provides for basically direct mortgage lending by the Government. I am opposed to the bill because it is class legislation. The bill is discriminatory in many ways. It is particularly so in the sense that it defines types of organizations which may secure the proposed mortgage moneys. It attempts to create groups of people that presently do not exist and it discriminates against the individual in favor of those groups.

These statements, I appreciate, are broad general statements. They are directed at the type of legislation proposed rather than at cooperative housing as such. The National Association of Real Estate Boards is not opposed to sound, self-supporting cooperative housing. It is opposed to the financing plan proposed in the bill for subsidizing cooperative housing and providing preferential benefits to nonprofit cooperative groups and other types of nonprofit organizations.

I should now like to be more specific and more detailed in my opposition to the bill. I said previously that I oppose it inasmuch as it provides unnecessary means of mortgage financing. There is, in my opinion, absolutely no demonstrated need for the type of mortgage financing proposed by the bill. I have checked the Senate committee hearings and statements by proponents before this committee. There is absolutely no evidence that private industry is not providing adequate financing for the so-called middle-income class of our citizens. Private industry has to date and will in the future provide mortgage funds at acceptable interest rates and on other acceptable terms to finance all economically sound housing, including cooperative housing. Mr. Chairman, I would like to elaborate briefly on what I have just said.

The CHAIRMAN. You may proceed as you desire.

Mr. THOMPSON. My company is in the mortgage business. It represents one of the largest insurance companies in the world in the placement of mortgage loans and in the servicing of those mortgage loans. We are, as correspondents for that insurance company, daily in active competition with other institutions and representatives of other institutions for mortgage loans.

We are not only competing with respect to interest rates, amortization terms, and the actual life of the mortgage, but we are constantly seeking new sources in which to invest mortgage moneys. That is the program of all other insurance companies, savings banks, and savings and loan associations.

The CHAIRMAN. What is the prevailing interest rate now?
Mr. THOMPSON. For what type of loan, Mr. Chairman?

The CHAIRMAN. The ordinary loans that we are talking about, which the middle-income group falls within, the prices being discussed. What would be the average interest rate?

Mr. THOMPSON. Of course, as you well know, veteran guaranteed loans provide for a 4 percent interest rate. Most of the loans provided by FHA for single-family dwellings are 42 percent; conventional loans, 42 percent for housing, single-family housing. The CHAIRMAN. Do you seek the FHA loans?

Mr. THOMPSON. We do.

Mr. KILBURN. After your service charge, it isn't 42, is it? I thought it was about 4.

Mr. THOMPSON. To the insurance company the gross return before costs of the servicing to the insurance company, the gross return is 412 percent and the net is something less to the insurance company. Mr. KILBURN. I know our bank just bought some, and they are going to pay $103 for it, making a net of 4 percent, plus the 3.

Mr. THOMPSON. Of course, FHA-insured mortgages are such a popular and accepted sound investment source that they do command a premium, and premiums up to sometimes 3 and 32 percent are paid by the permanent mortgagees for those loans.

What I am trying to bring out, Mr. Chairman, is that private funds, mortgage funds and when I say "private" I don't mean the funds of a few individuals, I mean the funds of insurance companies and saving and loan associations, and savings banks, and commercial banks, for the investments for the savings departments of those commercial banks, are today looking for mortgages.

Mr. MULTER. Will you please complete the answer as to the question about interest propounded by the chairman? I think you got as far as conventional loans. What is the interest rate on conventional uninsured loans on single-family dwellings charged to the home owner?

Mr. THOMPSON. That is in the record; I said 412 percent.

Mr. MULTER. What about the multifamily loans? What interest is charged to the owner of the building?

Mr. THOMPSON. The conventional mortgage loan to be secured by a multifamily dwelling?

Mr. MULTER. Yes.

Mr. THOMPSON. That will range from 4 to 42 percent.

Mr. MULTER. FHA-guaranteed?

Mr. THOMPSON. Conventional; no insurance.

Mr. MULTER. What about the FHA-guaranteed?

Mr. THOMPSON. We know that that is 4/2 or 4 percent, depending on the type.

Mr. MULTER. What is the interest rate charged to the owner of cooperative housing, multifamily?

Mr. THOMPSON. There again within the framework of the present FHA laws and regulations interest rates are fixed.

Mr. MULTER. What is the interest charged on the so-called conventional loan that is not guaranteed by the FHA on a cooperative multifamily building?

Mr. THOMPSON. There again I would say that the conventional mortgage loan rate to be secured by cooperative development will depend upon the size of the mortgage loan and the willingness of the investing institution to lend its funds at from 311⁄2 to 42 percent. Mr. MULTER. Are the institutions that you are connected with making any cooperative loans on multifamily dwellings?

Mr. THOMPSON.. Not in New Jersey.

Mr. MULTER. Anywhere else?

Mr. THOMPSON. Yes.

Mr. MULTER. Where?

Mr. THOMPSON. I don't know. This company operates throughout the United States and Canada.

Mr. MULTER. I am not talking about the Real Estate Board. I am talking about companies that you say you are connected with.

61731-50-18

Note: "None" does not exelude restrictions of the Houd ng Expeditor's office

Thirty-three and one-third percent to 50 percent more interest is being paid by millions of home buyers today. It is clearly evident that the proposed bill has the effect of encouraging people by unnecessary and unwarranted preferences to live in groups as against the traditional American patterns of living.

There is presently within the framework of the FHA and VA laws and regulations sufficient authority to provide mortgage financing for all income classes: the low-income, the middle-income, and the higher-income group. There is also sufficient legal authority within the scope of the FHA and VA to provide insurance and guaranties for private loans to cooperative housing.

I should like, Mr. Chairman, to have inserted in the record at this point a very well prepared, understandable schedule which sets forth all of the many provisions for FHA insurance, authorized by the National Housing Act, as amended, and by administrative rules and regulations.

The CHAIRMAN. It may be admitted.

(The information referred to is as follows:)

DIGEST OF FHA TERMS

This Headlines Supplement contains a digest of the law pertaining to all titles of the FHA program as of December 1, 1949. It is in chart form for quick reference.

Prepared by the Federal Housing Administration, this chart is reproduced by NAREB as a service to all realtors with the permission of FHA,

We suggest that you keep it at hand to answer your questions about FHA mortgage insurance.

(The chart is inserted facing this page.)

Mr. THOMPSON. There in one form prepared by the National Association of Real Estate Boards is a record that anyone can readily understand and realize that within the framework of the FHA there is ample provision right now for providing to those who want to invest in all types of housing, including cooperative housing.

Many States, too, have enabling legislation for cooperative developments on their own statute books. Wisconsin, I understand, has a 20year-old law for cooperative housing which involves no public subsidy or expense to the taxpayer. New York State, too, under its urban development law and its State redevelopment companies act, has experienced cooperative housing construction and the financing of it through, in some instances, State funds and in other instances through the funds of banks and insurance companies. Other States throughout the last 25 or 30 years have witnessed the construction of cooperative projects financed through private moneys.

As I have stated before, private mortgage funds are available today for the construction of cooperative housing of either the free-standing type or the multiple-family type if such housing is conceived and executed so that it is accepted to be economically sound-not only sound for the mortgagee, but sound for the cooperator as well.

And that, Mr. Chairman, I submit as a most important consideration, sound for the cooperator and sound for the mortgage investor. Effort has been made to show that real-estate, building, and financing circles are opposed to cooperative housing as such. That absolutely is not true. May I point to the item in the Congressional Record of January 30, page A666, inserted by a member of this committee, Mr. Multer?

He referred to the Bell Park Gardens, a cooperative for 800 families in Queens. This project was financed by private enterprise under existing legislation-FHA, section 207c. It was advanced by the Bowery Savings Bank, which advanced $7,222,000 of mortgage moneys. The project was for veterans' families. The last family moved in December 31, 1949.

The total charge for these units is $65.21 monthly, including decorating, heat reserve. That includes all interest charges-real-estate tax charges; it includes the the needed amounts for amortizing the mortgage; it includes all maintenance costs; in other words, every cost the occupant is responsible for.

Mr. MULTER. Including utilities?

Mr. THOMPSON. Precisely.

Mr. TALLE. May I ask a question at that point, Mr. Chairman?
The CHAIRMAN. Yes.

Mr. TALLE. The tax payment is something you cannot very well forecast. It may increase. Is there an escape clause in the arrangement so that in the event that taxes do increase the payment will be increased?

Mr. THOMPSON. Frankly, I cannot answer that question because I have not seen the terms of the leases; nor have I seen the other agreements relating to the raising or lowering of the monthly charge. I don't know.

Mr. MULTER. Those agreements and leases I have seen do include provision for increase in the event of increased charges. There is no fixed amount regardless of change of situation.

Mr. TALLE. Thank you.

Mr. THOMPSON. It seems to me, of course, there should be what is termed in real-estate circles an "escalator clause." In other words, if the taxes go up, the increased proportionate share of those taxes should be paid by the cooperators or the tenants. On the other hand, if they go down, the escalator should go down.

Mr. TALLE. That would also apply, would it not, to insurance rates? Mr. THOMPSON. Precisely.

Mr. MULTER. Can you supply us with a list of cooperative projects throughout the country that have been similarly financed, either privately or by FHA?

Mr. THOMPSON. I would be very delighted to do so, Mr. Multer. I am going to refer to a few others now, but the National Association of Real Estate Boards with its national facilities can get that information and it will be accurate and be submitted to the committee. We will be very happy to supply it.

The mortgage I have just referred to the Bowery Savings Bank mortgage-runs for 34 years and 6 months, not for 50 years or 60 years or possibly 63 years, as is provided in the bill, in the event there is a default, and a grace period of 3 years is extended to the defaulting cooperative.

Mr. MULTER. If this mortgage of the Bowery Savings Bank ran for 50, 60, or 63 years, then the monthly charge will be even less?

Mr. THOMPSON. If the loan were to be amortized over the entire period, yes.

Mr. MULTER. Is there any doubt in your mind that this Bell Park project will outlast 60 years?