Mr. RYAN. Well, that is an impossible question. The agency has never been willing to give us a list of the 608's, so we don't even know where they all are. But we do discover that in every part of America this thing is happening, that this particular establishment, and then that establishment, is found guilty of making transient rentals.

Mr. DEANE. I repeat that I recognize the seriousness of the problem which you face, but isn't this true, that in some of the smaller communities, and even in the larger communities, this matter of parking, convenience, and also the question of fire hazard, has operated to the serious disadvantage of a great many hotel owners?

Mr. JOHNSON. Well, yes, it has, indeed, but I don't understand, sir, how that refers to the competition between Government-financed hotels.

Mr. DEANE. What I was trying to do was to be fair to owners of 608's, and also fair to hotel owners.

Mr. JOHNSON. Well, they are in competition if they take one room away from us, unless it is written into the law that they should be permitted to compete with hotels, compete with private capital, and in this one instance, where one of those properties has as many as 40 or 50 transient rentals, we can't prove that all of those rentals would have gone into the hotels or motels in that area, but certainly the percentage has hit the hotel on any one of those particular nights where they have lost that occupancy.

Mr. DEANE. Knowing the FHA officials as I do, I feel that you certainly have people who want to do the right thing. They are faced with a serious problem, too. Some of these 608's may be on the downgrade, and a lot of pressure is being put on some of these projects, to my own personal knowledge.

Mr. KILBURN. Will you yield?

Mr. DEANE. Yes.

Mr. KILBURN. It seems to me if we pass legislation to help housing for the country, that it doesn't mean that we are passing legislation to increase competition for hotels. That isn't houisng.

Mr. JOHNSON. No, sir.

Mr. KILBURN. So I don't think the FHA people are interpreting it correctly.

Mr. DEANE. I wonder, Mr. Chairman, if, in executive session, we might not ask the housing agency to give us some views on the matter, so that we can really come to some accurate conclusion as to what the problem really is and determine what FHA can do to protect the hotel owners.

Mr. KILBURN. I can see what they are up against. I don't think it is fair.

Mr. JOHNSON. Because, after all, if somebody goes into one of these places overnight, somebody has to provide them with maid service to clean up the room, and we don't think it is the intent of your body to provide hotel rooms, or convention facilities, or cocktail lounges. We need some help.

Mr. DEANE. I agree with you.

Mr. BETTS. To operate a hotel you have to secure a State license; don't you?

Mr. JOHNSON. In some States, sir. You don't have to in all States. Mr. DEANE. That is all, Mr. Chairman.

The CHAIRMAN. Are there further questions!

Mr. OAKMAN. Mr. Chairman.

The CHAIRMAN. Mr. Oakman.

Mr. OAKMAN. I would like to tell Mr. Johnson that we are glad to have him with us today, coming from the great sovereign State of Michigan.

The CHAIRMAN. Though he is not from my district or Mr. Oakman's, I am very glad to put in a plug for Mr. Johnson's district. Mr. OAKMAN. That is right, Mr. Chairman.

But the projects which you referred to under section 608 do not apply to your own operation in Michigan?

Mr. JOHNSON. No, sir.

Mr. OAKMAN. So you are here today to speak for an industry problem?

Mr. JOHNSON. That is right.

Mr. OAKMAN. Rather than one which affects you directly?
Mr. JOHNSON. Yes, sir..

Mr. OAKMAN. This does not even affect you indirectly as an individual?

Mr. JOHNSON. In Michigan, Mr. Oakman, it doesn't affect us. Mr. OAKMAN. Mr. Chairman, it seems to me that the gentleman offers here two very valid solutions which, as our colleague, Mr. Deane, has suggested, might well be discussed in executive session with the FHA, and that is on page 3, to the effect that the FHA will not permit transient rentals in any rental housing so long as the Commissioner holds the mortgage, or the other suggestion, that the committee incorporate in its report a clear statement to the effect that this program of governmental assistance in financing of housing is intended to furnish shelter housing for low-income families, and that such facilities shall not be used and operated as hotels.

The CHAIRMAN. I would think that from now on, we might give consideration to a provision prohibiting that and administratively the FHA could incorporate language in its contract to cover it; to the effect that the property is not to be used for hotel purposes.

Mr. OAKMAN. That, of course, Mr. Chairman, wouldn't affectThe CHAIRMAN. I should think it could be handled under the general provisions in the act, administratively, to more clearly set forth the intent of Congress. I think we all agree that it was never the intent of Congress that the FHA would insure a commercial property. We had a lot of deliberation on that question before this committee and we have never gone into the commerical field, in FHA, and we surely wouldn't want to set up a situation which had developed at one point in FHA and RFC, where Government moneys were used to set up competition for privately financed industries to the prejudice, perhaps, of some of the industries in your district, Mr. Oakman.

Mr. OAKMAN. That is right. Mr. Chairman, do you feel that that could be made applicable to existing units, these half million units which have been referred to, as well as future units which will be constructed hereafter?

The CHAIRMAN. That is the problem, whether it can be made so, unless we find language in the existing law which would justify it. If we find language in the existing law, and Mr. Johnson has suggested that it is there, we might reiterate in the report our intentions

in that respect. And we could provide hereafter a specific prohibition against the use of 207's as commercial properties.

I think we will find some way of dealing with the problem.

Mr. JOHNSON. Thank you, sir.

The CHAIRMAN. Thank you very much, Mr. Johnson and Mr. Ryan. Mr. JOHNSON. Thank you, Mr. Chairman.

SUPPLEMENT TO TESTIMONY OF MARCH 12, 1954, BY EARL JOHNSON, APPEARING ON BEHALF OF THE AMERICAN HOTEL ASSOCIATION

As I have pointed out, FHA has indicated a reluctance to take any effective steps to enforce the provision against transient occupancy in its contracts with borrowers under sections 608 and 207. Probably the best way of correcting this situation is to amend the act to require FHA to file a petition for an injunction in a Federal district court within 30 days after it has received written notice of the breach of contract. If FHA fails to act within the 30-day period, the law should permit any property owner to petition the Federal district court for an injunction. I hestitate to suggest any specific statutory language to permit such injunctions. It would probably require amendments to the Judicial Code and the Administrative Procedures Act as well as the Federal Housing Act.

In addition, the law should require FHA to issue regulations to prohibit transient occupancy. I have here some language which your committee might want to consider as a specific amendment to the bill. The section numbers on the language we offer for your consideration refer to the United States Code, and not to the bill you are now considering.

1. Section 1713 (a) (1): Amend subparagraph (a) (1) so as to read as follows:

"The term 'mortgage' means a first mortgage on real estate in fee simple, or on the interest of either the lessor or lessee thereof (A) under a lease for not less than ninety-nine years which is renewable or (B) under a lease having a period of not less than fifty years to run from the date the mortgage was executed, upon which there is located or upon which there is to be constructed a building or buildings designed principally for permanent residential use; ***” 2. Amend section 1713 (a) by adding a new subparagraph, reading as follows: "(8) The term 'permanent residential use' shall mean occupancies for a term of at least one month and in no case shall occupancies or rental agreements be made for a lesser period."

3. Amend section 1715 (b), to read as follows:

"The Commissioner is authorized and directed to make such rules and regulations as may be necessary to carry out the provisions of this subchapter and shall make and enforce rules and regulations which will insure that the rental housing is not used for other than permanent residential purposes.”

4. Amend section 1743 (b) (2) by adding the following at the end thereof: "It is the intent of this Act that the mortgaged property shall be designed and used only for permanent residential purposes and shall not be rented for periods of less than one month."

5. Amend section 1742, to read as follows:

"The Commissioner is authorized and directed to make such rules and regulations as may be necessary to carry out the provisions of this subchapter and shall make and enforce rules and regulations which will insure that the rental housing is not used for other than permanent residential purposes.”

6. Amend section 1750b (a) so that the following is added at the end of the fourth proviso: "and preventing the rental of such properties for periods of less than one month."

7. Amend section 1750f, to read as follows:

"The Commissioner is authorized and directed to make such rules and regulations as may be necessary to carry out the provisions of this subchapter and shall make and enforce rules and regulations which will insure that the rental housing is not used for other than permanent residential purposes."

The CHAIRMAN. The committee will be in recess until 2:15. (Whereupon, at 12:50 p. m., the committee recessed, to reconvene at 2:15 p. m., the same day.)

AFTERNOON SESSION

The committee met at 2:15 p. m., pursuant to adjournment, the Honorable Jesse P. Wolcott (chairman) presiding.

Present: Chairman Wolcott, Messrs. Gamble, Talle, Kilburn, McDonough, Betts, Mumma, Merrill, Oakman, Van Pelt, Spence, Brown, Patman, Deane, O'Brien, Bolling, O'Hara and McCarthy.

The CHAIRMAN. The committee will come to order.

We will proceed with the consideration of H. R. 7839.

This afternoon we have representing the United States Savings and Loan League Mr. M. K. M. Murphy, past president.

Mr. Murphy, we are glad to have you proceed.

STATEMENT OF M. K. M. MURPHY, PAST PRESIDENT, UNITED STATES SAVINGS AND LOAN LEAGUE, ACCOMPANIED BY

STEPHEN SLIPHER

Mr. MURPHY. I am M. K. M. Murphy and I appear here as past president of the United States Savings and Loan League and vice chairman of the league's legislative committee. Our 62-year-old league is a nationwide organization which represents about 90 percent of the $27 billion savings and loan business, serving more than 15 million savers and homeowners in the country. By way of further personal identification, I live in Rutherford, Ñ. J., and I am president of the Boiling Springs Savings & Loan Association which is a relatively small neighborhood New Jersey financial institution with $10,700,000 in assets and about 18 employees, serving 17,000 folks in our area.

My associate this afternoon is Mr. Stephen Slipher of the staff of the United States Savings and Loan League, and we are most grateful for permission to appear before you here today.

The Housing Act of 1954 is largely a home-financing bill and since savings and loan associations finance more homes than any other type of financial institution we naturally have a very deep interest in this measure. The importance of our member savings associations in the home-financing field can be underlined by noting that last year savings and loans made 38 percent of all of the home loans in the country, helping over 1 million families to home ownership.

The importance of this volume of home lending to the Nation's economy is readily apparent when it is realized that the approximately $72 billion of loans made by our institutions last year was greater than the combined total of all FHA and GI loans made during the same period. It is also a larger sum by $1 billion than the combined total of home loans made by commercial banks, savings banks, and insurance companies last year.

There are two other characteristics of the savings and loan operation which I wish to emphasize. Savings and loan associations are homefinancing institutions first, last, and always. About 82 percent of our assets are invested in home mortgages. Unlike most other financial institutions we have always realized, and still do, our obligation to the concept of individual homeownership and thus deemphasize any alternative investments which may be available to us; thus we are constantly in the home mortgage market.

As your committee knows, there have been several times in recent years when changes in the Government bond market have caused a

sharp reduction in the home lending activity of some of the other types of financial institutions. Another characteristic is that savings and loan associations are the only home-financing institutions that do not place primary reliance on Government guarantees or insurance of home loans. We make 75 percent of our home loans entirely on our own judgment and responsibility. All but 5 percent of the remaining loans are GI loans. We have actively cooperated in the GI home loan program where, as the committee knows, a special act of Congress has provided a method for relieving veterans of World War II and the Korean conflict of the normal downpayment requirements.

TITLE VI. SAVINGS AND LOAN AMENDMENTS

Since title VI of the bill deals directly and exclusively with savings and loan associations, I should like to comment on that section before addressing testimony to the remainder of the bill. This title provides technical and minor adjustments to savings and loan law and also adds a new provision with respect to conservator and receivership procedures.

Section 601 is a technical change having to do with the right to sue the Federal Savings and Loan Insurance Corporations. Section 602 is an adjustment in the size of the maximum loan which Federal home loan banks may accept as collateral and section 603 (1) makes the same adjustment in maximum loans by Federal associations. We support these changes.

Section 601 is a technical change having to do with the right to sue the Federal Savings and Loan Insurance Corporations. Section 602 is an adjustment in the size of the maximum loan which Federal home loan banks may accept as collateral and section 603 (1) makes the same adjustment in maximum loans by Federal associations. We support these changes.

Section 603 (2) amends subsection (d) of section 5 of the Home Owners' Loan Act to set forth in detail the procedures under which the Home Loan Bank Board may enforce its supervisory directives and appoint conservators and receivers, and it also sets forth the rights of the Federal savings and loan association involved. The United States Savings and Loan League has given very serious study to this matter for a number of years and we feel that it is very important that adequate provisions be set forth in the statute. There have been numerous conferences by our league with the Home Loan Bank Board, with various groups within the savings and loan business, and with some Members of Congress; the results of such conferences are reflected to a great extent in the language contained in this bill. We very definitely support section 603 and urge its enactment.

The United States Savings and Loan League quite naturally has a comprehensive legislative program of suggested changes in the savings and loan law. We realize that it is not appropriate to suggest the addition of elaborate legislation affecting our savings institutions in a general housing measure and accordingly we will ask the committee at some later date to give consideration to our overall program. There are, however, four minor items which tie very closely to the purposes of the housing act and which we suggest could and should properly be included in the present measure. I have included at the