The bill would establish as the ultimate housing objective, the realization, as soon as feasible, of the goal of a decent home and a suitable living environment for every American family. The policy to be followed in seeking the attainment of that desirable objective is based on the premise that the provision of housing in the United States has been and will continue to be primarily and predominantly the function of private investment, private construction, and private ownership and management, and that governmental aids shall be designed to stimulate and supplement-not to impede or supplantprivate enterprise operations.

The bill, therefore, declares it to be the policy of the Federal Government to encourage and assist, by all reasonable means, the expansion of private housing enterprise so that it can more broadly serve the housing needs of our families, with the use of public funds and subsidies to housing operations limited to special problems which otherwise cannot now be overcome, and to those needs which cannot be met through the use of the existing supply of housing or through new private construction. Further, the policy declaration makes it clear that, while there are many ways in which the Federal Government can, and should, render assistance, first responsibility and iniative for meeting the problem rests with private enterprise and the local communities.

The policy declaration contained in the pending bill seems to me to be thoroughly sound. It is entirely consistent with my own convictions as to the best fundamental approach to the problem. As you know, those convicions have grown out of nearly 14 years of experience in housing, mainly in the administration of the aids extended to private housing enterprise through the operations of the Federal Housing Administration.

Secondly, title I, Federal Housing Administration, title VI, and transitional period amendments. My comments on the portions of the bill dealing with title VI of the National Housing Act will be very brief, since I have already testified at length before your committee in support of legislation to extend title VI, on a revised and transitional basis, until March 31 of next year, and to provide an additional $2 billion of mortgage insurance authorization for this extended period.

There are really no substantial differences in the title VI amendments contained in the bill now before your committee and the title VI bill previously reported from your committee and passed by the House.

In lieu of the provisions included in the House bill to make eligible for insurance, under section 609 of the National Housing Act, loans to finance the manufacture of housing equipment used on the site in the construction of housing, there have been included in section 104, of the pending bill, provisions to authorize loans by the Reconstruction Finance Corporation for somewhat similar purposes. I believe that this course of action is preferable, in view of the Reconstruction Finance Corporation's extensive experience with this type of business

or commercial loans.

The pending bill also contains, in the amendment to section 610 of the National Housing Act, additional provisions which would make eligible for Federal Housing Administration insurance, mortgages executed in connection with the sale by the Government of any of th

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village properties under the jurisdiction of the Tennessee Valley Authority. We have no objection to this provision.

Concurrently with the extension to March 31, 1949, of title VI of the National Housing Act, on a revised and transitional basis, these amendments are designed to make in title II of the National Housing Act the changes which appear necessary to afford reasonable assurance that it will operate with increasing effectiveness. This should make possible an orderly transition from the very liberal emergency type of assistance provided under title VI to the permanent type of Federal Housing Administration insurance operations. They are also designed to make a number of perfecting changes in the present provisions of title II which the operating experience of the Federal Housing Administration has shown to be necessary and desirable.

Many of these amendments are rather technical and, to conserve your time, we have provided a separate statement as to what each amendment does. Moreover, Mr. Richards, the Federal Housing Commissioner, is here and I believe it is preferable that he comment in detail on the amendments to the Federal Housing Administration's programs. I am in general agreement with Mr. Richards' statement and I am sure it will be helpful to the members of your committee. There is one matter, however, which I would call to your attention. The bill changes the present limitation of $3,000 on Federal Housing Administration, title I, class 3 loans to $4,500. It has been my opinion, which is shared by Commissioner Richards, that a $1,500 or 50 percent increase in the maximum principal amount of these title I, class 3, loans is not necessary and that a $1,000 or 1/3 increase to $4,000 would represent a preferable maximum limit. Mortgages of larger principal amounts should, I think, be subject to Federal Housing Administration's normal standards, appraisals, and inspections during construction, both for the protection of the Federal Housing Administration and the purchaser.

Now, as to title II-Secondary market for GI home loans and Federal Housing Administration-insured mortgages. The purpose of this title of the bill is to provide for a Government-sponsored secondary market for residential mortgage loans guaranteed under the Servicemen's Readjustment Act, or insured under titles II or VI of the National Housing Act. Under the bill, the Federal Housing Administration, title I, class 3, loans are not eligible for purchase since they are not subject to the Federal Housing Administration's title II standards, appraisals, or Federal Housing Administration inspection during construction. Your committee may recall that in the past when Federal Housing Administration, title I, class 3, loans were purchased by the Government, it was required as a condition to such sale that they be converted to Federal Housing Administration title II loans.

I believe that assurance of a secondary market for home-mortgage loans is needed to aid the home-building industry in continuing the present high volume of production. Certainly it is necessary that the Government do everything reasonably possible to assist in continuing and sustaining the momentum which has been achieved by the industry. I understand that your committee recently provided for a continuation of the purchasing activities of the Federal National Mortgage Association in the Reconstruction Finance Corporation, with respect to home mortgages insured under titles II and VI of

the National Housing Act. Such action was, in my judgment, very desirable, since those activities now represent an important aid in the current home-financing scene. Presumably, this will mean that there would be no gap in these operations until such time as the Congress has an opportunity to decide that the question presented in the pending bill as to the necessity for a Government-sponsored secondary market for home-mortgage loans insured by the Federal Housing Administration or guaranteed under the GI Act.

As I have indicated, I believe that provision for a Governmentsponsored secondary market for both Federal Housing Administration-insured and GI-guaranteed home loans is desirable and necessary, but I am convinced that this should only be done on a carefully restricted basis.

The essential features of the secondary market provisions of this bill are, in my judgment, those contained in section 205 which relate to the types of loans eligible for purchase, and to the conditions under which they may be purchased.

Purchases would be restricted to areas where a scarcity of private secondary credit develops to the extent of threatening the continued production of sale or rental housing, and where such purchases would not reasonably be expected to contribute to substantial increases in the costs and prices of housing. While these particular provisions may make the administration of this operation somewhat more difficult, it seems to me that they represent essential and desirable safeguards against increasing inflationary pressures with resulting increases in housing costs.

No loan would be eligible for purchase in the secondary market operation authorized by the bill

1. Unless it was made after the effective date of the act. This assures that the secondary market will assist lenders who continue to put their funds in home mortgages to finance additional home construction;

2. If the original principal obligation of the loan exceeded $7,000 for each family residence covered by the mortgage, although provision is made for increasing this limitation up to $10,000 if at any time in any area it is not feasible to construct dwellings which meet sound standards of construction and design within the limitations of a lower maximum amount. This should tend to encourage lenders to make funds more readily available to finance moderately priced homes;

3. Unless no private market is willing to purchase the loan; 4. Unless the loan is purchased from a mortgagee qualified by experience and facilities to service it;

5. Unless supporting data are submitted to show the reasonable ability of the borrower to meet his payments and the physical soundness of the property covered by the loan.

It seems to me that these provisions are desirable and are necessary to assure a sound secondary market operation. I believe they would do much to overcome some of the difficulties which resulted, prior to its discontinuance last year, of the Government-sponsored market facilities for loans guaranteed under the GI Act.

Attention is also directed to the fact that this title contemplates that reasonable construction standards would be established as a condition to the purchase of some loans guaranteed under the GI Act.

It is my general understanding that there is some doubt as to whether the Veterans' Administration has legislative authority to establish such standards in connection with its guaranty of GI loans.

Presumably, it is therefore intended to impose reasonable construction standards in connection with secondary market purchases of these loans, so that lenders who desire assurance of this outlet for their GI mortgage loans would voluntarily require these reasonable construction standards., This seems an altogether sound and essential safeguard in connection with a Government-sponsored secondary market operation.

This title of the bill would provide for carrying out this Government-sponsored secondary market operation through a new corporation established in the Housing and Home Finance Agency, and would provide for the liquidation of the Federal National Mortgage Association. In part, I assume that this provision grew out of various indications of a desire on the part of the Congress to liquidate the Federal National Mortgage Association and to discontinue this type of operation in the Reconstruction Finance Corporation.

I believe that it is sound policy to centralize in the housing agency, rather than to disperse among various other agencies of the Government, general supervision of those functions and activities which involve governmental aids for the provision of urban housing.

At the same time, I have recognized that this particular operation is a matter of considerable importance to the current operations of the home-building industry. The result would be that if I, as the Administrator, were charged with the responsibility for carrying out this program, I would desire to make such arrangements for its administration as would assure the continuation, without interruption, of the present secondary market facilities for FHA-insured mortgage loans. At the same time, it would be essential that immediate provision be made to permit the purchase of GI guaranteed loans where necessary. It therefore seems to me that it would be desirable for us to undertake to carry out this operation initially at least by utilizing the present experience and facilities of the Reconstruction Finance Corporation on a reimbursable basis. This would avoid any unnecessary interruption in present activities or undue delay in undertaking newly authorized secondary market operations in connection with GI guaranteed home loans.

Next, as to Title III-Housing Research.

Title III of the pending bill would authorize the Housing and Home Finance Administrator to undertake a program of technical housing research aimed primarily at cooperating with and assisting the housing industry in achieving improved methods of production and consequently in achieving reduced costs.

In my judgment, such a program would present one of the most promising avenues toward progress on the core of the housing problem-the fact that today, as in the past, new houses even of minimum standards cost too much for too large a segment of American families. It follows equally that progress in bringing the costs of housing down to within the reach of a much wider percentage of the population is essential to achieving and sustaining the high rate of housing production which the Nation's housing needs require.

In appraising the need for a technical research program of this kind, I believe we must keep clearly in mind the nature of the hous

ing industry-the fact that it is comprised of tens of thousands of builders, subcontractors, architects, materials distributors and materials producers. These tens of thousands of firms generally specialize on individual links in the complex chain of housing production. The one common characteristic of most of them is that they constitute small business institutions without sufficient individaul resources to undertake independent programs of technical research.

I am not saying that there has not been progress and improvement in housing production methods. Clearly there has been progress, but it has been scattered and sporadic and it has not been sufficient to accomplish the over-all reduction in housing costs which is the real need. The reason for this is that no single firm or group of firms has had either the resources or a sufficiently broad stake in the industry as a whole to undertake the kind of broad-scale technical research needed to modernize and improve the whole process of house production. As a result, the housing industry has been at a disadvantage technically in comparison with other basic American industries which contain many large firms with ample resources to undertake intensive research programs and to accomplish the technical advances and expanding productivity that have become the hallmark of American industrial progress in the eyes of the world.

Because of these circumstances, there is increasing agreement that if real progress in reducing housing costs through technical advances is to be achieved, the Federal Government must take the leadership in the necessary technical research.

I am thoroughly convinced that a coordinated program of technical research to develop better and more economical construction methods, to encourage the use of new materials, and to achieve efficiency and economy in all phases of the housing industry offers perhaps the greatest possibilities for the progressive reduction of housing costs and expansion of the private housing market.

This title does not contemplate the duplication of research activities now going forward publicly and privately. Rather, it is intended, in cooperation with industry, to map out the needs, to supplement the research going on elsewhere, to fill in the gaps, and to coordinate and integrate these activities and disseminate the practical results of that research.

The title also provides that in carrying out the program, the Administrator shall utilize to the fullest extent feasible the available facilities of other Federal agencies. To facilitate close coordination, provision is also made for the Secretary of Commerce to be represented on the National Housing Council in the Housing and Home Finance Agency. This is desirable since that Department has important facilities in the National Bureau of Standards.

I believe that such a program, at a relatively modest cost to the Federal Government, would pay dividends many times over in the form of a progressive lowering of housing costs and a progressive broadening of the housing industry's effective market. The actual cost of the program would be determined by the Congress through the regular appropriation process.

Next, Title IV-Rental Housing Aids for Families of Moderate Income and Veterans.

Mortgage investment aids; veterans' cooperatives; yield insurance.