Comparison of estimated gross monthly rental on an $8,000, 41⁄2-room unit financed under proposals for nonprofit and cooperative housing for families of moderate income and with a 90-percent mortgage insured by FHA under sec. 608 for a privately owned (for profit) project

1 Vacancy reserve of 3 percent used in view of cooperative feature and low rental rate. 2 Vacancy allowance of 7 percent.

3 Operating expenses-including all utilities and a reserve for replacement-of $24.40 per unit per month assuming same experience as on PHA low-rent housing assisted under USHA Act.

These figures for estimated operating expenses represent actual operating experience on large-scale rental housing projects insured by the FHA, adjusted to reflect what in the opinion of FHA represents a national average operating cost on a well-run project-including utilities used by the tenants.

Real-estate taxes at 1.6 percent annually on total cost.

Loan at $8,000 for 50 years on a level annuity basis.

"Includes principal and interest payments on a $7,200 mortgage at 4 percent for 32 years, 7 months, on a level annuity basis.

Mortgage insurance premium of 2 of 1 percent of the outstanding balance.
Contingency reserve of 3 percent of taxes, operating expenses, and debt service.

10 Funds available for income tax, reserves, and dividends.

Source: Housing and Home Finance Agency-Office of the Administrator, Economics and Statistics Branch.

Estimated monthly gross and shelter rent and debt service for a nonprofit organization on a $7,000, $8,000, and $9,000 41⁄2-room dwelling unit with 100 percent financing, assuming project operating expenses as on PHA projects

1 Estimated on the basis of a special review of operating expenses in higher cost urban areas: Operating expenses-including all utilities and a reserve for replacement of $24.40 per unit per month assuming same experience as on PHA low-rent public housing assisted under USHA Act; real estate taxes at 1.6 percent annually on total cost; contingency reserve of 3 percent of expenses; vacancy reserve, 3 percent; debt service as indicated.

2 Excluding all utilities-gas, electricity, water, fuel, and pay roll for heating. Estimates assume same experience on operating expenses as on PHA low-rent public housing assisted under USHA Act-operating expenses $24.40 per unit per month less $8 for afore-mentioned utilities. 3 Includes only interest and principal on level annuity basis.

Source: Housing and Home Finance Agency, Office of the Administrator, Economics and Statistics Branch.

Senator SPARKMAN. Come around, Mr. Greene, please.
Proceed, please. We are happy to have you with us today.

STATEMENT OF WALTER L. GREENE, FIRST ASSISTANT COMMISSIONER, FEDERAL HOUSING ADMINISTRATION

Mr. GREENE. Mr. Chairman and members of the committee, I am Walter L. Greene, First Assistant Commissioner of the Federal Housing Administration. I am grateful for the opportunity to appear before this committee on behalf of Commissioner Richards, who is absent from the city. I assume the committee would like me to limit my remarks to the amendments to S. 2246 which affect the operation of the FHA. These remarks will be made in the order in which amendments to the National Housing Act are presented in the bill.

Section 101 of S. 2246 proposes amending the National Housing Act by removing the expiration date for the insurance of loans under title I. This title, which authorizes the Commissioner to insure qualified lending institutions against loss on small loans made to finance the alteration, repair, improvement, or conversion of existing structures, expires March 1, 1950. Since the approval of the original National Housing Act of 1934 the authority to insure these repair loans has been extended or renewed 13 times. On each occasion there was considerable inconvenience and delay caused home owners as well as disruption in the operating procedure of insured lending institutions, local dealers, wholesalers, and suppliers.

Our experience of last summer, when title I expired on June 30, was renewed for 60 days, renewed a second time on September 1 for another 60 days, then again nearly expired on November 1, but was extended at the last minute to March 1 of this year, brought a plea from members of industry as well as the lending institutions in the interest of the consumer to place future operations on a permanent basis.

In establishing title I on a permanent basis, it is desirable that a provision be made whereby the insured lending institutions are not credited with excessive protection against loss. This is accomplished in the proposed amendment by authorizing the Commissioner to cut back the accumulated insurance protection by 20 percent each 6 months.

S. 2246, as presently written, provides for the establishment of a $5,000,000 insurance fund for the new low-cost single-family mortgageinsurance program under section 8 of title I. Further study has led us to the conclusion that a fund of $1,000,000 would be ample at this time for this purpose, and we recommend the proposed change.

The amendments to S. 2246 include an increase in the title II revolving-fund authorization from $6,750,000,000 to 9.5 billion dollars. One and one-quarter billion dollars of this increase would be made available directly to FHA upon passage of this bill, and the remainder of 1.5 billion dollars would be subject to the approval of the President. This proposed increase is expected to be ample for anticipated insurance operations under title II until the end of the fiscal year 1951. The authorization of $6,750,000,000 now available will be exhausted by late February-about 6 weeks hence.

The size of the increase requested is based generally on a continuance of recent levels of applications under section 203 and on an expansion of rental housing operations under this title following the expiration of section 608 on March 1, 1950, or the date of enactment of this bill, whichever date is earlier.

I would like to call your particular attention to the language recommended under section 106 of S. 2246 which amends section 207 (b) of the National Housing Act. In addition to requiring a mortgagor to certify that in the selection of tenants he will not discriminate against any family by reason of the fact that there are children in the family, it is further proposed that the Commissioner be authorized and directed in the administration of this section, by regulation or otherwise, to direct the benefits of mortgage insurance hereunder primarily to those projects which make adequate provision for families with children and to make every effort to provide such accommodations at moderate rental charges. These provisions clearly point out the intended direction of the 207 program; namely, providing adequate accommodations for families with children and to provide such accommodations at rents which better meet the abilities of families of moderate income.

In line with this objective we are recommending a sliding scale of ratio of loan to value somewhat similar to the pattern presently established under section 203 for single-family owner-occupied homes. These new provisions would permit a ratio of loan to value of 90 percent on that portion of the total value represented by $7,000 per unit and 60 percent on that portion of the value in excess of $7,000 per unit and not in excess of $10,000 per unit. This provision, we believe, will be very effective in encouraging sponsors to provide greater numbers of moderate-rental accommodations.

To further implement the objectives set forth above, we are recommending that the maximum mortgage per unit of $8,100 be applicable only in those cases where the average number of rooms per unit in a given project is 4.5 or more. In those cases where the average number of rooms per unit is less than 4.5, we recommend that the maximum loan per unit be reduced to $7,500.

Throughout our extensive operations under section 608, we found that, in order to give proper examination to applications for rental properties and to make adequate inspection thereon, we were required to charge an appraisal and inspection fee in connection with such cases of at least eight-tenths of 1 percent. Section 207 currently limits such fee to one-half of 1 percent, and we are accordingly recommending that this be changed to 1 percent.

To facilitate working out defaulted cases and avoid foreclosure wherever possible, we are recommending an appropriate amendment to provide that debentures issued under section 207 be issued as of the date of default, as has been the case in section 608, instead of issuing such debentures as of the date foreclosure proceedings commenced.

Senator SPARKMAN. Mr. Greene, all of that relates to the proposed amending of section 207, does it not?

Mr. GREENE. Yes, sir.

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Senator SPARKMAN. We don't seem to have the amendments available yet.

Mr. GREENE. Title I and section 207?

Senator SPARKMAN. What is that?

Mr. GREENE. Title I and 207?

Senator SPARKMAN. Yes; and the purpose in amending title I is to lend permanence to that program?

Mr. GREENE. Yes.

Senator SPARKMAN. The purpose in amending section 207 is to liberalize the features. It is anticipating the discontinuance of section 608?

Mr. GREENE. Yes; and incorporating an incentive to build in the lower price range-the same incentive we have in the sliding scale. unle section 203.

Senator SPARKMAN. Yes. I used the term "liberalize." It really changes some of the provisions of section 207 so as to make possible these larger family units.

Mr. GREENE. That is right.

Senator SPARKMAN. In rental properties.

Mr. GREENE. That is correct.

Senator SPARKMAN. Such as have been built generally under section 608?

Mr. GREENE. Yes.

Senator SPARKMAN. But the basic features of 207 are retained?
Mr. GREENE. They are retained; yes, sir.

Senator SPARKMAN. Now, Mr. Foley, Senator Maybank was going to ask you some questions with reference to S. 2570, the bill that Senator Anderson is proposing.

You recall in the very beginning of the hearing he was eager to have those on the record. I suppose he will be in soon. Do you care

to comment on that now, however?

Mr. FOLEY. I will be glad to, Senator.

As I understand it, the question arises out of the submission of a special bill, S. 2570, with respect to transfer of a temporary-housing project. The questions were, as I understand it, first, whether the disposition provisions in S. 2246 would give the necessary authority to handle that situation, and the answer to that is "Yes."

If you will permit me to do so I would like to read to you from the letter we have written on the subject:

The proposed general legislation contained in S. 2246, which is now pending on the Senate Calendar, would care for such situations and provide for the disposition of all war and veterans' housing in a consistent manner without discrimination among localities in like circumstances.

This proposed legislation would permit the village to secure transfer of this project upon payment of the cost to the Government of the underlying land if the village represents that it does not propose to dispose of the property for housing use except to another public agency or educational institution. It would also permit the village to purchase the project at its fair market value and subsequently to dispose of it in any manner in which it determined.

In the alternative, after a conditional or unconditional determination by resolution of the governing body of the village that the housing is satisfactory for permanent housing or nonhousing use in the community, the Housing and Home Finance Administrator could sell it to others at its fair market value without assuming any responsibility with respect to compliance with conditions contained in the resolution. The Administrator could, however, afford the village an opportunity to make arrangements with the prospective purchaser or purchasers as to compliance with conditions of the village concerning the use or physical characteristics of the housing. As you know, the enactment of disposition provisions such as those contained in S. 2246 would be in accord with the program of the President.

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