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Mr. DEANE. I learned for the first time, Mr. Winston, that the success of your program in Baltimore has been dependent, to a certain extent, upon the public housing program because you were able to move the people from one area into the other.

Mr. WINSTON. That is correct, sir. In Baltimore we have what we like to refer to as our balanced three-prong program. We have the rehabilitation, as you call it, or law enforcement, as it is referred to under the Baltimore plan; we have our redevelopment commission, and the local housing authority, which deals in public housing.

I would like to add one thing to the statement I made a moment ago, for the gentleman who asked about it, that the housing authority has a contract with the commission to relocate all of its families. That does not mean that we depend on public housing alone. We locate those families according to their need. We have to search out private housing. We always try to find private housing for them. I say that just to indicate that I did not want to leave any impression that we depend upon public housing alone, because many of the families are ineligible for public housing, in the first place, and we are still responsible for relocating that family in some housing in the city, whether private or public.

Mr. DEANE. Of those in public housing?

Mr. WINSTON. I would say the percentage going into public housing depends upon the vacancies. We have a small turnover of the vacancies and we are trying to complete a program of housing in Baltimore right now. We have three programs under construction. The State office building is likely to be held up if we cannot proceed more rapidly than we are now with the completion of housing for low-income fami lies. This one site happens to be a horrible slum and some thousand families will have to be relocated within the next 2 years.

Mr. DEANE. Under the present law a slum area now devoted to commercial or industrial projects, if Federal funds are used, must be converted into residential; isn't that true?

Mr. WINSTON. Mr. Searles can answer that.

Mr. SEARLES. That is true, sir, that at the present time, if the area is not now residential, its new uses must be predominantly residential in character to receive loans and grants under title I.

Mr. DEANE. That isn't true under present legislation; is it?

Mr. SEARLES. What I am citing is the present legislation, that would be changed by the proposed legislation.

Mr. DEANE. That is what I mean.

Mr. SEARLES. So that it could be

Mr. DEANE. In other words, a deteriorated commercial area now existing could be reconverted into a commercial area?

Mr. SEARLES. Under the proposed legislation.

Mr. DEANE. Yes, sir.

Mr. SEARLES. Yes, sir.

Mr. DEANE. Using Federal funds to do so?

Mr. DEANE. Yes, sir.

Mr. DEANE. That is all, Mr. Chairman.

The CHAIRMAN. Are there further questions?

If not, thank you very much, gentlemen for your valuable assistance. The committee will stand in recess until tomorrow morning at 10 o'clock.

(Whereupon, at 4: 12 p. m., the committee adjourned.)





Washington, D. C.

The committee met at 10 a. m., the Honorable Jesse P. Wolcott (chairman) presiding.

Present: Chairman Wolcott, Messrs. Talle, Kilburn, McDonough, Betts, Mumma, Merrill, Oakman, Hiestand, Stringfellow, Van Pelt, Spence, Brown, Patman, Multer, Deane, O'Brien, Addonizio, Dollinger, Bolling, and O'Hara.

The CHAIRMAN. The committee will come to order.
We will proceed with consideration of H. R. 7839.

We have with us this morning Mr. Norman P. Mason of the United States Chamber of Commerce.

Mr. Mason, we are very glad to have you here. You may proceed with your statement. If it is agreeable, Mr. Mason will proceed with his statement without interruption until he is through, and then will submit himself to such questioning as the members may wish to conduct.

Mr. MASON. Thank you, Mr. Chairman.


My name is Norman P. Mason. My home is in Chelmsford, Mass., where I am engaged in the building material business. I am chairman of the construction and civic development department committee of the United States Chamber of Commerce, and I am testifying on behalf of the chamber in respect to H. R. 7839.

The Chamber of Commerce of the United States is in hearty accord with the aims of this legislation. We believe it is good legislation because it expresses renewed faith in and increases reliance on a free competitive economy to bring about a constant improvement in the living standards of our people. It makes the system of privately financed mortgage insurance which has been successfully developed in the Federal Housing Administration over the past 20 years an even more useful feature of that market. It places the Federal Government in a position where it can strengthen these private forces, it increases American ability to add a large volume of new houses. It is a real step toward conserving our present housing and preventing the spread of blight. All this the national chamber endorses.

We commend the simplification of the FHA statute by the elimination of provisions that either have no proven usefulness or have out

lived their usefulness. We applaud those provisions eliminating differences in terms on the debentures offered in payment of the insurance and in allowances of foreclosure costs applicable to the several sections and subsections of the act.

Over the years FHA has been so laden with special purpose functions and special mortgage patterns designed to meet some assumed need or some current emergency that today it is difficult to count the number of possible ways of making an FHA mortgage. The effort to return to one general pattern for insuring loans on single-family houses and one for multi-family and cooperative structures should result in savings both to FHA and its users.

Two features of the bill will make homeownership easier for the great majority of people. One would replace the existing variety of systems of loans to value relations for FHA-insured mortgages with a single system of loan to value ratios of not to exceed 95 percent of $8,000 value and 75 percent of the value in excess of that amount. The other feature would increase the maximum mortgage which may be insured by FHA from the present $16,000 for a 1- or 2-family residence to $20,000 with corresponding increases for 3- and 4-family houses.

The raising of the top dollar limits for insured mortgages makes a partial adjustment to restore FHA to the broad coverage of the market that it had in its beginning. It does this by providing an even schedule of loan ratios and avoiding a sharp increase in the downpayment requirement at a mortgage amount of about $12,000 as is now the case. The legislation removes an artificial barrier that has caused builders to build to meet an arbitrary formula rather than to seek out and serve the actual demand that may exist at the time. We believe it is best to have the wishes of our citizens, rather than a Federal official, determine the direction of production.

Another very important provision of the legislation, which the chamber endorses, is that for a flexible interest rate to be regulated by the President from time to time so that FHA and VA mortgages will draw adequate funds to the building market. While we felt that the suggestion of the President's advisory committee that a board of five meeting at frequent intervals would have been a more workable way to have handled this adjustment, we believe that this proposal can be operated so that there is no arbitrary restriction on the normal flow of funds to this field. Certainly the ordinary American citizen is better served by a realistic interest rate which brings an adequate amount of lendable funds into the market rather than by a low fixed interest rate but no funds to borrow.

The proposal to provide the same mortgage insurance terms for new and existing construction is in keeping with the original idea of FHA as an accessory to the whole home mortgage market. It was not for several years after the creation of FHA that provisions specially favoring new construction were introduced. Whatever justification there may have been for doing this at the time no longer exists. Under present-day conditions we must recognize the desirability of favoring terms for financing existing homes not only as a means for encouraging maintenance of such property in good condition, but also as a means of stimulating new building. More and more the sale of a new home will depend upon the ability of the new home buyer to

make a satisfactory sale of his old home. The proposed amendment would be very helpful in this direction.

We commend the recognition given in the bill to the importance of maintaining and improving the value of existing dwellings. Particularly noteworthy are the increase in loan limits and maturities for the insurance of modernization and repair loans and the provisions which would enable an FHA mortgagor to get the benefits of the socalled open-end feature. He could obtain a loan for the improvement or alteration of his home by adding the amount of the loan to his existing mortgage without the necessity and costs of executing a new mortgage. In addition, there is a provision which would make FHA insurance under certain safeguards available for both old and new residences located in rundown or blighted areas.

These provisions should be of immeasurable benefit in conserving the largest single element in our national wealth-our housing. They should help to improve housing conditions generally, and they should be of especial help in increasing the supply of substantial, comfortable, modern housing for families with low incomes.

The chamber has worked for many years to encourage the elimination of slums and the restoration of blighted urban areas to economic and social usefulness. While we had reservations about the urban rehabilitation plans established in the housing acts of 1949, believing it to be too limited and too costly, the pending legislation promises to remove these defects. This legislation places a definite responsibility on the locality to put its own house in order with ordinances and enforcement of these ordinances to assure the proper maintenance of housing and to prevent its overcrowding, before that community can go to the Federal Government for assistance. It lets the Federal Government help in such a way as to encourage the conservation of sound structure. It helps to retard the decline of existing neighborhoods and to eliminate the causes of blight before it becomes necessary to do a wholesale clearance operation. Because of these desirable features, the provisions of title IV of the bill are strongly supported by the chamber and we urge their enactment.

We also endorse the idea of setting up a secondary mortgage market and doing away with the present Federal National Mortgage Association. This new facility is really needed to help the rank and file of American citizens living in the fast-growing areas such as in the West and Southwest, and those living in hundreds of average American small towns and cities which have no source of mortgage capital. To them such a secondary mortgage market spells the difference between their ability to have or not to have the house they desire and need. We in the chamber with our many grassroots contacts are especially aware of this need of our average American citizens. In the past many of the aids which have been extended by the Federal Government have been to help the mass builder to serve the needs in our large urban communities. Now, we need this new facility to help those in our smaller cities and towns.

We hope that with this in mind you will review carefully the recommended legislation on the secondary market and make it even more workable for these average people. I refer to the fixed nonrefundable charge of 3 percent which must be borne by all regular borrowers. We believe that the proposal of the President's Commit

tee which makes this refundable when the mortgage has been sold by the marketing organization is more equitable.

And I would like to add that we also believe that the $12,500 limit on this type of loan is detrimental to the welfare of the average American citizen.

We are disturbed at the idea of asking a sound business organization, such as this secondary market facility ought to be, to furnish funds for an experiment in mortgage lending which appears to us to be unsound. I refer to the 40-year, no downpayment, FHA-insured loan proposal in the legislation. We do not believe that it is good practice to ask an institution to run itself on sound lines so that it may finance its need through borrowing from the public and then ask this same institution to take Government funds and make them available for questionable risks. The idea of the sound secondary mortgage market which is the essence of the proposed legislation could work to the advantage of millions of our citizens and we endorse this.

What I have described comprises, we believe, a practicable housing program, one with attainable objectives: It is one that does not promise more than it can deliver but promises, nevertheless, a rapid and comprehensive upgrading and enlargement of the whole housing supply.

It appears to us that the extension of authority to the President to vary the loan to value ratios and maturities on FHA and VA loans is a provision which could be eliminated from the legislation without loss. It seems to us that this proposal would provide for a form of direct and selective credit control on the FHA, VA sector of the mortgage market which would keep that market in a state of constant uncertainty and would permit its manipulation to serve a wide range of political and social purposes that might be quite unrelated to the actual need for housing on the part of our average American citizens. We believe that the maximum limits on these loans should be directly controlled only by statute and that dependence can be placed on general monetary actions to regulate the flow of funds. Credit and price controls are not popular with our American citizens and we do not think they should be used except in wartime.

So far as the 40-year FA-insured loans are concerned we want to remind you that the liberalized provisions of the regular FHAinsured loans which we have endorsed should have an opportunity to be tried out before any such radical departure as this is called for. We feel sure that with the other changes proposed in section 203 loans that this special type of loan will not be needed. This special type of loan calls for a great deal of Federal programing, supervision, and general Federal meddling which is unnecessary and undesirable.

We wish to make a plea for greater dependence on a free market economy which, as we understand it, is the primary aim of this administration and its legislative program. We believe that this dependence on the free market economy is justified by performance. In the short time since the end of World War II and despite the difficulties created by the Korean war the industry built over 8 million new housing units and added several million more by converting existing dwellings. Besides this it has very markedly improved the condition of existing housing through the expenditure of billions of dollars on repair and modernization. All this constitutes a giant step

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