The CHAIRMAN. I do not know whether the charts can be published in the records or not.

Mr. HOLIFIELD. I am not asking they be published. I am submitting them for your own information.

Before giving my own views, which, I believe, are shared by many, I would like to take up two frequently expressed but erroneous observations made by others as to the cause of the falling off of VA-guaranteed home purchases by veterans.

First, many people say that production has not kept up with the desire and ability of veterans to purchase homes. In addition to old houses which become available for purchase by persons of the young veteran's age, production of new homes for purchase has almost reached the all-time high record in this country. I would like to submit a chart to you gentlemen which shows the record of new construction of nonfarm homes in this country for the period from February 1, 1946, to December 31, 1948, along with the record of GI home-loan purchases, showing that home loans guaranteed for veterans have not in any way kept up with homes built. May I submit this as exhibit 2?

The CHAIRMAN. All right.

(The chart referred to above is as follows:)

EXHIBIT 2

NON-FARM PERMANENT DWELLING UNITS

BUILT IN 1946-47-48

SHOWING PERCENTAGE OF VETERAN LOANS TO TOTAL CONSTRUCTION

Mr. HOLIFIELD. It may be noted also that while the volume of loans guaranteed by the Veterans' Administration in 1948 declined more than a third from the 1947 total, the volume of loans on single dwellings insured by the Federal Housing Administration practically doubled.

An even more dramatic demonstration of how the GI loan program has been curtailed is given in exhibit 2-a, which I hereby submit.

(The chart referred to above is as follows:)

EXHIBIT 2A

VA GUARANTEED HOME LOANS COMPARED WITH MORTGAGE RECORDINGS OF $20,000 OR LESS

Mr. HOLIFIELD. This compares the dollar volume of GI home loans in 1946-48 with the total volume of home purchases, as represented by nonfarm mortgage recordings of $20,000 or less. To explain why we used $20,000 or less for mortgage recordings, I wish to state. that that figure has been the standard used for many years by the Federal Home Loan Bank Administration. The principal amount and number of nonfarm mortgage recordings of $20,000 or less are estimated monthly by the Federal Home Loan Bank Administration. The exclusion of mortgages exceeding $20,000 is believed by the Housing and Home Finance Agency to eliminate largely the mortgages on nonresidential properties and large rental housing projects. In general, the data relate primarily on loans on 1- to 4-family properties. Since all reference material used in my arguments has come from Federal agencies, I accepted this standard of comparison. Not only has the volume of VA-guaranteed loans been a small part of the total, but while non-GI recordings increased 20 percent from 8.1 billion dollars in 1947 to 9.7 billion dollars in 1948, the volume of VA-guaranteed loans declined nearly one-half from 3.3 to 1.9 billion dollars.

It is interesting to note that the average FHA mortgage recorded in 1948 was $8,721, and the average VA mortgage was $8,300.

You can see by this chart, gentlemen, that in 1946 there was a total of 10.4 billion homes built, and you can see that only 2.3 billion were GI loans. Then it increased a little bit in 1947 to 11.4 billion, and your increase in GI loans was to 3.3. Then, in 1948, although the total over-all building was the highest of record (11.6 billion), your GI loans dropped to 1.9 billion.

Mr. MONRONEY. By that you mean the loans that went through the Veterans' Administration?

Mr. HOLIFIELD. That is right.

Mr. MONRONEY. Then there would be some veterans' loans going through title VI of the Veterans' Administration that would not be shown in that black figure?

Mr. HOLIFIELD. That is right. We must recognize the fact that the veteran is the most likely prospect for home ownership, due to his age, his family life, and his reestablishment in industry and business; and at the same time, when home production is at its highest, the record of purchases of homes by veterans should not be declining and should not lag behind production. This is particularly true, considering the housing shortage today.

And, as for the second point of observation by others regarding the decline in the GI home-loan guaranties, we hear frequently that the veteran has been priced out of the market. This is not true. Of course, he pays more for a house today than he did 10 years ago, but he does the same thing for shoes. As he must have shoes, he must have a house. I would like to see the veteran get a home cheaperand also his shoes cheaper, too. Yet, we know things have changed. It costs more to build a house today. It costs more to live today. We must face the facts.

Why, then, has the veteran lost out on getting a new home? There are probably many reasons. I submit to you, however, that a major reason is the lack of adequate support of the Federal Government of a liquid GI home-loan market. In other words, what is needed is the full backing of the Federal Government of this GI home-loan program. We need a full and complete Federal secondary market for all GI loans made by all lenders since the act went into effect. I do not mean backing of a second mortgage. I mean Federal backing of primary GI home loans, which is simply a secondary market in the Federal Government for these loans. To give a little of the history of this VA-guaranteed home-loan program, I want to point out that, as the postwar home-building activity got into full swing, the veteran was able to get a fair share of the new homes provided. Lending institutions, with an unprecedented accumulation of savings, were willing to make these 4-percent long-term loans, and did so to an unprecedented extent. However, these institutions holding the people's savings soon exhausted their loanable funds and found it necessary to curtail their lending activities because of the lack of a secondary market. Leaders of Congress became aware of this development. They began to recognize that small institutions, and practically all institutions in the small communities, were unable to continue to meet the mortgage-loan demand of the veteran. With this thought in mind, the Seventy-ninth Congress passed the Brown amendment, which your colleague here, of course, is responsible for, which was introduced May 29, 1946, amending the RFC Act and authorizing that agency to purchase GI loans. When this measure became law, it operated as a stabilizing support for the GI homeloan program.

When the life of the Reconstruction Finance Corporation was extended beyond July 1, 1947, this authority of the RFC to serve as a secondary market for GI loans was abolished. At the same time,

1946 level. corded the total loans made were still 65 percent below the October as it has for the past 6 months. But even with the increase as reI wish to illustrate this record with a chart, a copy of remaining 42 States the activity in GI loans remained at a low ebb, gation revealed the activity came from only 6 States, while in the There was a rise in the number of loans closed in May, and investidecline. This falling-off of loans has continued through April 1949. after the backlog of savings was exhausted, GI loans soon started a

(The chart referred to above is as follows:)

which I would like to submit as exhibiť 3.

Mr. HOLIFIELD. This is true in spite of the fact that in the Eightieth Congress the authority of the RFC, through the Federal National Mortgage Association (FNMA) to purchase GI loans, on a limited basis, was reinstated. This was accomplished through Public Laws 864 and 901 of the Eightieth Congress. Because of the limitations of these laws, which were further aggravated by additional limitations in the regulations issued by the FNMA, the present secondary market for GI loans has served to do little in rejuvenating the veterans' home-loan-guaranty program. The records show that of more than $1,000,000,000 which the FNMA could use under its present authorization to purchase GI and FHA loans as of April 30, 1949, only $91,000,000, less than one-eleventh of the total available, had gone into GI loans. The unnecessary restrictions in the present laws governing the purchase of GI loans would be eliminated by the amendments herewith as contained in H. R. 1324.

There is no justice to the veteran in restricting the purchase of GI loans by FNMA to only 50 percent of those loans made after April 30, 1948.

It is obvious from a check of the records that lending institutions will not rush in to sell their loans to the Government if the market is fully opened up; in fact, the opposite result may logically be expected. Considering the entire operations of both FNMA (since 1938) and the RFC Mortgage Company (1935 to 1947), only $981,000,000 of both FHA and GI Loans have been purchased, equivalent to only about half the present authorization. Of this total, only one-fifth has been VAguaranteed loans. Furthermore, when there was no limitation on Government purchase of GI and FHA loans, there was no rush to sell them to the Government. About $8,000,000,000 of GI loans have been made. Only $208,000,000 have been purchased by the Government. This represents about 21⁄2 percent of the total GI loans guaranteed. More than 15%1⁄2 billion dollars of loans have been insured by the Federal Housing Administration. Throughout the 14-year existence of that agency the Reconstruction Finance Corporation had purchased only $773,000,000 through April 30, 1949. This represents less than 5 percent of the total FHA-insured loans.

It is only logical that original lenders are not going to empty their portfolios of GI loans overnight. If they did, they could not maintain sufficient earnings to continue in business. It is the moral duty of the Federal Government to stand behind loans which it has guaranteed. We must keep in mind, too, that any mortgage bought by the Federal Government releases funds to enable lenders to make further investments immediately in veteran-home financing.

There is no sound objection to a full Federal secondary market for GI loans. Certainly it is not an expense to the Federal Government. On the contrary, the Government stands to make money, as proven by the history of the Federal National Mortgage Association and the RFC Mortgage Company.

I think, just to glance at that chart there, you will see that where we had our big spurt in building was the latter part of 1946, and we have been on a decline ever since. These figures are from the Veterans' Administration and I assure you that they are authentic. It shows just exactly what has happened to your GI home loan, guaranteed home loans.