COMMONWEALTH, INC., Portland, Oreg., April 7, 1954. Hon. E. L. BARTLETT, House of Representatives, Washington, D. C. DEAR MR. BARTLETT: During the past 2 years Commonwealth, Inc., has been perating a mortgage business in the Territory of Alaska. Since insurance ompanies and other investors in mortgage loans have been unwilling to invest i mortgages in Alaska, all our loans have been insured by the Federal Housing dministration and sold to Federal National Mortgage Association. Congress, in enacting Public Law 52, 81st Congress, as amended, known as ne Alaska Housing Act, recognized the higher costs in Alaska and made proision permitting the FHA to increase their commitments for Alaska by 50 perent and also to permit Federal National Mortgage Association to give advance >mmitments for the purchase of said loans and to make direct loans when rivate companies were not available. It also permitted FNMA to purchase ans in excess of $10,000 which is the statutory limitation in the States. We have reviewed Senate bill 2938, 83d Congress, which we understand is ow being considered by the Committee on Banking and Currency, and note that ction 305 repeals subsection (b) of section 2 of the Alaska Housing Act, as mended, which is the provision of the act that permits FNMA to make advance mmitments to purchase loans in Alaska in excess of $10,000 and also permits NMA to make direct loans in Alaska. Section 302 of this bill, which re-creates NMA, provides for FNMA to make commitments to purchase loans in the ates (and we assume also in the Territory of Alaska) but prohibits it from urchasing any mortgage if the original principal obligation thereof exceeds 2.500 for each single-family residence or dwelling. We understand the House mmittee on Banking and Currency amended the Senate bill to increase this $15,000. Due to the higher costs which are recognized in the Territory, the $12,500 (or en $15,000) limitation would be inadequate for Alaska, and since private nds are not available, housing would be almost entirely curtailed. It is recogzed that at the present there is not an acute housing shortage for the Anorage and Fairbanks areas, but without the availability of the secondary arket of FNMA, it would become almost impossible for a homeowner or prosctive homeowner to buy or sell an existing home under FHA terms. New sidents would be discouraged from settling in the Territory as there would not adequate housing on FHA terms. It will be appreciated if you can call this to the attention of the members of e House Committee on Banking and Currency with the view of having the oposed legislation further amended to permit FNMA to purchase FHA insured ins in Alaska without regard to the amount of each individual loan. Very truly yours, F. A. GRIMSDELL, Vice President. TOMKINS BROS., n. HOMER E. CAPEHART, Senate Office Building, Washington, D. C. Newark, N. J., April 14, 1954. MY DEAR SENATOR CAPEHART: I am taking the liberty of writing you to enrse most of the provisions of Public Housing $2938 which I believe is now Fore the committee. For the sake of brevity, I enclose herewith a copy of a resolution recently ssed by the New Jersey Lumbermen's Association, which explains certain visions very well indeed. agree with this resolution, with the exception of paragraphs 5 and 9. n the case of paragraph 5, I agree with the recommendation for the increase the maximum mortgage limit from $16,000 to $20,000 for 1- and 2-family ases. do not, however, agree with the final sentence in that paragraph, which ld eliminate the discretionary authority of the President and make such rease mandatory. am strongly of the opinion that discretionary authority is necessary in cases this kind, for the obvious reason that conditions change, and those charged h administration of the law should be given some flexibility in their powers meeting such changes. For similar reasons, I object to the wording of paragraph 9 in the resolution. If a businessman objects to rigid price supports for farm products, he should not ask for them in his own industry. Yours very truly, TOMKINS BROS., RESOLUTION ON THE NEW FEDERAL HOUSING BILLS Whereas there has been introduced in the Federal Congress Senate bill 2938 and House Resolution 7893 providing for the new Eisenhower Federal housing program; and Whereas we, the members of the New Jersey Lumberman's Association in convention assembled are convinced that the adoption of such a program is in the best public interest, since it will insure a high level of construction, with resulting maximum of employment throughout America, which is so vital for a sustained economy: Therefore be it Resolved, That we urge our United States Senators and Congressmen from New Jersey, that for the most beneficial effects from this new Federal housing program, they use their influence and vote to provide for the following: 1. A realistic flexible interest rate for FHA-insured and VA-guaranteed loans. This is accomplished by section 201, title II, of the bill. 2. A more adequate long-term credit for modernization and repair of homes. This is accomplished by section 101 of title I of the bill to increase the limits for title I repair and modernization loans to $3,000 and 5 years, and in section 125 of the bill which authorizes the open ending of FHA-insured mortgages for supplemental advances for repair. 3. The provision in subsection 4 of section 201 of the bill authorizing additional servicing charges for mortgages made in outlying areas to encourage investors in other areas to invest in mortgages in areas where there is a shortage of funds is a badly needed provision. 4. The establishment of a secondary mortgage facility (title III of the bill) which would buy and sell FHA-insured and VA-guaranteed mortgages from lending institutions with limited funds in certain areas experiencing a shortage of mortgage money, and which would provide a more even distribution of funds for home mortgages is very important to this industry. The provision in the bill for a new FNMA would not, however, in our opinion, do the job, because the charge made for the use of the Association's facilities would be 3 percent of the mortgages sold to the Association, which amount is nonrefundable, and which would in effect require such mortgages to be discounted 3 percent plus any other charge made by the Association. Furthermore, the bill provides that only mortgages of $12,500 or less could be bought by the secondary institution which would amount to channeling money into a certain price category of housing. We believe a facility which makes a use charge which is later refundable when the Association liquidates or resells the mortgages would permit more lending institutions, particularly in smaller communities, to use the facility so that the user charge would not be a complete loss to the original lending institution (or the builder or home purchaser). Such a proposal would be similar to that recommended by the President's Advisory Committee on Housing, instead of the proposal in the pending bill. 5. We favor an increase in the maximum mortgage limits under section 203 of the National Housing Act from $16,000 to $20,000 for 1- and 2-family houses. Section 104 of the bill does this, but gives the President discretionary authority to put such increase into effect. 6. Existing homes should be given the same treatment in FHA as new homes. The legislation would accomplish this in section 104 of the bill. 7. The various programs of FHA should be consolidated and simplified. bill accomplishes this. The 8. There should be a leveling out of the FHA downpayment schedule to give a better break to homes in the $11,000 to $15,000 price brackets. The bill does this in section 104. 9. Also the provision for a 95 percent loan (up to $8,000) and the 30-year maturity period. And be it further resolved, That a copy of this resolution be forwarded to our United States Senators and Members of Congress from New Jersey urging their active support of this housing program. Hon. HOMER E. CAPEHART, FEDERAL DEPOSIT INSURANCE CORPORATION, Chairman, Committee on Banking and Currency, United States Senate, Washington 25, D. C. DEAR SENATOR CAPEHART: Sections 501 (3) and 504 of H. R. 7839, as passed by the House of Representatives on April 2, 1954, provide for the change of the name of the Federal Savings and Loan Insurance Corporation to the Federal Savings Insurance Corporation. Reference is also made to the Federal Savings Insurance Corporation in section 503 (2) thereof. We are convinced that this proposed change is decidedly contrary to the public interest. Its effect would be to confuse the public as to the separate identities and functions of the Federal Deposit Insurance Corporation and the Federal Savings and Loan Insurance Corporation and to obscure the distinction which now exists between the savings and loan system and the banking system. Over the last 20 years many people have learned of the Federal Deposit Insurance Corporation and the nature of its deposit insurance protection. The insured banks and this Corporation have tried to educate depositors about Federal deposit insurance. Advertisements of insured banks relating to deposits must show that the bank is a member of the Federal Deposit Insurance Corporation. No such requirement is made of associations insured by the Federal Savings and Loan Insurance Corporation. Nevertheless, the Federal Deposit Insurance Corporation is continuously receiving inquiries concerning the insurance coverage afforded to share accounts in savings and loan associations and building and loan associations from investors in such associations, from savings and loan associations and even from lawyers for such associations. This indicates that many people still do not realize the difference between the Federal Deposit Insurance Corporation and the Federal Savings and Loan Insurance Corporation. With the proposed change the only difference in the names of the two Federal insurance agencies would be the word "deposit" in the name of one and the word "savings" in the name of the other. The public may reasonably regard deposits and savings as the same. Thus, the proposed change, in identifying the Federal Savings and Loan Insurance Corporation too closely with the Federal Deposit Insurance Corporation, would immeasurably aggravate the present confusion and be a disservice to insured banks and this Corporation and the public. Accordingly, we respectfully recommend against the proposed change in the name of the Federal Savings and Loan Insurance Corporation. With personal regards, I am Sincerely yours, H. E. COOK, STATEMENT OF JOHN FINKBEINER, NEW YORK, N. Y. A plan to rebuild New York City to one of the most attractive cities of the Nation. The most important element in achieving this goal is facing the facts eliminating the political expediency of catering to factional groups, which in itself is creating discrimination and dividing our people. Since the war there has been accelerated deterioration of housing and neighborhoods to such a degree that New York City is now called by many "the dirtiest city of the Nation." The breakdown of law enforcement of smoke-polluted atmosphere infiltrating homes, blackening buildings and jeopardizing the health of the people is one of he basic contributing factors in this developed condition. Garbage and ashes lying in the streets, thrown into yards and courts by tenants with undisciplined habits is another major contributing factor in the general breakdown. It is important to note that New York City since the war has been in financial lifficulty at a time of relative full employment and prosperity throughout the Dalance of the Nation. Rent restricted laws allowing a 15-percent increase above 1940 while the balance of the Nation average 46 percent and with maintenance and remodeling 44750-54-pt. 1 --72 costs 100 percent above prewar has retarded the proper upkeep and improvements, a survey of which is apparently evident to the least discrminating. The deliberate purchase of 1- and 2-family and old brownstone houses and turning them into furnished rooms, completely disregarding fire and sanitation laws of human decency about completes the picture of some of the basic conditions that must be faced. With these facts before them, a survey was made of a typical Harlem block with possibly the best transit facilities of the city. Block 200 by 600 comprising 36 5-story brick apartment houses containing 883 families, approximately 3,700 rooms and 14 stores with kitchens, toilets in each apartment, supplied with heat and hot water. Each building has a superintendent living in the basement and receives from $50 to $60 per month as salary. Most of the heating plants burn fuels creating and belching black smoke which is illegal, infiltrating the apartments and blackening the buildings. These plants are old, inefficient and inefficiently maintained. A survey made by competent heating engineers estimated that this entire block could be heated by a modern, automatic equipment, supplying heat and hot water serviced by only three competent men, with an overall savings in fuel and maintenance that would liquidate the cost within 10 years. It was estimated that this modern system would include the complete elimination of garbage and ash collection by the city and eliminate the smoke-polluted, atmospheric conditions now prevailing. These buildings have been badly neglected during the war and postwar periods with restricted rental income while maintenance and replacement costs have increased 100 percent now requiring new modern heating equipment, water supply lines and new plumbing. The assessed valuation of this typical block is $1,700,000, less than $2,000 per dwelling unit or $465 per room. The estimated mortgage indebtedness is $800,000 or less than $250 per room. The overall cost of replacing these buildings with Government housing is estimated from $14,000 to $16,000 per family requiring a subsidy of from $50 to $65 per month per family. The estimated cost of new plumbing and new rustless water supply lines, built-in bath tubs, showers, low-down toilet tanks, new sinks, tile walls, new sink and tub combinations, new gas stoves, new refrigeration and kitchen equipment is estimated at $1,200 per dwelling unit or $1,606,000 per block. Modern smokeless heating and completely new plumbing would bring the maintenance costs down to a minimum. The cost of new plumbing and equipment would approximate $1,200 per apartment or $300 per room. This could be financed under FHA 20-year improvement loans which would work out as follows: Capital investment.. Interest 4 percent on $1,060,000 annually. $1,060,000 42.400 53,000 This completely new equipment equivalent to new buildings could be liquidated by an increase of $9 per month per family making the room rental approximately $12 per room per month. New modern block heating equipment can be installed which would liquidate itself in 10 years by the overall savings over present obsolete equipment. This to be apportioned according to cubic-foot contents of building. It is estimated that there are 100 blocks in Harlem alone that would require this rehabilitation and modernization program. It has been stated that like anything new it might be difficult to get all the owners together and it was suggested that as an experiment the city purchase this typical block at assessed valuation, remodel it, and then sell it. This can be done under present laws of condemnation proceedings and to be set up as a pattern to be followed by banks, loaning institutions, and owners for the general cleanup of the largest city of the Nation to a point of attractiveness it has once enjoyed. FHA long-term credit arrangements should be applied throughout the city for improvement loans which are now restricted to 3-year payments, while in suburban areas plumbing, heating, kitchen equipment, washing machines, re frigerators, and so forth are boxed or housed in with 20 to 30 years to pay via long-term mortgage loan. For example, a framed suburban house is sold for $12,000 with an FHA mortage loan of $9,000, appraised by fire insurance for $8,000. An apartment house with 12-inch brick walls 35 years old, substantially conructed, containing 100 rooms, is appraised by fire-insurance companies at 150,000 above the foundation exclusive of the cost of the land, now requiring ew heating equipment and new rustless water-supply lines at a cost of $15,000, estricted with FHA payments of 3 years' duration or $5,000 annually, with a ent-restricted income, the owner is unable to accumulate sufficient enough reerve to carry out this urgently required improvement, with the consequent celerated housing deterioration throughout the city. Here we have a challenge and a tremendous opportunity to reconstruct and ean up the city and sustain its assets and contribute substantially to snowalling our national economy in the right direction. on. HOMER E. CAPEHART, HOUSEHOLD FINANCE CORP., Chairman, Committee on Banking and Currency, Senate Office Building, Washington, D. C. DEAR SENATOR: Section 224 of the proposed Housing Act of 1954 now pending efore the Senate Banking and Currency Committee of which you are chairman a source of serious concern to our company, and to the consumer finance indusy as a whole. Briefly, that section would extend the benefits of FHA mortgage surance to advances made under the terms of the so-called open-end mortgage. While we would be among the first to recognize the part which the FHA proam has played in providing needed housing for millions of American families, e are exceedingly anxious that the program be limited to the housing field, nd not extended so as to invade areas now adequately serviced by private enterise free of cost and responsibility to the Federal Government. In the past we have seen the open-end conventional mortgage used as a device hereby lending institutions, primarily concerned with-and indeed by law mited to-investments in loans secured by real estate, have invaded fields which e adequately and traditionally served by banks, sales finance companies, and e consumer finance organizations. The advertisement attached, taken from e Minneapolis Morning Tribune of March 22, 1954, presents a case in point. ere is a savings and loan association using the open-end mortgage for security connection with the financing of appliances and cars, and for other purposes r removed from home improvement. Without considering the important question of whether it is desirable from a cial point of view that the family homestead be put in jeopardy for such traneous purchases as automobiles, washing machines, and television sets, e feel certain that neither the Housing Administrator nor the Congress intends at Federal mortgage insurance should extend to advances made for any purse save the actual physical improvement of the real property covered by the rtgage. Section 224 leaves room for gross abuse, both in administration and on the rt of the lending institutions which would operate under its provisions. We rongly urge that the section be eliminated from the act; or at the very least so stricted in language that it cannot inure to the benefit of any lending instituon making advances for any purpose other than actual and needed substantial provement to the realty covered by the mortgage itself. We hope that you join in supporting the necessary change. Sincerely yours, ASA B. GROVES, Jr., Regional Director of Public Relations. [Minneapolis Morning Tribune, March 22, 1954] HERE'S WHAT AN OPEN-END MORTGAGE WILL DO FOR YOU A Twin City Federal open-end mortgage will help you to finance a home. ter it will help you to borrow money for some other worthwhile purpose. t works this way- 1. Through the open-end feature of your mortgage you can borrow more money from time to time as the principal is reduced. 2. There is no refinancing of your mortgage so you can borrow even large sums quickly and without red tape. |