covered by mortgages insured under section 221 could not exceed the total number of such dwelling units which the Housing Administrator determines and certifies to be needed for the relocation of displaced families who would be eligible to obtain the benefits of the insurance under this section.

Eligible displaced families would include families which are required to move because of any form of governmental action, such as land acquisition by a public body, closing or vacating of dwellings by public officials, or the eviction of families from public housing because of their income.

Some of these displaced families would be able to find decent homes in existing or new housing in the community, but many of them, because of their low income, would not. Section 221 is designed to bring privately financed housing within the reach of at least some portion of these families by applying the FHA mortgage insurance system on the most liberal terms deemed feasible.

The maximum mortgage under section 221 would be $7,600 per unit, or up to $8,600 in high-cost areas. The maximum term would be 30 years (instead of 40 years in House bill) and the mortgage insured by FHA could be as high as 95 percent of value in the case of new housing or 90 percent in the case of existing housing, except that, in the case of a private nonprofit corporation, the 95-percent loan may be obtained for either new or existing housing. Your committee reduced the term to 30 years from 40 years and provided for a minimum of 5-percent downpayment on the recommendations relating to either or both of these items made by the insurance companies, mortgage bankers, the National Association of Housing officials, and others who felt that such revision would make it an underwritable risk. The increase in the monthly payments required as a result of the 10-year reduction in the maturity of the loan would be comparatively small due to the reduction in the mortgage amount by the 5percent downpayment required. It is the hope of your committee that these changes in the mortgage terms will enable this program to stand on its own feet, the mortgages will prove to be good marketable investments and will not have to depend on any special Governmentassistance program.

The properties covered by the insured mortgages under section 221 could be single-family homes newly constructed or rehabilitated for sale to eligible displaced families, or they could be projects of 10 or more units (not necessarily contiguous) rehabilitated by private nonprofit organizations for rent to such families. Mortgage financing would also be available to the operative-builder as mortgagor for single-family homes built or acquired and repaired or rehabilitated for sale in amounts not to exceed 85 percent of value, to assist in the construction or repair and rehabilitation and provide financing pending subsequent sale to a qualified owner-occupant.

To encourage private funds for section 221 projects, one of the terms of the insurance contract would provide that if the mortgage is in good standing at the end of 20 years, the mortgagee would have the option to assign the mortgage to FHA and receive in exchange debentures for the unpaid principal balance of the mortgage.

MORTGAGE INSURANCE FOR SERVICEMEN

A new section 222 would be added to the National Housing Act to authorize a new FHA insurance program for housing for servicemen in the Armed Forces of the United States and the United States Coast Guard, and their families.

Your committee was informed that many members of the active Military Establishment who have served their country during World War II and the Korean conflict are unable to qualify for home-loan guaranty benefits because they have continued in active military service and do not possess a discharge. Home-loan benefits under the Servicemen's Readjustment Act of 1944, as amended, were intended as a readjustment aid for veterans returning to civilian life and their specific extension to career service personnel would therefore appear inappropriate.

Some career personnel do, however, have a need for guaranteed home loans apart from any readjustment need. This fact and the fact that possession of a discharge entitles a veteran in civil life to a benefit denied his counterpart in active service has had a very serious adverse psychological impact upon personnel of the service far out of proportion to the actual number of individuals directly affected.

Your committee considered the transient character of military service and the substantial progress which has been made during the past few years in alleviating the military housing situation in determining whether the extension of home-loan benefits to active-duty military personnel was necessary. It was your committee's judgment, however, that these factors probably do not diminish very much the feeling of discrimination prevalent among military personnel that continued military service denies them a substantial benefit to which they would otherwise be entitled. In the American way of life, the purchase of a home is fundamental in the provision for future security. Men in the service with families are no different from their civilian counterparts in their desire to provide homes and security for their dependents. Under present price conditions and financing regulations, the required investment is beyond the capacity of the average service member. Many individuals who have chosen to remain on active duty desire to establish their eventual permanent homes while on active duty and well in advance of retirement. An individual who retires for length of service may have considerable difficulty in obtaining a 30- or 25-year mortgage. In many military areas, it is advantageous and often necessary for an individual to buy a home for one tour of duty; and to sell upon departure using the proceeds to finance a future purchase. The granting of home-loan guaranty benefits, an item of special interest to military personnel, is an additional method of bolstering morale and developing esprit to a higher level.

Before a serviceman would be entitled to the benefits of this program the Secretary of Defense (or his designee) would have to issue to him a certificate indicating that he requires housing, that he is serving on active duty in the Armed Forces of the United States, and that he has served on active duty for more than 2 years. A certificate would not be issued to any person ordered to active duty for training purposes only. The Secretary of Defense could issue more than one certificate to a serviceman only if in his judgment the additional certificate is

47863-54

justified due to circumstances resulting from military assignment. A serviceman who has had the benefits of mortgage insurance assistance under this section would not be eligible for home-loan benefits under the Servicemen's Readjustment Act of 1944. Similarly, no person who has used his entitlement for home-loan benefits under that act would be eligible for the benefits of this section.

The mortages insured under this new section 222 would be subject to the same limits on amounts as mortgages insured under the regular section 203 sales housing program except that the maximum ratio of loan to value under this new section 222 could in the discretion of the Federal Housing Commissioner, exceed the maximum prescribed in section 203, up to 95 percent of the appraised value of the property. The maximum dollar mortgage amount under this section would be $14,250 (that is, 95 percent of $15,000). The serviceman would be required to either occupy the property or certify that his failure to do so is the result of his military assignment.

Premiums on the insurance would not be payable by the mortgagee while the serviceman owns the home but would be paid yearly by the Secretary of Defense from the appropriations for pay and allowances of persons eligible for mortgage insurance under this section. The Secretary of Defense (or such person as designated by him) would certify to the Federal Housing Commissioner the termination of ownership of such home by a serviceman, and future premiums would be payable in the same manner as in the case of other mortgage insurance.

The Secretary of the Treasury would perform the functions otherwise given to the Secretary of Defense where the benefits applied to members of the United States Coast Guard.

EXTENSION OF MILITARY, DEFENSE HOUSING, AND COMMUNITY

FACILITIES PROGRAM

Military Housing Insurance under title VIII is extended for 1 year. This provides mortgage insurance for rental housing at permanent military installations, or permanent installations of the Atomic Energy Commission.

The President is given standby authority to use title IX FHA mortgage insurance authority and the provisions in title III of the Defense Housing and Community Facilities and Services Act of 1951 for Federal aid in the provision of defense housing and community facilities and services in critical defense housing areas. Under the present law the authority for new projects under these two programs expires on June 30, 1954. Your committee believes that a need for this assistance could develop in some areas and the authority to provide such assistance should be available.

Under this section the President could designate periods after June 30, 1954, when either of these 2 programs could be used, or he could designate a specific project or projects to be assisted by either of the 2 programs.

In addition, the Housing and Home Finance Administrator would be authorized to enter into amendatory agreements after June 30, 1954, to provide additional Federal assistance with respect to defense community facilities undertaken on or before such date where he finds it necessary to do so to assure the completion of such facilities.

Such amendatory agreements could not involve the expenditure of Federal funds in excess of those available on or before June 30, 1954.

OPEN-END MORTGAGES

As a further aid in financing needed home additions or improvements, the new section 225 would authorize FHA insurance of advances to a mortgagor made pursuant to provisions in an open-end FHAinsured home mortgage. Open-end mortgages are mortgages which provide that the outstanding balance can be increased in order to advance additional loan funds to a mortgagor for improvement, alteration, or repair of the home covered by the mortgage without the necessity of executing a new mortgage. Your committee has been advised that in States where these mortgages can be used effectively, they eliminate the expenses of title search and recordings otherwise required in connection with placing a new mortgage for the additional loan funds. Also, it permits the homeowner to borrow for the improvements at the low rate of interest prescribed in the mortgage and generally for a longer term than otherwise available. This section would authorize the Federal Housing Administration to insure openend mortgages only with respect to dwellings for four families or less. In addition, only advances for such improvements or repairs as substantially protect or improve the basic livability or utility of the property involved and are affixed to, or become part of, the realty would be eligible for insurance. Neither could an advance be insured if the amount of the advance added to the unpaid balance of the mortgage loan would total more than the original principal obligation of the mortgage.

Under section 225 the Federal Housing Commissioner would be authorized to require the payment of charges in lieu of insurance premium for the insurance of the open-end advances. The Federal Housing Administration has advised that in administering this authority, it would perform whatever appraisal, credit analysis, and property inspections as may be necessary to assure the adequacy of the security to sustain the increased insurance liability, and that charges for use of the open-end provision will be computed to cover both processing cost and insurance risk.

Under existing provisions of the Servicemen's Readjustment Act relating to the VA home loan guaranty program, open-end mortgage provisions may be utilized for home repairs or improvements, but additional guaranty coverage of the advances made under open-end mortgages is available only to the extent that the veteran has unused guaranty entitlement available. This is due to the fact that the Veterans' Administration cannot extend guaranty coverage comparable to the proposed FHA program without a change in the existing statute, since the $7,500 entitlement currently available to veterans under section 501 (b) of the act is restricted to loans for the purchase or construction of residential property to be occupied by the veteran as his home. Consequently, additional entitlement for supplemental loans for the alteration or improvement of the veteran's home is available only if he used less than $4,000 of his entitlement in connection with the purchase or construction of his home. Testimony was presented to your committee to the effect that in recent years most veteran home purchasers have used at least $4,000 of their

entitlement in connection with the original purchase of the home, and accordingly, have no entitlement available for alteration or improvement advances.

Section 902 of the bill includes provisions to correct this situation by removing the existing limitation on the use of the currently authorized $7,500 maximum by a simple amendment to section 501 (b) of the Servicemen's Readjustment Act of 1944, as amended (thus permitting the $7,500 maximum to apply to loans for alterations, improvements, and repairs, as well as the purchase and construction of residential property), and by removing the April 20, 1950, date limitation.

INSURANCE AUTHORIZATION

All the existing mortgage insurance authorization (except the authorization for the FHA title I home repair and improvement program) are consolidated in one general mortgage insurance. Section 121 of the bill thus simplifies the operations under present separate insurance authorizations, and permits greater flexibility in use of the authorization as between separate programs, and establish at all times the amount of the current mortgage insurance authority under all programs. The total authorization would not exceed the estimated amount of the current mortgage insurance authority under all proThe total authorization would not exceed the estimated amount of insurance in force and commitments outstanding as of July 1, 1954, plus $1 billion, except that with the approval of the President such total authorization could be increased by amounts up to not to exceed $500 million.

MUTUAL MORTGAGE INSURANCE SYSTEM

The bill would modify the mutual mortgage insurance system in order to further increase the strength of the mutual mortgage insurance fund as a protection against the contingent possibility of payment of FHA debentures by the Treasury. This system is used to carry out the section 203 insurance program for 1- to 4-family home mortgages. Fundamentally, the changes made by the bill as reported would combine the independent resources of the 192 individual active group accounts in the present system into a single reserve system consisting of a general surplus account and participating reserve account. Funds could continue to be distributed to terminating mortgagors from funds in the participating reserve account.

Under the present system, only the resources of the general reinsurance account stand between a deficit in liquidation of insurance for a single year's mortgages in a particular group account and a call upon the Treasury for redemption of debentures issued. The provisions in the bill would make all the existing resources of the mutual mortgage insurance system available for redemption of maturing debentures before a call to the Treasury would be necessary.

PROHIBITION AGAINST USE OF MULTIFAMILY HOUSING FOR HOTEL

PURPOSES

The new section 513 of title V of the National Housing Act, as amended, declares that it has been the intent of the Congress since