As a Floridian I am well acquainted with the problems of the retiree and the elderly, for thousands upon thousands of these people are migrating to our great State. There are many other areas which are similarly affected. A vast number of these people are desirous of residing in outlying communities and they particularly enjoy the pleasure of small-city and community or rural living. I could go on and on expounding the virtues of H. R. 12939, because I sincerely believe this bill will greatly assist in the establishment of better living conditions and standards, and, at the same time, help to stimulate construction to offset the small recession presently confronting this great Nation of ours. I hope that the members of this committee will include H. R. 12939 in this year's housing bill. The committee members have done an outstanding job in the past and all that I ask is that they use their own experienced judgment in this important matter. Specifically, my bill provides for the following changes and deletions to section 203 (i) of the Federal Housing Act: (1) Present law: Paragraph 1, first sentence: "Not in excess of $8,000." Change: Page 1, line 9: "Not in excess of $9,000." Reason: General increase in labor and material cost, particularly those additional drayage costs and labor incident to rural construction. (The Senate Banking and Currency Committee recently reported a bill raising from $8,000 to $9,000 the maximum allowable for construction of rental units.) (2) Present law: Paragraph 1, first sentence: "Located in an area where." Change: Page 1, line 10, and page 2, line 11: Change "any area other than a built-up urban area” to read, “located in any area other than a built-up urban area." Reason: To eliminate any doubt as to what shall constitute a rural area. (3) Present law: Paragraph 1, first sentence: "Where there is located a dwelling designed principally ***." Change: Page 2, line 5, insert for "including a farm home" the following: "where there is located a dwelling (including a farm home) designed prin cipally". Reason: To remove all doubt that any distinction is drawn between farmers and other occupants of rural dwellings. (4) Present law: Paragraph 1, first sentence: "and which is approved for mortgage insurance prior to the beginning of construction". Change: Deletion of the foregoing phrase. Reason: To permit rural purchasers, subject to the regulations and approval of the Commissioner, to select for insurance an existing rural dwelling of their choice, a right and privilege now enjoyed by urban purchasers (203b). Under the law as now written the Commissioner is prohibited from issuing mortgage insurance on a rural dwelling unless application for mortgage insurance thereon was made prior to the start of construction. This provision imposes a restriction on the freedom of the individual to select a rural dwelling of his choice. Also, this provision depresses the home construction business since countless thousands of rural dwellers desire and can afford new and larger homes but cannot sell the home in which they live since a potential purchaser of the home cannot procure satisfactory mortgage financing. (5) Present law: Paragraph 2, first sentence: "providing adequate housing for families of low and moderate income". Change: Page 2, line 13, change "rural areas" to read, "in suburban and outlying areas, rural areas and small communities”. Reason: To further resolve any doubt that the proposed law will be applicable everywhere other than in an urban area. (6) Present law: Paragraph 4: “Provided further, That under the foregoing provisions of this subsection the Commissioner is authorized to insure any mortgage issued with respect to the construction of a farm home on a plot of land five or more acres in size adjacent to a public highway, the total amount of insurance outstanding at any one time under this proviso not to exceed a $100,000,000.” Change: The deletion of the above paragraph. Reason: The deleted paragraph empowered the Commissioner to approve mortgage insurance on rural dwellings adjacent to public highways and situate on 5 or more acres. This implies that no rural dwelling is insurable unless so situated. The Commissioner has heretofore taken the position that the authority to insure mortgages on rural construction is not limited by the above paragraph. Therefore, the elimination of this paragraph is a conforming change and not one of substance. Further, the provisions of the proposed legislation render this provision superfluous. I would like to request that you give your very careful attention to the provisions of H. R. 12939, and it is my sincere hope it will receive the approval of your committee for inclusion in the housing bill you now are writing. Now, Mr. Chairman, may I discuss briefly the report filed with the committee by Mr. Albert Cole, Administrator of Housing Home Finance Administration. Taking first the Administrator's criticism against increase from $8,000 to $9,000 under the provision of section 203 (i). Please note that he makes no mention of the fact that the cost of constructing housing in outlying rural areas is considerably more than that of housing construction of urban or city areas. No consideration is given in his statement to the additional cost incurred in conveying building materials to rural areas, nor has any consideration been given to the cost of importing labor and the housing of that labor in order to effect construction of housing in rural areas. Construction material houses usually add additional delivery charges to initial costs when materials are delivered outside of a fixed delivery area. In addition labor generally demands travel time after offering their services to a contractor or subcontractor outside of a given district. When computing the additional costs sustained by a contractor building in a rural area I am sure you will find that a dwelling costing $8,000 in an urban area, when duplicated item for item in the rural area, will cost in excess of $1,000 more. Secondly, the Administrator claims that under the provisions of section 203 (b) homes can be financed in outlying areas on existing construction up to 90 percent during the first year and 97 percent from the second year on. The Administrator makes a good point in stating that construction defects are usually not apparent during the first year after completion but more readily show up after the second and third years; however, most of our directors of FHA field offices are now very reluctant to insure existing dwellings under the provisions of section 203 (b) for fear they will set a precedent that regards the substandard off-site improvement which is at present a must under section 203 (b). Thirdly, the FHA field offices have definitely set a rule of thumb which in effect restricts the appraisal section recommending mortgage insurance to not exceed 70 percent of the appraised market value. In regard to the Administrator's argument that insurance of existing housing defeats the purpose of FHA in providing new housing, I wish to point to the large number of families, now living in houses which they have outgrown either because of increased income or need for additional space, or both. Since FHA refuses to insure mortgages on existing houses in rural areas they find it impossible to dispose of their house favorably and are therefore prevented from building or purchasing the new one which they need. In other words, if FHA policy were to include existing housing it would benefit two families-first, the one who could afford to purchase the existing house by reason of its having an insured mortgage and, second, the family who would then be able to use the money realized from the sale of their original house for the purpose of building a new house. These appear to be the major sections on which objections were filed. It is my understanding that the Administrator has indicated to your committee his general support of the objectives of my bill. Mr. RAINS. Next is the distinguished member of the Banking and Currency Committee, the Honorable J. Floyd Breeding. Come around, Mr. Breeding. We are glad to have you. STATEMENT OF HON. J. FLOYD BREEDING, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF KANSAS Mr. BREEDING. Thank you, Mr. Chairman. Mr. Chairman and members of the subcommittee, I appreciate the opportunity to appear here and testify briefly in favor of H. R. 10637. I know that the subcommittee has had a great deal of testimony on this measure and it was my pleasure to be here last Thursday when my fellow Kansan, Mr. Henry A. Bubb, chairman of the legislative committee of the United States Savings & Loan League, presented such a clearcut and vigorous statement in behalf of the program. I have a great deal of mail from the savings and loan and other people in my district urging enactment of this plan. As I understand it, the bill would allow savings and loan associations and other approved lenders to make loans up to 90 percent of value rather than the traditional 70 or 80 percent ratio. My district is mainly a farm district with small towns and does not have the great financial institutions that are found in the big metropolitan areas. Many of my people have complained that for one reason or another they are unable to avail themselves of the FHA or VA programs and that it is only the conventional loan which can meet their needs. Surely the conventional loan will be a better loan for many people if it is liberalized to 90 percent. As one lender put it in a recent letter to me, The Federal Housing Administration has been a considerable aid, but there are many borrowers in smaller communities that still do not wish to avail themselves of this type of loan. The tremendous amount of forms and paperwork, in addition to the waiting period, makes many prospective homeowners give up in despair. As further evidence of the scarcity of FHA loans, I recently received a letter from Mr. L. B. Hancock, president of L. B. Hancock, Inc., of Dodge City, Kans. His company is one of the outstanding real estate firms in that area and is also a member of the Mortgage Bankers Association and the National Association of Home Builders. He said, in part: So far, we have never been able to get any of the banks here to buy FHA insured loans for permanent investment, and I don't know of any except the ones in Sublette to which we sold a couple of loans a few years ago and the bank took the loans because of the fact that the people were their customers. I believe that the certified agency plan of the FHA is now helping this situation, but it is apparent from Mr. Hancock's letter and other information that FHA and VA loans are just not in plentiful supply in my district. I am sure that this subcommittee will take into consideration these facts as well as all of the other points submitted during these hearings. I do hope that the subcommittee will act favorably on the new home mortgage plan because I think it would be helpful generally and I am sure it will be helpful in my district. With this in mind I would like to submit as testimony four letters from my district and State in support of this bill. Mr. RAINS. They may be included in the record at the end of your testimony. Mr. BREEDING. Thank you, Mr. Chairman. And finally, naturally, there are some who are in opposition to this bill. In my office, I have recently received 39 letters from 21 States in regard to this bill, with only 3 in opposition. However, I would like to submit as testimony this particular letter from Mr. Harry Colmery, who is opposed to this legislation and who represents 10 Kansas life-insurance companies who operate extensively in my State. Mr. RAINS. The letters may be included in the record." Mr. BREEDING. Of course, I realize that some of our State laws dealing with this matter will have to be changed accordingly in order to accommodate this legislation. Mr. Chairman, I sincerely hope that you and the members of this subcommittee will be able to make any necessary changes in this legislation in order that everyone might be included in the many benefits therein. (The material referred to above is as follows:) KANSAS ASSOCIATION OF LICENSED NURSING HOMES, INC., Hon. FLOYD BREEDING, House Office Building, Washington, D. C. DEAR SIR: I am writing you in my official capacity as president of the Kansas Association of Licensed Nursing Homes, in Kansas, representing some 365 licensed homes in which the aged of our State are cared for under supervision. We are in favor of a bill to extend FHA loan privileges to nursing home administrators thereby enabling more and better homes in which our increasing number of aged citizens will be properly cared for. We will completely support this bill. (Mrs.) LOUISA JOPLIN, President. Hon. J. FLOYD BREEDING, Representative, Fifth District of Kansas, House Office Building, Washington, D. C. TOPEKA, KANS., June 27, 1958. DEAR MR. BREEDING: Please be advised that I have received a copy of Senate bill 4035 which is the amendment to the Federal Housing Act concerning nursing homes. As you will no doubt remember in previous discussions you have been asked to sponsor this bill in the House of Representatives and I would consider this to be a distinct pleasure to me if you can see fit to sponsor this legislation. If I can be of further assistance to you in this matter, please let me know. With best personal regards, I am, Very truly yours, LEONARD W. PIPKIN, Jr. THE BARBER COUNTY BUILDING & LOAN ASSOCIATION, Congressman J. FLOYD BREEDING, House Office Building, Washington, D. C. DEAR FLOYD: I can't imagine why the Senate Banking Committee voted against the Rains bill, H. R. 10637, which embodies our league's conventional-loaninsurance plan. This is a case where the FHA is fighting this plan and attempting to substitute an almost identical bill for themselves. In our case it will not require a penny of Government money and on the FHA plan it would require the insuring of millions of dollars of loans that would be guaranteed by the Government. Ordinarily we try to keep the Government out of anything we can so I would appreciate an explanation from you as to the committee's thinking on this proposition. I certainly hope the House Banking Committee will reverse the decision of the Senate committee and would give us another chance for what I think is a most forward step that has been taken by savings and loan associations in the United States to handle their own loans and take the load off of the United States Government. We have got the most wonderful wheat crop we ever had but on account of wet weather we have not been able to do any harvesting here to speak of for over a week. Most of the rains here have been light and with very little wind so practically all of it could be harvested if it rained no more. It looks like an average of at least 30 bushels for Barber County if we could save it, and most fields will go higher than that. 28431-58-24 I guess you know about my wife having a heart attack in Topeka on April 12 and she was in the hospital there for 5 weeks. Now she has been home for 5 weeks and seems to be getting better every day. I trust both you and Mrs. Breeding are fine, and with best personal regards, I remain, Sincerely yours, E. E. LAKE. FEDERAL SAVINGS & LOAN ASSOCIATION OF SUMNER County, Hon. J. FLOYD BREEDING, House of Representatives, House Office Building, Washington, D. C. DEAR CONGRESSMAN BREEDING: It has come to my attention that you are a member of the House Banking and Currency Committee. Our institution is very interested in the home-loan-guaranty plan, which will probably come before your committee. It is my opinion, and the opinion of many other officers of Federal savings and loan associations, that this plan would materially assist the small-home builder and buyer, stimulating housing construction, and enable savings and loan institutions, particularly in the smaller communities, to serve the communities a great deal better than we are now allowed to serve under our present laws and regulations. This home-loan-guaranty plan has been prepared and submitted after many months of study, both by officers of Federal savings and loan associations and attorneys. The Federal Housing Administration has been a considerable aid, but there are many borrowers in smaller communities that still do not wish to avail themselves of this type of loan. The tremendous amount of forms and paperwork, in addition to the waiting period, makes many prospective homeowners give up in despair. It is not that I am objecting to the Federal housing plan of loans, as we have made many of them, but as a lender there are many circumstances that arise which makes it nearly impossible for both the borrower and the lender to use this plan. Again I would like to call your attention to the fact that this is more true in the smaller communities than in the larger communities. I would like to thank you for your careful consideration of this matter. G. S. RENN. WESTERN SAVINGS ASSOCIATION, Hon. J. FLOYD BREEDING, House of Representatives, House Office Building, Washington, D. C. DEAR CONGRESSMAN BREEDING: First I want to thank you for your nice letter sent a few weeks ago with respect to the advantages of the certified agency program of the Federal Housing Administration and how it can be of value to home purchasers in our area. You will be interested to know, I am sure, that Western Savings was one of the early lenders to qualify under the new certified agency program and we have been using it with increasing frequency in the origination of FHA insured loans for the purchase of homes in our lending territory. Of even more importance, Mr. Breeding, is the subject about which I am writing you at this time. I am hopeful that you are somewhat familiar with Representative Rains' bill known as H. R. 10637. This is the bill which provides for a home loan guaranty plan for the savings and loan industry and we respectfully request that you give it your favorable consideration. Since the plan will be ably explained by our fellow Kansan Henry Bubb, of Topeka, I won't go into details of the plan except to mention the following, that first of all the loans which would be made under the provisions of this bill would be on our conventional home mortgage loan plan and would be originated as any other that we now make except that they could be made in much larger amounts thus making home financing available to a larger segment of our population in this area and, since such loans would be made at interest rates determined by |