Mr. FOLEY. Without a directive power over the units. In my opinion from my personal experience I believe this agency would be an effective agency for the purposes outlined. I think a directive. power is not necessary to the substantial progress of such an agency.

Senator ROBERTSON. May I ask this question: Do you find anything in the bill that you find does or might impinge upon the American system of private enterprise?

Mr. FOLEY. In the sense of endangering it, Senator?

Senator ROBERTSON. Either endangering or competing with it or in any way at all.

Mr. FOLEY. I have stated rather fully in the written statment which I have filed with you, my opinions with respect to that question. I will state them very quickly here if you wish.

In spite of all that we are now able to do in providing housing for the lowest-income groups in rental housing, and until we can succeed in the enterprise that I was there speaking about, of bringing the cost lower down, public aid is necessary in my opinion in order to maintain some kind of decent standard of housing for many of our people.

I believe that that public aid must continue to be rendered until we are substantially more successful in taking care of the people through private enterprise, with both new and existing housing.

I believe for instance, as I outlined in my statement, that the often discussed filtration process which is an essential part of our economy in housing in the past can be made much more effective through building a broader range of housing and in greater quantity.

I believe too that it is possible-and we should be able in time to devise means of applying that public aid in a manner that will progressively reduce the necessity for continued and increasing public ownership and management.

If I had today a formula for that that I could present to you it would be very simple and very valuable but I do not have, and I believe we should seek and if possible find such a formula.

I do not see, to answer your question directly, a danger to private enterprise in this proposal in connection with housing.

Other major phases of the bill, such as the research provisions, differ from the former bill, but not ir essence. The research provision, as again is explained fully in this statement, differs, in one place in the matter of appropriations and in grants-in-aid to communities which do not appear in this bill and in a provision for laboratory research.

Presently and until it is possible through an agency such as is here proposed or otherwise, to establish the kind of research program we really need, the first is probably not necessary or could not be as effectively used as might later be the case, and the second, the laboratory might never be necessary because ordinarily you use existing facilities of that sort but if they were necessary one could always come back to Congress, of course, and point out the need for consideration. The urban development program has been very fully explained to you, and time is running out so I will not go into that in detail but again pointed out that I have covered the changes in my written statement.

In my capacity as Federal Housing Commissioner I should review briefly I think changes in connection with the operations and procedures relating to the Federal Housing Administration, also contained

in the bill. They are relatively few. They have to do mainly with detail. Quite possibly I would best serve you by reading at this point because it is brief.

These provisions are contained in the latter part of title V, beginning with section 507, and in titles VI and VII. These provisions are substantially the same as corresponding portions of S. 1592, as passed by the Senate last year, except in the following particulars:

Section 308 of the former bill, eliminating the time limitation upon the authority of the Administrator to insure mortgages on existing homes, has been omitted from the present bill for the reason that this provision has been enacted by separate legislation, approved July 1,

1946.

Section 309 (b) of the former bill authorized the FHA Administrator to increase the maximum dollar amount of mortgages insured under section 203 of the National Housing Act prior to December 31, 1947, by not to exceed $1,000, upon a finding that it was necessary to compensate for temporarily higher costs. This provision is repeated in section 508 (b) of the present bill, except that the limitations with respect to the date of insurance and the temporary nature of the higher costs have been eliminated. It is felt that these changes are advisable in order to make this provision useful in certain high-cost areas and to provide needed flexibility in administration.

Section 312 (b) of the former bill, which was added by amendment from the floor and would have made the prevailing wage requirements of section 212 of the National Housing Act applicable to mortgages insured under any section of the Act, has been omitted from the present bill. The procedure required under this provision was designed solely for large rental housing projects and if required in connection with individual home mortgages insured under section 203, would, in my opinion, effectively eliminate FHA from this field.

Senator BUCK. You were very much opposed to that last year?
Mr. FOLEY. Yes.

Detailed views on this matter presented in testimony in the House of Representatives on S. 1592 on July 3, 1946.

Section 402 (b) of the former bill provided for a maximum maturity of 32 years in connection with the $5,000, 95-percent mortgage for home owners of lower income described in such section, but contained a proviso [reading]:

that such maturity shall not exceed 25 years unless the Administrator is satisfied that the periodic payments required under a mortgage of shorter maturity would be in excess of the mortgagor's reasonable ability to pay.

In section 602 (b) of the present hill, this provision has been changed by reducing the maximum maturity to 30 years and eliminating the proviso. In this bill the provision has been changed to make it a 30-year term with a 95-percent maximum.

It has been our feeling that the proviso would be an aid in maintaining economic soundness. Nevertheless, we do not consider its retention necessary to accomplish the purpose intended in the revised provisions of the present bill.

Section 404 (a) of the former bill, which provided for a 90-percent maximum rental housing mortgage for families of lower income and a 95-percent maximum for certain mutual ownership, nonprofit, or educational projects, has been revised in section 604 (a) of the present bill to provide for an over-all maximum of 90 percent. Section 404 (b)

of the former bill, which fixed the maximum interest rate for such mortgages at 3% percent, has been revised in section 604 (b) of the present bill by increasing such rate to 4 percent.

That is a subject which is of great interest. The possibilities of mutual and cooperative home ownership I think are only beginning to be realized and I think can be expanded to be a tremendously important force in housing.

The reason we feel at this point that the 90-percent provision is probably better than the 95, is that we do not have yet the experience necessary in the handling of that sort of thing, nor have there been enough projects of the sort developed in the country to give us the same basis for applying economic soundness which is inherent in all this act, as distinguished from an emergency provision.

It is therefore our belief that the whole situation would probably be better served by beginning at the lower percentage and developing our experience to determine the factors that are necessary, for instance, in the setting up of a charter, the determination of equities and so on. The experience that we now have is in connection with the individual home or the individual borrower, as developed over generations of common use, and billions of dollars' worth of insurance operation.

We believe that these changes are advisable in the interest of economic soundness and will promote wider interest and participation by private lenders throughout the country.

Mutual ownership projects we believe present very large possibilities for contribution to the solution of the housing problem, but they have not yet been given sufficient trial and testing to develop the best methods of setting them up, the type of charter provisions best suited to the purpose, and the best protective measures for the interest of participants.

We believe, therefore, that this development experience will be most constructively gained if the equity requirements is maintained on the same basis as other rental projects for low-income families at least during the development of the required experience.

Section 405 of the former bill provided that debentures issued in payment of insurance contracts in connection with such 90 or 95 percent mortgages should be dated as of the date of default rather than as of the date of commencement of foreclosure, and that certain other special benefits in calculating the amount of debentures upon assignment of defaulted mortgages should be available only to the holders of such mortgages.

Under section 605 of the present bill these special benefits have been eliminated or made applicable to all mortgages insured under section 207. We believe that special benefits for the holders of such 90percent mortgages are unnecessary as an inducement to lenders and that their elimination will tend to simplify our procedure.

Section 406 of the former bill provided that the powers of the Federal National Mortgage Association could be utilized in making such insured mortgages and authorized the Association to make preliminary advances to assist in the formulation of projects of the character described in connection therewith. This section has been omitted from the present bill.

Since the Federal National Mortgage Association already has authority under title III of the National Housing Act to make such insured loans, it is believed that this section is unnecessary.

I have only a few brief comments on S. 287, which is somewhat similar to the provisions contained in section 602 (b) of S. 866.

S. 287 would amend the maturity provisions with respect to FHA insured home mortgages to permit a maximum maturity of 32 years in any case where the mortgagor is the occupant of the property and has served in the armed forces during World War II.

Under present law the maximum term is 20 years, except that it may be up to 25 years in the case of single-family, new construction, owner-occupied homes where the mortgage loan does not exceed $5,400 and the mortgagor has established a 10-percent cash equity.

S. 287 would appear to make the 32-year maturity available on mortgages in amounts up to $16,000, which is the maximum insurable under section 203; also, such maturity would be applicable to mortgages on existing construction which may have a relatively short useful life, and to income-producing properties, such as dwellings designed for two, three, or four families, where one of the units is occupied by the veteran owner.

In section 602 (b) of S. 866, a somewhat similar provision in connection with mortgages for families of lower income provides for a maximum maturity of 30 years but is limited to new construction, single-family, owner-occupied dwellings on which the mortgage does not exceed $5,000.

I believe the provisions of section 602 (b) of S. 866 are preferable to those of S. 287 and would accomplish substantially the same objective. Therefore S. 287 would not appear to be necessary.

I think the senior Senator from Florida has already fairly well covered the points that I would make and if there is no objection I will merely file this paper on that.

I have two other things that I would like to state to you, one in connection with the over-all agency.

Because of the abbreviation of my presentation I should point out that we would suggest an amendment that would remove the Secretary of the Treasury or his designee from the proposed coordinating council, simply because the Treasury does not have any direct housing activities.

The purpose of the inclusion no doubt is to provide for coordination of the housing policy with the over-all fiscal policy of the Government-a purpose that we think might be more appropriately and equally as readily done by having the Secretary of the Treasury on one of the advisory committees rather than directly within the Coordinating Council.

Because I have been brief and because much of what I have to say was included in the written presentation, I would like to make a concluding statement and I would like to read it.

In conclusion, there is one general thought which I believe that all of the various groups interested in housing should recognize.

As our housing problems have become more acute, they have become the subject of increasing attention and discussion. On the. whole, I think the resulting debate has been instructive and valuable. I do not think that any of these groups would desire to slip into a habit of controversy that impairs ability to arrive at decisions. The right of full and free debate on public issues imposes a corresponding duty to exercise self-restraint, lest debate degenerate into bickering while important public problems go unanswered.

I recognize that necessarily there are differences of opinion as to the precise methods and details which are needed to reach the objective of a decent home and a suitable living environment for every American family. I cannot believe that there is any disagreement as to that objective. We cannot afford the kind of compromise which sacrifices principles or objectives. But there must be a reconciliation of differing opinions in order to arrive at decisions which will permit us to move forward.

Of course, the bill is not perfect, and I seriously doubt that anything short of operating experience can make it or any other major legislation approach perfection. In my belief, the bill is consistent with the general philosophy of housing which I expressed to you today.

In the light of that belief, I think it would be a wholesome thing to enact substantially such legislation as this which takes the important step of treating housing as the single broad problem which it is, rather than as a recurring item in a wide variety of matters that otherwise appear to be unrelated. I believe it would make it possible for this Nation to start forward now with the kind of a housing program which has long been needed and which all citizens may view with justified hope.

I thank you very much, Senators, and I should add that in view of the shortness of the time I have not been able to get the usual clearances on this testimony.

Senator ROBERTSON. Senator, I would like to ask a question. I would like to ask this question: In arriving at the matching formula of $2 of Federal money for $1 of local money, was it assumed that the Federal Government was twice as able as the localities to finance these desirable projects in better and low-cost housing?

Mr. FOLEY. Generally speaking and on the average, I would say yes, Senator. I will supply a statement on that.

(The statement follows:)

STATEMENT ON THE 2-TO-1 MATCHING FORMULA

The 2-to-1 matching formula of S. 866 embodies the recommendation of the Taft Postwar Subcommittee on Housing and Urban Redevelopment in its report of August 1, 1945. In working out a formula of this nature, there is always a certain amount of arbitrary best judgment involved, no matter what figures are finally arrived at.

The Taft subcommittee formula is probably the most workable and fairest formula, taking into consideration the national interest in a decent living environment for our American families, the inability of most States and localities to find in their tax systems the revenues necessary to undertake by themselves programs of this nature, and the expert opinion of those most familiar with local fiscal conditions and resources as to what realistically can be required from our communities if the program is to work.

I this connection, two special factors are to be noted: First, the provisions with respect to the amount of Federal contribution is a maximum, but with respect to the local contribution, a minimum. It therefore has the necessary flexibility to take care of those communities or projects where a larger local contribution is appropriate, without at the same time making it impossible for those communities who are worse off to receive Federal help. Secondly, not all the necessary local expenditures made in connection with a project, particularly in the nature of public works, may obtain credit for the purpose of the 2-to-1 matching requirement. These additional local expenditures may frequently have to be of a substantial nature, and when added to the types of local expenditures that can receive credit for the 2-to-1 matching requirement, may, therefore, mean a substantially different ratio of sharing of total public costs than is indicated by the statutory formula taken by itself.

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