The current section 245 program has been successful in helping to alleviate the burden of high initial monthly mortgage payments by reducing those payments in the early years of the mortgage and allowing the borrower to repay the additional money borrowed in higher payments in later years.

However, the current GPM program has been limited in its effectiveness. The program requires substantial down payments-as high as 8 percent-in order to assure compliance with the statutory requirement that outstanding loan balances shall not exceed 97 percent of the appraised value of the property at the time of origination of the loan. The higher down payment-$4,200 for a $55,000 home as compared with $2,250 tinder a standard FHA mortgage-prices these mortgages beyond the reach of many young families. In addition, the relatively steep annual increases in monthly payments under the most popular GPM option-increases of 7% percent over a 5-year term— limits the usefulness of the program by focusing it on primarily young professionals and others with the brightest economic prospects.

This provision would create a new type of GPM which is better targeted to the moderate-income family. It would provide for a reduction in the downpayment to the same downpayment which is required under the regular section 203(b) program. It would allow a number of new options by removing the existing limitation that the mortgage balance not exceed 97 percent of the appraised value of the home at the time of purchase. Under this program, the mortgage balance may never exceed 97 percent of the "projected value" of the property. The "projected value" would be calculated by increasing the initial appraised value of the property by an appreciation rate of not more than 21 percent.

The committee recognizes that there is some risk inherent in this program in the event that housing prices do not continue to appreciate in the future. Therefore, the committee has decided to limit the exposure of the FHA Insurance Fund by placing an annual limit on the volume of these new GPM's of 20 percent of the initial principal amount in all FHA-insured one- to four-family mortgages written in that year. The committee would also urge HUD to establish sound procedures of underwriting as applied to the new program. Collateral for advances

Section 321 of the bill would permit the Federal Home Loan Bank to prescribe the type of loans or obligations that can be used as collateral for advances from the Federal Home Loan Bank System.

All federally insured savings and loans and mutual savings banks are eligible for extensions of loans, known as advances from their regional Federal Home Loan Banks to meet home mortgage demands during periods of tight money, reduced savings inflows, or to cover extraordinary savings withdrawal requests.

In order to obtain advances (loans), member institutions are required by statute to pledge collateral in the form of specific mortgages and obligations as prescribed by section 10 of the Federal Home Loan Bank Act.

Under Section 10(a), security for advances is limited to certain mortgages, with specific loan-to-value ratios, and a ceiling limitation of not more than a 30-vear term nor exceeding $60,000 per unit.

This amendment would delete the specific loan requirements in section 10 and permit such collateral in the form of residential home

mortgages and U.S. obligations as the Federal Home Loan Bank may prescribe.

The committee believes that the $60, 00 and 30-year term limitation is a serious barrier to the use of the advance mechanism which was established by Congress to provide liquidity to home mortgages. In many high cost areas, thrifts have used the bulk of the mortgages in their portfolios that fit these terms for collateral. Additionally, under the present law, alternative mortgages are not eligible for use as collateral. The committee believes it is in the best interest of the thrift industry and home financing that all mortgages be eligible for collateral so thrifts can continue to make home financing available. Hospital refinancing

Section 817 of the Housing and Community Development Act of 1974 prohibits the administrative withholding or conditioning of Federal housing or community development assistance by reason of the fact that State or local governments were using the proceeds of tax-exempt borrowings to provide financing for use in connection with such Federal assistance. Congress passed section 817 because an agency of the Executive Branch had proposed to prohibit by administrative action the use of State and local tax-exempt borrowings in combination with Federal loan guarantees. Section 817 was necessary to make it abundantly clear that such a major interference with Federal assistance and guarantee programs authorized by the Congress should occur only as a result of congressional action and not by administrative decree.

It has come to the committee's attention that the Assistant Secretary for Housing has administratively terminated the availability of GNMA mortgage backed securities to be used in combination with tax-exempt obligations involving hospitals. The committee considers this moratorium inconsistent with the purposes and provisions of section 817. Accordingly, the committee urges the Secretary to rescind this administrative decision in order to permit many of our nation's financially pressed hospitals to continue servicing their patients and obtain relief from rising costs by achieving the cost savings which would result from the use of federally guaranteed loans under sections 242 and 306 (g) of the National Housing Act to collateralize tax-exempt obligations issued to refinance hospitals, either partially or fully.

Such refinancings include the refunding of existing indebtedness and commitments therefore as well as refinancings which are necessary to replace, modify, or rehabilitate existing hospital and health care facilities in order to bring them into conformance with applicable Federal or State health codes. It does not include, however, any borrowing for new hospital construction which is not mandated by or in conformance with such applicable Federal or State health codes, unless applications were filed with HUD or HEW prior to May 9, 1979.

TITLE IV-INTERSTATE LAND SALES

Section 401 of the bill would amend the Interstate Land Sales Full Disclosure Act.

Technical and conforming amendments are made to the municipal exemption enacted last year as part of the Housing and Community Development Amendments of 1978 and the circumstances under which this exemption may be utilized are clarified.

New exemptions to Federal registration and disclosure provisions, but not to the fraud provisions, would be created.

Under certain circumstances, the sale or lease of real estate by a developer engaged in a sales operation which is only intrastate in nature would be exempt. Hence, when the subdivision and principal residence of the purchaser are in the same State the exemption may be available even though telephones, the mail or other instrumentality of interstate commerce may be used by the developer.

Also, under certain circumstances, the sale or lease of real estate, not to exceed 500 lots in a subdivision, by a developer to a resident of another State when the principal residence of the purchaser is within a radius of 100 miles from the property to be purchased would be exempt.

These two new exemptions would only apply if:

The land is free and clear of all liens, encumbrances, and adverse claims;

The purchaser has made an onsite inspection of the land prior to purchase; and

Each purchase or lease agreement contains a clear and specific statement describing the party responsible for providing and maintaining the roads, water facilities, sewer facilities, and any existing or proposed amenities.

Lots sold under the "100-mile radius" provision would further require the developer to execute and supply the purchaser with a written designation of the developer's agent within the purchaser's State for the service of process, and provide a simple affirmation to the Secretary that he has complied with these requirements. With the exception of these two additional requirements, sales of lots which would be exempt under the 100-mile radius provision would be treated as if they were intrastate sales.

Other changes made by these amendments would include:

Clarifying the circumstances under which the voidability of contracts due to nondelivery of a property report would be applicable;

Clarifying the operative time for the application of the statute of limitations provisions; and

Directing the Secretary to conduct rulemaking and adjudicatory actions in compliance with the Administrative Procedures Act, and to provide written notice of reasons in any action taken which affects an individual.

The committee believes these amendments provide specific protections for purchasers who would not, under the new exemptions, receive the HUD property report. In addition, the provisions are explicit that HUD retains its full regulatory power to investigate and prosecute fraud.

SECTION-BY-SECTION SUMMARY

TITLE I-COMMUNITY AND NEIGHBORHOOD DEVELOPMENT AND

Rehabilitation loans

CONSERVATION

Section 101 (a) of the bill would amend section 312(d) of the Housing Act of 1964 to authorize an appropriation of an amount not to exceed $130 million for fiscal year 1980.

Section 101 (b) would amend section 312 (h) of the Act to extend the Secretary's authority to make section 312 loans through fiscal year

1980.

Comprehensive planning

Section 102 would amend Section 701 (e) of the Housing Act of 1954 by authorizing an appropriation of not to exceed $40 million for fiscal year 1980 for the section 701 comprehensive planning assistance program.

Neighborhood Reinvestment Corporation

Section 103 would amend section 608 (a) of the Housing and Community Development Amendments of 1978 by authorizing appropriations of not to exceed $12 million for fiscal year 1980.

Neighborhood self-help development

Section 104 would amend section 705 of the Housing and Community Development Amendments of 1978 by reducing the authorization for fiscal year 1980 from $15 million to $13.5 million.

Livable cities

Section 105 would amend section 807 of the Housing and Community Development Amendments of 1978 by reducing the fiscal year 1980 authorization from $10 million to $4.5 million.

Community development block grant programs

Section 106 (a) would amend section 103 (c) of the Housing and Community Development Act of 1974 by increasing the fiscal year 1980 authorization for the urban development action grant program from $400 million to $675 million.

Section 106(b) would amend section 104 (b) (3) of such act by authorizing the Secretary to waive all or part of the program summary, formulation and description requirements contained in section 104 (a) (1), (2) and (3), respectively, where an application does not involve a comprehensive community development program, as determined by the Secretary, and the Secretary determines that, having regard to the nature of the activity to be carried out, such waiver is not inconsistent with the purposes of the block grant program.

Section 106 (c) would amend section 106 (m) of the Housing and Community Development Act of 1974 by extending through fiscal year 1980 the provision that, if the total amount available for distribution under section 106 is insufficient to meet all entitlement funding requirements, and funds are not otherwise appropriated to meet the shortfall, the deficiency is to be made up through a pro-rata reduction in all section 106 grants.

Section 106(d) of the act would amend section 119 of the Housing and Community Development Act of 1974 to include cities and urban counties with pockets of poverty in the urban development action grant (UDAG) program. The amendment would allow both large and small cities with pockets of poverty to participate in that program.

Cities and urban counties of 50,000 or more in population would be eligible for the UDAG program if they contain an area comprised of one or more contiguous census tracts with a population of 10,000 persons or 10 percent of the population, whichever is smaller, providing those areas meet certain eligibility criteria. Cities and urban counties of less than 50,000 in population would be eligible for the UDAG pro

gram if they contained an area comprised of one or more contiguous census tracts with a population of 2,500 persons or 10 percent of the population, whichever is larger, providing those areas also meet certain eligibility criteria.

Grants made under this amendment must be used for the direct benefit of the area or areas exhibiting physical and economic distress. The Secretary must find that the cities and urban counties would be providing comparable services to the areas of distress commensurate with those provided to other areas of those cities or urban counties. Up to 20 percent of the authorized funding for the UDAG program would be available to cities and urban counties with pockets of poverty.

Section 106 (e) would amend section 119 of the act to authorize the Secretary to consider townships as cities for the purposes of eligibility under the urban development action grant program.

Urban homesteading amendment

Section 107(a) would amend section 810 of the Housing and Community Development Act of 1974 to allow the direct transfer of properties from FMHA and VA to local governments for use in urban homesteading programs. HUD is authorized to reimburse those agencies for transferred properties utilizing section 810 funds.

Section 107(b) would amend section 810 of the Housing and Community Development Act of 1974, to exempt local government from the requirement of the Uniform Relocation Assistance and Real Property Acquisition Policies Act when acquiring properties for use in an urban homesteading program. In each case, the seller must knowingly waive his rights under the act.

TITLE II-HOUSING ASSISTANCE PROGRAMS

Low-income housing

Section 201(a) of the bill would amend section 5(c) of the United States Housing Act of 1937 to provide, subject to approval in an appropriation act, annual contributions contract authority for the public housing and section 8 housing assistance payments programs in amounts of $1,286,155,000 for fiscal year 1980.

Section 201 (b) would amend section 8(f) (1) of the act by replacing the 80-percent ceiling on median area income for eligibility for section 8 rental assistance, with a ceiling of 70 percent. Those presently receiving such assistance would not be affected by the revision.

Section 201(c) would amend section 9 (c) of the 1937 act to provide an additional authorization of not to exceed $741,500,000 for fiscal year 1980 for operating subsidies for public housing projects, pursuant to that act.

Operating assistance for troubled multi-family housing projects

Section 202 (a) would amend section 201 (h) of the Housing and Community Development Amendments of 1978 by authorizing not to exceed $82 million for the section 201 troubled projects program for fiscal year 1980.

Section 202 (b) (1) would amend section 236 (f) (3) (B) of the National Housing Act to direct the Secretary to utilize amounts credited to the section 236 rental housing assistance fund prior to October 1, 1978, but remaining unobligated on October 31, 1978 (the date of enactment of the 1978 amendments), for the sole purpose of carrying out the section 201 troubled projects program.