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mortgage lenders, constantly being criticized for not meeting the needs for financing of home buyers on greatly liberalized terms, accepted the various programs as proposed, with constructive modifications, as an alternative to direct Government lending and greatly expanded public housing programs. The effect of regulation X and the companion Federal Housing Authority and Veterans' Administration limitations was to increase down payment requirements.

Liberal terms for financing the sale of existing houses do not create any demand for building materials and in fact may lessen the demand for new construction. They therefore neither tend to raise the prices of these materials nor take them away from defense uses.

Furthermore, there is no danger of credit being extended too liberally in this field. Down payment requirements in conventional loans are now and always have been strict. The tendency is for credit extension policy to lag behind price rises, rather than to facilitate them as has been suggested. New selling prices for existing houses are not immediately recognized by lenders and loan value appraisals are generally established below such selling prices. There is no threat to our economy in this particular field and we think that no regulation is required.

Under the auspices of the Federal Reserve Board a voluntary restraint program is being initiated and there is no question but that it will receive the hearty support of all lending institutions, large and small. The Board is to be congratulated on its foresight in handling the matter in this fashion. In essence, the program will reportedly involve a screening by the various divisions of the lending industry of loans with a view to weeding out and rejecting those loans which are inflationary. There is every reason why the voluntary program should be given a full opportunity to be effective. In the meantime, credit restrictions should not be imposed in the field of old house financing. No real evidence has been produced to indicate the need for control in this sector of mortgage lending.


Residential rents.- When the question of the extension of rent control was before the Congress last spring we expressed our view that the time was approaching when all Federal rent control should be abolished. The end of these regulations was in sight when the Korean situation came along and now this Congress is asked to enact a new rent-control law more stringent than anything heretofore known. In this bill it is proposed that the rents of any housing can be controlled or recontrolled, regardless of when the housing was constructed. Heretofore Congress has recognized that new housing facilities, whether for private ownership or for rent, would not be constructed if they were to come under Federal rent control. Under Federal law prospective builders and owners of new rental properties were encouraged to go ahead with their plans on the assurance that their rents would not be subject to control by the Government. Thousands of rental units were built, many under section 207 and section 608 of the National Housing Act. To repudiate the exemption of this new rental housing construction brings into question the good faith of our own Government in relation to those who have relied upon Federal law. Undoubtedly we shall need some new additional housing and rental units, especially in defense manufacturing areas. It may be difficult to induce private enterprise to build new housing in the face of the threat of immediate Federal rent control.

There have been built over 3,000,000 housing units in the 3 years ending December 31, 1950, exclusive of farm dwellings. We have read the testimony of Mr. Tighe Woods, Housing Expediter, before the House Banking and Currency Committee on the subject of this proposed rent-control law and we find nothing in his testimony that leads us to believe that there is not now an adequate supply of rental housing in this country, or that even under our curtailed building activities the country will not be able to maintain a reasonable supply of rental properties. If the supply is adequate, the price of rents will take care of itself. Here again let us not have controls for the sake of experiment, but only when such controls are strongly indicated by a threat to the economy, and when the law provides for gradual decontrol. It should be pointed out that involvement in a general war might change the whole picture and make the imposition of Federal rent controls a real necessity. We have not reached that stage and if we do, Congress can act expeditiously to plug the hole, as it did last summer in the rapid passage of the Defense Production Act following the Korean outbreak. No great geographical shifts in the labor force are contemplated as the result of this present

emergency except in the case of atomic and other unusual installations where the Housing and Home Finance Agency and VA have already removed credit restrictions. During the defense period prior to World War II, savings banks were a factor in financing necessary housing for defense workers.

Most of the workers engaged in defense work will be employed at the places of their regular employment, in many cases at the very same machine. Our defense installations grew to their present great capacity during World War II and their locations are set by the existence of those great enterprises which will shoulder the principal burden of production.

Commercial rents.—The proposed rent-control provisions of this bill would cover commercial rents, an area never before controlled under Federal authority. Commercial rent control is absolutely unnecessary, regardless of the fluctuation in our economic conditions. It is a popular misconception that commercial rent enters into the cost of the goods sold. Commercial rent is self-controlled. It is paid only out of profit. A merchant will pay the rent asked only if he thinks he can pay it out of his profit and he will pay it, regardless of rent control. He will only pay the rent asked as long as he can pay it from his profits. If the merchant's rent is raised to some figure which, in his opinion, his business cannot stand, he moves or goes out of business. We see it every day in our large and small cities. The great proportion of all retail commercial rents are today paid as a percentage of gross sales or, in effect, the rent is based on the profits expected to be derived from the business at a specific location. Under such circumstances, commercial rents are self-controlling and need no controls. Very truly yours,

Robert M. MORGAN, Chairman, Committee on Mortgage Investments.



Mr. Chairman and members of the committee, I am Maurice R. Massey, Jr., chairman of the Federal legislative committee of the Mortgage Bankers Association of America. Our membership consists of about 1,700 mortgage companies, commercial banks savings banks, life-insurance companies, and other lending institutions of all types.

I am president of Peoples Bond & Mortgage Co. of Philadelphia, Pa., which has been engaged in the business of making and selling loans on all types of properties for many years.

I am submitting this statement on behalf of the Mortgage Bankers Association of America in conformance with your written request. We understand it will be incorporated in full in the record.

We welcome the opportunity to appear before our committee.

We have reviewed carefully the provisions of H. R. 3871, a bill to amend the Defense Production Act of 1950. We do not feel sufficiently qualified to make comments and recommendations with regard to many of the sections of this bill, however we have very definite views concerning two specific sections of the proposed legislation and we would like to record these comments and recommendations with your committee.

1. Title IV of the bill extends and increases the authority of the Federal Government to control rents. We are opposed to the enactment of this title of the bill as well as to the continuation of any form of rent control. We believe that experience has shown that rent controls in operation have actually worked to decrease substantially the volume of housing accommodations offered for rent, and it has definitely reduced the incentive to produce new rental accommodations. We know that other witnesses who have testified before your committee have offered factual evidence that in those areas where rents have been decontrolled, rents have not risen as much as was predicted by housing officials, and where rents have advanced, the increases have been substantially less than the increases in the prices of other commodities. Therefore, we recommend that the subject of rent control be left as a matter of local jurisdiction entirely.

Further to the best of our judgment and experience, the extension of rent control to commercial facilities as provided in the bill would only impede the national defense effort. In many of our large cities, there are so many vacancies in desirable commercial space that it would seem thoroughly purposeless to extend rent control to these types of buildings. For example, in Philadelphia, vacancies in commercial buildings total nearly 644 percent of the total available commercial


space. In New York, commercial space totals almost 5 percent of the total available business and industrial available space. It is confusing, to say the least, as to the reasons for the objectives of the administration in the proposals to extend a system of rent control to commercial accommodations.

On the one hand, our Government proposes the extension of rent control in critical defense areas because of housing and commercial space shortages; on the other hand, by the adoption of Federal credit controls, it restricts the building of new housing and commercial accommodations in these same areas. The Government says-in effect-space is short, both housing and commercial, in defense areas, therefore rent control is needed. In the next breath, the officials say new building has inflationary tendencies, therefore you should not build in defense

2. Section 106 of the bill extends the authority of the Federal Government to control credit on real estate transactions to existing properties. Our association is opposed to this section of the bill.

If this section is enacted the real-estate and mortgage business will be placed in great jeopardy. Federal credit restrictions have already applied the brakes sharply to the volume of new building. The home building industry is grinding to a sharp stop because of credit controls and the lack of mortgage money at presently fixed, artificially low rates of interest. If these same credit restrictions are applied to existing properties, mortgage money will be further withheld from existing real estate and this will adversely affect the acquisition of existing industrial properties by defense plants and the sale or rental of existing residential properties to defense workers.

In our opinion there are no adequate statistical data which demonstrate any reason why existing properties should be put under credit controls.

The committee should realize that mortgage loans on existing properties either guaranteed by the Veterans' Administration or insured by the Federal Housing Administration are under credit controls. Therefore, the only loans which are not controlled are so-called conventional loans and these loans that are by custom, practice and tradition limited to 50-6633 percent of the appraised value of the property. Further, the present acute shortgage of funds for investment in mortgages will assure the continuance of conservative lending policies without the necessity for Government intervention.

In our opinion the committee should also realize that to impose controls on existing houses would immediately make it more difficult for defense workers to move from one defense area to another. The ability of the defense worker to sell his own house and to buy a new one at the site of his new employment would be seriously curtailed by imposing further restrictions on the mortgage financing available to him.

In conclusion, we would like to point out to the committee that far from indicating a need for additional controls, the conditions which we are presently experiencing in the mortgage market as a result of Regulation X and the other allied credit controls seem to indicate the possibility of the need for relaxing present controls if we are to maintain even a fairly even flow of mortgage funds to the building industry

(At 12:42 p. m., the committee adjourned to meet at 10 a. m. Monday, June 4, 1951.)

83473–51-pt. 3-11


MONDAY, JUNE 4, 1951


Washington, D. C. The committee met, pursuant to call, at 10 a. m., in room 1301, New House Office Building, Hon. Brent Spence, chairman, presiding.

Members present: Messrs. Spence, Brown, Patman, Multer, McKinnon, Dollinger, Talle, Cole, Nicholson, Buffett, Betts.

The CHAIRMAN. The committee will be in order.
You may proceed, Mr. Snyder.


Mr. SNYDER. Thank you, Mr. Chairman. I have associated with me Mr. John C. Williamson, who is counsel to the Washington committee of our association, and Mr. Albert A. Payne, my associate.

Mr. Chairman and members of the committee, I am Calvin K. Snyder, secretary of the realtors' Washington committee, National Association of Real Estate Boards. Our offices are located at 1737 K Street NW., Washington, D. C., and 22 West Monroe Street, Chicago, Ill. Our membership consists of 1,124 local real-estate boards and 44,655 individuals and firms of realtors. Our membership is engaged in every phase of the real estate and construction industry.

We deeply appreciate this opportunity to appear before your committee.

The National Association of Real Estate Boards endorses and supports the national defense program against communism at home and abroad. We also recognize the need to maintain a sound national economy if we are to achieve a lasting peace.

We offer the services of the Nation's realtors in all matters in which they can be helpful using their special knowledge and skill in the field of real property.

With your permission, Mr. Chairman, we should like to present our testimony with respect to four sections or portions of sections in the bill.

A. Section 102 (b) and (c). Authority to requisition and condemn.
B. Section 103 (e). Expansion of productive capacity and supply.
C. Section 105, title IV-A. Rent stabilization.
D. Section 106 (a). Control of credit.

In studying the testimony presented to this committee by witnesses representing the Federal agencies, we find these two factors as


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