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1975/06/24 HR4485 Emergency Housing Act of 1975 (vetoed) (3)
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1975/06/24 HR4485 Emergency Housing Act of 1975 (vetoed) (3)
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The original documents are located in Box 26, folder "1975/06/24 HR4485 Emergency
Housing Act of 1975 (vetoed) (3)" of the White House Records Office: Legislation Case
Files at the Gerald R. Ford Presidential Library.
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The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Gerald R. Ford donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
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copyright claim, please contact the Gerald R. Ford Presidential Library.
Exact duplicates within this folder were not digitized.
Digitized from Box 26 of the White House Records Office Legislation Case Files
at the Gerald R. Ford Presidential Library
94TH CONGRESS
HOUSE OF REPRESENTATIVES
REPORT
1st Session
No. 94-64
EMERGENCY MIDDLE-INCOME HOUSING ACT OF 1975
MARCH 14, 1975.-Committed to the Committee of the Whole House on the State
of the Union and ordered to be printed
Mr. REUSS, from the Committee on Banking, Currency and Housing,
submitted the following
REPORT
together with
AND FORD LIBRARY
SUPPLEMENTAL, ADDITIONAL INDIVIDUAL
MINORITY VIEWS
[To accompany H.R. 4485]
The Committee on Banking, Currency and Housing, to whom was
referred the bill (H.R. 4485) to provide for greater homeownership
opportunities for middle-income families and to encourage more effi-
cient use of land and energy resources, having considered the same,
report favorably thereon with amendments and recommend that the
bill as amended do pass.
The amendments are as follows:
On page 2, line 20, strike out "is dissuading" and insert in lieu there-
of "discourages".
On page 2, beginning in line 21, strike out "contributing" and insert
in lieu thereof "contributes".
On page 4, line 19, insert "an obligation of, and paid by, the Secre-
tary and to be" immediately after "be".
On page 5, line 10, strike out "mortgage" and insert in lieu thereof
"mortgages".
On page 6, beginning in line 17, strike out "purchased or assisted
by" and insert in lieu thereof "which".
On page 6, line 18, insert "purchases or commits to purchase" in
mediately after "Association".
On page 6, line 22, strike out "Act" and insert in lieu thereof "sec-
tion".
On page 6, line 25, strike out "under this Act" and insert in dieu
thereof "pursuant to this section".
On page 7, line 2, strike out "under this Act" and insert in lieu
thereof 'pursuant to this section".
(1)
2
3
On page 7, strike out lines 10 through 13.
On page 8, strike out lines 3 through 10, and insert in lieu thereof
far below its potential capacity in early 1975. Housing starts in Jan-
uary 1975 were at an annual rate of 987,000 compared with levels of
the following:
2.4 and 2.0 million in 1972 and 1973, respectively. Housing starts de-
(b) The term "home mortgage" means a mortgage covering a single-
clined in 1974 to a total of 1,351,000 units, down 43 percent from 1972.
family unit or one-family unit in a condominium project, or units in
Some 688,000 construction workers were unable to find work in Febru-
a cooperative housing project, where the appraised value of the unit
at the time of purchase does not exceed $38,000, or $42,000 in high-
ary 1975, or 15.9 percent of all workers in contract construction. The
cost areas as determined by the Secretary and $48,000 in Alaska,
rate of unemployment in the residential construction industry is esti-
mated at over 40 percent. The unadjusted unemployment rate in the
Hawaii, and Guam.
On page 8, line 19, immediately after "this Act." insert the follow-
related furniture industry is 17.5 percent and in lumber and wood
products, 20.9 percent. With building permits in January down to a
ing:
record-low annual rate of 661,000, prospects for a quick revival in
The aggregate amount of contracts to make interest reduc-
housing construction as a result of market forces and available govern-
tion payments shall not exceed amounts approved in ap-
mental programs are very poor.
propriation Acts, and payments pursuant to such contracts
Traditionally, housing has led the economy out of recessionary
shall not exceed $300,000,000 per annum. The aggregate
periods. The current severe slump in both the economy as a whole and
amount of contracts to make interest rate differential pay-
the construction industry does not appear to be breaking. In order to
ments shall not exceed amounts approved in appropriation
stimulate increased activity in the housing industry, H.R. 4485 would
Acts, and payments pursuant to such contracts shall not ex-
make possible the financing of up to 400,000 dwelling units. This bill
ceed $1,500,000,000. The aggregate amount of mortgages pur-
is intended as a temporary, emergency measure and authority under
chased by the Association under this Act shall not exceed
it would expire after June 30, 1976.
amounts approved in appropriation Acts, and the aggregate
Construction activity has a multiplier effect on the economy. For
amount of such mortgages shall not exceed $12,000,000,000.
each 1,000 man-years in on-site and off-site home construction, 1,200
The Association shall not issue obligations pursuant to section
man-years of work are required in manufacturing. wholesaling, 'and'
6(c) or securities pursuant to section 6(d) except as approved
mining. Additional demand is typically generated for employment
in appropriation Acts.
in appliances and home furnishing industries. As workers in these
On page 10, immediately following line 2, insert the following:
industries spend their earning, there is a ripple effect through the
(e) Not more than 20 per centum of the aggregate mortgage
rest of the economy.
amounts approved in appropriation Acts may be allocated
A Department of Labor study indicates that an increase in produc-
for use with respect to existing previously occupied dwellings
tion of 250,000 single-family houses would generate about 130,000
which have not been substantially rehabilitated.
on-site man-years of work, 25,000 off-site man-years, and another
On page 10, line 3, strike out "(e)" and insert in lieu thereof "(f)".
188,000 man-years of work in manufacturing, wholesaling, and
On page 10, line 7, strike out "(f)" and insert in lieu thereof "(g)".
mining. All together, one-quarter million additional home starts
would create up to 343,000 man-years of work.
INTRODUCTION AND BACKGROUND OF BILL
These many additional man-years of work would generate workers'
incomes aggregating approximately $4.2 billion on which an estimated
The committee bill, H.R. 4485, is a product of Congressional concern
$450 million in Federal income taxes would be paid for the year.
with the economy, and particularly the effect on the economy of a
Corporate and personal income taxes paid by builders, materials
severe and prolonged slump in residential construction. In the com-
suppliers and firms in related industries are estimated conservatively
mittee's view, the Administration has not recognized the seriousness of
at $250 million, for a total increase in Federal income tax revenues
the impact on the economy of a depressed homebuilding industry.
of $700 million.
Hearings on emergency housing legislation were held by the Sub-
WHAT THE BILL WOULD DO
committee on Housing and Community Development on February 6,
18, and 20. The Subcommittee held mark-up sessions on H.R. 29,
H.R. 4485 would stimulate housing construction by expanding the
the "Emergency Middle Income Housing Act of 1975" on February 26,
potential homebuying market and by counteracting recessionary "no-
March 4. 5, and 6. The Subcommittee made numerous changes in
buy" attitudes with the incentive of lower interest rates. The lower
H.R. 29 and reported out a clean bill, H.R. 4485, which the full com-
interest rates provided by the bill would increase the number of fami-
mittee amended and ordered reported on March 11.
lies eligible to purchase a given home by approximately 5 to 6 mil-
Your committee believes that early action on H.R. 4485 is essential.
lion. The attractive financing terms made possible by the bill would
Gross national product in the last quarter of 1974 fell by 9 percent
also encourage many families, particularly younger families, to make
in real terms and the unemployment rate, both in January and Febru-
a decision to buy a home within the next year instead of deferring
ary 1973, was 8.2 percent with more than 71% million persons unable
that decision. H.R. 4485 would thus shift a significant number of
to find work. At the same time, residential construction was undergoing
homebuying decisions into the current severely recessed period, in
its deepest postwar cycle. The homebuilding industry was operating
which substantial idle capacity exists, and away from a later period
4
5
of potentially high construction activity in which inflationary pres-
to be sold at to provide a market yield. These loans would also be
sures may be strong.
originated primarily by thrift institutions and mortgage companies.
In attempting to fashion means to stimulate housing construction
Under this approach, if a $30,000 mortgage at 7 percent would sell at
and sales, the committee determined that the most effective program
a price of 88, the payment would equal 12 percent of $30,000, or $3,600.
would provide alternative forms of subsidy and the tapping of various
Approximately the same cost would be incurred by HUD if it pur-
credit markets.
chased this mortgage at par and sold it immediately, but in the case
of a purchase and resale, there would be commitment and purchase
Subsidy pproaches
fees to be paid and temporary borrowing from the Treasury would
The bill authorizes the Secretary of Housing and Urban Develop-
be required.
ment to make assistance available either (1) to reduce temporarily the
Second, HUD, acting through the Government National Mortgage
payments on a market-rate mortgage to the level of payments on a
Association, could purchase seven percent loans at par. At the time
mortgage bearing an interest rate of six percent, or (2) to make it
of purchase or sometime thereafter, mortgage-backed securities guar-
possible for a home mortgage to be written with an interest rate of
anteed by GNMA would be issued by the originators of the loans
not more than seven percent for the life of the mortgage.
and the proceeds from their sale would, in effect, be the ultimate
Under the temporary six percent approach, HUD would make
source of the funds lent to homebuyers. These securities would bear
interest reduction payments on behalf of middle-income homebuyers
a below-market interest rate (about 61/2 percent) and HUD would
in the full amount authorized for three years. The amount of the pay-
bear a loss in this transaction of the difference between the market
ments would be reduced incrementally over the succeeding three years,
price of these securities and their face amount. Mortgage-backed secu-
so that the full assistance would be reduced by 25 percent in year four,
rities are mainly purchased by pension funds, bank trust departments,
by 50 percent in year five, by 25 percent in year six, and would be
insurance companies, and mutual savings banks, and by savings and
terminated after the sixth year. The gradual phasing down of the
loan associations which have surplus funds.
assistance not only eases the impact on the family assuming full home-
Third, HUD could purchase and hold the seven percent loans. In
ownership expenses, but provides adequate opportunity for families
this case, the loans would be financed by the issuance of Treasury
who do not feel capable of assuming these responsibilities to sell their
debt obligations. In addition, HUD could issue its own mortgage-
homes in an orderly manner.
backed securities based on these loans and sell the securities to the
The temporary subsidy approach capitalizes on the fact that
Federal Financing Bank. In either case, the mortgages would be
average incomes of American families have moved markedly upward
financed through the use of Government credit in the bond markets.
in recent years, rising 22 percent between 1970 and 1973. A significantly
The Government would incur losses to the extent that its cost of
reduced interest rate can be provided under this approach at modest
borrowing exceeded net income from the loans. The loans or securities
cost to the Government. The temporary subsidy should be particularly
could be sold to private investors when market conditions were
attractive to families which are upwardly mobile in terms of income
favorable.
or who do not expect to remain in one location for an extended period
Costs and Budgetary Outlays
of time.
The other subsidy approach involves the origination of below-
H.R. 4485 is designed to provide assistance for, approximately
market-interest-rate loans at a rate of seven percent. The benefits of the
400,000 units. The total amount of mortgages which could be assisted
reduced rate would therefore be realized for the life of the mortgage.
is limited to $12 billion, or an average mortgage amount under the
Under this approach, several different ways for the Government to
program of $30,000. The amount of mortgages to be assisted would
provide the subsidy are possible and involve varying costs, budgetary
be required to be approved in appropriation Acts. Within this overall
outlays, and credit markets.
limit on the scope of the program, H.R. 4485 provides separate authori-
zation or expenditure limits with respect to each of three methods
Use of Different Credit arkets
of assistance. First, the amount of contracts to make interest reduction
1. "emporary six percent subsidy These mortgage loans would be
payments. used with respect to the temporary six percent loans, can-
originated primarily by thrift institutions and mortgage companies
not exceed amounts approved in appropriation Acts and payments
and could be insured by the Federal Housing Administration, guaran-
pursuant to such contracts cannot exceed $300,000,000 per year. This
teed by the Veterans' Administration, or conventionally financed with
authorization should be sufficient to support approximately 400,000
or without non-Federal mortgage insurance. These loans could be
units, at an average annual cost per unit of $750, so that if this sub-
held by the originator, sold to a private investor, or sold to one of the
sidv mechanism were to be the only one utilized the bill's quantitative
Government's secondary market facilities-the Federal National Mort-
objectives could be achieved. Outlays under this subsidy approach
gage A issociation or the Federal Home Loan Mortgage Association.
would be spread over R seven to eight year period and the maximum
2. Seven percent mortgages. One method HUD is authorized to use
possible outlays would be $1.35 billion.
in bringing the interest rate down to seven percent is a single interest
Payments under the six percent temporary subsidy would not be
rate differential payment made to the lender at the time the loan is
transferable and would be continued only for SO long as the original
originated. The amount of the payment would be the difference between
family owned and occupied the assisted dwelling unit as its principal
the amount of the mortgage and the price the mortgage would have
residence. The committee feels that no useful purpose would be accom-
6
7
plished by continuing the subsidy for subsequent purchasers, since
appropriations process and that maximum amounts are approved
the unit has already been constructed and purchased with the incen-
which are needed to assist 400,000 units with the programmatic
tives provided by the bill. Thus, the actual cost to the Government
flexibility which the committee considers important.
of making interest reduction payments should be significantly less
than the budget authority since many families move from their homes
Other Elements of the Program
during a six-year period.
Eligible homes. Assistance can be provided under H.R. 4485 with
Second, the amount of contracts to make interest rate differential
respect to single-family homes, one-family units in a condominium
payments cannot exceed amounts in appropriation Acts and payments
project, both vertical and horizontal projects, and units in cooperative
pursuant to such contracts cannot exceed $1.5 billion. This authority
housing projects. With the two exceptions noted below, construction or
should be sufficient to support approximately 400,000 units, at an aver-
substantial rehabilitation of the dwelling units must be started after
age grant per unit of $3,600, SO that if this subsidy mechanism were
the enactment of H.R. 4485. The first exception permits the Secretary
to be the only one utilized the bill's quantitative objectives could be
to apply up to 25 percent of the mortgage funds approved for the pro-
achieved. Outlays under this subsidy approach would be spread over
gram to units in the current inventory of new, unsold homes, defined as
a period of two years.
units whose construction was started prior to the enactment of H.R.
Third, the amount of seven percent mortgages purchased by GNMA
4485. The current inventory contains some 400,000 single-family units
cannot exceed an amount approved in appropriation Acts, and this
plus an undetermined number of condominium units in multi-family
amount cannot exceed $12 billion. This authority should be sufficient
projects estimated at between 200,000 and 250,000. The inventory of
to support approximately 400,000 units, at an average mortgage
400,000 single-family homes represents about 45 percent of all single-
amount of $30,000, SO that if this subsidy mechanism were to be the
family starts in 1974. This ratio contrasts to ratios ranging from 24 to
only one utilized the bill's quantitative. objectives could be achieved.
32 percent between 1968 and 1972. Because of the slowness in sales of
Outlays under this subsidy approach would be spread over a period
new homes, the inventory is not only excessively large, but the rate at
of two years. If mortgage-backed securities are sold to the Federal
which units are leaving the inventory is twice as slow as was usual dur-
Financing Bank or other investors or if the mortgages are sold during
ing the period 1968 to 1972.
these two years, receipts from the sales would be offset against outlays
As a result of these conditions, many builders are not able to repay
for budgetary purposes. Under current market conditions, the cost to
construction loans and to begin the new housing starts sought to be
the Government of holding the mortgages for their life would be
stimulated by H.R. 4485. Accordingly, the committee feels that the
approximately $500 million; the cost if mortgage-backed securities
bill's objectives can be furthered through the allocation of a portion of
were sold to the Federal Financing Bank, approximately $1 billion;
funds to stimulate sales of new units from this inventory. If there is
and the cost if mortgage-backed securities were sold to other inves-
insufficient demand for the full 25 percent of the funds for this pur-
tors, approximately $1.4 billion.
pose, the committee expects the Secretary to use some of these funds to
With respect to a seven percent loan, the bill permits another middle-
stimulate new starts. In addition, the committee feels that the 25 per-
income family to assume the loan since the Government will have
cent allocation should be used by the Secretary, as far as possible) with
already made its full subsidy payment in all cases except where it
respect to units started after the enactment of H.R. 4485, but prior to
continues to hold the loan.
the date the program is funded and operational.
Operation of Alternative Subsidy schanisme
The other exception to use of funds to support new starts would
permit the Secretary to allocate up to 20 percent of the funds to assist
H. R. 4485 gives the Secretary of HUD the discretion to determine
the purchase of existing, previously occupied units. The committee
which credit markets are best utilized for financing under the pro-
intends that the Secretary have discretion in determining how much
grani at any given time. The committee, however, expects that the
of this allocation is used with respect to existing housing and to, limit
funds now flowing into thrift institutions will be extensively used. The
its use to situations which he feels will further the bill's objective of
bill provides that the users of the program will determine the extent
stimulating consrtuction activity.
to which each of the two basic subsidies will be used-the temporary
H.R. 4485 contains two other provisions relating to the type of
six percent loan or the seven percent loan. In other words, the Secre-
dwellings assisted. First, the bill directs assistance toward moderate
tary will determine which of the various methods for supporting
cost housing-homes with appraised values of $38,000 or under. This
seven percent loans will be made available and lenders who apply for
amount is approximately the average cost of new homes solding 1974. A
allocations of mortgage funds will determine. looking to the needs
limited exception is provided for high-cost areas. Not more than ten
and preferences of builders and potential homebuyers, the division of
percent of the mortgage funds could be used for homes valued between
their allocations between six and seven percent subsidies.
$38,000 and $42,000 in high-cost areas and up to $48,000 in the very
H.R. 4485 is thus structured to provide the flexibility for the quick
high-cost areas of Alaska, Hawaii, and Guam. Thus, H.R. 4485 would
adjustments to market conditions and user needs that will make pos-
not only increase construction activity, but would also add to the
sible an emergency stimulus to housing construction and employment.
housing supply a substantial number of moderate cost homes.
The committee hopes that this important element of the program it has
Second, H. R. 4485 would further reduce the costs of homeownership
devised to help turn around a recessed industry will be accepted in the
by directing the Secretary to encourage the construction of homes
8
9
which contribute to the conservation of land and energy resources. To
the extent feasible, the committee intends that the Secretary gives
yield at the time the mortgage is made on the basis of objective criteria
preference to applications which indicate that the design, construction,
selected at the time the contract is written.
and location of proposed dwellings are such as to contribute to the
Implementation
conservation objectives of the bill. The committee believes that while
The committee expects the Secretary of HUD to be prepared to
this provision may involve additional administrative effort, the bene-
implement the program authorized by H.R. 4485 upon its enactment
fits of reducing fuel and other homeownership expenses of middle-
and to make it fully operational as soon as funds are approved in an
income families and of conserving these resources generally far out-
appropriation Act.
weigh any administrative disadvantages.
In compliance with clause 2(1) (3) and 2(1) (4) of rule XI of the
Families Served by the Program
Rules of the House of Representatives, the following statements are
The committee has found that many families with incomes between
made:
$12,000 and $18,000 cannot afford to purchase new homes. The com-
With regard to subdivision (A) of clause 3, relating to oversight
mittee believes that the most effective way to introduce additional
findings, the committee finds, in keeping with clause 2(b) (1) of rule
buyers into the housing market is to make it possible, with the sub-
X, that this legislation is in full compliance with the provision of this
sidies provided, for families generally in this income range to pur-
rule of the House, which states:
chase new homes. Accordingly, the bill establishes a ceiling to the
In addition, each such Committee shall review and study
income of participating families at 120 percent of the median income
any conditions or circumstances, which may indicate the
for the area, as determined by the Secretary of HUD. The Secretary
necessity or desirability of enacting new or additional leg-
is already required to establish median incomes by area for use under
islation within the jurisdiction of the committee
existing housing programs, SO that no additional administrative bur-
The objectives of this legislation are two in number: namely, (1) to
den would be imposed. Median incomes would be established for each
assist in bringing the housing industry out of its severely depressed
county in the country, with all counties in the same metropolitan area
economic position and increase employment within this industry and
having the same median. Income limits are applied only at the time
other industries affected and (2) to provide incentives for middle-
of entry into the program.
income families to achieve ownership status.
The committee wishes to make clear its intent that the interest
With respect to subdivisions (C) and (D) of clause 3, the com-
reduction payments made by HUD under this bill are not to be con-
mittee advises that no estimate or comparison has been prepared by
sidered as being an obligation of or as having been paid by the mort-
the Director of the Congressional Budget Office relative to any of the
gagor, and that the committee regards such payments as neither in-
provisions of H.R. 4485, nor have any oversight findings or recom-
come nor a deductible expense to the mortgagor for federal income
mendations been made by the Committee on Government Operations
tax purposes.
with respect to the subject matter contained in H.R. 4485.
Administration
In compliance with clause 2(1) (B) (4) of Rule XI of the House of
The committee does not expect that the distribution of funds under
Representatives, the committee makes the following detailed state-
H. R. 4485 will be a telephone transaction. Lender-applicants will be
ment in compliance with this rule, which states:
required to submit written requests for allocations of mortgage
Each report of a committee
shall contain a detailed
amounts, specifying the amount to be utilized under each subsidy ap-
analytical statement as to whether the enactment. of such
proach and such other information as the Secretary may require in
bill
into law may have an inflationary impact on prices
order to effectively implement the program. The committee does not
and costs in the operation of the national economy.
intend that any mortgage transaction approved for interest reduction
payments receive a below-market rate of seven percent under the bill.
Our economy currently is in the worst recession we have experienced
The committee expects the Secretary to take appropriate steps to
since World War II. Output in the United States has declined for
assure that funds are promptly and firmly committed by lenders to
four consecutive quarters and practically every economic indicator
builders and homebuyers and that speculation by lenders be prevented.
points to another sharp decrease in production during the current
Commitments issued by GNMA to purchase mortgages under the pro-
quarter. The economic recession which our country is currently ex-
gram should not exceed one year, including any extensions.
periencing is so severe that our level of production in the fourth
To the extent feasible, the Secretary should try to assure an equitable
quarter of 1074 was lower than the level prevailing in the fourth
distribution of mortgage funds under the program to all participants.
quarter of 1972.
The committee expects the Secretary to administer his authority to
Every sector of our economy has suffered as a result of this decline.
contract to make interest reduction payments in a manner to assure
The drop in income which has accompanied the severe cutbacks in
that interest rates and charges on the mortgages are not unreasonable
production have also been severe. Since the fourth quarter of 1973,
or excessive. In contracting to make interest rate differential payments,
real disposable income has fallen 4.5 percent.
the Secretary should establish at the outset the maximum cost ex-
Currently, our economy is suffering from an 8.2 percent unem-
posure of the Government and should attempt to establish market
ployment rate. By industry-and specifically those industries that are
directly or indirectly related to the homebuilding industry-unem-
10
11
ployment in construction is currently running at 15.9 percent; in
sion both in terms of employment and output that exists throughout
furniture, 17.5 percent (unadjusted); and in lumber, 20.9 percent
(unadjusted). Homebuilding, which comprises a major segment of
the economy in general, that this legislation will in no way have an
the construction industry, is operating at less than half capacity at
inflationary impact on prices or costs in the operation of the national
the start of 1975. Housing starts at the beginning of 1975 were only
economy, unite to the contrary, this legislation, if enacted into law
at 868,000 and building permits had dropped to a recession level
and funded, should, in part, have the effect of moving our economy in
of 661,000.
those hardest of hit areas from an economic position of substantial
H.R. 4485 would make possible the financing of up to 400,000 units
recession along the road of economic recovery.
of housing. As many as 100,000 of these units could be new dwellings
In your committee's opinion, the above statement fully complies with
already completed or under construction but not yet sold. Another
the requirements of Rule XI (1) (4).
80.000 houses could be existing previously-occupied dwellings. Thus,
In compliance with clause 2(1) (2) of rule XI of the House of Rep-
the volume of new units generated by this measure might be in the
resentatives, the following statement is made relative to the record
order of 220,000. This level of production is well within the capacity
vote on the motion to report H.R. 4485. A total of 25 votes was cast
of the homebuilding industry. as indicated by the construction levels
for reporting and a total of 11 votes was cast against reporting H.R.
of 1972 and 1973, of 2.4 million and 2.0 million, respectively. The
4485, with one voting present.
current expectation is that housing starts in the absence of this pro-
posal will be only 1.1 to 1.2 million in 1975.
SECTION-BY-SECTION SUMMARY OF THE BILL
One out of six construction workers was idle in February and pres-
Section 1. Short Title
sure on wage rates is not likely to be intense. In 1974, with production
of housing on the decline, average hourly earnings of construction
This section of the bill provides that upon enactment, it may be cited
workers rose by 5.6 percent over the previous year compared with 9.4
as the "Emergency Middle Income Housing Act of 1975".
percent in 1970.
Section 2. Findings and Purpose
The rate of cost increases for building materials moderated in late
Subsection (a) of this section sets forth Congressional findings
1974 and early 1975. In January 1974 lumber and wood products were
that (1) many families of middle income cannot afford to purchase
selling at 183.7 (1967=100) by January 1975 the index was down to
homes at current prices and high interest rates; (2) the decline in the
164.7, a decline of 10 percent. Other building materials prices were
home purchasing power of middle-income families has contributed
generally higher than a year before, but increasing at a moderate pace
to the severe economic recession of the building industry and those
or remaining unchanged over the last several months. Since producers
industries dependent upon the building industry: (3) the sharp decline
of building materials are geared to levels of at least 2 million units,
in housing starts jeopardizes the attainment of an adequate housing
raising the level from 1.1 to:1.3 million units would not be likely to
stock in the years ahead: (4): the accessibility of homeownership to
induce a jump in materials prices. Increases in land costs also have
middle-income persons is further aggravated by the high costs of land
moderated during the past 12 months.
and fuel associated with low-density development: (5) recessionary
Short-term rates have dropped sharply since mid-1974. The prime
pressures in the economy have created an excessively large inventory
rate charged by banks to their best customers has come down from
of unsold, newly constructed residential properties which, although
12-121/4 percent in July 1974 to 73/4-8 percent in early March 1975.
seriously needed, are beyond the financial means of prospective buyers
Corporate bond rates have receded more slowly new Aaa utility issues
who are unable to find acceptable mortgage credit terms: and (6)
came down from 10.4 percent in September 1974 to below 9.0 percent
such inventory is dissuading the construction of additional seriously
in mid-February 1975. Mortgage interest rates for housing also showed
needed residential units, and contributing to an excessively high unem-
some tendency to ease in early 1975. According to the Federal Home
ployment rate in the homebuilding and related industries.
Loan Bank Board, the average effective rate on conventional mort-
Subsection (b) states that the purpose of this legislation is to reduce
gages closed on new homes declined 4 points to 9.33 percent in early
high mortgage interest costs to middle-income families and stimulate
January compared with the previous month. Residential mortgage
employment in the homebuilding industry during the current emer-
loans have declined about one-half of 1 percent (about 50 basis points)
gency period and to encourage land and energy conservation, where
since October 1974.
appropriate, to reduce further the costs of homeownership.
An increase in demand for funds will generally tend to keep interest
rates from declining as much as they might have in bsence of the
Section 3. emporary Homeownership Assistance Authority
added demand. But net new funds for savings and loan associations
This section authorizes the Secretary of Housing and Urban Develop-
are likely to be in the order of $30 billión in 1975; mutual banks will
ment to reduce interest rates on home mortgages for middle-income
have $4-5 billion more. Thus, residential mortgage funds will be in
families by (1) making, and contracting to make, periodic interest
ample supply, but out of range at 81/2 to 9 percent to millions of
reduction payments, as described in' section 4; (2) making, and con-
families.
tracting to make, interest rate differential payments, as described
There can be no question that with the unemployment rate existing
in section 5; and (3) purchasing, and committing to purchase. below-
in the construction and related industries, with the excess capacity that
market-interest mortgages, through the facilities of the Government
exists within the construction industry generally, and with the reces-
National Mortgage Association as described in section 6.
12
13
Section 4. Interest Reduction Payments
of the Association in such manner as may be determined by the As-
Subsection (a) of this section provides that any interest reduction
sociation, and shall bear interest at a rate determined by the Secretary
payments made on behalf of middle-income families shall equal the
of the Treasury, taking into consideration the current average yield
difference between the amount of principal, interest, and any mortgage
on outstanding marketable obligations of the United States of com-
insurance premium due under a home mortgage, and the amount of
parable maturities during the month preceding the issuance of the
principal and interest due if the mortgage were to bear interest at
obligation of the Association. The Secretary of the Treasury is au-
an annual rate of 6 percent.
thorized and directed to purchase any obligations of the Association
Subsection (b) provides that interest reduction payments may be
issued under this section, and for such purposes may use as a public
made with respect to any dwelling unit only for such period as the
debt transaction the proceeds from the sale of any securities issued
family on whose behalf the payments are made occupies the dwelling
under the Second Liberty Bond Act, as now or hereafter in force and
unit. Payments will be in the full amount provided for in subsection
the purposes for which securities may be issued under the Second
(a) for the first three years during which a family occupies'a dwelling
Liberty Bond Act, are extended to include any purchase of the As-
unit, 75 percent of such amount in the fourth year, 50 percent in the
sociation's obligations.
fifth year, and 25 percentum in the six year. No interest reduction
Subsection (d) authorizes the Government National Mortgage As-
payments shall be made after the sixth year.
sociation to guarantee securities based on pools or trusts of the mort-
Subsection (c) provides that interest reduction payments on behalf
gages purchased or assisted under this Act as provided in section 306
of occupants of cooperative housing projects shall be computed by
(g) of the National Housing Act (which authorizes such guarantees
applying the cooperative member's proportionate share of the obliga-
with respect to Federally-insured or guaranteed mortgages) and to
tions under the project mortgage to the items specified in the formula
act as the issuer of such guaranteed securities. The Association shall
set forth insubsection (a).
possess with respect to such securities all the powers it possesses with
Subsection (d) declares that for purposes of the Internal Revenue
respect to securities guaranteed under such section 306 (g), and the
Code of 1954, the interest reduction payments described in this section
provisions of that section shall apply to guarantees under this Act.
shall be deemed to be applied in their entirety toward the payment of
This subsection also authorizes the Association to offer and sell any
the interest due under a mortgage. The effect of this subsection is to
securities guaranteed to the Federal Financing Bank, and that Bank
preclude assisted homeowners from treating the payments received
is authorized to purchase any securities SO offered. The Association
under this section as deductible interest for income tax purposes.
may also offer and sell the guaranteed securities to any Federal
Section 5. Interest Rate Differential Payments
Reserve bank. The proceeds from the sale of these securities when is-
sued by the Association shall be treated in the accounts in the same
This section provides that interest rate differential payments shall
manner as if such proceeds were from the sale of the underlying
equal the difference between the amount of the outstanding principal
mortgages.
balance of a home mortgage and the amount which would be paid for
Subsection (e) authorizes the Government National Mortgage As-
the mortgage if it were priced to provide a market yield, as determined
sociation to pay for services performed in carrying out its functions
by the Secretary. The interest rate on the home mortgage with respect
under this Act without regard to any limitation on administrative ex-
to which an interest rate differential payment is made may not exceed
penses heretofore enacted.
7 percent per annum.
Section 7, Definitions
Section 6. Purchase of Mortgages
Subsection (a) defines "middle-income families" as used in this
Subsection (a) of this section requires the Government National
Act as those families (including single individuals) whose incomes
Mortgage Association to purchase, or commit to purchase, any home
do not exceed 120 percent of the median income for the area, as deter-
mortgages under this Act at a price equal to par. The interest rate on
mined by the Secretary, with adjustments for smaller or larger fami-
such mortgages may not exceed 7 percent per annum. The Association
lies, except that the Secretary may establish income ceilings higher or
may service, sell or otherwise deal in the mortgages it purchases.
lower than 120 percent on the basis of his findings that such variations
Subsection (b) provides that any mortgages which are not insured
are necessary because of prevailing levels of construction costs, usually
by the Federal Housing Administration or guaranteed by the Vet-
high or low family incomes. or other factors.
erans' Administration may be purchased by the Association only if
Subsection (b) defines "home mortgage" as a mortgage covering
(1) the outstanding principal balance of the mortgage does not exceed
a single family unit or one-family unit in a condominium project, or
80 percent of the value of the property securing the mortgage or (2)
units in a cooperative housing project. Where the appraised value of
the mortgage is insured by a qualified insurer as determined by the
the unit at the time of purchase not exceed $38,000, or $42,000 in
Association.
high-cost areas ($48,000 in Alaska, Hawaii, and Guam) as determined
Subsection (c) provides that the Government National Mortgage
by the Secretary.
Association may issue to the Secretary of the Treasury its obligations
in an amount outstanding at any one time sufficient to enable the As-
Section 8. Authorization
sociation to carry out its functions under this section. Each such
This section limits the aggregate amount of mortgages assisted
obligation shall mature at such time and be redeemable at the option
under the Act to amounts approved in appropriation Acts, but in no
14
15
event may such amount exceed $12,000,000,000. Appropriations of
such sums as may be necessary to carry out the provisions of the
Subsection (f) provides that a commitment to purchase a mortgage
Act are authorized, including such sums as may be necessary to make
issued by the Association pursuant to the provisions of any other law
the interest reduction payments and the interest rate differential pay-
shall not be exchanged or credited in any way to the purchase of a com-
mitment pursuant to this Act.
ments authorized in sections 4 and 5.
The aggregate amount of contracts to make interest reduction
Subsection (g) provides that a mortgage, with respect to which the
payments under section 4 may not exceed amounts approved in appro-
assistance described in section 5 (interest differential payments) or
priation Acts, and payments pursuant to such contracts may not exceed
6 (mortgage purchase by GNMA) is utilized, may not be assumed
$300,000,000 per annum. The aggregate amount of contracts to make
except by a middle-income family.
interest rate differential payments under section 5 may not exceed
Section 10. Energy Conservation
amounts approved in appropriation Acts, and payments pursuant to
This section directs the Secretary, in making financial assistance
such contracts may not exceed $1,500,000,000. The aggregate amount
available under this Act, to take appropriate steps to encourage the
of mortgages purchased by the Government National Mortgage Asso-
construction or sale of dwelling units which he determines will con-
ciation under section 6may not exceed amounts approved in appropria-
tribute to the conservation of land and energy resources because
tion Acts, and the aggregate amount of such mortgages shall not exceed
of their design or their location in clusters or projects or otherwise.
$12,000,000,000. The Association may not issue obligations to the Treas-
Section 11. Expiration Date
ury pursuant to section 6(c) or mortgage-backed securities pursuant to
section 6(d) except as approved in appropriation Acts.
This section provides that after June 30, 1976, no interest reduction
payments or interest rate differential payments shall be made except
Section 9. Allocation of Assistance
pursuant to contracts or commitments entered into or before that date
Subsection (a) directs the Secretary to allocate to applicant lenders
and that no mortgages shall be purchased or commitments to purchase
aggregate amounts of mortgages to be assisted. He shall take appro-
motrgages shall be issued except pursuant to commitments made on
priate steps to assure that mortgage funds under the Act are made
or before that date.
available on an equitable basis geographically among and within
the States and to different types and sizes of lenders.
Subsection (b) provides that the applicant lender shall indicate
in its request for an allocation of mortgage amount the proportion of
such amount. to be utilized with the assistance described in section 4
(mortgage reduction payments) and the proportion of such amount to
be utilized with the assistance described in sections 5 (interest differ-
ential payments) and 6 (purchase of mortgages by GNMA).
Subsection (c) authorizes the Secretary to determine which of the
types of assistance described in sections 5 (interest differential pay-
ments) and 6 (purchase of mortgages by GNMA) of this Act may
be made available at any particular time. The Secretary shall not,
however, make any division of the mortgage amounts approved in
appropriation Acts based on whether the assistance described in section
4 of this Act (mortgage reduction payments) or the assistance de-
scribed in sections 5 and 6 of this Act is to be utilized, nor shall he
accord any preference to a request for an allocation of mortgage
amount based on whether the assistance described in section 4 or the
assistance described in sections 5 and 6 is to be utilized.
Subsection (d) provides that not more than 25 percent of the aggre-
gate mortgage amounts approved in appropriation Acts may be allo-
cated for use with respect to new, unsold dwelling units the construc-
tion of which was commenced prior to the enactment of this Act. Also,
not more than 10 percent of the aggregate mortgage amounts approved
in appropriation Acts may be allocated with respect to dwelling units
with appraised values in excess of $38,000.
Subsection (e) provides that not more than 20 percent of the aggre-
gate mortgage amounts approved in appropriation Acts may be
allocated for use with respect to existing previously occupied dwellings
which have not been substantially rehabilitated.
SUPPLEMENTAL VIEWS SUBMITTED BY JERRY M.
PATTERSON
The majority of the Members of the Committee on Banking, Cur-
rency and Housing have, by voting to report this bill, expressed a com-
mitment to restoring the vitality of the housing market, providing
employment in the construction trades, and insuring that middle in-
come families will be able to buy homes. While we are wholeheartedly
in accord with these objectives, we feel compelled to bring to the at-
tention of the House a very serious flaw in the bill as reported by the
Committee. The bill is intended to provide Federal assistance to pros-
pective middle income home buyers. It establishes a $38,000 ceiling
on the value of homes to be purchased under the program, with the ex-
ception that not more than 10% of the total funds used in the program
can be used for homes valued up to $42,000 in areas designated by
H.U.D. as "High Cost Areas".
The Committee recognizes that the price of building homes varies
greatly from place to place, and that a set dollar limit for the entire
nation would not be equitable. Equitable distribution of the benefits
of this bill, however, will not be accomplished with a $42,000 ceiling
for high cots areas. A recent review of 17 geographically selected
metropolitan areas across the country reveal the following median
prices for new homes:
Median sales price
Metropolitan area
4th quarter 1974
Atlanta
$47,310
Baltimore
41, 705
Chicago
43,985
Cleveland
42,655
Dallas
50,350
39,615
Denver
46,740
Detroit
43,320
Houston
Los Angeles-Long Beach
51, 490
Miami
34,200
Minneapolis-St. Paul
39, 710
New York
49,970
Philadelphia
37,525
St. Louis
36,290
San Francisco-Oakland
45, 220
Seattle
42, 275
Washington, D.C-Maryland, Virginia
47, 405
In 11 of the 17 areas one half of the new homes are valued at over
$42,000. We believe that a bill that is intended to benefit middle in-
come families should logically apply to the bottom half of the new
homes in an area. As it comes before the House, the bill will have
limited aplication to these 11 major metropolitan areas, and perhaps
others.
Furthermore, one of the explicit objectives of the Committee in
reporting this bill is to provide a stimulus to increase employment in
the construction industry. We find that this objective, as well, will be
(17)
H. Rept. 64, 94
3
18
unfulfilled in those 11 large metropolitan areas. These areas happen
to have high unemployment as well as high building costs. Because of
these high building costs the bill denies these areas the full benefit of
the housing assistance program.
In conclusion, we want to emphasize our suppoprt for the bill and
its objectives. We want to make clear our agreement with the $38,000
MINORITY VIEWS
ceiling on home values as a general rule of thumb. Our objection is
simply that the "High Cost Area" exemption is far below the median
The Minority Members of the Banking, Currency and Housing
new home values in 11 of our largest metropolitan areas, and that the
Committee are deeply concerned about the plight of the homebuilding
10% assignment for "High Cost Areas" is not in proportion to the
industry and the mortgage markets in this country. Housing starts
magnitude of the housing needs of such areas.
must be accelerated with the corresponding result of putting people
back to work. On this there is no disagreement. There is disagreement,
JERRY M. PATTERSON.
however, as to how this should be accomplished.
HENRY GONZALEZ.
Unfortunately, as a result of the Committee's vote on reporting out
FRANK ANNUNZIO.
H.R. 4485, which was virtually along party-lines, the House will be
ANDREW MAGUIRE.
asked to rush into another emergency housing program, which, based
THOMAS M. REES.
on the lessons of the past, will prove undesirable. It is a complicated,
GLADYS NOON SPELLMAN.
administratively involved program which would take months to acti-
JAMES J. BLANCHARD.
vate. Last October, less than six months ago, we passed the Emergency
Home Purchase Assistance Act of 1974, designed to help middle in-
come families purchase homes and assist the homebuilding industry
out of a very serious recession. Now, with over $14 billion dollars in
subsidized commitments under the 74 Act and other prior programs
in the hands of potential lenders and available in unused authoriza-
tions, we are being asked to institute a new program entitled the
Emergency Middle Income Housing Act of 1975 authorizing assist-
ance to an additional $12 billion in mortgages (For a summary of
recent Federal activity in support of the industry and homebuyers
see Appendix A).
Before discussing the merits of H.R. 4485 or the alternative we have
offered thereto, we would like to address some of the basic economic
considerations affecting housing and how they relate to efforts to
revitalize this important industry. Also it should be noted that fore-
casts indicate that the housing slump has bottomed out and there will
be a marked improvement in housing in the near future.
INFLATION
Basically, inflation triggered the downward spiral of housing. You
may recall that one of President Ford's mini-economic summits dealt
solely with housing and construction. Ot that September conference
in Atlanta it was vividly brought out that inflation was ruining the
homebuilding industry. The prime interest rate had been at 12 percent
for almost three months and mortgage credit availability had virtually
disappeared. Three-month Treasury bills had a yield of 9.63% and
funds were flowing out of savings institutions.
These things happened because of inflation-they were not the
cause of inflation. We cannot afford to see such a condition return
because it is clear that if inflation spells trouble for basic short-term
credit, it spells disaster for long-term borrowing. After all, if inflation
runs unabated, the compounding of its effect makes long-term lending
a dismal investment form for capital. If we cannot control inflation-
in effect admitting to a lender that he will lose considerable purchas-
(19)
20
21
ing power when he finally receives repayment of his principal-then
and do not balance out our housing production with our resource
we cannot keep short-term, let alone long-term interest rates down.
availability, housing costs will jump out of reach for virtually all
A lender must be allowed a reasonable chance to recover his principal
Americans even with Federal subsidy.
amount without suffering a drastic loss of purchasing power or he
will leave the long-term investment market. And, if he leaves the
MINORITY AMENDMENTS
long-term market, there will not be a significant private housing
industry.
Minority members in the Subcommittee on Housing and Community
Now, interest rates are falling as inflation wanes. The prime rate is
Development offered a number of amendments to delete objectionable
at 8 percent or less, and short-term Treasury bills are in the 5.5 per-
features of the bill, strengthen certain facets of the bill, or generally
cent range. But, consumer psychology which first fed inflation, has
strengthen the bill in its relationship to the realities of the market
flip-flopped and appears to be demonstrating considerable resistance
place. By and large, most of these amendments were offered again
to higher-than-ever prices. In part, this resistance developed through
when the full Banking, Currency and Housing Committee met to
visceral reactions to high prices which was then compounded by the
mark up the legislation. In virtually every instance, Minority amend-
news that drops in consumer spending were sending recessionary
ments were rejected along party-line votes. We feel that at least a
tremors through the economy. The result is that consumer reluctance
few of these amendments should be listed here SO our colleagues can
to purchase is no longer due solely to reaction to high prices-there
judge for themselves the merits of the proposals.
is now a fear that income security or job security is uncertain, and
saving, rather than buying is the order of the day.
A Six Percent M ortgage Interest Rate
For housing, this new propensity to save is good news-but only SO
One such amendment would have raised the interest rate for the
long as there are enough purchasers of new homes to support this
purpose of Section 4 interest reduction payments from 6 to 7 percent.
vital industry. A word of caution is considered appropriate at this
A quick look at history shows that the 6 percent rate in this bill is
point. If the Congress continues to pursue this legislation, the smart
excessively low. Conventional mortgage rates have not been at 6 per-
buyer would be well advised to delay buying until this 6% money
cent since the beginning of 1966. During the boom years of 1971-1973
becomes available. This Bill could prove counterproductive and be
when the highest level of housing production in this nation's history
harmful to the very industry we seek to assist.
was attained, conventional mortgage rates were at least 71/2 percent.
Savings are flowing back into thrift institutions at a rate which
Even if we go back to the Emergency Home Finance Act of 1970,
last month exceeded $3 billion. As a result of this extremely positive
which was designed to accomplish basically the same goal as this Bill,
occurrence, there is bound to be an increase in mortgage lending and
we find the interest rate set at 7 percent. We feel that by setting a
housing production. Evidence to this effect can be found in a recent
lower rate, it only serves to boost the artificiality of the incentive and
article by Michael Sumichrast, chief economist for the National As-
unnecessarily increases the subsidy costs to taxpayers who are not
sociation of Home Builders (See Appendix B). Well, what does this
fortunate enough to obtain-or who do not qualify-for these mort-
all mean? How does this relate to this specific legislation?
gage reduction payments.
Proponents of this legislation argue that it will stimulate 400,000
It is also clear that mortgage interest rates which will not drop
units. It still has not been made clear whether the 400,000 units are in
below the 7 to 8 percent range will be the order of the day for some
addition to those units which could be expected to be constructed with-
time. Due to the inflation we have experienced-which in large part
out this legislation. If so, the effect would be grossly inflationary. If
has been due to government spending in excess of its means-the thrift
these units are not meant to be in addition to those that would be
institutions have been forced to pay higher rates to depositors to at-
built, then what is the actual number that would not otherwise be
tract capital. If we just look at the advertisements for such deposits,
provided Surely, the proponents can't have it both ways-tout it as
we can readily see that if a savings and loan is going to be paying
a bill to provide 400,000 units, but then say it is not inflationary be-
out 7 percent or more on its longer-term certificates, representing a
cause many of the units would have been built anyway. To attempt
significant portion of its deposits, it cannot possibly originate a mort-
to institute a new deeper subsidy program than now exists to spur
gage at the 6 percent or 5 percent rates we would all like to see.
new construction could seriously threaten to refuel the inflationary
It is easy to see, under these circumstances, where a program sub-
pressures we have all fought SO hard to subdue. To illustrate why
sidizing mortgages down to six percent will be the target of an effort
this is such a great concern we need only look at what is happening to
to extend and re-extend. We could well be forced to continue the pro-
lumber prices.
gram indefinitely. It is also interesting to note that the beneficiary
Generally, finished lumber prices have been going down over the
of a 6 percent mortgage could place his savings in an insured institu-
last year, but bids for future delivery of stumpage from certain
tion and receive up to 73/4 percent interest which when compounded
National Forests have skyrocketed. Testimony in hearings on this
would yield in excess of 8 percent.
legislation revealed that while finished Douglas Fir lumber was selling
at the mill for $133 per thousand board feet, bids for Douglas Fir
No Minimum Contribution on the Part of the Buyer
stumpage from National Forests in Oregon and Washington have
Another amendment was designed to assure that middle income
reachd a level of $221 per thousand board feet. If we are not careful,
homebuyers (whose income under the Act could exceed $21,000 per
annum in certain areas) will indeed set housing as a high priority item
22
23
for themselves in order to qualify for assistance under the 6 percent
interest reduction program. This would be done in much the same way
the homebuyer will have a gain of approximately $11,000 even after
as with the subsidized housing programs for lower income families. It
he repays the subsidy. Even though this figure would be reduced some-
would require the homebuyer to pay 25 percent of his income towards
what in determining net gain, it is clear that the opportunity for
the payment of principal, interest, taxes and insurance before the
profit is quite good. Surely in a time where enormous deficits endanger
subsidy is calculated. In this way, subsidy would not be wasted on a
rekindled inflation, it is not too much to ask for repayment in light
family which could afford the housing on its own and there would be
of such gains.
equity between those families qualifying for assistance. Without this
Multifamily Construction is Excluded
amendment, a family with income equal to 120 percent of median
Unfortunately, problems with this bill do not end yet. There is one
would receive the same subsidy as that of a family with an income of
final point relating to amendments offered and defeated in Commit-
only 80 percent of median-unless the higher income family buys a
tee. That point deals with the bill's exclusion of rental multi-family
more expensive home in which case his subsidy is greater. It is beyond
project mortgages from the types of mortgages, the Government Na-
us how the Majority could reject an amendment of this sort. In the
tional Mortgage Association, (GNMA) can assist under Sections 5
Washington, D.C. area, it means that the same, if not greater, subsidy
and 6 of the bill. When we see that rental multi-family starts have
will go to a family with an income of $21,000 as would go to a family
dropped 80 percent from the 1973 annual rate compared to a 30 percent
with an income of $14,000 even though one family makes 50 percent
drop in single family, it is difficult to see how this sector of the build-
more money. Incidentally, there would be no assistance to a family
ing trades can be ignored. Just as many people, if not more, can be
which might have income of one dollar in excess of the limits set in the
put to work in building multi-family rental projects as can by build-
legislation, while a family with one dollar less income can qualify for a
ing single-family units. It would also provide some aid to the cities
6% loan.
which have higher unemployment generally and could not adequately
As indicated earlier, this requirement to pay a portion of ones'
utilitize single family units. Our desire for homeownership should
income towards his own housing before the need for subsidy is de-
not be allowed to blind us to the needs of those who cannot afford to
termined, is basic to our system of equity and similar to that used for
buy a house due to reasons other than interest rates. Lowering interest
the subsidized lower income housing programs. It is inappropriate not
rates does not help a family which does not have the downpayment
to require the same contribution from the beneficiaries of this new
required to move into a new home. Such a family must rent until it can
housing subsidy program. A case by case review of each application
accumulate sufficient funds to afford a new home. Could it be that the
is already required in order to administer the program, and therefore,
short-sightedness of this legislation will lead to an avertable crisis
this action would not add a new burden to the program.
in the rental housing market?
Windfall Profits for the Subsidized omebuyer
In essence, a review of the amendments listed above which were
Another amendment which did have some support on the Majority
rejected in automatonic fashion, illustrates why we cannot support
side would have removed a windfall to certain homebuyers under the
this legislation. There are a number of other reasons, but those already
Act. It simply required that if the home, on which the purchaser re-
outlined should suffice to convince our colleagues that this bill does
ceives an interest subsidy down to six percent, is sold during the six
not merit enactment. But, lest we be unjustly accused of negativism,
year period of the subsidy, there would be a recapture of the lesser of
we do have an alternative which to no one's surprise, was also rejected
the subsidy or the net gain realized from the sale.
in the full Committee by a straight party line vote.
Let us look at what this actually means in terms of dollars and cents.
Assuming the same nationwide average increase in the price of housing
SUBSTITUTE TO H.R. 4485
over the next six years, as over the past six, a $35,000 house bought
today would sell for $50,000 in 1981. The actual appreciation rate
The substitute offered by Mr. Brown of Michigan was designed to
would undoubtedly be greater for newly constructed units than is
expand the existing Emergency Home Purchase Assistance Act of
1974 to make it more fully responsive to the needs of a viable home-
indicated by the figures. Since 80 percent of the mortgages will be on
newly constructed homes, the value of the home might double over the
building industry. Basically, the Emergency Act which was enacted
life of the subsidy, as has been the case in the Washington, D.C. area.
in October, authorizes GNMA to purchase or commite to purchase
It is a well-known fact that the most rapid appreciation is found in
mortgages originated at an interest rate determined by a formula
sub-division homes during the first three to four years when, generally,
which fluctuates according to the yields on certain long-term Treasury
the development is completed and the esthetics of the area take shape.
bonds. GNMA can then turn around and sell the mortgages to long-
As a result, under this Bill, the Federal government would provide
term investors (including the originators) at a discount to convert
people in middle income brackets with 6 percent financing on an item
the fixed lower interest rate to a market yield. Depending upon how
which will appreciate dramatically.
interest rates move during the period GNMA holds the mortgages, the
A quick calculation shows that the subsidy payable on a $35,000,
government can either make or lose money on the resale.
The substitute would have amended the 1974 Act to include con-
6 percent mortgage over the six year period equals $3,875 when com-
pared to a 9 percent mortgage. In this example, the subsidy must then
ventional condominium units and rental multi-family projects among
be compared to the $15,000 appreciation for that period. In effect,
the types of housing to be assisted. Condominium conversions would
be excluded and the per unit mortgage value of condominiums and
24
multifamily would be limited to the highest mortgage value presently
authorized for FHA mortgages. Also, due to problems in a number
of states, the substitute would clarify the waiver of usury laws in the
present statute and add an additional waiver concerning State laws
which restrict or limit the coverage authorized to be written by private
APPENDIX A
mortgage insurance companies.
Important as those features might be, the heart of the substitute
NEW FEDERAL SUPPORTS FOR HOUSING, JANUARY 1974 THROUGH JANUARY 1975
deals with the very troublesome and sometimes counterproductive
[In millions of dollars]
monthly determination of interest rates through an arbitrary formula.
Specifically, the interest rate would be set at the lesser of (a) FHA
Estimated
HUD programs
Amount
Percent
units
rate for Section 203 (b) as set by the Secretary of HUD or (b) 71/2%.
This new interest rate program would last until October 18, 1976
Government National Mortgage Association:
if need be, and the amount of mortgages GNMA would be allowed
Mortgage purchase programs-support levels announced:
Jan. 21, 1974
1 $6,600
73/4
200,000
to hold at any one time would be increased by $7.25 billion to $15
May 10, 1974
13,300
8
100,000
Oct. 21, 1974
3,000
81/2+81/48
100,000
billion.
Jan. 16, 1975
3, 000
78/1
100,000
The net effect of this substitute would be to give assurance and
Total
15,900
direct assistance to the whole homebuilding industry, including new
Low-rent public housing contract authority: Released Jan. 21, 1975
900
380,000
Direct loans for construction (elderly-202): Announced Jan. 21, 1975
215
10,000
construction, existing residential properties, condominiums and rental
multifamily. It would address the full range of problems; excess
Subtotal, HUD
17, 340
inventory, slow starts, unemployment and consumer confidence, and
Other agencies:
Federal Home Loan Bank Board, mortgage purchase commitments,
do it within the framework of an existing workable program.
May10,1974
3,000
8%
100,000
It is not another new program with built-in delay factors and com-
Federal Home Loan Bank System, advances to thrift institutions,
May 10, 1974
4,000
(2)
plicated administrative features which will further confuse both
Subtotal, other
7,000
HUD and the mortgage lending industry. The amended program
offers a stable and yet a flexible, managed system for the establish-
Total, all programs
24, 340
ment of interest rates based upon careful assessment of the condi-
1 Limited to FHA/VA insured mortgages.
tions in the mortgage credit field and avoids fixed interest rates at
2 BMIR advances.
excessively low levels, while ensuring that the rate would not exceed
Source: Department of Housing and Urban Development.
the very reasonable level of 71/2%.
CONCLUSION
APPENDIX B
It is for the reasons outlined above, and others which were not high-
[From the Washington Post, Mar. 9, 1975]
lighted, that we cannot support H.R. 4485. We urge our colleagues to
reject this legislation and support the substitute presented here as a
MORTGAGE $$ Now AVAILABLE
constructive alternative which can do the most good with the least
disruption of our capital and housing markets.
(By Michael Sumichrast)
Thrift institutions are being inundated with money as consumers
spend less and save more. Some lending institutions are even reducing
the interest they pay on savings in other parts of the country and are
taking a hard look at how to use this money. And reduced interest
on savings means a decline in other rates, including the mortgage rates.
Thus, money is becoming available for housing and many S-Ls and
banks may be ready to talk to you about a mortgage on a house.
This heavy inflow of savings is occurring across the nation as well as
in the Washington metro area (as shown in a recent S&L survey
conducted here).
Nationally, February savings at S-Ls reached an estimated $3.1 bil-
lion in net inflow. This figure compares with $1.7 billion last February
and the previous $2.7 billion record in February, 1972. With January's
near record savings of $3.11 billion, and a fairly good November and
(25)
26
27
December, S&Ls have made one of their fastest turnarounds-and
ently staff vice president and chief economist of the National Asso-
from heavy outflows in the June-September period.
ciation of Home Builders.)
A similar upturn has been experienced by mutual savings banks.
ALBERT W. JOHNSON,
After being drained of money for nine months last year, their January
J. WILLIAM STANTON,
net inflow was $225 million and is estimated to be around $600 million
GARRY BROWN,
in February.
CHALMERS P. WYLIE,
Many thrift institutions are now sending letters to builders asking
JOHN H. ROUSSELOT,
them to come in and talk about borrowing money. "We are accepting
JOHN B. CONLAN,
applications for construction (or mortgage) loans at competitive
GEORGE HANSEN,
rates," many letters begin. This situation is a sharp reversal. Just & few
WILLIS D. GRADISON, Jr.,
months ago, most thrifts were accepting either an extremely limited
HENRY J. HYDE,
number of applications, or none at all.
CHARLES E. GRASSLEY,
The major problem now is what to do with this money. Mortgage
MILLICENT FENWICK.
activity has declined. New housing production is 60% below its peak,
with little in the pipeline for mortgages. What complicates the problem
is the fact that nationally, S-Ls have about 56% of their savings
in high-paying certificates, with 15% (or some $35 billion) in 4 year
CDs, paying 73/4% S-Ls can barely afford to put their new money
into Treasury securities, or to lower their mortgage interest rates
to borrowers.
Nevertheless the decline in rates is already a fact in many parts
of the country. Last week, the FHA-VA rate was dropped from
81/2% to 8%. Only six weeks ago that rate was 9%.
In the last two months, S-Ls have put about $2 billion a month
into rebuilding their liquidity, which is now at about 9%, compared
to 7.26% last fall. They also are repaying about $1.5 billion a month
in advances (money they borrowed last year). Now they are starting
to look for new business.
In the Washington area, a survey of S-Ls showed the following:
All S-Ls are making mortgage loans on both new and existing
homes.
Eight out of ten are making construction loans.
The most quoted construction loan rate was 91/4%, ranging from
9% to 12%, with 1-3 points. These rates are still substantially above
the rates quoted two years ago (71/2% to 81/2% with 1 or 2 points).
Mortgage loans now vary from 81/2% to 10%, compared to 71/2%
to 81/4% two years ago.
The flow of new savings is higher than two or three years ago, with
present lending conditions considered good, excellent and easing-
contrasted to tightening two years ago.
Only one out of ten S-Ls considered new home sales poor. Sales
of existing homes are considered generally good to excellent.
All of the respondents suggested a further decline in interest rates,
and a majority expect rates to stabilize at 81/4% to 81/2% levels.
This optimistic news means that you can start looking for a real
estate investment again because lenders will be more than willing
to talk to vou-and even to help you fill out the loan application.
(Michael Sumichrast, a native of Czechoslovakia, studied at the
University of Bratislava. and Melbourne University in Australia,
and received his Ph.D. from Ohio State University. Also he helped
in production of over 3,600 houses here and in Australia. He is pres-
SUPPLEMENTAL VIEWS OF J. WILLIAM STANTON
Most everyone recognizes that the current slump in the housing
market is causing some severe problems within our economy. The
slump is creating hardships for many families that wish to own their
own homes. It is causing a deep recession within the home building
industry. And it is jeopardizing the health of the entire economy.
Overcoming these problems and forestalling even greater ones was
the goal of our Committee as we debated H.R. 4485, "The Emergency
Middle Income Housing Act of 1975". Undoubtedly, this goal is shared
by every member of the House. Thus, as we consider aiding the housing
industry, the real question we face is not "What is the problem or
"What are our goals?" but rather "What policies should we adopt to
overcome the problems we already recognize and to move toward the
goals we all share
Unfortunately, this is not a question that invites simple answers.
In fact, its complexity leads to disagreement. Therefore, although the
Committee reported out H.R. 4485, I feel that the bill suffers from
several pitfalls that the majority of Congress would like to remedy if
we are to provide sound assistance to the housing industry and in turn
to the entire economy.
Specifically, I favor four amendments to the bill:
(1) A CHANGE IN THE MORTGAGE INTEREST RATE
As the bill stands, it provides for interest payments at a 6 percent
rate. Such a low rate not only lacks a comparison with the rates of
recent years (the conventional mortgage rate has not been as low as
6 percent since 1966), but it also drains tax revenues and creates an
unhealthy incentive for the continuation of the subsidy. To be more
honest to the public, the rate should be increased to 7 percent.
(2) A COMMITMENT BY THE HOMEBUYER
Another fault of the bill is that it lacks a stated-financial commit-
ment by the middle-income homebuyer. An amendment which would
require the homebuyer to pay 25 percent of his income towards the
payment of the home would correct this fault. Such a commitment
insures that only those families that can afford their own homes would
qualify for the subsidy. Since we already require this commitment of
the lower-income homebuyer, how can we justify treating the middle-
income homebuyer differently ? Furthermore, the amendment com-
pensates for the differences between the incomes of those families
within the 120 percent median range of the subsidy. This latter point
refers to the fact that without the amendment it is possible for families
with incomes equaling 120 percent of the median to receive subsidies
equal to or greater than families with incomes of only 80 percent of the
median. In Washington, D.C., for example, a family with an income
(29)
30
of $21,000 will receive at least the same subsidy as a family with an
income of $14,000.
(3) THE "TAXPAYER'S RECOVERY AMENDMENT"
A third improvement upon the bill would be the inclusion of a
SUPPLEMENTAL VIEWS OF STEWART B. McKINNEY
recapture provision. This provision, "The Taxpayer's Recovery
Amendment", would provide that if a subsidized home is sold during
There is no doubt that this nation will be unable to beat back the
the six years of the subsidy and a profit greater than the subsidy is
forces of recession without a quick and strong recovery of our housing
realized, the homeowner would repay to the government the amount
industry. We are all aware of the masses of statistical data which in-
of the subsidy received. Simple arithmetic shows that, given the
dicates the decreasing number of housing starts, the high unemploy-
current rate of housing appreciation, this amendment would provide
ment rates in the building trades and the ripple effect which these fac-
some revenue return to the taxpayer and still leave the homebuyer
tors are having on allied and supportive industries.
with a good profit. For example, it is highly likely that a $35,000 home
It has also been demonstrated, much to everyone's amazement, that
purchased today will appreciate in value to $50,000 over the life of
funds exceeding $14 billion in subsidy commitments are currently
the subsidy. Since during those six years the subsidy payments on
available for distribution under existing government programs. The
the 6 percent would equal approximately $3,900 when compared to the
Emergency Housing Assistance Act of 1974, provided for $7 billion for
9 percent mortgage. the home buyer will stand to gain around $11,000
emergency aid to the housing industry which provided mortgage rates
from the sale of his home even after the subsidy is returned.
at 73/4 percent. In addition, savings flows to thrift institutions have
reversed their previous downward trend and last month inflows ap-
(4) THE "LENDER'S HONESTY AMENDMENT"
proached $3 billion.
Thus, while it is evident that funds for housing are available, it also
The final amendment that warrants inclusion is what I call the
becomes clear that the funds are not being completely utilized. It is
"Lender's Honesty Amendment". This amendment would require
my opinion that these funds have been left untouched because of the
that no interest reduction payments be made unless the home mortgage
lack of customer confidence in our economic position. Data obtained
interest rate of yield on which such payments are based is approved
from various studies indicate that there is a market for new homes but
by the Secretary of HUD based on comparable market rates. Essen-
families are not willing, or in some cases, unable to withdraw their
tially, this would establish another protection for the homebuyer.
savings for a downpayment and commit their families to a 30-year
It would insure that the homebuyer could not be charged a higher
mortgage in an economic climate which may bring sudden unemploy-
interest rate than would have been the case if no subsidy existed. This
ment to the families breadwinners.
possibility arises because there will be a relatively limited supply
It has recently been reported that one out of every three Americans
of 6 percent money. With such a limited supply. the lender would be
now fears losing his or her job and a slightly higher proportion re-
tempted to sell his 6 percent commitment to the homebuyer for a
ports itself in serious financial trouble and deeply worried about un-
premium. In other worlds, a lender may be making loans at 9 percent,
paid bills and shrinking savings. As a result, Time Magazine reports,
but in order to receive a 6 percent phase-out subsidy, the homebuyer
"two thirds of the American people think that this country is in deep
may agree to a permanent 91/2 percent rate.
economic trouble and almost half fear that the United States is headed
With the addition of these safeguards. H.R. 4485 will better speak
for a depression. Furthermore, nearly 45 percent of Americans are
to the needs of the housing industry, it will better protect the interest
worried about meeting their rent and mortgage payments." Even if a
of the public, and it will be better received by the President.
family could afford all the expenses incurred in the purchase of a
house, the emotional conviction required to make a long range commit-
ment in these tenuous economic times is lacking.
Given this data, I cannot in good conscience sit by and wait for
existing programs, which have not provided the impetus for economic
recovery over the last few months, to take hold. Thus, it is my aim in
supporting H.R. 4485 to provide the incentive for and aid to, those
Americans who have found it SO difficult to make this commitment.
The bill by no means is complete or comprehensive. Thus, while I
believe that the dual aims of increased employment and the provision
of housing at a reasonable mortgage rate can be accomplished more
rapidly through the basic thrust of H.R. 4485. I also believe that there
are serious defects which should be corrected before the whole House
(31)
32
33
supports the bill. For this reason, I intend to support the following
an income of up to 120 percent of median of their residential area, to
amendments when the bill is offered in the House:
be given the purchasing power which will begin a cycle resulting in
(1) Recapture of subsidy-One of the major objections to H.R. 4485
economic recovery for this nation. Without this assistance to the middle
is the cost of the subsidy. In order to limit the expense of the program,
income families, it will be difficult if not impossible to provide the
I fully support an amendment which provides that any family that
means for the rehabilitation of an industry and economy gravely in
receives mortgage assistance under this program and subsequently sells
need of rebuilding.
that house at a gain, will repay, out of that gain the amount attributed
STEWART B. McKINNEY.
to the subsidy. If there is no gain, then no repayment shall be required.
The goal of the amendment is to return the funds provided to the fed-
eral coffers, thereby minimizing the ultimate program cost.
(2) inimum payment amendment-This amendment would pro-
vide that any subsidized mortgagor must pay at least 25 percent of his
income towards his home ownership payments. Such payments would
include his mortgage payments, taxes and insurance. This concept
has been evident in many government housing assistance programs and
would have a beneficial effect on two areas. First, by paying at least
25 percent of his income, the mortgagor who receives a higher income
will pay proportionally more than lower income families that receive
the same assistance under the program. Under H.R. 4485, a family
that qualifies for assistance at 120 percent of median income could con-
ceivably pay as much per month as a mortgagor in the 30 percent
bracket. Second, by mandating these minimum mortgage payments
from the outset, more funds will be available for additional partici-
pants. Equity and common sense dictates that this provision must be
added if a responsible housing assistance program is to result.
(3) Secretarial Discretion regarding the allocation of Program
funds-Under H.R. 4485, complete discretion as to how much funding
is accorded to lenders under Section 4 of this bill remains in the hands
of the lenders. The cost of money and mortgages are affected by many
variables in the market place which must be continually monitored, in
order to determine the best possible time to accumulate or disperse
funds. Under this bill, the lenders have the power to determine how
much they will receive under the Section 4 subsidy. Thus, not only
do they determine the total cost of this program, but they also deter-
mine the number of mortgages which will be distributed in each sub-
sidy package. Thus, even during periods of economic expansion and
monetary growth over the 13-14 month life of this program, the lenders
will be abls to still use full funding under Section 4, without regard
to market conditions. The Secretary of HUD has the expertise, staff
assistance and past experience with the administration of similar
programs. The surrender of this power to the lender could result in
disastrous economic and programmatic consequences.
I must make it clear that without these amendments, H.R. 4485
will be little more than a skeleton of a responsible and comprehensive
rehabilitative program. We must remember that this is an "emergency"
measure. Its purpose is to save an industry whose unemployment rate
has not been this high since the depression. It is a bill to move the
more than 400,000 newly constructed yet unpurchased homes. It is a
bill which will enable Americans, afraid to commit themselves to a
long standing financial obligation, to purchase decent shelter for their
families. It is also a unique measure in that it attempts to aid a sector
of our economy which has received little in the way of government
subsidies in the past. It will provide a means for those families with
ADDITIONAL VIEWS OF REPRESENTATIVE JOHN H.
ROUSSELOT
I concur with the position of my Minority colleagues that an expan-
sion of the GNMA conventional "tandem plan" would be a more
sensible and responsible way to provide whatever additional Federal
assistance may be required to stiniulate recovery in the housing indus-
try, There is some doubt in my opinion that any additional stimulus
is needed, inasmuch as interest rates in the regular market place are
coming down, and the Secretary of HUD still has more than $2 billion
of additional "tandem plan" funding available. However, I will take
this opportunity to emphasize three specific objections to H.R. 4485,
the Emergency Middle Income Housing Act of 1975, as reported by
the Committee:
(1) THE "EMERGENCY" NATURE OF THE BILL
H.R. 4485 is yet another example of the growing tendency on the
part of Congress to enact ill-considered "emergency" legislation which
is more likely to aggravate the country's present economic problems
than to solve them. Moreover, this legislation is being proposed at a
time when mortgage interest rates have already fallen substantially,
savings flows into thrift institutions have resumed, and there are some
signs that consumer confidence can be restored before long if infla-
tion can be controlled for a sustained period. In short, there is every
reason to believe that the "emergency" in housing will ease before this
bill passes. If there should be a need for substantial additional assist-
ance to housing during the coming months, that assistance can be pro-
vided more rapidly and more efficiently by expanding the use of the
GNMA conventional "tandem plan," as the Minority substitute pro-
poses to do.
(2) THE FAILURE TO INCLUDE MULTI-FAMILY RENTAL HOUSING AMONG
THE TYPES OF HOUSING ELIGIBLE FOR ASSISTANCE UNDER SECTIONS 5 AND
6 OF THE BILL
If the purpose of this legislation is to promote recovery of the hous-
ing industry and increase employment, there is no reason for ignoring
this important segment in which starts have dropped 80%, a much
more dramatic drop than the 30% decline in single-family housing
starts. On the contrary, there are many reasons to believe that employ-
ment of labor and other resources in this segment could be increased
much more meaningfully than in some of the segments which would
be assisted under H.R. 4485.
Multi-family housing offers an efficient means of providing hous-
ing to those eligible families who are not yet prepared to buy a home
due to reasons other than high interest rates. Multi-family housing pro-
(35)
36
vides an excellent opportunity to promote conservation of valuable
energy and land resources and to provide such amenities as security,
parking, and recreation in an efficient manner. It is for these reasons
that I offered the "Meaningful Employment Amendment" during the
full Committee mark-up of this legislation to include mortgages for
multi-family projects in the bill. Unfortunately, this amendment was
defeated.
INDIVIDUAL VIEWS OF MR. SCHULZE
(3) THE HARMFUL LONG-RUN EFFECTS WHICH THIS BILL IS LIKELY TO
I would like to take this opportunity to reinforce the Minority
HAVE UPON MIDDLE-INCOME FAMILIES
Views in opposition to the proposed six percent mortgage interest
rate in this emergency housing legislation. I have strong objections to
As the Minority Views point out, the major cause of the current
the six percent rate, believing that it should be at least seven or seven
problem in housing is inflation. H.R. 4485 contemplates the Fed-
and one-half percent.
erally-assisted construction of 400,000 additional units of single-family
According to the Department of Housing and Urban Development,
housing. A program of this kind may disrupt what would otherwise
available data suggests that "a very high level of demand and pro-
be an orderly recovery in housing and touch off a new round of infla-
duction can be sustained with interest rates at 71/2 or 8 percent" and
tion in this volatile industry. Moreover, although the bill calls for
"that the reduced mortgage rate will be borne by other families, in-
a phase-out of the program over six years hence, it is likely that de-
cluding those who are still unable to afford a home and many others
mands will be heard for re-extension and that the program will con-
who, not choosing to move, will continue paying interest rates above
tinue indefinitely.
6 percent on their own home mortgages." I suggest that the lower
The best action Congress can take to provide relief from the infla-
rate is not only inequitable, but is not necessary. It is likely that al-
tion and high taxes which are pinching the middle-income citizen is
though thousands of families would take advantage of the lower inter-
to refrain from enacting new Federal spending programs which in
est rate, numerous additional families would have the opportunity to
turn require new Federal borrowing. Such measures are guaranteed
participate as a result of the funds freed up by only a one percent
to result in additional upward pressure on interest rates and to ag-
increase.
gravate the very problem which this legislation is supposedly designed
It is hardly consistent to offer a six percent interest rate on home
to solve.
mortages, while conventional mortgage rates have not been this low
JOHN H. ROUSSELOT.
for almost 20 years, and while insured savings institutions are yield-
ing a compounded interest rate of up to 8 percent.
I recommend that a minimum rate of at least 7 percent be main-
tained SO that the maximum number of families are able to participate.
Inflation is primarily responsible for the problems in the housing
industry, through increased costs in lumber and other materials, and
while this bill provides a short-term stimulus, it attacks the symptoms
rather than the cause of this sensitive situation.
(37)
ADDITIONAL MINORITY VIEWS OF CHARLES E.
GRASSLEY
The provisions of H.R. 4485 constitute an ill-advised attempt to in-
ject tax dollars into the middle income housing loan market, ease the
housing slump, and pronounce middle income housing as a critical
shortage in this nation. In each instance, the House Banking, Currency
and Housing Committee has by a near party-line vote missed its mark.
Above all, this bill is not a solution to unemployment in the housing
industry. Beyond this fallacy, it is clearly contrary to the wishes
of the vast majority of the people of this nation.
A Gallup survey conducted during the period of January 29 to
February 8 of this year underscores this view. Only one percent of the
responses to that survey listed housing at the top of the list of needs
to which this Congress must urgently address itself-and only 5
percent placed it in third position, With 36 percent of the respondnts
concerned about general unemployment, 25 percent worried about the
ravages of inflation, and 15 percent targeting corruption in govern-
ment; the majority of the members of the House Banking, Currency
and Housing Committee have determined that the slight interest in
housing needs is sufficient to declare a housing crisis exists. Only
traffic safety, with less than one-half of one percent, is of less impor-
tance to those surveyed. Clearly, this bill is out of step with the
thinking of the vast majority of Americans and that fact alone speaks
volumes as to how this Congress has missed assessing the housing
needs of this nation by a country mile.
Those who buy and sell homes report there is no shortage of
housing for middle income Americans today and the members of the
Banking, Currency and Housing Committee know it. To the con-
trary, statistics presented to the Committee emphasize that there are
presently twice the usual number of available homes on the housing
market.
A second reason for rejecting this legislation as it is reported from
Committee is that it not only commits this government to another
round of Washington-directed housing policy, but it also does little
to encourage the individual home owner to manage his or her home
investment wisely. There is nothing in the bill that requires an indi-
vidual to commit a specific portion of his or her net worth or annual
income toward paying off the mortgage on his or her dwelling. If the
taxpayers of this nation are to be comnelled to subsidize housing for
persons earning up to $21,000 annually, there must be an assurance
that those receiving the loans will not abrogate their financial respon-
sibility. Twice the Committee had an opportunity to require loan
recipients to spend 25 percent of their annual income on housing-and
twice the majority on the Committee voted down this provision.
Unfortunately. there is more bad news in the bill and it hits the
poor of this nation hardest. Where were the defenders of equal oppor-
tunity who will not tolerate discriminatory treatment of low-income-
(39)
40
persons who must by law pay a percentage of their income for public
housing programs ? Their voices were noticeably silent during Com-
mittee hearings on H.R. 4485. Under HUD managed 235, 236 and other
public housing programs, low income Americans must pay approxi-
mately 20 percent of their adjusted income for housing. Does this
Congress not want to require a similar stipulation for the more
affluent?
Not only is the bill discriminatory against poor people who live in
subsidized housing, but it also fails to treat middle income persons on
a fair and equitable basis. This bill will provide a higher subsidy for
higher income families and those families can afford a more expensive
home, a larger mortgage and greater interest payments.
Application of the bill's provision to the Nation's Capitol reveals
the same, if not greater, subsidy would go to a family with an income
of $21,000 as would go to a family with an income of $14,000, even
though the first family has 50 percent more income.
The concept of mortgage contributions according to individual
income has been a basic tenet to government subsidized programs for
years and such requirements were included in the language of the
Emergency Home Finance Act of 1970.
It is one thing for this Congress to develop reasonable means
to reduce the high cost of living. I await its action to do SO. It is
quite another thing to authorize subsidies for the high cost of high
living. Without a provision to require a 25 percent-of-income use for
housing, this Congress would open the door for those who wish to
place the country club before their own home.
Let us not discriminate against the poor of this nation; let's require
the middle income person to make a just commitment to his or
her own home.
CHARLES E. GRASSLEY.
94TH CONGRESS
HOUSE OF REPRESENTATIVES
REPORT
1st Session
No. 94-246.
EMERGENCY HOUSING ACT OF 1975
MAY 22, 1975.-Ordered to be printed
FORD
&
Mr. REUSS, from the committee of conference,
submitted the following
GERALD
LIBRARY
CONFERENCE REPORT
[To accompany H.R. 4485]
The committee of conference on the disagreeing votes of the two
Houses on the amendment of the Senate to the bill (H.R. 4485) to
provide for greater homeownership opportunities for middle-income
families and to encourage more efficient use of land and energy
resources, having met, after full and free conference, have agreed to
recommend and do recommend to their respective Houses as follows:
That the House recede from its disagreement to the amendment of
the Senate and agree to the same with an amendment as follows:
In lieu of the matter proposed to be inserted by the Senate amend-
ment insert the following:
SHORT TITLE
SECTION 1. This Act may be cited as the "Emergency Housing Act
of 1975".
TITLE I-EMERGENCY MIDDLE-INCOME HOUSING
SHORT TITLE
SEC. 101. This title may be cited as the "Emergency Middle-Income
Housing Act of 1975".
FINDINGS AND PURPOSE
SEC. 102. (a) The Congress finds that-
(1) many families of middle income cannot afford to purchase
homes at current prices and high interest rates;
(2) the decline in the home purchasing power of middle-in-
come families has contributed to the severe economic recession of
the building industry and those industries dependent upon the
building industry;
38-006 O
2
3
(3) the sharp decline in housing starts jeopardizes the attain-
obligation of, and paid by, the Secretary and to be applied in their
ment of an adequate housing stock in the years ahead; and
entirety toward the payment of the interest due under a mortgage.
(4) the accessibility of homeownership to middle-income per-
sons is further aggravated by the high costs of land and fuel as-
PURCHASE OF MORTGAGES
sociated with low-density development.
(b) It is the purpose of this title to reduce high mortgage interest
SEC. 105. (a) The Association shall purchase, or commit to pur-
costs to middle-income families, to stimulate employment in the home-
chase, a home mortgage pursuant to this title at a price equal to par.
building industry during the current emergency period, and to encour-
The interest rate on such a mortgage shall not exceed 7 per centum
age land and energy conservation, where appropriate, to reduce fur-
per annum. The Association is authorized to service, sell, or other-
ther the costs of homeownership.
wise deal in mortgages purchased pursuant to this title.
(b) A home mortgage which is not insured under the National
TEMPORARY HOMEOWNERSHIP ASSISTANCE AUTHORITY
Housing Act or insured or guaranteed under chapter 37 of title 38,
United States Code, shall not be purchased by the Association unless
SEC. 103. The Secretary of Housing and Urban Development (here-
either (1) the outstanding principal balance of the mortgage does not
inafter referred to as the "Secretary") is authorized to provide finan-
exceed 80 per centum of the value of the property securing the mort-
cial assistance with regard to home mortgages for middle-income
gage, or (2) the mortgage is insured by a qualified insurer as deter-
families-
mined by the Association.
(1) by making, and contracting to make, periodic interest re-
(c) The Association may issue to the Secretary of the Treasury its
duction payments, as described in section 104;
obligations in an amount outstanding at any one time sufficient to
(2) by purchasing and committing to purchase, below-market-
enable the Association to carry out its functions under this section.
interest-rate mortgages, through the facilities of the Government
Each such obligation shall mature at such time and be redeemable at
National Mortgage Association (hereinafter referred to as the
the option of the Association in such manner as may be determined
"Association"), as descibed in section 105; and
by the Association, and shall bear interest at a rate determined by the
(3) by making, and contracting to make, home purchase incen-
Secretary of the Treasury, taking into consideration the current aver-
tive payments, as described in section 106.
age yield on outstanding marketable obligations of the United States
of comparable maturities during the month preceding the issuance of
INTEREST REDUCTION PAYMENTS
the obligation of the Association. The Secretary of the Treasury 28
authorized and directed to purchase any obligations of the Association
SEC. 104. (a) Interest reduction payments made on behalf of middle-
issued under this section, and for such purposes the Secretary of the
income families shall equal the difference between the amount of
Treasury is authorized to use as a public debt transaction the proceeds
principal, interest, and any mortgage insurance premium due under
from the sale of any securities issued under the Second Liberty Bond
a home mortgage, and the amount of principal and interest which
Act, as now or hereafter in force, and the purposes for which securities
would be due if the home mortgage were to bear interest at the rate of
may be issued under the Second Liberty Bond Act, as now or hereafter
6 per centum per annum. Interest reduction payments may be made
in force, are extended to include any purchase of the Association's
only with respect to home mortgages bearing interest rates and yields
obligations hereunder.
approved by the Secretary as being reasonable.
(d) (1) The Association is authorized to guarantee securities based
(b) Interest reduction payments may be made with respect to any
on pools or trusts of the mortgages which the Association purchases
dwelling unit only for such period as the family on whose behalf the
or commits to purchase under this title as provided in section 306(g)
payments are made occupies the dwelling unit. Such payments shall
of the National Housing Act with respect to federally insured or
be made in the full amount provided for in subsection (a) for the first
guaranteed mortgages and to act as issuer of such guaranteed secu-
3 years during which a family occupies a dwelling unit, 75 per centum
rities. The Association shall possess with respect to securities under
of such amount in the fourth year, 50 per centum of such amount in
this section all the powers it posseses with respect to securities guar-
the fifth year, and 25 per centum of such amount in the sixth year.
anteed under such section 306 (g), and the provisions of such section
No interest reduction payments shall be made after such sixth year.
shall apply to guarantees pursuant to this section.
(c) Interest reduction payments on behalf of an occupant of a co-
(2) The Association may offer and sell any securities guaranteed
operative housing project shall be in amounts computed on the basis
pursuant to this section to the Federal Financing Bank, and such
of the formula set forth in subsection (a) applying the cooperative
Bank is authorized to purchase any securities 80 offered. The Asso-
member's proportionate share of the obligations under the project
ciation may also offer and sell any such guaranteed securities to any
mortgage to the items specified in the formula.
Federal Reserve bank. The proceeds from the sale of such securities
(d) For purposes of chapter I of the Internal Revenue Code of
when issued by the Association shall be treated in the accounts in the
1954, the payments described in this section shall be deemed to be an
same manner as if such proceeds were from the sale of the underlying
mortgages.
4
5
HOME PURCHASE INCENTIVE PAYMENTS
as may be necessary to make the interest reduction payments and the
home purchase incentive payments under contracts entered into under
SEC. 106. (a) The amount of a home purchase incentive payment
this title.
shall be $1,000.
(c) The aggregate amount of contracts to make interest reduction
(b) The Secretary's obligation to make a home purchase incentive
payments under section 104 shall not exceed amounts approved in
payment shall be evidenced by a certificate containing the name of the
appropriation Acts, and payments pursuant to such contracts shall
purchaser, a description of the property, and such other information
not exceed $300,000,000 per annum.
as the Secretary by regulation may prescribe. The face amount of the
(d) The aggregate amount of mortgages purchased by the Associa-
certificate shall be applied to the downpayment made in connection
tion under section 105 shall not exceed amounts approved in appropri-
with the purchase. Any person who acquires a certificate issued pur-
ation Acts, and the aggregate amount of such mortgages shall not
suant to this title may present such certificate to the Secretary who
exceed $12,000,000,000.
shall pay in full the face amount indicated on the certificate.
(e) The aggregate amount of contracts to make home purchase in-
(c) (1) Notwithstanding any other provision of this title, a home
centive payments under section 106 shall not exceed amounts approved
purchase incentive payment may be made only in connection with the
in appropriation Acts, and payments pursuant to such contracts shall
purchase of a single-family or two-family unit or a unit in α coopera-
not exceed $400,000,000.
tive housing project, the construction of which began on or after
(f) The Association shall not issue obligations pursuant 'to section
March 26, 1975.
105 (c) or securities pursuant to section 105 (d) except as approved in
(2) A home purchase incentive payment may not be made with re-
appropriation Acts.
spect to (A) a mortgage purchased or otherwise assisted, or to be
ALLOCATION OF ASSISTANCE
purchased or otherwise assisted, under section 313 of the National
Housing Act, or (B) any mortgage which is assisted or purchased
SEC. 109. (a) The Secretary shall allocate to applicant lenders ag-
under section 104 or 105.
gregate amounts of mortgages to be assisted. The Secretary shall
DEFINITIONS
take appropriate steps to the maximum extent practicable to assure
that assistance under this title is made available on an equitable basis
SEC. 107. As used in this title-
geographically.
(1) The term "middle-income families" means those families
(b) In carrying out his functions under this title and in making
(including single individuals) whose incomes do not exceed 120
the allocations under subsection (a), the Secretary shall afford fam-
per centum of the median income for the area, as determined by
ilies eligible for assistance under this title a choice, to the maximum
the Secretary, with adjustments for smaller or larger families,
extent practicable, among the programs described in sections 104, 105,
except that the Secretary may establish income ceilings higher or
and 106
lower than 120 per centum of the median for the area on the basis
(c) Not more than 20 per centum of the aggregate mortgage
of his findings that such variations are necessary because of pre-
amounts approved in appropriation Acts may be allocated for use with
vailing levels of construction costs, unusually high or low family
respect to existing units (other than substantially rehabilitated units)
incomes, or other factors.
and with respect to new, unsold dwelling units the construction of
(2) The term "home mortgage" means a mortgage (A) which
which commenced prior to 26, 1975.
is executed to finance the acquisition of a single family unit (in-
(d) Not more than 15 per centrum of the aggregate mortgage
cluding a unit in a condominium project) which will be the prin-
amounts approved in appropriation Acts may be allocated with re-
cipal residence of the mortgagor, or a two-family unit where one of
spect to dwelling units with appraised values in excess of $38,000.
the units will be principal residence of the mortgagor, or which
covers a cooperative housing project where all of the units will be
LIMITATIONS
the principal residences of its members; and (B) which covers
housing where the appraised value of the unit (or the average
SEC. 110. (a) If a family assisted under section 104 or 106 sells the
appraised value per unit in the case of a cooperative housing
property for which assistance was granted within 4 years from the date
project) does not exceed $38,000, or $42,000 in high cost areas as
of execution of the mortgage on such property, there shall become due
determined by the Secretary, or $48,000 in Alaska, Hawaii, and
and payable to the Secretary, by the family assisted at a time set by
Guam.
the Secretary, an amount equal to the lesser of (1) the full amount of
AUTHORIZATION
the assistance received under section 104 or 106, as the case may be; or
(2) the amount of the gain realized on the sale after adding the cost of
Sec. 108. (a) The aggregate amount of mortgages assisted under this
any improvements provided by the mortgagor to the original sales
title shall not exceed amounts approved in appropriation Acts, and in
price and deducting any selling expenses. If such property is sold more
'no event shall such amount exceed $12,000,000,000.
than 4 years but less than 5 years from the date of execution of the
(b) There are authorized to be appropriated such sums as may be
mortgage, 75 per centum of the amount payable in accordance with
necessary to carry out the provisions of this title, including such sums
the first sentence of this subsection shall be repayable. If such property
6
7
is sold more than 5 years but less than 6 years from the date of execu-
authorized by this title, except that such statement by the holder
tion of the mortgage, 50 per centum of the amount payable in accord-
of the mortgage may be waived by the Secretary if in his judg-
ance with the first sentence of this subsection shall be repayable. If such
ment such waiver would further the purposes of this title;
property is sold more than 6 years but less than 7 years from the date
(3) payments under the mortgage have been delinquent for at
of execution of the mortgage, 25 per centum of the amount payable in
least 2 months;
accordance with the first sentence of this subsection shall be repayable.
(4) the mortgagor has incurred a substantial reduction in in-
There should be no repayment if the property is sold by the family
come as a result of involuntary unemployment or underemploy-
after 7 years, or if the family purchases or constructs a new principal
ment due to adverse economic conditions and is financially unable
residence within the applicable time period prescribed in section 1034
to make the full mortgage payments;
of the Internal Revenue Code of 1954.
(5) there is a reasonable prospect that the mortgagor will be
(b) A mortgagor is not eligible both for a credit against income
able to make the adjustments necessary for a full resumption of
tax for the purchase of a home under section 44 of the Internal Reve-
mortgage payments; and
nue Code of 1954 and for assistance under this title.
(6) the mortgaged property is the principal residence of the
(c) A commitment to purchase a mortgage issued by the Associa-
mortgagor.
tion pursuant to the provisions of any other law shall not be exchanged
As used in this title, the term "mortgaged property" includes, but is
or credited in any way to the purchase of a commitment pursuant to
not limited to, property owned in fee simple, condominium units,
this title.
mobile homes, or multiunit dwellings.
(d) A mortgage purchased under section 105 may not be assumed
(c) Mortgage relief payments on behalf of a homeowner may be
except by a middle-income family.
in an amount up to the amount of the principal, interest, taxes, ground
rents, hazard insurance, and mortgage insurance premiums due under
ENERGY CONSERVATION
the mortgage, but such payments shall not exceed the lesser of $250
per month or the amount determined to be reasonably necessary to
SEC. 111. In, making financial assistance available under this title,
supplement such amount as the homeowner is capable of contributing
the Secretary shall take appropriate steps to encourage the construc-
toward such mortgage payment.
tion or sale of dwelling units which he determines will contribute to
(d) Mortgage relief payments may be made by the Secretary for
the conservation of land and energy resources because of their design
up to 12 months, and may be extended once for up to 12 additional
or their location in clusters or projects or otherwise.
months. The Secretary shall require the mortgagor to report any in-
crease in income which will permit a reduction or termination of
EXPIRATION DATE
mortgage relief payments during this period.
SEC. 112. fter June 30, 1976, no interest reduction payments, mort-
(e) Mortgage relief payments made under this title shall be repay-
gage purchases, or home purchase incentive payments shall be made
able by the homeowner upon such terms and conditions as the Secre-
under this title except pursuant to contracts or commitments entered
tary shall prescribe, except that interest on such payments shall not
into on or before such date.
exceed 8 per centrum per annum. Interest shall not begin to accrue
until after the last payment made by the Secretary in behalf of the
TITLE II-EMERGENCY MORTGAGE RELIEF
homeowner. The Secretary may defer repayment of the mortgage re-
PAYMENTS
lief payments until the disposition of the property or the completion
of the period of amortization for the mortgage. The Secretary shall
require such security for the repayment of mortgage relief payments
HOMEOWNERS RELIEF
as he deems appropriate and may secure such repayment by a lien on
SEC. 201. (α) The Secretary of Housing and Urban Development
the mortgaged property. The Secretary may make such delegations
(hereinafter referred to as the "Secretary") is authorized to make
and accept such certifications with respect to the processing of mort-
repayable emergency mortgage relief payments on behalf of home-
gage relief payments as he deems appropriate to facilitate the prompt
owners who are delinquent in their mortgage payments.
and efficient implementation of the assistance program authorized by
(b) Emergency mortgage relief payments shall not be approved
this title.
with respect to any mortgage unless—
NOTIFICATION
(1) the holder of the mortgage has indicated to the mortgagor
its intention to foreclose;
SEC. 202. Until 2 years from the date of enactment of this Act, each
(2) the mortgagor and holder of the mortgage have indicated
Federal supervisory agency, with respect to financial institutions
in writing to the Secretary and to any agency or department of
subject to its jurisdiction, and the Secretary, with respect to other
the Federal Government responsible for the regulation of the
approved mortgagees, shall (1) take appropriate action, not incon-
holder that circumstances (such as the volume of delinquent loans
sistent with laws relating to the safety or soundness of such in-
in its portfolio) make it probable that there will be a foreclosure
stitutions or mortgagees, as the case may be, to waive or relax limita-
and that the mortgagor is in need of emergency mortgage relief
tions pertaining to the operations of such institutions or mortgagees
8
9
with respect to mortgage delinquencies in order to cause or encourage
SEC. 304. The fourth sentence of section (c) of the United States
forebearance in residential mortgage loan foreclosures, and (2) re-
Housing Act of 1937 is amended-
quest each such institution or mortgagee to notify that Federal super-
(1) by inserting "(1)" after "except that"; and
visory agency, the Secretary, and the mortgagor, at least 30 days prior
(2) by inserting before the period at the end thereof a comma
to instituting foreclosure proceedings in connection with any mortgage
and the following: "and (2) after the date of enactment of the
loan. A8 used in this section the term "Federal supervisory agency"
Emergency Housing Act of 1975, none of the funds made avail-
means the Board of Governors of the Federal Reserve System, the
able under this sentence shall be used to fulfill any outstanding
Board of Directors of the Federal Deposit Insurance Corporation, the
commitments entered into prior to such date under any memo-
Comptroller of the Currency, the Federal Home Loan Bank Board,
randa of understanding among the Departments of Housing and
the Federal Savings and Loan Insurance Corporation, and the Na-
Urban Development, Interior, and Health, Education, and
tional Credit Union Administration.
Welfare".
SEC. 305. Section (1) of the National Housing Act is amended
AUTHORIZATION AND EXPIRATION DATE
by striking out "one year" the second time it appears and inserting in
lieu thereof "nineteen months".
SEC. 203. (a) There are authorized to be appropriated for purposes
SEC. 306. Section 236 of the National Housing Act is hereby amended
of this title not to exceed $500,000,000. Any amounts 80 appropriated
by adding at the end thereof a new subsection as follows:
shall remain available until expended.
(q) With respect to mortgages financed under State or local pro-
(b) Mortgage relief payments shall not be made after July 1, 1976,
grams which are not insured under this section but which are receiving
except with respect to mortgagors receiving the benefit of payments
the benefits of this section as provided in subsection (b) hereof, and
on such date.
whenever the Secretary determines that such action is necessary to
REPORTS
assist in maintaining the financial viability of a State or local agency
SEC. 204. Within 60 days after enactment of this title and within
providing such financing, the rental charge and percentage of income
each 60-day period thereafter prior to July 1, 1976, the Secretary shall
payable by the tenant as specified in subsection (i) (2), shall not be
make a report to the Congress on (1) the current rate of delinquencies
applicable, and the maximum income limitations, percentage of in-
and foreclosures in the housing market areas of the country which
come, and rental to be paid by the tenant shall be fixed by the State or
should be of immediate concern if the purpose of this title is to be
local agency thereof providing the mortgage assistance, in such
achieved; (2) the extent of, and prospect for continuance of, voluntary
amounts and percentages as are found necessary by such State or local
forebearance by mortgagees in such housing market areas; (3) actions
agency to achieve the purposes of this section: Provided, That assist-
being taken by governmental agencies to encourage forebearance by
ance payments under this section may be applied only with respect to
mortgagees in such housing market areas; (4) actions taken and actions
tenants whose incomes do not exceed the median family income for the
likely to be taken with respect to making assistance under this title
area, as determined by the State or local agency with adjustments for
available to alleviate hardships resulting from any serious rates of
smaller and larger families. The tenants shall pay no less than the basic
delinquencies and foreclosures; and (5) the current default status and
rental charge or such greater amount as the State or local agency deter-
projected default trends with respect to mortgages covering multi-
mines is necessary for the economic feasibility of the project, not ex-
family properties with special attention to mortgages insured under
ceeding the fair market rental charge, and no less than 20 per centum
the various provisions of the National Housing Act and with recom-
of the tenant's income. Any tenants occupying such units prior to any
mendations on how such defaults and prospective defaults may be
modification in the rental charge approved by the State or local agency
cured or avoided in a manner which, while giving weight to the finan-
as authorized herein, shall not be made liable for rental increases ex-
cial interests of the United States, takes into full consideration the
cept pursuant to the same criteria as would have been applicable under
urgent needs of the many low- and moderate-income families that cur-
the provisions of this Act prior to the effective date of this subsection.
rently occupy such multifamily properties.
The State or local agency shall report to the Secretary of Housing and
Urban Development the rental charges, income limitations and per-
TITLE III-MISCELLANEOUS
centage of income payable by the tenant and shall certify that the
charges and income limitations are the minimum amounts which can
SEC. 301. (a) Section 312 of the Housing Act of 1964 is amended
be fixed and still maintain the economic feasibility of the projects and
by striking out "one-year" and inserting in lieu thereof "three-year".
shall supply the Secretary with documentations supporting such
(b) Section 312(d) of such Act is amended by inserting "ending
certification.".
prior to July 1, 1975, and not to exceed $35,000,000 for each fiscal year
SEC. 307. Section 202(b) of the Flood Disaster Protection Act of
beginning on or after July 1, 1975, and ending prior to October 1,
1973 is amended. by inserting before the period at the end thereof a
1977," after "each fiscal year".
comma and the following: "except that the prohibition contained in
SEC. 302. The second sentence of section 5(c) of the United States
this sentence shall not apply to any loan made prior to January 1, 1976,
Housing Act of 1937 is amended by striking out "$150,000,000" and
to finance the acquisition of a previously occupied residential
inserting in lieu thereof $300,000,000".
dwelling".
Sec. 303. Section 235 (m) of the National Housing Act is amended
by striking "1976" and inserting in lieu thereof "1977".
10
SEC. 308. Section 313 of the National Housing Act is amended by
adding the following new subsection at the end thereof:
(h) Notwithstanding the provisions of subsection (b), the Associa-
tion may make commitments to purchase, and may service, sell
(with or without recourse), or otherwise deal in, a mortgage which
JOINT EXPLANATORY STATEMENT OF THE
covers more than four-family residences (including cooperative
COMMITTEE OF CONFERENCE
or condominium projects), or a single-family unit in a condominium,
and which is not insured under the National Housing Act or guaran-
The managers on the part of the House and the Senate at the con-
teed under chapter 37 of title 38, United States Code, if-
ference on the disagreeing votes of the two Houses on the amendment
(1) in the case of a project mortgage, the principal obligation
of the Senate to the bill (H.R. 4485) to provide for greater home-
of the mortgage does not exceed, for that part of the property
ownership opportunities for middle-income families and to encourage
attributable to dwelling use, the lesser of (4) the per unit amount
more efficient use of land and energy resources, submit the following
specified in subsection (b) (B), or (B) the per unit limitations
joint statement to the House and the Senate in explanation of the
specified in section 207 of this Act in the case of a rental project,
effect of the action agreed-upon by the managers and recommended in
or section 213 of this Act in a case of a cooperative project, or
the accompanying conference report:
section 234 in the case of α condominium project;
The Senate amendment struck out all of the House bill after the
(2) in the case of a mortgage covering a housing project, the
enacting clause and inserted a substitute text.
outstanding principal balance of the mortgage does not exceed
The House recedes from its disagreement to the amendment of the
75 per centrum of the value of the property securing such mortgage
Senate with an amendment which is a substitute for the House bill
or is insured by a qualified private insurer or public benefit cor-
and the Senate amendment. The differences between the House bills,
poration created by the State which acts as an insurer as deter-
the Senate amendment, and the substitute agreed to in conference
mined by the Association;
are noted below, except for clerical corrections, conforming changes
(3) in the case of a mortgage covering an individual condo-
made necessary by agreements reached by the conferees, and minor
minium unit, the mortgage is insured by a qualified private insurer
drafting and clarifying changes.
or public benefit corporation created by the State which acts as
an insurer as determined by the Association or has an outstanding
I-AMENDMENTS TO THE EMERGENCY HOME PURCHASE ASSISTANCE
principal balance which does not exceed 80 per centum of the value
AcT OF 1974
of the property securing the mortgage;
"(4) the mortgage is not being used to finance the conversion
Triggering Procedure for Activating and Deactivating Special Hous-
of an existing rental housing project into a condominium project
ing Assistance
or to finance the purchase of an individual unit in a condominium
The Senate amendment contained a provision not in the House bill
project in connection with the conversion of such project from
providing for an automatic triggering procedure to activate and de-
rental to condominium form of ownership; and
activate a housing assistance program designed to provide mortgage
(5) the mortgage meets the requirements of subsection (b) ex-
credit at reasonable interest rates through the use of Federal credit
cept as modified by this subsection and any additional require-
facilities during periods of low construction activity. The Senate
ments the Secretary may prescribe to protect the interest of the
amendment provided for the activation of this program whenever
United States or to protect consumers.".
housing starts fell below an average annual rate of 1.6 million units
And the Senate agree to the same.
over a period of 4 consecutive months and for deactivation of the pro-
HENRY S. REUSS,
gram whenever housing starts exceeded 1.6 million units for 4 consecu-
WILLIAM A. BARRETT,
tive months. The conference report does not contain this Senate pro-
WILLIAM S. MOORHEAD,
vision. The conferees agreed that a counter-cyclical housing program is
FERNAND J. ST GERMAIN,
worthy of further consideration by the Congress as a separate legisla-
PARREN MITCHELL,
tive measure.
LES AUCOIN,
Interest Rate on Assisted Mortgages
Managers on the Part of the House.
The Senate amendment contained a provision not in the House bill
WILLIAM PROXMIRE,
establishing the maximum interest rate on mortgages assisted at the
JOHN SPARKMAN,
lower of 8 percent or the maximum interest rate prescribed for FHA-
HARRISON A. WILLIAMS,
insured mortgages. The conference report does not contain this Senate
THOMAS J. MCINTYRE,
provision.
ALAN CRANSTON,
EDWARD W. BROOKE,
Limitation on Points
BoB PACKWOOD,
The Senate amendment contained a provision not in the House bill
M anagers on the Part of the Senate.
prohibiting mortgagees from charging any points, discounts, or similar
(11)
12
13
fees other than a loan origination fee not in excess of 1 percent of the
mortgage amount in connection with mortgages assisted under the
also contained a finding that a large inventory of unsold new homes
Emergency Home Purchase Assistance Act of 1974. The conference
existed and was discouraging new construction. The Senate amend-
report does not contain this Senate provision.
ment contained neither finding. The conference report contains the
Fees Charged by GNMA
House finding dealing with the high cost of land and fuel.
The Senate amendment contained a provision not in the House bill
TYPES OF SUBSIDY
limiting the fees which could be charged by GNMA in connection with
the purchase of mortgages or the guarantee of mortgage-backed securi-
Interest Reduction Payments
ties to 1 percent of the amount of mortgage or the amount of the
The House bill provided that interest reduction payments equal the
securities. The conference report does not contain this Senate provision.
difference between the amount of principal, interest and any mortgage
GNMA Authority to Guarantee Mortgage-Backed Securities
insurance premium due under the mortgage and the amount of princi-
The Senate amendment contained a provision not in the House bill
pal and interest due on a 6 percent mortgage. The Senate amendment
authorizing GNMA to guarantee securities backed by mortgages eligi-
provided that the interest reduction payments were not to exceed the
ble for purchase by GNMA under the provisions of the Emergency
difference between the amount of principal and interest due under
Home Purchase Assistance Act of 1974, but which were not purchased
the mortgage and the amount of principal and interest due under a
by GNMA. The conference report does not contain this Senate
6 percent mortgage. The conference report contains the House pro-
provision.
vision.
The Senate amendment contained a provision not in the House bill
Sale of GNMA Guaranteed Securities to Federal Financing Bank
authorizing the Secretary of HUD to prescribe the maximum interest
The Senate amendment contained a provision not in the House bill
rate on a mortgage with respect to which interest reduction payments
authorizing and directing the Federal Financing Bank to purchase
were made. The conference report contains the Senate provision with
mortgage-backed securities guaranteed by GNMA at a price equal to
an amendment which requires the Secretary to approve the interest
par. The conference report does not contain this Senate provision.
rate and yield on a mortgage eligible for interest reduction payments,
Multifamily Housing
but does not require the Secretary to prescribe maximum interest rates
The Senate amendment contained a provision not in the House bill
in advance. The conferees expect that the Secretary, in determining
extending coverage of the Emergency Home Purchase Assistance Act
whether the approved mortgage interest rate or yield is reasonable,
to conventionally financed multifamily housing (rental, condominium,
will look to the current range of interest rates and yields on comparable
and cooperative housing) where the mortgage amount did not exceed
mortgages in the area.
75 percent of the value of the property or the mortgage was insured.
Home Purchase Incentive Payments
The conference report contains this Senate provision.
The Senate amendment contained a provision not in the House bill
Authorization
authorizing the Secretary to make home purchase incentive payments
The Senate amendment contained a provision not in the House bill
in the amount of $1000 to eligible home buyers to assist them in meet-
authorizing appropriations to reimburse the Federal Financing Bank
ing downpayment or closing cost requirements. The conference report
for any. losses incurred by reason of the Bank's purchase of guaran-
contains the Senate provision with amendments limiting the use of
teed mortgage-backed securities. The conference report does not con-
such certificates to meeting downpayments, making such payments
tain this Senate provision.
applicable only to newly constructed homes and prohibiting the mak-
ing of incentive payments to home buyers receiving the benefits of be-
Expiration Date
low-market-interest-rate mortgages assisted under the Emergency
The Senate amendment contains a provision not in the House bill
Home Purchase Assistance Act of 1974.
repealing the expiration date (October 18, 1975) of the Emergency
Interest Rate Differential Payments
Home Purchase Assistance Act of 1974. The conference report does
not contain this Senate provision.
The House bill contained a provision not in the Senate amendment
authorizing the Secretary to make single payments to lenders which
II. EMERGENCY MIDDLE INCOME HOUSING
originated 7 percent mortgage loans on behalf of middle-income fami-
lies in order to bring the yields on these mortgages up to a market
yield. The conference report does not contain this House provision.
FINDINGS AND PURPOSE
Purchase of Mortgages
The House bill contained the findings that the high cost of land and
The House bill contained a provision not in the Senate amendment
fuel associated with low density developments aggravated the acces-
authorizing the Secretary to purchase 7 percent mortgage loans and to
sibility of homeownership to middle-income persons. The House bill
issue and guarantee mortgage-backed securities based on these mort-
gages. The conference report contains the House provision.
14
15
ELIGIBLE PROPERTIES
1976. The Senate amendment also contained a June 30, 1976, expira-
Types of Units
tion date but required the program to be terminated sooner if private
The House bill limited subsidies to home buyers of one- to two-
housing starts averaged at least 1,400,000 units for 3 consecutive
family homes, condominium units, and units in a cooperative the con-
months. The conference report contains the House provision.
struction and rehabilitation of which was started after enactment, but
provided that up to 30 percent of the amount of assisted mortgages
III-BUILDING ENERGY CONSERVATION STANDARDS
could be made available by the Secretary for use with respect to exist-
ing nonrehabilitated units and new, unsold units the construction of
The Senate amendment contained a provision not in the House bill
which started prior to enactment. The Senate amendment provided
authorizing the Secretary of HUD to develop component performance
that assistance could be made available with respect to the same kind
standards and performance standards with respect to the thermal
efficiency of newly-constructed residential and commercial buildings.
of dwelling units if their construction was completed 12 months or less
These standards would be incorporated in State or local building
prior to the sale under the program, with an exception that not less
than 10 percent nor more than 30 percent of the units must be con-
codes and would be enforced by State or local agencies. In order
structed more than 12 months prior to their purchase under the pro-
to insure incorporation of these standards into State or local building
gam (including substantially rehabilitated units).
codes, the Senate provided grants to States and also provided sanc-
The conference report contains the House provision with 2 amend-
tions, including the withholding of Federal assistance and Federally-
ments changing 30 percent to 20 percent and making units whose con-
related mortgage credit. The conference report does not contain the
struction was started after March 26, rather than the date of enact-
Senate provision in order to permit the House to act on energy con-
ment, eligible for assistance without restriction.
servation measures now pending in Committee.
Limits on Appraised Value of Units
IV-MISCELLANEOUS
The House bill limited the appraised value of eligible units to $42,-
000 in high cost areas and $48,000 in Alaska, Hawaii, and Guam and
REHABILITATION LOAN PROGRAM
further limited homes with values in excess of the basic $38,000 limit
The Senate amendment contained a provision not in the House bill
to 10 percent of assisted mortgage amounts. The Senate amendment
authorizing the extension of the section 312 rehabilitation loan pro-
limited the appraised value of eligible units to $48,000 in high cost
gram from August 22, 1975, until September 30, 1978, and authorizing
areas and $56,000 in Alaska, Hawaii, and Guam. The conference re-
$150 million a year, with certain provisions relative to Treasury
port contains the House provision with an amendment raising 10 per-
financing and interest rates. The conference report contains the Senate
cent to 15 percent.
provision with amendments extending the program two years (until
SELECTION OF TYPE OF SUBSIDY
August 22, 1977), reducing the authorization from $150 million a year
The House bill gave to lending institutions the choice as to the type
to $35 million for each of the two years, and deleting the provisions
of subsidy that would be made available to home buyers. The House
relating to Treasury financing and interest rates.
bill also provided that subsidies-would be allocated to lending institu-
tions who would apply to HUD for these subsidies. The Senate amend-
PUBLIC HOUSING AUTHORIZATION
ment gave to eligible home buyers the choice as to which of the subsidy
The Senate amendment contained a provision not in the House bill
approaches he would receive. The conference report provides that the
increasing the set-aside of contract authority for projects to be owned
Secretary take appropriate steps to give to the eligible home buyers the
by public housing agencies from $150 million to $450 million. The
choice to the maximum extent practicable as to the type of subsidy the
conference report contains the Senate amendment with an amend-
home buyer will receive.
ment reducing the set-side from $450 million to $300 million. The
conferees expect that funds for the increased set-aside will not be
RECAPTURE OF SUBSIDY
transferred from allocations already made to State agencies.
The Senate amendment contained a provision not in the House bill
exempting the obligation of the homeowner to repay the amount of
HOMEOWNERSHIP ASSISTANCE
the subsidy if the home were sold within 7 years or if the homeowner
purchased another home within 18 months. The conference report con-
The Senate amendment contained a provision not in the House bill.
tains this Senate provision.
extending the section 235 homeownership assistance program for one
year, until July 1, 1977, and extending the period during which im-
EXPIRATION DATE
pounded funds (approximately $270 million) could be used from
August 22, 1975, until July 1, 1977. The conference report contains
The House bill contained a provision providing that no new commit-
ments or contracts for assistance could be entered into after June 30,
16
17
the one-year extension of the program to July 1, 1977, the same date
less than 20 percent of the tenant's income. The conference report
for other FHA programs, but does not include the provision extend-
contains the Senate provision with minor modifications in language.
ing the period during which the impounded funds could be used. The
The conferees intend to limit the use of this provision to situations
conferees did not include an extension of the period for utilizing the
such as that which currently exists in the State of New York.
impounded funds because of uncertainties about the effect this exten-
sion would have on the Congressional budget process.
FLOOD INSURANCE
PUBLIC HOUSING AND ELDERLY HOUSING PROCESSING
The Senate amendment contained a provision not in the House bill
extending from July 1, 1975, until January 1, 1976, the date on which
The Senate amendment contained provisions not in the House bill
Federal financial assistance would be denied to flood-prone areas un-
requiring HUD to process all public housing and all section 202
less the community were participating in the National Flood Insurance
housing for the elderly project applications during distinct periods
Program. The conference report retains the prohibition in existing
not exceeding 75 days. The conference report does not contain these
law but authorizes a 6-month extension until January 1, 1976, of the
Senate provisions. The conferees believe that this rigid processing
prohibition against the making of loans by Federally-supervised
requirement could do more harm to the efficient implementation of the
lending institutions to finance the acquisition of a previously occupied
programs than good, but strongly urge the Secretary of HUD to take
residential dwelling.
all steps to minimize the time for processing housing assistance
applications.
V-EMERGENCY MORTGAGE RELIEF PAYMENTS
INDIAN HOUSING
The Senate amendment contained a provision not in the House bill
The Senate amendment contained a provision not in the House bill
authorizing the Secretary of HUD to make repayable mortgage relief
providing that none of the public housing funds set aside for Indian
payments to homeowners whose incomes have been substantially re-
housing in the 1974 Housing and Community Development Act could
duced because of involuntary unemployment or underemployment due
be used by the HUD Secretary for prior commitments to financing
to current adverse economic conditions, and who therefore cannot
public housing for the Indians. The conference report contains this
make full mortgage payments. The conference report contains these
Senate provision.
Senate provisions with the following amendments:
SUBSIDIZED SUPPLEMENTAL LOANS
AMOUNT OF PAYMENTS
The Senate amendment contained a provision not in the House bill
The Senate amendment limited the amount of the monthly mort-
authorizing HUD to make interest reduction payments with respect to
gage relief payment on behalf of any homeowner to $300. The con-
certain supplemental project improvement loans made pursuant to
ference report limits this payment to $250 a month.
section 241 of the National Housing Act. The conference report does
not contain this Senate provision.
LENGTH OF PAYMENTS
DEFECTS IN FHA-INSURED HOUSING
The Senate amendment authorized the Secretary to make payments
up to 18 months with one extension for up to another 18 months. The
The Senate amendment contained a provision not in the House bill
conference report reduces the maximum period during which pay-
extending by seven months the period during which owners of FHA-
ments can be made to 12 months, with one extension for another 12
insured houses which have serious structural defects could request
months.
assistance from the HUD Secretary to repair such defects under
AUTHORIZATION OF APPROPRIATIONS
authority of section 518 (b) of the National Housing Act. The con-
ference report contains this Senate provision.
The Senate amendment authorized appropriation of $750 million
to finance the program. The conference report contains an authoriza-
STATE-FINANCED HOUSING PROJECTS
tion of $500 million.
ELIGIBLE PROPERTY
The Senate amendment contained a provision not in the House bill
authorizing HUD to permit certain State housing agencies to raise
The Senate amendment authorized relief payments to be made to
the income limits for eligibility for admission to non-FHA insured,
owners of houseboats. The conference report does not contain this
State-assisted 236 projects and to vary rent-to-income ratios to not
Senate provision.
18
NOTIFICATION TO MORTGAGOR
The Senate amendment required the Secretary of HUD to notify
mortgagors threatened with foreclosure of the availability of assistance
under this program. The conference report does not contain this
Senate provision.
HENRY S. REUSS,
WILLIAM A. BARRETT,
WILLIAM S. MOORHEAD,
FERNAND J. ST GERMAIN,
PARREN MITCHELL,
LES AUCOIN,
Managers on the Part of the House.
WILLIAM PROXMIRE,
JOHN SPARKMAN,
HARRISON A. WILLIAMS,
THOMAS J. MCINTYRE,
ALAN CRANSTON,
EDWARD W. BROOKE,
BOB PACKWOOD,
M anagers on the Part of the Senate.
94TH CONGRESS
-
SENATE
REPORT
1st Session
No. 94-161
EMERGENCY HOUSING ACT OF 1975
MAY 22, 1975.-Ordered to be printed
Mr. PROXMIRE, from the committee of conference,
submitted the following
FORD i LIBRARY GERALD
CONFERENCE REPORT
[To accompany H.R. 4485]
The committee of conference on the disagreeing votes of the two
Houses on the amendment of the Senate to the bill (H.R. 4485) to
provide for greater homeownership opportunities for middle-income
families and to encourage more efficient use of land and energy
resources, having met, after full and free conference, have agreed to
recommend and do recommend to their respective Houses as follows:
That the House recede from its disagreement to the amendment of
the Senate and agree to the same with an amendment as follows:
In lieu of the matter proposed to be inserted by the Senate amend-
ment insert the following:
SHORT TITLE
SECTION 1. This Act may be cited as the "Emergency Housing Act
of 1975".
TITLE I-EMERGENCY MIDDLE-INCOME HOUSING
SHORT TITLE
SEC. 101. This title may be cited as the "Emergency Middle-Income
Housing Act of 1975".
FINDINGS AND PURPOSE
SEC. 102. (a) The Congress finds that—
(1) many families of middle income cannot afford to purchase
homes at current prices and high interest rates;
(2) the decline in the home purchasing power of middle-in-
come families has contributed to the severe economic recession of
the building industry and those industries dependent upon the
building industry;
38-010
0
2
3
(3) the sharp decline in housing starts jeopardizes the attain-
obligation of, and paid by, the Secretary and to be applied in their
ment of an adequate housing stock in the years ahead; and
entirety toward the payment of the interest due under a mortgage.
(4) the accessibility of homeownership to middle-income per-
sons is further aggravated by the high costs of land and fuel as-
PURCHASE OF MORTGAGES
sociated with low-density development.
(b) It is the purpose of this title to reduce high mortgage interest
SEC. 105. (a) The Association shall purchase, or commit to pur-
costs to middle-income families, to stimulate employment in the home-
chase, a home mortgage pursuant to this title at a price equal to par.
building industry during the current emergency period, and to encour-
The interest rate on such a mortgage shall not exceed my per centum
age land and energy conservation, where appropriate, to reduce fur-
per annum. The Association is authorized to service, sell, or other-
ther the costs of homeownership.
wise deal in mortgages purchased pursuant to this title.
(b) A home mortgage which is not insured under the National
TEMPORARY HOMEOWNERSHIP ASSISTANCE AUTHORITY
Housing Act or insured or guaranteed under chapter 37 of title 38,
United States Code, shall not be purchased by the Association unless
SEC. 103. The Secretary of Housing and Urban Development (here-
either (1) the outstanding principal balance of the mortgage does not
inafter referred to as the "Secretary") is authorized to provide finan-
exceed 80 per centum of the value of the property securing the mort-
cial assistance with regard to home mortgages for middle-income
gage, or (2) the mortgage is insured by a qualified insurer as deter-
families-
mined by the Association.
(1) by making, and contracting to make, periodic interest re-
(c) The Association may issue to the Secretary of the Treasury its
duction payments, as described in section 104;
obligations in an amount outstanding at any one time sufficient to
(2) by purchasing and committing to purchase, below-market-
enable the Association to carry out its functions under this section.
interest-rate mortgages, through the facilities of the Government
Each such obligation shall mature at such time and be redeemable at
National Mortgage Association (hereinafter referred to as the
the option of the Association in such manner as may be determined
"Association"), as descibed in section 105; and
by the Association, and shall bear interest at a rate determined by the
(3) by making, and contracting to make, home purchase incen-
Secretary of the Treasury, taking into consideration the current aver-
tive payments, as described in section 106.
age yield on outstanding marketable obligations of the United States
of comparable maturities during the month preceding the issuance of
INTEREST REDUCTION PAYMENTS
the obligation of the Association. The Secretary of the Treasury is
SEC. 104. (a) Interest reduction payments made on behalf of middle-
authorized and directed to purchase any obligations of the Association
income families shall equal the difference between the amount of
issued under this section, and for such purposes the Secretary of the
principal, interest, and any mortgage insurance premium due under
Treasury is authorized to use as a public debt transaction the proceeds
a home mortgage, and the amount of principal and interest which
from the sale of any securities issued under the Second Liberty Bond
would be due if the home mortgage were to bear interest at the rate of
Act, as now or hereafter in force, and the purposes for which securities
6 per centum per annum. Interest reduction payments may be made
may be issued under the Second Liberty Bond Act, as now or hereafter
only with respect to home mortgages bearing interest rates and yields
in force, are extended to include any purchase of the Association's
approved by the Secretary as being reasonable.
obligations hereunder.
(b) Interest reduction payments may be made with respect to any
(d) (1) The Association is authorized to guarantee securities based
dwelling unit only for such period as the family on whose behalf the
on pools or trusts of the mortgages which the Association purchases
payments are made occupies the dwelling unit. Such payments shall
or commits to purchase under this title as provided in section 306(g)
be made in the full amount provided for in subsection (a) for the first
of the National Housing Act with respect to federally insured or
3 years during which a family occupies a dwelling unit, 75 per centum
guaranteed mortgages and to act as issuer of such guaranteed secu-
rities. The Association shall possess with respect to securities under
of such amount in the fourth year, 50 per centum of such amount in
this section all the powers it posseses with respect to securities guar-
the fifth year, and 25 per centum of such amount in the sixth year.
anteed under such section 306 (g), and the provisions of such section
No interest reduction payments shall be made after such sixth year.
(c) Interest reduction payments on behalf of an occupant of a co-
shall apply to guarantees pursuant to this section.
operative housing project shall be in amounts computed on the basis
(2) The Association may offer and sell any securities guaranteed
pursuant to this section to the Federal Financing Bank, and such
of the formula set forth in subsection (a) applying the cooperative
Bank is authorized to purchase any securities 80 offered. The Asso-
member's proportionate share of the obligations under the project
ciation may also offer and sell any such guaranteed securities to any
mortgage to the items specified in the formula.
Federal Reserve bank. The proceeds from the sale of such securities
(d) For purposes of chapter I of the Internal Revenue Code of
when issued by the Association shall be treated in the accounts in the
1954, the payments described in this section shall be deemed to be an
same manner as if such proceeds were from the'sale of the underlying
mortgages.
4
5
HOME PURCHASE INCENTIVE PAYMENTS
as may be necessary to make the interest reduction payments and the
SEC. 106. (a) The amount of a home purchase incentive payment
home purchase incentive payments under contracts entered into under
this title.
shall be $1,000.
(b) The Secretary's obligation to make a home purchase incentive
(c) The aggregate amount of contracts to make interest reduction
payment shall be evidenced by a certificate containing the name of the
payments under section 104 shall not exceed amounts approved in
purchaser, a description of the property, and such other information
appropriation Acts, and payments pursuant to such contracts shall
as the Secretary by regulation may prescribe. The face amount of the
not exceed $300,000,000 per annum.
certificate shall be applied to the downpayment made in connection
(d) The aggregate amount of mortgages purchased by the Associa-
with the purchase. Any person who acquires a certificate issued pur-
tion under section 105 shall not exceed amounts approved in appropri-
suant to this title may present such certificate to the Secretary who
ation Acts, and the aggregate amount of such mortgages shall not
shall pay in full the face amount indicated on the certificate.
exceed $12,000,000,000.
(c) (1) Notwithstanding any other provision of this title, a home
(e) The aggregate amount of contracts to make home purchase in-
purchase incentive payment may be made only in connection with the
centive payments under section 106 shall not exceed amounts approved
purchase of a single-family or two-family unit or a unit in α coopera-
in appropriation Acts, and payments pursuant to such contracts shall
tive housing project, the construction of which began on or after
not exceed $400,000,000.
March 26, 1975.
(f) The Association shall not issue obligations pursuant to section
(2) A home purchase incentive payment may not be made with re-
105(c) or securities pursuant to section 105 (d) except as approved in
spect to (A) a mortgage purchased or otherwise assisted, or to be
appropriation Acts.
ALLOCATION OF ASSISTANCE
purchased or otherwise assisted, under section 313 of the National
Housing Act, or (B) any mortgage which is assisted or purchased
SEC. 109. (a) The Secretary shall allocate to applicant lenders ag-
under section 104 or 105.
gregate amounts of mortgages to be assisted. The Secretary shall
DEFINITIONS
take appropriate steps to the maximum extent practicable to assure
SEC. 107. A8 used in this title-
that assistance under this title is made available on an equitable basis
(1) The term "middle-income families" means those families
geographically.
(including single individuals) whose incomes do not exceed 120
(b) In carrying out his functions under this title and in making
per centrum of the median income for the area, as determined by
the allocations under subsection (a), the Secretary shall afford fam-
the Secretary, with adjustments for smaller or larger families,
ilies eligible for assistance under this title a choice, to the maximum
except that the Secretary may establish income ceilings higher or
extent practicable, among the programs described in sections 104, 105,
and 106
lower than 120 per centum of the median for the area on the basis
(c) Not more than 20 per centum of the aggregate mortgage
of his findings that such variations are necessary because of pre-
amounts approved in appropriation Acts may be allocated for use with
vailing levels of construction costs, wnusually high or low family
respect to existing units (other than substantially rehabilitated units)
incomes, or other factors.
and with respect to new, unsold dwelling units the construction of
(2) The term "home mortgage" means a mortgage (A) which
which commenced prior to March 26, 1975.
is executed to finance the acquisition of a single family unit (in-
(d) Not more than 15 per centum of the aggregate mortgage
cluding a unit in a condominium project) which will be the prin-
amounts approved in appropriation Acts may be allocated with re-
cipal residence of the mortgagor, or a two-family unit where one of
spect to dwelling units with appraised values in excess of $38,000.
the units will be principal residence of the mortgagor, or which
covers a cooperative housing project where all of the units will be
LIMITATIONS
the principal residences of its members; and (B) which covers
housing where the appraised value of the unit (or the average
SEC. 110. (a) If a family assisted under section 104 or 106 sells the
appraised value per unit in the case of a cooperative housing
property for which assistance was granted within 4 years from the date
project) does not exceed $38,000, or $42,000 in high cost areas as
of execution of the mortgage on such property, there shall become due
determined by the Secretary, or $48,000 in Alaska, Hawaii, and
and payable to the Secretary, by the family assisted at a time set by
Guam.
the Secretary, an amount equal to the lesser of (1) the full amount of
AUTHORIZATION
the assistance received under section 104 or 106, as the case may be; or
(2) the amount of the gain realized on the sale after adding the cost of
Sec. 108. (a) The aggregate amount of mortgages assisted under this
any improvements provided by the mortgagor to the original sales
title shall not exceed amounts approved in appropriation Acts, and in
price and deducting any selling expenses. If such property is sold more
'no event shall such amount exceed $12,000,000,000.
than 4 years but less than 5 years from the date of execution of the
(b) There are authorized to be appropriated such sums as may be
mortgage, 75 per centum of the amount payable in accordance with
necessary to carry out the provisions of this title, including such sums
the first sentence of this subsection shall be repayable. If such property
6
7
is sold more than 5 years but less than 6 years from the date of execu-
authorized by this title, except that such statement by the holder
tion of the mortgage, 50 per centum of the amount payable in accord-
of the mortgage may be waived by the Secretary if in his judg-
ance with the first sentence of this subsection shall be repayable. If such
ment such warver would further the purposes of this title;
property is sold more than 6 years but less than 7 years from the date
(3) payments under the mortgage have been delinquent for at
of execution of the mortgage, 25 per centrum of the amount payable in
least 2 months;
accordance with the first sentence of this subsection shall be repayable.
(4) the mortgagor has incurred a substantial reduction in in-
There should be no repayment if the property is sold by the family
come as a result of involuntary unemployment or underemploy-
after 7 years, or if the family purchases or constructs a new principal
ment due to adverse economic conditions and is financially unable
residence within the applicable time period prescribed in section 1034
to make the full mortgage payments;
of the Internal Revenue Code of 1954.
(5) there is a reasonable prospect that the mortgagor will be
(b) A mortgagor is not eligible both for a credit against income
able to make the adjustments necessary for a full resumption of
tax for the purchase of a home under section 44 of the Internal Reve-
mortgage payments; and
nue Code of 1954 and for assistance under this title.
(6) the mortgaged property is the principal residence of the
(c) A commitment to purchase a mortgage issued by the Associa-
mortgagor.
tion pursuant to the provisions of any other law shall not be exchanged
A8 used in this title, the term "mortgaged property" includes, but is
or credited in any way to the purchase of a commitment pursuant to
not limited to, property owned in fee simple, condominium units,
this title.
mobile homes, or multiunit dwellings.
(d) A mortgage purchased under section 105 may not be assumed
(c) Mortgage relief payments on behalf of a homeowner may be
except by a middle-income family.
in an amount up to the amount of the principal, interest, taxes, ground
rents, hazard insurance, and mortgage insurance premiums due under
ENERGY CONSERVATION
the mortgage, but such payments shall not exceed the lesser of $250
per month or the amount determined to be reasonably necessary to
SEC. 111. In making financial assistance available under this title,
supplement such amount as the homeowner is capable of contributing
the Secretary shall take appropriate steps to encourage the construc-
toward such mortgage payment.
tion or sale of dwelling units which he determines will contribute to
(d) Mortgage relief payments may be made by the Secretary for
the conservation of land and energy resources because of their design
up to 12 months, and may be extended once for up to 12 additional
or their location in clusters or projects or otherwise.
months. The Secretary shall require the mortgagor to report any in-
crease in income which will permit a reduction or termination of
EXPIRATION DATE
mortgage relief payments during this period.
(e) Mortgage relief payments made under this title shall be repay-
SEC. 112. After June 30, 1976, no interest reduction payments, mort-
able by the homeowner upon such terms and conditions as the Secre-
gage purchases, or home purchase incentive payments shall be made
tary shall prescribe, except that interest on such payments shall not
under this title except pursuant to contracts or commitments entered
exceed 8 per centrum per annum. Interest shall not begin to accrue
into on or before such date.
until after the last payment made by the Secretary in behalf of the
TITLE II-EMERGENCY MORTGAGE RELIEF
homeowner. The Secretary may defer repayment of the mortgage re-
lief payments until the disposition of the property or the completion
PAYMENTS
of the period of amortization for the mortgage. The Secretary shall
require such security for the repayment of mortgage relief payments
HOMEOWNERS RELIEF
as he deems appropriate and may secure such repayment by a lien on
SEC. 201. (α) The Secretary of Housing and Urban Development
the mortgaged property. The Secretary may make such delegations
(hereinafter referred to as the "Secretary") is authorized to make
and accept such certifications with respect to the processing of mort-
repayable emergency mortgage relief payments on behalf of home-
gage relief payments as he deems appropriate to facilitate the prompt
owners who are delinquent in their mortgage payments.
and efficient implementation of the assistance program authorized by
this title.
(b) Emergency mortgage relief payments shall not be approved
NOTIFICATION
with respect to any mortgage unless--
(1) the holder of the mortgage has indicated to the mortgagor
SEC. 202. Until 2 years from the date of enactment of this Act, each
its intention to foreclose;
Federal supervisory agency, with respect to financial institutions
(2) the mortgagor and holder of the mortgage have indicated
subject to its jurisdiction, and the Secretary, with respect to other
in writing to the Secretary and to any agency or department of
approved mortgagees, shall (1) take appropriate action, not incon-
the Federal Government responsible for the regulation of the
sistent with laws relating to the safety or soundness of such in-
holder that circumstances (such as the volume of delinquent loans
stitutions or mortgagees, as the case may be, to waive or relax limita-
in its portfolio) make it probable that there will be a foreclosure
tions pertaining to the operations of such institutions or mortgagees
and that the mortgagor is in need of emergency mortgage relief
8
9
with respect to mortgage delinquencies in order to cause or encourage
SEC. 304. The fourth sentence of section (c) of the United States
forebearance in residential mortgage loan foreclosures, and (2) re-
Housing Act of 1937 is amended-
quest each such institution or mortgagee to notify that Federal super-
(1) by inserting "(1)" after "except that"; and
visory agency, the Secretary, and the mortgagor, at least 30 days prior
(2) by inserting before the period at the end thereof a comma
to instituting foreclosure proceedings in connection with any mortgage
and the following: "and (2) after the date of enactment of the
loan. As used in this section the term "Federal supervisory agency"
Emergency Housing Act of 1975, none of the funds made avail-
means the Board of Governors of the Federal Reserve System, the
able under this sentence shall be used to fulfill any outstanding
Board of Directors of the Federal Deposit Insurance Corporation, the
commitments entered into prior to such date under any memo-
Comptroller of the Currency, the Federal Home Loan Bank Board,
randa of understanding among the Departments of Housing and
the Federal Savings and Loan Insurance Corporation, and the Na-
Urban Development, Interior, and Health, Education, and
tional Credit Union Administration.
Welfare".
SEC. 305. Section (1) of the National Housing Act is amended
AUTHORIZATION AND EXPIRATION DATE
by striking out "one year" the second time it appears and inserting in
SEC. 203. (a) There are authorized to be appropriated for purposes
lieu thereof "nineteen months".
of this title not to exceed $500,000,000. Any amounts so appropriated
SEC. 306. Section 236 of the National Housing Act is hereby amended
shall remain available until expended.
by adding at the end thereof a new subsection as follows:
(b) Mortgage relief payments shall not be made after July 1, 1976,
(q) With respect to mortgages financed under State or local pro-
except with respect to mortgagors receiving the benefit of payments
grams which are not insured under this section but which are receiving
on such date.
the benefits of this section as provided in subsection (b) hereof, and
whenever the Secretary determines that such action is necessary to
REPORTS
assist in maintaining the financial viability of a State or local agency
SEC. 204. Within 60 days after enactment of this title and within
providing such financing, the rental charge and percentage of income
each 60-day period thereafter prior to July 1, 1976, the Secretary shall
payable by the tenant as specified in subsection (i) (2), shall not be
make a report to the Congress on (1) the current rate of delinquencies
applicable, and the maximum income limitations, percentage of in-
and foreclosures in the housing market areas of the country which
come, and rental to be paid by the tenant shall be fixed by the State or
should be of immediate concern if the purpose of this title is to be
local agency thereof providing the mortgage assistance, in such
achieved; (2) the extent of, and prospect for continuance of, voluntary
amounts and percentages as are found necessary by such State or local
forebearance by mortgagees in such housing market areas; (3) actions
agency to achieve the purposes of this section: Provided, That assist-
being taken by governmental agencies to encourage forebearance by
ance payments under this section may be applied only with respect to
mortgagees in such housing market areas; (4) actions taken and actions
tenants whose incomes do not exceed the median family income for the
likely to be taken with respect to making assistance under this title
area, as determined by the State or local agency with adjustments for
available to alleviate hardships resulting from any serious rates of
smaller and larger families. The tenants shall pay no less than the basic
delinquencies and foreclosures; and (5) the current default status and
rental charge or such greater amount as the State or local agency deter-
projected default trends with respect to mortgages covering multi-
mines is necessary for the economic feasibility of the project, not ex-
family properties with special attention to mortgages insured under
ceeding the fair market rental charge, and no less than 20 per centum
the various provisions of the National Housing Act and with recom-
of the tenant's income. Any tenants occupying such units prior to any
mendations on how such defaults and prospective defaults may be
modification in the rental charge approved by the State or local agency
cured or avoided in a manner which, while giving weight to the finan-
as authorized herein, shall not be made liable for rental increases ex-
cial interests of the United States, takes into full consideration the
cept pursuant to the same criteria as would have been applicable under
urgent needs of the many low- and moderate-income families that cur-
the provisions of this Act prior to the effective date of this subsection.
rently occupy such multifamily properties.
The State or local agency shall report to the Secretary of Housing and
Urban Development the rental charges, income limitations and per-
TITLE III-MISCELLANEOUS
centage of income payable by the tenant and shall certify that the
charges and income limitations are the minimum amounts which can
SEC. 301. (a) Section 312(h) of the Housing Act of 1964 is amended
be fixed and still maintain the economic feasibility of the projects and
by striking out "one-year" and inserting in lieu thereof "three-year".
shall supply the Secretary with documentations supporting such
(b) Section 312(d) of such Act is amended by inserting "ending
certification.".
prior to July 1, 1975, and not to exceed $35,000,000 for each fiscal year
SEC. 307. Section of the Flood Disaster Protection Act of
beginning on or after July 1, 1975, and ending prior to October 1,
1973 is amended by inserting before the period at the end thereof a
1977," after "each fiscal year".
comma and the following: "except that the prohibition contained in
SEC. 302. The second sentence of section 5(c) of the United States
this sentence shall not apply to any loan made prior to anuary 1, 1976,
Housing Act of 1937 is amended by striking out $150,000,000" and
to finance the acquisition of a previously occupied residential
inserting in lieu thereof $300,000.000".
dwelling".
SEC. 303. Section 235 (m) of the National Housing Act is amended
by striking "1976" and inserting in lieu thereof "1977".
10
SEC. 308. Section 313 of the National Housing Act is amended by
adding the following new subsection at the end thereof:
'(h) Notwithstanding the provisions of subsection (b), the Associa-
tion may make commitments to purchase, and may service, sell
(with or without recourse), or otherwise deal in, a mortgage which
covers more than four-family residences (including cooperative
JOINT EXPLANATORY STATEMENT OF THE
or condominium projects), or a single-family unit in a condominium,
COMMITTEE OF CONFERENCE
and which is not insured under the National Housing Act or guaran-
teed under chapter 37 of title 38, United States Code, if
The managers on the part of the House and the Senate at the con-
(1) in the case of a project mortgage, the principal obligation
ference on the disagreeing votes of the two Houses on the amendment
of the mortgage does not exceed, for that part of the property
of the Senate to the bill (H.R. 4485) to provide for greater home-
attributable to dwelling use, the lesser of (A) the per unit amount
ownership opportunities for middle-income families and to encourage
specified in subsection (b) (B), or (B) the per unit limitations
more efficient use of land and energy resources, submit the following
specified in section 207 of this Act in the case of a rental project,
joint statement to the House and the Senate in explanation of the
or section 213 of this Act in a case of a cooperative project, or
effect of the action agreed upon by the managers and recommended in
section 234 in the case of a condominium project;
the accompanying conference report:
(2) in the case of a mortgage covering a housing project, the
The Senate amendment struck out all of the House bill after the
outstanding principal balance of the mortgage does not exceed
enacting clause and inserted a substitute text.
75 per centum of the value of the property securing such mortgage
The House recedes from its disagreement to the amendment of the
or is insured by a qualified private insurer or public benefit cor-
Senate with an amendment which is a substitute for the House bill
poration created by the State which acts as an insurer as deter-
and the Senate amendment. The differences between the House bills,
mined by the Association;
the Senate amendment, and the substitute agreed to in conference
(3) in the case of a mortgage covering an individual condo-
are noted below, except for clerical corrections, conforming changes
minium unit, the mortgage is insured by a qualified private insurer
made necessary by agreements reached by the conferees, and minor
or public benefit corporation created by the State which acts as
drafting and clarifying changes.
an insurer as determined by the Association or has an outstanding
principal balance which does not exceed 80 per centum of the value
I-AMENDMENTS TO THE EMERGENCY HOME PURCHASE ASSISTANCE
of the property securing the mortgage;
ACT OF 1974
'(4) the mortgage is not being used to finance the conversion
of an existing rental housing project into a condominium project
Triggering Procedure for Activating and Deactivating Special Hous-
or to finance the purchase of an individual unit in a condominium
ing Assistance
project in connection with the conversion of such project from
The Senate amendment contained a provision not in the House bill
rental to condominium form of ownership; and
providing for an automatic triggering procedure to activate and de-
(5) the mortgage meets the requirements of subsection (b) ex-
activate a housing assistance program designed to provide mortgage
cept as modified by this subsection and any additional require-
credit at reasonable interest rates through the use of Federal credit
ments the Secretary may prescribe to protect the interest of the
facilities during periods of low construction activity. The Senate
United States or to protect consumers.".
amendment provided for the activation of this program whenever
And the Senate agree to the same.
housing starts fell below an average annual rate of 1.6 million units
WILLIAM PROXMIRE,
over a period of 4 consecutive months and for deactivation of the pro-
JOHN SPARKMAN,
gram whenever housing starts exceeded 1.6 million units for 4 consecu-
HARRISON A. WILLIAMS,
tive months. The conference report does not contain this Senate pro-
THOMAS J. MCINTYRE,
vision. The conferees agreed that a counter-cyclical housing program is
ALAN CRANSTON,
worthy of further consideration by the Congress as a separate legisla-
EDWARD W. BROOKE,
tive measure.
BOB PACKWOOD,
M anagers on the Part of the Senate.
Interest Rate on Assisted Mortgages
HENRY S. REUSS,
The Senate amendment contained a provision not in the House bill
WILLIAM A. BARRETT,
establishing the maximum interest rate on mortgages assisted at the
WILLIAM S. MOORHEAD,
lower of 8 percent or the maximum interest rate prescribed for FHA-
FERNAND J. ST GERMAIN,
insured mortgages. The conference report does not contain this Senate
provision.
PARREN MITCHELL,
LES AUCOIN,
Limitation on Points
Managers on the Part of the House.
The Senate amendment contained a provision not in the House bill
prohibiting mortgagees from charging any points, discounts, or similar
(11)
12
13
fees other than a loan origination fee not in excess of 1 percent of the
also contained a finding that a large inventory of unsold new homes
mortgage amount in connection with mortgages assisted under the
existed and was discouraging new construction. The Senate amend-
Emergency Home Purchase Assistance Act of 1974. The conference
ment contained neither finding. The conference report contains the
report does not contain this Senate provision.
House finding dealing with the high cost of land and fuel.
Fees Charged by GNMA
TYPES OF SUBSIDY
The Senate amendment contained a provision not in the House bill
limiting the fees which could be charged by GNMA in connection with
Interest Reduction Payments
the purchase of mortgages or the guarantee of mortgage-backed securi-
ties to 1 percent of the amount of mortgage or the amount of the
The House bill provided that interest reduction payments equal the
securities. The conference report does not contain this Senate provision.
difference between the amount of principal, interest and any mortgage
insurance premium due under the mortgage and the amount of princi-
GNMA Authority to Guarantee Mortgage-Backed Securities
pal and interest due on a 6 percent mortgage. The Senate amendment
The Senate amendment contained a provision not in the House bill
provided that the interest reduction payments were not to exceed the
authorizing GNMA to guarantee securities backed by mortgages eligi-
difference between the amount of principal and interest due under
ble for purchase by GNMA under the provisions of the Emergency
the mortgage and the amount of principal and interest due under a
Home Purchase Assistance Act of 1974, but which were not purchased
6 percent mortgage. The conference report contains the House pro-
by GNMA. The conference report does not contain this Senate
vision.
provision.
The Senate amendment contained a provision not in the House bill
Sale of GNMA Guaranteed Securities to Federal Financing Bank
authorizing the Secretary of HUD to prescribe the maximum interest
The Senate amendment contained a provision not in the House bill
rate on a mortgage with respect to which interest reduction payments
were made. The conference report contains the Senate provision with
authorizing and directing the Federal Financing Bank to purchase
an amendment which requires the Secretary to approve the interest
mortgage-backed securities guaranteed by GNMA at a price equal to
rate and yield on a mortgage eligible for interest reduction payments,
par. The conference report does not contain this Senate provision.
but does not require the Secretary to prescribe maximum interest rates
Multifamily Housing
in advance. The conferees expect that the Secretary, in determining
The Senate amendment contained a provision not in the House bill
whether the approved mortgage interest rate or yield is reasonable,
extending coverage of the Emergency Home Purchase Assistance Act
will look to the current range of interest rates and yields on comparable
to conventionally financed multifamily housing (rental, condominium,
mortgages in the area.
and cooperative housing) where the mortgage amount did not exceed
Home Purchase Incentive Payments
75 percent of the value of the property or the mortgage was insured.
The conference report contains this Senate provision.
The Senate amendment contained a provision not in the House bill
authorizing the Secretary to make home purchase incentive payments
Authorization
in the amount of $1000 to eligible home buyers to assist them in meet-
The Senate amendment contained a provision not in the House bill
ing downpayment or closing cost requirements. The conference report
authorizing appropriations to reimburse the Federal Financing Bank
contains the Senate provision with amendments limiting the use of
for any. losses incurred by reason of the Bank's purchase of guaran-
such certificates to meeting downpayments, making such payments
teed mortgage-backed securities. The conference report does not con-
applicable only to newly constructed homes and prohibiting the mak-
tain this Senate provision.
ing of incentive payments to home buyers receiving the benefits of be-
Expiration Date
low-market-interest-rate mortgages assisted under the Emergency
Home Purchase Assistance Act of 1974.
The Senate amendment contains a provision not in the House bill
repealing the expiration date (October 18, 1975) of the Emergency
Interest Rate Differential Payments
Home Purchase Assistance Act of 1974. The conference report does
The House bill contained a provision not in the Senate amendment
not contain this Senate provision.
authorizing the Secretary to make single payments to lenders which
originated 7 percent mortgage loans on behalf of middle-income fami-
II. EMERGENCY MIDDLE INCOME HOUSING
lies in order to bring the yields on these mortgages up to a market
yield. The conference report does not contain this House provision.
FINDINGS AND PURPOSE
Purchase of Mortgages
The House bill contained the findings that the high cost of land and
The House bill contained a provision not in the Senate amendment
fuel associated with low density developments aggravated the acces-
authorizing the Secretary to purchase 7 percent mortgage loans and to
sibility of homeownership to middle-income persons. The House bill
issue and guarantee mortgage-backed securities based on these mort-
gages. The conference report contains the House provision.
14
15
ELIGIBLE PROPERTIES
1976. The Senate amendment also contained a June 30, 1976, expira-
Types of Units
tion date but required the program to be terminated sooner if private
The House bill limited subsidies to home buyers of one- to two-
housing starts averaged at least 1,400,000 units for 3 consecutive
family homes, condominium units, and units in a cooperative the con-
months. The conference report contains the House provision.
struction and rehabilitation of which was started after enactment, but
III-BUILDING ENERGY CONSERVATION STANDARDS
provided that up to 30 percent of the amount of assisted mortgages
could be made available by the Secretary for use with respect to exist-
The Senate amendment contained a provision not in the House bill
ing nonrehabilitated units and new, unsold units the construction of
authorizing the Secretary of HUD to develop component performance
which started prior to enactment. The Senate amendment provided
standards and performance standards with respect to the thermal
that assistance could be made available with respect to the same kind
efficiency of newly-constructed residential and commercial buildings.
of dwelling units if their construction was completed 12 months or less
These standards would be incorporated in State or local building
prior to the sale under the program, with an exception that not less
codes and would be enforced by State or local agencies. In order
than 10 percent nor more than 30 percent of the units must be con-
to insure incorporation of these standards into State or local building
structed more than 12 months prior to their purchase under the pro-
codes, the Senate provided grants to States and also provided sanc-
gam (including substantially rehabilitated units).
tions, including the withholding of Federal assistance and Federally-
The conference report contains the House provision with 2 amend-
related mortgage credit. The conference report does not contain the
ments changing 30 percent to 20 percent and making units whose con-
Senate provision in order to permit the House to act on energy con-
struction was started after March 26, rather than the date of enact-
servation measures now pending in Committee.
ment, eligible for assistance without restriction.
Limits on Appraised Value of Units
IV-MISCELLANEOUS
The House bill limited the appraised value of eligible units to $42,-
000 in high cost areas and $48,000 in Alaska, Hawaii, and Guam and
REHABILITATION LOAN PROGRAM
further limited homes with values in excess of the basic $38,000 limit
The Senate amendment contained a provision not in the House bill
to 10 percent of assisted mortgage amounts. The Senate amendment
authorizing the extension of the section 312 rehabilitation loan pro-
limited the appraised value of eligible units to $48,000 in high cost
gram from August 22, 1975, until September 30, 1978, and authorizing
areas and $56,000 in Alaska, Hawaii, and Guam. The conference re-
$150 million a year, with certain provisions relative to Treasury
port contains the House provision with an amendment raising 10 per-
financing and interest rates. The conference report contains the Senate
cent to 15 percent.
provision with amendments extending the program two years (until
SELECTION OF TYPE OF SUBSIDY
August 22, 1977), reducing the authorization from $150 million a year
The House bill gave to lending institutions the choice as to the type
to $35 million for each of the two years, and deleting the provisions
of subsidy that would be made available to home buyers. The House
relating to Treasury financing and interest rates.
bill also provided that subsidies would be allocated to lending institu-
PUBLIC HOUSING AUTHORIZATION
tions who would apply to HUD for these subsidies. The Senate amend-
ment gave to eligible home buyers the choice as to which of the subsidy
The Senate amendment contained a provision not in the House bill
approaches he would receive. The conference report provides that the
increasing the set-aside of contract authority for projects to be owned
Secretary take appropriate steps to give to the eligible home buyers the
by public housing agencies from $150 million to $450 million. The
choice to the maximum extent practicable as to the type of subsidy the
conference report contains the Senate amendment with an amend-
home buyer will receive.
ment reducing the set-side from $450 million to $300 million. The
conferees expect that funds for the increased set-aside will not be
RECAPTURE OF SUBSIDY
transferred from allocations already made to State agencies.
The Senate amendment contained a provision not in the House bill
exempting the obligation of the homeowner to repay the amount of
HOMEOWNERSHIP ASSISTANCE
the subsidy if the home were sold within 7 years or if the homeowner
purchased another home within 18 months. The conference report con-
The Senate amendment contained a provision not in the House bill
tains this Senate provision.
extending the section 235 homeownership assistance program for one
year, until July 1, 1977, and extending the period during which im-
EXPIRATION DATE
pounded funds (approximately $270 million) could be used from
August 22, 1975, until July 1, 1977. The conference report contains
The House bill contained a provision providing that no new commit-
ments or contracts for assistance could be entered into after June 30,
16
17
the one-year extension of the program to July 1, 1977, the same date
less than 20 percent of the tenant's income. The conference report
for other FHA programs, but does not include the provision extend-
contains the Senate provision with minor modifications in language.
ing the period during which the impounded funds could be used. The
The conferees intend to limit the use of this provision to situations
conferees did not include an extension of the period for utilizing the
such as that which currently exists in the State of New York.
impounded funds because of uncertainties about the effect this exten-
sion would have on the Congressional budget process.
FLOOD INSURANCE
PUBLIC HOUSING AND ELDERLY HOUSING PROCESSING
The Senate amendment contained a provision not in the House bill
extending from July 1, 1975, until January 1, 1976, the date on which
The Senate amendment contained provisions not in the House bill
Federal financial assistance would be denied to flood-prone areas un-
requiring HUD to process all public housing and all section 202
less the community were participating in the National Flood Insurance
housing for the elderly project applications during distinct periods
Program. The conference report retains the prohibition in existing
not exceeding 75 days. The conference report does not contain these
law but authorizes a 6-month extension until January 1, 1976, of the
Senate provisions. The conferees believe that this rigid processing
prohibition against the making of loans by Federally-supervised
requirement could do more harm to the efficient implementation of the
lending institutions to finance the acquisition of a previously occupied
programs than good, but strongly urge the Secretary of HUD to take
residential dwelling.
all steps to minimize the time for processing housing assistance
applications.
V-EMERGENCY MORTGAGE RELIEF PAYMENTS
INDIAN HOUSING
The Senate amendment contained a provision not in the House bill
The Senate amendment contained a provision not in the House bill
authorizing the Secretary of HUD to make repayable mortgage relief
providing that none of the public housing funds set aside for Indian
payments to homeowners whose incomes have been substantially re-
housing in the 1974 Housing and Community Development Act could
duced because of involuntary unemployment or underemployment due
be used by the HUD Secretary for prior commitments to financing
to current adverse economic conditions, and who therefore cannot
public housing for the Indians. The conference report contains this
make full mortgage payments. The conference report contains these
Senate provision.
Senate provisions with the following amendments:
SUBSIDIZED SUPPLEMENTAL LOANS
AMOUNT OF PAYMENTS
The Senate amendment contained a provision not in the House bill
The Senate amendment limited the amount of the monthly mort-
authorizing HUD to make interest reduction payments with respect to
gage relief payment on behalf of any homeowner to $300. The con-
certain supplemental project improvement loans made pursuant to
ference report limits this payment to $250 a month.
section 241 of the National Housing Act. The conference report does
not contain this Senate provision.
LENGTH OF PAYMENTS
DEFECTS IN FHA-INSURED HOUSING
The Senate amendment authorized the Secretary to make payments
up to 18 months with one extension for up to another 18 months. The
The Senate amendment contained a provision not in the House bill
conference report reduces the maximum period during which pay-
extending by seven months the period during which owners of FHA-
ments can be made to 12 months, with one extension for another 12
insured houses which have serious structural defects could request
months.
assistance from the HUD Secretary to repair such defects under
AUTHORIZATION OF APPROPRIATIONS
authority of section 518(b) of the National Housing Act. The con-
ference report contains this Senate provision.
The Senate amendment authorized appropriation of $750 million
to finance the program. The conference report contains an authoriza-
STATE-FINANCED HOUSING PROJECTS
tion of $500 million.
ELIGIBLE PROPERTY
The Senate amendment contained a provision not in the House bill
authorizing HUD to permit certain State housing agencies to raise
The Senate amendment authorized relief payments to be made to
the income limits for eligibility for admission to non-FHA insured,
owners of houseboats. The conference report does not contain this
State-assisted 236 projects and to vary rent-to-income ratios to not
Senate provision.
18
NOTIFICATION TO MORTGAGOR
The Senate amendment required the Secretary of HUD to notify
mortgagors threatened with foreclosure of the availability of assistance
under this program. The conference report does not contain this
Senate provision.
WILLIAM PROXMIRE,
JOHN SPARKMAN,
HARRISON A. WILLIAMS,
THOMAS J. McINTYRE,
ALAN CRANSTON,
EDWARD W. BROOKE,
BoB PACKWOOD,
Managers on the Part of the Senate.
HENRY S. REUSS,
WILLIAM A. BARRETT,
WILLIAM S. MOORHEAD,
FERNAND J. ST GERMAIN,
PARREN MITCHELL,
LES AUCOIN,
Managers on the Part of the House.
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H. R. 4485
078835
Ainety-fourth Congress of the United States of America
AT THE FIRST SESSION
Begun and held at the City of Washington on Tuesday, the fourteenth day of January,
one thousand nine hundred and seventy-five
An Act
To provide for greater homeownership opportunities for middle-income families
and to encourage more efficient use of land and energy resources.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SHORT TITLE
SECTION 1. This Act may be cited as the "Emergency Housing Act
of 1975".
TITLE I-EMERGENCY MIDDLE-INCOME HOUSING
SHORT TITLE
SEC. 101. This title may be cited as the "Emergency Middle-Income
Housing Act of 1975".
FINDINGS AND PURPOSE
SEC. 102. (a) The Congress finds that-
(1) many families of middle income cannot afford to purchase
homes at current prices and high interest rates;
(2) the decline in the home purchasing power of middle-income
families has contributed to the severe economic recession of the
building industry and those industries dependent upon the build-
ing industry;
(3) the sharp decline in housing starts jeopardizes the attain-
ment of an adequate housing stock in the years ahead; and
(4) the accessibility of homeownership to middle-income per-
sons is further aggravated by the high costs of land and fuel
associated with low-density development.
(b) It is the purpose of this title to reduce high mortgage interest
costs to middle-income families, to stimulate employment in the home-
building industry during the current emergency period, and to encour-
age land and energy conservation, where appropriate, to reduce further
the costs of homeownership.
TEMPORARY HOMEOWNERSHIP ASSISTANCE AUTHORITY
SEC. 103. The Secretary of Housing and Urban Development (here-
inafter referred to as the "Secretary") is authorized to provide finan-
cial assistance with regard to home mortgages for middle-income
families-
(1) by making, and contracting to make, periodic interest reduc-
tion payments, as described in section 104;
(2) by purchasing, and committing to purchase, below-market-
interest-rate mortgages, through the facilities of the Government
National Mortgage Association (hereinafter referred to as the
"Association"), as described in section 105; and
(3) by making, and contracting to make, home purchase incen-
tive payments, as described in section 106.
INTEREST REDUCTION PAYMENTS
SEC. 104. (a) Interest reduction payments made on behalf of
middle-income families shall equal the difference between the amount
of principal, interest, and any mortgage insurance premium due under
LIBRARY
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938839
H. R. 4485-2
a home mortgage, and the amount of principal and interest which
would be due if the home mortgage were to bear interest at the rate of
6 per centum per annum. Interest reduction payments may be made
only with respect to home mortgages bearing interest rates and yields
approved by the Secretary as being reasonable.
(b) Interest reduction payments may be made with respect to any
dwelling unit only for such period as the family on whose behalf the
payments are made occupies the dwelling unit. Such payments shall
be made in the full amount provided for in subsection (a) for the
first 3 years during which a family occupies a dwelling unit, 75 per
centum of such amount in the fourth year, 50 per centum of such
amount in the fifth year, and 25 per centum of such amount in the
sixth year. No interest reduction payments shall be made after such
sixth year.
(c) Interest reduction payments on behalf of an occupant of a coop-
erative housing project shall be in amounts computed on the basis of
the formula set forth in subsection (a) applying the cooperative
member's proportionate share of the obligations under the project
mortgage to the items specified in the formula.
(d) For purposes of chapter I of the Internal Revenue Code of
1954, the payments described in this section shall be deemed to be an
obligation of, and paid by, the Secretary and to be applied in their
entirety toward the payment of the interest due under a mortgage.
PURCHASE OF MORTGAGES
SEC. 105. (a) The Association shall purchase, or commit to purchase,
a home mortgage pursuant to this title at a price equal to par. The
interest rate on such a mortgage shall not exceed 7 per centum per
annum. The Association is authorized to service, sell, or otherwise deal
in mortgages purchased pursuant to this title.
(b) A home mortgage which is not insured under the National
Housing Act or insured or guaranteed under chapter 37 of title 38,
United States Code, shall not be purchased by the Association unless
either (1) the outstanding principal balance of the mortgage does not
exceed 80 per centum of the value of the property securing the mort-
gage, or (2) the mortgage is insured by a qualified insurer as deter-
mined by the Association.
(c) The Association may issue to the Secretary of the Treasury its
obligations in an amount outstanding at any one time sufficient to
enable the Association to carry out its functions under this section.
Each such obligation shall mature at such time and be redeemable at
the option of the Association in such manner as may be determined by
the Association, and shall bear interest at a rate determined by the
Secretary of the Treasury, taking into consideration the current aver-
age yield on outstanding marketable obligations of the United States
of comparable maturities during the month preceding the issuance of
the obligation of the Association. The Secretary of the Treasury is
authorized and directed to purchase any obligations of the Associa-
tion issued under this section, and for such purposes the Secretary of
the Treasury is authorized to use as a public debt transaction the pro-
ceeds from the sale of any securities issued under the Second Liberty
Bond Act, as now or hereafter in force, and the purposes for which
securities may be issued under the Second Liberty Bond Act, as now
or hereafter in force, are extended to include any purchase of the
Association's obligations hereunder.
(d) (1) The Association is authorized to guarantee securities based
on pools or trusts of the mortgages which the Association purchases
or commits to purchase under this title as provided in section 306(g)
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GERALD
H. R. 4485-3
of the National Housing Act with respect to federally insured or guar-
anteed mortgages and to act as issuer of such guaranteed securities.
The Association shall possess with respect to securities under this sec-
tion all the powers it possesses with respect to securities guaranteed
under such section 306(g), and the provisions of such section shall
apply to guarantees pursuant to this section.
(2) The Association may offer and sell any securities guaranteed
pursuant to this section to the Federal Financing Bank, and such
Bank is authorized to purchase any securities SO offered. The Asso-
ciation may also offer and sell any such guaranteed securities to any
Federal Reserve bank. The proceeds from the sale of such securities
when issued by the Association shall be treated in the accounts in the
same manner as if such proceeds were from the sale of the underlying
mortgages.
HOME PURCHASE INCENTIVE PAYMENTS
SEC. 106. (a) The amount of a home purchase incentive payment
shall be $1,000.
(b) The Secretary's obligation to make a home purchase incentive
payment shall be evidenced by a certificate containing the name of
the purchaser, a description of the property, and such other informa-
tion as the Secretary by regulation may prescribe. The face amount
of the certificate shall be applied to the downpayment made in con-
nection with the purchase. Any person who acquires a certificate issued
pursuant to this title may present such certificate to the Secretary
who shall pay in full the face amount indicated on the certificate.
(c) (1) Notwithstanding any other provision of this title, a home
purchase incentive payment may be made only in connection with the
purchase of a single-family or two-family unit or a unit in a coopera-
tive housing project, the construction of which began on or after
March 26, 1975.
(2) A home purchase incentive payment may not be made with
respect to (A) a mortgage purchased or otherwise assisted, or to be
purchased or otherwise assisted, under section 313 of the National
Housing Act, or (B) any mortgage which is assisted or purchased
under section 104 or 105.
DEFINITIONS
SEC. 107. As used in this title--
(1) The term "middle-income families" means those families
(including single individuals) whose incomes do not exceed 120
per centum of the median income for the area, as determined by
the Secretary, with adjustments for smaller or larger families,
except that the Secretary may establish income ceilings higher
or lower than 120 per centum of the median for the area on the
basis of his findings that such variations are necessary because
of prevailing levels of construction costs, unusually high or low
family incomes, or other factors.
(2) The term "home mortgage" means a mortgage (A) which
is executed to finance the acquisition of a single family unit
(including a unit in a condominium project) which will be the
principal residence of the mortgagor, or a two-family unit where
one of the units will be the principal residence of the mortgagor,
or which covers a cooperative housing project where all of the
units will be the principal residences of its members; and (B)
which covers housing where the appraised value of the unit (or
the average appraised value per unit in the case of a cooperative
housing project) does not exceed $38,000, or $42,000 in high cost
areas as determined by the Secretary, or $48,000 in Alaska,
Hawaii, and Guam.
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GERALD
H. R. 4485-4
AUTHORIZATION
SEC. 108. (a) The aggregate amount of mortgages assisted under
this title shall not exceed amounts approved in appropriation Acts,
and in no event shall such amount exceed $12,000,000,000.
(b) There are authorized to be appropriated such sums as may be
necessary to carry out the provisions of this title, including such sums
as may be necessary to make the interest reduction payments and the
home purchase incentive payments under contracts entered into under
this title.
(c) The aggregate amount of contracts to make interest reduction
payments under section 104 shall not exceed amounts approved in
appropriation Acts, and payments pursuant to such contracts shall not
exceed $300,000,000 per annum.
(d) The aggregate amount of mortgages purchased by the Asso-
ciation under section 105 shall not exceed amounts approved in appro-
priation Acts, and the aggregate amount of such mortgages shall not
exceed $12,000,000,000.
(e) The aggregate amount of contracts to make home purchase
incentive payments under section 106 shall not exceed amounts
approved in appropriation Acts, and payments pursuant to such con-
tracts shall not exceed $400,000,000.
(f) The Association shall not issue obligations pursuant to section
105 (c) or securities pursuant to section 105(d) except as approved
in appropriation Acts.
ALLOCATION OF ASSISTANCE
SEC. 109. (a) The Secretary shall allocate to applicant lenders
aggregate amounts of mortgages to be assisted. The Secretary shall
take appropriate steps to the maximum extent practicable to assure
that assistance under this title is made available on an equitable basis
geographically.
(b) In carrying out his functions under this title and in making
the allocations under subsection (a), the Secretary shall afford families
eligible for assistance under this title a choice, to the maximum extent
practicable, among the programs described in sections 104, 105, and 106.
(c) Not more than 20 per centum of the aggregate mortgage
amounts approved in appropriation Acts may be allocated for use
with respect to existing units (other than substantially rehabilitated
units) and with respect to new, unsold dwelling units the construction
of which commenced prior to March 26, 1975.
(d) Not more than 15 per centum of the aggregate mortgage
amounts approved in appropriation Acts may be allocated with respect
to dwelling units with appraised values in excess of $38,000.
LIMITATIONS
SEC. 110. (a) If a family assisted under section 104 or 106 sells the
property for which assistance was granted within 4 years from the
date of execution of the mortgage on such property, there shall become
due and payable to the Secretary, by the family assisted, at a time
set by the Secretary, an amount equal to the lesser of (1) the full
amount of the assistance received under section 104 or 106, as the case
may be; or (2) the amount of the gain realized on the sale after adding
the cost of any improvements provided by the mortgagor to the
original sales price and deducting any selling expenses. If such prop-
erty is sold more than 4 years but less than 5 years from the date of
execution of the mortgage, 75 per centum of the amount payable in
accordance with the first sentence of this subsection shall be repayable.
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If such property is sold more than 5 years but less than 6 years from
the date of execution of the mortgage, 50 per centum of the amount
payable in accordance with the first sentence of this subsection shall
be repayable. If such property is sold more than 6 years but less than
7 years from the date of execution of the mortgage, 25 per centum of
the amount payable in accordance with the first sentence of this sub-
section shall be repayable. There shall be no repayment if the property
is sold by the family after 7 years, or if the family purchases or con-
structs a new principal residence within the applicable time period
prescribed in section 1034 of the Internal Revenue Code of 1954.
(b) A mortgagor is not eligible both for a credit against income
tax for the purchase of a home under section 44 of the Internal
Revenue Code of 1954 and for assistance under this title.
(c) A commitment to purchase a mortgage issued by the Association
pursuant to the provisions of any other law shall not be exchanged or
credited in any way to the purchase of a commitment pursuant to this
title.
(d) A mortgage purchased under section 105 may not be assumed
except by a middle-income family.
ENERGY CONSERVATION
SEC. 111. In making financial assistance available under this title, the
Secretary shall take appropriate steps to encourage the construction
or sale of dwelling units which he determines will contribute to the
conservation of land and energy resources because of their design or
their location in clusters or projects or otherwise.
EXPIRATION DATE
SEC. 112. After June 30, 1976, no interest reduction payments, mort-
gage purchases, or home purchase incentive payments shall be made
under this title except pursuant to contracts or commitments entered
into on or before such date.
TITLE II-EMERGENCY MORTGAGE RELIEF PAYMENTS
HOMEOWNERS RELIEF
SEC. 201. (a) The Secretary of Housing and Urban Development
(hereinafter referred to as the "Secretary") is authorized to make
repayable emergency mortgage relief payments on behalf of home-
owners who are delinquent in their mortgage payments.
(b) Emergency mortgage relief payments shall not be approved
with respect to any mortgage unless—
(1) the holder of the mortgage has indicated to the mortgagor
its intention to foreclose;
(2) the mortgagor and holder of the mortgage have indicated
in writing to the Secretary and to any agency or department of
the Federal Government responsible for the regulation of the
holder that circumstances (such as the volume of delinquent
loans in its portfolio) make it probable that there will be a fore-
closure and that the mortgagor is in need of emergency mortgage
relief authorized by this title, except that such statement by the
holder of the mortgage may be waived by the Secretary if in his
judgment such waiver would further the purposes of this title;
(3) payments under the mortgage have been delinquent for at
least 2 months;
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H. R. 4485-6
(4) the mortgagor has incurred a substantial reduction in
income as a result of involuntary unemployment or underem-
ployment due to adverse economic conditions and is financially
unable to make the full mortgage payments;
(5) there is a reasonable prospect that the mortgagor will be
able to make the adjustments necessary for a full resumption of
mortgage payments; and
(6) the mortgaged property is the principal residence of the
mortgagor.
As used in this title, the term "mortgaged property" includes, but
is not limited to, property owned in fee simple, condominium units,
mobile homes, or multiunit dwellings.
(c) Mortgage relief payments on behalf of a homeowner may be
in an amount up to the amount of the principal, interest, taxes, ground
rents, hazard insurance, and mortgage insurance premiums due under
the mortgage, but such payments shall not exceed the lesser of $250
per month or the amount determined to be reasonably necessary to
supplement such amount as the homeowner is capable of contributing
toward such mortgage payment.
(d) Mortgage relief payments may be made by the Secretary for
up to 12 months, and may be extended once for up to 12 additional
months. The Secretary shall require the -mortgagor to report any
increase in income which will permit a reduction or termination of
mortgage relief payments during this period.
(e) Mortgage relief payments made under this title shall be repay-
able by the homeowner upon such terms and conditions as the Secretary
shall prescribe, except that interest on such payments shall not exceed
8 per centum per annum. Interest shall not begin to accrue until after
the last payment made by the Secretary in behalf of the homeowner.
The Secretary may defer repayment of the mortgage relief payments
until the disposition of the property or the completion of the period
of amortization for the mortgage. The Secretary shall require such
security for the repayment of mortgage relief payments as he deems
appropriate and may secure such repayment by a lien on the mort-
gaged property. The Secretary may make such delegations and accept
such certifications with respect to the processing of mortgage relief
payments as he deems appropriate to facilitate the prompt and efficient
implementation of the assistance program authorized by this title.
NOTIFICATION
SEC. 202. Until 2 years from the date of enactment of this Act, each
Federal supervisory agency, with respect to financial institutions sub-
ject to its jurisdiction, and the Secretary, with respect to other
approved mortgagees, shall (1) take appropriate action, not incon-
sistent with laws relating to the safety or soundness of such institu-
tions or mortgagees, as the case may be, to waive or relax limitations
pertaining to the operations of such institutions or mortgagees with
respect to mortgage delinquencies in order to cause or encourage fore-
bearance in residential mortgage loan foreclosures, and (2) request
each such institution or mortgagee to notify that Federal supervisory
agency, the Secretary, and the mortgagor, at least 30 days prior to
instituting foreclosure proceedings in connection with any mortgage
loan. As used in this section the term "Federal supervisory agency"
means the Board of Governors of the Federal Reserve System, the
Board of Directors of the Federal Deposit Insurance Corporation,
the Comptroller of the Currency, the Federal Home Loan Bank
Board, the Federal Savings and Loan Insurance Corporation, and the
National Credit Union Administration.
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H. R. 4485-7
AUTHORIZATION AND EXPIRATION DATE
SEC. 203. (a) There are authorized to be appropriated for purposes
of this title not to exceed $500,000,000. Any amounts so appropriated
shall remain available until expended.
(b) Mortgage relief payments shall not be made after July 1, 1976,
except with respect to mortgagors receiving the benefit of payments
on such date.
REPORTS
SEC. 204. Within 60 days after enactment of this title and within
each 60-day period thereafter prior to July 1, 1976, the Secretary
shall make a report to the Congress on (1) the current rate of delin-
quencies and foreclosures in the housing market areas of the country
which should be of immediate concern if the purpose of this title is to
be achieved; (2) the extent of, and prospect for continuance of, volun-
tary forebearance by mortgagees in such housing market areas; (3)
actions being taken by governmental agencies to encourage forebear-
ance by mortgagees in such housing market areas; (4) actions taken
and actions likely to be taken with respect to making assistance under
this title available to alleviate hardships resulting from any serious
rates of delinquencies and foreclosures; and (5) the current default
status and projected default trends with respect to mortgages covering
multifamily properties with special attention to mortgages insured
under the various provisions of the National Housing Act and with
recommendations on how such defaults and prospective defaults may
be cured or avoided in a manner which, while giving weight to the
financial interests of the United States, takes into full consideration
the urgent needs of the many low- and moderate-income families that
currently occupy such multifamily properties.
TITLE III-MISCELLANEOUS
SEC. 301. (a) Section 312(h) of the Housing Act of 1964 is amended
by striking out "one-year" and inserting in lieu thereof "three-year".
(b) Section 312(d) of such Act is amended by inserting "ending
prior to July 1, 1975, and not to exceed $35,000,000 for each fiscal year
beginning on or after July 1, 1975, and ending prior to October 1,
1977," after "each fiscal year".
SEC. 302. The second sentence of section 5(c) of the United States
Housing Act of 1937 is amended by striking out "$150,000,000" and
inserting in lieu thereof "$300,000,000".
SEC. 303. Section 235(m) of the National Housing Act is amended
by striking "1976" and inserting in lieu thereof "1977".
SEC. 304. The fourth sentence of section 5(c) of the United States
Housing Act of 1937 is amended—
(1) by inserting "(1)" after "except that"; and
(2) by inserting before the period at the end thereof a comma
and the following: "and (2) after the date of enactment of the
Emergency Housing Act of 1975, none of the funds made available
under this sentence shall be used to fulfill any outstanding com-
mitments entered into prior to such date under any memoranda of
understanding among the Departments of Housing and Urban
Development, Interior, and Health, Education, and Welfare".
SEC. 305. Section 518(b) (1) of the National Housing Act is amended
by striking out "one year" the second time it appears and inserting in
lieu thereof "nineteen months".
SEC. 306. Section 236 of the National Housing Act is hereby amended
by adding at the end thereof a new subsection as follows:
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H. R. 4485-8
"(q) With respect to mortgages financed under State or local pro-
grams which are not insured under this section but which are receiv-
ing the benefits of this section as provided in subsection (b) hereof,
and whenever the Secretary determines that such action is necessary
to assist in maintaining the financial viability of a State or local
agency providing such financing, the rental charge and percentage of
income payable by the tenant as specified in subsection (i) (2), shall
not be applicable, and the maximum income limitations, percentage
of income, and rental to be paid by the tenant shall be fixed by the
State or local agency thereof providing the mortgage assistance, in
such amounts and percentages as are found necessary by such State or
local agency to achieve the purposes of this section: Provided, That
assistance payments under this section may be applied only with
respect to tenants whose incomes do not exceed the median family
income for the area, as determined by the State or local agency with
adjustments for smaller and larger families. The tenants shall pay no
less than the basic rental charge or such greater amount as the State
or local agency determines is necessary for the economic feasibility of
the project, not exceeding the fair market rental charge, and no less
than 20 per centum of the tenant's income. Any tenants occupying such
units prior to any modification in the rental charge approved by the
State or local agency as authorized herein, shall not be made liable for
rental increases except pursuant to the same criteria as would have
been applicable under the provisions of this Act prior to the effective
date of this subsection. The State or local agency shall report to the
Secretary of Housing and Urban Development the rental charges,
income limitations and percentage of income payable by the tenant and
shall certify that the charges and income limitations are the minimum
amounts which can be fixed and still maintain the economic feasibility
of the projects and shall supply the Secretary with documentations
supporting such certification.
SEC. 307. Section 202(b) of the Flood Disaster Protection Act of
1973 is amended by inserting before the period at the end thereof a
comma and the following: "except that the prohibition contained in
this sentence shall not apply to any loan made prior to January 1, 1976,
to finance the acquisition of a previously occupied residential dwelling".
SEC. 308. Section 313 of the National Housing Act is amended by
adding the following new subsection at the end thereof:
"(h) Notwithstanding the provisions of subsection (b), the Associa-
tion may make commitments to purchase and purchase, and may serv-
ice, sell (with or without recourse), or otherwise deal in, a mortgage
which covers more than four-family residences (including cooperative
or condominium projects), or a single-family unit in a condominium,
and which is not insured under the National Housing Act or guaran-
teed under chapter 37 of title 38, United States Code, if-
"(1) in the case of a project mortgage, the principal obligation
of the mortgage does not exceed, for that part of the property
attributable to dwelling use, the lesser of (A) the per unit amount
specified in subsection (b) (B), or (B) the per unit limitations
specified in section 207 of this Act in the case of a rental project,
or section 213 of this Act in a case of a cooperative project, or sec-
tion 234 in the case of a condominium project;
"(2) in the case of a mortgage covering a housing project, the
outstanding principal balance of the mortgage does not exceed 75
per centum of the value of the property securing such mortgage or
is insured by a qualified private insurer or public benefit corpora-
tion created by the State which acts as an insurer as determined by
the Association;
LIBRARY
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H. R. 4485-9
"(3) in the case of a mortgage covering an individual condo-
minium unit, the mortgage is insured by a qualified private insurer
or public benefit corporation created by the State which acts as an
insurer as determined by the Association or has an outstanding
principal balance which does not exceed 80 per centum of the value
of the property securing the mortgage;
"(4) the mortgage is not being used to finance the conversion
of an existing rental housing project into a condominium project
or to finance the purchase of an individual unit in a condominium
project in connection with the conversion of such project from
rental to condominium form of ownership; and
"(5) the mortgage meets the requirements of subsection (b)
except as modified by this subsection and any additional require-
ments the Secretary may prescribe to protect the interest of the
United States or to protect consumers.".
Speaker of the House of Representatives.
Vice President of the United States and
President of the Senate.
FOR IMMEDIATE RELEASE
JUNE 24, 1975
Office of the White House Press Secretary
THE WHITE HOUSE
STATEMENT BY THE PRESIDENT
To help speed the recovery already underway in the housing industry,
whose health is vital to our overall economic recovery, I have today
directed the Secretary of Housing and Urban Development, Carla Hills,
to release $2 billion in previously-authorized Federal funds to assist
in the purchase of home mortgages. This action will immediately make
new mortgage money available to home buyers.
To help put workers in the building trades back to work, I am requesting
the Congress today to authorize an additional $7. 75 billion for this
program and to extend it for another year until July 1, 1976.
To prevent the possibility of foreclosures on homes whose owners
are temporarily out of work, I am also requesting the Congress to
move as rapidly as possible on legislation introduced by Congressman
Lud Ashley of Ohio and Congressman Garry Brown of Michigan and
others to provide mortgage payment relief loans and co-insurance for
lenders who refrain from such foreclosures. This legislation will
protect homeowners and head off needless foreclosures.
The steps I have announced today are the best way to meet the problems
of housing in this country. I am therefore, vetoing H. R. 4485 because
it will hamper the economic recovery now underway and will add to
the already oversize Federal deficit.
Now I want to introduce Secretary Hills who will fill you in on my
proposals to protect homeowners, further stimulate home building,
and provide more building trade jobs.
Thank you.
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EMBARGOED FOR RELEASE
UNTIL 3:30 P.M. EDT
JUNE 24, 1975
Office of the White House Press Secretary
THE WHITE HOUSE
TO THE HOUSE OF REPRESENTATIVES:
I am today returning, without my approval, H.R. 4485,
the proposed Emergency Housing Act of 1975.
After careful examination of this bill and its provisions,
it is my considered judgment that H.R. 4485. due to its cost,
ineffectiveness, and delayed stimulus, would damage the housing
industry and damage the economy.
This Administration is committed to a prompt recovery of
the housing industry and to getting the construction workers
back to work - which are crucial elements in our overall
economic recovery.
To reaffirm my commitment to such prompt recovery and my
support of the existing Federal mortgage assistance program,
I am today directing the release of the remaining $2 billion
in these funds and requesting Congress to authorize another
$7.75 billion in this assistance for housing. I will also
support a workable plan to prevent mortgage foreclosures for
home owners who are out of work.
But H.R. 4485 is not acceptable for these reasons:
It could not be implemented without substantial
delay, and probably would actually provide a
disincentive to some home purchases. Consequently
it would delay for months putting construction workers
back to work.
It is in some respects inequitable. In some areas
of the country, families with $25,000 of income
could qualify for benefits, while in other areas
of the country, families with $6,000 of income
could not qualify.
The levels of mortgage subsidies (down to 6% in
some cases) would give some buyers an excessive
benefit at the taxpayers' expense.
For the modest benefits that might come in housing
this bill is too expensive ---- over $1 billion in
additional Federal expenditures in FY 76, and more
in years to come.
This bill's provisions for the protection of home-owners
who are presently unemployed or under employed due to our economic
conditions and who face foreclosure on their homes, though well
intentioned, unnecessarily place the Federal government in the
retail loan-making business as a sole means of relief. Depository
institutions have a stake in avoiding foreclosures and should be
active participants in any such mortgage payment relief program.
I believe there is a better way both to stimulate jobs in
construction and to provide standby protection for homeowners who
may be threatened by foreclosure:
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1.
To add impetus to the industry's recovery and to put
the building trades back to work, I am today directing
the Secretary of Housing and Urban Development to make
available, immediately. under existing law, $2 billion
previously authorized for mortgage purchase assistance.
We know this program works, and this action will make
new mortgage money available immediately from thrift
institutions and other lenders. But since the mortgages
the Federal government purchases can be later resold,
the cost to the Federal government is relatively low
$60 million for FY 76.
2.
To continue this effective tandem authority program, I
propose that Congress extend this program beyond its
expiration date in October and to expand it to cover
conventionally financed multi-family housing, including
condominiums. In addition, I request authorization
from Congress to put $7.75 billion more into this
program to insure financing is available if needed to
sustain the recovery of the housing industry.
3.
To protect home-owners against foreclosure, I
commend the efforts of the sponsors of legislation
recently introduced in the Congress that would
confer standby authority on the Secretary of Housing
and Urban Development to make mortgage payment relief
loans or to co-insure lenders who refrain from fore--
closing on home-owners who are temporarily out of
work. We want to preserve the good relationship
between the home-owner and the bank or other insti-
tution which holds his mortgage and at the same
time provide some fiscal protection to the lender who
assists a home-owner.
While there continue to be many problems in the housing
industry, and while there is far too much unemployment among
housing construction workers, there are clear signs of recovery
in this vital part of the American economy.
During the current calendar year, funds needed for mortgage
loans have been flowing into savings institutions at record
levels $19.7 billion net during the first five months of
this year alone, nearly quadruple the level of the same period
last year. With this flow of funds, interest rates have fallen
substantially from their peaks of last summer.
Meanwhile, the government has been providing unprecedented
support to the housing industry. Since last October, the
Government National Mortgage Association has committed to
purchase nearly $9 billion in conventional, FHA and VA mort.
gages with interest rates down to 7-3/4 percent. And this
March, a tax credit for unsold new homes was enacted into law.
There are now strong indications that new home construction
and sales are responding to these actions. New home sales in--
creased 25 percent in April, the largest increase in 12 years.
Home building permits climbed 24 percent in April and an
additional 9 percent in May. Also in May, housing starts
which represent not only new homes but new jobs rose sharply.
These favorable trends, however, do not mean that we
have overcome our problem in housing. To the contrary, the
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level of home construction is still too low, and I fully
agree with those who believe that a swift recovery in housing
is a prime objective of national economic policy.
SERALD
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We must accelerate the improvement in housing that now
appears to be coming about.
My action today to commit $2 billion for mortgage purchase
assistance under the Emergency Home Purchase Assistance Act of
1974 will exhaust the current authorization under that Act.
In proposing that this Act be extended, broadened to multi--
family housing, and expanded by $7.75 billion, I am affirming
that we have a tried and tested mechanism for supplementing
and reinforcing housing construction.
Unfortunately, while H.R. 4485 does contain the multi-
family amendment I have recommended, it fails to extend the
current law, increase its authorization or effect any other
improvements. Worse, it would authorize a variety of new and
untried subsidies, including provisions for mortgages with
mandated 6 and 7 percent interest rates and $1,000 down.payment
grants. Since there appears to have been no consensus in
favor of any one of these new subsidies, the bill adopts all
of them in the hope that something will work.
The full implementation of these new subsidies, together
with other provisions of the bill, would add over $1 billion
to the fiscal 1976 deficit and ultimately cost more than
$2 billion. An addition to the budget of this magnitude to
benefit a few home-buyers is inequitable as well as costly.
It is most important to housing that we maintain a firm
line against ill-considered spending that adds to the growing
deficit and necessitates Federal government borrowing which
tends to drive up interest rates and depress housing construction.
I believe that budgetary restraint is a key element in our effort
to instill the kind of consumer confidence in the future that
is essential to a vigorous housing market.
Proponents of H.R. 4485 have argued that the budgetary
costs of this bill would be outweighed by stimulating an
upturn in housing starts, jobs and tax revenues. But critical
defects in the bill concerning its relative cost, impact,
timing and long-term implications will prevent it from
achieving these objectives.
First, the levels of subsidy provided are excessively
deep and costly. Under H.R. 4485, mortgages would be heavily
subsidized so that they could bear lower interest rates than
any previously available to other home-owners during the last
ten years. These deep subsidies would require substantial
Federal outlays. Moreover, experience demonstrates that a
strong and healthy housing industry can be maintained with-
out the deep subsidies contained in this bill.
Second, the bill would not work as intended even if
it could be immediately implemented. Although supporters of
H.R. 4485 have claimed that it would produce hundreds of
thousands of additional housing units, evaluation by HUD
and OMB does not suggest that the bill would have any impact
of this magnitude or that the units produced would necessarily
be additional to those that would be produced in the absence
of such large subsidies. Those most likely to be influenced
to buy under the bill would be families near the top of the
eligibility range. These same families would be most apt to
buy even without subsidy assistance on the scale proposed.
Third, because the bill could not be immediately
implemented, it would actually impede an early recovery in
GERALDO FORD LIBRARY
housing starts. The subsidies which would be authorized in
clude new approaches that have never been tried before. To
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4
make this assistance available, it would not only be necessary
to secure appropriations and write regulations, but also to
prepare a variety of new forms, establish procedures and
familiarize government, lender and builder personnel throughout
the country with them. Even given top priority, months could
be required before implementation is completed. Thus, H.R. 4485
far from helping during the coming months -- would actually
inhibit home purchases among those eligible for assistance,
since these families would understandably want to wait until
the subsidies become available.
Fourth, the bill has long-term impacts and implications
that are inappropriate and undesirable for an "emergency"
measure. One of the subsidy options included in the bill
would require home owners with 6 percent interest rate mort-
gages to make increasing monthly payments in the future, up
to the full payments that would be required at current market
interest rates. I believe there will almost certainly be in-
tense pressures for relief against these phase-up provisions
in years to come -- and thus for a continuation of the deep
subsidies this option involves. Moreover, even 1f this
approach works as intended, it would require substantial
government outlays in future years when the economy may be
operating at full capacity with inflationary forces at or
approaching their peaks.
Fifth, the subsidy provisions of H.R. 4485 pose
substantial problems of equity among those who would and would
not be eligible for the relatively large subsidies provided.
As the bill is written, substantial subsidies would be made
available to families within a given income group. Other
families with similar or even less income would receive no
subsidy at all and would be expected to pay full market rate
mortgages. These discrepancies would be very sharp and hard
to justify. In some areas, it would permit families with
incomes well over $25,000 to qualify while, in other areas,
families with incomes as low as $6,000 would be ineligible.
Sixth, H.R. 4485 would make a number of undesirable
changes in our housing and community development laws. For
example, the bill would extend the homeownership program
authorized under Section 235 of the National Housing Act.
It would also extend and expand the program of subsidized
government rehabilitation loans authorized under Section
312 of the Housing Act of 1964. These provisions would
reverse decisions the Congress itself enacted last year
after one of the most extensive reviews of Federal housing
policy ever conducted. Also objectionable are the pro-
visions which would divert funds from the new leased
housing program, and establish special rules for certain
State agency housing projects assisted under Section 236
of the National Housing Act.
Finally, the foreclosure provision of H.R. 4485 is too
limited in its mechanism for providing relief. This provision
reflects the concern that mortgage foreclosures may soar during
the recession. To date, no such trend has developed because
private lenders have been cooperating with home--owners through
forebearance and common sense arrangements. In fact, fore-
closures rates have remained stable ---- actually, at a level
lower than that experienced during the mid-1960s.
Nonetheless, I can appreciate the desire of Congress to
GERALO FORD СӀБКАНТ
enact legislation, and I will support legislation which would
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5
protect home-owners from loss of their homes due to temporary
economic hardship and which recognizes the provisions of such
relief is both a matter of concern for the federal government
and the depository institutions or other mortgagees involved.
Good housing is one of our greatest national assets, and
our objective was and is to assist in the recovery of the
housing construction industry and to help get the building
trades workers back to their productive and meaningful skills.
I shall be glad to work with the Congress toward this objective.
GERALD R. FORD
THE WHITE HOUSE,
June 24, 1975.
#####
GERALD LISTANY ? FORD
FOR IMMEDIATE RELEASE
JUNE 24, 1975
OFFICE OF THE WHITE HOUSE PRESS SECRETARY
THE WHITE HOUSE
REMARKS OF THE PRESIDENT
UPON VETOING H.R. 4485
THE EMERGENCY HOUSING ACT OF 1975
THE BRIEFING ROOM
3:05 P.M. EDT
I would like to make a relatively short state-
ment, and then Secretary Hills will follow with an
extensive briefing.
To help speed the recovery already underway in
the housing industry, whose health is absolutely vital
to our overall economic recovery, I have today directed
Secretary Hills, head of Housing and Urban Development,
to release $2 billion in previously authorized Federal
funds to assist in the purchase of home mortgages.
This action will immediately make new mortgage
money available to home buyers, to help put more workers
in the building trades back to work.
I am requesting the Congress to authorize an
additional $7 billion 750 million for this program
and to extend it for another year until July 1, 1976.
To prevent the possibility of foreclosures on homes
whose owners are temporarily out of work, I am also
requesting the Congress to move as rapidly as possible on
legislation introduced by Congressman Lud Ashley of Ohio
and Congressman Garry Brown of Michigan, and others, to
provide mortgage payment relief loans and co-insurance
for lenders who refrain from such foreclosures.
This legislation will protect home owners and
head off needless foreclosures.
The steps I have announced today are the best
way to meet the problems of housing in this country at
the present time.
I am, therefore, vetoing H.R. 4485 because it
will hamper the recovery now underway and will add to the
oversize Federal deficit.
Now, let me introduce Secretary Hills, who will
FORD
fill you in on my proposals to protect home owners,
stimulate home building and provide more jobs for the
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building trades.
Secretary Hills?
END (AT 3:09 P.M. EDT)
June 12, 1975
Dear Mr. Director:
The following bills were received at the White
House on June 12th:
H.R. 4485
H.R. 5899
Please let the President have reports and
recommendations as to the approval of these bills
as soon as possible.
Sincerely,
Robert D. Linder
Chief Executive Clerk
The Honorable James T. Lynn
Director
Office of Management and Budget
Washington, D. C.
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