given residential property to be underwritten with an insured mortgage loan. Basically, the FHA's appraisal system, as well as many of its other principal procedures (such as its property location standards, its minimum construction requirements, and its inspection system), are obviously essential to the proper underwriting of mortgage loan risks, and therefore operate primarily for the protection of the Government and its insurance funds. Nevertheless, the Congress has consistently recognized-and intended that, notwithstanding the fact that technically there is no legal relationship between the FHA and the individual mortgagor, these FHA procedures also operate for the benefit and protection of the individual home buyer. However, there has apparently been a strong tendency on the part of the FHA to view these procedures as operating exclusively for the protection of the Government and its insurance funds. The committee of conference does not believe such a view to be consistent with the intent of the Congress in respect of the basic legislation relating to the FHA in the past, and, as to the future, desire to make it abundantly clear that such is not the case.

In this connection, the committee of conference calls attention to two specific provisions included in the conference substitute which clearly indicate the intent of the Congress that the protections of the FHA system shall also inure to the benefit of the individual home buyers. One is the provision which requires that the builder or seller of a new home built with the assistance of an FHA-insured or VA-guaranteed mortgage must deliver to the purchaser a warranty that the home is constructed in substantial conformity with the plans and specifications (including any amendments thereof which have been approved in writing) on which the FHA or VA valuation of such home was based. The other is the provision which requires that, the seller or builder or such other person as may be designated by the FHA Commissioner shall agree to deliver, prior to the execution of a contract for the sale of the property, to the purchaser a written statement setting forth the amount of the FHA's appraised value of the property.

The committee of conference desires to point out the importance it attaches to the latter provision, especially at this particular time, in protecting the individual home buyers. Generally speaking, an appraisal of the long-term economic value of a particular residential property represents the informed judgment of a professional technician as to the dollar amount which a wellinformed purchaser, acting without duress or compulsion, would be warranted in paying for such property for long-term use or investment. To a large extent, this is determined by the price at which other properties, which are comparable as to location, type of construction, size and other amenities, are being freely sold in the open market. But, irrespective of market price, the upper limit for such an appraisal would always be the estimated reproduction cost of the

property. Thus, appraisal of the long-term

economic value as the basis for insurance of home mortgage loans by the FHA can have two important effects in terms of consumer protection.

First, by providing the new and more liberal mortgage insurance terms contained in the conference substitute, the Congress is seeking to benefit the individual families seeking to buy homes. The committee of conference desires to assure that these terms would not have an inflationary effect upon the going market prices for homes which might be reflected in upward pressure on prices which, in turn, might be reflected in FHA valuations. An appraisal system, such as FHA's based on long-term economic value would preclude valuations in excess of carefully estimated replacement costs as an upper limit in respect to new homes, and in

excess of replacement cost, less deterioration, in respect to existing homes. Therefore, any temporary cost or price rise, attributable to the new and more liberal mortgage insurance provisions continued in the conference substitute or otherwise, should not be reflected in FHA valuations to the detriment of individual home buyers.

Second, in those cases where a reasonable and careful estimate of the costs required to reproduce a fully comparable residential property may, for one reason or another, be less than the current market price for such properties, the individual consumer would obtain the benefit thereof since the FHA's

appraisal of the property at such lower fig

ure would be available to him and the maximum approvable FHA loan would be based on the lower of the two figures.

LOW-COST SUBURBAN HOUSING

Under title I, section 8, of the National Housing Act, provision is made for FHA insurance of mortgages on low-cost housing located in suburban and outlying areas. The House bill contemplated the integration of this FHA insuring operation into the FHA section 203 program and the House report made clear that in integrating the programs, underwriting procedures should be adopted to continue FHA section 8 type of insurance. The Senate amendment provides statutory authority for continuance of the section 8 program through adding a new subsection (i) to section 203 of the National Housing Act. The Senate provision also provided for an increase in the maximum mortgage amount from the $5,700 of existing law to $6,650 for a owner-occupant mortgagor and from the $5,100 of existing law to $5,950 for a buildermortgagor. The new mortgage limits represent 95 percent and 85 percent, respectively, of a home costing $7,000. The Senate amendment further provided that this section 8 type of insurance could be made available to an owner-occupant mortgagor regardless of his credit standing, provided a person or corporation with a credit standing satisfactory to the FHA guaranteed payment of the insured mortgage. In such cases, the guarantor might also loan the owner-occupant mortgagor part or all of the required down payment on a note maturing after the last maturity date of principal due on the insured mortgage. The Senate amendment also made this section 8 type of insurance available on a farm home on a plot of 5 or more acres adjacent to a public highway with maximum insurance authorization for such loans limited to $100,000,000 outstanding at any one time. The conference substitute retains these provisions of the Senate amendment.

It is the intention of the committee of conference that this special mortgage insurance for new low-cost housing be made available in rural and small suburban or outlying communities where the suspension of the regular FHA property location requirements (as distinguished from minimum construction standards) is not likely to be detrimental to the long-term value of the

housing or the general standards of the community. It is not intended that this special mortgage insurance be used to assist the financing of housing in areas which, with the proposed new construction, will constitute built-up urban communities. In such areas, the regular mortgage insurance under section 203 is available for low-cost housing meeting the usual FHA construction and location standards.

TERMS OF FHA INSURANCE FUND DEBENTURES The House bill contained a provision which would amend section 204 (d) of the National Housing Act so as to fix the term of debentures to be issued under sections 203 and 213 of the act at 10 years. The Senate amendment contained a provision further amending section 204 of the act so that any debentures issued under the act (other than debentures issued under section 221 (g)

(3)) could be replaced under certain conditions with refunding debentures maturing within a further 10-year period, thus in effect permitting the FHA Commissioner to impose a 10-year extension on debenture maturities. The conference substitute places a straight 20-year maturity on all FHA debentures issued under the act other than debentures issued under section 221 (g) (3). However, the change in debenture term does not apply in any case where the mortgage involved was insured or the commitment for such insurance was issued prior to the effective date of the Housing Act of 1954.

The Senate amendment contained a provision which was not included in the House bill under which the interest rate on FHA debentures, relating to mortgages hereafter insured, would be set at the rate in effect at the time of insurance as established by the FHA Commissioner with the approval of the Secretary of the Treasury. Such rate could not exceed the rate determined by the Secretary of the Treasury by estimating average yield to maturity on comparable marketable obligations of the United States. The conference substitute contains this provision of the Senate amendment. REHABILITATION AND NEIGHBORHOOD CONSERVATION HOUSING INSURANCE

Both the House bill and the Senate amendment provided for the addition of two new FHA insurance programs through the addition of new sections 220 and 221 to the National Housing Act. The new section 220 insuring authority would provide a mortgage insurance program to assist in the rehabilitation of existing dwellings and the construction of new dwellings in urban renewal areas. The new section 221 insuring authority would provide a mortgage insurance program to cover suitable housing for the relocation of people displaced as a result of Governmental action in a community which has a workable program for dealing effectively with slums and blight, including the prevention of the development and spread of slums and blight as well as the elimination thereof.

FHA section 220 insurance

With respect to the new section 220 insurance program the House bill provided that before it could become operative in a community the FHA Commissioner would have to determine that there exists a redevelopment or urban renewal plan applicable to the area in which the mortgaged property is to be located and he would have to determine that necessary legal and financial authority existed to carry out such plan. The Senate amendment provided that the insuring provisions could become operative upon the Housing and Home Finance Administrator certifying to the FHA Commissioner that he had made the findings required under the slum clearance and urban renewal program. Under the slum clearance and urban renewal program the Housing and Home Finance Administrator is required to find (1) that the governing body of the locality has approved a redevelopment or renewal plan (2) that such plan conforms to the general plan for the development of the locality as a whole and (3) that necessary legal authority and financial capacity exists to carry out such plan. The Senate provision avoids unnecessary duplication of functions between the Housing and Home Finance Administrator and the Federal Housing Commissioner with reference to making FHA section 220 insurance available in the community. The conference substitute contains this provision of the Senate amendment. In both the House bill and the Senate amendment the mortgage limitations with respect to insurance for other than large scale rental projects were consistent with the mortgage limitations which the House and Senate had imposed on insurance provided under the 1-to-4-family housing sales programs covered by section 203 of the act.

As will be noted under the previous discussion of the provisions of the conference substitute with respect to sales housing, the conference substitute represents a compromise between the provisions of the House bill and the Senate amendment and accordingly the mortgage limitations for section 220 insurance on other than large scale rental projects were modified by the committee of conference to make them consistent with the section previously agreed upon with respect to section 203 mortgage limitations.

With respect to large scale rental projects insured under section 220, the only difference (other than technical corrections) between the provisions of the House bill and the Senate amendment was that the Senate amendment added an escalator clause to the stated mortgage limitations so that the FHA Commissioner might by regulation increase the mortgage limitations by not to exceed $1,000 per room in any geographical area where he finds that cost levels so require. The conference substitute retains this provision of the Senate amendment.

FHA section 221 insurance

With respect to the new FHA section 221 insurance program the differences between the House bill and the Senate amendment are summarized in the following paragraphs. Under the House bill provision was made that the number of units covered by the new FHA section 221 insurance could not exceed the number which the FHA Commissioner determines to be needed in a particular community for the relocation of families being displaced by governmental action. The Senate amendment provided that the Housing and Home Finance Administrator would determine the number of section 221 units needed and so certify to the FHA Commissioner. Since the Housing and Home Finance Administrator must determine relocation needs in connection with the slum clearance and urban renewal operation, the procedure provided by the Senate amendment would avoid duplication of the same work by the FHA Commissioner. The conference substitute contains this provision of the Senate amendment.

The House bill provided that the new FHA section 221 insurance could be made available in a community presently undertaking a slum clearance and urban redevelopment project without the community having to meet the new workable program requirement. The Senate amendment with respect to this provision made it clear that the FHA section 221 insurance to be made available in communities which presently have slum clearance projects would only be available for families displaced during the period that the project was being carried out and thereafter the community would have to meet the workable program requirement in order to have additional section 221 units in the community. The Senate amendment also contained a provision to make clear that the Housing and Home Finance Administrator does not have to certify dwelling units for section 221 insurance during any period when the locality fails to carry out the workable program upon which it had agreed. The conference substitute retains both of these provisions of the Senate amendment.

With respect to sales housing under the new FHA section 221 insurance program, the House bill provided that the mortgage could amount to 100 percent of the appraised value of a new or existing home provided that the owner and occupant of the property at the time of insurance made at least a $200 payment to cover settlement costs and miscellaneous charges. Under the Senate amendment mortgage limitations under the section 221 insurance program were set at not to exceed 95 percent of the appraised value on new homes and 90 percent on existing homes. The conference substitute retains these provisions of the Senate amendment with respect to mortgage limitations.

Under the provisions of the House bill a private nonprofit corporation providing rental accommodations for ten or more families eligible for occupancy could obtain FHA section 221 insurance for the rehabilitation of existing homes up to 100 percent of the Commissioner's estimate of the value of the property or project when repaired or rehabilitated. Under a provision of the Senate amendment a private nonprofit corporation providing rental accommodations for ten or more families could obtain only a 95 percent section 221 loan insurance coverage but the mortgage could cover the construction of new accommodations as well as cover the repair or rehabilitation of existing accommodations. The conference substitute retains these these provisions of the Senate amendment.

Under the House bill, maximum maturities were set at 40 years for all section 221 mortgages. The Senate amendment prescribed 30 years for these maturities. The conference substitute prescribes 30 years or threequarters of the Federal Housing Commissioner's estimate of the remaining economic life of the building improvements, whichever is the lesser.

MORTGAGE INSURANCE FOR SERVICEMEN The conference substitute retains the new section 222 of the National Housing Act, which was added by the Senate amendment. The House bill contained no comparable provision. Section 222 of the National Housing Act would establish a new FHA mortgage insurance program for housing for servicemen in the Armed Forces of the United States and their families. This program would assist in the provision of housing for members of the active Military Establishment, who are usually not eligible for the home-loan benefits of the Servicemen's Readjustment Act of 1944 because they have not become veterans. The latter act deals, of course, with the readjustment of veterans to civilian life, and is not intended to assist in providing housing for servicemen while they remain in service.

Before a serviceman would be entitled to the benefits of the new program, the Secretary of Defense (or his designee) would have to issue to him a certificate indicating that the serviceman 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. The serviceman would be required either to occupy the property or to certify that his failure to do so is the result of his military assignment. A certificate would not be issued by the Secretary to any person ordered to active duty for training purposes only. The Secretary could issue a new certificate to a serviceman who has already had the benefits of mortgage insurance assistance under this section only if in his judgment the additional certificate is justified.

The Senate amendment provided that 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, and that no person who has used his entitlement for home-loan benefits under that act would be eligible for the benefits of this section. The conference substitute removes these limitations, thereby permitting an individual to avail himself of both types of benefits if he is appropriately qualified.

The mortgages insured under the new section 222 would be subject to the same limits on amounts as mortgages insured under the regular section 203 sales housing program, with certain exceptions designed to provide more liberal treatment for servicemen. The Senate amendment provided that, in the discretion of the Federal Housing Commissioner, the maximum ratio of loan to value under section 222 could exceed the maximum prescribed in section 203, up to 95

percent of the appraised value of the property, and that the maximum dollar mortgage amount could be $14,250 (that is, 95 percent of $15,000). The conference substitute increases the maximum dollar mortgage amount to $17,100 (that is 95 percent of $18,000).

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 appropriations for the pay and allowances of persons eligible for mortgage insurance under this section. The Secretary of Defense (or such person as may be 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.

Payment of insurance to the mortgagee in event of default on these mortgages would be made in accordance with the same provisions as those which govern the payment of insurance on section 203 mortgages, except that such payments would be from a separate servicemen's mortgage insurance fund established for the purposes of section 222. The Senate amendment authorized an appropriation of $1,000,000 for such fund; the conference substitute changes this provision so as to provide for the transfer of $1,000,000 from the war housing insurance fund instead of a direct appropriation.

The benefits of this section would apply to servicemen in the United States Coast Guard and their families, except that the Secretary of the Treasury would perform the functions otherwise given to the Secretary of Defense.

SALE OF GOVERNMENT-OWNED HOUSING

Both the House bill and the Senate amendment contain provisions permitting 90 percent FHA insured mortgages to finance the sale of Government-owned housing. However, the Senate amendment contained a provision which would permit a 95 percent insured mortgage to finance the sale of such housing if the mortgagor was a veteran cooperative. The conference substitute retains this provision of the Senate amendment.

It was called to the attention of the committee of conference that in some instances the FHA after acquiring a property through operation of its mortgage insuring programs, had resold the property and taken back a purchase money mortgage at a rate of interest under the rate that currently existed on insured mortgages covering similar property. While this practice undoubtedly permits the FHA to obtain a higher price for the property sold than would otherwise be the case thus limiting losses or even allowing it to move into a profit position on its liquidation operations, at the same time it leaves FHA with a long term mortgage which, if sold, could only be sold at a loss due to the unrealistic interest rate. The committee of conference is of the opinion that in any such transactions in the future, the FHA should not take back purchase money mortgages in connection with the sale of acquired properties unless the interest rate on such purchase money mortgages is comparable to the current interest rates on insured mortgages on properties of similar type. The committee of conference is further of the opinion that in cases where the Housing and Home Finance Administrator disposes of property under his control and accepts a purchase money mortgage as part of the payment such a mortgage should carry an interest rate not less than the current interest rate applicable to FHA insured mortgages on similar properties.

OPEN-END MORTGAGES

Both the House bill and the Senate amendment contained provisions permitting FHA insurance of advances pursuant to an “openend" provision in a FHA insured mortgage.

The Senate amendment, however, contained a provision which was not contained in the House bill which would limit such open-end advances to improvements and repairs which substantially protect or improve basic livability or utility of the property and to an amount which when added to the unpaid amount of the mortgage would not make the unpaid balance exceed the amount of the original mortgage. The conference substitute retains the Senate provisions with an amendment which would permit the amount of the advance when added to the unpaid amount of the mortgage to exceed the original principal obligation of the mortgage if the mortgagor certifies that the proceeds of the advance are to be used to finance the construction of additional rooms or other enclosed space as a part of the dwelling.

The Senate amendment contained a provision making the maximum veterans' home loan guaranty entitlement of $7,500 applicable to loans for repairs, alterations, and improvements (if they would substantially protect or improve the basic livability or utility of the property involved) as well as to loans for the purchase and construction of residential property. Under existing law (the so-called "veterans' open-end mortgage" provision) a veteran who has used his guaranty entitlement in acquiring a home can have additional entitlement for repair loans only if he has used less than $4,000 of his entitlement in acquiring the home. The House bill contained no corresponding provision, although in its original form it had included a similar provision which was eliminated when title II of the reported bill (relating primarily to mortgage interest rates and terms) was stricken out on the floor of the House. The conference substitute contains the provision added by the Senate amendment.

FHA APPRAISAL AVAILABLE TO HOME BUYERS The Senate amendment contained a provision which was not included in the House bill which would direct the FHA Commissioner to require the seller or builder of a one-or-two family residence to make available to the purchaser of a new home, prior to sale, a written statement setting forth the amount of the appraised value of the property as determined by the FHA. The conference substitute retains this provision of the Senate amendment but broadens it to include existing housing as well as new homes and to include also one-and-two family sales housing under the new servicemen's insurance program (sec. 222 of the National Housing Act), one-and-two family sales housing under the cooperative housing section (213) of the National Housing Act, and individual sale type defense housing (sec. 903 of the National Housing Act). The provision is not applicable in cases where a mortgage was insured or a commitment for insurance was issued prior to the effective date of the Housing Act of 1954.

BUILDERS COST CERTIFICATION

As noted in the opening paragraphs of this Statement of Managers, shortly after passage of the House bill disclosures were made of widespread "mortgaging out" operations under the former FHA 608 rental housing insurance program. The term "mortgaging out" means that the mortgagor was able to obtain a mortgage in an amount sufficient to equal or exceed the actual cost of the project including a normal allowance for builders profit. The Congress had recognized the possibility of such an operation as the 608 program developed and in increasing the title VI authorization in Public Law 384, 80th Congress, 1st session, approved December 27, 1947, provided that "Title VI of the National Housing Act, as amended, be employed to assist in maintaining a high volume of new residential construction without supporting unnecessary or artificial costs. In estimating necessary current cost for the

purposes of said title, the FHA Commissioner shall therefore use every feasible means to assure that such estimates will approximate as closely as possible the actual cost of efficient building operations." Subsequently, continued rumors of "mortgaging out" operations led the Congress to impose builders costs certification provisions in the military housing insurance program (sec. 803) and in the rental housing section of the Defense Housing program (sec. 908). Following the disclosures of widespread "mortgaging out" operations under section 608, the Senate amendment included a provision, which was not contained in the House bill, which would require a builders cost certification with respect to all FHA mortgage insurance for new or rehabilitated multifamily and rental housing. This provision would require the builder to certify that the approved percentage of the actual cost (i. e., 80 percent under section 207, 90 percent or 95 percent under section 213, 90 percent under section 220, etc.) equaled or exceeded the proceeds of the mortgage loan or the amount by which the proceeds exceeded such approved percentage and to apply the amount of such excess to the reduction of the mortgage loan. In the computation of actual cost, the land value considered may not exceed the Commissioner's estimate of the fair market value of the land in the project prior to the construction of the improvements. There would be excluded from the computation of actual costs amounts representing any kickbacks, rebates, or trade discounts received in connection with the construction of the improvements. The conference substitute while essentially retaining this provision of the Senate amendment, makes clear that a reasonable allowance for builders profit may be included as part of the "actual cost" of a project in the case where the builder is also the mortgagor and desires to leave his profit in the corporation as equity.

NEW FHA POSITIONS

The Senate amendment contained a provision, which was not included in the House bill, which would authorize the establishment in FHA of 18 positions at grade GS-16 without regard to the civil service laws, in lieu of positions previously allocated in FHA under section 505 of the Classification Act. The committee of conference was of the opinion that allocation of all these positions at grade GS-16 would unnecessarily disrupt FHA administrative organization. Accordingly the conference substitute authorizes the FHA to establish one position in Grade GS-18, four positions in grade GS-17, and eight positions in grade GS-16, which would be subject to the civil service laws. Thus the positions would not be taken completely out from under the provisions of the civil service laws but would follow normal statutory procedures which permit such positions to be classified as schedule "C." This is consistent with the practice being followed by the Congress in establishing new positions in other agencies at these grades.

ADDITIONAL FHA PROVISIONS

The House bill contained a provision terminating the yield insurance program under title VII of the National Housing Act. The Senate amendment contained no comparable provision. The conference substitute retains the FHA title VII program.

Under existing law authority of the FHA to insure mortgages in connection with the defense housing program under title IX would expire August 1, 1954, except as to commitments issued prior to such date on loans to refinance existing insured loans. Under the House bill this authority would not be continued but the authority to insure as to commitments issued prior thereto was continued.

The Senate amendment gave the President standby authority to use title IX FHA mortgage insurance authority and the pro

visions of 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. The President under the Senate provision could designate periods after June 30, 1954, when either of these two programs could be used or he could designate a specific project or projects to be assisted by either of the two 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.

The conference substitute conforms to the Senate amendment, but limits the President's standby authority to the period ending July 1, 1955.

The Senate amendment contained a provision requiring that each dwelling covered by a mortgage hereafter insured under section 903 of the National Housing Act be held for rental for at least 4 years. The House bill contained no comparable provision. The conference substitute conforms to the Senate amendment but reduces the period to three years.

The Senate amendment contained a provision making it a criminal offense to misuse "FHA" in advertising or firm or business names. The House bill contained no comparable provision. The conference substitute conforms to the Senate amendment on this point and also modifies section 709 of title 18 of the United States Code, which contains this provision, so as to prohibit similar misuse of the words "Housing and Home Finance Agency," "Federal Housing Administration," and "Federal National Mortgage Association."

Section 709 also prohibits the false advertisement or representation that any project, business, or product has been in any way endorsed, authorized, or approved by the agencies named above or the Government of the United States or any agency thereof. The conference agreement applies this prohibition to any false advertisement or representation that any housing unit, project, business, or product has been in any way endorsed, authorized, inspected, appraised, or approved, as above provided.

The Senate amendment added a new section to the National Housing Act to authorize the Federal Housing Commissioner to refuse the benefits (either directly or indirectly) of participation in FHA insurance programs to persons or firms who knowingly and willfully violate the National Housing Act or the loan guarantee title of the Serv

icemen's Readjustment Act of 1944 or the regulations promulgated under either of those acts. Such benefits could also be refused if the Commissioner determines that there has been a violation of Federal or State penal statutes in connection with programs under either of the two acts or that there has been material failure to carry out contractual obligations with respect to the completion of construction or repairs financed with assistance under either of the two acts. Persons or firms proposed to be denied such benefits would be afforded an opportunity for hearing and to be represented by counsel. These provisions would be applied not only to insured lenders and borrowers, but to builders, contractors, dealers, salesmen, or agents for a builder, contractor, or dealer. The House bill contains no comparable provision. The conference substitute retains the Senate provision with amendments making it clear that it applies to all the insurance titles of the act and with clarifying changes.

the

The House House report accompanying House bill clearly expressed the intent of the House Banking and Currency Committee that FHA insured rental properties were never intended to be used to provide hotel accommodations and directed the FHA to take all appropriate action possible to prevent such use of FHA insured rental projects. The Senate amendment includes specific provisions relating to this problem. These provisions (1) declare that it has been the intention of Congress since enactment of the National Housing Act that housing covered by mortgage insurance is not to be used for hotel or transient purposes while insurance remains outstanding; (2) prohibit any new, existing, or rehabilitated multifamily housing from being rented for a period of less than 30 days, or operated in a manner as to offer hotel services, while such housing has mortgage insurance; (3) prohibit future mortgage insurance on multifamily housing unless mortgagor certifies under oath that as long as insurance is outstanding no part of the housing will be rented for a period of less than 30 days, and no hotel services will be offered; (4) direct the FHA Commissioner to enforce restrictions on hotel use of such properties whether insurance was issued prior or after the enactment of the Housing Act of 1954 but provides that criminal penalties shall not be retroactive; and (5) require the FHA Commissioner to investigate in 15 days any written complaint that a building is being rented or operated in violation of any provision of the National Housing Act or regulation thereunder and, if a violation is found, to order it to cease. If the alleged violation did not cease, the FHA Commissioner would be required to refer the case to the Department of Justice in 15 days for criminal prosecution. Also, in that time, the Commissioner would be required to start injunction proceedings in Federal district court. If the FHA Commissioner did not start such action in that time, any individual could bring the action in the name of the United States. The district courts of the United States would be given jurisdiction over such cases.

The conference substitute follows the Senate provisions, modified as follows:

1. Provides that multifamily housing shall not be used for transient or hotel purposes unless (a) by May 28, 1954, the FHA Commissioner had agreed in writing to rental of specified number of units for such purposes, or (b) the FHA Commissioner finds that the project is in a resort area and that prior to May 28, 1954, a specified number of the accommodations were used for transient or hotel purposes.

2. No multifamily mortgage to be insured by FHA hereafter, except under outstanding commitment, and no mortgage to be insured for an additional term, unless (a) mortgagor certifies under oath the property will not be used while insurance remains outstanding for transient or hotel purposes, and (b) the FHA Commissioner has contracted with or bought stock of mortgagor needed to enforce compliance while mortgage insurance remains in effect.

3. (a) The FHA Commissioner must define "transient or hotel purposes," but rental for less than 30 days shall in any event constitute rental for such purposes.

(b) "Multifamily housing" is defined to include property held by a mortgagor on which 5 or more single-family dwellings are located, or a two-, three-, or four-family dwelling is located, or rental-type housing is insured under sections 207, 213, 220, 221, 608, title VII, 803, and 908.

4. On written complaint, the FHA Commissioner must investigate and order violation, if found to exist, to cease. If such violation does not cease, the FHA Commissioner

must send complaint to Attorney General for appropriate civil or criminal action.

5. A hotel owner, or operator, or association, within 50 miles radius of place of violation, at their own expense may apply for injunctive relief against violations upon showing cause for the issuance of such injunction.

SLUM CLEARANCE AND URBAN RENEWAL

The Senate amendment added to the House bill a provision prohibiting the delegation or transfer, to any official except a person serving as Acting Administrator, of certain final authorities vested in the Housing Administrator in connection with the slum clearance and urban renewal program. Under this provision, the Administrator could not delegate or transfer his authority (1) to determine whether the workable program provided for under section 101 (c) of the Housing Act of 1949 (compliance with which is a condition precedent to slum clearance and urban renewal assistance and to FHA assistance under section 220 or section 221 of the National Housing Act) meets the requirements of such section; (2) to make the certification that Federal assistance of the types enumerated in such section 101 (c) may be made available in a community; (3) to make the certifications with respect to the maximum number of dwelling units needed for the relocation of families who are to be dis

placed as a result of governmental action in a community and who would be eligible to rent or purchase dwelling accommodations in properties covered by mortgage insurance under the section 221 program; or (4) to determine whether the relocation program (which by law must be submitted to the local public agency) for the rehousing of families to be displaced by a slum clearance and urban renewal project meets the requirements of section 105 (c) of the Housing Act of 1949. The conference substitute includes the provision added by the Senate amendment.

The Senate amendment added to the House bill a provision that no contract may be made for advances of funds to local public agencies for surveys and plans for urban renewal projects unless the governing body of the locality involved has approved (by resolution or ordinance) the undertaking of the surveys and plans and the submission by the local public agency of an application for the advance of funds, thus assuring that the approval of the local governing body of the locality concerned will be obtained before any financial assistance contracts are executed. A related provision in the House bill required the governing body of the locality concerned to make the determination that an urban renewal area is blighted or deteriorated, and to designate such area as appropriate for an urban renewal project, before any contract could be made for advances of funds to the local public agency for surveys and plans in preparation of the project. The Senate amendment deleted this provision in the House bill (and substituted the provision described above) on the ground that, as a practical matter, the governing body of the locality would not have the necessary data to support such a determination until after the survey and planning stage, and on the further ground that any redevelopment plan in connection with a project must be approved by the governing body of the locality before any monies could be disbursed under a loan and grant contract. The conference substitute follows the Senate provision.

The House bill contained a provision which would have had the effect of permitting grants for urban renewal projects to be paid in connection with projects consisting of open land which is arresting the sound growth of a community, even though the land is not being redeveloped for predominantly residential purposes. The Senate amendment deleted this provision of the

House bill, thereby in effect continuing the requirements of existing law. (Under existing law, capital grants may not be paid in connection with any open land project, and an open land project is not eligible even for loan assistance unless it is to be developed for predominantly residential use and is necessary to the effective carrying out of a local slum-clearance program already undertaken or specifically contemplated.) The conference substitute retains the Senate provision.

The House bill provided that mortgages and others who acquire property in an urban renewal area as a result of foreclosure need not comply with the obligation imposed upon other purchasers (1) to begin construction of improvements within a specified time, and (2) to comply with such other conditions as the Housing Administrator finds (prior to the execution of the contract for loan or capital grant) are necessary to carry out the purposes of the urban renewal project. The Senate amendment eliminated the exemption granted by the House bill from the second of these two obligations, thus permitting the Administrator to make appropriate conditions applicable to those who acquire property as a result of foreclosure as well as to other purchasers. The conference substitute retains the Senate provision.

The House bill changed the requirements established for a project in existing law and substituted provisions establishing as the general criteria of eligibility for an urban renewal project the achievement of "sound community objectives for the establishment and preservation of well-planned residential neighborhoods." Under existing law loans and capital grants may be made available for clearing a slum or blighted residential area, whether it is to be redeveloped for residential use or for commercial or industrial use or for a combination of such uses; but if the area is not already predominantly residential in character, such financial assistance may be made available only if it is to be redeveloped for predominantly residential uses. The Senate amendment deleted the House provisions and reinstated existing law by prohibiting loans and capital grants for projects involving slum clearance and redevelopment of areas not clearly predominantly residential in character unless such redevelopment is for predominantly residential uses; except that if an area contains a substantial number of slums, or blighted, deteriorated, or deteriorating dwelling, or other living accommodations, the elimination of which would tend to promote the public health, safety, and welfare in the locality, and such area is not appropriate for redevelopment for predominantly residential uses, the Administrator may extend financial assistance for such a project in that area, but the aggregate of the capital grants made with respect to such projects cannot exceed 10 percent of the total amount of capital grants authorized by title I of the Housing Act of 1949. The conference substitute follows the Senate amendment.

The House bill contained a provision which would exclude from local grants-in-aid for an urban renewal project any revenue-producing public facilities the capital cost of which is financed by service charges or special assessments. The Senate amendment did not include that provision. The conference report includes a provision which would exclude from such local grants-in-aid only those revenue-producing public utilities where the capital cost is wholly financed with local bonds and obligations payable solely out of revenues derived from service charges. The provision would not apply to utilities where the capital cost is partly financed from tax revenues or from any source other than revenue bonds. However, the provision would be broadened to cover public facilities financed by special assessments against land in the project area.

The House bill contained a provision increasing from $2,000 to $3,000 the maximum amount of any unsecured home repair and modernization loan, not insured under the FHA title I program, made by a savings and loan association in the District of Columbia. The Senate amendment provided for a lesser increase, from $2,000 to $2,500. The conference substitute follows the Senate amendment.

The House bill provided that the District Commissioners and "the other appropriate agencies operating within the District of Columbia" shall have the same rights and powers with respect to the new type "urban renewal" projects as they now have with respect to redevelopment projects. The Senate amendment adds a provision specifically designating the National Capital Planning Commission as one of the "appropriate agencies operating within the District of Columbia" for this purpose. The conference substitute contains the new language added by the Senate amendment.

The House bill provided that the "workable program" for urban renewal in the District of Columbia shall be prepared by the District of Columbia Redevelopment Land Agency with the approval of the District Commissioners. The Senate amendment provided that such workable program should be prepared by the District Commissioners, with the participation of the Redevelopment Land Agency and other agencies of the District, if requested by the Commissioners. The Senate amendment also contained a provision making it clear that any appropriations required for the preparation of the workable program for the District of Columbia shall be requested by the District Commissioners rather than by the Redevelopment Land Agency. The conference substitute retains the provisions of the Senate amendment.

The committee of conference has noted the statement of the Senate Committee on Banking and Currency, in its report accompanying the bill (Report No. 1472, at pp. 40 and 41) with respect to the coordinated administration of the undertakings authorized by the bill to enable cities to attack effectively the entire problem of urban slums and blight. The committee of conference is fully in accord with that statement and expects the Housing and Home Finance Administrator to apply firmly the unified direction to such undertakings as instructed by the Senate committee.

SECONDARY MORTGAGE MARKET

The House bill contained provisions providing for the rechartering of the Federal National Mortgage Association. The rechartered FNMA would have three principal functions, namely, (1) to provide assistance to the secondary market for FHA-insured and VA-guaranteed home mortgages in order to furnish additional liquidity for mortgage investments and thereby improve the distribution of mortgage investment funds; (2) to provide Government assistance for certain types of these mortgages, or for mortgages generally if necessary to retard or stop a decline in home building activities which threatens the stability of a high level national economy; and (3) to manage and liquidate in an orderly manner the mortgages held in the portfolio of the present FNMA. Provision was made so that the Government investment in FNMA would gradually be replaced by private investment funds and provision was also made to enable FNMA to replace an important part of its borrowings from the Government with borrowings from the private investment market.

The Senate amendment struck the provisions from the House bill relating to the rechartering of FNMA but provided that the authority of the present FNMA to make advance commitments to purchase FHA title VIII military housing mortgages be extended for one year to July 1, 1955, and also granted

FNMA authority to make advance commitments to purchase FHA-insured or VAguaranteed mortgages covering property in Guam in an aggregate amount not exceeding $15,000,000. The conference substitute retains the provisions of the House bill with respect to the rechartering of FNMA except in the following respects: (1) the users of the rechartered FNMA will receive common stock for their capital contributions in place of the convertible certificates (convertible into common stock upon retirement of Treasury stock) that had been provided for in the House bill; (2) the Treasury will receive preferred stock for its investment in place of common stock, and dividends could be paid on both the preferred and common stock out of available earnings; and (3) a formula is provided for the equitable distribution between the Secretary of the Treasury and the private stockholders of the FNMA general surplus and reserves at the time that the last of the Government's stock is retired.

VOLUNTARY HOME MORTGAGE CREDIT PROGRAM

Both the House bill and the Senate amendment contain provisions, which are essentially similar, under which there would be established a voluntary home mortgage credit program under which private financing institutions in an organized manner would undertake to make VA and FHA home mortgage credit available where needed. However, the Senate amendment, as does the conference substitute, strengthens the declaration of policy with respect to the voluntary home mortgage credit program and provides that the development of the program shall be consonant with sound underwriting policies. The conference substitute also provides, as did the Senate amendment, that a representative of the Home Loan Bank Board shall serve as an advisory member of the National Voluntary Mortgage Credit Extension Committee and that the Housing and Home Finance Administrator may act through and utilize the services of the Federal Home Loan Banks in providing regional subcommittees under this program with suitable offices and meeting places and staff assistance.

Under the provisions of the House bill, the definition of "private financing institutions" included life-insurance companies, savings banks, commercial banks, cooperative banks, homestead associations, building and loan associations, and savings and loan associations. Such definition as contained in the Senate amendment omitted homestead associations and building and loan associations but added mortgage banks. The conference substitute provides that the definition of "private financing institutions" includes life-insurance companies, savings banks, commercial banks, savings and loan associations (including cooperative banks, homestead associations, and building and loan associations), and mortgage companies.

The House bill contained a provision which would exempt members of the National Voluntary Mortgage Credit Extension Committee and regional subcommittees from the "conflict of interest" statutes applicable to Government officers and employees. This provision was stricken by the Senate amendment. The conference substitute contains a provision making clear that service as a member of the National Voluntary Mortgage Credit Extension Committee or regional sub

ing Administration from entering into any new contracts or other arrangements for additional public housing units or projects (except with respect to those now authorized), thus restoring the provisions of the basic substantive legislation. The same provision of the Senate amendment limited annual contributions contracts for new public housing units to 35,000 units during each of the calendar years 1954, 1955, and 1956, and limited the authority to authorize the commencement of construction to 35,000 units during each of the fiscal years 1955, 1956, 1957, and 1958. The program contemplated by the Senate amendment thus would provide for the construction of 140,000 additional public housing units over a fouryear period. The House bill contained no provision for additional public housing, in effect terminating the public housing program after the completion of the approximately 33,000 units still authorized under existing law.

Under the conference substitute the Public Housing Administration is authorized to enter into new contracts, agreements, or other arrangements during the fiscal year 1955 for loans and annual contributions with respect to not more than 35,000 additional public housing units. The new contracts, agreements, and other arrangements can be entered into only with respect to low-rent housing projects which are to be undertaken in communities where a slum clearance and urban redevelopment or urban renewal project is being carried out with assistance under title I of the Housing Act of 1949, as amended, and only if the local governing body of the community undertaking the project certifies that the low-rent housing project is needed to assist in meeting the relocation requirements of section 105 (c) of that Act by providing housing for persons displaced by the slum clearance operations.

may be contained in any low-rent housing The total number of dwelling units which tracts, agreements, or other arrangements is project provided for under these new confurther limited by the requirement, contained in the conference substitute, that it may not exceed the number of such units which the Administrator determines are needed for the relocation of families dis

placed as a result of Federal, State, or local governmental action in the community. It should be noted, however, that although the existence of a slum clearance and urban redevelopment or urban renewal project, in the community is a prerequisite to making any new contracts, agreements, or other arrangements for a low-rent housing project, the displacement of families as a result of governmental action other than slum clearance may be taken into consideration in determining the number of dwelling units which may be included in the project.

The net result of the conference substitute is to limit the extension of the public housing program to one additional year and 35,000 additional units, to restrict the authorization of the additional units to communities which have slum clearance and urban redevelopment or urban renewal programs and which require housing for the relocation of persons displaced by those programs, and to limit the number of dwelling units in such projects to the number required for the relocation of persons dis

any office or employment of the Government of the United States and thus resolves any question that might otherwise arise as to the application of the "conflict of interest" of statutes.

LOW-RENT PUBLIC HOUSING

The Senate amendment contained a provision in effect repealing the provisos in the Independent Offices Appropriation Acts of 1953 and 1954 which presently limit public housing starts and prohibit the Public Hous

The House bill contained a provision requiring owners of all Federally-assisted housing to agree to require from each prospective occupant or purchaser a certificate that he is not a member of any organization designated as subversive by the Attorney General. The Senate amendment eliminated this provision and repealed certain riders in recent appropriation acts which applied similar requirements to lowrent public housing, and substituted a provision requiring all tenants of low-rent pub