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The Chamber of Commerce of the United States is in hearty accord with the aims of this legislation. We believe it is good legislation because it expresses renewed faith in and increases reliance on a free competitive economy to bring about a constant improvement in the living standards of our people.

We wish to make a plea for greater dependence on a free market economy which, as we understand it, is the primary aim of this administration and its legislative program. We believe that this dependence on the free market economy is justified by performance. In the short time since the end of World War II and despite the difficulties created by the Korean war, the industry built over 8 million new housing units and added several million more by converting existing dwellings. Besides this it has very markedly improved the condition of existing housing through the expenditure of billions of dollars on repair and modernization. All this constitutes a giant step toward the goal of providing every American family with a decent home.

The national chamber has worked for many years to encourage the elimination of slums and the restoration of blighted urban areas to economic and social usefulness. While we had reservations about the urban redevelopment program established in the Housing Act of 1949, believing it to be too limited and too costly, the pending legislation promises to remove these defects.

This legislation places a definite responsibility on the locality to put its own house in order with ordinances and enforcement of these ordinances to assure the proper maintenance of housing and to prevent its overcrowding, before that community can go to the Federal Government for assistance. It lets the Federal Government help in such a way as to encourage the conservation of sound structures. It helps to retard the decline of existing neighborhoods and to eliminate the causes of blight before it becomes necessary to do a wholesale clearance operation. Because of these desirable features, the provisions of title IV of the bill are strongly supported by the chamber and we urge their enactment.

A very important provision of the proposed legislation, which the chamber endorses, is that for a flexible interest rate to be regulated by the Persident from time to time so that FHA and VA mortgages will draw adequate funds to the building market. While we felt that the suggestion of the President's Advisory Committee that a board of five meeting at frequent intervals would have been a more workable way to have handled this adjustment, we believe that this proposal can be operated so that there is no arbitrary restriction on the normal flow of funds to this field. Certainly the ordinary American citizen is better served by a realistic interest rate which brings an adequate amount of lendable funds into the market rather than by a low fixed interest rate but no funds to borrow.

There are two features of the bill which in our judgment will make homeownership easier for the great majority of people. One would replace the existing variety of systems of loans to value relations for FHA-insured mortgages with a single system of loan-to-value ratios of not to exceed 95 percent of $8,000 value and 75 percent of the value in excess of that amount. The other feature would increase the maximum mortgage which may be insured by FHA from the present $16.000 for 1- or 2-family residence to $20,000 with corresponding increases for 3- and 4-family houses.

The raising of the top dollar limits for insured mortgages make a partial adjustment to restore FHA to the broad coverage of the market that it had in its beginning. It does this by providing an even schedule of loan ratios and avoiding a sharp increase in the downpayment requirements at a mortgage amount of about $12,000 as is now the case. The legislation removes an artificial barrier that has caused builders to build to meet an arbitrary formula rather than to seek out and serve the actual demand that may exist at the time. We believe it is best to have the wishes of our citizens, rather than a Federal official, determine the direction of production.

The proposal to provide the same mortgage insurance terms for new and existing construction is in keeping with the original idea of FHA as an accessory to the whole home-mortgage market. It was not for several years after the creation of FHA that provisions specially favoring new construction were introduced. Whatever justification there may have been for doing this at the time no longer exists. Under present day conditions we must recognize the desirability of favoring terms for financing existing homes not only as a means for encouraging maintenance of such property in good condition, but also as a means of stimulating new building. More and more the sale of a new home will depend upon the ability of the new home buyer to make a satisfactory sale of his old home. The proposed amendment would be very helpful in this direction.

We commend the recognition given in the bill to the importance of maintaining and improving the value of existing dwellings. Particularly noteworthy are the increase in loan limits and maturities for the insurance of modernization and repair loans and the provisions which would enable an FHA mortgagor to get the benefits of the so-called "open end" feature. He could obtain a loan for the improvement or alteration of his home by adding the amount of the loan to his existing mortgage without the necessity and costs of executing a new mortgage. In addition there is a provision which would make FHA insurance under certain safeguards available for both old and new residences located in rundown or blighted areas.

These provisions should be of immeasurable benefit in conserving the largest single element in our national wealth-our housing. They should help to improve housing conditions generally, and they should be of especial help in increasing the supply of substantial, comfortable, modern housing for families with low incomes.

We commend the simplification of the FHA statute by the elimination of provisions that either have no proven usefulness or have outlived their usefulness. We applaud those provisions eliminating differences in terms on the debentures offered in payment of the insurance and in allowances of foreclosure costs applicable to the several sections and subsections of the act.

Over the years FHA has been so laden with special-purpose functions and special-mortgage patterns designed to meet some assumed need or some current emergency that today it is difficult to count the number of possible ways of making an FHA mortgage. The effort to return to one general pattern for insuring loans on single-family houses and one for multifamily and cooperative structures should result in savings both to FHA and its users.

We also indorse the idea of setting up a secondary mortgage market and doing away with the present Federal National Mortgage Association. This new facility is really needed to help the rank and file of American citizens living in the fast-growing areas such as in the West and Southwest and those living in hundreds of average American small towns and cities which have no source of mortgage capital. To them such a secondary mortgage market spells the difference between their ability to have or not to have the house they desire and need. We in the Chamber with our many grassroots contacts are especially aware of this need of our average American citizens. In the past many of the aids which have been extended by the Federal Government have been to help the mass builder to serve the needs in our large urban communities. Now we need this new facility to help those in our smaller cities and towns.

We hope that with this in mind you will review carefully the recommended legislation on the secondary market and make it even more workable for these average people. I refer to the fixed nonrefundable charge of 3 percent which must be borne by all regular borrowers. We believe that the proposal of the President's committee which makes this refundable when the mortgage has been sold by the marketing organization is more equitable.

We are disturbed at the idea of asking a sound business organization, such as this secondary market facility ought to be, to furnish funds for an experiment in mortgage lending which appears to us to be unsound. I refer to the 40-year, no downpayment, FHA-insured loan's proposal in the legislation. We do not believe that it is good practice to ask an institution to run itself on sound lines so that it may finance its need through borrowing from the public and then ask this some institution to take Government funds and make them available for questionable risks. The idea of the sound secondary mortgage market which is the essence of the proposed legislation could work to the advantage of millions of our citizens and we endorse this.

What I have described comprises, we believe, a practicable housing program, one with attainable objectives. It is one that does not promise more than it can deliver but promises, nevertheless, a rapid and comprehensive upgrading and enlargement of the whole housing supply.

It appears to us that the extension of authority to the President to vary the loan to value ratios and maturities on FHA and VA loans is a provision which could be eliminated from the legislation without loss. It seems to us that this proposal would provide for a form of direct and selective credit control on the FHA, VA sector of the mortgage market which would keep that market in a state of constant uncertainty and would permit its manipulation to serve a wide range of political and social purposes that might be quite unrelated to the actual need for housing on the part of our average American citizens. We believe that the maximum limits on these loans should be directly controlled only by statute and

that dependence can be placed on general monetary actions to regulate the flow of funds. Credit and price controls are not popular with our American citizens and we do not think they should be used except in wartime.

So far as the 40-year FHA-insured loans are concerned we want to remind you that the liberalized provisions of the regular FHA-insured loans which we have endorsed should have an opportunity to be tried out before any such radical departure as this is called for. We feel sure that with the other changes proposed in section 203 loans that this special type of loan will not be needed. This special type of loan calls for a great deal of Federal programing, Federal supervision, and general Federal meddling which is unnecessary and undesirable. Assuming the continuance of the same rate of progress we have had, the goal of good housing for all citizens, which heretofore has never been reached in any country of the world, is within our grasp. The provisions of the pending legislation that the national chamber is endorsing should greatly help to speed up and make sure the accomplishment of this goal. The question before you gentlemen is which methods will prove quickest and most effective, and which ones will contribute most to the stability of our American economy. The continued addition of a million or more privately built and financed new houses a year combined with a vigorous program of upgrading the quality of the existing housing and removing housing that no longer can be economically maintained in good condition is the best method of doing this job. Any other method can have no more than a token effect at best.

The CHAIRMAN. You may proceed.

Mr. MASON. Sir, one of the things the chamber feels could be omitted from the bill without harming it is the provision which gives the President the power to set the maturities and the down payments on FHA and VA loans, and we do that because we believe that the free, private enterprise of our country will arrange for that setting; that our banks won't loan beyond what they believe is a sound loan, and we believe they should have that privilege, and that will vary.

The CHAIRMAN. The bill, as written, gives the President the right to set the terms in the downpayment and the interest rate.

Mr. MASON. That is correct; yes, sir.

The CHAIRMAN. You think Congress ought to specify that in the law?

Mr. MASON. I do, sir.

The CHAIRMAN. And the President should have no discretion whatsoever?

Mr. MASON. I believe that is the proper way to do it.

The CHAIRMAN. Terms, downpayment, and interest rate?

Mr. MASON. I believe it should be done by statute, by the Congress, and then let the

The CHAIRMAN. As it is now, as this proposed law is written, it gives the President the right to change them from day to day if he wanted to.

Mr. MASON. That is right. I believe that this provision for the changing interest rate is a proper one, however. In other words, I like a flexible interest rate.

The CHAIRMAN. You like a flexible interest rate, but not a flexible downpayment or yearly payments?

Mr. MASON. That is right.

One of the other things that we are a little disturbed about is the secondary mortgage market. We believe that the secondary mortgage market is very important to the ordinary people of this country.

Around the country, for the past few years, the aids that Congress has given through FHA have been to help the builders in the large areas and I think that was proper. That was where the bulk of our problem was, in those large areas. But now, for the next few years,

we have a lot of people in our smaller rural communities that need help, and we have, besides that, people in large, fast-growing areas out West, and in the Southwest, that need help, and a good secondary mortgage market would do that without upsetting the competition of this country at all.

The CHAIRMAN. Then you are in favor of the secondary mortgage? Mr. MASON. I am in favor of the market, but not the one that is written in the bill, because the way it is written in the legislation, this 3 percent nonrefundable charge, besides the ordinary charge of doing business-which is quite proper-but the 3 percent nonrefundable charge, where the bank which sells the loan has to invest 3 percent in the stock of a corporation which it can't market for a long, long while, just means to me that the bank won't take advantage of it, unless it is a very serious situation. And that will deprive these people in—well, I have a friend in Bluefield, W. Va., for instance, who can't build houses because he can't market the mortgage loans. And I have another friend down in Mr. Goldwater's area in Arizona. He writes me that they get money enough in Phoenix, but in these smaller towns. around, they just don't have funds to loan there, because there is no place where these smaller banks can market their securities.

The CHAIRMAN. Do you like that feature of the secondary mortgage where the President can call upon the Treasury of the United States for money to buy these mortgages direct?

Mr. MASON. No, sir; I do not. You are talking about the Government purchase of the proposed 40-year, no down payment mortgages. I can make it very positive that it is my viewpoint, and the viewpoint of the chamber, that with the other parts of the bill which provide for insured mortgages for 30-year, 95 percent up to a certain limit, and then 75 percent from there on, that we have no need for that 40year mortgage, even in these areas where it is thought that it might be effective.

As you know, the 40-year mortgage, is only proposed for relocation of people, and we believe that that can be done without that, and we don't believe that a mortgage of that kind is a really good vehicle. It creates some wrong impressions in the minds of the public.

The CHAIRMAN. Well, your point is that you don't think the banks or the mortgage people will buy such mortgages? You don't think there is a market for them?

Mr. MASON. I have been told by bankers that they would buy them with a guaranty.

The CHAIRMAN. They would buy them with the Government's guaranty?

Mr. MASON. Yes, sir. But my contention is that I believe that this administration of ours is interested in putting some of the work of running of this country back on private business, and not being paternalistic about it, and I believe that we can do that without the need of having that under the statutes

The CHAIRMAN. Well, the purpose of the 40-year or 50-year loan is to get away from public housing.

Mr. MASON. That is correct, sir.

The CHAIRMAN. On the theory that if we are going to spend a billion dollars for public housing, we maybe should spend a billion dollars for individual houses or doubles. Give these people a very,

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very long opportunity to pay for them with, say, nothing down, on the theory that two-thirds of them might pay for them, and your public housing might only cost $300 million instead of a billion dollars. That is the purpose.

Mr. MASON. That is the purpose; yes, sir.

The CHAIRMAN. The purpose of it is a substitute for public housing. If you will always keep that in mind, then you will be keeping the record straight.

Mr. MASON. That is correct.

The CHAIRMAN. That is the purpose of it, a substitute for public housing.

Now, the question is: Will it work; is it better than public housing; do we want to try some kind of a substitute for public housing? That is the point.

Would you rather, let's say, have a million units in the United States where people were living and were at least trying to pay for them and making some payments, and have some degree of pride in ownership, even though they were unable to pay for them in the end, than you would to have a million people live in so-called public apartment housing that 10 years from now will be slums?

Mr. MASON. I think the position of the chamber is probably well known to this committee-that we are unalterably opposed to public housing--but we did feel that with a 5-percent downpayment and a 30-year maturity, that the difference was so small between that and the 40-year proposed mortgage, that we would rather try the 30-year mortgage first, and see if it did not do the job

The CHAIRMAN. Of course, the question in my mind is: Is it practical and will it work? Will the banks buy the mortgages, or will the Government have to buy them, or furnish the money?

Mr. MASON. Certainly, they will buy the well-established section 203 FHA mortgages. They have demonstrated they will do that. And I am sure they will continue to do so. So our contention is that we should try the liberalized section 203 FHA mortgages as a means of counteracting public housing first, instead of going to this other 40-year-mortgage proposition which requires programing

The CHAIRMAN. What do section 203 FHA mortgages do that is better than this 40-year-mortgage plan?

Mr. MASON. It is not quite so liberal. It provides for a 5-percent downpayment for the first $8,000, and 75 percent beyond that. The $8,000, of course, takes care of everything that the 40-year-mortgage proposition would take care of.

So the difference is not very great. It is the difference between $200 and $300, perhaps.

The CHAIRMAN. Well, always keep in mind the only reason that no downpayment and long terms have been recommended or talked about, or even 95 percent, with longer terms, is to get away from public housing. To get people into ownership of their own houses and get them into the suburbs, rather than jammed up all together in a big building that goes way up in the air. And those public-housing settlements, in 10 years, will be slums.

Mr. MASON. Crowding is what makes slums.

The CHAIRMAN. Yes, crowding and smoke and dirt. And I will talk to you about the smoke in a minute. That is what makes slums. That is what we are trying to do, and that is the purpose of it.

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