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of the Farmers Home Administration a list of towns, arranged by counties, in which the particular lender is seeking loans. All such lists would be tabulated and the appropriate information sent by the State director to the various area directors within the State. If no local sources of private credit are available, each applicant applying for a loan in a small town would be referred to at least two of the statewide or area lenders who had indicated an interest in making loans in this particular town. If neither of the two lenders can handle the loan, this would indicate that private capital is not available for that particular applicant and the Farmers Home Administration could proceed to process the case.

We wish to make it clear that this plan does not encompass the strictly farmtype loan on properties in strictly rural territory. Nor are we saying that every nonfarmer applicant on properties within towns and suburban areas can be accommodated by private lenders. What we are saying is that a large percentage of this latter type loan can be made by private lenders if only a simple mechanism is established to place these lenders in touch with the applicants.

It seems to us that here is an excellent opportunity for private enterprise and Government to cooperate to make the most effective use of funds available to the Farmers Home Administration to carry on its basic function; namely, the supplying of loan funds to those in rural areas who cannot obtain private credit. We would welcome the opportunity to participate in the development of such a plan.

Sincerely,

EHNEY A. CAMP, Jr.,

Chairman, Housing and Mortgage Lending Subcommittee.

Mr. CAMP. You know, the FHA itself-the Federal Housing Administration I am talking about-has always been held up as an extreme, wonderful example of cooperation between Government and private business, and I think we can do this same thing in the Farmers Home Administration.

There are two separate, distinct areas there, one that private lenders just cannot get into, another that they can.

Now, if we can work together and let us put in as much as we can, then that saves the money for the needy cases.

Senator SPARKMAN. Well, what you are suggesting is practically an application of the "Voluntary Home Mortgage Plan" to the rural program.

Mr. CAMP. Yes, Senator; but probably on a little less formal basis. What we are saying is, as you know, the act under which the Farmers Home Administration makes loans particularly-and I am talking mainly now of loans in the smaller towns-provides that they must make them only if private credit is not available. And the Farmers Home Administration wants to operate under that. I think what we have is a lack of communications between the local committee there in the little town or in that area and the lenders. They have no way of knowing, for example, that these statewide lenders are out there beating the bushes trying to make loans in those towns.

So there is nothing deliberate about this. It has just been lack of communication.

Senator SPARKMAN. It seems to me to be a very good suggestion.
Mr. CAMP. Thank you, sir.

Senator SPARKMAN. Senator Javits.

Senator JAVITS. Well, I had no statement here, Mr. Chairman, but when the witness is through I would like permission to spread about a 30-second statement on the record introducing another witness so I can go to another committee.

Senator CLARK. Mr. Chairman, I now have a question which I would like to ask Mr. Camp.

Senator SPARKMAN. All right.

Senator CLARK. Mr. Camp, would you refer to page 4 and over to the top of page 5 of your statement, where you are discussing the title I, section 102, rehabilitation assistance to elderly homeowners in urban renewal areas.

You referred to the privilege given under that proposed section to elderly owner-occupants of one- and two-family homes in urban rerenewal areas to obtain FHA-insured home improvement loans up to $10,000 at a subsidized interest rate of 3% percent per annum with provision for deferment of principal repayment until death.

Then, skipping down, you say at the start of the next paragraph: Although the desire to help needy elderly persons is a worthy one, we question whether the use of FHA insurance is the proper approach.

And then at the top of page 5 you say:

If Congress should decide that this is a desirable program, why is it necessary to introduce FHA insurance at all?

Iwould like to answer that question and then get your comment. It is necessary to go to FHA insurance because the practical and pragmatic limitations on the direct Government loan program are so great that in the opinion of those of us who are sponsoring 102 there is no possibility of getting a sufficiently large direct loan program going to meet any really substantial part of the need.

This is in part due to the ancient and almost cave-dwelling system under which the Federal Government keeps its budget, whereas if this program is authorized under FHA, miraculously a number of those objections disappear among what I might call the illiterate economic views of so many individuals in this country, some of whom are in the Congress.

And, therefore, it was our thought to give the opportunity for FHA loans to these unfortunate individuals that need them at a subsidized interest rate, hoping that we could get a substantial number of them the kind of mortgage assistance which will enable them to improve their lot in life.

Now, I would quite agree with you that if such a program were to seriously threaten the financial integrity of the FHA we should stop, look, and listen very carefully before we do it.

My question to you is: Why do you think that this would really be a serious threat to the high financial standing of FHA in the insurance world, in the mortgage world, and elsewhere?

Is it not at least equally possible that wise administration curtailed by legislative restriction could make this program do an enormous amount of good for people who badly need it without threatening the financial integrity of the FHA?

Mr. CAMP. Senator, I am delighted to get your thinking on this whole subject, because it is a very interesting question.

I think all of us know and are aware of your interest in this whole problem, and I think you can see from our statement that we are not questioning what you are attempting to do and what you want to do by providing good homes.

I think there is very little difference in our fundamental thinking. I think it all goes back to the fact that as private lenders we think when FHA was first created, its basic concept, as we mentioned in the first of our report which you probably did not hear, was an area of cooperation to try to bring out private money.

Senator CLARK. You are absolutely right.

Mr. CAMP. I guest we just still think of it as that kind of agency. Now, you said would it hurt the FHA? One thing we must always keep in mind is those kind of programs which are not self-supporting. We like to keep the insurance fund separate. If you recall part of our testimony here, we want the one we deal in to be kept separate from this kind.

Senator CLARK. I used to be of counsel for the Penn Mutual Life Insurance Co., so I understand your point of view very fully.

Mr. CAMP. Now, another thing, that I guess is just a minor difference of opinion you might say, does revolve around the fact that if these loans are made at substandard rates of interest there is no doubt but that FNMA will have to buy them, and I assume the Treasury will have to put up the money.

So in our thinking we would just think it is still the same thing. But if you have got a point that there is some practical limitation as to how much can be done directly, it is a very valid point from your standpoint.

Senator CLARK. I would suggest that you people in the insurance business keep your eagle eyes well peeled to see whether this prorgam, if we authorize it, and I hope we will, shows any signs of getting out of hand, and I hope it will not, and then come down and holler pretty loud.

But I would like to see the effort made, because I do not know of any other practical way in which we can help these unfortunate people. Mr. CAMP. Senator, there is one other point I think might disturb us just a little bit. If there are too many programs put in under FHA which get away from its basic concept, we find it takes a lot of our time and effort, and there have been times, as Senator Sparkman knows, down in Alabama where the FHA got pretty far behind in its regular program of loans.

So those are the kind of things that would influence it. We are not taking any strong position on this. We are just making some general statements about it.

Senator CLARK. Well, I agree with you that is a danger. We have to watch it. I think it is an administrative danger. And those who are benefiting from the FHA program in the private sector of our economy will unquestionably be alert to see that that does not happen. Mr. CAMP. Yes.

Senator CLARK. But from where I sit I would like to see FHA take a lot less interest in financing private dwellings of $50,000, $60,000, and $70,000 in cost and pay a little more attention to taking care of the needs of these unfortunate people who are unable to get any assistance from the private mortgage market.

I do not see why somebody who wants to buy a $50,000, $60,000, or $70,000 house and I know there are limits on the FHA, but it is now proposed to raise them

Mr. CAMP. To raise that. That is right.

Senator CLARK. Why should they not make a big downpayment and get a conventional mortgage? I do not like to see these people going out on a limb for that kind of a luxury house and have the Government help them get it.

Mr. CAMP. I wonder if I may ask, Senator, if Mr. Jewett would have any comment on the whole subject. Would you permit

Senator SPARKMAN. Yes, indeed.

Mr. JEWETT. It has never been in my mind that the raising of the limit on the FHA would ever get into that classification, Senator. We will take that type of loan conventionally at any time if the credit is good. And if the credit is not good, the house should not be built in the first place.

Senator CLARK. If the real estate operators and mortgage bankers have their way, there would be no ceiling on a mortgage the FHA could insure.

Mr. JEWETT. I think we would definitely endorse a ceiling not too much in excess of the present ceiling.

Senator CLARK. You can always rely on the life insurance companies to come out with a sound position.

Mr. CAMP. Thank you, Senator.

Senator CLARK. Thank you.

Senator SPARKMAN. All right. Thank you very much, gentlemen. We appreciate your testimony. It has been most helpful. Mr. CAMP. Thank you as always.

Senator SPARKMAN. I recognize Senator Javits.

Senator JAVITS. Mr. Chairman, I am very grateful to the Chair for recognizing me out of turn.

I just wanted to spread this on the record in advance of the testimony, whenever he is called, of Roger Starr, executive director of the Citizens' Housing and Planning Council of New York. First, my introduction to the committee. Second, the importance of this organization in New York. It is a distinguished body.

Mr. Starr himself is a young New York businessman who took this on as a labor of public dedication. He happens to be also a personal friend of mine whom I have known for years.

The board of the Citizens' Housing and Planning Council is distinguished by a tremendous diversity of real estate developers, lawyers, public-spirited, civic-minded citizens of the most distinguished character. It has a very deep insight into the reconciliation between private enterprise and the public sector and a very profound understanding of the psychology as well as the problems and dynamics of the economic operation of the city of New York and of the State in housing and of the people of the city of New York in private housing enterprise.

So I commend Mr. Starr's testimony to the committee and thank the Chair for allowing me to make this statement.

Senator SPARKMAN. Thank you very much, Senator Javits. Our next witnesses are Mr. Edward Eichler and Mr. Victor Palmieri. Mr. Eichler is chairman and Mr. Palmieri a member of Governor Brown's Advisory Commission on Housing Problems.

Before doing that I recognize the distinguished visitor that we have this morning in the person of Congressman Edwards, of California, who will make a presentation of the witnesses.

STATEMENT OF DON EDWARDS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA

Mr. EDWARDS. Mr. Chairman and members of the subcommittee, it is a great pleasure for me to be here today to introduce to you one of

California's most distinguished citizens and a close personal friend, Edward P. Eichler.

Mr. Eichler is president of Eichler Homes, Inc., the largest builder in California of homes in the $20,000 to $30,000 class. He is presently on leave from Eichler Homes to direct the study of new community development at the University of California at Berkeley.

From 1961 to 1963 Mr. Eichler was chairman of the Governor's Advisory Commission on Housing Problems and is a member of the California Coordinating Council on Urban Policy.

The report to the Governor and the California Legislature of the Advisory Commission on Housing Problems was published in January 1963 and has been recognized throughout the United States as the most exhaustive analysis of housing that has ever been done by a State. It is a great pleasure to introduce to you Mr. Edward Eichler and to commend his testimony.

Senator SPARKMAN. Thank you very much, Congressman Edwards. We are delighted to have you with us.

Mr. Eichler, I called off Mr. Palmieri's name also; is he not here?

STATEMENT OF EDWARD P. EICHLER, CHAIRMAN, GOV. EDMUND G. BROWN'S ADVISORY COMMISSION ON HOUSING PROBLEMS

Mr. EICHLER. Mr. Palmieri unfortunately at the last moment was detained and could not come to Washington, so I will testify on his behalf as well as my own.

Senator SPARKMAN. We welcome you, sir.

Mr. EICHLER. Let me apologize first, Mr. Chairman, I have a bad cold. I will try to do my best.

I am presently on leave from my position as president of Eichler Homes, one of the largest homebuilders in the Nation, in order to direct an analysis of new community development at the University of California under a grant from the Ford Foundation. I am a member of the recently created California Coordinating Council on Urban Policy and was formerly chairman of the Governor's Advisory Commission on Housing Problems in California. This latter commission spent over 1 year making an exhaustive analysis of housing in California and in January 1963 issued its report to the Governor and the legislature.

I am deeply grateful for the opportunity to present my views to this committee, but I wish to make it clear that although I shall draw on experiences cited by Congressman Edwards as well as the findings and recommendations of the commission which I chaired, I speak only for myself and not for the State or for the university.

Generally, I support the President's message and related bills which he has submitted to Congress. The housing industry in this country, and particularly in California, has made significant progress in attacking the housing shortage created by a low level of production during the 1930's and the Second World War and aggravated by the increase in population and migration. But much remains to be done. First, I shall address myself to those particular provisions which I think are most important and then the changes in Federal programs which have not been presented but could be of significant benefit.

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