A bill to amend the National Housing Act to provide for emergency interest reduction payments and for other purposes.

(Reported to Senate from the Committee on Banking, Housing and Urban Affairs with amendment, S. Rept. 97-362)

Amends the National Housing Act to authorize the Secretary of Housing and Urban Development, through the Government National Mortgage Association, to assist middle-and lower-income families in acquiring or substantially rehabilitating a home or a unit in a cooperative housing project by making periodic interest reduction payments on behalf of such families to mortgagees and lenders.

Prohibits the Secretary from entering into contracts to provide interest reduction payments during any month unless the Federal Home Loan Bank Board's home mortgage interest rate index for the most recent two-month period exceeds 12.5 percent per year.

Conditions eligibility for interest reduction payments on the insurability of the first mortgage or loan secured by such property. Sets forth the qualifications for insurance, which include requirements that: (1) the loan be executed by a borrower who has an annual family income of less than $30,000, except that such limitation may be increased to $37,000 for certain families in areas having high prevailing housing sales prices; (2) the principal obligation of the loan not exceed $67,500, except that such limitation may be increased by 15 percent in such high priced areas; (3) the loan involve a one-to-four-family dwelling the construction or rehabilitation of which began on or after enactment of this Act and was completed by January 1, 1983; and (4) the loan be a growing equity loan amortized over 30 years with increased payments in the second through sixth years to be applied toward the principal obligation.

Limits the duration of the interest reduction payments to five years. Declares that the amount of all such payments shall constitute a second lien on the property. Requires repayment of such amount, not to exceed 60 percent of the homeowner's net equity: (1) upon the sale or disposition of the property; (2) upon the refinancing of the loan; or (3) when the property ceases to be the owner's principal residence.

Limits the amount of interest reduction payments to the difference between the amount of the monthly principal and interest payment under the terms of the loan and the amount such payment would be if the interest rate on the loan were: (1) 11 percent per year; or (2) four percentage points less than the rate specified in the loan, whichever rate is higher.

Requires the Secretary to: (1) allocate the amount available to carry out this Act on the basis of the population, number of housing starts, and unemployment in each State relative to all States; and (2) assure that the allocated amounts are made available in a manner which maximizes participation by eligible lenders and borrowers.

Declares that any mortgage insured or assisted under this Act shall be eligible for purchase by the Federal National Mortgage Association and the Federal Home Loan Mortgage Association Corporation.

Authorizes appropriations which shall remain available for commitment until November 1, 1982.

Exempts loans assisted under this Act from State usury laws.