WEDNESDAY, FEBRUARY 20, 1957.

HOUSING AND HOME FINANCE AGENCY

WITNESSES

ALBERT M. COLE, ADMINISTRATOR

OAKLEY HUNTER, GENERAL COUNSEL

M. CARTER MCFARLAND, ACTING ASSISTANT ADMINISTRATOR (PLANS AND PROGRAMS)

LESTER P. CONDON, DIRECTOR, COMPLIANCE DIVISION

LEE ANDREWS, DIRECTOR, COMMUNITY DISPOSITION PROGRAM JOHN M. FRANTZ, AGENCY BUDGET OFFICER

NATHANIEL J. EISEMAN, PRINCIPAL BUDGET ANALYST

JOHN C. HAZELTINE, COMMISSIONER, COMMUNITY FACILITIES ADMINISTRATION

PERE F. SEWARD, DEPUTY COMMISSIONER

JAY duVON, DIRECTOR, COLLEGE HOUSING BRANCH

RICHARD L. STEINER, ACTING COMMISSIONER, URBAN RENEWAL ADMINISTRATION

RICHARD H. ADAMS, DIRECTOR, ADMINISTRATIVE MANAGEMENT BRANCH, URA

Mr. THOMAS. Will the committee please come to order?

We have with us this morning the Housing and Home Finance Agency representatives.

Do you have any other people here besides those from the Office of the Administrator, Mr. Cole?

Mr. COLE. No, sir.

Mr. THOMAS. Gentlemen, we have with us the group comprising the Office of the Administrator and, certainly, it is nice to have with us our former colleague and the present Administrator, Mr. Albert M. Cole; we also have the General Counsel, Mr. Oakley Hunter, our former colleague.

We are glad to have with us the Acting Assistant Administrator, Mr. Carter McFarland; Mr. Condon, Director, Compliance Division; Mr. Lee Andrews, Director, Community Disposition Program; Mr. John M. Frantz, Agency budget officer, who is well and favorably known; Mr. Nathaniel J. Eiseman, who is the principtl budget analyst. The Community Facilities Administration is ably represented by Mr. John C. Hazeltine, Commissioner, and our old and distinguished friend of many years, Mr. Seward, the Deputy Commissioner; Mr. Jay duVon, the Director of the College Housing Branch.

From the Urban Renewal Administration we have Mr. Richard L. Steiner, the Acting Commissioner, and Mr. Richard H. Adams, Director, Administrative Management Branch of the Urban Renewal Administration.

Mr. Administrator, if you or any of you people have a statement for us, we will certainly be delighted to listen to you as long as you want to talk.

GENERAL STATEMENT

Mr. COLE. Thank you very much, Mr. Chairman and members of the committee. I am glad to have the opportunity to appear before your committee today in behalf of the President's Budget Program for the Housing and Home Finance Agency for fiscal year 1958.

As this committee knows, the housing situation in the country today is in a state of flux, and there is more than a little confusion about just what is going on. Some say there is too much Government assistance to housing; some say too little. Some argue that interest rates are too high; others contend they are too low. Some say the housing economy is about to collapse and drag the general economy down with it; others can see no such catastrophe in the making. In introducing this budget, I will try to give you briefly my own appraisal of the overall situation and the general outlook for the future, and then I will briefly touch on the highlights of these estimates.

The first factor that has to be recognized, of course, is that housing is feeling a very definite money pinch at this time. For some months past the tightening up of the mortgage market has created problems for both home builders and would-be purchasers. Housing starts are down more than seasonally, and this effect has shown up more prominently in the Government-insured and guaranteed sector of the market, with its fixed interest rates. As you know, we have raised the FHA rates and have recommended a parallel increase in the GI rate, in order to restore these kinds of loans to a competitive position in the market. In the interim until these measures can have their effect, a considerable part of the gap is being bridged by Fannie May's purchase activities in the secondary market.

The programs covered in the budget are based on assumptions related to a level of about 1.1 million new starts. Although that is somewhat above the present seasonally adjusted level, I do not think it will require a great improvement to make the figure attainable. My best judgment as of now is that there will be enough improvement to make the assumptions quite reasonably realistic.

Of course, none of us claims to be able to predict what is going to happen over the next 16 months. I can only give you my personal opinion, and it is probably superfluous even to remind you that there are many other views. Personally, I look for a moderate improvement in the availability of mortgage funds during the balance of this year and fiscal year 1958. I think there are some signs pointing that way already, even though they are not very striking, perhaps. Yields on long-term Government bonds have eased off a bit since the first of the year. We are beginning to get a few reports-I would not want to say more than a few, as yet of institutional lenders reexamining their plans with a view to increasing the share of funds allocated for new mortgage investment.

I guess, Mr. Chairman, that the note I am trying to strike is one of cautious optimism. Our budget does contemplate a moderate improvement. I think that if the financial picture stayed as it has been in recent weeks, or tightened up further, that quite a few esti

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