the Secretary of the Treasury of such obligations under this subsection shall be treated as public debt transactions of the United States. (d) Repealed.1

SPECIAL ASSISTANCE FUNCTIONS

SEC. 305. (a) To carry out the purposes set forth in paragraph (b) of section 301, the President, after taking into account (1) the conditions in the building industry and the national economy and (2) conditions affecting the home mortgage investment market, generally, or affecting various types or classifications of home mortgages, or both, and after determining that such action is in the public interest, may under this section authorize the Association, for such period of time and to such extent as he shall prescribe, to exercise its powers to make commitments to purchase and to purchase such types, classes, or categories of home mortgages (including participations therein) as he shall determine.

2

(b) The operations of the Association under this section shall be confined, so far as practicable, to mortgages (including participations) which are deemed by the Association to be of such quality as to meet, substantially and generally, the purchase standards imposed by private institutional mortgage investors but which, at the time of submission of the mortgages to the Association for purchase, are not necessarily readily acceptable to such investors. Subject to the provisions of this section, the prices to be paid by the Association for mortgages purchased in its operations under this section shall be established from time to time by the Association. The Association shall impose charges or fees for its services under this section with the objective that all costs and expenses of its operations under this section should be within its income derived from such operations and that such operations should be fully self-supporting.3

(c) The total amount of purchase and commitments authorized by the President pursuant to subsection (a) of this section shall not exceed $1,700,000,000 outstanding at any one time, which limit shall be increased by $100,000,000 on the date of the enactment of the Housing

1 Sec. 204 (b) of Public Law 1020, 84th Congress, approved August 7, 1956, 70 Stat. 1091, 1096, in rewriting sec. 304 (d) removed a prohibition against advance contracts or commitments (on other than a "one-for-one" basis) and retained a prohibition against the purchase of participations. Sec. 704 of Public Law 88-560, approved September 2, 1964, 78 Stat. 769, 802, eliminated the prohibition against the purchase of participations under the Secondary Market Operations by repealing sec. 304 (d).

2 Sec. 303(b), Housing Act of 1959, Public Law 86-372, approved September 23, 1959, 73 Stat. 654, 669, provides:

"(b) When the holder of a commitment contract entered into by the Federal National Mortgage Association prior to August 27, 1958, pursuant to section 305 of the National Housing Act, cannot deliver the mortgages covered thereby within the original commitment period, and establishes that hardship to such holder will result therefrom and that such inability to deliver the mortgages is a consequence of circumstances beyond the control of such holder, the Association shall reissue or extend such commitment for a reasonable additional period or periods, according to the circumstances, on terms not less favorable than were the terms of the original commitment."

3 Sec. 205 of Public Law 1020, 84th Congress, approved August 7, 1956, 70 Stat. 1091, 1096, prescribed a minimum price of 99 for a period of 1 year from August 7, 1956. Sec. 204 (a) of Public Law 85-104, approved July 12, 1957, 71 Stat. 294, 298, prescribed a minimum price of par for the period ending August 7, 1958. Sec. 204 (b) of Public Law 85-104, 71 Stat. 299, limited charges and fees to a maximum of 12 per centum and specified that not more than one-half of the charges or fees imposed with respect to any mortgage could be collected at the time of FNMA's commitment to purchase. Sec. 303(a) of Public Law 86-372, approved September 23, 1959, 73 Stat. 654, 669, had the effect of restoring to sec. 305(b) the language originally provided in the 1954 FNMA Charter Act to govern purchase prices and charges or fees.

and Urban Development Act of 1965, by $550,000,000 on July 1, 1967, and $525,000,000 on July 1, 1968.1

(d) The Association may issue to the Secretary of the Treasury its obligations in an amount outstanding at any one time sufficient to enable the Association to carry out its functions under this section, such obligations to mature not more than five years from their respective dates of issue, to be redeemable at the option of the Association before maturity in such manner as may be stipulated in such obligations. Each such obligation shall bear interest at a rate determined by the Secretary of the Treasury, taking into consideration the current average rate on outstanding marketable obligations of the United States as of the last day of the month preceding the issuance of the obligation of the Association. The Secretary of the Treasury is authorized to purchase any obligations of the Association to be issued under this section, and for such purpose the Secretary of the Treasury is authorized to use as a public debt transaction the proceeds from the sale of any securities issued under the Second Liberty Bond Act, as now or hereafter in force, and the purposes for which securities may be issued under the Second Liberty Bond Act, as now or hereafter in force, are extended to include any purchases of the Association's obligations hereunder.

(e) Notwithstanding any other provision of this Act, the Association is authorized to enter into advance commitment contracts and purchase transactions which do not exceed $200,000,000 outstanding at any one time, if such commitments or transactions relate to mortgages with respect to which the Federal Housing Commissioner shall have issued pursuant to section 213 either a commitment to insure or a statement of eligibility; but such commitments in any one State shall not exceed $20,000,000 outstanding at any one time: Provided, That (1) of the total amount of advance commitment contracts and purchase transactions authorized by this subsection, the amount of $50,000,000 shall be available solely for commitments or purchases of mortgages where the management or sales-type cooperative involved is certified by the Federal Housing Commissioner as a consumer cooperative, and (2) of

1 Sec. 208 of Public Law 1020, 84th Congress, approved August 7, 1956, 70 Stat. 1091, 1097, corrected an error, substituting the word "purchases" for "purchasers". Sec. 205 of Public Law 85-104, approved July 12, 1957, 71 Stat. 294, 299, increased the general authorization from $200,000,000 to $450,000,000, and eliminated a $100,000,000 authorization for immediate participations in mortgages and a related unspecific authorization for deferred participations. Sec. 2 of Public Law 85-364, approved April 1, 1958, 72 Stat. 73, substituted "$950,000,000" for "$450,000,000". Sec. 601 (a) of Public Law 87-70, approved June 30, 1961, 75 Stat. 149, 175, substituted "$1,700,000,000" for $950,000,000". Sec. 801(a) of Public Law 89-117, approved August 10, 1965, 79 Stat. 451, 493, added the provisions for increases in the limit of $100,000,000 on August 10, 1965, $450,000,000 on July 1, 1966, $550,000,000 on July 1, 1967, and $525,000,000 on July 1, 1968. Sec. 3(a) of Public Law 89-429, approved May 24, 1966, 80 Stat. 164, 166, repealed the addition of $450,000,000 on July 1, 1966. By reason of adjustments in the dollar limitation of sec. 305(c), effected by secs. 305(f), 305 (g), and 306(f), this amount as of November 3, 1966, is $2,418,417,256.71.

2 Sec. 103 of Public Law 345, 84th Congress, approved August 11, 1955, 69 Stat. 635, 636, added sec. 305 (e). Sec. 207 of Public Law 1020, 84th Congress, approved August 7, 1956, 70 Stat. 1091, 1097, amended the original language, relating the total authorization in the first sentence not only to commitments but also to purchases, and making the State authorization revolve. Sec. 2 of Public Law 85-10, approved March 27, 1957, 71 Stat. 7, increased the total authorization in the first sentence from $50,000,000 to $100,000,000 and raised the State authorization from $5,000.000 to $10,000,000. Sec. 206 of Public Law 85-104, approved July 12, 1957, 71 Stat. 294, 299, amended sec. 305 (e) to read as set forth in the text of the first sentence thereof above. Sec. 304 of Public Law 86-372, approved September 23, 1959, 73 Stat. 654, 669, added the second sentence. Sec. 109 (b) of Public Law 88-560, approved September 2, 1964, 78 Stat. 769, 777, added the third sentence of sec. 305 (e).

the commitments in any one State, not more than $15,000,000 shall be outstanding at any one time for mortgages with respect to cooperative projects which are not of the type described in clause (1) of this proviso. On and after the date of enactment of the Housing Act of 1959, the Association is authorized to enter into advance commitment contracts and purchase transactions (in addition to those authorized by the preceding sentence) relating to mortgages with respect to which the Federal Housing Commissioner shall have issued pursuant to section 213 a commitment to insure or a statement of eligibility, without regard to any of the limitations contained in the preceding sentence; except that the total amount of the additional advance commitment contracts and purchase transactions authorized by this sentence which may be outstanding at any one time shall not exceed $25,000,000, of which the amount of $12,500,000 shall be available solely for commitments or purchases of mortgages where the management or sales-type cooperative involved is certified by the Federal Housing Commissioner as a consumer cooperative and the amount of $12,500,000 shall be available solely for commitments or purchases of mortgages where the cooperative involved is a builder-sponsor cooperative. Without regard to any of the limitations of this subsection except the total amount of authorizations available, the Association is authorized to enter into advance commitment contracts and purchase transactions on supplementary cooperative loans with respect to which the Federal Housing Commissioner shall have issued, pursuant to section 213 (j), either a commitment to insure or a statement of eligibility; but such commitments and purchases shall be made solely where there is a management-type cooperative involved which is certified by the Federal Housing Commissioner as a consumer cooperative.

(f) Notwithstanding any other provision of this Act, the Association is authorized to make commitments to purchase and to purchase, service, or sell, any mortgage (or participation therein) which is insured under title VIII of this Act, as amended on or after August 11, 1955: Provided, That the total amount of purchases and commitments authorized by this subsection shall not exceed $500,000,000 outstanding at any one time: Provided further, That of the amount authorized in the preceding proviso not less than $58,750,000 shall be available for such purchases and commitments with respect to mortgages insured under section 809: Provided further, That any portion of the total amount of authority set forth in the first proviso of this subsection, which (1) is not required under the second proviso of this subsection to be kept available for purchases and commitments with respect to mortgages insured under section 809, and (2), on the date of enactment of the Housing and Urban Development Act of 1965 and on each July 1 thereafter, would otherwise be available for making new purchases and commitments pursuant to this subsection, shall be transferred to

1 Sec. 402 of Public Law 345, 84th Congress, approved August 11, 1955, 69 Stat. 635, 651, added sec. 305(f). Sec. 206 of Public Law 1020, 84th Congress, approved August 7, 1956, 70 Stat. 1091, 1097, substituted "on or after August 11, 1955" for "by the Housing Amendments of 1955". Sec. 207 of Public Law 85-104, approved July 12, 1957, 71 Stat. 294, 299, increased the authorization from $200,000,000 to $450,000,000 and added the initial language of the second proviso. Sec. 3 of Public Law 85-364, approved April 1, 1958, 72 Stat. 73, increased the total amount authorized for purchases and commitments from "$450,000,000" to "$500,000,000" and substituted "$58,750.000" for "7.5 per centum". Sec. 81(b) of the Housing and Urban Development Act of 1965. Public Law 89-117, approved August 10, 1965, 79 Stat. 451, 493, added the third proviso.

and merged with the authority granted by subsection (a) and added to the amount of such authority which is available, as of the date of the transfer, for purchases and commitments under subsection (c); and the total amount of authority as set forth in the first proviso of this subsection shall progressively be reduced by the amount of each such transfer.

(g)1 With a view to further carrying out the purposes set forth in section 301(b), and notwithstanding any other provision of this Act, the Association is authorized to make commitments to purchase and to purchase, service, or sell any mortgages which are insured under title II of this Act or guaranteed under chapter 37 of title 38, United States Code, if the original principal obligation of any such mortgage does not exceed $15,000: Provided, That the Association is authorized to increase the foregoing amount for single family dwellings to not more than $17,500 ($22,500 in Alaska, Guam, or Hawaii) in any geographical area where the Secretary finds the cost levels so require. The total amount of such purchases and commitments made after August 1, 1966, shall not exceed $1,000,000,000 outstanding at any one time, and no such commitment shall be made unless the applicant therefor certifies that construction of the housing to be covered by the mortgage has not commenced. For the purposes of this subsection, $500,000,000 of the authority hereinabove provided shall be transferred from the amount of outstanding authority specified in subsection (c), and the amount of outstanding authority so specified shall be reduced by the amount so transferred.

(h) Notwithstanding clause (2) of section 302(b) and any provision of this Act which is inconsistent with this subsection, the Association is authorized (subject to Presidential action as provided in subsection (a), as limited by subsection (c)) to purchase pursuant to commitments or otherwise, and to service, sell, or otherwise deal in, mortgages insured under the provisions of sections 221(d)(3) and 221 (h) of this Act.

(i) In any case where the Association makes a commitment to purchase under this section (1) a mortgage insured under section 213, (2) a mortgage insured under section 220, or (3) a mortgage insured under section 221 (d) (3) and executed by a cooperative (including an investor-sponsor), a limited dividend corporation, a private non-profit corporation or association, or a mortgagor qualified under section 221(e), such commitment may provide for participation by the Association in the making of insured advances on the mortgage during construction. Such participation shall be limited to 95 per centum of the amount of each of the advances involved, and the mortgagee providing the balance of such amount shall perform all necessary servicing

1 Sec. 305 (g) was added by sec. 4 of Public Law. 85-364, approved April 1, 1958, 72 Stat. 73, 74, and authorized $1,000,000,000 in purchases and commitments outstanding at any one time for FHA title II and VA mortgages on newly constructed properties, limited to mortgages with original principal obligations of not more than $13,500 each. Sec. 601(b) of Public Law 87-70, approved June 30, 1961, 75 Stat. 149. 176, terminated the purchasing and commitment authority, and transferred to sec. 305 (c) the dollar amount of such authority then available, which was $207,188,642.07. Sec. 3 of Public Law 89-566, approved September 10, 1966, 80 Stat. 738. revised sec. 305(g) to read as set forth in the text.

2 Sec. 101 (c) of Public Law 87-70, approved June 30, 1961, 75 Stat. 149, 153, added sec. 305(h). Sec. 310 (d) of Public Law 89-754, approved November 3, 1966, 80 Stat. 1255, 1270, substituted "sections 221(d)(3) and 221(h)" for "section 221(d)(3)" before the last three words of this paragraph.

3 Sec. 1005 of Public Law 89-754, approved November 3, 1966, 80 Stat. 1255, 1285, added sec. 305(1).

and processing of such advances until the final insurance endorsement of the mortgage. The Secretary of Housing and Urban Development shall approve the reasonableness of the fee to be paid a participating mortgagee, taking into account its services and the extent of its participation in the advances.

MANAGEMENT AND LIQUIDATING FUNCTIONS

SEC. 306. (a) To carry out the purposes set forth in paragraph (c) of section 301, the Association is authorized and directed, as of the close of the cutoff date1 determined by the Association pursuant to section 303 (d) of this title, to establish separate accountability for all of its assets and liabilities (exclusive of capital, surplus, surplus reserves, and undistributed earnings to be evidenced by preferred stock as provided in section 303 (d) hereof, but inclusive of all rights and obligations under any outstanding contracts), and to maintain such separate accountability for the management and orderly liquidation of such assets and liabilities as provided in this section.2

(b) For the purposes of this section and to assure that, to the maximum extent, and as rapidly as possible, private financing will be substituted for Treasury borrowings otherwise required to carry mortgages held under the aforesaid separate accountability, the Association is authorized to issue, upon the approval of the Secretary of the Treasury, and have outstanding at any one time obligations having such maturities and bearing such rate or rates of interest as may be determined by the Association with the approval of the Secretary of the Treasury, to be redeemable at the option of the Association before maturity in such manner as may be stipulated in such obligations; but in no event shall any such obligations be issued if, at the time of such proposed issuance, and as a consequence thereof, the resulting aggregate amount of its outstanding obligations under this subsection would exceed the amount of the Association's ownership under the aforesaid separate accountability, free from any liens or encumbrances, of cash, mortgages, and obligations of the United States or guaranteed thereby, or obligations, participations, or other instruments which are lawful investments for fiduciary, trust, or public funds. The proceeds of any private financing effected under this subsection shall be paid to the Secretary of the Treasury in reduction of the indebtedness of the Association to the Secretary of the Treasury under the aforesaid separate accountability. The Association shall insert appropriate language in all of its obligations issued under this subsection clearly indicating that such obligations, together with the interest thereon, are not guaranteed by the United States and do not constitute a debt or obligation of the United States or of any agency or instrumentality thereof other than the Associa

1 October 31, 1954.

2 The aggregate amount placed under separate accountability as of the close of the cutoff date (October 31, 1954) was $3,012,905,653.

Sec. 305 (a) of Public Law 86-372, approved September 23, 1959, 73 Stat. 654. 670, struck out from sec. 306 (b) "and bonds or other obligations of, or bonds or other obligations guaranteed as to principal and interest by, the United States" and inserted in lieu thereof "and obligations of the United States or guaranteed thereby, or obligations which are lawful investments for fiduciary, trust, or public funds”. Sec. 701 (b)(2) of Public Law 88-560, approved September 2, 1964, 78 Stat. 769, 800, struck out "or obligations which are lawful investments" and inserted in lieu thereof "or obligations, participations, or other instruments which are lawful investments" (see sec. 310).