Mr. ST GERMAIN. It is better than living in a tent, I will agree with that, but by the same token it is not what we should set up as our aim or goal.

Mr. ROGERS. I would not like to see us become a nation of mobile home dwellers.

Mr. ST GERMAIN. Does your bank lend money on mobile homes, Mr. Rogers?

Mr. ROGERS. Yes.

Mr. ST GERMAIN. In another section of your testimony, by the way, I admire whoever did the editing, because on page 14 when discussing the rates charged on mortgages, you said commercial banks last year had an effective rate of 7.8, which is commendable, and then 8.3 by savings and loans, 8.6 life insurance, 8.5 by mortgage companies, and then at the tail end you throw in 7.8 by the mutuals. And then in the next paragraph you bring out three-quarters of a percentage point increase by the commercial banks, and then 12 by life insurance, 1 by savings and loans; .8 mortgage company rates, and mutual savings by .7.

Well, .7 is 70 percent of a point and three-quarters of a point. Once again, they separate them. It is great editing. But by the same token— I say I am not criticizing-I don't think they had to go to that extent because I think your record is good in these figures, and I just wondered why they felt they should couch it in that manner.

Mr. ROGERS. I don't believe there is any deliberate intent involved. Mr. ST GERMAIN. It may not be so but it is very good writing.

Mr. ROGERS. Let me say this. It is not an effort to make invidious comparisons with regard to rate averages. As a matter of fact, Mr. St. Germain, the real reason relates to what Mr. Stephens had to say earlier, and that is that banks are quite sensitive to the charge that we are responsible for high interest rates and so we would like to demonstrate in the process of increasing rates that the banking industry has really been very modest, quite a bit more modest than other major elements in the financial fields.

Mr. ST GERMAIN. Well, my followup to this, Mr. Rogers, is that you didn't-this was not brought out but I think that one of the points you would probably like to make here is the tax situation that you are faced with in comparison with the savings banks, and they do, as we know, have a tax advantage over the commercial banks. And furthermore, I do feel-I am impressed by your suggestion that perhaps it might be wise to look very seriously at tax incentives for the purpose of allowing or encouraging commercial banks only in that area of mortgages for low- and middle-income people, to encourage the commercial banks in this area. And as I say, I found this quite impressive.

Mr. ROGERS. I am encouraged by your encouragement, sir.
Mr. ST GERMAIN. My time has expired.

Mrs. SULLIVAN. Mr. Crane.

Mr. CRANE. I was just going to inject one comment in connection with your discussion of the mobile home industry. Having had some experience in college owning one, we paid $4,300 in 1959, sold it 4 years later for $2,600. This was an alternative to renting, and as a result we were, economically speaking, vastly better off having purchased the mobile home than had we rented during that period of our

early married life. And I think it is true that in the case of many, many college students and also many of the retired folks who are living on fixed incomes.

Mr. ST GERMAIN. You purchased that mobile home because there was nothing else available?

Mr. CRANE. NO. There were rentals available. In other words, we could have rented as we did during the first years of marriage, and we concluded that it was vastly better to purchase a mobile home because of the equity that we could build up in that home even with the depreciation. And figuring it out in dollars and cents we were vastly better off buying the mobile home. Now, at the same time there were many other college students who were in exactly the same situation. It was superior housing to the rentals that were available at the same time as well. It was better quality living, at a reduced cost over the long run because we had something to show for it after we turned around and sold our home.

Mr. ST GERMAIN. Well, if I might give you an example of the type of thing that impresses me, I had one woman come in just recentlyI won't go into details as to why she had to get out of the mobile home park. However, she has been in this mobile home now for maybe 7 or 8 years. It was costing her $136 a month to live in a mobile home with her three children. She has now been able to arrange for a section 235 loan and she is buying a home, and it is going to cost her $140 a month and she will be living in a home. And that is what I am particularly concerned about. I still feel that a home is a whole lot better investment because when she finishes paying on this she will have an estate for her children, whereas with the mobile home, this does not hold true. Mr. CRANE. Fine. I am not saying that, but what I am suggesting is that in the majority of cases, at least as far as the university campus situation goes and also for many retirees, that those are not the alternatives.

Mr. ST GERMAIN. I agree with you. In those two instances they have proven to be ideal.

Mr. CRANE. That is right. And $145 a month to live in a mobile home park is an extraordinarily high fee. I mean there are luxury mobile home parks and then there are those that you find on most campuses. Mr. ST GERMAIN. I was talking about the cost of the mobile home. Mr. CRANE. Oh, the cost of the mobile home. I see. I misunderstood. Mr. ST GERMAIN. The whole bit, the mortgage on the mobile home and the rental at the park.

Mr. CRANE. In a case like that I would agree with you that it is better to pay another $5 and get a more substantial home.

Mrs. SULLIVAN. Yes. Mr. Griffin.

Mr. GRIFFIN. Thank you, Madam Chairman. I have no questions, but I do want, however, to commend my former constituent, Mr. Rogers, and Mr. Wallace for your very fine statements and the ideas and thoughts and information that you have brought before us. Thank you very much.

Mrs. SULLIVAN. Well, I thank you both, gentlemen, and I did want the answers to my questions, but the reporter has been given the questions and asked to type them into the transcript so that you can answer them for me. I will appreciate it and thank you very much for your time.

Mr. ROGERS. Thank you, Madam Chairman.
Mr. WALLACE. Thank you.

Mrs. SULLIVAN. Thursday morning at 10 o'clock Mr. Norman Strunk, president of the U.S. Savings & Loan League, Mr. Louis the witnesses.

Barba, president of the National Association Home Builders, will be The committee is recessed until 10 o'clock Thursday morning.

(Whereupon, at 12:20 p.m., the committee recessed to reconvene at 10 a.m., Thursday, February 19, 1970.)

EMERGENCY HOME FINANCING

THURSDAY, FEBRUARY 19, 1970

HOUSE OF REPRESENTATIVES,

COMMITTEE ON BANKING AND CURRENCY,

Washington, D.C.

The committee met, pursuant to recess, at 10 a.m., in room 2128, Rayburn House Office Building, Hon William A. Barrett, presiding. Present: Representatives Barrett, Sullivan, Ashley, St Germain, Hanna, Annunzio, Rees, Galifianakis, Chappell, Widnall, Halpern, Mize, Blackburn, and Crane.

Mr. BARRETT. This morning the committee will hear testimony from spokesmen from the institutions that provide most of the residential mortgage loans in the Nation and represent most of the Nation's homebuilders. With us are Norman Strunk, executive vice president of the U.S. Savings and Loan League, which represents savings and loan associations; and Louis Barba, president of the National Associa tion of Home Builders, the trade association of the Nation's homebuilding industry.

Also, appearing this morning is James V. Rice, chairman of the Mortgage Finance Committee of the Home Manufacturer's Association. Mr. Rice is a spokesman for prefabricated housing manufacturers and building product manufacturers.

These men represent the lending institutions and building firms which are most severely affected by the Nation's housing crisis. For this reason we look forward with great interest to the remarks you gentlemen will make regarding the committee's efforts to develop additional sources of mortgage funds at reasonable rates.

Gentlemen, the House session this morning will begin at 11 o'clock, an hour earlier than usual. For this reason, I will ask you all to briefly summarize your statements, so that committee members will have a better opportunity in the time available to ask questions of you.

We will begin with Mr. Strunk, and then hear Mr. Barba and Mr. Rice, before beginning the questioning. The text of your full remarks will, of course, be entered into the hearing record. Mr. Strunk, will you begin your summary, please.

STATEMENT OF NORMAN STRUNK, EXECUTIVE VICE PRESIDENT, U.S. SAVINGS & LOAN LEAGUE

Mr. STRUNK. Thank you, Mr. Chairman. I have about a 10-minute summary of that longer statement and I'll get right into it. We appreciate the opportunity to be here with you this morning. Certainly the housing crisis has been fully documented and I do not need to emphasize what has been stated so often about inflation being a fundamental

cause of the shortage of mortgage credit. We congratulate this committee for initiating the law which gave the President standby authority to institute credit controls. We have urged the President to use the authority which the Congress has granted last year. (A copy of a letter sent to President Nixon on credit controls follows Mr. Strunk's prepared statement.) Of course, we believe that even if inflation is cured and interest rates come down somewhat, that present programs and laws will not produce an adequate flow of funds for housing. Reliance on the marketplace to determine who gets the money will generally leave housing on the short end of the stick. The only time that housing has done well in the past is when the mortgage-oriented thrift institutions have had a substantial increase in savings each year. I would like to direct your attention, if I might, to several charts which I have with me this morning. (The charts referred to may be found in Mr. Strunk's prepared statement.)

Chart 1 shows the flow of funds into various types of credit in two different periods: the 4 years 1953-56 and the 4 years most recently passed, 1966-69. Chart 1 shows the dollar amounts and chart 2 shows the percentage distribution. I think we all recall that throughout the 1950's, there was a great flow of money into housing. In the 1953-56 period, we were building homes at the average rate of about 1,500,000 units per year, which sounds pretty good, even today.

On chart 2 you can see that housing is getting a much smaller share of credit in the current period. Home mortgages in the last 4 years have received only 18.8 percent of the total, compared to about twice that share in the 4-year period of the 1950's. Note how much more housing credit today is going into multifamily, commercial and farm mortgages than in the 1950's Except for farm loans, these are mortgages where equity kickers, or piece-of-the-action financing are possible.

One obvious reason for the substantially reduced flow of funds into home mortgages is that savings and loan associations have not been attracting the high share of the savings dollar we once attracted.

Chart 3 shows net savings gains in our institutions, and we also show on it the GNP, gross national product each year. You will note we are getting less money from a much bigger economy. The two basic reasons for the reduced flow into savings associations are: first, the American people are not placing their savings in financial institutions as they once did. Second, commercial banks have been much more aggressive and very successful competitors for household savings than they were in earlier years. We once paid a full percentage point more than commercial banks paid for savings, but we now may pay only one half-point more on passbook accounts and one-quarter more on certificates.