who may desire family accommodations, we will still end the year with 1,700,000 doubled families in nonfarm areas if these estimates are correct.

The surveys made by the Bureau of the Census for the National Housing Agency last summer and fall all showed that substantial numbers of veterans in each community are still living under conditions which they considered to be intolerable. Most of these veterans are either doubled up with other families or are living in hotels or rented rooms. In many cities a third or more of married veterans were living in rented rooms or had doubled up. Some of them were willing to live under such conditions until they could find what they wanted at a price they felt they could afford, but others were urgently in need of more space and better accommodations.

As long as such a condition exists there is an emergency need for housing. I do believe that this condition will be further alleviated during 1947 by reducing the numbers of families living under such conditions. However, the needs of the remaining families will still be just as acute, although the number of such families will be smaller at the end of the year.

Question 12: How fast do you feel that the present doubling up of families can be relieved in the coming year if the present Taft bill is passed?

It is very difficult to estimate the extent to which the present doubling up of families can be relieved in the coming year. I have already indicated that the effect of passage of the proposed Taft-Ellender-Wagner bill can hardly be significant in terms of accommodations completed during 1947. Consequently, passage of the bill would have little effect on relieving doubled-up families during this year. However, its effect in 1948 should be substantial, and as I have pointed out a large unsatisfied demand for rental housing and for sales housing in the lower price brackets will continue to exist until that time.

Sincerely yours,

RAYMOND M. FOLEY, Administrator.

We will recess now to reconvene at 2 o'clock this afternoon, when the witnesses will be Mr. Fahey, Mr. Myer, and Mr. Brannan. (Whereupon, at 12:30, a recess was taken to 2 p. m.)

AFTERNOON SESSION

The committee reconvened at 2 p. m., upon the expiration of the

recess.

Senator Buck (presiding). The committee will come to order.

We are fortunate to have with us this afternoon Mr. Fahey, Commissioner of the Federal Home Loan Bank Administration, as the first witness.

Mr. Fahey, we will be glad to hear from you at this time.

STATEMENT OF JOHN H. FAHEY, COMMISSIONER, FEDERAL HOME LOAN BANK ADMINISTRATION, WASHINGTON, D. C., AND HAROLD LEE, GOVERNOR, FEDERAL HOME LOAN BANK SYSTEM Mr. FAHEY. Mr. Chairman and members of the committee, I am pleased to be here with you this afternoon. The clerk has, I believe, handed copies of my statement to the members of the committee. Senator BUCK. Yes; we have copies of your statement.

Mr. FAHEY. In the first place, of course, many of the provisions of this bill were contained in S. 1592 passed by the Senate in the last Congress. I had an opportunity to appear before your committee on that bill and stated reasons why I thought that many of its provisions should be adopted, so it is wholly unnecessary for me to refer to those. Section 501 of the present bill would amend section 5 (c) of the Home Owners' Loan Act of 1933, as amended, which deals with the powers and functions of Federal savings and loan associations. In

addition to the provision authorizing such associations to invest their funds in or upon GI and FHA insured or guaranteed loans, which is similar to provisions contained in S. 1592, Seventy-ninth Congress, it would authorize these associations to invest in obligations of the Federal Savings and Loan Insurance Corporation. This provision would aid the operations of the Federal Savings and Loan Insurance Corporation and its enactment would be desirable in the public interest.

In connection with these provisions of the bill as to the statutory authority under which Federal savings and loan associations operate, I would suggest that section 501 of the bill be amended by the addition of a further provision to authorize such associatons to make loans for property alteration, repair, or improvement, or for home equipment up to a limit of $2,500 without the necessity for taking a lien or obtaining Federal insurance or guaranty. This could be accomplished by the following amendment to the bill:

Page 19, line 2, after the period and before the quotation mark, insert the following:

"Without regard to any other provision of this subsection, any such association, upon the approval of the Board or the Federal Home Loan Bank Administration by regulations or otherwise, may lend or invest its funds in or upon loans for property alteration, repair, or improvement, or for home equipment: Provided, That no such loan shall be made hereunder in excess of $2,500 except in conformity to the other provisions of this subsection."

As I am sure you gentlemen realize, one of the most promising sources of additional housing accommodations is the modernization and repair of existing houses, and the alteration of properties to provide needed additional space for growing families, or for a greater number of families.

There are millions of well-built excellent small homes in this country, and it has been the usual plan of families who own such homes, when the opportunity was afforded, to add another bedroom or two or a bathroom, and that provides for families increasing in numbers, and also in the case of multiple housing additions also afford an opportunity for providing accommodations for more families. There are very valuable opportunities at present in making loans available freely for home expansion, improvement, and repair.

Now, when it comes to the smaller loans in the case of the Federal associations, chartered by the United States Government, many of the competing lending institutions such as State-chartered banks and trust companies and the commercial banks of all types, mutual savings banks, and State-chartered savings and loan associations have had latitude to make such loans without going through the process of making a new mortgage to cover them.

Similar authority was omitted from the legislation providing for the organization of these Federal associations, and it should be corrected. To make new mortgages in order to make loans of this character is a time-consuming process. Oftentimes they have to search title again and aside from the element of delay there are too many an

novances.

The operation ought to be simplified when it comes to the smaller loans those up to $500 or $600 for a roof and things of that sort. Borrowers object to a lot of red tape and it is a very real handicap.

Senator MCCARTHY. Is it your suggestion that loans should be made without taking a mortgage on the premises?

Mr. FAHEY. Where there is an existing lien or existing mortgage outstanding, and it is a matter of improving the property or so forth, it should not be necessary to go through the process.

Senator MCCARTHY. In other words, if I have a home and there is a $3,000 or $4,000 mortgage on it, I then want to borrow another $1,000, your thought is not to give a second mortgage, as is customary, but that I get the money without giving any security at all?

Mr. FAHEY. You would have to give a note for it.

Senator MCCARTHY. Why would you object to my giving a second mortgage?

Mr. FAHEY. The second mortgages are hardly necessary where the lending institution knows you, is familiar with your credit standing. They know you are a perfectly good risk and there is no reason for checking title and all the rest of it in order to make a loan for that

purpose.

Senator MCCARTHY. If my credit is perfectly good, then I can go to a bank and borrow the money. It is only when my credit is questionable that I have to go to a Federal agency to borrow. Is that right?

Mr. FAHEY. NO. Other types of lending institutions aside from banks loan this money. The commercial banks generally have not been in this type of business at all until recent years. Now they are going much further than ever before in seeking personal loans and loans of this class.

Senator MCCARTHY. Why do you object to giving a Government agency security? It is a very simple matter to make out a second mortgage, is it not? I do not follow you on that at all. I do not know what would be gained by loaning money without giving the Federal agency some security.

Mr. FAHEY. I would like to refer that to Colonel Lee, governor of the Federal Home Loan Bank System, as far as the legal aspects of the question are concerned.

Mr. LEE. It is the delay incurred and the title expense in a small loan. People come in and want to put on a porch or add a bathroom, or make some reconditioning or repairs to the roof. They have to wait from 4 to 6 or 7 or 8 weeks to get a title search.

Senator MCCARTHY. Why?

Mr. LEE. Because it takes that long to get an abstract or title search. At the present time it takes about 6 weeks.

Senator MCCARTHY. I have been in the practice of law and on the bench, and I know of no reason why it should take 6 weeks to have a title search. Ordinarily it takes a half hour. You drop down to the register of deeds office, check the title from the date of the last entry, and if it takes you longer than a half hour I would say you were very incompetent or inefficient as a lawyer.

Mr. LEE. That is true in small places, but that is not the case in the District of Columbia, New York, or other large cities where you have to get an abstract and bring it down to date, and where lenders do not accept a certificate of an attorney unless it is based on that. That is the practice.

I know that it does vary in some States like North and South Carolina, for example, in some States like that where the attorneys search the record, but that is the exception and not the general rule. Furthermore, the savings-and-loan people are more experienced in

determining costs. If a prospective borrower comes in he is told that he has to wait for title search, and he has to bear that expense. He could go across the street or some place else and get it without that delay or expense. They lose that business.

Senator MCCARTHY. I am not sure that I follow you on the latter part of your statement.

Mr. LEE. Because of these delays and expenses they lose much of this business.

Senator MCCARTHY. You mean the loaning business?

Mr. LEE. That type of business; yes, sir.

Senator MCCARTHY. Who will lose if they go somewhere else? As long as they can borrow money? I do not follow you.

Mr. LEE. The lending institution, the savings-and-loan institution, would be eliminated from that type of business, because they would not be able to meet that kind of competition.

Mr. FAHEY. While other classes of institutions can make them. Senator BUCK. The idea, as I understand the premise of your thought, is to get this business for the Government agency?

Mr. FAHEY. This should not be the one class of institution that is debarred from doing this business. All home mortgage lending institutions should be able to do it. They are organized for the very purpose of serving home owners.

I would like to add to that

Senator MCCARTHY. Let me interrupt there. I am not sure that I follow you. You mean that you are suggesting this so that the Government agency will be able to get this particular type of business, that unless this is done someone else will do the lending?

Mr. LEE. These are not Government loans. Federal savings and loan associations have private funds but are suprvised by a Government agency.

Now, some types of institutions can make these loans without the necessity for delay. If these savings and loan associations are not authorized to do it, they are not permitted to compete upon an equal basiş.

May I say that the Seventy-ninth Congress passed a law, Public Law 372, by which it authorized any Federal Savings and Loan Association whose main office is in the District of Columbia to make such loans under those conditions, up to $2,000. Many State associations can make such loans under such conditions. But Federal associations whose main offices are outside the District of Columbia cannot. Senator MCCARTHY. I have no further questions. Senator BUCK. Proceed, please.

Mr. FAHEY. Section 502 would amend section 5 (i) of the Home Owners' Loan Act of 1933, as amended, so as to provide that Federal savings and loan associations may convert to State-chartered institutions, subject to approval of the Federal Home Loan Bank Administration and the Federal Savings and Loan Insurance Corporation. It would also provide that, if the Federal Savings and Loan Insurance Corporation elects to terminate insurance in connection with any such conversion, termination shall be concurrent with such conversion.

The situation is that under the existing law, while it is provided that State-chartered institutions may convert to Federal savings and loan associations, there is no provision that would permit Federal associations to convert into State-chartered institutions. This

amendment, this proposed amendment of the act, is intended to equalize that situation. At the same time, it would permit the adoption of regulations to appropriately safeguard such conversions for the protection of investors and the Federal Savings and Loan Insurance Corporation.

Of course it is important in providing for such voncersions, that the Federal Home Loan Bank Administration, as an agency of the Government, be in a position to see that it is done on a fair and equitable basis, wherever that kind of an issue arises, because the responsibility of the Government in connection with this matter is a very large one. In the first place through the Treasury and through the Home Owners' Loan Corporation, the Government provided over $200,000,000 of capital to Federal associations to make possible their establishment and development.

In addition to that it provided the capital for the Federal Savings and Insurance Corporation, to the extent of $100,000,000 through the Home Owners' Loan Corporation.

It also has one hundred and twenty million-odd-dollars of investments in the capital stock of the Federal home-loan banks, through the Reconstruction Finance Corporation.

Under the insurance provision, as an agency of the Government, the Federal Savings and Loan Insurance Corporation guarantees protection to the shareholders' investment, and in fact if a Federal savings and loan association fails to properly regard his interests and goes into default, the Insurance Corporation is obliged to make good on each investor's savings up to $5,000.

The Government, having thus provided for the establishment and encouragement of Federal savings and loan associations and for the safety of investments therein, is vitally interested in seeing that any conversions of such associations into State-chartered institutions are upon conditions that will assure complete protection to the savers, to the Government, and to the Insurance Corporation.

The present bill, S. 866, would afford the means for such protection by providing that such conversions shall be upon an equitable basis and shall be subject to approval by the Federal Home Loan Bank Administration and the Insurance Corporation.

When the national banks were created it was provided that Statechartered institutions could secure national charters but there is no corresponding provision for conversion in the case of national banks. Senator BUCK. Have any of these associations, Federal associations, loan associations, wanted to change to a State charter, that you know of?

Mr. FAHEY. We have had very few applications. The question has been raised, and we do not care whether they are State chartered or Federal. I am speaking now from the standpoint of the Federal Home Loan Bank Administration, if they properly protect the interests of the savers, and if there are ample safeguards.

Some of the State laws are inadequate. We would not be disposed to approve conversion without exercising proper care.

Section 503 of the bill deals with the lending and investing powers of the Federal home-loan banks. Similar provisions were contained in S. 1592.

I would like to suggest to the committee the advisability of including an amendment to authorize the Secretary of the Treasury, in his