A breakdown of the trailer-coach market gives further proof that we are dealing with permanent growing trends and with problems which are not transitory and must be faced by the Congress.

One-fourth of the purchasers of trailer-coach mobile dwellings are under 30 years of age and 60 percent are under 40. The encouragement of home ownership in the early formative years is basic in our national housing policy.

Newlyweds are an important and growing part of the market for trailer-coach dwellings.

On the other end of the age spectrum, the increase in older people in our national population is one of the basic economic facts of our time. Some 12 million people are in the 65-and-over age group. By 1980 they will number 22 million. The immensely favorable and growing demand for trailer coach mobile homes for retired couples promises therefore not merely to continue but to increase sharply in coming years.

As long as we have national defense to worry about, the serviceman subject to repeated reassignment within the United States will have the choice of having a succession of dwellings but no home or of taking his home and family along with him. Experience is showing that an increasing number will be choosing the trailer-coach mobile dwelling.

Finally, in a dynamic economy, many defense and essential civilian workers will continue to have the problem of relocating from where the economy_no longer needs their skills to the places where the economy will need them. The average family income of the trailer coach population is about $5,000 a year. In periods of less-than-full employment, the divergence is likely to increase on account of the ability of the trailer coach family to seek out the areas of greatest economic strength. Thus, this segment of the trailer coach market will also continue to be strong and to grow.

The fact is that the trailer coach mobile dwelling is here to stay. The people who live in them and the people who would like to live in them are an important segment of our population.

To a family which has chosen a trailer coach for a home, there is no sense whatever in being excluded from the financing assistance which the Federal Government provides other homeowners. The offhand objections of trailer-coach critics are easily answered:

1. The trailer coach is not real property.-The distinctions that have been evolved between real and personal property are far less pertinent than the fact that the trailer coach is used as a dwelling like any other housing. There is no reason in our day and age why the National Housing Act should not make provision for all low-cost housing whether in the legal concept of real property or not. Incidentally, the trailer park which is indisputably real property-closely akin to a garden-apartment property in the function of renting out space-is also completely neglected in the National Housing

Act.

2. It would be risky to lend money on housing that doesn't stay put.-No such thing. The experience of banks and other lending institutions which have made loans to trailer-coach dealers and their customers demonstrates that such loans are safe and not risky. Only 1 percent of these banks and lending institutions experienced losses involving more than onehalf of 1 percent of the loans made. That is a remarkable record backed up by the fact that the trailer coach is a low-cost dwelling and that its owner can move to areas of employment demand.

3. The trailer-coach purchaser doesn't need the benefits of the National Housing Act.-Had it not been for the disadvantageous credit terms, many more people would be enjoying the advantages of trailer-coach mobile dwellings today. Also, many people in defense areas would have bought a mobile dwelling rather than rely on the Government to furnish them public housing at the taxpayers' expense. The purchaser of a $6,000 fixed-to-site house under section 8 of title I puts down only $250 and under the longterm FHA-insured mortgage pays less than $31 a month. For a $5,000 mobile dwelling, the purchaser might have to lay out $1,667 and would have monthly payments to pay of about $100 plus an average of about $25 for ground rent and utilities. At the end of several years, of course, the trailercoach purchaser will be in a much better position than the fixed-to-site homeowner who will have to continue his payments for many more years. However, the intitial financial lead of purchasing a trailer-coach mobile dwelling is a hardship for most purchasers and prohibitive for many. It would cost the United States Government nothing to provide the same kind

of credit insurance for trailer-coach purchasers as it does for such purposes as property improvement.

The trailer coach mobile dwelling needs and deserves FHA credit guaranties such as are extended to the low-cost housing or property improvements. Until the National Housing Act is amended to accomplish that purpose, millions of Americans are penalized for exercising a choice in selecting the type of dwelling most suited to their own needs.

A proposal to the Congress of the United States for legislative recognition of the trailer coach dwelling as an essential part of the national housing resources. Congress can remedy the major credit difficulties of the trailer coach mobile dwelling purchaser by amending the National Housing Act in two ways:

1. To authorize FHA to insure lending institutions against losses of up to 10 percent of their outstanding loans to finance the purchase of trailer coaches for occupancy as dwellings by their owners: Provided that each such loan shall not be for a term of more than 7 years or exceed $5,000 or 75 percent of the purchase price of the trailer, whichever is less; and that the dwellings are certified to the lenders as meeting minimum FHA standards for trailer coach mobile home construction.

2. To authorize FHA to insure mortgage loans to finance the construction or sale of trailer parks meeting FHA minimum standards: Provided that no loan shall exceed $1,000 per trailer space or $300,000 in the aggregate; and that the term of the loan shall not exceed 30 years.

The first of these amendments is patterned along the general lines of title I, class 1 (a) of the National Housing Act and the second follows the general lines of section 207 of title II. These tested provisions of the existing law have provided assistance to homeowners and builders without loss to the United States Government. In the same way, they can be adapted constructively for trailer coach mobile dwellings and trailer coach parks. The results will benefit the people of every State

The benefits of the proposed amendments will be of lasting advantage, not only to the purchasers of trailer coaches but also to the public at large:

1. Trailer coaches are sold by 3,000 dealers, in every State. Very substantial quantities are sold in Ohio, Indiana, Michigan, Texas, Illinois, Pennsylvania, California, New York, Iowa, and Florida.

2. The 150 manufacturers of trailer coaches-whose plants are located in Illinois, Michigan, Indiana, Ohio, Wisconsin, and California and other States are mostly in the small-business category, employing an average of somewhat more than 100 employees per company. They are heavy purchasers of parts and equipment from the lumber industry, the automotive parts industry, the appliance industry, the housefurnishings industry, and others.

3. The 12,000 trailer parks are widely distributed over the country, with a significant number located in such States as California, Florida, Arizona, and Texas. Under the proposed amendment, with its provision for the establishment of FHA standards, these parks will develop into an increasingly valuable community asset.

4. Finally, and most important, there are no housing facilities better adapted for emergencies than the trailer coach mobile dwelling. The trailer coach use during the river flood disaster of 1952, the trailer coach use during such emergency housing shortages as existed at Paducah and Savannah River atomic installations are just two examples. Should natural or military disaster strike, the trailer coach dwelling would be the most useful type of housing in our national resources.

Sober consideration of the public interest fully supports the legislative proposals for the inclusion of the trailer coach mobile dwelling within the provisions of the National Housing Act.

(Attachment E)

QUESTIONS AND ANSWERS CONCERNING PROPOSED LEGISLATION FOR MOBILE
DWELLINGS

(Prepared by the Kaul Co., Washington, D. C., for the Trailer Coach

Association)

The proposed inclusion of trailer-coach and trailer-park financing under the credit insurance provisions of the National Housing Act naturally gives rise to

some basic questions about the industry's practices and experience. The following questions and answers are intended to provide information for those seeking to understand the practical effect of the proposal.

Q. To what extent does the trailer-coach mobile home supply the market for low-cost housing?

A. According to the Sixth Annual Report of the Housing Agency, some 6,200 houses costing less than $6,000 each were built under FHA insurance in 1952. This represents the bulk of nonfarm housing in this cost category. The 83,000 trailer-coach mobile dwellings sold that year under $6,000 each constitute about 90 percent of the housing in this low-cost category.

Q. Who are the people that live in trailer-coach mobile homes?

A. More than 2 million people, the families of service personnel, defense workers, construction workers, agricultural workers, and others in mobile or semimobile occupations; newlyweds; retired folks. Most of these people live permanently or indefinitely in trailer-coach dwellings. About 2 out of 3 trailer coach dwellings are sold to people who have lived in such dwellings previously.

Q. What are the terms now for trailer coach financing and how would it be if it were included as proposed under title I of the National Housing Act?

A. There are some $400 million of outstanding loans on trailer coaches. Present terms provide for downpayment of one-fourth to one-third of price, 3- to 5-year term, 5- to 7-percent discount. Under proposal, eligible loans would require downpayment of 25 percent and would have a maximum term of 7 years and interest would be at 5-percent discount.

Q. How are trailer parks now financed and how does it compare with what is proposed?

A. Trailer parks are now financed under a great variety of terms and conditions. Mortgages not infrequently call for 6 percent interest with repayment in 15 years or less.

Q. Are trailer coaches now included in the National Housing Act? A. Under the Defense Housing Act, Public Law 189, the Housing Administrator was authorized to buy trailer coaches as temporary defense housing, but this authority expires June 30, 1954, and its renewal is not being sought in the pending Housing Act of 1954. The trailer-coach mobile dwelling has never been included in the homeownership FHA credit-insurance program.

Q. As a practical matter, isn't it true that there just is no shortage of trailercoach financing at this time?

A. Frequently money is not available at reasonable terms and conditions when compared with what is available for fixed-to-site housing. The terms and conditions of financing are often reminiscent of those which are more appropriate when trailer coaches were tourist items and were financed along the lines of automobile financing. What is needed is financing on terms which will permit this low-cost housing to be purchased with reasonable downpayments and reasonable monthly payments. That kind of financing is practically nonexistent now. Q. Have you made any estimates of the volume of loans that would be made under your proposals?

A. FHA insurance is used in only one-sixth of the loans for property improvements. By analogy when we take into account downpayments of 25 percent, it seems reasonable that FHA-insured loans probably would amount to about $50 million of a total of 350 or 400 million dollars of sales.

Q. Can you illustrate how the trailer coach buyer would benefit from the proposal?

A. Let us look at a family which is buying a trailer coach for $5,000. Under the most favorable financing generally available today the buyer would make a downpayment of $1,250 and would pay $78 a month on the 5-year loan. To this is added about $25 a month for trailer space, bringing total payments to $103 a month.

Under the proposal, assuming the same downpayment, monthly payments on the 7-year loon would be $60 a month and total payments $85 a month, a reduetion of $18 a month.

In addition, there would be the indirect benefits from improved trailer park facilities, perhaps at lower rent. The family would also have a better chance to trade in their present trailer dwelling because the sale of used trailers would be helped by the proposed legislation.

Q. Will it be necessary to increase the FHA authorization under this proposal? A. We think not: Title I has an authorization of $1,750 million and it revolves rapidly due to the relatively short term of loans. On December 30, 1953, au

thorizations were $226 million in excess of commitments. FHA trailer-coach loans would utilize only a small proportion of such authorization or surplus available for commitment.

The trailer park resource represents an investment of roughly $550 million. The addition and modernization each year is estimated at least 10 percent or $50 million. Even if one-third of this amount required FHA insurance, it would have a negligible effect on the billions of dollars in authorizations under title II. Q. How do the banks feel about this?

A. We know that there are some banks that would welcome the opportunity to get into this line of financing with the encouragement of FHA insurance. But it must be made clear that the proposal involves no compulsion whatever ; banks may and many surely will continue to engage in financing trailers without coming under the FHA insurance. The proposal merely provides banks with alternative arrangement, which they may choose to adopt or not as they see fit same as they now do with FHA and GI loans for housing construction and improvement.

Q. Is the credit of the mobile home purchaser equal to that of other homeowners?

A. Inasmuch as the question is directed to the risk which FHA would assume if its operations were extended to cover the financing of trailer coaches, it may be well to compare trailer-coach experience with property improvement loan experience under class 1 (a). From 1934 to date, FHA has paid claims amounting to about 2 percent of the amount of loans insured. Recoveries against claims run to about 50 percent of claims paid, leaving unrecovered losses of about 1 percent and unrecovered losses amount to less than one-half of 1 percent.

According to a study prepared by the Mobile Homes Manufacturers Association, only 1 percent of the institutions extending credit in this field had loss ratios of as much as one-half of 1 percent. Approximately 93 percent had no losses at all. Assuming that the 1 percent of the banks which had losses in excess of one-half percent actually had average losses of as high as 2 percent, then the average loss for all of the banks would be less than one-twentieth of 1 percent.

The largest trailer-coach lender ($31 million volume) stated that its loss ratio was one-eighth of 1 percent. Another institution stated that in 7 years it never had a loss. Another institution experienced a loss of one-half of 1 percent over a 15-year period and one-fourth of 1 percent for the year 1953. Another institution reported that in connection with an extension of credit in the amount of $2 million its loss ratio amounted to one-fortieth of 1 percent.

Inherently the trailer-coach loans have certain advantage over class 1 (a) property-improvement loans: (a) They are almost invariably secured; (b) trailer-coach owners have a higher than average income per family; (c) the trailer coach, by reasons of its mobility, represents choice collateral, whereas the value of property improvements may be dissipated by adverse charges in a particular location.

Q. Is 7 years a reasonable term for trailer-coach finance? What is the practical life of a trailer coach?

A. The modern trailer-coach mobile home originated after World War II, that is the coaches with fully equipped bathrooms, bedrooms, and kitchens. The coaches sold in 1946 are being lived in and there is an active secondhand market. A trailer coach built to present-day industry standards has a life well in excess of 10 years.

Q. What is meant by construction standards of the modern trailer coach? A. In recent years the industry association has developed standards of good construction and has policed these standards with inspection and approval. The industry has worked with government agencies such as HHFA, Public Health Service, Department of Commerce, and others in developing trailer-coach and trailer-park standards consistent with technical requirements of the Government. The requirements of the National Plumbing Code Underwriters Laboratories, and others have been used to the extent applicable. It is believed that FHA would have little trouble in establishing minimum requirements for mobile dwellings and parks.

Q. Aren't some trailer parks a pretty sad example of good housing?

A. Some are indeed. Our concept is that modern mobile home park is the same as the suburban garden apartment except that the tenant owns his housing unit and rents the space and the utilities. All the essential requirements for planning and good quality construction such as FHA minimum property requirements, national plumbing code and regulation of the National Underwriters,

would apply to trailer parks just as they apply to apartments. The establishment of such standards to trailer parks by FHA would have the effect of raising standards wherever substandard conditions exist.

Q. Is it proposed that small vacation trailer be included in the housing law? A. The proposal is intended for trailer-coach mobile dwellings fully equipped for permanent, year round occupancy. The industry would cooperate with FHA in defining the size, quality and equipment necessary to assure that the purpose would be served. However, our thinking is that any unit that meets this standard should be eligible just as summer homes in Vermont and winter homes in Florida get FHA financing even though they are not guaranteed to be occupied continuously 12 months of the year.

Q. Do you intend that repairs or improvements of trailers be financed under FHA insurance?

A. We think repairs and improvements of trailer-coach dwellings should be subject to FHA insurance in a manner that is analogous to the repair and improvement of fixed-to-site dwellings, under such administrative conditions as the FHA may find desirable.

Mr. SHAW. I also would like to introduce Mr. Lee Painter, president of the Mobile Dealers National Association, and Mr. Bill Welch, financial consultant of the Mobile Home Manufacturers Association in Chicago, who are here in support of the proposals, and with us to answer any questions that the committee may have.

The CHAIRMAN. Thank you, Mr. Shaw.

Are there any questions of Mr. Shaw?

Mr. MCDONOUGH. I think a little explanation of the amendments might be in order, Mr. Chairman, if it doesn't take too long. I don't want to take too much time of the committee.

Mr. McCormick or Mr. Kaul, can either one of you give us an explanation of the amendments?

Mr. MCCORMICK. I think Mr. Kaul is better prepared to answer that question, Mr. McDonough.

Mr. KAUL. Mr. Chairman, the amendments, it was our intention to propose inclusion of mobile dwellings, and the trailer parks, with the least possible changes in the existing act.

As shown in attachment A of our prepared statement, in the purposes of title I, it would involve simply writing in that this title would have for a purpose the financing of trailer coach mobile dwellings for owner-occupants thereof. We are not proposing that for rental housing. The limitations and safeguards that are included, we feel that $5,000 would represent a maximum loan on the trailer coaches, which I believe are averaging in price in the Nation, about $4,000 of the type of trailer coach mobile dwelling that we would propose to have included in the act.

We are not referring to the small, partially equipped vacation trailers, but the larger trailers.

Mr. MCDONOUGH. Should that further specify, then? As you say, 75 percent of the purchase price, or $5,000, whichever is less, which should represent so many square feet of area. Otherwise, that may be misunderstood.

Mr. KAUL. Yes, that could be included in a limitation of the statute, though our thought on it was that the FHA Commissioner, with his authority to prescribe the space requirements, equipment requirements, and so on, that that sort of detail might better be handled as a regulatory matter by the Commissioner than included as a statutory limitation.