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them day after day, night after night, and week after week in their efforts to develop a well-rounded program to better the living conditions of American families. I think the members of this Advisory Committee did an excellent job and performed an important public service.

The conclusions and recommendations of the Advisory Committee were set forth in the report which it submitted to the President on December 14, 1953. I have sent copies of that report to each member of your committee. Most of the conclusions of the Advisory Committee, as well as the results of our own studies and experience in administering the existing housing legislation, were reflected in the recommendations contained in the President's special housing message, and are included in the pending bill.

I desire to advise your committee that I have been authorized by the Bureau of the Budget to state that the enactment of the bill would be in accord with the program of the President. Since the clearance letter contains specific comments with respect to two or three provisions of the bill I am submitting a copy of that letter for the information of your committee.

The CHAIRMAN. Without objection the list of members of the President's Advisory Committee may be inserted in the record at this point.

(The document referred to is as follows:)


George L. Bliss, president, Century Federal Savings and Loan Association, New York, N. Y.

Ernest J. Bohn, director, Cleveland Metropolitan Housing Authority, Cleveland, Ohio.

Ehney A. Camp, Jr., vice president and treasurer, Liberty National Life Insurance Co., Birmingham, Ala.

Miles L. Colean, economist and author, Washington, D. C.

A. R. Gardner, president, Federal Home Loan Bank of Chicago, Chicago, Ill. Richard J. Gray, president, Building and Construction Trades Department, American Federation of Labor, Washington, D. C.

Richard G. Hughes, first vice president, National Association of Home Builders, Pampa, Tex.

Rodney Lockwood, past president, National Association of Home Builders, Detroit, Mich.

William A. Marcus, senior vice president, American Trust Co., San Francisco, Calif.

Norman P. Mason, treasurer, William P. Proctor Co., North Chelmsford, Mass. Robert M. Morgan, vice president and treasurer, the Boston Five Cents Savings Bank, Boston, Mass.

Thomas W. Moses, attorney, Pittsburgh, Pa.

Aksel Nielsen, president, Title Guaranty Co., Denver, Colo.

Robert Patrick, financial vice president, Bankers Life Insurance Co., Des Moines, Iowa.

James W. Rouse, the Moss-Rouse Co., Baltimore, Md.

Bruce C. Savage, Bruce Savage Co., Indianapolis, Ind.

John J. Scully, vice president, the Chase National Bank of the City of New York, New York, N. Y.

Alexander Summer, Alexander Summer Co., Teaneck, N. J.

James G. Thimmes, chairman, CIO Housing Committee, Pittsburgh, Pa.

Ralph T. Walker, past president, American Institute of Architects, New York, N. Y.

Paul R. Williams, architect, Los Angeles, Calif.

Ben H. Wooten, president, First National Bank, Dallas, Tex.

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MY DEAR MR. COLE: This will acknowledge your letters of January 15 and February 9, 1954, transmitting drafts of a bill which you desire to present to the Congress, entitled "The Housing Act of 1954."

The major provisions of this legislation were reviewed and agreed upon prior to January 25 when the President sent forward his message to the Congress. The revised draft, as your letter of February 9 indicates, incorporates changes made in the course of these and later drafting sessions in addition to certain changes recommended by the chairmen of the Banking and Currency Committees. Title I includes a new section (sec. 129) authorizing the Federal Housing Commissioner to insure advances made pursuant to "open end" provisions in mortgages. Authority of this type is clearly needed, but this Bureau questions the necessity for the last proviso exempting such advances in determining the aggregate amount of mortgages which may be insured under the National Housing Act.

Title III would drastically revise the present Federal National Mortgage Association, with the objective of shifting as rapidly as feasible to private ownership and control most future assistance to the secondary market for home mortgages. This would be accomplished by requiring each mortgage seller to make payments of nonrefundable capital contributions of not less than 3 percent of the amount of mortgages involved in any purchases or contracts for purchases. The certificates issued evidencing these capital contributions would be convertible into capital stock of the Association when all of the outstanding stock and obligations of the Corporation held by the Treasury have been retired. During this interim period, however, no return would be paid on these certificates. In the interest of encouraging more extensive use of the secondary market and more rapid retirement of the Government stock, this Bureau suggests that provision be made for payment of interest on these certificates at the same rate as provided under section 303 (a) for capital stock held by the Secretary of the Treasury. During the initial period when the Federal Government would still own and control the secondary market operations of the Association, it would be required under section 309 (c) to make payments to the Treasury in amounts equivalent to Federal corporation income taxes with respect to the secondary market operations. The Treasury Department suggests that the desired objective could be achieved more effectively and with benefit of better public understanding if the Association were subjected directly to income taxation on a parity with private enterprise. Presumably, under this approach if returns were paid on the convertible capital certificates as recommended above, they should be treated as nontaxable expenses of doing business.

Title IV would broaden the existing Federal authority to make loans and grants to local public agencies for slum clearance and urban redevelopment by authorizing similar assistance for other types of urban renewal. The Administrator under section 414 also would be authorized to make grants to local public agencies "to assist them in developing, testing, and reporting methods and techniques, and carrying out demonstrations and other activities for the prevention and the elimination of slums and urban blight." The necessity for this additional authority is not apparent, since the activities under the broadened urban renewal program in the normal course of operations, if properly administered, should provide ample opportunity for developing new methods and techniques without requiring separate Federal grants for this specific purpose.

Title VI includes in section 603 (2) detailed legal provisions spelling out the authority and procedures for the Home Loan Bank Board in enforcing its rules and regulations and in appointing conservators or receivers for Federal savings and loan associations. The provision of legislative standards for the appointment of conservators is highly desirable, but the need to prescribe detailed administrative procedures is not apparent.

While this Bureau questions the necessity of desirability of the specific provisions mentioned above, the bill otherwise adequately carries out the recommendations made by the President in his message of January 25 to the Congress. Accordingly, you are advised that there is no objection to the presentation of

the draft legislation to the Congress for its consideration, and that its enactment would be in accord with the program of the President.

Sincerely yours,


Deputy Director.

Mr. COLE. I should like to comment briefly on 3 or 4 of the principal features of the bill relating to the operations of the FHA. Federal Housing Commissioner Guy Hollyday is here with me and has a more detailed statement covering the provisions of the bill relating to the FHA. If it is agreeable to your committee it might be helpful if Commissioner Hollyday were permitted to present his statement to you at the conclusion of the portion of my statement on the FHA provisions of the bill. We could then proceed with questions on this phase of the bill before I proceed with the remainder of my testimony on the secondary mortgage credit facility and the other titles of the bill.


In my judgment, one of the most important features of this bill is represented by various provisions which are designed to assist in the improvement and conservation of our supply of existing housing. Because of the housing shortages which developed during the depression and war years much of the Federal housing legislationparticularly in recent years has been directed primarily toward increasing the volume of new housing construction. This bill likewise contains a number of important provisions designed further to assist in achieving and maintaining a high annual volume of new housing construction. At the same time it recognizes that we need to direct more specific attention to the fact that in our existing homes we have a tremendous asset. It also recognizes that by assisting families in their efforts to keep their homes in good repair and to bring them up to modern standards of comfort and convenience we can make an important contribution to the raising of national housing standards. Several provisions of the bill are directed toward this important objective. With respect to the home repair loan program under title I of the National Housing Act, the bill increases the maximum loan from $2,500 to $3,000 and the maximum maturity from 3 to 5 years. The latter provision would reduce the monthly charges required to carry such loans by about 35 percent. For example, the monthly charge required to carry a $1,000 loan having a 5-year maturity would be about $21, as compared with about $32 in the case of a 3-year maturity.

Certain changes would also be made with respect to title I loans to finance the improvement or conversion of existing structures used or to be used as dwellings for two or more families. The present maximum of $10,000 for this type of loan would be changed to $1,500 per family unit, or $10,000, whichever is the greater, and the maximum maturity would be increased from 7 to 10 years.

It is recognized, of course, that the FHA title I home modernization and repair loan program has inherent limitations. Because they are usually unsecured "character" loans and the insurance of loans meeting the specified standards must be more or less automatic, the title I modernization and repair loans must be small and of short term.

The result, of course, is that the title I home modernization and repair loan program, while most useful and helpful in financing relatively less costly home repairs and improvements, is of limited assistance to families of modest income who need to finance major home improvements or modernization work. Assistance for such work therefore must be on a relatively long-term mortgage loan basis which permits lower monthly carrying charges.

Several other provisions of the bill are designed to help in better maintenance and fuller utilization of existing housing. The bill would eliminate the existing statutory disadvantages in the maximum loan to value ratios which now apply to FHA insured loans on existing housing as compared with newly constructed housing.

In his statement Commissioner Hollyday will furnish two examples which clearly illustrate the desirability of this provision of the bill. The bill would aso eliminate the present statutory disadvantage in the maximum maturity which now applies to FHA insured loans on existing housing regardless of its physical condition or durability. The FHA, of course, would not permit a maturity in connection with an existing house which was longer than warranted by the physical condition and the expected economic life of the particular house involved. I believe that these provisions of the bill would be of material assistance to families who desire to purchase good existing homes well suited to their particular needs, and also to families who wish to enlarge or modernize existing homes.

The new FHA section 220 and section 221 programs proposed in the bill would also assist in the improvement and conservation of our existing housing supply. These sections would authorize mortgage insurance to assist in financing the rehabilitation of existing dwellings as well as the construction of new dwellings in connection with slum clearance and urban renewal undertakings as contemplated by title IV of the bill. Both of these new FHA insurance programs are directly related to the broader effort to rehabilitate and restore whole neighborhoods, and I will discuss them further in the later portion of my testimony dealing with title IV.

As an aid to the elimination and prevention of the spread of slums and blight in urban renewal areas, new mortgage insurance provisions are included in the proposed legislation by adding section 220 to the National Housing Act. It is expected that the provisions of section 220 will provide a stimulus to local community action and encourage the support of builders, lenders, and others in the rehabilitation of blighted areas and the conservation of residential values.

The proposed section 221 FHA program should be particularly helpful in facilitating urban renewal programs in many communities by providing housing for many of the families displaced from their homes as a result of urban renewal activities. The enforcement of local housing codes to reduce overoccupancy, the rehabilitation of housing, the clearance of slum areas, and other renewal activities generate needs for housing for relocation purposes. The relocation needs of the low-income families, particularly the minority group, are particularly acute and require special provisions.

The section 221 program would make mortgage insurance available on very favorable terms so that displaced low-income families could buy these homes or acquire them on lease-and-purchase options. The

maximum mortgage amount would be $7,000 and not in excess of 100 percent of value for a single-family dwelling where the mortgagor is the owner-occupant. A minimum cash outlay of $200 would be required. Builders would be permitted to obtain 85 percent loans to facilitate construction and financing pending subsequent sale to qualified owner-occupant purchasers under purchase contract or lease-option agreements. The maximum term is fixed at 40 years.

Mortgage insurance would also be provided under this section for the repair or rehabilitation of dwellings for use by ten or more families as rental accommodations for qualified displaced families where the mortgagor is a nonprofit corporation, association, or organization, public or private, which is regulated under Federal or State laws as to rents, charges, and methods of operation. The maximum mortgage would be $7,000 per family unit and not in excess of 100 percent of value, with a maximum term of 40 years.

There is one other matter about the section 221 program to which I want to call particular attention. It should be recognized frankly as an experimental program. Recognizing it as such, I am strongly of the opinion that it is very necessary and a very worthwhile program. The development of a better supply of adequate housing for families of low income is one of our most important and pressing problems. The urban renewal program contemplated by this bill necessarily will displace many families of low income from the unsatisfactory dwellings in which they are now living. I do not propose to turn my back on this important problem. That is why I'fee! so strongly that this section 221 program ought to be tried.

It is an effort to develop a practical means for making it possible to meet more of this particular need through private enterprise. But, to me, private enterprise means not only that the housing is built by private builders and owned and operated by individual families or private business organizations. It means also that it is financed by private long-term mortgage credit supplied by private lenders who obtain the necessary funds from private sources-not from the Federal Government. Section 221 offers every inducement to make this possible. It provides a means under which lenders can invest funds in such loans without risk of loss. It provides a means under which the income hazards of long investment at a fixed rate of return are minimized by permitting any such loan in good standing to be assigned to the FHA at any time after 20 years in exchange for 10-year fully guaranteed debentures. Such debentures would bear interest at a rate equivalent to the yield on Government marketable obligations of comparable maturity at the time such debentures are issued. We are prepared to go even further to make it possible for private enterprise to meet more of this need. We are prepared to have FNMA agree in advance to buy any such loans from the lender upon default, thus permitting the private lender to obtain settlement in cash rather than in debentures. We are even prepared, if necessary, to have FNMA purchase a modest part of any such loan at the time of origination.

I believe we ought to try the approach provided by section 221, because it is my belief and my hope that, in time, it could result in a substantial and vital source for the provision of adequate housing for families of lower income and could progressively reduce the pres

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