a proposal to build in accordance with plans and specifications prepared by his own architect and the usual commercial standards of quality and workmanship. If the proposal is acceptable, they will then enter into a contract under which the Local Authority agrees to purchase the completed property. This contract is backed by HUD's financial assistance commitment to the Local Authority, thereby enabling the developer to secure commercial construction financing in his usual manner. The "turnkey" technique may also be used in the rehabilitation of existing housing; instead of a Local Authority itself acquiring and rehabilitating existing dwellings, the Local Authority, under the "turnkey" approach, can contract with a private builder or rehabilitator to purchase from him certain dwellings which he has acquired and rehabilitated to HUD standards.

(c) Joint enterprise between Local Authorities and private organizations may consist, for example, of joint undivided ownership of housing by the Local Authority and a private organization, with moderate-income families housed in units used by the private organization and low-income tenants housed in other units with the aid of HUD annual contributions channeled through the Local Authority. Another form of joint enterprise would be for a private organization having full ownership of housing to use a portion of its units to house moderate-income families with the remaining units leased for occupancy by low-income families with the aid of HUD subsidy channeled through the Local Authority.

plications and all related documents to the appropriate HUD Regional Office. Application forms and other forms, procedures, policy statements, and materials issued by HUD for the use or guidance of Local Authorities may be obtained through the appropriate HUD Regional Office; however, after approval of its application, a Local Authority will be sent copies of all relevant materials without specific request.

(b) Information with respect to methods of providing low-rent housing with private participation may be obtained from the Local Authority in the locality or from the appropriate HUD Regional Office. Information may also be obtained from the Department of Housing and Urban Development, Washington, D.C. 20410.

(c) A list of HUD Regional Offices appears as Appendix A to § 1500.7 of this chapter.

§ 1520.8 Federally owned low-rent housing.

Low-rent housing projects owned by the Federal Government have been disposed of except for project Cherokee Terrace in Enid, Okla. Information on final action on applications for tenancy and information as to final action of the Housing Manager in the procurement of supplies and materials for which such a Manager is authorized to contract shall be kept at the project office and made available to the public by the Housing Manager. Inquiries concerning the project and requests for statements of policy, procedures, and forms should also be directed to the Housing Manager. The address is: Cherokee Terrace, 619 East Main Street, Enid, Okla. 73701.

Location of FNMA Agencies and area served. Atlanta, Ga., 30303, 34 Peachtree Street, NE.: Alabama, Florida, Georgia, Kentucky, Mississippi, North Carolina, South Carolina, Tennessee.

Chicago, Ill., 60603, 1112 CommonwealthEdison Building, 72 West Adams Street: Illinois, Indiana, Iowa, Michigan, Minnesota, Nebraska, North Dakota, Ohio, South Dakota, Wisconsin.

Dallas, Tex., 75201, 411 North Akard Street: Arkansas, Colorado, Kansas, Louisiana, Missouri, New Mexico, Oklahoma, Texas.

Los Angeles, Calif., 90005, 3540 Wilshire Boulevard: Alaska, Arizona, California, Guam, Hawaii, Idaho, Montana, Nevada, Oregon, Utah, Washington, Wyoming.

Philadelphia, Pa., 19107, 211 South Broad Street: Connecticut, Delaware, District of Columbia, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Puerto Rico, Rhode Island, Vermont, Virgin Islands, Virginia, West Virginia.

Sales Office. New York, N.Y., 10006, 149 Broadway, Room 2310.

[30 F.R. 10159, Aug. 14, 1965, as amended at 32 F.R. 9662, July 4, 1967]

ORGANIZATION AND SCOPE OF OPERATIONS § 1600.1

General.

The Federal National Mortgage Association (called "FNMA" or "the corporation") purchases, services, and sells mortgages insured or guaranteed by the Federal Housing Administration (FHA) and the Veterans Administration (VA). Rural housing loans insured by the Farmers Home Administration of the Department of Agriculture (FHDA loans) are also bought and sold. The corporation also makes short-term loans on the security of such mortgages and loans. As used in this part, unless the context indicates otherwise, the term "mortgages" is inclusive of mortgages or other loans insured or guaranteed by FHA under the National Housing Act or by VA under the Servicemen's Readjustment Act of 1944 or chapter 37 of title 38, United States Code, but does not

include FHDA loans. Neither mortgages nor FHDA loans may be purchased at a price rate in excess of par (100); FHDA loans, but generally not mortgages (see § 1600.25), may be purchased when they are offered by, or cover property held by, a State, territorial, or municipal instrumentality. FNMA itself is a national corporation that had its inception in 1938. In 1954 it was rechartered by

the Congress as a mixed-ownership corporation; all of its common stock is freely transferable and is owned by private shareholders; the preferred stock is owned by the Federal Government (Secretary of the Treasury). The corporate charter expressly contemplates that in due course the preferred stock will be retired and the Secondary Market Operations (hereinafter described) will qualify to become privately owned and managed. The corporation is required to pay a full Federal income tax equivalent on the earnings of its Secondary Market Operations. Under its charter, known as the Federal National Mortgage Association Charter Act, 12 U.S.C. 1716 et seq., the corporation has established and now maintains, dating from November 1, 1954, three separate portfolios of FNMAowned mortgages, each with its own accountability. These three portfolios result from three separate operations predicated on different purposes and objectives: (1) Secondary Market Operations, as described in §§ 1600.11 to 1600.15; (2) Special Assistance Functions, as described in §§ 1600.21 to 1600.26; and (3) Management and Liquidating Functions, as described in §§ 1600.31 to 1600.33. The corporation also furnishes fiduciary services for financing purposes as described in §§ 1600.41 and 1600.42.

§ 1600.2 Area of operations.

FNMA is authorized to conduct its business in any State of the United States, including the District of Columbia, the Commonwealth of Puerto Rico, and the territories and possessions of the United States. It carries on its operations through its principal office located at 811 Vermont Avenue NW., Washington, D.C., 20414, and through the offices of its Agencies listed herein. Inquiries concerning offerings to FNMA of Mortgages and FHDA loans or concerning short-term loans may be directed to any FNMA Agency.

§ 1600.3 Public information.

Pursuant to the requirements of Part 15 of this title, FNMA maintains an information center at its principal office described in § 1600.2 and at each of its Agency Offices described in § 1600.0. There is an Information Officer in each of the information centers. Any person may obtain any information available to the public concerning FNMA from any Information Officer in the manner described in part 15 of this title, subject to the requirements and limitations set forth in such Part 15.

[32 F.R. 9662, July 4, 1967]

SECONDARY MARKET OPERATIONS

The Secondary Market Operations are basically a privately financed activity which provides supplementary assistance to the broad general secondary market for mortgages by providing a degree of liquidity for mortgage investments, thereby improving the distribution of investment capital available for mortgage financing. In accomplishing the purposes of the Secondary Market Operations, FNMA purchases mortgages and FHDA loans in areas where market funds are needed, holds them available for sale to private investors, and makes shortterm loans on the security of such mortgages and loans. Certain fees and charges may be imposed with the objective that they will reasonably prevent excessive use of FNMA's facilities and that the conduct of the operations will be within the income derived therefrom. The users of FNMA's Secondary Market Operations are required to subscribe for FNMA common stock, as stated in § 1600.15(a).

§ 1600.12 Purchases of mortgages and FHDA loans.

Purchases of mortgages and FHDA loans are confined, insofar as practicable, to those which are of such quality, type, and class as to meet, generally, the purchase standards imposed by private institutional mortgage investors. Purchases are made under the terms of specific contracts, and in accordance with the conditions and requirements stated therein. FNMA will also give consideration to the purchase, on a negotiated basis, of participations (partial interests) in mortgages and FHDA loans.

(a) Immediate purchase contract. A seller may offer mortgages or FHDA

loans to FNMA for immediate purchase by executing an appropriate immediate purchase contract and delivering therewith required documents and forms. With each offer, the seller must agree to subscribe for FNMA common stock (as stated in § 1600.15(a)) and, if required, to pay a Purchase and Marketing Fee.

(b) Repurchase option. With respect to immediate purchase contract transactions, the seller may request an Option Contract which will permit the seller to repurchase, at seller's option, the mortgages or FHDA loans sold to FNMA, at a stated repurchase price rate or rates which may be the same as paid by FNMA. The Option Contract is issued to cover a stated period after the date of purchase of the mortgages or loans by FNMA, upon payment of the required fee.

(c) Commitment contract. A seller may offer mortgages for future purchase by FNMA by executing a commitment contract which, when accepted, obligates FNMA to purchase in accordance with its terms within the commitment period, but does not obligate the seller to effect delivery. With each such offer the seller pays a Commitment Fee which is nonrefundable if the contract is accepted by FNMA. The seller is required to subscribe for FNMA common stock, as stated in § 1600.15(a). A part of the stock is paid for at the time of the offer; the remainder is paid for if and when the purchases are effected. No Purchase and Marketing Fee is applicable.

(d) Eligible mortgages. Each mortgage or FHDA loan purchased under the Secondary Market Operations must have been insured or guaranteed on or after August 2, 1954, pursant to a provision, as announced by FNMA, of the National Housing Act (12 U.S.C. 1701 et seq.); the Servicemen's Readjustment Act of 1944 or chapter 37 of title 38, United States Code; or title V of the Housing Act of 1949 (42 U.S.C. 1471 et seq.).

(e) Special acceptability requirements. On the date of the offer of a mortgage or FHDA loan to FNMA, its unpaid principal balance, unexpired term, and rate of interest must be currently acceptable to FNMA. In addition, general acceptability requirements, including those set forth in §§ 1600.51 to 1600.62 must be met.

[30 F.R. 10159, Aug. 14, 1966, as amended at 31 F.R. 16515, Dec. 28, 1966]

§ 1600.13 Purchase price.

The price or prices to be paid by FNMA are established within the range of market prices for the particular classes of mortgages or loans involved, as determined by FNMA. The price paid by FNMA for a mortgage may vary according to its interest rate, the location of the security property, the relative equity of the mortgagor, the term of the loan, and other factors. Information concerning FNMA's current mortgage purchase prices may be obtained from the FNMA Agency serving the area in which the mortgaged property is located. prices paid for FHD)A. loans will vary according to their yields, and information concerning current prices may be obtained from any FNMA Agency. All prices quoted by FNMA are subject to change without notice. A quotation of prices does not constitute an offer by FNMA but is solely an invitation to the Seller to make an offer to FNMA. FNMA is under no obligation to purchase any mortgage or loan except pursuant to the terms of a written contract executed by FNMA and a Seller.

131 F.R. 16515, Dec. 28, 1966]

The

§ 1600.14 Loans on the security of mortgages and FHDA loans.

FNMA makes bank-type short-term loans that are secured by mortgages or FHDA loans. They may not have a term in excess of 12 months; however, consideration will be given to requests for extensions not in excess of 12 months. The volume of lending activities and the establishment of loan ratios, interest rates, maturities, and charges or fees are determined by FNMA from time to time with the objective of preventing excessive use of the facilities and of assuring that the Secondary Market Operations will remain fully self-supporting.

§ 1600.15 Financing of secondary market operations.

Funds for the conduct of FNMA's Secondary Market Operations are obtained principally from borrowings from private investors, subscriptions for FNMA capital stock, liquidations of the portfolio, and net earnings.

(a) FNMA capital stock. The corporation issues nonvoting $100 par value common and preferred stock; the common shares are initially issued to lenders and other institutions that sell mortgages or FHDA loans to, or borrow funds

from, FNMA in the Secondary Market Operations; subsequent to issuance, the common stock is freely transferable. The preferred stock, in its entirety, is held either by the Secretary of the Treasury or by the corporation as corporate treasury stock. Users of the Secondary Market Operations are required to subscribe for common stock in amounts determined by FNMA, as prescribed by the corporate charter. With respect to such subscriptions, the corporation issues to each subscriber shares of common stock (only in par value denominations of $100, or multiples thereof). The amount of any subscription that cannot be evidenced by a whole share of common stock may not be withdrawn by the subscriber, but the subscriber will be permitted to supplement any such amount by payment of an additional sum sufficient to pay for a full share at the then applicable issue price. No restrictions are imposed by FNMA as to who may be the holder of such shares of common stock; however, the shares are transferable only on the books of the corporation. Pursuant to law, 12 U.S.C. 1718(f), any institution (including a national bank or State member bank of the Federal Reserve System or any member of the Federal Deposit Insurance Corporation, trust company, or other banking organization) organized under any law of the United States, including the laws relating to the District of Columbia, is authorized to subscribe to FNMA's common stock under conditions described in this paragraph and to receive, hold, or dispose of such stock.

(b) Borrowings. FNMA may issue, and have outstanding at any one time, obligations in an aggregate amount not exceeding 15 times the sum of its capital and surplus, and not in excess of its ownership under the Secondary Market Operations, free from any liens or encumbrances, of cash, mortgages, shortterm notes, and other approved securities. Such FNMA obligations are not guaranteed by the United States and do not constitute a debt or obligation of the United States. The obligations are available from time to time for sale to private investors. The Secretary of the Treasury is authorized, within certain limitations, to purchase these FNMA obligations until such time as all of the corporation's preferred stock has been retired.

[30 F.R. 10159, Aug. 14, 1965, as amended at 31 F.R. 12055, Sept. 15, 1966]