dends to the average citizens and taxpayers of this country who have been educated to the advantages of thrift since this country's inception. Government bonds make up the most substantial portion of interestearning investments of all these institutions, most of which are mutually owned. With United States Government bonds bearing a gross interest rate of 21⁄2 if purchased at par, it becomes necessary to invest funds in an amount in excess of 212 percent in order to be able to pay the depositors or policyholders a rate of 2 to 3 percent in the respective fields mentioned herein.

Mortgage interest by average in the State of New York, as disclosed by the official reports of the superintendent of banks for the year ending June 30, 1949-the most recently published and tabulated periodwas 4.19 percent. This included mortgages which had been on the books for many years bearing interest as high as 6 percent. The full impact of the FHA and GI financing programs subsequent to the cessation of hostilities in 1945 had not been fully felt, nor had the effect of the FHA economy housing program sponsored 3 months earlier been made known.

After calculating the holdings of savings banks, in which instance more than two-thirds of the total portfolio portion was in United States Government bonds, as disclosed on page 12 of the banking department report, the average earning was 2.94 percent gross for all forms of investments, including mortgages, before the deduction of a cost factor equal to sixty-nine one-hundredths of 1 percent for operating overhead, thereby reducing the net income figure to 2.25 percent on all investments. This record also discloses that at the time the average interest paid on time deposits was equal to 1.65 percent.

In the year 1949—that is, the full period-savings banks increased the interest dividend to their depositors to a point equal to 1.85 percent State-wide; and at the same time the interest rate obtainable on mortgage investments, including those loans in the portfolios of the institutions, dropped from 4.19 o 3.96 percent. It will readily be seen that with the increased cost of operation, which has not as yet been computed, but with the higher dividend rate paid to the depositors and the lower yield in interest through the satisfaction of old high-incomebearing mortgages and the reinvestment of these funds in lower FHA, VA, and conventional mortgages, the institutions in the savings-banks class did not earn 2.94 percent by December 31, 1949, as they did on June 30, 1949, but will earn closer to 2.86 percent on the over-all investment picture.

For the calendar year 1947, which is the last official report turned out by the New York State Department of Insurance, the life-insurance companies of this State carried total investments in mortgages equal to 11.7 percent and bonds, including United States Government bonds, in an amount equal to 78 percent. Those insurance companies not resident in the State of New York but permitted to do business in this State, including alien insurance corporations, carried 14.6 percent of their assets in mortgages and a total of 74.3 percent in all types of bonds.

The country-wide earnings of every life-insurance company in the United States of every category for the year 1948, as disclosed in the sixty-first annual edition, entitled "Compendium of Official Life Insurance Reports," showed a gross interest income on every form of

investment equal to $1,472,178,994. This figure, when taken against the total admitted assets of all of these life-insurance companies which this report covers, worth fractionally over $50,000,000,000, disclosed a gross interest income of 2.93 percent.

The same factor of investment problem that holds true in the savings-banks field undoubtedly holds true in the life-insurance field, and the gross income of 2.93 percent on investments for the calendar year 1949 will undoubtedly be reduced in the same proportion as the savings banks.

This loss in reduction of income is for the same reason that high interest yield on mortgages is unobtainable through the repayment or satisfaction of existing high-interest-bearing mortgages and the replacement of these investments with mortgages carrying the standard interest rate of 4 and 412 percent.

It can readily be seen by the afore-mentioned figures that should the Government, through direct or subsidized lending at substandard interest rates, enter this field of investment it would materially reduce the amount of mortgages available for institutional investment and automatically the income of the depositor and the individual policyholder, many of whom are veterans and widows of veterans of the United States armed forces in both World War I and World War II, and it would ultimately result in lesser earnings for the institutions. National Cooperative Housing Association financing in the proposed law will result in more deficit financing with its incumbent attack on thrift. This attempt to subsidize the so-called middle-income group, which is a definite misnomer, is entirely unnecessary, unwarranted, and uncalled for, because financing is available to all citizens within the bracket they can afford.

The Government is not expected to again create specialized housing, and the passage of these amendments would do just that for the benefit of a specific class already covered and completely taken care of by the passage in 1949 of the Federal public-housing law.

The official reports of the Federal Housing Administration designated as "Fifteenth Annual Report of the Federal Housing Administration for 1948," at page 59, shows the classifications of not only income but the size of the mortgages that were involved in the year's work of that Government agency.

Before these figures are quoted, may we respectfully call to the attention of the Congress, in the opinion of the private lending field, that this agency is a most competent and cooperative organization.

Of all houses financed through FHA in 1948, more than one-half were purchased by families in the annual income group of $2,000 to $4,000.

In the case of veterans, FHA figures show that more than 76 percent of all veterans purchasing homes used the combination FHA 203 loan coupled with Veterans' Administration 505 loan, and that this group has an income as a class of less than $4,000 per annum.

Fifty-one and six-tenths percent of all FHA applications for the year 1948 showed an income on the part of the purchasing family of a sum less than $3,500 per annum.

All of these figures of the Federal Housing Administration do not include the actual results of the economy housing program, which was started in March of 1949 and which resulted in larger production of

homes at lesser prices than the record of 1948 shows. None of these purchasers as a class were provided directly or indirectly with Government subsidies or special financing or tax-exempt devices not freely available to all other citizens. Yet the cooperative housing proposals as contained in H. R. 6618 specifically call for special treatment to special groups.

Seventeen percent of all Federal Housing Administration mortgages in the year 1949, based on preliminary reports, were those under title II, section 203b2B, with a maximum loan of $6,000 for a term of 30 years. Total carrying charges extended on this average-type house is $43 per month in major metropolitan areas, including real-estate taxes, interest on principal, fire insurance, and water charges. These items are broken down roughly as $30 for interest and principal, $9 for taxes, $1.10 for fire and hazard insurance, and $1.50 for water. Nonurban areas would result in a lesser real-estate tax charge and would thus reduce the total carrying charge from $40 to $38 per month. Heating and hot-water supply in northern climes would account for $9 per month by average and in the South approximately $3.50 per month.

Thus, full ownership, including total carrying charges and heat, could be obtained from $50 to $52 in the areas adjoining the metropolitan centers in the North, and from $41.50 to $43.50 in the equivalent areas in the South. This average home contains four rooms, full expansion attic for one or two bedrooms to be added as needed, on a plot of land of 5,000 to 6,000 square feet. Cash investment at the time of purchase ranges from $300 to $500 for nonveterans and zero investment for veterans.

The low-income group purported to be reached under the proposal of the national cooperative housing law-in other words, those earning $2,000 or $2,500 per year-are presently being taken care of under title I, class 3, section of the National Housing Act, wherein a 15-year loan is provided-not 30 years and the carrying charges in the outlying sections in the metropolitan areas of New York amount to under $35 per month, which is less than the rentals charged in fully subsidized public housing projects.

The maximum loan as presently set forth in the law is $4,500.

These citizens who are availing themselves of the use of title I, class 3, have an income of $50 per week and less and find it expedient and satisfactory to purchase these homes within their income brackets without the benefit of any special subsidy by the Federal Government. The Hoover Commission on Government Reorganization specifically went on record against direct Government lending. Since this was an impartial commission appointed by President Truman and staffed by the finest group of impartial but practical experts, it would seem that these direct and indirect lending factors in this bill as now presented, after only cursory examination and listening to the largest of pressure groups, are a repudiation by the administration of its outstanding Commission appointed by the President for impartial reporting of facts.

Rentals are, and have been, adjusted by area under title VI, section 608; and on all new applications filed, first, subsequent to July 28, and, secondly, to November 1, these rentals have been consistently lowered by the Federal Housing Administration as the basis for its consideration to insure.

The success of the entire 608 housing program since the cessation of hostilities can no longer be questioned. Apartments in all rental income groups have been made available, and the rentals have been fixed by the Federal Housing Administration in each area on the basis of the ability of the income secured from rents to properly support the amount of mortgage insurance issued by the Federal Housing Administration.

With the continued high rate of issuance of FHA commitments under title VI, section 608, it is our opinion that the rental-housing market in the rental brackets set forth by the FHA will become saturated when all of the structures for which commitments have been issued have been built. Federal, State, and municipal public housing authorities projects have also adequately covered the income groups intended to be covered by the National Cooperative Housing Act, and the veterans have formed and built limited-dividend corporation cooperative projects under 608.

We believe that the aims of this bill could be accomplished in a more satisfactory manner, without cost to the Government or any further expenditures in the form of deficit financing and loss of taxable income, and we respectfully recommend the following changes under title I, class 3, title II, section 203, and title II, section 207, to accomplish the results now desired, within the framework of existing laws which have been tried, tested, and found to be successful:

RECOMMENDATION I

(a) Title II, section 203, to be amended under all subsections to permit 30-year loans on new construction and 25-year loans on existing construction, instead of the 30-year loans under 203 (b) 2d, and the 25- and 20-year loans under section 203b.

(b) Mandatory firm commitments to be issued to operative builders, whereby homes can be offered for rental or for sale. This was successfully proven through the operations of title VI, section 603, both during and subsequent to the war.

RECOMMENDATION II

(a) Title II, section 207, to be amended so that maximum financing is equal to $8,100 per family unit.

The term of the mortgage under this section to be extended to 37 years and 7 months, instead of 32 years and 7 months, so as to further reduce the carrying charges on the property, thereby making it possible to offer the apartments for rental at a lesser sum than under the shorter-term mortgage.

RECOMMENDATION III

(a) Section 505a and section 501 of the Servicemen's Readjustment Act of 1944 to be amended to provide for mortgages for a maximum term of 30 years.

RECOMMENDATION IV

(a) Section 505a is to remain unchanged until the Servicemen's Readjustment Act expires. The success of the combined FHA-VA program has undoubtedly resulted in the greatest volume of construction and the records of the Federal Housing Administration so prove

that 76 percent based on 1948 reports of all veteran purchasers used this form of financing where available. The removal through repeal of section 505a would be a calamity of the first order and definite repercussions on the part of veterans and veteran organizations, who had no cash with which to purchase and still desired to purchase their own homes, would be heard in less time than the 180-day period established under this bill for the elimination of this very successful form of financing.

RECOMMENDATION V

That all mortgages, not only those covered by FHA law as well as Veterans' Administration, be limited to maximum terms of the economic life of a single family and multiple family occupancy as now fixed by the Underwriting Manual of the Federal Housing Administration.

RECOMMENDATION VI

Title VI, section 611, should be incorporated as part of title II of Federal Housing Administration in that the provisions of this existing law provides for both rental and sale of residential accommodations under individual occupancy of individual homes where 25 or more houses are to be built at one time.

There is the alternate provision in section 611 that any one house can be reduced on the general blanket lien and that property sold to an interested purchaser with financing then converted to title II, section 203 (b), upon approval by the Federal Housing Administration of the credit stability of the proposed purchaser.

We also further recommend that the amount of the mortgage, presently limited to $6,000 per family dwelling unit, be increased in accordance with the provisions as passed by the House of Representatives under H. R. 6070 covering title II, section 203 (b) 2b, to wit, $7,650 for each two-bedroom dwelling and $950 for each additional bedroom beyond the first two but not exceeding a total of four bedrooms in the entire structure.

All of these recommendations can be effected without any cost or expense to the Government, will provide for adequate housing under private enterprise, together with that which was provided for under the Public Housing Act of 1949, and completely eliminates the necessity for the enactment of national cooperative housing law, as proposed by H. R. 6618.

The final net result is, that there is no expense to the Government under the recommendations proposed by this association and that further deficit financing and loss of taxable income through issuance of tax-exempt securities will not be required in the housing field. Now I would like to emphasize three points.

Mr. BUCHANAN (presiding). Very well.

Mr. EPTER. On page 7 we referred to the size of the average onefamily house being built, and on the basis of justification of that, the so-called four-room and expansion attic home, the Census Bureau average figure, for 1940, showed that the average family in the United States was comprised of 3.8 individuals.

In talking to Dr. Houser, of the Bureau of Census, he said that the 1950 ratio, based on the trend as has been shown for every decade since