Mr. WOLCOTT. And the building materials are exceptionally high. If the automobile industry increased the cost of their cars, as they did a few months ago, in a declining market, we may now expect in the building trade just what has happened in the automobile industry, a stoppage of buying? Mr. ECCLES. You cannot expect your building-material prices or the wage prices all to come down at once. This is what has happened. Take the lumber industry. Lumber has come down over 30 percent over the last 2 months. The price of lumber at the mills is 30 percent less today. Mr. WOLCOTT. Is that not due to the fact there is no demand for lumber? Mr. ECCLES. Of course it is. Lumber would possibly go up some. Mr. GOLDSBOROUGH (acting chairman). Several members desire to interrogate you and we also want to get on the floor at 12 o'clock today. Would it be agreeable for you to return Monday morning at 10:30? Mr. ECCLES. It would be agreeable but I would like to get through as soon as I may. Mr. FORD. May I just ask one question at this time? Mr. GOLDSBOROUGH. Yes, sir. Mr. FORD. If a house were built on a new tract and it was the only house there and no other houses were ever built there, depreciation would set in, but if by reason of the attractiveness of that location a dozen or 20 other houses were built around that house, the value would be enhanced, would it not? Mr. ECCLES. Yes. Mr. KOPPLEMAN. Do I understand Mr. Eccles is coming back Monday morning? Mr. GOLDSBOROUGH. Yes, sir. At half past 10 Monday morning. (Whereupon, at 12 noon, the committee adjourned until 10:30 a. m., Monday, December 6, 1937.) AMENDMENTS TO NATIONAL HOUSING ACT TUESDAY, DECEMBER 7, 1937 HOUSE OF REPRESENTATIVES, COMMITTEE ON BANKING AND CURRENCY, Washington, D. C. The committee met, pursuant to notice, at 10:30 a. m., for further consideration of H. R. 8520, Hon. Henry B. Steagall (chairman) presiding. Present: Messrs. Steagall, Goldsborough, Reilly, Hancock, Williams, Spence, Farley, Meeks, Kopplemann, Ford of California, Brown, Patman, McKeough, Evans, Transue, McGranery, Barry, Wolcott, Fish, Gifford, Luce, Crawford, Gamble. The CHAIRMAN. Mr. McDonald is here, gentlemen. Somebody asked that he be here to answer some questions, and I suggest that we hear him right now, as he has an engagement at the White House at 11:30. Mr. WILLIAMS. I would like to ask Mr. McDonald some questions, Mr. Chairman. STATEMENTS OF STEWART MCDONALD, ADMINISTRATOR; ABNER B. FERGUSON, GENERAL COUNSEL; C. WYLIE ALLEN, CHIEF, SAVINGS LOAN SECTION; MILES L. COLEAN, DIRECTOR OF RENTAL, HOUSING DIVISION; DR. ERNEST M. FISHER, DIRECTOR OF ECONOMICS AND STATISTICS; CLYDE L. POWELL, ASSISTANT DEPUTY ADMINISTRATOR, AND THEODORE B. NICKSON, COMPTROLLER, FEDERAL HOUSING ADMINISTRATION The CHAIRMAN. All right, Mr. Williams. Mr. WILLIAMS. Mr. McDonald, under the present program there are two general kinds of projects that are insured by the Federal Housing Administration, low-cost housing projects and the dwellings. I suppose you have a record showing the amount of money that has been loaned by the different kinds of institutions that make the loans, the rates that have been charged, the amount of mortgages insured by F. H. A., and the insurance premiums that have been paid, and so forth? Mr. McDONALD. Yes, sir. Mr. WILLIAMS. Now, how much money, how much in dollars has been insured in the low-cost housing projects? Mr. McDONALD. Mr. Colean is here, and I would like to ask him to answer that, Mr. Williams. Mr. COLEAN. We have outstanding first mortgages on buildings that are in operation of $5,530,000; mortgages insured on buildings now under construction in the amount of $8,286,000, and, in addition, an amount of $2,472,000 for projects for which the financing has been arranged, and in the process of closing, making a total of $17,438,000. That is as of October 31 of this year. Mr. WILLIAMS. That is on the low-cost housing projects? Mr. COLEAN. Yes, sir. Mr. WILLIAMS. And you have insured or made commitments to insure something over $17,000,000? Mr. COLEAN. That is right. Now, in addition, we have commitments outstanding for additions. On October 31 it was $12,000,000, and today it is about $16,000,000 on projects for which the finance has not been arranged at the moment. Mr. WILLIAMS. Does that cover the full amount that you have had insured? Mr. COLEAN. That is correct, sir. Mr. WILLIAMS. None of this has been redeemed? None of the insurance that you have on these low-cost-housing projects has been redeemed? Mr. COLEAN. Yes, sir; in one base. A project in the New York area, where a mortgage of $1,250,000 was insured. It was canceled and taken by a private insurance company before the building was completed. Mr. WILLIAMS. The insurance was released as to that? Mr. COLEAN. That is right, sir; and on the others the insurance is in force. of those Mr. WILLIAMS. Have there been any defaults on any financial arrangements concerning any of those projects to date? Mr. COLEAN. No, sir. To date these projects have been very successful but, of course, they are quite new and experience is therefore limited. Mr. WILLIAMSs. Who has made the loans on those projects? Mr. COLEAN. The loans have been made by the Prudential Life Insurance Co., the New York Life Insurance Co., the Union Central Life Insurance Co. of Cincinnati, the RFC Mortgage Co., and, in certain cases, by bond issues distributed to local institutions. Mr. WILLIAMS. What rate of interest has been paid to those insurance companies? Mr. COLEAN. The rate has been uniformly 41⁄2 percent without any additional service when charged 4%1⁄2 percent, except in one case where the mortgage was 4 percent. Mr. WILLIAMS. Where the mortgage was what? Mr. COLEAN. Four percent. Mr. WILLIAMS. It has been at the rate of 4 and 4% percent? Mr. COLEAN. Yes, sir; at the rate of 4 and 41⁄2 percent, with that one exception. Mr. WILLIAMS. And what has been your insurance charge? Mr. COLEAN. I would have to add that up. Mr. WILLIAMS. Well, approximately. You do not need to state it exactly. Mr. COLEAN. I do not have that, but I can give that to the clerk. It would amount to not over, I would say, $4,000,000 at the top, and I may say that one of their mortgages on one of the projects at the end of Sixteenth Street here in Washington was originally made by the RFC and sold to the Union Central Life Insurance Co. after completion. Mr. WILLIAMS. What rate of interest does the RFC charge? Mr. WILLIAMS. The same as the others? Mr. COLEAN. That is right, sir. Mr. WILLIAMS. That, of course, does not include your insurance premiums. That is one-half percent extra in addition to the interest? Mr. COLEAN. Yes, sir; that is one-half of 1 percent extra. Mr. WILLIAMS. That would make a charge of 5 percent? Mr. COLEAN. Yes. Mr. WILLIAMS. What other charges are there in addition to that? Mr. COLEAN. There are no other annual charges. Mr. WILLIAMS. No other annual charges, but what other charges are there in addition? Mr. COLEAN. There are certain charges in connection with making the loans. Mr. WILLIAMS. What are they? Mr. COLEAN. In some cases the brokerage fee is 11⁄2 percent. Mr. WILLIAMS. To whom does that go? Mr. COLEAN. It usually goes to the local agent of the RFC who handles the rent and makes the appraisal of the property, and so forth. Mr. WILLIAMS. That charge is 11⁄2 percent? Mr. COLEAN. One and a half percent; yes, sir. Mr. WILLIAMS. One and a half percent on the principal amount of the obligation? Mr. COLEAN. That is right. Mr. WILLIAMS. What are the other charges? Mr. COLEAN. That is the only financial charge that has been made on these loans. Mr. WILLIAMS. Is there not an appraisal or inspection of it? Mr. COLEAN. At the outset of this program we did not charge an appraisal fee ourselves-for this reason, that the outlet for these loans was so limited we did not feel we could assure the projects that were under examination of a sufficient guaranty of getting their money to encourage them and charge them for an examination. We wanted to get our projects examined and available for the market. Mr. WILLIAMS. What has been your policy in more recent times? Mr. COLEAN. We have recently, and that is a matter of 2 months ago, charged them a fee, so that we now charge three-tenths of 1 percent on the total amount, to cover our appraisal and inspecting expenses. Mr. WILLIAMS. That is in addition to the 1%1⁄2 percent brokerage commission? Mr. COLEAN. Yes, sir; that is in addition to the brokerage commission of 11⁄2 percent. Replying to your previous question, Mr. Williams, the F. H. A. rental housing mortgages which have been taken by the RFC Mortgage Co. amount to $2,134,000. Mr. WILLIAMS. Let us go to the question of insuring the smaller houses, smaller programs. How much has been insured in dollars on dwellings? |