which are authorized under this section and applicable regulations, or which have been insured on the basis of their being so authorized, shall not be subject to any State constitution, statute, court decree, common law, or rule or public policy limiting the amount of interest which may be charged, taken, received, or reserved, or the manner of calculating such interest (including but not limited to prohibitions against the charging of interest on interest), if such statute, court decree, common law, or rule would not apply to the mortgage or loan in the absence of such graduated payment mortgage provisions.]

(b) Notwithstanding the provisions of subsection (a), the Secretary may insure under any provision of this title a mortgage or loan which meets the requirements of the first sentence of subsection (a) and which has provisions for varying rates of amortization if (1) the principal obligation of the mortgage or loan initially does not exceed the percentage of the initial appraised value of the property specified in section 203(b) of this title as of the date the mortgage or loan is accepted for insurance, and (2) the principal obligation of the mortgage or loan thereafter (including all interest to be deferred and added to principal) will not at any time be scheduled to exceed 97 per centum, or, if the mortgagor is a veteran, such higher percentage as is provided under section 203(b)(2) for veterans, of the projected value of the property. For the purpose of this subsection, the projected value of the property shall be calculated by the Secretary by increasing the initial appraised value of the property at a rate not in excess of 21⁄2 per centum per annum. The initial aggregate principal amount of mortgages which are insured in accordance with this subsection in any fiscal year may not exceed 20 per centum of the initial principal amount of all mortgages secured by properties improved by one- to fourfamily residences which are insured in that year.

(c) Any mortgage or loan insured pursuant to this section which contains or sets forth any graduated mortgage provisions (including but not limited to provisions for adding deferred interest to principal) which are authorized under this section and applicable regulations, or which have been insured on the basis of their being so authorized, shall not be subject to any State constitution, statute, court decree, common law, or rule or public policy (1) limiting the amount of interest which may be charged, taken, received, or reserved, or the manner of calculating such interest (including but not limited to prohibitions against the charging of interest on interest), if such constitution, statute, court decree, common law, or rule would not apply to the mortgage or loan in the absence of such graduated payment mortgage provisions, or (2) requiring a minimum amortization of principal under the mortgage or loan.

ARMED SERVICES HOUSING MORTGAGE INSURANCE

SEC. 809 (a) ***

(f) The provisions of sections 801, 802, 803 (c), 803 (i), 803 (j), 804 (a), 804 (b), and 807 and the provisions of section 803 (a) relating to the aggregate amount of all mortgages insured under this title, shall be applicable to mortgages insured under this section. No more

mortgages shall be insured under this section after [September 30, 1979] September 30, 1980, except pursuant to a commitment to insure before such date.

SEC. 810 (a) ***

(k) The provisions of sections 801, 802, 803 (c), 803 (i), 803 (j), 804 (a), 804 (b), and 807 and the provisions of section 803 (a) relating to the aggregate amount of all mortgages insured under this title shall be applicable to mortgages insured under this section. No more mortgages shall be insured under this section after [September 30, 1979 September 30, 1980, except pursuant to a commitment to insure before such date.

MORTGAGE INSURANCE FOR LAND DEVELOPMENT

BASIC CONDITIONS FOR INSURANCE

SEC. 1002. (a) The Secretary is authorized (1) to insure upon such terms and conditions as he may prescribe, any first mortgage (including advances on such mortgage) in accordance with the provisions of this title, and (2) to make a commitment for the insurance of such mortgage prior to the date of execution of such mortgage or prior to the date of disbursement of the mortgage proceeds. No mortgage shall be insured under this title after [September 30, 1979,] September 30, 1980, except pursuant to a commitment to insure issued before such date.

TITLE XI-MORTGAGE INSURANCE FOR GROUP

PRACTICE FACILITIES

INSURANCE OF MORTGAGES

SEC. 1101. (a) The Secretary is authorized (1) to insure mortgages (including advances on such mortgages during construction), upon such terms and conditions as he may prescribe, in accordance with the provisions of this title, and (2) to make commitments for the insuring of such mortgages prior to the date of their execution or disbursement thereon. No mortgage shall be insured under this title after [September 30, 1979, September 30 1980,

FHA AND VA INTEREST RATES AND COMMISSION TO STUDY

Excerpts from Public Law 90-301

[82 Stat. 113, 12 U.S.C. 1709–1]

An ACT to amend chapter 37 of title 38 to the United States Code with respect to the veterans' home loan program, to amend the National Housing Act with respect to interest rates on insured mortgages, and for other purposes.

SEC. 3. (a) Notwithstanding the provisions of sections 203 (b) (5), 207 (c) (3), 213 (d), 220 (d) (4), 220 (h) (2) (iii), 221 (d) (5), 231 (c) (6), 232(d) (3) (B), 234(f), 235 (j) (2) (C), 236 (j) (4) (B), 240 (c) (4), 241

232(d) (3) (B), 234 (f), 235 (j) (2) (C), 236 (j) (4) (B), 240 (c) (4), 241 (b) (3), 242 (d) (3) (B), and 1101 (c) (4) of the National Housing Act regarding the maximum interest rates which the Secretary of Housing and Urban Development may establish for certain mortgage insurance programs authorized by that Act, the Secretary is authorized, until [October 1, 1979]2 October 1, 1980, to set the maximum interest rates for such programs at not to exceed such per centum per annum on the amount of the principal obligation outstanding at any time as he finds necessary to meet the mortgage market, and during that time the interest rates so set shall be deemed to be for all purposes the interest rates in effect under the provisions of said section 203(b) (5) and the other sections referred to above: Provided, That in determining the rate to be applicable for the said section 203 (b) (5) program, the Secretary shall consult with the Administrator of Veterans' Affairs regarding the rate which the Administrator considers necessary to meet the mortgage market for guaranteed or insured home loans to veterans under chapter 37 of title 38, United States Code. Notwithstanding the provisions of section 2(b) of the National Housing Act regarding the maximum interest rate which may be established for obligations with respect to which insurance is granted to financial institutions under section 2 of such Act, the Secretary of Housing and Urban Development is also authorized, until the date specified in the preceding sentence, to set the maximum interest rate for obligations with respect to which insurance is granted under such section, at such level as he finds necessary to meet the loan market.

ESTABLISHMENT OF GENERAL INSURANCE FUND

SEC. 519 (a) ***

(f) There are authorized to be appropriated to cover losses sustained by the General Insurance Fund not to exceed $1,341,000,000, which amount shall be increased by $165.000.000 on October 1, 1978.] There are authorized to be appropriated such sums as may be necessary from time to time to cover losses sustained by the General Insurance Fund.

EXEMPTION FROM STATE USURY LAWS

SEC. 529. (a) The provisions of the constitution of any State expressly limiting the rate or amount of interest, discount points, or other charges which may be charged, taken, received, or reserved by lenders and the provisions of any State law expressly limiting the rate or amount of interest, discount points, or other charges which may be charged, taken. received, or reserved shall not apply to any loan, mortgage, or advance which is insured under title I or II of this Act. (b) The provisions of subsection (a) shall apply to loans, mortgages, or advances made or executed in any State until the effective date (after the date of enactment of this section) of a provision of law of that State limiting the rate of amount of interest, discount points, or other charges on any such loan, mortgage, or advance.

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ADDITIONAL VIEWS ON THE DAVIS-BACON ACT

We believe the Davis-Bacon Act should be repealed as it applies to our nation's housing and community development programs. We also believe that certain labor standards under the Davis-Bacon Act should be repealed as they apply to rehabilitation projects by neighborhood-based non-profit organizations.

The Davis-Bacon Act is an outdated federal law that does not serve any worthwhile purpose in our society. The Act is impossible to administer effectively, efficiently or equitably. Even a massive increase in the federal bureaucracy to administer it would not solve the problems inherent in making wage rate determinations under the Act. The Act is also inflationary and results in unnecessary construction costs. These costs reflect excessive wage rate determinations by the Department of Labor, significant compliance costs imposed on contractors, costs associated with administering the Act and the effect which it has in racheting wage rates upwards on private construction projects throughout the economy. The Act also discourages many contractors from bidding on federally-sponsored construction projects, thereby reducing competition. In the end the Federal Government loses in terms of both the quality of the final product and the price it has to pay on the construction projects it supports. Finally, the Act is a major stumbling block to neighborhood self-help rehabilitation projects. It results in less housing for American families and frustrates efforts to reach our nation's housing goals.

We do not believe the nation is well served by keeping such a poorly administered, inflationary and outdated federal statute on the books. We believe our views on this matter are substantiated by a recent review of The Davis-Bacon Act by the General Accounting Office, as well as a number of other studies, and we do not believe the views contained in these studies have been refuted by supporters of the Davis-Bacon Act.

We are disappointed that the Committee did not accept amendments dealing with these matters. An amendment to repeal the DavisBacon Act as it applies to the nation housing and community development programs failed by a vote of 8 to 6, while an amendment repealing certain provisions of the Act as they relate to neighborhood selfhelp rehabilitation projects failed by a vote of 8 to 6. However, we are encouraged by the bi-partisan support which each of these amendments received in the Committee.

PURPOSE OF THE DAVIS-BACON ACT

The Davis-Bacon Act was enacted into law in 1931. The purpose of the Act was to discourage non-local contractors from bidding on federal construction projects, bringing in laborers outside a local community to work on those projects and undermining the wage rate structures within a community in the process. Although a number of (83)

States had passed similar legislation earlier, and similar legislation had been introduced in Congress in 1927, the legislation was given a great deal of impetus by the onset of the great depression when wage rates in construction and elsewhere were declining. At that time declining wage rates were viewed as a source of instability, and the resulting erosion in the incomes of workers was seen as a depressing factor on household spending.

The Davis-Bacon Act requires that each contractor pay "prevailing" wages on all federally-sponsored projects in excess of $2,000 involving construction, alternation or repairs. Under that Act, and 77 separate Acts in which the Davis-Bacon Act applies, the Secretary of Labor is to determine the "prevailing" wage rate to be those for "the corresponding classes of laborers and mechanics employed on projects of a character similar to the contract work in the city, town, village, or other civil subdivision of the State in which the work is to be performed."

The Department of Labor issues two types of "prevailing" wage rate determinations in implementing the Act-project determinations and area determinations. Project determinations are issued for a specific agency project, whereas area determinations apply to certain geographical areas, such as counties or states and are required to be used on all federal projects to be constructed in the area covered. The Wage and Hour Division in the Department of Labor is responsible for developing, issuing and maintaining "prevailing" wage rates for all worker classifications involved in varying types of construction in more than 3,000 political entities throughout the nation. In 1978, the Wage and Hour Division in the Department of Labor is responsible determinations. Project determinations have comprised the overwhelming share of the Division's wage determinations in the past.

THE ACT IS IMPOSSIBLE TO ADMINISTER

The Davis-Bacon Act is impossible to administer effectively. It requires the Labor Department to determine "prevailing" wage rates for corresponding classes of workers on projects of a similar character in thousands of political subdivisions and in tens of thousands of individual projects. We believe this is an impossible task. The Wage and Hour Division of the Department has less than 100 staff members working on the wage determinations program at the headquarters and regional offices. Of these, only 50 are wage determination specialists or wage analysts. Even a massive increase in the bureaucracy, however, would not solve the problems inherent in the Act.

The problems of administering the Act were well known from its inception. In referring to an amendment providing for the pre-determination of prevailing wages in 1932, the then-Secretary of Labor stated that,:

It is impracticable of administration . . . it would stretch a new bureaucracy across the country; and unless . . . wages were based on a thorough investigation of the locality, the rate stated would only provoke dissatisfaction and controversy.

We believe this statement is as true today as it was then, and would apply to the administration of the Davis-Bacon Act in its entirety.