May I go off the record? Mr. THOMAS. Yes. (Off the record.) Mr. THOMAS. But the point you made is that you did not have any specific plans and projects of any kind. I want now to quote from your own language. [Reading:] First the success of this operation will be completely dependent upon effective timing, in order that the development of housing and facilities may accompany the development of the defense installation. It is considered essential that policies and procedures, in considerable detail, be developed prior to the necessity for operation of this title. That assumes that none are on the drawing boards now. language continues: That Consequently, it is planned to limit administrative expenses to $30,000– $35,000 per year for this developmental work. The size and type of field staff necessary once a project is actively undertaken will depend upon the scope of defense activity involved, which, of course, is impractical to estimate at this time. How many employees will the $30,000 to $35,000 provide for? Mr. THOMAS. Why can you not absorb that small cost in the great office that you have and the good organization that you have? This comes directly under the Office of the Administrator; does it not? Mr. FITZPATRICK. Yes, sir; it does. Mr. THOMAS. How many people do you have on the payroll of the Office of the Administrator? Give me that figure as of the 1st of September. Mr. FRANZ. 840 in the departmental and field total. Mr. THOMAS. 840? Mr. FRANZ. That is right, sir. Mr. THOMAS. And you want about 683 additional, or a total of about 1,500. Could you not absorb that small additional number? LOANS FOR PREFABRICATED HOUSING Let us now take a look at prefabricated housing quickly. Mr. Reporter, at this point will you insert in the record page 40, which gives the breakdown of administrative expenses. (The page referred to is as follows:) Mr. THOMAS. The Table of Administrative Expenses indicates that for "Personnel services" the request is $90,400. For "Travel" the request is $6,900; for "Transportation of things," $100; for "Communications services," $1,700; for "Rents and utilities services," $2,900; for "Printing and reproduction," $300; for "Other contractural services," $400; for "Supplies and materials," $700; and for "Equipment," $6,600. That is a total of $110,000. You are asking for a total increase of 32 jobs, of which 18 will be in the field, 14 will be in the District of Columbia, at a total cost of $90,400 for "Personal services." I would like now to read this paragraph, which I think is worth getting into the record. The administrative cost of a program of this nature is relatively high because of the amount of supervision required to provide adequate safeguards for the protection of funds advanced and the heavy volume of legal and financial documents to be handled. It is estimated that some 26 loans for $13 million will be committed in the 1952 fiscal year. Based upon previous experience, there will be a large number of inquiries, a relatively small percentage of which will result in the filing of loan applications. About 50 percent of the applications are estimated to receive approval. What is the status of that now? Mr. FITZPATRICK. Under this new operation, or the status under the authorization transferred? Mr. THOMAS. How many employees did you have in 1952 Independent Offices Appropriation Act? Mr. FITZPATRICK. At present we have 18 employees in that division. Thirteen are located here in Washington and five in the field. Mr. THOMAS. What is the total authorization? Mr. FITZPATRICK. I think the uncommitted authorization at this point is around $10 million. None of that may be used, under the language of the independent offices bill, except for protection of existing accounts. Mr. THOMAS. And that is the way the Administrator wanted it? Mr. FITZPATRICK. That was the compromise. As you will recall, at that time we did come in and discuss with you the absolute necessity of some freedom to protect funds advanced. Mr. THOMAS. Off the record. (Off the record.) Mr. THOMAS. Go ahead. APPROPRIATION LANGUAGE Mr. FITZPATRICK. The language in the Independent Offices Appropriation Act is as follows: Provided, That no additional loan shall be made under the authority transferred to the Administrator pursuant to Reorganization Plan No. 23 of 1950 for the foregoing purposes after the effective date of this act unless the Administrator shall have determined that such loan is in the interest of the Government in the furtherance of any existing loan or for the refinancing of any existing loan. Mr. THOMAS. Here is your appropriation language for your supplemental: The amount made available under this head in title IV of the Independent Offices Appropriation Act, 1952, for administrative expenses incident to providing financial assistance for prefabricated housing and large-scale modernized site construction is increased from "$157,250" to "$267,250"; and such increased amount shall be available for administrative expenses in connection with all functions of the Office of the Administrator under section 102 of the Housing Act of 1948, as amended, and title V of the Defense Housing and Community Facilities and Services Act of 1951. STATUS OF AUTHORIZATION FOR PREFABRICATED HOUSING LOANS Mr. MORSE. When we got it there was approximately a total, there was a total of $50 million. Mr. THOMAS. $50 million authorized? Mr. MORSE. Yes; under the act of 1948. Mr. THOMAS. How much did you have uncommitted at the time of transfer? Mr. MORSE. At the time of transfer about $11.5 million. Mr. THOMAS. The language here says the probability is that you are going to need about $10 million-no; I will take that back. It is estimated that the loans you intend to make for $50 million included $13 million. So evidently you are collecting some money from that $37 million you had committed, is that correct, putting that back in? Mr. MORSE. Yes, sir.. Mr. THOMAS. How did you come out with the California project which you tried to salvage and save? Mr. FITZPATRICK. Mr. Thomas, we worked that up to the point where we thought we had a pretty good loan. And subsequently the proponents of that modified the proposal to the point where we thought we were obligated to decline to make the loan and foreclosure proceedings have been instituted. Mr. THOMAS. You could not salvage it? Mr. FITZPATRICK. No, sir. Mr. THOMAS. How much of a loss did you have? Mr. FITZPATRICK. Have you got an estimate of that, Jerry? Mr. MORSE. Can we make that off the record? Mr. THOMAS. Sure. (Off the record.) PERSONAL SERVICES Mr. THOMAS. What is the total number of employees as of September 1? Mr. FITZPATRICK. A total of 18-13 departmental and 5 field. Mr. THOMAS. A total of 18—13 and 5? Mr. FITZPATRICK. Yes. Mr. THOMAS. With 129 mortgages outstanding. And you want to practically double that with 32 new positions. Isn't that considerably out of line? Mr. FITZPATRICK. No, Mr. Thomas. The case where we have a group of 90 loans to individual veterans really ought to be counted as a single loan. So we would have for all practical purposes 33 loans. Mr. THOMAS. Thirty-three loans rather than 129? Mr. FITZPATRICK. Yes, sir. The 90 is somewhat misleading. Mr. THOMAS. Well, you have got one employee to two outstanding loans. That is considerably out of line. And you plan to do how much additional business, now? About another $13 million? Mr. FITZPATRICK. We anticipate $13 million under the new authorization consisting of roughly 22 loans. MAXIMUM LIMITATIONS ON MORTGAGE INSURANCE Mr. YATES. I noticed in the justifications the statement that the new housing act for which this appropriation was sought looks to a top limitation for the construction of houses of $8,100. Am I correct on that, approximately $8,100 for a 4-room home or a 4-room unit? Here it is on page 5 of the justifications, your bound justifications [reading]: Section 908 authorizes the Commissioner to insure mortgages on rental projects not to exceed 90 percent of the value of the property when the proposed improvements are completed and not to exceed $5 million. Mr. FITZPATRICK. You are speaking there, Mr. Yates, of the maximum mortgage amount that the FHA could insure. Mr. PHILLIPS. Not the price of the building. Mr. YATES. It says: "Further limitations of $8,100 per family unit." Is that the maximum mortgage amount? Mr. FITZPATRICK. That is the maximum mortgage amount. Mr. YATES. That would be what? That would be about $9,000 value? Mr. FITZPATRICK. Yes; on a 90-percent basis. Mr. YATES. Can you build outside of the South or the warmer climates of the country for $9,000? Mr. FITZPATRICK. Our experience would indicate that. Moreover, I think the Congress itself has recognized that that is the expectation, with the realization that there may be some areas which are problem areas, and they have provided some flexibility. Mr. YATES. For a thousand dollars. You can't build them around the city of Chicago for that amount, can you? I was under the impression that the FHA averages, certainly for the city of Chicago, for a 4-room house, were around eleven or twelve thousand dollars a year and a half ago. Mr. RICHARDS. Our average loan last year was about $7,000, with an average value somewhat in excess of $8,000. Mr. YATES. Nation-wide? Mr. RICHARDS. Nation-wide. I recognize that costs vary from area to area and in metropolitan areas in many respects, particularly in the North where the costs are higher because of the type of construction that is necessary, and so on. These military housing projects which have been built are insuredthe loans insured under the FHA title VIII have had the same limitations of $8,100 per unit, and they have been developing in all parts of the country. And I think they have been very good housing. That means normally that the valuation might be Mr. YATES. Did you say an average cost? Mr. RICHARDS. They have been built with an $8,100 maximum mortgage amount. Mr. YATES. Have most of those been built in the South? Mr. RICHARDS. No. They have been built pretty much all over the country. As a matter of fact I just saw one a few weeks ago out in Cheyenne, Wyo., where there is a very rigorous climate, and I would say it was an exceptionally well-built house. And these were singlefamily units, whereas the multifamily units generally are somewhat cheaper per unit. We think that you can operate under this title of maximum mortgage amount of $8,100, particularly with the permission to go another $900 in mortgage amount, which is a thousand dollars in value, in so-called high-priced areas. Mr. YATES. That is roughly a house of $10,000 with four rooms; isn't that right? Mr. FITZPATRICK. Yes. There is also this fact. Those are not ceilings of cost, they are ceilings on the mortgage which the FHA may insure. Mr. YATES. What is the present ceiling on the amount that a person may build a house for in a critical area? Mr. FITZPATRICK. There is no ceiling on costs, Mr. Yates. There is a square foot limitation. Mr. YATES. I thought there was a $25,000 limitation. Mr. FITZPATRICK. I think at one time they had a $35,000 cost limitation on it. But I think we all felt a square footage limitation was a much more feasible limitation, and it operates far better geographically. And it was changed to a 2,500 square foot limitation. Mr. YATES. And you do feel that this is a realistic limitation is a high enough limitation to permit every section of the country to be served by this housing program rather than just the sections that don't require heated units and other units of that type? Mr. FITZPATRICK. We feel so; yes, sir. PROSPECT OF LOSSES ON PREFABRICATED HOUSING LOANS Mr. Yates. What is the outlook on this prefab program, in your opinion? Are you running into the same sort of difficulties that you run into under the present one? Under the present one there were losses of 18 percent up to now; isn't that right? Mf. FITZPATRICK. Yes. You have to take into consideration loan cases which I think perhaps tend to obscure what otherwise has been a rather good record with loans that were originated by RFC and transferred to us. We do have a number of loans where we have shown substantial progress; where the accounts are in good shape and where producers are making a very good record. I think we will have sound protection in the type of program which is contemplated by this title of the act, in that the loans are restricted to those producers who have a record of being able to produce and market a good house. |