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There is a very pressing need for housing at military installations which cannot, at this time, be deemed to be a permanent part of the military establishment and eligible for title VIII mortgage insurance. The Wherry Housing Association would like to recommend for your consideration amendments to the National Housing Act which, in our opinion, would enable private enterprise to furnish necessary and adequate housing for personnel at installations which cannot qualify for Wherry housing under the present provisions of the National Housing Act by reason of the fact that the installations requiring housing cannot be certified as a permanent military installation. The activity at these installations is for an indeterminate duration, maybe 10 or even 25 years or possibly longer. We think title VIII can also provide housing at many of this type of installations.

In order to provide housing at installations which cannot be certified as permanent, it is recommended that section 803 be amended to add to the present insurance provisions a program for housing at military establishments when there is a need to provide adequate housing for the personnel at such installation and there is no present intention to substantially curtail activities at such installation.

Eligible mortgages under title VIII may not exceed 90 percent of the amount which the Federal Housing Commissioner estimates will be the replacement cost of the property or project when the proposed improvements are completed or $8,100 per family unit for such part of such property or project as may be attributable to dwelling use, except that in exceptional cases where the Secretary of Defense and the Federal Housing Commissioner concur that the needs would be better served by single family detached dwelling units, the mortgage may involve a principal obligation not to exceed $9,000 per family unit for such part of the property as may be attributable to such dwelling units.

It appears that in order to assure the success of this proposed program it will be necessary to increase the existing authorized insured mortgage limitation from its present 90 percent limitation to 95 percent of the amount which the Commissioner estimates will be the replacement cost of the property or project when the proposed improvements are completed. This increase is designed to minimize the increased hazard to the sponsor for his making the said investment in the required housing on a base which cannot be certified as permanent. The existing dollar limitation of $8,100 per family unit for such part of the property or project as may be attributable to dwelling use with the additional proviso for a mortgage of $9,000 per family unit where it is determined that single family detached dwelling would better serve the need should be adequate under the proposed program.

It appears that the amendment would require several provisions substantially as follows:

1. After the last word in section 803 (b) (2) delete the period and substitute a semicolon and add the following:

and provided further, That where the installation is not a permanent part of the Military Establishment and the Secretary of Defense or his designee shall have certified to the Commissioner that such installation is an essential part of the Military Establishment, the mortgage shall be insured under this title.

2. In section 803 (b) (3) (B) delete the word "and" after the semicolon and insert the following:

except that where the Secretary of Defense or his designee certifies that the installation is an essential part of the military establishment the mortgage may

involve a principal obligation not to exceed 95 percentum of the amount which the Commissioner estimates will be the replacement cost of the property or project when the proposed improvements are completed; and

3. Delete section 803 (b) (2) (C) and substitute the following:

(C) not to exceed an average of $8,100 per family units for such part of such property or project as may be attributable to dwelling use where such family unit is for an installation that is a permanent part of the Military Establishment; and

(D) not to exceed an average of $8,550 per family unit for such part of such property or project as may be attributable to dwelling use where such family unit is for an installation which is an essential part of the Military Establishment.

And provided further, That where the Secretary of Defense or his designee in exceptional cases certifies and the Commissioner concurs in such certification that the needs would be better served by a single-family detached dwelling units the mortgage may involve a principal obligation not to exceed $9,000 per family unit for such part of such property as may be attributable to such dwelling units.

The association recommends that the proposed Housing Act of 1954 specifically limit the rate of interest which may be charged on a title VIII loan to 41% per annum. This is extremely important as interest rates in excess of that amount will defeat the purpose of the military housing program by requiring rentals in excess of the ability of the intended tenants to pay. Each one-quarter of 1 percent increase in interest rates on a $8,100 mortgage increases monthly rentals to tenants by approximately $1.80 per month. As an example a 41⁄2 percent interest will require $3.58 per unit per month more rent than a 4 percent interest rate for the identical housing accommodations and a 5 percent interest rate would raise the rentals $7.17 per unit per month. An analysis, showing the effect of increased interest rates is attached.

Sir, I would like to have it made a part of the record. Senator BRICKER. It will be made a part of the record. (The table referred to follows:)

Effect of increased interest rates on average Wherry housing mortgage of $8,100

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Mr. EHLERS. The only alternative would be to reduce the size and quality of the house to the extent that it would not be a desirable permanent type of accommodations and defeat the purpose of the legislation to provide adequate low rental housing for military personnel.

It is therefore recommended that there be inserted after line 14, page 41 of section 201 of the bill the following:

Notwithstanding the provisions of this section, mortgages insured under title VIII of the National Housing Act shall bear interest (exclusive of premium charges for insurance) at not to exceed 4% per centum per annum of the amount of the principal obligation outstanding at any time.

Experience indicates that the Government-financed secondary-mortgage market is essential to the successful operation of any military housing program. There is no question that such would even more so be the case in respect to continued use of the title VIII program herein proposed. The proposed Housing Act of 1954 contemplates the rechartering of the Federal National Mortgage Association, substituting private financing for Federal funds. In order to provide adequate financing at reasonable interest rates and thus assure the feasibility and workability of this proposed program, it is recommended that there be added to section 306 of the proposed Housing Act of 1954 the following:

Notwithstanding subsections (a) and (b) of this section, the Association is authorized to enter into advance commitment contracts to purchase, and to purchase mortgages with respect to which Federal Housing Commissioner has issued a commitment to insure or a statement of eligibility under title VIII of the National Housing Act, as amended. Any advance commitment contract under this subsection shall provide for purchase in the amount of the insurance commitment. However, no mortgage may be purchased for an amount exceeding the principal balance thereof, plus accrued interest, at the time of purchase.

The proposed Housing Act of 1954 contemplates the extension of title VIII for a period of 1 year. In order to permit sufficient time to properly determine the need for military housing and to permit adequate planning and processing, it is recommended that section 126 of the proposed Housing Act of 1954 be amended to read as follows:

Section 803 (a) of the said Act, as amended, is amended by striking out "And provided further, That no mortgage shall be insured under this title after July 1, 1954, except (A) pursuant to a commitment to insure issued on or before such date, or (B) a mortgage given to refinance an existing mortgage insured under this title and which does not exceed the original principal amount and unexpired term of such existing mortgage."

The 1-year limitation in the act is presently due to the custom that has grown up in this type of legislation which follows the pattern set in title VI, section 608 as well as title IX. The limitation as applied to the military program should be removed for the following

reasons:

1. Military programing and development of bases required more than 1 year due to the contingencies of the availability of public works funds to complete the base structures.

2. The development of a housing project normally requires more than 1 year of planning, engineering and legal work.

3. The military program requires that the plans be developed and paid for from appropriated funds and reimbursed from construction or mortgage funds at the closing. The military departments cannot

conscientiously spend appropriated funds in the processing period left in any year for such if you make it reasonably certain that a commitment could not be obtained prior to the automatic expiration of the insuring authority.

4. Removal of the automatic cutoff date will not cause increased numbers of projects but will develop better projects in that adequate time may be given to planning and development to insure the military will receive the best housing for the rent dollar.

5. The limitations proposed in the bill adequately limit the Government insurance risk. Consequently, there would appear to be no real benefit gained by continuing the yearly cutoff on the Wherry program. It is recommended that the provision for a "cost certification," added to section 803 (b) of the National Housing Act by section 10 (b) of Public Law 94, 83d Congress, be eliminated. This provision requires the mortgagor under a title VIII FHA insured mortgage to agree to certify either (A) that the amount of the actual cost to him of the physical improvements on the property equaled or exceeded the proceeds of the mortgage, or (B) the amount by which the proceeds of the mortgage loan exceeded the actual cost of the physical improvements. In the latter case, the mortgagor would be required to agree to repay to the mortgagee, within 60 days after the certification, any excess of the amount of the mortgage loan over the actual cost of the improvements.

Under the bid procedures which the Department of Defense is presently following in respect to the award of title VIII certificates of need, the requirement for a cost certification is needless. It is our recommendation that this provision be eliminated from title VIII.

Title VIII was designed to provide housing for military personnel under the private enterprise system and in keeping with the private enterprise system we deem it essential to make provision for and create incentive for efficient, well organized know-how in the planning, construction and management of said housing. The sponsor is required under the present statute to give a firm bid price for the providing of the said housing and further is required to put forth his private funds to augment any deficiencies in the amounts allowed for in said bid to complete and provide the housing. When a sponsoring organization is a successful bidder under the bid procedure he is, generally speaking, receiving less mortgage money than the maximum mortgage the FHA is willing to insure. All of this constitutes the normal calculated risk of the sponsor under the private enterprise system. The present statute further provides that in the event the sponsor is successful in completing his project at something less than the amount of the mortgage, which is predicated on his bid, he is required to return same within 60 days. The Association takes the stand that this final statutory requirement is inequitable and defeats the private enterprise system of competitive bidding.

Mortgagees are not particularly interested in acceleration of mortgage payments through this method. They are primarily interested in money invested in order to receive the return. The military departments, on the other hand, receive no reduction in rent due to the efficiency of the builder. Consequently, whether he makes or loses money in the project is of no particular practical importance to the prospective tenants, to the mortgagee or the FHA.

I believe that is all we have to offer, sir.

Senator BRICKER. Thank you very much.

Mr. BEAN. Thank you.

Senator BRICKER. Well, now we will hear from Mrs. Houser. Good morning, Mrs. Houser.

Mrs. HOUSER. Good morning.

Senator BRICKER. Do you wish to read your statement or just put it in the record?

Mrs. HOUSER. I would like to read the statement, if I may.
Senator BRICKER. You may proceed.

STATEMENT OF MRS. JENCY PRICE HOUSER, NATIONAL
ORGANIZER, RESIDENCE AT EASE ASSOCIATION

Mrs. HOUSER. Mr. Chairman, my name is Mrs. Jency Price Houser, national organizer for Residence At Ease Association and the Cause for Permanent Housing Designed for Occupancy by Single Persons. We have been active in the development of mutual housing plans on a national basis but principally in Detroit, Mich., and Washington, D. C., for the purpose of providing permanent housing designed for occupancy by single persons.

We are coming back to Congress for assistance after having advocated the passing of paragraph (g) of section 213 of the National Housing Act in 1950. Now, we wish to support enactment of section 119 of H. R. 7839-Cooperative Housing-the section 213 of the former act-with regard to which we have the following two suggestions to make:

1. In connection with section 213, management-type projects, there is an administrative requirement under FHA that needs an amendment, because FHA requires that a commitment may not be issued pursuant to a certificate of eligibility until 90 percent of the cooperators have been obtained and their required subscription prices have been fully paid. This seems to us to be too costly, delaying the obtaining of a sponsor for this type of building. Moreover, it seems to be a great handicap since the lining-up of would-be tenants before any financing or building can be started has led to much misunderstanding and violent criticism on the part of those who are accustomed to projects being built under section 207, which allows for buildings to be sponsored first and the tenants found afterwards. Officials have considered it a misrepresentation to act on this part of the legislation,. which requires 90 percent of the cooperators before a certificate of eligibility can be obtained, and it has become quite an imputation of wrongdoing that there are prospective tenants but no building.

It is therefore recommended that section 213 be amended to provide for the issuance of the commitment to a sponsoring group, in the same manner and with the same provisions as are permitted under section 207, but providing means for a special trust.

2. Our second suggestion is that paragraph (g) of section 213 of the National Housing Act of 1950 should be expanded into a whole section, embodying the provisions under section 207 and the special trust. Section 213 (g) reads as follows:

Nothing in this act shall be construed to prevent the insurance of a mortgage under this section covering a housing project designed for occupancy by single persons, and dwelling units in such a project shall constitute family units within the meaning of this section.

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