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Mutual mortgage insurance fund, balance sheet, June 30, 1941
LIABILITIES, GROUP AND GENERAL REINSURANCE ACCOUNT Current liabilities:
Cash adjustments on deben
tures authorized and in
$5, 364. 85
123, 905. 51 Unliquidated obligations: On real properties.
94, 847. 78
and refunds to mort-
113, 138. 79
32, 513. 07
$474, 649. 68 Fixed liabilities:
Debentures payable --- 8, 074, 955. 28
566, 050. 00
$9, 560, 004. 96 Group and general reinsurance accounts.
34, 350, 549. 12
43, 910, 554. 08
Contingent liability for certificates of claim-properties on hand. 245, 275. 58
Volume of business under sec. 203, through June 30, 1941
Mortgages selected for
Mortgages accepted for
1935 1936 1937 1938 1939 1940 1941.
$92, 887, 361
710, 538, 147
9, 288 77, 990 123, 779 113, 037 172, 521 175, 985 215, 023
$39,052, 394 312, 125, 870 501, 558, 969 481, 199, 375 738, 421, 819 767,881, 835 943, 420, 450
2, 847 48, 481 96, 954 93, 938 141, 035 154, 862 188, 212
$11, 514, 309 193, 132, 173 395, 135, 760 398, 067, 275 609, 297, 524 681, 200, 547 820, 145, 951
Total June 30, 1941.
1, 256, 872
3,783, 660, 712
726, 329 3, 108, 493, 539
NOTE.-Of the mortgages accepted for insurance during the fiscal year 1941–77.73 percent in number and 78.96 percent in amount involved the construction of new homes.
Income from fees and premiums-mutual mortgage insurance fund-through June
1 Includes $286,089.26 income from fees and premiums insured under sec. 207 prior to amendments of February 1938, which created a separate housing fund.
Section 207, rental housing insurance. Section 207 of the National Housing Act, as amended, authorizes the insurance of mortgages on privately constructed and financed rental housing property. The primary objective is to encourage, through a system of mortgage insurance, the construction of privately financed rental housing developments for a large group of people in rented living quarters and who are both willing and able to pay rent commensurate with their income for adequate living accommodations.
Section 210 which provided alternative conditions for insured mortgages on rental projects up to $200,000 was repealed by the act of June 3, 1939.
To be eligible for insurance under section 207 a mortgage must meet the following qualifications:
1. It must not exceed $5,000,000.
2. It must not exceed 80 percent of the amount which the Administrator estimates will be the value of the property or project when the proposed improvements are completed.
3. It must not exceed the amount which the Administrator estimates will be the cost of the completed physical improvements on the property.
4. It must not exceed $1,350 per room for such part of the property as may be attributable to dwelling use.
A mortgagee under a mortgage covering a rental housing project does not have to foreclose and convey the property to the Administrator, but can, at its election, assign the mortgage to the Administrator without foreclosure and receive debentures in an amount equal to 98 percent of the unpaid principal of the mortgage.
There has been created in connection with this program a separate fund known as the housing fund which was started by a transfer of $1,000,000 from the mutual mortgage insurance fund, and which is built up by premiums and other charges in connection with this insurance less expenses applicable thereto. The net worth of the fund on June 30, 1941 was $1,487,916 after transfer of $1,200,000 for administrative expenses authorized in the 1941 Appropriation Act.
The Administrator charges a premium for this insurance in the same amount as that charged for the individual house loans.
The maximum interest rate permitted by law on these large mortgages is 444 percent but the Administrator, by regulation, has reduced the interest rate to be charged to 4 percent.
The owner corporation is regulated by the Administrator as to capital structure, charges, rents, rate of return, and methods of operation.
These mortgages must be periodically amortized in such a way that they will be completely paid off over a period of approximately 27 years. All income over and above the debt service, maintenance and operations costs, reserves, and dividends not in excess of 6 percent of the equity investment, are required to be paid in reduction of the mortgage so that there is little or no chance of bleeding the property. The debt is always reduced in direct proportion to depreciation.
The Federal Housing Administrator holds special stock in these companies which gives him a right granted by the charter to take possession and management of the property upon any default under the mortgage.
There is on the Board a director representing the Administrator and he requires periodic reports and makes periodic examinations of the affairs of the owner and the owner cannot, without the approval of the Administrator, charge rents in excess of those approved by the Administrator at the time the loan was insured.
Under this program as of June 30, 1941, mortgages amounting to $135,393,516, involving 335 projects (35,548 dwelling units) had been insured. In addition, there were outstanding commitments to insure on 17 projects (2,891 dwelling units) amounting to $9,428,000.
It is estimated that during the fiscal year 1942 the volume of business will amount to about $16,000,000 and a similar amount during the fiscal year 1943. Total income from fees, premiums, and interest on investments is estimated at $644,300 during 1942 and $666,000 during 1943.
The following statements show volume of business transacted, income from fees and premiums through June 30, 1941, and the status of the housing insurance fund, as of June 30, 1941.
Housing insurance fund–Balance sheet, June 30, 1941
LIABILITIES AND SURPLUS Current liabilities:
Cash adjustments on debentures authorized.
$40. 87 Cash adjustments on debentures in audit...
97. 62 Accrued interest payable..
159, 016. 65 Unliquidated obligations:
Stock in rental housing corporations... 1, 000.00
96, 010. 75 Mortgagor's escrow deposits.
20, 611. 85
276, 777. 74 Reserve for foreclosed costs.
59, 799. 63 Fixed liabilities: Debentures payable -
$9, 304, 000. 00 Debentures payable claims in audit
824, 400.00 Debentures payable authorized.
10, 461, 300.00 Surplus.--
1, 487, 915. 98 Total liabilities and surplus..
12, 285, 793. 35
Summary of all operations, under secs. 207 and 210, cumulative through June 30, 1941
Income from fees and premiums—housing insurance fund—through June 30, 1941
1 Income from fees and premiums under sec. 207 prior to February 1938 amendments amounting to $286,089.26 has been credited to the mutual mortgage-insurance fund.
Title VI, defense-housing insurance.—The act of March 28, 1941, Public, No. 24, as amended by the act of September 2, 1941, Public, No. 248, added a new title to the National Housing Act which for a limited time and to a limited aggregate amount provides for defense housing insurance on mortgages on residential properties in defense areas designated by the President.
The purpose of the act is to speed the production of dwelling accommodations at low cost in certain strategic areas by the maximum use of numerous builders of low-cost homes and by the use of private capital. The act is not intended to apply to housing of a temporary nature or to those areas in which the need for housing will cease to exist after the emergency, but only to projects which are "economically sound.”
It was recognized that operations under this act may result in a higher ratio of loss than has been the experience of the Administration in its normal busi
Accordingly, the plan was incorporated into a separate title, involving a separate insurance fund (known as the defense housing insurance fund) so as not to affect in any way the interest of mortgagors in the mutual mortgage fund under title II. The authorized amount of this fund was set up at $10,000,000 of which $5,000,000 has been obtained from the Reconstruction Finance Corporation,
Section 603, as amended, places a definite limitation of $300,000,000 upon the aggregate amount of obligations which the Administrator may insure under this title and also prevents the insuring of any mortgage thereunder, upon which a commitment to insure is issued after July 1, 1942.
This section limits the period of operations under this title to June 30, 1942. The eligibility requirements are similar to those contained in section 203 (b) (2)
(a) of existing law except that the maximum amount of the mortgage ranges from $4,000 in connection with single-family residences to $10,500 in connection with a four-family residence. The maximum ratio of loan to value may not exceed 90 percent, and the location of the dwelling must be in an area in which the President shall find that an acute shortage of housing exists or impends which would impede national-defense activities.
The Administrator is authorized to fix a premium charge for the insurance of mortgages in an amount not less than one-half of 1 percent per annum nor more than 1% percent per annum of the amount of the principal amount of the mortgage outstanding. Under this provision the Administrator has fixed the premium at three-quarters of 1 percent per annum.
The rules and regulations and the procedure set up for operations under this title are similar to those under title IỈ of the act.
There is attached a balance sheet showing the status of the fund as of June 30, 1941.
Defense housing insurance fund—balance sheet- June 30, 1941
Cash on deposit with Treasurer of United States.
(see reserve below).
$403, 814. 40
27, 499. 98
5, 000, 000.00
Fixed assets: Treasury bonds.-
5, 431, 314. 38 4, 400, 000.00
9, 831, 314, 38
RESERVES AND SURPLUS
Total reserves and surplus....
5, 000, 000.00 4, 831, 314. 38
9, 831, 314. 38
APPROPRIATIONS The original appropriation for administrative expenses for the fiscal year 1942 was in the amount of $13,388,000 provided from the insurance funds of the Administration. This was based on the handling of 267,000 applications for mortgage insurance under section 203 and about 100 applications for mortgage insurance under section 207 of the National Housing Act. Since the time of preparation of estimates for the fiscal year 1942, certain amendments to the act have been passed which impose additional duties and, therefore, additional expenses upon the Administration. These amendments are as follows:
1. The creation of an entirely new function—that of defense housing insurance under the act of March 28, 1941, Public, No. 24, as amended by the act of September 2, 1941, Public, No. 248.
2. The extension of the insurance provisions of title I under the act of June 28, 1941, Public, No. 138.
3. 'The extension of the provisions of section 203 relating to the insurance of mortgages on existing construction under the act of June 28, 1941, Public, No. 138.
As a result of these amendments, it was necessary to revise the estimates of the volume of business for the fiscal year 1942 upward.
In order to cover the expenses of this inereased business, the Third Supplementa! National Defense Appropriation Act, 1942, authorized an additional sum of $1,366,453 from funds of the Administration, making a total of $14,754,453 for the fiscal year 1942. The estimated appropriation necessary for the fiscal year 1943 is $15,041,343 as shown on the accompanying schedules, all of which is to be furnished from the insurance funds of the Administration,
This is $286,890 more than the total appropriation for 1942. The estimate of $15,041,343 is based upon doing a volume of new business amounting to $,502,250,000.