Special Message to the Congress Transmitting Reorganization Plan 22 of 1950.

To the Congress of the United States:

I transmit herewith Reorganization Plan No. 22 of 1950, prepared in accordance with the provisions of the Reorganization Act of 1949. The plan improves the grouping of Government programs according to their major purposes by transferring the Federal National Mortgage Association from the Reconstruction Finance Corporation to the Housing and Home Finance Agency. This reorganization carries out the specific recommendation of the Commission on Organization of the Executive Branch of the Government that "The Federal National Mortgage Association be placed under the Administrator of the Housing and Home Finance Agency."

At present, the Federal National Mortgage Association, a wholly owned Government corporation, is a subsidiary of the Reconstruction Finance Corporation. Its purpose is to provide a secondary market for home mortgages insured or guaranteed by other Government agencies through the purchase, service, and sale of such mortgages. In addition, it is authorized to make direct loans for housing in Alaska. As of the end of March 1950 its total holdings were approximately a billion dollars and its outstanding commitments to purchase were more than $1,400,000,000 in addition. Such a volume of activity has an obvious impact on the Government's entire housing program.

The Congress has long recognized that the function of such a secondary mortgage market is closely related to the entire housing program. The Federal National Mortgage Association originally was chartered by the head of the Federal Housing Administration as authorized by Title III of the National Housing Act. In rechartering the Federal National Mortgage Association two years ago the Congress recognized the relationship between it and the operations of the Housing and Home Finance Agency by providing that the Federal Housing Commissioner alone would have authority to determine whether and when the Federal National Mortgage Association should be terminated. This Act also required submission of semiannual reports to the Federal Housing Commissioner and for the transmittal by him of these reports to the Congress together with his recommendations thereon.

Nearly three years ago the Congress approved the establishment of the Housing and Home Finance Agency under an Administrator who could be held responsible by the President and the Congress for the general coordination and supervision of Federal housing programs placed in the Housing Agency at that time. The Federal National Mortgage Association was not then made a part of the Housing Agency because the provisions of Section 5(e) of the Reorganization Act then in effect precluded submission of plans involving agencies whose organizational status had been changed by the Congress subsequent to January 1, 1945. The Act of February 24, 1945, transferred the Federal Loan Agency which included the Federal National Mortgage Association from the Department of Commerce. Moreover, the holdings of the Federal National Mortgage Association amounted to only $7,500,000. This small volume of operation presented few immediate problems of coordination with other aspects of the entire housing program. However, the basic relationship of the Federal National Mortgage Association to the housing program was recognized by making the Chairman of the Reconstruction Finance Corporation, or his designee, a member of the National Housing Council.

The present high volume of activity by the Federal National Mortgage Association has radically altered the situation which existed in 1947 and has made it essential that these market operations be geared more closely into the Government's housing program. The manner in which these market operations are administered has a direct effect on the kind of mortgages written and the availability and cost of mortgage credit. The secondary market must be administered therefore at all times in full consistency with other programs affecting housing credit.

The Government seeks to accomplish the objectives of its housing program through the use of several methods. The purchase and sale of home mortgages in the secondary market by the Federal National Mortgage Association is merely one of such methods. Others include the insurance of home mortgages and improvement loans, insurance of shares of savings and loan associations, and loans and grants to local public agencies for the purpose of financing low rent housing projects and slum clearance. All of these methods are means whereby the objectives of the housing program are achieved and should be the responsibility of the agency charged with that program.

The transfer of the Federal National Mortgage Association will not prevent the Reconstruction Finance Corporation from making loans to business enterprises on the security of real estate, or from accepting mortgages as collateral in connection with a business loan. This type of activity is consistent with normal business lending functions.

The transfer of the Federal National Mortgage Association to the Housing and Home Finance Agency will assure the necessary coordination of its operations with other housing programs, thus providing a sounder basis for future progress toward a betterhoused America. It is not probable that the reorganization in this plan will immediately result in reduced expenses, but in view of the relationship to other programs of housing aids, a more consistent approach in carrying out such policies will be possible and should result in long-term economies.

After investigation I have found, and I hereby declare, that each reorganization included in Reorganization Plan No. 22 of 1950 is necessary to accomplish one or more of the purposes set forth in section 2(a) of the Reorganization Act of 1949.

In view of the direct relation of the Federal National Mortgage Association to other housing finance programs, which was initially recognized by the Congress and only last year reiterated by the Commission on Organization of the Executive Branch of the Government, I recommend that the Congress grant its approval to the transfer provided in this reorganization plan.

HARRY S. TRUMAN