shall include its recommendations (including recommendations for governmental action, either legislative or administrative, as it shall deem necessary) with respect to the matters referred to in section 4, and such other related matters as it shall determine to be appropriate. The Commission shall cease to exist ninety days after submission of its final report. [S. 1737, 85th Cong., 1st sess.] A BILL To amend the United States Housing Act of 1937, as amended, to increase the number of new public housing units, and for other purposes Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That (a) section 10 (i) of the United States Housing Act of 1937, as amended, is amended to read as follows: “(i) Notwithstanding any other provision of law, the Authority may enter into new contracts for loans and annual contributions for not more than thirty-five thousand additional dwelling units during fiscal year 1957 and for not more than two hundred thousand additional dwelling units during each of the fiscal years 1958 and 1959: Provided, That any balances of this authorization not utilized in any such year shall be available in succeeding years: And provided further, That no new contracts for loans and annual contributions for additional dwelling units in excess of the number authorized in this sentence shall be entered into unless authorized by the Congress." SEC. 2. Section 15 (8) (d) of the United States Housing Act of 1937, as amended, is amended by inserting before the period a colon and the following: "Provided, That the public housing agency may permit any such families to remain as tenants in the project during any period in which it is determined by the public housing agency that there is an inadequate supply of decent, safe, and sanitary dwellings for their use in the locality involved at levels which they can afford, if such families pay during any such period rentals equal to at least 20 per centum of their net incomes (less the exemptions permitted by section 2 (1) of this Act) or rentals equal to the rents at which comparable accommodations would be provided by private enterprise unaided by public subsidy, whichever is less." SEC. 3. In order to enable low-rent housing to serve more effectively the needs of large families of low income, the United States Housing Act of 1937, as amended, is amended by deleting the second and third sentences of subsection (1) of section 2, and substituting therefor the following: "The dwellings in lowrent housing as defined in this Act shall be available solely for families whose net income at the time of admission, less an exemption of (a) $100 for each minor or adult dependent member of the family having no income, and (b) not to exceed $600 of the income of each member of the family other than the principal wage earner, does not exceed five times the annual rental (including the value or cost to them of water, electricity, gas, other heating and cooking fuels, and other utilities) of the dwellings to be furnished such families. For the sole purpose of determining eligibility for continued occupancy, a public housing agency may allow from the net income of any family, an exemption (a) for each minor member of the family (other than the head of the family and his spouse) of either $100 or all or any part of the annual income of such minor, and (b) of $100 for each adult dependent member of the family having no income, and (c) not to exceed $600 of the income of any other member of the family other than the principal wage earner." SEC. 4. Section 101 (c) of the Housing Act of 1949 is amended by striking out "or for annual contributions or capital grants pursuant to the United States Housing Act of 1937, as amended, for any project or projects not constructed or covered by a contract for annual contributions prior to August 1, 1956,". SEC. 5. Section 15 (5) of the United States Housing Act of 1937, as amended, is amended by striking out in the first sentence the figure "$1,750" and inserting in lieu thereof "$2,000," and by striking out the figure "$2,250" and inserting in lieu thereof "$2,500". [H. R. 4602, 85th Cong., 1st sess.] AN ACT To encourage new residential construction for veterans' housing in rural areas and small cities and towns by raising the maximum amount in which direct loans may be made from $10,000 to $13,500, to authorize advance financing commitments, to extend the direct loan program for veterans, and for other purposes Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That section 512 of the Servicemen's Readjustment Act of 1944 (38 U. S. C., sec. 694 (1)) is amended to read as follows: "DIRECT LOANS TO VETERANS "SEC. 512. (a) The Congress finds that housing credit under section 501 of this title is not and has not been generally available to veterans living in rural areas, or in small cities and towns not near large metropolitan areas. It is therefore the purpose of this section to provide housing credit for veterans living in such rural areas and such small cities and towns. "(b) Whenever the Administrator finds that private capital is not generally available in any rural area or small city or town for the financing of loans guaranteed under section 501 of this title, he shall designate such rural area or small city or town as a 'housing credit shortage area', and shall make, or enter into commitments to make, loans for any or all of the following purposes in such area— "(1) For the purchase or construction of a dwelling to be owned and occupied by a veteran as his home; "(2) For the purchase of a farm on which there is a farm residence to be owned and occupied by a veteran as his home; "(3) For the construction on land owned by a veteran of a farm residence to be occupied by him as his home; or "(4) For the repair, alteration, or improvement of a farm residence or other dwelling owned by a veteran and occupied by him as his home. If there is an indebtedness which is secured by a lien against land owned by a veteran, the proceeds of a loan made under this section for the construction of a dwelling or farm residence on such land may be expended also to liquidate such lien, but only if the reasonable value of the land is equal to or in excess of the amount of the lien. "(c) No loan may be made under this section to a veteran unless he shows to the satisfaction of the Administrator that— "(1) he is a satisfactory credit risk; "(2) the payments to be required under the proposed loan bear a proper relation to his present and anticipated income and expenses; "(3) he is unable to obtain from a private lender in such housing credit shortage area, at an interest rate not in excess of the rate authorized for guaranteed home loans, a loan for such purpose for which he is qualified under section 501 of this title; and "(4) he is unable to obtain a loan for such purpose from the Secretary of Agriculture under the Bankhead-Jones Farm Tenant Act or under the Housing Act of 1949. "(d) (1) Loans made under this section shall bear interest at a rate determined by the Administrator, not to exceed the rate authorized for guaranteed home loans, and shall be subject to such requirements or limitations prescribed for loans guaranteed under this title as may be applicable. "(2) The original principal amount of any loan made under this section shall not exceed an amount which bears the same ratio to $13,500 as the amount of guaranty to which the veteran is entitled under section 501 at the time the loan is made bears to $7,500; and the guaranty entitlement of any veteran who heretofore or hereafter has been granted a loan under this section shall be charged with an amount which bears the same ratio to $7,500 as the amount of the loan bears to $13,500. (3) In connection with any loan under this section, the Administrator is authorized to make advances in cash to pay the taxes and assessments on the real estate, to provide for the purpose of making repairs, alterations, and improvements, and to meet the incidental expenses of the transaction. The Administrator shall determine the expenses incident to origination of loans made under this section, which expenses, or a reasonable flat allowance in lieu thereof, shall be paid by the veteran in addition to the loan closing costs. "(4) Loans made under this section shall be repaid in monthly installments; except that in the case of loans made for any of the purposes described in para graph (2), (3), or (4) of subsection (b), the Administrator may provide that such loans shall be repaid in quarterly, semiannual, or annual installments. (5) The Administrator may sell, and shall offer for sale, to any person or entity approved for such purpose by him, any loan made under this section at a price not less than par; that is, the unpaid balance plus accrued interest, and shall guarantee any loan thus sold subject to the same conditions, terms, and limitations which would be applicable were the loan guaranteed under section 501 of this title. "(6) No veteran may obtain loans under this section aggregating more than $13,500. "(e) (1) If any builder or sponsor proposes to construct one or more dwellings in a housing credit shortage area, the Administrator may enter into commitment with such builder or sponsor, under which funds available for loans under this section will be reserved for a period not in excess of three months, or such longer period as the Administrator may authorize to meet the needs in any particular case, for the purpose of making loans to veterans to purchase such dwellings. Such commitment may not be assigned or transferred except with the written approval of the Administrator. The Administrator shall not enter into any such commitment unless such builder or sponsor pays a nonrefundable commitment fee to the Administrator in an amount determined by the Administrator, not to exceed 2 per centum of the funds reserved for such builder or sponsor. "(2) Whenever the Administrator finds that a dwelling with respect to which funds are being reserved under this subsection, has been sold, or contracted to be sold, to a veteran eligible for a direct loan under this section, the Administrator shall enter into a commitment to make the veteran a loan for the purchase of such dwelling. With respect to any loan made to an eligible veteran under this subsection, the Administrator may make advances during the construction of the dwelling, up to a maximum in advances of (A) the cost of the land plus (B) 80 per centum of the value of the construction in place. "(3) After the Administrator has entered into a commitment to make a veteran a loan under this subsection, he may refer the proposed loan to the Voluntary Home Mortgage Credit Committee, in order to afford a private lender the opportunity to acquire such loan subject to guaranty as provided in paragraph (5) of subsection (d) of this section. If, before the expiration of sixty days after the loan made to the veteran by the Administrator is fully disbursed, a private lender agrees to purchase such loan, all or any part of the commitment fee paid to the Administrator with respect to such loan may be paid to such private lender when such loan is so purchased. "If a private lender has not purchased or agreed to purchase such loan before the expiration of sixty days after the loan made by the Administrator is fully disbursed, the commitment fee paid with respect to such loan shall become a part of the special deposit account referred to in subsection (c) of section 513 of this title. If a loan is not made to a veteran for the purchase of a dwelling, the commitment fee paid with respect to such dwelling shall become a part of such special deposit account. "(4) The Administrator may exempt dwellings constructed through assistance provided by this subsection from the minimum land planning and subdivision requirements prescribed pursuant to subsection (b) of section 504 of this title, and with respect to such dwellings may prescribe special minimum land planning and subdivision requirements which shall be in keeping with the general housing facilities in the locality but shall require that such dwellings meet minimum requirements of structural soundness and general acceptability. "(f) The authority to make loans under this section shall expire July 25, 1958, except that if a commitment to a veteran to make such a loan was issued by the Administrator before that date the loan may be completed after that date." SEC. 2. (a) Subsection (a) of section 513 of such Act (38 U. S. C., sec. 694m) is amended (1) by striking out "June 30, 1957" and inserting "July 25, 1958", and (2) by inserting immediately before the period at the end of the second sentence thereof the following: "retaining, however, a reasonable reserve for making loans with respect to which he has entered into commitments with veterans before such last day". (b) Subsection (2) of such section is amended by striking out "June 30, 1958" and inserting "June 30, 1959". (c) Subsection (d) of such section 513 is amended (1) by striking out "1957" and inserting "1958"; (2) by inserting immediately after "so advanced" the following: "under this sentence"; and (3) by inserting immediately after the first sentence therein the following new sentence: "The Secretary of the Treasury shall also advance to the Administrator from time to time until July 25, 1958, such additional sums as the Administrator may request (not in excess of the difference between the amounts advanced under this subsection after June 30, 1955, and the maximum amounts which could have been advanced upon the request of the Administrator after June 30, 1955, and before the date of the request)." SEC. 3. (a) The fourth sentence of subsection (a) of section 500 of such Act (38 U. S. C., sec. 694) is amended by striking out all that follows "in this title," and inserting "is automatically guaranteed by the Government by this title in an amount not exceeding 60 per centum of the loan if the loan is made for any of the purposes specified in section 501 of this title and not exceeding 50 per centum of the loan if made for any of the purposes specified in section 502, 503, or 507 of this title: Provided, That unless the loan is made for one of the purposes specified in section 501 of this title the aggregate amount guaranteed shall not exceed $2,000 in the case of non-real-estate loans, nor $4,000 in the case of real-estate loans, or a prorated portion thereof on loans of both types or combination thereof.". (b) Subsection (b) of section 501 of such Act (38 U. S. C., sec. 694a) is amended by striking out all that follows "(b)" to the colon immediately preceding the first proviso and inserting: "Any loan made to a veteran for any of the purposes specified in subsection (a) or subsection (c) of this section 501 is automatically guaranteed, if otherwise made pursuant to the provisions of this title, in an amount not exceeding 60 per centum of the loan". (c) Subsection (c) of such section 501 is amended by striking out "may be guaranteed" and inserting "is automatically guaranteed". Passed the House of Representatives March 25, 1957. Attest: RALPH R. ROBERTS, Clerk. (The reports of agencies on the bills before the committee follow:) HOUSING AND HOME FINANCE AGENCY, Re S. 88, 85th Congress. Hon. J. W. FULBRIGHT, Chairman, Committee on Banking and Currency, United States Senate, Washington, D. C. DEAR MR. CHAIRMAN: This is in further reply to your request for the views of this Agency with respect to S. 88, a bill to amend title III of the National Housing Act to provide that the Federal National Mortgage Association shall exercise its special assistance functions by purchasing mortgages securing loans which are guaranteed under the Servicemen's Readjustment Act of 1944, and for other purposes. Section 1 of the bill would make the following changes in the special assistance functions of the Federal National Mortgage Association: (1) FNMA would be directed to make commitments to purchase, and to purchase, service, or sell, mortgages guaranteed by the Administrator of Veterans' Affairs in the total amount of $1 billion. (2) The Association would be further authorized, when directed by the President, to make commitments to purchase, and to purchase, service, or sell, additional mortgages guaranteed by the Administrator of Veterans' Affairs in an amount not to exceed $1 billion in purchases and commitments outstanding at any one time. (3) The Association would be required to pay a uniform par (100) price for all mortgages purchased under the above two authorizations. Section 2 of the bill would require the Federal Housing Administration and the Veterans' Administration to control fees and charges imposed in their mortgage insurance and loan guaranty programs on the builder, veteran, or other purchaser in connection with the financing of the construction or sale of FHA and VA-aided housing. We assume that the legislation intends that discounts be controlled along with fees and charges. Section 3 of the bill would direct the Secretary of the Treasury to invest and reinvest up to 25 percent of the national service life insurance fund in residential mortgage loans guaranteed by the Veterans' Administration on or after the date of enactment of the bill. The purchase price of the loans would be fixed at par (100) and the Secretary would be precluded from selling them for less than par. The FNMA would act as agent for the Secretary with respect to the purchase, sale, and servicing of the mortgages. A major purpose of the bill would appear to be to establish a par market for for VA-guaranteed loans by controlling charges and discounts on guaranteed loans and by having FNMA purchase either for its own account or as agent for the Treasury a total of up to about $3.4 billion in guaranteed mortgages at par. The need for the Treasury to borrow such large amounts of money in the tight market prevailing would raise interest rates and make private funds for insured and guaranteed loans at par more difficult to obtain. In the present money market, practically all builders and sellers of homes to avail themselves of the most liberal financing would seek to take advantage of the opportunity to do so at par. This would include practically all who sell with VA-guaranteed loans, which amounted to about $6 billion in 1956, and a good part of those who might sell with FHA-insured home loans. It is quite likely, therefore, that FNMA would be offered guaranteed loans in 1 year in an amount substantially greater than the $3.4 billion to be made available. The funds to be made available under the bill might be exhausted in an even shorter period, however, since many of the mortgages to be purchased at par could be 41⁄2 percent mortgages. Lenders would soon unload large quantities of 41⁄2 percent mortgages by selling to FNMA at par. Furthermore, the requirement under section 3 that the mortgages may not be sold for less than par would obviously freeze the mortgage portfolio so long as VA-guaranteed mortgages were selling generally at a discount in the private mortgage market. Thus, there would exist no likely possibility of investing and reinvesting this portion of the fund to be utilized. It is also important to note that were section 3 to be enacted, the Treasury would be obliged to refinance part of its outstanding debt in the hands of the public to the extent the NSLI fund might be used for purchasing mortgages. This is true because cash would be needed to purchase the mortgages, and the fund has already been invested in special obligations of the Treasury. The higher interest rate costs for the Government and the private economy which would be engendered by the short-range proposal in this bill can be avoided by providing private enterprise with conditions which would lead to an adequate supply of funds for home loans to veterans. It is believed that under a 5 percent interest rate on VA-guaranteed loans, private lenders would provide the required funds at par or with small discounts in most areas. The same can be accomplished for small and remote communities and for minority group members by extending the Voluntary Home Mortgage Credit Program, and by raising the interest rate on VA direct loans to 5 percent. The VHMCP would then be able to function even more effectively in its areas of operation than in the past when it had to obtain 41⁄2-percent loans in a climate of rapidly rising interest rates. The foregoing objections to the legislation are directed to basic economic policy. There are also several other objections to the enactment of the bill. The uniform purchase price policy in section 3 appears to us to require the Secretary of the Treasury to act somewhat inconsistently in view of his role as trustee for the NSLI fund. His purchasing of mortgages at par, at a price above the market, would be advantageous to the mortgagors. However, his obligation as trustee of the fund appears to us to require that he not purchase mortgages at a price above that prevailing in the market. Section 3 is also defective in that the provisions for reimbursing FNMA for acting as agent for the Treasury do not take into account the level of expenses which would be involved at two stages of the operation. One stage is the initial period of investment when the FNMA would be rapidly acquiring a portfolio of some 100,000 mortgages. The other is the period when mortgage loan balances are greatly reduced through repayments so that the rate of reimbursement to FNMA would be correspondingly reduced and steadily declining while the burden of servicing the loans would be declining only slightly. Before concluding this report, I would like to comment in some detail on practical difficulties which, on the basis of past experience, will most certainly arise if section 2 of the bill were to be enacted. |