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FHA TITLE I HOME REPAIR ASSISTANCE

HEARING
BEFORE THE

COMMITTEE ON BANKING AND CURRENCY
HOUSE OF REPRESENTATIVES
EIGHTY-FOURTH CONGRESS
SECOND SESSION
ON

H.J. Res. 471
JANUARY 18, 1956

Printed for the use of the Committee on Banking and Currency

UNITED STATES
GOVERNMENT PRINTING OFFICE
71932


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WASHINGTO~ : 1956

COMMITTEE ON BANKING AND CURRENCY
BRENT SPENCE,
PAUL BROWN, Georgia
WRIGHT PATMAN, Texas
ALBERT RAINS, Alabania
ABRAHAM J. MULTER, New York
HUGH J. ADDONIZIO, New Jersey
WILLIAM A, BARRETT, Pennsylvania
BARRATT O'HARA, Illinois
LEONOR K. SULLIVAN, Missouri
L. H. FOUNTAIN, North Carolina
HENRY S. REUSS, Wisconsin
MARTHA·~. GRIFFITHS, Mlchiga}l
THOMAS L. ASHLEY, Ohio
CHARLES A. V ANIK, Ohio
JOHN J. BELL, Texas

Kentucky, Chairman
JESSE P. WOLCOTT, Michigan
RALPH. A. GAMBLE, New York
HENRY 0. TALLE, Iowa
CLARENCE E. KILBURN, New York
GORDON L. McDONOUGH, California
WILLIAM B. WIDNALL, New Jersey
JACKSON E. BETTS, Ohio
WALTER M. MUMMA, Pennsylvania
WILLIAM E. McVEY, Illinois
EDGAR W. HIESTAND, California
D:ONALD W. NICHOLSON, Massachusetts
OLIVER P. BOLTON, Ohio
PERKINS BASS, New Hampshire

ROBERT L. CARDON, Clerk
ORMAN S. FINR", Professional Staff
JOHN E. BARRIERE, Professional Staff

II


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co N rrENTS
Page

House Joint Resolution 471. Joint resolution to permit FHA title I repair
assistance to new homes damaged by major disasters________________
-Statement ofMason, Norman P., Commissioner, Federal Housing Administration__
Additional data submitted to the committee:
Property improvement loans, insured under title I, 1950-55_________
Property improvement loans insured by FHA, 1954-55_____________


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FHA TITLE I HOME REPAIR ASSISTANCE
WEDNESDAY, JANUARY 18, 1956

HousE OF REPRESENTATIVES,
COMMITTEE ON BANKING AND CURRENCY,
Washington, D. C.
The committee met at 10:30 a. m., the Honorable Brent Spence,
chairman, presiding.
Present: Chairman Spence presiding and Messrs. Brown, Patman,
Rains, Multer, Addonizio, O'Hara, Mrs. Griffiths, and Messrs. Vanik,
Bell, Wolcott, Talle, McDonough, Betts, Mumma, McVey, and
Nicholson.
[H. J. Res. 471, 84th Cong., 2d sess.)
JOINT RESOLUTION To permit FHA Title I repair assistance to new homes damaged by major disasters

Resolved by the Senate and House of Representatives of the United States of America
in Congress assembled, That section 2 (a) of the National HouRing Act, a& amended,
is hereby amended by striking the period at the end thereof and inserting a
eolon and the following:
"P,.ovided, That this clause (iii) shall not be mandatory with respect to the
period of occupar>.cy or completion of new residential structures where such structures have bep~_ damaged in a disaster which the Pres:dent, pursuant t'.> section 2
(aJ of the Act eP.titled 'An Act to authorize Federal assistance to States and local
govemmenti, in major disasters and for other purpose&' (Public I-aw 875, Eightyfirst Congress, appro.-ed September 20, 1950), as amended, has determined to be
a major disast_er."

The CHAIRMAN. The committee will be in order.
Mr. Mason, on House Joint Resolution 471, is our first witness.
STATEMENT OF NORMAN P. MASON, FEDERAL HOUSING
ADMINISTRATION COMMISSIONER

Mr. MASON. Good morning, Chairman Spence and members of the
committee. My name is Norman Mason and I am the Commissioner
of the Federal Housing Administration.
The amendment to the FHA title I legislation which is before you
today is intended to enable the Federal Government within the limits
of present authorized programs to make available maximum assistance to victims of major disasters as determined by the President.
Under the terms of this amendment, loans for property improvement or repair would be eligible for FHA insurance under title I without regard to the age of the property in areas which have been declared by the President to be major disaster areas if the specific property requiring improvement has been damaged by the declared
disaster.
The immediate occasion for this proposal is the recent series of
floods on the west coast. In 8 counties within the jurisdiction of the
FHA San Francisco office there were at least 26 subdivisions of new
homes reported suffering some flood damage. Within the jurisdiction
of the Sacramento office, especially around Yuba City, Calif., there
were 12 to 14 subdivisions of new homes which were inundated. Without doubt, many of these new homes have been occupied less than


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FHA TITLE I HOME REPAIR ASSISTANCE

6 months. I have had a personal representative from my Washington staff out in the flood area examining flood conditions and meeting
with local citizens and officials in order to extend to them all possible
FHA assistance. Local lenders have called FHA attention to the
fact that present restrictions in title I would preclude title I-insured
loans for the repair of such properties.
As you know, Congress added the 6 months' occupancy restriction
in the Housing Act of 1954 primarily to minimize the possibilities of
misuse of title I loans as a means of making downpayments on houses.
It was also desired that some incentive be placed on builders to make
each home as livable as possible on the basis of the original sales
price, rather than omitting desirable parts of the property to be
built and separately financed with a title I loan. Such additional
financing would be likely to involve heavy monthly payments in the
early life of the mortgage debt, thus endangering both the mortgage
and the title I loan. The objectives of the 6 months' occupancy
provision have little relation to this proposal to allow these loans to
be used in disaster areas for repair of recently occupied homes which
have been damaged in the disaster.
If title I loans are unavailable, alternative uninsured financing is
generally more expensive if there is such financing available to homeowners needing to repair damaged homes.
It may be noted that other types of disasters than floods may well
cause damage to new homes. For example, hurricanes and tornadoes
are as likely to strike new properties as old. This proposal would,
therefore, make title I a more effective aid in major disaster areas.
We shall be pleased to answer any questions that we can about this
legislation.
The CHAIRMAN. What interest would the title I loan bear in the
disaster areas? Would there be any change in the interest rate?
Mr. MASON. No, sir. It is a straight title I repair loan at 5 percent discount.
The CHAIRMAN. It would be a 5-percent discount?
Mr. MASON. Yes. We also have loans, Mr. Spence, for building
new housing in disaster areas.
Mr. BROWN. What about the terms of payment?
Mr. l\1AsON. Terms of payment, Congressman Brown, are exae:tly
the same on this type of loan as they woul~ be on ~he regular title
I program. This is no attempt to make a different kmd of loan.
The CHAIRMAN. If a man can get a disaster loan, he certainly
wouldn't take a title I loan for the same purpose, would he?
Mr. MASON. The difference, Mr. Chairman, is that this gives
private industry a chance to loan this money to these people rather
than the Federal Government loaning it through a direct loan by
Small Business Administration.
The Small Business Administration loan would be cheaper to the
individual.
.
The CHAIRMAN. There has been a constant decline m the number
of title I loans that have been made in the last few years, has there
not?
Mr. MASON. Yes.
The CHAIRMAN. What do you attribute that to, Mr. Mason?
Mr. MASON. I attribute it to the tightening up of the program,
which I think was an excellent thing-the restrictions that we put
on many of the items that are insured under a title I loan.

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FHA TITLE I HOME REPAIR ASSISTANCE

The CHAIRMAN. To what extent have those loans decreased in the
last 3 or 4 years?
Mr. MASON. I think we have that. Just a moment. My statistician tells me, sir, that prior to the changes which put into effect
coinsurance, the level of these loans had begun to slacken off very
slightly. Since the coinsurance features were put in, the loans have
dropped about 35 percent in number. They are currently running
at about the same rate that they did 12 months ago, so that apparently
this 35 percent lower level is a fairly even amount to be expected at the
present time. I will furnish the Committee, if you wish, the exact
amounts of various years of FHA. title I loans.
The CHAIRMAN. I would like to have you·do that.
Mr. MASON. I will do it for the record.
(The information referred to is as follows:)
Property improvement loans insured under Title I, 1950-55
Nnmberof
loans

Year
1950 __ -------------------------- ------------ ---------------------- --------1951- __ -- -- __ --- --- --- -- -- --- _-- _-- _-- --- --- -- _-- -- _-- -- _--------- -- _--- -- _
1952 , __ ----- --- --- --- --- -- -- --- _----- -- _-- -- --· _--- _--- --- _--- --- -- _--- -- -- _
1953 '--- --- _-- _--- -- _----- -------- --- _----- --- --- -- _---- __ ---- _--- __ --- -- -1964 ___ -- --- --- _-- -------- --------- --- -- --- --- -- --- ----- -- ---- --- _-- __ ----1955 ,_ ---------- -------- -- ----- - -- --- - -- --- --- --- --------- - - -- --- - -- ----- ""

1,447,101
1,437,764
1,816,881
1,832,180
1,506,480
1,024,471

Net proceeds
$693, 761,000
707, 070, 000
1, 047, 358, 000
l, 092, 277, 000
890, 606, 000
644, 555, 000

1 Data for 1952 and 1953 are estimated on the basis of current counts of loan reports received for
tabnlation. Other years' data are totals of loan reports tabulated during the respective years. For
1952-53, tabulation reports are not recorded here because about $200 million of loans actually made in 1952
were not insured and tabulated until 1953 because of limitation of available insurance authorization from
September 1952 to March 1953,
·
• Preliminary.

Property improvement loans insured by FHA, 1954-55
Year and month
1954-January_________________________________________ _

Number of
Joans

Percent Net proceeds Percent
change 1 to borrower change 1

Oct'ober •- ---------------------------------------November
________ ------- _______________________ _
December _______________________________________ _

116,231
91,831
114,294
125,548
118,179
138,132
118,942
122,218
172,286
153,403
129,046
106,370

$69, 387, 250
54,191,667
68,797,050
75,767,960
71,040,175
81,711,057
69,626,805
71,485,541
100,568, 744
89,017,489
76,313,642
62,699,092

Total.-------------------------------------

1,506,480

890,606,372

February_--------------------------------------March
________ --- _______________________________ _
April ____________________________________________ _
May ____________________________________________ _
June_____________________________________________
___ -------- --- -- --- -- --- -- --- -- -- - -- - - - -- - -- -_
July
August __________________________________________ _
September ____________________ . _________________ _

-24. 9
1955--January__________________________________________
87,340
February________________________________________
56,633
-38. 3
March___________________________________________
73,915
-35. 3
ApriJ_____________________________________________
70,942
-43. 5
May______________________________________________
79,929
-32, 4
June______________________________________________
92,-707
-32. 9
July ___________________ ·-----------------__________
81,097
-31.8
August____________________________________________
105,442
-13. 7
September_-------------------------------------98,567
-42. 8
October__________________________________________
97,606
-36. 4
-27. 71
November_______________________________________
93,293
December•-------------------------------- ______ 1_ _ _8_1,_0_00_ 1_ _-_1_s._2_
Total'-----------------------------------__
1 1954 to 1955 change for same month.
• Coinsurance amendment effective Oct. 1, 1954.
• Preliminary data.
• Decrease from 1964 to 11155: 32 percent.
'Decrease from 1964 to 1955: 27.6 percent.


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• 1,024,471

52,004,023
35,575,610
45,728,867
45,359,626
51,178,992
58,251,604
50,230,379
66,908,379
63,866,161
62,693,238
58,957,745
53,800,000

-25.1
-34.4
-33.5
-40.1
-28.0
-28.7
-27.9-6.1
-36 . .i
-29.6
-22.8
-14.2

-32. O '644,554,624

-27.6

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FHA

TITLE I HOME

REPAIR

ASSISTANCE

Mr. BROWN. What is the length of time these payments have to
be made under title I?
Mr. MASON. They can be made up to 3 years. They can be made
for shorter lengths of time if borrowers wish but the limit is 3 years.
Mr. BROWN. Don't you think some of these people should have more
time to repay?
Mr. MASON. Yes, but I do not think we should ask for it under an
emergency clause such as this. I am recommending to the committee
that we extend the period of title I loans to a 5-year period instead of
3 years in the regular legislative program.
The CHAIRMAN. Mr. Patman?
Mr. PATMAN. Why not just change the law and leave it within the
discretion of the Commissioner about granting a title I loan for the
repair or improvement of a home that has been constructed less than
6 months and make it over all-universally. Just leave it up to the
Commissioner.
Mr. MASON. Mr. Patman, it certainly is within the prerogatives of
Congress to do that. The reason this legislation was introduced this
way, we thought this was an emergency which should be enacted
rather quickly and we felt that you probably would be willing to consider an emergency matter of this kind, where the other would involve
a lot more debate.
M. PATMAN. To the best of my recollection, we considered that
before, and this amendment was put on the theory-I believe you
brought it out--that it war thought too many of them would use that
as means of a downpayment. Since this has been brought to our
attention it shows us exceptions can arise that would justify a change,
so why not make a change that will take care of any exceptions, not
just this hurricane, not just this flood, but any other exceptions that
should arise within the discretion of the Commissione-r, and then he
could make sure that the abuses did hot creep in that Congress intended to legislate against when this provision was put in there. You
wouldn't oppose that, would you?
Mr. MASON. No, I would not.
Mr. PATMAN. Don't you think it would be a fine thing to do?
Then you would not have to ask Congress every time.
Mr. MASON. Certainly when emergencies arise it is nice to be able
to take action, that is true.
Mr. PATMAN. Can credit unions get this insurance? For a member
of a credit union, could this member get title I loans as guaranteed?
Mr. MASON. Any individual can, Congressman, who is a homeowner.
Mr. PATMAN. That is a homeowner?
Mr. MASON. Yes, and a member of the credit union.
Mr. PATMAN. Suppose the credit union puts up the money. Would
a credit union, like a bank, be protected?
Mr. MASON. A credit union can be an approved lender under this
program.
Mr. PATMAN. Are they approved now?
Mr. SWEET. We are having quite a number of them coming in now
asking for it. In just recent months that has happened.
Mr. PATMAN. Have you actually made any loans?
Mr. SWEET. Yes, sir.


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FHA TITLE I HOME REPAIR ASSISTANCE

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Mr. PATMAN. Would you place in the record a statement as to the·
extent that this privilege has been used through a credit union?
Mr. MASON. We will be very happy to.
(The information referred to is as follows:)
Between March 1, 1950, and June 30, 1955, a total of 39 credit unions had
reported under the title I insurance program a total of 2,077 property improvement loans with net proceeds aggregating $1,861,510.

Mr. PATMAN. You said to let private enterprise make the loans,
which of course we all favor, but don't you think a 9. 7 percent interest
is rather high? Don't you think if we are going to favor banks and
others in carrying what is tantamount to riskless loans, that we should
have some ceiling on it? 9.7 percent is pretty high.
Mr. BROWN. If you will yield, under the Small Business Administration you can make disaster loans up to 10 years at 3 percent.
Mr. MASON. That is correct. Twenty years, I believe.
You asked me if I don't think this is too high an interest rate, Mr.
Patman.
Mr. PATMAN. Yes.
Mr. MASON. The answer to this question is written in the record
of what is happening all over the country today. Many lending
institutions are not now using FHA for repair and remodeling loans
but are having their own programs, and very generally these programs
of theirs are carrying a much higher rate than FHA's approved rate
of 5 percent discount, which as you say, approaches 9.7 percent
interest. Over a 3-year period, the effective interest earned is 9.3
percent.
Mr. PATMAN. What are they charging generally?
Mr. MASON. The usual charge is 6 percent discount.
Mr. PATMAN. That makes about 12.
Mr. MASON. Yes; it does.
Mr. PATMAN. That is pretty high. Of course, I am always glad to
see private enterprise take advantage of some program that the Government has developed and profit from it, and but I hate to see them
charge unreasonable rates of interest.
The CHAIRMAN. Mr. Wolcott?
Mr. WOLCOTT. How much is there left nnder the authorization for
title I?
Mr. MASON. About $660 million for the current year.
Mr. WOLCOTT. All of that conceivably can be made available for
this program?
·
Mr. MASON. Yes, but Congressman Wolcott, there will not be a
large charge against it for this type of loan.
Mr. WoLCOTT. I say conceivably.
Mr. MASON. It could be, yes.
Mr. WOLCOTT. That is all I have.
Mr. RAINS. I have a question, Mr. Chairman.
The CHAIRMAN. Mr. Rains.
Mr. RAINS. Mr. Mason, following up Mr. Patman's question a
moment ago, the private banks and other lending institutions which
would make necessary loans of course assume their own risk. They do
not have an FHA guaranty on those loans, do they?
Mr. MASON. They do not, no, sir.


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FHA TITLE I HOME REPAIR ASSISTANCE

Mr. RAINS. On the 9.7, on those loans which we speak of under
title I, there is of course the FHA insurance back of those particular
loans.
Mr. MASON. Yes. They also do have a 10 percent risk of course in
each one that they make, and the lender must pay his insurance
premium also from the interest earnings.
Mr. RAINS. You partly answered my question, but I cannot understand why it is that the number of loans under title I is lower, or was
lower for 1955 than it has been in recent years when your agency and
others have been putting forth great effort toward a home improvement program. How did you account for the lower number of loans
under title I for 1955?
Mr. MASON. I believe that it is caused by the changes in the number of items, the sort of items that we insure title I loans for. As you
know, when the Congress corrected that, or instructed me to correct
the list, which is what it did, I am sure, we took off such items that
we did not feel contributed to livability of a house, such as swimming
pools and dog kennels and things of that sort. The 6 months' occupancy clause took off other business that FHA would have done under
title I programs-storm windows and screens and that sort of thing,
which would have been insured many times under a separate loan instead of being insured under the mortgage when the house was built.
I think that these probably were the main factors in this change in
business.
Some of it might have been, because loaning institutions were unhappy about the 10 percent coinsurance feature, although it is not my
opinion that that had so much bearing on the case. We had a drive,
as I am sure the members of the committee are aware, by the American
Bankers Association, telling their members that they should have
their own program, rather than the Government program, and Mr.
Rains, I cannot object if they will give a good program to the country
and do it on their own basis without Government insurance. I think
that is proper; Where they get the rate too high I think it is improper.
Mr. RAINS. A reai onable rate of interest is one of the essential
things. The question was asked by some of my collea~ues before I
came in, likely, but what strikes me as a very unfair situation is to
charge these people who have been subjected to all of this flood and
the disasters, to charge them 9.7. That does not seem fair to me.
What do you think about it?
Mr. MASON. My observation is that many people in the disaster
areas are taken care of by Red Cross.
Mr. RAINS. I am not talking about that.
Mr. MASON. I know you are not, but can I make this point?
Mr. RAINS. Yes.
Mr. MASON. For those individuals who are not wanting to be
helped by somebody, there should be a private-industry source of
money which they can use.
Mr. RAINS. Under the disaster loan program-strictly disaster loans
that we had, in which the Government was lending the money and
here the Government is guaranteeing payment-the loans started out
at 5 percent and after quite a bit of hammering by Congress the
administration cut it down to 3 percent. That is straight, direct
loans.
Mr. MASON. That is right.

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FHA TITLE I HOME REPAIR ASSISTANCE

7

Mr. RAINS. But these are guaranteed loans as well. There is a
great difference between 3 percent on a disaster loan from the Government and 9.7 guaranteed loan disaster, isn't there?
Mr. MASON. There is a great difference.
Mr. RAINS. Do you think the interest rate ought to be lowered
where it is to be made on a disaster loan basis?
Mr. MASON. I suspect that this could be done.
It presents a problem as to whether we would get private funds to
do the job or not. Now this would be the problem, I believe, as to
whether or not if we provided for the vehicle for private industry to
make loans at a lower rate than they normally wished to, whether
we would get the loans made or not. There would be nothing wrong
with trying something of that kind.
Mr. RAINS. Do you think it would be fair if the loan, say, went
above a thousand dollars and on up into higher figures, it would be
well to have the interest rate bear some relationship to the size of
the loan? The larger the loan the cheaper the interest rate could be.
Mr. MASON. This is a very desirable way of handling loans, yes,
but FHA title I loans are all rather in the small-loan category.
Mr. RAINS. Would you recommend that the amount of the title I
loan be increased and that the term for it be increased?
Mr. MASON. I would recom~end not in this emergency legislation
but in the general legislation which I know your committee has been
studying, I certainly would recommend that the amount of the loan
be increased and the period of it, the maturity be increased.
Mr. RAINS. This is a little bit off the immediate subject, but has
to do with title I loans and I might n-ot get a chance to ask you again.
You know one of the great clamors now, and even mentioned in the
President's message to Congress on housing, is housing for the aged.
Mr. MASON. Yes.
Mr. RAINS. There is a lot of talk about it.
I have thought, and want to know if you will agree with me, that
a great many people who are old and left alone still want to live in
their own home. I am thinking of widows, but they need a home in
which an apartment can be built, so someone can live with them.
This is a great segment of our aged population. I was surprised to
find that in the present title I act, there is frovision now, not only for
repair of those homes, but for conversion o those homes into the type
of situation which I just mentioned to you. Is the FHA making
loans along that line now for the conversion of homes affecting old
people?
Mr. MASON. Let me ask my title I man.
Mr. SwEET. We do not know what the percentage would be. We
are making loans of that type. We do not know the use that they
are put to, however.
Mr. RAINS. Don't you really believe that an expansion of title I
with special emphasis put on the opportunity to convert a home for an
elderly citizen to where they could have someone to live with them
might help to solve the problem of housing for the aged?
Mr. MASON. I would agree with you, Congressman, that this idea
of having someone live in an apartment in the house with the older
person is an excellent proposal for that sort of thing.
Mr. RAINS. It is happening all over the country, and usually at
the expense of some members of the family.
·

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FHA TITLE I HOME REPAIR ASSISTANCE

Mr. MASON. Whether it would be better to have it on such a short
term financing program as title I, or whether it shouldn't be on a
longer term-I lean always toward longer term financing and I don't
think we need necessarily expect the aged person to get this house paid
for within their lifetime, either.
Mr. RAINS. I agree with that. Of course I had the idea it might
be well to expand the time and the amount of the loans to meet such
conversions as I suggested.
Well, I will take no more time. Thank you.
The CHAIRMAN. Are there further questions?
Mr. MuLTER. Mr. Chairman-The CHAIRMAN. Mr. Multer.
Mr. M ULTER. Mr. Mason, has there ever been a computation made
of the maximum amount or the aggregate amount of loans made for
so-called luxury items, such as swimming pools, and the like, before
that part of the program was discontinued?
Mr. MASON. I do not believe-I would have to check certainly to
be sure, but I do not believe, Mr. Multer, that we have made such a
study. ,
Mr. MuLTER. It has been the impression of many of us, even though
we did consider it an abuse for the FHA to lend money for swimming
pools and that sort of thing, nevertheless, that part took a small
percentage of the total fund. I don't think we will find that that
accounted for any substantial decrease in the amount of loans in the
last 2 years, that is, title I loans. If you have any information to
the contrary I am sure we would like to have it.
Mr. Mason, if this provision is enacted, won't the title I loans then
for disaster purposes be in direct competition with the disaster loan
program of the Small Business Administration?
Mr. MASON. They are now. They are now in competition. This
just simply says that if you live in a new house you have the same
privilege as a man who has lived in his house for 6 months to get such
a loan.
I wouldn't say it was really in competition, because, as has been
pointed out, the terms are very different on these loans than on the
loans made by the Small Business Administration.
Mr. MuLTER. Certainly nobody is going to pay 9.7 for a loan
that he can get for 3 percent.
Mr. MASON. The fact that FHA does guarantee or insure these
loans, which is what we do, insure them, I think proves that some
people do do that.
Mr. MuLTER. Do you think-Mr. MASON. I am not too well posted on the small business program
but I believe that these loans are not available unless you have been
declined credit by some loaning institution.
Mr. MuLTER. That is precisely the point I make. Even though
there is no provision in the law that the disaster loan shall be approved only after the bank has turned it down, if we now enact this
bill the policy board may very well adopt such a principle, and say
that unless your local bank turns you down, we, SBA, will not make a
disaster loan. Then when one goes to SBA and asks for a 3 percent
loan, SBA will be able to say, "We are not going to give it to you
because your local bank will lend it to you at 9.7" or more than 3
tµne~ what SBA is charging.


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FHA

TITLE I HOME REPAIR ASSISTANCE

9

Mr. MASON. That is right.
Mr. MuLTER. Do you think we ought to set up that kind of program
in competition to what is designed to be a low-interest rate disaster
program to help out a fellow who met with an unfortunate disaster?
Aren't we going to create the situation that the loans will have to be
made under title I, rather than the disaster loan fund? The banks
are very happy to get this kind of business when guaranteed and with
a 9.7 rate.
Mr. MASON. I just want to say again that we are only putting the
man with the new house in the same position as the man with the
existing house. The program already does exist where a man who has
lived for 6 months in his house is eligible for a modernization and
repair loan under title I.
Mr. MuLTER. Up to the present time Congress is in the position to
say to SBA and to the Loan Policy Board, "When we set up this
disaster loan program, we set it up in lieu of a title I program, so that
the man can get a low-rate long-term loan," but if we come along after
we increase the amount of the disaster loan program, and after having
made the changes we did in the law so as to liberalize the disaster loan
program, we now come along with something like this, that may cause
the Loan Policy Board to say, "Go to the local bank and pay them
9.7 for 3 years as against paying SBA 3 points for 10 years."
Mr. MASON. That is correct. Your assumption is correct.
Mr. l\!Iu,LTER. Now as a matter of fact, if a man needeg a thousand
dollars for his house today, to repair something on account of disaster,
and he took the title I loan, he would have to pay back the whole
amount in 3 years at the rate of $32 a month. Take the man who has
just bought a $15,000 house. He has not only bought the house and
made his downpayment, obligated himself for his monthly payments,
he has gone out and bought the necessary things to make it a comfortable place to live in, and most of it also on the installment plan,
and he has just about got as much as he can st1,1.nd and pay for month
by month, and if it is too high, you will turn him down.
The bank will turn him down.
Under your regulations he should be turned down.
Mr. MASON. Yes.
Mr. MuLTER. He is struck with this disaster and must take a loan
of another thousand dollars and pay $32 a month on that thousand
dollar loan for a 3-year period. It would be a little less if it is a 5year period, if we should change it to 5 years.
Mr. MASON. Yes.
Mr. MuLTER. That man probably won't lose his house if he takes
the loan under the disaster loan program, even if we assume not a
20-year term, but a 10-vear loan at 3 percent. That SBA loan he
would pay back at the rate of $8 per month, and it would make that
guaranteed FHA loan or VA loan a sounder loan.
Mr. MASON. Can I just add one thing to what you have said, and
that is, the individual who is this close, would not be available for a
title I loan, because of his credit standing. This program is for the
person who has credit. The businessman who owns this house and
owns a business and has s:>mething in the world and is not right upand there are some of these, although Jots of our people are pretty
close to the cushion -but who has something and who wants to do
it this way rather than with a direct loan from Government.


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10

FHA

TITLE I HOME REPAIR ASSISTANCE

Ml". MuLTER. Is it fair for us to say the disaster loan should only
for the fellow who can qualify for a business loan? We did not
write the law on that basis. We wrote it on the basis that when a
man suffers a disaster he should be able to go to this agency and get
the disaster loan, regardless of financial resources. Of course, having
in mind his abiliLy to pay back, but we do not expect it to be a bankable loan. The standards we set up for the disaster loan are entirely
different than those for a business loan.
Mr. MASON. The idea of this part of our program was for the
person who could get a bankable loan and might wish to do it that
way. Now, I grant you that it is always desirable to get money
for less. We are all in that category, but there are people who can
afford it, who would perhaps rather have the loan from their own
institution, than they would from the Federal Government.
Mr. MuLTER. I think when it comes to that situation they can
go to the banks that are not using title I. I think you said some
of the banks are making this type loan without the guaranty and are
charging more than permitted to be charged under title I. I know
that there are at least four of the larger banks in New York City that
are charging less than title I permits, and not only charging less so
far as interest is concerned, but including in their charges an insurance
policy, which pays the loan up in the event of death of the home
owner. That, of course, is a lot less than the maximum fixed for the
title I program. As long as we have bankers who are making that
kind of loan, I don't think we should change title I so as to put it
into direct competition with the disaster-loan program.
Mr. MASON. This condition has existed in New York City for a
long time with banks there making loans at less-making FHA loans,.
if you please, at less than the maximum rate. We have been very
proud of these institutions and believe they are doing an excellent
job for the American economy, but they are very few in number.
This is a big country. Unfortunately, most of the lenders feel they
need the higher return on their capital.
Mr. Murn·F.R. I believe we should give the people every opportunity
to carry on as they desire, but I feel very strongly that this is going
to be an overriding of the principles we wrote into the disaster-loan
program, at least someone might interpret it that way.
I do not think it should be done.
Do you know of anybody who has been turned down for a disaster
loan in any of these areas where they might use this new facility, if we
changed the law as recommended by you?
Mr. MASON. We are told by lending institutions .there that they
would like to present loans for insurance on this basis.
·
Mr. MuLTER. You do not know of any disaster loans that were
turned down in those areas?
Mr. MASON. I do not, no, sir.
Mr. MuLTER. Except for the 6-month limitation, you cannot think
of any kind of a loan or a loan for any type of repair or improvement
that might not qualify under the disaster loan program that would
qualify under this program, can you?
Mr. MASON. No.
Mr. MuLTER. In other words, if the roof is blown off mv house
whether_ it is 6 months old or 6 years old, I must put on a new roof'.
Under either of these programs I can qualify for a loan.

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FHA TITLE I HOME REPAIR ASSISTANCE

11

Mr. MASON. Yes.
Mr. lV[uLTER. Thank you.
The CHAIRMAN. Are there any further questions?
Mr. O'HARA. Mr. Chairman.
The CHAIRMAN. Mr. O'Hara.
Mr. O'HARA. If I understand correctly, if one has had ownership
for a period of 6 months he is now eligible under the title I repair
assistance provision.
·
Mr. MASON. If one has owned a house for 6 months, they can get
a loan, yes.
Mr. O'HARA. All you are seeking to do now is to give the same
eligibility to one who has suffered a disaster, but has only owned the
house for 5 months, 29 days, or less.
Mr. MASON. Yes, Congressman.
Mr. O'HARA. This has no bearing upon the interest rate or any
other feature, other than the extension of eligibility to those victims
of a disaster, who have been in the status of home ownership for a
period of less than 6 months. In other words, as far as this provision
is concerned, it places all victims of a declared disaster on the same
basis.
Mr. MASON. Yes.
Mr. O'HARA. Is that substantially what the bill does?
Mr. MASON. That is correct.
The CHAIRMAN. Are there any further questions?
(No response).
The CHAIRMAN. If not, you may stand aside, Mr. Mason. We are
glad to have your views.
Mr. MASON. Thank you.
I appreciate the privilege of appearing before the committee.
(Whereupon, at 11 :03 a. m., the committee proceeded to further
business.)
X


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