HOUSING ACT OF 1954

selecting and using fuels) for the prevention or elimination of excessive smoke and air pollution; and (c) guidance and assistance to local communities in smoke abatement and air pollution prevention and control. Up to $5 million would be authorized to be appropriated to carry out the research program.

The Secretary would also be authorized to make contracts with any Federal, State, or local public agency or instrumentality, educational institution, or nonprofit agency or organization for the research and studies authorized by this section. Other general provisions necessary for the conduct of the research program would also be enacted by this section and the Secretary would be directed to disseminate the results. of the research and studies in such form as may be most useful to industry and to the general public.

LOANS

The Housing and Home Finance Administrator is authorized to provide a program of Federal loans not to exceed $50 million outstanding at any one time, in cooperation with private lending institutions, to business enterprises to aid them in financing the purchase, installation, construction, reconstruction or remodeling of any smoke abatement or air pollution prevention device, structure, machinery, or equipment used or to be used in connection with the business activities of the borrower.

A loan would not be made by the Housing and Home Finance Administrator unless he determines that the purpose for which the loan is to be used would (1) substantially reduce the amount of smoke or air pollution or contamination in the community in which the device, structure, machinery, or equipment is located or to be located; or (2) in conjunction with other proposed action in the community, substantially reduce the amount of such smoke pollution or contamination.

Also, the loan would not be made unless the borrower is unable to obtain such a loan from private sources on reasonable terms. Further, the section would provide that loans made may be made subject to the condition that, if at any time the business enterprise can obtain funds from other sources at interest rates as low as or lower than provided in the loan contract, it can do so with the consent of the Housing and Home Finance Administrator without waiving any rights to loan. funds under the contract for the remainder of the life of the contract, and the borrower may pledge the loan contract as security for the repayment of the loan obtained from other sources. this is in the nature of an insurance operation. It makes unnecessary When used, the actual use of Federal funds. It has been used successfully in slum-clearance programs.

The loans would be made in cooperation with banks or other lending institutions through agreements to participate or by the purchase of participations, or otherwise. The loans made would be reasonably secured, and would be repaid within such period, not exceeding 20 years, as the Housing and Home Finance Administrator may determine. They would bear interest at a rate of not less than 1 percent plus the base annual rate specified by the Secretary of the Treasury as applicable to the 6-month period during which the contract for the loans is made.

TITLE IX. MISCELLANEOUS PROVISIONS

BUILDERS CERTIFICATION

Section 901 requires the builder or seller of a single-, 2-, 3-, or 4family residence, which has a mortgage insured or guaranteed by the FHA or VA, to certify that the dwelling was constructed in conformity with the plans and specifications (including any amendments) on which the FHA or VA based its valuation. The FHA or VA must deliver to the person making the certification its written approval of any amendment to the plans and specifications and also file a copy of the approval with the plans and specifications. The certification applies only when the purchaser notifies the person making the certification that there has been nonconformity to the plans and specifications within 1 year from the date of conveyance of title or initial occupancy, whichever occurs first. The FHA and VA are required to have copies of the plans and specifications (including the written approval of amendments) on file in their appropriate local offices for inspection and copying by the person making the certification or by the purchaser.

Your committee adopted substantially the provisions contained in the House bill with the following amendments:

(1) The language of the House bill requiring a "warranty" was changed to a "certification" in order to avoid any possibility of misleading prospective purchasers as to the protection extended by this section. Your committee felt that the word "warranty" carried with it the connotation of a blanket guaranty against all structural defects, poor materials, and poor workmanship. The word "certification" more clearly indicates that the purchaser is only safeguarded against nonconformity with the plans and specifications.

(2) The House bill used the phrase "substantial conformity," and this has been changed by deleting the word "substantial." Your committee believes that the term "substantial conformity" would be construed too loosely by the courts and would not be given the interpretation intended. The use of the word "conformity" would enable the courts to interpret these building contracts under the "Substantial Performance Doctrine," which has been applied in many contract cases in the past.

(3) The House bill limited the certification to single- and twofamily residences. This has been extended to include, in addition, 3- and 4-family residences, and thus the certification will be required for all sale housing under the FHA and VA programs.

The need for this type of provision to protect purchasers grew out of the investigations conducted by the Rains subcommittee of the House Banking and Currency Committee and the Teague Select Committee on Loan Guaranty Programs. These investigations revealed that many homes were not built in conformity with the plans and specifications filed with the FHA and VA, and in many cases, the building contracts were so worded as to deny the purchaser any legal right to require compliance with such plans and specifications. The principle adopted in this section has also been endorsed by a number of witnesses who testified before your committee.

Your committee believes that every builder should be willing to comply with this very basic requirement and that the requirement

will impose no severe hardship on the responsible builder. The FHA and VA will have the administrative responsibility of carrying out effectively the certification requirement and of preventing any attempts to circumvent the protection afforded to the purchaser. It should be noted, as was discussed earlier in the report, that the requirement of the certification is only supplemental to the compliance inspection systems of the FHA and VA, which are the primary means for insuring the construction of sound homes.

CONTINUATION OF THE VETERANS' DIRECT HOME LOAN PROGRAM

In addition to the open-end mortgage provision in connection with VA guaranteed home loans, discussed earlier in the report, your committee (at sec. 902 of bill), extended the veterans' direct home loan program for another year, until June 30, 1955. It doubled the size of the program by increasing the quarterly authorization from $25 million to $50 million.

As a means of encouraging a turnover in the veteran direct loan portfolio, an amendment to the act was provided which would permit the Veterans' Administration to sell these loans to "any person or entity" approved for such purpose by the Administrator, rather than as at present to "any private lending institution evidencing ability to service loans." Thus, charity and pension funds, and other groups who now are unable to purchase such loans would be permitted to do so.

LOANS TO PUBLIC AGENCIES

Section 903 (a) of the bill amends section 108 of the Reconstruction Finance Corporation Liquidation Act in four primary respects.

1. It designates the Housing and Home Finance Administrator to handle the public agency loan program instead of leaving with the President the power to designate an officer or agency of the Federal Government other than the RFC to handle the program.

This authority was vested in the President upon passage of the Reconstruction Finance Corporation Liquidation Act on July 30, 1953. Since that date the President has not chosen to designate any Federal officer or agency to administer the public agency loan program. Your committee is of the opinion that such a designation should be made in order to expedite the carrying out of this program as authorized by the Congress. The Housing and Home Finance Administrator presently has on his staff employees familiar with the problems of financing community facilities sponsored by States and other political subdivisions or public bodies. Your committee, therefore, has included in this bill a provision to authorize the Housing and Home Finance Administrator to handle the public agency loan program, in the opinion that this course of action will enable the program to be implemented immediately and conducted by Federal employees familiar with the problems involved.

2. The amount of the revolving fund available for the loan program is increased to $50 million from $25 million. Since July 30, 1953, the unfilled needs of communities for this type of Federal loan have increased, especially since the program has not been operative in the meantime.

3. The bill appropriates $50 million to a revolving fund in the Treasury of the United States so that HHFA may have funds with which to carry out expeditiously this long-delayed program.

4. The expiration date of the program is changed to June 30, 1957 from June 30, 1955. An added 6 months is allowed for liquidation. As previously noted, although authorized on July 30, 1953, this program has necessarily remained inactive for the more than 10 months which have elapsed since that date. Its expiration date is therefore altered by this section to a date in the future sufficient to allow orderly processing of the many loan applications expected under the program. Under section 108 of the Reconstruction Finance Corporation Liquidation Act, the Congress authorized what in effect was a continuation of the public agency loan program formerly handled by the RFC. To aid in financing projects under Federal, State or municipal law, loans may be made to or securities and obligations purchased from public bodies. These include States, municipalities and political subdivisions of States; public agencies and instrumentalities of one or more States, municipalities, and political subdivisions of States; and public corporations, boards and commissions. Proceeds to pay ordinary governmental or nonprofit operating expenses cannot be obtained from this program. Proceeds must be used to finance specific public projects. No aid can be obtained under the program unless it is not otherwise available on reasonable terms. All purchases and loans are to be of sound value and so secured as reasonably to assure retirement or repayment. Loans may be made directly or in cooperation with banks or other lending institutions through immediate or deferred participation agreements. Forty years is the maximum maturity limit for loans made or securities or obligations purchased.

The program is to be financed by means of a $50 million revolving fund created in the United States Treasury. Interest is to be paid into the Treasury for the use of money from the fund at the current average rate for United States obligations of comparable maturities.

In executing the program the Housing and Home Finance Administrator has the same powers as those granted to the Small Business Administration and its Administrator under the Small Business Act of 1953 (67 Stat. 232). These include power to hire employees under the civil service and classification laws, and experts or consultants outside these laws for not more than 6 months, power to use the services of other employees of the Federal Government, power to sue and be sued, power to handle and dispose of personal property assigned or held in connection with payment of loans and real property acquired in that connection, power to collect or compromise loans or claims against third parties assigned in connection with loans, and power to make rules and regulations.

SUCCESSION OF RFC

Subsections (b) through (e) of section 903 of the bill change the expiration of the succession of the Reconstruction Finance Corporation from June 30, 1954, to the date upon which the Corporation is dissolved. The decision as to when the RFC will be dissolved remains with the Secretary of the Treasury. He is to reach such a decision when he finds that liquidation of the RFC will no longer be of ad

vantage to the United States and that all legal obligations of RFC have been provided for.

Your committee is of the opinion a change in the expiration date of the succession of the RFC is necessary for the following reasons. Until the enactment on July 30, 1953, of the Reconstruction Finance Corporation Liquidation Act, the succession of the Corporation was to terminate on June 30, 1956. By section 102 of that act, the date of termination of succession was advanced to June 30, 1954. This 2-year advance in the termination of succession of RFC has made it impracticable to conclude outstanding litigation in which RFC is involved. Unless the law is changed, it will be necessary to transfer the conduct of such litigation to the Secretary of the Treasury. In turn, the Department of Justice would handle the litigation for the Secretary of the Treasury. Such a transfer would cause delay in the conclusion of the litigation because of the period required for new attorneys to become familiar with the varied and complex problems frequently involved in such litigation. This in turn would probably result in additional expense to the United States.

Adoption of the provisions of subsections (b) to (e) inclusive will permit the RFC to continue to handle litigation on behalf of the Corporation until such time as the Corporation is dissolved.

FARM HOUSING

The bill provides in section 911 authorization for continuing through fiscal year 1955 the farm-housing assistance authorized in title V of the Housing Act of 1949 (Public Law 171, 81st Cong.).

Title V of that act is administered by the Farmers' Home Administration of the Department of Agriculture and authorized the Secretary of that Department to extend financial assistance in the form of loans and grants to farm owners to enable them to construct, improve, or repair farm housing.

1. Loans of up to 33 years' maturity which bear 4-percent interest may be made to farmers having adequate farms who are nevertheless unable to obtain private credit on terms which they can reasonably fulfill.

2. Similar loans, supplemented by modest contributions during a 5-year period are also authorized where the farmer is unable to undertake to repay the loan in full. This form of aid is authorized only if the farm is potentially adequate—that is, capable of being improved to a point where it is self-sustaining and if the necessary improvement program is actually undertaken.

3. Modest loans and grants are authorized to help farm families on very poor farms to undertake minor improvements or minimum repairs to farm dwellings where necessary to remove hazards to the health or safety of the occupants.

The authority granted by the present law to obtain loan funds from the Treasury was limited to $25 million on and after July 1, 1949, an additional $50 million on and after July 1, 1950, and additional $75 million on and after July 1, 1951, an additional $100 million on or after July 1, 1953. The bill provides authorization for an additional $100 million on or after July 1, 1954.

Annual contribution commitments for housing on potentially adequate farms were authorized to be entered into on and after July 1,