B-153460, JUNE 25, 1964, 43 COMP. GEN. 828

B-153460, JUNE 25, 1964, 43 COMP. GEN. 828

HOUSING - MORTGAGES - INSURANCE - LOSSES GUARANTEED BY DEFENSE DEPARTMENT THE LOSSES INCURRED BY THE FEDERAL HOUSING ADMINISTRATION (FHA) IN THE SALE OF PROPERTIES ACQUIRED BY DEFAULT ON MORTGAGE LOANS INSURED PURSUANT TO SECTION 809 OF THE NATIONAL HOUSING ACT, AS AMENDED, 12 U.S.C. 1748H-1, AND COVERING HOUSING CONSTRUCTED FOR CIVILIAN EMPLOYEES OR CONTRACTORS OF THE DEPARTMENT OF DEFENSE AT RESEARCH OR DEVELOPMENT INSTALLATIONS, THE SECRETARY OF DEFENSE GUARANTEEING THE ARMED SERVICES HOUSING INSURANCE FUND FROM LOSSES UNDER SECTION 809, ARE NOT REQUIRED TO BE REIMBURSED TO THE FUND ON THE BASIS OF EACH INDIVIDUAL PROPERTY, BUT ON THE BASIS OF A NET LOSS TO THE FUND AFTER INCLUDING THE AMOUNT OF THE INSURANCE PREMIUMS, OTHERWISE FHA WOULD RECEIVE MORTGAGE INSURANCE PREMIUMS WITHOUT INCURRING ANY RISK OF LOSS, AND THE "MEMORANDUM OF AGREEMENT" PROVIDING FOR ANNUAL CERTIFICATION TO THE MILITARY OF THE LOSSES INCURRED ON INSURED MORTGAGE LOANS AND REIMBURSEMENT OF THE FUND BY THE MILITARY ON A CASE-BY-CASE BASIS, AS DISTINGUISHED FROM A NET LOSS BASIS, MAY BE AMENDED ACCORDINGLY.

TO THE SECRETARY OF THE AIR FORCE, JUNE 25, 1964:

BY LETTER OF FEBRUARY 6, 1964, THE ASSISTANT SECRETARY OF THE AIR FORCE REQUESTED A DECISION CONCERNING THE PROPRIETY OF THE AIR FORCE'S REIMBURSING THE FEDERAL HOUSING ADMINISTRATION (FHA), FOR CERTAIN MORTGAGE INSURANCE LOSSES.

SECTION 809 OF THE NATIONAL HOUSING ACT, AS AMENDED, 12 U.S.C. 1748H-1, PROVIDES FOR FHA MORTGAGE INSURANCE IN CONNECTION WITH THE CONSTRUCTION OF HOUSING FOR ESSENTIAL CIVILIAN EMPLOYEES AT A RESEARCH OR DEVELOPMENT INSTALLATION OF ONE OF THE MILITARY DEPARTMENTS OR A CONTRACTOR THEREOF. SECTION 809 (B), 12 U.S.C. 1748H-1 (B), PROVIDES THAT:

NO MORTGAGE SHALL BE INSURED UNDER THIS SECTION UNLESS THE SECRETARY (OF DEFENSE) OR HIS DESIGNEE SHALL HAVE CERTIFIED TO THE (FHA) COMMISSIONER THAT THE HOUSING IS NECESSARY TO PROVIDE ADEQUATE HOUSING FOR SUCH CIVILIANS EMPLOYED IN CONNECTION WITH SUCH A RESEARCH OR DEVELOPMENT INSTALLATION AND THAT THERE IS NO PRESENT INTENTION TO SUBSTANTIALLY CURTAIL THE NUMBER OF SUCH CIVILIAN PERSONNEL ASSIGNED OR TO BE ASSIGNED TO SUCH INSTALLATION. SUCH CERTIFICATION SHALL BE CONCLUSIVE EVIDENCE TO THE COMMISSIONER OF THE NEED FOR SUCH HOUSING BUT IF THE COMMISSIONER DETERMINES THAT INSURANCE OF MORTGAGES ON SUCH HOUSING IS NOT AN ACCEPTABLE RISK, HE MAY REQUIRE THE SECRETARY TO GUARANTEE THE ARMED SERVICES HOUSING MORTGAGE INSURANCE FUND FROM LOSS WITH RESPECT TO MORTGAGES INSURED PURSUANT TO THIS SECTION. THERE ARE AUTHORIZED TO BE APPROPRIATED SUCH SUMS AS MAY BE NECESSARY TO PROVIDE FOR PAYMENT TO MEET LOSSES ARISING FROM SUCH GUARANTY.

THE ASSISTANT SECRETARY STATES THAT DURING FISCAL YEARS 1962 AND 1963 FHA SOLD 42 PROPERTIES IT HAD ACQUIRED BY DEFAULT ON MORTGAGE LOANS INSURED PURSUANT TO SECTION 809; AND IT CLAIMS LOSSES OF $108,770.59 WITH RESPECT TO THESE PROPERTIES AND HAS REQUESTED PAYMENT FROM THE AIR FORCE OF THIS AMOUNT. THE ASSISTANT SECRETARY IS OF THE VIEW THAT SECTION 809 (B) DOES NOT REQUIRE REIMBURSEMENT OF THE ARMED SERVICES HOUSING MORTGAGE INSURANCE FUND (FUND) FOR A LOSS ON EACH INDIVIDUAL PROPERTY (I.E., A CASE-BY-CASE BASIS) BUT ONLY FOR A NET LOSS TO THE FUND WITH RESPECT TO ALL GUARANTEED MORTGAGES INSURED UNDER SECTION 809.

THE ASSISTANT SECRETARY ADVISES THAT:

THE PURPOSE OF THE STATUTE IS TO PROVIDE FHA MORTGAGE INSURANCE SO AS TO FACILITATE THE CONSTRUCTION OF HOMES TO BE OWNED BY ESSENTIAL CIVILIAN EMPLOYEES OF THE ARMED SERVICES OR OF CONTRACTORS THEREOF, AT RESEARCH OR DEVELOPMENT INSTALLATIONS. BECAUSE THE INSURANCE OF MORTGAGES UNDER SECTION 809 ARE NOT SUBJECT TO THE USUAL FHA DETERMINATION OF ECONOMIC SOUNDNESS, THE ACT PROVIDES THAT THE FHA COMMISSIONER MAY IN CERTAIN CASES REQUIRE THE SECRETARY OF DEFENSE TO GUARANTEE THE ARMED SERVICES HOUSING MORTGAGE INSURANCE FUND FROM LOSS WITH RESPECT TO HOUSING INSURED UNDER THE ACT. DOD DIRECTIVE 4165.27 AND MEMORANDUM OF AGREEMENT DATED JULY 17, 1956 BETWEEN THE FEDERAL HOUSING COMMISSIONER AND THE ASSISTANT SECRETARY OF DEFENSE (P AND I), COPY ATTACHED, WERE ISSUED TO IMPLEMENT THE STATUTE.

THE ASSISTANT SECRETARY STATES THAT UNDER SECTION 803 (C) OF THE NATIONAL HOUSING ACT, 12 U.S.C. 1748B (C), MADE APPLICABLE TO MORTGAGES INSURED UNDER SECTION 809, THE COMMISSIONER OF FHA IS AUTHORIZED TO FIX A PREMIUM CHARGE FOR THE INSURANCE OF MORTGAGES UNDER THE LATTER SECTION. HE POINTS OUT THAT SECTION 809 SPEAKS OF GUARANTEEING THE "ARMED SERVICES HOUSING MORTGAGE INSURANCE FUND FROM LOSS.' HE STATES THAT IF THE AIR FORCE WERE TO REIMBURSE FHA ON EACH INDIVIDUAL PROPERTY LOSS, FHA WOULD RECEIVE MORTGAGE INSURANCE PREMIUMS WITHOUT INCURRING ANY RISK OF LOSS. THE ASSISTANT SECRETARY REFERS TO PORTIONS OF THE LEGISLATIVE HISTORY OF SECTION 809 AND IN LIGHT OF THIS HISTORY STATES THAT YOUR DEPARTMENT HAS CONCLUDED THAT THE STATUTE DOES NOT REQUIRE REIMBURSEMENT FOR LOSS ON EACH INDIVIDUAL PROPERTY BUT ONLY FOR A NET LOSS TO THE FUND WITH RESPECT TO MORTGAGES INSURED UNDER THE SECTION IN QUESTION.

SHORTLY AFTER THE ENACTMENT OF SECTION 809 INTO LAW THE DEPARTMENT OF DEFENSE AND THE FEDERAL HOUSING ADMINISTRATION ENTERED INTO A "MEMORANDUM OF AGREEMENT," DATED JULY 17, 1956, FOR THE PURPOSE OF PROVIDING THE FAMILY HOUSING AUTHORIZED BY SECTION 809. ARTICLE VI OF THE AGREEMENT PROVIDES FOR THE ANNUAL CERTIFICATION TO THE MILITARY OF THE LOSSES INCURRED ON INSURED MORTGAGE LOANS AND THE REQUEST FOR PAYMENT THEREOF. FHA ADVISES THAT ITS REQUEST FOR REIMBURSEMENT ON A CASE-BY-CASE BASIS IS BASED PRIMARILY ON THE AGREEMENT, AND THAT THE AGREEMENT WAS ENTERED INTO ON THE BASIS THAT SECTION 809 WAS INTERPRETED TO MEAN REIMBURSEMENT ON A CASE-BY-CASE BASIS.

IT IS NOT CLEAR FROM THE LANGUAGE OF SECTION 809 (B) OR THE LEGISLATIVE HISTORY OF THAT SECTION, WHETHER IT WAS INTENDED THAT THE ARMED SERVICES HOUSING MORTGAGE INSURANCE FUND BE REIMBURSED ON A CASE BY-CASE BASIS FOR EACH LOSS SUSTAINED ON A GUARANTEED MORTGAGE LOAN INSURED UNDER SECTION 809 OR ON THE BASIS OF NET LOSS TO THE FUND WITH RESPECT TO GUARANTEED MORTGAGE LOANS INSURED UNDER THE SECTION. HOWEVER, WE HAVE CONSIDERABLE DOUBT THAT THE CONGRESS INTENDED THE FHA SHOULD BE PAID PREMIUMS BY THE MORTGAGEE FOR THE INSURANCE OF SECTION 809 MORTGAGES AND ALSO BE REIMBURSED BY THE DEPARTMENT OF DEFENSE--- INCIDENT TO ITS GUARANTEE--- ON EACH INDIVIDUAL LOSS. AS INDICATED IN THE ASSISTANT SECRETARY'S LETTER, TO SO HOLD WOULD RESULT IN FHA RECEIVING SECTION 809 MORTGAGE INSURANCE PREMIUMS WITHOUT INCURRING ANY RISK OF LOSS. WE ARE NOT AWARE OF ANY REASON WHY THE CONGRESS WOULD INTEND SUCH A RESULT.

ACCORDINGLY, WE AGREE WITH THE ASSISTANT SECRETARY THAT THE LOSS CONTEMPLATED BY SECTION 809 WITH RESPECT TO SECTION 809 MORTGAGES IS THE NET LOSS TO THE FUND AFTER INCLUDING THE AMOUNT OF INSURANCE PREMIUMS RECEIVED BY FHA (AND COVERED INTO THE FUND) ON SECTION 809 MORTGAGE LOANS. THEREFORE, IT IS OUR VIEW THAT SECTION 809 DOES NOT REQUIRE REIMBURSEMENT FOR LOSS ON EACH INDIVIDUAL PROPERTY BUT ONLY FOR A NET LOSS TO THE FUND WITH RESPECT TO MORTGAGE LOANS GUARANTEED BY THE DEPARTMENT OF DEFENSE PURSUANT TO SECTION 809.

IN LIGHT OF THE FOREGOING IT IS OUR OPINION THAT THE PROVISIONS OF THE "MEMORANDUM OF GREEMENT" PROVIDING FOR REIMBURSEMENT TO THE FUND BY THE MILITARY ON A CASE-BY-CASE BASIS, AS DISTINGUISHED FROM A NET LOSS BASIS, ARE NOT IN ACCORDANCE WITH THE INTENT OF SECTION 809. THEREFORE, AND SINCE NO VESTED RIGHTS OF THE GOVERNMENT ARE BEING WAIVED, THE "AGREEMENT" SHOULD BE AMENDED IN ACCORDANCE WITH THE VIEWS EXPRESSED HEREIN, THE AMENDMENT TO BE EFFECTIVE AS OF JULY 17, 1956.