Perhaps the biggest reason advanced by those who do not reenlist is the matter of inadequate and insufficient housing. Proper housing facilities to cover Dow Air Base and all other installations would surely result in a greater percentage of reenlistments.

In view of all of the above, we do hereby respectfully request and urge this committee to report Senate bill 1501 out of committee favorably and at your earliest convenience. We are in desperate need of housing in our city for military personnel and selfishly we feel that your favorable action on this bill will be the first step toward the solution of our problem.

The next group is the Title I Advisory Group, Mr. George P. Spiczak, vice president of the Home Federal Savings and Loan Association of Chicago; Mr. Fred W. Heitmann, vice president of the Northwest National Bank, Chicago, and Mr. B. J. Staal, treasurer of the Holland Furnace Co., Holland, Mich.

Senator DOUGLAS. May I say that I know the first two of these gentlemen. They have a very good reputation in the city of Chicago. Senator SPARKMAN. I recall they came before us last year and helped us work out some difficulties on the title I provision. We are very glad to have you gentlemen with us. You heard my suggestion that your statements be given to the reporter for inclusion in the record, and then for you to discuss or summarize your statement. Home repair and modernization

STATEMENT OF FRED W. HEITMANN, VICE PRESIDENT,

NORTHWEST NATIONAL BANK, CHICAGO, ILL.

Mr. HEITMANN. It was our pleasure to meet with you a year ago in executive session when you were seeking remedial answers to this FHA problem. We were here for the same purpose. We felt in the exchange of answers and questions that we both accomplished something, and we are here again for that purpose, to answer your questions now or at any time that it would be convenient for you.

Senator SPARKMAN. I wonder if I might ask you this. You heard Mr. Nichols' statement; did you not?

Mr. HEITMANN. Yes, sir.

Senator SPARKMAN. You heard his recommendations?

Mr. HEITMANN. The Lenders Advisory Committee is a group composed of 6 bankers and 1 savings and loan man, my colleague, Mr. Spiczak. These bankers are representatives of the United States on a geographical basis. We meet from time to time here in Washington. Our recommendations are substantially those of Mr. Nichols. I would like to highlight two of those recommendations.

As I told one of you gentlemen yesterday, we bring you we think the grassroots opinion of the bankers and savings and loan men who actually make these loans. It seems a bit incongruous to us that we only permit a man owning a single-family residence $2,500 for 3 years, whereas if a man had a 2-flat or a 3-flat we would permit him to borrow up to $5,000, yes, up to $10,000, for 7 years. Obviously the two do not gibe.

This original limitation passed in 1934 to permit a single-family residence $2,500 for 36 months has not been changed since that time. We all recognize that an addition or repair to a home necessitates a higher bill, a higher construction cost, than it did then. It seems reasonable for us to propose that you do give some consideration to the single-family residence. Your Presidential Advisory Committee 1

year ago suggested this, and it was passed in the House committee. It was only in subsequent hearings resulting from the FHA investigation that it was thrown out. All lenders in the industry are in agreement upon that.

Our other suggestion is on this 6-months occupancy requirement. It is a bit of a hardship for a man moving into a home, wanting to put screens and storm doors on his home or some other necessary addition, that he should have to go out to another financial market at perhaps a different rate to secure this financing.

Answering your question, Senator Douglas, about thrift, I think the consumer credit on the part of the homeowner when he borrows to improve his home is a form of forced savings, and many savings plans and financing institutions require such monthly payments.

I think Senator Capehart asked why we banks want title I. The banker in an area that is growing and he is trying to meet the credit of his community--the veteran, the businessman, the individual—has found that the credit needs have so expanded that it is difficult with the high corporate tax rate that we pay to establish the type of reserves that we need to protect our depositors' money. We bankers operate with other people's mney mre than anybdy else, and we do not know what our losses will be. If we can pay the Government a premium and it is at no cost to the taxpayer, this program seems to make sense.

Some 18 million people have used this program since 1934, and it has not cost the taxpayer a single nickel. We have paid premiums, and we think we should. Our claims received back from the Government are insignificant compared to the premiums we have paid. In my own bank's particular case, our loss has been one-fifth of 1 percent. Gentlemen, I appreciate that brevity is in order, and I am going to finish right there.

Home repair and modernization

STATEMENT OF GEORGE P. SPICZAK, VICE PRESIDENT, HOME FEDERAL SAVINGS & LOAN ASSOCIATION, CHICAGO, ILL.

Mr. SPICZAK. Mr. Chairman and members of the committee, I do not think we should overlook the small percentage of abuses to the total loan volume handled and the fact that 18 million homeowners have benefited through the title I program in the past 20 years.

The matter of insurance on these loans is one that I feel is just as important as the insurance furnished by the Federal Deposit Insurance Corporation on their bank accounts of $10,000, and your Federal Savings and Loan Insurance Corporation on your savings accounts of savings and loan associations of $10,000.

These are unsecured loans. They are not secured by a chattel mortA heating plant is put into a home, and there is no possibility of repossessing it. Since the lender is making an unsecured loan, the FHA title I insurance is a very important factor.

Another important factor is that this type of loan furnishes the lender with a certain degree of liquidity. The result is a ready market for title I loans, so that they can be disposed of in the event of a need of cash. With a noninsured loan or property improvement loan on a lender's loan plan, there is no ready market for it. In our particular operation, we have paid FHA approximately $700,000 in in

surance premiums. We have collected back in claims about $400,000. Certainly it is not a program that is being taken advantage of. The claims ratio is small, and overall I believe that 90 percent of the operation is one of the finest for the homeowners of this country and one of the finest for the economy of the country. Thank you.

The prepared statement of Mr. Heitmann and Mr. Spiczak follows:) Home modernization and repair

STATEMENT OF FRED W. HEITMANN, JR., AND GEORGE P. SPICZAK, TITLE I ADVISORY COMMITTEE

We are with you today to present the recommendations of the FHA Title I Advisory Committee, officially appointed September 2, 1954. This committee appointed on a geographical basis, as to be representative of all sections of the Nation, has met from time to time in Washington and is composed of the following:

D. Z. Albright, vice president, Security-First National Bank of Los Angeles; Fred W. Heitmann, Jr., vice president, Northwest National Bank of Chicago; W. L. Johnson, vice president, Construction Finance Co., Boise, Idaho; R. T. Mayfield, vice president, the First National Bank of Fort Worth; J. Andrew Painter, vice president, the National City Bank of New York; and George P. Spiczak, vice president, Home Federal Savings & Loan Association, Chicago.

We are also here to bring you grassroots answers to the questions you might have, as to how the title I program is working since Congress amended the act last June. We appreciated the fair hearing given us a year ago and felt our answers to your questions then were helpful. Whereas, we have an economic interest in talking to you, we feel our recommendations are also in the public interest.

At a meeting of this FHA Advisory Committee, held in Washington on February 24 and 25, 1955, it was agreed that it would be unwise for us to recommend that title I be discontinued precipitously, but, rather to recommend to Congress certain modifications in the existing title I act. They are:

1. Make title I permanent

Reason: This would eliminate the uncertainty facing industry and lenders about continuation or renewal of the title I act as heretofore experienced and it would also make title I conform to other FHA insuring programs.

2. Eliminate the 6-month occupancy limitation

Reason: This would remove discrimination against the new-home owner in financing needed improvements, alterations or additions where the credit aspects justify the extension of such improvement loan credit. New home buyers, because of this statutory limitation, are forced to go into other methods of financing to obtain alterations or improvements needed within the 6 months' term and almost always at a considerably higher price to the homeowner than would be the expense if financed under title I.

3. Increase the term for single family home loans from 36 to 60 months and raise the maximum permissible loan from $2,500 to $3,500

Reason: $2,500 maximum loan was established in 1934. Current economic conditions warrant an increase to $3,500 and a 60-month term to provide the single-family homeowner with adequate financing facilities for needed repairs and desired improvements or modernization. Obviously, with the increased cost of construction since 1934, this limitation of $2,500 for 36 months should be changed.

Also to cover the large need for expansion of homes to provide for family growth.

In addition, this increase in term and loan amount would provide more effective means for elimination and prevention of blight or slum areas.

4. Increase the $10,000 limitation for class 1 (b) loans to $15,000, the present maximum maturity of 7 years and 32 days and the present $2,500 per unit limitation to remain unchanged

Reason: To expand the benefits of the FHA financing plan to the rehabilitation of multiple-family dwellings, to prevent extension of blight areas and to

bring houses up to acceptable living standards and building code requirements. The question of whether home improvement loans would be made on a lender's so-called "own plan" or under the FHA I, should, we believe, be left to the determination of each lender and that those disliking title I because of purely competitive reasons should not try to kill it. Rather, let time and experience prove which plan is in the best interest of the homeowners, industry and lenders. The case for the title I plan of lending may be summed up in the advantages accruing to (1) the homeowners, (2) the lending institutions, and (3) the building material manufacturers, suppliers and dealers.

The FHA has enabled millions of families to own and maintain far better homes than they could otherwise afford, and is the best example of intelligent collaboration between Government and business at no cost to the taxpayers. The initial Government investment of $8,333,314 has been returned to the Treasury and there is a cash surplus in excess of $33 million. In the past 20 years, over 18 million American homeowners have participated in the title I program.. At present, over 7,200 lending institutions, exclusive of over 3,900 branch offices, hold title I insurance contracts.

When the title I program was launched in 1934, facilities for financing home repairs and improvements were practically nonexistent. Through the new system of dealer controls, which each insured lender is required to maintain, the homeowner is provided protection against unscrupulous or fraudulent dealers. The precautionary dealer listing that the FHA publishes and distributes gives some warning to both lenders and the public regarding undesirable dealers.

Even though some lenders have plans of their own for financing property improvement loans at higher discount rates, the availability of title I financing in practically every community serves as an effective check on excessive financing charges. It is felt that without title I financing, many areas would be left high and dry with inadequate facilities. Minority groups might have difficulty in securing credit for maintenance and repair in areas where these are most needed. The advantages of the FHA plan to lenders are many; the most important of which is the loss protection offered under it, and also the public's ready acceptance of it. We believe the FHA offers the greatest amount of reserve protection at the least cost, which is highly important for those lenders who wish to meet the increasing demand for credit in this period of our economy which makes the accumulation of adequate reserves out of earnings most difficult.

We who operate on other people's money, perhaps more than any other business, owe our depositors and savers the greatest degree of protection we can give them in the employment of their funds. Who can say what our losses would be on this type of unsecured credit in a severe business downtown. Some current pronouncements sound as if we were free forevermore of business cycles. We must guard against wishful thinking. In 1928, the leading authority on the statistics of business cycles stated that at that time they were being ironed out. The early thirties proved him a poor prophet.

Some of the advantages of the FHA plan accruing to manufacturers and suppliers of materials and to local dealers or contractors are as follows:

The dealer controls which all insured lenders are required to enforce tend to eliminate irresponsible, unethical or fraudulent dealers and salesmen, particularly the itinerant gypsy or hit-and-run type of high-pressure operators. This will protect the reputable local dealers established in the area, and conserve for them the legitimate business against the depredations of the mobs of dynamiters which have roamed the country.

Dealer reserves are not permitted under title I regulations. Legitimate dealers get the full proceeds of the notes discounted. There will be no occasion to load the amount of the reserve holdback onto the price of the job thereby unnecessarily burdening the borrower.

Manufacturers and suppliers of materials are protected against false guaranties, overpricing, and misrepresentation of the quality of materials. They are assured of proper application and satisfactory servicing.

It is also in order that we mention some other important reasons why title I should be continued:

(1) Without title I, many savings bank and savings and loan associations, because of local State laws, would have to discontinue making unsecured loans, thereby creating a hardship on home owners seeking funds for necessary repairs and improvements.

(2) Local State laws vary but in many instances amounts, terms and rates would be less favorable than now permissible under FHA.

(3) Many rural banks will discontinue making these loans without FHA insurance because they cannot diversify their risks. A bank making 100 loans in a one-industry town faces trouble if the plant closes its doors. This condition does not exist in metropolitan areas with diversified employment. (4) Title I paper has a ready market. Valuable to banks and savings and loan associations with a high ratio loan portfolio and who are meeting the needs of their community.

(5) We must realize that the job of maintaining our existing housing inventory of 45 million units in a sound condition extends from Alaska to Puerto Ricofrom Maine to Hawaii. There are areas where local adjustments are taking place and the all-out help of the local banker in a home improvement program is dependent upon FHA insurance.

(6) Financing property repairs is a must in the successful execution of the urban renewal program. Because of the risk title I insurance is necessary.

It is our own belief that title I should be continued on a permanent basis with revisions outlined, if for no other reason than that of helping to maintain our housing inventory in a sound condition.

Home repair and modernization

STATEMENT OF BEN J. STAAL, TREASURER, HOLLAND FURNACE CO., HOLLAND, MICH.

Mr. STAAL. Mr. Chairman and members of the subcommittee, I appear in a dual capacity as a member of the Industry Advisory Committee to title I and also as treasurer of a large user of title Ĭ, the Holland Furnace Co. We operate about 500 branches throughout the country in 41 States and do business with 700 banks all over the United States.

It has been our experience that whereas there is quite a bit of promotion about bank lending plans they are, even after 20 years of FHA, still in a great minority. The installment lending directory of the American Bankers Association will show that out of 7,600 banks engaged in consumer credit, only 1,300 have their own modernization financing plan. There are only 1,300 home modernization plans on the part of those banks as against 7,600 engaged in consumer credit. This is after 20 years of pioneering on the part of FHA in the home modernization field.

I think it is self-evident that if after 20 years only 1,300 banks have initiated their own plan that there is a definite place for title I in the American market.

I would also like to point out another thing in that same connection, and that is that it has been our experience in writing $280 million worth of business, approximately $20 million annually, under title I, that wherever there is a non-FHA plan instituted almost without exception the rates are from 1 to 2 percent higher. One percent on five is actually an increase in cost to a consumer of 20 percent, and a 7 percent finance fee over against 5 percent is 2 percent or actually a 40 percent increase in the cost of financing the improvement desired.

The third thing I would like to highlight is this: It has also been our experience in writing close to $300 million of paper under title I that whenever there is a reversal of economic conditions in the local area there is more courage, shall we say, or there is at least more confidence, in continuing the home improvement market and enabling people to purchase under title I than where there is a bank modernization plan in effect. For the long-range viewpoint, we feel that after