A technical change would also be made in the method of calculating the 5 percent minimum downpayment. Such downpayment, where required under the present law, must equal "5 percent of the appraised value." This has an unintended and unreasonable result in certain cases. Thus, 4 identical row houses may be valued alike except for the corner house which the FHA values at $500 more than the other 3. Even though all 4 houses are sold at the same price, the present law requires the purchaser of the corner house to make a $25 larger downpayment than the purchasers of the other 3 houses. This has the undesirable result of limiting the mortgage on the more valuable house to a smaller amount than is permitted for the less valuable houses. The bill would correct this defect in the present law through a new provision which requires the downpayment to equal at least "5 percent of the Commissioner's estimate of the cost of acquisition.' This change in no way relaxes the separate requirement that the mortgage loan shall not exceed a specified percentage of the "appraised value" of the property as determined by the FHA.

Section 105. Maximum maturity of section 203 mortgages

This section would amend section 203 (b) (3) to fix a maximum statutory term of 30 years for all mortgages insured under section 203, except those covering existing housing, without reference to amount of mortgage and other considerations presently provided in the statute, and would leave specific mortgage terms to regulations to be prescribed by the Federal Housing Commissioner. The maximum maturity of a mortgage covering an existing dwelling would be reduced by 1 year for each of the first 10 years of age of the dwelling. Thus the maximum maturity of such a mortgage could not exceed 20 years if the house was 10 years old, or not to exceed 25 years if it was 5 years old. If the house was 10 years of age or older the maximum maturity could not exceed 20 years. Maximum statutory mortgage terms under section 203 are now 20, 25, or 30 years, depending on whether the house is new or old, the number of bedrooms, the size of the loan, and whether the mortgagor is the owner-occupant. Section 106. Maximum interest rate on section 203 mortgages

This section would amend section 203 (b) (5) to continue the FHA Commissioner's power to establish the maximum statutory interest rate on section 203 mortgages at not to exceed 5 percent with authority in the Federal Housing Commissioner to increase the rate to not to exceed 6 percent as he finds it necessary to meet the mortgage market. These maxima are the same as now provided by existing law. Currently, the maximum interest rate is fixed at 41⁄2 percent, and your committee was advised that no increase in the current rate is presently contemplated.

The amendment also permits the Commissioner to allow a service charge. Special service charges may be allowed to encourage mortgage loans on inexpensive houses where the amount of the loan is so small that the interest rate does not compensate for overhead. Special service charges could also be allowed on an area basis to encourage residential credit in localities where mortgage funds are not readily available.

Section 107. Debentures presented in payment of premium charges

This section would add a proviso to section 203 (c) to provide that debentures presented in payment of premium charges shall represent

obligations of the particular insurance fund to which such premium charges are to be credited.. Under existing law debentures issued by one insurance fund may be used to pay premiums only as to mortgages insured under the same fund, with the exception of the mutual mortgage insurance fund and the housing insurance fund. This exception exists only because these two funds were originally one fund. This amendment would merely give effect to an oversight at the time the two funds were established, and thereby make the provisions applicable to these two funds consistent with the provisions applicable to all other funds with respect to this subject.

Section 108. Farm housing mortgage insurance authorization terminated This section would terminate the authority of the Federal Housing Commissioner under section 203 (d) to insure mortgages on farm housing after the effective date of the Housing Act of 1954, except pursuant to a commitment to insure issued on or before that date. There have been virtually no applications under this section in recent years. In any case, the continuation of the farm housing program under title V of the Housing Act of 1949 provided for in section 911 of this bill would make this program no longer necessary. Section 109. Repeal of refinancing requirement and President's standby authority

This section would repeal section 203 (f). This subsection was enacted in 1939 to provide that if a proposed FHA mortgagee refinances a then existing mortgage in whole or in part, the mortgagor must certify that prior to the date the application was filed the holder of the existing mortgage has failed or refused to make a loan on as favorable terms.

This section would also repeal subsection (g) of section 203. This subsection was added by the housing amendments of 1953 (Public Law 94, 83d Cong.) to give the President standby authority to increase ratio of loan to value and term, up to 95 percent and 30 years, but not beyond a $12,000 mortgage amount, under certain conditions. The liberalizations contained in sections 104 and 105 of this bill make such standby authority unnecessary at this time.

Section 110. Disaster housing and housing in suburban and small communities

This section would add a new subsection (h) to section 203 to continue the authority previously carried in section 8 (which would be terminated by this bill) to insure 100 percent disaster housing loans on the same basis as formerly permitted under section 8.

A new subsection (i) would also be added to section 203 to authorize the insurance of mortgages covering single-family dwellings in suburban and small communities where the Federal Housing Commissioner finds (1) it is not practicable to obtain conformity with many of the requirements essential to the insurance of mortgages on housing in built-up urban areas and (2) that the project is an acceptable risk giving consideration to the need for low and moderate income housing.

The amount of the mortgage could not exceed $6,650 and 95 percent of appraised value if the mortgagor is the owner and occupant of the property, or $5,950 and 85 percent of value if the mortgagor is the builder. A downpayment of at least 5 percent of the cost of the

housing would be required from an owner-occupant mortgagor. Another person or corporation with a credit standing satisfactory to the Commissioner would be permitted to advance all or part of the downpayment for the house and to guarantee payment of the mortgage where the mortgagor is the owner-occupant.

Section 111. Payment of insurance

This section would amend section 204 (a) dealing with the payment of insurance.

Paragraph (1) of this amendment would permit a mortgagee to receive in debentures amounts (not allowable under existing law) paid by it for internal revenue stamps on a deed to it and on a deed to the Commissioner.

As to mortgages accepted for insurance under section 203 after the effective date of the Housing Act of 1954, paragraph (2) would permit a mortgagee to receive in debentures two-thirds of foreclosure costs or $75, whichever is greater, which allowance is permitted under existing law only as to special programs. The present differences in such allowances are not believed justified, and in addition a uniform treatment would simplify the processing of payment of insurance benefits.

Paragraph (3) would permit a conveyance (where permissible under State law) to be made by mortgagor by deed in lieu of foreclosure, or by trustee, or by sheriff, direct to the Commissioner rather than to the mortgagee and then to the Commissioner. This will avoid duplicate expenses of recording, stamp taxes, etc. This effects merely a mechanical change in getting title in the Commissioner (in those cases where title is now conveyed to the Commissioner by the mortgagee, either after or without foreclosure) and would involve no additional expense to FHA and no other change in procedure or in amount paid to the mortgagee under insurance contract. Section 112. Terms of debentures and refunding debentures

Section 112 would amend section 204 (d) by fixing the term of debentures to be issued under sections 203 and 213 at 10 years, consistent with the present debenture term under all other mortgageinsurance programs.

This amendment would also add a new subsection (i) to section 204 of the National Housing Act which would authorize the Federal Housing Commissioner to issue refunding debentures maturing in not more than 10 years from their date of issuance when he determines that moneys available to him for the payment of debentures may not be sufficient to permit full payment of principal and interest on debentures maturing in the immediate future. The refunding debentures would bear interest at the same rate as the original debentures.

The holders of refunding debentures would have no recourse to the Treasury on the original debentures, but in case the Commissioner fails to pay the refunding debentures when due the Secretary of the Treasury would be directed to pay to their holders the amount of principal and interest due. Appropriations are authorized for such payments. The authority to issue refunding debentures would not apply in cases where the mortgage involved was insured or the commitment for insurance was issued prior to the effective date of the Housing Act of 1954.

Section 113. Technical amendment

This is a technical amendment adding a new subsection 204 (j) in order to transfer from section 205 certain provisions which do not conform to the wording of section 205 as it would be amended by section 114 hereof. No change or new material is involved.

Section 114. Establishment of general surplus account and participating reserve account in mutual mortgage insurance fund

Section 114 would amend section 205 by revising and completely rewriting section 205 and accomplishes a change in the mutuality system under section 203 by eliminating the group accounts and substituting a general surplus account and a participating reserve account. These changes 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 4family 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 a 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 as reported 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. Section 115. Section 207 rental housing

This section would amend section 207 (c) dealing with eligibility for rental housing mortgage insurance as follows:

Paragraph (1) would amend paragraph (2) of section 207 (c) to make it clear that the Commissioner can insure mortgages on existing multifamily structures if located in slum or blighted areas, as defined in an existing provision of section 207, and part of proceeds are used to repair or rehabilitate property. Such a mortgage would otherwise be subject to the same eligibility requirements and limitations as other loans under section 207.

Paragraph (2) of the amendment to paragraph (2) of 207 (c) would permit special limitations under 207 as now applicable to property in Alaska (90 percent of replacement cost rather than 80 percent of value) to be extended to mortgages covering property located in Guam. The need for housing in Guam and cost factors present in construction there are similar to conditions in Alaska.

Paragraph (3) of the amendment would amend paragraph (3) of 207 (c) by substituting a new paragraph 3 which would retain the present mortgage amount limitation of $2,000 per room or $7,200 per family unit (less than 4 rooms) but would remove the $10,000 per family-unit limitation, and would permit an increase in such limitations to $2,400 per room and $7,500 per family unit for elevator-type

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structures. Such higher limits would be permitted because of higher costs incident to elevator-type structures. No change is made in the existing ratio of loan to value limitation or in the 90-percent loan for projects which average 2 bedrooms per unit under the existing $7,200 per family-unit limitation.

Section 116. Technical amendment concerning debentures

This is a technical amendment to section 207 (d) to carry out the purposes of the proposed amendment to section 203 (c) in section 107 of the bill by permitting debentures of the housing insurance fund to be used to pay only those premiums as are credited to such fund. Section 117. Foreclosure costs

This is a clarifying amendment to section 207 (h) to remove any question as to the inclusion of foreclosure costs, costs of acquisition, and costs of conveyance to the Commissioner in the certificate of claim, consistent with the other rental-housing programs.

Section 118. Protection of labor standards

This section would make the provisions of the National Housing Act with respect to the protection of labor standards apply to multifamily housing financed by mortgages insured under the new section 220 proposed by this bill. (See sec. 123 of bill.) The labor-standard provisions would apply in the case of the new section 220 to mortgages covering existing multifamily housing to be rehabilitated or reconstructed as well as to new construction.

Section 119. Cooperative housing

This section would amend section 213 (b) dealing with eligibility for cooperative housing mortgage insurance. A provision would be added to subsection (b) (1) to permit FHA-insured cooperative housing mortgages to be as high as $50 million in amount if the mortgagor cooperative is regulated by Federal or State law as to rents, charges, and methods of operation. The section would also change, with respect to nonveteran projects the present per family or per room mortgage amount limitations from $8,100 per family unit or $1,800 per room, to $2,250 per room and with a per family unit limitation of $8,100 applicable only if number of rooms is less than 4. The section would also provide for changing from a cost basis to a valuation basis. In addition, it would change the basis for allowing increases for veteran membership so that in all cases such increases would be made only if 50 percent of members are veterans, instead of making such increases on basis of certain allowances for each 1 percent of veteran membership. This latter change would simplify computations, and experience has shown substantially all projects to date have had over 50 percent veteran membership. Also an increase would be authorized to the per room and per family mortgage amount limitation for elevator-type structures in both veteran and nonveteran projects. A provision would also be added to section 213 (b) which would authorize the Federal Housing Commissioner, by regulation, to increase the dollar amount limits on mortgages covering elevator-type structures by an additional $1,000 per room for housing projects in (1) a slum clearance and urban redevelopment project covered by a Federal aid contract entered into prior to the effective date of the Housing Act of 1954, or (2) an urban renewal area as defined in title I of the Housing