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day and see if there is any merit to it. I don't know whether there is or not.
Mr. EDELMAN. We will be here.
The CHAIRMAN. Our next witness will be Mr. McCormick, of the Trailer Coach Association, and I think you have other people with you.
STATEMENT OF PAT A. McCORMICK, TRAILER COACH ASSOCIATION,
ACCOMPANIED BY E. R. SHAW, TRAILER COACH ASSOCIATION OF LOS ANGELES, CALIF.; RALPH KAUL, CONSULTANT AND WASHINGTON REPRESENTATIVE; WALTER WELLS, MOBILE HOME MANUFACTURERS ASSOCIATION OF CHICAGO; LEE PAINTER, PRESIDENT, MOBILE HOME DEALERS NATIONAL ASSOCIATION
Mr. McCORMICK. Yes, Mr. Chairman. I would like to introduce Mr. E. R. Shaw, from California, who will, with your permission, substitute for me as the witness on behalf of the Trailer Coach Association. We also have with us Mr. Ralph Kaul, our Washington consultant and representative; and Mr. Walter Wells and Mr. Lee Painter, each of whom represent important segments of this industry.
Mr. Shaw. Mr. Chairman and members of the committee, my name is E. R. Shaw, and I am president of the Columbia Trailer Co., Van Nuys, Calif. I am also a member of the board of directors of the Trailer Coach Association, which includes manufacturers, suppliers, dealers, and park operators in the trailer coach mobile homes industry, principally in the Western States. I am appearing today in behalf of this association and have with me Mr. Ralph Kaul, its consultant and representative in Washington, D. C., and Mr. Pat McCormick, general counsel.
With us today also are representatives of the Mobile Homes Manufacturers Association, which represents the manufacturers mainly in the Midwest and East, and the Mobile Home Dealers National Association. These associations have collaborated with us in developing the industry's legislative program and proposals, and are here today to support them.
Our purpose in appearing before you is to obtain the recognition of this industry as a part of our national resources, and to eliminate the discrimination against more than 2 million occupants of mobile dwellings who are now deprived of the benefits of the National Housing Act.
I have briefly summarized (1) the need to include the mobile home in the housing law; (2) how this need can be met within the existing framework of FHA statutes and procedures; and (3) the advantages that would accrue to the public, advantages, as I will show later, that can be cbtained without subsidies or cost to the taxpayer.
With your permission, Mr. Chairman, I can present this summary to the committee in about 10 minutes.
National Housing Act does not recognize mobile dwellings which provide 90 percent of the low-cost housing market.
First, I would like to call the committee's attention to a very startling fact: As it now stands, the National Housing Act completely neglects the Nation's most important low-cost housing resource, the trailer coach mobile dwelling. Under section 8 of title I, the National Housing Act recognized low-cost housing as that costing $6,000 or less. Approximately 6,000 such houses have been built each year in recent years under FHA mortgage insurance, and this has been the bulk of the fixed-to-site housing in the low-cost category. During those same years about 80,000 mobile dwellings in the same low-cost category were built and sold in the United States annually. In other words, about 90 percent of the market for low-cost housing has been met by mobile dwellings.
Trailer coaches are permanent homes for over 2 million people.
Essentially, we are dealing with a situation in which the law has not caught up with the facts. In the 1930's when Congress was first considering and enacting housing legislation to provide better credit terms for homeownership, there was no such thing as a trailer coach mobile home. The trailer coaches of that day were small partially equipped vacation units connected with motor touring, and the trailer parks were usually camping facilities for transient vacationists. But, the industry has changed greatly during the past 15 years, and more particularly during the postwar period. Today, it is an important segment of the housing industry. Nearly 800,000 trailer coaches are providing permanent homes for more than 2 million people. These people are living in trailer coaches because they find their housing needs are best met that way.
The CHAIRMAN. Are there 800,000 trailers in operation today?
The CHAIRMAN. And of these 800,000, have most of them been built in the last 10 years?
Mr. Shaw. I would say that. Possibly since 1946.
The CHAIRMAN. Has your yearly production been about the same for the last 4 or 5 years ?
Mr. Shaw. It would vary from 65,000 to 83,000.
The CHAIRMAN. One hundred and fifty different concerns making trailers?
Mr. Shaw. That's right.
Mr. Shaw. Various finance companies and banks. I think the largest one in the east is one of the banks in Michigan.
The CHAIRMAN. Are most of them financed by the regular finance companies who finance automobiles ?
Mr. Shaw. Yes; and banks.
Mr. Shaw. They do some of it. CIT does. I'm not sure about Commercial Credit.
The CHAIRMAN. Would you say that practically every finance company in the United States has at some time or other financed from a few up to a lot of trailers? Mr. SĦAW. No; I don't think so.
The CHAIRMAN. Are there finance firms who specialize in this one thing?
Mr. Shaw. A few. Very few.
The CHAIRMAN. Do the manufacturers in every instance sell for cash?
Mr. Shaw. To the dealers.
The CHAIRMAN. The manufacturers sell to dealers who in turn, sell to users ?
Mr. Shaw. That's right.
The CHAIRMAN. Then the dealer, he sells on the installment basis to the ultimate buyer?
Mr. Shaw. That's correct, sir.
The CHAIRMAN. How many dealers would you say there are in the United States at present?
Mr. Suaw. Between three thousand and thirty-five hundred. The CHAIRMAN. What is the average price that the trailer sells for! Maybe you have all this in here.
Mr. Shaw. Partially; yes, sir.
The CHAIRMAN. I would kind of like to get it in sequence here anyway. What is the average price trailers are sold for!
Mr. Shaw. I would say around $1,000.
Mr. McCORMACK. There is a 6-percent discount, Mr. Chairman, if I may interrupt. That runs up around 11 to 1112 percent, simple interest.
The CHAIRMAN. You are going to tell us later what you propose. What you are going to recommend, I presume, is that trailers be insured under FHA?
Mr. Shaw. That's correct, under title I, sir.
The CHAIRMAN. Meaning that if a bank or anybody wants to buy one of these mortgages, that it will be insured under FHA the same as any other home?
Mr. Kaul. Yes; the insurance is made to the lending institution rather than attaching to the mortgage or the property itself. It is the same technique as the property-improvement loans.
The CHAIRMAN. FHA never in the past has financed or insured anv trailer loans?
Mr. KAUL. Never to our knowledge, sir.
Mr. Kaul. It was discussed briefly 2 years ago, but not considered in the sense of this proposal. Just a preliminary exploration. I should mention, sir, that the Housing Agency has purchased trailers under the Defense Housing Act as emergency and temporary housing.
The CHAIRMAN. I have seen a lot of them in different places.
I just wanted to get some of the things in the record, here, altogether in one place.
Now, why don't you proceed.
The modern trailer coach mobile home has been developed to meet high standards of living. It has become, by apartment standards, a livable two bedroom dwelling unit with a fully equipped bathroom and kitchen, and includes all the essential house furnishings. The modern trailer park is developing into an attractive, suburban development with landscaping, recreation areas and utilities equal in every respect to the average garden apartment.
Mobile dwellings are the best housing solution for some people and the only solution for many others.
People in all walks of life and income groups live in trailer coach mobile dwellings. It is the best housing solution for most of these people and for some it is the only solution.
Mobile homes are the homes of military personnel who are enabled to have their families with them wherever stationed in the United States, of defense workers and their families, of newlyweds, of retired folks, of construction and agricultural workers and others in mobile or semimobile employment. For many of these workers it is their only practical solution for family living and home ownership.
Why do these people and this industry need the benefit of FHA?
Now, let us examine why these people need equal consideration with others under FHA. Let us take an example of a family that can afford only a $6,000 house, in other words the FHA low-cost house. Under section 8 of title I, if they buy a fixed-to-site house, they would have to pay only $250 down and $31 a month for interest and amortization; and would have 30 years to pay off the mortgage at an interest rate of 5 percent including FHA insurance premium.
On the other hand, if the family needs and buys a mobile dwelling, they will be called on to pay one-fourth to one-third down and the balance in 3 to 5 years at 5 to 6 percent discount and up to 8 percent on used units. Assuming the most liberal terms under present sending practices this family would have to pay for a $5,000 trailer coach $1,250 down and $78 a month. On top of this they would have to pay $25 a month for a trailer park rental making a total of $103 a month. What starts as low-cost housing in total price becomes high-cost housing in monthly payments.
The manufacturers and dealers of mobile dwellings are also at a disadvantage as compared with the builders of fixed-to-site housing. When a family buys a dwelling under FHA, the builder and realtor immediately get their money. When a mobile dwelling is sold, the dealers in many areas are called upon to deposit 5 percent of the purchase price as non-interest bearing collateral to secure the loan for the mobile home family.
Trailer coach loans involve negligible risks.
These disadvantages are despite the fact that trailer coach loans involve negligible risks. Whereas in recent years the FHA has been
experiencing net losses of about one-half of 1 percent on loans made for property improvements, the lending institutions financing trailer coaches have experienced losses of less than one-fourth of 1 percent. In view of this excellent credit record there could be no objection to mobile dwellings as an unsound FHA credit risk.
What we propose:
The mobile home industry does not seek the identical terms that FHA gives to low-cost, fixed-to-site housing. Nor does it oppose pend
, ing amendments to grant even more generous terms to such housing. But, we are seeking adjustment of the adverse credit relationship.
This, we believe, can be accomplished within the framework of the present law and without conflicting with other amendments.
Title I, section (2), loans for mobile dwellings and title II, section 207, for trailer-park mortgages :
There are two basic proposals: First, we are proposing that title I, section 2, of the National Housing Act be broadened to include the trailer-coach mobile dwelling. Under this title lending institutions are partially insured against losses on loans which do not involve appraisals, mortgages, or long-term financing.
T'he procedure and terms of title I are applicable to mobile dwellings with the following safeguards and limitations: Insured loans should be limited (1) only to those meeting construction standards, (2) to $5,000 per loan or 75 percent of the purchase price, whichever is less, and (3) a maximum term of 7 years.
Our second proposal is to include trailer parks under the rental housing mortgage insurance of title II, section 207, on the same basis as the garden-type apartment. With trailer parks, as with the mobile dwellings, we recommend reasonable safeguards, namely, (1) a high standard of construction, (2) a $1,000 maximum loan per trailer space and a $300,000 maximum per mortgage, and (3) a term of amortization reasonably comparable with rental housing.
Benefit to the mobile home family:
Now, let us consider how the family in the foregoing example would benefit from these proposals. First, the total monthly payments would be reduced from $103 under present terms to $85 a month which is more in line with reasonable housing costs and ability to pay. There would be additional indirect benefits. The more liberal terms for trailer-park financing wouid be translated into improved facilities, perhaps at lower rentals. And, finally, the family would be in a better position to trade in its present home because the financing of used mobile dwellings would also be improved.
The public interest:
We believe these proposals are clearly in the public interest. First, they remove the penalty against a free choice by Americans to select housing that best fits their particular needs. We are talking about the really low-cost housing of our times. A housing act which overlooks this fact is simply not doing the job for which it is intended.
Secondly, the proposals will encourage a strong mobile housing resource for national security. Millions of taxpayers' dollars have been spent in housing arrangements that have outlived their usefulness at the original site but could not be moved to places where they were subsequently needed. Defense production has been constantly hampered by housing shortages. Should the uncertainties of the