(5) Provide that assistance under this section will not render a project ineligible for other Federal assistance programs and that the cost of land acquired with this assistance will not be an ineligible project cost in such other programs;

(6) Permit grants for imputed interest charges when borrowed funds are not used to acquire the land; and

(7) Clarify the authority of States to participate in the program.

Section 604. Water and sewer facilities program

Subsection (a) amends section 702(c) of the Housing and Urban Development Act of 1965 to extend interim planning requirements in the water and sewer facilities program from July 1, 1968, to October 1, 1969.

Subsection (b) amends the proviso of section 702(b) of the 1965 act to make basic water facilities (as well as basic sewer facilities) in areas with a population of 10,000 or less and a high unemployment rate eligible for such grants at the higher (90 percent) rate.

Subsection (c) adds a new subsection (o) to section 702 of the 1965 act to require that in the administration of the water and sewer facilities grant program, to the greatest extent practicable, new job opportunities be provided for unemployed or underemployed persons. Section 605. Authorizations for water and sewer facilities, neighborhood facilities, and advance acquisition of land programs

This section amends section 708 of the Housing and Urban Development Act of 1965 to provide that any funds authorized but not appropriated for the basic water and sewer facilities, neighborhood facilities, and the advance acquisition of land programs will remain available for appropriation through fiscal year 1970. (Present authorization for these programs expires with fiscal year 1969.) This section also increases the authorization for the basic water and sewer program from $200 million to $350 million for fiscal year 1969 and authorizes an additional appropriation of $115 million for fiscal year 1970.

Section 606. Open-space land program

This section amends section 702(b) of the Housing Act of 1961 to change the present $310 million contract authority under the openspace land program to a $310 million authorization of appropriations, and to authorize the appropriation of an additional $150 million for the program for fiscal year 1970; the sublimitations on grants for beautification and certain land acquisitions are accordingly eliminated. It also amends section 708(b) of the 1961 act to increase from $50,000 to $125,000 the amount of grant funds which may be used in any fiscal year for studies and the publishing of information.

Section 607. Authorization to make feasibility studies in the public works planning advances program

This section amends section 702(a) of the Housing Act of 1954 to clarify the authority of the Secretary of HUD to make advances for the conduct of feasibility studies under the public works planning advance program.

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TITLE VII-URBAN MASS TRANSPORTATION

Section 701. Grant authorizations

Subsection (a) amends section 4(b) of the Urban Mass Transportation Act of 1964 to increase by $190 million for fiscal year 1970 the amount authorized to be appropriated for the various activities under that act.

Subsection (b) amends section 6(c) of the 1964 act to increase by $6 million, commencing July 1, 1968, the amount which may be made available for research, development, and demonstration projects, and to remove the statutory limits on the funds available for this purpose, commencing July 1, 1969.

Section 702. Definition of mass transportation

This section amends section 12(c) (5) of the Urban Mass Transportation Act of 1964 to broaden the definition of mass transportation by substituting "general or special service*** on a regular and continuing basis" for "service to the general public

scribed routes."

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Section 703. Extension of emergency program under the Urban Mass Transportation Act

This section amends section 5 of the Urban Mass Transportation Act of 1964 to extend the emergency capital grant program from November 1, 1968, to July 1, 1970.

Section 704. Non-Federal share of net project cost

This section amends sections 4(a) and 5 of the Urban Mass Transportation Act of 1964 to provide that not more than half of the nonFederal share of a mass transportation project (or a project under the emergency program) will be paid from private sources, except in certain cases of demonstrated fiscal inability. Any public or private transit system funds provided toward the non-Federal share must be solely from undistributed cash surpluses, cash replacement or depreciation funds or cash reserves, or new capital.

TITLE VIII-SECONDARY MORTGAGE MARKET

Section 801. Purposes

This section states as the purpose of title VIII the partition of the existing Federal National Mortgage Association into two separate and distinct corporations. One will be a Government-sponsored private corporation to be known as the Federal National Mortgage Association (FNMA); it will retain the assets and liabilities of the existing association which are accounted for under section 304 of the National Housing Act and will continue to conduct the secondary market operations authorized by that section. The other will remain within the Federal Government and be known as the Government National Mortgage Association (GNMA); it will retain the assets and liabilities of the existing association which are accounted for under sections 305 and 306 of such act and will continue to operate the special assistance functions and management and liquidating functions authorized by those sections.

Section 802. Amendments to the Federal National Mortgage Association Charter Act

This section extensively amends title III of the National Housing Act to carry out the purposes described in section 801. In addition to making the substantive and technical changes which are strictly necessary to carry out these purposes, and generally making the basic powers of the existing association applicable to both of the new corporations, the section makes changes as follows:

Subsection (d) provides that the present restrictions against buying mortgages at prices in excess of par and mortgages offered by or covering property held by State and local instrumentalities are to be applicable only to GNMA, and extends FNMA's purchase authority to include securities guaranteed by GNMA under section 306 (g) of the

act.

mon stock of FNMA to no-par-value voting stock, clarifies the free transferability of the common stock, repeals the provision for retirement of the common stock at par, eliminates the restriction that payments to retire the preferred stock must come entirely out of capital surplus and general surplus accounts, and provides that the preferred stock is to be retired as rapidly as possible after the effective date of the amendments.

Subsection (j) provides that fees and charges imposed by FNMA in its secondary market operations may be regarded as elements of pricing (and not necessarily as fees for services).

Subsection (k) allows FNMA to issue common stock in addition to the stock required in connection with its purchasing and lending activities; and it requires each servicer of mortgages for FNMA to own, at all times, FNMA common stock in a minimum amount (as determined by FNMA) but not more than 2 percent of the outstanding principal balances of the FNMA mortgages being serviced (disregarding mortgages purchased by FNMA before the effective date). It also eliminates the provision limiting the return on the common stock to 5 percent of its par value, and adds a requirement that cash dividends shall not exceed a fair rate of return as determined by the Secretary. Subsection (1) prohibits issuance of any preferred stock after the effective date.

Subsection (m) makes it clear that financial institutions may purchase FNMA stock in addition to their initial capital contributions. Subsection (p) eliminates the prohibition against FNMA purchases of mortgages insured or guaranteed before August 2, 1954.

Subsection (q) authorizes the Secretary of HUD to fix the debtto-capital ratio at a figure higher than the present limit of 15 times the sum of its capital, surplus, and reserves.

Subsection (r) eliminates the prohibition against FNMA borrowing from the Treasury after the retirement of its preferred stock.

Subsection (y) eliminates the present FNMA Board of Directors, vesting GNMA's powers and duties in the Secretary and providing a new 15-member Board of Directors for FNMA. One-third of the members of FNMA's Board of Directors will be appointed by the President of the United States (including one each from the homebuilding industry, the mortgage lending industry, and the real estate industry) and the other two-thirds will be elected by the stockholders, each member serving for a 1-year term.

Subsection (aa) allows GNMA to retain its tax exemptions; it makes FNMA subject to all Federal taxes but exempt from all State or local taxes except those on real property.

Subsection (bb) gives FNMA's Board of Directors the power to appoint and employ officers and employees without regard to the civil service laws, with present employees retaining civil service retirement rights so long as their employment is continuous. FNMA is to make specified payments into the civil service retirement and disability fund to cover costs attributable to its covered employees.

Subsection (cc) prohibits the use by others of GNMA's name as well as FNMA's name, and substitutes civil penalties for the present criminal sanctions imposed for violations of this prohibition.

Subsection (dd) extends to GNMA as well as FNMA the authority to use Federal Reserve banks as depositories, custodians, and fiscal agents, and the authority to receive deposits and act as depository for others.

Subsection (ee) gives the Secretary of HUD general regulatory authority over FNMA, and permits him to require that a reasonable portion of FNMA's mortgage purchases be related to housing for low and moderate income families (but with reasonable economic return to FNMA); it also provides that FNMA may not issue stock or obligations without his approval, and authorizes him to examine and audit FNMA's books and transactions.

Subsection (ff) makes obligations of GNMA as well as of FNMA lawful investments, and exempts all stock, obligations, securities, and other instruments issued by either from regulation by the Securities and Exchange Commission.

Section 803. Participations

This section amends section 302 (c) (5) of the National Housing Act to permit GNMA, in managing trusts created for sales of participation certificates, to issue such certificates for refinancing purposes without regard to the present requirement of appropriation act authority. Section 804. Mortgage-backed securities

Subsection (a) amends section 304 of the National Housing Act to allow FNMA to issue and sell securities backed by a set-aside portion of its portfolio of mortgages.

Subsection (b) amends section 306 of such act to authorize GNMA to guarantee payment of principal and interest on any mortgagebacked securities issued by FNMA, and also on any similar securities issued by other approved private issuers so long as they are backed by mortgages or loans guaranteed or insured by FHA, VA, or the Farmers Home Administration and are set aside in a manner similar to that established by FNMA under section 304.

Subsections (c), (d), and (e) make it possible for savings and loan associations and banks to issue and sell securities guaranteed by GNMA under this section.

Section 805. Subordinated and convertible debentures

This section amends section 304 of the National Housing Act to allow FNMA to issue obligations which (in any manner set forth therein) are subordinated to its other obligations and may be converted into common stock. The total amount of such subordinated obligations outstanding at any time may not exceed twice FNMA's

capital and surplus, but such obligations outstanding which are subordinated to FÑMÁ's general obligations may be considered part of FNMA's capital for purposes of determining the amount of its general obligations which may be outstanding at any one time.

Section 806. Special assistance authorization

This section amends section 305 (c) of the National Housing Act to increase the authorization for purchases and commitments under GNMA's special assistance functions by $500 million on July 1, 1969. Section 807. Amendments to other laws

This section makes numerous technical changes in other Federal laws to reflect the separation of the existing FNMA functions and the creation of the two new entities.

Section 808. Effective date

This section provides that the amendments made by this title are to become effective on a date to be established by the Secretary of HUD, but within 120 days after the date of the bill's enactment.

Section 809. Savings provisions

This section preserves causes of action and legal proceedings existing or instituted by or against FNMA before the effective date so that they will not abate.

Section 810. Transitional provisions

This section sets forth transitional provisions governing FNMA's capital stock, and provides for a board of directors during the transitional period, which is to end at such time as one-third of the common stock is owned by persons or institutions in the mortgage lending, homebuilding, real estate, or related businesses, but in any event no sooner than May 1, 1970, or later than May 1, 1973. During this period the board is to consist of nine members, initially all appointed by the Secretary and subsequently partly appointed by him and partly elected by the stockholders. The president of FNMA during this period would be appointed by the President of the United States, by and with the advice and consent of the Senate, and would be removable for cause only. One of the Secretary's appointees to the board would have to be the president. Until all of its outstanding preferred stock has been retired, FNMA is to be considered a wholly owned Government corporation. FNMA's present officers and employees are to become officers and employees of GNMA on the effective date. Thereafter FNMA and GNMA will provide methods whereby FNMA may hire GNMA's employees, and the Secretary is to seek to place unhired employees in comparable Federal positions. The two entities may provide by contract for the performance by either of any of the functions of the other.

TITLE IX-NATIONAL HOUSING PARTNERSHIPS

Section 901. Statement of purpose

This section states the congressional finding that housing for low and moderate income families must be increased, and that one or more private organizations should be created to encourage maximum private investor participation to this end.