before congressional committees during the past several years, "Let's get the confusion about FHA title I over by putting its governing legislation on a permanent basis.”

I mean by that that people in our business are confronted every 1, 2, 3, 4, or 5 years, which is the longest it has ever been extended, and that was the last time-with the same problem. Along about the end of the period they are wondering, "Will I be able to go out and sell FHA title I and have this wonderful program to present to my customers?" Of course, it usually gets the administration of FHA title I in a kind of a dither, may I say. That is my reason for thinking it is proven. Why should we keep renewing it?

Senator CAPEHART. I think it should be watched very, very carefully. I would be against making it permanent. I want you to know that. Certainly I think we have to watch it for another 1 or 2 or 3 years to make sure that these safeguards we wrote in the last time are going to work.

Mr. NICHOLS. As I pointed out, you can watch it each year. If I understand the ability of Congress they can also do away with the law if they do not like it.

Senator CAPEHART. Sure, but we found so many irregularities in title I that I do not see any necessity for making them permanent legislation.

Senator SPARKMAN. It seems to me we have plenty of time to consider that question because it runs until 1960 under the present law. Mr. NICHOLS. It does not run yet. It expires June 30. Senator SPARKMAN. I mean, assuming the bill is passed.

Mr. NICHOLS. I am glad to hear you say it will run until 1960, Mr. Chairman.

Senator CAPEHART. S. 1800 extends it for 5

years.

Mr. NICHOLS. I did not know that law had passed.

Senator CAPEHART. It will pass. S. 1800 will pass.

Senator DOUGLAS. Are you not afraid this will be a permanent invasion by Government into the sphere of private enterprise? Should not the Government not interfere with private enterprise?

Mr. NICHOLS. Senator, I know you are an economist and I hate to talk economy with you, but I believe if you make a careful study you will find that all of the banks of the United States cannot carry the home-improvement loans that are necessary to keep the houses of America in livable condition.

Senator DOUGLAS. But should we not try to educate the banks rather than have the Government interfere in this matter?

Mr. NICHOLS. They cannot do it, Senator. I am not talking about the Manufacturers Trust or Chase or Hamilton and all of these big banks in the metropolitan areas. I am discussing small banks out in the country. They cannot possibly do it and keep up the loans in their areas without some help on this FHA title I. You know as well as I do you have to set up what your program is for the year, and you allot so much money for loaning to this, that, and the other. You realize, of course, under FHA title I, under the insured program, that the loans are not carried against the liabilities of the banks who have these insured loans. That means they have more money to loan to other businesses and for other purposes.

Senator DOUGLAS. Do you have respect for ex-President Herbert Hoover?

Mr. NICHOLS. Well, I had. Yes, sir.

Senator DOUGLAS. Ís it not true that the Hoover Commission recommends the Government getting out of this type of business?

Mr. NICHOLS. I recommend some things here, I imagine, a lot of people will not agree with, and I do not agree with everything that President Hoover is recommending in his report.

Senator DOUGLAS. In other words, you disagree with the Hoover Commission report that the Government get out of the insurance business?

Mr. NICHOLS. I feel in the matter of home improvements the Government has a very sound reason for being in that business.

Senator DOUGLAS. But you agree with Mr. Hoover on all other matters?

Mr. NICHOLS. No, I did not say I agree with Mr. Hoover on all other matters. I have a great many opinions of my own. I like what I like and I dislike very much what I do not like. May I go on, Mr. Chairman?

Senator DOUGLAS. Mr. Hoover says this is socialism to have the Government in the business.

Mr. NICHOLS. I had a member of the Banking and Currency Committee of the House, about 8 or 9 years ago tell me he thought I was a Hitler, and I was proposing a Hitler program. I did not agree with him, and that was back under a Democratic administration. Senator DOUGLAS. Mr. Hoover is opposed to REA too, I understand. How do you stand on that?

Mr. NICHOLS. I have no stand at all and know very little about it. I live in New York City and am not affected by REA.

Senator DOUGLAS. You should take a general interest in the affairs of the country. Are you opposed to REA? Are you in favor of Government loans to the REA cooperatives?

Mr. NICHOLS. I shall not get into any argument about the Hoover Commission report.

Senator DOUGLAS. If you favor guaranteeing loans for home repairs would you also oppose governmental loans for bringing electricity into the home?

Mr. NICHOLS. I do not believe I would. No.

Senator DOUGLAS. So you are in favor of REA?

Mr. NICHOLS. If that is all it means, I am in favor of it.

Senator DOUGLAS. You are in favor of the Government guaranty of farm mortgages?

Mr. NICHOLS. I certainly am. I am interested in a little piece of property myself in Indiana.

Senator DOUGLAS. And production credit, for the purchase of machinery?

Mr. NICHOLS. I think, Senator, I am of the opinion you can go a little bit too far.

Senator DOUGLAS. Wait a minute. I am trying to find out what "too far" is. It is always somebody else's business that is "too far" but I am trying to find out just where you step over the line. Would you favor Government loans for the purchase of farm machinery? Senator CAPEHART. You mean the repair of farm machinery? Senator DOUGLAS. No. Loans.

Senator CAPEHART. And repair of farm machinery?

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Senator DOUGLAS. I have not brought that in yet.

Mr. NICHOLS. I would not be in favor of loans for repairing them. I do not know whether it is necessary.

Senator DOUGLAS. For the purchase of farm machinery so that a farmer can put a crop in.

Mr. NICHOLS. I have no idea of whether we should go that far or not.

Senator DOUGLAS. Are you in favor of Government loans on crops?
Mr. NICHOLS. To a certain extent.

Senator DOUGLAS. It sounds as though you are in favor of the New
Deal program.

Mr. NICHOLS. I did not know this was a political discussion.

Senator CAPEHART. You certainly showed good judgment in going to Indiana to buy a farm.

Mr. NICHOLS. That is my home, sir, right outside of your town— Fort Wayne.

Senator CAPEHART. You showed good judgment going to Indiana. Mr. NICHOLS. Getting away from the permanency of title I, I would like to go into another point which is that I think we need a greater amount of insurance coverage and longer terms.

The time has come when consideration must be given to increasing the amount of the loan to be isured by FHA and lengthening the time in which the loan can be repaid.

In the period between 1940-44, that is, about the time higher prices began to prevail, the average loan insured by FHA under title I was $313. According to the FHA's December 31, 1953, 20th annual report, the average insured loan was $595. This means that the average has almost doubled.

These averages, however, do not disclose that 41 percent of title I insured loans are between the range of $600 and $2,500. It may surprise you to learn from this latest FHA report that 21.3 percent of the insured loans are between $800 and $2,500; 9 percent are in the range between $1,000 and $1,500.

It is becoming almost impossible for a home owner to make all necessary repairs to insure a livable home if he insists on an automobile, radio, or television and many other consumer-financed luxuries. Unfortunately, he too often lets the roof go bad, the siding drop off or pays extra heating costs because of the lack of insulation or combination storm windows and doors. Then suddenly he is confronted with an overdue necessary maintenance repair job which, because of neglect, is higher than it would have been if done in time.

Payments for the necessary improvements become a burden if the home owner must pay in 36 months. An $800 repair bill will cost him under FHA title I, $25.56 per month; a $1,000 job, $31.94; and a $1,500 job will amount to $47.91. This is just too much, and yet these payments are for permanent, necessary items of expense.

There is another very important reason why insured loans should be larger and payments extended. This affects a part of the Federal Housing Act of 1954 which is near and dear to all the rehabilitation of slums and blighted areas.

Section 220 of that act is designed to establish within FHA a means for a city to work out a well-rounded neighborhood improvement program. As you are aware, loans can be obtained for the rehabilita

tion of existing dwellings in specific older neighborhoods and financing can be arranged on new construction projected in these established blighted areas. A well-defined plan, approved by FHA, must be worked out by city authorities, after which loans may be insured up to 90 percent of appraisal value, with amortization periods up to 30 years and interest at 42 percent. This section 220 plan may be used to cover purchases plus rehabilitation, refinancing plus rehabilitation, or for new construction.

Both the real-estate and home-building interests have special programs for pushing this very worthwhile Government program. Great success is expected and already several cities are engaged in completing final arrangements to participate in the plan.

The establishment of such programs in any community will have what is termed "fringe areas." These are the sections immediately adjacent to the blighted area. Homes and buildings have been permitted to deteriorate in these "fringe areas" due to the slum condition adjacent. With the improvements under section 220, the owners of the "fringe" buildings will want to bring them up to at least the standard of the former blighted area.

Because these buildings have been neglected, the absolutely necessary repairs will be high, in many instances higher than the $2,500 limit allowed under the present FHA title I terms. The payments on the present 36 months' limit would be impossible, so in a majority of instances a new blighted area is established adjacent to a former blighted section. This would destroy the expense and effort to eliminate the first area.

Now, if larger insured amounts and longer payment time were granted, these "fringe" areas could also be improved under FHA title I. As an example of the difference in monthly payments, compare the following payments under a 60-month payment plan with the amounts I have indicated above for specific sums under a 36-month payment plan:

Eight hundred dollars would be $16.67 per month; $1,000, a payment of $20.84 each month; while $1,500 would require a monthly outlay of only $31.25.

You can see this is quite a difference and could permit the "fringe" area to be rehabilitated too.

Senator MONRONEY. Would you limit that additional time to these fringe areas?

Mr. NICHOLS. No. I would like to, but as I say a little bit later, Mr. Monroney, rising costs have caused higher prices for maintenance and repair work. The average of loan amounts, as shown previously in this statement, will most certainly increase.

To meet this situation, we beg you, on behalf of the hundred thousand maintenance, repair and home improvement contractors and the millions upon millions of homeowners to include in the FHA title I legislation larger loans and longer time payments. Mr. Chairman, we suggest $3,500 and 6 months. We are not asking for these terms on smaller loans. We believe the smallest loan on which these more favorable terms can prevail should be left to and established by FHA. They could very well regulate this by establishing a minimum monthly payment.

I want to speak for a moment on the 6 months' occupancy section in the Housing Act of 1954. Congress, following the Capehart Com

mittee investigation, placed in the National Housing Act of 1954 a provision which forbids the insuring of a title I improvement loan on a new home which has not been occupied for at least a period of 6 months. This is commonly known as the 6 months' occupancy legislation.

In the heat of the Capehart investigation, several cases were exposed where the improvement contractor had unethically cooperated with a prospective home owner. In the instances brought out, the contractor would establish title I loans which would include a sufficient amount to furnish the prospective home owner with the down payment on his new home.

No responsible or reputable contractor, such as those who subscribe to NERŠICA's code of ethics and are members of the Association, condone these or any unethical practices. But they must suffer along with new and honest home owners for the acts of a small, infinitesimal percentage of the contractors and new home purchasers in our country. I do not know how many violations of this kind were found, but there is one thing I know, and that is when compared to the millions of improvement loans insured it is most unfair to the home owner.

It is a distinct disadvantage to the small income couple who purchase a home, which in layout and surroundings suits them perfectly. The builder, in order to bring the price of the new home down to a cost these prospects can afford to pay, has had to eliminate many modern conveniences. These include, among many other items, combination storm windows and doors, awnings, jalousies and screening. All of these will make the home more livable and less expensive to keep up. He has enough money to make the down payment on the new home and keep up monthly payments, plus the addition of one or more of the needed improvements which would add to the comfort and pleasure of his new home. He does not want to wait 6 months to do this.

Senator DOUGLAS. Are you not proposing to do virtually everything for the homeowner? Are you not destroying his individual initiative in furnishing him with capital in this way? Should he not work and save? What has happened to the old-fashoned virtue of thrift?

Mr. NICHOLS. I believe you are in favor of the National Housing Act, are you not, Senator?

Senator DOUGLAS. I raise the question here as to whether or not you are going a little too far. Is it not necessary that people should save? Are you not destroying individual initiative and thrift and saving?

Mr. NICHOLS. I think you might say that, Senator, if you wanted to have that kind of opinion, which many people have, that the whole idea of Government in business and of the Housing Act is granting too much credit and giving too much leeway and making too many people go in debt that should not go in debt. I cannot see why the repair and keeping up of a home is not an important thing in this economy of ours.

Senator MONRONEY. May I ask a question right there? Would it not tend, if you renewed the 6 months' clause, to skeletonize the finished FHA house and lead to what in effect would be a second mortgage on the completion of it with the necessary things installed?

Mr. NICHOLS. I believe that you will find on investigation that the average house that you buy does not have I do not like to use this