1 2 3 5 14 (1) by inserting "or part II of title XII" after "title XI"; and (2) by inserting "or part" after "under such title". FEDERAL NATIONAL MORTGAGE ASSOCIATION SEC. 5. (a) Section 302 (b) of the National Housing 6 Act is amended by inserting after "section 1004 thereof," 7 the following: "or insured under title XII,". 8 (b) Section 305 of such Act is further amended by 9 adding at the end thereof the following new subsection: 10 "(j) Notwithstanding any other provision of this Act, 11 the Association is authorized to make commitments to pur12 chase and to purchase, service, or sell any mortgages which 13 are insured under title XII of the National Housing Act. 14 The total amount of such purchases and commitments shall 15 not exceed $200,000,000 outstanding at any one time.” 16 17 COST CERTIFICATION SEC. 6. Section 227 (a) of the National Housing Act 18 is amended by striking out "or" before "(VIII)", and by 19 striking out the semicolon at the end and inserting in lieu 20 thereof the following: ", or (IX) under part II of title 21 XII;". THE CHAIRMAN OF THE COUNCIL OF ECONOMIC ADVISERS, Senator JOHN SPARK MAN, Committee on Banking and Currency, U.S. Senate, Washington, D.C. DEAR MR. CHAIRMAN: This letter is in response to your request for our views on S. 2229, a bill "To amend the National Housing Act to provide mortgage insurance for the development of land for recreational uses, and for other purposes." The objectives of the proposed legislation are twofold: to increase the supply of recreational facilities, and to provide additional employment opportunities for residents of underdeveloped areas. There are undoubtedly some localities within the United States qualifying as underdeveloped areas which possess the natural and locational prerequisites to build a significant recreation industry. In these instances tourism can provide substantial impetus to the general economic development of the area, as it has already done in some areas. Any program attempting to encourage private investment in underdeveloped areas should take cognizance of this fact and provide assistance to potential developers of recreational facilities. On the other hand, not all, or even most, underdeveloped areas are well suited for substantial recreational development. Furthermore, even in areas that are so suited for recreational development, other industries might, if induced to invest in the area, provide comparable, if not superior, employment opportunities for local residents. Federal Government assistance to recreational develop ment alone would thus be uneven, and not necessarily most beneficial to the local residents. If some other type of investment in poverty areas could generate more employment for the poor, but the Federal Government provides assistance only for recreational investment, then the Federal Government biases the pattern of private investment. This bias is disadvantageous unless some identifiable public interest exists favoring the provision of recreational facilities over the provision of other goods and services. Since the principal beneficiaries of an increase in the supply of motels, lodges, and seasonal homes would be the upper income groups, special assistance to this industry does not appear to be justified on the grounds of a priority public need. A more useful approach to the problem of increasing private investment in underdeveloped areas would be to avoid specifying one or even a few particular industries that qualify for investment assistance. If several industries might potentially locate in such an area, which in some cases would include recreational facilities, provision of equal assistance to them all would enlist the aid of the market mechanisms in determining the "best economic use" of area locations. Although possessing a laudable objective, S. 2229 would not establish an efficient mechanism for attacking poverty and underdevelopment. If recreational development, or investment in some other industry, can contribute to the economic growth of an underdeveloped area, then the more direct approach of EDA, Area Redevelopment, or similar programs is superior. These latter programs not only provide greater flexibility under a single administrative organization, but they do not run as great a risk of merely serving to redirect private capital away from other types of useful investments. For these reasons, the Council of Economic Advisers does not recommend passage of this legislation. The Bureau of the Budget has no objection to the submission of this report. Sincerely, ARTHUR M. OKUN. FEDERAL HOME LOAN BANK BOARD, Hon. JOHN SPARKMAN, Chairman, Committee on Banking and Currency, DEAR MR. CHAIRMAN: Further reference is made to your request for a report on S. 2229 of the present Congress. Section 1 of the bill would add a new title XII to the National Housing Act to provide mortgage insurance for the development of land and the construction of facilities for recreational purposes in underdeveloped areas of the United States. Under part I of the new title XII, the Secretary of Housing and Urban Development would be authorized to insure and make commitments to insure first mortgages given to mortgagees (approved by the Secretary) by State recreational development corporations to secure the financing for the development of land for recreational or related purposes within certain underdeveloped areas. Before a land development project would be eligible for such mortgage insurance, the Secretary would have to determine, after consultation with appropriate State agencies, that the project is consistent with, and in furtherance of, an overall economic development program being carried out by the State. Insured mortgage loans under this part could not exceed the lesser of (1) 90% of the estimated value, as determined by the Secretary, of the property upon completion of the land development or (2) 75% of the estimated value of the land before development, plus 90% of the estimated cost of development. The maximum outstanding principal obligation permitted for any single land development project would be $25,000,000. Under part II, the Secretary would be authorized to insure and make commitments to insure mortgages (not limited to first mortgages) given to approved mortgages by approved mortgagors to secure the financing for the construction or rehabilitation of facilities for recreational and related uses, including homes, lodges, motels and recreational, commercial and community facilities. An insured mortgage loan under this part could not exceed the lesser of (1) 90% of the estimated value, as determined by the Secretary, of the property or project when construction or rehabilitation is completed (including certain construction costs) or (2) $5,000,000; maturity could not exceed 30 years. Part III would authorize the Secretary to collect reasonable premiums for mortgage insurance and to make reasonable charges for analyses of land development plans and for appraisals and inspections. The Secretary would be authorized to make such rules and regulations and to require such agreements as he might deem necessary or desirable to carry out the provisions of title XII. Section 2 of the bill would amend section 24 of the Federal Reserve Act (12 U.S.C. § 371) to permit national banks to make real estate loans secured by mortgages insured under the new title XII of the National Housing Act. Section 3 would amend subsection (c) of section 5 of the Home Owners' Loan Act of 1933 (12 U.S.C. § 1464 (c)) to permit Federal savings and loan associations, subject to regulation by this Board, to invest in loans and interests in loans secured by mortgages insured under the new title XII. Section 4 would amend subsection (a) of section 212 of the National Housing Act (12 U.S.C. § 1715c (a)) to extend the provisions of that section concerning labor standards to land development and construction projects financed by mortgages insured under title XII. Section 5(a) would amend subsection (b) of section 302 of the National Housing Act (12 U.S.C. § 1717(b)) to permit the Federal National Mortgage Association to purchase and deal under section 305 of the National Housing Act in mortgages insured under title XII. Section 5(b) would amend section 305 of the National Housing Act (12 U.S.C. § 1720) by adding a new subsection (j) permitting FNMA to make commitments to purchase and to purchase, service, or sell mortgages insured under title XII up to a limit of $200,000,000 outstanding at any one time. Section 6 would amend subsection (a) of section 227 of the National Housing Act (12 U.S.C. § 1715r (a)) to include within the term "new or rehabilitated multifamily housing" certain projects insured under part II of title XII. This would impose the requirement of a builder's cost certification on such title XII projects. The Federal Home Loan Bank Board is of the view that, if the bill is enacted, Federal savings and loan associations should be permitted to invest in loans secured by mortgages insured under title XII, as section 3 would provide. Even though some mortgages insured under part II of title XII might not be first mortgages, the insurance should provide adequate protection for any Federal association making an investment in a loan secured by such a mortgage. Although the Board has no further comments of a substantive nature, two technical comments might be made. First, the reference to "title" at line 20, page 8, should read "part". Second, in section 2, the reference to "the next to the last sentence" in line 5, page 13, should read "the second from the last sentence". We have been advised by the Bureau of the Budget that there is no objection to the submission of this report from the standpoint of the Administration's program. With kindest regards, I am, Sincerely, 91-619 0-68-pt. 2- -25 JOHN E. HORNE, Chairman Hon. JOHN SPARKMAN, THE SECRETARY OF HOUSING AND URBAN DEVELOPMENT, Chairman, Committee on Banking and Currency, Washington, D.C. DEAR MR. CHAIRMAN: This is in further reply to your request for the views of this Department on S. 2229, a bill "To amend the National Housing Act to provide mortgage insurance for the development of land for recreational uses, and for other purposes." This bill would authorize a new FHA mortgage insurance program for the development of land for recreational purposes and the construction or rehabili tation of recreational facilities in underdeveloped areas (redevelopment areas or economic development regions designated under the Public Works and Economic Development Act of 1965 and the Appalachian region). A prerequisite for both types of insured loans would be that the activities to be carried out would promote employment and economic activity in the area. Land development loans would be made available on an acceptable risk basis to nonprofit or limited dividend corporations authorized by the State to develop the land in accordance with an overall economic development program carried out by the State. Land development loans would be limited to a maturity of 7 years, except where privately owned water and sewage systems were involved: the maximum loan would be $25 million and could not exceed 90 percent of estimated value upon completion and not more than 75 percent of the estimated value of land before development plus 90 percent of development costs. There would be no limitation on the interest rate or on mortgage insurance premiums. Loans for recreational facilities would be made available on an acceptable risk basis to approved mortgagors and could not exceed $5 million and 90 percent of the value of the project when completed. The maximum loan maturity would be 30 years and the interest rate could not exceed 6 percent. Both land development and recreational facility loans would be eligible for special assistance purchase by FNMA up to a total of $200 million outstanding at any one time. While the program authorized by S. 2229 is in many respects patterned after title X of the National Housing Act, which authorizes mortgage insurance for land development and new communities, its primary objective is to create job opportunities and stimulate the economy of certain underdeveloped areas. These areas are now receiving special Federal assistance through the Economic Development Administration in the Department of Commerce and the Appalachian Regional Commission. This assistance includes the making of grants and loans for public works and development facilities, and the making and guaranty of loans and the purchasing of evidences of indebtedness to assist in financing industrial or commercial location in these areas. The objectives and areas to be served by S. 2229 correspond to those of the Economic Development Administration and the Appalachian Commission under their enabling statutes. We believe that any new program for development of these areas, such as proposed by S. 2229, should be integrated into the package of special assistance programs administered by these agencies. Accordingly, we recommend that the administration of the program proposed by S. 2229 not be placed in this Department. With respect to the desirability of mortgage insurance or other forms of assistance for recreational development as a stimulant to the economy in underdeveloped areas, we would defer to the agencies more directly concerned with promoting economic growth in these areas. The Bureau of the Budget has advised that there is no objection to the presentation of this report from the standpoint of the Administration's program. Sincerely yours, (S) ROBERT C. WEAVER. 90TH CONGRESS 1ST SESSION S. 2343 IN THE SENATE OF THE UNITED STATES AUGUST 24, 1967 Mr. Tydings (for himself and Mr. MONDALE) introduced the following bill; which was read twice and referred to the Committee on Banking and Currency A BILL To amend the United States Housing Act of 1937 to facilitate the purchase of dwelling units by tenant families; to encourage the formation of resident councils in public housing projects; to assist in the rehabilitation and modernization of such projects and in the provision of needed social services; and for other purposes. 1 Be it enacted by the Senate and House of Representa2 tires of the United States of America in Congress assembled, 3 PURCHASE BY TENANT FAMILIES OF DWELLING UNITS IN 4 LOW-RENT HOUSING PROJECTS 5 SECTION 1. Paragraph (9) of section 15 of the United 6 States Housing Act of 1937 is amended to read as follows: 7 "(9) (a) Notwithstanding any other provision of this 8 Act, but subject to the provisions of any contract with the |