It is strangely paradoxical to hear on one hand that we must provide facilities for college housing in order to provide the college-trained personnel essential if our capitalistic free enterprise system is to prevail over the collectivist ideology, while on the other hand it is suggested (and now provided under the college housing program) that in financing the construction of housing for these institutions we should forsake the free-enterprise system and turn to the central government. Should not we practice what we preach? 2. Additional funds for Federal college housing loans are not necessary at the present time H. R. 10157, under section 701 in title VII, would increase from $500 million to $750 million the authorized funds for Federal college loans. H. R. 9537, under section 501 of title V, would increase the authorized funds from $500 million to $600 million. It appears that adequate funds are still available under the present $500 million authorization. Mr. Albert Cole, Housing and Home Finance Administrator, stated this year before the Subcommittee on Housing of the Senate Committee on Banking and Currency that as of March 1, 1956, $180 million had been committed by contract for college housing loans and $132 million had been reserved for eligible applicants. This indicates that as of March 1, with the college housing program in operation for over 41⁄2 years, $188 million was still not committed by contract or reserved for eligible applicants and was available for loans; $188 million should be adequate to carry the program for another year. If the interest rate at which Federal loans are made for college housing is put at a more realistic level, rather than at the arbitrarily fixed and economically unsound present rate of 24 percent, private industry will be able to provide a substantial volume of the loans so that there would be less demand on the Federal funds authorized for the program. Representatives of the Housing and Home Finance Agency in February of this year, before the Subcommittee on Independent Offices of the House Committee on Appropriations, submitted the following table regarding approved applications under the Federal college housing program, from 1952 through a projected estimate for 1956 and 1957 (House hearings on independent offices appropriations for 1957, p. 1094): This table indicates that additional funds for the program are unnecessary at the present time. Furthermore, the funds can be supplied by private industry at reasonable rates. CONCLUSIONS AND RECOMMENDATIONS (1) Section 401 of the Housing Act of 1950 should be amended to raise the interest rate at which Federal college housing loans will be made, when such loans are not available from other sources at that rate, from the present 2% percent to an economically more realistic rate which would permit private industry to compete with the Federal Government in making such loans. The proposal in sections 502 and 503 of title V of H. R. 9537 to raise the interest rate at which the Federal Government will make loans under the college housing program from the present 24 percent to about 3% percent is a step in the right direction, but it would be highly desirable to provide a higher interest rate for such loans in order to permit private industry to supply a substantial volume of the funds necessary for college housing. (2) The proposals to increase the authorized funds for college housing loans (from $500 million to $600 million under section 501 of title V of H. R. 9537 or from $500 million to $750 million under title VII of H. R. 10157) are unnecessary at the present time. STATEMENT OF H. R. NORTHUP, EXECUTIVE VICE PRESIDENT, NATIONAL RETAIL LUMBER DEALERS ASSOCIATION Mr. Chairman and members of the committee, my name is H. R. Northup, and I am executive vice president of the National Retail Lumber Dealers Association. I am appearing before your committee in behalf of the thousands of retail lumber dealers of the Nation and will address my remarks to certain provisions of H. R. 10157 introduced by Mr. Rains. PROPERTY IMPROVEMENT LOANS The importance of the home-improvement business to the national economy and to our industry is well known by the members of this committee. Of some 50 million homes at the time of the last census, just about half, or 25 million, are 30 years old or older; 10 million of our homes, or about 20 percent are 50 years old or older; about 27 percent have no bathtub or shower; 15 percent have no kitchen sink, and millions of our postwar homes which were built to minimum standards are now too small for the family increase in second, third, and fourth born children. Some homeowners are in a financial situation that permits the payments of cash for necessary improvements. Others are not so fortunate and must borrow to finance any major home improvement. The title I home improvement loan insurance program of the Federal Housing Administration has, over the years since its inception, proven to be an excellent means of financing home improvements. Although it originally was created or more or less of an experimental basis, it has proven its worth many times over and should now be made a permanent program of FHA. The average homeowner looks upon his home not only as a place to live and raise his family, but also as an investment. He must protect this investment by keeping it in good repair. Unfortunately, many have been unable to finance necessary improvements. Many lending institutions have set up their own home improvement loan programs. Of course, these programs vary, but generally speaking, we believe your committee will find that the discount rates charged under the private programs are higher than that permitted by title I. The information that we receive is that these rates run $6 per $100 per year discount to $8 per $100 per year, while title I has a $5 discount rate. Many lending institutions in the smaller towns are unable to have their own program of home-improvement loans. Therefore, they must necessarily rely upon title I to finance home improvements. It is good business for the average lumber and building material dealer to have available adequate financing for home improvements at reasonable interest or discount rates. If the Congress should lower the discount rate on title I paper to the point where lending institutions no longer consider such paper desirable, it would, I believe, have the effect of forcing homeowners to turn to private lending programs having a higher discount rate. We do not want the committee to think we are opposed to private lending programs. Far from it. We welcome them, and hope there will be more of such programs providing funds at a reasonable rate for home improvements. We respectfully suggest, however, that very careful study be made before any action is taken by your committee to change the present maximum discount rate permitted under title I. Section 101 of this bill would extend the title I program to 1958, increase the maximum loans to $3,500 and the maximum terms to 5 years. It would also increase repair loans on dwellings of 2 or more units to $15,000, or $2,500 per unit. This section would reduce the discount rate on loans above $1,000, permitting a 5 percent rate up to $1,000, and 4 percent in excess of $1,000. The members of this industry are in complete accord with the provisions to increase the maximum loan limit for a title I home improvement loan for a single family dwelling to $3,500, and the maximum term to 5 years. We also endorse the provision to increase class IB loans for improvement of structures housing 2 or more families to $15,000. The present limits of $2,500 and 3 years were established many years ago, and are no longer sufficient in terms of today's prices to adequately finance many major home improvements. The liberalized terms in H. R. 10157 are more realistic and would, if enacted into law, permit many more homeowners to avail themselves of this program than at present. The 5-year term is, in our opinion, of primary importance because it would permit lower monthly payments within the reach of more people, particularly those of lower income in need of home improvements. We prefer this provision to that provision in the Administration's housing bill giving the FHA Commissioner authority to increase the rate up to 5 years in his discretion. We question the proposal extending the title I program for only 2 years. Because this program has stood the test of time and has, in our opinion, been a very important factor in bringing about an upgrading of thousands of homes, we respectfully urge that the program be made permanent. If the committee does not agree with this recommendation, then we urge an extension of the program for at least 5 years. Turning to the provision which would reduce the discount rate for loans in excess of $1,000, we urge careful study of the effect of this proposal before any action is taken. Members of this association are lumber and building-material dealers, not lenders. We are not qualified to testify as to the effect upon lending institutions of the proposal to reduce the discount rate. We do know, however, that lumber dealers must compete with automobile dealers, appliance dealers, and others in financing home improvements. No action should be taken to place home improvement financing in a less favorable competitive position for available funds than it is at present. If the discount rate is reduced above $1,000, it may very well have the effect of limiting the use of the title I program to loans of $1,000 or less, and forcing those needing larger loans to turn to programs calling for a higher discount rate. If this should be the result, it would, in our opinion, virtually kill title I. Once title I is out of business, the discount rates under private programs would, we believe, be increased. If Congress determines that larger loans should be limited to a $4 discount rate, we suggest that $2,500 be the point at which the lower rate becomes effective. In 1954 the Congress amended title I to prohibit the use of title I loans for improvements on a home occupied for less than 6 months. The primary purpose of the amendment was, as we understand it, to prevent the use of title I as a downpayment on a new home. We are in complete agreement that this is an improper use of the program. Experience has shown, however, that this provision has worked a hardship on the legitimate owner of a new residence which was not intended by the Congress when this limitation was written into the law. In many instances builders do not provide storm sash, fences, and other improvements which are desirable or necessary. Consequently many purchasers would like to add these improvements, but are forced to finance them through sources other than title I at a higher cost because of this 6-month occupancy provision The desired end, we believe, can be accomplished administratively without the penalizing provision in the law. We recommend the repeal of the 6-month occupancy provision. INCREASE OF FHA AUTHORIZATION Section 105 of H. R. 10157 would increase the overall mortgage insurance authority of FHA by $3 billion. We urge approval of this authorization to permit FHA to continue to function at its present level of activity. FEDERAL NATIONAL MORTGAGE ASSOCIATION Title II of II. R. 10157 would liberalize the provisions of the National Housing Act affecting Federal National Mortgage Association. Section 201 (b) would change the requirement that each mortgage seller make payments of nonrefundable capital contributions equal to not more than 3 percent of mortgages sold to FNMA (present law) to 2 percent. We believe that this amendment will encourage smaller lending institutions to use FNMA and therefore we urge adoption of this amendment. DIRECT LOANS FOR HOMES FOR ELDERLY PERSONS Title III of the bill (sec. 302) authorizes the Housing and Home Finance Agency Administrator to make direct loans to nonprofit corporations for construction of homes for elderly persons, if such loans are not available from other sources upon equally favorable terms. We are opposed to this provision because it amounts to a further encroachment by the Government upon the areas served by private lending institutions and places the Government in competition with private enterprise. PUBLIC HOUSING Title V of H. R. 10157, section 501 (a), authorizes the Public Housing Administration to enter into new contracts for loans and annual contributions for not more than 50,000 additional units each year for 3 years, plus any unused authorization for fiscal 1956. Section 502 (b) would authorize 10,000 public housing units for elderly persons each year for 3 years in addition to the regular public housing program. Section 502 (a) would amend the present law to make single persons over 65 years of age eligible for public housing. Certainly, no one wants to deny an adequate home to our elderly citizens. We do not, however, believe that public housing is the answer to this problem. We oppose this provision as well as the provision authorizing a continuation of the public housing program and little can be added to our reasons for this opposition which have been presented to the Congress in preceding years. RECOMMENDATIONS In conclusion, we respectfully recommend the following amendments: That title I of the National Housing Act be amended to (1) Increase the maximum loan limits from $2,500 to $3,500; (2) Increase the maximum term of the loan from 3 years and 32 days to 5 years and 32 days; (3) That the title I program be made a permanent program of the Federal Housing Administration; and (4) That the 6-month occupancy provision be repealed. II. Public housing. That this program be permitted to terminate in 1956. That the 3-percent stock requirement be reduced to 2 percent to permit greater use of the secondary market functions of FNMA by smaller lending institutions. IV. General Mortgage Insurance Authorization of Federal Housing Administration. That the Congress approve the $3 billion additional mortgage insurance authorization for fiscal 1957 as provided in H. R. 10157. V. We oppose title III of H. R. 10157 which would authorize direct loans for homes for elderly persons. Hon. WALTER JUDD, THE MARQUETTE NATIONAL BANK OF MINNEAPOLIS, Congressman, Fifth Congressional District, DEAR CONGRESSMAN JUDD: We would like to take this opportunity to express a few of our views pertaining to changes we would like to see made under the present FHA title I laws. We would like to see the 6 months' law removed. This law comes under section 101 (a) (iii). The legislative history of the act indicates that this section was introduced in order to put a halt to the practice of using a title I home improvement loan as a device for obtaining funds to make the downpayment on a new home to be purchased by the borrower. Although it is not stated, it was also to keep the borrower from getting too deeply in debt. We feel that it has accomplished neither. It is our experience that this regulation, in practice, has frustrated one of the major objects which the act intended to accomplish, namely, the limitation of FHA loans for improvements which substantially protect or improve the basic livability or utility of the property. A typical example in this area is the situation which is presented when a purchaser acquires a new home in a suburban area which has no public water system. The private wells that are typically used in connection with mineral content to be used efficiently or practicably for home purposes. Accordingly, it has been the practice of such purchasers to obtain water softeners through the use of title I FHA home improvement loans. Obviously, such an improvement improves the basic livability of the home and protects the water system installed within the home and is therefor, precisely the kind of improvement for which FHA I loans were created. Since most of the banks in this area have reached a point where they now feel they have enough unsecured paper in their portfolio the water softener buyer is left without means of financing his unit. The primary requisite of a good loan is the least amount of money for the shortest period of time. This is the main reason that we do not care to see the limits of the act raised, neither in money nor time. We feel that at the present limit there are very few who qualify. Since wall-to-wall carpeting is now acceptable under FHA title VI, we feel no reason why it should not be acceptable under FHA title I also. We feel that in time landscaping will again be made eligible. At the same time we would like to see built-in stoves and ovens be approved. Sincerely, GENE HOLTMEYER, Installment Loan Officer. THE RETAIL MERCHANTS ASSOCIATION, Chairman, Banking and Currency Committee, Hon. BRENT SPENCE, House of Representatives, Washington, D. C. MY DEAR REPRESENTATIVE SPENCE: We wish to bring to your attention and that of the other members of the House Banking and Currency Committee the views of the board of directors of the Retail Merchants Association of Alexandria concerning liberalization of the title 1 section of the Federal Housing Act. Our board of directors is on record as endorsing certain proposals to liberalize the act including placement of title 1 on a permanent basis by eliminating the expiration date; increasing the maximum amount of loan for improvements to a single-family home to at least $3,500; increasing the limitation on loans for improving structure housing two or more families from the present maximum of $10,000 to $15,000 and also increasing the maximum term for this class of loan from 7 to 10 years; and elimination of the requirement that a residential structure must be occupied at least 6 months before it qualifies for a title 1 home improvement loan. Our board of directors, however, views with concern any proposals under which semidurable items with a probable useful life not exceeding 5 or 10 years, would be included under the terms of a 30-year mortgage of the FHA or VA mortgage programs. We believe such financing would unduly increase the cost of such items as paid by the consumers. We further urge that the current practice of including free standing appliances, such as refrigerators and stoves be abandoned for the reasons stated above. We believe that either by legislation or administrative regulation the items which may be included in such FHA and VA mortgage contracts be limited to built-in equipment with an anticipated useful life approximating the duration of the mortgage contract. We request that our views as stated above be made a part of the record of the committee. We wil appreciate the committee's consideration of our position. JOSEPH A. ELLIS, President. STATEMENT WITH REGARD TO H. R. 10157, THE HOUSING ACT OF 1956, BY ELTON KILE, PRESIDENT, NATIONAL ASSOCIATED BUSINESSMEN This statement is presented in the interest of the members of National Associated Businessmen, who are greatly concerned over the business enterprises in which the Federal Government is engaged in direct competition with privately owned, taxpaying companies. The statement is directed only to section 102 of the bill: hazard insurance on FHA-acquired properties, beginning on line 4 of page 3: "SEC. 10. (a) Notwithstanding any other provision of law, the Commissioner is authorized to establish a Fire and Hazard Loss Fund which shall be available to provide such fire and hazard risk coverage as the Commissioner, in his dis |