SEC. 506. The third sentence of subsection (e) of section 10 of the United States Housing Act of 1937, as amended, is hereby amended by striking out the period at the end thereof and inserting a colon and the following new proviso: "And provided further, That, notwithstanding any other provisions of law except provisions hereafter enacted expressly in limitation hereof, the provisions of this subsection and of section 9 shall be in full force and effect, and, insofar as the provisions of any other Act are inconsistent with the provisions of this subsection or of said section 9, the provisions of this subsection and of said section 9 shall be controlling."

Mr. HENDERSON. Too often in the slum-clearance program we find that Negro residents in the areas which are designated to be cleared, are displaced by the force and weight of the Government, under the power of eminent domain, and all of that, and then refused the opportunity to live in the new housing that is built on the land that is cleared. We feel that is grossly unfair, Senator, and that if the slum clearance program is going to operate effectively, and in the way that the Federal Government and the principles of democracy should be handled, certainly people who are cleared from the land should have the opportunity to come back, if they meet the economic requirements. We suggest that the committee consider putting an amendment in this bill which would guarantee that that could be done.

That is not as revolutionary as it might seem. Of course, the slumclearance program itself is revolutionary, but Mr. Zechendorf, the big builder from New York, was down here the other day, and in his layout of what he plans to do down there in Foggy Bottom, and the tremendous development he is going to make, he announced that the housing that would be constructed there, under his leadership, would be available to all persons, without regard to race or color. As you know, a lot of the people who are going to move there are going to be Negroes, and if they meet the economic requirements for the housing that will be built, under the agency of the Federal Government, it seems to me that they should be permitted to go back there. We would like the committee to give serious consideration to that, because otherwise, Senator, the slum-clearance program, I am afraid, is likely to get bogged down in a great deal of litigation.

One other aspect of slum clearance is relocation, and we seriously believe that the strict relocation requirements of the 1949 act should still be adhered to. In addition to the workable plan that is talked about in the bill, and in the other features that are mentioned, we believe that section 105 (c) in the act should be repealed, to provide for relocating people in safe and sanitary homes, equally accessible to their employment, and so forth.

We do not wish our criticism of the way the Federal Government's housing program has operated in the past to be considered a reflection on either President Eisenhower or Administrator Cole. Both have shown an acute awareness of the problems of minorities and a willingness to do something about it administratively. I would just like, at the expense of burdening the committee a minute longer, to read this excerpt from the President's housing message:

However, the administrative policies governing the operations of the several housing agencies must be, and they will be, materially strengthened and augmented, in order to assure equal opportunity for all our citizens to acquire, within their means, good and well-located homes.

We think that is a fair statement of policy, and we hope that the different constituent branches of the Housing and Home Finance

Agency will carry out the President's wishes in that regard, and set up these administrative policies, and, incidentally, carry out the wishes of this committee, such as you included in the report last year.

Mr. Cole has constantly warned the building industry of the necessity of doing something about the housing needs of minorities. I would just like to call your attention to-I am not offering it for the record the latest issue of the National Association of Home Builders magazine Correlator, in which they feature a series of articles on housing for minority groups. Among these they mention the work that has been done by some pioneers in this field. There are still pioneers. The industry generally has turned its back on this question.

The Congress, however, should provide the basic legislation to strengthen their hands.

Great work has also been done by the race-relations staff of the Housing and Home Finance Agency and its constitutent agencies. This staff, we believe, should be strengthened and enlarged.

We are not giving a blanket endorsement to the bill, although I am not offering any criticism of any particular point. We did endorse the Housing Act of 1949, and it hasn't worked out the way we feel it should have, as far as we're concerned. We believe in the same principles, and so forth, and there is no doubt about it but that this bill follows somewhat in that same tradition, although it has some new ideas and new approaches to the problem.

But the question is how will it work, so far as we are concerned. That is the question we want to ask.

Senator, in conclusion, I note in this magazine House and Home that your staff member, Mr. McMurray, is planning to leave the committee. I don't know how the committee feels about him, but I know some of us who have worked on the Hill for a number of years will be very sorry to see him go.

I thank you for this opportunity to appear.

Senator FREAR. Just one question: Does the organization you represent have restricted membership?

Mr. HENDERSON. They do not.

Senator FREAR. As I understand it, the American Council on Human Rights is made up of six national college fraternities and sororities, as listed on your letterhead, and there is no restriction on your membership?

Mr. HENDERSON. No. The majority of our members are colored, but there are no restrictions as to members.

Senator FREAR. As to not only color, but as to religion and creed? Mr. HENDERSON. That is right. There are no restrictions what

soever.

Thank you, Mr. Chairman, for this opportunity.

The CHAIRMAN. Thank you. You have been very, very helpful, and we appreciate it. You have made some very constructive suggestions. We will recess until 10 o'clock tomorrow morning, at which time we will have the Mortgage Bankers Association, the American Society of Civil Engineers, the Wherry Housing Association, the Residence at Ease Association, and then the Lindenwood Realty Corp.

(Whereupon, at 12: 10 p. m., the committee recessed, to reconvene at 10 a. m., Tuesday, March 16, 1954.)

HOUSING ACT OF 1954

TUESDAY, MARCH 16, 1954

UNITED STATES SENATE,

COMMITTEE ON BANKING AND CURRENCY,

Washington, D. C. The committee met, pursuant to recess, in room 301, Senate Office Building, at 10:10 a. m., Senator Homer E. Capehart (chairman) presiding.

Present: Senators Capehart, Bricker, Ives, Bennett, Beall, Goldwater, Maybank, Fulbright, Robertson, Frear, and Douglas.

The CHAIRMAN. The committee will come to order.

The first witness is Mr. Clarke of the Mortgage Bankers Association. You may proceed in your own way. Would you like to read your statement or talk from it?

Mr. CLARKE. I thought I would read it.

The CHAIRMAN. You may proceed in your own way.

STATEMENT OF WILLIAM A. CLARKE, PRESIDENT, ACCOMPANIED BY SAMUEL NEAL, GENERAL COUNSEL; MAURICE R. MASSEY, JR., PHILADELPHIA; AND JAMES W. ROUSE, BALTIMORE, MD., ALL OF MORTGAGE BANKERS ASSOCIATION OF AMERICA

Mr. CLARKE. My name is William A. Clarke. My home is in Media, Pa. I am the principal owner and operating head of a mortgage company bearing my name in Philadelphia. I am appearing today on behalf of the Mortgage Bankers Association of America of which I have the honor of being the president.

Although the Mortgage Bankers Association has in its membership of over 2,000 representation of all types of mortgage-lending institutions, the largest part consists of organizations the primary function of which is the development of mortgage business and the origination and servicing of loans for the account of other institutions, mainly banks and life-insurance companies.

Mortgage bankers must have close relations with, and intimate knowledge of, every element and aspect of home-building and homefinancing activity. There can be no advantage to them that is not an advantage to this great activity as a whole. For only when mortgage money is available at attractive terms, when builders are able to find a good market for their houses, when buyers are both satisfied with their houses and capable of meeting their mortgage obligationswhen, in short, the country is prosperous and the economy expanding, can the mortgage-banking industry live and grow. There is no way in which mortgage bankers can prosper unless all with whom they deal are prospering.

The interest of mortgage bankers, consequently, is not a narrow one. Since the legislation before this committee, if enacted, will have a profound influence on the future course and character of the housing market and, through that, on the whole economy of this country, our concern with it is justifiably great, as I believe our view toward it and its implications is genuinely broad.

We have been much impressed by and are in full accord with the statement of basic policy which introduced the recent report of the President's Advisory Committee on Government Housing Policies and Programs. Because of its significance as well as its bearing on what I shall later say, I ask your indulgence to let me read it in full:

It is the conviction of this committee that the constant improvement of the living conditions of all the people is best accomplished under a strong, free, competitive economy, that every action taken by Government in respect to housing should be for the purpose of facilitating the operation of that economy to provide adequate housing for all the people, to meet demands for new building, to assure the maintenance, restoration, and utilization of the existing stock of housing, and the elimination of conditions that create hazards to public safety and welfare and to the economic health of our communities, and that only those measures that prove to be successful in meeting these objectives should be continued.

Since this statement has been quoted or paraphrased both in messages of the President and speeches and statements of the Housing Administrator, we assume that it offers the underlying principle on which this legislation is based. Our examination of the bill has been made with the view of considering the extent to which this principle has been embodied in its specific provisions.

Title I, for the most part, we believe faithfully follows this underlying principle. It looks upon FHA, as did its originators back in 1934, as a means for improving private lending methods, of making possible a wider distribution of the savings of the country for mortgage-lending purposes, and, through that, a great expansion of the housing market and the improvement of housing conditions; but not as a means for supplanting private savings with Government credit, or supplanting private decisions, based upon demand as expressed in a free market, with official decisions as to what ought to be built and where and how much.

The original FHA statute was relatively a simple affair, dealing broadly with the whole housing market, high, low, new, and old, without discrimination or special favor. In the intervening years, the tendency has been to move away from this position, to substitute special purposes for one broad purpose, Government direction of activity for private decisions, and complexity for simplicity.

The results have not been satisfactory. The law has had to be frequently changed to prevent excesses resulting from misconceptions of the market by Government officials.

The creation of special provisions for one type of activity or another has produced pressures of all kinds to increase or modify these favors. In the end the statute has been so cluttered up with procedural variations and provisions of little or no utility that it has got beyond the comprehension of the experts in the field, let alone the ordinary citizen for whose benefit it was intended.

The pending bill probably goes as far as is presently possible to simplify the statute, to remove discrimination as between one type of house and one type of borrower as against another, to reassert con

fidence in the private market to make its own decisions, and to make FHA again truly an instrument for facilitating the operation of "a strong, free, competitive economy."

Specifically, we endorse the elimination of sections of the National Housing Act that have no proven utility; the simplification of procedures for handling group accounts in the mutual mortgage insurance fund; the allowances made against the cost of foreclosure; the provisions on debentures issued on foreclosure; the removal of distortions in the schedule of loan-to-value ratios so as to avoid undue concentration on one area of the market; the increase in the top dollar limits so as partially to restore FHA's original broad market coverage; the equalization of terms for new and existing construction; the increase in the limits for financing unsecured loans for repair and modernization; the application of the "open-end" procedure to FHAinsured loans; and the utilization of FHA-insured loans for the renewing of blighted neighborhoods.

We have only a few suggestions to make about these sections of the act. One of these would be to give FHA authority to refund its own debentures, if necessary, at their 10-year maturity, instead of having to resort to Treasury financing as might be necessary if the foreclosed properties should not have been previously liquidated. Another is a proposal to facilitate the operation of section 213 of the National Housing Act dealing with cooperatives.

On that subject I am not proposing to testify. Mr. Maurice R. Massey, Jr., who is a member of our board of governors, is here today and will discuss our proposals in connection with section 213.

We also wish to urge the adoption of a provision in the advisory committee's report, but not included in the bill, which would give FHA greater leeway in using its income to meet the inevitable variability in its operating expenses. We refer you specifically to recommendation No. 27 of that committee as it appears on page 56 of the printed report.

We believe that, if the things are done that I have been discussing, all that may be done to make FHA a beneficial aid to the operation of the private market will have been done. To go beyond this would only be to revert to the practice of setting up a special provision to meet each real or assumed emergency, to renew pressure to make the new provision applicable to a greater range of cases, and to turn builders and lenders away from their own responsibility for meeting public demand to dependence on Government support and direction.

For example, the bill proposes enactment of a new insurance program to be called section 220. We support the objectives of this proposed program but we do not support the method it is proposed to use to accomplish these objectives. So far as we can determine the maximum loan limits and other terms proposed for these new section 220 loans are almost identical with those which would be imposed if the proposed amendments to section 203 are enacted.

It is our belief, therefore, that the purposes of section 220 could be effected by FHA under the new section 203 program if proper underwriting instructions are issued by FHA with reference to the kind of neighborhood improvement operation contemplated for section 220.