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Mr. FOLEY. If I remember correctly, Congressman, the passage in that colloquy that you were referring to was the fear that we might have a tremendous downward movement in values or great depression which would cause the Federal Government through insuring or guaranteeing agencies to take over so much property that it would result in a great loss, and we would have to call on the Treasury.

I told him then that I did not pose as a prophet, but that I saw nothing in past history, nor in the present operation, to lead me to have such fears. I think there are many safeguards involved in this system which in themselves would tend to prevent the reoccurrence of such a situation.

Mr. DEANE. I mentioned that statement by Dr. Talle to call to your thinking that last Friday was a rather significant day, I think, in the life of one of the constitutents in your agency, and that involves the Home Owners' Loan Corporation.

Wasn't it true, that back in 1933, approximately 1,000,000 American homes were in the process of being foreclosed ?

Mr. FOLEY. I think those are about the correct figures.

Mr. DEANE. The Government at that time stepped in and put up—I am speaking now in general terms, because I do not have the exact figures—approximately $200,000,000 in capital to begin to try underwriting, saving those homes?

Mr. FOLEY. That is my recollection. It was $200,000,000.

Mr. DEANE. Was it not generally felt by Representatives in the Congress as well as administrators in the Departments at the time that a great deal of this capital of $200,000,000, a great amount of it at least, if not all of this sum, would be lost?

Mr. FOLEY. As I recall the debates at that time, that was the expectation, and the price would have been thought to be cheap for the benefits that would result.

Mr. DEANE. Well, the Government followed through, and to support this capital issued—did they not?-approximately $3,500,000,000 in bonds.

Mr. FOLEY. Debentures of the HOLC bonds, yes.

Mr. DEANE. Then on last Friday the last of those bonds were paid in full ? Mr. FOLEY. They have all been retired.

Mr. DEANE. And at one time during the administration of HOLC there were sufficient losses that absorbed this entire capital stock of $200,000,000 at one time; isn't that right?

Mr. FOLEY. Yes; I believe so, depending on how the books were interpreted, and they could be so interpreted.

Mr. DEANE. Which created a deficit in this particular fund of $200,000,000 in capital, but through the years since the initiation of this particular program these funds have been built back up, and today there is $8,000,000 surplus. Isn't that true?

Mr. FOLEY. I can't recall all the figures, but I believe you are substantially right, Congressman.

Mr. DEANE. And, by the 1st of July of this year, $50,000,000 will have been retired and returned to the Government, and by July of 1951 this entire capital of $200,000,000 will have been paid with a surplus of at least $10,000,000?

Mr. FOLEY. That is our present expectation. We are proceeding with the liquidation of HOLC rather rapidly now; and we believe

from the experience we are having in the sale of portfolios on a Statewide basis, that at that time we will have completely liquidated, returned the full investment, and shown some surplus.

Mr. DEANE. Mr. Chairman, with your permission, I should like to ask Mr Foley to develop these figures accurately and insert them in the record at this particular point.

Mr. FOLEY. I will be glad to do so.
(The information requested is as follows:)

HOME OWNERS' LOAN CORPORATION RECORD

The Home Owners' Loan Corporation was established in 1933 for the purpose of making loans to refinance the mortgages of more than a million American home owners who were victims of the depression. Most of these home owners were nearly 2 years in arreas on principal and interest on their mortgage and nearly 3 years on their taxes. Between the time the corporation was established and the time it terminated its lending operation on June 12, 1936, it had refinanced loans on 1,017,521 homes throughout the United States, involving approximately 312 billion dollars. Since that time the major activity of the corporation has been the liquidation of this great volume of loans. As the accompanying table indicates, by the end of 1949 over 93 percent of the total loans had been liquidated. As a result there was outstanding at the end of calendar year 1949 only slightly in excess of $230,000,000 worth of loans and vendee accounts.

To finance its lending operation, the Home Owners' Loan Corporation sold $3,489,453,550 worth of Government-guaranteed bonds. At the time they were issued it was felt in many quarters that losses on the HOLC operation might well range between one-half billion and 1 billion dollars, all of which would have to be made up by the Federal Government. Instead, it now appears that this vast rescue operation will prove to have been accomplished without cost to the Federal Government. Thus, on January 27, 1950, the HOLC retired the last of the bonds which were outstanding. In addition, it now appears that when final liquidation is complete the Corporation, after having paid interest on its bonds and after having paid all the administrative expenses of operating the Corporation since its incepton, will be able to return to the United States Treasury without impairment the $200,000,000 of capital stock originally subscribed by the Government plus an additional sum representing a profit to the Government on its investment.

HOLC total investment and loans outstanding, 1933–49

(Dollar amounts in thousands)

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End of year

$117, 367
2, 379, 951
2,978, 778
3, 123, 806
3, 194, 665
3, 275, 208
3, 385, 094
3, 444, 068
3, 468, 679
3, 481, 113
3, 486, 234
3, 488, 708
3, 490, 243
3, 491, 859
3, 493, 870
3, 495, 889
3, 497, 998

0.1

$117, 283 2, 365, 504 2,897, 162 2, 765, 098 2, 397, 647 2, 168, 100 2,035, 716 1, 955, 572 1, 776, 918 1, 566, 971 1, 338, 102 1,091, 363

$117, 283 2, 365, 504 2,897, 080 2, 763, 245 2, 380, 319 2, 070, 941 1,817, 880 1, 632, 703 1, 415, 563 1, 200, 203

0 a

1933. 1934 1935 1936 1937. 1938. 1939 1940 1941 1942 1943 1944 1945. 1946 1947 1948 1949.

.6 2. 5 6.1 11.3 17. 2 24. 7 32.8 40.5 48.5 58.9 68.4 75. 5 81.8 86. 1 89.4 93.4

852, 319 636, 463 485, 909 368, 908 230, 623

959, 818 741, 656 565, 923 416, 038 312, 712 234, 145 146, 266

$82 1,853 17, 328 97, 159 217, 836 322, 869 361, 355 366, 768 378, 284 349, 707 286, 396 220, 425 173, 197 134, 763 84, 357

$3 6, 848 166, 938 436, 845 542, 119 509, 520 356, 825 288, 064 226, 925 96, 455 11, 407 1, 632

418 182 28 37

urce: Home Loan Bank Board.

Mr. DEANE. In my opinion the Home Owners' Loan Corporation program represents one of the most thrilling stories in the life of holding together American homes, and, likewise, it seems to me to counteract the feeling of some pessimism that may have been advanced by some. Here is one housing program assured by the Government that has done a remarkable job. I am pleased to note that some of the same officials are still connected with the Federal housing program.

Would you be able to relate the HOLC program in the setting up of capital in the corporation proposed under the bill before us as to administration and operation?

Mr. FOLEY. Yes, generally speaking.

I would like to point out, however, the difference, fundamentally, by way of answer, again, to many of the critics of these proposals.

The Home Owners Loan Corporation is a wholly owned Government corporation which loaned funds raised on Government credit, and consequently was, in essence, a direct Government operation.

There is this difference in the corporation proposed in the bill, fundamentally: that it is not a wholly owned Government corporation. It is contemplated eventually to become a wholly owned private corporation, becoming so progressively, and I think that is a material difference.

As to the operation, if by that you mean just the mechanics of operation, I would say that basically they would be the same. It would be a case of obtaining funds and lending them on the security of home ownership. In detail, the operation would be considerably different, for one reason, because you would be dealing with a relatively smaller number of larger projects as distinguished from the large number of individual home projects, which would materially alter the mechanics through which you would operate, and probably materially reduce your cost of operation.

Beyond that, I don't know that I could comment at this point, Congressman.

Mr. DEANE. Going to section 608, for a moment, and since we are beginning to put that section in mothballs, will you, for the record, Mr. Foley, submit a statement, statistically speaking, for 608 during the period that it has been in operation.

Mr. FOLEY. I will be glad to do so, in the several phases of its operations, do I understand, from defense, the war, the veterans ?

Mr. MULTER. May we have as part of that compilation the number of applications on hand, still unprocessed, indicating dollar value, number of units, and number of projects? Mr. FOLEY. We can do that.

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1 Additional VEH applications in process at end of 1949 numbered 648 projects with 61,670 units, and the amount was $488,755,836.

Source: Federal Housing Administration,

Mr. DEANE. Take the southern part of our country. In what way do you think that this program might be attractive?

Mr. FOLEY. I think that would depend entirely upon the condition that prevails in an area with respect to their general ability to get proper, decent housing, either for rent or for sale, within the means of middle-income families. There will be a wide variance among the attitudes of people as to whether they wish to be participating in a cooperative program, or not. Of course, not everybody, and not a majority of people in this group will want to go the cooperative route, but if the situation in a community is such that families of this income group are not able readily to obtain housing of the sort that they want, then I think that this would be an attractive procedure for them, regardless of whether it is a big city or a small city, or whether it is a suburban area.

As to the mechanics of handling, with respect to creating a situation where they can go through the operation of setting up with sufficient facility, I think we can cope with that as we get into the development of the organization.

Mr. MULTER. May I suggest another answer to Congressman Deane is this. Although I recall that our colleagues from Mississippi were, I think, unanimous in voting against the passage of the public-housing provisions of the law when passed last year, the first application filed under that law was from the State of Mississippi. I think it will take the same course here. Although there may be some vocal opposition from some parts of the South, they will be the first to come in under its provisions to take advantage of its benefits.

Mr. Rains. Will you yield?
Mr. MULTER. Yes.

Mr. Rains. This is a question of paramount concern to me. Does this legislation meet a Nation-wide problem and does it have universal appeal?

We don't build houses on a cooperative basis in the South. We have space, and plenty of it. I would like for you to get us some figures to show that this would be of interest to people who look forward to building in small towns. I would like to have some figures to show that it might work into their plans for building.

Mr. FOLEY. I will be glad to do that. (The material referred to follows:)

H. R. 6618 FEATURES ATTRACTIVE TO FAMILIES IN THE SOUTH The cooperative features of H. R. 6618 would be attractive to families in the South and in less populous areas as well as in large northern metropolitan districts. There is nothing in the bill to prohibit the formation of a cooperative consisting of a group of single-family detached homes and it may well be that in less populous areas this type of cooperative project would be preferred over a multifamily project.

The following estimates relate to a $6,500 single-family two-bedroom home located in the South. Comparisons are presented between (a) the estimated monthly rent on such a single-family home assuming it is part of a rental housing project financed with a mortgage insured by FHA under section 608 of the National Housing Act; (b) estimated monthly charges on an identical singlefamily home assuming it is part of a cooperative housing project financed with a mortgage loan from the National Mortgage Corporation; (c) estimated monthly charges on an identical single-family home assuming it was not part of a project but was financed with a separate mortgage insured by FHA under section 203 of the National Housing Act. The estimates should be considered as illustrative comparisons rather than a precise measurement of the actual differences involved.

The estimates as explained above are as follows:

Cooperative

Owner-ocSec. 608 rent- or nonprofit al project project (H. R. cupied home

6618)

(sec. 203)

Rent or charges per month
Total debt service.
Vacancy allowance
Cash available after debt service
Operating expense and taxes.
Equity or down payment.

$58. 52 30. 30 4. 10 4. 91 19. 21 650.00

$42.70
21.00
1. 28
1. 21
19. 21
0

$49.84
33. 88
0
0
15. 96
325.00

The difference in estimated monthly rental between the house under a 608 mortgage and the proposed cooperative or nonprofit results from a reduction in the debt service of $9.30 per month, in vacancy allowance of $2.82 per month, and in cash available after debt service of $3.70 per month-a total reduction of $15.82 per month, or about 27 percent. In this comparison, no allowance was made for greater tenant maintenance in the cooperative project because of the difficulty of making such an estimate and because this difference probably would be substantially smaller in the case of a project composed of single-family homes as compared with a project of multifamily units. Additionally, since the project was to be composed of single-family houses and was to be located somewhere in the South, no allowance was made in the operating expense estimates for the cost of heat and utilities. Thus, the reduction of $15.82 results primarily from the longer loan term, the lower interest rate, and the absorption of the mortgageinsurance premium into the interest rate charged on the mortgage.

In the case of the single-family home owned separately and financed with an individual mortgage, if an allowance is made for repairs, maintenance, replacements, and insurance, the monthly cost to the owner is estimated to be $47.47. The debt service for this owner-occupied home is higher than for the home in a 608 project because of the higher interest rate and the shorter term of 30 years. This higher debt service is partially offset by the elimination of the vacancy allowance, cash available after debt service, and administrative expense, which would be provided under the section 608 proposal but not included for the singlefamily home owned and financed separately. Thus, the estimated cost per

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