Similarly, the Department of Urban Affairs and Housing is the product of an evolutionary growth in Federal housing and urban programs. Federal interest in housing and the Nation's communities goes back at least to the turn of the century. However, substantial development of the Government's present housing and urban development functions first took place in the 1930's.

During that decade the original statutes establishing the Federal Housing Administration (1934), the low-rent public housing program (1937), and the Federal National Mortgage Association (1938) were enacted by the Congress. I would like to submit for the record, at this point: (1) A brief history of the program and organizational developments affecting housing and urban affairs; and (2) a statement of the current functions of the Housing and Home Finance Agency.

Senator HUMPHREY. We will have these included at this point in your testimony.

EXHIBIT 1

MAJOR DEVELOPMENTS AFFECTING URBAN AFFAIRS AND HOUSING

This summary outlines the major events which, over the last three decades, have led to the establishment of a single point of responsibility for the supervision and coordination of the Government's principal housing and community development programs.

THE DEPRESSION YEARS

Although there are isolated instances of Federal concern over housing and related problems which go back 50 years and more, the substantial development of the Government's interest in this field did not occur until the 1930's.

The President's Conference on Home Ownership in 1931 undertook an extensive study of housing and its financing. There were enacted during the ensuing prewar years:

1932: The Home Loan Bank Act which established the Federal Home Loan Bank System under a Federal Home Loan Bank Board.

1933: The Home Owners Loan Act, which established the Home Owners Loan Corporation for the relief of distressed homeowners and lending institutions. 1934: The National Housing Act, which—

Established the Federal Savings and Loan Insurance Corporation under the Federal Home Loan Bank Board.

Established the Federal Housing Administration to administer the title I program of insurance for home improvement and the title II program of mortgage insurance for small homes and rental housing projects.

Authorized the chartering of national mortgage associations to provide a secondary mortgage market. The Federal National Mortgage Association was originally chartered under this authority.

1937: The United States Housing Act of 1937, which created the U.S. Housing Authority in the Department of the Interior to administer a program of federally aided low-rent public housing.

1939: Reorganization Plan No. 1 of 1939, which transferred the U.S. Housing Authority to the Federal Works Agency; and transferred the Federal Home Loan Bank Board and the Federal Housing Administration to the Federal Loan Agency.

In the depression years various emergency relief acts were also enacted, under which experimental public housing programs were undertaken by the Public Works Administration, the Subsistence Homesteads Division of the Department of Agriculture, and the Resettlement Administration.

THE DEFENSE AND WAR PERIOD

During the defense and war periods of World War II, housing was viewed as an essential component of the war production effort. This period saw the following developments in housing legislation and organization:

1940: Authorization for the U.S. Housing Authority to construct projects for defense workers and for the Army and Navy to build emergency housing for defense and military personnel.

Appointment in July 1940 of a Defense Housing Coordinator, attached to the National Defense Advisory Committee and having only advisory powers. The Lanham Act which authorized the construction of publicly financed war housing by the Federal Works Agency.

1941: Establishment in January 1941 of a Division of Defense Housing Coordination in the Office for Emergency Management, with vague and indefinite powers of coordination.

Title VI of the National Housing Act, which laid the basis for FHA-insured privately financed war housing.

1942: Establishment of the National Housing Agency by Executive Order 9070 in February 1942. This consolidated most of the Federal housing programs into three constituents: the Federal Home Loan Bank Administration, Federal Public Housing Authority, and Federal Housing Administration. The National Housing Administrator reported directly to the President.

1946: Establishment of the Office of the Housing Expediter in 1946 to administer the veterans' emergency housing program. The positions of Housing Expediter and National Housing Administrator were combined from February 1946 to January 1947, when they were again separated.

THE POSTWAR PERIOD

The Executive order which set up the National Housing Agency was issued under war powers and would have ceased to be effective 6 months after the legal termination of the war. The need for a coordinated Federal approach to housing assistance was, however, emphasized by the severe national housing shortage which existed after the war.

As this need began to be met, the emerging problems of the central cities came into focus as one of major consequence to urban and metropolitan area development and to the entire Nation.

Important steps in the postwar period which affected the position of HHFA as the focal center for national planning and action on housing and community development problems generally were:

1947: Establishment of the Housing and Home Finance Agency by Reorganization Plan No. 3 of 1947 as a permanent independent Agency reporting to the President. The plan established as constituent agencies of HHFA the Federal Housing Administration, the Public Housing Administration, and the Home Loan Bank Board.

1948: Authorization for a housing research program in the Housing Act of 1948.

1949: Enactment of the slum clearance and redevelopment program and of an extended low-rent public housing program in the Housing Act of 1949. This act also contained a declaration of national housing policy and broadened the scope of the housing research program.

1950: Transfer to HHFA by Reorganization Plans 17, 22, and 23 of 1950 of the program of advances for public works planning and the Lanham Act war public works program from the General Services Administration; of the Federal National Mortgage Association from RFC; and of the prefabricated housing loan program from RFC.

Enactment of the college housing loan program.

1951: Assignment to HHFA of the defense housing and community facilities and services program, designed to provide housing and community facilities for defense activities stimulated by the Korean conflict.

1953: Recommendations of the President's Advisory Committee on Government Housing Policies and Programs, from which most of the provisions of the Housing Act of 1954 evolved.

1954: The Housing Act of 1954, which broadened the approach to slum clearance to include rehabilitation and conservation, authorized the special urban renewal section 220 and 221 FHA insurance programs, instituted the workable program for community improvement as a prerequisite to participation in certain Federal programs, and established the urban planning assistance program.

1954: Establishment, by an order of the Administrator, of the Community Facilities Administration and the Urban Renewal Administration. These new constituents had previously been divisions in the Office of the Administrator. 71743-61 -4

Enactment of the Federal National Mortgage Association Charter Act, which rechartered FNMA and provided the basis for the eventual transfer of the Association's secondary market operations to a privately owned and financed corporation.

1955: Enactment of a new program for public facility loans, to be administered by HHFA.

Separation of the Federal Home Loan Bank Board from HHFA, and its establishment as an independent executive agency.

1956: Authorization of a program of studies on problems of housing need, demand, and supply. No funds have been appropriated under this authorization. Enactment of special programs designed to assist in providing housing for elderly persons, including special authorities and priorities under the PHA lowrent public housing program.

1957: Transfer by Reorganization Plan No. 1 of 1957 of the RFC public agency loan portfolio to HHFA for liquidation. The mortgages held by RFC as a result of loans made under the programs of the RFC Mortgage Co., and the Defense Homes Corporation had been transferred to HHFA for liquidation in 1954.

1959: Enactment of FHA mortgage insurance programs for rental units and nursing homes for the elderly and a program of direct loans for housing for the elderly.

EXHIBIT 2

ORGANIZATION AND FUNCTIONS OF HHFA

The Housing and Home Finance Agency consists of the Office of the Administrator, three constituent agencies, and two constituent units.

The constituent agencies are the Federal Housing Administration, Public Housing Administration, and Federal National Mortgage Association. These constituents are established by law and have statutory powers independent of the Administrator. The Federal Housing Commissioner and the Public Housing Commissioner are appointed by the President, with the advice and consent of the Senate. Under the FNMA Charter Act, the Housing Administrator is Chairman of the FNMA Board of Directors and appoints the other members of the Board and the Association's principal officers.

These three constituents are self-contained entities and each has its own field structure, although regional boundaries conform with minor variations to a standard HHFA pattern.

The constitutent units are the Community Facilities Administration and the Urban Renewal Administration. These constituents were established in 1954 by order of the Administrator to administer programs vested directly in him by law. The Community Facilities Commissioner and Urban Renewal Commissioner are appointed by the Administrator.

These two constituents obtain common administrative services from the Office of the Administrator and in the field their programs are carried out through HHFA regional offices.

The regional administrators in charge of HHFA regional offices, in addition to supervising field execution of the community facilities and urban renewal programs, assist the Administrator generally in the field and in the general coordination of Housing Agency programs at the local level.

The Administrator is chairman of the National Voluntary Mortgage Credit Extension Committee (voluntary home mortgage credit program), and the Agency provides staff help for both the national and regional committees set up under this program.

The Administrator is also chairman of the National Housing Council, established under Reorganization Plan No. 3 of 1947, to promote the most effective use of the Government's housing resources and assure coordination of national housing policies with overall Government and fiscal policies. The National Housing Council is made up of ex-offiicio members from various Government departments and agencies. It has been largely inactive since 1954.

Office of the Administrator

FUNCTIONS

The Office of the Administrator assists the Administrator in carrying out his responsibilities as head of the Agency, including the supervision and coordination of the constituent agencies and units, and in carrying out those program func

tions not delegated to or performed by the constituents. The Office also provides certain common services to the Community Facilities Administration and the Urban Renewal Administration.

Federal Housing Administration

The Federal Housing Administration insures lenders against loss on mortgage loans covering new or existing residential properties and on loans for home modernization and improvement. The principal FHA programs are:

Home mortgage insurance.-More than 70 percent of all FHA insurance is on one-to four-family houses in the regular mortgage market. The majority of these mortgages are insured under section 203 of the National Housing Act and included in the mutual mortgage insurance fund.

Multi-family rental housing insurance.—Mortgages on multifamily rental housing in the regular market are insured under section 207.

Cooperative housing mortgage insurance.-Section 213 provides for the insurance of mortgages on cooperative housing built by cooperative associations or by builders for sale to cooperatives.

Urban renewal mortgage insurance.-There are two special mortgage insurance aids to urban renewal activity. Section 220 provides for the construction or rehabilitation of residential properties in urban renewal project areas. Section 221 covers housing for persons displaced by slum clearance, code enforcement, public works construction, and other governmental action.

Elderly housing mortgage insurance.-A special program, under section 231, assists in providing housing for the elderly.

Armed services housing mortgage insurance.-FHA has three programs, under sections 803, 809, and 222, which are particularly designed to provide housing for military and civilian personnel living at or near military installations. A large part of the family housing for military personnel in the past decade has been financed under these programs.

Property improvement loan insurance.—In addition to its mortgage insurance programs, FHA coinsures qualified lending institutions against loss on loans made to finance alterations, repairs, and improvements to homes and other properties and the building of small nonresidential structures.

Public Housing Administration

Public housing projects for low-income families are planned and carried out by local housing authorities.

PHA assists in the provision of such housing through (1) direct loans and the guarantee of private loans to local housing authorities for construction financing and (2) annual contributions to meet the local housing authority's annual payments on its long-term bonds issued for permanent financing. The annual contribution is reduced to the extent that project income exceeds operating expense and reserve requirements.

Preferences in occupancy are given to families displaced by urban renewal projects or other governmental action and to families of veterans and servicemen. Special provisions may also be made for larger families and elderly persons.

Federal National Mortgage Association

FNMA carries out three primary functions, for which separate accountability is required under the FNMA Charter Act. These are:

Secondary mortgage market function: FNMA supplements the private secondary mortgage market by providing a degree of liquidity for mortgage investments and improving the distribution of investment capital available for home mortgages. This is done through the purchase and sale of FHA-insured and VAguaranteed mortgages.

Sellers to FNMA under this function must subscribe to the common stock of the Association. The Charter Act contemplates eventual private ownership of the secondary market function through the transfer of the Association's liabilities and assets to the owners of the common stock.

Special assistance functions: At the direction of the President or Congress, FNMA makes commitments to purchase and purchases selected types of mortgages originated under special housing programs. This authority may also be used by the President to retard or stop a decline in mortgage lending and homebuilding activities which threatens materially the stability of a high level national economy.

FNMA is now financing special programs for urban renewal housing, housing for the elderly, armed services housing, and cooperative housing. FNMA also

finances housing in Guam, Alaska, and areas which have suffered a major catastrophe.

Management and liquidation function.-FNMA is responsible for managing and liquidating the portfolio of mortgages acquired by it prior to the Charter Act of 1954. It may also purchase and dispose of mortgages held by other HHFA constituents when the Administrator finds that this will be in the interest of efficient management.

Community Facilities Administration

The Community Facilities Administration administers five active programs and is responsible for the liquidation of certain programs for which program authorization has expired. The active programs are:

Advances for public works planning.-Interest-free advances are made for the planning of essential public works. The advances are repayable when and if construction is undertaken.

College housing loans.-Loans are available, for student and faculty housing and related facilities and for housing for student nurses, interns, and residents, to public and private nonprofit colleges and hospitals which cannot secure funds from other sources on equally favorable terms. Loans are limited to 40 years. Interest rates cannot exceed the higher of 24 percent of one-fourth of 1 percent above the cost of borrowing from the Treasury. The current rate is 32 percent. Public facility loans.-Loans for essential public facilities are made to nonFederal public bodies unable to obtain funds from other sources at reasonable interest rates. Loans are limited to 40 years. Interest rates are varied from time to time to keep them generally in line with the private market. The current rates for loans of 30 years or more are 4.375 percent for revenue bonds and 4.125 percent for general obligation bonds.

Arrangements are being made with the Department of Commerce for the technical aspects of the public facility loan program under the Area Redevelopment Act to be administered through the Community Facilities Administration.

Loans for housing for the elderly.-Low-interest long-term loans are made to private nonprofit corporations for up to 98 percent of the cost of constructing or converting housing facilities for elderly persons and families. The maximum repayment period is 50 years. The interest rate cannot exceed the higher of 24 percent or one-fourth of 1 percent added to the average annual interest rate on all interest-bearing U.S. obligations forming a part of the national debt. The current rate is 32 percent.

School construction.—CFA provides technical legal, financial, and engineering services in the administration of the Federal and non-Federal school construction programs of the Office of Education.

Urban Renewal Administration

This constituent administers three programs relating to urban renewal and community planning.

Slum clearance and urban renewal program.-Urban renewal projects are planned and carried out by local public agencies.

URA provides advances for survey and planning activities, feasibility surveys, and general neighborhood renewal plans.

Loans and grants are provided to assist in carrying out such project execution activities as land acquisition, temporary operation of acquired properties, relocation of site occupants, demo'ition work, installation of public improvements to prepare the land for redevelopment, and land disposition. The Federal grant at project settlement covers two-thirds of the net cost of the project.

Grants are also made for two-thirds of the cost of citywide plans for a longrange urban renewal program.

Demonstration grant program.-Grants are made to non-Federal public bodies to cover two-thirds of the costs of projects which develop, test, and demonstrate improved methods and techniques for slum prevention and elimination.

Urban planning assistance grants.-Fifty percent grants are made to State planning agencies to provide planning assistance to municipalities, counties, or groups of adjacent communities which have a population of less than 50,000. Simi'ar grants are made to State, metropolitan, and regional planning agencies for comprehensive planning in State, interstate, and metropolitan areas and urban regions; and to local governments in disaster areas and in areas facing rapid urbanization as a result of the expansion of Federal installations. Under the Area Redevelopment Act, grants of up to 75 percent can be made for comprehensive planning in designated redevelopment areas, either directly or through State planning agencies.