by imprisonment for not more than five years, or both.

(e) Whoever, being connected in any capacity with the Corporation, (1) embezzles, abstracts, purloins, or willfully misapplies any moneys, funds, securities, or other things of value, whether belonging to it or pledged, or otherwise entrusted to it, or (2) with intent to defraud the Corporation or any other body, politics or corporate; or any individual, or to deceive any officer, auditor, or examiner of the Corporation, makes a false entry in any book, report, or statement of or to the Corporation, or without being duly authorized draws any order or issues, put forth, or assigns any note, debenture, bond, or other such obligation, or draft, bill of exchange, mortgage, judgment, or decree thereof, shall be punished by a fine of not more than $10,000, or by imprisonment for not more than 5 years, or both.

(f) All general cirminal and penal statutes of the United States relating to public moneys, property, or employees of the United States shall apply to public moneys, property, and employees of the Corporation. No officer or employee of the Corporation shall participate in any matter affecting his personal interests or the interests of any corporation, partnership, or association in which he is directly or indirectly interested.

SHORT TITLE

SEC. 15. This act may be cited as the "Federal Limited Profit Mortgage Corporation Act".

S. 1342

DIGEST OF BILL

Section 1.-Finds that the goal set forth in the declaration of national housing policy (Housing Act of 1949) is not being met for families of moderate income, and that there is an urgent need for supplementary assistance to enable private enterprise to achieve this goal.

Section 2.-Declares the purpose to provide satisfactory housing for families of moderate income and elderly persons whose needs are not now being served through existing housing programs.

Section 3.-Creates a Federal Limited Profit Mortgage Corporation with power to make and service mortgage loans, issue obligations, and to exercise other corporate powers.

Section 4.-Vests the management and administration of the Corporation in a board of five directors appointed by the HHFA Administrator, who would be Chairman. Also permits the Chairman to appoint an advisory committee to assist and advise members of the Board in the management and administration of the Corporation.

Section 5.-Authorizes the Corporation to issue up to $100 million in capital stock which shall be subscribed by the Treasury.

Section 6.-Permits the Corporation to make direct loans to public or private nonprofit or limited profitmaking corporations. Establishes mortgage terms: (1) maximum maturity 50 years (not to exceed 60 years in certain cases of refinancing); (2) interest rate computed on cost of money to Corporation, plus one-half of 1 percent for administrative expenses; and (3) maximum mortgage may equal 90 percent of development cost of multifamily project and may not exceed 90 percent of such amount as the Corporation shall determine is necessary to make the housing units available for families of moderate income and elderly persons.

Section 7.-Authorizes the Corporation to issue for purchase by the public (on or after July 1, 1959) up to $500 million in obligations and, with approval of the President, up to $1.5 billion annually beginning July 1, 1960. Maximum outstanding obligations at any one time cannot exceed the aggregate of all assets of the Corporation. Maximum interest on obligations of the Corporation shall not exceed 4 percent per annum. In the event of default by the Corporation, the obligations would be replaced by debentures fully guaranteed by the United States.

Section 8.-Establishes an insurance fund as a reserve account for losses, equal to one-fourth of 1 percent annually of the outstanding balance of mortgages held by the Corporation.

Section 9.-Gives priority for loans on projects which receive assistance from State or local government in ways specified in section 1(b).

Section 10.-Defines certain terms, including the following:

(a) Families of moderate income' means families, or individuals who cannot purchase or rent conventionally financed new housing with total monthly housing expenditures of 20 percent of their normal stable income as defined by the Federal Housing Administration.

“(b) ‘Eligible borrower' or 'borrower' shall mean (1) any private or public nonprofit organization (including cooperative ownership housing corporations), or (2) any private corporation, borrowing directly on a commitment from the Federal Limited Profit Mortgage Corporation and authorized to provide dwellings (i) the occupancy of which is to be permitted in consideration of agreed charges, or (ii) for sale to an organization of the character described in clause (1) of this paragraph.

"(j) The term 'elderly person' means a person 60 years of age or over or a family the head of which or his sponse is 60 years of age or over."

Section 11.-Amends certain related Federal statutes.

Section 12.-Makes real and tangible personal property subject to State and local taxation. Permits borrower to obtain complete or partial tax exemption from State or political subdivision, and exempts the Corporation franchise, capital reserves, surplus, income, assets, and other property (except real estate and tangible personal property) from Federal, State, and local taxes. Also exempts all obligations issued by the Corporation and interest paid on such obligations from Federal, State, and local taxes.

Section 13.-Provides for certain minimum labor standards on construction assisted by this act, including those of the Davis-Bacon Act. Section 14.-Provides for certain criminal penalties.

55869-60- -3

HOUSING AND HOME FINANCE AGENCY,

Re S. 1342, 86th Congress.

Hon. A. WILLIS ROBERTSON,

OFFICE OF THE ADMINISTRATION, Washington, D.C., September 16, 1959.

Chairman, Committee on Banking and Currency,

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

DEAR MR. CHAIRMAN: This is in further reply to your March 11 letter requesting the views of this Agency on S. 1342, a bill to create a Federal Limited Profit Mortgage Corporation to assist in the provision of housing for moderate income families and for elderly persons.

The bill would establish, under the effective control of this Agency, a Federal Limited Profit Mortgage Corporation with authority to make mortgage loans (1) to nonprofit public or private organizations, including cooperative ownership housing corporations, for housing projects to serve "families of moderate income" and "elderly persons"; (2) to private, profit-motivated corporations renting dwellings to such families, with dividends limited to 6 percent; and (3) to private, profit-motivated corporations providing housing for sale to nonprofit organizations of the type described in (1) above. All rents would be at amounts approved by the Federal Corporation. Priority would be given to projects receiving State or local assistance through tax exemption, the use of eminent domain for site assembly, or the provision of urban renewal area sites. Loans equal to 90 percent of the approved development cost would be permitted, with maturities of 50 years. The maturity under certain circumstances could be as high as 60 years, with a further moratorium of 3 years being permitted. The interest rate would be "based on the cost to the Corporation of capital investment and borrowings from the private market, plus one-half of 1 percent."

The Corporation, which would be wholly federally owned, would be given authority to issue up to $500 million in obligations annually, on which it could pay a maximum of 4 percent interest. The obligations would be exempt from Federal and State taxation. After July 1, 1960, up to $12 billion of borrowing authority could be made available at the option of the President in addition to the annual authorization. Although the Corporation would thus initially obtain loan funds by issuing its obligations in the private market, in the event of default these obligations would be replaced by debentures fully guaranteed by the United States both as to principal and interest. Capital stock of up to $100 million could be issued by the Corporation and would be subscribed to entirely by the Treasury.

The Housing Agency recommends against the enactment of this bill. It would commit the Federal Government to supplanting the present satisfactory system of FHA-insured or VA-guaranteed private loans with direct public loans, and it would do this for a large segment of the housing market which could readily obtain good housing without the extraordinary aids the bill would provide.

Its liberal direct loan terms are coupled to an unrealistic standard of eligibility for "moderate-income" families. They are defined as those families whose incomes preclude them from obtaining "conventionally financed new housing with total monthly expenditures of 20 percent of their normal stable income." This definition overlooks the manner in which our housing market functions for people of moderate income. New housing each year generally adds less than 3 percent to our stock of existing housing units, and it is inevitable that by far the largest part of our population should live in existing units.

Also, under the bill, only the inability to obtain conventionally financed homes would be considered in determining eligibility, disregarding the availability of housing, both new and old, now being financed through the FHA or the VA. The purchase or the rental of existing housing and of FHA- or VA-financed housing certainly accounts for the great majority of the entire housing market. It seems entirely unrealistic, therefore, to base eligibility for housing under the bill upon inability to purchase or rent new, conventionally financed housing with expenditure of a given percent of income.

The existing FHA programs for assistance to cooperatively owned and rental housing (secs. 207 and 213 of the National Housing Act), could not compete with the longer amortization and the lower interest rate provided those who are eligible under this bill. The interest charges would reflect the subsidy involved in basing the rate on borrowings which are exempt from both Federal and State

taxes. It seems certain, also, that many persons who would otherwise purchase individual houses financed with VA or FHA assistance would take advantage of the very liberal terms under the bill. Indeed, it is likely that the initial borrowing authorization of $500 million annually and the reserve of $1 billion would be only a beginning, in view of the broad segment of the housing market which would probably seek the advantages provided under the bill.

The allocation of the authorized loan funds would present a virtually im. possible administrative burden. The Board of Directors of the Corporation would be required to "estimate the need for housing for moderate-income families and elderly persons in each housing market area of the country and allocate and reallocate to each area its appropriate share of the loan funds," presumably in relation to estimated needs. This would require surveys in thousands of market areas throughout the country. Furthermore, the surveys would have to be sufficiently comprehensive to determine first, the cost of new conventionally financed housing in the area; second, the incomes of families in the area in order to see how many cannot obtain such housing within 20 percent of their incomes; and third, the number of elderly people in the area. It would then also be necessary to determine the need for housing in each housing market in the three priority categories specified in the bill: (1) families displaced by public clearance or enforcement action; (2) families living in substandard houses; and (3) families living in overcrowded homes.

It is important to note that these almost insurmountable administrative problems do not arise merely from detailed provisions of the bill but rather from its basic defect, the substitution of direct governmental lending for the normal operations of the private mortgage market.

We have been informed by the Bureau of the Budget that there would be no objection to the submission of this report as the enactment of the legislation would not be in accord with the program of the President.

Sincerely yours,

NORMAN P. Mason, Administrator.

TREASURY DEPARTMENT,

August 31, 1959.

Hon. A WILLIS ROBERTSON,

Chairman, Committee on Banking and Currency,
U.S. Senate,

Washington, D.C.

MY DEAR MR. CHAIRMAN: Reference is made to your request for the views of this Department on S. 1342, to create a Federal Limited Profit Mortgage Corporation to assist in the provision of housing for moderate-income families and for elderly persons.

The Federal Government has made possible the financing of millions of homes for moderate-income families through the FHA and VA insurance and guarantee programs. These programs are still functioning and the administration has recommended legislation authorizing substantial increases in, and liberalizations of, the FHA insurance programs for the future years. In this way, the Federal Government can cooperate effectively with sources of private financing to provide housing for our citizens without adding to their tax burdens.

On the other hand, the potential $2 billion expenditure for loans under the bill would make the objective of a balanced budget more difficult to attain, and the issuance of obligations pursuant to its provisions would add to the problems of public debt management.

In the circumstances, the Department would be opposed to the enactment of the proposed legislation.

The Department has been advised by the Bureau of the Budget that there is no objection to the submission of this report to your committee and that enactment of S. 1342 would not be in accord with the program of the President.

Very truly yours,