backed loans to finance the sale of houses to minorities may submit an application to a regional committee. The staff of each regional committee maintains a rotating referral procedure by which loan applications are referred to participating lending institutions. The referral process is repeated until the loan has been committed for by a lender or until it becomes clear that the loan cannot be placed.

Each institution participating in the program is permitted to apply its own credit test, its own standards of construction, its own loan-tovalue and amortization standard, and so forth. These standards, of course, change from time to time and vary as between different lenders and different geographical areas. Operating as a clearinghouse service, it is up to the regional committees to do their best to assist applicants in obtaining from private financing institutions, mortgage loans insured by the FHA or guaranteed by the VA.

The VHMCP has now been operating for 41⁄2 years. By bringing lenders and borrowers together, this joint industry-Government program has helped provide over $383 million of FHA and VA aided funds for borrowers who had previously been under disadvantages in obtaining such funds. As of June 1, 1959, the VHMCP had placed 39,056 loans. Nearly 21 percent of this total are loans to minority group families.

In the VHMCP the term "minority group" applies to families of any group without regard to race, creed or color who, although qualifying for an FHA-insured or VA-guaranteed loan, cannot find credit generally available to them to the same extent and under the same terms and conditions as are generally available to others in the same locality. Thus, the term "minority group" applies to Negroes, orientals, Puerto Ricans, Mexicans, and any body of persons identified by reason of a specific religious adherence or common usage of a foreign language.

During its 42 years of operations, the VHMCP has helped more than 8,000 minority-group families in metropolitan areas with their mortgage problems. Through May 1959, VHMCP placements of minority home loans totaled approximately $80 million. Based on the record in large cities alone, the VHMCP has placed over 60 percent of the minority applications it has received. I might add that the placement ratio of loans to minorities is superior to the placement ratio for nonminority applicants. This record is a major accomplishment when it is considered that during this 42-year period we have had two periods of tight mortgage money.

Many loans have been made to members of minority groups in small communities through VHMCP but program statistics in these areas do not distinguish between minority and non-minority categories. The VHMCP has also arranged the financing for three project

loans covering 546 open-occupancy rental units totaling over $3 million. VHMCP has played a key role in alerting, educating, and stimulating private lending institutions to finance new rental and cooperative housing projects and the relocation of minority groups displaced by slum clearance.

Serving as a national clearing house for locating mortgage funds, the VHMCP has proved to be an effective instrument through which the home financing needs of minority families can be met. The terms of the loans obtained for members of minority groups have been at least as favorable as the terms prevailing in the regular mortgage market. Many minorities in the country who never before had access to mortgage credit are now able to realize their dreams of homeownership.

One of the most heartening byproducts of the VHMCP is the growing acceptance of the fact that loans to minorities are safe investments. Through the VHMCP, private lenders have discovered that the delinquency rate is as low for well-checked loans to minorities as for loans made to the general public. By forcefully focusing attention upon the worth of mortgage loans to minorities, the VHMCP has contributed greatly to a more equitable flow of mortgage credit to these groups.

I have a supporting document to file with the Commission which shows the number of applications, loans placed, and percentage of applications placed for members of minority groups in each State.* Chairman HANNAH. Thank you, Mr. Graves.

Mr. MASON. Could I add to Mr. Graves' statement, Mr. Chairman, that on his national and regional committees there is a substantial representation of members of minority groups, particularly Negro groups. On the national committee is Mr. A. T. Spalding, who is president of the North Carolina Mutual Life Insurance Co. On the region 1 committee, Mr. William S. Harps, a real estate broker of Washington; Mr. Albert S. Brothers, Sr., a real estate broker of Roxbury, Mass., and Mr. William R. Hudgins, director of a savings and loan association in New York City.

In region 2, Mr. Calvin McKissock, who is a homebuilder in Nashville, Tenn., and Mr. T. M. Alexander, who is the executive vice president of the Southeastern Fidelity Fire Insurance Co.

In region 3, Mr. George S. Harris, a real estate broker from Chicago. In region 4, Mr. D. D. Shackelford, who is the administrative assistant to the Louisiana Life Insurance Co. of New Orleans, and Mr. J. R. Roberts, a mortgage banker of Houston, Tex.

In region 5, Mr. Edgar Johnson, executive vice president of the Golden State Mutual Life Insurance Co. of Los Angeles, and Mr. Herman Plumber, a real estate broker of Portland, Oreg.

See appendix.

Chairman HANNAH. Before we open this up for questioning, I am wondering if we should have a statement for the Veterans' Administration. Would that be desirable?

Mr. AMIDON. Yes, sir, Mr. Chairman.

Their home loan guaranty program is somewhat similar to the FHA's, although it is directed specifically to veterans. Perhaps the Commission would like to hear their testimony first so that they might direct questions to them at the same time as it directs them to the FHA. Chairman HANNAH. If that is agreeable to you, Mr. Mason.

Mr. MASON. It certainly is.

I suggest he come over to the middle where he can be heard.

Mr. AMIDON. Representing the Veterans' Administration is the Associate Deputy Administrator, Mr. Robert Lamphere. Accompanying him are Mr. P. N. Brownstein, Director of the Loan Guaranty Service, and Mr. P. J. Maloney, the Chief of the Legislative and Regulatory Staff.

Chairman HANNAH. Mr. Lamphere, we would be interested in hearing from you.

TESTIMONY OF ROBERT LAMPHERE, ASSOCIATE DEPUTY ADMINISTRATOR, VETERANS' ADMINISTRATION

Mr. LAMPHERE. My name is Robert Lamphere. I am the Associate Deputy Administrator of the Veterans' Administration.

This is Mr. Brownstein and Mr. Maloney. Mr. Brownstein is the Director of our Loan Guaranty Service and Mr. Maloney is one of his assistants.

Our Administrator, Mr. Whittier, asked me to extend to you his personnal regrets at not being here today. It so happens that the scheduled budget hearings for the Veterans' Administration in the Senate fall at the same time this afternoon.

Chairman HANNAH. That could be of some importance.

Mr. LAMPHERE. It is to us, sir.

I am pleased to have the opportunity to appear before the Commission and tell you the Veterans' Administration's position regarding discriminatory practices in the sale of housing to veterans when the purchase is to be made with a loan guaranteed, insured, or made by the Veterans' Administration. The Veterans' Administration becomes concerned with housing in the guaranteed-loan program and the direct-loan program.

In the guaranty program the loan itself is made by private lending institutions and the Veterans' Administration guarantees or insures the repayment of the loan by the veteran borrower. In the direct-loan program the Veterans' Administration loans the money to the veteran to assist in the purchase of housing.

All of the programs administered by the Veterans' Administration are, in a sense, class legislation, that is, the direct beneficiaries of our legislation are limited to veterans or their dependents. No others are entitled to the benefits afforded by the statutes we administer. Consequently, our requirements for eligibility are directed solely to a determination that the beneficiary is a veteran or a dependent of a veteran. We have no basis for inquiry into the race, creed, or color of claimant. The forms for establishing eligibility or for applying for loan benefits are not now, and never were, designed to elicit such information. We have no basis for making an inquiry into such matters. We have no statistical breakdown of the recipients of these benefits which will indicate the number of beneficiaries who are members of a particular race, creed or color.

Insofar as our housing loan programs are concerned, we have regulations relating to restrictions on property prohibiting sale or occupancy based on race, creed, or color. These were promulgated in 1950 at the time similar action was taken by other Federal agencies concerned with housing. The action was designed to bring the policy of Federal agencies fully in line with the policy underlying the Supreme Court decision in the Shelley v. Kraemer case which held that the enforcement of racial restrictions was against public policy.

In our GI loan program we do not refuse to issue guaranty on a loan made by a private lender if the property is encumbered by racial restrictions created and recorded after February 15, 1950. However, the lender who makes a GI loan on such property does not, under our regulation, have the option which would otherwise be available, of conveying the property to the VA in the event of default and foreclosure. This removes a very desirable option from the lender's use and has the effect of causing lenders to refrain from making the loan in the first instance. That has an additional effect of making it virtually impossible for the developer, who has placed the racial restriction on the property, to market his product to veterans. So far as we know, no loan has been guaranteed on a property covered by the proscribed restriction.

In addition, our regulation provides that if the title to real property or a leasehold interest which secures a home loan guaranteed or insured after February 15, 1950, is restricted against sale or occupancy on the ground of race, color, or creed, by restrictions created and filed of record by the borrower subsequent to that date, such action may be considered by the holder of the loan as constituting an event of default. Under such circumstances, the lender could declare the entire unpaid balance of the loan immediately due and payable. If foreclosure then followed, the restriction would be cut off by operation of law and the lender would have protected his right to the option to convey to the Veterans' Administration.

The General Counsel of the Veterans' Administration has held that because of the automatic-guaranty feature provided by the law these regulations represent the limit of the Administrator's authority under the basic statutes to regulate against the use of such restrictions.

In our direct-loan regulations we provide that no loans will be made to purchase any residential property which is encumbered with a racial restriction against sale or occupancy which was created and filed of record subsequent to February 15, 1950. Likewise, the subsequent recording of such a restriction by the borrower can be an event of default.

As of April 30, 1959, we had made 133,638 direct loans to veterans. We have found it necessary to waive the requirement in only three cases in order to relieve undue hardship to the veterans involved. One case involved a paraplegic veteran who had received a grant for a specially adapted house and who acquired the land and became heavily obligated before the title was examined and the restriction revealed. The other two cases were inadvertently approved by Veterans' Administration employees who overlooked the restrictions and the veterans, on the basis of Veterans' Administration commitments, would have sustained substantial losses and hardship. These have been the only waivers granted during the 9-plus years that the regulation has been in effect. To avoid recurrences we now advise the veteran in our loan-approval letter that we will not make the loan if the property is subject to the proscribed racial restriction.

We have cooperated with four States in their efforts to enforce antidiscrimination laws relating to the sale of newly constructed housing. They are New York, New Jersey, Washington, and Oregon. These were the only States which had requested such cooperation, until we received a similar request from Connecticut last week. Their State law is not effective until October 1, 1959, and we anticipate having a cooperative agreement with Connecticut at that time. Our agreement with the four States mentioned is that we will advise the enforcement agency of the new housing developments which are submitted to our office for approval. The agency, in turn, advises the builder concerned of the requirements of the local statute. If a builder is found in violation of the local law and given a cease-anddesist order after appropriate hearing by the State, we will make inquiry regarding the violation or violations and if they involve the sale of housing to veterans we will undertake suspension of the builder from our program.

While we have had no occasion to date to suspend a builder for the violation of a State antidiscrimination law, our offices have cooperated fully with the State enforcing agencies.

The question has been raised as to why we have not included in our mortgage forms a clause warning the mortgagor that if he places