tions of such mortgages, and the credit requirements of mortgage borrowers. Now that the money has been loaned and committed, the State's principal concern will be to see that regular mortgage payments are made until all the loans have been repaid. As of December 31, 1952, a total of $3,056,352 in principal amortization has been repaid to the State.

3. Method of financing the program

The $60 million for State mortgage loans is borrowed by the State in short-term notes sold through competitive public bidding and placed in the housing mortgage fund. This money is then made available for mortgage and construction loans. None of the general funds of the State have been used up to the present time.

The effective rate of interest on borrowings to date has ranged from 0.79 percent in January 1950 to 1.25 percent in July 1951 with the average 1.05 percent. 4. How the administrative expenses of the program are paid

The homeownership program has been entirely self-supporting to date. The interest paid by the home buyers and other service fees have been enough to pay all expenses. In fact, as of December 31, 1952, there was an operating surplus of $49,519. Although no moneys have been taken from the general funds of the State as yet for administrative expenses, the present favorable financial situation is dependent on interest rates.

5. Full local real-estate taxes are paid

Full local real-estate taxes are paid to the municipality where the houses are located. It is estimated that over $1 million is paid annually in such taxes.

6. The amount loaned under the $60 million authorization

A total of $59,800,000 has been loaned or committed to eligible buyers. The sum of $200,000 has been set aside as an operating expense reserve.

7. The difference between a mortgage loan and a commitment

A mortgage loan is a loan approved and disbursed while a commitment is a loan approved but not yet fully disbursed. As of December 31, 1952, the records show that out of the total of 6,070 mortgage loans and commitments, 5,853 were mortgage loans and 217 commitments.

8. The requirements necessary to qualify for a certificate of eligibility

The head of any family of moderate income could be certified as an eligible buyer by the State provided that: (a) He was a citizen of the United States, and a resident citizen in Connecticut; (b) his prospective and continuing year together with the prospective and continuing yearly incomes of the members of his family was less than $3,000 plus $600 for each dependent member of his family with his available net cash worth less than $3,500. (The figures were $2,500, $600, and $3,000, respectively, up to July 17, 1951, when the limits were raised due to a change in Federal credit regulations.) (c) His family was not properly housed; and (d) he was in need of assistance to enable him to acquire a decent, safe, and sanitary dwelling suitable for long-term occupancy by his family.

9. The choices open to the certified buyer

(a) He might buy a lot, obtain plans, and hire his own builder to build the house.

(b) He might shop for a suitable house among new houses being constructed by private builders.

(c) He might select a home offered by operative builders under contract with the State.

10. Loan correspondents

The program is operated by the State with the assistance of 21 loan correspondents which carry out the details under instructions and supervision of the State. These agents are State savings banks, Federal savings and loan associations, national banks, and other established local mortgage-servicing agencies. Their compensation is one-half of 1 percent of the average principal balance on permanent loan accounts.

11. The function of a loan correspondent

After receiving his certificate of eligibility, the prospective buyer conferred with his local State loan correspondent, who might help the applicant with forms for the State FHA and VA, and follow through until the mortgage loan

was closed and thereafter receive the monthly payments for interest, principal amortization, taxes, and insurance premiums.

12. Types of mortgage loans made

(a) First permanent mortgage loans insured by the FHA.

(b) First and second permanent mortgage loans guaranteed by the VA. (c) First mortgage construction loans to eligible certificate holders desiring to build their own homes, either insured by FHA or VA.

(d) First mortgage construction loans to operative builders.

13. Veterans received preference

According to the housing statutes first choice of eligibility shall be to families of low and moderate income and among such families preference shall be given to veterans of World War II. The latest survey showed that approximately 80 percent of all the loans have been made to veterans.

14. The interest rate charged

The interest rate charged by the State is 11⁄2 percent on the State's permanent mortgages and 31⁄2 percent on construction mortgages.

15. Eligible certificate holders had to pass FHA and VA credit requirements Eligible certificate holders as designated by the State received the permanent mortgages at 11⁄2 percent interest provided they passed FHA or VA credit requirements. They were free to purchase houses built by any private builder or by a builder who had a State construction loan or to hire a builder to construct the house on their own lot so long as the home met FHA or VA minimum property requirements.

16. Minimum property requirements

The buildings on the mortgaged property had to conform to minimum property requirements established by the Federal Housing Commissioner or, in the case of a first-mortgage loan guaranteed by the Administrator of Veterans' Affairs, to such property requirements as were established by this Administrator.

17. The State's construction loans

Construction loans were made to eligible individuals and to approved builders at an interest rate of 32 percent. Builders who took State construction loans were required to offer their houses for sale only to eligible buyers for a period of 60 days after completion.

It has been the policy of the State to make construction loans available to builders primarily in localities and under circumstances where private financial accommodations were not available. The purpose was to encourage builders to find construction money through private sources whenever possible. On operative builders' loans the State made an initial service charge of 1 percent of the principal amount of the construction loan. This fee, paid by the builder to the correspondent, was divided equally between the State and the correspondent. 18. Inspection procedures enforced

By regulation and by contract operative builders constructing homes under the State program were required to have the completed homes approved before the passing of title by qualified field inspectors of the FHA and State Housing Division.

19. The insured market agreement

The State recognized the necessity of building a large number of moderate priced houses where there was evidence of considerable need. Therefore, it was felt advisable for the State to offer the builders insured market agreements. For a fee of $50 per house insured, a builder could insure the sale of any or all of the projected houses in his development.

Under this agreement, the builder agreed to hold all houses insured for sale only to certified families of moderate income for a period of 60 days after completion. He further agreed to make a diligent effort to sell the houses to any prospective buyer either eligible or ineligible for State loans for an additional period of 30 days.

Then, 90 days after completion, the builder might offer the house for sale to the State at a price equal to 90 percent of the amount of the estimate of value established by the FHA or $9,000, whichever was less.

Any qualified builder could apply for such an agreement with the State. There was no relationship between the insured market agreement and the State construction loans.

Under the insured market agreement, the State received $26,300 in premiums covering the construction of 526 homes. Since all insured homes were readily sold to certificate holders, the State consequently suffered no losses under this operation.

20. Facts about the program

(a) The number of towns which participated in the program: Houses financed with State loans were built in 116 separate towns out of the total of 169 towns in Connecticut.

(b) The average mortgage loan and average cost per house: The average amount of the 5,853 mortgage loans closed as of December 31, 1952, was $9,820. The average cost per house over the whole program has been $10,700.

(c) The average type of family which received certificates of eligibility: The average head of the household was a veteran of World War II, with two children and inadequately housed at the time of application.

(d) The type of home required by most certificate holders: 60 percent required the 5-room ranch-type style home and 40 percent desired 4 rooms with second-floor expansion area.

The CHAIRMAN. The next witness is Mr. Levitt, who is, I believe, the largest builder in the United States. If I have overstated it, Mr. Levitt, you can correct me.

Mr. LEVITT. It sounds good, Mr. Chairman, and I appreciate it.
The CHAIRMAN. Do you have a prepared statement?

Mr. LEVITT. No, I don't have a prepared statement.
The CHAIRMAN. You may proceed in your own way.

STATEMENT OF WILLIAM J. LEVITT, NEW YORK, N. Y.

Mr. LEVITT. I would like to take a leaf out of the American Legion's statement. They say this: "While we are not concerned with those provisions not affecting veterans." I came here for exactly the opposite. I am a veteran, and I am also a member of the Legion, but I came here to talk strictly about the housing problem as it affects everybody.

It might be interesting to you to know that in the last 6 months, we have been selling 99 percent of our houses to veterans only. The nonveteran has been excluded from the market. And, as you know, we are not in a high-priced market; it is from $9,500 up

The CHAIRMAN. Will you state that again? You say 99 percent of all your sales are going to veterans?

Mr. LEVITT. That is right.

The CHAIRMAN. Under certain veterans' preferences?

Mr. LEVITT. Under the GI bill.

The CHAIRMAN. Under the GI bill?

Mr. LEVITT. That is right, Senator.

The reason for it is that we are fortunate enough to have a 100-percent loan, and these people are buying without any money.

The CHAIRMAN. Without any down payment?

Mr. LEVITT. Without any down payment.

The CHAIRMAN. Under the GI bill of rights, and legislation that we

have passed?

Mr. LEVITT. That is right, Senator.

The CHAIRMAN. They are buying without any down payments, and 99 percent of your business is that kind of business?

Mr. LEVITT. That is right. The nonveteran is practically nonexistent, as far as our purchasers are concerned.

The CHAIRMAN. Where are you building?

Mr. LEVITT. In Pennsylvania.

I have checked New York also, and the builders there tell me that 8 out of 10 are veterans. Of course, when it gets above $20,000 it doesn't make any difference.

The CHAIRMAN. You think that is just typical of Pennsylvania and New York, or do you think that is all over the United States?

Mr. LEVITT. I think it is all over the United States, perhaps not in that high percentage.

The CHAIRMAN. Mr. McMurray, will you get the records from FHA and VA on just what percentage the sales are to veterans all over the United States?

(The information requested follows:)

MEMORANDUM FROM HOUSING AND HOME FINANCE AGENCY

Very little information is available on veterans purchasing homes in 1953 other than that arising out of VA statistics. These figures show that there were 322,000 home loans closed during the year. This was 10 percent of the total number of nonfarm mortgage recordings ($20,000 or less) during the year. Because the average VA home loan was $9,511 which was higher than the average of small home loan mortgage recordings ($6,241), the dollar volume of VA home loans closed (slightly over $3 billion) was 16 percent of the total of $19.7 billion in mortgage recordings (under $20,000) during the year. The mortgage recording series is a fairly good indicator of the volume of business done, but for a number of reasons it cannot be considered a precise measure of the total number of homes purchased during the year. For example, in 1952 somewhat slightly over 3 million nonfarm mortgages ($20,000 or less) were recorded. For the same year the Federal Reserve Board's survey of consumer finances showed approximately 1.7 million homes purchased.

If we take VA home loans closed as a percentage of total homes purchased, using the Federal Reserve Board study and projecting the 1952 FRB figures into 1953, we would arrive at a figure indicating that 1 home in every 5 was purchased under the VA home loan program.

Unfortunately there are no data available on veterans purchasing homes in 1953 and not using VA facilities. The FHA does not collect data on the veteran status of its mortgagors. Data on the veteran status of mortgagors holding conventional mortgages are also not available.

There are, however, some data available for previous years other than 1953. The Housing Census of 1950 shows that veterans constituted 53.9 percent of all persons acquiring 1-family dwelling units during the 18-month period covering all of 1949 and the first half of 1950. These data are for only mortgaged properties. For properties with FHA-insured mortgages during the same period, the data show that 43.1 percent of all properties with FHA-insured first mortgages were acquired by veterans. It should be noted, however, that this was during the time when the FHA and VA first and second mortgage combination was available to veterans.

The survey of consumer finances, conducted by the Board of Governors of the Federal Reserve, furnishes some additional light on the number of veterans purchasing homes in 1950, 1951, and 1952: 1950, 36 percent; 1951, 50 percent; 1952, 34 percent.

It should be noted that this is based on a relatively small sample and covers all home purchases, including purchases with and without mortgages.

Projecting the figures reported in the census study and the survey of consumer finances, it would appear more than likely that veterans purchasing homes in 1953 were a far higher proportion than is shown by the figures used in the first paragraph of the relation of VA home mortgages closed from mortgage recordings. It would certainly seem that at least 30 percent and probably more of all homes purchased in 1953 were purchased by veterans.

Mr. LEVITT. I am talking about the last 6 months, Senator. That is the record.

The gentleman that preceded me got into quite a discussion with you and Senator Ives on the question of how to bring costs down. I think we are kidding ourselves on these interest rates. There is only one

good way, without waving a flag, to bring costs down, and that is volume. If we can produce volume we will be competitive.

Let me cite what happened, for instance, in 1950. In 1950, about 2 months before Korea-I think I testified on this same subject last year-we were really in the swing of things. When I say "we," I am talking about the whole country. Builders were really going to town in a big way, and costs were just beginning to tumble. I know we started to review all costs, and we were buying refrigerators for less and washing machines for less, and everybody was making money at lower prices.

Then, of course, came Korea, and it disturbed the applecart. But we had production, and we haven't got it now.

Specifically, here is what I object to in the present bill: It is a liberal bill, more liberal than everything we have had before, but it is not liberal enough. There has been much talk-and I followed some of the testimony before the House committee; I testified there on Monday-that this country should more or less gear itself to a million units a year. And the ADA testified that a million is just about all right, that we shouldn't go overboard on it-we might overbuild. Then the Mortgage Bankers Association has its ideas on what production ought to be.

But if you consider the facts for just a moment-in 1926, when the population of the country was about 45 percent less than it is now, or we are 45 percent more than we were then, we produced almost a million units a year. We are talking now, almost a generation later, of producing that same million, with a terrific increase in population, and it is going up all the time. Those are not my facts; the Census Bureau, I think, will confirm them.

We should produce a million and a half or 2 million units a year, which can easily be absorbed and this is simply a question of arithmetic, of how many new family formations there are, what the degree of obsolescense is, and so on. If you do that, if you can produce the houses that can be purchased in this kind of a market, you reduce your construction costs.

I am talking as a builder. I know what it means to be able to reduce the construction costs some 5 percent or 6 percent, as against a half a point or a point reduction in interest rates.

We can still cover this gentleman's argument in another way. You have a proposal before you for a 30-year loan, as against the 25-year loan. There is no earthly reason under the sun why it shouldn't be a 35-year loan. Let's forget 40 for a moment, and take 35, and see what that does.

First, the objection that 35 years is too long, again advanced by ADA and a few others-that is unadulterated bunk, the record proves it. Whether you have a 20-year mortgage or a 25-year mortgage or a 30-year mortgage makes no difference. The FHA's figures will show you that the average mortgage in the United States is either satisfied or refinanced in 10 or 12 years, so it doesn't make any difference as to the original term of the mortgage, but it does make this big difference. That is that you broaden the field, you broaden the base, the amount of people that can afford a given house or a given-sized house at a given price.

I propose in this bill that you have here, one slight change. You call for a 95-percent mortgage on the first $8,000, and then 75 percent