SECTION-BY-SECTION SUMMARY OF THE HOUSING AND URBAN DEVELOPMENT ACT OF 1968

The first section provides that the bill may be cited by its short title the "Housing and Urban Development Act of 1968." Section 2. Declaration of policy

In this section the Congress reaffirm the national housing goal-“a decent home and a suitable living environment for every American family" but finds that the goal has not been fully realized for many lower income families although the necessary resources and capabilíties exist in the public and private sectors of the economy. The Congress declares that the highest priority and emphasis should be given to meeting, with full utilization of private enterprise and individual self-help, the housing needs of those families for which the national goal has not become a reality.

Section 3. Jobs in housing; employment opportunities for lower income persons in connection with assisted projects

This section provides, in connection with housing assisted under the section 221(d) (3) below-market interest rate program, the low-rent public housing program, and the rent supplement program, and under the new section 235 and 236 programs added by the act, that the Secretary:

(1) require, in consultation with the Secretary of Labor, that to the greatest extent feasible training and employment opportunities arising in connection with the planning, construction, rehabilitation, and operation of such housing be given to lower income residents residing in the area of such housing; and

(2) require, in consultation with the Administrator of the Small Business Administration, that to the greatest extent feasible contracts for work be awarded, where appropriate, to business concerns located in or substantially owned by persons residing in the area of such housing.

Section 4. Improved architectural design in Government housing pro

grams

In this section the Congress finds that Federal housing aids have not contributed fully to the objective of improvement in architectural standards, although better architectural design in federally assisted housing is possible even within necessary budget limitations. The Congress declares that emphasis in low and moderate income housing programs should be given (consistent with prudent budgeting) to this objective.

Section 5. Annual report on areas of program administration and management which require improvement

This section requires the Secretary of HUD to make a report, as early as practicable in each of calendar years 1969 and 1970, to the

Senate and House Committees on Banking and Currency identifying specific areas of program administration and management which require improvement, describing actions taken and proposed for the purpose of making such improvements, and recommending such legislation as may be necessary to accomplish such improvements.

TITLE I-LOWER INCOME HOUSING

Section 101. Homeownership for lower income families

Subsection (a) adds to title II of the National Housing Act a new section 235, establishing for lower income families a homeownership assistance program providing for periodic assistance payments to mortgagees on behalf of homeowners where the mortgage involved is insured under subsection (i) or (j) (4) of the new section (or, in certain cases, is insured under the new section 237 added by section 102 of the act), or on behalf of cooperative members in a new or rehabilitated project which is financed with a mortgage insured under section 213 of the National Housing. Act. Assistance payments under the new program cannot exceed the difference between the required monthly mortgage payment for principal, interest, taxes, insurance, and mortgage insurance premium and 20 percent of the homeowner's monthly income (determined with a $300 deduction for each minor person in the family and without regard to any income of such minor, and recertified at least every 2 years) or, if less, the difference between the required monthly mortgage payment for principal, interest, and and mortgage insurance premium and the monthly payment for principal and interest which would have been required if the mortgage bore interest at the rate of 1 percent. Assistance payments can be continued on resale where the mortgage is insured under subsection (j) (4) if the purchaser assumes the mortgage and is approved for such payments, or where an otherwise eligible cooperative member receives his membership by transfer from an initial member who received assistance payments.

The assistance payment is available on behalf of a purchaser having an income, at the time of his initial occupancy, not in excess of 135 percent of the maximum income limits that can be established in the area for initial occupancy in public housing dwellings, except that up to 20 percent of the contract funds, authorized in appropriation acts, can be used to assist families with incomes above these limits but not in excess of 90 percent of the income limits for occupancy in a section 221(d) (3) BMIR project. These limitations are to be administered so as to accord a preference to those families whose incomes are within the lowest practicable limits for achieving homeownership with assistance under this section. A deduction of $300 for each minor person in the family is permitted in calculating income for purposes of determinig eligibility, and any income of such minors is also to be disregarded for this purpose. The Secretary is to report annually to the Banking and Currency Committees with respect to income levels of families assisted. The new section 235 (in subsections (i) and (j)) establishes two new mortgage insurance programs. Under subsection (i), the Secretary of HUD is authorized to insure a mortgage, executed by a mortgagor eligible for periodical assistance payments, which satisfies the requirements of section 221 (d) (2) and involves a single family dwell

ing which has been approved by the Secretary prior to the beginning of construction or substantial rehabilitation or a two-family dwelling, one of the units of which is to be occupied by the owner, if the dwelling is purchased with the assistance of a nonprofit organization and is approved by the Secretary prior to the beginning of substantial rehabilitation. A mortgage which satisfies the requirements of section 234 (c) of the National Housing Act would also be eligible for insurance if it involves a one-family unit in a condominium project which is released from a multifamily project, the construction or substantial rehabilitation of which has been completed within 2 years prior to the filing of the application for assistance payments with respect to such family unit and the unit has had no previous occupant other than the mortgagor. A mortgage which satisfies the requirements of either section 221(d) (2) or section 234 (c) may be insured without regard to the general requirement that the construction or substantial rehabilitation of the dwelling or family unit must have been approved by the Secretary if: (1) the mortgagor qualifies as a displaced family, a family which includes five or more minor persons, or a family occupying low-rent public housing; (2) assistance payments have been made on behalf of the previous owner of the dwelling unit with respect to a mortgage insured under subsection (j) (4); or (3) the mortgage involves a dwelling unit in an existing project covered by a mortgage insured under the new section 236 or a project with respect to which rent supplement payments have been made under section 101 of the Housing and Urban Development Act of 1965. The same requirements that apply to the insurance of a mortgage on a one-family unit in a condominium project also apply to the making of assistance payments with respect to a unit in a cooperative project with the same exemptions for displaced families, families with five or more minors, and families living in low-rent public housing. Notwithstanding the general prohibition against making assistance payments with respect to existing properties, 25 percent of the amount of contracts made before July 1, 1969, could apply to existing housing, with this decreasing to 15 percent of the amount of contracts made in the following year, and 10 percent in the third year. Included within these percentages would be any contracts for payments entered into with respect to the insurance of mortgages for standard dwelling units not in need of rehabilitation purchased by a nonprofit organization or a public body or agency with assistance of a mortgage insured under subsection (j) (1) and sold with a mortgage insured under subsection (j) (4).

Mortgage limits are $15,000, ($17,500 in high-cost areas), or $17,500 (and $20,000) for families of five or more. Minimum downpayment is $200 for families with incomes not in excess of 135 percent of the maximum income limits that can be established in the area for initial occupancy in public housing dwellings and 3 percent in other cases.

Under the new subsection (j), the Secretary is authorized to insure a mortgage executed by a nonprofit organization or a public body or agency to finance the purchase (and rehabilitation if necessary) of housing in viable, or potentially viable, areas for resale to lower income families who are eligible for assistance payments. The housing must include four or more one-family dwellings (or two-family dwellings, one unit of which is to be occupied by the owner), or four or more onefamily units in a condominium project, in any case where rehabili

tation is involved. Under subsection (j) (4) the Secretary is authorized to insure the individual mortgages given to finance the resale of the housing to lower income persons after its purchase and the completion of any necessary rehabilitation. The Secretary is authorized to pay on behalf of the nonprofit mortgagor the difference between the required monthly payment for principal, interest, and mortgage insurance premium under the blanket mortgage and the monthly payment for principal and interest which would have been required if the mortgage bore interest at the rate of 1 percent.

The aggregate amount of assistance payment contracts as approved in appropriation acts could not initially exceed $75 million, which limit would be increased by $100 million on July 1, 1969, and by an additional $125 million on July 1, 1970. (A reasonable portion of this authority is to be transferred to the Secretary of Agriculture for use in rural areas and small towns.)

Subsection (b) of section 101 makes conforming changes in the FHA section 221(d) (2) program, and permits a mortgagor under section 221(d) (2) and, therefore, under section 235 to contribute the value of his labor toward his equity in the housing involved.

Subsection (c) amends the FHA section 221(h) program to allow the Secretary to reduce the interest rate thereunder to as low as 1 percent where the purchaser's low income justifies it, with periodic adjustments between 1 and 3 percent to reflect changes in the homeowner's income; to increase the total amount of insurance which may be outstanding thereunder for mortgages of nonprofit organizations from $20 million to $50 million; and to establish a program, to expire 1 year after enactment, for the insurance of mortgages given to finance the rehabilitation or improvement of a single-family dwelling purchased by the owner-occupant from a nonprofit organization along with any existing indebtedness. Under this new program, the maximum mortgage amount is $15,000, and the interest rate can be as low as 1 percent, with periodic adjustments between 1 and 3 percent to reflect changes in the homeowner's income (but the interest rate would increase to the highest possible section 221 rate if the owner sells the property to anyone except a nonprofit organization, a lowrent public housing agency, or another approved low-income purchaser). It also permits the purchase of any individual dwelling sold by a nonprofit organization pursuant to section 221 (h) to be covered by a mortgage insured under the new section 235 (j) (4).

Subsection (d) makes the labor standards provisions of section 212 of the National Housing Act applicable to housing financed with blanket mortgages under the new section 235 (j) (1).

Subsection (e) authorizes the Secretary (directly or by contract) to provide budget, debt management, and related counseling services to mortgagors whose mortgages are insured under subsection (i) or (j) (4) of the new section 235.

Section 102. Credit assistance

This section authorizes, through a new section 237 of the National Housing Act, FHA mortgage insurance for those families of low and moderate income who cannot qualify for mortgage insurance under existing FHA housing programs because of their credit histories or irregular income patterns, but who the Secretary of HUD finds are reasonably satisfactory credit risks and capable of homeownership with

the assistance of budget, debt management and related counseling. The Secretary of HUD (directly or by contract) is authorized to provide such counseling services to mortgagors as well as to prospective homeowners who lack sufficient funds to supply a downpayment.

Mortgages insured under this program would have to meet the basic requirements under one of the various FHA home mortgage programs (including the new programs authorized by sec. 235. and sec. 221 (i)). The credit and income requirements of the particular section would not apply, however, and the principal obligation of the mortgage could not exceed $15,000 ($17,500 in high-cost areas). However, the lower mortgage limits prescribed under subsections (h) and (i) of section 203 would govern, when mortgage insurance is sought pursuant to them. Insurance would not be authorized under section 237 unless the monthly mortgage payments for principal and interest, including payments for local real estate taxes, could be paid with 25 percent or less of the mortgagor's average monthly income, computed over the previous year or the previous 3 years, whichever is higher. The interest rates and mortgage insurance premiums would be the same as those under the existing programs.

Preference under the new program would be given to families living in public housing and especially those required to leave because their incomes have risen beyond the maximum prescribed by the local housing authority, as well as those eligible for public housing residence who have been displaced from federally assisted urban renewal areas.

The principal balance of all mortgages insured under section 237 and outstanding at any one time is limited to $200 million. Section 103. Relaxation of mortgage insurance requirements in certain urban neighborhoods

This section amends section 223 of the National Housing Act to permit insurance of mortgages financing the repair, rehabilitation, construction, or purchase of property in an older, declining urban area, where such mortgages do not meet all of the normal eligibility requirements for insurance because of the nature of the area. The property must be an acceptable risk giving consideration to the need for providing adequate housing for low and moderate income families in the area. (A comparable provision in existing law which is more limited (sec. 203 (1)) is repealed.)

Section 104. Special Risk Insurance Fund

This section establishes, through a new section 238 of the National Housing Act, a "Special Risk Insurance Fund," which would not be intended to be actuarially sound and out of which claims would be paid on mortgages insured under the new sections 235-homeownership assistance; 236-assistance for rental and cooperative housing; and 237-credit assistance; as well as those mortgages insured pursuant to the authority contained in the amendments to section 223— properties in older, declining urban areas and section 233-development of new technologies for lower income housing.

The fund would be established with a $5 million advance from the general insurance fund, which would be repayable at such time and at such interest rates as the Secretary of HUD deemed appropriate. Appropriations to the fund would be authorized to cover any losses sustained by the fund in carrying out the mortgage insurance obligations of these programs.