ened our requirements on construction disbursements. And many times, rather than place the cost of a bond upon the builder, we have insisted that we put our own inspector or someone there during certain stages of the construction, for which they pay. I am talking now about larger construction. We have watched it. It is a problem. I do believe and this is my own observation, and I do not know what the experience of my associates may be-but I do believe that in most cities and in most metropolitan areas we are getting better construction for the amount of money spent than we ever had at any time in our history. I think the building trades, the material men and others are doing a conscientious job in trying to build better buildings.

During the last war-and I suppose this is what you had in mind, there were a lot of "jerry" builders. A druggist or somebody who had never had any experience in building would go out and get himself a contract and a few carpenters, and start to build. They should never have been in the building industry. As the result, many buildings of what we call the "jerry" type were built.

I think the trades themselves are trying to improve their methods. I think materialmen-and I see this every day-in their research studies are trying to improve their materials. And with the assistance of the FHA and their standards of construction, I think our country is geared much better for better construction than it has. been at any time in my experience, which has extended over about 30 years.

Senator ELLENDER. There has been a decided improvement, there is no doubt about that. And it is my opinion that this guarantee would cause them to do much better toward the home owner. After all, I believe that he needs protection. When the banker can get the Federal Government to back any loan that is guaranteed, they do not have to worry about it. But the poor devil who puts maybe all he has in it and then has to assume the obligation for the deferred payments, why, he is helpless without this protection.

Mr. MAHAN. I know the habits of lenders pretty well, and I would much more encourage a mortgaged home than I would a direct investment in a home. I think the average mortgage lender, particularly with the longer loans they are making, is attempting to protect his security much more than ever before. I would not encumber the industry with warranties, which are rather uncertain, and which I think would only create, Senator Ellender, an additional deterrent to getting the building industry going. It is a dormant industry and we have to do everything in our power to get those wheels moving again. There is a fear. They fear this and they fear that. They fear they cannot get materials. They cannot do this.

Senator MITCHELL. Materials is the greatest fear now?

Mr. MAHAN. Yes.

Senator MITCHELL. The building industry would have been booming already if they had materials.

Mr. MAHAN. If there could be certainty, for instance, if a loan comes to us today on a rental proposition, or rental project, there is no way in the world for us to know whether it is an economically sound project. If that certainty could be established-there is no greed in

that recommendation at all, it is just to eliminate this fear which exists on the part of the builder and the investor in those projects. I think we should all attempt to do whatever we can to eliminate that fear at this particular time.

Senator MITCHELL. You are making an argument there for Senator Wagner's full employment bill.

Mr. MAHAN. I think that would help out.

The CHAIRMAN. I do not want to go back into the past, but in 1921 in New York we had to pass legislation. There was a shortage of housing and the owners of houses were insisting upon very high rents that people could not afford to pay, and they needed the protection of the Government. You remember that act.

Mr. MAHAN. I remember that, yes.

The CHAIRMAN. And I was on the bench then.

Mr. MAHAN. I remember that.

The CHAIRMAN. So we had to protect them.

Mr. MAHAN. It is our observation that still further reductions can be made by the adaptation of better and more efficient construction methods. It is this type of study that the Government should direct its attention to, and by so doing it could assist better than any other way in the over-all program of producing better and adequate housing for all its people.

While we illustrate this particular point, we would direct Federal interest in the development of building codes, zoning and planning laws, equitable taxation of real property, both farm and city, standardized appraisal methods, experimentation and research in new building materials and processing of standard materials, available labor and material studies, building standards adaptable to various geographic sections, and cost studies.

The Government can do much toward standardizing the laws within the respective States which would give private industry and the local communities more latitude in the acquisition of land for the development of housing needs, and also toward standardizing mortgage foreclosure laws which in many States are now obsolete and impractical.

TITLE VIII. HOUSING ON FARMS AND IN RURAL AREAS

While I have had some experience in farm loans, and have lived in an area in which many of my competitors and associates are largely interested in farm loans, I have tried to seek additional information. And I am indebted to Dr. Butts, of Purdue University, and some others for the suggestions which are here set forth.

Section 801: The FHA provisions relating to the insurance of loans on farm property are amended to eliminate any requirement for the construction or repair of buildings.

We regard this section as being satisfactory.

Section 802: Wherever the circumstances of a farm family are such as to prevent it from obtaining the credit necessary to provide a decent, safe, and sanitary dwelling, the Secretary of Agriculture is empowered to make loans on the following basis: interest at 3 percent, maturity up to 40 years, security satisfactory to the Secretary. Thus, no limit on loan-to-value ratio is prescribed. Payments may be varied in accordance with variations in income.

This section does not limit lending to the United States, but extends to the Territories, including Puerto Rico and Hawaii. We do not know the conditions there and we cannot say that a 40-year loan would be satisfactory in these Territories, but we are firmly of the belief that it is too long a term in the United States. We also regard the other terms as being entirely too liberal.

Mr. Blandford, in his testimony to which you referred, classified houses 30 years old as being somewhat obsolete and inadequate. Here we are recommending a 40-year loan.

Section 803: Similar loans

not in excess of the amount that the Secretary finds can be repaid within the useful life of the housing may be made to farm owners, or groups of farm owners to provide adequate housing for seasonal agricultural workers.

We believe that this section is satisfactory, but would not be used to any large extent.

Section 804: The Secretary is authorized to borrow an unstated amount from the RFC to make such loans, and the RFC is authorized to increase its outstanding obligations accordingly.

No provision is made in regard to coverage of losses.

We are of the opinion that Government agencies of this character should be required to come to Congress annually for appropriations, rather than to have blanket authority to borrow through the RFC. It provides too easy a means to indulge in unwarranted expansion, if a department has free access to the funds of the RFC.

Section 805: The Secretary is authorized to provide, with or without charge, plans, specifications, inspection, and other technical services in connection with the lending operations under his control.

This section is entirely satisfactory, and, as a matter of fact, the Department of Agriculture already performs a great many of the services listed therein.

Section 806 (a): The Secretary may determine what are suitable standards of housing under this title.

Sections 806 (a), 806 (e): The Secretary may purchase, at foreclosure, any property in respect to which a loan has been made, and resell on terms of his own making. He may—

enter into or require subordination or subrogation agreements with the holders of other obligations secured by the farm with respect to which a loan is made. We would like to make a further study of this section.

Section 808 (secs. 201, 202, 203) : In addition to the methods for providing rural areas, a new title (title II) is added to the United States Housing Act which authorizes local housing authorities to construct dwellings for rent to families of low income in rural areas (farm or rural nonfarm).

Section 201: This section may be subject to considerable abuse. The Farm Security Administration will be able to certify that from one-third to one-half of the United States farm families will need assistance under this section. Moreover, the section is constantly talking about helping farm owners to improve their houses. It is our impression that the most critical housing problem in the rural areas. is on tenant-operated farms. We believe the entire bill misses the point with respect to this problem.

I think that we recognize that government-in our thinking that there are some socialistic trends at the present time, and these are

found in the Department of Agriculture and other agencies. Our whole philosophy of government depends upon whether they are right or wrong. But there are certain groups in the Department of Agriculture who could very easily say that one-third to one-half of the farm families are in need of assistance under this section.

Senator MITCHELL. What do you mean by that statement? Are you saying that these groups in the Department recommend that because they have socialistic tendencies?

Mr. MAHAN. That is what I mean, yes.

Section 202: This section is entirely satisfactory.

Section 203: This section is satisfactory. We must point out, however, that at the present time, the part-time farmer who lives adjacent to industrial areas and operates a small acreage for home consumption is in somewhat of a no-man's land with respect to credit for residential purchases or construction.

Section 808-204. A dwelling constructed under this plan may be sold to the tenant and, in any such sale

credit shall be given for payments made by him which were applied toward amortizing the cost of the houses.

Any subsidy previously paid is simply written off.

We cannot see very much incentive for a landlord to improve the housing on his farm if at any time the tenant will have the option to purchase, and to apply any payments he made as rent on the purchase price. This would simply be a case of "heads I win, tails you lose" for the tenant. We could not favor its inclusion in this bill. We believe the net effect would be to discourage the improvement or modernization of residences on tenant farms by landlords who otherwise might take advantage of the proposed legislation.

Section 808-205. The Federal Public Housing Authority is authorized to make 45-year loans to local authorities to cover the cost of such housing at the "applicable going Federal rate," secured in any manner satisfactory to the Authority.

Section 808-206: To facilitate these operations, the FPHA may make maximum annual contributions which may cover all charges and expenses except the annual amortization, which latter amount represents the minimum that the tenant must pay. The contributions are to be reduced in accordance with the tenant's ability to pay more than that minimum. No provision for contributions by the local agency is included. The FPHA may enter into contribution contracts for this program totaling $5,000,000 in each year for 5 years. All contracts may run for a 45-year period.

We would point out with regard to these sections that it is an extension of public housing in the rural field, which we do not favor. We would like to point out that the genuine danger of long-term loans on farm lands is that with any fluctuation in value, the owner of such farm may have no equity to protect and we would draw the committee's attention to a study of the situation obtaining in Denmark prior to the war, where many of the rural population availed themselves of the opportunity to borrow at low rates and long terms from Government agencies. They owned their farms with virtually no equity and were essentially "wards" of the Government. We do not want this situation to develop in our own country.

In conclusion: In preparing this statement for the consideration of the committee, we have attempted to do so without bias or preju

dice. We have constantly kept in mind the best interests of the Nation and all its people, rather than the benefits of any particular

class.

We very frankly believe that the bill, as written, is not the solution of our present housing problem.

While the bill is couched in terms favoring private enterprise, it is, in our opinion, primarily a public housing bill.

We believe that the industrial forces of our country which have so admirably demonstrated their ability to produce during the period of the war, can and will produce the present necessary and required housing, if these forces can do so without governmental restraint and competition.

We urge that those agencies which have been established for wartime emergencies be terminated at the earliest possible date.

Little has been said about labor in this statement, or in the bill, but it is a very important factor in the housing problem. If the problem is to be solved, it must be done with the mutual and sympathetic understanding of labor, the material men, and those who finance. Finally, we recognize and command those who have given so much thought to this very important problem, and the long detailed study which has been made.

We hope that our remarks have been helpful.

The CHAIRMAN. Talking about labor, the American Federation of Labor was represented by Mr. Green here yesterday and made a very comprehensive statement favorable to the law.

Mr. MAHAN. Yes. I think they are really making progress, too.
The CHAIRMAN. Yes.

Mr. MAHAN. Finally, we recognize and commend those who have given so much thought to this very important problem and the long detailed study which has been made.

We hope that our remarks have been helpful.

Now, if I can, I shall be glad to answer your question.

Senator MITCHELL. Just one question. You signed this "L. E. Mahan." Is that your own statement or does it represent the thinking of the Mortgage Bankers Association?

Mr. MAHAN. In the introduction I have stated that the statement represents the general cross section of thinking of the Mortgage Bankers Association, and I also pointed out that there is some, even, variance of opinion among such a large group as that, but I do believe that everyone is giving conscientious thought to the subject.

Senator MITCHELL. Has your statement been considered by any executive committee of the organization?

Mr. MAHAN. Those that have, I have stated. The others have been referred to our other committees and have been gone over very carefully by our legislative committee, and some features of this report have been gone over by the executive committee, and for instance those features which pertain to life insurance investment. And that is an important factor. The life insurance companies have tremendous resources available at the present time and seeking investment in home. finance; and just one deduction: Let me point out that as of the close of business in '44, and that has been increased considerably in 1945, the admitted assets of life insurance were in excess of $10.000,000,000.

There is a rough rule-of-thumb rule that 40 percent of its assets can be invested in mortgages, which would mean $16,000,000,000. That