dealers between October 1954 and March 1955. These actions have involved 14 firms and 12 individuals. In addition, the number of precautionary measure actions were increased to 844 letters covering 421 companies and 1,177 individuals during the period from April 1, 1954, through March 31, 1955, as compared with 349 letters covering 194 companies and 404 individuals during a like period in 1953-54. These precautionary measures are required of lenders after they have been notified that FHA has information that dealers or salesmen have shown disregard for the statute and regulations or have committed irregularities or have otherwise shown that the type of business originated by such dealer or salesman is such that FHA ought not to assume insurance responsibility for loans so originated.

The investigative functions formerly performed by FHA's Legal Division have been transferred to the Office of the Administrator, HHFA, Compliance Division. Under this arrangement, facilities of the FBI are available in those cases where criminal prosecution is indicated. In addition, all FBI reports referred to the Title I Division are being reviewed to determine whether restrictive action should be taken on the basis of information developed in these reports or whether such administrative action as FHA is authorized to take has already been effected. Another organizational change effected during the year was the transfer of title I collection activities to the field and an increase in the number of loanservicing representatives.

In an effort to further strengthen this program, the Agency obtained from the President's management improvement fund in the Bureau of the Budget an allocation for the employment of an outside management firm for the purpose of undertaking a study of title I premium-billing and claims-payment procedures. This was done in order to effect additional efficiencies and economies in the internal operations of the FHA. I might mention that such studies involving other programs of the Agency are in the process of formulation.

Among the administrative actions taken under my direction has been the elimination from the list of eligible improvements of all luxury items which by their nature lend themselves to abuse of this program. The regulations have been amended to make ineligible any items, products, alterations, repairs, or improvements which would not substantially protect or improve the basic livability or utility of the property.

There have been numerous revisions of processing forms and procedures including a change in the credit application for property improvement loan which was revised to remove the possibility that property owners would assume they were dealing with a Government agency for a Government loan. Additional changes were made in the body of the loan application form to comply with requirements of the Housing Act of 1954, and an additional requirement has been made for the insertion of the true name and signature of the salesman. The title of the completion certificate for property improvement loan was changed for the same reason, while the advance notice of approval to applicant for property improvement loan has been expanded to require the lender to show the face amount of the note including financing charges and the dollar amount per month called for by the obligation. Under earlier procedures the form had required the lender to show only the net amount and number of months the note would run.

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Circular letters have been sent to all title I lenders as part of a program of education and in order to secure greater vigilance on the part of these lenders where this program is concerned. These letters have covered such topics as listings of ineligible items for financing under title I, deferment of initial payments on title I loans, unauthorized use of title I forms, credit life insurance, and refusal of benefits of participation in the program. Further educational measures designed to prevent abuses under this program were taken through the revision of booklets of instruction on title I. In this connection we have revised the Dealer Guide for Title I Loans, enlarging this publication to better educate dealers in FHA procedures and to warn them concerning their responsibilities in connection with business originated by them.

Major changes in regulations pertaining to the title I program which were instituted during the past year were:

(1) In the case of property conversions, the maximum limitation of a title I loan was restricted to $2,500 per dwelling unit with a maximum of $10,000 regardless of the number of units in the structure.

(2) A limitation was instituted providing that where more than one class 1 (a) title I loan is obtained to improve the same property or structure, the aggregate loan balance may at no time exceed $2,500.

(3) In class 2 (a) and 2 (b) loans where the maximum amount of loan is $3,000, the regulations have been amended to limit the amount outstanding on any one property at any one time to a maximum of $3,000, thus preventing a series of loans of this type.

(4) Where a loan is made to a lessee of a property to be improved (other than residential or agricultural), the owner of the property must join in signing the note.

(5) Regulations have been revised to require that all dealer approvals must now be evidenced on forms approved by the Commissioner.

Additional revised regulations put into effect the statutory measures to prevent abuses, such as the coinsurance provision, the requirement of at least 6 months' occupancy of a new residential property before becoming eligible for a title I loan, and maximum loan controls.

In addition to this program for the education of lending institutions and dealers, we have undertaken a comprehensive program of consumer education designed to enlighten and warn consumers who make purchases financed under the title I program. Actions taken along this line have included:

(1) The preparation of an educational pamphlet containing advice on the selection of a contractor or dealer, caution regarding exaggerated guaranties, warning about the signing of papers and general information on the title I program.

(2) Radio and TV spot announcements which have been issued weekly.

(3) Local and national press releases covering such subjects as the elimination of luxury items, the new title I regulations, educational articles on abuses and precautionary measures, and other materials designed to educate the public in connection with the title I program.

(4) Carrying on this educational program through the medium of speeches delivered in numerous public appearances by the Commissioner, the Director of the title I division, and members of his staff.

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(5) Holding many meetings with representatives of better-business groups and industry, or with individuals, for the purpose of identifying and checking on complaints and furthering the work of this consumer-education program.

In all of this comprehensive program for the improvement of the title I program, we have been materially assisted by the membership of a title I advisory committee which was appointed in August 1954, and held meetings on September 2 and 3 of that year and on February 24 and 25, 1955. This committee discussed and reviewed with the title I director the functions of the title I program under current legislation and regulations and made recommendations to increase the effectiveness of the program.

The effect of these new controls with respect to (1) the volume of business and effectiveness of the program and (2) the prevention of abuses is shown hereinafter. Our statistics reveal that the number of loans submitted for insurance by lenders have decreased markedly. In the 6 months preceding October 1, 1954, FHA insured 876,800 loans with net proceeds to borrowers of approximately $526 million. In the 6 months from October 1, 1954, to March 31, 1955, 563,000 loans were insured for approximately $338 million, a decrease of about 36 percent. During this latter 6-month period the number of institutions reporting loans for insurance decreased only slightly from the number reporting loans in the first 6-month period. This seems to indicate that although lenders are not withdrawing from the title I program entirely, they are either making fewer property improvement loans, or they are setting up loan programs of their own without reliance on FHA insurance.

The Housing Act of 1954 and the new administrative controls mentioned above appear to have materially improved the quality of dealer-originated propertyimprovement loans. A spot check of 330 complaint cases in our dealer-control unit shows that in 248 cases the loan was originated prior to December 1, 1953, 74 cases were on loans originated between December 1, 1953, and September 30, 1954, and only 8 cases involved loans made subsequent to October 1, 1954, when the new regulations took effect. It may still be too early to take these figures as indicating the effectiveness of the new measures designed to prevent abuses, but there is positive evidence that the number of complaints being received has been drastically reduced.

Senator SPARKMAN. Have the provisions we put in the law last year proved helpful?

Mr. MASON. They were very helpful, Senator Sparkman.

Senator LEHMAN. I want to say I agree with the statement made by Commissioner Mason that in a project of this size and complexity you will never in the world be able to avoid some abuses. They will always exist. All we hope for is that most of them can be dissipated. Mr. MASON. Any other questions on title I?

Senator CAPEHART. Do you feel there is any of the so-called modelhome technique being used today in title I?

Mr. MASON. We have no record of any being used under title I, Senator, but I find the boys that were doing it are still doing it and not financing under Government insurance.

Senator CAPEHART. I see. But they are financing in other ways? Mr. MASON. Yes, sir, we have evidence of that.

Senator CAPEHART. Is the Attorney General here today? He ought to look into that. Let us call that to the attention of the Attorney General, that these same boys are using this model-home technique but financing through other sources. That is interesting. The ingenuity of the American people is pretty good, isn't it?

Mr. MASON. The American people are very ingenious, sir.

Multifamily housing mortgage limitation

REVISION OF THE FHA MORTGAGE LIMITATIONS FOR MULTIFAMILY

HOUSING PROJECTS

The present statutory limit on the dollar amount on a multifamily housing project, where the mortgagor is a private corporation, would be increased from $5 million to $12.5 million.

This limit would apply to mortgages insured under sections 207 (the major FHA rental housing program), 213 (cooperative housing), 221 (low-cost housing for families displaced in slum-clearance areas and by governmental action), and 803 (military housing) of the National Housing Act. The limitation on FHA mortgages financing multifamily housing in slum clearance or urban-renewal areas under section 220 of the National Housing Act would be increased from $5 million to $50 million, where the mortgagor is a private corporation. This conforms to the dollar ceiling now in the law with respect to multifamily housing mortgages where the mortgagor is a public body. This proposal is in recognition of the increase in construction costs since 1938. Furthermore, it would get the FHA legislative clarification for administrative guidance in these matters. As it is today we find that the $5 million limitation results in subterfuge in order to produce a large-scale project. Farm housing

REPEAL OF SEPARATE LIMITATION ON INSURANCE AUTHORIZATION FOR FARM HOUSING MORTGAGES

This is merely a consolidation to simplify FHA administration and reduce recordkeeping. The insurance volume would be controlled in the same manner as other section 203 sales housing mortgages. I might add this control is by the amount of insurance authorization, of course, that is provided for.

Certificates of claim

FHA SETTLEMENT OF CERTIFICATES OF CLAIM

This is also an amendment to reduce recordkeeping and effect savings through simplifed accounting. The proposal would enable FHA to make final settlement of certificates of claim at any time after the sale or transfer of title by the FHA of the property acquired. Under the present law such final settlement cannot be made until the housing which has been sold by the FHA has been completely paid for, which might be for as long as 20 years.

The financial savings from this proposal would be very substantial in a period of high volume of insurance claims.

I would like to add here that we have been looking for ways to save money in FHA this year, and with the help of the General Accounting Office people and their recommendations, this is one that we had suggested to us. We thought it was an excellent one.

Cost certification requirement removal

REMOVAL OF COST CERTIFICATION REQUIREMENT FROM SECTION 221 SINGLEFAMILY HOMES

Section 221 housing is low-cost housing for families displaced by slum clearance or Government action. The cost certification for single-family homes duplicates other established procedures and is not used under any of the other FHA programs for single-family homes. It is felt that all home-mortgage programs should have the same requirements with respect to cost certification, and that this provision does not appear to serve any useful purpose in the 221 program. Senator CAPEHART. Is that the program where there is no downpayment?

Mr. MASON. There is a downpayment in section 221.

Senator CAPEHART. You are insuring 100 percent?

Mr. MASON. Not in section 221. Ninety-five percent. The buyer in this case does get a certificate as provided for in the Housing Act of 1954, of the value of the house, so it seems needless to have this extra safeguard.

Senator LEHMAN. I am not quite clear why you make that recommendation. What is the difference in philosophy between low-cost housing for families displaced by slum clearance and a single-family

home?

Mr. MASON. Sir, when this legislation was written it provided cost certification which we all were thinking of as so needed. It was written into the legislation for that purpose. No other single-family housing requires cost certification, rental or otherwise.

Senator SPARKMAN. His recommendation makes it uniform. It has been an exception in the law. Originally when you proposed 100-percent insurance, we reduced it to 95 percent, but we did not remove the cost certification.

Senator LEHMAN. This makes it uniform?

Mr. MASON. It makes all single-family housing on the same basis. These things that are simple are better for the industry and better for us, too.

Military housing

EXTENSION OF TITLE VIII MILITARY HOUSING

Under the existing law, title VIII expires June 30, 1955. This bill would extend title VIII for only those projects which are certified by the Secretary of Defense prior to June 30, 1955. It also provides that all FHA commitments to insure these projects must be made during the following year. This extension is intended to provide an orderly conclusion to the FHA military housing program.

Senator CAPEHART. Might I ask a question there? Is it not a fact that there has been no so-called military housing under title VIII or Wherry housing started since we wrote the cost certification into the act?

Mr. MASON. No, that is not true.

Senator CAPEHART. How much has been started?
Mr. MASON. There are 17 projects.
Senator CAPEHART. How many?

Mr. MASON. Seventeen projects, sir.

Senator CAPEHART. They were all started prior

Mr. MASON. And probably the reason for your question was that you wrote cost certification into Wherry housing before you did into other housing. It was written on June 30, 1953.

Senator CAPEHART. Under the Wherry Act has there been any project started since we wrote the certification in?

Mr. MASON. Yes, 17 projects.

Senator CAPEHART. Were they not started prior to that time?
Mr. MASON. No, sir.

Senator CAPEHART. Since we wrote it in in 1954 there has been no

project started?

Mr. MASON. I cannot answer that.

Senator CAPEHART. What is the date of the starts of those?

Mr. MASON. I do not have the dates here, sir.

Mr. COLE. Prior to 1954.

Mr. MASON. I have a listing of the projects that have been started. Senator CAPEHART. I think you will find that since 1954 there has been no Wherry project started-since we wrote the certification amendment in the 1954 act.

Mr. MASON. I cannot state positively.

Senator CAPEHART. You do not have the date these were started, Mr. Mason?

Mr. MASON. No, but since June 30, 1953, when cost certification was written into the Wherry Act.

Senator CAPEHART. That is June 30, 1953?

Mr. MASON. We have 17 projects in Alabama, California, Idaho, Massachusetts

Senator CAPEHART. But I think you will find there has been none started since May 1954.

Mr. MASON. Senator, there have been no commitments issued by FHA for Wherry Act housing since August 2, 1954.

Senator CAPEHART. That was the day the bill passed.

Mr. MASON. Yes, sir.