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Mr. KUNKEL. He advocated making it retroactive to 1948.
Mr. MONRONEY. Behind 1948, clear on back to 1947.

Mr. TALLE. You see, if you go back beyond April 30, 1948, my memory tells me we would assume an obligation of around $7,000,000,000 in loans.

Mr. MONRONEY. $8,000,000,000 have been loaned.

Suppose the interest rate should happen to go up one-half of 1 percent. You will get all those 4-percent securities dumped on you. Then they turn around and loan money at 41⁄2 percent.

Mr. FERGUSON. That is right.

Mr. KUNKEL. As Mr. Monroney pointed out, making it retroactive does not cause so many hazards.

Mr. FERGUSON. My own view is that it should be a current proposition and operate for current benefit.

The CHAIRMAN. Are there further questions?

Mr. MULTER. As a matter of good business, your associations have more or less a fixed policy not to make loans that have a maturity beyond 20 years; is that not so?

Mr. FERGUSON. I would say the practice of a building and loan association, irrespective of the operations under FHA, is an 18-year loan-a maximum of 18 years. But they are making FHA loans.

Mr. MULTER. I think it is more or less the unanimous opinion among your associations, though, that anything that goes beyond 20 years is not good business.

Mr. FERGUSON. That is right. I think they make some of the 25-year loans.

Mr. MULTER. Until FHA came on the scene, 20 years was always considered the maximum?

Mr. FERGUSON. Naturally.

Mr. MULTER. Your business experience showed that that was the limit you should stretch to on home loans?

Mr. FERGUSON. That is right.

Mr. MULTER. Have any of your associations been compelled to refuse to take applications or to make loans because of lack of funds?

Mr. FERGUSON. Well, I would not want to say whether any of them have. We have 3,700 of them. I suppose some of them, at times, are short of money.

Mr. MULTER. Comparatively few?

Mr. FERGUSON. That is right. We have been able to get all the funds we need.

Mr. MULTER. One other thing. Because of your background, Mr. Ferguson, I would like to have your comment on the feasibility or nonfeasibility of combining the Veterans' Administration and FHA lending facilities, so far as homes are concerned. Do you think it would be wise to combine them in one agency, or should they be kept separate?

Mr. FERGUSON. I should think they should be kept separate. That was the decision I made when I was at FHA. I do not think I want to change it now. I think they should be separate agencies

at all times.

Mr. MULTER. Thank you, sir.

Mr. MONRONEY. We are having trouble as a result of the FHA refusing to grant interim construction financing to contractors unless they agree to take the finished mortgage through FHA and not

them to "Fannie Mae." They only sell them when they need money. They are in business to make interest on the loans.

Mr. KUNKEL. Not all of them. I am not speaking for direct loans, but I certainly do not like to see something frozen where somebody gets a guaranteed profit from the Government for taking no risk when they are probably making loans which will be bad for the person who is borrowing the money, except on the assumption that if these veterans' loans are all turned over to the Government then eventually the Government is not going to foreclose on the veteran. That is going to be a serious problem.

Mr. FERGUSON. That is a question you gentlemen have to decide. Mr. KUNKEL. I am surprised you are not opposed to endorsement without recourse.

Mr. FERGUSON. Well, one reason that I suppose I said what I did was because it is not at all usual to sell loans with recourse.

Mr. KUNKEL. Maybe it is not with your group, but when we had this bill up before we ran into some instances of that. We had the same problem, with some instances where it was being done purely as a brokerage operation. I do not like to see things like that happen. Mr. FERGUSON. I do not either.

Mr. KUNKEL. While it may be advantageous for a few people who are in private industry, it is certainly the kind of a thing that knocks the bottom out of private industry if you establish stratifications like that. Then everybody else wants to get the same stratification and you topple the whole structure. I am very skeptical about that idea. Mr. FERGUSON. I certainly am not speaking for lenders that lend and make loans just to broker them.

Mr. BROWN. What percent of the GI loans has the savings and loan association made?

Mr. FERGUSON. I did not understand you.

Mr. BROWN. What percent of GI loans has your agency made?
Mr. FERGUSON. One-third-500,000 loans.

Mr. BROWN. And you have sold less than one-third of 1 percent of your holdings?

Mr. FERGUSON. That is right.

Mr. BROWN. That demonstrates that in a lot of places where you have only two or three banks, the banks cannot accommodate the veterans unless they can sell some of their morgages.

Mr. FERGUSON. The secondary mortgage is no problem with us at all.

Mr. MONRONEY. You would not be in favor of making this secondary market available to VA loans that have been made prior to this cut-off date of 1948, would you?

Mr. FERGUSON. I would not think so.

Mr. MONRONEY. I think it would be highly dangerous to open that. If you increase the 100 percent turn-over to "Fannie Mae" it ought to be after the passage of this act, at least.

Mr. FERGUSON. Yes.

Mr. MONRONEY. Otherwise you would be taking retroactive securities that have no bearing on increasing your housing supply at all.

Mr. FERGUSON. That is right.

The CHAIRMAN. I have not heard anything about that.

Mr. MONRONEY. A gentleman testified concerning that yesterday.

Mr. KUNKEL. He advocated making it retroactive to 1948.
Mr. MONRONEY. Behind 1948, clear on back to 1947.

Mr. TALLE. You see, if you go back beyond April 30, 1948, my memory tells me we would assume an obligation of around $7,000,000,000 in loans.

Mr. MONRONEY. $8,000,000,000 have been loaned.

Suppose the interest rate should happen to go up one-half of 1 percent. You will get all those 4-percent securities dumped on you. Then they turn around and loan money at 41⁄2 percent.

Mr. FERGUSON. That is right.

Mr. KUNKEL. As Mr. Monroney pointed out, making it retroactive does not cause so many hazards.

Mr. FERGUSON. My own view is that it should be a current proposition and operate for current benefit.

The CHAIRMAN. Are there further questions?

Mr. MULTER. As a matter of good business, your associations have more or less a fixed policy not to make loans that have a maturity beyond 20 years; is that not so?

Mr. FERGUSON. I would say the practice of a building and loan association, irrespective of the operations under FHA, is an 18-year loan-a maximum of 18 years. But they are making FHA loans. Mr. MULTER. I think it is more or less the unanimous opinion among your associations, though, that anything that goes beyond 20 years is not good business.

Mr. FERGUSON. That is right. I think they make some of the 25-year loans.

Mr. MULTER. Until FHA came on the scene, 20 years was always considered the maximum?

Mr. FERGUSON. Naturally.

Mr. MULTER. Your business experience showed that that was the limit you should stretch to on home loans?

Mr. FERGUSON. That is right.

Mr. MULTER. Have any of your associations been compelled to refuse to take applications or to make loans because of lack of funds?

Mr. FERGUSON. Well, I would not want to say whether any of them have. We have 3,700 of them. I suppose some of them, at times, are short of money.

Mr. MULTER. Comparatively few?

Mr. FERGUSON. That is right. We have been able to get all the funds we need.

Mr. MULTER. One other thing. Because of your background, Mr. Ferguson, I would like to have your comment on the feasibility or nonfeasibility of combining the Veterans' Administration and FHA lending facilities, so far as homes are concerned. Do you think it would be wise to combine them in one agency, or should they be kept separate?

Mr. FERGUSON. I should think they should be kept separate. That was the decision I made when I was at FHA. I do not think I want to change it now. I think they should be separate agencies at all times.

Mr. MULTER. Thank you, sir.

Mr. MONRONEY. We are having trouble as a result of the FHA refusing to grant interim construction financing to contractors unless they agree to take the finished mortgage through FHA and not

through VA, and we have either got to duplicate the interim financing set-up to make available this interim financing to mass production contractors for GI loans or expect the FHA to give this interim financing and then let the mortgage go either way, through VA or FHA. You have had considerable experience with FHA.

Mr. FERGUSON. I had not heard about that.

Mr. MONRONEY. But they are saying they will no longer make commitments unless they will guarantee that the paper will be run through FHA. It looks like we have a bureaucratic deadlock.

Mr. FERGUSON. I say this is the first I have heard of that. I have not heard of that at all, but the only possible reason I can see for it is that the FHA does not anything like come out on its appraisal cost. It has a fixed appraisal fee that the borrower pays which, I think, takes that loan about 21⁄2 years to pay. FHA does not get profit on that loan for 21⁄2 years. That is what it was when I was there. The premium for the first 21⁄2 years was absorbed in making up the deficit in the appraisal costs. Of course, FHA has got an enormously expensive appraisal system.

Mr. MONRONEY. It could be arranged to reimburse FHA for the economic cost of that if they choose to take it through VA, could it not?

Mr. FERGUSON. Yes.

Mr. MONRONEY. They would not do the work for nothing, but they would not be forced to duplicate, in the same town and community, the parallel ventures by VA.

Mr. FERGUSON. That is right. The Veterans' Administration is now accepting FHA rates, as I understand it.

Mr. MONRONEY. They say, "No dice; you have to run it through us or we won't play."

Mr. FERGUSON. I have not heard that.

Mr. MULTER. Does the FHA appraisal cost go much higher than in private industry?

Mr. FERGUSON. It would average out about the same, I would say. You mean private appraisers and FHA appraisers?

Mr. MULTER. Yes.

Mr. FERGUSON. I would say we used to appraise higher, but I think, taking here, there, and all over the country, it would be about the same.

Mr. MULTER. I do not quite understand what you mean when you said that the FHA appraisal cost is very high.

Mr. FERGUSON. I mean cost of making the appraisal.

Mr. MULTER. That is what I am referring to.

Mr. FERGUSON. The cost of making the appraisal is much higher than in the case of private interests.

Mr. MULTER. Why is that?

Mr. FERGUSON. Because they go into much more processing. They theoretically tear the house down to determine cost of rebuilding it. Private lenders just go out and look at it.

Mr. MULTER. Do you think FHA might take a lesson from VA and do it by fee appraisals rather than by the system they are using now?

Mr. FERGUSON. They do not think that is a sound practice.
Mr. MULTER. What do you think?

Mr. FERGUSON. I do not think it is, either.

Mr. MULTER. Which is better?

Mr. FERGUSON. I think the FHA appraisal system has been denounced by some people in the industry.

Mr. MULTER. Should the Veterans' Administration not use the FHA appraisal system?

Mr. FERGUSON. I understand they are using that, but, as Mr. Monroney said, they cannot use them if the FHA will not let them. Mr. MULTER. I am toying with the idea of whether or not we should not make them do it.

Mr. MONRONEY. That is what I was suggesting.

Mr. MULTER. I did not have in mind, in my question about VA and FHA, combining the two institutions, but I did have in mind compelling VA to take FHA appraisals and all the rest of the processing being done in VA as to eligibility of veterans, and so forth. Let VĂ have full jurisdiction but let the real-estate agency make all the appraisals.

Mr. FERGUSON. I do not know whether FHA could do all VA appraisals because FHA does not have facilities in small towns. They only deal with larger towns and cities. When VA was first set up, that plan was frozen. It would have meant that we would have had to enlarge our underwriting department about 10 times. You see, their loans are in the country and in small towns and hamlets, and FHA does not operate in those places at all. They may have after this new bill goes through.

The CHAIRMAN. Are there further questions?

If not, you may stand aside.

Mr. BROWN. Mr. Ferguson, under the law FHA can make those loans out in the country.

Mr. FERGUSON. Yes; but they do not comply with property standards and construction standards.

The CHAIRMAN. We thank you, Mr. Ferguson.

Mr. FERGUSON. Thank you, Mr. Chairman.

The CHAIRMAN. I know you represent an organization that has done a great service to the country in assisting people in building homes. Mr. Mason, you may proceed. Please identify yourself.

STATEMENT OF NORMAN MASON, PAST PRESIDENT, NATIONAL RETAIL LUMBER DEALERS ASSOCIATION

Mr. MASON. Mr. Chairman and members of the committee: My name is Norman Mason. In 1912 I first started to work in the retail building supply business and, except for a bit of time out for naval service in World War I, I have been connected with this industry. For at least 25 years I have been asscoiated with the William P. Procter Co. of North Chelmsford, Mass. I am a past president of the National Retail Lumber Dealers Association.

I do not propose to discuss title I of the bill because that will be discussed by Mr. Broderson after I finish. Before dealing with the various phases of this legislation I would like to direct the committee's attention to a fundamental issue which I feel merits careful consideration.

Many of the provisions of the bill tend to extend the idea of class. legislation. In my opinion, this is unfortunate because we are becoming a nation of minorities. We have the so-called poor versus the

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