projects, then there would be no advantage to either a self-propelled cooperative group or to a sponsor-builder type of project to build under the section 213 program.

In my testimony before the committee, I recommended that, to strengthen the cooperative housing program, section 213 be amended so as to permit a sponsorbuilder to file an application for cooperative housing and that a commitment be issued without the necessity of first selling 90 percent of the total membership in the project before construction starts. With this amendment, it would be no problem for the FHA to amend its present administrative requirements and, for purposes of clarity, I offer the following brief outline of FHA processing of a combination of sections 213 and 207 processing to accomplish this purpose: 1. Joint application is filed with the FHA under title II, sections 207 and 213 of National Housing Act.

2. Upon completion of processing, sponsor-builder is furnished copy of FHA form 2264 (very similar to form 2264W used in section 213 cases). The criteria on page 4 of form 2264 sets forth the mortgage amount insurable under section 207 provisions. Inasmuch as page 3 of the 2264 discloses the total estimated replacement cost of the project (summation), a further criteria would be set forth on page 4 showing the estimated mortgage insurable based on section 213 provisions and a new type section 213 statement of eligibility would be issued stating the mortgage amount insurable for nonveterans and 65 percent veterans upon completion of the project. (A form 2264W, which would be copied from the 2264, could be issued also.)

3. A 207 mortgagor corporation would be formed.

4. A 213 nonprofit cooperative mortgage corporation would be formed.

5. Subject to certain conditions, the 207 mortgagor corporation would agree to sell and the 213 mortgage corporation would agree to purchase, at a specific figure, the assets of the 207 mortgagor corporation upon completion of the project, subject to, of course, the mortgagees' and FHA approval.

6. The FHA would issue its commitment to insure to the 207 mortgagor corporation under the section 207 provisions and, after initial loan closing, the corporation would start construction.

7. At any time before construction started, during construction or after completion of the project, the 213 mortgage corporation would proceed to sell the dwelling units to the individual cooperators for such downpayments and monthly charges as approved by FHA.

8. FHA would issue a commitment to insure upon completion to the 213 mortgage corporation when 90 percent of the total membership had been sold and their credit approved.

9. Ali equity or downpayments collected on the purchase price of the stock would be placed in escrow together with the stock, and not disturbed or paid into the 213 mortgage corporation until sale and transfer of the 207 corporation's assets to the 213 corporation and final endorsement of the 213 credit instruments. The shares of stock would be issued to the shareholders simultaneously with final endorsement of the 213 note and mortgage.

10. If, during the course of construction, some of the structures were completed before others, prior occupancy could be granted prospective stockholders (even though they had not paid for their stock in full) under a month-to-month rental agreement at schedules approved by FHA, but not in excess of the estimated total monthly charges under the 213 provisions. This accessory rental income would belong to the 207 mortgagor corporation and eventually, upon completion of the project and sale to the 213 corporation, would become an asset of the 213 corporation to be used to increase the 3-percent operating reserve or disbursed as patronage refunds to the cooperators.

11. Failure to sell the 213 dwelling units before 120 days after completion of the project would require that the sponsor-builder and his mortgagor corporation would have to accept final endorsement of the note and mortgage under the provisions of section 207 and, thereafter, operate as a rental-housing project. In this event, they would dissolve the 213 mortgage corporation and return any moneys held in escrow.

If this suggested amendment were in effect and the FHA administrative requirement that a commitment to insure cannot be issued nor construction started until 90 percent of the membership is sold were deleted, 6 or more months' time could be saved in the start of construction. Any delay in the start of a cooperative project proves costly. Many members become impatient and withdraw their subscriptions, which has resulted, in many cases, to as high as 50-percent turnover in membership and, before the project can be started, these memberships

have to be resold again. Furthermore, the suggested amendment would eliminate many technical and legal difficulties.

Myself and my associates are very impressed with the possibilities of the cooperative housing program. We believe and we have proven from actual experience in building and completing approximately 4,000 units to date that its low downpayments and monthly charges for large families of middle incomes fills, in part, the gap that now exists between subsidized Federal public-housing programs and newly constructed rental housing.

It goes without saying that it was a pleasure to meet with you.

Sincerely,

Senator BRICKER. Thank you.

EFREM A. KAHN.

Tomorrow morning at 10 o'clock in this room the committee will again meet for the purpose of hearing testimony on this bill.

The witnesses tomorrow will be Mr. Wilbur C. Daniel on behalf of the American Legion; Edward D. Hollander, on behalf of the Americans for Democratic Action; William J. Levitt; and Clair W. Ditchy, on behalf of the American Institute of Architects.

The committee can now recess.

(Whereupon, at 12:05 p. m., the committee recessed, to reconvene at 10 a. m., Wednesday, March 17, 1954.)

HOUSING ACT OF 1954

WEDNESDAY, MARCH 17, 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, Ives, and Frear.

The CHAIRMAN. The committee will come to order.

Our first witness will be Mr. Kennedy, of the American Legion. Good morning, Mr. Kennedy.

STATEMENT OF MILES D. KENNEDY, DIRECTOR, NATIONAL LEGISLATIVE COMMISSION, AMERICAN LEGION

Mr. KENNEDY. Good morning, Senator.

The CHAIRMAN. Mr. Kennedy, do you want to read your statement, or do you want to place it in the record and talk extemporaneously from it?

Mr. KENNEDY. Mr. Chairman, I would like at the beginning to thank you for giving the American Legion permission to appear before your committee.

The CHAIRMAN. We are delighted to have you.

Mr. KENNEDY. I would like to say for the record, and also on behalf of Mr. Daniel, who is chairman of the national economic commission, for whom this statement was prepared, asked me to express his compliments to you and the members of your committee and his regrets, due to conditions beyond his control; he was called out of the city last night and could not be here this morning. He testified yesterday before the House committee.

The CHAIRMAN. We are sorry Mr. Daniel isn't here, but we are delighted to have you.

Mr. KENNEDY. Mr. Chairman, as long as you are the only member here at the moment, in order to save time, with your permission, I would like to request that we be allowed to file these two statements which Mr. Daniel has prepared here. One is marked "Supplemental statement." Have those both incorporated in the record.

The CHAIRMAN. Without objection, they will be incorporated in the record just as prepared, and each word you state before the committee, likewise will be placed in the record.

(The statement and supplement of Mr. Daniel follows:)

Statement of WILBUR C. DANIEL, CHAIRMAN, NATIONAL ECONOMIC COMMISSION, THE AMERICAN LEGION

Mr. Chairman and gentlemen of the committee, my name is Wilbur C. Daniel; I reside at Danville, Va. I am the chairman of the national economic commission of the American Legion, which commission has jurisdiction over housing matters for our organization.

At the outset, I wish to thank you for the opportunity of appearing before the committee to present the views of the American Legion in connection with the bill, S. 2938, commonly referred to as the Housing Act of 1954.

While we are not concerned with those provisions not affecting veterans, there are two sections which we must strongly object to in their present form. We respectfully request that they be given serious consideration by the committee. The first provision the American Legion objects to is contained in title II: Home mortgage interest rates and terms, section 201 (pp. 40-41 of the bill). Under the provisions of section 201 the President is authorized, without regard to any other provision of law except provisions hereafter enacted expressly in limitation hereof, to establish from time to time;

"(1) the maximum rates of interest (exclusive of premium charges for insurance and service charges, if any) for various classifications of residential mortgage loans insured or guaranteed or made under the National Housing Act, as amended, or the Servicemen's Readjustment Act of 1944, as amended; Provided, That no such maximum rate of interest shall, at the time established by the President, exceed 21⁄2 per centum plus the annual rate of interest determined by the Secretary of the Treasury, at the request of the President, by estimating the average yield to maturity. on the basis of daily closing market bid quotations or prices during the calendar month next preceding the establishment of such maximum rate of interest, on all outstanding marketable obligations of the United States having a maturity date of fifteen years or more from the first day of such next preceding month, and by adjusting such estimated average annual yield to the nearest one-eighth of 1 per centum."

This plan, if adopted, would change the method in which interest rates may be set on mortgages under the GI loan provisions of Public Law 346 of the 78th Congress, approved June 22, 1944, and Public Law 101 of the 83d Congress, approved July 1, 1953. The latter law amended the Servicemen's Readjustment Act of 1944 so that the Administrator of Veterans' Affairs, with the approval of the Secretary of the Treasury, may prescribe by regulation from time to time such rate of interest, not in excess of 42 per centum per annum, as he may find the loan market demands.

When the original Servicemen's Readjustment Act (Public Law 346, 78th Cong.) was written, great consideration was given by the proponents of same, in cooperation with representatives of the lending industry, the Treasury Department, and the Veterans' Adlministration, in the setting up by Congress of the present method of determining interest rates and a ceiling was placed on the interest rate to be charged on VA loan guaranty mortgages, so that there might not be a prohibitive interest rate charged to those who had served in the Armed Forces and to whom this legislation was intended to give assistance in reestablishing themselves on a sound economic basis.

The American Legion, after giving this problem serious consideration over a long period of time, felt that it was wise to insert this provision in the Servicemen's Readjustment Act in order to protect the veteran home buyer from excessive interest payments. To us it is crystal clear that a move is now under way to remove the protecting ceiling also placed on said interest rates by Congress when Public Law 101 was enacted on July 1, 1953, at which time the rate was permitted to be increased to 4 percent. The American Legion opposed said increase in the interest rate.

The American Legion objects to the foregoing provisions as set forth in said section 201 (1) for the following reasons:

1. The American Legion recommends any change made should be by the Veterans' Administration and by no other agencies or individual.

2. The American Legion believes in the maintenance of a separate housing program for veterans under the sole jurisdiction of the Veterans' Administration. The American Legion wants the present policy continued.

3. We believe that the power to regulate interest rates should remain in Congress.

4. We submit that the phrase ** the President is hereby authorized, without regard to any other provision of law ***" (sec. 201, p. 40, lines 17-18) is too broad and that only specific authority should be granted, not only to the President, but to any other Government official who may be concerned.

5. The American Legion is unalterably opposed to section 201, because it would unquestionably result in increase in the interest rate as fixed by Public Law 101 of the 83d Congress. In addition, the proposal carries with it a distinct possibility of discrimination between veteran home purchasers.

We would like to be permitted to invite the committee's attention to an article entitled "Easy Money Comes Back" which appeared at pages 100-102 of the February 26, 1954, issue of the U. S. News & World Report, a reputable and reliable business magazine. A true copy of said article is annexed and made a part of this statement. The article includes a chart showing interest rates average for long-term United States Government bonds for the years 1951, 1952, 1953, and 1954.

Reference to the chart shows the percent yield for these years to be as follows? Year 1951, from 24 to nearly 24 percent.

Year 1952, from 2% to 24 percent.

Year 1953, from 2 to 3 percent.

Year 1954, from 21⁄2 to 24 percent.

As has been stated above, the interest rates on VA loans to veterans was increased to 41⁄2 percent pursuant to Public Law 101, 83d Congress, approved July 1, 1953. Using this 4%-percent rate as a base, and adding the 21⁄2-percent increase above average for Government long-term United States bond yield, as herein proposed, for the years 1951 to 1954, both inclusive, reference to the chart from the U. S. News & World Report readily shows that, had the maximum rate proposed under section 201 been in effect during the years in question veterans would have had to pay the following rates of interest on their mortgages:

We respectfully submit there is absolutely no reason to justify the increase proposed over the present rate of 4% percent.

We see no reason why veterans should be required to pay increased interest rates, which are bound to follow if the provisions of section 201 are enacted. It is our firm belief after earnest consideration of this problem that the 42percent rate when viewed in connection with the additional benefits which accrue to the investor, is adequate on the present market and will be more than adequate in the near future.

Last year the money interests told us that if the rate were increased to 41⁄2 percent they would be satisfied; now they want it to go to 5% percent or higher; we have a strong feeling that in the not-too-far-distant future they will be asking Congress to make the rate 6 percent. In fact, it might well go to 6 percent under the provisions of section 201 (1) of the bill.

The American Legion submits that the provisions of S. 2938, as now contained in section 201, page 40, lines 9 to 25, and in lines 1 to 14, both inclusive, on page 41, should be stricken in their entirety.

The other section in this bill which the American Legion objects to is to be found in title VIII-Miscellaneous Provisions, section 801, at page 104, etc.

Title VIII deals with the preferences now granted veterans in the purchase of surplus housing and opens wide the door for the elimination of veterans' preference in these purchases.

While we have confidence in the present Administrator of the Housing and Home Finance Agency, we must say that there are still in that Agency those who feel that preference in the sale of surplus homes to veterans should be eliminated, and they have often so expressed themselves. They have absolutely no regard for the interests of veterans. Therefore, the American Legion feels that while the present Administrator may be sincere in his objectives, if he were given the power of determination in selecting surplus housing for sale under the provisions of section 801 of the bill, we are fearful that those who would actually be responsible for and really determine policy for the Administrator will use this authority to gain their personal desires to take away from veterans their opportunities to purchase surplus housing.

It has been the privilege of our representative to work closely with the Housing and Home Finance Agency for some time, and we have watched with