HOUSING ACT OF 1954 MONDAY, MARCH 22, 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 10:05 a. m., Senator Homer E. Capehart, chairman, presiding. Present: Senators Capehart, Bush, Payne, Robertson, and Sparkman. The CHAIRMAN. The committee will come to order. Our first witness will be Mr. O'Malley of the National Savings and Loan League. Mr. O'Malley, do you have a prepared statement? STATEMENT OF JAMES J. O'MALLEY, CHAIRMAN, FEDERAL LEGISLATION COMMITTEE, NATIONAL SAVINGS AND LOAN LEAGUE Mr. O'MALLEY. Yes; I do, Senator. The CHAIRMAN. Do you want to read your prepared statement, or do you want to have it placed in the record and talk from it? Mr. O'MALLEY. I would like to read it, if I could, Senator. It won't be too long. My name is James J. O'Malley. I am president of the First Federal Savings and Loan Association of Wilkes-Barre, Pa. I appear here in my capacity as chairman of the Federal Legislation Committee of the National Savings and Loan League, and wish to express the appreciation of our committee for this opportunity to present our position on H. R. 7839. The National Savings and Loan League has more than 700 savings and loan association members throughout the United States, with assets over $5 billion. Savings and loan associations hold one-third of the home mortgages of the country and currently are doing around 38 percent of the home-mortgage financing. The National Savings and Loan League is in accord with the aims and purposes of the bill under consideration, which would contribute greatly toward providing an adequate housing supply for the country, but believes at the same time savings and loan associations should have as broad authority as is consistent with safety to engage in homemortgage financing. Section 101 would increase the maximum loan amount from $2,500 to $3,000 for property improvement and repair loans under FHA title I. We believe savings and loan associations should be able to make these loans without FHA insurance, if they wish. Federal savings and loan associations, however, are at present restricted on such loans to a maximum of $1,500. We urge that Federal savings and loan associations be permitted to lend, without security, on FHA, VA, and conventional loans for property alteration, repair, and improvement up to $3,000. The total amount of such loans would not, at any time, exceed 15 percent of the association's assets. This provision would increase the ability of savings and loan associations to do a better job in the home-financing field. If certain of the liberalization provisions of this bill extend to FHA lending, such as the use of open-end mortgages, if they were also extended to VA loans, we believe the purpose of the bill to help home financing would be considerably furthered. We suggest that the committee carefully consider this extension of authority to VA loans. The bill applies the same mortgage terms to existing housing as is applied to new housing. In the field of new construction, FHA served an important purpose in getting these homes financed. The President's Advisory Committee on Government Housing statedThe opportunities for wider use of FHA-insured mortgages in financing purchases of existing homes are emphasized by the fact that fewer than 10 percent of existing home purchases in recent years have involved new FHA mortgages. We think this committee should carefully consider whether there is a real need for extension of Government insurance on mortgages on existing homes. We do not consider that it is the purpose of the sponsors of this bill to use Government aid or insurance any further than is necessary. We are not here specifically opposing this section, but are merely raising the question with this committee whether this section could be utilized to jeopardize other systems or methods of home financing. We are in accord with the provisions of the bill which give needed flexibility in the fixing of FHA and VA interest rates. This provision may render a secondary mortgage credit facility unnecessary. The provisions of the bill, however, in which we are primarily interested are those dealing with the Home Loan Bank Board. We are in full accord with these proposed amendments to the basic acts governing the operation of the Home Loan Bank Board and its agencies and urge their enactment into law. The first of these provisions is contained in section 601. This section would facilitate the service of process on the Federal Savings and Loan Insurance Corporation throughout the United States. This would obviate the necessity for persons having claims against the Federal Savings and Loan Insurance Corporation having to bring their suit in Washington, or wait until an officer of the Federal Savings and Loan Insurance Corporation appears in their jurisdiction. This section would also give the insurance corporation a much needed statute of limitations on the enforcement of claims against it. We are in accord with the provisions of this section. The Federal home loan banks throughout the country make advances to their member associations upon the collateral security of home mortgages which, under the present law, cannot exceed $20,000. Section 602 would amend the Federal Home Loan Bank Act to increase this $20,000 figure to $35,000. The $35,000 figure is now roughly comparable to the $20,000 figure when it was first put into the act back in the early thirties. We feel that this provision is urgently needed and urge its enactment. Section 603 amends the basic act dealing with Federal savings and loan associations. The first subsection is a companion provision to section 602, and would increase the maximum home mortgage loan that a Federal savings and loan association may make within its regular portfolio from $20,000 to $35,000. As stated before, this $35,000 is roughly comparable to the $20,000 figure when it was put into the act. This would enable these Federal savings and loan associations to serve better the home financing needs of the country. We urge its enactment. The second subsection of section 603 would give the Board greater powers in the enforcement of its supervisory authority of Federal savings and loan associations and, at the same time, it would give the Federal savings and loan associations specific rights and remedies in the case of action by the Home Loan Bank Board. The Home Loan Bank Board would be given authority by this bill to act in its own name and sue and be sued in its own name. It would authorize the Board, or its representatives, to administer oaths and issue subpenas and request the court to enforce them. The Board would have authority to seek a declaratory judgment and an injunction or other relief for violation of law or regulations, or could apply to a court for enforcement of its orders. Specific authority is granted the Federal Savings and Loan Insurance Corporation as receiver for any Federal savings and loan association to buy at its own sale. Fine and imprisonment are provided for the refusal of any officer, agent, employee, or director of a Federal savings and loan association which fails to relinquish possession of the association when demanded by a conservator or like authority appointed by the Board. The proposed amendment also grants substantial equitable provisions for Federal savings and loan associations. The grounds for appointment of a conservator or receiver are set out in the statute and notice of hearings are required and set out in the statute. The hearing is to be in the Federal judicial district where the association is located, unless it consents to another place, and is to be conducted under a hearing examiner as provided by the Administrative Procedures Act. Appeal may be taken as is provided by the Administrative Procedures Act, and the review by the court is to be upon the weight of the evidence. The association may apply to a court for declaratory judgment, injunction, or other relief. The Board is subject to suit in the United States district court of the district where the home office of the association is located and may be served by serving a copy of process on any of its agents, and mailing a copy of such process into Washington. A supervisory representative in charge, instead of a conservator or receiver, may be appointed when an emergency exists requiring immediate action, and his tenure of office is limited by the statute. We believe that these amendments would be of substantial benefit, both to the Home Loan Bank Board, and to the savings and loan business, and urge their enactment. The CHAIRMAN. Mr. O'Malley, you say your association does 38 percent of the home financing? Mr. O'MALLEY. That is right, sir. The CHAIRMAN. Is that more than the life-insurance companies do? Mr. O'MALLEY. Yes, it is, Senator. The CHAIRMAN. You handle more than the life insurance companies? Mr. O'MALLEY. It is the largest individual group, I think, in the whole business. The CHAIRMAN. I gather you are for this bill almost 100 percent as written? Mr. O'MALLEY. That is right. The CHAIRMAN. Do you like the 40-year terms and practically no downpayment? Mr. O'MALLEY. Senator, we have no particular objection to that, for several reasons: First, it is an experiment, and I think it is a worthwhile one. And it is supposedly used in a place where a family has been displaced for slum clearance. The CHAIRMAN. Do your members buy the mortgages? Mr. O'MALLEY. We would make them. The CHAIRMAN. You would make them? Mr. O'MALLEY. Yes. The CHAIRMAN. You really think the banks and the insurance companies would take those mortgages? Mr. O'MALLEY. I am not sure about the banks and the insurance companies, Senator, but I am sure the savings and loan associations, if this happened in their communities, would take them. I think a lot of them are taking 20-year, no-down-payment mortgages for the veterans now, and in this case, I believe there is a provision that after 20 years, if they desire, they could sell it to the FHA and get back debentures. The CHAIRMAN. Are you in accord with this new FNMA association? Mr. O'MALLEY. Well, I am not too familiar with that, Senator, but I believe it is being worked out on an experimental basis. I would like to see it in private capital, if possible. I don't know whether this 3 percent is the proper amount or not, because not too many of our associations have availed themselves of that. The CHAIRMAN. I believe that is all the questions I have. Thank you, unless you have something further. Mr. O'MALLEY. Thank you, Senator. The CHAIRMAN. You seem to approve of the bill as written. Our next witness will be Mr. Arthur J. Packard of the American Hotel Association. Good morning, Mr. Packard. Do you prefer to read your statement or have it placed in the record? Mr. PACKARD. I would like, if I may, to read it, Senator. STATEMENTS OF ARTHUR J. PACKARD, CHAIRMAN OF THE BOARD, AND M. O. RYAN, MANAGER, WASHINGTON OFFICE, AMERICAN HOTEL ASSOCIATION Mr. PACKARD. As you know, I am Arthur Packard of Mt. Vernon, Ohio. I am president of the Packard Hotel Co. I operate 7 hotels |