Page images
PDF
EPUB

RECOMMENDATIONS MADE BY THE PRESIDENT'S ADVISORY COMMITTEE TO WHICH THE PROPOSED HOUSING LEGISLATION DOES NOT ADDRESS ITSELF

[NOTE.-Numbers refer to numbering in committee report]

II. TO ENCOURAGE THE CONSERVATION AND RENEWAL OF DECAYING NEIGHBORHOODS 4. The present basis for geographical allocation of funds should be modified to make one-third of the capital grant funds available to those cities showing the highest level of performance in a positive overall attack on urban decay.

9. A broadly representative private organization on a national scale should be formed outside the Federal Government with congressional and/or Presidential sponsorship to mobilize public opinion in support of vigorous action by the communities in slum prevention, neighborhood conservation, and other urban renewal activities.

10. The committee urges that this private national organization encourage inquiries into the ownership and operation of slum property and the failure of cities to compel compliance with their health and housing codes. These inquiries can be an important first step in activating public opinion in support of effective slum prevention and urban renewal programs.

III. TO MAINTAIN AND IMPROVE THE EXISTING HOUSING SUPPLY

6. Appropriate administrative steps should be taken by the Federal Housing Commissioner to permit wider use of the trade-in house program as a means of upgrading the existing inventory of housing.

IV. TO ENCOURAGE PRIVATE BUILDING ACTIVITY

11. An objective and independent long-range study of prospective foreclosure and loss experience of the Federal Housing Administration's insurance programs should be made.

12. An objective and independent long-range study of probable losses on Veterans' Administration guaranteed loans should be made.

13. The Federal Housing Administration and the Veterans' Administration should consider providing special assistance to mortgagees in small communities in the preparation of applications for the insurance or guaranty of loans.

14. The Veterans' Administration should seek advice of lending institutions in revising and simplifying its regulations, and committees of lenders should be formed to place applications for Veterans' Administration direct loans with private lenders wherever practicable.

15. Congress and the Appropriations Committees should be urged to return to the principles of Public Law 387, 81st Congress, or to develop another formula designed to achieve the objective of flexibility in the operating expense budget of the Federal Housing Administration. The Federal Housing Administration would be able to operate much more efficiently if the annual amounts it was authorized to spend for administrative expenses were based on a percentage of income rather than a fixed dollar ceiling.

18. The Treasury Department and the appropriate congressional committees should be requested to study whether there are tax inequities which deter private investment in rental housing, and, based on such findings, appropriate action should be taken. The committee is impressed with the need for such an inquiry. However, since the committee had neither the time nor the competence to carry out a study of this kind, it recommends that it be undertaken by the Treasury Department.

V. TO FACILITATE THE FREE OPERATION OF THE MORTGAGE MARKET

5. The Housing and Home Finance Administrator should study proposals for the establishment of a cooperative housing mortgage corporation to assist in the production and financing of cooperative housing projects.

VI. RECOMMENDATIONS DESIGNED TO PROVIDE HOUSING FOR LOW-INCOME FAMILIES

5. Whenever feasible public housing should be built at lower densities, and the design of public housing projects should conform more closely to local dwelling patterns and construction practices. This recommendation is designed to avoid the institutionalized character of public housing and to facilitate the sale of public housing when no longer needed for low-income families.

7. Where feasible, existing sound structures, rehabilitated if necessary, should be used for public housing.

8. More attention should be paid in public housing to the problems of the aged, both in the design and size of dwellings.

VII. RECOMMENDATIONS DESIGNED TO IMPROVE THE ORGANIZATION OF FEDERAL HOUSING ACTIVITIES

1. There should continue to be a single housing agency headed by an Administrator appointed by the President by and with the advice and consent of the Senate. The Administrator should be relieved of the miscellaneous operating responsibilities now assigned to his immediate office. A reassignment of these functions is proposed in recommendation No. 3 below. The Administrator should, of course, be provided with necessary staff assistance which should include the new position of labor relations adviser. The Administrator should be given clear authority to supervise and direct, if necessary, the activties of constituent agencies where any matter of basic policy is involved. The committee is convinced that, although the heads of constituent agencies should be fully responsible for the day-to-day operations of the programs of their agencies, the Administrator must have clear and unmistakable authority to supervise constituent operations for and on behalf of the President.

2. The major housing activities of the Federal Government should be consolidated into the following five constituents:

(a) The Federal Housing Administration. (b) The Public Housing Administration.

(c) The Urban Renewal Administration, incorporating the functions of the present Division of Slum Clearance and Urban Redevelopment and some of the functions of the present Division of Community Facilities and Special Operations. Both of these Divisions are now located in the Office of the Administrator. (d) A Federal Home Loan Board responsible for the administration of the Federal Home Loan Bank System, the Federal Savings and Loan Insurance Corporation, and the National Mortgage Marketing Corporation.

(e) A new Housing Management and Disposition Administration responsible for the management and disposition of Lanham housing, temporary defense housing constructed under Public Law 139, 82d Congress, loans to the manufacturers of prefabricated housing, Alaska housing loans, and acquired property resulting from the activities of the Federal Housing Administration and the National Mortgage Marketing Corporation.

3. Miscellaneous activities and authorities now in the Administrator's office should be reassigned as follows:

(a) Slum clearance and urban redevelopment. This program, amended to transform and extend it into a broad program of urban renewal, should become the nucleus of a new constituent known as the Urban Renewal Administration. Staff of the Division of Community Facilities and Special Operations not otherwise transferred (see below) should be assigned to this constituent.

(b) Housing research. This program is now in liquidation and it is not recommended that it be reinstituted on the former basis. Better data on the volume and types of residential construction, mortgage financing trends, etc., should be obtained through the Bureau of the Census and other data collection facilities in the Department of Commerce and the Bureau of Labor Statistics.

(c) Community facilities and special operations. This organizational unit now includes a number of miscellaneous programs. The following disposition is recommended:

(1) Maintenance and disposition of defense public works. This activity represents the windup of the Lanham Act public works provided in World War II. The remaining workload is small, and should be liquidated as rapidly as possible by staff transferred to the Housing Management and Disposition Administration. (2) Advance planning of non-Federal public works. This activity is also in liquidation and should be concluded by the new Urban Renewal Administration. (3) Defense community facilities and services. This is an emergency activity under Public Law 139, 82d Congress. It should be allowed to expire on June 30, 1954. Staff transferred to the Urban Renewal Administration should wind up any remaining projects as fast as possible.

(4) Alaska housing program. The need for this program has passed. Any cases in process should be delegated to the Housing Management and Disposition Administration or to the Federal Housing Administration for handling, and no new business should be accepted.

(5) Prefabricated housing loans. This program has properly been placed in liquidation. The servicing and disposition of outstanding loans should be assigned to the Housing Management and Disposition Administration.

(6) College housing program. This is not properly a housing activity. It should be transferred to the Department of Health, Education, and Welfare. (7) School construction program. This is not a proper activity of a housing agency, and should be assigned to the Department of Health, Education, and Welfare.

(d) Disposition of Lanham housing. Although responsibility for this function vests in the Housing and Home Finance Administrator, actual operations have been delegated to the Public Housing Administration. It is a mistake to merge a program of housing disposition with one of low-rent housing. This activity should be transferred to the Housing Management and Disposition Administration.

(e) Programing of defense housing. This activity should be abandoned, with any activity necessary to its termination delegated to the Federal Housing Administration.

(f) Federal National Mortgage Association: The purchasing authority of FNMA should be terminated and the Association should be transferred to the new National Mortgage Marketing Corporation which should act as a liquidating agent to dispose of the Association's portfolio in an orderly manner.

(g) International housing activities should be transferred to the Foreign Operations Administration.

4. In place of the National Housing Council, the Administrator of the reorganized housing agency should have a statutory Advisory Board composed of the heads of the five constituents above named and a representative of the Administrator of Veterans' Affairs. The Administrator should be required to review with this Board all current major policy matters. It should be made clear, however, that in the event the Advisory Board is unable to reach a conclusion on particular policy questions or if the Administrator is unable to accept the conclusions of the Advisory Board, his own decision can be independently made and enforced.

5. The Administrator of the Housing and Home Finance Agency, the VA Administrator, and the Commissioner of FHA should be requested to work out an interagency agreement under which the Veterans' Administration would contract for the FHA to perform the technical functions of processing veterans homeloan applications under the present home loan guaranty program.

6. The Urban Renewal Administration should be charged with the responsibility of advising the Administrator concerning the programs developed by the communities to comply with requirements that a workable program to attack the problem of urban decay has been submitted. Based on such findings, it will become the responsibility of the Administrator to certify to the FHA, the PHA, and the Urban Renewal Administration those communities which are eligible for the types of Federal assistance which are conditioned upon such a certification.

Mr. CLARKE. Thank you, Mr. Chairman.

Mr. PATMAN. On page 7 of your testimony you mentioned the Advisory Committee report, and the departure from it, especially concerning the fixing of the interest rate to conform to existing rates as they change.

Now, under the recommendation of the Advisory Committee, who would compose this particular committee, and how many members would it have?

Mr. CLARKE. As I remember the Advisory Committee report, they suggested that the membership of the committee should be the Chairman of the Board of the Federal Reserve System, the Secretary of the Treasury, the Administrator of the Housing and Home Finance Agency, the Commissioner of the Federal Housing Administration, the head of the Loan Guaranty Section of the Veterans' Administration. I believe that is all.

Mr. PATMAN. And they would all be public officials?

Mr. CLARKE. That is correct.

Mr. PATMAN. And it would be their duty to take into consideration the existing mortgage rates and increase or decrease them as the facts would justify?

Mr. CLARKE. That is correct. They would be charged with the duty of doing it.

The thing that we object to, as it stands at the present moment, is no one is really charged with the responsibility. The President is given the authority.

Mr. PATMAN. I see your point. It seems to be a very reasonable

one.

Mr. CLARKE. We think the thing should be set to the point where, if you are going to do it this way-and we think this is an improvement over the present system-that it should be with some group specifically charged with it, so that there is not any basis whereby anyone can duck it.

Mr. PATMAN. Is it left out of this bill, that provision?

Mr. CLARKE. Yes; it is left out.

Mr. PATMAN. It is left out entirely?

Mr. CLARKE. Yes, sir.

Mr. PATMAN. You brought up a question that we discussed yesterday about this 3 percent that the borrowers must pay into this capital fund of this new substitute for FNMA, and I believe you point out in your testimony that it will not be tax deductible to the person who pays. He will have this interest in the capital structure from which he will receive no dividend or no benefit except when the capital is finally retired, which could possibly be 20, 30, or 50 years from now. It would be that long before it was returned to the borrower.

Mr. CLARKE. It is not redeemable even then. The only thing he might get them is a little interest or dividend. That is the only thing he would get then.

Mr. PATMAN. Doesn't he get his 3 percent back?

Mr. CLARKE. No.

Mr. PATMAN. What happens to that?

Mr. CLARKE. He just keeps it there as an investment.

Mr. PATMAN. Keeps it there as an investment?

Mr. CLARKE. Yes.

Mr. PATMAN. Well, that part makes it rather hard on the borrower, the way I see it. We were talking about a $10,000 loan yesterday. That means he will have to put up $300 to this capital structure, and that means, too, that he will continue to pay for 25, 30, or 40 years interest on the entire $10,000, whereas he only received $9,700.

Mr. CLARKE. Well, of course, the theory of the thing, I think, is slightly different from that, Mr. Patman. The theory of it would be that a firm such as our own would, in order to dispose of mortgages in our portfolio, that we would-this does not permit this organization to deal directly with an individual-that our firm would invest 3 percent per thousand dollars of loan that we sold to FNMA in it.

Now, that is a complete impractical thing. From my point of view I cannot see any method of ever making it work. I cannot conceive of our firm ever doing it at all.

Mr. PATMAN. I can't understand how they are going to raise the money on it.

Mr. CLARKE. In addition to that, anything that has happened in the past in connection with operations of FNMA, it would have made

other fees and charges in addition to 3 percent and would make it a very costly affair, but the 3 percent would just drive it right out.

In other words, my vision of the FNMA as set up here is that it is geared up to do only one thing, and that is to take care of special affairs, such as 221 or some other situation of that sort.

As a normal support for the market, or to see to it that funds got in to remote or semirural areas, or, if you will, got into the matter of minority housing, and so forth and so on, I cannot see that it could be used.

Mr. PATMAN. You mentioned the return of credit controls. May I invite to your attention the attitude of this committee on that.

Real-estate-credit controls were eliminated by this committee in 1952, Committee Report No. 2177. On page 15 of that report we said:

Evidence was presented to your committee that inevitable discriminatory aspect of credit controls-namely, that they bear most heavily upon those in the lower-income groups, who have less ready cash-had in the existing situation shadowed the entire inflationary aspect.

And, of course, the proposal in this committee to restore it only received 1 vote out of the 27 or 28 members at that time. So this committee is certainly not in favor of real-estate-credit controls, as demonstrated by its vote in the past.

Mr. CLARKE. This specifically puts it back.

Mr. PATMAN. It does put it back?

Mr. CLARKE. Yes, and in addition to that, Mr. Patman, in my opinion, it puts it back very badly.

Mr. PATMAN. Worse than it was before?

Mr. CLARKE. Well, in this way: You are selecting, in this case, only the Government-aided programs through FHA and VA, as the things susceptible to credit controls. All other types of mortgage lending, all other types of banking, and so forth and so on, are completely eliminated-have nothing to do with it. So it is worse in the sense that it picks out only two particular phases of the operation and gives them the possibility of credit control at the whims of whoever may want to operate them.

Mr. PATMAN. Do you deal in the open market, in Government securities, at any time?

Mr. CLARKE. Not ourselves; no.

Mr. PATMAN. You never buy any for your company?

Mr. CLARKE. No, sir.

Mr. PATMAN. And you don't sell any?

Mr. CLARKE. No, sir.

Mr. PATMAN. You don't know what the standard margin is in the transaction of that type for the person who negotiates the purchase and sale, do you?

Mr. CLARKE. Well, I would hazard some figures in connection with it, because I have been mixed up in it a great deal.

Mr. PATMAN. I wish you would.

Mr. CLARKE. It, of course, has an effect on our operations, and, in addition to that, I happen to be a director of a life-insurance company, so, therefore, I have some idea of what is going on in connection with that.

The normal spread in connection with it, I think you would find by investigation-after all, I am having to guess a little at the present moment is somewhere between 2 and 212 percent.

« PreviousContinue »