REDUCTION OF FHA INSURANCE PREMIUM RATE Section 3 of H.R. 10213 would authorize reduction of FHA mortgage insurance premium rates for home and multifamily mortgages insured under title II of the National Housing Act to as low as one-fourth of 1 percent. Under present law the premium rate cannot be less than one-half of 1 percent. Section 1 of S. 3042 would permit FHA mortgage insurance premiums to be reduced to not less than one-fourth of 1 percent where the mortgages are insured under the multifamily housing provisions of section 207, 213, 220, and 221 of the National Housing Act, except in the case of profitmaking multifamily housing under section 221. FHA studies indicate that no FHA mortgage insurance premiums can be reduced on a responsible basis at this time, and that for many FHA programs it is unlikely that premium reductions would be warranted at any time in the foreseeable future. However, FHA would not object to being given discretionary authority to reduce the insurance premium on any of its programs. With such authority, FHA would be in a position to reduce its rates at any time its studies indicate that it is actuarially sound. The authority, if given, should also specify that any reduction in rates under its provisions could be made applicable to existing insured mortgages. FHA has established its premium rates for its mortgage insurance programs within the statutory limits based on the expenses of administering each program plus assumed losses under depression conditions. It reviews its reserve requirements periodically and they are also examined by the General Acocunting Office in the course of its annual audits. Its actuarial processes have also been studied by independent experts outside of the Government. As yet none of these studies has resulted in a judgment that FHA premiums should be reduced. There is even less justification for considering reduction of the insurance premium rates on the urban renewal, relocation, and cooperative housing programs as proposed by S. 3042. Each of the first two programs (secs. 220 and 221) has an insurance fund established in 1954 that is separate from the section 203 mutual mortgage insurance fund and other FHA mortgage insurance funds. The financial status of the two funds under sections 220 and 221, the greater risk characteristics involved in the two programs, and the lack of experience with them would make inadvisable a reduction in their insurance premiums at this time. There is no requirement under section 220 or section 221 that the property be economically sound or even an acceptable risk, as is required under most other FHA programs. These factors all add to the risk characteristics of these mortgages which must be considered by FHA in its maintenance of necessary reserves. REPORTING BY MORTGAGEES OF FEES, CHARGES, OR DISCOUNTS Section 14 of H.R. 10213 would require that with respect to FHA and VA mortgages the originating mortgagee shall report any fees, charges, or discounts paid by the builder, seller, broker, sponsor, or any other person in connection with or for the purpose of arranging the mortgage or loan. The only exclusion from this requirement would be the normal origination fee charged to the mortgagor. FHA considers this provision unnecessary and undesirable. It receives regularly from its field offices current information similar to that which would be required by the bill. Additional information can be obtained quickly at any time. The information received by FHA under the provisions of the bill would be so voluminous as to defy systematic recording and analysis except at prohibitive costs. The present system requires only the correlation of the summaries submitted by 75 field offices reporting uniformly. The proposed requirement would necessitate the correlation of over 500,000 reports per year from a diverse group of mortgagees. Because the reporting would be at the time of insurance, summaries based on these reports would lag so far behind actual market developments they would make little or no contribution to the current administration of FHA programs. SECTION 809 HOUSING FOR SPACE ADMINISTRATION EMPLOYEES S. 3226 and section 15 of H.R. 10213 would authorize FHA insurance of home mortgages under section 809 of the National Housing Act for housing for persons employed at research or development installations of the National Aeronautics and Space Administration. The installation must have been transferred to the Space Administration by one of the military departments. FHA is in agreement with the purposes of this proposed amendment of section 809. The amendment is deficient, however, in that it does not clearly authorize the Administrator of the Space Administration to guarantee and indemnify the FHA armed services housing mortgage insurance fund against loss on the insured mortgages. Under section 809 it is necessary for the FHA to require such a guarantee if the Commissioner determines that insurance of the mortgages on proposed housing is not an acceptable risk. Language along the lines of that which previously has been furnished to your committee should be added to this amendment in order to remove any possible question on this authority. That concludes my statement, Mr. Chairman. Mr. MASON. Senator Clark, I would like to have Mr. David Walker, Commissioner of the Urban Renewal Administration. STATEMENT OF DAVID M. WALKER, COMMISSIONER, URBAN RENEWAL ADMINISTRATION Mr. WALKER. Senator Clark, I am very happy to have this opportunity to appear before you and to answer questions on pending legislation that would affect the urban renewal program. As you know, we are not proposing new urban renewal legislation at this time, because we feel that the legislative framework in which we operate is basically sound, and that this should be a time for concentrating on accomplishments. In February I explained to you the efforts we are making in that direction by simplifying our procedures and require ments, delegating more operational autority to our regional offices, and giving the cities more freedom and responsibility to make their own decisions. We believe that the new manual for local public agencies which was issued in March will make it possible to cut as much as a year off the time between the initiation and completion of a typical project. We have continued to urge the localities to recognize the importance of (1) bringing their existing projects to fruition, in the form of new or rehabilitated structures, and (2) adjusting the size of each new undertaking to the city's actual capacity for carrying out project activities. To assist the cities in putting their program on a basis of continuing accomplishment, we have made much wider use of the general neighborhood renewal plan the method by which a large area can be renewed in stages and we intend to make the fullest possible use of the community renewal program grants which were authorized by the Housing Act of 1959. Our experience in the past few months indicates that this approach is working. On the whole, the cities have been quick to accept our suggestions with respect to the scheduling of projects, and we have been able to continue processing new projects applications at an accelerated rate. We have now approved 142 new projects since the beginning of the fiscal year, with estimated capital grant requirements totaling $196.1 million. In addition, we have provided $81.5 million in capital grant increases for projects that were already in existence. It appears even more certain now than it did in February that we will use all but a small part of the capital grant authority provided for fiscal 1960, and that the additional authority which becomes available on July 1 will be adequate for our needs in the coming fiscal year. Senator CLARK. Mr. Walker, let me interrupt you there to emphasize that last statement that the new authority which becomes available on July 1 will be adequate. We will get into this later at greater length, but you know there is a strong school of thought that thinks this will not be adequate at all. I assume you have given that thought, but nevertheless you stand on this statement? Mr. WALKER. That is right. Senator, I have statements on the bills, and I am wondering if you want me to read these or whether you want me to offer them for the record. Senator CLARK. I will ask the chairman. Senator SPARKMAN. It is perfectly all right to offer them for the record if you choose. They will be printed in full in the record. You can comment on them, summarize, or you can read your statement, whatever you wish. Mr. WALKER. I suspect, Mr. Chairman, that many of my comments will be developed in the questioning, so I will offer them for the record. (The material referred to follows:) STATEMENT ON BILLS PENDING BEFORE THE COMMITTEE The first bill I would like to discuss is S. 3278. This bill contains provisions which would affect both the urban planning assistance program, which is administered by the Urban Renewal Administration, and the public facility loan program, which is administered by the Community Facilities Administration. I will limit my comments to the former provisions, which are contained in section 2 of the bill. These provisions would amend section 701 of the Housing Act of 1954, in order to encourage and assist State and local planning agencies to undertake planning for mass transportation in our urban areas. We believe that planning for the provision of adequate transportation facilities in metropolitan areas is extremely important, and that it is an inescapable and vital part of the overall comprehensive planning work that is assisted by the urban planning assistance program. This sort of planning for mass transportation would be encouraged by section 2 of S. 3278, but it would be simpler, perhaps, for the bill to amend the existing provision of section 701 rather than to add a new subsection. The committee has been supplied with suggested language for this purpose. I should point out, however, that the adoption of language to encourage the use of grants for mass transportation planning would undoubtedly result in a substantial increase in the demand for funds provided by the urban planning assistance program. At present, the House of Representatives has adopted legislation appropriating $4 million for the operation of the program in fiscal 1961. If the provisions of S. 3278 or similar provisions are adopted, we believe that additional appropriations would be necessary. The next bill I would like to discuss is S. 3042, which would affect the urban renewal program in two ways. Section 2 of the bill would increase from $100 million to $200 million the amount by which the Administrator may increase the State-by-State limitation on capital grant funds in certain cases. Our figures indicate that the existing limitation of $100 million will be adequate to meet the needs of any State through the end of the 1961 fiscal year, and there is no foreseeable need for an increase in the limitation. Section 3 of S. 3042 would increase the maximum limit on relocation payments provided under the urban renewal program, from $200 to $500 for families and individuals, and from $3,000 to $5,000 for businesses. The first $200 or $3,000 of these payments would be paid by 100 percent Federal grants, as is presently the case, while any additional amount up to the new limit would be shared on the same basis as other project costs: That is, two-thirds by the Federal Government, and one-third by the localities. We believe that the present limit of $200 is adequate to avoid any serious hardship for families or individuals, and the limit of $3,000 meets the relocation expenses incurred by most businesses. There are undoubtedly some cases where business concerns suffer real hardship, but in many of those cases the problem would not be solved by an increase of $2,000. At the same time, there does not appear to be any sound reason for the Federal Government to pay 100 percent of a portion of the relocation expenses, and two-thirds of some additional amount. Actually, we believe that the entire cost of relocation payments should be shared by the localities in the same way that they share in other project costs. In many States there are constitutional or other legal obstacles to this, and I understand that is the reason Congress provided for the Federal Government to pay 100 percent of the relocation costs, within fixed limits. However, we would not object to legislation that permitted higher relocation payments, where justified, in States that authorize their localities to share in the entire cost of relocation, on the normal two-third-one-third basis. S. 3458 would amend section 112 of the Housing Act of 1949 with respect to urban renewal areas involving colleges or universities-to make this section applicable to hospitals as well as institutions of higher learning. Section 112 provides for a waiver of the normal predominantly residential requirement in such projects, and also permits the locality to receive noncash grant-in-aid credit for expenditures made by universities for the acquisition and clearance of property either within or in the immediate vicinity of urban renewal projects. We are opposed to this extension of the provisions of the existing law. In effect, section 112 increases the Federal contribution to the urban renewal project-or to other projects in the locality-without financially assisting the university in any way. If hospitals are added to the category of institutions that can create such credits, there could be justification for adding a long list of other types of institutions, and ultimately the local share of project costs could be reduced to little or nothing. S. 1680 would provide for Federal urban renewal funds to be used to pay for the entire cost of constructing any civil defense shelters in urban renewal areas, including land costs. Our present law and procedures permit such shelters to be constructed by a locality and included in gross project cost as a local noncash grant-in-aid, which means in effect that Federal renewal funds would pay two-thirds of all or some portion of the construction cost. By requiring Federal payment of the total cost of a shelter, S. 1680 would distort this normal Federallocal sharing ratio and divert urban renewal funds from their basic purpose. We believe that any program of direct grants for the construction of civil defense shelters should stand on its own merits as a separate program, whether or not this coincides with urban renewal project areas or not. Mr. WALKER. That completes my statement. I will be glad to answer any questions the committee may have. Mr. MASON. Next, Senator Sparkman, we would like to have Mr. Hazeltine, the Commissioner of the Community Facilities Adminis tration. Senator SPARKMAN. All right, Mr. Hazeltine. We are glad to have you. STATEMENT OF JOHN C. HAZELTINE, COMMISSIONER, COMMUNITY FACILITIES ADMINISTRATION Mr. HAZELTINE. Mr. Chairman and members of the committee, I consider it a privilege to appear before the committee to assist in your consideration of community facility and college housing legislation. If it suits the preference of the chairman, I would like to discuss first the various bills pertaining to community facilities and then to discuss the bills pertaining to college housing. Pursuant to title II of the Housing Amendments of 1955, the Housing Administrator, acting through the Community Facilities Administration, is authorized to make loans to municipalities and other local government units to finance essential public works where such financial assistance is not otherwise available on reasonable terms. Processing priority is given to applications from communities which had a population of less than 10,000 at the time of the 1950 Federal census for loans to provide basic public works such as water, sewerage, and gas systems. Loans may be made for periods up to 40 years at an interest rate set by the Administrator. On February 16, 1960, the Administrator established a new interest rate formula to reflect changes in the municipal market, both in the new issues and the outstanding bond market. Current interest rates under the revised formula are 434 percent for general obligation bonds and 5 percent for revenue bonds, for bonds with maturities of 30 years or more. Interest rates are adjusted downward one-eighth of 1 percent for each full 5-year differential from the 30-year maturity. For example, a 25-year general obligation loan would currently bear a 45% percent interest rate. Title II established a revolving fund of $100 million to finance these loans. The money is borrowed from the Secretary of the Treasury at a rate of interest determined by him, taking into consideration the current average rate on outstanding marketable obligations of the United States of comparable maturities. As of March 31, 1960, $76 million of the authorized revolving fund had been committed, leaving an uncommitted balance of $24 million. I would like to comment briefly on S. 1955, introduced by Senators Fulbright, Sparkman, and their associates. This bill would increase the funds for public facility loans from $100 million to $1 billion, of which $400 million would constitute a revolving fund. The bill would eliminate the population preference so that loans could be made to |