homes in that very large project, were stuck with the cost of rebuilding and repairs.

Senator CARVILLE. Do you know what percentage of those houses where that was the situation?

Mr. SHISHKIN. One reason the remedy is needed, is that there is no way of finding out what happens to the property after occupancy in each case, unless the house really begins to fall apart.

All we know is that it seems to be very prevalent. We know this on the basis of local housing committee reports, and those come in from many cities. I would like to add one more point.

Senator MURDOCK. Do you think the warranty provision as it now appears in the pending bill is adequate?

Mr. SHISHKIN. Absolutely adequate, sound, and extremely desirable. It will greatly strengthen the FHA system. It will appeal to the public, if it is properly explained. I think nothing will appeal more to the public than a provision of warranty, assuring a well-built home, and the lapsed-payment provision guarding against foreclosure.

Senator MURDOCK. Before you leave this, I do not know whether you have commented on this matter of overappraisal.

Mr. SHISHKIN. Yes.

Senator MURDOCK. Do you think the bill we are considering does anything toward the elimination of that situation of overappraisals? Mr. SHISHKIN. The builder's warranty provision of the bill is a direct safeguard against overappraisal. This provision will have a strong effect, as you pointed out, to put the contractor on his toes, and to provide for much better building, so that a warranty could be given and carried through without the builder having to go to expense to make good. Under it, he will build well in the first place.

Senator MURDOCK. The warranty also has a very direct bearing, does it not, as stated by a former witness, on the deficiency judgments? If the warranty is good, and the builder builds the house properly, and the occupant gets a dollar in value for the dollar he puts in, then we do not have to worry too much about deficiency judgments in case of foreclosure?

Mr. SHISHKIN. That is quite right. Now, on the question of the 32 years' amortization. There has been some opposition indicated to that, also. The opposition is on the ground primarily that the amortization is not properly related to the rate of depreciation.

On the question of depreciation, there is a period of seven years or so in the initial life of the mortgage in which the house depreciates faster than the mortgage runs, and therefore, the risk of the insurer is greater.

All I want to say on that is this. In the first place I would like to have the FHA indicate to this committee and to us, the reason why they depreciate so rapidly. It seems to us that depreciation allowances can be put on a much sounder and more realistic basis.

The 32-year amortization by lowering the payments brings the whole mortgage into a sounder, broader base of greater financial ability, and thereby, of course, reduces the risk.

Why would it not be a sounder risk, through lowering of the payments, for the FHA to face that brief period, even under the present schedule of faster depreciation and yet avoid foreclosure? The point is

that if you have a shorter amortization period and higher monthly payments you force a quicker turn-over. The rate of turn-over runs something like 8 years. If there is outright foreclosure, then the FHA risk is infinitely greater.

But in addition, let me say that the answer that the FHA has given and its criticism, is the answer and the criticism from the point of view of the lender. Mr. Foley overlooks the basic fact that the whole purpose of insurance is to underwrite the risk. That is what insurance is for.

The analysis that was made here by Mr. Foley is a banker's analysis. But even as such his analysis does not stand up. The 32-year amortization means lesser risk: In combination with the other provisions, it results in lower price. This means greater stability of ownership and greater security of the loan investment. From the standpoint of the lender there is certainly every justification for achieving that. What this legislation should do is not only to reduce the cost of construction, which is the only course Mr. Foley urges, but also ease the financial burden and thus reduce the payments sufficiently to bring better homes within reach of moderate income families. And that is our whole approach.

Senator RADCLIFFE. Are there not counteracting factors? There may be some less risk of foreclosure by reason of the fact that the payments are smaller. That might be true. On the other hand, the equity in the property is less in case there is a foreclosure. If the equity is less, there is more likelihood of a foreclosure taking place.

Besides, there are many people who do not want to live in a home 30 years. Fortunately, or unfortunately, as the case may be, people want to move around. It has been my observation that many losses are due to the fact that people want to move out after 5 or 10 years. After they have been there a number of years, they do not want to stay there indefinitely, and that migratory instinct has always been one of the sources of loss. Of course the longer you spread this out and extend the payments, the greater the loss would be in that case.

I think there should be a long period of time, but a period of time which extends it beyond the duration of the risk itself is not sound from a business standpoint, though it might be desirable from other viewpoints.

Mr. SHISHKIN. That is true, Senator, that the families may not want to live in a house that long. Experience shows that most houses change hands every 8 to 10 years. It is equally true under the 25-year amortization period, as under the 32 years. But that in itself would not be a bar or a barrier to 32-year amortization.

Senator RADCLIFFE. It would not be a bar, but the greater the amortization, the less the danger that the risk will be unsound, if the family does not move away.

Mr. SHISHKIN. But our conclusion was, and the evidence points. Senator, I submit, in this direction, that the turnover on home ownership is in direct ratio to the ability to pay. And when you strengthen the ability to pay by lowering the payments, you greatly reduce the turnover, and really enable the family to plunge roots into the soil of a particular community, so that you have the stability you do not have now.

Mr. RADCLIFFE. I am heartily in favor of anything to encourage home ownership. But sometimes it is better for a young couple to deny themselves some things and try to pay for their home, rather than to find the home unpaid for when they are not in condition to meet the obligation. A thrifty home owner will hurry up his payments. He is going to pay them in advance, do anything he can to get his home free.

Mr. SHISHKIN. Mr. Chairman, I do not want to devote any more time to further detail in connection with the FHA. I should likeThe CHAIRMAN. I was temporarily away, and I missed your 32-year statement.

Mr. SHISHKIN. On the 32-year question?

The CHAIRMAN. You need not repeat it. You are strongly for it? Mr. SHISHKIN. Yes; very strongly. In order to save the time of the committee, I was wondering whether I could on that point and with further reference to title III file a supplementary statement in the record, Senator, or statements.

The CHAIRMAN. Yes; you may do that.

Mr. SHISHKIN. There is one thing we are very anxius to bring out, to clear up a misunderstanding created here by the testimony of the FHA Commissioner, and that is the extent to which the FHA actually serves the middle-income group. He cast doubt as to the real scope of the provisions of this legislation.

Mr. Foley said in effect that 20 percent of the FHA insurance reaches below the $4,000 cost of housing. Of course Mr. Foley did not point out that this is an average for the country as a whole, disregarding regional differences and sizes of communities.

If you reduce it to metropolitan areas, you reduce that very substantially. If you reduce it to the 11 metropolitan areas with a population of a million or more, the FHA reaches only 12 percent of all homes costing less than $4,000. And if you take out Los Angeles, the FHA only reaches 7.2 percent of homes costing less than $4,000, for the period which Mr. Foley has covered, 1935 to 1941.

And even if you take the most favorable year for the FHA, the year 1940 itself, you will find that the extent to which, after you eliminate Los Angeles, the Gulf coast and the southern areas, if you eliminate the very small towns in which the costs are lower, you will find the FHA has not served the lower half of the middle market. The upper half, yes, the FHA has reached and served, and that is where its large proportion is concentrated.

It is also important to bear in mind in connection with the income data furnished by the FHA, that the incomes of families as submitted are very strongly understated. They are not the total income of families, if you consider the subsidiary incomes of individual members of the family. They are the kind of income that is taken by the mortgagerisk examiner as available to the family, to cover mortgage payments. But I would like to have permission to cover those points and the 32 year amortization in our supplementary statement.

I want to mention two major points with respect to remaining legislation. One is in connection with the public housing title. A provision is made in the public housing title to provide a 20-percent gap between public housing and the housing that is reached by private enterprise.

We feel that the congressional declarations, and the actual performance in the past has made it so certain that there is no interference on the part of public housing with private enterprise, that it is not desirable to leave a gap of 20 percent, one-fifth, between what public housing reaches and what private enterprise is able to serve. Such a gap would make official à "no-man's land," from which people of moderate incomes have long suffered, and for which there was no provision. If private enterprise does not reach that "no-man's land" and public housing is not provided, you will have a great number of families that will not be served at all. There are some three and a half million non-farm families in this gap, over thirteen million people, many of whom urgently need to be served, who will not be served.

This very question came before another committee, and was before the Senate in this very session, in connection with the District urban redevelopment legislation. It was in the McCarran bill which contained the identical provision for a 20 percent gap. The Senate struck that 20-percent gap provision out. It seems to me, in view of the deliberation given to that measure, and the extensive testimony presented, that the elimination of this gap would certainly accord with the stated views of the Senate at this time. The gap should be eliminated as a matter of realism in meeting the need and, in order to assure as many people and families as possible that they will be properly served.

We feel that the existing safeguards are more than sufficient. The effectiveness of the public housing administration in the past and the intent on the part of all of the supporters of this program for slum clearance and public housing is so clear, that no such competition would be permitted as a matter of expressed legislative intent or established administrative purpose. None of us who championed this legislation in 1937 want or would permit or would support the legislation if there were any valid evidence of any real, effective competition between public housing and the area which private enterprise can reach. When I say valid evidence, I do not mean studies of the kind that have been broadcast around this end of our Capital City, that are propaganda rather than valid evidence. I refer particularly to the type of a partisan report that is concocted to get across a particular prejudiced point of view. The notorious study of the National Industrial Conference Board for the District of Columbia is that type of a discredited study, designed to mislead and serve a particular purpose.

But any responsible objective study of the situation in any community can give us a foundation for a sound policy which will thoroughly protect the main element which we support, the element of private responsibility for the increasingly greater service to the entire community.

My other point is in connection with land assembly provided in the Urban Redevelopment title. The bill places the administration of this program in the National Housing Administration. This would create an operating unit in what should be the policy-making office. Operations should be placed in constituent agencies. The Federal Public Housing Authority has had extensive experience in land assembly. Its skills and demonstrated administrative integrity qualify

it best for the task. As a matter of economy, efficiency, and sound administration, the program should be placed in FPHA.

I would like to make another request, Mr. Chairman, in conclusion of my testimony.

The CHAIRMAN. Very well.

Mr. SHISHKIN. And that is that in addition to the supplementary exhibits we might file with your committee, we have been advised by several of our affiliated organizations of their intention to submit by mail to you statements for the consideration of this committee. And we were wondering if it will meet with your approval to have those statements included in the permanent record of these hearings at the conclusion of our testimony today.

The CHAIRMAN. Yes; that may be done.

Mr. SHISHKIN. Thank you very much, Mr. Chairman.

The CHAIRMAN. All right. Thank you. Tomorrow, we will have four representatives of the American Bankers Association. We will get the names later on.

We will also have Mr. Lawrence E. Mahan, president, Mortgage Bankers Association of America; Robert T. Veit, of Shields & Co.; L. Douglas Meredith and Paul McCord, of the United States Chamber of Commerce; Bleeker Marquette, National Council of Housing Associations; and Newton C. Farr, National Association of Real Estate Boards.

Mr. SHISHKIN. Mr. Chairman, having heard you read that list, may I make one request of this committee?

The CHAIRMAN. Yes.

Mr. SHISHKIN. I should like very much to suggest to this committee, in the light of the testimony already offered in these hearings and as the hearings develop, to take stock at the conclusion of the hearings, and make a matter of public knowledge, just who has appeared in support of the basic provisions serving the middle market, and the basic provisions of this legislation, and who has criticized and opposed them, and which groups have presented the broad public view in the interests of the whole people of the United States, and which have presented the views of special interests that are selfish in their presentation.

Senator RADCLIFFE. I think the members will bear that in mind. But do you mean that as a general criticism of the motives of people? Suppose they are bankers. Are not bankers conscientious, as well as other people? Are we to assume that because of a man's business that he is not conscientious, that he cannot look at things fairly and squarely? What foundation is there for that? Why should we impute that to a banker? You mentioned bankers.

Mr. SHISHKIN. No; I did not, Senator.

Senator RADCLIFFE. You did not?

Mr. SHISHKIN. No, indeed, Senator. The bankers should, and many do, fully support this legislation.

Senator RADCLIFFE. Well, Senator Wagner read the list of names, and you commented upon it. I think we make a great mistake when we assume that one class of people have more morals and conscience than another. I would like to study this on its merits, not because a man who supports it is a banker, a laboring man, or what. Let us look at it on its merits.