to make advance commitment in order to get the construction funds, it will probably result over a period of time that we will not hold those mortgages in the Fannie Mae. Mr. THOMAS. But even on that ratio of 18 or 19 to 1, it gets back to one fundamental thing: That the taxpayers are really underwriting through insurance and direct appropriations the housing program to about $2 billion. Mr. FOLEY. In the defense program? Mr. THOMAS. Yes. Mr. FOLEY. If I understand what you mean by the underwriting of it, including FHA insurance, yes. Of course, then we have to go back to our experience with insurance, which is that we have had infinitesimally small losses as against the total risk. Mr. THOMAS. We have had an ascending market for the last 15 years, but suppose we have the reverse and start on a descending market? Mr. FOLEY. If we started in on a descending market-and supposing that we had a large percentage, relatively speaking, of foreclosures and properties coming to us-we still have the property itself as our security, together with the reserves for insurance which we built up out of fees and insurance premiums. So that the probabilities are that even in a serious depression, considering the fact we do not have to dump the properties, the probabilities- Mr. THOMAS. Then Mr. Baughman would switch over and go back to his original first love, the HOLC, would he not? Mr. FOLEY. I did not get the first part of your statement. Mr. THOMAS. I said Mr. Baughman would immediately switch over to his first and original love, HOLC, would he not? Mr. FOLEY. Well, I doubt very much that we will ever have a situation like that again. Mr. THOMAS. I hope not. Mr. FOLEY. Because all the things Congress has done in this field. have been aimed to prevent it. Mr. THOMAS. What is the outside total liability as of some recent date of Fannie Mae? Mr. BAUGHMAN. About $2 billion. Mr. THOMAS. Was it 2 billion or nearer 3? Mr. BAUGHMAN. Our portfolio is $2,083,000,000. Mr. THOMAS. And you expect to add another $900 million to it? Mr. BAUGHMAN. Yes. Mr. THOMAS. What is the rate of your foreclosures now? Mr. BAUGHMAN. Well, we have pending at the present time about 700 foreclosures. We anticipate this year we will acquire probably about 1,200 properties. Mr. THOMAS. How will that compare with last year and the year before that? Mr. BAUGHMAN. It is about the same ratio. It is very small. Mr. THOMAS. And can you put into the record at this point the rate of foreclosures and the percentage for the last 5 years? Can you do that without too much trouble? Mr. BAUGHMAN. Yes. (The information is as follows:) Summary of property acquired through foreclosure for the 5 fiscal years 1948 through Mr. THOMAS. What is the money market now and what are the prospects for a favorable change in the foreseeable future? Mr. FOLEY. Do you want to handle that, Mr. Baughman? Mr. BAUGHMAN. We are continually on top of it, and we are always hoping for a break, but it has been very, very quiet. In other words, the market has been very dull. Mr. THOMAS. In other words, you are saying the conventional investors, insurance companies, and banks and so forth, are not now putting their money into FHA investment housing? Mr. FOLEY. I think, Mr. Chairman, Mr. Baughman was answering that largely from the standpoint of the sales program of Fannie Mae. Actually, of course, there is a very great deal of private money being loaned in the residential field. Housing starts so far this year, in spite of the restricting situations in the money market and regulation X, and all the rest of it, look like a million houses this year. Mr. THOMAS. Then why are they not putting it in Fannie Mae paper? Mr. FOLEY. They are initiating the mortgages themselves instead of coming to us to buy them. Our experience is always that way. They buy in volume from the Federal National Mortgage Association when there is a shortage of mortgages they can initiate for themselves. Mr. THOMAS. Why initiate them for themselves? Let's get down to the interest rate. That is what it is. What about it? Mr. FOLEY. The interest rate of course, is being complained about very much, but the interest rate on a VA or FHA mortgage would be the same whether they initate it themselves or buy it already made from Fannie Mae. There is a definite restrictive effect in the present interest rate, particularly in the VA 4-percent rate. That, as you know, is controlled by the Veterans' Administrator and not by the Housing Agency. The 44 rate of FHA on one to four families, and the 4-percent rate on the large projects, large mortgages, still continue to be in our opinion generally effective rates, as evidenced by the filings of applications with FHA. Mr. THOMAS. What are they getting now when they go outside of Fannie Mae and buy home mortgages? What rate of interest are they getting? Mr. FOLEY. You mean when they go conventional as distinguished from FHA or VA? Mr. THOMAS. Yes. Mr. FOLEY. I think the rate there would generally run about 5 percent. That is traditional. Mr. THOMAS. Is that discrepancy between 414 and 5 percent going to be so large it is going to continue to prevent private investors from taking "Fannie Mae" mortgages? What is your judgment on that? Mr. FOLEY. My thinking, my judgment-conditioned by the statement we must always make, that we are not prophets-is that if the housing program continues at a rate not greater than it presently is, the production during the current year, we will see a gradually improving situation because the pools of capital for investment continue to increase. Mr. THOMAS. In other words, the individual savings are increasing month by month and week by week? Mr. FOLEY. That is right. Mr. THOMAS. And eventually those funds are going to have to have an outlet? Mr. FOLEY. Particularly in types of institutions that normally are appealed to by this type of mortgage. Mr. YATES. On page 5 of the justification, at the top, it says that: The act contemplates the maximum construction of defense housing by pri vate enterprise Mr. THOMAS. Will you excuse me, Mr. Yates, for one more question? Mr. YATES. Surely. SLUM CLEARANCE AND URBAN REDEVELOPMENT Mr. THOMAS. Tell us about this $10 million here for slum clearance. I recall, if my memory serves me correctly, your original financing was set out in the recent act of 1949 which gave you authority to go to the Treasury and borrow $1 billion in loans. Mr. FOLEY. To use in lending; yes. Mr. THOMAS. And an additional $500 million authorized in grants, but the $500 million were to be appropriated funds. Mr. FOLEY. Right. Mr. THOMAS. And this is the first request that you have made for any part of that $500 million? Mr. FOLEY. That is right, sir. Mr. THOMAS. And now you are seeking $10 million? Mr. FOLEY. That is right, sir. Mr. THOMAS. What part of that billion in the way of loans have you taken from the Treasury up to date? Mr. FOLEY. Mr. Frantz will give you the figures in the table here, sir. Mr. FRANTZ. We have executed loan contracts totaling approximately $20 million, Mr. Chairman, and have actually disbursed about $81% million. Mr. THOMAS. Is that the table here you set out on page A, with Little Rock, central area, $980,000; Chicago, $9,176,000; Detroit, $4.761,000; and New York made up here of about 18 or 19 million? Mr. FRANTZ. That table shows the projects which we believe will require the $10 million in grants during fiscal 1953. Mr. THOMAS. I think that is right. But do you have a table here showing about your loan section? Mr. FRANTZ. We do not have that table in the justification Mr. Thomas. We can insert one in the record. (The information is as follows:) |