DEFENSE HOUSING ACT

TUESDAY, JANUARY 16, 1951

UNITED STATES SENATE,

COMMITTEE ON BANKING AND CURRENCY,

Washington, D. C. The committee met at 10:35 a. m., pursuant to notice, in room 301, Senate Office Building, Senator John J. Sparkman presiding.

Present: Senators Sparkman, Robertson, Frear, Long, Bricker, Ives, Schoeppel, and Bennett.

Senator SPARKMAN. Let the committee come to order, please.

First let me say, speaking for the chairman, who is necessarily absent, that we welcome two new members to the committee this morning, Senator Schoeppel and Senator Bennett. Don't we have a third new member assigned?

Senator BRICKER. Senator Dirksen.

Senator SPARKMAN. Senator Dirksen, we hope, will be in a little later.

I would like to say to the two new members who are here that I know you are going to enjoy the work of this committee, and it is a working committee.

The hearing this morning is on a proposal for defense housing, S. 349. The hearing is being held before the full committee, no subcommittees having yet been formed for the new Congress. The bill will be inserted in the record at this point.

(The bill S. 349 follows:)

[S. 349, 82d Cong., 1st sess.]

A BILL To assist the provision of housing and community facilities and services required in connection with the national defense

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That this Act may be cited as the "Defense Housing and Community Facilities and Services Act of 1951".

DECLARATION OF POLICY

SEC. 2. The Congress hereby declares that where military personnel or civilian workers required for the carrying out of national defense activities being, or to be, undertaken in any area or locality must be brought in from other areas or localities, or other additions to the local labor force are required for such purpose, housing and community facilities and services for such persons and their families represent essential defense needs, and that the defense and security of the Nation therefore require that housing and community facilities and services needed to support national defense activities shall be provided in sufficient time to avoid delaying or impeding such activities. The policy to be followed in attaining the accomplishment of that objective shall be that, to the maximum extent feasible in view of the emergency and the requirements of national defense

(1) Federal departments and agencies constructing, or awarding contracts for the construction of, national defense facilities, or undertaking, or awarding contracts for the undertaking of, national defense activities in any area or

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locality shall take into consideration the manpower needs and the needs for housing and community facilities and services which will result in such area or locality from such construction, undertaking, or award, and for such purpose shall consult with such departments or agencies as the President may designate;

(2) the necessary plans, programs, and assistance for the provision of the housing and community facilities and services which will be needed in any area as a result of the proposed construction or expansion of a national defense facility, or the undertaking of national defense activities, shall proceed concurrently with the plans for the construction or expansion of such facility, or the undertaking of such activities, toward the end that such housing or facilities or services shall be available when and where needed to support such national defense activities;

(3) notwithstanding the type of construction, housing provided to support national defense activities shall, to the maximum extent practicable, be held for rental for appropriate periods for persons engaged or to be engaged in national defense activities;

(4) private enterprise shall be encouraged to provide as large a part of the total defense housing needed as it can, with special governmental assistance being made available where feasible and necessary to enable private enterprise to provide more of the total defense housing needed;

(5) defense housing shall be constructed by the Government only where it cannot otherwise be provided when and where needed, and, where of permanent construction, shall be sold as expeditiously as possible and in the public interest taking into consideration the continuation of the need for such housing by persons engaged in national defense activities;

(6) when it is necessary for defense housing to be constructed by the Government, such housing shall, wherever possible, be of permanent construction and shall consist of one- to four-family dwelling structures (including row houses) so arranged that they may be offered for separate sale, and preference in the sale of such dwellings shall be given to the occupants thereof and to veterans;

(7) community facilities and services needed to support national defense activities being, or to be, undertaken shall, insofar as possible, be provided, and shall be operated and maintained, by the appropriate State, city, or other local agency having responsibility for such facilities or services in the area; financial assistance may be extended hereunder by the Federal Government where feasible and necessary to such States, cities, and other local agencies for the accomplishment of such purpose; and such facilities and services shall be provided, constructed, or operated and maintained by the Government directly only where no such State, city, or other local agency is available for such provision, construction, operation, or maintenance, or, where available, is unable or unwilling to do so with the governmental financial assistance which can be extended hereunder to assist it with such provision, construction, or with such operation and maintenance;

(8) any department or agency performing functions hereunder shall, in carrying out such functions, consult with the appropriate State and local agencies having responsibilities in connection with the planning, provision, construction, or operation of community facilities or services, so that, insofar as practicable, community facilities assisted or provided pursuant to this Act may be integrated with State and local programs for such facilities and services.

TITLE I-MORTGAGE INSURANCE FOR DEFENSE HOUSING SEC. 101. The National Housing Act, as amended, is amended by the addition of the following title at the end thereof:

"TITLE IX-NATIONAL DEFENSE HOUSING INSURANCE

"SEC. 901. As used in this title, the terms 'mortgage', 'first mortgage', 'mortgagee', 'mortgagor', 'maturity date', and 'State' shall have the same meaning as in section 201 of this Act.

"SEC. 902. There is hereby created a National Defense Housing Insurance Fund which shall be used by the Commissioner as a revolving fund for carrying out the provisions of this title, and mortgages insured under this title shall be known and referred to as 'national defense housing insured mortgages'. The Commissioner is hereby authorized and directed to transfer immediately to such fund

the sum of $10,000,000 from the War Housing Insurance Fund established pursuant to the provisions of section 602 of this Act. General expenses of operation of the Federal Housing Administration under this title may be charged to the National Defense Housing Insurance Fund.

"SEC. 903. (a) This title is designed to supplement systems of mortgage insurance under other provisions of the National Housing Act in order to assist in providing adequate housing in areas or localities in which the President shall find that a shortage of housing exists or impends which impedes or threatens to impede national defense activities. The Commissioner is authorized, upon application by the mortgagee, to insure under this section or section 908 as hereinafter provided any mortgage which is eligible for insurance as hereinafter provided and upon such terms as the Commissioner may prescribe to make commitments for the insuring of such mortgages prior to the date of their execution or disbursement thereon: Provided, That the property covered by the mortgage is in an area or locality in which the President shall find that a shortage of housing exists or impends which impedes or threatens to impede national defense activities, and that the total number of dwelling units in properties covered by mortgages insured under this title in any such area does not exceed the number authorized by the Housing and Home Finance Administrator from time to time as needed in such area for defense purposes and to be insured pursuant to this title: Provided further, That the aggregate amount of principal obligations of all mortgages insured under this title shall not exceed such sum as may be authorized by the President from time to time for the purposes of this title pursuant to his authority under section 217 hereof: Provided further, That the Commissioner shall have power to require properties covered by mortgages insured under this title to be held for rental for such periods of time and at such rentals or other charges as he may prescribe; and, with respect to such properties being held for rental, (a) to require that the property be held by a mortgagor approved by him, and (b) to prescribe such requirements as he deems to be reasonable governing the method of operation and prohibiting or restricting sales of such properties or interests therein or agreements relating to such sales: And provided further, That no mortgage shall be insured under this title unless the mortgagor certifies under oath that in selecting tenants for any property covered by the mortgage he will not discriminate against any family by reason of the fact that there are children in the family, and that he will not sell the property while the insurance is in effect unless the purchaser so certifies, such certification to be filed with the Commissioner. Violation of any such certification shall be a misdemeanor punishable by a fine of not to exceed $500.

"(b) To be eligible for insurance under this section a mortgage shall

"(1) have been made to, and be held by, a mortgagee approved by the Commissioner as responsible and able to service the mortgage properly; "(2) involve a principal obligation (including such initial service charges, appraisal, inspection, and other fees as the Commissioner shall approve) in an amount not to exceed 90 per centum of the appraised value (as of the date the mortgage is accepted for insurance) of a property, urban, suburban, or rural, upon which there is located a dwelling designed principally for residential use for not more than two families in the aggregate, which is approved for mortgage insurance prior to the beginning of construction, the construction of which is begun after the date of enactment of this title. The principal obligation of such mortgage shall not, however, exceed $8,100 if such dwelling is designed for a single-family residence, or $15,000 if such dwelling is designed for a two-family residence: Provided, That if the Commissioner finds that it is not feasible within the aforesaid dollar amount limitations to construct dwellings containing three or four bedrooms per family unit without sacrifice of sound standards of construction, design, and livability he may increase such dollar amount limitations by not exceeding $900 for each additional bedroom (as defined by the Commissioner) in excess of two contained in such family unit if he finds that such unit meets sound standards of livability as a three-bedroom or a four-bedroom unit, as the case may be;

"(3) have a maturity satisfactory to the Commissioner but not to exceed twenty-five years from the date of the insurance of the mortgage;

"(4) contain complete amortization provisions satisfactory to the Commissioner;

"(5) bear interest (exclusive of premium charges for insurance) at not to exceed 41⁄2 per centum per annum on the amount of the principal obligation outstanding at any time;

"(6) provide, in a manner satisfactory to the Commissioner, for the application of the mortgagor's periodic payments (exclusive of the amount allocated to interest and to the premium charge which is required for mortgage insurance as herein provided) to amortization of the principal of the mortgage; and

"(7) contain such terms and provisions with respect to insurance, repairs, alterations, payment of taxes, default reserves, delinquency charges, foreclosure proceedings, anticipation of maturity, additional and secondary liens, and other matters as the Commissioner may in his discretion prescribe. "(c) The Commissioner is authorized to fix a premium charge for the insurance of mortgages under this title but in the case of any mortgage such charge shall not be less than an amount equivalent to one-half of 1 per centum per annum nor more than an amount equivalent to 12 per centum per annum of the amount of the principal obligation of the mortgage outstanding at any time, without taking into account delinquent payments or prepayments. Such premium charges shall be payable by the mortgagee, either in cash or in debentures issued by the Commissioner under this title at par plus accrued interest, in such manner as may be prescribed by the Commissioner: Provided, That the Commissioner may require the payment of one or more such premium charges at the time the mortgage is insured, at such discount rate as he may prescribe not in excess of the interest rate specified in the mortgage. If the Commissioner finds upon the presentation of a mortgage for insurance and the tender of the initial premium charge or charges so required that the mortgage complies with the provisions of this title, such mortgage may be accepted for insurance by endorsement or otherwise as the Commissioner may prescribe; but no mortgage shall be accepted for insurance under this title unless the Commissioner finds that the project with respect to which the mortgage is executed is an acceptable risk in view of the needs of national defense referred to in this section. In the event that the principal obligation of any mortgage accepted for insurance under this title is paid in full prior to the maturity date, the Commissioner is further authorized in his discretion to require the payment by the mortgagee of an adjusted premium charge in such amount as the Commissioner determines to be equitable, but not in excess of the aggregate amount of the premium charges that the mortgagee would otherwise have been required to pay if the mortgage had continued to be insured under this title until such maturity date; and in the event that the principal obligation is paid in full as herein set forth the Commissioner is authorized to refund to the mortgagee for the account of the mortgagor all, or such portion as he shall determine to be equitable, of the current unearned premium charges theretofore paid.

"(d) Notwithstanding any other provisions of this or any other Act, except provisions of law enacted hereafter expressly referring to this paragraph (d), the Commissioner, with the approval of the Housing and Home Finance Administrator, is further authorized and directed to prescribe such procedures as are necessary to secure to persons engaged or to be engaged in national defense activities preference or priority of opportunity to purchase or rent properties, or interests therein, covered by mortgages insured under this title.

"(e) Any contract of insurance heretofore or hereafter executed by the Commissioner under this title shall be conclusive evidence of the eligibility of the mortgage for insurance, and the validity of any contract of insurance so executed shall be incontestable in the hands of an approved mortgagee from the date of the execution of such contract, except for fraud or misrepresentation on the part of such approved mortgagee.

"SEC. 904. (a) In any case in which the mortgagee under a mortgage insured under section 903 shall have foreclosed and taken possession of the mortgaged property, in accordance with regulations of, and within a period to be determined by, the Commissioner, or shall, with the consent of the Commissioner, have otherwise acquired such property from the mortgagor after default, the mortgagee shall be entitled to receive the benefit of the insurance as hereinafter provided, upon (1) the prompt conveyance to the Commissioner of title to the property which meets the requirements of rules and regulations of the Commissioner in force at the time the mortgage was insured, and which is evidenced in the manner prescribed by such rules and regulations; and (2) the assignment to him of all claims of the mortgagee against the mortgagor or others, arising out of the mortgage transaction or foreclosure proceedings, except such claims as may have been released with the consent of the Commissioner. Upon such conveyance and assignment the obligation of the mortgagee to pay the premium charges for insurance shall cease and the Commissioner shall, subject to the cash adjustment hereinafter provided, issue to the mortgagee debentures having a total face value equal to the value of the mortgage and a certificate of claim, as hereinafter provided.

For the purposes of this subsection, the value of the mortgage shall be determined, in accordance with rules and regulations prescribed by the Commissioner, by adding to the amount of the original principal obligation of the mortgage which was unpaid on the date of the institution of foreclosure proceedings, or on the date of the acquisition of the property after default other than by foreclosure, the amount of all payments which have been made by the mortgagee for taxes, ground rents, and water rates, which are liens prior to the mortgage, special assessments which are noted on the application for insurance or which become liens after the insurance of the mortgage, insurance of the mortgaged property, and any mortgage insurance premiums paid after either of such dates and by deducting from such total amount any amount received on account of the mortgage after either of such dates and any amount received as rent or other income from the property, less reasonable expenses incurred in handling the property, after either of such dates: Provided, That with respect to mortgages which are foreclosed before there shall have been paid on account of the principal obligation of the mortgage a sum equal to 10 per centum of the appraised value of the property as of the date the mortgage was accepted for insurance, there may be included in the debentures issued by the Commissioner, on account of the cost of foreclosure (or of acquiring the property by other means) actually paid by the mortgagee and approved by the Commissioner an amount

"(1) not in excess of 2 per centum of the unpaid principal of the mortgage as of the date of the institution of foreclosure proceedings and not in excess of $75; or

"(2) not in excess of two-thirds of such cost, whichever is the greater: And provided further, That with respect to mortgages to which the provisions of sections 302 and 306 of the Soldiers' and Sailors' Civil Relief Act of 1940, as now or hereafter amended, apply and which are insured under section 903, and subject to such regulations and conditions as the Commissioner may prescribe, there shall be included in the debentures an amount which the Commissioner finds to be sufficient to compensate the mortgagee for any loss which it may have sustained on account of interest on debentures and the payment of insurance premiums by reason of its having postponed the institution of foreclosure proceedings or the acquisition of the property by other means during any part or all of the period of such military service and three months thereafter.

"(b) The Commissioner may at any time, under such terms and conditions as he may prescribe, consent to the release of the mortgagor from his liability under the mortgage or the credit instrument secured thereby, or consent to the release of parts of the mortgaged property from the lien of the mortgage.

"(c) Debentures issued under this title shall be in such form and denominations in multiples of $50, shall be subject to such terms and conditions, and shall include such provisions for redemption, if any, as may be prescribed by the Commissioner with the approval of the Secretary of the Treasury, and may be in coupon or registered form. Any difference between the amount of debentures to which the mortgagee is entitled under this section or section 908 of this Act and the aggregate face value of the debentures issued, not to exceed $50, shall be adjusted by the payment of cash by the Commissioner to the mortgagee from the National Defense Housing Insurance Fund.

"(d) The debentures issued under this section to any mortgagee shall be executed in the name of the National Defense Housing Insurance Fund as obligor, shall be signed by the Commissioner by either his written or engraved signature, and shall be negotiable. All such debentures shall be dated as of the date foreclosure proceedings were instituted, or the property was otherwise acquired by the mortgagee after default, and shall bear interest from such date at a rate determined by the Commissioner, with the approval of the Secretary of the Treasury, at the time the mortgage was accepted for insurance, but not to exceed 3 per centum per annum, payable semiannually on the 1st day of January and the 1st day of July of each year. Such debentures shall mature ten years after the date thereof. Such debentures shall be exempt, both as to principal and interest, from all taxation (except surtaxes, estate, inheritance, or gift taxes) now or hereafter imposed by any Territory, dependency, or possession of the United States, or by the District of Columbia, or by any State, county, municipality, or local taxing authority, and shall be paid out of the National Defense Housing Insurance Fund, which shall be primarily liable therefor, and they shall be fully and unconditionally guaranteed as to principal and interest by the United States, and such guaranty shall be expressed on the face of the debentures. In the event that the National Defense Housing Insurance Fund fails to pay upon demard,