In the latter case, the only asset available as security for the loan is this one project and the income solely from this project. I will assure you that the lender will differentiate very distinctly between the two and will not pay the same price for a bond or a mortgage or whatever you may call it issued by one of these corporations. They will not pay the same price for the security issued by one of these corporations that they would pay for a security issued by a college having all of the income which the Congressman has mentioned. Mr. TALLE. You may remember what Daniel Webster said in the Dartmouth College case: "This is a small college, but there are those who love it," and it is the love of the college that means more than anything else, I would say, in sustaining the college. That love has a direct effect on the five sources of income which I have enumerated. Mr. COLE. Of course, it has the income from the dormitory as additional assets. Mr. ADDONIZIO. What did you mean by corporations in this elderly housing program? Mr. COLE. I meant corporations as defined in section 304 of Congressman Rains' bill. Mr. ADDONIZIO. There is certain to be some church groups involved. Mr. COLE. The only asset, as I understand it, is the obligation of the corporation under section 302 of 10157. There is no indication that anybody else other than the corporation will be liable for this investment. If so, that would make some difference and I think it would add to the value of the security, if the church or a lodge would make their total assets responsible. This is not required by the bill. If it were, it would make the security better and the lenders would be more willing to take a lower rate of interest. Under the bill any nonprofit corporation could be eligible to borrow from the Federal Government, even though the corporation had no other assets and is organized solely to borrow the funds and build the project. Mr. ADDONIZIO. Any church group certainly would have a good credit rating in a community, the Catholic Church or the Mormon Church. Mr. COLE. Some of them. But even then, a subsidiary housing corporation sponsored by a local church group would not have the same credit rating as does the church itself or a college. Mr. ADDONIZIO. Thank you. The CHAIRMAN. Are there any further questions? Mr. WIDNALL. Mr. Chairman. Mr. Hazeltine, do you have any breakdown as to the type of applications as between public schools and private schools? Mr. HAZELTINE. We have the number of public schools and number of private schools that have applied. I can furrnish that for the record. Mr. WIDNALL. Do you have the total amount of the applications, too? Mr. HAZELTINE. We can give you that. Mr. WIDNALL. Will you furnish that for the record? Mr. HAZELTINE. Yes. Preliminary reservation of funds; loan approval dependent upon review of full application. As of Apr. 30, 1956. 252 204, 126 214 175,723 56 71, 096 Preliminary reservation of funds; loan approval dependent upon review of full application. Includes two combined projects, one containing student union building and the other containing a storage and laundry building. Combined with a dormitory facility. Addition to food stores building. NOTE.-Where project consists of three or more types of facilities, the project has been included in most appropriate of above categories. Mr. WIDNALL. Also, could you break down the type of applications as to facilities, whether it was a dormitory, dining hall, or what it was? Mr. HAZELTINE: Yes. Mr. WIDNALL. That is all. The CHAIRMAN. Are there further questions? Mr. BETTS. Mr. Chairman, I just want to say this, Mr. Hazeltine. As you will recall, your agency made a loan to a college in my hometown, which was a small, struggling, private church college. The dormitory is now built and I frankly think that it was maybe the reason why the college stayed in business. I am very enthusiastic about this program and I would be happy to look at this information that you are going to furnish in response to Mr. Widnall's question, because I think a lot of these public-supported colleges have a lot more opportunity back of them to launch on building programs than small private colleges, and I think that the attention you have given to these small private colleges deserves commendation. Mr. HAZELTINE. Thank you. Mr. WIDNALL. If the gentleman will yield, I would like to ask one more question: Do you find that the applications have slackened after the first rush or do you feel there is still a tremendous backlog? Mr. HAZELTINE. There is a tremendous backlog and it is increasing. Mr. WIDNALL. I think it is really important if we continue the program we do have the proper amount of authorization. I know that what you speak about, 100 million, will never take care of that backlog if private money doesn't come into the market. Mr. HAZELTINE. That is the entire point we make. We believe that the interest rate which is now being charged has not substantially increased the total overall building of dormitories in the United States, but has merely funneled them all into our program. Mr. WIDNALL. Thank you. The CHAIRMAN. If there are no further questions Mr. MUMMA. Let me put 5 cents worth in, will you, Mr. Chairman? Speaking of the commendation of your staff, there is a man in Harrisburg-I don't know his name, but he handles your applications there and he had a particular one for Lebanon Valley College. It was a little matter involving letting a contract that he interpreted well to the advantage of the college and not to the disadvantage of the Government. I would like to commend his attitude on that. Mr. HAZELTINE. Lou Finley. Mr. MUMMA. Finley is his name, that is right. The CHAIRMAN. If there are no further questions, you made a very excellent statement and it is certainly a function of government to assist in the education of its people at the local level. I think you are doing a great work and I hope you will invest your money wisely as time goes on. Mr. COLE. We want it understood, Mr. Chairman, that the agency is very enthusiastic about this college dormitory program. We think it is a good program. Thank you, sir. The CHAIRMAN. Do you have another witness, Mr. Clerk? Mr. CARDON. Mr. Chairman, the next witness is Mr. Fred B. Morrison, national executive secretary of the voluntary home montgage credit program. STATEMENT OF FRED B. MORRISON, NATIONAL EXECUTIVE SECRETARY, VOLUNTARY HOME MORTGAGE CREDIT PROGRAM Mr. MORRISON. Mr. Chairman, members of the committee, my name is Fred B. Morrison. My objective today is to bring to this committee a report of the current status of the voluntary home mortgage credit program of which I am national executive secretary. Through the voluntary home mortgage credit program, the mortgage lending industry, with the cooperation of the Government, has established machinery to channel funds for GI and FHA mortgages into small communities which hitherto had nonexistent or dormant facilities for guaranteed and insured mortgages. As a result, the residents of these communities have been obtaining private mortgage loans in greater quantity with lower downpayments, for longer maturities, and at lower interest rates than they previously have had available to them. In certain of these aspects the loans obtained through the VHMCP have been even more liberal than those that have been made available by the VA direct loan program, previously the only source of mortgage funds on these reasonable terms. Furthermore, the VHMCP has made such financing available to all qualified residents of small communities, veterans and others. The program has made unnecessary a large part of authorized Government direct loan funds, but these funds have still been available where the VHMCP has not been able to obtain loans for qualified veterans. The overall effect has been a stimulation of the housing markets in small towns where the lack of financing in the past has stifled the demand from qualified borrowers for better housing. Individuals in small communities have often been forced to buy inadequate or obsolete homes while their counterparts in the cities had a wide range of choice among new and up-to-date houses. This, we believe, is because builders in small and remote areas had inadequate sources of GI or FHA financing until recently. Few builders in small communities could plan long-range building programs when the VA direct loan program was their only source of financing, because of the long delays which occurred when the direct loan funds of the Veterans' Administration ran out. Individuals who wanted to buy existing houses often could not buy the home of their choice because financing was not available to them under FHA terms or VA terms either as direct or guaranteed loans. The voluntary home mortgage credit program was proposed as an answer to this problem for individuals in small communities and for members of minority groups everywhere. In my opinion, it is a thoroughly successful answer, despite the fact that it is only now entering its second year of operation. The VHMCP represents a remarkable example of business statesmanship. The private housing and mortgage lending industry proposed to the Congress that the VHMCP be set up to minimize the need for direct mortgage lending by the Government. The administration recognized in this new type of program an idea that is thoroughly compatible with its objective of strengthening the economy by encouraging private enterprise to do what might otherwise be done through large outlays of Government funds. The enabling legislation introduced by Congressman Widnall of this committee was enacted as a part of the Housing Act of 1954. As of April 30, after 14 months of operation, the voluntary home. mortgage credit program has received 41,255 applications for assistance in obtaining VA-guaranteed or FHA-insured loans from applicants who had been unable to obtain these loans from local sources. Seventeen thousand three hundred and forty-seven of these applica cants had obtained loan commitments from financial institutions participating in the program. The applications of another 4,453 were still being processed. The loans placed by the VHMCP aggregated $149,291,547. Our success with builder applications for the financing of minority group projects is continuing. The record of placement in this field is very nearly 100 percent. The effectiveness of the VHMCP is greater than can be shown by a report of loans made under the program. The normal lending activities of the Nation's financial institutions have been modified to serve the same small communities introduced to them first by the VHMCP. A recent survey of 16 representative life insurance companies shows that their commitments of $69 million through the VHMCP are matched by $68 million of GI and FHA loans in areas eligible for assistance under the VHMCP, which would not have been made were it not for the program. During the past few months the program has been subjected to severe criticism. The charge has been made that veterans have been subjected to unconscionable delays in the processing of their loan applications. As the committee is aware, mortgage lending is intrinsically a time-consuming business. Nevertheless, the mechanics of our program have recently undergone a rigorous appraisal, and our average processing time for an individual case has been sharply reduced. Another recurring complaint about the program is that the discounts charged by private lenders participating in the program are excessive. This statement is not in conformity with the facts, since the average discount charged under the VHMCP is well under 2 points. We recognize that any program, and particularly any new program as intricate as the voluntary home mortgage credit program, is bound to cause inconvenience and concern to some of the people it seeks to serve. While we feel that by and large the program is operated with great efficiency and effectiveness, we are always anxious to make any improvements that can be made in its operations. Experience under the voluntary home mortgage credit program has shown that many small towns all over the country have shared much more in other phases of postwar economic expansion than in housing. To the extent that an insufficient supply of funds for investment in FHA-insured and VA-guaranteed home mortgages was an obstacle to the expansion of housing, the VHMCP is paving the way for these towns to attract builders to a relatively untouched market. It is possible that building activity in small communities, with the help of the VHMC program, can prove important in sustaining the housing sector of the economy. And, if other obstacles to the building of homes for minority groups, such as the availability of land, can be overcome, that, too, can be a potent contributor to total construction. The voluntary home mortgage credit program is a bold experiment in cooperation between industry and Government, and illustrates again how the solution of economic problems is being achieved by private industry, through broad and imaginative measures. The program is growing as it becomes better known, and the best test of its success is that it is proving itself in a tight mortgage market. This |