posed a redraft of its plan by which a means is provided for all types of conventional lenders to use the system of coinsurance established by the plan for conventional loans. With this change, I can assure you that the plan has our unqualified support and that we urge its enactment. We recommend to the committee, in approving this plan, that it be specifically provided in the proposed statute that any FHA-approved mortgagee is automatically eligible to participate. It is our belief also that any State or federally supervised lending institution should be able to purchase stock and participate in the operation of the new corporation. We suggest that a maximum initial subscription requirement should not exceed $10,000 to $15,000. Further, the amount of stock-ownership required as a condition precedent to such participation should be neither onerous nor unrealistic. Such requirement should be based only upon the dollar volume of loans guaranteed, not upon the total loans owned and serviced by the lender. We suggest a rate of subscription of between 1 and 3 percent. In short, the intention of Congress that nonmembers of the Federal Home Loan Bank System be admitted freely and equitably to participate in this proposed coinsurance program should be made crystal clear in the statute and in this committee's report. We suggest use of directive, and not merely permissive, language to accomplish this objective. In addition to the major conditions which I have already described, we have a number of other recommendations with respect to the plan which we believe would be desirable and should form a part of the proposed legislation. Thus, we believe that a maximum term of 30 years would be preferable to the 25-year limit which has been proposed. Also, it should be made clear that the Corporation may issue irrevocable written commitments to guarantee upon receipt of loaninsurance applications. The default provisions should not encourage liquidation of holdings by lenders in times of economic stress and, to avoid this, longterm debentures should form an integral part of the default mechanism. Finally, we believe that no attempt should be made to control or set the interest rates on conventional mortgages insured under this plan beyond, perhaps, the fixing of a ceiling high enough to give free operation to the plan and yet keep it from being abused through exorbitant interest rates. Mr. Chairman and members of the committee, this concludes my statement, but I shall, of course, be glad to discuss any other item on which the committee would like to have the views of NÅHB. I should like to ask permission of the committee, also, to submit any additional views which the association may have on matters which we have not had an opportunity to discuss during this testimony. Thank you very much for your courtesy and attention and for the opportunity to present the views of the home-building industry. Mr. RAINS. That was a very fine statement, Mr. Severin. (The documents accompanying Mr. Severin's statement are as follows:) ATTACHMENTS TO STATEMENT OF NELS G. SEVERIN, PRESIDENT, NATIONAL 1. Economic news notes on June housing starts. 2. Summary of May 1958 survey of the NAHB builders economic council (labeled "Attachment A"). 3. Comparative table of required downpayments on FHA section 203 family homes (labeled "Attachment B”). 4. Comparative chart of minimum downpayment requirements under section 203. 5. An analysis of mortgage maturities (labeled "Attachment C"). 6. Proposed revision of section 210 for reenactment. 7. Excerpt from supplemental statement filed May 23, 1958, with Subcommittee on Housing, Senate Banking and Currency Committee, on NAHB public-housing policy (labeled "Attachment D"). [Economic news notes of the National Association of Home Builders, July 14, 1958] To: John M. Dickerman. From: Economics Department, Nathaniel H. Rogg, director; Ken Burrows, assistant director. HOUSING STARTS RATE JUMPS TO 1,090,000 IN JUNE The seasonally adjusted annual rate of private starts rose 8 percent between May and June to 1,090,000, the highest level since August 1956. Since the low point in March of this year (now revised to 918,000), the annual rate has risen 172,000. During the first half of 1958, the annual rate of private starts averaged 984,00. In actual number, 115,000 nonfarm homes were put under construction in June, a gain of 15 percent over the same month of last year. The total for the current month included 10,500 public starts, of which 5,800 were Capeharts. These public starts were nearly double the number in June 1957 and the highest in over 6 years. Private starts numbered 104,500 in June-11 percent more than in the same month of 1957. The sharpest change from a year ago has been in FHA starts (excluding Capeharts) which rose to 27,900 in June-up 82 percent from a year ago. Conventional starts, 68,100, were 3 percent above last June, while starts under VA inspection, 8,500, were still 35 percent below a year ago in spite of recent increases. At the halfway mark in 1958, two things stand out in the starts figures. First, there has been little change in overall volume compared to a year ago. Total starts of 530,400 so far this year are up 3 percent from the first half of 1957, while private starts for the period are up 2 percent. Second—and more encouraging the industry is entering the second half of 1958 with a strong uptrend evident in FHA and VA activity in contrast to the rapid decline which was taking place at this time in 1957. Virtually all of the recent gain in the starts rate has been in the FHA-VA segment, and the even sharper rise in applications and appraisal requests indicate further increases in starts under these programs in the months ahead. FHA APPLICATIONS CONTINUE HIGH New homes in FHA applications numbered 33,400 in June, 3 percent less than in the preceding month. However, this was less than the usual May-toJune dip so that on a seasonally adjusted basis, the annual rate of these applications rose slightly to 362,000 from 357,000 in May. Existing home applications continued their sharp rise, reaching an alltime high of 57,200 in June129 percent more than in the same month of last year. New project mortgage applications covered 11,200 units in the latest month, a gain of 14 percent over May and 81 percent above a year ago. VA received appraisal requests for 28,400 proposed homes during Junemore than double the year-ago level. Although the June total was 3 percent less than in May (the same dip as in FHA new home applications), the seasonally adjusted annual rate held at about 300,000. SUMMARY OF THE MAY 1958 SURVEY OF THE NAHB ECONOMIC COUNCIL Approximately 450 builders, members of the NAHB economic council, have just reported on their plans and the outlook for home building in their communities. This survey, the fourth in a series, covered every size and type of home building operation in every part of the country. Most of the reporting builders are optimistic. Three builders out of every five expect housing starts in their communities this year to exceed last year. Another 25 percent expect no change from 1957 while only 16 percent foresee a decline. Typically, they forecast that housing starts in their communities during 1958 would top last year by 10 percent. The reporting builders were even more optimistic about their own operations. Better than 7 builders in 10 plan to build more this year than in 1957, while 1 in 10 expects no change and 2 in 10 plan to cut back. Altogether, the reporting builders started 28,000 new homes last year, plan to build 38,000 this year-an increase of a little better than one-third. The sharpest gains will be in the brackets below $15,000. Three-fourths say that the market for new homes at present is the same or better than it was at this time last year, and two-thirds look for further improvement over the next 6 months. The strongest market pressure is in the lower priced brackets; 58 percent say that the market for low-price homes is better than a year ago, 34 percent say this of the market for middle-priced homes, and 21 percent say this of the market for high-priced homes. One of the most important findings of the survey is that the trend toward higher price brackets which has prevailed for the past several years appears to have been halted. In their own operations, the builders plan an increase in housing starts in every price bracket, but the sharpest gains are in moderatepriced homes. As a result, the median sales price this year-$14,350-is somewhat lower than the 1957 median of $14,950. This reduction is the result of changes in design rather than lower costs to the builder. In fact, the majority of builders report that materials prices, labor costs and land costs are the same or higher than they were a year ago. Financing costs, however, have come down. While builders are shifting to lower priced brackets, the typical new home this year will be larger than in 1957, since 39 percent plan to increase floor area in their typical 1958 model against 16 percent who are planning to build a smaller home. (The remaining 45 percent plan no change in size.) Reflecting rapid changes in mortgage money and consumer demand, and the new housing legislation, 3 out of every 5 builders have changed their plans since the beginning of this year. Four-fifths of those who have revised their planned number of starts have raised their sights, though about 1 in 5 now expects to build fewer units than he had thought on January 1. Of those who have changed to a different price bracket, nearly three-fifths have shifted to a lower bracket. [Attachment B] Comparative table of required downpayments on FHA section 203 family homes, May 1958 11958 Emergency Housing Act: 3 percent of first $13,500 of value; plus 15 percent of the next $2,500; plus 30 percent of the excess above $16,000. Maximum mortgage, $20,000. 23 percent of $13,500; plus 10 percent of next $6,500 of value; plus 25 percent of excess over $20,000. Maximum mortgage, $30,000. |