rate. This proposal is recommended on the basis that in various sections of the country, different types of accounts receive greater competition from outside investments, and further, that small, active accounts are more costly to handle than stable, long-term accounts.

(b) It is recommended that authorization be granted on an optional basis to pay dividends on savings share accounts on a quarterly basis or such other procedure in the payment of dividends which may be considered necessary to meet services offered by other local institutions.

(c) It is recommended that authority be granted to member institutions to make capital investments not to exceed 20 percent of share capital in land and/or buildings for the purpose of slum clearance, community rehabilitation, minority housing, and such other real estate developments that are in the interest of community development and public welfare. This recommendation is made because it is recognized that the savings and loan industry has an obligation to the community to improve the standard of living of the citizens of the area.

(d) It is recommended that member associations be authorized to purchase conventional mortgage loans in areas outside of their normal lending area on a direct basis or a participating basis, so long as such loans are serviced by another member institution and the total of such loans do not exceed 20 percent of their mortgage loan portfolio. This recommendation is made in recognition of the differences in funds available between the geographic areas of the country.

(e) There should be attempts made to provide self-insurance program within the Federal Home Loan Bank System in connection with life insurance on mortgage loans to retire the indebtedness in the event of the death of the principal mortgagor.

(f) It is recommended for the purpose of relieving a hardship on many of the savings members of associations in the lower economic levels that authority be granted to make personal loans to any member of a Federal savings and loan association not to exceed $500 for a term not exceeding 3 years, such loans not to exceed 10 percent of the savings accounts of the association.

(g) It is recommended that the policy of the Board with regard to the issuing of authorization for branch offices of Federal savings and loan associations be relaxed. Careful consideration should at all times be given to the possibility that a branch office might serve the needs of the community better than a newly chartered association. Areas not presently served with adequate financing facilities and localities not able to be served by branch facilities of existing nearby institutions should be granted new charters where public need is indicated.

15. In order to provide a sounder savings and loan system for the furtherance of thrift and home financing, the National Savings & Loan League recommends a broader base of investment powers for Federal savings and loan associations which would authorize investment in such municipal and other bonds or obligations as are authorized from time to time by rules or regulations of the Federal Home Loan Bank Board. This authority would extend to savings and loan associations investment powers now held by savings banks and many State chartered institutions in the savings and loan field.

16. The National Savings & Loan League favors striking the words "and Loan" from the name "Federal Savings and Loan Insurance Corporation" since loans are not insured and the inclusion of those words in the title is not properly descriptive.

17. On the subject of international relationships, it is recommended that the Federal Government and the Congress be urged to channel through the Federal home loan banks such funds as may be appropriated for assistance to housing in foreign countries, particularly with emphasis upon aid to housing to be provided in the foreign countries through counterparts of savings and loan associations.

18. In the international field, it is further recommended that the Federal Government undertake the study of the possibilities for direct investment in housing in Latin American countries by savings and loan associations through the medium of a guarantied or insured mortgage. In view of the fact that commercial banks of the United States have branches in many of the Latin American nations, it is believed that there is no justifiable reason for barring savings and loan associations from having offices in such countries if the countries themselves permit foreign banking and mortgage institutions.

JAMES E. BENT, Chairman.

Senator SPARKMAN. We have listed next Mr. Henry Bubb, chairman of the legislative committee of the United States Savings & Loan League. Before we begin the questioning of Mr. Bubb, I understand

Mr. Frank Yeilding, president of the Jefferson Federal Savings & Loan Association of Birmingham, Ala., is here and has about a 1minute statement he would like to make.

Mr. Yeilding is one of our outstanding citizens and business leaders and heads the largest savings and loan association in Alabama. He represents the Southeastern States on the executive committee of the United States Savings & Loan League.

If it is agreeable with you, Mr. Bubb, we will let Mr. Yeilding make his brief statement.

We are glad to have you, Mr. Yeilding.

STATEMENT OF FRANK B. YEILDING, JR., PRESIDENT, JEFFERSON FEDERAL SAVINGS & LOAN ASSOCIATION, BIRMINGHAM, ALA.

Mr. YEILDING. Thank you very much, Mr. Chairman, for the privilege of using some of your valuable time in saying a few words at the hearing today.

We folks in Alabama are very proud of the contribution this Housing Subcommittee has made to better housing in Alabama, and we are particularly proud of the fact that our distinguished friend, Senator Sparkman, is chairman of this subcommittee. I simply want to tell the subcommittee I am wholeheartedly behind this plan.

The savings and loan associations of Alabama are willing, ready, and anxious to put this plan into effect, so as to bring homeownership within the reach of many additional families, particularly the younger people and the families of low or moderate incomes.

Most of the savings and loan associations in Alabama, particularly in the small towns, are fairly small, and have not as a rule made FHA loans. Outside of Birmingham there are only 5 associations in the State who have assets exceeding $10 million. I think this program will encourage these assocations to seek greater amounts of savings and invest these funds profitably in the home-mortgage field under this plan. They will be in a position for the first time to offer people in smaller towns low-downpayment loans.

Again I want to thank you for the privilege of appearing before

you.

Senator SPARKMAN. When you refer to this plan, you mean the plan under S. 2791?

Mr. YEILDING. Yes, sir.

Senator SPARKMAN. Thank you, Mr. Yeilding, and thank you, Mr. Bubb, for letting him come ahead of you.

Now if you will proceed in your own way, and for the purposes of the record identify the gentleman who are with you.

STATEMENT OF HENRY A. BUBB, CHAIRMAN, LEGISLATIVE COMMITTEE; ACCOMPANIED BY STEPHEN SLIPHER, STAFF VICE PRESIDENT; AND T. BERT KING, WASHINGTON COUNSEL, UNITED STATES SAVINGS & LOAN LEAGUE

Mr. BUBB. The gentleman on my right is Mr. Stephen Slipher, manager of our Washington office; and the general counsel of our Washington office, T. Bert King, is on my left.

I am Henry A. Bubb of Topeka, Kans., and I appear here today as chairman of the legislative committee of the United States Savings

& Loan League. The league's 4,400 member savings and loan associations represent 90 percent of the total savings and loan assets of the country. The savings and loan business itself is the largest single source of home financing credit, making 37 percent of all home loans in 1957. While our interest extends to a variety of housing matters, my testimony today will be devoted entirely to S. 2791, the bill introduced by Senator Sparkman to provide for a new program of guaranteed conventional loans.

For the convenience of the committee, let me preview or outline my testimony.

Senator BUSH. Does this organization include Federal savings and loan associations, as well as the conventional and non-Federal?

Mr. BUBB. Yes, sir. It includes all kinds of savings and loan, building and loan, and cooperative banks, and homestead associations, Senator Bush.

Senator BUSH. All rght.

Mr. BUBB. First, I would like to give a basic description of the guaranteed conventional loan plan.

Second, I would like to review the importance of the conventional loan, both as to volume and as a stabilizer in the housing market.

Third, I would like to suggest that with FHA and VA loans now calling for virtually no downpayment, the conventional loan is the only remaining area in which we can liberalize credit terms.

Fourth, I would like to discuss the details of the plan and the exact way in which it works.

Finally, I would like to point out the advantages of the program to the Federal Government, to the economy, to the building industry, and to the homeowner of low or moderate income.

BASIC DESCRIPTION OF THE PLAN

The program contained in S. 2791 is based on the age-old principle of insurance of sharing the risk. Savings and loans themselves are based on this principle. Instead of one individual making an individual mortgage, the savers collectively lend the money to a large group of borrowers. Thus, the occasional loss of an individual loan is shared by a great number of persons. In a sense, the FHA program, the Federal Home Loan Bank System, the Federal Deposit Insurance Corporation, the Federal Savings and Loan Insurance Corporation, are all based on this same principle of sharing the risk.

This new program would permit the sharing of risk beyond the individual association and would permit them to make higher percentage loans with the risk and expense distributed among all savings and loan associations. Here is how the plan would work.

A Federal Home Mortgage Guarantee Corporation would be established under the jurisdiction of the Federal Home Loan Bank Board. That Corporation would insure or guarantee the top portion of certain conventional loans. These loans would be made to 90 percent of appraised value for a term of 25 years. The top 25 percent of the loan would be guaranteed, but even of that guaranteed 25 percent, the Corporation would only pay 90 percent of the loss. This is the familiar coinsurance provision. The plan would permit savings and loan associations to make 90 percent loans with no more risk to the

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association than is now involved in the 70 to 80 percent loans now permitted by law and regulation.

These loans would require a single premium, paid only once, or between 1 and 2 percent of the face amount of the loan. This works out to much less than an insurance premium of one-half of 1 percent paid annually over the life of the loan.

The initial capital to start the new Corporation would come from the Federal home loan banks which are entirely owned by the savings and loan business. There would be no Federal money whatsoever involved and there would be no Federal liability. Later in my testimony I will recite the full details of the program and describe exactly how the loan wold be insured.

MAJOR ROLE OF CONVENTIONAL LOAN

At this point I would like to review briefly the recent history of the conventional loan. The conventional loan-that is, a loan which is not insured by the FHA or VA-is truly the workhorse, the "old faithful" of our home mortgage system. Since 1950, 70 percent of all mortgage recordings for the purchase of existing houses and new houses have been conventional loans and only 30 percent have been FHA and VA.

I have tables with my testimony, but I have an enlarged table to show you.

These are conventional loans here, and these are the FHA and VA loans.

Senator CLARK. That table, however, has no reference to the total number of mortgages, does it? Because by looking at it you would think you had many more mortgages issues in 1955, 1956, and 1957, than you did in prior years, but these are not the facts, are they? Mr. BUBB. That's right Senator. That is our dollar volume. Senator CLARK. It has nothing to do with total volume? Mr. BUBB. Yes. It is total dollar volume.

Senator CLARK. But it has nothing to do with the number of mortgages?

Mr. BUBB. No, sir.

Senator CAPEHART. Do you have a table showing the number? Mr. SLIPHER. No, but we can supply that for the record. Senator CAPEHART. Will you hold that up again?

Mr. BUBB. I imagine the numbers would be even more so than this, because many conventional loans are smaller loans.

Senator CAPEHART. The number would not increase as fast as the dollars, because the average of each loan has been going up.

Senator BUSH. Is this not a fairly good indication of how the numbers would run?

Senator SPARKMAN. May I offer this suggestion: In considering this table we ought to consider it for the purpose for which it was offered. That is, it shows the relationship between conventional loans and FHA loans and VA loans.

I was going to comment that I think it is a most interesting point because I think a great many people throughout the country believe we depend entirely on the FHA and VA program, and they forget the tremendous part played by conventional loans. Mr. Bent, a few minutes ago, and Mr. Bubb now, both point out the fact that we

have this savings and loan business, which is getting 37 percent of the total business. Mr. Bubb brings out the point that 70 percent of the mortgages are of the conventional type.

Senator BUSH. Will you yield for a question there?

Senator SPARKMAN. Yes.

Senator BUSH. This says that since 1950 70 percent of all mortgage recordings have been conventional loans.

Senator SPARKMAN. Yes.

Senator BUSH. That is not total dollars the way it reads.

Mr. BUBB. The table is total dollars.

Senator BUSH. Total value you mean then? Seventy percent of the value of all mortgage recordings.

Mr. BUBB. It is the total dollar value of all the mortgages recorded. Maybe our statement is not clear, but that is what it means. Senator SPARKMAN. I think it would be helpful if you could give us for inclusion in the record at this point, the number.

Mr. BUBB. We would be happy to.

(The material referred to follows:)

UNITED STATES SAVINGS AND LOAN LEAGUE,

Washington, D. C., May 19, 1958.

Senator JOSEPH S. CLARK,

Senate Office Building,

Washington, D. C.

DEAR SENATOR: We appreciated very much your interest in our testimony on May 15 and the many constructive questions and comments which you introduced.

You will recall that you requested some supplementary information regarding the number of mortgages as contrasted to the dollar volume of mortgages. I believe the attached tables comply with your request. I have also supplied them to the staff for inclusion in the record.

Your comment at the hearing was correct, and it is true that the number of mortgages has risen much slower than the dollar volume. This, of course, is because the average size of the mortgages has been constantly increasing. I have enclosed a table showing the increase in the average mortgage. It is interesting that, while the dollar volume of conventional loans has risen about 75 percent, the number of loans has risen about 25 percent. In the case of the FHA and VA loans, the dollar volume between 1950 and 1957 increased about 10 percent, but the number of mortgages actually dropped nearly 33 percent.

I hope this material is satisfactory to you, and just as soon as possible, we will supply the other information you requested regarding the possible reserves of the new loan corporation.

Sincerely yours,

STEPHEN SLIPHER, Staff Vice President.

Number and dollar volume of home mortgage recordings, 1950–57