legislation, House Joint Resolution 202, indicated that such increase was recommended to permit continuation of FHA mortgage insurance operations on a temporary basis until the Congress has an opportunity to consider an increase in sufficient amount to cover operations for the next fiscal year. H. R. 5827 would provide that increase. It would authorize FHA mortgage insurance up to the aggregate of outstanding insurance liability and commitments on June 30, 1955, plus $4 billion. The amount of unused authorization under existing legislation remaining on June 30, 1955, would be merged with the new additional authorization. As it is estimated that such unused amount will be over $600 millon, the actual increase in authorization provided by the bill would not exceed $3,400,000,000. This increase, plus the $112 billion increase granted earlier this year, would be within the amount prescribed for this purpose in the budget submitted by the President to the Congress in January. Estimates of mortgage insurance operations during the 1956 fiscal year indicate a gross use of insurance authorization totaling about $7,400,000,000. After allowance for return of authorization through expiration of commitments, scheduled repayments on insured mortgages, and prepayments of such mortgages, the net use of insurance authorization for FHA mortgage insurance programs during that fiscal year is estimated at approximately $4 billion. I strongly urge your committee to make available that amount of insurance authorization. EXTENSION OF FHA TITLE I HOME REPAIR AND MODERNIZATION Title I of the National Housing Act, authorizing the FHA repair and modernization program, would expire under existing law on June 30 of this year. The bill would extend title I for 5 years, which is similar to the most recent extension of the title from March 1, 1950, to July 1, 1955. The title I program of insurance for modernization and repair loans constitutes an integral part of the urban renewal program for neighborhood conservation and improvement which was adopted in the Housing Act of 1954. The continuation of the title I program is also important to the maintenance of a high level of general construction activity, improvement of individual properties in need of modernization or repair, and proper maintenance of the existing housing inventory of the Nation. All are vitally affected by the availability of adequate consumer credit for modernization and repair loans and the title I program has contributed significantly toward assuring that supply of credit. Availability of FHA insurance for this type of credit encourages lenders to make the loans available to borrowers in smaller communities and to eligible borrowers in larger communities who might otherwise have difficulty in arranging loans. It should be recognized that, without such insurance, credit for home repair purposes would not be as readily available as consumer credit for other consumer durable goods, such as automobiles and appliances. In other fields, the dealer frequently receives credit support from the manufacturer. In the case of home repair loans, however, manufacturers of building products are each likely to have a relatively small financial interest in the repair or improvement job done by the local firm. Naturally, the manufacturer or wholesale supplier is thus rarely interested in backing up credit for a repair or improvement job, especially when the largest cost item is labor at the site. Also consumer items can normally be made subject to a chattel mortgage and can be repossessed, while items financed under title I become part of the house and cannot be repossessed. Neither is it generally practical in the case of a repair loan to go through the expense of obtaining real property mortgage security. For these reasons home repair or improvement loans, in the absence of title I aids, would be unavailable to many borrowers, or else be available at exorbitant interest rates or fees. FHA MORTGAGE LIMITATION FOR MULTIFAMILY HOUSING I wish to call your particular attention to one clarifying amendment which would revise the present mortgage limitations in the National Housing Act with respect to multifamily projects. The act now makes a $5 million mortgage limitation generally applicable to all such projects with private sponsorship. Although the statute technically applies only to the maximum mortgage amount, it is not clear from the statute or legislative history whether the Congress intended that the limitation should be applied to the total of several mortgages where the mortgagor on each is the same. Nor is it clear how such a limitation should be applied. The congressional intent has been variously interpreted by different persons or groups as making the limitation applicable (i) to each mortgage separately in all cases, (ii) to the total of all mortgages having the same mortgagor, (iii) to the total of such mortgages if they are in the same housing market area, and (iv) to the total of the mortgages if they are on property which can actually be managed as one project. I believe it is important that the limitation in the law be definite and firm, but realistic in terms of present costs and the type of project to be undertaken. I believe the revision of this limitation as provided in the bill would accomplish that purpose. The $5 million mortgage limitation would be increased to $12,500,000 to conform to estimated increases in building construction costs since the limitation was first imposed. On the other hand, the limitation would be applied both to each individual mortgage and to the total amount of commitments outstanding at any one time under each section of the act with respect to projects in the same housing market area which involve the same mortgagor, or mortgagors under substantially the same control. In the case of mortgage insurance under section 220 of the National Housing Act for multifamily projects in urban renewal areas, the mortgage limitation would be $50 million. This is the same amount now provided in section 207 of the act, covering the regular FHA insurance for rental housing, where the mortgagor is a public body or subject to certain supervision under State or Federal law. The extension of this limitation to section 220 housing seems reasonable, as the locality is required to prepare and submit plans for the urban renewal undertakings where the project is located and the Housing Administrator must approve such plans before section 220 mortgage insurance can be made available. EXPIRATION OF MILITARY HOUSING PROGRAMS You will note that the bill does not extend the special title IX mortgage insurance for programed defense housing in critical defense housing areas. Title IX was enacted to assist the provision of housing for defense workers and military personnel required as a result of the rapid expansion of defense industries and military installations after the beginning of the Korean war. This period of rapid expansion has ended. There has been almost no new programing activity under title IX during this fiscal year, and the title is not well suited for meeting the current family housing needs of the military as presented to us by the Department of Defense. The title VIII, Wherry Act, military housing program would be extended for only those projects which are undertaken pursuant to a certification by the Secretary of Defense prior to July 1, 1955, and a commitment to insure, issued prior to July 1, 1956. This extension was requested by the Department of Defense so that existing title VIII operations could be concluded in an orderly manner. It is my understanding that the Department will furnish testimony to your committee concerning military housing. If agreeable to your committee, Mr. Mason, the Federal Housing Commissioner, will now present his statement, and then we will together be happy to answer your questions on FHA. The CHAIRMAN. You may proceed, Mr. Mason. STATEMENT OF NORMAN P. MASON, FEDERAL HOUSING Mr. MASON. I am gratified for the opportunity to appear before you today in support of H. R. 5827 as it pertains to FHA operations, In my capacity as Commissioner of the Federal Housing Administration, I shall limit my remarks to the proposed amendments to the National Housing Act which affect FHA programs. The bill would amend the National Housing Act by extending the expiration date for the insurance of property improvement loans under title I for 5 years. Other provisions include modifications for clarification of certain sections of the act, amendments to increase efficiency in operations, and the termination of mortgage insurance programs. that have fulfilled their usefulness. In the light of our experience during the past year all of these provisions are desirable aids in increasing the effectiveness of the FHA in carrying out its responsibilities as to the people of the country. I shall summarize briefly the main points of the proposals in H. R. 5827: Section 2 of the bill proposes the extension of the FHA home repair and modernization program for 5 years to July 1, 1960. This title, which authorizes the FHA to insure qualified lending institutions against 90 percent of loss on small loans made to finance the alteration, repair, and improvement of existing structures, was last extended in 1950 for a similar 5-year period. Title I property improvement loans are of material assistance in preserving the present housing inventory of the Nation, in checking 63137-55-2 the spread of blight, in improving housing standards, and in maintaining a high level of construction work on individual dwellings throughout the country. Some idea of the scope of the title I property improvement program is apparent from the fact that FHA has insured title I loans in every county and territory of the United States. Title I makes it possible for individual homeowners to arrange loans to improve their properties in areas where, without this program, it would be difficult except at extremely high cost. We have found, too, that the title I program gives an added incentive to home ownership and community pride. It should be noted that while the volume of FHA title I insurance has decreased in the last year it is still impressively large. In the 6-month period from October to the end of March, 560,000 property improvement loans were insured for about $338 million. The corrective measures taken in the Housing Act of 1954 and numerous new administrative controls have materially improved the program. Complaints and violations have been reduced to a minimum. In order to maintain an even closer vigilance of title I activities, FHA has transferred collection activities to the field and increased the number of loan servicing representatives in the field while decreasing the staff at Washington headquarters. Section 3 is a perfecting amendment that would repeal the separate limitation on insurance authorization for farm housing mortgage insurance under section 203 (i). The Housing Act of 1954 consolidated all outstanding mortgage insurance authorizations and eliminated the necessity of recordkeeping for several separate insurance limitations. However, unlike other sections, in creating section 203 (i) provision was made for a separate authorization limitation of $100 million. I urge that the separate authorization control on this program be eliminated and the insurance volume be consolidated with the other home mortgage insurance activity under section 203. This will simplify recordkeeping and thus effect savings in administration. Section 4 of the bill is an amendment that would also increase efficiency of FHA operations by reducing the amount of recordkeeping that now has to be done. Under the present law the final settlement of certificates of claim in connection with FHA acquired properties cannot be made until the housing which has been sold by the FHA has been completely paid for, which means that records may have to be kept for as long as 20 years. The proposed amendment would enable FHA to make final settlement of certificates of claim at any time after the sale or transfer of title by the FHA of the acquired property. Section 5 would increase the FHA mortgage limitation for multifamily housing projects from $5 million to $1212 million where the mortgagor is a private corporation. This revision of the limitation is, in my opinion, a realistic increase. It would have the advantage of clarifying the intent of Congress which has been interpreted in various ways by different people. Some groups have felt that it is a limitation on the total of all mortgages with the same mortgagor. Under the provision of this bill the limitation would be applied both to each individual mortgage and to the total amount of commitments outstanding at any time on projects in the same housing area involving the same mortgagor. A limitation of some sort seems desirable since it helps prevent monopoly of a housing market by one builder. The limitation on FHA mortgages financing multifamily housing in slum clearance or urban renewal areas under section 220 of the National Housing Act would be increased from $5 million to $50 million, where the mortgagor is a private corporation. This conforms with the dollar ceiling now in the law with respect to multifamily housing mortgages where the mortgagor is a public body. I recommend this increase not only because of the extensive work that may have to be done in urban renewal projects, but also because the locality is required to prepare and submit plans for the undertaking and the plans must be approved by the Administrator of HHFA before FHA mortgage insurance under section 220 can be made avail able. Section 6 of H. R. 5827 would increase the FHA general mortgage insurance authorization up to the aggregate of outstanding insurance liability and commitments on June 30, 1955, plus $4 billion. I recommend that this amount of insurance authorization be made available in order to provide for the estimated amount of housing which will be assisted by FHA mortgage insurance during fiscal year 1956. This amount is in line with the budget which has been submitted to the Congress. I anticipate that it will be just enough to handle the current volume of business. Section 7 would provide for the removal of cost certification from section 221 single-family homes. Section 221 housing is low-cost housing for families displaced by slum clearance or Government action. To the extent that construction under section 221 consists of singlefamily homes built in projects, the cost certification serves no advantageous purposes. In such construction, as under section 203, homes produced in subdivision developments by operative builders are completed in succession and are transferred upon sale to an owner-occupant mortgagor. Upon such transfer the cost to be certified would be the sale price of the property, a figure which is already reported to FHA and used as a basis for determining one of the limitations to the insurable mortgage amount. In this type of case, just as in the case of the construction of a single home for sale, the cost certification procedure serves no additional purpose. I believe the cost certification requirements should be restricted to multifamily operations under section 221 as is the case of other FHA programs. This provision in essence makes the requirements for all single-family housing uniform. Section 8 is a technical amendment to expedite final settlement of certificates of claim with respect to section 603 veterans emergency housing. This section of the proposed bill corresponds with section 4 which deals with insurance programs now in operation. Of course, no further mortgage insurance can be written under section 603. Section 9 would provide for the extension of FHA title VIII, Wherry Act, military housing in order to terminate the program in an orderly manner. Under the existing law title VIII expires June 30, 1955. This bill would extend title VIII for only those projects which are certified by the Secretary of Defense prior to June 30, |