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In closing, Mr. Chairman, I would like to add that I am sure Mr. Higley will be glad to supply for the information of this committee any supplemental data which it may require pertinent to this testimony or to the GI loan program.

Mr. Chairman, in coming over this afternoon, Mr. Hopkins gave me a little set of figures that came to his attention this noon which illustrates rather well the point I made this morning. He happened to be talking to one of our men just in from the field.

Last year, the average monthly totals of new appraisals for committee assignment, in Michigan, was 26 per month. That may have involved hundreds or thousands of units, but it was just 26 project cases a month. In January of this year, that stepped up to 45. In February, to 85.

So, as you can see where you get influxes of that kind, and you are staffed on a level volume basis, it is pretty hard to figure out any way to avoid delays in the processing.

Senator BENNETT. We broke off this morning in order to give the other two witnesses a chance to testify, and I think in fairness to the VA, we should put into the record the paragraph on page 67—the paragraph at the bottom of page 67 which begins with these words:

The survey showed, too, that the faults were not all on the VA side. In some areas, the VA has been preferred over the FHA, even in the presence of added cost factors

et cetera, et cetera.

So I didn't have any impression that it was a black and white situation, and that the VA was all black, even if I might have conveyed that in my questioning.

But I felt that since these seven rather definite statements were contained in the report, that you would like to make some kind of a record in answer to them.

Mr. KING. I appreciate your purpose and I appreciate your consideration in regard to that, Mr. Chairman.

Senator BENNETT. Did you finish your statement?

Mr. KING. I did, sir.

Senator BENNETT. Did you have any questions, Senator?

Senator SPARKMAN. Mr. Chairman, I would like to go back a little bit and ask Mr. King to clarify this matter, if he can, for me.

With reference to the preference for veterans, back on about page 4 or 5 of your statement, you brought out the fact-you referred to the "diluting of the preference," and said that because of the liberalizing of the terms, that there would be a tendency to take away from the veterans the preference that they now enjoy. I am not sure I follow you on that.

Mr. KING. Well, sir, as you know, since the enactment of the Servicemen's Readjustment Act, the veteran has had a better opportunity that his civilian counterpart to sign on the dotted line for the purchase of new or existing housing, for the reason that the Congress had given him a credit support which supplied what he might lack in the way of the normal amount of money which customarily in this country a prospective home buyer had to put down on the line.

Senator SPARKMAN. Yes; I recognize the preference that exists, now. How is that taken away?

Mr. KING. The fact that he had that special credit aid more or less required builders to build for the veterans' market, and it required lenders to open up their investment policy to GI loans. That was the practical impact of the GI loan guaranty, and it was recognized, as you know, by all, that that was the significance of those legislative aids which the Congress had generously provided to veterans of World War II, and which it extended to Korean veterans in 1952.

Now, it is possible, here, and it seems to be directly contemplated, here, that the same factors made so liberal for the returning veteran, by the Congress, a few years ago, now should be extended to all civilians, which would put all on an equal footing, and have the practical consequence of making it unnecessary for builders to cater to the veteran buyer or for lenders to open up their investment portfolio to the GI loan, a loan most favorable from the borrower's standpoint. So, we call attention to the practical consequences or impact that is inherent in these proposals. If it is the will of the Congress that the need for this preference has passed, or that other considerations must be paramount, I presume that should be the decision of the Congress. However, we in the VA felt that it was necessary that we, as the agency charged with observing these changes, these things, should bring this point to the attention of the committee at this time.

Senator BENNETT. You have no specific recommendation for us? Mr. KING. Well, sir, I can figure out one. That is correct; I do not have a specific recommendation. I should have anticipated the question.

Incident to the imposition of the controls, for defense purposes, back in 1950 and 1951, this issue was brought out on the table very plainly; and consequently it was brought before the Congress very plainly. The Congress resolved it on at least two occasions by supplying to the bill then offered to it for consideration a veterans' preference clause.

I can get for the record, at this point, if you wish, Mr. Chairman, the exact language of those clauses.

Senator BENNETT. We can get that, can't we?

Mr. MCMURRAY. Yes, sir. That was in 1952, wasn't it?

Mr. KING. It was in the fall of 1950, I believe, under the Defense Production Act.

Mr. BROWNSTEIN. Section 605.

Mr. KING. And again in 1952 it came up incident to a revision of that law.

Now, I do not want to indicate that I think that the extraction and adoption of that particular clause would suffice here, because administrative abrasiveness-developed in an endeavor of the agencies to apply that clause, as it read then.

For example, it was not clear as to what margin of preference, within a proper interpretation of the intent of the Congress, would suffice. It was disputed, for example, whether it was proper or needful, or required of the agencies, under the law as it read, to give the veteran any preference with regard to ratio of loan to value, or as to maturity. In fact, at one point, I believe, the relatively greater impact of the Defense Production Act was imposed on the veteran. So, in view of that history, I think it only sensible to write something in here which would resolve those things, so there wouldn't be

any possibility of quibbling or quarreling or misunderstanding in the future.

Senator BENNETT. Do you feel, for instance, that we should write into the bill a double set of ratios of loan to value, or a double set of maturities, with the more desirable one labeled "available to veterans only"?

Mr. KING. That would be one way of doing it, Mr. Chairman. However, I doubt very much whether it is necessary to be that particular, or to be that specific.

Senator BENNETT. Well, the committee is going to be on this bill for a long time. I think we would welcome any specific suggestions you could give us as to how you feel this problem could be resolved.

Mr. KING. Of course, the key to this lies in what the President may do under it. And we do not presume that he will, as a matter of choice, or preference, dilute this preference to veterans. But we think his hand will be strengthened if the bill supplies an indication that it is the purpose of the Congress that this historical policy of giving veterans preference should be observed in whatever discretionary action he takes under the provisions of the bill.

Senator SPARKMAN. And to such extent as may be necessary to produce an orderly amount of housing, to meet the needs of the

veteran.

Mr. KING. I presume so; yes, sir.

Senator SPARKMAN. That is a very definite field of demand, isn't it, a continuing demand of veterans?

Mr. KING. The demand of veterans for housing, Senator Sparkman, seems to be continuing.

Now, a lot of veterans were pretty young when they spent those 3 or 4 years in the service, back in the early forties. They are getting to family age, and they are getting up to income age. The same will be increasingly true of Korean veterans.

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I have some figures here somewhere, I hope, which show rather startingly how World War II veterans have surpassed their civilian counterparts, in the same age groups, in their average earned income. So, they are getting to a point where they are becoming, under concepts of credit worth that we formerly accepted to be more legitimate buyers, if you will.

Senator BENNETT. Less in need of preference.

Mr. KING. The credit factor I am speaking of is not concerned or impinged or affected by these provisions I have been discussing. You could acept the theory that they are less in need of preference, Mr. Chairman, only if you would find that by and large, as a group, they had amassed enough in the way of cash balances so that they could make very liberal downpayments.

Senator BENNETT. Well, if the difference in the downpayments were a matter of $100 or $200 on a $10,000 house, the thing becomes hardly academic. I am very much interested in your statement that the veterans, as a class, are now of sounder credit than their colleagues of the same age who did not serve.

Mr. KING. I would like, with your consent, Mr. Chairman, to put in the record at this point, a one paragraph recital of the Bureau of Census figures, which bring out this improved income status.

Senator BENNETT. I think we would like to have it very much. (The information referred to follows:)

STATEMENT OF THE VETERANS' ADMINISTRATION REGARDING INCOME OF VETERANS AND NONVETERANS

Reports by the Bureau of the Census show that the average income of World War II veterans has increased faster than that for nonveterans in the same age group. In 1947, nonveterans between the ages of 25 and 35 had bigger annual incomes than veterans. However, the positions were soon reversed and by 1952 veterans in this age group had a median income of about $3,600, compared with a median income of about $3,100 for nonveterans in the 25-to-35-age group.

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Mr. KING. Now, with that improved income status which enabled them to meet monthly payments required by housing, veterans are newly incoming into the prospective purchaser class. And, we know from the record of the last 2 or 3 years that many of them had to forego their plans to buy, because money wasn't available.

So, we think that perhaps it may be a little early to dilute this preference. Maybe at the time the President is required to do it for some paramount reason, it may not then be too early-we have to recognize that. But, we consider it our plain duty to bring these things to the attention of this committee.

Senator BENNETT. We welcome any suggestions, but I think Senator Sparkman will agree with me, that when this bill is passed, almost as soon as it becomes effective, pressure will be on the President to reduce the downpayments, with the rights he acquires under the bill. Senator SPARKMAN. I would think so; yes.

Mr. KING. Off the record.

Senator BENNETT. Off the record.

(Discussion off the record.)

Senator BENNETT. Do you have any questions, Senator Sparkman? Senator SPARKMAN. I wonder if this is the amendment you referred to (reading):

Provided, That if the exercise of these powers, the President shall preserve the relative credit preference as accorded to veterans under existing law. Mr. KING. That is the language I refer to; yes.

Senator SPARKMAN. I would like to ask a few more questions on this, and then I will be through.

I wish you would tell us just exactly how the 1-for-1 FNMA program works, so far as veteran loans are concerned.

Mr. KING. Well, I will try to be clear about that, Senator Sparkman, by giving an example. We'll say "X" thinks well of this plan, and decides to buy $1 million of VA 4-percent loans, now in the hands of FNMA in the general locality, in the general servicing area of this particular lender.

At the beginning of the 1-for-1 plan "X" could have bought those loans from FNMA at 96-now, the price is 98. Presume if you will, that "X" has some acumen with respect to the outlets that his acquisition of those loans will open up to him.

So, he buys these million dollars in FNMA loans, for, currently, $980,000. He pays a point, in order to get a commitment from FNMA, that will entitle him, within a year, to submit to FNMA an equivalent dollar amount, in 42 percent VA loans.

Senator SPARKMAN. When you say equivalent amount, do you mean $980,000, or a million dollars?

Mr. KING. A million.

Senator SPARKMAN. In other words, face amount?

Mr. KING. I could be wrong on that point. In fact it is $980,000. Either he is contacted by builders, or he contacts builders, and he agrees to cover their upcoming production, with the FNMA commitment. Now, he is entitled-

Senator SPARKMAN. He is not tied down to that particular area. He can do that anyway, couldn't he?

Mr. KING. He could do that anyway. Conceivably, in Washington, D. C., a bank or broker could extend his commitment on new construction in Seattle, Wash.

Now, these 4 percent loans that the bank or broker has bought from FNMA for the $980,000, aren't worth that, marketwise, currently. So, "X" will be absorbing the loss up to this point. So, in negotiating with the builder to cover his upcoming product with the commitment, he is entitled under the law, quite legitimately, to tell the builder what he will charge, in order to compensate himself, for the difference between the $980,000 and the actual market value of these 4 percent loans bought from FNMA.

Variously, those charges, insofar as we are informed, run anywhere from 2 to 6 percent.

As a result, the purchaser from FNMA, entitled to sell new 412 percent loans to FNMA at par, is now holding or has sold the 4 percent loans at a figure somewhere between 98 and 90.

Now, to put these new loans into FNMA at par, requires that a half point be paid. It took a point to get the "tickets." Now it takes another half point to put the new 412 percent originations into FNMA, at par. Presumably, the builder also is required by the lender, or broker, to cover that charge.

In due course, the builder completes his projects; the $980 million of new 412 percent mortgages is sold to FNMA, and transaction is completed in all detail.

Senator SPARKMAN. Somewhere in that transaction, I know the mortgages got down as low as 90 cents on a dollar, or 91-I think you used that figure.

Mr. KING. Yes, sir.

Senator SPARKMAN. Now, what happens to the home buyer, when they get down that low?

Mr. KING. Well, presumably the cost of that absorption of these charges by the builder, is carried by the builder. The VA cost determinants, used in its finding of evaluation, make no allowance for the payment of any of these factors.

Now, as we have stated incident to hearings on section 504, of the Housing Act of 1950, we cannot maintain, categorically, or prove, that none of this gets to the veteran. We make a statement that we make no allowance, that it is improbable that any high percentage of it gets to the veteran, and we know from the many complaints we get as to

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