Government Mortgage Liquidation Trust, created pursuant to a trust indenture entered into between the Administrator of Veterans Affairs and the Federal National Mortgage Association, sold $300 million of participation certificates involving the portfolios of the Federal National Mortgage Association special assistance functions to the extent of $200 million and the Veterans Administration to the extent of $100 million. Projections for 1966 provide for the issuance of $1,285 million of participations involving the portfolios of the Federal National Mortgage Association special assistance functions to the extent of $350 million, management and liquidating functions to the extent of $135 million, and the Veterans Administration to the extent of $800 million. Revenue, Expense, and Retained Earnings (in thousands of dollars) The Housing Act of 1964 vested fiduciary powers in the Association with the objective of facilitating the liquidation of its own mortgages and those of other Government agencies or instrumentalities through the sale of beneficial interests or participations in such mortgages. These powers are administered under the management and liquidating functions of the Association. The program provides, under a trust indenture, for the pooling of Federal National Mortgage Association Treasury-financed first. mortgages and Treasury-financed first mortgages of other Government agencies or instrumentalities. Under its fiduciary powers the Association, as Trustee, sells to private investors, through its established facilities, participations in the interest and principal payments which are derived from the pooled mortgages, and retires the maturing securities with funds derived from the liquidation of the mortgages comprising the pool. A major advantage of the participation program, aside from providing for the immediate liquidation of a portion of the Government's mortgage assets, is the expectation that the securities which are issued thereunder will be attractive to private investors, such as pension and retirement funds and others which are not ordinarily interested in 1-4 family mortgages as a form of long-term investment. In 1965 the 2,145 11,260 LIMITATION ON ADMINISTRATIVE EXPENSES, FEDERAL NATIONAL MORTGAGE ASSOCIATION Not to exceed [$8,500,000 $8,800,000 shall be available for administrative expenses, which shall be on an accrual basis, and shall be exclusive of interest paid, expenses (including expenses for fiscal agency services performed on a contract or fee basis) in connection with the issuance and servicing of securities, depreciation, properly capitalized expenditures, fees for servicing mortgages, expenses (including services performed on a force account, contract, or fee basis, but not including other personal services) in connection with the acquisition, protection, operation, maintenance, improvement, or disposition of real or personal property belonging to said Association or in which it has an interest, cost of salaries, wages, travel, and other expenses of persons employed outside of the continental United States, expenses of services performed on a contract or fee basis in connection with the performance of legal services, and all administrative expenses reimbursable from other Government agencies, and said Association may utilize and may make payment for services and facilities of the Federal Reserve banks and other agencies of the Government: Provided, That the distribution of administrative expenses to the accounts of the Association shall be made in accordance with generally recognized accounting principles and practices. [In addition to the amount otherwise available for administrative expenses of the Federal National Mortgage Association for the current fiscal year, not to exceed $100,000 shall be available for such expenses.] (12 U.S.C. 1716-1723d; 5 U.S.C. 1332-15; Independent Offices Appropriation Act, 1965; Supplemental Appropriation Act, 1965.) Program and Financing (in thousands of dollars) (d) Settlement.. (e) Participation pay 43,486 ments out of -5,667 -45 -15,985 93 Gross expenditures.. Applicable receipts.. 760,830 787,012 762,384 -804,271 -895,522 -889,660 Net increase or decrease in The Federal Housing Administration, created by the National Housing Act of 1934, is a noncorporate businesstype agency, which was brought under the Government Corporation Control Act by the Housing Act of 1948. The principal purposes of Federal Housing Administration are to improve home financing practices, to encourage improved housing standards and conditions, to further home -3,847 ownership, and to stabilize the mortgage market. These objectives are achieved through the insurance of loans for -906,927 financing the production, purchase, repair, and improvement of residential properties. At the end of 1964, $92.1 billion of insurance had been written, with $45.5 billion outstanding. During 1964 more than $7.6 billion of insurance was written, covering 521,186 units of housing and 664,951 title I property improvement loans. An estimated $7.8 billion of insurance will be written during 1965 and $8.7 billion in 1966. 950,714 92,487 Federal Housing Administration loan insurance is now administered through 24 different active programs. In addition, maintenance and settlement work continues under eight programs for which the authority to insure additional loans has expired. The various programs are -904,874 identified in the following table, which also shows the amount of insurance written under the individual programs and the amount in force at the end of 1964. 768,600 -136,274 1 Less than $0.5 million. * Covers 321,303 dwelling units. For financial purposes, the agency's programs are grouped under 15 separate insurance funds and accounts established by statute. Income from fees, premiums, and investments are credited to the funds; operating expenses and other expenses and losses connected with foreclosed property and defaulted notes and mortgages are charged to the funds. Through June 30, 1964, income had amounted to $2,986 million, and expenses and losses had totaled $1,868 million, leaving a reserve of $1,118 million for the payment of future expenses and losses. The largest insurance fund is the Mutual mortgage insurance fund for the insurance of mortgage loans on homes under section 203. Other insurance funds cover the insurance of loans on property repairs and improve 750-100-65- -53 * Estimated. ments; on basic and special-purpose multifamily housing, including cooperatives, condominiums, housing for the elderly, and nursing homes; on urban renewal and middle income housing; on armed services housing; and on war and defense housing. The Mutual mortgage insurance fund differs from the other funds in that mortgagors at termination of their mortgages, as authorized by statute, may share in the rebate of premiums paid into the fund which are not required for expenses or losses. Through June 30, 1964, such participation payments to home owners had amounted to $174 million with $147 million reserved for future payments or losses. Budget program.-The Federal Housing Administration budget request for 1966 is embodied in an administrative FEDERAL HOUSING ADMINISTRATION-Con. PROGRAM HIGHLIGHTS-Continued Public enterprise funds-Continued FEDERAL HOUSING ADMINISTRATION FUND-Continued expense limitation covering those expenses of the central office related to (1) the general direction of operations, (2) the establishment of policies and procedures, and (3) the provision of housekeeping services for the entire agency, and and a nonadministrative expense limitation covering the operating expenses of both the central office and the field related to (1) the initiation of insurance, (2) the maintenance of insurance on the books, and (3) the settlement activities associated with (a) the payment of claims, (b) the acquisition, management, and disposition of mortgages and properties acquired under insurance contracts, and (c) the liquidation of property improvement notes. Anticipated program developments for 1966 are summarized in the table below, which also includes estimates for 1965 and actual data for 1964. PROGRAM HIGHLIGHTS [Dollars in millions] Insurance initiation: Mortgage insurance applications: Applications received (units). Applications examined (units).. Mortgage insurance committed: Units.. Amount Mortgage insurance written: Units.. Amount.. 521,186 $6,807 508,500 570,400 $7,071 $7,976 1,060,000 1,080,000 Average multifamily units under inspection.. 91,665 Title I property improvement loans insured: Notes... 664,951 Amount (net proceeds). $744 96,000 97,500 ($417) 7,500 72,606 $52 The major activities of the agency may be grouped under the categories of insurance initiation, insurance maintenance, insurance settlement, and financial operations. Insurance initiation. The principal initiation activities, which currently account for about 70 percent of the total expenses under the nonadministrative expense limitation, are the examining of applications for insurance, the inspecting of properties under construction, and the recording of new insurance contracts, including property improvement loans, in the agency records. The number of applications for loan insurance received under the various agency programs is a measure of the initiation work of the agency. The total number of applications for mortgage insurance is expected to increase from 982,012 in 1964 to 1,023,000 in 1965 and to 1,062,000 in 1966. Insurance maintenance.-Maintenance activities, which currently account for about eight percent of all expenses under the nonadministrative expense limitation, relate generally to the servicing of insurance on the books, such as billing mortgagees for premiums due, recording changes in mortgagees, making participation payments from the Mutual mortgage insurance fund, terminating insurance contracts, inspecting insured multifamily housing, and analyzing annual financial reports on such housing. These are cumulative workloads, increasing each year with the growth of insurance in force. At the end of 1964, insurance in force had reached $45.5 billion. Section 203 accounted for 72 percent of the total, with the expired programs, under which additional insurance contracts are no longer written, still accounting for nine percent of the |