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Mr. REIFLER. Everything would have to be accepted by the board at every point here. Nobody has any mandatory rights in the first place; everything would have to be accepted by the board. In the second place, no apartment property could be insured where the cost per housing unit was high. The distinction is made by insisting on low cost per housing unit.

The question was asked this morning as to what is meant by the phrase in the bill “ low-cost housing projects.” I have attended all of the hearings, I believe, with possibly one or two exceptions, before the Senate committee, and the only person I have heard testify whose testimony might throw some light on what is meant by a low-cost housing project was a gentleman from New York by the name of Rodger, who appeared before the Senate committee, and his testimony was to the general effect that he had about $45,000,000 worth of work to be let the moment this bill is signed, and that it would consist in the erection of 10- and 12-story apartment houses of the low-cost variety, renting at from $5 to $12 per room in Manhattan, and I think he said at from $5 to $10 per room in Queens.

I mention that in passing because it is the only thing I have heard discussed with reference to what is actually meant by a lowcost housing project, and the bill is wide open as to what it does mean.

But Mr. Riefler has further testified with respect to section 5.

Mr. LUCE. Would it not be well to have in the proper place a carrying forward of the figures which would indicate that nobody with an income of less than $3,000 a year would occupy one of those apartments, and that the income of the people who occupy them would go from that amount up to $10,000!

Mr. FARRINGTON. I judge the committee could get that. His testimony is to be found in the Senate hearings. It seemed to me to be a pretty high rate. He had already $90,000,000 worth of work.

Under section 5 they contemplate not to exceed $1,000,000,000 on existing homes, and that is for insuring mortgages on existing homes, and there is no limit as to the insurance to be written on new construction.

Of course, the bill, while it does not specifically say so, is intended to be limited by the plan to urban property and to none other. There is nothing, as you have already seen from reading the section, to protect the home owner with reference to interest or charges of that kind. I am not saying that the plan may not adequately cover that. I do not know what the plan is except as it may be revealed by the persons who testify, but the same thing is true with reference to section 5 as to sections 3 and 4 on the repair feature.

There is not a provision anywhere in this bill that is put in for the purpose of protecting the home owner, the man who ultimately pays, and that is why we are coming to you and presenting not only our criticism-and I am endeavoring to be constructive about it-but certain amendments which we think you should seriously consider, and which we hope you will adopt if you are to pass the bill as it has been introduced.

Now, Mr. Chairman, in order that I may be accurate in what I say, I am requested by the Home Owners' Protective Enterprise to offer the following 14 amendments to House bill 9620.

I am requested, however, to make clear that while the amendments we offer would remove some of the features of the bill which we feel

are very hostile to the interests of home owners, it is the conviction of the officers that such amendments do not remove the fundamental objections to the national housing act, as the measure still moves up in the direction of needless regimentation in the field of home ownership and needless increase in the burden of taxes.

With your permission, Mr. Chairman, I desire to offer for the record these amendments, nos. 1 to 14.

(The amendments offered by Mr. Farrington are as follows:) Amendment no. 1: On page 4, strike all of line 17 after the word Government", and strike all of lines 18 to 20, both inclusive.

Amendment no. 2: On page 4, strike the following at the end of line 23 and beginning of line 24: “personal finance companies."

Amendment no. 3: On page 6, line 4, change the period (.) after the word title” to a semicolon (;) and add the following:

Provided, however, That it shall be a condition precedent to making any such loan or agreement to lend that the Corporation shall require any and all such financial institutions applying to it to produce evidence to prove that each and every obligation representing a loan or advance of credit presented to the Corporation does not include interest and financing charges against the maker of such obligation, which together are in excess of an actual 8 per centum per annum: And provided further, That the Corporation is hereby prohibited from making a loan or agreement to lend against the security of an obligation representing a loan or an advance of credit that includes interest and financing charges against the maker thereof, which together are in excess of 8 per centum per annum.”

Amendment no. 4: On page 6, line 10, strike the word “amortized.”

Amendment no. 5: On page 6, line 11, strike the following: “Or low-cost housing projects."

Amendment no. 6: On page 6, line 20, strike the figures "80" and in lieu thereof substitute the figures “ 70."

Amendment no. 7: On page 6, line 21, add a comma (,) after the word “therefor” and then strike the remainder of line 21, all of line 22, and the following from line 23: “ In the case of homes constructed since the passage of this act, or 60 per centum of the appraised value of such property in the case of existing homes."

Amendment no. 8: On page 6, line 25, strike the word “existing.”

Amendment No. 9: On page 7, lines 3 to 8, both inclusive, strike the following: " It shall be the duty of the Corporation to discourage socially undesirable building or purely speculative overbuilding, and the Corporation shall not insure mortgages where in the opinion of the Corporation such socially undesirable building or purely speculative overbuilding will result.”

Amendment No. 10: On page 17, beginning in line 8 and ending in line 15, strike the following: "Such associations, including their franchises, capital, reserves, and surplus, and their loans and income, shall be exempt from all taxation now or hereafter imposed by the United States, and all shares of such associations shall be exempt both as to their value and the income therefrom from all taxation (except surtaxes, estate, inheritance, and gift taxes) now or hereafter imposed by the United States; and ".

Amendment No. 11: On page 22, line 13, strike all of line 13 after the comma (,), and also strike all of lines 14, 15, and 16.

Amendment No. 12: On page 35, lines 23, 24, and 25, strike the following: * in no case shall the amount of the advance exceed 60 per centum of the value of the real estate securing the home-mortgage loan".

Amendment No. 13: On page 36, line 3, strike the figures "50", and in lieu thereof substitute the figures " 65".

Amendment No. 14: On page 36, lines 4, 5, and 6, strike the following: "in no case shall the amount of such advance exceed 40 per centum of the value of the real estate securing the home-mortgage loan".

Mr. FARRINGTON. I would like at this time, Mr. Chairman, to comment on amendment no. 1. In that connection I would like to call your attention particularly to amendment no. 1, which provides for striking on page 4 all of line 17 after the word “Government " and striking out all of lines 18 to 20, both inclusive.

The part proposed to be stricken out is this: and shall determine its necessary expenditures under this act and the manner in which they shall be incurred, allowed, and paid, without regard to the provisions of any other law governing the expenditure of public funds.

In that connection, in view of what we have heard as to how this bill came to be prepared, and the form in which it was prepared, in all my experience in reading legislation passed by Congress respecting governmental agencies, I have never seen a bill like that.

Here you are setting up a Home Credit Insurance Corporation with unlimited power to issue bonds, with complete insurance to the beneficiaries of the bill, and with a complete absence of any protection to the home owner as to what he has, and he is ultimately to pay for it. And yet they have the audacity to put in lines like that, and it is only further emphasized when I remind you that throughout the bill there are provisions that the corporation may designate its depositaries of public funds. That same provision is to be found in title III with reference to the Federal Savings Loan Insurance Corporation.

I have no comments to make upon title III. I do not present myself as one qualified to discuss building and loan association matters, but as I read the bill, and as I said

this morning, this bill can be divided into three bills. Down to section 4 it would constitute your repair campaign, and from section 5, including title II, you have a separate proposition. Section 5 and title II are inseparable. Title III can stand by itself, as well as the amendment made to the Federal Home Loan Banking Act under title IV.

I think that concludes what I have to offer, Mr. Chairman.

Mr. Sisson. Were these amendments that you have offered to us also offered to the Senate committee, and do they appear in the Senate committee's hearings?

Mr. FARRINGTON. Yes, sir; they do.

Mr. LUCE. Some time in the course of your statement I understood you to express opposition to those features of the bill which tend to encourage amortization, and to express regret that straight mortgages had met with disfavor. Did I understand you right?

If so, will you elaborate upon that, because there are those of us who have been of the opinion that the development of the amortization principle in recent years has been a great social gain, and that the mortgagor is always much better off with an amortized mortgage.

Will you give us your views on that?

Mr. FARRINGTON. I should not take issue with the gradual development of amortization, but here we have a condition where we have about $21,000,000,000 of mortgage debt, 51 percent of which is in straight mortgages.

Under the plan as it has been drawn in the bill, you are going to discriminate against the existing mortgages by allowing only 60 percent to be insured, whereas the average mortgage debt on the homes today is about 63 percent of the appraised value.

Immediately, if this bill were passed, the holders of straight mortgages which are presently to mature will begin to present requests to the mortgagors to curtail, to do all that is possible to put the mortgage in shape to be insured.

There are millions I was going to say thousands—but there are millions of people in this country, Mr. Luce, who do not find an

amortized mortgage a desirable thing from their viewpoint. I do not think that it is the proper thing to do at this time to try and stereotype the form of mortgage indebtedness that the home owners of the country are to have.

What may be done by education as the years roll along is one thing, but to endeavor to do it by one sweep of the pen by the passage of a bill like this, I think is distinctly something else. I can see nothing but great harm to that.

You have many mortgagors who prefer to have straight mortgages.

I do not underestimate the social good of the amortized mortgage, but there are a large number of people, and that is shown by the fact that the building and loan associations have developed very rapidly, who prefer that type, and they will continue to do so, but it does not follow that the rest of the people should be forced into that particular type of mortgage.

Mr. LUCE. I could agree with you if we could except the strength of the word “ forced.” It is undesirable in law to force any man to sway his own judgment.

But it is apparent to men who have given a lot of thought to this situation, as a good many of us have, that there is this great social advantage in amortization. There is no harm in asking them to transfer their straight mortgages to amortized mortgages, is there?

Mr. FARRINGTON. I think not, but you will probably not accept my view of section 5, as to how it will operate as a practical proposition.

Mr. LUCE. I was not considering the details, but I was thinking of the general proposition, of whether we may, with propriety, frame our legislation so that amortization will be made attractive.

Mr. FARRINGTON. That possibly can be brought about with great good to the country, but not at this time, as I see it.

Mr. LUCE. Why not at this time! Mr. FARRINGTON. Because of the condition in which mortgage indebtedness stands. Money is not to be had.

Mr. GOLDSBOROUGH. As I understand you, your major difficulty is that the average of these straight mortgages covers more than 60 percent of the value of the property.

Mr. FARRINGTON. Sixty-three percent.

Mr. GOLDSBOROUGH. That that amounts to 63 percent, and that therefore a mortgagee desiring to get better security will, at the first opportunity insist upon the curtailment of the mortgage down to at least 60 percent, so he can get the benefit of this bill.

Mr. FARRINGTON. That was my testimony this morning.
Mr. GOLDSBOROUGH. That is what you had in mind ?
Mr. FARRINGTON. Yes, sir.

Mr. WILLIAMS. That being true, what about the advisability of raising the figure stated in this bill to 65 percent on the existing homes?

Mr. FARRINGTON. Mr. Williams, realizing that there is pressure back of this bill and that we have got to meet the situation as it actually exists and not as we would like to have had the legislation framed, one of our amendments endeavors to reach that point by fixing the percentage at 70 percent.

Mr. WILLIAMS. Making no distinction between existing homes and new structures.



Mr. FARRINGTON. No, sir.
Mr. WILLIAMS. Placing the average at 70 percent.
Mr. FARRINGTON. That is correct.

Mr. WILLIAMS. Do you know the percentage of homes in this country that are mortgaged for more than 60 percent of their value!

Mr. FARRINGTON. I do not have that information, Mr. Williams. Miss Obenhauer is well informed on the statistics, both from knowl. edge and research.

Mr. WILLIAMS. As I understand you—and let me see if I did understand you correctly—the average of straight mortgages in this country is 63 percent, or does that include also amortized mortgages?

Mr. FARRINGTON. That includes all mortgages.

Mr. WILLIAMS. That is the average for all home mortgages in the country, 63 percent?

Mr. FARRINGTON. Yes, sir.

Mr. WILLIAMS. You have not that separated into the straight and amortized classes, have you?

Mr. FARRINGTON. No; I have never heard that figure discussed.

Mr. WILLIAMS. You have no information as to whether the amortized mortgages would be at a higher percentage than the others?

Mr. FARRINGTON. No, sir.

Mr. WILLIAMS. It would probably be true, would it not, that the amortized mortgages would be upon a higher percentage of the value of the property?

Mr. FARRINGTON. That would be my opinion; yes, sir.

Miss OBENHAUER. That is right; the amortized mortgage is considerabły higher, on the average, and Mr. Farrington is right when he says that figure is 63 percent. That covers both straight and amortized mortgages, but in the cities they have separated them and the amortized mortgage is higher than the straight mortgage.

Mr. WILLIAMS. That being true, 60 percent would probably cover the average of straight mortgages?

Mr. FARRINGTON. I do not know, but my guess would be that it would in Montgomery County, Md., but in Washington that it would not. I think you would find that the straight mortgage would run nearer 65 percent, based on my own personal knowledge.

Mr. Sisson. In those figures, Mr. Farrington, what do you take as the definition of a home. Does that include 2-family and 3-family houses, or apartment houses?

Mr. FARRINGTON. There again, Mr. Congressman, I do not personally have that information.

Mr. Sisson. I was wondering what that would include.
The CHAIRMAN. We thank you for your statement, Mr. Farrington.

Congressman White, of Idaho, is here. Do you desire to be heard on this bill, Mr. White !



Mr. WHITE. Mr. Chairman, I have some telegrams that I would like to submit to the committee. This act would affect building conditions in my State. While in many districts the population is quite dense, the districts are widely scattered.

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