throughout the fiscal year of 1958 under the insurance programs which are already in operation. However, if substantial changes in existing programs or the assignment of new programs to FHA by the Congress were to increase the prospective volume of FHA operations, it would probably be necessary to request an increase in the available insurance authorization at some later time prior to June 30, 1958.

We also propose additional technical and clarifying amendments to the National Housing Act to enable us to better administer the various FHA-mortgage insurance programs. I would like to enumerate the more significant of these amendments, which are contained in the housing amendments of 1957. The section-by-section analysis, which you have, discusses each amendment, and I shall be happy to answer any additional questions you may have.

Section 202 would extend the mortgage limitation of up to $8,400 per unit on elevator-type structures that is currently a program to include housing for the elderly and would make it clear that the rental housing program for the elderly permits the design and occupancy of units for elderly single persons.

Section 207 provides under the title I property repair and modernization program that, in the absence of fraud or misrepresentation on the part of the financial institution, any payment for loss made to the institution shall be final and incontestable after 2 years from the date the claim was certified for payment.

Section 209 makes two modifications of the FHA home-mortgage program provisions for management of properties being submitted to FHA for debentures. First, FHA is authorized to include in its debentures the approved expenditures of mortgages made for protection of the property from vandalism, termites, weather, etc., prior to transfer of the property to FHA, which may be delayed 18 months or longer in States with extended redemption periods. Second, mortgagee payment of mortgage insurance premiums is terminated when an application is filed for exchange of the property for FHA deben

tures.

Section 210 clarifies the language of sections 204, 207, and 803 of the National Housing Act to be consistent with section 224 of the Housing Act, added in 1954, which provides that FHA debenture interest rates shall be fixed by the Commissioner with approval of the Secretary of the Treasury, based upon yields on long-term Government obligations.

Section 212: The present statute provides that commercial and community facilities may be allowed under the mortgage in section 213 cooperative housing projects only in the case of the multifamily management-type cooperative. The investor-sponsor-type structure, which in most cases will be a multi-family-type structure, is presently not included under this provision. Similarly, certain types of community facilities, such as community houses or play areas for children, are not included in the mortgage in sales-type cooperative projects. This amendment would provide that the commercial and community facilities provisions for management-type cooperatives would be extended to the new investor-sponsor-type projects as well as sales-type projects.

Section 213 makes clear that the provisions of section 204 (j) of the National Housing Act extend to the insurance programs under sections 213, 220, 221, and 222 of the act. Section 204 (j) permits termination of the mortgagee's liability for payment of mortgage insurance premiums in those cases where the mortgagee forecloses on the mortgaged property but informs the Commissioner that it does not intend to convey the property to FHA in exchange for debentures. Section 214 would extend to the section 221 housing insurance fund and the section 222 servicemen's mortgage insurance fund the authority provided by section 219 for transfer of resources as may be required among certain of the FHA insurance funds.

Section 215 amends section 226 of the Housing Act to provide, in those cases where the mortgage is based upon replacement cost rather than appraised value, that the Commissioner be allowed to submit a statement of the estimate of replacement cost rather than to furnish a statement of appraised value to purchasers of the property. This would apply to sales housing sections 213 and 220 of the National Housing Act.

Section 216 amends section 513 (e) of the National Housing Act in order to relieve mortgagors under the various sales housing programs of certifying that they will not use the dwellings for hotel purposes.

I would like to reaffirm Mr. Cole's statement concerning section 2 of S. 88, which would attempt by legislative action to control discounts on FHA-insured and VA-guaranteed mortgages. Such legislation, we believe, would deprive many prospective home buyers of the opportunity to purchase a home with the benefits of FHA mortgage insurance.

This, Mr. Chairman, concludes my prepared statement.
Senator SPARKMAN. Thank you, Mr. Mason.

Any further questions, Senator Capehart?

Senator CAPEHART. One question. Going back to military housing: Do you think if we increased the interest rate from, say, 4 to 44 percent that we would get more private money?

Mr. MASON. Senator Capehart, we haven't recommended a change. We have naturally thought about this kind of thing and certainly any increase in the interest rate does broaden the interest of lenders in the program.

Mr. COLE. Senator, as you know

Senator CAPEHART. I wondered why you had recommended increasing the VA to 5 percent, whereas military housing is 4 and you didn't recommend increasing it.

Mr. COLE. Senator, as you well know, the Capehart mortgages are quite close to the Government bonds and

Senator CAPEHART. Are what?

Mr. COLE. Are quite comparable to Government bonds in their acceptability in the market, and the Administration believes, at least thus far, that these mortgages would provide quite effective competition to the Treasury in borrowing funds for its use.

Senator CAPEHART. You are going to have to increase FNMA's borrowing capacity of military housing; is that it?

90300-57-10

Mr. COLE. Senator, again the military will appear here with their recommendation approved by the Administration. We have no recommendation at present in that regard.

Senator CAPEHART. You mean you think it is the military's responsibility?

Mr. COLE. Yes.

Senator CAPEHART. That is the reason you haven't

Mr. COLE. That is correct.

Senator CAPEHART. You think the interest rate is their responsibility, and on funds for FNMA?

Mr. COLE. It is, on the amount of funds for FNMA. On the interest rate, our opinion is, as you say, that higher interest rate will attract more private funds, although, as Mr. Baughman testified over in the House the other day, rather interestingly enough, some private lenders are becoming interested in and purchasing some Capehart mortgages. It may be that private lenders will find that these are extraordinarily good securities and will go into the market.

So I think that the Administration wants to test that.

Senator CAPEHART. Your observation of the military housing section of this bill-has it worked smoothly other than these recomendations?

Mr. COLE. Mr. Mason could answer that.

Mr. MASON. Yes, Senator. I would say I think we have done a remarkable job of coordination between FHA and the military, two organizations with different viewpoints, and we have gotten together very well.

Senator CAPEHART. And these minor changes you have recommended, were the only changes you feel are needed?

Mr. MASON. That is right.

Senator CAPEHART. They have the same problem that everybody else does at the moment, and that is selling their mortgages?

Mr. MASON. That is correct.

Senator SPARKMAN. Thank you, Mr. Mason.

(The chart and tables attached to Mr. Mason's statement follow :)

Percent downpayment

17.8%

16.0%

$20,000

$ 25,000

18.3%

$ 30,000

TABLE I.—Minimum downpayments for 1-family owner-occupant mortgagors based on alternative mortgage formulas, assuming sale price equal to FHA value

TABLE II.-Title VIII military housing project bids in excess of FHA replacement