Functions of the Federal Housing Administration

Under authority provided in Titles I, II, VI, and VII of the National Housing Act of June 27, 1934, as amended, the Federal Housing Administration operates an insurance program designed to encourage improvement in housing standards and conditions and to guide the creation of a sound mortgage market. The FHA itself makes no loans and does no building.

Title I, Housing Renovation and Modernization:

Title I of the act authorizes the FHA to insure qualified lending institutions against loss on loans made to finance the alteration, repair, improvement, or conversion of existing structures, and the building of small new structures.

Title II, Mortgage Insurance:

Section 203 of Title II authorizes the insurance of mortgages in amounts up to $16,000 on one- to four-family homes.

Section 207 authorizes the insurance of loans on multifamily rental housing projects and projects built by nonprofit cooperatives to provide housing for their members.

Title VI, War Housing Insurance:

Section 608 (added to the act in 1941) authorizes the insurance of mortgages on one- to four-family dwellings. The authority to issue commitments on new construction under this section expired April 30, 1948.

Section 608 (added in 1942) authorizes the insurance of mortgages in amounts up to $5,000,000 on rental housing projects.

Section 609 (added in 1947) authorizes the insurance of short-term loans to finance the manufacture of housing, and the insurance of lending institutions against loss on notes given in part payment by purchasers of manufactured housing financed with insured loans.

Section 610 (added in 1947) authorizes the insurance under Sections 603 and 608 of mortgages on specified types of permanent housing sold by the Government.

Section 611 (added in 1948) in order to encourage the application of cost-reduction techniques through large-scale modernized construction operations authorizes the insurance of mortgages, including construction advances, on projects of 25 or more new single-family dwellings.

Title VII, Insurance for Investments in Rental Housing for Families of Moderate Income:

Title VII (added in 1948) authorizes the insurance of a minimum. amortization charge and an annual return on outstanding investments in rental projects for moderate-income families, where no mortgage financing is involved.

Section I

GENERAL REVIEW

Significant Developments in 1948

Two notable events of 1948 were the passage of the Housing Act of 1948, which placed increased responsibilities on the Federal Housing Administration, and the writing of a record volume of FHA insurance during the year.

Provisions of the 1948 Housing Act and Other Legislation

Public Law 468, Eightieth Congress, approved March 31, 1948, extended from March 31 to April 30 the expiration date of the authority to issue commitments for the insurance of new-construction mortgages under Sections 603 and 608 of the National Housing Act, and substituted value for necessary current cost as the basis for considering applications under Section 603 received during the period of the extension. This law also increased the insurance authorization under Title VI from $4,950,000,000 to $5,350,000,000.

The chief purposes of the Housing Act of 1948 (Public Law 901, 80th Congress, approved August 10) were to stimulate the production through private enterprise of housing in the lower price and rental ranges where the greatest demand exists, and to aid the transition from emergency to normal peacetime conditions in home financing. The provisions of the act that directly affected FHA operations took the form of amendments to the National Housing Act, including the following:

Title I was amended to provide insurance coverage for loans in amounts up to $10,000, with maturities up to 7 years, to finance the alteration, repair, improvement, or conversion of existing structures used or to be used as apartment houses or dwellings for two or more families. The maximum amount of a Title I "Class 3" loan to finance the construction of a single-family dwelling was increased from $3,000 to $4,500. The limitation on aggregate outstanding insurance liability under Title I was increased from $165,000,000 to $200,000,000.

Section 203 of Title II was amended by increasing the maximum amount of a 90 percent mortgage from $5,400 to $6,300, and the maximum amount of a 90-80 percent mortgage from $8,600 to $9,500 (90 percent of the first $7,000 of appraised value and 80 percent of the remainder up to $11,000). The 25-year maximum maturity for

merly applicable only to mortgages of $5,400 or less on singlefamily owner-occupied homes now applies to mortgages up to $16,000 on property approved for insurance before construction is begun.

Section 203 was further amended by the addition of a new subsection 203 (b) (2) (D) to authorize the insurance of mortgages on single-family dwellings up to 95 percent of appraised value when the loan is made to an owner-occupant, or 85 percent when made to an operative builder. The maximum amount of such a loan is $6,000, and the maximum maturity is 30 years.

Section 204 was amended to permit the inclusion of a limited amount of foreclosure costs in the debentures issued with respect to mortgages insured under Section 203 (b) (2) (B) when the amount of mortgage principal amortized before foreclosure is less than 10 percent of the appraised value of the property. Inclusion of these costs was formerly limited to mortgages accepted for insurance before July 1, 1944. Similar costs may be included in debentures issued with respect to mortgages insured under the new Section 203 (b) (2) (D), and mortgages on cooperative projects and projects for low-income families insured under Section 207. Section 204 was further amended to provide that when the amount realized from a property insured under Section 207 and conveyed to the FHA exceeds the claims of the FHA and the mortgagee against the property the excess is to be credited to the Housing Insurance Fund instead of being refunded to the mortgagor.

Section 207 was amended to provide for:

(1) Insurance of mortgages in amounts up to $50,000,000 when the mortgagor is a governmental agency or a limited-dividend, redevelopment, or housing corporation restricted by Federal or State laws or regulations of State banking or insurance departments. Other mortgages insured under Section 207 may not exceed $5,000,000. (2) Insurance of mortgages up to 90 percent of estimated value on special projects for low-income families and on cooperative projects, and mortgages up to 95 percent of replacement costs as of December 31, 1947, on cooperative projects for veterans. Other mortgages insured under Section 207 may not exceed 80 percent of estimated value, and may not exceed the estimated cost of the completed physical improvements.

(3) Limitation of maximum mortage amount attributable to dwelling use to $8,100 per family dwelling unit; or, for a cooperative project, to $8,100 per dwelling unit or $1,800 per room if the FHA finds that the per-room basis more adequately meets the needs of the cooperative.

(4) Amortization within a maximum term of 40 years for mortgages on cooperative projects or projects for low-income families. Other mortgages insured under Section 207 are to provide for amortization "within such term as the Commissioner shall prescribe."

The insurance authorization under Title VI was increased from $5,350,000,000 to $5,750,000,000, with an additional $400,000,000 to be made available at the discretion of the President.

Under Section 608 of Title VI, the authority to issue commitments of mortgage insurance on new construction, which had expired April 30, was extended to March 31, 1949, with the stipulation that in selecting tenants no discrimination should be made against families with children. The limitation on maximum mortgage amount was amended to provide for (1) not over $5,000,000, (2) not over 90 percent of necessary current cost, (3) not to exceed the cost of the completed physical improvements, (4) not over 90 percent of the FHA estimate of replacement costs as of December 31, 1947, and (5) not over $8,100 per family dwelling unit. The former limitations were $5,000,000, 90 percent of necessary current cost, cost of the completed physical improvements, and $1,500 to $1,800 per room.

Section 609 was amended to provide for insurance of lenders against loss on notes given by purchasers in part payment for houses the manufacture of which was financed under this section, and for a premium charge of not over 1 percent for such insurance.

Section 610 was amended to include mortgages on additional types of permanent housing sold by the Government.

Section 611, providing for the insurance of mortgages, including construction advances, on projects of 25 or more single-family dwellings, was added to Title VI "in order to assist and encourage the, application of cost-reduction techniques through large-scale modernized site construction of housing and the erection of houses produced by modern industrial processes." The amount of the blanket mortgage may not exceed 80 percent of the estimated value of the completed project, and further may not exceed a sum computed on the basis of $6,000 or 80 percent of valuation per dwelling unit, whichever is less. The maximum interest rate permitted is 4 percent per annum, or 41⁄2 percent if the Commissioner determines that the mortgage market demands it. The mortgage may provide for release of individual dwellings from the mortgage lien. Occupancy preference is to be given to World War II veterans and their families and to hardship

cases.

Title VII, Insurance for Investments in Rental Housing for Families of Moderate Income, was added to the National Housing Act to encourage investments in rental housing for moderate-income families,