high cost short-term credit, I don't believe this is an unwise practice. Of course he could choose not to maintain his home but the net result would be a depletion of his equity and also the equity of the man next door.

To us the chief importance of the long-term mortgage credit is the opportunity it holds for recognition of the mortgage as a social instrument of prime importance. Every lender knows that one chief reason for foreclosure is the homeowner's tendency to overload himself with installment credit. The use of the mortgage as a basic credit instrument for home modernization would establish the local mortgage lender as a permanent credit counselor to the homeowner of limited

means.

An official of one of the west coast's leading financial institutions that specializes in short-term credit told me this story that highlights the need of separating the sales from the lending function: A mutual friend of ours not too long ago put up a thousand very attractive, inexpensive homes for minority steelworkers near San Francisco. For the first time in their lives the Negro occupants of these homes became eligible for credit because they were "men of property." Within a few days after these poor folks moved in, a hoard of dynamiters came knocking on their doors.

"How would you like some of this-synthetic-brick siding put on over that ugly redwood siding," or "How would you like this barbecue pit? Just sign this title I form and we will take care of the rest."

They did. Before the year was out a good number of these innocents were over their heads in debt. Nor did the short-term credit outfits who made these unnecessary title I loans even bother to check with each other to see if the homeowners were overextended. They were protected against loss up to 10 percent.

As a result a number of these unfortunate people contracted to pay monthly installments, including the mortgage payments, that exceeded their incomes. And you can guess what happened under the circumstances.

If the homeowner had gone to his mortgage lender, the lender would have talked him out of dealing with disreputable fly-by-night operators, and out of making a lot of useless expenditures. Or, if modernization was needed, the lender would have helped him with an additional advance.

If credit is understood in its fullest importance to our whole economic system, there would seem no safer or more intelligent way to employ it than to relate it to the prime security owned by the majority of United States families: a house and land.

In conclusion, I hope that you will not only see fit to give FHA authority to insure additional advances but will consider liberalizing the provisions of the Servicemen's Readjustment Act relative to such supplemental lending for purposes of repair or improvement of veterans' homes.

Bert King points out:

As the law now provides, the Veterans' Administration cannot extend guaranty coverage comparable to the proposed FHA program without a change in the existing statute since the $7,500 entitlement currently available to veterans under section 501 (b) of the act is restricted to loans for the purchase or construction of residential property to be occupied by the veteran as his home. Consequently,

additional entitlement for supplemental loans for the alteration or improvement of the veteran's home is available only if he used less than $4,000 of his entitlement in connection with the purchase or construction of his home. In recent years most veteran home purchasers have used at least $4,000 of their entitlement in connection with the original purchase of the home, and accordingly have no entitlement available for alteration or improvement advances. Naturally, lender interest in making such advances would be stimulated if some additional guaranty protection for such advances were obtainable. Furthermore, the housing needs of a large segment of the 3 million families who have obtained homes with the assistance of GI financing have changed materially, due to increasing family size, and in many cases there has been an improvement in the economic status of these homeowners. It is to be borne in mind also that in many instances a substantial reduction in the mortgage debt has taken place since the home was purchased. Those veterans are now in a position to undertake the responsibility entailed in financing improvements and alterations in their homes. If a lender is willing to make a GI supplemental loan, the veteran obtains the advance on a low-cost, long-term repayment basis, and the primary loan is not jeopardized by the high carrying cost of short-term improvement loans. Such a result could be obtained in many cases by removing the existing limitation on the use of the curently authorized $7,500 maximum by a simple amendment to section 501 (b) of the Servicemen's Readjustment Act of 1944, as amended, permitting the $7,500 maximum to apply to loans for alterations, improvements and repairs, as well as the purchase and construction of residential property and by removing the April 2, 1950, date limitation.

May I insert the following into the record:

List of some lending institutions making additional advances: Can FHA Insure Open-end Mortgages? article reprinted from House and Home, July 1953; Legal Bulletin, published by the United States Savings and Loan League, September 1953 issue featuring The Flexible Mortgage Contract, by Horace Russell and William Prather; Excerpt from House and Home, December 1952, Modern Mortgages-Dime Savings Bank of Brooklyn writes open-end clause in to all its family house mortgages; Open-end Mortgages: Good Business Bet, Not a Legal Problem, article reprinted from House and Home, September

1953.

The CHAIRMAN. Without objection they will go into the record. (The documents referred to follow :)

Mississippi State law does not prohibit additional advances but makes no special provision for them.