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When I last looked at the figures a month or 2 ago, I remember there were just 26 foreclosures. I see here a statement as of January 31, 1954, which shows that a total of 2,289 direct loans have been terminated as of that date. That is out of the approximately 43,000 loans made by that date. Of these, 519 were terminated by repayment in full, 1,709 as a result of sale by the veteran, 29 by foreclosure, and 32 by voluntary conveyance, which is action probably consequent upon the inability of the veteran to keep up on his payments.

I say that our experience with the credit factor here has been extremely satisfactory.

Senator SPARKMAN. How many had been foreclosed?

Mr. KING. Through January 31, 1954, Senator, 29.

Senator SPARKMAN. 29 out of 41,000?

Mr. KING. 43,000.

Senator SPARKMAN. Nearly 43,000?

Mr. KING. Yes, sir.

Senator SPARKMAN. It seems to me that it is a very fine record. Mr. KING. Yes, sir; I think it is very good.

Senator BENNETT. Who services your contracts? Do you have a contract of your own?

Mr. KING. VA salaried people service these loans, Senator.

Senator BENNETT. Do you have any questions, Senator Bush?
Senator BUSH. No questions.

Senator BENNETT. Ĉan you tell the committee what, if anything, has been done to eliminate the duplications and wipe out the variations in standards between VA and FHA?

I notice the President's Advisory Committee was a little critical of the existence of these variations, and called on the heads of the two agencies to develop a mutual program which would minimize, if not eliminate, them.

Do you know whether anything is being done in that respect, or what has been done?

Mr. KING. Mr. Chairman, I know of no work that is actually being done, at least by VA, toward the ultimate accomplishment of the purposes of those who have raised this issue, which is to transfer all or part of VA functions to another agency.

Senator BENNETT. There is an intermediate item which I think is covered by the report which represents the elimination of unnecessary differences, appraisal standards, and paper work that they criticized rather strongly.

Mr. KING. Yes, sir.

Mr. Chairman, we have considerable difficulty in reconciling fact and fancy, with reference to many of those assertions or statements. It is widely believed, for example, that VA requires two sets of inspectors to come on the premises during construction, namely, FHA inspectors, and VA inspectors.

That is a very considerable exaggeration.

If I may, I will give you some statistics that bear on that: During calendar year 1953, the VA made appraisal assignments on slightly over 467,000 units. More than 223,000 of those related to the appraisal of a single unit of existing construction. In considering any possible overlap in inspections, therefore, such units must be excluded.

Now, of the remaining 244,000 units, a total of nearly 184,000 were scheduled for VA inspection. This would mean that there could be no dual processing in respect to the units thus being inspected by VA. As to the balance, VA would accept FHA compliance inspections with but few exceptions.

The VA rule, Mr. Chairman, is-"You, Mr. Builder, can take your choice as between FHA or VA inspections. If you take FHA inspections, we, VA, will take the FHA Form 2051, the final inspection certificate." That rule, as I have mentioned, is subject to some exceptions which I will refer to later. On the other hand, as to the builder who prefers VA inspections, in his case, no FHA inspections whatever are involved.

Now, the figures I have given you show that there is a possibility of duplication in less than 15 percent of the total appraisal work of VA, on new construction. That rule that we will take the FHA 2051 form eliminates practically all of that 15 percent. Now, in given exceptions, VA will either not take the FHA inspection, or will require supplemental VA inspections, usually a single, final inspection.

In the very few areas-and there are 3 or 4, at most-where we won't take FHA inspections, we agree to do so as soon as our reasons for not doing that are eliminated, and we are working that out very nicely with FHA, I believe.

As to those place where we still find it necessary to have a VA fourth and final inspection, the necessity for our doing so is consequent upon the need for having a determination made as to whether or not the plans and specifications upon which VA based its initial appraisal have been carried through in the actual construction. It is a little difficult to explain the routine of that. But I will try. As a builder in this relatively small percentage of cases, proceeds through both FHA and VA simultaneously, he puts in his package with both the agencies. If that involves land planning, VA accepts the FHA findings on that, as a rule.

But, now, during the time elapsing, between the submission of those plans and specifications, the making of the VA determination in value upon them, and completion of the construction a lot of things can happen. For example, the builder can alter his specifications. FHA is not very much concerned with the detail of that, because they are interested primarily in the observance of standards and in the mortgage loan value. The VA has to be interested also in the veteran's contract-in what the builder has contracted to supply to him. So, where a very considerable possibility of substitution exists, there is only 1 of 2 ways in which VA can get what is necessary: Either by having a lender certify that the in-place construction is identical with the specifications upon which VA is acting, or by having VA require a final of its own.

Now, in a considerable number of that type of case, where we have both agencies operating on one project, the lender does supply that certification and VA requires no final. But where no one will supply us with that certification, we have to go get the facts for ourselves. How essential that step is was learned abundantly by the two subcommittees of the House that went into this a year or a year and one-half ago.

Now, as to what we are doing to eliminate some of the cases of these complaints: We are endeavoring constantly to see that on the local

scene, VA's requirements conform with the pattern which FHA requires locally. Where we find we have to differ-and we tell our offices to do a lot of soul searching before they differ-where we find we have to differ as to "X," and "X" contemplates a given standard, we have it reported into Washington. If the VA technical staff here supports the position of its local office we check with the national office of the FHA to see if it will support its local office. There is ample opportunity for coordination in this routine.

If the home office of the FHA supports this specification or this standard "X" which our peopele couldn't get along with, then we give consideration in our central office as to whether we will make the particular point at issue a mandatory requirement or whether we will go along with standard "X."

These instances have been relatively few. We are urging and have been urging for some months that many of these details can be worked out very nicely if you have an effective local builders' committee to study these things and study the requirements of the agency, and endeavor to reconcile our respective positions on a practical basis.

Now, there is another ingredient in this picture which is causing some resentment against VA. Consequent upon experience, and that experience is reflected abundantly in the investigations of the Rains committee and the Teague committee, VA finds very often that it wants more in the way of engineering detail than the builder is prepared to supply. We want to know from an adequate engineering report how the drainage is going to work out in that area, or we may need data on soil factors, or the possibility of using septic tanks.

Now, that is an aggravating requirement of VA processing, dependent upon which side of the picture you are looking from, and it costs the builder some money. We require it only where we feel that otherwise we have no way of knowing whether the project, as proposed, is one that should have the Government agency's approval.

We have another little requirement that is somewhat aggravating. Once the installation goes on under that engineering report, we require, when it is in place when it is completed, that that engineer look at it and give us a followup report, stating that the installation was put in place in a manner consonant with his initial survey.

Now, I don't think that VA can do differently in those things. I don't think we could go back, again, and answer a subcommittee of the Congress, if we neglected to do these things, because I believe— although I don't have in mind the specific recommendations of either of those subcommittees-I believe that this action was either specifically recommended by those committees or is entirely within the tenor of the recommendations of those committees and within what those committees found would be necessary, were the incidence of legitimate complaints as to housing deficiencies to be narrowed.

Senator BENNETT. Well, I have enjoyed the explanation. Now, I would like a short answer: Are you working to try and eliminate the differences and confusion, or are the two agencies going down parallel courses, insisting on their individual rights?

Mr. KING. We are working to eliminate the causes of these complaints, Mr. Chairman, within the present alinement of functions and the divergent responsibilities of the respective agencies.

Senator BENNETT. You think you have made some progress in that direction?

Mr. KING. I think that there is being considerable progress made. We would be glad to submit the detail on any of these things, relative to any specific complaint you may have, as to unnecessary duplications. Senator BENNETT. The report of the President's Advisory Committee contains 7 specific references or 7 specific areas in which it says problems exist in the differences of approach between the 2 agencies.

I think we would like to have you submit, for the record, comments about each 1 of these 7 differences, unless you are prepared now to discuss them.

Mr. KING. I am not sure, Mr. Chairman, that I can identify the seven. I will endeavor to do it. If we can identify the seven, we will give you the detail.

Senator BENNETT. I can identify them for you one at time by reading from the report.

The first objection is-I am quoting from page 66 of the committee report

The time required to secure VA appraisals and certificates of reasonable value. The survey shows that on the average it takes twice as long to get a certificate of reasonable value from a VA field office as it does to get an FHA commitment. That goes on into further detail, unless you would like me to read the rest of the paragraph.

Mr. KING. I would be glad to make some allusion to that, specifically.

I believe you will find that that varies from office to office, and in some areas VA processes more expeditiously than FHA, and in other offices the opposite is true. The reason for that, basically, is the workload which currently is facing the individual office.

VA offices by and large have been facing extremely high appraisal workload factors. For example, our February estimates show a total incoming volume of appraisal requests which is higher than that for any period since early 1950, which, as you know, was the great 1,400,000-unit year.

We went up some 12,000 or 13,000 cases above January. Now, the technicians allowed the VA, on the budget considerations, are allowed on the basis of annual volume. Where you have fluctuations in the workload from month to month, the only result that humanly can be expected is that the office becomes backlogged. It gets behind in its processing.

We are adopting every expedient we can to reduce that processing time. However, it is going to continue to plague builders and I believe you will find FHA offices would be put in the same position if they had heavy influxes of volume.

Senator BENNETT. Are there no factors that contribute to that problem which represent more complicated reports, or more involved mechanics in making these appraisals?

Mr. KING. Yes, sir; there are factors that complicate that, Mr. Chairman.

The VA makes a finding of reasonable value. It determines the maximum price at which a builder can sell those houses to veterans under the VA program. So there is considerable in the way of appeals and jockeying and endeavors of one kind or another to work those specifications over and work those valuations over to see if they can't

get a better deal out of VA. It does occasion a very considerable workload.

Senator BENNETT. That is a problem that is related to the VA system which is not involved in the FHA system, is that right?

Mr. KING. I believe it is relatively less involved in the FHA system, although, of course, there is undoubtedly a lot of discussion or negotiation or pressure with reference to what specifications the FHA might require of a builder, on a given project, or as to what FHA will allow as a maximum mortgage amount.

Senator BENNETT. Does the VA endeavor to keep its specification formulas-I was going to say-up to date, keep them abreast of developments within the building industry, or are they inclined to lag behind the pattern of the industry?

Mr. KING. Basically, Mr. Chairman, as you know, VA uses the FHA booklet of MPR's. We don't impose a duplicate set of standards or specifications upon the building industry. We endeavor to keep that current, at all times.

There is considerable in the way of asserting that neither FHA nor VA-and you can read an article on the subject in the current issue of House and Home-keep abreast of improvements. VA is prepared to make a pretty good demonstration of the fact that we do keep abreast of improvements. However, the problem that bothers architects with reference to both the FHA and VA systems, as that article pretty well sets forth, is that we have to drag our feet in tempo to public acceptance. There isn't enough education of the public, or even of the lenders who are required to finance these houses, with reference to innovations in housing that have great merit.

Senator BENNETT. Is there any chance that you drag your feet too much? I would like to quote this sentence from the survey: "Many commented that VA appraisals are unrealistic, making no allowance for refinements in building products or planning, and forcing builders to leave out popular items demanded by veteran purchasers, and the result has been the production of minimum houses unacceptable to many veterans."

Mr. KING. We would contend that is not a true statement. Although I am not a technician, I went into this pretty thoroughly myself. I found in our cost approach to valuation, we allow specifically for anything that has merit in the way of a deviation or a modification of basic plans.

Senator BENNETT. Is it the process of getting the permission to make the deviation that helps to slow up the appraisal time?

Mr. KING. It would be true with reference to either an FHA or a VA office, that if a builder came in with plans that were unique, it would take longer to figure that job than it would to figure a Cape Cod, or a Williamsburg, or a square box. Apart from that, VA endeavors to allow a fair reflection of the added cost of those unique features in the VA valuation process.

For example, we have a specific linear-foot allowance for every additional linear foot of perimeter, and it is a liberal one. It would be hard to prove that statement you quoted. The debate probably would eventuate in an assertion, "Well, such and such a local office of VA hasn't heard the rule," and that in turn might be very hard to prove or disprove.

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