Senator BRICKER. Do you confer with the local appraiser boards? Mr. HOLLYDAY. Quite a few of the men on our staff belong to the various appraiser societies and are quite highly regarded and fit into the local appraising fraternity. There is an interchange between those who work for us and those who do the appraising for the Veterans' Administration and those who do the appraising for the banks. The appraisal system throughout the country, Senator, I think, is in pretty high order. They endeavor to maintain a professional status to it.

Senator BRICKER. I wonder if you did confer with the local appraiser boards whose appraisals I think are generally taken as pretty authentic. They are used in court, of course, and condemnation proceedings and the like and they have a pretty clear-cut understanding of local values.

Mr. HOLLYDAY. There seems to be a very friendly and constructive relationship between the different specialists in practically all sections of the country.

Senator MAYBANK. In some instances you don't confer with them? I am not speaking personally. I mean it has been that way.

Mr. HOLLYDAY. My attention is called to the fact that on individual cases we do not, but

Senator MAYBANK. That is usually where the trouble is that I have heard of and it hasn't been local at all. It has been general throughout the United States. There is no use to rehash that over a period of years but local people hadn't been conferred with. I don't know that there were even local people to confer with in some of these projects FHA had in various regions of the country, because of the impact of war and defense and atomic energy, for instance.

Mr. HOLLYDAY. Well, sir; most of these people don't get what they consider

Senator MAYBANK. I am not trying to criticize. I am trying to find out. There has been some criticism, as you know.

Mr. HOLLYDAY. I think it is inherent in the business when you turn somebody down who thinks his land is worth more than you think it is

Senator MAYBANK. And some fellow gets more than he is worth, too. Mr. HOLLYDAY. We don't often hear that.

Senator MAYBANK. I have, unfortunately.

Mr. HOLLYDAY. In our rising market that can occur.

Senator MAYBANK. This is only constructive because I appreciate what you have done with the FHA. I think I have heard-most of us have about some projects in the United States, with the FHA. Not recently but over a period of time.

Mr. HOLLYDAY. In effect, I take it, you are saying these people are human.

Senator MAYBANK. Yes. I was hoping you could tighten that up if you could. You give thought to it.

Mr. HOLLYDAY. I couldn't promise, but we will consider it.

Senator MAYBANK. I always remember the confusion I had when I was chairman when the people came from far away and told me of the land values that had been assessed at a project, which at that time was an FHA project. I never followed it. It might have borne it out.

44750-54 -pt. 1-9

Mr. HOLLYDAY. I appreciate the constructive suggestion.

Section 121 of the bill amends section 217 of the National Housing Act to consolidate all FHA mortgage insurance authorizations into a single limitation. With the increasing number of separate insurance programs and separate insurance authorizations, it becomes increasingly difficult to forecast with reasonable accuracy the authorization requirements of the individual programs. Consolidation of these authorizations is therefore proposed as a means of reducing administrative workload and minimizing the necessary total amount of insurance authorization. It may be noted that the proposed language provides only sufficient authorization for operation of all FHA programs through June 30, 1955.

Senator MAYBANK. What would be the total when you get this into effect after what we have authorized less what you amortize?

Mr. THORNTON. It would be within the range of twenty to twentyone billion dollars.

Senator MAYBANK. Has that increased or decreased over June 30, last year?

Mr. THORNTON. It is difficult to answer. I would say it is less. Senator MAYBANK. If the amortization kept up with what you put out, I mean.

Mr. THORNTON. We have in the past had some of our authorization on a revolving basis and some of our authorization has been on a one-time-use basis. The combination of all of the authorizations has been in excess of $21 billion, but now if we put all of it on a revolving basis, which is the proposal that is made here, then the $21 billion would be a smaller total, but the active insurance authorization would be a little bit larger-perhaps as much as a billion and a half larger than what we have had.

Senator MAYBANK. The gross guaranty of the United States wouldn't be any more, though?

Mr. THORNTON. About the same. It would be increased some.
Senator MAYBANK. How much would it be increased?

Mr. THORNTON. About a billion and a half dollars.

Mr. HOLLYDAY. Section 125 authorizes the Commissioner to insure future advances under outstanding insured mortgages for purposes of additions or other property improvement, pursuant to so-called open-end provisions in the mortgages. In administering this authority, FHA will perform whatever appraisal, credit analysis, and property inspections may be necessary to assure the adequacy of the security to sustain the increased insurance liability.

Charges for use of the open-end provision will be computed to cover both processing cost and insurance risk, and it is contemplated that the most effective form of charge may be a single charge at time of insurance. It is to be noted that the use of open-end provisions in insured mortgages would in no way alter the responsibility of the mortgagee, in the event of foreclosure, to make available to FHA a satisfactory title in exchange for debentures. FHA will tackle the development of the open-end mortgage with determination. We recognize, however, that there will be many problems and that time and patience will be required to make it a really effective tool in the housing

program.

Section 128 extends the section 803 military housing program to June 30, 1955.

A further modification of the operation of the FHA insurance programs is provided in section 201 of S. 2938, where authority is given to the President to establish interest rates and financing charges for various FHA programs. That section permits maximum interest rates for FHA-insured mortgages to be established within a limit of 21 percent above the estimated average yield on outstanding Government bonds with maturities of 15 years or more. This is a maximum limitation which would have been adequate for all FHA operations in the past. A chart has been distributed to the members of the committee showing the relation of this limitation to the actual maximums in effect under section 203 over a period of 10 years. The same chart also indicates that a similar maximum based on a 2-percent spread above the yield on long-term Government bonds would not have been adequate for much of the period from 1945 to 1950 to have allowed the actual limits to have been in effect.

AVERAGE YIELD ON U. S. TREASURY TAXABLE BONDS WITH 15 OR MORE YEARS REMAINING MATURITY ROUNDED TO NEAREST 1/8 PERCENT,
PLUS 2 PERCENTAGE POINTS AND SAME AVERAGE BOND YIELD PLUS 2 PERCENTAGE POINTS, AND MAXIMUM INTEREST RATES
ON FHA-INSURED SECTION 203 LOANS, MONTHLY 1944 JANUARY 1954

1953

Senator MAYBANK. Mr. Chairman, might I ask a question there? How far have you gone in solidifying the military housing program or putting it under FHA? I mean, for instance, on some forts the Army engineers built homes to be rented to officers and the FHA lent money on the same basis.

Is there any unification of that program as yet?

Mr. HOLLYDAY. Mr. Cole, do you know?

Mr. COLE. Senator, you are talking about the so-called MaybankWherry Act, title VIII.

Senator MAYBANK. That is right.

Mr. COLE. We are not attempting to justify the continuation of it. We do understand there are some problems in connection with it. The military will be testifying on this legislation. They have a number of installations in which they have been processing the problem of determining how many houses they may require. So far as the agency is concerned, we do not have sufficient firm information upon which we can justify a request for continuation of the program. That information will be presented to your committee by the Defense Department.

Senator MAYBANK. I know that. We spent a long time with that bill over here, as you know. The thought I had would be on places, as you know, where the FHA had made a loan, and the houses or apartments were built at far less expense to the Government than what the Army engineers had done, because you had your local contractors and constructors on the job. One place I know, I saw a house that cost $25,000 built by the Army engineers, that cost $15,000 on FHA, within, I would say, a half a mile of each other.

Mr. COLE. Yes. I think the so-called Maybank-Wherry Act, in which the Senator was interested.

Senator MAYBANK. At the time it was a good thing to get the land away. What we were trying to do was to get the land away from the engineers so houses could be built on it. Under that plan, as you know, FHA went in and also the engineers. In most instances that I have seen, the FHA did a better job than the Army insofar as money was concerned.

Mr. COLE. What I started to say was that very thing: That we believe the Maybank-Wherry Act was a very effective tool to provide housing for military installations. There may have been, and, of course, were, as you were discussing with Commissioner Hollyday, some specific instances about which there was criticism.

Senator MAYBANK. I didn't mean to criticize exactly, but if you get the Army engineers 400 miles away to build a couple of barracks or houses, you couldn't expect them to compete with the FHA people. You couldn't do it. You are trying to consolidate it with the FHA oans wherever possible.

Mr. COLE. Yes.

Senator MAYBANK. The law is in to get the land. That was our idea, to get the land on the reservations.

Mr. COLE. Yes, sir.

Senator MAYBANK. I wish you would keep after that, Mr. Commissioner, because wherever you operate you can certainly save money where you have got local people rather than bringing the Army engineers in. In one instance I believe they were brought in 500 miles. Mr. COLE. Yes, sir.