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HOUSING AND HOME FINANCE AGENCY-Con.
FEDERAL NATIONAL MORTGAGE ASSOCIATION-Con.
SECONDARY MARKET OPERATIONS (TRUST REVOLVING
FUND) Continued

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-1,687,167 -2,053,190 -2,105,930

-9,215

-174,320

62,037

360,016

-484,927

-124,911

53,949

1965 estimate

70,820

-37,392

378,708 -416,100

2,105,930

111,194

501,134

-442,680

58.454

-24,084 -77,000
-13,166 -13,163

24,084

13,166

vestors, or to the Secretary of the Treasury (the Secretary of the Treasury may not at any one time hold more than $2.25 billion of such obligations), (2) subscriptions by the Secretary of the Treasury to FNMA preferred stock ($92.8 million was authorized in 1955, $50 million in 1957 and $65 million in 1958, making a total of $207.8 million), (3) mandatory contributions into capital incident to subscriptions for the Association's common stock by mortgage sellers and by borrowers, (4) the sale of mortgages to the investing public, (5) repayments and prepayments of mortgage principal, and (6) income from operations. Recommendations for such legislation as may be necessary or desirable to transfer ownership of the Association to the private holders of the common stock must be submitted to the Congress as promptly as practicable after all of the Treasury-held preferred stock has been retired. Meanwhile, the present interim program, financed by 2,064,730 private as well as by Government investment funds, is treated as a trust fund. Operations are discussed in part I of this document in connection with the program's general fund financing and effect on budget expenditures.

Revenue, Expense, and Retained Earnings (in thousands of dollars)

42,460

48,000

439,156 -391,156

1966 estimate

162,000

720,100

-516,900

203,200

77,000
13,163

-102,000
-13,163

178,200

677,600 -499,400

1 Balances of selected resources are identified on the statement of financial condition.

Repayment of borrowings or purchase of preferred stock from Treasury represent obligations and expenditures of this fund but do not decrease the authority available to the fund since they may be reborrowed from or resold to Treasury at some future time.

The secondary market operations of the Federal National Mortgage Association were authorized by the Housing Act of 1954 to provide limited liquidity for Government insured and guaranteed mortgages and to improve the distribution of investment capital available for home mortgage financing. Mortgage purchases and short-term loans secured by FHA-insured and VA-guaranteed mortgages under these operations are financed by the proceeds from (1) the sale of obligations to private in

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Assets of the fund, which are largely invested in special Treasury interest-bearing securities and in policy loans, are expected to increase from $6,316 million as of June 30, 1964, to $6,711 million as of June 30, 1966. The actuarial estimate of policy obligations as of June 30, 1964, totals $6,259 million, leaving a balance of $57.3 million for contingency reserves.

The income of the fund derives from premium receipts, interest on investments, and payments which are made to the fund from the appropriation "Veterans insurance and indemnities," for claims (1) resulting from extra hazards of the veterans' service, and (2) arising on certain policies held by personnel on active duty. Administrative expenses are charged to the appropriation General operating

175,023 176,471 178,362 180,877 5,993 5,969 6,000 5,950 476,733 478,300 479,155 477,803 657,749 660,741 663,517 664,630 747,095 585,267 562,608 439,229

5,721,305 5,796,779 5,897,688 6,123,089

expenses.

In order to bolster the economy, all dividends are being disbursed in January rather than being spread throughout the calendar year. The accelerated payment of dividends advanced $99 million of dividend expenditures into 1964 from 1965 and an estimated $94.5 million into 1965 from 1966.

The fund is operated on a commercial basis to the greatest possible extent consistent with law. In the program and financing statement, the noncash transactions, which are offset by other claims of the fund, are excluded from program costs in order to show obligations. The following business-type statements of revenue and expense and of financial condition include these noncash transactions relating to the status of insurance policy accounts.

Revenue, Expense, and Retained Earnings (in thousands of dollars)

Revenue: Funded.

Unfunded.

Total revenue.. Expense....

Net income or loss for the year. Analysis of retained earnings: Retained earnings, start of year____

Retained earnings, end of year..

Assets:

Treasury balance
U.S. securities (par).
Accounts receivable, net.
Policy loans..
Policy liens.....

Total assets.

Liabilities: Current Operating reserves: Policy reserves. Premium waiver disability reserves.. Reserve for future installments on matured contracts.... Total disability in

come reserves_

Reserve for dividends.

Financial Condition (in thousands of dollars)

1963

actual

340,910 3,437,089 147,468

1964 actual

758,809 759,616 766,615 12,202 12,550 12,900

Total liabilities. 6,146,478

1965 1966 estimate estimate

771,011 772,166 779,515 763,571 769,488 776,218 7,440 2,678 3,297 49,825 57,265 59,943 57,265 59,943 63,240

1964

actual

7,390 5,713,915 11,546 463,060 392

13,787 5,782,992 12,729 506,308 398

6,196,303 6,316,214

1965

estimate

8,488 5,889,200 13,530 539,100 400

6,450,718

2,070,595 1,967,002 1,882,000 32,916 39,733 117,500 115,500

46,400 112,750

6,258,949 6,390,775

1966 estimate

8,989 6,114,100 14,257 572,840 400

6,710,586

337,446 321,090 330,146 3,624,928 3,848,970 4,055,800 174,339 179,565 184,120

1,822,600

52,430

202,250

6,647,346

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10

Identification code
29-00-8150-0-7-805

1963 actual

60

49,825

Analysis of Government Equity (in thousands of dollars)

Program by activities:
Operating costs, funded:

33.0 Investments and loans (policy loans).
42.0 Insurance claims and indemnities..

99.0

Total obligations

49.825

dowments.

1964 actual

57,265

Object Classification (in thousands of dollars)

1964 actual

5,391,941

5,472,061 5,590.128

5,807,200

463,452 506,706 539,500 573,240 -5,805,568 -5,921,502 -6,069,685 -6,317,200

57,265

Total operating costs.

1. Death claims..

2. Disability claims....

3. Cash surrenders and matured en

4. Dividends

5. Interest paid on dividend credits and

deposits.

6. Other expense.

Capital outlay, funded:

7. Policy loans made.

8. Policy liens established..

Total capital outlay.

Total program costs, funded-ob-
ligations....

Financing:

14 Receipts and reimbursements from: Non

UNITED STATES GOVERNMENT LIFE INSURANCE FUND

Program and Financing (in thousands of dollars)

Federal sources:

Optional income settlement.
Income offsets and refunds.
Other noncash adjustments....

21 Unobligated balance available, start of year:
U.S. securities (par)....

1965 estimate

24 Unobligated balance available, end of year:
U.S. securities (par)..

New obligational authority (appropria-
tion)..

1964 actual

48,668

24,454

9,182

14,616

59.943

427

23

94,090 91,495 89,360 635,358 608,680 515,728 729,448 700,175 605,088

97,369

59,943

107,933

1966 estimate

962,355

50,127

1965 1966 estimate estimate

63,240

48,587

24,396

1965

1966 estimate estimate

8,271

14,500

10,391 8,500
173
120
10,564 8,620

63,240

450
20

96,224

104,844

50,159
23,672

7.450

7,700

455 20

89,456

6,750 100 6,850

-17,250 -17,233 -16,922
-3,608 -3,384 -3,137
-14,635 -13,729 -12,725

-984,669-962,355 -940,903
940,903 924,549

96,306

[blocks in formation]

reserves.

The income of the fund derives from premium receipts, interest on investments, and payments which are made to the fund from the appropriation Veterans insurance and indemnities, for claims (a) resulting from the extra hazards of the veteran's service, and (b) arising on certain policies held by personnel on active military duty. Administrative expenses are charged to the appropriation General operating expenses.

In order to bolster the economy, all dividends are being disbursed in January rather than being spread throughout the calendar year. The accelerated payment of dividends advanced $7 million of expenditures into 1964 from 1965 and an estimated $6.5 million into 1965 from 1966. The fund is operated on a commercial basis to the greatest possible extent consistent with law. In the program and financing statement, the noncash transac 49,046 47,168 tions, which are offset by other claims of the fund, are excluded from program costs in order to show the obliga

1965 estimate

1966 estimate

982,713 962,368

35,113 34,464 34,213
-240 -143
80
15,805 14,753
16,926

33.485

128

13,555 51,799 50,127 49,046 47,168 79,131 72,204 69,391 62,998

1,004,791

982,713 962,368 946,538

Assets of the fund, which are largely invested in interestbearing securities and policy loans, are estimated to decline from $1,078 million as of June 30, 1964, to $1,032 million as of June 30, 1966, as an increasing number of policies mature through death or disability. The actuarial evaluation of policy obligations as of June 30, 1964, totals $1,042 million, leaving a balance of $36 million for contingency

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