Senator SPARKMAN. With all the administration being done by the Government and the servicing, too, wasn't it? Mr. SMITH. That's right. Senator SPARKMAN. And yet the lending institutions never did go for it very well. I remember when it was provided and I remember the high hopes we had at the time. If I remember correctly, the first one that was made was down in southeast Alabama. I think I was down there, at Geneva, I believe, one of the towns in southeast Alabama. I was there when it was made. Mr. SMITH. Senate bill 1276, which is referred to in Mr. Farrington's statement, would permit adjusting the interest rates for these loans under titleI, in keeping with the money market at any given time, but not to exceed 5 percent. Senator SPARKMAN. You mean of the Bankhead-Jones Act? Senator SPARKMAN. But it would involve this giving of a second mortgage? Mr. SMITH. We are proposing an additional amendment to the Bankhead-Jones Farm Tenant Act, that would permit either the making of the loan direct by the Government, or insuring the loan made by private brokers, and under that proposal, we could make or insure the loan on a second-mortgage basis. Senator SPARKMAN. I want to say that I am very strong for the Bankhead-Jones Farm Tenant Act. I think it was one of the best pieces of legislation ever passed. I take considerable pride in the fact that the first speech I ever made in Congress was in favor of that act, back in 1937. I think it has done a wonderful job. But, this Farm Housing, under title V, was written because of the inadequacy of the Bankhead-Jones Farm Tenant Act to provide housing, particularly on those farms that were not a part of the BankheadJones tenant purchase program. Mr. SMITH. Senator, at the present time, the bulk of the lending under title V has been in connection with the section 502 loans. Senator SPARKMAN. And it ought to be. That is as it should be, and as was contemplated originally. Mr. SMITH. Approximately 50 percent of those loans are made on the basis of second mortgages. Senator SPARKMAN. With the Government-yes; that was the purpose of the act and that was the reason the direct lending was set up. It was deemed necessary to do that, where there had to be a second mortgage. Now, under your program, you propose to try to sell that to the investing public, and I just don't think they will buy it. Mr. SMITH. We had authority to do either, for making the loan direct or insuring Senator SPARKMAN. Isn't title V housing working very well? I would like to say in addition to that, Senator, a very high percentage of the section 502 loans that have been made under the Housing Act and the same is true, we think, of the section 503 loans are made on the same type farms, same sites and character of farms, that loans are made on under the Bankhead-Jones Farm Tenant Act. And we are of the opinion that we can carry on an effective farm housing program on family-type farms with bona fide farmers by a few changes in the Bankhead-Jones Farm Tenant Act. Senator SPARKMAN. Isn't it true that under the Bankhead-Jones Farm Tenant Act your loans have been primarily in connection with the original purchase of the farms? In other words, such housing as you have done there has ordinarily been in connection with the. purchase of the farm, isn't that right? Mr. SMITH. No, sir; in the past several years more than half of our title I loans have been made to landowners, for the further development of the farm, a high percentage of which has to do with improving the house or adding other farm buildings. Senator SPARKMAN. Did you say it also included building new houses? Mr. SMITH. Yes, sir. Senator SPARKMAN. How did you say your loan volume under that, for housing purposes, compares with the volume under title V? Mr. SMITH. We haven't been making as many loans under title I as we have under the housing for the last few years. Senator SPARKMAN. Why? Mr. SMITH. One thing, I think, is the loan fund situation and the average size of the title I loans are higher. Our loans have been averaging about $5,500, but the average size of our title I loans are approximately $10,000, at the present time. Senator SPARKMAN. By the way, that is another thing you have accomplished that I think you should point to with a great deal of pride. That is the price at which you have been able to build this farm housing, an average of say $5,500. Mr. BARNARD. I think it is around $6,500. Senator SPARKMAN. I was present, by the way, when you closed the first contract, when you made your first contract on this new housing program, out in the country in Scottsboro, Ala. And that house was built-a very pretty house for $3,600. Mr. BARNARD. In Congressman Jones' district. Senator SPARKMAN. It was. And the man's name was Jones, a veteran, who got the first loan. I want to say this. I want a good program that will function in rural areas, and I know the difficulty of getting one. It took us a long time to work out the one under sections 502 and 503, and so forth, and I am just afraid to see it scrapped. It is working, and it is working well, and you have made a good record out of it, and I just don't see the advantage of scrapping one that has proved itself, and going into a field which to me looks pretty dubious. Senator BENNETT. Will you proceed and finish your statement, sir. Mr. FARRINGTON. I have covered No. 1. Now, item 2. Provision that title I loans may be insured up to 100 percent of the fair and reasonable value of the farm. The act now provides that the insurance authority is limited to 90 percent. These revisions will place the insurance authority on the same basis as direct loans. In discussions with the Bureau of the Budget and other interested Government agencies, questions have been raised concerning these recommendations that have not been finally resolved. These relate to the proposed insurance of second mortgages. As soon as these questions are resolved, drafts of legislation covering these proposed revisions will be submitted. The Department is in favor of legislation providing ample credit on a reasonable basis for better housing for bona fide farmers. On July 14, 1953, the Department transmitted proposed legislation to the Congress which would extend the present provisions of title V of the Housing Act of 1949 on an indefinite basis. However, after further consideration, it now believes and recommends that S. 1276, with the proposed revisions discussed in this statement, would provide ample credit on family-size farms and would be preferable to continued utilization of the authority of title V of the Housing Act of 1949. As indicated, the proposed revisions the Department of Agriculture is recommending have not been finally agreed upon by the Bureau of the Budget and other interested Government agencies. We are unable, therefore, to say that the proposal has the approval of the Bureau of the Budget. Senator BENNETT. Will you stand ready to return to the committee, with the proposed amendments that you are now working on? Í think we will probably be in session on this big bill for a good many weeks. Mr. FARRINGTON. We certainly will, Mr. Chairman. And this may be disposed of in a matter of days. It is merely a matter of getting around the table for a couple of hours. Senator BENNETT. If you will notify the staff of the committee when you do have it disposed of, we will undertake a schedude for your reappearance. Mr. BARNARD. I believe the Bankhead-Jones Farm Tenant Act amendments will probably go to the Agriculture Committee. Senator BENNETT. That's right. But we are concerned with them. because we might decide to take title V out of this bill, and we might not do that if we thought these other proposals were adequate. Senator SPARKMAN. I think we ought to be furnished with a statement, because it does bear on this. Mr. FARRINGTON. We will do that. Senator BENNETT. Ladies and gentlemen, these are all the witnesses that have been scheduled for today. We will take up again at 10 o'clock tomorrow morning, in the Banking and Currency Committee room, when Mr. Cole, the Housing and Home Administrator, will resume the witness stand. So, we are in recess until 10 o'clock tomorrow morning. (Whereupon, at 3:35 p. m., the committee recessed, to reconvene at 10 a. m., Friday, March 12, 1954.) HOUSING ACT OF 1954 FRIDAY, MARCH 12, 1954 UNITED STATES SENATE, COMMITTEE ON BANKING AND CURRENCY, Washington, D. C. The committee met, pursuant to recess, at 10:30 a. m., in room 301, Senate Office Building, Senator Homer E. Capehart, chairman, presiding. Present: Senators Capehart, Sparkman, and Frear. The CHAIRMAN. The committee will please come to order. STATEMENT OF ALBERT M. COLE, ADMINISTRATOR, ACCOMPANIED Mr. COLE. Thank you, sir. We are now at page 22 of the statement which you have, Senator. We have been reading it not consecutively. We are now on page 22. The broadened authorization provided in title IV of the bill is designed to assist our cities to increase both the scope and effectiveness of their efforts to eliminate slums and blight, and to develop and preserve well-organized residential neighborhoods of good homes in a suitable living environment for adequate family life. The major change of emphasis and approach which would be provided by the bill would, in my judgment, permit a much more realistic and effective means of accomplishing that basis objective. This bill recognizes that slums and blighted areas are the symptoms, not the causes, of this particular urban disease. It recognizes the plain fact that we cannot cure the disease by eliminating only the symptoms and doing nothing about the causes. It recognizes that the pressure from these causes pushes American cities along the pipeline of deterioration faster than slums can be demolished and cleared at one end and new dwellings added at the other. It recognizes that we must continue to demolish and clear our slums, and to add good new housing to the supply, but that, if we are to be realistic about the job of eliminating urban slums and blight, it is necessary to go after the causes as well as the symptoms of the trouble. |