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POST-WAR ECONOMIC POLICY AND PLANNING
HEARINGS
BEFORE THE
SUBCOMMITTEE ON HOUSING AND URBAN
REDEVELOPMENT OF THE
SPECIAL COMMITTEE ON POST-WAK ECONOMIC
POLICY AND PLANNING
UNITED STATES SENATE
SEVENTY-NINTH CONGRESS
FIRST SESSION
PURSUANT TO
S. Res. 33
(Extending S. Res. 102, 78th Congress)
A RESOLUTION CREATING A SPECIAL COMMITTEE
ON POST-WAR ECONOMIC POLICY
AND PLANNING
PART 12
HOUSING AND URBAN REDEVELOPMENT
JANUARY 17, 1945
Printed for the use of the Special Committee on Post-War
Economic Policy and Planning
UNITED STATES
GOVERNMENT PRINTING OFFICE
01183 WASHINGTON : 1945
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«• 8. SUP£R|NT£NDENI 0f MCUMENrs
*M 8 1945
SPECIAL COMMITTEE ON POST-WAR ECONOMIC POLICY AND
PLANNING
WALTEE F. GEORGE, Georgia, Chairman
ALBEN W. BARKLEY, Kentucky ARTHUR H. VANDENBERG, Michigan
CARL HAYDEN, Arizona WARREN R. AUSTIN, Vermont
JOSEPH C. O'MAHONEY, Wyoming ROBERT A. TAFT, Ohio
CLAUDE PEPPER, Florida ALBERT W. HAWKES, New Jersey
SCOTT W. LUCAS, Illinois
Meyer Jacobstein, Director
Subcommittee on Housing and Urban Redevelopment
ROBERT A. TAFT, Ohio, Chairman
DENNIS CHAVEZ, New Mexico ' ROBERT M. LaFOLLETTE, Jr., Wisconsin
ALLEN J. ELLENDER, Louisiana GEORGE L. RADCLIFFE, Maryland
O. DOUGLASS BUCK, Delaware ROBERT F. WAGNER, New York
II
CONTENTS
Page
Statement of —
Hines, Brig. Gen. Frank T., Administrator of Veterans' Affairs and
Administrator of Retraining and Reemployment Administration,
Office of War Mobilization and Reconversion; accompanied by
Edward E. Odom, solicitor, Veterans' Administration 1761
Mahan, L. E., president, Mortgage Bankers Association of America-. 1847
Wickard, Hon. Claude R., Secretary of Agriculture; accompanied by
Raymond C. Smith, Chief Program Analyst of the Bureau of Agri-
cultural Economics and Chairman of the Department of Agricul-
ture's Interbureau Committee on Post-war programs 1887
Grant, 3d, Maj. Gen. U. S., first vice president, American Planning and
Civic Association 190 1
Ware, Caroline F 1909
ill
POST-WAR ECONOMIC POLICY AND PLANNING
WEDNESDAY, JANUARY 17, 1945
United States Senate,
Subcommittee on Housing and
Urban Redevelopment of the Special Committee
on Post-War Economic Policy and Planning,
Washington, D. C.
The subcommittee met, pursuant to adjournment, at 10:30 a.pm.,
in room 312, Senate Office Building, Senator Robert A. Taft (chairman)
presiding.
Present: Senators Taft (chairman), Ellender, and Buck.
Senator Taft. The committee will come to order.
The first witness is General Frank T. Hines, Administrator of
Veteran's Affairs.
STATEMENT OF BRIG. GEN. FRANK T. HINES, ADMINISTRATOR
OF VETERANS' AFFAIRS AND ADMINISTRATOR OF RETRAIN-
ING AND REEMPLOYMENT ADMINISTRATION, OFFICE OF WAR
MOBILIZATION AND RECONVERSION (ACCOMPANIED BY ED-
WARD E. ODOM, SOLICITOR, VETERANS' ADMINISTRATION)
General Hines. Mr. Chairman and gentlemen of the committee, I
have, of course, a great interest in this housing program, not only from
the standpoint of the effect that it has upon the veteran who desires
to build or buy a home, but it has a bearing upon the reemployment
of the veteran, and also has a great bearing upon the citizenship of our
country. I think it is a very important subject.
Senator Taft. We, of course, have no desire to do anything that
would have any adverse effect upon any benefit given to the veterans.
Our main interest is to see how that is going to fit in with the whole
post-war housing problem, which Mr. Blandford has outlined as calling
perhaps for the construction of 1,260,000 homes a year for 10 years.
We are anxious to have your view on this important phase of it.
You may proceed, General.
General Hines. I have prepared a statement which, with your per-
mission, I would like to read. It is not too long, and I think it will
bring the point out that I have in mind.
veterans' administration interest in housing
The Servicemen's Readjustment Act of 1944, Public Law No. 346,
Seventy-eighth Congress, approved by the President June 22, 1944,
gives the Veterans' Administration an interest in the post-war housing
problems. This is so, although the act is a veterans', and not a
1761
1762 POST-WAR ECONOMIC POLICY AND PLANNING
housing act. Title III authorizes the guaranty of loans not to exceed
$2,000 to veterans for the purpose of the purchase or construction of
homes, the purchase of farms and farm equipment, or the purchase of
business property. Reference will be limited herein to loans for the
purchase or construction of homes and for the purchase of farms and
farm equipment. The act itself lays down certain requirements
which must be met before a loan can be guaranteed.
HOME LOAN REGULATIONS
The regulations issued — and I might say the folder which I have
given to each member of the committee contains all of the references
that I make here— by the Veterans' Administration have been drafted
carefully to accomplish the intent of Congress. Consequently, there
have been retained in the Veterans' Administration the policy making,
the over-all control, and the general supervisory functions, but every
endeavor has been made fully to utilize the services available through
other agencies to the greatest practicable extent. However, the Con-
gress evinced no desire to restrict the veteran in acting as a free agent.
The purchase of a home or a farm is an important personal matter.
The act provides two plans of guaranty. The Veterans' Administra-
tion may guarantee 50 percent of the loan, provided the aggregate
amount shall not exceed $2,000. Also, under section 505, if the vet-
eran procures a loan for any purpose authorized by the act which is
to be made, guaranteed, or insured by any Federal agency, and needs
a second loan to cover the remainder of the purchase price or cost,
the Administrator may guarantee the full amount of the second loan
up to $2,000. The Federal Housing Agency is the Federal agency
which operates in the field of insuring home loans.
Senator Taft. So, as I understand it then, if a man wants a loan
for $4,000 on a home you will guarantee one-half of it to the man who
makes it?
General Hines. That is right.
Senator Taft. You do not make the loan yourself?
General Hines. No; our authority is confined to guaranty of loans.
We process it first, to find out whether the veteran is eligible. We
issue a certificate of eligibility and at the same time indicate in a given
area the appraiser that we would like to have make the appraisal of
the property. Then he deals with the banker or individual, or any of
the mortgage companies. He is free to go to any agency that will
make the loan. They then perfect the papers and they are processed.
At the present time, those that are just straight 501 loans, where there
is no guaranty on a loan approved by a Federal agency under section
505, they are now processed through our regional offices.
The committee may be interested to know what progress we are
making on that. The number of eligibility certificates issued up to
January 10, 1945, was 3,360. The number of loan guaranties issued,
158.
Senator Taft. How many?
General Hines. One hundred and fifty-eight. The number of loan
guaranties rejected, 32. The total amount of the guaranties issued to
date, which is the Government's obligation, is $290,710.
Senator Ellender. What is the chief cause of rejection?
POST-WAR 'ECONOMIC POLICY AND PLANNING 1763
General Hines. Of course, the large number of applications for
eligibility and the few that have been made is readily explainable by
the fact that many of those are in the process of being perfected. The
rejections generally lie upon the reasonable, normal value of the prop-
erty. I think we all realize the conditions that exist at this time. I
recall a statement to the committees when they had this legislation
under consideration, that we are probably in a seller's market rather
than a buyer's market, and many of these properties are high, so
there is a clause contained in the bill — it is not a regulation, it is the
law — that it is our business and the appraiser's business to see that
they are purchased at what is normal and reasonable value.
Senator Ellender. General, are there any restrictions as to the
rate of interest to be charged on the loans made to veterans?
General Hines. Yes, the restriction is that it must be 4 percent or
not more than 4 percent.
Senator Ellender. Not more than 4 percent?
General Hines. Yes.
Senator Ellender. Does that apply to that part of the loan which
you guarantee, as well as the balance which may be borrowed?
General Hines. It applies to that part which we guarantee.
Mr. Odom. It applies to the entire loan, if it is a guaranteed loan.
Senator Ellender. Even though it is only a partial guarantee?
Mr. Odom. It might be a $10,000 loan, and that $2,000 guaranty
would apply to the entire loan.
Senator Taft. Is the 4 percent in the act?
General Hines. Yes, that is in the act.
I might say, Mr. Chairman, some comments were made on the rate
of interest, and I contemplate answering that a little later on, as to
whether it is a good rate or bad rate, and our judgment on it so far.
Senator Taft. On this guarantee, what is that? Is that a propor-
tional guarantee?
Mr. Odom. That is a pro rata guarantee, Senator. The law
specifies that it will decrease or increase within the $2,000 limitation,
that is decrease or increase on the unpaid portion of the obligation.
Senator Taft. So that a bank making this $4,000 loan, if it is a bad
loan, the bank would stand half the loss?
General Hines. That is right.
Senator Taft. So as far as the amount of the loan is concerned,
they would be just as loath to make the loan too big, whether you
guarantee it or not?
Mr. Odom. Not quite, Senator. It works out this way, perhaps, in
practice: Generally speaking, banks and some other lending agencies
are restricted by statute as to the ratio of the loan to the value of the
property. Generally speaking, those ratios do not exceed 66%
percent. However, in some instances they may go up as high as 80
percent, under certain conditions. The intent of the Congress was to
make the guarantee take the place of what is usually termed the pur-
chaser's equity or down payment, so that should be included in the
entire cost and be included in the mortgage itself.
Senator Taft. I should think, though, that a banker or building
and loan association would still be just as loath to make a 100 percent
loan as they ever were. I do not see what difference it makes. They
might be able to get away from a statutory restriction, but no bank
would be anxious to make a 100 percent loan. I should think they
1764 POST-WAR ECONOMIC POLICY AND PLANNING
would be just as loath to make a 100 percent loan with this guarantee
as they would be if there is no guarantee.
Mr. Odom. The Government would pay off its liability before the
lender would suffer any loss whatsoever.
Senator Taft. That is what I wanted to ask you.
I understood you to say the guarantee was a pro rata guarantee.
Mr. Odom. The guaranty is prorated, but not the liability.
Senator Ellender. To be more specific, suppose you make a loan,
say, for $4,000 and in the space of 2 years the veteran should pay
$1,000, are we to understand the Government would then be liable for
only $1,500?
Mr. Odom. That is right; but the Government would pay its $1,500
liability before there was any loss to the lender.
Senator Ellender. And the rest of it would be the liability of the
lender?
Mr. Odom. Yes.
Senator Taft. Suppose you have a $4,000 loan and the bank fore-
closed and sold it for $3,000, and that is what is realized, then the en-
tire loss would be stood by the Government?
Mr. Odom. Yes, sir.
General Hikes. I think the bank is well protected. It has that
$2,000 margin.
Mr. Odom. That is not an indemnification.
Senator Taft. I did not understand your answer to my first ques-
tion.
Senator Buck. It is merely a second lien.
General Hines. That is what it is.
Senator Ellender. If the loan is good on a 100 percent basis, it
ought to be better after 50 percent is paid.
Mr. Odom. That is right.
Senator Buck. Was not there a provision in the bill where a man
could borrow 20 percent of the value of the property in addition to the
$2,000?
General Hines. That is where a Federal agency approves a loan.
Mr. Odom. The example I gave, Senator Buck, a $10,000 loan, if
$8,000, or 80 percent were insured by the F. H. A., for example, then
the Administration could guarantee the 20 percent.
General Hines. That makes 100 percent. I believe, Mr. Chairman,
that this would be a good time for me to put into the record whatever
comment should be made on the statement which was made here rela-
tive to this very subject of interest and interest rate, if you will permit
me to depart from my prepared statement and work it in.
You will recall when the representative of the American Federation
of Labor was testifying before the committee, under the title of "Hous-
ing for Veterans" he had this to say:
Housing for Veterans
Of special concern to labor is the provision of post-war housing to veterans. The
Servicemen's Readjustment Act of 1944, generally known as the G. I. bill of rights,
utterly fails to protect the interests of the veteran. The housing provisions of this
law expose the veteran to speculative profiteering at his expense and place upon
him an unreasonable and unfair burden of high interest charges by lenders whose
loans are fully guaranteed by the Government against risk.
The great majority of veterans paying high interest charges and maintenance
costs will not be able to maintain a home when they attempt to buy one. We
urge that interest rates on the veteran's housing loans be substantially lowered.
POST-WAR ECONOMIC POLICY AND PLANNING 1765
There should be no second mortgages. No deficiency judgments should be
permitted against veterans in the event that they lost their homes. There
should be an adequate grace period to tide over veterans in the event of default.
In the event of the veteran's death, provision should be made to assure the
security of the home to his family and to prevent speculative resale of the property
by the mortgage lender. Standards should be established to provide for proper
planning and design of veterans' homes and their location in an adequate neighbor-
hood that will protect them against early obsolescence and blight.
The. present law exposes the veteran to the danger of the worst fleecing of any
group in the community. Over-valuation of possibilities alone can be disastrous
to him. The provisions of this bill are likely to yield such an enormous volume
of housing construction completely exempt from all standards, even the present
inadequate standards of the F. H. A., that the entire post-war housing program
in the Nation stands in grave jeopardy of deterioration. We ask that the Senate
authorize a special study of housing for veterans with full consultation afforded
to all veterans' organizations and to labor.
My comment is this: This drastic criticism of the legislation
proposed by leading veterans' organizations and enacted by the
Congress evidences an apparent complete lack of understanding on the
basis of the legislation and of the desires and characteristics of veterans.
Title III providing in effect for the guaranty by the Government of
that, part of the purchase price of a home, farm, or business, repre-
senting the usual cash payment, or purchaser's equity, is in no sense
a housing bill. It is a veteran's bill. The overwhelming majority
of veterans do not and never will desire to be set aside as a class apart
from all the rest of the community whether with respect to the homes
they live in or where such homes are situated. While they, because
of their service, have achieved a status which others cannot reach,
they will not because of that status desire differentiations in treat-
ment which might in times removed from the psychology of war be
looked upon, particularly by another generation, as constituting
unfair competition.
In the light of the above generalizations, let us analyze the different
elements of the stated criticism. First, let us state what the act does
with respect to guaranty of loans for the purchase, or construction of,
or for making repairs, alterations, or improvements in, or paying
delinquent indebtedness, taxes, or special assessments on, residential
property to be used as the home of a veteran in the present war.
Title III, among other things, provides for the guaranty of certain
percentages of loans, the proceeds of which are to be expended for the
purposes indicated.
The amount guaranteed on behalf of any eligible veteran may not
exceed $2,000 and it may not exceed 50 percent of the loan, thus the
guaranty might range anywhere from 1 percent of a $200,000 loan to
50 percent of a $4,000 loan. Under section 505 provision is made for
guaranteeing fully a second loan, secondary lien, not exceeding $2,000
in amount nor 20 percent of the purchase price in any case where a
principal loan, first lien, has been made, guaranteed or insured by a
Federal agency — as for example — Federal Housing Administration
insured mortgage loan. Under these provisions all loans guaranteed
must constitute first liens on the property except (1) loans guaranteed
under section 501 (b), the proceeds of which are to be used for making
repairs, alterations, or improvements in, or paying delinquent indebt-
edness, taxes, or special assessments on, residential property used as a
home of the veteran and owned by him; (2) secondary loans under
section 505 where the primary loan has been made, guaranteed, or
insured by a Federal agency.
1766 POST-WAR ECONOMIC POLICY AND PLANNING
In all cases the interest on the loan, any part of which is guaranteed,
must not exceed 4 percent. The purchase price must not exceed the
reasonable normal value of the property as determined by proper
appraisal. The loan must be a practicable one and the contemplated
terms of payment of the mortgage in payment of the purchase price,
or the construction cost, must bear a proper relationship to the vet-
eran's present and anticipated income and expenses, and the property
must be suitable for dwelling purposes. The loans must be payable
in full in not less than 20 years. They may be made by any persons or
lending agency, private or governmental, State or Federal. Under
the regulations issued pursuant to the provisions of the act, any
unamortized loan to be eligible for guaranty must be in an amount
not in excess of 66% percent of the value of the property and the
term of the loan must not exceed 5 years. An amortized loan running
for a period not to exceed 20 years may represent the full purchase
price, or construction cost of the property. Under section 505 the
primary loan made, guaranteed, or insured by a Federal agency may
represent up to 80 percent, or, in some instances, a greater percentage
of the cost; the secondary guaranty loan may represent the remainder.
For example, on a $10,000 home there may be an F. H. A. insured
mortgage for $8,000 and a second loan in the amount of $2,000 guaran-
teed in full under the provisions of title III. The terms of payment
are fixed in the regulations issued by the Administrator pursuant to
the authority of the act. The repayment provisions, sections 4012
and 4013, are as liberal as the reasonable interests of the veteran
permit. It must be borne in mind always that the provisions of the
act are for the purpose of enabling the veterans to buy a home and
unless the Government proposes to finance, at the cost of the general
taxpayers, homes for veterans, the provisions must bear a realistic
relationship to the general business methods of the community.
Liberal provisions likewise are made for indulgencies to prevent fore-
closure in the event of temporary hardship, section 4041, and for the
Government carrying the charges for a reasonable period without
foreclosure. Provision is also made for refinancing and extension of
guaranty, section 4042, and for continuation of the guaranty in case
of death of the veteran, section 4038.
The first allegation is that the act "utterly fails to protect the in-
terests of the veteran. The housing provisions of this law expose the
veteran to speculative profiteering at his expense and place upon him
an unreasonable and unfair burden of high interest charges by lenders
whose loans are fully guaranteed by the Government against risk."
The act itself and the regulations fully protect the interests of the
veteran. The interest cannot exceed 4 percent — the labor representa-
tive's charge in this respect seems to be based upon the contention
that money should be available at an interest rate not exceeding 1
percent over the "going Govenrment rate." Since the 1 percent will
hardly be more than the service cost the practical question is whether
lenders would risk money on mortgages at a net rate equal to that on
Government bonds. The loans are not fully guaranteed by the Gov-
ernment, in fact the Government guaranty may not exceed 50 per-
cent of the loan. Loans under section 505 may be fully guaranteed
or insured by the Government and there is a discrepancy in that
while the interest rate on the secondary loan may not exceed 4 per-
cent, the interest rate on the primary loan may be greater. Whether
the element of competition will result in lowering the interest rate on
POST-WAR ECONOMIC POLICY AND PLANNING 1767
F. H. A. insured mortgages, for example, is a question which concerns
many interested persons at the present moment.
Senator Buck. Today, they would have to pay 4% percent, would
they not?
General Hines. Yes, the F. H. A. loan is 4}i percent.
The next allegation is that the majority of veterans cannot main-
tain a home because of the excessive interest charges and maintenance
costs. The act fully contemplates that in the first instance the pur-
chase price, or cost of construction, must not exceed the reasonable
normal value as determined by proper appraisal. With such limita-
tion and interest rate not exceeding 4 percent it would appear there
should be no undue hardship. Maintenance costs should be no greater
than normal. Some veterans, as others, may never be able to afford
owning a home, some may prefer not to do so.
Senator Taft. The question that arises there, I suppose, is the ques-
tion of appraisal.
General Hines. That is right.
Senator Taft. There is such a tremendously wide possibility in the
manner in which it, is done. We had the F. H. A. before us. They
claim they hold a pretty tight appraisal, that when loans were made
directly from the outside the appraisals were not so sound and they
may get too high.
General Hines. We are using, wherever practical, the appraisers of
the F. H. A. When we designate the appraiser we try to protect the
veteran by giving him the best appraiser in the community where he
is seeking to purchase a home.
Senator Taft. Of course, in the case of the second form of guaranty
you would be bound by the F. H. A. appraisal, itself, I presume.
General Hines. Exactly. When the veteran is turned down, and
in some cases they have been turned down, he has an appeal and
review of the turn-down, in other words, the refusal. Those appeals
go through the same processing agency. For instance, on farmers we
are using the Department of Agriculture clear out into the field with
their advisory committees and their appraisers. For the small busi-
ness, we are using the Reconstruction Finance Corporation and Smaller
War Plants Corporation, and on the homes we have already an agree-
ment, on the section 505 cases, with the National Housing, and we ex-
pect within a few days to reach an agreement on 501 with Mr. Bland-
ford's set-up. But in the meantime we are making loans as rapidly
as they are applied for through our own agencies by using the ap-
praisers which are on their list.
Senator Taft. The only loophole, I see, if the bank has an appraiser
who says it is worth more he would be likely to accept that man's
appraisal rather than to go back and get someone who was pursuing a
conservative policy.
General Hines. There is a review either by the processing agency,
or when it gets into our review group, that actually issues the guaranty.
Of course, they do not go out to look at the property, they do not
make a reappraisal — that would be repetition — but a review of Xhe
papers gives them a good index.
Mr. Odom. Primarily, we avoid that by ourselves designating the
appraiser. We do not permit the lending agency to designate the
appraiser.
1768 POST-WAR ECONOMIC POLICY AND PLANNING
Senator Taft. Of course, the bank is likely to appraise a house at
the price you pay for it. If the prices go up, as they have gone up
today when houses are scarce, that appraisal is likely to be too high
an appraisal.
General Hines. No question but what at the present time, with
values at the top, great care would have to be taken. I think the
greater danger lies in the loans entering into the purchase of small
businesses. We know even in normal times men going into business
are generally enthusiastic, or they would not start, and the veterans
are just as apt to be enthusiastic, and that is the most hazardous part
of this bill. Fifty-two percent of those that go in businesses gener-
ally fail in 2 years anyway.
Senator Taft. What controls do you exercise over the type of loan
and amortization?
General Hines. WTe are insisting on the straight loans to veterans
on homes being amortized over a 20-year period.
Senator Taft. Twenty years?
General Hines. Twenty years. That is on the monthly payment
plan which the veteran will pay, jus.t as he pays rent. A certain part
is interest and a certain part curtailment. After each payment the
amount of the rent and the amount of interest is reduced. In other
words, as he goes on he pays more on curtailment and less interest.
At the beginning he pays the total interest and after the first payment
it gets less.
Mr. Odom. Perhaps it should be stated at that point, in further
answer to Senator Taft's question that the regulations themselves are
made a part of the contract and the terms of the deed and mortgage
must comply with the regulations, so that we control all of those
matters specifically in the regulations.
Senator Taft. Do you make loans to a man who has no immediate
source of income or do you require that he have a job?
General Hines. We get a business report on him as to his ability
to take care of the obligation. That is included in the regulation.
Now, the Government pays the interest the first year.
Mr. Odom. On the guaranteed part only.
General Hines. Yes, on the guaranteed part. We have taken the
precaution that when a case comes up of default, even of default in
the payment of interest, to investigate that case, to make sure that a
bad bargain has not been made, not permitted to run on to the point
of foreclosure. That investigation is conducted by the Veterans'
Administration. We feel we should retain control of that for the
simple reason that the law itself leaves some discretion in the Admin-
istrator, in what he should do about if it is a bad bargain, whether he
closes out and takes his loss or whether he refinances it and continues
it.
Senator Taft. I was more interested in the procedure you go
through in the beginning. Do you have any rule of thumb as to
what percentage a man can pay of his income on these payments?
Do you relate that back to his wages?
General Hines. We have worked out certain tables. I would not
say it is a rule of thumb, but we will get the information through the
lender and through our own loan office as to the ability of the man,
his ability to carry what he has undertaken to carry. Now, what we
POST-WAR ECONOMIC POLICY AND PLANNING 1769
will work out, which will be a guide, is the amortization table for
$2,000, $3,000, $4,000, and so on, which will indicate the monthly
carrying charge. Now, there must be some showing on the part of
the veteran to indicate that he is capable of taking care of his family
and paying those charges.
Senator Taft. I wondered if you had some percentage of the total
income that you would permit to be paid on these obligations.
General Hines. The rule of thumb generally used is 25 percent as
the right amount to pay for rent and amortization.
Senator Taft. Twenty-five percent includes rent, amortization,
and taxes?
General Hines. Not to exceed that.
Mr. Odom. You will find all of those things pretty well covered in
the file which is placed before you, which has all of the forms, the
application, appraisal, credit report, the guaranty; all of those are'
covered in those forms.
Senator Taft. The figure suggested to us here up to date I think
has been 20 percent, or perhaps 22 percent is the limit of what the
man should pay.
Mr. Odom. It depends somewhat on the income. In the low-
income group it would maybe run a little higher, although it would
seem it should not. In the higher-income group, that is true.
Senator Buck. I am not entirely clear as to how the loans are made.
Suppose a man wants to build a $6,000 home, he gets $2,000 from the
bank, guaranteed by you, and $4,000 from the F. H. A.?
Mr. Odom. No, sir; that would never be the set-up. It would be
either one of two things: Either there would be a first-mortgage loan
for the entire $6,000, with $2,000 of that guaranteed bv us, or there
might be 80 percent of the $6,000, that would be $4,800, of mortgage
loan insured by the F. H. A., for example, with the remaining $1,200
guaranteed by us. Those are the only two possibilities.
Senator Buck. How is that $1,200 repaid? Over what period of
time?
Mr. Odom. Not to exceed 20 years.
Senator Buck. Amortized each year?
General Hines. Amortized monthly.
Senator Taft. The payments made then are applied proportionately
on that loan and on the first mortgage?
Mr. Odom. That is right.
General Hines. That is right.
Senator Taft. You may proceed, General.
General Hines. The next contention is that there should be "no
second mortgages." As pointed out above, under the act and regu-
lations there are no second mortgages except for repairs, and so forth,
and under section 505, that is, the second lien under section 505. If
these were precluded, the benefits of the act would be curtailed.
The next contention is that there should be no deficiency judgments
against veterans in the event of foreclosure on homes. It is not
understood whether the representative intends to imply that legisla-
tion precluding deficiency judgments would be within the constitutional
power of the Congress. Clearly this is a matter for State legislation
and so far only one State, North Dakota, has absolutely prohibited
deficiency judgments, although two additional States — California and
Nebraska — have enacted legislation of somewhat similar import.
1770 POST-WAK ECONOMIC POLICY AND PLANNING
Senator Buck. That applies to veterans only in these States that
passed the legislation?
Mr. Odom. No, sir; that is general.
General Hines. The matter is clearly one within the power of the
States, but it may be said, generally, that little is ever realized in
deficiency judgments.
The next contention for an adequate grace period is adequately
covered by sections 4034 and 4035 of the regulations, and the recom-
mendation for safeguards in the event of death of the veteran is met
by section 4038. Here again, however, there is a field of law, namely,
that with respect to descent and distribution, which is wholly beyond
the constitutional power of the Congress and is within the powers
reserved to the States or to frhe people.
Senator Taft. I suppose we could refuse to guarantee a loan unless
they waived the deficiency judgment.
General Hines. Yes.
Senator Taft. So, it is not beyond the power of Congress.
General Hines. It would be clearly outside the general business
procedure in a given State, which would probably not give the freedom
which the Congress intended the veteran should have in going any
place to get his loan rather than to be singled out for any special rules
in relation to that. So, I think the veterans are going to look upon
this as pretty much their own money in that respect. But I do agree
with you, Senator, that every precaution should be taken to make sure
that the veteran makes a good business deal, and whatever can be
done in that line we will try to do.
Senator Taft. We would like to get the money back, if we can.
That is the basis for putting conditions on lending.
General Hines. What we are really doing is paying the losses that
result in guaranteeing these loans. The lender is the man primarily
responsible for getting his money back.
Senator Buck. Where these loans have an F. H. A. guaranty, and
many of them will on these homes, that matter will be taken care of?
General Hines. All that I have indicated there, the 158, are all on
homes either building or they are purchases. The great majority
of them are purchasing homes already constructed.
Senator Buck. With F. H. A. mortgages?
General Hines. Some have and some have not. Most have not.
Senator Buck. Then, the requirement we are discussing will be
taken care of by that.
General Hines. Yes.
Mr. Odom. I might say, gentlemen, it is a fact that the greatest
complaint, the most frequent complaint, is that our appraisals are too
low. In other words, a man very much wants a home, and in these
days it is hard to get one. He might be willing to pay even a little
more to get it, but the law specifies a reasonable, normal value, and
our definition of reasonable, normal value is such that the appraisers
cannot very well appraise property so it will sell at the present market
value anywhere.
General Hines. Still it is possible to buy homes.
Senator Taft. A lot of people who bought farms at inflated values
in the last war went broke.
Mr. Odom. Congress intended to prevent that, both as to farms
and homes, and also business.
POST-WAR ECONOMIC POLICY AND PLANNING 1771
General Hines. I recall there was considerable discussion, when the
bill was up in both committees, as a matter of fact, on the question
whether this guaranteeing the loan was good business or not, on
account of the market being nearly at the top. That is so in some
communities, while in others the prices are going down.
The next suggestion is for adequate standards, proper planning and
designing of veterans' homes and location in an adequate neighbor-
hood to protect against early obsolescence and blight. This sugges-
tion might have place in a housing bill, but, even in connection with
a bill of such character, it should be borne in mind that the several
million veterans of the present war will represent a complete cross-
section of the present generation of Americans and that a veteran
will not be regimented into living where he does not desire to live.
Veterans will be of all income groups. They will be engaged in all
types of employment and business pursuits. Their choice of a home
will depend upon the several factors pertaining to their occupations
and previous attachments. The Congress in my judgment has
wisely provided, not only in title III, but in the other titles of the
Readjustment Act for the greatest possible freedom of choice and
action on the part of the individual veteran.
Of course, there should be adequate standards of construction, but
these belong in a housing bill, not a veterans bill. After all if a
veteran desires a specific house in a specific community for reasons
of his own and assuming that the cost and other limitations of the act
are met, is the Federal Government to tell him he cannot live where
and in the condition he wants to? At the most it would seem it
could only make it more attractive to purchase a better house in a
better location.
The last paragraph of the criticism indicates that the representative
fears that the veterans will be subject to "fleecing" through over-
valuation of properties and jerry-built construction. It has been
pointed out that the act requires that the purchase price or cost of
construction must be the reasonable normal value of the property.
The Congress specified reasonable normal value in order to prevent
veterans being handicapped by loans based upon inflated values.
The regulations are designed to implement this safeguard. Generally
speaking, approved Government appraisers, only, are selected for
appraising the property to be purchased or constructed. Arrange-
ments have been made for utilizing the services of the F. H. A. in
connection with any recommended approval of loans to be guaranteed
under section 505 and it is hoped that arrangements can be made to
utilize not only the F. H. A. but also the Home Loan Bank System
in processing applications for the purchase or construction of homes
generally. These safeguards will be more adequately understood
by reference to sections 4000, definitions; 4024, veteran's applica-
tion; 4026, recommendation for approval of guaranty; 4027, Ad-
ministrator's action on application; and 4032, construction loans.
In short, the representative's entire criticism seems to have utterly
ignored the provisions of the regulations which were issued under the
authority of the act and to carry out its evident purposes. There is
attached a complete copy of the regulations under title III for the
guaranty of loans for the purchase or construction of homes — filed
1772 POST-WAR ECONOMIC POLICY AND PLANNING
Federal Register, October 19, 1944 — and I suggest, that these regula-
tions be included in the hearings as a complete refutation of the allega-
tions of the representative of the American Federation of Labor
with respect to the housing of veterans.
I would further urge that the Congress if it give consideration, as it
doubtless will, to the question of post-war housing, consider the hous-
ing problem as a whole and not as one pertaining particularly to
veterans. I believe it is a correct conclusion that veterans will
benefit more by sound economy and by sound general programs con-
ceived in the interest of all than they possibly could by special differen-
tiations based upon their status as veterans. In this respect I think
the Congress acted wisely in making the Veterans' Readjustment Act
of 1944 a veteran's act and not an education or housing act.
Senator Buck. As I recall, title III of the G. I. bill allows the
veteran to apply for a loan for 5 years after the war.
General Hines. Two years after the war.
Mr. Odom. Five years after the war, 2 years after his release from
the service.
Senator Buck. Up to 5 years, though?
Mr. Odom. After the war, but 2 years after his discharge from the
service.
Senator Buck. That is his limit?
Mr. Odom. That is the limit. That may be a little bit short, from
the standpoint of preventing inflation. Bills have been introduced
already to lengthen that limitation.
Senator Buck. What are they going to offer?
Mr. Odom. Well, there are various provisions. None has been
acted on as yet.
General Hines. No report has been called for yet.
Regulations covering the guaranty of home loans were issued
October 19, 1944, after extensive consultation with officials of other
Government agencies, representatives of lending groups and service
organizations. They provide in effect that a veteran who desires to
buy or build a home or to improve an existing dwelling will proceed
in the usual manner of a person seeking a loan for such a purpose.
The veteran will go to his bank, building and loan company, or other
lending agency, or an individual lender. Either before or after the
veteran and the lender reach a tentative accord, a request may be
made of the nearest Veterans' Administration office for a certification
of eligibility of the veteran and information as to the amount avail-
able for guaranty. The Veterans' Administration will issue in eligible
cases the certification of eligibility and statement of the amount for
guaranty. The Veterans' Administration will also name an appraiser
from the list of appraisers who are qualified and reputable, and the
agency to process the loan. Perhaps it is well at this point to again
emphasize that the total amount that can be guaranteed by the
Veterans' Administration is limited to a maximum of $2,000. This
$2,000 guaranty can be made available to the veteran in one or more
transactions so long as the aggregate of the transactions does not
exceed the $2,000 maximum.
Section 501 of the law requires that before the Administrator may
approve a guaranty of a loan for the purpose of purchasing or con-
structing a home he must find —
POST-WAR ECONOMIC POLICY AND PLANNING 1773
1. That the proceeds of such loan will be used for payment for
such property to be purchased or constructed by the veteran;
2. That the contemplated terms of payment required in any mort-
gage to be given in part payment of the purchase price or the con-
struction cost bear a proper relation to the veteran's present and
anticipated income and expenses and that the nature and condition
of the property is such as to be suitable for dwelling purposes; and
3. That the purchase price paid or to be paid by the veteran for
such property or the construction cost, including the value of the
unimproved lot, does not exceed the reasonable, normal value thereof
as determined by proper appraisal.
The act makes available a potential flow of credit which without
the limitations provided by the act might lead to veterans being
induced to purchase unsuitable property and to an unhealthy inflation
of the real-estate market.
COOPERATION OF GOVERNMENT AGENCIES AND STATES
The Treasury has modified its regulations to permit certain banking
institutions to participate in this program and the Federal Reserve
has relaxed regulation W — relating to consumer credit — to liberalize
the terms on which loans may be made for repairs and improvements
on a home. The National Housing Agency, through its three agen-
cies, Federal Housing Administration, Federal Home Loan Bank
Administration, and Federal Public Housing Authority, is cooperating
in the program. Several of the States and the District of Columbia
have in process plans for amending local laws if necessary so that
insurance and other corporations may make loans guaranteed in
whole or in part under the act.
There are some provisions in some States where that cannot be
done.
Mr. Odom. That is right.
General Hines (continuing his statement):
FARM LOAN REGULATIONS
Regulations concerning the guaranty of loans for the purchase of
farms and farm equipment were announced on December 8, 1944.
It will be recalled that the act provides that any veteran found to
be eligible for a loan guaranty and who is found by the Secretary of
Agriculture to be likely to carry out the undertakings required by a
loan under the Bankhead-Jones Farm Tenant Act, shall be eligible
for the benefits of the Bankhead-Jones Farm Tenant Act. The
Department of Agriculture has been designated as cooperating agency
to aid in determining whether guaranty of farm loans should be
approved. The issuance of the regulations followed extensive con-
sultations with the Department of Agriculture and national organiza-
tions representing interested groups, such as farmers, bankers, and
insurance companies. I have arranged to use the set-up the Depart-
ment of Agriculture has in handling farms with an added member of
each county committee, required to be a businessman and a veteran
if possible. We intend to utilize that machinery, rather than dupli-
cate it by setting up machinery of our own. The veteran who
91183— 45— pt. 12 2
1774 POST-WAR ECONOMIC POLICY AND PLANNING
contemplates purchasing a farm may obtain assistance from veterans'
advisory committees in farming communities. Reference is made
to the guaranty of loans for farm purchase on this occasion for the
reason that of the Nation's 37,000,000 dwellings reported by the
1940 census, 8,000,000 are on farms and it is estimated that 6,600,000
of these farm dwellings are in need of repairs and improvement. At
this point I would like to insert the loan regulations and forms.
Regulations on Home Loans
UNITED STATES OF AMERICA
VETERANS' ADMINISTRATION
GUARANTY OF LOANS
Regulations Under Title III
SERVICEMEN'S READJUSTMENT ACT OF 1944
(Public Law 346— 78th Congress)
(Chapter 268— 2d Session)
(58 Statutes at Large 284)
(38 U. S. Code 693 et seq.)
[veterans' administration sealI
(Note.— This pamphlet covers the subject of Guaranty of Home Loans pursuant to Section 501 of the
Act. The subjects of Guaranty of Loans for the Acquisition of Farms and Farm Equipment pursuant
to Section 502, and the Guaranty of Loans for the Purchase of Businesses, etc., pursuant to Section 503,
will be printed in separate pamphlets.)
FOREWORD
The Servicemen's Readjustment Act of 1944 and these regulations constitute
a part of each contract of guaranty issued by the Administrator of Veterans'
Affairs on behalf of the United States of America, pursuant to Title III of said
Act.
The officials and employees of the Veterans' Administration from time to time
assigned to duties in connection with the administration of the Act shall act on
behalf of the Administrator of Veterans' Affairs, and when so acting within the
scope of authority delegated to them shall for all purposes of the Act and these
regulations be deemed to be acting for said Administrator.
Central Office of the Veterans' Administration, Washington 25, D. C, is the
main office of the Administrator of Veterans' Affairs. The functions pursuant
to Title III of the Act will also be performed in field offices of the Veterans'
Administration from time to time designated for that purpose. Transactions
and communications with, and contracts by such designated field offices shall have
the same effect as if with, or made by, Central Office.
These regulations should be carefully read. The completed application or
other papers submitted should be carefully examined by the applicants, (bor-
rowers and lenders) in order to be certain of accuracy and avoid any possible
embarrassment resulting from errors.
It will facilitate the service of the Veterans' Administration to the veterans
and the lenders if, in correspondence, reference is made to the appropriate section
numbers, if any, involved in the subject of the correspondence.
In view of the large number of veterans with the same or similar names, it is
important not only in correspondence, but also in documents to use the veteran's
full first name instead of his initial only, and also his middle initial. If unobjec-
tionable, it will be helpful to use his full middle name. In adition to the full
name, other available identifying data should be used in correspondence, such
as serial number allocated to the veteran while in active service, rank, and organ-
ization at date of discharge, current residence address, etc. In mortgages and
other documents it will be desirable to use the service serial number in addition
to the full name, although if there is objection the number will not be required.
If there has been a guaranty application previously submitted by the veteran
POST-WAR ECONOMIC POLICY AND PLANNING
1775
and the number assigned thereto by the Veterans' Administration is known,
that number should be used in all communications; and on all documents per-
taining to that application.
j> It should be clearly understood that the Act does not authorize the Veterans'
Administration or the Administrator of Veterans' Affairs to lend money to the
veteran under Title III; but only to guarantee loans within the prescribed
limitations.
NOTICE
P Federal statutes provide severe penalties including forfeitures, fines, and
imprisonment, for fraud on the part of the applicant and also as to "any person
who shall knowingly make or cause to be made, or conspire, combine, aid, or assist
in, agree to, arrange for, or in any wise procure the making or presentation of a
false or fraudulent affidavit, declaration, certificate, statement, voucher, or paper,
or writing purporting to be such" concerning any application for the guaranty
of a loan bv the Administrator. (38 U. S. C. A. 697, 715, 450, 451, 454 (a),
556 (a); 18 U. S. C. A. 80.)
TITLE 38— PENSIONS, BONUSES AND VETERANS' RELIEF »
Chapter I — Veterans' Administration
Part 36 — Regulations Under Servicemen's Readjustment Act op 1944
GUARANTT OP LOANS
October 18, 1944.
The following regulations govern the guaranty of loans under Title III of the
Servicemen's Readjustment Act of 1944:
Sec.
36. 4000
(a)
(b)
(e)
(d)
(e)
(0
(g)
(h)
(i)
(J)
(k)
(1)
(m)
(n)
(o)
(P)
(q)
(r)
(s)
(t)
(u)
36. 4001
36. 4002
36. 4003
36. 4004
36. 4005
36. 4006
36. 4007
36. 4008
36. 4009
36. 4010
36.4011
36. 4012
36. 4013
36. 4014
36. 4015
36. 4016
Definitions.
Administrator.
United States.
State.
Designated agency or agency.
Federal agency.
Guaranty.
Mortgage.
Secondary or Junior loans.
Guaranteed loan.
Home and residential property.
Reasonable normal value.
Property and lot.
Indebetedness.
Note.
Appraiser.
Certificate of title.
Credit report.
Eligible veteran.
Eligible lender.
Creditor.
Debtor.
Miscellaneous.
LOANS ELIGIBLE FOB GUARANTY
Eligible loans.
Purchase or construction.
Repairs, etc.
Increase in value due to repairs, etc.
Prior liens.
First liens required.
Mortgages required.
Transfer of title.
Obligation of guarantor.
Contract provisions.
Repayment provisions.
Prepayments.
Pro rata decrease of guaranty.
Insurance coverage required.
Loan charges.
LOANS ELIGIBLE FOR GUARANTY— Continued
Sec.
36. 4017 Interest.
36. 4018 Advances.
36. 4019 Construction loans.
GUARANTY BY THE ADMINISTRATOR
36.4020 Limits.
36. 4021 Second loan under section 505 (a).
36. 4022 Two or more eligible veterans or borrowers.
36. 4023 Maximum liability where there are two or
more veterans.
36. 4024 Veterans application.
36. 4025 Papers required.
36. 4026 Recommendation for approval of guaranty.
36. 4027 Administrator's action on application.
36. 4028 Execution and form of guaranty.
36. 4029 Disposition of papers.
36. 4030 Loan procedure after approval of guaranty.
36. 4031 Guaranty when effective.
36. 4032 Construction loans.
36. 4033 Losses which are not guaranteed.
CLAIMS UNDER A GUARANTY
36.4034 Default.
36. 4035 Claim on notice of default.
36. 4036 Legal action.
36. 4037 Notice of suit and subsequent sale.
36. 4038 Death of veteran.
36. 4039 Death or insolvency of creditor.
36. 4040 Filing claim under guaranty.
36. 4041 Option available to the Administrator.
36. 4042 Refinancing and extension of guaranty.
36.4043 Subrogation.
36. 4044 Future action against mortgagor.
36. 4045 Suit by Administrator.
36. 4046 Creditor's records and reports required.
36. 4047 Failure to supply information.
36. 4048 Notice to Administrator.
36. 4049 Right to inspect books.
1 As printed in the Federal Register, Volume 9, Number 210, Washington, Friday, October 20, 1944.
1776 POST-WAR ECONOMIC POLICY AND PLANNING
Authority: §§ 36,4000 to 36.4049, inclusive, issued under 58 Stat. 284.
§ 36.4000 Definitions. Wherever used in these regulations, unless the con-
text otherwise requires, the terms defined in this section shall have the meaning
herein stated, namely:
(a) "Administrator" means the Administrator of Veterans Affairs or any em-
ployee of the Veterans' Administration designated by him to act in his stead.
(b) "United States" used geographically means the several States, Territories
and possessions, and the District of Columbia.
(c) "State" means any of the several States, Territories and possessions, and
the District of Columbia.
(d) "Designated Agency" or "Agency" as used in respect to processing applica-
tions for guaranty of loans, means any Federal instrumentality designated by
the Administrator (including Veterans' Administration if so designated) to certify
whether an application meets the requirements of the act and regulations, and
recommend w hether the application should be approved if the applicant is found
eligible.
(e) "Federal Agency" as used with respect to agencies making, guaranteeing
or insuring primary loans, means any Executive Department, or administrative
agency or unit of the United States Government (including a corporation essen-
tially a part of the Executive Branch) at any time authorized by law to make,
guarantee or insure such loans.
(f) "Guaranty" means the obligation of the United States of American as-
sumed bv virtue of the guarantv bv the Administrator as provided in Title III
of the Servicemen's Readjustment Act of 1944 (58 Stat. 284; 38 U. S C. 693), and
subject to the limitatinons and conditions thereof and of these regulations. The
subject of the guaranty is that portion of an eligible loan procured by an eligible
veteran which may be subject to being guaranteed as provided in said Title III,
as determined by the Administrator upon application in accordance with these
regulations.
(g) "Mortgage" means an applicable type of security instrument commonly
used or legally available to secure loans or the unpaid portion of the purchase
price of real or personal property in a State, District, Territory, or possession of
the United States of America in which the property is situated. It includes, for
example, deeds of trust, security deeds, escrow instruments, real estate mort-
gages, conditional sales agreements, chattel mortgages, etc.
(h) "Secondary" or "junior" loan means a loan which is secured by a lien or
liens subordinate to any other lien or liens on the same property.
(i) "Guaranteed loan" means a loan unsecured, or secured by a primary lien,
or where permissible under the act and these regulations, a secondary lien, which
loan is guaranteed in w hole or in part by the Administrator as evidenced by
endorsement thereon; or by Loan Guarantee Certificate issued by the Adminis-
trator, and which shall have become effective as prescribed by these regulations;
or by such other legal evidence as may be provided by the Administrator.
(j) "Home" and "residential property" means any dwelling consisting of not
more than four family units, or any combination dwelling and business property,
the primary use of which is occupation by the veteran as his home.
(k) (1) "Reasonable normal value" for the purposes and intent of the act is
that which can be justified as a fair and reasonable price to be paid for a property
for the purposes for which it is being acquired, assuming a reasonable business
risk, but without undue speculative or other hazard as to the future of such value.
(2) The purpose and intent are (i) to assure that the price to be paid repre-
sents a fair and reasonably permanent value in the real property to be acquired,
(ii) to give, so far as the real estate is concerned, the basis for a fair but not unrea-
sonable risk on the part of the United States Government when executing its
guarantee, (iii) to assure that the appraisal shall be founded upon true and rea-
sonably permanent values.
(3) Each valuation shall be justified, inter alia, (i) by the history of values
and prices for this and similar properties, (ii) by the future resale possibilities as
indicated by trends in the immediate locality and (iii) by the most probable and
reasonably assured long term future economic and real estate conditions, national
and local, as they will affect properties similar to and competitive with that
under appraisal.
(4) "Reasonable normal value" is not necessarily "fair market value" nor
"fair market price" in the usual legal sense of those terms, nor is it necessarily the
same as "value for mortgage purposes."
(1) "Property" and "lot" as used in section 501 of the act refer to an interest
in reality defined in this section, and subject to the conditions therein.
POST-WAR ECONOMIC POLICY AND PLANNING 1777
(1) An interest in realty may be a fee simple estate, or certain other estates
indicated in subparagraphs (1) to (6) (including an estate for years) eligible as
security for guaranteed loans. But in any event the estate shall be one limited
to end at a date more than 14 years after the ultimate maturity date of the loan,
or when the fee simple title shall vest in the lessee; except that, if it is a leasehold
that terminates earlier, it shall nevertheless be acceptable if lessee has the irre-
vocable right to renew for a term ending more than 14 years after the ultimate
maturity date of the loan or until the fee simple title shall vest in lessee: Provided,
The mortgagee obtains a mortgage lien of the required dignity upon such option
right or anticipated reversion or remainder in fee.
(2) A life estate or other estate of uncertain duration is excluded, unless the
remainder interests are also encumbered by lien of the same dignity to secure the
same debt.
(3) A remainder interest in realty shall be eligible as security for a mortgage
loan only in the event that all the owners of intervening immediate or remainder
interests lawfully can and do (i) join in the mortgage in such manner as to sub-
ject all such intervening estates to the lien; or (ii) execute and deliver a lease or
other proper conveyance to the owner of the ultimate remainder in fee simple
in such manner as to assrre his legal right to possession and enjoyment until
the vesting of his ultimate remainder interest.
(4) If other than a fee simple estate or estate for years with minimum duration
as stated in subparagraph (1) of this paragraph, is offered as security full infor-
mation may be submitted to the Administrator before taking application from
the veteran. The Administration shall determine the eligibility of any such
estate.
(5) The existence of any of the following will not require denial of the guaranty;
hence will not require special submission:
(i) Outstanding easements for public utilities, party walls, driveways, and sim-
ilar purposes;
(ii) Customary building or use restrictions for breach of which there is no re-
version and which have not been violated to a material extent;
(iii) Slight encroachments by adjoining improvements;
(iv) Outstanding water, oil, gas or other mineral, or timber rights, which do
not materially impair the value for residential purposes, or which are customarily
waived by prudent lenders in the community: Provided, however, That if there is
outstanding any legal right to quarry, mine or drill within 400 feet of the en-
cumbered building the application for guaranty may be denied for that reason
unless upon consideration of all the facts the Administrator determines otherwise.
Such determination at the option of the lender or borrower may be obtained upon
a special submission of all the facts prior to taking application for guaranty.
(6) A mortgage on an undivided interest in realty shall not be acceptable un-
less all co-tenants of the veteran join in the mortgage, and unless such joinder
has the legal effect of creating a lien on the property such as is otherwise required.
In such case it shall not be required that the co-tenants join in, endorse, or other-
wise become personally liable on the veteran's indebtedness. Notwithstanding
such joinder in the mortgage by the co-tenants the value of the security for pur-
pose of guaranty shall be determined with respect to the individual interest of the
veteran only, and the guaranty will be limited to the proper proportion of that
sum, irrespective of the actual amount of the loan.
(m) "Indebtedness" means the unpaid principal and accrued interest on the
note, bond or other obligations, the subject of the guaranty, and includes also
taxes, insurance premiums and any other items for which the debtor is liable under
the terms of the mortgage, or other contract, including proper contractual or
statutory trustee fees and attorney fees, if any.
(n) "Note" means a promissory note, a bond, or other instrument evidencing
the debt and the debtor's promise to pay same.
(o) "Appraise " means an individual or firm or corporation of recognized stand-
ing, approved in writing by the Administrator to appraise property. An appli-
cant for designation as an approved appraiser shall show to the satisfaction of
the Administrator that he is of good character and that his experience and infor-
mation enable him to form sound opinions as to the reasonableness of the pur-
chase price or cost of property to be appraised in the territory in which he expects
to operate.
A list of appraisers, considered by the Administrator to be in good standing at
the time these regulations become effective, may be approved.
(p) "Certificate of title" means a written and signed opinion or statement as
to title by a qualified member of the bar of, or by a title company authorized to
1778 POST-WAR ECONOMIC POLICY AND PLANNING
do such business in, the jurisdiction in which the mortgaged property is situated;
or at the option of borrower and lender a title insurance or guaranty contract by
a corporation authorized to engage in such business in the State wherein the
property is situated; or appropriate evidence of title in the proposed encum-
brancer pursuant to a Torrens or other similar title registration statute.
(q) "Credit report" means the report submittde by any credit reporting agency
of at least five years' experience with facilities for national coverage, approved by
the Administrator, or any other form of report acceptable to the Administrator
for the purpose of determining the applicant's credit standing.
(r) "Eligible veteran" means a veteran who:
(1) Served in the active military or naval service of the United States on or
after September 16, 1940, and before the officially declared termination of World
War II.
(2) Shall have been discharged or released from active service under condi-
tions other than dishonorable, either
(i) After active service of ninety days or more, or
(ii) Because of injury or disability incurred in service in line of duty, irre-
spective of the length of service; and
(3) Applies for the benefits of this title within two years after separation from
the military or naval forces, or within two years after the officially declared termi-
nation of World War II, whichever is later. In no event, however, may an ap-
plication be filed later than five years after such termination of such war.
(s) "Eligible lenders" are persons, firms, associations, corporations, and "gov-
ernmental agencies and corporations, either State or Federal." (Section 500 (c)).
(t) "Creditor" means the payee, or any subsequent holder of the "indebted-
ness" and includes a mortgagee.
(u) "Debtor" means the maker of the note, or obligor in any other obligation,
or any other person who is, or becomes, liable thereon, by reason of a contract of
assumption or otherwise.
§ 36.4001 Miscellaneous. Throughout these regulations unless the context
otherwise requires:
(a) The singular includes the plural;
(b) The masculine includes the feminine and neuter;
(c) Person includes corporations, partnerships and associations;
(d) Month means calendar month, i. e., the period beginning on a certain date
in one month and ending at midnight on the preceding date of the next month;
(e) "The act" or "the statute" means the Servicemen's Readjustment Act of
1944, Ch. 268, 78th Congress, 2nd Session (Public Law No. 346), 58 Stat. 284;
38 U. S. C. 693;
(f) Title III means Title III of the act.
LOANS ELIGIBLE FOR GUARANTY
§ 36.4002 Eligible loans. Real or personal property encumbered to secure a
loan guaranteed pursuant to Title III of the act shall be situated within the
United States.
§ 36.4003 Purchase or construction. Section 501 (a) of the act provides for
granting to an eligible veteran "the guaranty of a loan to be used in purchasing
residential property or in constructing a dwelling on unimproved property owned
by him to be occupied as his home." The application therefor "may be approved
by the Administrator," if he finds that:
(a) The proceeds of such loan will be used to pay for such property * * *
(including construction cost) ;
(b) The contemplated terms of payment of any mortgage loan bear a proper
relation to the veteran's present and anticipated income and expenses;
(c) The property is suitable for dwelling purposes;
(d) The purchase price or the construction cost, plus the value of the lot, does
not exceed the reasonable normal value of the entire property as determined by
proper appraisal; and,
(e) The loan appears practicable.
§ 36.4004 Repairs, etc. Section 501 (b) provides: "Any application for the
guaranty of a loan under this section for the purpose of making repairs, altera-
tions, or improvements in, or paying delinquent indebtedness, taxes or special
assessments on, residential property owned by the veteran and used by him as
his home may be approved by the Administrator if he finds that the proceeds of
such loan will be used for such purpose or purposes."
POST-WAR ECONOMIC POLICY AND PLANNING 1779
(b) For the purpose or section 501 (b) :
(1) "Alterations or improvements", means any structural changes in or addi-
tions to the property, including heating and other equipment that become fixtures,
or the replacement of either, or operations of a protective nature, which will
increase the usefulness of the property as a home.
(2) "Repairs" means the work and material necessary to restore the building,
or a fixture therein, to a condition that is useful and appropriate to the circum-
stances, the need therefor having arisen because of wear and tear, accident, or other
cause.
(3) "Taxes" means general or special taxes assessed against the property.
(4) "Special assessments" means any charges for improvement purposes as-
sessed against the property.
(5) "Delinquent indebtedness" means past due amounts of principal or interest
(without giving effect to any acceleration provisions) on an obligation secured in
whole or in part by a lien or liens on property of an eligible veteran and occupied
as his home.
(6) Satisfactory evidence will be required to establish that the proceeds of such
loan will be used for one or more of the purposes stated in paragraph (b) of this
section.
§ 36.4005 Increase in value due to repairs, etc. An application pursuant to
section 501 (b) for the guaranty of a loan for repairs, alterations, or improvements
of the property, must show that the amount of the loan will bear a proper relation
to the value of the property, and that the repairs, alterations or improvements will
enhance such value to a reasonable degree.
§ 36.4006 Prior liens. The existence of a lien or liens on the property in
respect to which a guaranty of a loan is sought pursuant to section 501 (b) will
not necessarily require a denial of the application for guaranty ; but full consider-
ation will be given to the amount, rate of interest, and maturity dates of the
primary loan in determining whether a suitable relation will exist between the
veteran's obligation and probable available income.
§ 36.4007 First liens required. Except as provided in section 505 of the act,
loans for the purpose of purchasing or constructing homes, and in respect to which
any guaranty is sought, shall be secured by a first lien on such property; but the
existence of tax or special assessment prior liens will not disqualify security which
is adequate and otherwise acceptable.
§ 36.4008 Mortgages required, (a) Each loan guaranteed in whole or in part
by the Administrator shall be secured by a mortgage except that when the princi-
pal amount of a loan to be guaranteed does not exceed $500 and the lender does
not require a mortgage, the Administrator may nevertheless guarantee such loan
provided it complies otherwise with the act and these regulations (as to procedure
see § 36.4024 (e)).
(b) The law of the State where the contract is made determines the capacity
of the parties to contract. Similarly the law of the State wherein the real estate
is situated determines the capacity of mortagor to encumber and of the mort-
gagee to hold the legal rights resulting from encumbrance. The act does not
modify such law of the State. The guaranty by the Administrator will be avail-
able only in the event that under the applicable State law the contract between
the borrower and lender is binding on both, and the mortgage has the legal effect
intended. Paragraph (b) of this section will be applicable particularly in cases
involving minors, "persons of unsound mind," and persons under other legal
disability by reason of the law of the State. It will be applicable also in cases
involving mortgage or other loans which any guardian, conservator, or other
fiduciary seeks to make, or obtain; and to a guaranty thereof for which application
is submitted.
(c) Type of loan and mortgage. (1) Except as otherwise provided in para-
graph (a; of this section each loan guaranteed under the provisions of Title III
must be evidenced by a note or notes secured by appropriate security instrument
or instruments ("mortgage legally sufficient in the jurisdiction in which the prop-
erty to be encumbered is situated. ">
(2) A term loan, which is in accord with applicable State or Federal law, and
regulations, if any, may be eligible for guaranty if the amount of the loan to be
guaranteed plus the unpaid amount of all obligations secured by liens superior to
the lien securing the proposed loan does not exceed two-thirds of the reasonable
normal value of the property encumbered to secure the loan and if the ultimate
maturity date of the mortgage indebtedness so secured, and to be guaranteed, is
not more than five years from the date of the note. Such superior liens shall not
1780 POST-WAR ECONOMIC POLICY AND PLANNING
be mortagge liens, except when the guaranty is issued pursuant to sections 501 (b)
or 505 of the act. (3) Except as provided in subparagraph (2) of this paragraph
the loan shall be amortized. The obligation to be amortized may, and except for
the first year shall, require such periodical payments of stated sums as v\ill in
accordance with standard amortization practice result in payment of the entire
principal and interest v\ithin not more than 20 years from the date of the loan,
or the date of assumption by the veteran, whichever is later. At the request of
the mortgagor the payments during the first year shall be less than the amount
required thereafter, by the sum representing the interest charge on the guaran-
teed part of the loan, and which interest charge the Administrator will pay at the
end of that year.
§ 36.4009. Transfer of title. The conveyance of, or other transfer of title to
the property after the creation of a lien thereon to secure the veteran's debt, which
is guaranteed in v\ hole or in part by the Administrator, shall not terminate or
othervs ise affect the contract of guaranty, unless (a) the creditor by express agree-
ment for that purpose releases or otherwise discharges the veteran from personal
liability thereon; or (b) by indulgence of, or by agreement with, the veteran's
immediate or remote grantee contrary to these regulations and without the
consent of the Administrator the creditor so alters the contract made by the
veteran w ith the lender as to cause discharge of the veteran by operation of law.
§ 36.4010 Obligation of guarantor. To the extent prescribed the obligation
of the United States is that of a guarantor, not an indemnitor.
§ 36.4011 Contract provisions. Subject to the provisions of the act and these
regulations, the contract between the lender and borrower, may contain such
provisions as they may agree upon and which are reasonable and customary in
the locality where the property is situated.
§ 36.4012 Repayment provisions, (a) If the loan be an amortized loan the
lender and borrower may contract for such periodical payments at monthly or
other intervals but not less frequently than annually.
(b) If the mortgagor consents the mortgage may provide that each monthly or
periodical payment shall include in addition to the proper amount to be credited
to principal and interest a proportionate part of the estimated amounts required
annually for all taxes, ground rents if any, special assessments if any, and fire and
other hazard insurance premiums. Such provisions may direct the method of
crediting the additional amounts included in the periodical payments for the
purposes stated in this paragraph.
(c) The method may be by crediting the note with the amounts so received and
debiting same with disbursements by the creditor for such purposes; or by credit-
ing and debiting a separate "trust account", or otherwise as the debtor and credi-
tor agree. Unless otherwise provided by the parties, all periodical payments made
by the debtor on the obligation shall be applied to the following items in the
order set forth:
(1) Taxes, special assessments, fire and other hazard insurance premiums,
and ground rents (allocated among such items as the creditor elects) ;
(2) Interest on the mortgage debt; and
(3) Principal of the mortgage debt.
§ 3H.4013 Prepayments, (a) When the debt is to be amortized the note or
other evidence thereof, or the mortgage securing same, shall contain appropriate
provisions granting any person liable for such debt, the right to pay at any time
the entire unpaid balance or any part thereof. Unless otherwise agreed all such
prepayments shall be credited to the unpaid principal balance of the loan as
of the due date of the next installment. No premiums shall be charged for any
partial or entire prepayment.
(b) Any person liable shall be entitled to prepay a term loan, or any part there-
of, upon not less than one month's notice, The note or mortgage shall so provide.
(c) Any prepayment shall be applied in the manner and to the items directed
by the person making the prepayment.
§ 36.4014 Pro rata decrease of guaranty. The amount of the guaranty shall
decrease pro rata with any decrease in the amount of the unpaid principal of
the loan, prior to the date the claim is submitted.
§ 36.4015 Insurance coverage required, (a.) Buildings the value of which
erter into the appraisal forming the basis for the loan guaranteed shall he insured
against fire, and other hazards against which it is customary in the community
to insure and in amount at least equal to the amount by which the loan exceeds
the value of the encumbered land plus that of the improvements included in
the appraisal but which are not subject to the hazards insured against; Pro-
vided, That upon a satisfactory showing at the time of application for guaranty
POST-WAR ECONOMIC POLICY AND PLANNING 1781
that (1) it is impossible or impracticable to obtain such insurance because of loca-
tion, prohibitive cost, or other good reason; (2) prudent lenders in such com-
munity customarily do not require such insurance, or some portion thereof,
(amount or hazard) and (3) the lender submitting the application is willing to
make the loan without insurance coverage on one or more of the buildings, or
without certain coverage, or in a reduced amount, and subject to the provisions of
paragraphs (b) and (c) of this section; the Administrator may at the time of
approving the application waive all or part of such insurance requirements,
subject to the provisions of said paragraphs (b) and (c) of this section. No
waiver will be granted on the basis of premium cost in any case wherein the
premium cost on an annual basis does not exceed $5.00 per $1000 of insurance
against the hazard of fire, or $10.00 per $1000 for fire and all other hazards cov-
ered by the insurance. The procuring of insurance of the amount and coverage
stated in the approved application shall constitute conclusive evidence of waiver
by the Administrator of insurance in excess of the amount stated in or in con-
nection with the application and also all hazards not mentioned therein as haz-
ards to be covered.
The creditor shall require that there be maintained in force such insurance
of the coverage stated in the approved application in an amount not less than
the amount stated or the amount of the unpaid indebtedness whichever is the
lesser.
In the event insurance becomes unavailable the fact shall be reported to the
Administrator for determination whether waiver shall be granted or loan declared
in default.
(b) For the sole purpose of determining the amount payable upon a claim
under the guaranty after an uninsured loss (partial or total) has been sustained,
the unpaid balance of the loan (except as provided in paragraph (c) of this section)
will be deemed to have been reduced by an amount equal to the amount of the
uninsured loss, but in no event below an amount equal to the value of the land and
other property remaining and subject to the mortgage.
(c) There shall be no reduction of the amount of the guaranty as provided in
paragraph (b) of this section by reason of an uninsured loss which is uninsured
(as to hazard or amount) by reason of a waiver by the Administrator as provided
in paragraph (a) of this section.
(d) All insurance effected on the mortgaged property shall contain appropriate
provisions for payment to the creditor, (or trustee, or other appropriate person
for the benefit of the creditor), of any loss payable thereunder. If by reason of
the creditor's failure to require such loss payable provision in the insurance
policy payment is not made to the mortgagee the liability on the guaranty never-
theless shall be reduced as provided in paragraph (b) of this section with respect
to an uninsured loss, except to the extent that the liability under the policy
was discharged by restoring the damaged property, by the insurer, or out of pay-
ments thereunder to the insured, or otherwise. No waiver pursuant to para-
graph (a) of this section shall modify this paragraph (d) .
(e) Upon the creditor (or trustee or other person) collecting the proceeds of
any insurance contract, or other sum from any source by reason of loss of or
damage to the mortgaged property, he shall be obligated to account for same,
by applying it on the indebtedness, or by restoring the property to the extent
the expenditure of such proceeds will permit. As to any portion of such pro-
ceeds the mortgagee is not entitled to retain for credit on such indebtedness or by
reason of other legal right, he shall hold and be obligated to pay over the same
as trustee for the TJnited States and for the debtor, as their respective interest may
appear.
(f) Nothing in these regulations shall operate to prevent the veteran from pro-
curing acceptable insurance through any authorized insurance agent or broker he
selects. In all cases the insurance carrier shall be one licensed to do such business
in the State wherein the property is situated.
§ 36.4016 Loan charges, (a) In the case of a purchase of real or personal
property by the veteran and a guaranty pursuant to the act and these regulations
of an indebtedness representing part of the purchase price, there may be charged
to the veteran and included in said note amounts actually paid or incurred by the
seller (mortgagee) for such expenses and charges as are chargeable to such pur-
chaser in accord with local custom, if the purchaser so agrees, such as fees for
appraisals, credit and character report on the veteran, surveys, fees of purchaser's
(not seller) attorney, recording fees for recording the deed and the mortgage only,
premiums on fire and other hazard insurance that may be required in accordance
with these regulations.
1782 POST-WAR ECONOMIC POLICY AND PLANNING
(b) In the case of a loan to the veteran, charges in accord with local custom,
such as fees for appraisals, credit and character report, surveys, abstract, or title
search, curative work and instruments, attorney fees, fees for tax certificates
showing all taxes paid, premiums on fire and other hazard insurance that may be
required in accordance with these regulations, revenue stamps, recording fees,
etc., all limited to amounts actually paid or incurred by the lender, may be
charged to the borrower and withheld from the gross amount of the loan.
(c) Any unreasonable charges shall be ground for denying an application for
guaranty. No brokerage or other charges shall be made against the veteran for
obtaining any loan guaranty under this title.
§ 36.4017 Interest, (a) The rate of interest chargeable on a loan guaranteed
fully or in part, shall not exceed 4 per centum per annum on unpaid principal
balances. Interest may be computed in accordance with standard amortization
practices.
(b) The rate of interest on a secondary loan which is guaranteed pursuant to
section 505 of the act may exceed by not more than 1% per annum the rate
charged on the principal loan, but in no event shall the rate on the secondary
loan exceed 4% per annum.
§ 36.4018 Advances. (1) Nothing herein shall prevent the creditor from
making advances for the benefits of the mortgagor to pay taxes, assessments, and
insurance premiums as they become due, and the cost of the emergency repairs
needed to protect the propert}r. The amount guaranteed by the Administrator
shall be increased pro rata with all such increases in the unpaid principal balance
of the loan; Provided: (1) That the annual interest rate on all advances shall not
exceed 4 per centum per annum ; (2) that the terms of repayment shall not extend
the date of the amortization of the loan and (3) that the amount of the guaranty
shall in no event exceed the original amount thereof, nor exceed the percentage of
the indebtedness originally guaranteed.
(b) In the case of any advance made by a creditor to a debtor, the creditor
with the consent of the debtor, may apply any and all payments made by the
debtor for a period of twelve months to the liquidation of the advance without
considering the original loan in default. This shall not be construed to extend
the period of indulgence contemplated by §§ 36,4034 and 36.4035.
§ 36.4019 Construction loans. Under certain circumstances loans relating to
new construction may be guaranteed pursuant to the Act. (See § 36.4032)
GUARANTY BY THE ADMINISTRATOR
§ 36.4020 Limits. In no event will the aggregate obligations of the United
States as guarantor under Title III exceed $2,000 in respect to one veteran,
whether there be one or several loans, and whether some are obtained for the
acquisition of a home, others for a farm, and others for business, or equipment, or
other purposes. Repayment of a loan or loans in whole or in part, or transfer of
the encumbered property does not modify or enlarge such limitation. The guar-
anty shall not at any time exceed 50 per centum of the aggregate of the indebt-
edness for any of the purposes specified in sections 501, 502 and 503 of the act.
§ 36.4021 Second loan under section 505 (a). Section 505 (a) of the act pro-
vides that when the principal loan for any of the purposes stated in sections
501, 502 or 503 is "approved by a Federal agency to be made or guaranteed or in-
sured by it pursuant to applicable law and regulations, and the veteran is in
need of a second loan to cover the remainder of the purchase price or cost, or a
part thereof," the Administrator may guarantee the full amount of the second
loan, Provided:
(a) It does not exceed 20 per centum of the purchase price or cost, i
(b) The amount guaranteed together with all other guarantees under Title
III for the same veteran does not exceed $2,000.
(c) The loan conforms to all other applicable requirements of these regula-
tions.
§ 36.4022 Two or more eligible veterans or borrowers, (a) In the absence
of a statement to the contrary, an application signed by two or more eligible
veterans shall be conclusively presumed to be an application by each for the
guaranty of an equal proportionate part of the entire amount to be guaranteed;
Provided, however, That if husband and wife execute the application, both being
eligible veterans, it will be conclusively presumed in the absence of a contrary
statement in the application that it is an application for guaranty on behalf of the
husband only. Unless the amount of guaranty then available to the husband
is insufficient to meet the requirements of the case for guaranty of a proper
amount under these regulations and the terms of the application; in which event
POST-WAR ECONOMIC POLICY AND PLANNING 1783
the deficiency may be charged against the amount available to the wife, unless
she has in the application or otherwise (before approval) stated in writing her
unwillingness to be so charged.
(b) The Administrator will not require a wife to sign an application made by
her husband. If she also is an eligible veteran and desires to exercise her right
as such to obtain a guaranty, a separate application by her will be required. Sig-
nature of her husband to indicate his pro forma joinder will be required only
when the wife is resident of, or the application is signed in, or the property to
be encumbered is situated in, a State under the laws of which such contract
cannot be legalty executed by a married woman alone as in the case of an un-
married woman.
§ 36.4023 Maximum liability where there are two or more veterans, (a) For
the purpose of determining the maximum amount of the potential liability of
the United States under a guaranty incident to an' obligation on which two or
more eligible veterans who applied for the guaranty are liable, the obligation
will be deemed a several, and not a joint, obligation of the respective applicants
who were charged with the guaranty or a part thereof notwithstanding that as
among the debtors or any of them, and as between them, or any of them, and
the creditor, the obligation is in fact and law a joint obligation or a joint and
several obligation.
(b) In no event will the amount of any veteran's debt thereunder be deemed to
exceed for guaranty purposes the amount for which such veteran is legally liable
to the holder of the obligation, nor the value of the interest of the veteran in the
property. If more than one of the obligors is an eligible veteran and application
by him or them is granted, the maximum aggregate amount of the guaranty
will be the sum of the amounts available to each applying veteran but in no event
will the aggregate of the guarantees for more than one veteran exceed 50 per
centum of the total loan except as provided under section 505 oi the Act.
(c) For the purpose of this § 36.4023 the wife of a principal obligor shall not
be counted unless (1) she is legally liable on the obligation under the law of juris-
diction where she executed it, and (2). if she is a veteran she be properly charge-
able with a part or all of the guaranty as provided in § 36.4022.
§ 36.4024 V iter an' s application, (a) To apply for a guaranteed loan the vet-
eran and the prospective lender shall complete and sign in duplicate Finance
Form 1802, Application for a Home Loan Guaranty. The lender shall inquire of
the nearest office of the Veterans Administration whether the proposed borrower
is eligible and the amount of his available guaranty. This information will be
supplied on Finance Form 1800, Certification of Eligibility. The Administrator
will also supply the name and address of an approved appraiser to be used in the
course of processing the application.
(b) Before forwarding the executed application the prospective lender shall
procure a credit report on the borrower and an appraisal of the property by the
appraiser designated. The appraiser's report shall include photographs neces-
sary to reflect generally existing conditions, and in any event those specified in
the application, or appraisal forms prescribed. They may be snapshots. (See
instructions for appraisers.)
(c) If the proposed loan is for alteration or improvement purposes the appraisal
report shall reflect an examination of the building contract, the plans and specifi-
cations, and include appropriate data sufficient to afford a basis for estimating
the increased value of the property to result from completion of such improvements.
(d) In every case the appraiser's report shall indicate the basis, by survey or
otherwise, of identifying the property appraised as that to be encumbered to
secure the proposed loan.
(e) If (1) the loan does not exceed $500, (2) the lender does not require a mort-
gage, and (3) the loan otherwise complies with these regulations, the provisions
of paragraphs (b), (c), and (d) of this section; paragraphs (d), (e), and (h) of
§36.4025; paragraphs (a), (c), and (d) of § 36.4030; subparagraphs (2) and (3) of
paragraph (a) of § 36.4031; and paragraphs (c) and (e) of § 36.4032 shall be
inapplicable to such loan and any guaranty thereof.
§ 36.4025 Papers required. The prospective lender shall submit to the
agency the following papers:
(a) Certification of eligibility.
(b) Loan guaranty certificate.
(c) Original application for guaranty signed by prospective lender and borrower.
(d) The credit report.
(e) The appraisal report.
(f) Copy of the "conditional sales agreement" if the loan is to be predicated
on such an instrument.
1784 POST-WAR ECONOMIC POLICY AND PLANNING
(g) Proposed loan closing statement of the estimated amounts to be disbursed
by the lender for the account of the borrower.
(h) Unless stated in the mortgage, or otherwise in the papers submitted, a
statement of the kinds and amounts of insurance to be required to protect the
mortgagor, the lender and the Administrator against loss by fire and other hazards,
and the estimated premium cost thereof. (See § 36.4015)
§ 36.4026 Recommendation for approval of guaranty. The Agency shall review
the papers to determine whether it will recommend approval of the application
for guaranty. Thereupon the Agency shall forward all the papers to the appro-
priate office of the Administrator with recommendation that (a) the Administra-
tor approve the application, or (b) he disapprove it. If disapproval is recom-
mended the reasons therefor shall be stated in writing at the time the papers are
forwarded. A recommendation that the application be approved, shall be appro-
priately endorsed on the original of the application.
§ 36.4027 Administrator'' s action on application, (a) Upon receipt of the
papers from the Agency, the Administrator will determine whether to approve
the application. If disapproved he shall return to the proposed lender all papers
except the original application for guaranty and shall state that the application
for guaranty has been denied and the reasons therefor. He shall send a copy of
the letter to the veteran and the Agency. Upon denial any expenses incurred by
the lender or the borrower shall be borne by them or either of them as they shall
have agreed.
(b) (1) The veteran and the proposed lender, or either, may appeal to the
Administrator for review of a denial of the application.
(2) Such appeal may be by letter, or on any prescribed form, and mailed or
delivered to central office of the Veterans Administration within one month after
receipt of notice of denial.
§ 36.4028 Execution and form of guaranty. If the Administrator approves the
application he shall notify the Agency and the veteran thereof. For the purpose
of evidencing the contract of guaranty, he shall execute a loan guaranty certifi-
cate, to become effective upon the conditions therein stated. It shall be in sub-
stantially the following form:
Note: Forms printed in the Federal Register are for information only and do not follow the exact format
prescribed by the issuing agency.
United States of America
loan guaranty certificate
Issued by Veterans' Adminittration
State..
(Where property is located)
Number L. H
(To be filled in by Vets. Adm.)
(Lender) (Exactly as appears as payee of note)
Address
(Borrower— Veteran) (Exactly as to be signed on note and mortgage)
Address
I
A. This certificate shall become effective when the requirements of the statute and regulations have been
complied with and the acts certified in Part III hereof have been accomplished in compliance with said
requirements.
B. When it becomes effective as hereinabove prescribed, this certificate shall obligate the United States
of America to pay to the legal holder of the "note" described on the reverse hereof upon his duly filing claim
therefor:
1. All or such portion of (he maximum amount hereby guaranteed a", become^ payabli upon thy conditions,
at the times stated in, and in accordance with the provisions of, the Servicemen's Readjustment Act of 1944,
(38 V . S. Code 693; 58 Stat. 284), and the regulations issued pursuant thereto which are in effect on the date
of this Cerl ificate. In no event will the obligation under this Certificate exceed $2,000. Subject to the fore-
going this guaranty on this date is for $ , being per centum of the face amount of said note,
and in no event will it exceed said sum or percentage.
2. At the expiration of one year from the date of the "note," an amount equal to the interest for one year
at the contract rate on that portion of the indebtedness ("note") originally guaranteed hereby, such payment
to be credited on the indebtedness as prescribed by said regulations.
POST-WAR ECONOMIC POLICY AND PLANNING 1785
C. Executed on behalf of the United States of America by the Administrator of Veterans Affairs, through
the undersigned authorized agent on this date, to become effective in the manner hereinabove prescribed.
Date - -
Administrator of Veterans Aftairs,
By:
(Authorised Agent)
At: —
(Post Office)
II
description of property to be "mortgaged"
Type lot and block number, if any, or field notes and any other proper language to complete legal descrip-
tion. *r,Include description of personal property if any.
Premises identified as:
(House Number and Street)
" ' " " (City| Town"," Village) " " """
(County, Parish)
(State, District, Territory)
and further described as:
(Continue legal description if necessary in the space below)
III
certification by borrower and lender
A. We hereby warrant that (1) the undersigned borrower named on the reverse hereof executed the note,
the principal sum of which is $ ; (2) it is dated the day of 19 ; (3) borrower(s)
and mortgagor(s) delivered it together with the "mortgage" (as defined in the regulations) bearing the
same date, and executed to secure payment of said note; (4) said note and mortgage are those approved by
the Administrator of Veterans' Affairs upon application of the undersigned pursuant to which this loan
guaranty certificate was issued; and (5) the amount stated above has been paid to, or according to the direc-
tions of, the undersigned borrower(s).
B. The undersigned lender warrants that (1) the same "mortgage", duly executed and acknowledged was
properly filed for record on the day of 19 ; at M; and was given file No
by the Recorder; (2) that it covers the property described on the reverse hereof, which is the same property
described, or otherwise identified, or referred to, in the above-mentioned application for guaranty, and in
this loan guaranty certificate; and (3) that no lien superior to said "mortgage" has intervened since the date
of said application.
(If a corporation)
(Secretary)
Mr.
Mrs.
Miss
(Lender (sj)
By: _.
Title— (President, Vice- President,
etc.)
Mr.
Mrs.
Miss _
Mr.
Mrs.
Miss _ _ _
(Borrower(s))
(Sign in ink on these lines)
If the note is unsecured but is eligible for guaranty under the regulations, references to "mortgage" in
paragraphs "A" and "B" above are inapplicable. (See Regulations sec. 4008, par. 1)
§ 36.4029 Disposition of papers.jQThe original application for guaranty will
be retained in the files of the Veterans' Administration. The loan guaranty cer-
tificate and all other papers will be forwarded to the proposed lender with instruc-
tions as to closing the loan in a manner to make the guaranty effective.
§ 36.4030 Loan procedure after approval of guaranty. Upon receipt of the
papers from the Administrator, the lender shall:
(a) Satisfy himself by title certificate, as defined in these regulations, as to the
title to the property to be encumbered.
(b) Cause all necessary instruments to be properly signed and those to be re-
corded properly witnessed, acknowledged or proved so as to entitle them to rec-
ordation.
(c) Disburse all funds in substantial accord with the proposed loan closing
statement submitted with the application. (See § 36.4025 (g))
1786 POST-WAR ECONOMIC POLICY AND PLANNING
(d) File with the proper public official for record the mortgage and any other
appropriate instrument which under the law of the State is required or permitted
to be recorded.
§ 36.4031 Guaranty when effective, (a) Within two months after closing the
loan and riling the proper instrument for record, the lender shall complete and
forward to the Administrator (using prescribed form, if available) a properly
signed report of closing the loan stating that:
(1) The disbursement of the amount named as the principal of the note has
been completed by the lender.
(2) Such disbursements were as estimated on the loan closing statement sub-
mitted with the application, except as otherwise stated on the reverse side of the
report of closing loan. (See §§ 36.4016 (a) and 36.4025 (g))
(3) The note and the mortgage (or other security instrument) were properly
executed stating the date, and the latter "was duly acknowledged, witnessed, or
proved, to that it was legally eligible for recording; the date and hour and county
in which it was properly filed for record; and the filing number thereof."
(4) The note was dated, (stating the date thereon), and signed by the "debtor",
and the rate of interest provided therein.
(5) The loan guaranty certificate (stating its L-number) was completed, and
appropriately signed by the lender and the borrower as therein provided.
(b) If lender is a corporation its corporate seal shall be impressed on such
report.
§ 36.4032 Construction loans, (a) Upon the submission to an agency of an
application made pursuant to section 501 (a) of the act for the guaranty of a loan
for the construction of a dwelling on unimproved property owned by the veteran,
or under section 501 (b) for construction involving alterations or improvements,
the guaranty will be issued to become effective only upon completion of the con-
struction project, and upon fulfillment of the same requirements of these regu-
lations as are applicable to the guaranty of loans for the acquisition of homes
other than by construction.
(b) Notwithstanding the provisions of paragraph (a) hereof, the guaranty
mentioned therein may become effective without the entire amount of the loan
having been disbursed if:
(1) Complete disbursement is prevented, in the exercise of ordinary care, by
reason of the filing of mechanic liens or other liens, or other controversy or threat
of litigation, as to entitlement to any part of the proceeds of such loan; and
(2) There is paid to an Escrow Agent approved by the Administrator so much
of such proceeds as have not been disbursed, or other arrangements satisfactory
to the Administrtaor have been made for assuring the availability of such sums;
and
(3) There is issued by the Administrator Finance Form 1810, Approval of
Escrow Certificate, which, may be attached to the loan guarantee certificate.
(c) For construction loans the lender will follow the procedure provided in
§§ 36.4024-36.4031 for the guaranty of loans for the purchase of residential
property and in addition will furnish to the Agency:
(1) Complete plans and specifications for the proposed construction.
(2) An estimate, prepared by a qualified appraiser, of the fair market value
of the property on which the improvements will be situated together with a sep-
arate estimate of the increased value of the property which will result from the
improvements according to the plans and specifications. Such estimates of
value are in addition to the appraiser's report of the "reasonable normal value".
(3) A copy of the agreement or agreements (which may be unsigned) on which
the proceeds of the proposed loan will be disbursed.
(d) Upon the receipt of such papers the Agency will follow the procedure pre-
scribed in § 36.4026 and submit same to the Administrator for action under
§§ 36.4027 and 36.4028.
(e) The loan guaranty certificates shall contain a condition precedent to its
becoming effective additional to those set forth in § 36.4030 such condition being
the supplying to the Administrator of a statement by an appraiser on Finance
Form 1803 (a), Statement by Appraiser on Completion of New Construction,
which document must be supplied in addition to those specified in § 36.4031. It
shall state that:
(1) He has inspected the building as constructed;
(2) The same has been constructed and completed in substantial conformity
with the contract, plans and specifications, (if any) ;
(3) The increased value of the property as completed and which will be encum-
bered is substantially in accord with his estimate.
POST-WAR ECONOMIC POLICY AND PLANNING 1787
(f) During the course of construction the Administrator shall be entitled at his
expense, to cause such inspection of the construction work at such time or times
as he may determine.
(g) Upon compliance with the requirements of this section and of §§ 36.4030
and 36.4031 relating to the guaranty becoming effective in other than construction
loan cases, said Loan Guaranty Certificate shall become effective.
(h) The borrower and lender may contract for the payment to the lender of a
reasonable sum for the advance of funds during the construction and the super-
vision or inspection of the construction.
§ 36.4033 Losses which are not guaranteed. The guaranty shall not cover any
loss sustained by the creditor as the result of: •
(a) The acceptance by the mortgagee of a mortgage on any property, title to
which is not merchantable according to customary practices in the community
where the property is situated;
(b) Failure of the mortgagee to procure a duly recorded lien of the dignity
required by these regulations;
(c) Failure of the mortgagee to comply with § 36.4015 with respect to insurance,
or
(d) A tax sale pursuant to execution, or otherwise as provided by law, oc-
casioned by nonpayment of taxes accruing against the mortgaged property
after the date of the mortgage if mortgagee fails to give notice to the Administrator
of the delinquent taxes at least one month before such sale.
CLAIMS UNDER A GUARANTY
§ 36.4034 Default, (a) In the event of default, not cured, continuing three
months on an amortized loan or one month on a term loan the creditor may elect
to assert claim under the guaranty, and give notice thereof to the Administrator.
(b) If any default occasioned by failure seasonably to pay to the creditor en-
titled any amount of principal or interest due him under the contract (not cured)
shall have persisted as long as six months the holder of the indebtedness shall give
notice thereof to the Administrator notwithstanding the failure results from pay-
ments on advances as provided in § 36.4018, or from any indulgences of the
debtor as provided in § 36.4041.
(c) (1) The notice shall state the loan guaranty number if available. If not
available other identifying data shall be included, such as date and amount of
original obligation, location of Veterans Administration office that issued the
guaranty and the property encumbered.
(2) In all cases the notice shall state the name and last known address of the
debtor, of the veteran, and of the creditor, and the date and manner of default,
and amount past due. If he desires, the creditor may also state his views as to
any indulgence that should be extended.
(3) The notice to the Administrator shall be mailed by registered mail or per-
sonally delivered in exchange for a written receipt within one month after the
expiration of said 6 months' period.
§ 36.4035 Claim on notice of default, (a) In the notice of default or separately,
then, or later, the creditor may make claim under the guaranty.
(b) Then or thereafter the creditor may also give notice of his intention to
foreclose the lien or liens securing the indebtedness.
(c) The Administrator may approve the creditor's request, if any, to postpone
action to press his claim against the mortgagor, or the property, such post-
ponement, with the consent of the Administrator, shall not operate to void or
diminish the ultimate liability under the guaranty. In no event shall indulgence
or postponement of action authorized by these regulations impair any right of the
creditor to thereafter proceed within the applicable statute of limitations period
as if there had been no indulgence or postponement.
§ 36.4036 Legal action, (a) The creditor shall not begin action in court, or
give notice of sale under a power of sale, until the expiration of 30 days after
receipt by the Administrator of the notice of intention to foreclose. Notwith-
standing paragraph (a) of § 36.4034 such notice may be given at any time after
a default.
(b) (1) If the circumstances require immediate action to protect the interest
of the creditor or the Administrator, the Administrator may waive the require-
ment for prior notice if notice of the action taken is immediately given.
(2) Without limiting the foregoing, the existence of conditions justifying the
appointment of a Receiver for the property shall be sufficient excuse for beginning
suit without prior notice to the Administrator if within ten days after commence-
ment of the suit or action, plaintiff gives the Administrator notice thereof.
1788 POST-WAR ECONOMIC POLICY AND PLANNING
§ 36.4037 Notice of suit and subsequent sale, (a) Within ten days after be-
ginning suit or causing notice of sale without suit to be given, the creditor shall
notify the Administrator thereof by registered mail or personal delivery in ex-
change for written receipt. It shall state whether the foreclosure will be by
proceeding in court, or under a power of sale; the style and number of the suit, if
any, and the name and location of the court in which pending.
(b) The creditor shall give written notice to the Administrator by registered
mail (or delivery) of any foreclosure sale, judicial, or under a power of sale; or
of any proposed termination of the rights of any vendee or his immediate or
remote grantee (assignee) pursuant to any power or option in a sales contract,
or in any other instrument affecting the property which constitutes an}7 security
for the obligation guaranteed. Such notice shall be given so that it is received
at least thirty days before such sale or other proposed action. It shall state the
date, hour and place thereof. The Administrator may bid thereat on the same
terms as the lender or other bidders, and may exercise any right the debtor
could exercise by virtue of the contract, or any statute, or otherwise. This
section is applicable whether the suit, or the sale, or termination, occur before
or after payment of the guaranty.
§ 36.4038 Death of veteran, (a) In the event the creditor has knowledge of
the death of the veteran, or of any owner of an interest in the encumbered prop-
erty, or the death of any other person liable on the indebtedness which is guaran-
teed in whole or in part, the creditor shall take such steps, if any, as are legally
necessary, and reasonably available, in the jurisdiction where the encumbered
property is situated, to avoid loss of the lien, or impairment thereof, or of all or
part of the proceeds of any sale of the property as a result of, or incident to, such
death, or of any probate proceedings thereby occasioned in said jurisdiction.
(b) In addition to protecting the lien rights as required by paragraph (a) of
this section, the creditor at his discretion may proceed in probate, or otherwise,
as may be permissible and feasible, in any jurisdiction where administration
proceedings are pending or properly may be instituted, or other appropriate legal
action taken against assets or persons, to assert any rights, by means of any
remedies, therein available to a similarly situated creditor or the decedent.
(c) Upon direction of the Administrator and his designation of an accessible
attorney for the purpose, and making appropriate provisions for advancing or
paying the costs and expenses of the proceeding, the creditor shall proceed as
provided in paragraph (b) of this section: Provided, however, That in any case
the Administrator may, at his option, proceed immediately in respect to protecting
the lien, or asserting claim as contemplated by paragraph (b) of this section, or
as to both remedies. If the Administrator takes action, it may be in his name
or the name of the creditor as the Administrator may elect and as may be appro-
priate under applicable law. If action is taken by the Administrator he shall
seasonably notify the creditor thereof.
(d) Nothing in this section shall impair any right of set-off or other right or
remedy of the Administrator.
§ 36.4039 Death or insolvency of creditor, (a) Immediately upon the death of
the creditor and without the necessity of request or other action by the debtor or
the Administrator, all sums then standing as a credit balance in a "trust", or
"deposit", or other account to cover taxes, insurance accruals, or other items in
connection with the loan secured by the encumbered property, whether stated to
be such or otherwise designated, and which have not been accredited on the note
shall, nevertheless, be treated as a set-off and shall be deemed to have been
credited thereon as of the date of the last debit to such account, so that the
unpaid balance of the note as of that date will be reduced by the amount of such
credit balance: Provided, however, That any unpaid taxes, insurance premiums,
ground rents, or advances may be paid by the holder of the indebtedness, at his
option, and the amount which otherwise would have been deemed to have been
credited on the note reduced accordingly. This section shall be applicable whether
the estate of the deceased creditor is solvent or insolvent.
(b) The provisions of paragraph (a) of this section shall also be applicable in
the event of:
(1) Insolvency of creditor;
(2) Initiation of any bankruptcy or reorganization, or liquidation proceedings
as to the creditor, whether voluntary or involuntary;
(3) Appointment of a general or ancillary receiver for the creditor's property;
or, in any case
(4) Upon the written request of the debtor if all secured and due insurance
premiums, taxes, and ground rents have been paid, and appropriate provisions
made for future accruals.
POST-WAR ECONOMIC POLICY AND PLANNING 1789
(c) Upon the occurrence of any of the events enumerated in paragraphs (a) or
(b) of this section interest on the note and on the credit balance of the "deposits"
mentioned in paragraph (a) shall be set-off against each other at the rate payable
on the principal of the note, as of the date of last debit to the deposit account.
Any excess credit of interest shall be treated as a set-off against the unpaid
"advances," if any, and the unpaid balance of the note.
(d) The provisions of paragraphs (a), (b) and (c) of this section shall apply
also to corporations. The dissolution thereof by expiration of charter, by for-
feiture, or otherwise shall be treated as is the death of an individual as provided
in paragraph (a).
§ 36.4040 Filing claim under guaranty. Claim under the guaranty may be
made on Finance Form 1805, Claim under the Guaranty. Subject to the limita-
tion that the total amount payable under the guaranty shall in no event exceed
the original amount thereof, the amount payable under the guaranty shall be the
percentage of the indebtedness originally guaranteed applied to the indebtedness
(as defined in § 36.4000 (a)), computed as of the date of the claim, and reduced
by any payments theretofore made by the United States pursuant to the guaranty.
§ 36.4041 Options available to Administrator. Upon receipt of claim under the
guaranty the Administrator shall have the following options:
(a) Pay to the creditor not later than one month after receipt of notice of any
default, as a partial payment of any actual or potential claim under the guaranty,
the amount of principal, interest, taxes, advances, or other items in default; and
in consideration of such payment the lender shall be deemed to have agreed to
refrain from giving effect to any acceleration provisions by reason of defaults
prior to the date of notice of default theretofore given: Provided, however, That
unless the creditor consents, the Administrator may exercise this option once
only, and in an amount not exceeding an amount equivalent to the aggregate of
principal and interest payable in one year, or not exceeding ten per centum of the
original amount of the guaranty, whiever sum is less.
(b) Pay the creditor within one month after receipt of claim the full amount
payable under the guaranty without requiring foreclosure, or personal action.
(c) Pay to tho creditor promptly after receipt of claim any amount agreed upon,
not exceeding the amount due under the guaranty; and notify him to institute
appropriate foreclosure proceedings, with, or without, legal action to reduce the
debt to judgment, against all or any of the parties liable thereon, and whose
names are stated in such notice to the creditor.
(d) If the creditor does not begin appropriate action within two months after
receipt of notice to institute action as provided in paragraph (c) above, the
Administrator shall be entitled to begin and prosecute the same to completion in
the name of the creditor, or of the Administrator on behalf of the United States,
as may be appropriate under applicable laws and rules of proceduer: Provided,
however. That in such event the Administrator shall pay (in advance if required
under the practice in the jurisdiction) all court costs, and other expenses, and
provide the legal services required.
§36.4042 Renfiancing and extension of guaranty, (a) When the Administrator
shall have received notice from the creditor that he intends to institute foreclosure
proceedings, the Administrator shall be entitled to obtain a refinancing which
will prevent the consummation of the foreclosure sale. Nothing herein shall be
construed to require a creditor to lend money for such refinancing.
(b) If refinanced in any manner the Administrator may continue in effect the
guaranty granted with respect to the previous loan in such manner as to cover
the loan which effected the refinancing.
(c) The Administrator in appropriate cases shall be entitled to exercise any
redemption rights of a debtor, or a creditor, in connection with the loan guaran-
teed, or property rights arising out of, or incident to, such loan,
§ 36.4043 Subrogation, (a) Any amounts paid to the creditor by the Ad-
ministrator pursuant to the guaranty shall constitute a debt due to the United
States by the veteran on whose application the guaranty was made; and by his
estate upon his death. The Administrator is subrogated to the contract and the
lien rights of the creditor to the extent of such payments, but junior to the
creditor's rights as against the debtor or the encumbered property, until the
creditor shall have received the full amount payable under his contract with the
debtor. No partial or complete release by the creditor of the debtor or of the
lien shall impair any rights of the Administrator, by virtue of the lien, or
otherwise.
91183 — 45— pt. 12 3
1790 POST-WAR ECONOMIC POLICY AND PLANNING
(b) The creditor, upon request, shall execute, acknowledge and deliver an
appropriate instrument tendered him for that purpose, evidencing any payment
received from the Administrator and the Administrator's resulting right of
subrogation.
§ 36.4044 Future action against mortgagor. In addition to the amount, if
any, collected from the proceeds of the encumbered property by reason of the
right of subrogation, the United States will collect from the veteran, or his
estate, by set-off against any amounts otherwise payable to the veteran or his
estate; or in any other lawful manner, any sums disbursed by the United States
on account of the claim pursuant to the guaranty.
§ 36.4045 Suit by Administrator, (a) Whenever pursuant to these regulations,
the Administrator institutes, or causes to be instituted by the creditor, or other-
wise, any suit in equity; action at law; or probate proceedings or the filing of a
claim in such; or other legal or equitable proceedings of any character, or any
sale, in court or pursuant to any power of sale, the person or persons properly
instituting the same (including the Administrator), shall be entitled to recoup
from any proceeds realized therefrom any expenses reasonably incurred, includ-
ing trustee fees, court costs, and attorney fee paid (or the reasonable value of the
services of the trustee and of the attorney, if performed by salaried person or
persons, or by the party himself, when proper).
(b) The net proceeds, after setting off such items that may properly be re-
couped, shall be credited to the indebtedness, or otherwise as may be proper
under the facts.
(c) In determining the propriety of recoupment and the amount thereof
consideration shall be given to any provisions in the note or mortgage relating
to such items, and any amounts actually realized pursuant thereto.
§ 36.4046 Creditor's record? and reports required, (a) The creditor shall
maintain a record of the amounts of payments received on the obligation and
disbursements chargeable thereto, and the dates thereof. Any creditor who fails
to maintain such record shall be presumed to have received on the dates due
all sums which by the terms of the contract are payable prior to date of claim
for default, and the burden of going forward with evidence and of ultimate proof
of the contrary shall be on such creditor; not on the debtor, or the United States.
(b) On any delinquent loan the creditor shall report annually on the anni-
versary of the earliest unremedied default any amount received or disbursed,
the unpaid balance of principal and accrued interest and any other items charge-
able; and the nature of any defaults not already reported. He shall include such
additional information, if reasonably necessary and obtainable, which may, from
time to time be requested by the Administrator.
(c) A proposed lender may be required to submit evidence satisfactory to the
Administrator of his equipment for maintenance of adequate records on, and his
ability to service, loans if guaranteed pursuant to the provisions of the act and
these regulations.
§ 36.4047 Failure to supply information. Failure to supply any available
information required by these regulations within two months after request therefor
will entitle the Administrator to obtain such information otherwise, and the
expense of so obtaining it, plus ten dollars to cover estimated overhead expenses,
shall be chargeable to the creditor who failed to comply with such request.
§ 36.4048 Notice to Administrator. Any notice required by these regulations
to be given the Administrator shall be sufficient if in writing, and delivered at,
or mailed to, the Veterans Administration office at which the application for
guaranty was approved or to any changed address of which the creditor has been
given notice or, at the option of the creditor, to the central office of the Veterans
Administration, Washington 25, D. C. If mailed the notice shall be by registered
mail when so provided by these regulations.
§ 36.4049 Right to inspect books. The Administrator has the right to inspect,
at a reasonable time and place the papers and records pertaining to the loan and
guaranty. If permission to inspect is declined the Administrator may enforce the
right by subpoena under the provisions of Title III, Public No. 844, 74th Congress,
49 Stat. 2031-35, 38 U. S. C. 131, or in any other lawful manner.
[seal] Frank T. Hines,
Administrator of Veterans Affairs.
[F. R. Doc. 44-16112; Filed, Oct. 19, 1944; 10:19 a. m.]
POST-WAR ECONOMIC POLICY AND PLANNING 1791
Finance Form 1800
Veterans Administration Forms Required for Processing Home
Loans
veterans administration
Certification of Eligibility
Manager, Veterans Administration,
I, , ,
(Name— Last) (First) (Middle) (Service or serial number)
(Address— Number) (Street) (City or Town) (County) • (State)
intend to make application to the Administrator of Veterans Affairs under the
provisions of Title III, Public Law 346, Seventy-eighth Congress (Servicemen's
readjustment Act of 1944), for a maximum guaranty of $ on a loan of
approximately $ to be made for and there-
(State purpose of loan)
fore request that the prospective lender named below be informed if the amount of
the guaranty stated above is available to me under Title III of the Act.
Place of birth Date of birth
□ Army □ Navy Q M. C. □ C. G.
Periods of service in armed forces; show date of entry and date of separation:
Date of entrance upon active duty
Date of separation from active
duty
Reason for separation
Rank and organization at time of separation:
State permanent mailing address given at time of separation from service:
(Number) (Street) (City or Town; (County) (State)"
(Witness) (Signature of veteran)
Date , 19
(Prospective lender)
(Address)
, Service Serial No. , is under the terms
of Section 500 (a), Title III, Public Law 346, Seventy-eighth Congress (Service-
men's Readjustment Act of 1944), eligible for the benefits of this title.
For the purpose above stated there has been reserved $ of the amount
of the guaranty credit of the veteran named under the provisions of Title III of
the Act cited.
Any appraisal required in connection with the proposed loan herein referred to
shall be made by —
(Name of appraiser) (Address)
Application for guaranty of loan
should be forwarded to —
(Agency) (Address)
Administrator of Veterans Affairs
By
(Veterans Administration) (Loan guarantee officer)
[Original]
[Copy of duplicate attachedl
1792 POST-WAR ECONOMIC POLICY AND PLANNING
VETERANS' ADMINISTRATION
Finance Form 1801
united states of america
Loan Guaranty Certificate
issued by
VETERANS' ADMINISTRATION
State Number L.
(Where property is located) (To be filled in by V. A.)
(Lender) (Borrower— Veteran)
(Exactly as appears as payee of note) (.Exactly as to be signed on note and mortgage)
(Address) (Address)
I
A. This certificate shall become effective when the requirements of the statute
and regulations have been complied with and the acts certified in part
III hereof have been accomplished in compliance with said requirements.
B. When it becomes effective as hereinabove prescribed, this certificate shall
obligate the United States of America to pay to the legal holder of the
"note" described on the reverse hereof upon his duly filing claim therefor:
1. All or such portion of the maximum amount hereby guaranteed as
becomes payable upon the conditions, at the times stated in, and in accord-
ance with the provisions of, the Servicemen's Readjustment Act of 1944
(38 U. S. Code 693; 58 Stat. 284), and the regulations issued pursuant
thereto which are in effect on the date of this certificate. In no event
will the obligation under this certificate exceed $2,000. Subject to the
foregoing, this guaranty on this date is for $ , being per
centum of the face amount of said "note," and in no event will it exceed
said sum or percentage.
2. At the expiration of 1 year from the date of the "note," an amount
equal to the interest for 1 year at the contract rate on that portion of the
indebtedness ("note") originally guaranteed hereby, such payment to be
credited on the indebtedness as prescribed by said regulations.
C. Executed on behalf of the United States of America by the Administrator of
Veterans' Affairs, through the undersigned authorized agent on this date,
to become effective in the manner hereinabove prescribed.
Dated Administrator of Veterans' Affairs,
By
(Authorized agent)
At
(Post office)
II
description of property to be "mortgaged"
(Type lot and block number, if any, or field notes and any other proper language
tolcomplete legal description. Include description of personal property, if any)
Premises identified as
(House number and street)
(City, Town, Village) | (County, Parish) (State, District, Territory)
and further described as:
(If more space is needed, continue description on reverse)
POST-WAR ECONOMIC POLICY AND PLANNING 1793
III
CERTIFICATION BY BORROWER AND LENDER
A. We hereby warrant that (1) the undersigned borrower named on the reverse
hereof executed the note, the principal sum of which is $ ;
(2) it is dated the day of , 19 ;
(3) borrower(s) and mortgagor(s) delivered it together with the "motrgage"
(as defined in the regulations) bearing the same date, and executed to
secure payment of said note; (4) said note and mortgage are in the form
and type contemplated in the application of the undersigned pursuant to
which this loan guaranty certificate was issued; and (5) the amount stated
above has been paid to, or according to the directions of, the undersigned
borrower (s).
B. The undersigned lender warrants that (1) the same "mortgage," duly executed
and acknowledged, was properly filed for record on the day of
, 19 , at M; and was
given file No. by the recorder ; (2) that it covers the
property described on the reverse hereof, which is the same property de-
scribed, or otherwise identified, or referred to, in the above-mentioned
application for guaranty, and in this loan guaranty certificate; and (3) that
no lien superior to said "mortgage" has intervened since the date of said
application.
(// a corporation)
Mr.
Mrs.
Miss
Secretary. Lender (s).
By
Title (president, vice president, etc.)
CORPORATE
SEAL
Mr.
Mrs.
Miss
Mr.
Mrs.
Miss
Borrower(s).
(Sign in ink on these lines)
If the note is unsecured but is eligible for guaranty under the regulations, references to "mortgage" in para-
graphs "A" and "B" above are inapplicable. (See regulations, sec. 4008, par. 1.)
Finance Form 1802 [Page 1]
veterans administration
Application for Home Loan Guaranty
State .
(Where property is located)
(Lender)
... 2. .._.
Number L.
1.
(To be filled In by V. A.)
( B orrower— Veteran)
(Address)
(Address)
1794
POST-WAR ECONOMIC POLICY AND PLANNING
INSTRUCTIONS
(Read carefully before beginning to fill out thit form)
I. Loan Guaranty Certificate (Form 1801).
Fill in all spaces at top of the form, except the "L" number. Also
complete part II, "Description of Property To Be Mortgaged," in such
a manner that all required information will be duplicated by a carbon
impression in the proper spaces on page 1 of the application. If it is
necessary to continue the property description on the reverse side of the
certificate, use spaces on page 2 of the application for the carbon impres-
sion thereof. The certificate may then be separated from the applica-
tion along the perforated line at the bottom of the page and submitted
to the agency with the application and other papers. (See regulations,
section 4025.) No copy of the certificate other than the original is neces-
sary. It will be signed and returned to the lender by the Veterans Ad-
ministration if the application is approved.
II. Application for Home Loan Guaranty (Form 1802).
(a) This form should be made in duplicate. For the duplicate copy
which is to be retained by the lender, use the form which does not have
the certificate attached to it. The original signed copy will be per-
manently retained by the Veterans Administration and should be sent
to the agency with other papers. (See regulations, section 4025.)
(b) Answer every question in some manner. If not applicable, place
a check mark (j/) in the space for answer.
(.See continuation of instructions, page 4)
3. DESCRIPTION OF PROPERTY TO BE "MORTGAGED"
(Type lot and block number, if any, or field notes and any other proper language
to complete legal description. Include description of personal property, if any)
Premises identified as
(House number and street)
(City, Town, Village)
and further described as:
(County, Parish)
(State, District, Territory)
(// more tpace it needed, continue description on page t)
[Page 2]
5. Sex
6. Race.
4. Applicant's age
7. Service or serial No.
8. Date of birth 9. Place of birth
10. Indicate by a cross (X) the branch of service in which you served:
□ Army fj Navy □ Marine Corps □ Coast Guard
11. Date entered service
12. Date separated from active duty _>
13. Rank at time of separation
14. If you have served in any branch under another name, state that name, the
branch, and dates between which you served under that name. If none, so
answer
15. Have you applied to the Administrator of Veterans' Affairs for any other
loan or loans?
(Yes or no)
If yes, give the following information for each application.
Date of Application(s)
Name and Address of Lender(s)
Purpose of
Loan(s)
Was Loan
Closed?
Amount of
Guaranty
{
$
$
$
POST-WAR ECONOMIC POLICY AND PLANNING
1795
16. (a) Purpose of loan hereby applied for:
(b) Purchase price or cost $
(If for repairs, improvements, etc., state nature)
17. (a) Amount of loan $ (b) Rate of interest %.
(c) Guaranty requested $ (d) Secured by a
mortgage, or
(e) For years. (/) Payable $ each
18. Homesite: Plat. — Indicate below shape, location,
(a) The lot faces on and dimensions of lot, distance from
Street, between Street nearest intersections, and names of
and Street, feet streets.
front and extends back N
feet or 1 I 1 I
The lot area is about
(sq. ft.) (acres).
(b) Easements (location and pur-
pose) :
19. Leasehold Ground rental, $ per year.
(Yes or no)
Lease is dated and expires
Options: Renewable for years: Purchasable for $
Option expires
[Page 3]
20. What estate in the land described on page 1 hereof are you to own or do you
now own?
(State whether fee simple, or other estate. If a lease only, so state)
(Also state whether all, or an undivided interest: and if latter, how much)
21. Street improvements. Street in front of property surfaced with _
22. Utilities. (Answer "Yes" or "No" as to each connected to the home.)
(a) Electricity (b) Gas (public main) (c) Public sewer
(d) Septic tank and drain (e) Water supply:
Public Private Other (specify)
23. Residence: (a) When built ; (b) Type of construction
Frame , brick veneer , masonry , other
; (c) Roof material
(d) Stories above basement ; (e) Number of rooms
(/) Baths ; (g) Designed for families; (h) Describe
any nonresidential use
{i) Percentage of floor area for such use ; 0') Type of heating
system and fuel
(k) Garage: Attached , detached , built-in
Number of cars ; (I) Living quarters in garage?
housekeeping ; Number of rooms
24. Taxes and assessments: (a) Real estate taxes: Amount levied this fiscal
year, $ ; (b) If proposed construction: Estimated yearly
taxes when completed, $ ; (c) Special assessments: Total
amount outstanding, $ ; amount payable this fiscal year,
$ ; (d) Amount payable per year, $ ,
beginning
25. If new construction or alterations involved, state (a) Name and address of
contractor ; (b) Date of beginning work
; (c) Expected completion date ;
(d) General nature of work (e. g., new building, kitchen, roof, garage, etc.,
see Regulations, sec. 4032)
1796 POST-WAR ECONOMIC POLICY AND PLANNING
26. If new construction, what amount will veteran pay for (a) the advance of
funds ; (b) Supervision or inspection
27. Personal and financial status of veteran:
(a) Occupation ; (6) Income per year, Salarv
$ ; Other $ ; (c) Employed by
, Address ; (d) How long employed
there ; (e) Estimated net worth, $ ;
(/) Check one: □ Married □ Single □ Divorced □ Widower;
(g) Number of dependents ; (h) Ages ;
(i) Name of husband or wife ; Occupation
; Income per year: Salary, $ ;
other, $ ; Employed by ;
Address ; (j) Names and addresses of three
credit references :
28. Have you read or had read to you, Form 1804, "Explanation of Home Loan
Guaranty"?
29. Do you intend to occupy the property as a home?
30. Insurance will be obtained against: (a) Fire $ ; (b) Windstorm,
$ ; (c) Extended coverage, Form No. , $ ;
(d) Other
(Specify)
31. The person signing this application as the veteran hereby represents that he
is the veteran named in question 2 on page 1 of this application. His identity
as such has been established to the satisfaction of the lender by
(State
method, e. g.. personal acquaintance of stated period; comparing signature and description on certi-
ficate of discharge, etc.)
32. All the information reflected by the application is true to the best of lender's
information and belief.
33. The undersigned borrower (veteran) and lender (or seller) hereby apply for
a guaranty by the United States of a loan in accordance with this application,
which is also an application to the lender by the borrower for said loan: said
guaranty to be pursuant to the Servicemen's Readjustment Act of 1944 (38
Stat. 284), which act and the regulations issued pursuant thereto and in
effect on the date of the loan guaranty certificate issued pursuant to this
application shall be a part of the contract between the United States, the
borrower, the lender, and each of them.
34. Borrower and lender understand and agree that, if issued, the guaranty will
be issued in reliance upon the information contained in this application.
[Page 4]
35. The lender, or authorized employee, or agent of the lender, has read this
entire application as completed, has seen and spoken with applicant, believes
he is the veteran, and he appears to be competent to understand the nature
of the transaction and to enter into it.
(7/ a corporation)
Attest
Secretary. Lender.
By
(Authorized signature)
CORPORATE
(Title)
SEAL
Borrower (s).
Signatures of lender and borrower must exactly correspond in every detail with
the names as typed at top of page 1 — notwithstanding name of borrower so shown
may differ from name in question 14. A married woman will include her surname
before marriage, but sign husband's surname as her present surname.
POST-WAR ECONOMIC POLICY AND PLANNING 1797
RECOMMENDATION OF DESIGNATED AGENCY
This application and the attached papers are forwarded to the Administrator
of Veterans' Affairs by the undersigned designated Federal agency, which hereby
recommends that said Administrator said application for
a guaranty.
(Designated agency)
By
(Authorized signature)
instructions — continued
III. Reference is made to the following sections of the regulations for guidance
in connection with applications for (a) purchase of a home, 4024-4031;
(b) new construction, 4032; (c) repairs, alterations, improvements, delin-
quent indebtedness, taxes, special assessments, 4004-4006; (d) two or more
borrowers, 4022-4023; (e) second loans under section 505 (a) of the act,
4021.
IV. If the loan is for any of the purposes in paragraph III (c) above (section
501 (b) of the act) and is to be secured by a junior lien because of existing
prior liens, attach a signed memorandum stating with respect to such prior
liens: (a) Date, original amount, and unpaid balance of loan; (6) amounts
and frequency of payments required and permitted; (c) rate of interest;
(d) whether any payments are past due, and the amounts thereof; (e)
whether any taxes, special assessments, or insurance premiums are due but
unpaid and the amounts; (/) date of most recent appraisal of the property
and value therein stated; (g) date and nature of default, if any.
V. The veteran should have read Form 1804, "Explanation of Home Loan
Guaranty," before signing application.
VI. Permissible loan charges, see regulations, section 4016.
VII. If the loan is not to be secured by a "mortgage," see regulations, section
4024, paragraph 5.
VIII. A notary's certificate is not required on the application. Nevertheless it
must be remembered that Federal statutes provide severe penalties includ-
ing forfeitures, fines, and imprisonment for fraud on the part of the appli-
cant and also as to any person who shall "knowingly make or cause to be
made, or conspire, combine, aid, or assist in, agreed to, arrange for, or in
anywise procure the making or presentation of a false or fraudulent affi-
davit, declaration, certificate, statement, voucher, or paper, or writing
purporting to be such," concerning anv application for the guarantv of
a loan bv the Administrator. (38 U. S. Code 697, 715, 450, 451, 454a,
556a; 18 U. S. Code. 80.)
[Duplicate copy attached]
1798
POST-WAR ECONOMIC POLICY AND PLANNING
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POST-WAR ECONOMIC POLICY AND PLANNING
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POST-WAR ECONOMIC POLICY AND PLANNING
1801
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1802
POST-WAR ECONOMIC POLICY AND PLANNING
Show Street Names, Location of Subject Property on Plat, One Front View Photo-
graph, and Other Views to Show Additional Buildings. Show Dimensions of
Lot on Plot Plan
PLOT PLAN
Indicate
I
I
North
PHOTOGRAPHS
In first column list repairs necessary to preserve property. Second column for
additions or improvements
REPAIRITEMS
Exterior Repairs
Estimated cost
Interior Repairs
Estimated cost
Necessary
Other
Necessary
Other
Total Interior Repairs
Total Exterior Repairs
Total
VALUATION SUMMARY
Value based on depreciation reproduction cost of buildings plus land
Value based on capitalization of stabilized rentals
Value based on comparable vicinity transactions...
I hereby certify that (a) I have carefully viewed the property described in
this report, Inside and Outside so far as it has been completed; that (6) it is the
same property that is identified by legal description in my appraisal assignment;
that (c) I have no interest, or present prospective, in the applicant, property, or
mortgage except:
POST-WAR ECONOMIC POLICY AND PLANNING
1803
and that (d) basing my opinion upon terms prevalent in this community and data
recorded in this report, I estimate the property's
Reasonable Normal Value as Repaired $
Date
Appraiser's Address
Appraiser's Signature
Appraiser's Name Typed
VETERANS ADMINISTRATION
Finance Form 1803a
veterans administration
Statement by Appraiser on Completion of New Construction
Completed new construction □ Alterations □ Improvements □
Veteran's name Serial or Service No.
Veteran's address V. A. Guaranty No.
To
(Lender) (Address)
The undersigned Approved Appraiser certifies that:
(1) On . he examined the property at
(Date)
; that
(2) He found the projected construction, alterations, or improvements to have
been fully completed thereon:
(3) In good and workmanlike manner;
(4) Substantially in accordance with the plans, specifications, and building
contract identified by the above Serial or Service Number and the
counter signature of the undersigned, both previously attached by him;
and that
(5) In his opinion, the property as improved now has the following reasonable
normal value:
Land $
Increased value resulting from improvements shown in
plans and specifications
Other improvements
Total reasonable normal value.
Date
(Appraiser's signature)
(Appraiser's address)
1804
POST-WAR ECONOMIC POLICY AND PLANNING
Finance Form 1803c
Rev. Dec. 1944
VETERANS ADMINISTRATION
Applicant must Application for Approval as Appraiser
attach a recent
photograph here
File No.
State __
Countv
Print Plainly
Full name
Last
First
Middle
State . .
County
Home address City Tel. No.
Business address City Tel. No.
Present occupation
Employed now by Address
State below business history during past 5 years
From
To
Occupation
Employer
Address
Birth date Birthplace
School education
College education Degree
Special education
Name professional organizations of which you are a member
Name Real Estate Board of which you are a member
License No.
as R. E.
Appraiser
License No.
as R. E.
Broker
License No.
as Prof.
Architect
License No.
as Prof.
Engineer
State any other especial qualification you have for this type of work
Name Courts or Commissions Before
Which You Have Qualified as Expert
Upon Valuation of Real Estate
When
Describe Briefly Type of Testimony
State principal engagements in appraising for Mortgage-Loan purposes
during recent years
Client
Year
Type of
Property
Location
No. Parcels
Approx. $
Value
POST-WAR ECONOMIC POLICY AND PLANNING
1805
State any comment you wish to make relating to data in Sections 27-30
State principal engagements in appraising real property for ALL purposes
during past 5 years.
Year
Purposes of Appraisal
Type of Property
Principal
Location
No.
Parcels
Approi.
$ Value
194
194
194
194
194
I submit herewith (at least 3) letters attesting my qualifications as
an appraiser
From Sponsor
Occupation
Address
The foregoing statements are true and correct, and are submitted by me in
in support of this, my request to be registered as an appraiser whose
qualifications meet the requirements of the Veterans Administration, and
to be approved for service as such in (define territory)
Signature Date
This applicant is hereby recommended for appraisal service in (define terri-
tory)
Loan Guarantee Officer
Date
Note: This form when completed, should be mailed to Veterans Adminis-
tration, Washington 25, D. C.
91183 — 45— pt. 12
1806
POST-WAR ECONOMIC POLICY AND PLANNING
VETERANS ADMINISTRATION
Finance Form 1803b
veterans administration
Preliminary Report of Appraiser on New Construction
New construction □ Alterations □ Improvements □
Veteran's name Serial or Service No.
Veteran's address
To
(Lender) (Address)
The undersigned Approved Appraiser certifies that he has personally examined
the plans and specifications prepared by and the pro-
posed agreement in which undertakes to complete for
the above-named veteran certain
Type
Check
New construction . .
Alterations
on property located as follows:
clear of lien or danger of lien, for the sum of$ , which documents he has
previously identified by writing thereon his own name.
It is the judgment of the undersigned Appraiser that when the proposed build-
ing^) and appurtenances have been completed substantially in accordance with
the said plans, specifications, and agreements, the property will have the following
reasonable normal value:
Land value $
(Size of plot)
(Main structure
Garage
Other (describe)
Total
If proposed construction has been started, how far has it progressed?
Signed
Date
Address
Approved Appraiser.
(Final Certificate of Inspection (Form 1803a) must follow this estimate)
Finance Form l&03d
veterans administration
Appraisers Rating Card
Name of appraiser
Date of Approval
Address
Home Bus.
Telephone
City
State
Date of
Auth.
Applica-
tion
Number
Date of
Comple-
tion
Guaranty
Number
Rating
Name of Veteran
Complete-
ness
Quality
Prompt-
ness
POST-WAR ECONOMIC POLICY AND PLANNING 1807
VETERANS ADMINISTRATION
Finance Form 1804
veterans administration
Explanation of Home Loan Guaranty
(Under the Servicemen's Readjustment Act of 1944)
Veterans should read this explanation before signing the application form
1. The Veterans Administration has no authority to make a loan. The loan
is made by banks and other lenders at not over 4 percent interest. When made
in accordance with the regulations it may be partially guaranteed by the Ad-
ministrator. The guaranty is available on purchase money notes also. For
convenience these transactions are called loans in this explanation. Payments
may extend over a period of 20 years.
2. If the veteran fails to make payments as they become due according to his
contract with the lender the property may be foreclosed. If the Veterans Ad-
ministration is required to pay any or all of the amount guaranteed the veteran
will become obligated for the repayment to the Government of the amount paid
on account of the guaranty.
3. Interest for the first year on the amount guaranteed will be paid by the
Government. The veteran does not repay this amount.
4. Any lender has the right to refuse to make a loan, with or without stating a
reason. The fact that a particular lender refuses to lend the money does not
mean that another lender may not be willing to lend it. The Veterans Adminis-
tration will determine whether to guarantee the loan on the basis of the facts
presented, irrespective of who may be the proposed lender (or seller).
5. Neither the act nor the regulations limit the amount of the loan, but the
maximum amount of guaranty available to an eligible veteran is $2,000. Once
this amount has been guaranteed by the Administrator it cannot be made avail-
able on another loan, for any purpose.
6. Under certain conditions the Administrator may guarantee a loan secured
by a "second mortgage," obtained for the purpose of acquiring a home, if the
"first mortgage" is to secure a loan "made, guaranteed, or insured" by a "Federal
Agency." Most lenders can furnish details about such a loan.
7. The Veterans Administration will not undertake to advise a veteran as to
the purchase or nonpurchase of a specific property as this is a decision for which
the veteran must accept personal responsibility, but information of a general
character may be made available. However, there may be essential elements of
a proposed transaction which require specialized knowledge and it may be to the
veterans' interest to consult experts in such matters so that he may properly
determine the practicability and feasibility of his assuming such an obligation.
8. Read the entire Application Form 1802 before answering the questions in it.
This will suggest several matters which, while not precisely covered in the appli-
cation, require careful consideration in the purchase of a home. For example:
(a) Soundness, type, and condition of foundation, floors, walls, ceilings, roof,
furnace, stove, plumbing, fixtures, kitchen and bathroom equipment; (6) probable
cost of electricity, gas, fuel for heating (it is less if house is completely insulated),
water supply, and maintenance items such as repairs, painting, contemplated
alterations, etc.; (c) nearness to suitable schools, churches, recreation centers,
shopping facilities, place of business, and public transportation (fares and fre-
quency of service, day and night) ; (d) present and future desirability of the
neighborhood; (e) adequate drainage by storm sewer or otherwise; (/) present and
possible future assessments against the home or the owner for sidewalks, curbs,
sewer, water mains, or other improvements; (g) existing restrictions or "zoning
laws" as to building lines, use of the land or nearby lots for business or other
purposes, cost and type of buildings, etc.
9. The purchase of a home is an important transaction. To be successful, all
factors must be carefully considered. A copy of the regulations, which are a
part of the contract, is available at any office of the Veterans Administration and
probably at any bank or other lending institution.
Frank T. Hines, Administrator.
1808
POST-WAR ECONOMIC POLICY AND PLANNING
VETERANS ADMINISTRATION
Finance Form 1806
Guaranty
No. L-
(To be filled in by Veterans
Administration)
(Lender's file or loan number)
VETERANS ADMINISTRATION
Loan Closing Statement
Service or
Name of veteran Serial No.
Mailing address
Purchase price or cost of property
Credits to veteran's account: Cash $.
Other $-
(Specify)
Amount to be financed
First mortgage held by $.
Second mortgage held by $.
Other
(Specify)
held by
Amount to be guaranteed
disbursements
Column No. I
u
III
IV
Item
No.
Account
Name of Payee
(If available)
Estimated
Amount >
Actual Amount J
Seller -
$ -
$
2
3
Amounts in escrow or trust (purpose:)
5
6
7
8
9
10
12
13
14
15
Insurance Premium:
Other - $ ---
17
18
19
xxxxxxxxxxxxxxxxxx
21
22
23
24
25
26
$
$ .
i Complete column III when sending papers to the agency in accordance with regulations Sec. 4025.
' Complete column IV and return form to Veterans Administration when loan is closed and "Report of
closing Loan" on the reverse hereof has been executed in accordance with regulations Sec. 4031. Explain
by reference to item number on reverse hereof any difference between columns III and IV.
Date:
19 Lender
(Borrower (veteran))
By
(Title)
POST-WAR ECONOMIC POLICY AND PLANNING 1809
Explanation of differences between columns III and IV
Item
No.
Explanation
Report of Closing Loan
Administrator of Veterans' Affairs,
Attention
Pursuant to section 4031 of the Regulations, this is to certify that the loan
referred to on the reverse hereof has been closed and the following conditions
have been carried out to make effective the Certificate of Loan Guaranty issued
by the Administrator of Veterans' Affairs:
(a) The principal amount of the note evidencing the loan has been disbursed.
(b) The disbursements have been made for the purposes set forth in the loan
closing statement submitted to the Veterans Administration and in
accordance with the amounts therein estimated except as shown by
the actual disbursement in column IV on the reverse hereof.
(c) The note and mortgage (or other security instrument) were validly
executed; and the latter was duly acknowledged, witnessed, or proved,
so that it was legally eligible for recording; and was properly filed for
record on the day of , 19--, at M.
with the for
(Title of recording official) (District, County, Parish, Town, etc.)
State of His file No.
(d) The note was duly executed by the debtor and dated day of
, 19- _, in the amount of $ bearing interest at
percent per annum.
(e) The loan guaranty certificate No. L- was completed and
appropriately signed by the lender and the borrower (veteran) as
therein provided.
Witness \™^\ hand and seal this day of , 19. -.
If a corporation:
19...
(Lender)
Attest: By
Secretary. (Title)
(Address)
^corporate"!
SEAL (City) (State)
1810
POST-WAR ECONOMIC POLICY AND PLANNING
VETERANS ADMINISTRATION
Finance Form 1807
veterans administration
Audit Review and Analysis Sheet
loan guarantee division
Application No.
Guaranty No.
Veteran Serial No.
Amount of guaranty
Address requested, $
Lender Address
501 (a) D 502 (a) □ 503 (a) □
Type of Loan: 501 (6) □ 502 (6) □ 503 (6) □ 505D Unsecured □
Document
Initial
Remarks
Certification of Eligibility — Form 1800__
Loan Guaranty Certificate— Form 1801- .
Application for ( ) Loan Guaranty
Type
Form 1 802
Credit Report ( )
Name of Company
Appraisal Report (2 copies) Form 1803_.
Loan Closing Statement — Form 1806
Statement of Insurance (if not on
application)
Recommendation of Federal Agency
Other (describe)
NEW CONSTRUCTION
Plans and Specifications (if any)
Preliminary Appraisal Report — Form
1803 b
Escrow or Trust Agreement for Dis-
bursement of Funds During Construc-
tion
AFTER LOAN CLOSING
Loan Closing Statement — Form 1806
Statement of Appraisal on Completion of
New Construction — Form 1803 a
REVIEW AND RECOMMENDATIONS
Accep-
ted ]/
Rejec-
ted i \'
Name of Reviewer
Eligibility of loan
Application and credit report:
Annual income, $ Risk: Good □
Fair □ Poor □
Appraisal — Reasonable normal value, $_.
Fee appraiser
Repairs and reconditioning
Reviewers estimated cost of repairs, $
Insurance review — Amount adequate
Recommended guaranty, $
Letter of transmittal submitting loan
closing instructions forwarded .
Loan guaranty certificate signed
Loan guaranty number assigned
Date
1 If application is disapproved, the reasons should be stated on the reverse hereof.
POST-WAR ECONOMIC POLICY AND PLANNING
1811
Cross Index Card
[White Cardl
Finance Form 1808
(Veteran)
(Lender)
(Address)
(Address)
a . /Navy □ Marines □
Service |Arm* y Coagt Guard y
Serial No ._
Type of loan _
Amount of loan, $
Amount of guaranty, $ _ _ .
If disapproved, state reasons below:
Guaranty No
Duplicate on blue card attached
Finance Form 1809
VETERANS ADMINISTRATION
LOAN APPLICATION
CONTROL CARD
State
Application
Number
Guaranty
Number
Veteran .
Address.
Lender..
Tvpe of Loan 501(a) □ 502(a) □
501(b) G 502(b) □
Serial No
Am't. of
Guaranty Requested $.
Address
503(a) □
503(b) □
505
Unsecured
□
□
CONTROL UNIT
Date
Initials
1 . Received
2. Assigned to Application Register Clerk.
3. Assigned to Index Typists
LOAN REVIEW UNIT
4. Assigned to Eligibility Clerk
5. Assigned to Application and Credit Report Clerk.
6. Assigned to Appraisal Reviewer
7. Assigned to Building Construction Reviewer
8. Assigned to Closing Statement Clerk
9. Assigned to Loan Review Officer
10. Assigned to Loan Guaranty Officer
CONTROL UNIT
11. Assigned to Loan Guaranty Register. _.
12. Assigned to Loan Application Register.
13. Papers Mailed to Lender
14. Final Papers Received from Lender
Remarks :
1812 POST-WAR ECONOMIC POLICY AND PLANNING
Regulations on Farm Loans
UNITED STATES OF AMERICA
VETERANS' ADMINISTRATION
GUARANTY OF LOANS
Regulations Under Title III
(FARMS AND FARM EQUIPMENT)
SERVICEMEN'S READJUSTMENT ACT OF 1944
(Public Law 346— 78th Congress)
(Chapter 268— 2d Session)
(58 Statutes at Large 284)
(38 U. S. Code 693 et seq.)
[veterans' administration seal]
(NOTE: This pamphlet covers the subject of Guaranty of Loans for the Acquisition of Farms and Farm Equip-
ment pursuant to Section 502 of the Act. The subject of the Guaranty of Loans for the Purchases of
Businesses, etc., pursuant to Section 503 will be printed in a separate pamphlet. The subject of Guaranty
of Home Loans has been printed in a separate pamphlet.)
FOREWORD
The Servicemen's Readjustment Act of 1944 and these regulations constitute a
part of each contract of guaranty issued by the Administrator of Veterans' Affairs
on behalf of the United States of America, pursuant to Title III of said Act.
The officials and employees of the Veterans' Administration from time to time
assigned to duties in connection with the administration of the Act shall act on
behalf of the Administrator of Veterans' Affairs, and when so acting within the
scope of authority delegated to them shall for all purposes of the Act and these
regulations be deemed to be acting for said Administrator.
Central Office of the Veterans' Administration, Washington 25, D. C, is the
main office of the Administrator of Veterans' Affairs. The functions pursuant to
Title III of the Act will also be performed in field offices of the Veterans' Admin-
istration from time to time designated for that purpose. Transactions and com-
munications with, and contracts by such designated field offices shall have the same
effect as if with, or made by, Central Office.
These regulations should be carefully read. The completed application or
other papers submitted should be carefully examined by the applicants (bor-
rowers and lenders), in order to be certain of accuracy and avoid any possible
embarrassment resulting from errors.
It will facilitate the service of the Veterans' Administration to the veterans
and the lenders if, in correspondence, reference is made to the appropriate section
numbers, if any, involved in the subject of the correspondence.
In view of the large number of veterans with the same or similar names, it is
important not only in correspondence, but also in documents to use the veteran's
full first name instead of his initial only, and also his middle initial. If unobjec-
tionable, it will be helpful to use his full middle name. In addition to the full
name, other available identifying data should be used in correspondence, such as
serial number allocated to the veteran while in active service, rank, and organiza-
tion at date of discharge, current residence address, etc. In mortgages and other
documents it will be desirable to use the service serial number in addition to the
full name, although if there is objection the number will not be required. If there
has been a guaranty application previously submitted by the veteran and the
number assigned thereto by the Veterans' Administration is known, that number
should be used in all communications; and on all documents pertaining to that
application.
It should be clearly understood that the Act does not authorize the Veterans'
Administration or the Administrator of Veterans' Affairs to lend money to the
veteran under Title III; but only to guarantee loans within the prescribed
limitations.
POST-WAR ECONOMIC POLICY AND PLANNING
1813
Federal statutes provide severe penalties including forfeitures, fines and im-
prisonment, for fraud on the part of the applicant and also as to "any person who
shall knowingly make or cause to be made, or conspire, combine, aid, or assist in,
agree to, arrange for, or in any wise procure the making or presentation of a false
or fraudulent affidavit, declaration, certificate, statement, voucher, or paper,
or writing purporting to be such" concerning any application for the guaranty of a
loan by the Administrator. (38 U. S. C. A. 697, 715, 450, 451, 454 (a), 556 (a);
18 U. S. C. A. 80.)
TITLE 38— PENSIONS, BONUSES AND VETERANS' RELIEF >
Chapter I — Veterans' Administration
Part 36 — Regulations Under Servicemen's Readjustment Act of 1944
GUARANTY OF LOANS ON FARMS AND FARM EQUIPMENT
The following regulations govern the guaranty of loans on farms and farm equip-
ment under Title III of the Servicemen's Readjustment Act of 1944:
Sec.
36.4100 Definitions.
(a) Administrator.
(b) United States.
(c) State.
(d) Designated agency or agency.
(e) Federal agency.
(f) Guaranty.
(g) Mortgage.
(h) Secondary or junior loans.
(i) Guaranteed loan.
(j) Farming operations,
(k) Reasonable normal value.
(1) Real property.
Sec.
(m) Indebtedness.
(n) Note.
(o) Appraiser.
(p) Certificate of title.
(q) Credit report.
(r) Eligible veteran.
(s) Elieible lenders.
(t) Creditor.
(u) Debtor.
(v) Conducted by a veteran.
(w) Interest.
36.4101 Miscellaneous.
LOANS ELIGIBLE FOR GUARANTY
Sec.
36. 4102 Eligible loans.
36. 4103 Agricultural loans.
36. 4104 Repairs, improvements, taxes, delinquent
indebtedness, etc.
36. 4105 Loan for delinquent indebtedness and taxes
on farm home.
36. 410C Prior liens.
36. 4107 First liens required.
36. 4108 Mortgages required.
36. 4109 Transfer of title.
Sec.
36. 4110 Obligation of guarantor.
36. 4111 Contract provisions.
36.4112 Repayment provisions.
36.4113 Prepayments.
36. 4114 Pro rata decrease of guaranty.
36 4115 Insurance coverage required.
36.4116 Loan charges.
36.4117 Interest.
36.4118 Advances.
36.4119 Construction loans.
GUARANTY BY THE ADMINISTRATOR
36.4120 Limits. 36.4127 Administrator's action on application.
36. 4121 Second loan under section 505 (a). 36. 4128 Execution and form of guaranty.
36.4122 Two or more eligible veterans or borrowers. 36.4129 Disposition of papers.
36.4123 Maximum liability where there are two or 36.4130 Loan procedure after approval of guaranty.
more veterans. 36.4131 Report of closing loan.
36. 4124 Veteran's application. 36. 4132 Construction loans.
36.4125 Papers required. 36.4133 When guaranty does not apply.
36. 4126 Recommendation for approval of guaranty.
CLAIM UNDER A GUARANTY
36.4134 Default.
36. 4135 Claim on notice of default.
36. 4136 Legal action.
36. 4137 Notice of suit and subsequent sale.
36. 4138 Death of veteran or other owner.
36. 4139 Death or insolvency of creditor.
36. 4140 Filing claim under guaranty.
36. 4141 Options available to Administrator.
36. 4142 Refinancing and extension of guaranty.
36.4143 Subrogation.
36. 4144 Future action against mortgagor.
36. 4145 Suit by Administrator.
36. 4146 Creditor's records and reports required.
36. 4147 Failure to supply information.
36. 4148 Notice to Administrator.
36. 4149 Rieht to inspect books.
36.4150 Forms, construction to be placed on refer-
ences to.
36. 4151 Disqualified lenders and bidders.
1 As printed in the Federal Register, Volume 9, Number 246, Washington, Saturday, December 9, 1944.
1814 POST-WAR ECONOMIC POLICY AND PLANNING
Authority: §§ 36.4100 to 36.4151, Inclusive, issued under 58 Stat. 284.
§ 36.4100 Definitions. Wherever used in these regulations, unless the con-
text otherwise requires, the terms defined in this section shall have the meaning
herein stated, namely:
(a) "Administrator" means the Administrator of Veterans' Affairs or any
employee of the Veterans' Administration designated by him to act in his stead.
(b) "United States" used geographically means the several States, Territories
and possessions, and the District of Columbia.
(c) "State" means any of the several States, Territories and possessions, and
the District of Columbia.
(d) "Designated agency" or "agency" as used in respect to processing applica-
tions for guaranty of loans, means any Federal instrumentality designated by the
Administrator (including Veterans' Administration if so designated) to certify
whether an application meets the requirements of the act and regulations, and
recommend whether the application should be approved if the applicant is found
eligible.
(e) "Federal agency" as used with respect to agencies making, guaranteeing,
on insuring primary loans, means any Executive Department, or administrative
agency or unit of the United States Government (including a corporation essen-
tially a part of the Executive Branch) at any time authorized by law to make,
guarantee or insure such loans.
(f) "Guaranty" means the obligation of the United States of America assumed
by virtue of the guaranty by the Administrator as provided in Title III of the
Servicemen's Readjustment Act of 1944 (58 Stat. 284; 38 U. S. C. 693), and
subject to the limitations and conditions thereof and of these regulations. The
subject of the guaranty is that portion of an eligible loan procured by an eligible
veteran which may be subject to being guaranteed as provided in said Title III,
as determined by the Administrator upon application in accordance with these
regulations.
(g) "Mortgage" means an applicable type of security instrument commonly
used or legally available to secure loans or the unpaid portion of the purchase
price of real or personal property in a State, District, Territory or possession of
the United States of America in which the property is situated. It includes, for
example, deeds of trust, security deeds, escrow instruments, real estate mortgages,
conditional sales agreements, chattel mortgages.
(h) "Secondary" or "junior" loan means a loan which is secured by a lien or
liens subordinate to any other lien or liens on the same property.
(i) "Guaranteed loan" means a loan, unsecured, or secured by a primary lien,
or where permissible under the act and these regulations, a secondary lien, which
loan is guaranteed in whole or in part by the Administrator as evidenced by
endorsement thereon; or by a Loan Guaranty Certificate issued by the Adminis-
trator, and which shall have become effective as prescribed by these regulations;
or by such other legal evidence as may be provided by the Administrator.
(j) "Farming operations" are those which involve actual production and mar-
keting of crops, livestock, livestock products, or other agricultural commodities,
and which constitute the applicant's major occupation. No acreage limit will
be established but size will be a factor in determining practicability.
(k) "Reasonable normal value" for the purposes of the act is that which can
be justified as a fair and reasonable price to be paid for the real or personal prop-
erty for the purposes for which it is being acquired, assuming a reasonable
business risk, but without undue speculative or other hazard as to the future of
such value. There must also be taken into consideration the normal earning
capacity value of the farm or other property, assuming average managerial
ability, and yields and prices for farm products that may reasonably be antici-
pated during the period of the loan. There will not be unreasonably rigid
adherence to long-time average prices or reliance upon a continuation of abnormal
prices.
(1) (1) "Real Property" as used in section 502 of the act refers to an interest
in realty defined in this section and subject to the conditions therein. It includes
buildings and other improvements that are deemed to be real property under the
law of the State where situated.
(i) An interest in really may be a fee simple estate, or certain other estates
indicated in subdivisions (i) to (vi), inclusive, of this subparagraph including an
e-t ale for years, eligible as security for guaranteed loans. But in any event the
estate shall be one limited to end at a date more than 14 years after the ultimate
maturity date of the loan, or when the fee simple title shall vest in the lessee;
except that, if it is a leasehold that terminates earlier, it shall nevertheless be
POST-WAR ECONOMIC POLICY AND PLANNING 1815
acceptable if lessee has the irrevocable right to renew for a term ending more
than 14 years after the ultimate maturity date of the loan or until the fee simple
title shall vest in lessee; provided the mortgagee obtains a mortgage lien of the
required dignity upon such option right or anticipated reversion or remainder in
fee.
(ii) A life estate or other estate of uncertain duration is excluded, unless
the remainder interests are also encumbered by liens of the same dignity to secure
the same debt.
(iii) A remainder interest in realty shall be eligible as security for a guaranteed
loan only in the event that all the owners of intervening immediate or remainder
interests lawfully can and do (a) join in the mortgage in such manner as to subject
all such intervening estates to the lien; or (b) execute and deliver a lease or other
proper conveyance to the owner of the ultimate remainder in fee simple in such
manner as to assure his legal right to possession and enjoyment until the vesting
of his ultimate remainder interest.
(iv) If other than a fee simple estate or estate for years with minimum duration
as stated in subdivision (i) of paragraph (1) (1) of this section is offered as security,
full information may be submitted to the Administrator before taking application
from the veteran. The Administrator shall determine the eligibility of any such
estate.
(v) The existence of any of the following will not require denial of the guaranty,
hence will not require special submission:
(a) Outstanding easements for public utilities, party walls, driveways, and
similar purposes;
(b) Customary building or use restrictions for breach of which there is no rever-
sion and which have not been violated to a material extent;
(c) Slight encroachments by adjoining improvements;
(d) Outstanding water, oil, gas or other mineral rights which do not and will
not materially impair the value for farming purposes, and which are customarily
waived by prudent lenders in the community: Provided, however, That if there is
outstanding any legal rights to quarry, mine, or drill within 400 feet of the prin-
cipal residence or barn on the encumbered farm, the application for guaranty may
be denied for that reason, unless upon consideration of all the facts, the Ad-
ministrator determines otherwise. Such determination at the option of the
lender or borrower may be obtained upon a special submission of all the facts
prior to taking application for guaranty.
(vi) A mortgage on an undivided interest in realty shall not be acceptable
unless all co-tenants of the veteran join in the mortgage and unless such joinder
has the legal effect of creating a lien on the property such as is otherwise required.
In such cases it shall not be required that the co-tenants join in, endorse, or other-
wise become personally liable on the veteran's indebtedness. Notwithstanding
such joinder in the mortgage by the co-tenants the value of the security for purpose
of guaranty shall be determined with respect to the individual interest of the
veteran only, and the guaranty will be limited to the proper proportion of that
sum, irrespective of the actual amount of the loan.
(2) "Personal property" means tangible or intangible property other than
"real property" as defined in paragraph (1) (1) of § 36.4100 if such property is to
be used in farming operations conducted by the veteran as prescribed in these
regulations. It includes property which by reason of the contract of the seller
and purchaser remains personalty notwithstanding that except for such contract
it would become a "fixture", or otherwise a part of the realty.
(3) Livestock, equipment, machinery or implements for the purchase price of,
or loan upon, which a guaranty under section 502 is applied for shall be those
to be used directly in farm operations to be conducted by the veteran on farm
land in which he holds any estate mentioned in subdivisions (i) to (vi), inclusive,
of paragraph (1) (1) of § 36.4100, or any farm land to the use and occupancy of
which he is entitled for a sufficient period to make a suitable crop. The latter
right shall be evidenced by a lease, or by an appropriate letter from the landlord,
evidencing the veteran's right to use of the land.
(m) "Indebtedness" means the unpaid principal and accrued interest on the
note, bond or other obligations, the subject of the guaranty, and includes also
taxes, insurance premiums and any other items for which the debtor is liable
under the terms of the mortgage or other contract, including proper contractual or
statutory trustee fees and attorney fees, if any.
(n) "Note" means a promissory note, a bond, or other instrument evidencing
the debt and the debtor's promise to pay same.
(o) "Appraiser" means an individual or firm or corporation of recognized
standing, approved in writing by the Administrator to appraise property. An
1816 POST-WAR ECONOMIC POLICY AND PLANNING
applicant for designation as an approved appraiser shall show to the satisfaction
of the Administrator that he is of good character and that his experience and
information enable him to form sound opinions as to the reasonableness of the
purchase price or cost of property to be appraised in the territory in which he
expects to operate. He shall also be experienced in determining the earning
capacity of farms.
A list of appraisers, considered by the Administrator to be in good standing at
the time these regulations become effective, may be approved.
(p) "Certificate of title" means with respect to real property a written and
signed opinion or statement as to title by a qualified member of the bar of, or by a
title company authorized to do such business in, the jurisdiction in which the
mortgaged property is situated; or at the option of borrower and lender a title
insurance or guaranty contract by a corporation authorized to engage in such
business in the State wherein the property is situated; or appropriate evidence
of title in the proposed encumbrancer pursuant to a Torrens or other similar title
registration statute.
(q) "Credit report" means the report submitted by any credit reporting agency
of at least five years' experience with facilities for national coverage, approved
by the Administrator, or any other form of report acceptable to the Administrator
for the purpose of determining the applicant's credit standing. (See §§ 36.4124
and 36.4125 before ordering credit report).
(r) "Eligible veteran" means a veteran who:
(1) Served in the active military or naval service of the United States on or
after September 16, 1940, and before the officiallv declared termination of World
War II;
(2) Shall have been discharged or released from active service under conditions
other than dishonorable either (i) after active service of ninety days or more, or
(ii) because of injury or disability incurred in service in line of duty, irrespective
of length of service; and
(3) Applies for the benefits of this Title within two years after separation from
the military or naval forces, or within two years after the officially declared
termination of World War II, whichever is later. In no event, however, may an
application be filed later than five years after such termination of such war.
(s) "Eligible lenders" are persons, firms, association, corporations and govern-
mental agencies and corporations, either State or Federal. (Section 500 (c).)
(t) "Creditor" means the payee, or any subsequent holder of the indebtedness,
and includes a mortgagee.
(u) "Debtor" means the maker of the note, or obligor in any other obliga-
tion, or any other person who is, or becomes, liable thereon, by reason of a
contract of assumption or otherwise.
(v) "Conducted by a veteran" means personally directed and operated by a
veteran on the site, with or without hired labor; not solely operated by a tenant
or an employee who does not receive supervision and direction by the veteran.
(w) "Interest" means the compensation fixed by law, or by the parties to a
contract, for the use or detention of, or forbearance with respect to money,
irrespective of the name applied to such compensation.
§ 36.4101 Miscellaneous. Throughout these regulations unless the context
otherwise requires; (a) the singular includes the plural; (b) the masculine in-
cludes the feminine and neuter; (c) person includes corporations, partnerships
and associations; (d) month means calendar month, i. e., the period beginning
on a certain date in one month and ending at midnight the preceding date of
the next month; (e) "the act" or "the statute" means the Servicemen's Read-
justment Act of 1944; Ch. 268, 78th Congress. 2d Session (Public No. 346) 58
Stat. 284; 38 U. S. C. 693; (f) Title III means Title III of the act,
LOANS ELIGIBLE FOR GUARANTY
§ 36.4102 Eligible loans, (a) The real or personal property encumbered to
secure a loan guarantee pursuant to Title III of the Act shall be situated within
the United States as defined in § 36.4100 (b).
(b) (1) The veteran must possess such actual knowledge of farming and be of
such character and industry as to indicate that because of his ability and ex-
perience relevant to farming he likely will be able to succeed in the conduct of
farming operations. Agricultural courses in schools of recognized standing and
other training will be given due weight in evaluating experience.
(2) It must appear that the veteran's financial situation will be such that he
likely will be able to carry on the farming enterprise successfully. The amount of
"readjustment allowance", if any, payable pursuant to Title V of the act (38
U. S. C. 696, 696d) shall be considered in this connection
POST-WAR ECONOMIC POLICY AND PLANNING 1817
(c) A farming operation must be of sufficient size and productivity to enable
an operator of average ability, operating under normal circumstances as to yields
and prices, to derive sufficient subsistence and income from it to meet necessary
living and operating expenses and debt obligations. The area of the farm unit
and its composition (i. e., crop acres, pasture, woodland, etc.) must be carefully
related to and reconciled with the type of operations which would be undertaken
by a typical operator. Improvement and farm facilities must be appropriate, or
feasibly adjustable, to operations to be undertaken.
§ 36.4103 Agricultural loans. Section 502 of the act provides for granting to
an eligible veteran "the guaranty of a loan to be used in purchasing any land,
building, livestock, equipment, machinery, or implements, or in repairing, alter-
ing, or improving any buildings or equipment, to be used in farming operations
conducted by the applicant" if the Administrator of Veterans' Affairs finds
that:
(a) The proceeds of such loan will be used in payment for real or personal
property purchased or to be purchased by the veteran, or for repairing, altering
or improving any buildings or equipment, to be used in bona fide farming opera-
tions conducted by him;
(b) Such property will be useful in and reasonably necessary for efficiently
conducting such operation;
(c) The ability and experience of the veteran, and the nature of the proposed
farming operations to be conducted by him are such that there is a reasonable
likelihood that such operations will be successful; and
(d) The purchase price paid or to be paid by the veteran for such property
does not exceed the reasonable normal value thereof as determined by proper
appraisal.
§ 36.4104 Repairs, improvements, taxes, delinquent indebtedness, etc. (a)
"Alterations" in respect to a farm, means any structural changes in or additions to
an existing building, or equipment, on or to be used on the farm, including heat-
ing and other equipment that become fixtures; or operations of a protective
nature, which increase the usefulness of such buildings or equipment.
(b) "Improvements" means construction of new buildings (other than the
main residence), new or improved fencing, installation or extension of water
supply, or of electricity for domestic or other purposes on the farm, sewers and
other waste disposal systems on the farm, silos, barns, and other structures
thereon.
(c) "Repairs" means the work and material necessary to restore the building or
fixture therein, or the equipment, to a condition that is useful and appropriate
to the circumstances, the need therefore having arisen because of wear and tear,
accident or other cause.
(d) "Taxes" means general or special taxes assessed against the real property.
(e; "Special assessments" means any charges for improvement purposes assessed
against the real property.
(f) "Delinquent indebtedness" means past due amounts of principal or interest
(and without giving effect to any acceleration provisions) on an obligation secured
in whole or in part by lien or liens on propertv of an eligible veteran and occupied
as his home.- (See § 36.4105 (a).)
(g) "Purchased or to be purchased" as used in section 502 (1) of the act refers
to real or personal property to be used for the purpose stated in section 502 of
the act, whether the property is purchased contemporaneously with such ap-
plication, or is to be purchased subsequent thereto. But as to any loan for a
future purchase the guaranty will become effective only from the time the purchase
is consummated.
§ 36.4105 Loan for delinquent indebtedness and taxes on farm home, (a)
Under appropriate circumstances a guaranty pursuant to section 501 (b) of
the act may be obtained if the loan is "for the purpose of * * * paying
delinquent indebtedness, taxes, or special assessments on residential property
owned by the veteran and used by him as his home * * *". Section 501 (b)
is applicable to a farm if it is the veteran's home. (See § 36.4104 (d), (e), (f).)
(b) Guaranty of a loan for alterations, improvements, or repairs (as each
is defined and limited in § 36.4104) for the farm may be granted if otherwise
proper, notwithstanding that such loan is not secured by a first lien.
(c) Satisfactory evidence will be required to establish that:
(1) The proceeds of the loan will be used for an appropriate purpose as pre-
scribed in paragraphs (a) and (b) of this section.
(2) The amount of the loan will bear a proper relation to the value and earn-
ing power of the property, and the alterations, improvements or repairs of the
real or personal property will enhance its value to a reasonable degree.
1818 POST-WAR ECONOMIC POLICY AND PLANNING
§ 36.4106 Prior liens, (a) Real property. The existence of a lien or liens on
the real property in respect to which a guaranty of a loan is sought pursuant to
section 501 (b) will not necessarily require a denial of the application for guaranty;
but full consideration will be given to the amount, rate of interest, and maturity
dates of the primary loan in determining whether a suitable relation will exist
between the veteran's obligation and probable available income.
(b) Personal property. Unless section 501 (b) of the act is applicable, or unless
the circumstances are extraordinary, a loan which is to be secured by a lien on
personalty shall be secured by a first lien thereon. (See §§ 36.4104 and 36.4105.)
§ 36.4107 First liens required. Except as provided in section 505 of the act,
loans for the purpose of purchasing a farm with or without a residence thereon,
and loans for constructing a residence thereon, and in respect to which any guar-
anty is sought, shall be secured by a first lien on the property, but the existence
of tax or special assessment prior liens will not necessarily disqualify security
which is adequate and otherwise acceptable.
§ 36.4108 Mortgages required, (a) (1) Each loan guaranteed in whole or in
part by the Administrator shall be secured by a "mortgage" except that when the
principal amount of a loan to be guaranteed does not exceed $500 and the lender
does not require a mortgage, the Administrator may nevertheless guarantee such
loan provided it complies otherwise with the Act and these regulations. (As to
procedure see § 36.4124 (c) and (f).)
(2) If indebtedness of the veteran is not adequately secured by a lien on the
entire interest in specific chattels or other personal property, but is secured by
undivided interests therein, the requirements of § 36.4100 (1) (1) (vi) relating to
undivided interests in realty shall be applicable to the interests in said chattels or
other personal property.
(3) The "mortgage" shall include all intangible property rights which are inci-
dent to the encumbered property, real or personal.
(4) If the encumbered real or personal property is owned by a partnership all
partners shall join in the encumbrance or their authorization to the person or
persons executing the encumbrance shall be in writing in due form and properly
acknowledged. The Veterans' Administration will not require that a partner
other than the veteran become personally liable on the obligation.
(b) The law of the "State" where the contract is made determines the capacity
of the parties to contract. Similarly the law of the "State" wherein the real
estate or personal property is situated determines the capacity of "mortgagor" to
encumber and of the "mortgagee" to hold the legal rights resulting from encum-
brance. The act does not modify such law of the "State". The guaranty by the
Administrator will be available only in the event that under the applicable "State"
law the contract between the borrower and lender is binding on both, and the
"mortgage" has the legal effect intended. Paragraph (b) of this section will be
applicable particularly in cases involving minors, "persons of unsound mind", and
persons under other legal disability by reason of the law of the "State". It will
be applicable also in cases involving "mortgage" or other loans which any guardian,
conservator, or other fiduciary seeks to make, or obtain; and to a guaranty thereof
for which aoplication is submitted.
(c) Type of loan and mortgage. (1) Except as otherwise provided in paragraph
(a) of this section each loan guaranteed under the provisions of Title III must be
evidenced by a "note" or "notes" secured by appropriate security instrument or
instruments ("mortgage legally sufficient in the jurisdiction in which the property
to be encumbered is situated"), including a pledge or hypothecation when appro-
priate.
(2) A term loan, which is in accord with applicable State or Federal law, and
regulations, if any, may be eligible for guaranty if the amount of the loan to be
guaranteed plus the unpaid amount of all obligations secured by liens superior to
the lien securing the proposed loan does not exceed two-thirds of the "reasonable
normal value" of the property encumbered to secure the loan and if the ultimate
maturity date of the "mortgage" indebtedness so secured, and to be guaranteed,
is not more than five years from the date of the "note". Such superior liens shall
not be mortgaged" liens except when the guaranty is issued pursuant to § 36.4105
and § 36.4106 of these regulations.
(3) Except as provided in subparagraph (2) of this paragraph the loan shall be
amortized. If the obligations to be amortized is secured by realty it may, and
except for a period not in excess of the first three years shall, require periodical
payments not less frequently than annually. The amounts so payable shall be
substantially equal as to principal, or if the parties so agree, as to principal and
interest. In any event they shall be such as will result in payment of the entire
principal and interest within not more than 20 years from the date of the loan
POST-WAR ECONOMIC POLICY AND PLANNING 1819
or the date of assumption by the veteran, whichever is later. At the request of
the mortgagor the payments for the first year shall be less than the amounts re-
quired in other years by the sum representing the interest charge on the guaran-
teed part of the loan, and which interest charge the Administrator will pay at the
end of the first year. The mortgagor and mortgagee may agree that no payment
on principal will be required during a period not extending beyond the first three
years. The ultimate maturity, and the dates and amounts of periodical pay-
ments, shall be fixed so as to maintain until the ultimate maturity substantially
the same ratio between the indebtedness and the value of the real and personal
property encumbered to secure same, taking into consideration the fact that the
useful life of portions of the real or personal property will have ended prior
thereto.
§ 36.4109 Transfer of title. The conveyance of, or other transfer of title to
the property after the creation of a lien thereon to secure the veteran's debt,
which is guaranteed in whole or in part by the Administrator, shall not terminate
or otherwise affect the contract of guaranty, unless (a) the "creditor" by express
agreement for that purpose releases or otherwise discharges the veteran from
personal liability thereon; or (b) by indulgence of, or by agreement, with the
veteran's immediate or remote grantee or vendee contrary to these regulations
and without the consent of the Administrator the creditor so alters the contract
made by the veteran with the lender as to cause discharge of the veteran by
operation of law.
§ 36.4110 Obligation of guarantor. To the extent prescribed the obligation of
the United States is that of a guarantor, not an indemnitor.
§ 36.4111 Contract provisions. Subject to the provisions of the act and these
regulations, the contract between the lender and borrower may contain such
provisions as they agree upon and which are reasonable and customary in the
locality where the property is situated.
§ 36.4112 Repayment provisions, (a) If the loan be an amortized loan the
lender and borrower may contract for periodical payments at monthly or other
intervals, but not less frequently than annually, subject to the provisions of
§ 36.4108 (c) (3).
(b) If the mortgagor consents the mortgage may provide that such monthly
or other periodical payment shall include in addition to the proper amount to
be credited to the principal and interest a proportionate part of the estimated
amounts required annually for all taxes, rents, special assesments, if any, and fire
and other hazard insurance premiums. Such provisions may direct the method of
crediting the additional amounts included in the periodical payments for the pur-
poses stated in this paragraph.
(c) The method may be by crediting the note with the amounts so received
and debiting same with disbursements by the creditor for such purposes; or by
crediting and debiting a separate "trust account", or otherwise as the debtor and
creditor agree. Unless otherwise provided by the parties, all periodical payments
made by the debtor on the obligation shall be applied to the following items in
the order set forth:
(1) Taxes, special assessments, fire and other hazard insurance premiums and
rents (allocated among such items as the creditor elects) ;
(2) Interest on the mortgage debt; and
(3) Principal of the mortgage debt.
&36.4113 Prepayments, (a) When the debt is to be amortized the note or
other evidence thereof, or the mortgage securing same, shall contain appropriate
provisions granting any person liable for such debt, the right to pay at any time
the entire unpaid balance or any part thereof. Unless otherwise agreed all such
prepayments shall be credited to the unpaid principal balance of the loan as of
the due date of the next instalment. No premium shall be charged for any
partial or entire prepayment.
(b) Any person liable shall be entitled to prepay a term loan, or any part thereof,
upon not less than one month's notice. The note or mortgage shall so provide.
(c) Any prepayment shall be applied in the manner and to the items directed
by the person making the prepayment.
£36.4114 Pro rata decrease of guaranty. The amount of the guaranty shall de-
crease pro rata with any decrease in the amount of the unpaid principal of the
loan, prior to the date the claim is submitted.
/c36.4115 Insurance coverage required, (a) Buildings, the value of which enter
into appraisal forming the basis for the loan guaranteed, shall be insured against
fire, and other hazards against which it is customary in the community to insure,
and in reasonable amount at least equal to the amount by which the loan exceeds
the value of the encumbered land plus that of the improvements included in the
1820 POST-WAR ECONOMIC POLICY AND PLANNING
appraisal but which are not subject to the hazards insured against: Provided
That upon a satisfactory showing at the time of the application for guaranty
that (1) it is impossible or impracticable to obtain such insurance because of
location, prohibitive cost, or other good reason; (2) prudent lenders in such com-
munity customarily do not require such insurance, or some portion thereof,
(amount or hazard) and (3) the lender submitting the application is willing to
make the loan without insurance coverage on one or more of the buildings, or
without certain coverage, or in a reduced amount, and subject to the provisions
of paragraphs (b) and (c) of this section; the Administrator may at the time of
approving the application waive all or part of such insurance requirements, sub-
ject to the provisions of said paragraphs (b) and (c) of this section. No waiver
will be granted on the basis of premium cost in any case wherein the premium
cost on an annual basis does not exceed $5.00 per $1000 of insurance against the
hazard of fire, or $10.00 per $1000 for fire and all other hazards covered by the
insurance. For loans on personalty insurance collectible in amount equal to the
debt and against the hazards usually insured against, if reasonably available at
reasonable cost, shall be required. The insurance coverage on personalty will be
a factor in determining the practicability of the loan. The procuring of insurance
of the amount and coverage stated in the approved application shall constitute
conclusive evidence of waiver by the Administrator of insurance in excess of the
amount stated in or in connection with the application and also all hazards and
property not mentioned therein as hazards and property to be covered.
The creditor shall require that there be maintained in force such insurance of
the coverage stated in the approved application in an amount not less than the
amount stated or the amount of the unpaid indebtedness whichever is the lesser.
In the event insurance becomes unavailable the fact shall be reported to the
Administrator for determination whether waiver shall be granted or loan declared
in default.
(b) For the sole purpose of determining the amount payable upon a claim under
the guaranty after an uninsured loss (parital or total) has been sustained, the
unpaid balance of the loan (except as provided in paragraph (c) of this section)
will be deemed to have been reduced by an amount equal to the amount of the
uninsured loss, but in no event below an amount equal to the value of the land
and other property remaining and subject to the mortgage.
(c) There shall be no reduction of the amount of the guaranty as provided in
paragraph (b) of this sefction by reason of an uninsured loss which is uninsured
(as to hazard or amount) by reason of a waiver by the Administrator as provided
in paragraph (a) of this section.
(d) All insurance effected on the mortgaged property shall contain appropriate
provisions for payment to the "creditor," (or trustee, or other appropriate person
for the benefit of the "creditor"), of any loss payable thereunder. If by reason
of the "creditor's" failure to require such loss payable provision in the insurance
policy, payment is not made to the "mortgagee" the liability on the guaranty
nevertheless shall be reduced as provided in paragraph (b) of this section with
respect to an uninsured loss, except to the extent that the liability under the policy
was discharged by restoring the damaged property, by the insurer, or out of pay-
ments thereunder to the insured, or otherwise. No waiver pursuant to paragraph
(a) of this section shall modify this paragraph.
(e) Upon the "creditor" (or trustee or other person) collecting the proceeds of
any insurance contract, or other sum from any source by reason of loss of or
damage to the "mortgaged" property, he shall be obligated to account for same,
by applying it on the indebtedness, or by restoring the property to the extent
the expenditure of such proceeds will permit. As to any portion of such proceeds
the "mortgagee" is not entitled to retain for credit on such indebtedness or by
reason of other legal right, he shall hold and be obligated to pay over the same
as trustee for the United States and for the debtor, as their respective interests
may appear.
(f) Nothing in these regulations shall operate to prevent the veteran from pro-
curing acceptable insurance through any authorized insurance agent or broker
he selects. In all cases the insurance carrier shall be one licensed to do such
business in the State wherein the property is situated.
§ 36.4116 Loan charges, (a) In the case of a purchase of real or personal
property by the veteran and a guaranty pursuant to the act and these regulations
of an indebtedness representing part of the purchase price, there may be charged
to the veteran and included in said note amounts actually paid or incurred by the
seller ("mortgagee") for such expenses and charges as are chargeable to such
purchaser in accord with local custom, if the purchaser so agrees, such as fees for
appraisals, credit and character report on the veteran, surveys, fees of purchaser's
POST-WAR ECONOMIC POLICY AND PLANNING 1821
(not seller's) attorney, recording fees for recording the deed and the "mortgage"
only, premiums on fire and other hazard insurance that may be required in accord-
ance with these regulations.
(b) In the case of a loan to the veteran, charges in accord with local custom,
such as fees for appraisals, credit and character report, surveys, abstract, or title
search, curative work and instruments, attorney fees, fees for tax certificates
showing all taxes paid, premiums on fire and other hazard insurance that may be
required in accordance with these regulations, revenue stamps, recording fees,
etc., all limited to amounts actually paid or incurred by the lender, may be charged
to the borrower and withheld from the gross amount of the loan.
(c) Any unreasonable charges shall be ground for denying an application for
guaranty. No brokerage or other charges shall be made against the veteran for
obtaining any loan guaranty under this title.
§ 36.4117 Interest, (a) The rate of interest chargeable on a loan guaranteed
fully or in part, shall not exceed 4 per centum per annum on unpaid principal
balances. Interest may be computed in accordance with standard amortization
practices.
(b) The rate of interest on a secondary loan which is guaranteed pursuant
to section 505 of the act may exceed by not more than 1% per annum the rate
charged on the principal loan, but in no event shall the rate on the secondary
loan exceed 4% per annum.
§ 36.4118 Advances, (a) Nothing herein shall prevent the creditor from
making advances for the benefit of the mortgagor to pay taxes, assessments and
insurance premiums as they become due, and the cost of emergency repairs
needed to protect the property. The amount guaranteed by the Administrator
shall be increased pro rata with all such increases in the unpaid principal balance
of the loan: Provided, (1) That the annual interest rate on all advances shall
not exceed 4 per centum per annum; (2) that the terms of repayment shall not
extend the date of the amortization of the loan and (3) that the amount of the
guaranty shall in no event exceed the original amount thereof, nor exceed the
percentage of the indebtedness originally guaranteed.
(b) In the case of any advance made by a creditor to a debtor, the creditor
with the consent of the debtor may apply any and all payments made by the
debtor for a period of twrelve months to the liquidation of the advance without
considering the original loan in default. This shall not be construed to extend
the period of indulgence contemplated by §§ 36.4134 and 36.4135.
§ 36.4119 Construction loans. Under certain circumstances loans relating to
new construction may be guaranteed pursuant to the act. (See § 36.4132.)
GUARANTY BY THE ADMINISTRATOR
§ 36.4120 Limits. In no event will the aggregate obligations of the United
States as guarantor under Title III exceed $2,000 in respect to one veteran,
whether there be one or several loans, and whether some are obtained for the
acquisition of a home, others for a farm, and others for business, or equipment, or
other purposes. Repayment of a loan or loans in whole or in part, or transfer of
the encumbered property does not modify or enlarge such limitation. The guar-
anty shall not at any time exceed 50 per centum of the aggregate of the indebted-
ness for any of the purposes specified in sections 501, 502 and 503 of the act.
§ 36.4121 Second loan under section 505 (a). Section 505 (a) of the act pro-
vides that when the principal loan for any of the purposes stated in sections 501,
502 or 503 is "approved by a Federal agency to be made or guaranteed or insured
by it pursuant to applicable law and regulations, and the veteran is in need of a
second loan to cover the remainder of the purchase price or cost, or a part thereof",
the Administrator may guarantee the full amount of the second loan, Provided:
(a) It does not exceed 20 per centum of the purchase price or cost.
(b) The amount guaranteed together with all other guarantees under Title III
for the same veteran does not exceed $2,000.
(c) The loan conforms to all other applicable requirements of these regulations.
k 36.4122 Two or more eligible veterans or borrowers, (a) In the absence of a
statement to the contrary, an application signed by two or more eligible veterans
shall be conclusively presumed to be an application by each for the guaranty of
an equal proportionate part of the entire amount to be guaranteed: Provided,
however, That if husband and wife execute the application, both being eligible
veterans, it will be conclusively presumed in the absence of a contrary statement
in the application that it is an application for guaranty on behalf of the husband
only, unless the amount of the guaranty then available to the husband is insuffi-
cient to meet the requirement of the case for guaranty of a proper amount under
91183— 45— pt. 12 5
1822 POST-WAR ECONOMIC POLICY AND PLANNING
these regulations and the terms of the application; in which event the deficiency
may be charged against the amount available to the wife, unless she has in the
application or otherwise (before approval) stated in writing her unwillingness to
be so charged.
(b) The Administrator will not require a wife to sign an application made by
her husband. If she also is an eligible veteran and desires to exercise her right
as such to obtain a guaranty, a separate application by her will be required.
Signature of her husband to indicate his pro forma joinder will be required only
when the wife is resident of, or the application is signed in, or the property to be
encumbered is situated in, a State under the laws of which such contract cannot
be legally executed by a married woman alone as in the case of an unmarried
woman.
§ 36.4123 Maximum liability where there are two or more veterans, (a) For
the purpose of determining the maximum amount of the potential liability of
the United States under a guaranty incident to an obligation on which two or
more eligible veterans who applied for the guaranty are liable, the obligation
will be deemed a several, and not a joint, obligation of the respective applicants
who were charged with the guaranty or a part thereof notwithstanding that as
among the debtors or any of them, and as between them, or any of them, and
the creditor, the obligation is in fact and law a joint obligation or a joint and
several obligation.
(b) In no event will the amount of any veteran's debt thereunder be deemed
to exceed for guaranty purposes the amount for which each veteran is legally
liable to the holder of the obligation, nor the value of the interest of the veteran
in the property. If more than one of the obligors is an eligible veteran and
application by him or them is granted, the maximum aggregate amount of the
guarantees will be the sum of the amounts available to each applying veteran
but in no event will the aggregate of the guarantees for more than one veteran
exceed 50 per centum of the total loan except as provided under section 505 of
the act.
(c) For the purpose of § 36.4123 the wife of a principal obligor shall not be
counted unless (1) she is legally liable on the obligation under the law of the
jurisdiction where she executed it, and (2) if she is a veteran she be properly
chargeable with a part or all of the guaranty as provided in § 36.4122.
§ 36.4124 Veteran's application, (a) To apply for a guaranteed loan the
veteran and the prospective lender shall complete and sign in duplicate Form
1822, Application for Farm Loan Guaranty. Before or after preparing the ap-
plication, and before submitting it, the lender and the veteran will address a
joint inquiry to the nearest office of the Veterans Administration on Form 1800,
Certification of Eligibility, or otherwise. In addition to the necessary identifying
information, they will state whether the property to be encumbered is real or
personal, or both, the State and county in which it is situated, and the nearest
highway. The Administrator will reply on said Form 1800 or otherwise, stating
the name and address of an approved appraiser of realty, and in the case of
personal property, the person or persons to function as such.
(h) If instructed by the Administrator so to do, on Form 1800, Certification of
Eligibility, or otherwise, the creditor will secure a credit report. If not so in-
structed such report will not be required by the Veterans Administration. (See
paragraph (d) of this section.)
(c) If the proposed loan is for repairs, alterations or improvements to realty
the appraisal report shall reflect an examination of the building contract, and
the plans and specifications, if any, and shall include appropriate data sufficient
to afford a basis for estimating the increased value of the farm to result from
such repairs, alterations or improvements: Provided, however, That if the
cost of such repairs, alterations and improvements does not exceed $500 the ap-
praisal requirements of these regulations will be met. by an appraisal report by the
agency, and no plans or detailed specifications will be required as a condition to
a guaranty otherwise proper. Such appraisal report may be abbreviated and
consist of bill of material, estimate of labor cost, general description of the work
to be done, and opinion of the agency as to reasonable normal value, and the
enhancement of the value of the property.
(d) The veteran, the lender, and the appraiser shall be entitled, before or dur-
ing the preparation of the application and other papers preliminary to a loan
or purchase, to consult with the agency.
(e) In every case the appraiser's report shall indicate the basis, by survey
or otherwise, of identifying the real property appraised as that to be encumbered
to secure the proposed loan.
POST-WAR ECONOMIC POLICY AND PLANNING 1823
(f) If (1) the loan does not exceed $500, (2) the lender does not require a
mortgage, and (3) the loan otherwise complied with these regulations, the pro-
visions of paragraphs (b), (c) and (e) of this section; paragraphs (d), (e) and
(h) of § 36.4125; paragraphs (a), (c) and (d) of § 36.4130; subparagraphs (2) and
(3) of paragraph (a) of § 36.4131; and paragraphs (c) and (e) of § 36.4132 shall
be inapplicable to such loan and any guaranty thereof: Provided, however,
That in every such case there shall be submitted with the application a report
by the agency as to the reasonable normal value of the work, or property, real
or personal, to be purchased, repaired, altered, or improved.
(g) If the guaranty is applied for in connection with the acquisition of, or
a loan upon livestock, equipment, machinery, or implements, the agency shall
upon inspection or evidence and review of the application report its opinion as
to the reasonable normal value of such property, and its recommendation as to
the guaranty. Such report shall constitute an appraisal.
§ 36.4125 Papers required. The prospective lender shall submit to the agency
the following papers:
(a) Certification of eligibility (see § 36.4124 (a)).
(b) Loan Guaranty Certificate (Form 1821 attached to application).
(c) Original application for guaranty signed by prospective lender and bor-
rower (see § 36.4124 (a)).
(d) The credit report, if required. (See § 36.4124 (b) and (d).)
(e) The original appraisal report, Form 1833. (See § 36.4124 (c), (f) and (g).)
(f) Copy of purchase option, if any; and copy of conditional sales agreement
if loan is to be predicated on such an instrument.
(g) Proposed loan closing statement of the estimated amounts to be disbursed
by the lender for the account of the borrower (see Form 1806).
(h) Unless stated in the mortgage, or otherwise in the papers submitted, a
statement of the kinds and amounts of insurance to be required to protect the
mortgagor, the lender and the Administrator against loss by fire and other haz-
ards, and the estimated premium cost thereof. (See § 36.4115.)
(i) When applicable, the original and copy (both signed) of Form 1862, Appli-
cation to Amend Loan Guaranty Certificate. (See §36.4131 (c) and (d).)
§ 36.4126 Recommendation for approval of guaranty. The Agency shall review
the papers to determine whether it will recommend approval of the application
for guaranty. Thereupon the Agency shall forward all the papers to the appropri-
ate office of the Administrator with recommendation that (a) the Administrator
approve the application, or (b) he disapprove it. If disapproval is recommended
the reasons therefor shall be stated in writing at the time the papers are forwarded.
A recommendation that the application be approved, shall be appropriately
endorsed on the original of the application. If more than one person functions
as or for the Agency in making such recommendation each such person shall sign
the recommendation made, indicating concurrence or dissent. In case any such
person fails to participate in the decision or is absent, the appropriate fact and
name of such person shall be noted on the recommendation.
§36.4127 Administrator's action on application, (a) Upon receipt of the papers
from the Agency, the Administrator will determine whether to approve the appli-
cation. If disapproved he shall return to the proposed lender all papers received
from the lender except the original application for guaranty and the original
appraisal report and shall state that the application for guaranty has been denied
and the reasons therefor. He shall send a copy of the letter to the veteran and
the Agency. Upon denial any expenses incurred by the lender or the borrower
shall be borne by them or either of them as they shall have agreed.
(b) (1) The veteran and the proposed lender, or either, may appeal to the
Administrator for review of a denial of the application.
(2) Such appeal may be by letter, or on any prescribed form, and shall be
mailed or delivered to central office of the Veterans Administration within one
month after receipt of notice of denial.
(c) (1) If for any reason the loan transaction is not concluded and the same or
another lender thereafter wishes to consider making a loan on the same security
described in the original application, a supplemental application, if the same
lender, or a new application if a different lender, may be submitted. If accom-
panying it is a statement by the borrower and lender that the condition of the
security is substantially the same as when the appraisal report was made, the
supplemental or new application may be approved without a new appraisal, if
the supplemental or new application shall have been received by the Adminis-
trator within three months from the date of the appraisal report.
1824 POST-WAR ECONOMIC POLICY AND PLANNING
(2) Without reference to the time limit stated in subparagraph (1) hereof, a
copy of the appraisal report will be supplied without cost to a prospective new
lender or to the original proposed lender at the currently prescribed price for a
copy.
§36.4128 Execution and form of guaranty, (a) If the Administrator approves
the application he shall notify the Agency and the veteran thereof. For the
purpose of evidencing the contract of guaranty, he shall execute a Loan Guaranty
Certificate, to become effective upon .the conditions therein stated. It shall be
in substantially the form following:
Finance Form 1821
Nov. 1944
United States of America
loan guaranty certificate
Issued by Veterans' Administration
State
(Where property is located)
Number L. F ----.
(To be rilled in by V. A.)
(Lender) (Exactly as Payee's name will appear on note)
(Borrower— Veteran) (Exactly as to be signed on note and mortgage)
(House or Box Number— R. F. D or Street— Post Office— County)
(State) ~
(House or Box Number— Street — Post office— County)
(Stated
I
A. This certificate shall become effective when the requirements of the statute and regulations have been
complied with and the acts certified in Part HI hereof have been accomplished in compliance with said
requirements.
B. When it becomes effective as hereinabove prescribed, this certificate shall obligate the United States of
America to pay to the legal holder of the "note" described on the reverse hereof upon his duly filing claim
therefor:
1. All or such portion of the maximum amount hereby guaranteed as becomes payable upon the conditions
at the times stated in, and in accordance with the provisions of the Servicemen's Readjustment Act of
1944 (38 U. S. Code 693; 58 Stat. 284), and the regulations issued pursuant thereto which are in effect on the
date of tnis certificate. In no event will the obligation under this certificate exceed $2,000. Subject to the
foregoing, this guaranty is for per centum of the principal amount of said "note", but not for more
than $ In no event will it exceed said percentage of the principal amount.
2. At the expiration of 1 year from the date of the "note", an amount equal to the interest for 1 year at the
contract rate on that portion of the indebtedness ("note") originally guaranteed hereby, such payment to be
credited on the indebtedness as prescribed by said regulations.
I C. Executed on behalf of the United States of America by the Administrator of Veterans' Affairs, through
the undersigned authorized agent on this date, to become effective in the manner hereinabove prescribed.
Date -
Administrator of Veterans' Affairs,
By
(Authorized Agent)
At
(Post Office)
Note: If loan is not closed the proposed lender, or when paid the holder of the note will mark this cer-
tificate "Cancelled", sign thereunder and return to the Veterans' Administration.
II
description of property to be "mortgaged"
Lot and block, section and township, land lot and Land District, etc., and surveyor's field notes where
appropriate and any other language proper to complete description. Include description of personal
property (if any). Describe fully: show serial numbers, if available, or any other means of identification.
Premises identified as:
(Name of farm, if any, and R. F. D. also number or name of nearest highway)
YCityiTown,"Viifager
(County, Parish)
(State, District, Territory)
and further described as:
(If more space is needed, detach and continue description on reverse)
POST-WAR ECONOMIC POLICY AND PLANNING 1825
III
CERTIFICATION BY BORROWER AND LENDER
A. We hereby warrant that (1) the undersigned borrower named on the reverse hereof executed the note,
the face amount of which is $ consisting of $ principal and $ interest as defined in the
Regulations; (2) it is dated day of 19 ; (3) borrower(s) and
mortgagor(s) delivered it together with the "mortgage" (as defined in the regulations) bearing the same
date, and executed to secure payment of said note; (4) said note and mortgage are in the form and type con-
templated in the application of the undersigned pursuant to which this loan guaranty certificate was
issued; and (5) the principal stated above has been paid to, or according to the directions of, the under-
signed borrower(s).
B. The understgned lender warrants that (1) the same "mortgage," duly executed and witnessed,
acknowledged, or proved as required by law, was properly filed, or filed for record, if and as prodded by
law on the day of 19 at M; and was given file
No. by the Reeordei or other proper official; (2) that it covers the property described on the reverse
hereof, which is the same property described, or otherwise identified, or referred to, in the above-men-
tioned application for guaranty and in this loan guaranty certificate, or in the application to amend loan
guaranty certificate, if any, applicable to such loan; (3) that no lien superior to said "mortgage" has inter-
vened since the date of said application; and (4) if the approved application for guaranty related to a loan
wholly or partly to be secured by a hypothecation or a pledge of personal property, such hypothecation or
pledge has become effective by appropriate delivery to the lender and no superior lien has intervened since
date of application.
(All signatures must be in ink)
(If a corporation)
(Secretary)
Mr.
Mrs.
Miss
(Lender(s))
By
Title (president, vice president, etc.)
Mr.
Mrs.
Miss
Mr.
Mrs.
Miss
(Borrower(s))
Note 1. If the note is unsecured, references to "mortgage" in paragraph "A" and "B" above are inap-
plicable. (See Regulations, § 30.4108, Par. (c).)
Note 2. If the local law provides for filing only, not recording, chattel mortgages or similar instruments
paragraph "B" above nevertheless is to be completed. It refers not only to the County Recorder or Clerk,
but also the State Commissioner of Motor Vehicles or other officials who keep motor vehicle mortgage
records, and to other similar officials, State or County. (See § 30.4133 of Regulations.)
§ 36.4129 Disposition of papers. The original application for guaranty and
the appraisal report will be retained in the files of the Veterans Administration.
The Loan Guaranty Certificate and all other papers will be forwarded to the
proposed lender with instructions as to closing the loan in a manner to make the
guaranty effective.
§ 36.4130 Loan procedure after approval of guaranty. Upon receipt of the
papers from the Administrator, the lender shall:
(a) Satisfy himself by "title certificate", as defined in these regulations, as to
the title to the real estate to be encumbered (§ 36.4100 (p)), and satisfy himself
in such reasonable manner as may be available as to the title to personal property
to be encumbered.
(b) Cause all necessary instruments to be properly signed and those to be
filed, or filed and recorded, properly witnessed, acknowledged or proved so as to
entitle them to filing or recordation.
(c) Disburse all funds in substantial accord with the proposed loan closing
statement submitted with the application. (See § 36.4125 (g) and Form 1806
or 1861.)
(d) File with the proper State, County or other public official to be retained
where required, or recorded and returned, the "mortgage", and any other appro-
priate instrument which under the law of the State is required or permitted
to be filed or recorded for the purpose of establishing a valid lien as between the
parties, or third persons, or of giving actual or constructive notice of the "mort-
gage," pledge, hypothecation, or other transaction.
(e) Take possession or do any other necessary act to make effective the pledge,
or hypothecation, if any.
§ 36.4131 Report of closing loan, (a) Within two months after closing the
loan and filing with appropriate public official of the proper instruments, or the
taking of other appropriate steps, if any, to make the lien effective, the lender
shall complete and forward to the Administrator (using prescribed form, if
available) a properly signed report of closing the loan stating that:
1826 POST-WAR ECONOMIC POLICY AND PLANNING
(1) The disbursement of the amount named in such report as the principal
of the note has been completed by the lender, which amount may be not more
than 3% in excess of the amount of the proposed loan as stated in the original
application for guaranty, without complying with the procedure stated in para-
graphs (c) and (d) of this section.
(2) Such disbursements were as estimated on the loan closing statement sub-
mitted with the application, except as otherwise stated on the reverse side of
the report of closing loan. (See §§ 36.4116 (a) and 36.4125 (g) and Form 1806
or 1861.)
(3) The note and the mortgage (or other security instrument) were properly
executed, stating the date, and the latter was duly acknowledged, witnessed, or
proved, so that it was legally eligible for filing and in which it was properly filed
and the filing number thereof; or in the case of a pledge, or hypothecation the
necessary possession, or other steps were taken to make same effective.
(4) The note was dated (stating the date thereon) and signed by the debtor;
the actual principal amount thereof; and the rate of interest provided therein.
(5) The Loan Guaranty Certificate (stating its L-Number) was completed,
and appropriately signed by the lender and the borrower as therein provided.
(b) If the lender is a corporation, its corporate seal shall be impressed on suoh
report.
(c) If the transaction to be closed is essentially the same as indicated in the
original application except that:
(1) The amount of the loan actually to be made is more than 103% of the
amount stated in the application, or
(2) Personal property to be acquired differs from that described but is for the
same use or purpose, and substantially similar in kind, quality and value.
Form 1862, Application to Amend Loan Guaranty Certificate, will be com-
pleted and signed in duplicate.
(d) The lender will forward the original and copy of Form 1862, Application
to Amend Loan Guaranty Certificate, to the "Agency," which will recommend
approval or disapproval and forward both to the Veterans Administration office
which issued the Loan Guaranty Certificate. Such office will determine whether
to approve the Application to Amend Loan Guaranty Certificate. Such deter-
mination will be based on the original application, the evidence submitted in or
with the original application, the application to amend, the recommendation of
the Agency, and such other evidence, if any, as it considers necessary. Notice
of action will be given as in the case of original applications. If approved such
approval will be appropriately indicated on the original, and such original, duly
executed by the Veterans Administration will be forwarded to the lender. It may
be attached to the original Loan Guaranty Certificate to evidence amendment
thereof as reflected by such "rider."
' § 36.4132 Construction loans, (a) Upon the submission to an Agency of an
application made pursuant to section 502 of the Act for the guaranty of a loan for
construction on a farm owned by the veteran, or for repairs, alterations or improve-
ments thereon (hereinafter collectively referred to as "construction loans") the
guaranty will be issued to become effective only upon completion thereof, and
upon fulfillment of the same requirements of these regulations as are applicable to
the guaranty of loans for the acquisition of residential or non-residential farm
buildings other than by construction.
(b) Notwithstanding the provisions of paragraph (a) of this section, the guar-
anty mentioned therein may become effective without the entire amount of the
loan having been disbursed if:
(1) Complete disbursement is prevented, in the exercise of ordinary care, by
reason of the filing of mechanics' liens or other liens, or other controversy or
threat of litigation, as to entitlement to any part of the proceeds of such loans; and
(2) There is paid to an escrow agent approved by the Administrator so much
of such proceeds as have not been disbursed, or other arrangements satisfactory
to the Administrator have been made for assuring the availability of such sums;
and
(3) There is issued by the Administrator Form 1863, Approval of Escrow
Certificate, which may be attached to the Loan Guaranty Certificate.
(c) For construction loans the lender will follow the procedure provided in
§§ 36.4124 to 36.4131, inclusive, for the guaranty of loans for the purchase of
farms, and in addition will furnish to the Agency:
(1) Complete plans and specifications, except as provided in § 36.4124 (c).
When complete plans and specifications are not required the data mentioned in
said paragraph (c) will be supplied unless § 36.4124 (g) is applicable, in which
event the requirements will be those stated therein.
POST-WAR ECONOMIC POLICY AND PLANNING 1827
(2) An estimate, prepared by a qualified appraiser, of the normal agricultural
value of the property on which the improvements will be situated together with
a separate estimate of the increased value of the property which will result from
the improvements according to the plans and specifications or other data. (See
§ 36.4124 (c).) Such estimates of value are in addition to the appraiser's report,
otherwise required;
(3) A copy of the agreement or agreements (which may be unsigned) on
which the proceeds of the proposed loan will be disbursed.
(d) Upon the receipt of such papers the Agency will follow the procedure
prescribed in § 36.4126 and submit same to the Administrator for action as
prescribed in §§ 36.4127 and 36.4128.
(e) The Loan Guaranty Certificate shall become effective only upon the con-
ditions stated in § 36.4130 and in addition the further condition that there be
supplied to the Administrator a statement by an appraiser on Form 1803 (a),
Statement by Appraiser on Completion of New Construction. It shall recite
that :
(1) He has inspected the construction, repairs, alterations, or improvements.
(2) The same have been constructed and completed in substantial conformity
with the contract, the plans and specification (if any), and any authorized
changes therein (if any), permitted by these regulations, or, in those cases em-
braced in § 36.4124 (c) or § 36.4124 (f) there are no plans and specifications,
within good building practices. »
(3) The increased value of the property as completed and which will be en-
cumbered is substantially in accord with his estimate.
(f) During the course of construction the Administrator shall be entitled at
his expense, to cause such inspection of the construction work at such time or
times as he may determine.
(g) Upon compliance with the requirements of this section and of §§ 36.4130
and 36.4131 relating to the guaranty becoming effective in other than construc-
tion loan cases, said Loan Guaranty Certificate shall become effective as originally
executed (and subject to § 36.4131), or as amended pursuant to approval of
application therefor on Form 1862, Application to Amend Loan Guaranty Cer-
tificate. (See §36.4131 (c) (d).)
(h) The borrower and lender may contract for the payment to the lender of a
reasonable sum for the advance of funds during the construction and supervision
or inspection of the construction.
(i) Minor changes may be made in the plans and specifications or substitution
of material of substantially equal quality or value, as the creditor, the debtor, and
the builder (contractor) may agree if same are not of a major character and in
the aggregate do not increase or decrease the cost more than five per centum of
the contract price. This does not modify the provisions of § 36.4131. Changes
or substitutions other than as herein stated must have the approval of the
Administrator.
§ 36.4133 When guaranty does not apply. The guaranty shall not cover any
loss sustained by the creditor as the result of:
(a) The acceptance by the mortgagee of a "mortgage" on any real or personal
property, title to which is not merchantable;
(b) Failure of the mortgagee to procure a duly recorded lien of the dignity
required by these regulations; or a lien of such dignity by filing, without recording,
if lawful, or by pledge or otherwise as required or permitted by applicable law
in the jurisdiction where the property is situated at the time the loan is closed.
(c) Failure of the mortgagee to comply with § 36.41 15 with respect to insurance.
(d) A tax sale pursuant to execution, or otherwise as provided by law, oc-
casioned by nonpayment of taxes accruing against the mortgaged property after
the date of the "mortgage" if "mortgagee" fails to give notice to the Administrator
of the delinquent taxes at least one month before such sale.
(e) A release by the creditor of the lien on any of the real or personal property
securing the guaranteed loan, or any part thereof unless the Administrator con-
sents in writing. Such consent may be granted if the debt is appropriately re-
duced or on such other terms as the Administrator may determine: Provided
however, That if the land is sought by a public authority for highway or other
purposes, consent is hereby given for the creditor to release without consideration
or for such consideration as he deems proper and without reference to the Admin-
istrator, the creditor's lien on land without any buildings thereon if the land so
released does not exceed five percent of the acreage encumbered and does not
exceed $200 in value. The same consent is hereby given when the release, ease-
ment grant, or other instrument is sought by a public or private agency, or
person, for the purpose of pipe line, telephone, telegraph or electric transmission
1828 POST-WAR ECONOMIC POLICY AND PLANNING
lines: Provided, however, That when such releases, or grants by the lender for any
one or more of the purposes stated in this paragraph, or otherwise, with or without
specific consent by the Administrator, shall have decreased the security as much
as five percent in acreage, or $200 in value, no further releases shall be executed,
without consent of the Administrator. If release of lien is executed contrary to
the provisions of these regulations the amount of the guaranty will be reduced
proportionately in the same manner as if the value of the released property were
applied as a credit on the unpaid balance of the loan. The provisions of this
paragraph will not be construed to affect the guaranty in the event of any grant
of title or easement that leaves unaffected the lien on the property affected
thereby; or
(f) Sale by reason of foreclosure of a superior lien if the holder of the guar-
anteed loan secured by a subordinate lien has knowledge of such foreclosure sale
as much as 10 days prior thereto and fails to notify the Administrator of the time
and place thereof.
CLAIM UNDER A GUARANTY
§ 36.4134 Defaxdt. (a) In the event of default, not cured, continuing three
months on an amortized loan or one month on a term loan the "creditor"
may elect to assert claim under the guaranty, and give notice thereof to the
Administrator.
(b) If any default occasioned by failure seasonably to pay to the "creditor"
entitled any amount of principal or interest due him under the contract (not
cured) shall have persisted as long as six months the holder of the indebted-
ness shall give notice thereof to the Administrator notwithstanding the failure
results from payments on "advances" as provided in § 36.4118 or from any indul-
gence of the debtor as provided in §§ 36.4135 and 36.4141.
(c) CI) The notice shall state the loan guaranty number if available. If not
available other identifying data shall be included, such as date and amount of
original obligation, location of Veterans' Administration office that issued the
guaranty and the property encumbered.
(2) In all cases the notice shall state the name and last known address of the
debtor, of the veteran, and of the creditor, and the date and manner of default,
and amount past due. If he desires, the creditor may also state his views as to
any indulgence that should be extended.
(3) The notice to the Administrator shall be mailed by registered mail or
personally delivered in exchange for a written receipt within one months after
the expiration of said six months' period.
§ 36.4135 Claim on notice of default, (a) In the notice of default, or sepa-
rately, then, or later, the creditor may make claim under the guaranty.
(b) Then or thereafter the creditor may also give notice of his intention to
foreclose the lien or liens securing the indebtedness.
(c) The Administrator may approve the creditor's request, if any, to postpone
action to press his claim against the mortgagor, or the property. Such post-
ponement with the consent of the Administrator, shall not operate to void or
diminish the ultimate liability under the guaranty. In no event shall indulgence
or postponement of action authorized by the^e regulations impair any right of the
creditor to thereafter proceed within the applicable statute of limitations period
as if there had been no indulgence or postponement.
§36.4136 Legal action, (a) The creditor shall not begin action in court or give
notice of sale under a power of sale, until the expiration of 30 days after
receipt by the Administrator of the notice of intention to foreclose. Notwith-
standing paragraph (a) of § 36.4134 such notice may be given at any time after
default.
(b) (1) If the circumstances require immediate action to protect the interest
of the creditor or the Administrator, the Administrator may waive the require-
ment for prior notice if notice of the action taken is immediately given.
(2"i Without limiting the foregoing, the existence of conditions justifying the
appointment of a Receiver for the property shall be sufficient excuse for begin-
ning suit without prior notice to the Administrator if within ten days after com-
mencement of the suit or action, plaintiff gives the Administrator notice thereof.
§ 36.4137 Notice of suit and subsequent sale, fa) Within ten days after
beginning suit or causing notice of sale without suit to be given, the creditor
shall notify the Administrator thereof by registered mail, or by personal deliv-
ery of notice in exchange for written receipt. The notice shall state whether
the foreclosure will be by proceeding in court, or under a power of sale; the style
and number of the suit, if any, and the name and location of the court in which
pending.
POST-WAR ECONOMIC POLICY AND PLANNING 1829
(b) The creditor shall give written notice to the Administrator by registered
mail (or delivery) of any foreclosure sale, judicial, or under a power of sale;
or of any proposed termination of the rights of any vendee or his immediate or
remote guarantee (assignee) pursuant to any power or option in a sales contract,
or in any other instrument affecting the property which constitutes any security
for the obligation guaranteed. Such notice shall be given so that it is received
at least thirty days before such sale or other proposed action. It shall state the
date, hour and place thereof. The Administrator may bid thereat on the same
terms as the lender or other bidders, and may exercise any right the debtor could
exercise by virtue of the contract, or any statute, or otherwise. This section is
applicable whether the suit, or the sale, or termination, occur before or after
payment of the guaranty.
§ 36.4138 Death of veteran or other owner, (a) In the event the creditor has
knowledge of the death of the veteran or of any owner of an interest in the en-
cumbered property, or the death of any other person liable on the indebtedness
which is guaranteed in whole or in part, the creditor shall take such steps, if any,
as are legally necessary, and reasonably available, in the jurisdiction where the
encumbered property is situated, to avoid loss of the lien, or impairment thereof,
or of all or part of the proceeds of any sale of the property as a result of, or incident
to, such death, or of any probate proceedings thereby occasioned in said jurisdic-
tion.
(b) In addition to protecting the lien rights as required by paragraph (a) of
this section, the creditor at his discretion may proceed in probate, or otherwise,
as may be permissible and feasible, in any jurisdiction where administration
proceedings are pending or properly may be instituted, or other appropriate legal
action taken, against assets or persons, to assert any rights, by means of any
remedies, therein available to a similarly situated creditor of the decedent.
(c) Upon direction of the Administrator and his designation of an accessible
attorney for the purpose, and making appropriate provisions for advancing or
paying the costs and expenses of the proceeding, the creditor shall proceed as
provided in paragraph (b) of this section: Provided, however, That in any case
the Administrator may, at his option, proceed immediately in respect to protect-
ing the lien, or asserting claim as contemplated b}r paragraph (b) of this section,
or as to both remedies. If the Administrator takes action, it may be in his name
or the name of the creditor as the Administrator may elect and as may be appro-
priate under applicable law. If action is taken by the Administrator he shall
seasonably notify the creditor thereof.
(d) Nothing in this section shall impair any right of set-off or other right or
remedy of the Administrator.
§ 36.4139 Death or insolvency of creditor, (a) Immediately upon the death of
the "creditor" and without the necessity of request or other action by the debtor
or the Administrator, all sums then standing as a credit balance in a "trust,"
or "deposit," or other account, to cover taxes, insurance accruals, or other items
in connection with the loan secured by the encumbered property, whether stated
to be such or otherwise designated, and which have not been credited on the
"note" shall, nevertheless, be treated as a set-off and shall be deemed to have
been credited thereon as of the date of the last debit to such account, so that the
unpaid balance of the note as of that date will be reduced by the amount of such
credit balance: Provided, however, That any unpaid taxes, insurance premiums,
rents, or advances may be paid by the holder of the indebtedness, at his option,
and the amount which otherwise would have been deemed to have been credited
on the note reduced accordingly. This section shall be applicable whether the
estate of the deceased creditor is solvent or insolvent.
(b) The provisions of paragraph (a) of this section shall also be applicable iu
the event of:
(1) Insolvency of creditor;
(2) Initiation of any bankruptcy or reorganization, or liquidation proceedings
as to the creditor, whether voluntary or involuntary;
(3) Appointment of a general or ancillary receiver for the creditor's property;
or, in any case
(4) Upon the written request of the debtor if all accrued and due insuiance
premiums, taxes, and rents have been paid, and appropriate provisions made
for future accruals.
(c) Upon the occurrence of any of the events enumerated in paragraph (a) or
(b) of this section interest on the note and on the credit balance of the "deposits"
mentioned in paragraph (a) shall be set-off against each other at the rate payable
on the principal of the note, as of the date of last debit to the deposit account.
1830 POST-WAR ECONOMIC POLICY AND PLANNING
Any excess credit of interest shall be treated as a set-off against the unpaid "ad-
vances," if any, and the unpaid balance of the note.
(d) The provisions of paragraphs (a), (b) and (c) of this section shall apply also
to corporations. The dissolution thereof by expiration of charter, by forfeiture,
or otherwise, shall be treated as is the death of an individual as provided in para-
graph (a).
§ 36.4140 Filing clnim under guaranty. Claim under the guaranty may be
made on Form 1864, Claim under the Guaranty. Subject to the limitation that
the total amount payable under the guaranty shall in no event exceed the original
amount thereof, the amount payable under the guaranty shall be the percentage
of the indebtedness originally guaranteed applied to the indebtedness (as defined
in § 36.4100 (m)), computed as of the date of the claim, and reduced by any pay-
ments theretofore made by the United States pursuant to the guaranty.
§ 36.4141 Options available to Administrator. Upon receipt of claim under the
guaranty, or notice of intention to foreclose, the Administrator shall have the
following options:
(a) Pay to the creditor not later than one month after receipt of notice of any
default, as a partial payment of any actual or potential claim under the guar-
anty, the amount of principal, interest, taxes, advances, or other items in default;
and in consideration of such payment the lender shall be deemed to have agreed
to refrain from giving effect to any acceleration provisions by reason of defaults
prior to the date of notice of default theretofore given: Provided, however, That
unless the creditor consents, the Administrator may exercise this option once
only, and in an amount not exceeding an amount equivalent to the aggregate of
principal and interest payable in one year, or not exceeding ten per centum of the
original amount of the guaranty, whichever sum is less.
(b) Pay the creditor within one month after receipt of claim the full amount
payable under the guaranty without requiring foreclosure, or personal action.
(c) Pay to the creditor promptly after receipt of claim any amount agreed
upon, not exceeding the amount due under the guaranty; and notify him to in-
stitute appropriate foreclosure proceedings, with or without legal action to reduce
the debt to judgment, against all or any of the parties liable thereon, and whose
names are stated in such notice to the creditor.
(d) If the creditor does not begin appropriate action within two months after
receipt of notice to institute action as provided in paragraph (c) of this section,
the Administrator shall be entitled to begin and prosecute the same to completion
in the name of the creditor, or of the Administrator on behalf of the United States,
as may be appropriate under applicable laws and rules of procedure; Provided,
however, That in such event the Administrator shall pay (in advance if required
under the practice in the jurisdiction) all court costs, and other expenses, and
provide the leeal services required.
§36.4142 Refinancing and extension of guaranty, (a) When the Administrator
shall have received notice from the creditor that he intends to institute foreclosure
proceedings, the Administrator shall be entitled to obtain a refinancing which will
prevent the consummation of the foreclosure sale. Nothing herein shall be con-
strued to require a creditor to lend money for such refinancing.
(b) If refinanced in any manner the Administrator may continue in effect the
guaranty granted with respect to the previous loan in such manner as to cover
the loan which affected the refinancing.
(c) The Administrator in appropriate cases shall be entitled to exercise any
redemption rights of a debtor, or a creditor, in connection with the loan guaranteed
or propertv rights arising out of, or incident to such loan.
§ 36.4143 Subrogation, (a) Any amounts paid to the creditor bv the Admin-
istrator pursuant to the guaranty shall constitute a debt due to the United States
by the veteran on whose application the guaranty was made; and by his estate
upon his death. The Administrator is subrogated to the contract and the lien
rights of the creditor to the extent of such payments, but junior to the creditor's
rights as against the debtor or the encumbered property until the creditor shall
have received the full amount payable under his contract with the debtor. No
partial or complete release by the creditor of the debtor or of the lien shall impair
any rights of the Administrator, by virtue of the lien, or otherwise.
(b) The creditor, upon request, shall execute, acknowledge and deliver an ap-
propriate instrument tendered him for that purpose, evidencing any payment re-
ceived from the Administrator and the Administrator's resulting right of subro-
gation.
§ 36.4144 Future action against mortgagor. In addition to the amount, if any,
collected from the proceeds of the encumbered property by reason of the right of
subrogation, the United States will collect from the veteran, or his estate, by set-off
POST-WAR ECONOMIC POLICY AND PLANNING 1831
against any amounts otherwise payable to the veteran or his estate; or in any
other lawful manner, any sums disbursed by the United States on account of the
claim pursuant to the guaranty.
§36.4145 Suit by Administrator, (a) Whenever pursuant to these regulations,
the Administrator institutes, or causes to be instituted by the creditor, or other-
wise, any suit in equity; action at law; or probate proceedings or the filing of a
claim in such; or other legal or equitable proceedings of any character, or any sale,
in court or pursuant to any power of sale, the person or persons properly instituting
the same (including the Administrator) shall be entitled to recoup from any pro-
ceeds realized therefrom any expenses reasonably incurred, including trustee fees,
court costs, and attorney fee paid (or the reasonable value of the services of the
trustee and of the attorney, if performed by salaried person or persons, or by the
party himself, when proper).
(b) The net proceeds, after setting off such items that may properly be re-
couped, shall be credited to the indebtedness, or otherwise as may be proper
under the facts.
(c) In determining the propriety of recoupment and the amount thereof con-
sideration shall be given to any provisions in the "note" or "mortgage" relating
to such items, and any amounts actually realized pursuant thereto.
§ 36.4146 Creditor's records and reports required, (a) The creditor shall main-
tain a record of the amounts of payments received on the obligation and disburse-
ments chargeable thereto, and the dates thereof. Any creditor who fails to main-
tain such record shall be presumed to have received on the dates due all sums
which by the terms of the contract are payable prior to date of claim for default,
and the burden of going forward with evidence and of ultimate proof of the con-
trary shall be on such creditors; not on the debtor, or the United States.
(b) On any delinquent loan the creditor shall report annually on the anniver-
sary of the earliest unremedied default any amount received or disbursed, the
unpaid balance of principal and accrued interest and any other items chargeable;
and the nature of any defaults not already reported. He shall include such addi-
tional information, if reasonably necessary and obtainable, which may from time
to time be requested by the Administrator.
(c) A proposed lender may be required to submit evidence satisfactory to the
Administrator of his equipment for maintenance of adequate records on, and his
ability to service, loans if guaranteed pursuant to the provisions of the Act and
these regulations.
§ 36.4147 Failure to supply information. Failure to supply any available
information required by these regulations within two months after request
therefore will entitle the Administrator to obtain such information otherwise,
and the expense of so obtaining it, plus ten dollars to cover estimated overhead
expenses, shall be chargeable to the creditor who failed to comply with such
request.
§ 36.4148 Notice to Administrator. Any notice required by these regulations
to be given the Administrator shall be sufficient if in writing, and delivered at,
or mailed to, the Veterans' Administration office at which the application for
guaranty was approved or to any changed address of which the creditor has been
given notice or, at the option of the creditor, to the central office of the Veterans'
Administration, Washington 25, D. C. If mailed the notice shall be by registered
mail when so provided by these regulations.
§ 36.4149 Right to inspect book*. The Administrator has the right to inspect,
at a reasonable time and place the papers and records pertaining to the loan and
guaranty. If permission to inspect is declined the Administrator may enforce
the right by subpoena under the provisions of Titel III of Public No. 844, 74th
Congress, 49 Stat. 2031-35, 38 U. S. C. 131, or in any other lawful manner.
§ 36.4150 Forms, construction to be placed on references to. All references in
the regulations to Form 1800, Certification of Eligibility, or to other form numbers,
shall be construed to include any revision of the same forms, identified by the
same, or by different numbers.
§ 36.4151 Disqualified lenders and bidders. Except under unusual circum-
stances and upon prior approval by the Administrator an application for guar-
anty of a loan will not be approved if the lender is known to be an employee of
the Veterans' Administration or of the Agency; and without such approval, an
employee of either may not bid at a foreclosure sale of the security for a guaranteed
loan.
[seal] Frank T. Hines, Administrator.
December 8, 1944.
[F. R. Doc. 44-18638; Filed, Dec. 8, 1944; 12:37 p. m.]
1832 POST-WAR ECONOMIC POLICY AND PLANNING
Veterans' Administration Forms Required For Processing
Farm Loans
(Additional forms are being printed)
[Duplicate]
[Page 1]
VETERANS ADMINISTRATION
Finance Form 1822 a
veterans administration
Application for Farm Loan Guaranty
State Number L. F.
(Where property is located) (To be filled in by V. A.)
1. 2.
(Lender) (Exactly as will appear on note) (Borrower — Veteran) (Exactly as will appear on
note and mortgage)
(R. F. D., city, county) (Street number, city, county)
(State) (State)
INSTRUCTIONS
(.Read carefully before beginning to fill out this form)
I. Loan Guaranty Certificate (Form 1821).
Fill in all spaces at top of the form, except the "L. F." number. Also com-
plete part II, ''Description of Property To Be Mortgaged," in such manner
that all required information will be duplicated by a carbon impression in the
proper spaces on page 1 of the application. If it is necessary to continue the
property description on the reverse side of the certificate, use space on page
2 of the application for the carbon impression thereof. The certificate may be
separated from the application along the perforated line at the bottom of the
page. Submit it to the agency with the application and other papers.
(See regulations, sec. 4125.) No copy of the certificate other than the
original is necessary. It will be signed and returned to the lender by the
Veterans Administration if the application is approved.
II. Application for Farm Loan Guaranty (Form 1S22).
(a) This form is to be executed in duplicate (use Form 1822a). The
duplicate copy does not have the certificate attached and will be retained by
the lender. The original signed copy will be permanently retained by the
Veterans Administration and should be sent to the agency with other papers.
(See regulations, sec. 4125.)
(6) Every question must be answered. Place a check mark (/) in space
for answer to any question that is not applicable.
(c) If the loan is to be secured by personal property, but exceeds 81.000,
answer question 16 (o) with respect to the land on which it is to be used,
notwithstanding the land is not described on page 1 and is not to be encum-
bered.
(.See continuance of instructions, page 4)
3. DESCRIPTION OF PROPERTY TO BE "MORTGAGED"
(Lot and block, section and township, land lot and land district, etc., and surveyor's field notes where appro-
priate, and any other language proper to complete description. Include description of personal property,
if any. Describe fully. Show serial numbers, if available, or any other means of identification)
Premises identified as
(Name of place, if any, and R. F. D. Also number or name of
nearest highway. Street and number in city, etc.)
(City, town, village) (County, parish) (State, district, territory)
(If more space is needed, continue carbon copy of description on reverse)
POST-WAR ECONOMIC POLICY AND PLANNING 1833
[Page 2]
4. Applicant's age 5. Sex 6. Race
7. Service or Serial No. 8. Date of birth
9. Place of birth
10. Indicate by cross (X) the branch of service in which you served:
□ Army □ Navy □ Marine Corps □ Coast Guard
11. Date entered service 12. Date separated from active duty
13. Rank and organization at time of separation
14. If you have served in any branch under another name, state that name, the
branch, and dates between which you served under that name. If none,
so answer
15. Check one: □ Married □ Single □ Divorced □ Widower (or Widow).
Number of children
Full name of wife or husband
Boys' ages Girls'
16. Farming Experience:
Dates
(a)
Types of Farming
(b)
Number of Years as Laborer, Renter,
Sharecropper, Owner, or Student (State Which)
(c)
Location
(d)
17.
(a) Lender's (seller's) estimate of value of property which will be encum-
bered to secure the loan? Land, $ Buildings, $
(b) Personal property (identify generally)
(c) Name and location of farm, highway numbers, and distance and direction
from nearest town
18.
(d) If tenant, state amount of rent («) Unexpired term
(/) Do you have option to purchase? (g) Number of acres,
cultivated (h) Woodland (i) Pasture
land 0') Wasteland (k) Total acres
(I) Amount and kind of fencing (m) Source of water
supply (n) Is electricity available for lights,
power? (o) Describe dwelling — number of rooms,
type of construction, etc.
(p) Kind and size of outbuildings
(q) What estate in the land described on page 1 hereof are you to own or do
you now own?
(State whether fee simple or other estate. If a lease only or sharecropper, state)
(Also state whether all or an undivided interest; and if latter, how much)
(r) Do you occupy or intend to occupy the farm as your home?
(s) Do you operate or intend to operate the farm yourself?
(as provided in sec. 4100 (b) of the regulations).
Proposed Farm Operations:
Crops
(a)
Acres
(b)
Production
(c)
To be sold
(d)
Unit Price
(e)
Total
(f)
Total, $.
1834
POST-WAR ECONOMIC POLICY AND PLANNING
[Page 3]
19. Production of Livestock and Livestock Products:
Livestock
(a)
Number on
Hand
(b)
Production
(c)
To Be Sold
(d)
Unit Price
(e)
Total
(0
$
20. I. Assets
(a) Cash. . . .
(b) Value of land
(c) Buildings . .
(d) Machinery .
(e) Livestock .
(/) Other . . .
(9)
Total
Total, $..
Total assets (from col. I). .
II. Liabilities
Indebtedness:
(a) Secured ...$..
(b) Unsecured . .
(c) Total indebtedness.
(d) Net worth . . . .
21. I. Estimated Income
(a) Crops
(b) Livestock
(c) Compensation or pen-
sion from U. S.
Government . . .
(d) Other income of vet-
eran
(e) Of wife (or husband).
(/)
Total
Total income (from col. I) . . $.
II. Estimated Expenditures
(a) Farm operating and
living expenses
(6) Payment of deitts
(c) Taxes
(d) Other
(e) Total expenditures
(/) Excess of income
expenditures . .
22. Have you applied to the Administrator of Veterans' Affairs for guaranty
of any other loan or loans?
(Yes or No)
If yes, give the following information for each application:
Date of Appli-
cation (s)
(a)
Name and Address of Lender(s)
(b)
Purpose of
Loan(s)
(e)
War Loan
Closed
(d)
Amount of
Guaranty
(e)
$
23. (a) Is loan to be secured by a second lien pursuant to sec. 505 of the act?
(6) If "yes" state name and address of holder of primary loan
(c) Amount of primary loan $ (d) Interest
rate % per year, (e) Final maturity date? (/) Amount of
payments? $ (g) How often due? (h) Name of Federal agency
making, insuring, or guaranteeing primary loan?
24.
Property Insured
(a)
Fire
( Yes or No)
(b)
Amount
(c)
Annual Pre-
mium per
$1,000
(d)
Other (Specify Amount, Ma-
ture— e. g. storm, hail, etc.)
(e)
Annual Pre-
mium per
$1,000
(g)
POST-WAR ECONOMIC POLICY AND PLANNING 1835
25. (a) Purpose of the loan hereby applied for is:
(b) Cost to veteran of real or personal property to be purchased, $
(c) Repairs, alterations, or improvements to any buildings or equipment,
$ (d) If for taxes, .special assessments, or delinquent indebted-
ness, state amount of loan for: (i) Taxes, $ ; (ii) Special assessments,
$ ; (hi) Delinquent indebtedness, $ ; (iv) Total amount
of outstanding, $ • Payable this fiscal
(State which)
year, $ ; (v) Payable per year, $ , beginning .
26. (a) Amount of loan now applied for, $ (6) Rate of interest %
per year, (c) Maturities (d) Secured by mort-
gage or
(Deed of trust, conditional sales contract, etc.)
Note. — Must be first lien except as otherwise provided in regulations.
27. Amount of guaranty hereby requested, $
28. Have you read or had read to you Form 1824, "Explanation of Farm Loan
Guaranty"?
29. The person signing this application as the veteran hereby represents that he is
the veteran named in question 2 on page 1 of this application. His identity
as such has been established to the satisfaction of the lender by
(State method, e. g.F personal acquaintance of stated period; comparing signature and description on
certificate of discharge, etc.)
[Page 4]
30. All the information reflected by the application is true to the best of lender's
information and belief.
31. The undersigned borrower (veteran) and lender (or seller) hereby apply for
guaranty by the United States of America of a loan in accordance with this
application, which is also an application to the lender by the borrower for
said loan; said guaranty to be pursuant to the Servicemen's Readjustment
Act of 1944 (58 Stat. 284), which act and the regulations issued pursuant
thereto and in effect on the date of the loan guarantv certificate issued pursu-
ant to this application, shall be a part of the contract between the United
States of America, the borrower, the lender, and each of them.
32. Borrower and lender understand and agree that, if issued, the guaranty will
be issued in reliance upon the information contained in this application.
33. The lender, or authorized employee, or agent of the lender, has read this
entire application as completed, has seen and spoken with applicant, believes
he is the veteran, and he appears to be competent to understand the nature
of the transaction and enter into it.
(// a corporation)
Attest
Secretary. Lender.
Date By
(Authorized signature)
CORPORATE
SEAL (Title)
Date .._
(Borrower(s))
Signatures of lender and borrower must correspond in every detail with the
name as typed at top of page 1, notwithstanding name of borrower so shown
may differ from name in question 14. A married woman will include her sur-
name before marriage, but sign husband's surname as her present surname.
34. RECOMMENDATION OF DESIGNATED AGENCY
We, the certifying agency, after consideration of all the facts, believe that the
loans for which guaranties are sought are for the purposes stated in the
application; that the property purchased or to be purchased with the proceeds
of the loan will be used in and will be useful and reasonably necessary to the
efficient conduct of the bona fide farming operations of the applicant, whose
ability and experience and proposed operations are such that there is reason-
able likelihood of his success; and that the purchase price of the property is
not in excess of the reasonable normal value thereof.
1836 POST-WAR ECONOMIC POLICY AND PLANNING
This application and the attached papers are forwarded to the Administrator
of Veterans' Affairs by the undersigned designated Federal agency, which
herebv recommends that said Administrator J ^aPP1"^ e I sajd application for
J [approve J rr
a guaranty.
(Chairman of committee) (Member) (Designated agency)
- By
(Member) (Member) (Authorized signature)
Date
instructions — continued
III. Reference is made to the following sections of the regulations for guidance
in connection with applications for (a) purchase of a farm (4124-4132);
(6) new construction (4132); (c) repairs, alterations, improvements, delin-
quent indebtedness, taxes, special assessments (4104-4107) : (d) purchase of
personal property (4104); (e) two or more borrowers (4122).
IV. If the loan is for any of the purposes in paragraph III (c) above (section
501 (b) of the act) and is to be secured by a junior lien because of existing
prior liens, attach a signed memorandum stating w ith respect to such prior
liens; (a) date, original amount, and unpaid balance of loan; (6) amounts
and frequency of payments required and permitted; (c) rate of interest;
(d) whether any payments are past due and the amounts thereof; (e) u hether
any taxes, special assessments, or insurance premiums are due but unpaid
and the amounts; (/) date of most recent appraisal of the property and
value therein stated; (g) date and nature of default, if any.
V. The veteran should have read Form 1824, "Explanation of Farm Loan
Guaranty," before signing application.
VI. Permissible loan charges, see regulations, section 4116.
VII. If the loan is not to be secured by a "mortgage," see regulations, section
4124, paragraph 5.
VIII. A notary's certificate is not required on the application. Nevertheless, it
must be remembered that Federal statutes provide severe penalties, includ-
ing forfeitures, fines, and imprisonment for fraud on the part of the applicant
and also as to any person who shall "knowingly make or cause to be made,
or conspire, combine, aid or assist in, agree to, arrange for, or in any vise
procure the making or presentation of a false or fraudulent affidavit, declara-
tion, certificate, statement, voucher, or paper, or writing purporting to be
such," concerning anv application for the guarantv of a loan by the Admin-
istrator (38 U. S. Code 697, 715, 450, 451, 454a, 556a; 18 U. S. Code 80).
VETERANS ADMINISTRATION
Finance Form 1824
veterans administration
Explanation of Farm Loan Guaranty
(Under the Servicemen's Readjustment Act of 1944)
(Veteran should read this explanation before signing the application form)
1. The Veterans Administration has no authority to make a loan. The loan
is made by banks and other lenders at not over 4 percent interest. There are no
"designated lenders." All lenders are "eligible." When made in accordance
with the regulations, the loan mav be partially guaranteed by the Administrator.
The guarantv is available on purchase money notes also. For convenience these
transactions are called loans in this explanation. Payments may extend over a
maximum period of 20 years, but not longer than the useful life of property (real
or personal) which is security for the loan.
2. If the veteran fails to make payments as they become due according to his
contract with the lender the lien may be foreclosed and the property sold. If the
Veterans Administration is required to pay any or all of the amount guaranteed,
the veteran will become obligated for the repayment to the Government of the
amount paid on account of the guaranty.
3. Interest for the first year on the amount guaranteed will be paid by the
Government. The veteran does not repay this interest.
POST-WAR ECONOMIC POLICY AND PLANNING 1837
4. Any lender has the right to refuse to make a loan, with or without stating a
reason. The fact that a particular lender refuses to lend the money does not
mean that another lender may not be willing to lend it. The Veterans Adminis-
tration will determine whether to guarantee the loan on the basis of the facts
presented, irrespective of who may be the proposed lender (or seller).
5. Neither the act nor the regulations limit the amount of the loan, but the
maximum amount of guaranty available to an eligible veteran is $2,000. Once
this amount has been guaranteed by the Administrator it cannot be made avail-
able on another loan, for any purpose.
6. Under certain conditions the Administrator may guarantee a loan secured
by a "second mortgage," for the purpose of acquiring a farm, if the "first mort-
gage" is to secure a loan made, guaranteed, or insured by a "Federal agency."
Most lenders can furnish details about such a loan.
7. The Veterans Administration will not undertake to advise a veteran whether
to purchase a specific property. This is a decision the veteran must make on his
own responsibility after obtaining such information as he considers proper.
Information of a general character will be supplied on request of the veteran.
In any important deal it usually is wise to obtain some expert advice on the
particular facts, and applicable law, before signing any agreement. Advice
should be obtained from a person qualified on the particular subject and who does
not represent any other party to the deal. Care should be taken to see that the
acreage actually is the amount purchased. The county clerk or judge can supply
the name of the official surveyor or another surveyor. Your county agent or
State commissioner of agriculture, or similar official, can supply certain other
information, or the names and addresses of others who can.
8. Read the entire application Form 1822 before answering the questions in it.
This will suggest several matters which, while not precisely covered in the appli-
cation, require careful consideration in the purchase of a farm. For example: (a)
productivity and soil type, sufficiency of timber to furnish wood for fuel and
lumber for repairs on the farm, erosion hazrdas, size, and is the farm adaptable
for the type of farming contemplatea; (6) probable cost of upkeep of builoir.gs,
fencing, erosion control, taxes, water supply, and other costs; (c) nearness of
suitable schools, churches, recreation centers, shopping facilities, markets for
produce, produce-buying routes, etc., railroad stations, and type of roads; (d)
suitability of living conditions to size of family, and ages of children.
9. The purchase of a farm is an important transaction. To be successful, all
factors must be carefully considered. A copy of the regulations, which are a part
of the contract, is available at any office of the Veterans Administration and
probably at any bank or other lending institution.
10. If loan is not closed the proposed lender, or when paid the holder of the note
will mark Finance Form 1821, "Loan Guaranty Certificate," "Canceled," sign
thereunder, and return to Veterans Administration.
Frank T. Hines, Administrator.
Instructions to Lenders
Important — The instructions below should be read by the
lender before securing appraisal or presenting application
No. 1. — When "Certification of Eligibility" Form 1800 designates as appraiser
the Chief Reviewing Appraiser of the Farm Credit Administration, the lender
will, when requesting the service forward the amount of the fee indicated on the
Form 1800. The remittance will be payable to the Federal Land Bank and
accompany the request for appraisal report when mailed to Chief Reviewing
Appraiser, care of Federal Land Bank in the district in which the property to be
appraised is located. The lender shall furnish at the time of his request for
appraisal, description of the real property, distance and direction to nearest
town, name of farm, if any, number of highway or name of road on which located,
and any other information that might be helpful to the appraiser in locating the
property to be appraised.
No. 2. — When "Certification of Eligibility" Form 1800 designates as appraiser
the Veterans agricultural loan committee for real or personal property, the
lender shall notify the committee whose address is in care of the farm supervisor
of the Farm Security Administration of the area in which farm operations are
to be conducted.
91183 — 45— pt. 12 6
1838 POST-WAR ECONOMIC POLICY AND PLANNING
No. 3. — When loan application and related papers are completed the lender
shall forward all papers to the Veterans agriculture loan committee as indicated
in the foregoing paragraph.
No. 4- — Amendments to Veterans Administration regulations as they occur will
be published in the Federal Register, as required by law.
General Hines (continuing his statement):
EXTENT OF VETERAN DEMAND FOR HOMES AND FARMS
The Veterans' Administration has endeavored to ascertain the
intention of persons in the armed forces with reference to purchase or
construction of homes after discharge. It does not appear possible
to obtain a realistic estimate on this point. Owning a home is the
aspiration of nearly every young person, but aspiration must not be
confused with specific intent and under the law itself a guaranty may
not be made unless the loan is practicable, requiring in effect that the
veteran be fairly well established economically and have definite
prospects of paying for the property he contracts to purchase. Forty
percent of those inquiries received by the Veterans' Administration
concerning loans during the first month after passage of the G. I. bill
indicated an interest in buying homes. It is not considered that this
figure can be taken as typical inasmuch as there is a preponderance of
older and economically established veterans among those persons
discharged since September 16, 1940, to date. It can be anticipated,
however, that several hundred thousand veterans will desire to take
advantage of the provisions of the law for assistance in purchasing
a home.
Senator Taft. How many persons have been discharged to date?
General Hines. About 1,300,000.
Senator Taft. Where you say several hundred thousand, you mean
out of the 1,300,000?
General Hines. I mean out of the larger number of men who are in
the services.
Senator Taft. I would think that we would be more likely to get
5,000,000 requests for home loans.
General Hines. I am guided somewhat by the questionnaire we
had on education, which gives you a pretty good index. We had a
questionnaire, a sampling of 25,000 both in and out of the service, and
25 percent of the 25,000 only were interested in education; 8 percent
of the 25 percent were interested in college education. Now, you may
be right in the long run, when these men come out of the service, if
there is a continuation of favorable employment opportunities, which
I hope there will be, at anywhere near the wages that are being ob-
tained now, the veterans are going to be interested first in getting a
job. It will take them some time before they settle themselves unless
they go directly back in their own communities.
They will then commence to look for homes and farms. I am sure
that the veterans, because they cover a complete cross section of our
country, are also going to realize that they are in a seller's market,
that the prices are high, and I doubt very much whether there will be
an immediate rush to make loans until after some time.
Senator Taft. If they take the advantage of education that does
not preclude them from making loans.
POST-WAR ECONOMIC POLICY AND PLANNING 1839
General Hines. No, no; they can take the advantage of rehabilita-
tion, education, and even unemployment allowance, and it will have
no effect on this provision. They are all separate benefits. Of course,
as I say, it is a difficult thing to gage how many will apply.
I have talked to some of the men who have come from abroad. I
have been urged to send some men over, but I do not agree with that
thought, thinking we ought not to send a man over to interfere with
the fighting, but of those men who have come back, I tried to take
advantage of what information I could get from them.
Out of the 1,300,000 discharged, we find that approximately between
600,000 and 700,000 were discharged following the training period,
with rather short service, and many of them with no overseas service.
I am not convinced that that is a good sample of the men who are now
serving overseas and who have had longer service. Those men who
are coming out disabled and going on the pension rolls and will not
render any further service, in that group you will undoubtedly find a
fair sampling group.
Those men are looking around, and I think are responsible for the
applications we now have.
Probably the committee would be interested in knowing, too, that
while we hardly realize it, something like 330,000 of World War II
veterans are already on the pension rolls in the Veterans' Administra-
tion; that more than 118,000 are either in or have passed through our
hospitals up to date.
So the magnitude of this undertaking we are in is very impressive
when you see data of that kind.
Senator Taft. How many are drawing unemployment compensa-
tion?
General Hines. Between 18,000 and 20,000, and that covers all
States. Some States have remarkably few and other places where
you would expect they would be employed, you have more than you
would expect. So it is going to be a case of rather sampling that group
to find out their reasons for not doing it.
Senator Taft. It seems to me that there must be 5,000,000 in the
group between 18 and 25, and nearly all of them will wish to be married
and will want a home. I do not quite see why not, if the Government
is going to pay for it all, so that they do not have to pay anything, I
do not see why they would not want a home.
General Hines. Of course, they are going to debate between the
thought of buying a home and maintaining it as against living in an
apartment or renting a home.
Senator Taft. That may be. Of course, I think the biggest restric-
tion is on income, but if they will get a job that will support a home I
would think nearly everybody would take advantage of it, either
through their own wishes or those of their wives.
Mr. Odom. Of course, the only benefit that title III gives is the
first year's interest on the guaranteed part and the providing of the
guaranty for that part which normally he would have to pay as a cash
down payment.
General Hines. Now, we have an estimate on the farming activ-
ities, which seems reasonable. There are, however, some estimates
available with reference to the interest in farming.
1840 POST-WAR ECONOMIC POLICY AXD PLAXXIXG
It is estimated that approximately 800,000 persons in the military-
forces anticipate entering or resuming farming as a life occupation ;:
400,000 of this number are estimated as prospective purchasers of
farms or farm equipment.
HOUSING FOR VETERANS DISCHARGED BEFORE TERMINATION OF WAR
The situation with reference to recently discharged World War II
veterans 1ms been covered by Public Regulation 60-5D, effective
November 13, 1944. issued by the National Housing Agency, which
includes recently discharged veterans among those persons eligible for
public war housing, and provides preference for veterans and the
families of absent military personnel. Additionally, the National
Housing Agency, pursuant to an agreement reached with the War
Production Board, has secured authority to authorize, to the extent
that the War Production Board may make materials available there-
for, the construction, alteration, or betterment of housing needed for
veterans of World War II. In view of the increased demands of our
military forces and the requirements for additional civilian workers
in essential war industries, the regulations issued and steps taken by
the National Housing Agency in the matter of relaxation of rules with
reference to veterans of World War II are as far as the Government
should be expected to go under existing conditions.
We also have taken part in getting priorities for veterans who desire
to go into business, to get those things necessary to enter business.
Veterans employed as in-migrant civilian war workers have, of
course, full benefits of housing available under the jurisdiction of the
National Housing Agency.
HOUSING NEEDS FOR VETERANS' ADMINISTRATION EMPLOYEES
Due to the location of certain Veterans' Administration facilities,
and the nature of its responsibilities, housing has been provided for a
limited number of employees. Recently, due to the manpowwer
shortage, arrangements have been made with the War Department for
limited-service enlisted personnel to be detailed to the Veterans'
Administration and temporary-type housing was required for some of
this personnel. The Veterans' Administration agreed to reimburse
the War Department which arranged for this housing. The cost was
$562,500. It is anticipated that this housing will not be required after
the war, when civilian employees should be available.
TRAINING AND EMPLOYMENT OF VETERANS
The Veterans' Administration is interested in housing as one of the
possible sources of employment, in view of its responsibility under the
Servicemen's Readjustment Act of 1944, for the education and train-
ing of veterans, and, additionally, the Administrator of Veterans'
Affairs serves as chairman of the Veterans' Placement Service Board
which was created to cooperate with and assist the United States
Employment Service by the same act. Furthermore, under Public
Law 16, Seventy-eighth Congress, approved March 24, 1943, as
amended, the Veterans' Administration has a great responsibility in
the vocational rehabilitation and job placement of disabled veterans
and, therefore, has a direct interest in the development of vocational
opportunities.
POST-WAR ECONOMIC POLICY AND PLANNING
1841
It is appreciated that while the construction of housing has been
•greatly reduced during the war, there has been much construction
work related directly to the conduct of the war which has furnished
employment to many construction workers. It is also understood
that the military and naval forces have many skilled construction
workers in their service forces and also have trained in construction
work members of the service forces. The Seabees, for example, are
in mind in this connection. Many men will be discharged with con-
struction experience and training and these will be available for imme-
diate employment in the building and other constiuction trades.
Opportunities for training in construction trades will depend upon
the volume of woik in this field following the war.
POST-WAR HOUSING
Both as Retraining and Reemployment Administrator and as
Administrator of Veterans' Affairs, it is necessary to consider the
■economic problems following this war. In this connection, the
construction trades may absorb and give employment within a rela-
tively short time to many persons, and this, also, would mean increas-
ing employment opportunities in related industries. Hence, it may be
of interest for me to include certain material on the housing situation,
endeavoring, as far as practicable, not to duplicate testimony already
furnished the committee.
In determining the housing needs following the war it may be well
to consider the experience of the country following World War I.
Following is a table of housing construction 1916-25:
Dwelling units constructed in nonfarm. areas
1916 480,000
1917 230,000
1918 120,000
1919 330, 000
1920 247,000
1921 449,000
1922 716, 000
1923 871,000
1924 893,000
1925 937, 000
Beginning in 1925 tbere was a decline in construction of new non-
farm dwelling units. The figures for 1929 and the years following are:
1932 134,000
1933 93, 000
1934 126, 000
1929 509, 000
1930 330, 000
1 931 254, 000
From 1934 to 1941 there was a steady increase in the number of
new dwelling units constructed. In 1941, 715,000 new nonfarm
dwelling units were constructed, the greatest number since 1925.
Construction has decreased each of the war years. In the first 6
months of 1944, 97,000 new dwelling units in nonfarm areas were
constructed. This constituted 51.5 percent less construction than
for the same period in 1943. ■
HOUSING BACKLOG
The foregoing figures show that the lag in housing during the
depression was never fully offset prior to the war and the backlog
has increased further during the war. It has been estimated that
during the first 10 years following the termination of the war, the con-
struction of 1,200,000 new dwellings per year will be required.
1842
POST-WAR ECONOMIC POLICY AND PLANNING
I think that is the same number as Mr. Blandford indicated to the
committee. There will also be need for extensive renovation and
improvement in existing housing.
GEOGRAPHICAL DISTRIBUTION OF HOUSING CONSTRUCTION
Construction of new dwelling units has been unevenly distributed —
both public and private construction have been concentrated in cen-
ters of war industry. The following table published in the monthly
Labor Review, October 1944, indicates the comparative distribution
of new housing the first 6 months of 1943 and of 1944:
(The table referred to is as follows:)
New dwelling units financed by public funds,1 private funds, all types
New dwelling units financed by —
Geographic division
units first first
i6 months of—
Public funds,1 first
6 months of—
Private funds, all
tvpes, first 6
months of—
1944
1943
1944
1943
1944
1943
97, 100
200, 200
• 17, 200
114,400
79, 900
85, 800
1,100
3,900
17, 900
2,500
16, 200
5,300
16, 100
3.600
30, 400
6, 700
19, 700
32,100
6,600
40, 100
7,000
22, 700
13, 400
51,900
(?)
700
3,000
400
4, 100
1,400
2,300
1,000
4,300
3,400
9,800
15, 000
3, 500
18, 900
3,200
12, 700
10, 600
37, 300
1,100
3, 200
14,900
2,100
12, 100
3, 900
13, 800
2,600
26, 100
3,300
9,900
Middle Atlantic
East North Central
17, 100
West North Central
3,100
South Atlantic..
21,200
East South Central
3,800
West South Central
10, 000
2,800
14, 600
Pacific -
1 Includes 1- and 2-family dwellings with stores.
8 Less than 50 units.
General Hines. Two-thirds of the 1944 construction was in cities of
500,000 or more population. With the exception of construction in
and near Army camps, war housing generally has been constructed
in areas of industrial concentration. I have here a map showing
these areas.
(The map referred to faces this page.)
General Hines. It may be anticipated that there will be immediate
demand for new housing in noncritical war areas in which no housing
has been constructed during the war.
AVAILABLE CAPITAL
In addition to the governmental program of insuring mortgages and
the progsam of loan guaranty under the Servicemen's Readjustment
Act, there would appear to be capital available to finance housing
construction. The Securities and Exchange Commission in a release
dated December 17, 1944, reports that the liquid savings of individuals
in the third quarter of 1944 attained the figure of $10,600,000,000
which is to be added to the $100,000,000,000 of individual savings
accumulated between the end of 1939 and June 1944. More than
40 percent of the liquid savings of $100,000,000,000 accumulated dur-
ing the preceding 4Y2 years have taken the form of currency holdings
and bank deposits. Some $52,000,000,000 savings of individuals are
ArfAv5 of Industrial Concentration
Solid color are.a^ ind/co/c industrial 'concent 'ror/on bjur rfous/no has been loco+ed qenerallu in areas of Induihial Gnoentrahon.
91183 O - 45 - pt. 12 (Face p. 1842)
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POST-WAR ECONOMIC POLICY AND PLANNING 1843
invested in War bonds. Over $7,000,000,000 are in savings accounts
in building and loan associations.
AVAILABILITY OF BUILDING MATERIALS
In the matter of materials, a comparison of studies made by the
Department of Labor and the Producers Council indicates that from
4 months to 1 year will be required to reconvert and replenish supplies
of materials for home construction. The average house consists of
some 30,000 parts. Plumbing, hardware, and electrical supplies are
among the items which will require the longest time before being avail-
able in adequate quantities following the war. There has been ex-
treme depletion of hardware inventories and many plants which nor-
mally produce hardware have been converted to war production.
Availability of building materials in the quantities and varieties needed
will probably be governed by 4 principal factors, although not all of
these represent problems for all materials. These are productive
plant (reconversion, restoration, and pre-war capacity), trade inven-
tories, supply of basic materials, and labor supply. On the whole the
Department of Labor study is hopeful that within a year after the end
of the war, physical capacity can be sufficient for a construction
volume about equal to the greatest peaks attained in the past.
EMPLOYMENT IN HOME BUILDING
In 1939 when 515,000 dwelling units were constructed, the Bureau
of Labor Statistics estimated that the monthly average of persons
employed in building housing was 521,000. It was estimated for
that same year, 1939, that the total construction work cost $6,035,-
000,000. Assuming that the average cost of each dwelling unit was
$2,500, housing construction involved the expenditure of approxi-
mately $1,287,500,000. . The Department of Labor estimates that at
the end of the war there will be 1,120,000 construction mechanics in
civilian life and, in addition, there will be 440,000 helpers and experi-
enced laborers. To these can be added 400,000 inexperienced persons
capable of doing construction laborers' work. An indefinite number
of these workers are now employed in war industries; also, there will
be available skilled construction workers now in the military services.
It is estimated by the Department of Labor that of those persons
now in civilian life, the total of 1,920,000 listed above are sufficient for
a construction program of approximately $8,750,000,000 per year at
1940 cost levels. It will be seen, therefore, that housing construction
on a large scale will be required to afford employment to available
construction labor.
VETERANS A PART OF WHOLE ECONOMY
The housing problem is interrelated with all other economic
problems which will follow the war, in my opinion, and reemployment
and rehabilitation of veterans may not be dealt with satisfactorily
apart from the national economy as a whole. If there is not full
employment in an expanding economy with income sufficient to
provide active markets for the goods that are produced, there is little
that can be done for veterans alone which will solve the problem.
The problem of finding jobs and housing for veterans will be no
1844 POST-WAR ECONOMIC POLICY AND PLANNING
problem at all if there are jobs enough to go around and sound
economic planning relative to the housing problem. The Service-
men's Readjustment Act of 1944 is one of the tools the Congress has
provided for easing the transition period between the termination
of the war and the achievement of full employment in an expanding
economy. I shall try to use that tool as I think Congress intended.
Senator Taft. General Hines, the first question, according to that,
is this question of the 2 years. It has been suggested that with that
2-year limitation a large number of men will rush in to get the advan-
tage of it. You have simply a flood of applications for the first
2 years, or the first 5 years. There are persons who really do not
need the homes yet and who would like to postpone it for a while.
General Hines. Much will depend, Mr. Chairman, upon the
demobilization of the forces. Of course no one knows when the war
will end, and I think very few really know the plans of demobilization.
Good common sense would indicate, I think, knowing the general
shipping situation, that the forces abroad — and they are at great
distances, as we know- — will have to be demobilized gradually. I am
not convinced but what the contention of those that time should be
extended is not a good thing. I am trying to get some experience
upon which to base any recommendation to Congress from those that
are now out and have come out really after being in the service a
year or 2 years abroad.
Senator Taft. From a political standpoint I would judge at the end
of the 2 years, or when the 2 years begin to expire Congress would be
asked to extend it, and would certanly extend it, and there would not
be any way to resist it. The argument would be: If 200,000 people
have gotten it, why cannot other veterans get it?
General Hines. No doubt about that.
Senator Taft. It it is wise to extend it at that time, why isn't it
wist to extend it now?
General Hines. I was asked what recommendation I had on the
G. I. bill as a whole and I indicated I felt we ought to go slowly.
There are one or two points like the one we are talking about, where it
would appear we could make some recommendation. Considering the
Navy, for instance, I would not expect that our Navy would be demobi-
lized. I would expect a number of replacements in it, but I would
expect the Navy to continue at its full strength for some tim.e.
Most certainly we ought to go slowly until many of the problems
growing out of the war are settled, until all of our men are withdrawn
from the far ends of the globe.
Now, of that group there will be many in the Navy, young men par-
ticularly that will want to stay in longer, and it would not be fair to
deny those men the right that they always have 2 years following dis-
charge, and if we do not tighten up too much on how long after tire war,
why, they will always have the opportunity of taking the benefits under
the G. I. bill.
I hesitate always to rush in with recommendations to the Congress
on something we have not had experience enough with to point out the
right direction. We have already made certain amendments. For
instance, we found out quite early, soon after the Retraining and
Reemployment Administration was set up, that the 40 days which was
given the men to obtain their old jobs back was insufficient in the case
of the group that is probably the most deserving. Those that were dis-
abled could not get out of the hospitals in time, hardly, although they
POST-WAR ECONOMIC POLICY AND PLANNING 1845
may have been discharged from the Army and gone into a Veterans'
Administration hospital. So we extended that. Public Law 473,
approved December 8, 1944, changed the former requirement of appli-
cation within 40 days after release from training or service, to applica-
tion within 90 days after release from training or service, or from
hospitalization continuing after discharge for a period of not more than
1 year. There may be further extensions similar to that, in order that
those men could be cared for or in order that it would not run against
them.
We have under consideration right now whether the law in regard
to reporting back to the draft board and getting the old job back is
really the solution of it in the selective service. We find this: These
men have been trained in the service, they are equipped and they feel
they are equipped to do better jobs. They are not particularly
interested in their old jobs in many cases.
I feel we should endeavor to get them better jobs, if we can. Take
the Air Service as an example. Many of those men have been trained
and have become expert mechanics, they know a good deal about an
engine.
Senator Taft. There is one question I might ask in connection with
that. Have you any difficulty in getting these men, the construction
workers particularly, back into the unions?
General Hines. No.
Senator Taft. Has the union agreed to take them back?
General Hines. We put several questions up to the unions pertain-
ing to joining a union, back dues and seniority rights, and both
organizations up to date are cooperating with us very well. Of course,
they all have to go to their local unions.
When they go out to the locations there is the question involved of
contract with the employer, what that contract provides, so it is not
a simple problem. I can say that certainly the intent of labor is to
give the veterans as good a break as it is possible to give them.
You will have many problems involving seniority. For instance,
in some companies as many as three men have occupied the same
job. Now, assuming that all three of those men come back, who
gets the job? Well, right off, naturally, you would say the first man
that was in that job. Now, there are certain seniority rights between
those men.
The unions have indicated also that they are willing to consider the
time that these men have had in the service as though they were on
the job. That will help out a great deal in the establishment of the
seniority rights.
Senator Taft. How about their membership in the union?
General Hines. Nothing of that kind; no. So far the C. I. O. has
submitted a report to me. We are analyzing it right now. That
report indicates that their intent is to be very fair with these men;
that the question of back dues of those who belong in the unions —
and I think there are some 3,000,000 men in the services who belonged
to either one group or the other of the unions — would not be insisted
upon, and also they would be given credit for the time in the service,
and that would enable them to come back to their old jobs and their
seniority would be about where it would be if they stayed on the job.
I have not found anything so far that would indicate that the unions
do not desire to do the fair thing in dealing with the veterans. Now,
1846 POST-WAR ECONOMIC POLICY AND PLANNING
they realize, as I do, and as we all must, that we are going to have an
employment problem of great magnitude. We are going to have a
great number of unemployed during the reconversion period.
How well we plan — and by that I mean labor, management, indus-
try, and Government — will determine the length of that period for
which we will have unemployment. I have a great feeling, and a
very strong feeling, that if we are ingenious enough to build up the
great production machine that we have we ought to be ingenious
enough to keep a great majority of our people employed.
Senator Ellender. General, have you had any cases where vet-
erans were compelled to join a union in order to obtain a job?
General Hines. No; none has come to my attention. I think the
Selective Service has some question raised on that.
Senator Ellender. The reason I ask that question is because I
have had a few complaints in that respect.
General Hines. J think Selective Service has had a few of those
cases. I have taken over in the Retraining and Reemployment Ad-
ministration, Colonel Griffith, who has been with General Hershey a
good deal, and he is making a study of this thing right now, with some
assistants. I was speaking of the general over-all feeling on the policy
of jobs by the labor unions. They certainly want to solve this, and
I think they realize it. But we must keep in mind that we have a
great problem when we come to readjustment of the pay envelope at
the end of the week and when you go to reduce the hours. They will
all go along on the 40-hour week, but then the question arises that
they would probably like to carry home the same amount in the pay
envelope at the end of the week.
Senator Ellender. General, I would like to ask a few questions
with respect to title III.
General Hines. Yes.
Senator Ellender. Is it necessary for you to have a large organiza-
tion in order to administer that title?
That is the one dealing with the purchase and construction of homes.
General Hines. Not if the National Housing will undertake to make
loans under 501 as they are making under 505, then it will not be nec-
essary. Of course, we will have to have certain personnel to issue the
guaranties. We have to decentralize that to our regional offices. We
expect to set up more regional offices in order to carry the work out.
Senator Ellender. I do not know what the Congress is going to
do as the result of these hearings and as the result of other data that
has been gathered in the past, but I presume if the Congress should
decide to create a central housing agency to handle housing financing
and everything else connected therewith, that there would not be any
difficulty in the utilization by you of that agency.
General Hines. No.
Senator Ellender. In order to carry out title III.
General Hines. No. I think it would be a great mistake if we
would duplicate in any place that which we have some machinery
now to do.
Senator Ellender. I am exceedingly glad to hear you say that,
General.
General Hines. It is my job to find out what the agencies of the
Government can do, and then having adopted the policies on this, to
make sufficient provisions in order to be sure that it is being done,
POST-WAR ECONOMIC POLICY AND PLANNING 1847
because the responsibility rests with the Veterans' Administration,
and I cannot delegate that.
Senator Ellender. Well, you have declared in your testimony a
while ago, and I was glad to hear that, that you are utilizing as many
of the established agencies in housing and financing as possible so as
to help you carry out this program.
General Hines. Yes; and I expect to have the rest of the National
Housing Agency signed up very shortly. I think we have reached an
agreement. One of the perplexing problems in this whole thing, as
you must realize — the Solicitor can tell you better than I can — was
drawing up regulations that would not bump into some State laws.
We are doing business in all the States and the District of Columbia,
and they all have their own way of handling mortgages and mortgage
loans.
Senator Taft. General, may I ask one question? Have there been
any proposals by private organizations, or otherwise, to try to colonize
the veterans, I mean to build all these homes in a veterans' com-
munity?
General Hines. There have been some suggestions along that line.
I do not feel that that would be advisable. If you look back to World
War I, we have some examples in the rehabilitation program of
colonizing veterans, and they were hopeless failures. I think the
veteran on the whole, when he gets home, will not want to be taken
by the hand and led around, but he will desire to have an opportunity,
he will be looking for an opportunity, and he will want to make the
decisions himself.
Senator Buck. What possible argument could there be in favor of
•colonizing veterans?
General Hines. Well, it is generally based on somebody buying a
large tract of land and splitting it up into small amounts and thereby
being more economical to the veteran. The veteran will seek his
own environment, I am sure of that.
Senator Taft. Thank you very much, General.
General Hines. I thank the committee.
Senator Taft. Of course, if we have any suggestions to make we
will consult with you before we put it in our report.
General Hines. If there is anything further I can obtain for the
committee, I will be glad to assist in any way I can.
Senator Taft. Thank you. The next witness is Mr. Mahan,
president of the Mortgage Bankers Association of America.
STATEMENT OF L. E. MAHAN, PRESIDENT, MORTGAGE BANKERS
ASSOCIATION OF AMERICA
Senator Taft. Mr. Mahan, roughly speaking, the Mortgage
Bankers Association is made up of what type of operation?
Mr. Mahan. Chiefly of life insurance companies, commercial
banks and trust companies, and the individual mortgage banks and
bankers over the country. Our membership consists of about 1,000
and practically all of the leading life insurance companies are included
in our membership.
Senator Taft. Do your members buy and hold the mortgages or
do they sell them to individuals?
1848 POST-WAR ECONOMIC POLICY AND PLANNING
Mr. Mahan. There are two classes of membership. Some sell,.
but in the main they are direct investors in mortgage loans themselves.
Senator Taft. I suppose a good many of the local mortgage
bankers merely pass the mortgage on to the insurance companies?'
Mr. Mahan. To insurance companies and to other investing in-
stitutions. Fraternal organizations and some of the endowment
funds are also investors in mortgage loans. Many loans are sold
to them by local mortgage dealers.
Senator Taft. A good percentage of the total mortgage loans are-
held by individuals. How are those placed? Are those just nego-
tiated between one man and another?
Mr. Mahan. I find in various localities the system is somewhat
different, but in the main the individual investor purchases his loan
through local real estate dealers and sometimes through mortgage-
brokers. In many instances, a mortgage broker or a banker will
represent an insurance company and will sometimes divide his busi-
ness between individuals and institutions, and he may sell those to
individuals.
In recent years the number of individual purchasers has been less
and less, because there are not available mortgages for them. As you
know, the Federal Housing Administration loans are developed for
approved mortgagees, which are institutions, so that the large Fed-
eral F. H. A. lending system has more or less directed individual loans
to institutions rather than to individuals.
Senator Ellender. Mr. Mahan, what kind of services do you per-
form for the membership of your association? Is it advisory, or is it
somewhat like that which is made available to the members of, let
us say, the American Bankers Association?
Mr. Mahan. Senator, you are referring to what services the asso-
ciation renders?
Senator Ellender. Yes; that is right.
Mr. Mahan. The services of the Mortgage Bankers Association
are chiefly that of bringing together all of those interested in mort-
gage lending, both the direct lenders and those who produce loans
for the direct lenders. It is our purpose to try to improve appraisal
methods. We hold clinics. We have a system whereby question-
naires are sent to our members. We try to assimilate information
and data and in turn pass on the experience to the other members
throughout the country.
Senator Ellender. I presume your association is maintained from
fees that you collect from your members. P< #** NPH
Mr. M apian. Yes; that is true. Geographically, I might state-
our membership extend^ all throughout the United States, both in
small cities and large and includes both city and farm lending. In
fact, the association in the beginning was formed by farm-mortgage
lenders and later included the city group.
Senator Buck. In recent years that has been rather restricted, has
it not, on farm mortgages?
Mr. Mahan. In recent years; yes. I will have some figures to,-
show that, Senator Buck.
There appears with me today, representing the Mortgage Bankers
Association of America, Mr. Dean R. Hill, president, Hill Mortgage
Corporation, Buffalo, N. Y.; Mr. Milton T. MacDonald, vice presi-
dent, the Trust Co. of New Jersey, Jersey City, N. J.; Mr. Guy T. (X
POST-WAR ECONOMIC POLICY AND PLANNING 1849
Hollyday, president, Title Guarantee & Trust Co., Baltimore, Md.;
Mr. S. M. Waters, president, M. R. Waters & Sons, Inc., Minne-
apolis, Minn. ; Mr. W. L. King, president, Boss & Phelps Mortgage
Co., Washington, D. C; Mr. G. Calvert Bowie, executive vice presi-
dent, H. L. Rust Co. ; and Mr. H. Loy Anderson, of the firm, Duckett,
Gill & Anderson, Washington, D. C.
We appreciate the privilege of appearing before this committee
and recording the views of the Mortgage Bankers Association of
America on the subject of post-war housing.
The study of housing embodies wide and diversified research into
technical, social, and economic problems. We do not find that there
has ever been assembled what we consider a complete statistical study.
We do believe, however, that at the present time there is more avail-
able information than ever before, and your committee is fortunate
in having this material available. We particularly refer your com-
mittee to the report of the President's Conference on Home Building
and Home Ownership, 1931, and you have available the very com-
prehensive studies made by Mr. Miles L. Colean, embodied in the
recent book, American Housing Problems and Prospects, published
by the Twentieth Century Fund. You have also had presented to
you at these and previous hearings the very thorough studies made
by Mr. John B. Blandford, Jr., Administrator of the National Housing
Agency, as well as others. Likewise, there is the very valuable data
assembled by the Bureau of the Census — Sixteenth Census, 1940 —
and a great fund of data prepared by the United States Department
of Agriculture, Farm Credit Administration, the National Resources
Planning Board, and the United States Department of Labor, Bureau
of Labor Statistics.
In Senator Robert Taft's letter inviting us to appear at this hearing
he outlined the general subjects in which your committee is particu-
larly interested. These were as follows:
1. Nature of the permanent Federal administrative organization of
the housing agencies.
2. Disposal of war housing.
3. Problems of revival of the home-building industry, including
relaxation of wartime controls.
4. Role of Federal Government in future public housing.
5. Types and methods of private credit aids.
6. Relation of housing agencies to the general credit policy of the
Government.
7. Effect of veterans' loans on the housing picture.
8. Relation of rural housing and urban rehabilitation to the
general housing program.
In touching on these specific subjects, it will be our purpose to
submit to you what we consider to be the prevailing opinion of the
membership of the Mortgage Bankers Association, and we feel that
we should outline very briefly what this membership consists of.
The mortgage Bankers Association of America was organized in
1914 by a small but important group of mortgage lenders throughout
the United States. It has been an active organization from the
beginning and its membership now consists of approximately 1,000.
These members in the main, are direct investors in mortgage loans
and include practically all of the important life-insurance companies
purchasing mortgages throughout the United States, secured by
1850 POST-WAR ECONOMIC POLICY AND PLANNING
both farm and city property. More recently there have come into*
our membership many of the leading commercial banks, mutual
savings banks, fraternal organizations and societies, so that any
expression of opinion coming from this particular organization would
constitute the prevailing opinion of both institutional and private
lenders.
For your information, the Mortgage Bankers Association of
America maintains a friendly relationship with the various govern-
mental agencies of the National Housing Agency and the constituent
units, the Federal Housing Administration, the Federal Home Loan
Bank Board, and the Federal Public Housing Authority, as well as
the Farm Credit Administration, operating under the Department of
Agriculture, and we are at present endeavoring in every way to co-
operate with the Veterans' Administration in its development of
title III, Public Law 346, Seventy-eighth Congress — G. I. bill — and
we believe that the latter agency will be a dominant influence upon
the post-war housing program.
The membership of our association is diversified both geographically
and as to the type of lenders, and the members are found in the metro-
politan areas as defined by the Bureau of the Census; likewise, its
members are found in the smaller cities and rural areas. We point
out this diversity of membership in order to show that any expression
of opinion of the members would repesent a fairly accurate cross-
section of opinion of mortgage bankers.
The method employed by the Mortgage Bankers Association of"
America in accumulating information is to keep in constant touch
with its membership by a system of questionnaires, which are period-
ically sent to all members. The questions included touch on current
problems and the answers are tabulated and reviewed in our current
publications, The Mortgage Bankers, and Local Chapter News.
We recognize that conditions are not alike in all areas and that
among our membership there may be some variance of opinion, but
in the main, the opinions expressed by the majority of our member-
ship are worthy of consideration, for, as a rule, such opinions' arc
based on day-to-day experience in the field, and as most of our mem-
bers have had actual mortgage-banking experience in good years
and bad, their opinions are sound, as they are not based upon momen-
tary observations.
The purpose of this report shall be to present to you a study of
the available funds, a study of interest rates, and our observations
of conditions as they exist today, in making loans secured by both
city and farm properties. We shall endeavor also to outline some of
the aids which might improve lending conditions throughout the
country and enable both Government and private enterprise to be of
greater assistance in the development of better housing throughout
the United States, both urban and rural.
These members present are available to answer to the best of their
ability any questions which your committee may desire to direct to us.
(l) NATURE OF THE PERMANENT FEDERAL ADMINISTRATIVE ORGANI-
ZATIONS OF. THE HOUSING AGENCIES
At the beginning of the present war, 1941, we found on the urban
side a cumbersome and varied group of Government agencies under
the direction of the Federal Loan Agency created by virtue of the-
POST-WAR ECONOMIC POLICY AND PLANNING 1851
President's Reorganization Plan No. I, dated April 25, 1939; in
addition to many others in this group, numbering about 16 in all,
were found the Federal Housing Administration, created by the
National Housing Act, 1934, the Federal Home Loan Bank Board,
originally provided for in the Federal Home Loan Bank Act, 1932,
the Home Owners' Loan Corporation, a relief agency created by the
Home Owners' Loan Act, 1933; the Defense Homes Corporation,
incorporated pursuant to a Presidential letter dated October 18,
1940, addressed to the Secretary of the Treasury. Another group of
agencies were under the direction of the Federal Works Agency
created by the President's Reorganization Plan No. I, dated April
25, 1939, and in this group were found the United States Housing
Authority created by the United States Housing Act of 1937, the
United States Housing Corporation, incorporated in 1918 under the
laws of the State of New York.
On the rural side, or nonurban side, and in the Department of
Agriculture, were found the Farm Credit Administration, directing
those agencies created by the Federal Farm Loan Act, 1916, the
Cooperatives Marketing Act, 1926, the Agricultural Marketing Act,
1929, the Emergency Farm Mortgage Act, 1933, the Farm Credit Act of
1935, and other acts and Executive orders. Chief of these agencies,
as far as farm loans are concerned, are the Federal Farm Loan Bank
System, and the Farm Security Administration.
In addition to the above agencies, there are many others, whose
functions, directly or indirectly, touch on the housing problem, both
urban and nonurban.
The omnifarious problems of urban and nonurban housing, do not
arise from the same causes, nor would their solution have the same
social or economic effect. There may be, however, some interlocking
functions which should be considered in any permanent Federal
administrative organization. We believe, however, that the direc-
tion of rural housing should remain under the Agricultural Depart-
ment.
With respect to urban housing, it is obvious that without central
direction, the many existing agencies created at different times for
entirely different purposes, and by various authorizations, will be
working at cross-purposes with a duplication of effort. We believe
also, that the cost can be greatly reduced if a comprehensive program
is developed under unified direction.
The Federal Government, in your opinion, acted wisely in simplify-
ing the organization in order to expedite war housing and to prepare
the Nation for any emergency which might arise to improve our war
effort and production.
The creation of the National Housing Agency, 1942, by the Presi-
dent, pursuant to the powers vested in him by the First War Powers
Act, brought under the direction of this new agency the three principal
constituent units, being the Federal Housing Administration, the
Federal Home Loan Bank Board, and the Federal Public Housing
Authority. We believe that many benefits were derived by this
simplified organization and that the program for war housing and
the program for financing such housing, was expedited and was very
beneficial during the wartime emergency.
It is the consensus of opinion of the membership of the Mortgage
Bankers Association of America, based on several surveys which we
have made, that when the emergency of this war has passed, the
1852 POST-WAR ECONOMIC POLICY AND PLANNING
Federal Housing Administration be divorced from the National
Housing Agency. We also contend that the functions of finance,
of credit, or the insuring of credit, as pertaining to housing, should
not be involved with the many technical problems of housing, con-
struction, and research.
The question may be asked as to what disposition and under which
directive the Federal Home Loan Bank Board should be placed.
Providing there could be established uniform standards of appraisal,
which would apply to all Government agencies having to do with
urban housing, we would encourage the development of a plan where-
by the Federal Housing Administration and the Federal Home Loan
Bank Board could be directed through some agency such as the
Federal Loan Agency, but we would not encourage any correlation
of the activities of the Federal Housing Agency and the Federal
Home Loan Bank Board unless the same lending philosophies and
the same standards of appraisal be applied to both.
It is the opinion of our membership that the research and. statistical
work that has proven so invaluable shall be continued after the
emergency and that the department or agency designated to carry on
this work shall make its findings available to all departments of the
government, vState and Federal, and to private enterprises.
Our association wishes to go on record as opposing public housing
wherein the Federal Government becomes the direct owner or oper-
ator of housing property. The social and political implications of
public ownership are well known to the student of political economy.
Likewise, we oppose any plan which establishes the Government,
Federal or State, as a direct lender. The only exception would be
when some unusual social or economic crisis exists which might re-
quire subsidy, such as disaster caused by flood, earthquake, or some
other catastrophe.
We believe that such Government agencies as are created in a time
of emergency should be liquidated as soon as that emergency has
passed, and that in our established system of government, agencies
created to meet special emergencies should not be perpetuated when
those emergencies have ceased; otherwise, there is a likelihood that
our whole economy might be distorted by Government interference in
normal business pursuits.
(2) DISPOSAL OF WAR HOUSING
We recommend that the program for the disposition of real estate,
including war housing, be centralized in one agency and that careful
consideration be given to an orderly liquidation of all real property.
Where construction has been made which is purely of an emergency
nature and which would tend to distort normal trends, either in popu-
lation shifts or in property values within given communities, we would
recommend that such properties be demolished as soon as it can be
definitely determined that the war emergency has passed.
In the main we subscribe to the recommendations made in the
Baruch-Hancock Report on War and Post- War Adjustment Policies
and particularly to the following recommendation contained in the
"goldfish bowl" clause:
The business of all of the disposal agencies should be conducted in a goldfish
bowl, with the facts on all sales open to public inspection at the point of sale and
each agency submitting reports, summarizing these sales regularly to Congress
through the Surplus Administrator.
POST-WAR ECONOMIC POLICY AND PLANNING 1853
As stated in this report, real property disposition is complicated by
both administration and legislation overlapping, and we urge that
the whole program of disposition and liquidation be studied by the
now established Surplus War Property Administration created by
Surplus Property Act, 1944, and that the facilities of all governmental
agencies be made available for its use.
Among the policies of the Surplus Administration, or any agency
having the responsibility of the sale of surplus real estate, we urge par-
ticularly the adoption of those suggestions contained in paragraph 6
under section C of the Baruch-Hancock report, designated as "Surplus
property" and outlined as follows:
1. Sell as much as he can as early as he can without unduly dis-
rupting normal trade.
2. Listen to pressure groups but act in the national interest.
3. No sales, no rentals to speculators; none to promoters.
4. Get fair market prices for the values with proceeds of all sales
going to reduce the national debt.
5. Sell as in a goldfish bowl, with records always open to public
inspection.
6. As far as practicable, use the same regular channels of trade
that private business would in disposing of the particular properties.
7. No Government operation of surplus war plants in competition
with private industry.
8. No monopoly; equal access to surpluses for all businesses; pref-
erence to local ownership, but no subsidizing of one part of the country
against another.
9. Scrap what must be scrapped, but no deliberate destruction of
useful property.
10. Before selling surplus equipment abroad, assure America's
own productive efficiency on which our high wages and high living
standards rest.
We recommend that the Surplus Administration, or any agency
having the responsibility of the sale of surplus real estate, operate in
close conjunction with the National Housing Agency, which has been
given certain specific power of disposal, by Congress, of war housing
and that careful study be given to remedial legislation. However,
we recommend that proper legislation be adopted to centralize the
disposition of all real property, including war housing under one
designated agency, which we believe should be the Surplus War
Property Administration.
(3) PROBLEMS OF REVIVAL OF THE HOME BUILDING INDUSTRY, INCLUDING
RELAXATION QF WARTIME CONTROLS
From all sections of the country we are receiving reports of serious
housing shortages, and it is also reported to us that excessive prices
are being paid for residential property, purely for right of possession.
These distorted sales prices are having a tendency to inflate all resi-
dential property values. We, therefore, urge that as soon as prac-
ticable, and when vital materials can be released for the use of the
Army and Navy, by the War Production Board and under the direc-
tion of the National Housing Agency, that a housing program be
.developed, somewhat along the following lines:
91183— 45— pt. 12 7 j
1854 POST-WAR ECONOMIC POLICY AND PLANNING
(a) That housing allocated to the respective areas be distributed
substantially as follows:
(1) Five to 10 percent to custom-built for so-called contract housing,
limiting the cost — sales price — of each unit to $9,000.
(2) Twenty to 25 percent for rental housing, with a rental limit of
$75 per month.
(3) Seventy to 75 percent to single family housing to be built for
home owners, or to operative builders for sale to home owners, the
limit of cost — sales price^of each unit to be $8,000.
(b) That careful consideration be given by the National Housing
Agency to the allocation and distribution of this housing and, where
practical, it be allocated to municipalities within metropolitan areas
rather than bulk distribution to entire districts oi areas.
(c) That the initial allocation of housing be limited to substantially
improved land.
(d) We would also recommend that the building of residential units
for Negro families be encouraged under the direction of the National
Housing Agency, but that the percentage of such Negro housing be
ratioed on the basis that the Negro population of a given community
bears to the total population.
Because of the acute shortage of housing which exists at this time,
we would recommend that present controls be continued until such
time as there may be a normal flow of materials and available labor.
(4) ROLE OF FEDERAL GOVERNMENT IN FUTURE PUBLIC HOUSING
In preparing this report we adhere to the general principle that pri-
vate enterprise and local communities should be responsible for the
development of housing needs of the people. The Federal Govern-
ment, however, has a clear responsibility to help private enterprise
and local communities to do the job, and, in our opinion, can best aid
in the following manner:
(1) In assembling data and information on housing problems. This
sometimes requires the correlation of activities of all agencies having
to do with housing and in some instances might extend to such depart-
ments as the Post Office Department in determining vacancy studies.
Our association does not subscribe to the idea that it is the responsi-
bility of government to subsidize home construction for any particular
class of citizenry.
(2) We do believe, however, that much can be done in perfecting
construction methods and in the development of processes whereby
adequate housing can be produced for people in the lower income
brackets at less cost than by the methods now employed. It is
significant that the cost of the family unit is actually being reduced.
The average cost per family of new dwellings in 227 identical cities, as
shown by studies made by the Bureau of Labor Statistics, was $4,385
in 1930 as compared to $3,268 in 1942, and for multiple units, the cost
is reduced from $3,857 in 1937 to $2,750 in 1942. (See Appendix
No. 6-A and 6-B p. 1882.)
(3) It is our observation that still further reductions can be made
by the adaptation of better and more efficient construction methods.
It is this type of study that the Government should direct its attention
to, and by so doing it could assist better than any other way in the
over-all program of producing proper and adequate housing for all its
people. While we illustrate this particular point, we would direct
POST-WAR ECONOMIC POLICY AND PLANNING 1855
Federal interest in the development of building codes, zoning and
planning laws, equitable taxation of real property, both farm and city,
standardized appraisal methods, experimentation and research in new
building materials and processing of standard materials, available labor
and material studies, building standards adaptable to various geo-
graphic sections, and cost studies.
The Government can do much toward standardizing the laws within
the respective States which would give private industry and the local
communities more latitude in the acquisition of land for the develop-
ment of housing needs and also toward standardizing mortgage and
foreclosure laws which in many States are now obsolete and im-
practical.
(5) TYPES AND METHODS OF PRIVATE CREDIT AIDS
We believe that private industry can assist in the National Housing
Program by improving some of the present methods and practices.
Among them we suggest the following:
(a) A recent study made of the national associations touching
directly or indirectly on housing problems would show that there are
in excess of 76 associations, not including Government agencies,
making special studies of the problem. (See Appendix No. 2 p. 1887.)
We believe that there is much duplication of work and effort and that
a closer cooperation of these associations would be helpful. We would
recommend that a national conference of the representatives of these
various associations be called to jointly discuss the housing problem.
This conference should be in its nature similar to the President's Con-
ference on Home Building and Home Ownership of 1931 but limited
to 2 or 3 representatives from each of the interested organizations.
(b) We believe that private enterprise should endeavor to establish
more uniform lending practices, and in the various States more uni-
form mortgage laws should be adopted. This would encourage the
flow of mortgage money to all areas alike, whereas at the present time
certain States and areas are handicapped because of obsolete mortgage
laws and practices.
(c) We believe that the Federal Housing Administration has been
an aid to the mortgage lending field and to the encouragement of
greater home ownership. We feel, however, that certain practices
should be amended to facilitate better relations in the future.
Correspondence between members of our national F. H. A. com-
mittee clearly indicates that there is an appreciation on the part of
institutional investors of the advantage of lending funds with F. H. A.
insurance. This point of view is doubtless influenced by the fact
that the majority of the members recall the conditions which prevailed
immediately after the last war when the pressure for housing brought
into the construction field a great many builders who produced housing
that turned out to be very unsatisfactory.
Much of this housing was done on the outskirts of metropolitan
areas where there was a minimum amount of supervision and few, if
any, standards of construction. In the apartment house field, com-
petitive lending based on overzealous appraising resulted in the loss
of millions of dollars to investors in this type of security.
With its requirements as to adequate standards of building and its
Nation-wide system of risk rating, F. H. A. has been of very great
1856 POST-WAR ECONOMIC POLICY AND PLANNING
assistance both to the home buyer and the institution with funds to
invest and to the building of communities of home owners.
As far as the war housing is concerned, it was necessary to depart
from sound lending practices and M. B. A. members and institutions
they represent naturally look forward to a return to situations where it
will again be possible to provide adequate shelter with proper safe-
guards for those who advance the money to make this shelter possible.
It has been suggested that F. H. A. might enter the rather large but
difficult field facing almost all large cities in the rehabilitation of
blighted areas. If the F. H. A. does enter this field, it is hoped that
proper safeguards will be erected so that there will be no infringement
upon the insurance fund established under title II. The accumula-
tion of valuable housing information in many branch offices of F. H. A.
could be of real value to the various housing authorities in the many
cities in which F. H. A. is established.
We believe that F. H. A. should profit by its war experience and
should decentralize its administration so that the necessary time for
processing may be reduced to a minimum.
To give the public the advantages of low-priced housing in the
post-war era will necessitate the construction of homes on a wholesale
rather than retail basis. Many financial institutions are limited to
loans not exceeding 10 percent of their capital and surplus to any one
builder. Through the medium of F. H. A., however, and the vast
market created by F. H. A. insurance, lending institutions can make
it possible for builders to operate on a wholesale basis.
Private enterprise should establish more uniform methods of ap-
praisal which we believe can only be accomplished by carefully thought-
out educational programs, and we regret that one of the greatest hazards
and dangers in mortgage financing today is the lack of uniform ap-
praisal methods. We find that a variance of as much as 50 percent
will occur in appraisals ol a given piece of property. We recognize
that appraisal is largely a matter of opinion yet by more uniform
practices the appraisal of a given piece of property among experienced
lenders should not vary over 5 to 10 percent in a given community.
We believe that the mortgage indenture should be more tlexible in
its nature to enable the borrower and the lender to make adjustments
throughout the term of the mortgage to meet special conditions. In
the operation of the mortgage business as it now exists, we find that
anv change in the original terms usually necessitates the preparation
of entirely new papers or refinancing the existing loan at an excessive
cost to the borrower. This applies to both farm and city loans.
We believe that mortgage lending should be placed on a professional
basis and that mortgage institutions should be encouraged as the
agencies through which mortgage financing should be directed. We
likewise would encourage these institutions to improve their servicing
methods which means more effective method of collection, more care-
ful study of delinquencies, and a closer relationship with the borrower
throughout the term of the loan.
(6) RELATION OF HOUSING AGENCIES TO THE GENERAL CREDIT POLICY
OF THE GOVERNMENT
Under section 4 of the report, Role of Federal Government in Future
Public Housing, we state that in our opinion, the financial and credit
agencies of Government should be divorced from the purely housing
agencies as now constituted. In other words, we believe and state
POST-WAR ECONOMIC POLICY AND PLANNING 1857
again, that the National Housing Agency should be a fact-finding
agency for the purpose of accumulating data and information for all
agencies, government and private enterprise, having to do with home
construction. As will be shown later in this report, it is our opinion
that the credit of the Government should not be used for the develop-
ment of housing needs, except in the case of catastrophe, as there are
sufficient funds, as shown in this report, in the hands of private enter-
prise to take care of all such credit needs of the country. We do not
believe that the housing of the indigent, the improvident, and the
laggard should be a part of this study, as it resolves itself entirely into
a social, rather than an economic function. It is beyond the scope of
private enterprise to provide satisfactory housing for this particular
group of citizenry, and such groups should be considered entirely
separate from what has recently been termed the low-income wage
earner.
(7) EFFECT OF VETERANS' LOANS ON THE HOUSING PICTURE
Sufficient experience has not been had to enable us to properly see
the effect of veterans' loans under title III Public Law 346, Seventy-
eighth Congress, on the housing picture. Accurate figures are not
available of the number of men and women eligible, from a credit
standpoint, for such loans, nor can we determine at this time the
future policy of the Government with respect to the maintenance of a
standing army and other factors which may retain men in service,
or what action Congress may take with respect to the extension of the
present act. All of these factors would have a definite bearing on the
housing picture.
From the experience of our members thus far, we have observed
that the estimates previously made as to the number of veterans
eligible for and desiring new homes, are excessive. Our projection of
housing requirements after the war, as shown in appendix 9A, antici-
pates the effect of the Servicemen's Readjustment Act of 1944 on the
national housing requirements. While credit has been made easy
to the veteran, and his equity in the home may be made available to
him by virtue of the act, it must be remembered that this is a loan
and not a gift to the veteran, and under this circumstance, he is going
to be reluctant to enter into a contract to purchase a home unless he
is fairly well assured that his income is sufficient to meet the required
payments. It is also our observation that the veterans now being
discharged are reluctant to pay the execssive cost for right of occu-
pancy, which in many communities ranged from 20 percent to 35
percent above the fair appraised value of the property based on normal
standards. The Veterans' Administration has a grave responsibility
in the administration of the act, in making certain that the veteran
is not being penalized by purchases at inflated values which may result
in later loss to the veteran and eventually the very purpose and intent
of the act as passed by Congress would be lost.
We have found that not only our own membership, but also all
financial groups are willing to assist in every way possible to make
the act operative and entire communities are organized to assist the
veteran in rehabilitating himself into civilian life. The chief danger
is that the veteran may get into the hands of speculators and be
encouraged to borrow money for purposes which may not eventually
inure to his financial benefit.
1858 POST-WAR ECONOMIC POLICY AND PLANNING
(8) RELATION OF RURAL HOUSING AND URBAN REHABILITATION TO THE
GENERAL HOUSING PROBLEM
(a) The approach to the rural housing problem in most parts of
the United States is one of modernization and adaptation of existing
facilities rather than one which would involve a large amount of new
construction. The most obvious need we have in connection with
new construction seems to be in the matter of reducing costs. The
Mortgage Bankers Association believes that legislators and others
considering this problem are most likely to err in approaching the
rural housing problem by encouraging farmers to make heavier invest-
ments in the farm homes than the inherent earning capacity of their
farms will warrant. Certainly all segments of our population would
like to see every American farmer housed in an adequate and well-
equipped home. However, members of the Mortgage Bankers
Association approach this problem primarily from an economic
point of view and they cannot lose sight of the necessity for paying
for these rural homes. In studying this problem, therefore, we must
always be conscious of the low-net incomes of a large proportion of
American farmers, particularly in certain geographical areas of our
country. (See appendix No. 11.) It would be an economic burden
and an injustice to this group to saddle them with an unbearable
debt in order that they might have housing facilities beyond their
capacity to pay for them. The ultimate result of such a situation
would be inevitably a wholesale loss of whatever equity such farmers
may have had before incurring unwarranted building expenses. This
would lead to their being far worse off than before.
The probable developments affecting rural housing values and
costs are:
(1) Most economists agree that building costs will remain high
for a period of 3 to 5 years following the end of the war. The factors
which cause high building costs in urban areas are largely those
affecting rural home building.
(2) It is possible that with the supply of farm products at an all-
time high level in production that farm prices may decline in the
period following the end of the war. If this condition does exist
rural building costs will go higher than present levels because it will
take more bushels of wheat or corn to build the same building.
(3) Technological changes will have a tendency to reduce the need
for certain service buildings. No longer is it necessary for the farmer
to have a large horse barn, plenty of storage space for feed, when the
tractor has largely replaced the horse. This may allow a larger per-
centage of building investment for the farm residence than previously.
This is not necessarily true generally, as other specialized farms
may need to increase the number of buildings, as for example many
dairy farms.
(4) A larger portion in the post-war period will probably go to
operation, and less to the owner of the property. This means of
course a lower rate of capitalization than formerly. A larger portion
of net farm income will be capitalized into the residence because —
(a) Generally rising standard of living on farms. This is
the long term trend. It is evidenced by the increased number
of farms having electricity, gas, water systems, and so forth.
POST-WAR ECONOMIC POLICY AND PLANNING 1859
(b) It is necessary in certain instances enumerated below to
have a good farm residence:
(1) Necessary to attract desirable tenant.
(2) Sons of present owners may not be satisfied with the
housing accommodations of their parents and will seek
better housing.
(3) A good farm home is necessary to sell the whole farm
at a good price.
(5) As part of the higher standard of living for the operator's
family the homemaker will no longer board the hired man. This
will necessitate increased use of tenant houses for married farm
laborers.
(6) The long time trend is toward small families even in the rural
areas. This will result in smaller farm residences.
The factors affecting the amount a farmer can spend for his resi-
dence are different from those of urban owners. As a rule of thumb
city residences should not exceed in value 2}{ times the annual income
of the owner. Investment in a farm residence certainly should not
exceed nor equal this figure. In the Appendix Chart No. 11, the
net income of farmers for the United States is given for the years
1935-39 and for 1940. It is interesting to note that the net cash
income of farmers for both periods shows that the most common
income of this group is less than $500. The cost of ownership of a
well constructed frame house may be estimated at 7.5 percent of the
new cost of the property. A $3,000 house for example would have
an estimated annual cost of ownership of $225 or $18.75 per month.
The following are genera] principles which we believe to be sound
reasoning for the outlook of rural housing in the post-war period.
(1) The amount invested in a farm residence, especially if debt is
involved, should be conservative. Gross farm income goes for
production expenses, family living expenses and for debt servicing.]
(2) In many parts of the United States where improvements on
farms are generally overbuilt, building may be purchased cheaper
than they can be built. This condition we believe will continue in
the near post-war period.
(3) The erection of farm service buildings should not be slighted
unduly in order to invest more money in a farm residence. The
contribution of the residence to farm income is secondary to that of
farm service buildings.
(4) The major expenditures for farm residence in most areas should
be for modernization and adaptation rather than for new construction.
(5) Rural housing problems should be adapted to the areas where
the need is greatest.
(a) We must fit the cost of housing to the economic level to
which the farmer can economically afford. Emphasis should
be on the cost range of $500 to $2,500.
(b) Restrict houses in size, quality, and equipment to farmers'
ability to pay.
(e) Include some home contribution of goods, services, and
native materials.
(d) Rather than emphasizing the ideal, all agencies concerned
should put practicability in their plan for rural housing.
(e) Do not assume that everything must conform to specifica-
tions ; that is, labor, materials, and equipment.
1860 POST-WAR ECONOMIC POLICY AND PLANNING
if) It may be necessary to sacrifice some individuality in order
to reduce costs. This may come about through localizing pre-
fabrication.
(b) We have reviewed elaborate post-war plans of many metro-
politan areas, both large and small, and there is a tremendous reserve
of capital made available in municipalities throughout the country
for urban rehabilitation. These programs, include the building of
highways, public buildings, hospitals, parks and playgrounds, bridges,
overpasses, airports, and in fact, all types of self-sustaining public
improvements. All of these have their direct bearing upon the
housing program, first, by eliminating blighted areas and, second, by
developing entirely new residential districts. We believe that
encouragement should be given to the filling-in of areas adjacent to
large metropolitan centers, and even within the metropolitan centers
themselves. In other words, the efficiency in operation of a munici-
pality is a significant factor in all rehabilitation programs as it has a
direct bearing upon police, fire, educational and transportation
problems within the areas themselves.
We bfelieve that in some areas the pendulum of housing programs
has swung too far toward the development of individual homes and
that more attention should be given to rentable units for the immigrant
and transient labor as there is a general tendency in our whole indus-
trial program for labor to become more mobile.
Following the last war, a very unfortunate development of apart-
ment-house building broke out in a speculative field which brought
financial ruin to a large number of investors in real-estate mortgage
bonds. There was practically no control over the distribution of these
securities by the State or Federal Government, and it was a new
venture in the investment field which was entered into under the
guise of conservative first mortgage loans. Fortunately, we now have
the control of the Securities and Exchange Commission on the distri-
bution of this type of investment, and we do not anticipate that
following this war a similar type of speculation will develop.
Again in this field it is necessary that we have intelligent research
to guide the Government and private enterprise alike.
We believe, in the rehabilitation of urban areas, that a careful study
should be made of ways and means of making the distribution of secu-
rities secured by real property, such as apartments, hotels, office
buildings, and the like, less costly to the borrower. The controls of
the Securities and Exchange Commission are in the main established
to protect the public on investment in issues having Nation-wide dis-
tribution, and are applicable, because of their cost, chiefly to issues in
excess of $1,000,000. There is a zone between the $100,000 issue and
the $1,000,000 issue which should be encouraged, and we believe that
the proper controls for these issues should surround (a) appraisal
methods; (6) proper building standards; (c) estimates of operating
income and expenses based on experience; and (d) on some borrower
of financial strength having an equity in the project. We would rec-
ommend that a committee be appointed to study the Securities and
Exchange Act of 1934 to determine the changes that should be made
in the act in order to make it applicable to urban rehabilitation and,
at the same time, to encourage proper controls over the distribution of
real-estate securities so that the investing public may be protected
against the unscrupulous promoters.
POST-WAR ECONOMIC POLICY AND PLANNING 1861
PERTINENT SUGGESTIONS
(1) We believe that the Government agencies, private organizations,
and associations, should encourage a more professional approach to
the subject of real-estate appraisals in all its phases. This can be
accomplished —
(a) By including in the curricula of colleges and universities, more
subjects bearing on appraisals. We point to just one university which
has made some very forward steps in this direction, namely, New
York University, New York City, N. Y., and we are pleased to note
that other colleges are gradually including courses of study touching
on the subject.
(6) Adult courses should be encouraged in night schools and in spe-
cial institutes held throughout the year.
(c) Appraisal clinics should be held by national associations in which
their members and others should be invited to participate.
(d) More literature should be distributed on the subject of real-
estate appraisals and we are of the opinion that by the development
of more thorough study on the subject, this will naturally follow. We
would recommend that all trade journals published by associations
having to do with real estate lay more emphasis on the subject of
appraisals.
(e) Younger men and particularly returning veterans should be ad-
vised to enter the study of real-estate appraisals in conjunction with
business and administration courses.
(2) There should be developed a unified and comprehensive program
on the part of Government and private enterprise to avoid duplication
of work and effort:
(a) We would recommend that the President call another conference
similar to the President's Conference on Home Building and Home
Ownership, 1931.
(b) We believe that the many associations dealing with home build-
ing and home finance should inaugurate a plan whereby there would
be a correlation of work and effort. This might be encouraged by
holding a meeting once each year, to which there could be invited one
or two representatives of each of the respective associations. The
chief subject, of course, of such a group should be directed toward
standardization of methods, both in home building and home finance
and careful consideration should be given to ways and means of lower-
ing the initial cost of mortgage financing. Thought should also be
directed to uniform foreclosure practices throughout the United States.
(3) A whole field of thought develops when we get into the subject
of construction methods:
(a) We believe that this field should be left to the contractor and
builder, but as we directly touch on this phase of activity through the
financing of home construction and home ownership, we believe that
the contracting industry, as a whole, should be strengthened financially
to enable the contractor to carry on a construction program without
leaning too heavily on credit.
(b) Contractors should be better tooled and equipped for a build-
ing program in order that each item going into construction might be
produced at the lowest possible cost.
(c) The one or two house a year builder should be discouraged in
the building of average homes. We would refer the committee to the
1862 POST-WAR ECONOMIC POLICY AND PLANNING
studies made by Miles L. Colean in American Housing particularly
figures 10 and 11 shown on pages 76 and 77, which show that almost
64 percent of the builders in 72 cities constructed only one house a
year.
(d) We would encourage the development of more research on the
part of manufacturers, on material, and particularly commend the
valuable studies now being made by many national trade associations.
(4) Farm lending: Sections 1 and 3 would apply in a measure to the
program of urban and nonurban lending. However, we believe that
the time has come when there should be appointed a commission to
review the entire rural credit structure, similar to the one appointed
by President Wilson in 1913.
(5) Our association feels that real property taxes in many urban
and suburban communities as presently assessed are far out of line
with the actual or estimated earning power of the properties and are
a serious deterrent to the development of housing for the lower income
classes. We further believe that the Federal tax program should be
revised to encourage individual initiative and the investment of risk
capital in the building industry. Taxing authorities should, in our
opinion, be giving more emphasis to the use value of property.
Total mortgage debt (as of Dec. 31, 1943) !
Urban mortgages of Federal agencies:
Home Owners' Loan Corporation $1,338,000,000
RFC Mortgage Company 101, 000, 000
Federal National Mortgage Association 65, 000, 000
Farm mortgages of Federal agencies:
Federal land banks 1, 358, 000, 000
Federal Farm Mortgage Corporation 403, 000, 000
Farm Security Administration 171, 500, 000
Total 3, 436, 500, 000
Urban and farm mortgages of private agencies and others:
Life insurance companies 2 6, 670, 000, 000
Building and loan associations 3 4, 489, 000, 000
Mutual savings banks " 4, 435, 000, 000
Commercial banks 4, 647, 000, 000
Fraternal societies and associations 6 195, 200, 000
Others_ « 10, 500,000,000
Total 30, 936, 200, 000
Total urban and farm mortgage debt 34, 372, 700, 000
1 Unless otherwise' indicated, above data have been taken from annual reports of various agencies and
groups.
2 Source: Life Insurance Institute.
3 Federal Home Loan Bank Review.
< Source: Association of Mutual Savings Banks.
» Annual statistics— Fraternal Monitor.
Rough estimate based on previous studies and opinions of various authorities competent to make such
estimates.
Of the above total amount, approximately $4,000,000,000 of mort-
gages are insured by the Federal Housing Administration.
We would also estimate that as of the same date, the farm and
city loans are divided approximately as follows:
Farm mortgages $6, 500, 000, 000
Urban and all others 27, 800, 000, 000
POST-WAR ECONOMIC POLICY AND PLANNING 1863
We would direct the committee's attention to the fact that the
mortgages are well distributed as to the class and type of lender,
which we believe is a healthy condition in our economy. Further
studies will be made in this report to show the vast amount of funds
held by the leading lending groups which funds will be available to
meet the post-war requirements.
One study recently made by our association shows the growth of
the admitted assets of 49 leading life Insurance companies from 1920
through 1943. There were $6,935,972,000 in 1920 which increased to
$34,400,000,000 in 1943. (See volume of mortgages and total ad-
mitted assets Appendix la and b.) In the same period of time, the
percentage of mortgage investments was 32 percent in 1920 and
increased to a peak of 43.09 percent in 1927, this percentage was as
of December 31, 1913, at 14.24 percent. (See Appendix, 1A, B
and C p. 1873.)
It is now estimated that total admitted assets of all life insurance
companies exceeds as of December 31 , 1944. a total of $41,000,000,000.
By this particular class of investor, it is generally conceded that 40
percent of the total admitted assets could be invested in mortgage
loans. That is, it may be projected that there may be a potential
investment for mortgages by life insurance companies in an amount
equal to 40 percent of $4 1,000,000, 000 or approximately $16,400,000,000,
deducting from this the present volume outstanding as of December
31, 1944— $6,935,000,000 would leave approximately $9,500,000,000
available for mortgage investment in this one group of investors alone.
We do not contend that this sum is immediately available, but we
do advocate this sum will gradually be released for mortgage invest-
ment in the post-war years.
In addition to these immense sums, there is likewise available in
commercial banks and trust companies, mutual savings banks, fra-
ternal, social, and in individual savings at least an additional ten to
fifteen billion dollars, making a total sum of from $19,000,000,000 to
$24,000,000,000. This sum is sufficient to finance the most ambitious
building program which labor and material could develop in the post-
war years based on past peak volumes.
Senator Taft. Referring to the disposal of war housing, I suppose
the only controversial question is whether the permanent war housing
shall be made salable to public-housing authorities if requested by the
local city government or whatever local government there may be.
Since you are opposed to public housing altogether, I suppose that
you will not want to dispose of it to public-housing authorities?
Mr. Mahan. That is our opinion, and I think that is also the opin-
ion of the Hancock-Baruch report.
Senator Taft. I do not think they distinguish very much between
what may be called permanent war housing and the war housing every-
body agrees ought to be gotten rid of somehow.
Mr. Mahan. I do think every situation must be studied. It is
very difficult to lay down any general rule. There may be situations
where it might be highly advantageous to dispose of it for public
housing in a certain community to supply a housing need. It would
be ridiculous to destroy housing units where they are needed in a
community.
Senator Taft. Of course, the Surplus Property has already desig-
nated the National Housing Agency as the disposal agency.
1864 POST-WAR ECONOMIC POLICY AND PLANNING
Air. Mahan. We recommend in our report that they work in very
close conjunction with each other. As a matter of fact, all Govern-
ment agencies having to do with housing should work in close con-
junction with each other.
Senator Ellender. Mr. Mahan, as I understand it, after the war
your desire is to separate the housing from mortgages.
Mr. Mahan. From the financial functions.
Senator Ellender. I see. Now, have you received a different
treatment, or has the financing been handled differently since it is
under the National Housing to what it was before it was placed in
National Housing? In other words, what has occurred since this
agency is under National Housing to make you say that we ought to
put financing back to itself?
Mr. Mahan. The functions of finance and the functions of credit,
whether it is the insuring of credit or the direct lending on prop-
erties, we believe are controlling factors in the whole industry. We
have observed out over the country — and this comes to us from
practically every center — that the standards set up by the Federal
Housing Administration, for appraisals particularly, have been very
beneficial to the mortgage business as a whole, and it also benefits the
borrower and lender alike.
The Senator referred to the losses during the early thirties. We
have observed that there is no standard for appraisals. You just run
high at one period and low in another and speculators take control of
the market, and it is that element in mortgage lending which usually
results in ultimate loss. We believe that the Federal Housing Ad-
ministration has done much toward standardizing appraisals and that
their appraisal methods are basically sound.
Senator Ellender. Suppose that their appraisal methods could
be adopted, or would be adopted by National Housing, and let us say
they may be improved, would you then say that the agencies ought to
be separate?
Mr. Mahan. I think we might change our attitude.
Senator Taft. Of course, in setting up an agency we can really
write in pretty definite responsibilities which go to that agency,
although it is under a general direction from above.
Senator Ellender. There is a great cry by some of the people in
the country with respect to the establishment of bureaus here and
bureaucracy as a whole.
Mr. Mahan. I understand.
Senator Ellender. What I desire to do is try to place as many
agencies as possible, dealing with the same problems, under one head
rather than have them spread over the lot.
Mr. Mahan. If they are, then the same standards should apply to
all. That is the point that I want to make.
Senator Ellender. That is exactly it.
Mr. Mahan. I think our attitudes might change.
Senator Taft. I have had the feeling that the desire to separate
the agencies comes from the fear by one side or the other that the man
at the head of the whole business may be for or against public housing.
I do not know whether we can allay that fear, but that seems to me
to be the basis for the desire to separate them. If the head is sup-
posed to be against public housing, the Public Housing Authority does
not want to be in it, and if he is for public housing then the other
people do not want to be in it.
POST-WAR ECONOMIC POLICY AND PLANNING 1865
Mr. Mahan. Some have recommended that a board be in control
lather than one individual.
Senator Taft. The A. F. of L. mentioned a board here yesterday.
Mr. Mahan. That has its dangers, too. But anything that we
might suggest is going to meet with opposition from one section or
another; I realize that. Even within our own membership, that
might be the case.
Senator Taft. Mr. Blandford's recommendation for a single
agency contained a number of autonomous divisions. We can do
that. We can definitely allocate to certain people certain functions.
Mr. Mahan. In making this report, I am more or less concerned
with the situations as we see them out in the field, and in our local
communities. There is no reason why a given house on a given street
should have a value of $9,000 in the morning and $12,000 in the
afternoon and the fellow that pays $12,000 at a given moment for the
right of possession is ultimately going to lose some money.
Senator Taft. It is fair to say to him that if he wants to pay more
for that house than is its value it is his affair, if he has the cash to 'do
it with.
Mr. Mahan. That is true, if he has the cash to do it with, but we
also have the inflationary trends which we have to watch, because
while he may do it in one instance it may influence the value of the
house next door and the next purchaser will say he paid $12,000 for it,
so the next house is worth $12,000, when there is no reason for it.
Senator Ellender. Mr. Mahan, you have given us some figures
here. The smallest amount aggregates $2,750, exclusive of land, and
your contention is that this may be further reduced.
Mr. Mahan. That is true.
Senator Ellender. Assuming that the figures could be further re-
duced, let us say, to $2,500, which would include the land, and assum-
ing further that the usual rental that would be charged would be
1 percent per month, which would make the rent $25 per month, how
could a person earning less than $800 a year pay as much as $25 a
month rent?
Mr. Mahan. I think we have here a picture of a house, which I in-
tended to show as an exhibit. We have been making studies, and I
have been asking contractors personally to supply me with figures
and data on given houses. If I see a particularly attractive little
home some place, I try to find out what the cost of that home is. I
find very much can be done, Senator, in reducing the cost of construc-
tion. As I have brought out in my report, the housing industry today
is very much like the shoe industry was in former years, when the
cobbler made them at the bench. A large percentage of builders who
build only one house a year, as shown by the fine reports that Mr.
Colean and others have prepared, in our opinion increases the cost
of housing.
Here is a house [indicating a photograph], and I haven't all the
figures, but this attractive home was built in Wilmington, Del. Now,
the carrying cost per month to that owner is $17.17 per month. Any
of us could live in that house comfortably.
Senator Buck. That is outside of the city, is it not?
Mr. Mahan. I think this house is outside the city.
Senator Taft. What is the total cost including the land, would you
say?
1866 POST-WAR ECONOMIC POLICY AND PLANNING
Mr. Mahan. The total sales price, as I deduct it from these carrying
charges, was about $2,500.
Senator Taft. How many rooms?
Mr. Mahan. There is a living room, a kitchen and utility room, a
bathroom, and two bedrooms. It has city water, city sewer, and city
transportation. Now, whether this is outside the city I cannot say.
Senator Ellender. You say the house cost $2,500?
Mr. Mahan. I say that is what it sold for.
Senator Ellender. What it sold for?
Mr. Mahan. Yes.
Senator Ellender. How much should that house rent for in order
to bring a reasonable return to an investor?
Mr. Mahan. I would like to direct that question to Mr. Hill.
Mr. Hill. In this $17.17, there is included $5.43 for amortization.
Now, that would probably take care of the depreciation.
Senator Ellender. How much?
Mr. Hill. $5.43 a month.
Senator Ellender. Does that include the interest?
Mr. Hill. The $17.17 includes that much payment on principal
initially.
Senator Buck. The tax is not more than $12 a year, is it not?
Mr. Hill. It is $1.09 a month. Of course, that is a little unusual
in that respect. I think really our difficulty in getting at this low-
income group is getting the land at a price that is right and in getting
the taxes down so that they do not make an undue burden on him.
Senator Ellender. In the figures that appear at the bottom of
your chart there, do you include anything to cover vacancy?
i Mr. Hill. No, sir. This house was sold, so there is nothing to
cover vacancy. You would have to cover a return on your principal,
of course, and vacancy.
Senator Ellender. I think the rule is that the amount of rental per
month ought to be 1 percent of the investment.
Mr. Hill. Approximately that.
Mr. Mahan. That is approximately so, yes.
Senator Ellender. Of course, that is a good deal less.
Mr. Hill. That is correct. Of course, he has paid something down,
too.
Seantor Ellender. I understand.
Senator Taft. I should think, though, that the rental could be
figured at lower than that.
Senator Ellender. Lower than $17 on a $2,500 investment?
Senator Taft. I was going to figure 10 percent, including taxes.
Mr. Mahan. That is less than 1 percent a month.
Senator Taft. I wondered if it might be even lower than that.
Mr. Mahan. There is no geneial rule which applies. I think it
could be lower. I think there is a big zone of study that can be made.
The more I see it, the more I am convinced we can go far toward
reducing it. If we can make the cost of building lower, we are going
to satisfy a larger zone of our population. How much can be done, I
do not know.
Senator Taft. I do not know how we can find out the facts about
this cost of building, because the figures are very different. I mean
whether it is the difference between this housing and the public
housing experience, the difference in quality or difference in location,
POST-WAR ECONOMIC POLICY AND PLANNING 1867
or what it is, it is very difficult to determine, and that is why I asked
the question.
Mr. Mahan. There is a large field of study which is worthy of a
study being made at Purdue University. I have blocked out here in
exhibit 8 in the report a $5,000 pre-war house. Now, Mr. Paul
Bestor, who has possibly done as much research work in this par-
ticular field as anyone, more or less follows the same percentage.
The labor cost on that house is 29 percent. The actual material cost,
what he terms "platform cost" — that is, the cement at the factory,
the lumber at the factory, the hardware where it is manufactured —
that is, the bulk buying that could be done and bulk purchases could
be made and a more efficient purchasing power if the contractors
could be better financed to accumulate materials; and the total of
those two items — that is, labor and material — at platform cost, is 52
percent. Now, the other zone of cost in building is approximately 48
percent. That includes all freight, all intermediate profits, all of
those costs which go into our present cumbersome system of building a
house. It is largely due to the method employed. We maintain
that one man, one firm, building one house a year, cannot build it
cheaply. The studies show that about 64 percent of building is done
on that basis. '
Senator Taft. We have some figures showing that 8,000,000 urban
families have incomes under $1,000 a year from which they could pay,
we will say, for rent not much over $240 a year or $20 a month. I
may not have the figures exactly right.
Senator Ellfnder. You have a lot of workers whose income is
$650 to $700.
Senator Taft. Yes. They may have something else the matter
with them other than earning.
Mr. Mahan. I have pointed that out in my report.
Senator Taft. Of course, it is important for us to find out whether,
if you went ahead under the present system, there would be on the
market, we will say, 300,000 or 400,000 houses at $3,000 even, over-all
cost, available for sale. Now, I do not know how we could find that
out. There are a lot of theories about how much things cost, but up
to this date they have not been produced in any quantity.
Mr. Mahan. Senator, the question of income is a vital factor. I
would like to point out in one county that we have in Missouri,
which was formerty a mining county, it possibly brought in 22,000
people into that county who were miners. Mining ceased, and those
people remained in the county, bought little farms and land, and it
has been a social problem trying to get those people new homes. There
is nothing for those people to increase their income. Now, the
problem in that particular county, where their income would possibly
show less than $500 a year for the greater bulk of those people, is not
in getting those people a better home but getting them relocated into
areas where they can produce enough labor and effort to increase their
income and have better housing. In other words, the building of the
house itself will not solve their problem. That is my point.
Senator Taft. That is true. It may be that as to the $500 people
there is usually something else wrong than just low pay, but there is
a very wide range of activities that does not provide over $900 or
$1,000, and in that group we would like to know whether that demand
-can be met.
1868 POST-WAR ECONOMIC POLICY AND PLANNING
Mr. Mahan. I think that is an important phase of this study.
Mr. MacDonald, do you have any ideas on that?
Mr. MacDonald. The only observation I can add to what has
gone on here is in the State of Delaware, which is an exceptional
situation; while we have only shown an exhibit here of one house
where the buyer of that house had an annual income of $1,200, there
are hundreds and hundreds of cases, because of the favorable tax
situation in that State, where people with incomes in the $1,000 and
$1,200 range can have modern and good housing.
Senator Taft. Well, the normal tax on a house of this sort, a
$2,500 house, might be $40 a year, I suppose, in most places. That
would be $3.50 instead of $1.09, that you have listed here.
Mr. MacDonald. Well, that is on this particular house, but the
average would be about $1.50 a month. Of course, that saving makes
a tremendous difference in the financing and working out of the carry-
ing charges on these small homes.
Senator Taft. On the other hand, it must be remembered that
that is a perfectly proper cost, it seems to me, for people who own
homes. The cost of schooling alone will probably run a good deal
more than half that for the children. If you take that off you must
subsidize them in another form of subsidy. Usually, of the local
tax, at least half goes for the school. The rest is for police and fire
service and stuff that is right there, that they get and have to pay
for. If you are going to give it to them for nothing, even a very
small sum, as perhaps Delaware is doing in this outlying district,
that, in effect, is a local subsidy to the home owners.
Mr. MacDonald. It is a local subsidy ; there is no question about it.
Senator Taft. I have seen plenty of studies showing the tax money
paid by the smaller residences. Certainly they get their full value for
that money. It is burdensome, but then they get modern service in
the city for it.
Mr. MacDonald. Well, that is true. In my State of New Jersey,
it is very difficult to find anything that approximates the figures in
Delaware. The bank I represent financed hundreds of houses under
class III of title I of the F. H. A., National Housing Act, and those
houses were very comparable' to this exhibit, but the taxes in those
cases would run anywhere from $5 to $7 a month instead of the $1 to
$1.50 in the State of Delaware.
Senator Buck. It might interest you to know there are no school
taxes involved in that.
Mr. MacDonald. No school taxes on that.
Senator Taft. The schools in most States are supported by taxes,
Mr. MacDonald. Yes.
Mr. Mahan. There is one point I would particularly like to bring
to your attention, and that is this: I believe it is a step in the right
direction as far as trying to get these costs of building down. We
observe that there are a great many associated housing people that
are housing conscious at the present time, and we recognize that.
There are some 76 that I have enumerated in the appendix, and I
presume there are double that number of associations, who are fairly
well organized groups, making studies and have given some atten-
tion and some thought to this problem. You might say that private
enterprise could get these all working together, but it does not seem
to work that way. It seems to me that some attempt should be
made, similar to the President's Conference on Home Building and
POST-WAR ECONOMIC POLICY AND PLANNING 1869
Home Ownership of 1931, whereby we could bring all of those ele-
ments and all of those groups together, to more or less get them
thinking together and avoid duplication of work. I think it would
help the Government and private enterprise alike if we could get the
material groups, the contractor groups, the financial groups, the title
groups, the real estate groups, and all of the others in one room to
discuss these problems together, and I think much can be done in
that respect.
As to the preparation of section 8 of this report, I want to state
that in the preparation of this particular section, the association as a
whole was very well advised by Dr. Earle Butts and Dr. E. C. Young,
of Purdue University.
Senator Taft. We are going to have the Secretary of Agriculture
here at 2:30.
Mr. Mahan. I want to be sure that I hear his testimony.
Mr. Earle Butts has just completed 2 years of study on farm credit
at Purdue University, and he is possibly as well informed as any man
that we can find on this subject.
Senator Taft. Have you taken any position on these rehabilita-
tion bills that were introduced in the last session under which the
Federal Government finances the purchase of large areas in cities?
Mr. Mahan. We have not taken any general position on that. I
would like to ask Mr. Hill to discuss it briefly.
Senator Taft. We had Mr. Bettman before us on one of the rehabili-
tation bills. I think the National Real Estate Board has a bill.
Mr. Mahan. They are naturally interested in it.
Mr. Hill. We have a committee charged with studying those bills.
You refer to the Thomas bill and the Wagner bill, I suspect.
Senator Taft. Yes.
Mr. Hill. I think we may take some official position on it later.
We are a little bit foggy, as I think everybody else is, on the question
of acquiring land at a price at which it can earn the necessary return,
whether it should be paid for by a municipality or by the State.
Senator Taft. It seems this bill involved a subsidy by the Gov-
ernment, because they were going to let the localities, the local au-
thority, whoever it was that did the job, have 100 percent of the cash
needed at 1 percent, which certainly is a very considerable Federal
subsidy.
Mr. Hill. Unquestionably, something will have to be done. We
have considered an area, for instance, that we think should be
rehabilitated.
Senator Taft. There may be something that ought to be done.
The question is whether the Federal Government ought to do it.
That is the problem before our committee.
Mr. Hill. The average city could not do it; it does not have the
credit to do it. It seems to me the question is whether it should be
the State or the Federal Government. For the State of New York,
we have accumulated a little money, and I think we should do it by
the State there.
Senator Ellender. I imagine your position would be the same in
that respect regarding housing. You would not want the Federal
Government to step in, would you?
Mr. Mahan. We have taken that position; yes.
91183— 45— pt. 12 8
1870 POST-WAR ECONOMIC POLICY AND PLANNING
Mr. Hill. You are going to find a lot of opposition. That ques-
tion has raised some contention. A fellow from Tulsa, Okla., said:
""We are not going to contribute to any work in the city of New
York." I think you are going to find a lot of conjecture, or a lot of
contention on that, before you get through with it.
Senator Taft. On this question of rehabilitation, you are only
•discussing the general desirability of doing something, you are not
taking any position as to whether we should do anything; is that right?
Mr. Mahan. That is right.
Senator Taft. I see.
Mr. Mahan. I would like to say something on this question of
individual homes. I believe this was brought out by General Hines
this morning. We believe that the pendulum is possibly swinging
too far in some areas toward individual homes. Labor is becoming
more mobile, and particularly the young men coming back and the
veterans coming back after this war are undetermined in their own
minds. They have not established themselves. A veteran coming
home after this war is possibly just getting married, and he might
prefer to rent. We believe certain areas and the Government alike
should be giving attention to rental units, and this is a suggestion
which I have thrown in here and which I do not believe has been
made to you before, and that is that we all subscribe to the idea that
we want to do all things possible to avoid the speculative era which
followed the last war when so many people were led into investments
in real-estate mortgage bonds under the guise of conservative first-
mortgage loans. I believe we have proper controls under the Securi-
ties and Exchange Commission to protect the public from that kind
of speculators or promoters that we found following the last war.
However, m operating a business in the field there is a zone of credit
of between $100,000 and. $1,000,000 which would apply chiefly to the
development of apartment houses or hotels or like structures. The
Securities and Exchange controls seem to apply more particularly
to issues for Nation-wide distribution, and the cost of producing
those issues is tremendous upon the average borrower, and we believe
that some consideration should be given to that zone of mortgage
lending between $100,000 and $1,000,000, and that those controls
should surround, first, the appraisal methods; second, proper building
standards; and third, estimates on operating income and expenses
based on experience.
In the past years there was no regard paid to it. They just threw
the figures into the circular and sold the issues on pure estimates.
Fourth, that some borrower of financial strength, that has an equity
in the project — in other words, that the fellow developing it has some-
thing at stake, something to protect. I think it might be advisable
that we view the Securities Exchange Act of 1934 to see if something
might be done about that zone of $100,000 to $1,000,000 with less
cost to the borrower.
Senator Taft. Those issues, as I remember them, related to hotels
and high-priced apartment houses.
Mr. Mahan. Yes, sir; that is right. That was in Chicago and
Philadelphia and all our metropolitan areas throughout the country.
Now, in developing the Securities Exchange Act, it set up a
standard which would apply to the $20,000,000, $30,000,000, and
$40,000,000 corporate issues. The cost of the prospectus alone and
POST-WAR ECONOMIC POLICY AND PLANNING 1871
the legal expenses incident to creating a loan of $100,000 or $200,000
are prohibitive under the standards set up by the Securities and Ex-
change Commission. I have no recommendations to make. I think
it is an area of credit which should be studied.
Senator Taft. I notice you did not divide the ownership of urban
and farm mortgages by private agencies. Do you have the figures?
Mr. Mahan. The only figures I have are for the insurance compa-
nies, and those are contained in a schedule. I do not have the figures
for the other groups.
Senator Taft. I see you have made an estimate, though.
Mr. Mahan. Yes.
Senator Ellender. What is the average rate charged on farm
mortgages, do you know?
Mr. Mahan. I should say about 4 percent.
Senator Ellender. Arid on urban?
Mr. Mahan. About 4% percent. That is just a rough estimate.
Senator Ellender. I understand.
Senator Taft. You feel, as far as money available for mortgages is
concerned, that there is plenty of money, do you?
Mr. Mahan. I want to point that out particularly in one group of
investors. I have tried to bring it out as pertaining to life insurance
companies. I do not believe we realize how rapidly funds are being
accumulated in these major groups of lenders."
Following the last war, the total admitted assets of life insurance
were $6,935,000,000. That increased in 1943 to $34,000,000,000, and
recent figures which I have obtained, which I estimate for December
31, 1944, would show a further increase to about $41,000,000,000. In
conferring with many of our members, it is generally conceded that
about 40 percent of the total admitted assets invested in farm and city
loans makes a well-balanced portfolio. If 40 percent of $40,000,000,-
000 were invested in mortgage loans it would be an amount equal to
about $16,000,000,000.
As a matter of fact there are between $5,500,000,000 and $6,000,000,-
000 at the present time. So deducting that from the $16,000,000,000
it shows that there are approximately $10,000,000,000 in that pool
alone which will gravitate to mortgage investment.
Now all of the insurance companies with which I have conferred
give preference to residential mortgages. I mean that is the prime
investment. It convinces me. The same figures relatively project
themselves for the other important groups and it convinces me that
there is a tremendous amount of money available for mortgage lending
following the war.
Senator Taft. What about the question of money for rental hous-
ing? Of course in the ordinary house the purchaser has got to find
10 percent of the equity at least, or 20 percent in the case of the veteran
which we are lending to him, but there seems to be a shortage of
money, or an unwillingness on the part of people to go into rental
housing for not only the lowest income but for the intermediate-income
group. Have you any suggestion on that question? They can prob-
ably get mortgages in reasonable amounts, but there has to be some
equity investment in that kind of enterprise.
Mr. Mahan. I would like to direct that question to Mr. MacDon-
ald. He lives in a metropolitan area.
1872 POST-WAR ECONOMIC POLICY AND PLANNING
Mr. MacDonald. The rental housing program under title VI of the
National Housing Act, as far as the State of New Jersey is concerned,
has been, in my opinion, very comprehensively done.
Senator Taft. That is war housing, though, is it not?
Mr. MacDonald. That is war housing.
Senator Taft. Is that mostly temporary housing?
Mr. MacDonald. No; that is permanent, garden-type apartments
that cater to a rent scale of $45 for a three-room apartment and $62
for four-room apartments.
Senator Taft. As I understand it, the F. H. A., does not want
title IV renewed. It it should be renewed for that purpose I would
like to know it.
Mr. MacDonald. I believe the garden-apartment scheme of the
F. H. A. has been very successful. I think there will be equity capital
available for a continuation of it in the post-war period, a modified
207, which was the pre-war rental housing, I think.
Senator Taft. The testimony shows they have not been very suc-
cessful in the pre-war period. I would like to find out how to make
them so, if it can be done.
Mr. MacDonald. Our experience in it was very successful. There
was not a great number of those projects.
Senator Taft. There was very little money loaned for that purpose.
Mr. MacDonald. Many builders who ordinarily were one-family-
house builders went into rental housing and into war housing under
section VI. Those same builders, I believe, from my personal experi-
ence with them, are going to want to continue to build that type of
house in the post-war era.
Senator Taft. They want to build it but they do not want their
money tied up in it, as a rule, they want to get it out as quickly as
they can.
Mr. MacDonald. Under the present tax laws, many of those build-
ers seem to want to stay in for a while.
Senator Taft. Yes; at the present time that is true, because there
is not much to do, but once they get into full-scale building they will
need all the capital just for building.
Mr. MacDonald. I think the proof of the success of the pre-war
projects, while they were somewhat limited in number, was that the
F. H. A. lost most of those mortgages and they were refinanced by the
life-insurance companies. There has been a very large demand for
that type of loan. We in New Jersey perhaps did more of it than
any other State in the Union, under title VI. All the indications that
we can find up there are that builders would like to have something
like that.
Senator Taft. The only thing is this: If the Federal Government
puts 100 percent in the rental housing proposition you are not very
far from subsidizing, because they may well lose the money.
Mr. MacDonald. That is correct. Of course, the pre-war were
set up on an 80-percent basis. While the war housing approximated
100 percent, since the 10 percent is taken out in profit, I still feel that
the builders who have made money during the war, under the war-
housing, will put equity capital into rental housing after the war.
POST-WAR ECONOMIC POLICY AND PLANNING 1873
Mr. Mahan. I wonder if Mr. Hollyday would like to say some-
thing, because he has an idea of F. H. A.'s participation in this.
Mr. Hollyday. I might add to what Mr. MacDonald has said,
that I think some of us who are in the position of lending money to
builders are doing what he implies we think we should do. We are
urging the large builders to invest a percentage of their own capital
in the larger operations.
Senator Taft. I did not suggest that. My suggestion was the
opposite. The men are in the building industry to build, they are
not ordinarily investing. They need their capital for building con-
struction. I was asking the question how we would find people who
would be permanent investors in rental housing.
Mr. Hollyday. Well, sir, we do find some of these builders have
been successful during the war and do have capital available now.
We find those. They are a logical, potential group of investors of
their own capital.
Senator Taft. Your report, however, emphasizes the fact that they
ought to have more capital for their building business. That is the
general effect of your report, that there are too many contractors and
builders who haven't any capital so they can build cheaply but are
now generally handicapped in meeting their requirements.
Mr. Hollyday. As I understand it, if the F. H. A. is going to con-
tinue the 207 operations, that will mean they will have to put 20 per-
cent into it, and I see no reason why we could not encourage that
type of ownership. Furthermore, I see no reason why some of the
builders could not build individual homes and own them and plow
back part of their capital that way. The successful builder is a
potential capitalist for that form of operation, and I think quite a
few of us will urge that he continue to do that.
Senator Taft. We are very much obliged to you. We are sorry
your time has been short. There seem to be more people interested
in housing in the country than I imagined, and I am afraid we cannot
give much more time to it.
Mr. Mahan. Thank you, Mr. Chairman.
(The matter submitted by Mr. Mahan is as follows:)
EXPLANATION OF APPENDIX 1 (SECTIONS A, B, AND C)
The schedule designated as 1-A and the charts designated as 1-B and C are
inserted in this report to show the growth of the total admitted assets of life-insur-
ance companies from 1920 through 1943. While the figures for 1944 have only
been roughly compiled, it is estimated that the total admitted assets of life-insur-
ance companies as of December 31, 1944 are approximately $41,000,000,000.
The body of the report shows that the investments of life-insurance companies in
farm and city loans as of December 31, 1943, are $6,670,000,000, and it is generally
conceded that this figure will be considerably less as of December 31, 1944.
Mortgages secured on farm and city property have been one of the principle
investments of life-insurance companies throughout the years, and the percentage
of mortgages to total admitted assets as shown by the schedules have been declin-
ing since the late twenties.
It is generally conceded that when mortgages are again available for investment
that the life-insurance companies will be one of the principal purchasers, and
estimates as to the amount available for mortgages in life-insurance companies
at the present time will vary from nine and one-half to eleven billion dollars. It
is understood that this amount would gravitate to mortgage investment over a
period of time and would not be immediately diverted.
1874
POST-WAR ECONOMIC POLICY AND PLANNING
Appendix 1-A
Volume of mortgages and total admitted assets (life-instiranee companies)
Year
Farm mort-
gage
Other mort-
gages
Total
Total admit-
ted assets
Percent
1920'
$1, 127, 903, 000
1, 320, 902, 000
1, 455, 025, 000
1, 664, 553, 000
1, 805, 582, 000
1, 885, 365, 000
1,951,111,000
1, 977, 418, 000
1, 955, 946, 000
1, 926, 808, 000
1, 883, 246, 000
1, 832, 742, 000
1,706,959,000
1, 506, 570, 000
1,191,626,000
989, 250, 000
868, 496, 000
813, 801, 000
800, 187, 000
790, 629, 000
801, 000, 000
802,119,000
788, 045, 000
750, 000, 000
$1,113,750,000
1, 242, 126, 000
1, 395, 428, 000
1, 670, 453, 000
2, 004, 098, 000
2, 488, 529, 000
3,131,373,000
3, 680, 499, 000
4, 268, 250, 000
4, 794, 664, 000
5,108,451,000
5, 236, 196, 000
5, 081, 912, 000
4, 741, 648, 000
4,308,601,000
3, 962, 860, 000
3, 836, 972, 000
3, 944, 082, 000
4, 138, 170, 000
4, 330, 493, 000
4, 542, 000, 000
4, 904, 756, 000
5, 144, 968, 000
5, 150, 000, 000
$2, 241, 653, 000
2, 563, 028, 000
2, 850, 453, 000
3, 335, 006, 000
3, 809, 680, 000
4, 373, 894, 000
5, 082, 484, 000
5, 657, 917, 000
6, 224, 196, 000
6, 721, 472, 000
6, 991, 697, 000
7, 068, 938, 000
6,788,871,000
6, 248, 218, 000
5, 500, 227, 000
4,952,110,000
4, 705, 468, 000
4, 757, 883, 000
4, 938, 357, COO
5,121,122,000
5, 343, 000, 000
5, 706, 875, 000
5, 933, 013, 000
5, 900, 000, 000
$6, 935, 972, 000
7, 460, 776, 000
8, 089, 147, 000
8, 787, 595, 000
9, 634, 285, 000
10,668,056,000
11,829,280,000
13, 132, 025, 000
14, 631, 984, 000
16,001,812,000
17, 247, 166, 000
18, 410, 683, 000
18, 988, 249, 000
19, 258, 954, 000
20, 109, 785, 000
21, 385, 228, 000
22, 900, 051, 000
24,141,991,000
25, 494, 796, 000
26, 846, 682, 000
28, 250, 000, 000
29, 936, 937, 000
31,884,197,000
34, 400, 000, 000
32.32
1921 '
34.35
19221
35.24
1923 1
37.95
1924 1...
39.54
1925 1
41.00
1926 1 _
42.91
1927 i
43.09
1928 1 .
42.54
1929 1
42.00
1930 1 _
40.54
1931 i..
38.40
1932 i
35.75
1933 1 .
32.44
1934 i...
27. 35
1935 1
23.16
1936 i
20.55
1937 i
19.71
1938 i
19.37
1939 i
19.08
1940 i
18.90
1941
19.06
1942
18.68
1943
14.24
1 Pp. 84-85, Proceedings of Life Insurance Presidents, Thirty-fourth Annual Convention.
POST-WAR ECONOMIC POLICY AND PLANNING
1875
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POST-WAR ECONOMIC POLICY AND PLANNING 1877
EXPLANATION OF APPENDIX 2
There are mentioned in appendix 2 seventy-six associations which are interested
in one way or another in mortgage loans and while this list does not attempt to
list all of the associations having such interest, it does attempt to show that there
are a great many different, groups definitely interested in the program and each
are directing some proportion of their program to housing problems. Some of
the associations listed are less active at present than in former years but when
construction is revived their activities no doubt will increase.
We have not attempted to list the Federal organizations the number of which
is roughly estimated at 22.
There are a great many other associations interested in the program which are
not listed herein and there may be some omission of names of important organi-
zations as the list, is only devised for the purpose of showing the large number of-
interested organizations.
Appendix 2
Architects:
American Institute of Architects.
Appraisers :
American Institute of Real Estate Appraisers.
Association of Appraisal Executives of America.
Society of Residential Appraisers.
City planning:
American Institute of Planners.
American Society of Landscape Architects.
Regional Planning Association of America.
Urban Land Institute.
Contractors :
American Construction Council.
Building Contractors Employers Association.
General Contractors Association.
National Association of Home Builders.
Educational:
Economists National Committee on Monetary Policy.
Ely Economic Foundation.
Farm:
American Farm Bureau Federation.
Institute of Farm Land Brokers and Managers.
National Farm Chemurgic Council.
National Grange.
Federal organizations:
Twenty-two in number.
Financial:
American Bankers Association.
American Institute of Banking.
American Savings and Loan Institute.
Investment Bankers Association.
Morris Plan Bankers Association.
Mortgage Bankers Association of America.
National Association of Mutual Savings Banks.
National Association of Securities Dealers.
National Savings and Loan League.
New England Association of Morris Plan Banks.
United States Savings and Loan League.
Fraternal :
National Fraternal Congress of America.
Insurance:
American Life Convention.
Association of Life Insurance Presidents.
Institute of Life Insurance Companies.
National Association of Insurance Commissioners.
National Association of Mutual Insurance Companies.
Material:
American Wood Preservers Association.
Building Contractors and Mason Builders Association.
California Redwood Association.
Cast Stone Institute.
1878 POST-WAR ECONOMIC POLICY AND PLANNING
Material — Continued.
Cement Institute.
Douglas Fir Plywood Association.
National Hardwood Lumber Association.
National Lumber Manufacturers Association.
National Retail Lumber Dealers Association.
Northern Pine Manufacturers Association.
Plywood Manufacturers Institute.
Southern Pine Association.
-Miscellaneous:
American Association of Engineers.
American Municipal Association.
American Warehousemens Association.
Better Homes in America, Inc.
Financial Advertisers Association.
Governors Conference of United States.
Institute of Real Estate Management.
Metropolitan Builders Association.
Middle Atlantic Conference of Building Owners.
National Association of Building Owners and Managers.
National Association of Housing Officials.
National Association of Insurance Commissioners.
National Association of Securities Commissioners.
National Association of State Bank Commissioners.
National Public Housing Conference.
New York Real Estate Securities Exchange.
Pacific Coast Building Officials Conference.
Real Estate Auctioneers Association of City of New York.
Super Market Institute.
United States Conference of Mayors.
United Real Estate Owners Association.
Building Officials Conference of America.
Real estate: National Association of Real Estate Boards.
Research:
Brookings Institute.
Twentieth Century Fund.
Tax:
National Conference on Real Estate Taxpayers.
Tax Foundation.
Tax Research Foundation.
Title: American Title Association.
EXPLANATION OF APPENDIX 3
Appendix 3 shows the volume of building permits in the city of St. Louis,
1917 through 1943, and superimposed on this chart is the average interest rate
of mortgages in the city of St. Louis from the perod 1917 to 1941.
We recognize that there are other contributing factors other than interest rate
which contribute to the volume of construction, but the purpose of this chart is
to show the relationship of dollar volume to interest rate in a typical metropolitan
area.
EXPLANATION OF APPENDIX 4, 4-A, 4-B, AND 4-C
One of the most comprehensive studies of interest rates thus far made has been
compiled by Roy Wenzlick & Co., New York and St. Louis, and the studies apply
to interest rates on mortgage loans in the city of St. Louis from the period 1893
to 1944. This has been reduced to chart form showing A the mortgages made at
various varying interest rates, and B the average interest rate on all motgage
loans during the same period. We point particularly to the great decline- in
interest rates from 1933 to 1944 showing that the number of loans made at per-
cent has increased during that particular period and more loans have been made
since 1940 at less than 4 percent than in any other similar period reflected in this
study.
POST-WAR ECONOMIC POLICY AND PLANNING
1879
MORTGAGE INTEREST RATE
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POST-WAR ECONOMIC POLICY AND PLANNING
Appendix 4
Comparison of city building permits by years l
Number
Number
of fami-
of build-
lies
ings
1,139
7,491
204
5,396
600
7,923
579
8,700
1,487
11,366
3,384
13, 822
5,156
16, 510
5,251
16, 236
8,689
15, 676
7,770
14, 178
5,463
13, 707
6,392
12, 626
4,335
10, 146
1,617
8,223
1,479
6,750
565
4,397
297
3,719
551
3,699
536
4,809
935
5,107
860
5,107
1,041
2,800
1,604
5,125
1, 221
5,463
2,583
4,934
750
3,580
39
2,344
New con-
struction
Estimated cost
Alterations
Total
1917
1918
1919
1920
1921
1922
1923
1924
1925
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943
$9, 838, 614
4, 081, 595
16, 696, 801
13, 321, 778
13,803,464
21,181,065
36. 102, 475
34,687,117
48, 063, 771
33, 436, 203
35, 066, 145
38, 206, 329
22. 103, 607
14, 047, 187
14, 608, 855
2, 956, 526
8, 915, 442
3, 692, 947
8, 401, 485
11,233,918
6, 261, 403
7, 700, 890
8, 837, 860
10,474,841
13, 638, 470
6, 814, 253
1, 270, 078
$2, 699, 718
2, 270, 987
3,841,659
4, 372, 300
2, 827, 841
4, 029, 438
5, 341, 280
5, 144, 522
6, 813, 242
6, 405, 361
7, 008, 537
4, 613, 166
5, 227, 016
3, 300, 678
2,010,954
1,375,378
1,191,090
961,039
2, 894, 373
2, 235, 669
2, 473, 710
1,739,367
2. 713, 204
3, 165, 371
3, 429, 614
1, 393, 727
1, 689, 845
$12, 538, 332'
6, 352, 582
20, 538, 460
17, 694, 078
16, 631, 305
25, 210, 503
41,443,755
39,831,639
54, 877, 013
39, 841, 564
42,074,682
42, 819, 495
27, 330, 623
17, 347, 865
10, 619, 809
4,331,904
10, 106, 632
4. 923, 986
11, 295, 858
13, 469, 587
8, 735, 113
9, 440, 257
11,651,064
13, 640, 212
17, 067. 784
8, 207, 980
2,959,923
» P. 8, The St. Louis Realtor, January 1944.
EXPLANATION OF APPENDIX 5
Two charts appear showing the building cost for the standard six-room house
for the periods 1936 to 1943 as compiled by the Federal Home Loan Bank Board
and the other the reproduction cost of a standard six-room frame house in the city
of St. Louis for the ^ ears 1913 through 1944.
The insertion of these charts is for the purpose of reference on cost figures for
the years shown.
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POST-WAR ECONOMIC POLICY AND PLANNING
1881
INDEXES Of"
BUILDING COSTS FOR THE
STANDARD 6 ROOM FRAME HOUSE
(1935-39-100)
SOURCE
■FEDERAL HOME LOAN BANK REVIEW
CHART PRERARED BY
JLR.MILLER.01RECTOR OF RESEARCH
MORTGAGE BANKERS ASSN.OT A«ftlCA
JAN.V94S
1936 1937 1938
1939 1940
YEARS
1942 1943
ST LOUIS REPRODUCTION COSTS 1913-1944 STANDARD 6-ROOM FRAME. 25.376 CU.FT
LOT INCLUDED
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CHART BY PERMISSION OF
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POST-WAR ECONOMIC POLICY AND PLANNING
EXPLANATION OF APPENDIX 6-A AND 6-B
Appendix 6-A and 6-B show the average cost per family unit of new dwellings
in 257 identical cities for the years 1921 through 1943 based on figures compiled
by the United States Bureau of Labor Statistics.
Particular attention is drawn to the fact that the cost has been gradually de-
clining and it is the consensus of opinion of the Mortgage Bankers Association that
with this trend and the fact that the average income is gradually increasing, that
the number of lower income families that may be properly housed will gradually
be increased in the post-war years, and we lay stress on the fact that private enter-
prise and Government alike should do all things possible to encourage lower unit
cost and to maintain higher income levels, particularly, for those groups which
have been earning less than $1,500 per year prior to 1941.
AVERAGE COST PER FAMILY OF NEW
DWELLINGS IN 257 IDENTICAL CITIES
1921-1943
SOURCE-U.S. BUREAU OF LABOR STATISTICS
SINGLE FAMILY
-MULTI-FAMILY
POST-WAR ECONOMIC POLICY AND PLANNING
1883-
Appendix 6-B
Average cost per family of new dwellings in 257 identical cities
Year
Average cost per new
dwelling unit
Year
Average cost per new
dwelling unit
1-family
Multiple
family 1 «
1-family
Multiple
family 1 s
1921
$3, 972
4,259
4,189
4,342
4,593
4, 763
4,830
4,937
4,919
4,994
4,836
3,943
$4, 019
3,950
4,004
4,395
4,271
4, 103
4,170
4,129
4,400
3, 857
3,644
3,010
1933
$3, 845
4,071
4,228
4,355
4,352
4,105
3,970
3,890
3,975
3,510
2,876
$3, 040
2,716
3,245
3,679
3,641
3,217
3,359
3,075
3,108
2,680
2,648
1922
1934
1923
1935
1924
1930
1925
1937
1926
1938 t.
1927
1939 .
1928
1940
1929
1941 .
1930
1942 .
1931.
1943
1932
i Th is table does not show change in cost of erecting building but does show change in cost of such buildings.
as were erected. Does not include land costs.
2 1 includes multiple-family dwellings with store.
Source: U. S. Bureau of Labor Statistics.
Appendix 7
The following percentages are inserted to show the relative building cost during
the years 1936-43, and is for reference in connection with the charts contained
herein.
Building costs, standard 6-room frame house {indexes 1936-48)
[1935-39=100]
1936 96. 2
1937 104. 5
1938 102. 8
1939 101. 8
Source: Federal Home Loan Bank Review.
1940 103. 3
1941 114.0
1942 123. 2
1943 127. 2
EXPLANATION OF APPENDIX 8
Appendix 8 shown in chart form shows the allocation of cost of a $5,000 pre-war
house divided as to distribution, labor, and material.
We believe that much can be done to lower area of cost designated as distribu-
tion cost and by the development of more efficient building methods, and by
encouraging wholesale rather than retail building. We have attempted to>
emphasize this in the body of the report.
EXPLANATION OF APPENDIXES 9-A AND 9-B
We have shown in appendix 9-A in chart form the new dwellings in nonfarm
areas 1920-43, which shows great peaks and depths in the total volume as
between the various years during the period. It is our estimate that the number
of building units in the post-war years will more nearly approximate the averages
over the period from 1920 to 1941 whan the figures previously shown by many of
the Federal agencies.
It is the consensus of opinion among our members that the total number of
new dwelling units in nonfarm areas in the years following the war will range
from 500,000 to 750,000 units and we recognize that there may be wide variance
from these figures based upon many other conditions which will control construc-
tion activitv.
1884 POST-WAR ECONOMIC POLICY AND PLANNING
$ 5000 PRE-WAR HOUSE COSTS
SOURCE- PRODUCERS COUNCIL
DISTRIBUTION 48%
LABOR 297.
MATERIAL 23%
CHART PREPARED BY
J.R.MILLER.DIRECTOROF RESEARCH
MORTGAGE BANKERS ASSN.OF AMERICA
JAN. 8,1945
Appendix 9. — New dwelling units in nonfarm areas, 1920-43
Year
1920.
1921.
1922.
1923.
1924.
1925.
1926.
1927.
1928.
1929.
1930.
1931.
Total
non-
farm
247, 000
449, 000
716, 000
871.000
893, 000
937, 000
849, 000
810,000
753, 000
509, 000
330, 000
254, 000
Single
family
202,000
316,000
437, 000
513,000
534. 000
572, 000
491,000
454, 000
436, 000
316.000
227, 000
187, 000
Multiple
family
21,000
63, 000
133, 000
183, 000
186, 000
208, 000
241,000
257, 000
239, 000
142, 000
74, 000
45. 000
Year
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943
Total
non-
farm
134, 000
93, 000
126,000
221,000
319,000
336. 000
406. 000
515, 000
603, 000
715, 000
497, 000
351, 000
Single
family
118, 000
76, 000
109, 000
183, 000
244, 000
267, 000
317,000
399. 000
486, 000
613,000
391, 000
287, 000
Multiple
family
9,000
12,000
12,000
30. 000
b 1,000
53, 000
71,000
87,000
80, 000
68, 000
86, 000
46,000
1 P. 35, The Construction Industry in the United States.
Source: Bureau of Labor Statistics.
POST-WAR ECONOMIC POLICY AND PLANNING
1885
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1886
POST-WAR ECONOMIC POLICY AND PLANNING
EXPLANATION OF APPENDIX 10
Appendix 10 is placed in this report for reference only as it is compiled from
rather accurate sources and shows the large amount of cash and Government
bonds and net working capital of the United States Corporations for the vears
1939-44.
These large current resources did not exist in the period following World War I,
and it is the opinion of the Mortgage Bankers Association that corporations will
be able to finance from reserves a large proportion of plant expansion and this
tj'pe of demand upon banks and others for credit following the war will not be
as great as in previous periods.
CASH AND GOVERNMENT SECURITIES
US CORPORATIONS
SOURCE
SEC BULLETIN 745
NOV. 28, 1944
1941 194 2
YEARS
NET WORKING CAPITAL
US. CORPORATIONS
1939-1944
SOURCE
S.E.C BULLETIN 745
NOV. 28.1944
JUNE 30.
343 1944
CHARTS PREPARED Br
J.RMILLER. DIRECTOR OF RESEARCH
MORTGAC£ BANKERS ASSH OF AMERICA
JAM.BJ94S
POST-WAR ECONOMIC POLICY AND PLANNING
1887
EXPLANATION OF APPENDIX 11
Appendix 11 is included in this report to show the distribution of net income
of families in various areas throughout the United States, and the figures are
compiled from Agricultural Statistics, 1942, and are the basis of many of the
statements made in the section of our report designated as rural housing.
Appendix 11
The following shows the distribution of net income of farmers in various areas
throughout the United States:
1935-39
1940
North
Atlantic
East
North
Central
West
North
Central
1940
Net income
South
Atlantic
South
Central
West
$5,000 or over
$3,000 to $4,999
$2,000 to $2,999.
$1,500 to $1,999
$1,000 to $1,499
$500 to $999
1.1
3.4
5.9
6.6
11.5
23.0
37.0
10.0
1.0
.5
1.7
3.6
6.5
7.0
13.8
25.0
35.3
6.7
.2
.2
2.1
3.5
8.9
6.4
12.7
26.2
24.7
14.1
.7
.7
1.5
4.8
7.7
8.2
15.5
25.7
30.0
6.3
.2
1.2
4.9
10.5
9.7
17.0
26.4
25.7
3.8
.6
.2
1.0
1.5
2.4
4.9
10.3
24.0
47.8
8.1
1.3
2.4
1.9
3.3
10.6
23.2
49.8
7.5
4.4
3.4
8.1
9.3
15.8
24.2
$0 to $499
30.8
Do --
$500 to $999
3.4
.3
$1,000 or less
.3-
Source: Agricultural Statistics, 1942, p. 671.
Senator Taft. The committee will adjourn until 2:30 this after-
noon, when Secretary Wickard will appear on rural housing.
(Whereupon, at 1:15 p. m., the committee recessed until 2:30 p. m.
of the same day.)
AFTERNOON SESSION
(The committee reconvened at 2:30 p. m.)
Senator Taft. The committee will come to order,
proceed, Mr. Wickard.
You
may
STATEMENT OF HON. CLAUDE R. WICKARD, SECRETARY OF
AGRICULTURE (ACCOMPANIED BY RAYMOND C. SMITH, CHIEF
PROGRAM ANALYST OF THE BUREAU OF AGRICULTURAL
ECONOMICS, AND CHAIRMAN OF THE DEPARTMENT OF AGRI-
CULTURE'S INTER-BUREAU COMMITTEE ON POST-WAR PRO-
GRAMS)
Secretary Wickard. About two-thirds of the Nation's farm families
are ill-housed. Nearly half the inadequate houses are beyond repair.
Slums usually are associated with cities, yet the average level o"f
farm housing is far below that of the city dwellings. This is true of
what might be termed the settled farm families. Housing conditions
for most migrant farm workers are on an even lower level.
Adequate steps to improve farm housing would advance the health,
happiness, and general effectiveness of millions of farm people. Also,
the resulting volume of new construction and repairs would contribute
greatly to national employment and general business activity in the
years after the war.
1888 POST-WAR ECONOMIC POLICY AND PLANNING
If periods of depression ever should delay progress toward per-
manent full employment, farm housing offers a tremendous field
for concentrated efforts to maintain employment. "We should keep
this possibility in mind, even though we must plan for farm housing
in terms of full national employment and primarily from the stand-
point of the housing needs of farm families.
Today I should like to discuss, first, the essential nature of farm
housing that sets it off so sharply from urban housing; second, the
present situation; and third, some of the basic principles that should
be considered in building a comprehensive farm housing policy for the
years after the war.
Farm housing has been a major problem for many years. Varied
attempts to correct the situation have been made. Farm housing
remains a major problem.
The loans and limited subsidy programs of recent years have
affected probably less than 4 percent of the Nation's farm homes, and
a large percentage of the improvements consists of repairs and addi-
tions to houses that already were in fairly good condition. Even
making allowance for the unmeasurable results of research and
educational programs, the record is not impressive.
Why have gains in farm housing fallen short of urban gains? One
reason, undoubtedly, has been the high visibility of urban slums.
Even the casual passer-by can't help noticing them. But most
substandard farm houses stand alone, many of them far from main-
traveled roads. Those that can be seen as often as not strike the
passing traveler as more picturesque than pitiable.
A more compelling reason has been imperfect public understanding
of the true nature of the farm housing problem.
Farm housing is just not like city or suburban housing. The aver-
age faim house is a headquarters for many farming operations as well
as a family dwelling; it is a center for more of the family's social life;
home preparation of food and its preservation for future use is vastly
more important here. The farm dwelling is very much a part of the
whole farm plant, and must be closely integrated with other buildings
and the entire nature of farming operations.
Even in the matter of design, there is a great difference between farm
and city housing. Although many technical lessons learned in one
field may be adapted for use in the other, it seldom is satisfactory to
borrow citv or suburban house plans for rural use.
The difference is even wider in the field of finance. In the vast
majority of cases, the amount of money available for building or
maintaining a farm house is tied to the income from the particular
farm on which it stands. In this the farm house is unique. The
average city house has a value of its own, distinct from the particular
source of income of the people who live in it.
The implications are clear. A loan to build or improve a farm house
of necessity involves the value of the whole farm, not just that of the
dwelling. Subsidies to help put better houses on farms would of
necessity have to continue indefinitely on faims that did not have the
income base to support adequate housing. Thus efforts to improve
farm housing, unless integrated closely with other farm programs,
might often run counter to efforts to help farmers make adjustments
needed to enable them to earn adequate incomes, either wholly from
farming or with the aid of off-farm employment.
Next, what of the present farm housing situation?
POST-WAR ECONOMIC POLICY AND PLANNING 1889
Let us start with the fact that there are roughly 6 % million dwellings
on farms in this country, most of them occupied by farm operators,
and the rest — about a million and a half — occupied mainly by farm
laborers, urban workers who live in the country, and retired farmers.
We can roughly measure the part of the farm housing problem
represented by those 6K million homes. There is another part that is
almost impossible to measure — the needs of the migrant farm workers,
some of whom travel singly, some in family groups. We simply do
not have enough information about these people and the way they
live; but we know their needs are great and must be taken into account
in any broad effort to improve farm housing.
To get back to the 6% million fairly permanent farm houses, a recent
analysis of census data, made by the Bureau of Agricultural Economics
with the assistance of the Census Bureau, has divided them into three
main groups — those that are acceptable as they stand, those that need
extensive repairs or improvements to make them really fit to live in;
and those in such bad shape or so small that they ought to be replaced.
The standards used in making the three groupings cannot be called
too high by any stretch of the imagination. For instance, many of
the houses classed as acceptable lack facilities that the average city
family would insist on as necessary to good housing — things like elec-
tric lighting and running water. I shall not attempt to go into the
detailed figures here. They are included in an analysis of the farm
housing situation prepared by the Agriculture Department's Inter-
bureau Committee on Post-YVar Programs. It is a most interesting
and useful paper and with your permission I should like to submit it as
part of the record of this hearing.
Senator Taft. It may be made a part of the record.
(The analysis above referred to will appear at the conclusion of Mr.
Wickard's statement.)
Secretary Wickard. It is enough to say here that on the basis of
1944 estimates it appears that about 2,000,000 farmhouses need
major improvements and about the same number should be entirely
replaced.
Five million of the 6% million total were houses occupied by farm
operators. Two million of these were fairly satisfactory. The other
3,000,000 houses were inadequate; about half probably could be
fixed up, and half were beyond repair. Even in 1944- — a year of
record high farm income — about a million of the operator families
with inadequate dwellings did not have enough money — including
returns from jobs off the farm — to improve their houses or build new
ones. Among the other families living on farms, housing conditions
and levels of income probably were less favorable. A million and a
half all told does not seem too high a guess as to the total number of
families who needed better housing and could not finance it.
Standards used in estimating what levels of income could support
satisfactory farm housing were not set overly high. Some well-to-do
farmers, of course, are able to build or repair houses on almost any
terms; but for the most part even the families classified as able to
finance housing need credit programs designed especially to meet their
requirements.
Now, with at least something of a yardstick for measuring the job,
what general approaches can we use to improve farm housing?
1890 POST-WAR ECONOMIC POLICY AND PLANNING
Before everything else, it seems to me, it is necessary to recognize
that housing programs, in themselves, never will be enough to
solve the farm housing problem. Generally speaking, the farm
families with the lowest incomes and the poorest prospects of increasing
their incomes live in the worst houses.
We are dealing with a long-neglected problem whose roots run back
far into the Nation's past. The only broad and permanent solution
can come through a combination of stable and adequate farm income
and full and continuing industrial employment. Better housing for
farm people depends largely on better opportunities in agriculture or
outside of it. We must have no more industrial depressions that
drive people back to the land in tar paper shacks.
But it does not follow that we should fold our hands and wait for
the happy day when full employment solves the farm housing prob-
lem. We can do a lot to speed its solution.
Many of the Nation's basic farm programs already aim at achieving
and maintaining fair farm incomes. Those programs must be con-
tinued and improved, and new ones should be considered. The
present tenant purchase program is an object lesson in what can be
done to help farm families get a start on farms large enough and good
enough to yield an adequate income. That program could be modi-
fied to cover adding sufficient acreage to farms too small for profitable
operation. Above all, there is room for greatly increasing the size of
the tenant purchase program. Its operations on their present scale
are just a drop in the bucket.
But no large-scale effort to help some farm families enlarge their
holdings can get anywhere unless large numbers of other farm families
have wide opportunities to get good jobs off the farm. Consequently,
we should consider steps to train farm people for off -farm work;
and to help them get off-farm employment, either on a part-time
or full-time basis. In other words, better housing for some of the
families now on farms will be urban housing.
Such efforts take time. Meanwhile, millions of the lowest income
farm people would continue to live in wretched houses. So we also
should consider the possibilities of providing some kind of emergency
aid toward correcting some of the worst existing deficiencies. In
my opinion, any subsidies used toward this end should be temporary
and as constructive as possible.
So much for the indirect approach to the problem of farm housing.
There are a number of more direct possibilities. First there are the
activities basic to all efforts to improve housing. Research and
education should be continued and expanded so that more farm
families will become aware of the need for good housing, and so thart
they will have somewhere to turn for advice on design and materials.
Cooperative buying of building materials should be encouraged; also
use of timber, stone and gravel production on the farm. So should
pooling of labor. More attention should be given to training archi-
tects in the specialized field of rural housing; and insofar as possible,
training builders and skilled workers. Such training also could be
useful to farmers themselves; often they can supply much of the
labor needed for improving their homes. Every effort should be
made to reduce the basic costs of farm housing. Housing programs
should include encouragement in construction and repair of other
POST-WAR ECONOMIC POLICY AND PLANNING 1891
farm buildings; and I have said the dwelling is an integral part of
the whole farm plant.
Such activities would provide just a foundation. Finance has
always been a great stumbling block in the path of better farm
housing.
Credit — specialized credit designed specifically to meet their
requirements — is the general need of the families who own their farms
and have the financial base to support adequate housing.
To this end we should consider modifying some of the present
limitations on loans of agencies of the Farm Credit Administration
so as to make the loans more readily available for construction and
repair of farm buildings. The principle of a flexible repayment
schedule in accordance with the annual size of farm income should
be explored by both public- and private-lending agencies. The
possibilities of Government insurance of mortgage loans for farm
housing on the large scale on which it has been applied to city housing
should be thoroughly explored. The Rural Electrification program
brings lighting, water systems, and other elements of good housing
within reach of many farmers who could not obtain them otherwise;
it should be continued and expanded.
An expansion of the present tenant-purchase-loan program along
with some modification to authorize similar loans for houses and
farm buildings to owner-operators of family-sized farms should be
helpful. I have already mentioned this program in connection with
the basic task of improving farm incomes. It also offers a direct
way toward better housing.
Then, there are the farm tenant families, and those of the farm
laborers who live on farms. Most of the time their desire for better
housing, and even the size of their incomes, have little to do with
whether their dwellings are adequate. It is the landlord or employer
who decides. Education can help some; I do not believe that as yet
enough landlords or employers realize that ability to attract and hold
efficient farm operators and capable workers depends partly upon the
condition of the farm house offered them, and that the adequacy of a
house, in fact, may have a direct effect on the efficiency of the people
who live in it. Credit, however, is probably the most important
factor. The types of action I have suggested for owner-operators
could and should be adapted for landlords and for operators employing
farm workers. Better farm tenure practices also can help bring an
improvement in tenant housing.
Finally, there are the migrant farm workers. On farms employing
large numbers of seasonal workers, special credit for improving living
quarters for the transients would be helpful. The present sugar pro-
gram, which makes minimum housing standards for workers a condi-
tion of Government payments to growers is an example of a specialized
approach already used in the case of at least one commodity.
In areas where no one farm requires many seasonal workers, the
possibilities of community operated farm labor camps should be ex-
plored. Although special credit might be necessary to finance con-
struction of such camps, their operation need not, and should not, be
subsidized by local or Federal Government. Adequate minimum wage
scales for farm workers would enable the workers to pay enough rent
to allow the camps to pay their own way.
1892 POST-WAR ECONOMIC POLICY AND PLANNING
In connection with general methods of procedure, I can say that
there is substantial agreement between the National Housing Agency
and the Department of Agriculture on the principle that rural and
urban people are equally entitled to help from the National Govern-
ment in improving housing standards, and on the close relationship
between farm bousing and farm programs in general. Our two organ-
izations also agree that as much as possible of the improvement of
rural housing should be done by private enterprise; but that the Gov-
ernment has an ultimate responsibility for helping all families achieve
adequate housing levels. There is agreement, too, that all types of
possible programs will require a large degree of local initiative and
responsibility. And finally, I believe both agencies agree that long-
range housing projects ultimately must be able to stand on their own
financial feet — that the use of subsidies, when necessary, should be
temporary, and should be used constructively so as to remove the
need of further subsidies as soon as possible.
In general, I should say that the many phases of the rural housing
problem can be met only by a variety of separate programs. I believe
the unifying direction needed to make them all fully effective can be
supplied through the cooperation of the National Housing Agency and
the Department of Agriculture.
This has been a long statement, yet I have touched only the surface
of the countless problems and possibilities of rural housing. No mat-
ter how great an effort we may undertake, the task of enabling all rural
families who desire them to have adequate homes will take years to
accomplish. Such basic factors as national farm income and full in-
dustrial employment are involved.
For many reasons I consider the work of this subcommittee of vital
importance to the national welfare. I hope the facts I have pre-
sented have been helpful; and I am glad to offer the wholehearted
cooperation of the Department of Agriculture in supplying any other
information you may need as well as in administering whatever hous-
ing programs Congress may assign it.
Senator Taft. Thank you, Mr. Secretary.
Before I ask anv general questions, may I ask, dc you have charge
of these Green Hills projects, Green Hills in Cincinnati and Green-
dale in Milwaukee?
Secretary Wickard. That is under Mr. Hancock, the head of Farm
Security Administration, and that is under Marvin Jones' supervision.
Senator Taft. That cannot be called rural housing?
Secretary Wickard. No. Those are built in the neighborhood of
large cities.
Senator Taft. Yes.
Secretary Wickard. That came into the Department of Agriculture
through the old Resettlement work. I don't believe that is in the
Farm Security at the present time. Those projects have been trans-
ferred recently to the Housing Administration.
Senator Taft. I recently had a letter from a man living in Green-
dale, outside of Milwaukee, saying that all the tenants wanted to buv
their own homes. Of course, they are well above the low-income level.
I can't quite see why thev should not be sold.
Secretary Wickard. Most of those have been transferred recently
to the Housing Administration.
POST-WAR ECONOMIC POLICY AND PLANNING 1893
Senator Taft. I understood they were still owned by the Farm
Administration.
Secretary Wickard. The administration was transferred to the
Housing Agency a couple of years ago.
Senator Taft. My impression would be that the disposal would
have to be provided for by law or by the Farm Administration. I am
not sure.
Secretary Wickard. I can't say.
Senator Taft. You might look into that and advise me later.
Maybe some of them are more suitable for sale to individuals than
others.
Secretary Wickard. It is my impression that those houses were
constructed to take care of low-income people primarily.
Senator Taft. That may have been the original thought but they
cost as high as $15,000 a house, in Cincinnati, at least, and the rent
charged now is away above the low -income levels.
Secretary Wickard. Yes.
Senator Taft. You have not commented on the county housing
authorities. I believe there was some reference in past testimony to
them receiving subsidies like metropolitan housing authorities.
Secretary Wickard. I believe there were about 500 rural houses
that were subsidized under the national housing program. Is that
what you refer to?
Senator Taft. Yes.
Secretary Wickard. I don't know too much about that. We did
work with the housing people on it. I have the general comment that
I think it is foolish to subsidize the construction of houses on farming
units that cannot maintain the house after it is constructed. It seem
to me that that tends to perpetuate a condition which is uneconomic
to begin with. You simply can't say to people, "You go some place
where you can make a good living," when we can't tell them where
that is.
Senator Taft. Is there any policy of loans for repairs, as to who
should make those loans?
Secretary Wickard. As to rural housing?
Senator Taft. Yes.
Secretary Wickard. Oh, I don't have any decided opinion. As I
said in the testimony, I think the Farm Credit Administration might
be authorized to do some of this in connection with general farm
loans.
Senator Taft. My recollection is that Mr. Blandford's testimony,
while recommending a single agency for all housing, exempted rural
housing.
Secretary Wickard. It seems rather logical to tie the farm-home
loan in with the farm loan .
Senator Taft. Isn't it impossible to separate them?
Secretary Wickard. You can't. It shouldn't be attempted.
Senator Taft. Nobody wants a farm mortgage unless it covers the
house, and consequently it is a first mortgage, and I should think the
two would be tied closely together.
Secretary Wickard. Yes. That is why it is unique. In urban
housing you might have a factory going along full-blast and then it
shuts down and the people in that housing project might find employ-
ment elsewhere. That isn't the case on the farm. The house, you
might say, stays with the farm, and the ability to maintain it is
1894 POST-WAR ECONOMIC POLICY AND PLANNING
dependent on what is gotten from the farm. That is why you can't
separate the economic factors as well as the whole general farm
management from the housing part of the farm.
Senator Taft. In making loans for rural rehabilitation or farm-
tenant purchase or even direct farm mortgages from the farm banks,
don't they consider the housing?
Secretary Wickard. That is right.
Senator Taft. Are they permitted to include money to make the
housing adequate for the farm?
Secretary Wickard. The Federal land banks make a loan to a
farmer, they are permitted to loan up to 50 percent of the normal value
of the land and 20 percent of the normal value of the buildings, showing
those two go together.
However, the commissioner type of loan may be made up to 75 per-
cent of the normal value of both the land and the buildings. So, as
you say, they are definitely tied in together.
Senator Taft. The Government is so far in the farm-loan business
that it seems to me that housing could be treated as a branch of it, and
we should revise the laws as you suggest to see that it is a factor
that is taken into account.
Secretary Wickard. I think that might be done because surely we
don't want to make a survey of the entire farming operation and the
economic conditions in the community. It would be foolish to put a
loan on or finance the building of a house on a farm where the land
was so badly eroded that the farm ought to be put in trees or something
else to restore it. Those are things you have got to think about when
you start out to construct farm buildings.
Senator Taft. We had some testimony on these projects for cooper-
ative farming but I don't see that they affect our problem, because
regardless of what happens to them the farm-housing problem affects
6,000,000 separate farms.
Secretary Wickard. Those cooperative farms, I think, involve but
one-fiftieth of 1 percent of all the farms.
Senator Taft. One-fiftieth?
Secretary Wickard. Yes.
Senator Taft. Well, that really is a minor thing, so far as our
inquiry is concerned.
Secretary Wickard. That is right.
Senator Taft. Senator Ellender.
Senator Ellender. Mr. Secretary, have you or any of your repre-
sentatives discussed with representatives of the National Housing
Agency the feasibility of having all this under one general agency?
Secretary Wickard. I don't believe I have. Have you, Mr. Smith?
Mr. Smith has been conferring with the people in the Housing
Administration.
Mr. Smith. We have had some informal discussions on the prob-
lem and developed it far enough to believe it would be worth while to
sit down and really get into the matter seriously.
Senator Ellender. You haven't definitely concluded that it can't
be done, have you?
Mr. Smith. No, sir.
Senator Ellender. That is all.
Senator Taft. Senator Buck.
POST-WAR ECONOMIC POLICY AND PLANNING 1895
Senator Buck. I want to ask a question but I would like to have
it off the record because it does not relate at all to the subject under
discussion.
(Discussion was had outside the record.)
Senator Taft. Thank you, Mr. Secretary. We appreciate your
coming.
(The matter submitted by Secretary Wickard is as follows:)
United States Department of Agriculture,
Interbureau Committee on Post- War Programs,
Washington, D. C.
The Farm Housing Problem 1
For decades there has been a growing realization of the importance of adequate
housing to the health and the social and material well-being of people and a
recognition that the public interest requires special ways and means of enabling
large population groups to gain access to better living quarters. For the most
part, however, inadequate housing has been associated in the public mind with
cities. Little thought has been given to the rural situation. Yet the fact is
that rural-farm dwellings in general are inferior to those of urban families, and
the homes of hired farm workers are even less adequate than those of farm
operators.
Table 1. — Percent of rural-farm and urban dwellings having selected characteristics,
1940 »
Item
Overcrowding (more than 1.5 persons per room)
Electric lighting ' ---
Running water
Mechanical refrigerator ---
Private flush toilet
Private bath
1 U. S. Department of Commerce, Bureau of Census. Sixteenth Census of United States, (1940) Housing,
vol. II, pt. I, General Characteristics, table 8, p. 23; table 7, p. 20; table 9B, p. 36; table 7A, p. 21; table 7B,
p. 22. Vol. I, Data for Small Areas, pt. I, table 5, p. 9.
CLASSIFICATION OF RURAL-FARM DWELLINGS
For the country as a whole, the houses of operator and nonoperator families
living on farms may be grouped according to their size and value as reported by
the census in 1940. In like manner, farms on which operator families resided
in 1940 may be classified in terms of their capacity to finance and support ac-
ceptable housing. When this is done the condition of houses for each class of
farms may be described. Also, account can be taken of off-farm work as it
affects the ability of farm families to finance and support acceptable dwellings.
This view of housing in relation to the capacity of farm families to support
acceptable dwellings from the proceeds of farm employment or a combination
of farm and off-farm employment brings into clearer focus some of the practical
problems which different income groups of farmers must overcome in order to
secure and maintain acceptable housing.
While such a general over-all view is now possible, available information is not
yet sufficient to 'yield a full description of the farm housing problem. The ap-
proach is helpful but much remains lacking in detail. For example, proper
account of regional variations is not yet possible nor is an analysis of the effect
of tenure status on the opportunity to enjoy acceptable housing. Also it is
unfortunate that the information does not permit a better description of the
housing of farm laborers, particularly of migratory workers. However, the in-
formation dbes provide a basis for partial analysis of the housing problems of
nonoperator families living on farms, including among others a portion of the
farm laborer families, and a somewhat more complete analysis with respect to
the farm-operator group.
1 This analysis of the farm housing problem was prepared by a working group of the Interbureau Com.
mittee on Post-War Programs of the Department of Agriculture for submission to the Senate bpeciai
Committee on Post-War Economic Policy and Planning, January 17, 1945.
1896
POST-WAR ECONOMIC POLICY AND PLANNING
Using 1940 census data, farm dwellings have been classified into three groups
on the basis of their size and value.2 The first group consists of units which had
at least five rooms and were worth at least $1,000. It is assumed that these
dwellings are acceptable although many of them lack modern conveniences and
comforts. The second group consists of units which had three or four rooms
and were worth $500 or more, and all larger units if worth from $500 to $1,000.
In most cases, these units need extensive repairs or remodeling. In general,
three or four room structures are too small, particularly on farms where on the
average families are larger than in cities. The third group consists of all dwell-
ings which had only one or two rooms, and larger units worth less than $500.
Usually it would be more economical to replace such structures than to enlarge
or remodel them. For convenience, the first group has been designated as
"acceptable," the second as "repairable," and the third as " nonrepayable." 3
There is a marked relationship between these classes of houses and the facilities
which we usually expect to go with a dwelling. That is, the proportion of
"acceptable" dwellings having given facilities in generally much greater than for
"repairable" or "nonrepairable" dwellings and the proportion of "repairable"
dwellings having these facilities is much greater as a rule than for "nonrepairable"
dwellings, as indicated in table 2.
Table 2. — Classes of Rural-farm dwellings related to specified facilities l
Class
All
Acceptable
Repairable
Nonrepairable
Unclassified 2.
Percent having
Electric
lights
Water supply
Running
water
Inside
hand
pump
Flush
toilet
Refrigeration
equipment
Mechan-
ical
Ice
Radio
1 Adapted from U. S. Department of Commerce, Bureau of the Census, sixteenth Census of the United
States (1940), Housing, vol. Ill, pt. I, tables A-6 and A-7. In this adaptation it was assumed (1) that for
1- and 2-room dwellings valued at $500 or more (rental $5 or more) the same proportion of the above facilities
would be reported as for all dwellings valued at under $500; and (2) that for 3- and 4-room dwellings valued
at $1,000 or more the same proportion of the above facilities would be reported as for dwellings of 3 or more
rooms valued at $500 to $999 ($5 to $9 rental) .
2 Dwellings with value or number of rooms not reported. In view of the fact that the percentages of
facilities reported for unclassified dwellings are so close to the percentages for all dwellings, these unclassified
dwellings may be distributed proportionately among the 3 classes indicated. This has been done in suc-
ceeding tables.
It may be observed that rural-farm tenant dwellings were in worse condition
than those of owners. For example, half of tenant-occupied dwellings as against
about one-fourth of owner-occupied dwellings were classified as "nonrepairable,"
while only about one-sixth of tenant dwellings were classified as "acceptable"
as compared with nearly half of owner houses. The same relationship holds for
facilities, as indicated in table 3.
2 Values for tenant-occupied dwellings were calculated by assuming the rent per month to be 1 percent
of the value.
s While for any particular group the term may not be appropriate for every house included, it probably
is suitable for the vast majority in the group. Since there may be as many houses outside a particular
group, which might appropriately bear the label of the group, as houses within the group which in this
way are mislabeled, the number in each group probably represents the number among the total houses
included in all groups which would be properly characterized by the term.
POST-WAR ECONOMIC POLICY AND PLANNING
1897
Table 3. — Comparison of rural farm owner-occupied and tenant-occupied dwellings,
1940 »
Class of dwellings:
Acceptable
Repairable. ...
Nonrepairable
Facilities:
Running water
Inside band pump
Flush toilet.
Mechanical refrigerator
Ice refrigerator
Electric lights
Radio
Percent
Owner-
Tenant-
occupied 2
occupied 8
45
17
28
32
27
51
25
11
13
10
17
6
21
7
19
16
43
20
70
46
1 Same source as table 2. Unclassified dwellings were distributed proportionately among the 3 classes
of dwellings.
1 <<* * * A dwelling unit is classified as owner-occupied if it was owned either wholly or in part by the
head of the household or by some related member of his family living in the dwelling unit. All other oc-
cupied units are classified as tenant-occupied whether or not cash rent was actually paid for the living
quarters. Rent-free quarters and living accommodations which were received in payment for services
performed are thus included with the tenant-occupied units." 1940 Census of Housing, vol. Ill, pt. I,
p. 4. It should also be noted that in most cases tenant farm operators and hired farm workers do not ac-
tually pay cash for living quarters, as these are usually included in the arrangements for renting the farm,
or in the terms of employment.
WHY POOR FARM-OPERATOR DWELLINGS
An important reason for inadequate farm housing has been the lack of suf-
ficiently remunerative employment to pay for better structures. For the country
as a whole, it appears reasonable to assume that unless a family was able to
produce at least $1,500 gross farm income per year under 1939conditions, it
was not able to finance an acceptable dwelling from farm income. With less
than this amount, there would not be much left for housing after farm operating
and family living expenses were met and necessary farm capital purchases were
made. This does not mean that every farm with a smaller gross income capacity
under 1939 conditions could not finance and maintain an acceptable dwelling,
nor that every higher-income farm could do so. The situation would vary for
different parts of the country, but for the country as a whole this appears to be
a reasonable figure to use.1 After the value of home-used products and farm-
operating expenses are deducted from this $1,500 gross, there remains on the
average about $750 net cash farm income. In many cases farm mortgage prin-
cipal payments would have to be deducted from this $750 as well as any cash
advances for expanding farm operations. The remainder would be available for
family living expenditures, including housing, savings, or retirement of non-real-
estate debts. It is thus difficult to see how the average farm family could provide
itself with an American standard of living, including an acceptable house, with
much less than $750 net cash or $1,500 gross farm income.
Sufficiently remunerative employment to support adequate housing may be
provided by the farm alone or by the combination of farm with off-farm employ-
ment of the operator and members of his family. Estimates have been prepared
for the 5,760,000 farm-operator households living on farms in 1940. Information
available is not sufficient to estimate the housing and employment of the operators
of the other 337,000 farms reported by the census in 1940/
For this purpose farms have been grouped into three broad classes. Class I
farms are all units which in 1939 had a gross farm income of at least $1,500 and
other units that had at least $8,000 worth of land and buildings and at least a
1 Were one to prefer to use $1,200 as the breaking point between the 2 upper farm classes, it would shift
only about 7 percent more farra-operator families into the top group.
1898
POST-WAR ECONOMIC POLICY AND PLANNING
team of horses or equivalent power. In like manner, class II farms are remain-
ing units with a gross farm income of $750 to $1,499, and other units that had
$4,000 to $7,999 worth of land and buildings and at least a team of horses or
equivalent power. Class III farms are all remaining units. This class contains
all farms with gross farm income under $750, except those that had land and
buildings worth $4,000 or more and at least a team of horses or equivalent power.
All class I farms were considered to be sufficiently productive to finance accept-
able dwellings without off-farm employment. Class II and III farms were not.
Class I farms comprised about one-fourth of all 5,760,000 units, class II about
one-fifth, and class III slightly more than one-half (see table 4). To be able to
support an acceptable dwelling from the proceeds of their employment, it is esti-
mated that in 1939 farm-operator families of class II farms needed on the average
at least 100 days of off-farm employment in addition to employment on their
farms, while families on class III farms needed about 200 days.
About one-fourth of the 1,200,000 operator families on class II farms had at
least 100 days of off-farm employment and nearly one-fourth of the 3,000,000
operator families on class III farms had 200 days (see table 4). In other words,
as of 1940, of the 5,760,000 farm-operator families on farms, less than half, about
2,560,000, could finance acceptable dwellings. About one-fourth, 1,560,000, could
do so from farm employment alone, while about one-sixth,' 1,000,000, could do so
from a combination of farm and off-farm employment. This leaves more than
half, 3,200,000, who could not finance acceptable dwellings either from farm or a
combination of farm and off-farm work, as indicated in table 4.
Table 4. — Class of farm related to ability of farm-operator families living on farms
to finance an acceptable dwelling from farm or combination of farm and off-farm
employment in 1940 l
[All numbers in thousands]
Class and number of farms
Indicated ability to finance an
acceptable dwelling
Class
Number
Able from
farm em-
ployment
alone
Able from
farm em-
ployment
combined
with off-
farm em-
ployment
Unable to
finance an
acceptable
dwelling
from
farand
off-farm
employ-
ment
Total
2 5, 760
1,560
1,000
3,200
I
1,560
1,200
3,000
1,560
II
300
700
900
III j
2,300
i Estimated by the Bureau of Agricultural Economics. Based in part on U. S. Department of Com-
merce, Bureau of the Census, and the U. S. Department of Agriculture, Bureau of Agricultural Economics,
a cooperative study, technical monograph, Analysis of Specified Farm Characteristics for Farms Classified
by Total Value of Products, table 3, p. 21, and table 1, p. 31. Based in part on unpublished data obtained
through a joint study made by the Bureau of the Census and the Bureau of Agricultural Economics.
2 U. S. Department ol Commerce, Bureau of the Census, and U. S. Department of Agriculture Bureau
of Agricultural Economics; Series Census-BAE No. 1 Estimates of Farm Population and Farm House-
holds, April 1944 and April 1940, Jan. 14, 1945.
HOUSING ON DIFFERENT CLASSES OF FARMS
In general the quality of farm housing corresponds with the capacity of the
farm or combination of farm and off-farm employment to support the dwelling.
Of 5,760,000 farm-operator dwellings on farms in 1940, approximately one- third
were classified as "acceptable," one-third as "repairable," and one-third as "non-
repairable" (see table 5). In the case of 2,560,000 of these farms, where either
farm or farm and off-farm employment was sufficient to support acceptable hous-
ing, about two-fifths of these dwellings needed either replacement or major over-
hauling. In more detail, about 3 of every 5 were classified as "acceptable," 1
of every 4 as "repairable," and only 1 out of every 6 as "nonrepairable."
POST-WAR ECONOMIC POLICY AND PLANNING
1899
On the remaining 3,200,000 farms, approximately 5 of every 6 dwellings needed
ther replacing or major overha" ''
dwellings were classified as "noni
either replacing or major overhauling. In more detail, approximately half the
irepairable," 1 of 3 was "repairable," while only
1 of 6 was "acceptable."
In case of the 3,200,000 farms where neither farm income nor a combination
or income from farm and off-farm employment would finance acceptable housing
the problem of improving or replacing dwellings under 1939 conditions, whether
the occupants were owners or tenants, was a difficult problem indeed. Fortu-
nately, 560,000 of these farms already had "acceptable" housing. On the re-
maining 2,640,000 farms, houses of about a million operatois were classified as
"repairable" and those of more than V/z million as "nonrepayable."
Table 5. — Estimated number and condition of occupied farm-operator dwellings
on farms, related to adequacy of farm and off-farm employment to finance an
acceptable dwelling, for the United States, April 1940 l
[All numbers in thousands]
Farm and off-farm employment income is—
Class of
farms
Class and number of farm-operator
dwellings on farms
Total
Accept-
able
Repair-
able
Nonre-
pairahle
A. Estimated to be sufficient to finance an accept-
able dwelling.
Ufl
1, 560
300
700
1,100
150
250
360
SO
220
100
70
230
2,560
1,500
660
400
II
B. Estimated not to be sufficient to finance an ac-
ceptable dwelling.
II
UlJ
900
2,300
260
300
340
700
300
1,300
Subtotal
3, 200
560
1,040
1,600
Total
5,760
2,060
1,700
f > Estimated by the Bureau of Agricultural Economics on the basis of class of farms and class of dwellings
shown in preceding tables and relationships shown by unpublished data obtained through a joint study
made by the Bureau of the Census and the Bureau of Agricultural Economics.
DWELLINGS OF RURAL FARM NON-OPERATORS
In addition to the 5,760,000 faim operators living on farms it has been estimated
that in 1940 there were 1,400,000 households on farms which did not include a
farm operator. In about 600,000 the head was employed in agriculture, in
about 300,000 the head was employed in nonfarm occupations, while in the
remaining families the head was either unemployed or not in the labor force.
Nearly three-fourths of the families where the head was employed in agriculture
reported less than $500 in family wages and salaries in 1939, a sum too small to
support acceptable housing.
f Dwellings on farms occupied by nonoperators were substantially inferior to
those occupied by farm operators. About 1 in 7 was classed as "acceptable"
as indicated in table 6. Over half of these nonoperator dwellings were classed
as " nonrepayable" as compared with about one-third in the case of farm
operators.
1900 POST-WAR ECONOMIC POLICY AND PLANNING
Table 6. — Class and estimated numbers of occupied rural-farm, non-operator
dwellings, for the United States, 1940 1
[000s omittedl
Class
Number of
dwellings
Acceptable
Repairable
Nonrepayable.
All
200
400
800
1,400
• Estimated by the Bureau of Agricultural Economics. Based in part on U. S. Department of Com-
merce, Bureau "of the Census, Population andj Housing, Characteristics of Rural-Farm Families,
tables 2 and 12. Based in part on unpublished data obtained through a joint study made by the Bureau
of the Census and the Bureau of Agricultural Economics.
THE SITUATION IN 1U44
Since 1940 probably no net, improvement has been made in the quality of
farm dwellings, owing to the difficulty of obtaining materials during the war
emergency. However, several forces have reduced the number of houses needed
on farms and have enhanced the ability of farm families to afforo better dwellings.
There has been a reduction in farm population, a reduction in the number of
farm operators living on farms, an increase in both full-time and part-time off-
farm employment opportunities for farm people, and an increase in farm income
due both to higher production and higher prices.
It has been estimateo that there was a reduction of about 4% millions (15
percent) in rural-farm population from April 1940 to April 1944 and a reduction
of about three-quarter million in the number of farm operator households on
farms.5 By 1944 the total volume of farm production had increased about
one-third from the average production in 1935-39 and farm prices had nearly
doubled. Many more part-time and full-time off-farm jobs had become available
to farm families. The opportunity for more regular and productive employment,
either on or off the farm, and to earn higher incomes obviously has increased the
number of farm families that can afford acceptable housing under present
conditions.
Also the number of houses needed on farms under piesent conditions is smaller
than the number needed in 1940. As compared with about 2,640,000 operator
families who were living in "repairable" or "nonrepairable" houses in 1940, and
were unable to finance "acceptable" dwellings at that time, either from farm or
a combination of farm with off-farm employment, only around 2,000,000 such
families were living in the same type of houses in 1944, if we take into account
the reduction in the number of farm-operator households and assume that not
many operator families living in "acceptable" houses were involved in this
reduction. A rough estimate indicates that about half of these families, or
around 1,000,000, were able to finance acceptable dwellings under 1944 conditions,
while 1,000,000 still were unable to do so.
In summary, under 1944 conditions of practically full employment, about
5,000,000 operator families were in need of housing on farms. Approximately
2,000,000 now occupy "acceptable" houses, and about 3,000,000 are in "repair-
able" and "nonrepairable" houses, approximately half in each class. Of this
3,000,000 about 2,000,000 are in position to finance acceptable housing ,if appro-
priate housing credit can be made available to serve their needs, while about
1,000,000, even under 1944 conditions, had insufficient incomes to finance accept-
able housing. About half of these 2,000,000 who can finance acceptable housing
need to replace their dwellings, and about half of the million who cannot finance
acceptable housing also need new houses.
Available information did not permit an estimate of the number of nonoperator
families, including many farm laborer families, liivng on farms in "repairable"
and "nonrepairable" houses who still are unable, under present conditions, to
finance the replacement or improvement of their homes. Neither did it permit
an analysis of the special bousing problems of farm laborers and tenants. It may
be pointed out, however, that while an owner-operator with sufficient income is
free to go ahead and improve or replace his dwelling if he desires to do so, unless he
» Series Census-BAE No. 1, Estimates of Farm Population and Farm Households, April 1944, and April
1940, January 14, 1945.
POST-WAR ECONOMIC POLICY AND PLANNING 1901
needs and is unable to obtain a type of credit which is suitable to his situation, a
tenant-operator usually is not. His problem of getting acceptable housing' is
often very difficult, because, even though he may have an ample income, his
ability to obtain acceptable housing may be dependent in part upon the willing'ness
of the landlord to invest in acceptabl tenant housing and in part upon availability
to the landlord of suitable housing credit.
Measures to bring about needed adjustments and improvements in farming
practices to increase efficiency and thus to make the farm operator's labor more
productive should be generally helpful, as should measures to reduce the cost and
to expedite the construction of acceptable housing. Modifications of the credit
mechanism and other devices may prove to be helpful in remedying housing
conditions on the farms of operator families who have adequate incomes. How-
ever, if a substantial portion of the million farm-operator families who, even under
1944 conditions, could not afford acceptable housing are to be adequately housed
it appears that such additional steps as the following may be required.
1. Increase the income of some of these families from farming by enlargement
of small farms or by some other means.
2. Increase the income of other families in this group from supplementary
sources or by full-time off-farm employment.
3. Use temporary subsidies, in accordance with some agreed-upon minimum
standards, particularly with reference to health, until the more basic measures
take sufficient effect and in cases in which such measures are not fully applicable.
Senator Taft. General Grant.
STATEMENT OF MAJ. GEN. U. S. GRANT 3D, FIRST VICE PRESIDENT,
AMERICAN PLANNING AND CIVIC ASSOCIATION
General Grant. Mr. Chairman, I would like to explain that I am
appearing here as vice president of the American Planning and Civic
Association in lieu of Mr. Delano, the president, because of his illness.
The American Planning and Civic Association is very glad to respond
to your invitation to set forth before your subcommittee its ideas on
the subjects listed in your letter. Fortunately, the association has
recently held a board meeting at which many of these problems were
discussed.
1. Concerning the nature of the permanent Federal administrative
organization of the housing agencies, we submit that the best first
move of Congress would be to confirm the existing arrangement,
brought about by Executive order, which will automatically expire 6
months after the emergency. No doubt the organization set-up can
be improved and we shall have some suggestions along that line; but
we predict that it will not be easy to secure sufficient unanimity of
opinion to bring about drastic changes in time to permit continuous
planning and functioning of the Federal Government in the housing
field. We therefore advocate immediate action to make sure of con-
tinuity of service and policy. Modifications can be worked out as
they are agreed upon by housing officials and public opinion. Indeed,
Congress may wish to specify that the National Housing Agency, after
adequate surveys, make definite recommendations to Congress for
improvements in the handling of housing by the Federal Government.
Perhaps some of the agencies may prefer to operate independently,
but, from the point of view of the public good, it would seem that the
consolidation, while preserving a large degree of autonomy in the
component units, has already accomplished some of the desired
objectives, and, with further experience, can iron out overlaps and
supply omissions.
2. Most authorities are agreed that the four-hundred- thousand-odd
temporary housing units, at least in their present substandard
91183 — 45— pt. 12 10
1902 POST-WAR ECONOMIC POLICY AND PLANNING
condition, should not be used for permanent post-war bousing.
This would seem to be the intent of Congress. But it seems to us that
sufficient discretion should be given N. H. A. to utilize them during
a transition period and to prevent all from being put on the market
at one time. We look with favor, also, on the experiments and
proposals of the F. P. H. A. to reuse the materials, as far as possible,
in permanent buildings for other t.ypes of utility. We are also
impressed with the various proposals of F. P. H. A. for salvaging the
demountable dwellings.
The disposal of war housing involves a number of considerations
dependent in part on conditions which cannot be predicted accurately
at this time; but, in the main, the various permanent housing units
erected under various agencies can probably make their best contri-
bution to post-war housing if they are turned over to such local
housing authorities as desire to acquire them and use them for
permanent low-rent housing. The Government should retire from
the ownership and management of projects built to command high
rentals. But the sooner the diverse ownership and operation of
housing within the Federal Government is either consolidated or
turned back to local communities, the better. We favor the local
community whenever it is able and willing to take over.
Senator Taft. Those projects, built for high rentals, would apply
to the Green Hills project, and things of that kind, is that not so?
General Grant. It would apply to any house with a rental over
what a poor man could pay. I am not certain what the rentals are
in that project which you mention, but I should imagine many of the
houses
Senator Taft. About S50.
General Grant. Yes. Many of the houses are above what we
would call low rentals. The fixing of a low-rental limit is something
that is very difficult, because manifestly what is a low rental for a
two-room dwelling unit, that may be evident to am7one, but what is
a low rental for a five-room dwelling unit might be a high rental for a
two-room unit. So it is difficult to put a figure on it, but I believe
you have nearly hit the average in most people's mind, and that is
somewhere near $50.
3. The Government's activities in the field of housing should be
such as to foster the revival of the home-building industry. We all
look forward to the time when there shall be abundant building
materials and labor so that private enterprise can proceed to supply
the market with an adequate number of dwellings to meet the needs
of different income groups, but we think that priorities and price
controls will have to be relaxed gradually if we are to avoid unduly
high prices and other excesses of scarcity.
4. As to the role of the Federal Government in future public
housing, an excellent start has been made in developing the three
principal types of Government service — the F. H. A., with its insured-
loans for private lending institutions; the Federal Home Loan Bank
Administration, which provides a national credit reserve through the
F. H. L. Bank System, insures savings of investors in home financing
institutions through the Federal Savings and Loan Insurance Cor-
poration, and supervises the Home Owners' Loan Corporation; and
the Federal Public Housing Authority. The first two have had a
profound effect on stabilizing home loans and in reducing the number
POST-WAR ECONOMIC POLICY AND PLANNING 1903
of loans falling due every few years in favor of loans which can be
amortized monthly until paid. The F. P. H. A. has, very propeily,
been responsible for the creation of local housing authorities in cities,
States, and counties. The 130,000 public-housing units provided
by the four hundred-odd local housing authorities has provided a
basis for further study which is now being conducted by the F. P. H. A.
Naturally, the pioneer nature of the job, and more recently the defense
and war pressures, have prevented the progress which would other-
wise have been made in low-cost housing, but there is every evidence
that with better coordination with local plans and planning com-
missions, with the use of extensive urban redevelopment programs,
and other planning aids, the public housing of the post-war period
can be a city-wide asset as a part of the comprehensive city plan, in
addition to furnishing low-rent housing, We believe, too, that experi-
ence will bring about more economical building and operation. There-
fore, we recommend progressive greater unification of Federal agen-
cies dealing with housing and greater conformity with local city and
metropolitan plans.
5. No doubt, further advances can be made in stimulating sound
private credit aids, but we are inclined to think that further develop-
ment under the two groups of Federal agencies — the F. H. A. and
the H. L. B. group — will stimulate the use of private capital on terms
which are fair to builders and owners. Certainly we should never
wish to revert to the predepression loose methods of financing by
which so many innocent buyers of homes were sacrificed. Some of
them, no doubt, were induced to overbid their own resources; but
even with those who seemed to have a fair chance of meeting their
obligations, there were far too many obstacles and far too many
charges loaded onto buyers of low-priced homes. However, the
association has never favored complete or partial tax remission by
local authorities in order to promote building, because it is an indefi-
nite subsidy difficult to estimate with precision.
6. We recommend that all Federal housing credit be handled
through the N. H. A. Probably the defense and war pressures
thoroughly justified the different methods used for building or financ-
ing housing. In the post-war period, all Federal housing credit
activities should be brought into the one organization, thereby
eliminating duplications and inconsistent policies. In the end, the
collective specialized experience should produce steadily improved
methods for home financing. No doubt, also, the financing of home
building by private enterprise, without benefit of either of the existing
types of Federal housing credit, would tend to become more favorable
to buyers than the antiquated methods of the predepression period.
7. It is too early to predict with certainty the effect of veterans'
loans on the housing picture, but we can be certain that these loans
should be handled by the N. H. A. so that results of the different types
of loans can be compared and so that the veterans' loans may have
the benefit of the N. H. A. experience and established procedures
instead of being handled by a new organization which would be
obliged to improvise its structure and methods from the ground up.
8. On the relation of urban rehabilitation to the general housing
program, we point to one of the saddest results of the old-time method
of locating homes and subdivisions where land was cheap or for other
reasons regardless of the city plan. This is the deterioration and final
1904 POST-WAR ECONOMIC POLICY AND PLANNING
desertation, in some instances, of great interior areas in the city, with
its consequent drain on all taxpayers, and the building up of unregu-
lated and unplanned communities outside of the city limits which do
not carry their part of the tax burden. This has produced the decay
of vast urban areas, with progressively lowered tax receipts, and has
taken off the city tax rolls great numbers of large taxpayers who have
moved beyond the city's jurisdiction but who impose upon the city
the cost of highways, transit lines, utilities, and other facilities to con-
nect their city offices with their suburban homes. Some studies have
been made in selected communities as to the values involved and the
population and areas affected, but we have not at hand comprehensive
authoritative information as to these elements of the problem through-
out the Nation. However, since 56.5 percent of our population in 1940
was living in urban communities and it has been estimated that at
least one-third of all urban territory is blighted, and much more
deteriorating, the national scope and importance of the problem is
evident. Probably 20,000,000 to 25,000,000 people are now living
in these blighted districts. We know that only about 60 percent of
urban dwelling are in good repair and supplied with adequate plumb-
ing. Some of the remaining dwellings can be repaired where they
stand. But the rehabilitation of acknowledged blighted neighbor-
hoods and the stopping of blight in the principal cities of the United
States is a most urgent problem for solution now. Manifestly the
expenditures for housing, both private and public, anticipated at the
conclusion of the war should be applied so as to help in the solution
of this problem.
All students of planning are agreed that these blighted areas can be
redeemed only through the assembly of land in districts extensive
enough to set a new use and quality to the neighborhood. This in-
volves the use of local planning commissions for fundamental planning
that has not been possible when the Commission was bound to accept
the settled districts of the city with their existing use. For this we
need both laws authorizing condemnation to assemble such property
and also means to finance its acquisition. Under our present tax
systems cities are mainly dependent upon real estate taxes, and, with
existing debt limits, very few cities in the United States can afford to
buy outright an entire district. Experience shows that piecemeal
rebuilding, either by private or public agencies, does not change the
character of the blighted district as a whole sufficiently to make a new
and prosperous community of it.
Since it seems that any proposed tax reforms which will permit cities
to use more productive tax sources than at present will be many years
in the making, the cities which, under satisfactory conditions, under-
take to rehabilitate entire districts within their borders, must look to
the Federal Government for credit — and perhaps in the end for grants-
in-aid — in order to do the job. As a matter of fact, in most of the
larger cities the citizens pay into the Federal Government in income
and other taxes amounts far in excess of any grants-in-aid which have
ever been begged back again. Short of a comprehensive tax reform
program which would permit cities to tax obvious sources of revenue
for their own purposes, it is only a fair and wise alternative to return
to the cities some part of the tax on income earned there.
Senator Taft. Why do you think the Federal Government has any
more productive tax sources than the cities?
POST-WAR ECONOMIC POLICY AND PLANNING 1905
General Grant. Well, I think the cities are limited by their charters
and also limited very definitely in what credit they can extend.
Senator Taft. The Federal Government hasn't been able to find a
tax system in the last 14 years which would pay the expenses of the
Federal Government. There is no prospect of getting rid of the debt
for some time. I don't cjuite see why the Federal Government is any
better off than the city governments as far as additional tax sources
are concerned to pay for the things that we are spending money on
now.
General Grant. Well, the claim that certainly is made is the limi-
tation of the cities and their inability to do this, and what arrange-
ments can be made for the States to assist and play their part is a
problem that certainly deserves consideration. But the Federal
Government has and is subsidizing so many things for the general
benefit
Senator Taft. That it should subsidize everything?
General Grant. No, sir; I don't go that far, but this is one case
in which the national interest in providing employment is believed to
be very important, because there is probably no type of development
which gives employment to relatively as many people as building
houses.
Senator Taft. Well, we are, of course, interested in housing, but
you are suggesting something a good deal wider than housing, namely,
the purchasing of vast areas in cities where there are now no houses
and where there are blights of different character. I cannot see the
Federal interest beyond housing and beyond the elimination of slums.
General Grant. We try to suggest that, sir. Perhaps, I should
finish my statement, and then if there are questions I shall be glad to
answer them.
Senator Taft. Yes. Proceed, General. But I was interested in
this argument that cities and States can't do things because they
haven't got a tax system that will pay for the doing of those things.
No one has devised a Federal tax system yet that will, in peacetime,
pay the twenty billion post-war budget for things that are necessary,
like interest on the public debt, and for the Army and the Navy, and
ordinary activities of the Federal Government. So I don't see the
argument that the Government is better off financially to do things
than the cities or States are.
General Grant. Well, sir; I would submit that the Federal Govern-
ment's leadership is very important, a very important element.
Senator Taft. That may be so. There may be reasons for Federal
intervention. We are considering it right now; but I never could see
the argument that the Federal Government should do these things
because it is richer, as I don't see where it is any richer.
General Grant. The States have an interest in this, and there
should be consideration given to the part of the States, the part they
would play. I think there are nine States which have passed legis-
lation of sorts, of this kind. I also submit, sir, that urban redevelop-
ment does not contemplate permanent large expenditures but there
should be a considerable return on this expenditure. That will
depend, like in any other business, on how wisely and how well it is
done. That is the reason why we are emphasizing the necessity of
coordinating with the general plan the city and coordinating the
housing that the Federal Government does with that plan, so that
1906 POST-WAR ECONOMIC POLICY AND PLANNING
it will be applied to the blighted districts and to the improvement of
a city rather than to be a Federal subsidy to do something that is
adding to the decentralization.
Senator Taft. Of course, these bills do include a Federal subsidy.
General Grant. Well, what we are trying to bring out, Mr. Chair-
man, is the fact that the housing problem, if it is going to be solved
in a way that is generally beneficial, the solution should be applied
to assisting cities to do what they have to do in order to save them-
selves for the future.
Senator Taft. As applied to slum clearance, I agree.
General Grant. Yes.
If the properties within an area denned by the Planning Commis-
sion could be purchased with Federal loans, to which the credit of
the district, not of the city as a whole, would be pledged, we should
have, for the first time in America, an opportunity for the local plan-
ning commission to decide where housing of various types — private
and public — should be developed with the built-up city, and under
conditions which could insist on adequate recreation spaces, off-
street parking of cars where desirable, reasonable densities of occupa-
tion, and highway and transportation service.
Therefore, we approve the general principles of the bill, drawn by
Mr. Alfred Bettman, of Cincinnati, and introduced into the Seventy-
eighth Congress by Senator Thomas. Under such a bill, with certain
needed State and local legislation, we believe there will be a real
chance that urban redeveoplment on an adequate scale will take place.
Without such Federal leadership and aid, the present favorable
opportunity for successful urban redevelopment will be lost, including
the use of post-war building by private enterprise, and the deteriora-
tion of our cities will continue to neutralize other efforts for general
economic redevelopment.
9. In this connection the association would point out the necessity
for an over-all Federal planning agency to guide and coordinate all
the various land uses and construction programs at all levels of Gov-
ernment. Such an agency should enjoy the guidance and close con-
tact of Congress, but should include enough executive, ex officio
members, to have within itself full knowledge and understanding of
the problems presented for solution.
As a practical means of achieving this, we respectfully submit the
analogy of the old Public Buildings Commission which operated within
a more limited field most successfully for many years, and suggest a
Federal Planning Commission be established and constituted as fol-
lows: Chairman and senior minority member of the Public Buildings
and Grounds or other appropriate committee of both Houses of Con-
gress, Federal Works Administrator, National Housing Administrator,
representative of Department of the Interior, representative of the
Department of Agriculture, Director of Planning, two or more quali-
fied citizens.
The Director of Planning would be the only salaried member. The
other members of the Commission would receive nothing beyond ex-
penses and a per diem for actual service.
If such an agency is not created, planning within the Federal Gov-
ernment will continue to be compartmentalized and there will be no
method of coordinating and reconciling plans of Federal, State, and
local governments.
POST-WAR ECONOMIC POLICY AND PLANNING 1907
Senator Ellender. I would judge from that that you desire a sep-
arate agency for that purpose.
General Grant. That would be an over-all planning agency. It
would have no administrative work but would see that' it was coordi-
nated to avoid conflict and programs that would do one another harm.
Senator Ellender. Why wouldn't it be feasible to have such an
organization under the Housing Agency? In other words, just have
everything under one umbrella.
General Grant. That agency, if it were under the Housing alone,
would be simply a planning agency for Housing, sir, and you have a
great many other things that enter in. Projects for roads. Water-
ways. All sorts of things which affect the use of lands. We feel that
it would be very advisable to have an ever-all planning agency which
would coordinate those programs, to whom Congress could look for a
recommendation that would not be based on trying to get something
for its own, but could be based on adjustment and coordinated with
the job other people are interested in doing.
Senator Taft. You are proposing to reconstitute the Resources
Planning Board, in other words.
General Grant. It would be different. I think a most important
feature of it, which we did not have on the old Public Buildings Com-
mission, is the chairman and senior minority member of Public Build-
ings and Grounds or other appropriate committee of both Houses of
Congress, because there should be the guidance, through such a plan-
ning commission, I believe, of the legislative branch, too, sir.
Senator Taft. Is it your idea that such a commission be confined
to physical planning?
General Grant. Yes, sir, I should think it would, as made up here.
It would be concerned with construction and land-use planning.
Senator Taft. We are much obliged to you, General. Are there
any questions?
Senator Buck. You said that you were opposed to tax grants as a
form of subsidy. How would you' handle these low cost housing
projects if you didn't subsidize them?
General Grant. I think a better form of subsidy, sir, is a capital
subsidy of writing down, perhaps, the cost of the land which has been
brought up with dilapidated improvements, to a price at which private
enterprise can do the job, and below what private enterprise can do
it for, local Federal housing authorities can do it, under the terms of
the present policy, or whatever that policy might be.
There is a subsidy but if you make the subsidy in the write-down
of the cost of the land you know exactly what the subsidy is and you
can figure whether the increased taxes due to the improvement are
amortizing that subsidy or not. You can make some arrangement
for amortizing it if desirable. But if you make an exemption you
don't know what the subsidy is that you put in that project.
Senator Buck. Maybe it is just as well not to know.
General Grant. Well, it is a loss, the loss is very definitely there,
and it is a loss to the city in taxes.
I have in mind one case where the purchase of the property was
said to be something like $6,000,000 and where the saving in taxes
due to tax exemption is estimated at something like $24,000,000.
Well, there is a very enormous type of.subsidy.
1908 POST-WAR ECONOMIC POLICY AND PLANNING
Senator Buck. Over the life of the project.
General Grant. Over the period for which the tax exemption is
granted by local law. Nobody can be sure that that is the actual
saving because nobody knows what the actual taxes would be.
Senator Buck. They would certainly be higher.
General Grant. They certainly would be higher, and you don't
know exactly how much you are contributing.
Senator Taft. Thank you very much, General Grant.
(The following letter from Maj. Gen. U. S. Grant 3d:)
American Planning and Civic Association,
Washington, D. C, January 18, 194-5.
Hon. Robert P. Taft,
Chairman, Subcommittee on Housing, Special Committee Post-War Economic
Policy and Planning, United States Senate, Washington, I). C.
My Dear Senator Taft: The following statement, supplementary to my
testimony of yesterday, is respectfully submitted to clarify my answers to some
of the Senators' questions and to explain further the basis for this association's
recommendations.
While no general formula appears to have been found to relieve the Federal
Government of its rapidly mounting war debt, there is almost universal agree-
ment that a prosperous Nation with full employment and an exceptionally high
national income is absolutely necessary to avert financial disaster after the war.
The association has been convinced by policies actually adopted by Congress
and approved by the President, that the Congress would consider favorably any
program which would help to create such favorable conditions.
The association therefore recommends Federal aid, and especially Federal
leadership, in the urban redevelopment program under specific conditions which
in its opinion will make this program ultimately self-liquidating and by helping
the economic revival of our cities will result in materially enhancing an important
source of Federal revenue.
The conditions thought necessary to accomplish this purpose are:
1. Federal aid to municipalities for the acquisition of land in blighted areas
that are in need of redevelopment to save the municipality from continued
economic loss and deterioration by stopping decentralization and the spread of
slum conditions. The advances so made can be substantially repaid over a period
of years from the proceeds of sales and leases and the increased taxes justified by
the redevelopment, if the latter is wisely planned.
2. The write-down in the cost of the land to its new use value for sale or lease to
private enterprise, so as to induce the maximum use of private capital in the
construction on and management of the land redeveloped.
3. Limitation of public housing authorities to the minimum purchase of land
and construction of houses necessary to shelter decently the lowest income
groups, which are unable to pay the lowest rents that private enterprise can offer
«ven with a reasonable reduction in land cost to a fair new use value. Such
participation by Federal aided public housing authorities to be financed in accord-
ance with the Federal housing program established by Congress.
4. Conditioning Federal aid to urban redevelopment upon the existence or
establishment of a competent local planning agency and the close integration of
urban redevelopment projects with the city or metropolitan area plan.
5. Similar integration of other Federal and Federal aid projects in the locality
with the plan and with the urban redevelopment projects, whenever they are
related or can mutually affect one another. Lacking the means of urban re-
development and in the emergency conditions of the last 4 years, many Federal
and Federal aid projects have had to be so located and designed as to increase
the tendency to decentralization and blight.
6. The inability of most of our cities to assume the additional indebtedness
necessary to assemble the land for needed urban redevelopment is the chief
impediment to its being initially financed by them. However, it is believed that
in many cases the increase in taxes or even all the taxes on the particular areas
redeveloped could be made available, in addition to the proceeds from sales and
leases, to pay back the advance made by the Federal Government, as proposed
in 1 above. Several States have passed legislation to bring about urban re-
development and it is probable that State participation or aid could be obtained
if required.
POST-WAR ECONOMIC POLICY AND PLANNING 1909
7. The adoption of a Federal urban redevelopment policy in time for the large
amount of house construction that will inevitably take place after the war,
both by private enterprise and by public housing agencies, shall be in the blighted
areas and a contribution to municipal improvement, rather than on cheap land in
the suburbs and a further impetus to decentralization and municipal decay.
The Federal interest in urban redevelopment lies in the production thereby
of more good and prosperous citizens and in the rehabilitation of the citl s as a
most important source of Federal revenue. A study of 5,800 selectees recently
rejected in the District of Columbia as unfit for psychiatric reasons shows a
definite majority from the areas recognized as due for redevelopment. The other
costs of slums and decaying neighborhoods to the Federal Government as well
as to the local municipalities have been recognized by Congress and need not be
repeated. But it is believed the experience gained to date proves that building
new houses for low income groups alone does not remove the slums; only well
planned urban redevelopment can do this. We believe that urban redevlopment,
as outlined, constitutes a program the promising results of which in husbanding
and enhancing national wealth especially merit your consideration.
Respectfully submitted.
U. S. Grant,
Major General, United States Army,
First Vice President,
(For the American Planning and Civic Association.)
Senator Taft. Miss Ware.
STATEMENT OF CAROLINE F. WARE
Miss Ware. Mr. Chairman, I have been asked to present this
statement on behalf of the following national organizations: American
Association of University Women, American Home Economics Asso-
ciation, Consumers Union, General Federation of Women's Clubs,
League of Women Shoppers, Inc., National Board, Young Woman's
Christian Association, National Consumers League, National Council
of Catholic Women, National Council of Jewish Women, National
Council of Negro Women, National Federation of Settlements,
National Urban League, and National Women's Trade Union League.
(The statement is as follows:)
Joint Statement on Housing
On behalf of our respective organizations, we wish to express to this Committee,
our conviction that good homes in good neighborhoods for all the people must be a
major objective of public policy in the immediate post-war years. We speak as
representatives of citizen organizations, concerned with housing from the point of
view of American families who live in houses and raise their children there — the
consumers rather than the producers of housing. It is not our purpose to go over
the ground already covered by the several agencies and interests engaged in
housing production, or to set forth in detail the ways by which the need for good
homes should be met. It is our purpose, rather, to stress our belief that the need
must be met and to state some of the criteria by which, in our opinion, measures
to meet it may be judged.
In asserting that decent homes in good neighborhoods must be provided for all
the people we are not simply expressing a pious hope; we are stating what, in the
views of our organizations, is a paramount principle of public policy to which
problems and lesser principles must be made to yield. As a nation, we have
demostrated in war that we can achieve the impossible when it is sufficiently
important to us to do so. Surely we can achieve the infinitely smaller and easier
goal of good homes for all the people if we give this objective number one priority
in post-war public policy.
There is no need to repeat the basic data on the housing situation, which has
already been presented to this committee. It is a matter of common knowledge
that household rent and household operation take, on the average, 29 percent of
the family budget, a larger item than anything except food; that enough decent
dwellings do not now exist to house the American people properly, even if all
1910 POST-WAR ECONOMIC POLICY AND PLANNING
families had enough money to rent decent homes, and that a large proportion of
American families could not afford a decent home even if houses were available
at rents which represent adequate standards under sufficient present conditions of
private construction. This committee has before it sufficient evidence of the
high correlation between crowding and disease, and between slum conditions
and such indexes of lack of family well-being as infant deaths and juvenile delin-
quency— the human cost of bad housing. It has evidence, too, that cities are
losing money on their slums, receiving in revenues from slum properties only a
small fraction of their expenditures for police, fire, health, and other services in
slum areas.
The National Housing Administrator has presented a graphic picture of the
estimated needs for new housing construction after the war and has shown how far
short we shall fall if we revert to the building pattern of 1940. He estimates that
unless we use better techniques than our 1940 construction pattern, we shall have
an annual deficit of some 666,000 new homes (exclusive of badly needed farm
housing) representing an expenditure in 1940 prices of over one and a half billion
dollars. This estimate defines quantitatively the problem of providing good homes
for all after the war.
Without attempting to specify the means by which this housing problem may
be met, we should like to list some criteria by which the adequacy of housing meas-
ures may be judged.
1. Sufficient decent housing must be available for all.
2. Housing standards consistent with good living must be achieved and main-
tained.
3. There must be good neighborhoods as well as good houses.
4. Local communities and the National Government must both assume their
share of responsibility.
I. Sufficient decent housing must be available in each community for all income
groups, for all family sizes, for members of minority as well as members of domi-
nant groups, for both rural and urban dwellers.
It will obviously require the united efforts of all construction agencies, private
and public, to meet the needs of all the people. Just how much can or will be
supplied through one means or another will, of course, depend on many factors.
The level of national income and the distribution of family incomes after the war
will affect the amount which families can pay in rent. Changes in the cost of
housing construction in the coming years will influence the proportion of the hous-
ing need which can be met by private enterprise and the proportion which will
have to be supplied by public means.
The one fact which seems to us incontrovertible is that the needs of all the
people for decent homes cannot be met by either public or private construction
alone, but must depend upon both a high level of activity in the private building
industry and substantial public construction for low-income groups, accompanied
by continued research and technological development.
It is our hope that research into new methods of production and the develop-
ment of more economical methods of financing will combine to reduce the costs of
private construction, thereby enlarging the proportion of the housing need which
can be met by private industry. We consider it the responsibility of the Federal
Government to contribute to the development of the private housing industry,
both through the promotion of research and through the development of improved
methods of financing. At the same time, we believe that failure of private indus-
try to build suitable homes for all income groups should not stand in the way of
the provision of decent homes through public effort.
Furthermore, families whose incomes fall in the "no man's land" between the
top of the income brackets for which public housing has been built and the bottom
of the private housing bracket should not be overlooked, but must be provided
for in one way or another. Measures should be sufficiently flexible, too, to apply
to families whose incomes change, so that, for example, families would not have
to go house-hunting and children be separated from their playmates and forced
to change schools because of an increase in the family income.
While the shortage of decent homes and the inability to afford existing rents
affects lower income families of all types, the problem is accentuated for some
groups, and their special needs must not be slighted.
Large families, for example, find greater difficulty than small in meeting their
housing needs. The following table shows that in 1941, larger families in low-
income brackets spent, on the average, less for housing than did smaller families
although they needed larger housing accommodations.
POST-WAR ECONOMIC POLICY AND PLANNING
1911
Table 1. — Annual expenditure for housing (including fuel, light, refrigeration), 1941
(by urban families of different sizes at different income levels)
Family size
$500-$l, 000
$1, 000-$l, 500
$1, 500-$2, 000
$2, 000-$2, 500
$2, 500-$3, 000
$3, 000-$5, 000
$300
273
276
225
$406
336
350
315
$458
395
449
428
$521
540
534
515
$560
591
627
560
$660
671
700
5 or more persons. - .
679
Source: Unpublished data from Survey of Spending and Saving in Wartime, Bureau of Labor Statistics.
Negro families, too, experience in an exaggerated form the effects of the short-
age of decent homes at rents within range of low-income families. In most
urban communities, Negro families, because of residential restrictions, find them-
selves forced to pay higher rents than other residents for corresponding accom-
modations, and to spend a larger proportion of their income for housing, as the
following tables indicate:
Table 2. — Relation between condition of dwelling and rental value, 1940 in 14
northern cities and 26 southern metropolitan districts for white and nonwhite
occupants
Proportion of occupied
units that are substand-
ard (needing major re-
pairs or with plumbing
deficiencies)
White occupants, percent .
Nonwhite occupants, percent.
Monthly rental
Under $5
90
98
$5-$10
87
96
$10-$15
70
79
$15-$20
43
56
$20-$25
25
45
$25-$30
15
31
$30-$40
8
21
$40-$50
4
13
$50-$60
3
11
Source: Unpublished analysis of U. S. Census housing data, 1940.
Table 3. — Proportion of income spent for rent at different rent levels in 4 cities,
by white and Negro families, 1933
Monthly rental
Under
$5
$5 to $10
$10 to $15
$15 to $20
$20 to $25
$25 to $30
Average
for city
Cleveland:
White - -
Percent
12
25
11
17
13
23
8
24
Percent
23
34
20
40
16
29
18
31
Percent
29
37
23
41
17
34
21
34
Percent
31
43
24
33
18
34
20
36
Percent
30
40
22
40
18
48
21
37
Percent
29
44
23
41
19
(')
22
47
Percent
27
42
Indianapolis:
White --.
22
39
Birmingham:
White -.
18
30
Atlanta:
White
21
33
i Insufficient sample.
Source: Financial survey of urban housing, U. S. Department of Commerce, 1937.
Rural families, easily forgotten because urban slums are so much more con-
spicuous, must not be overlooked. For the United States as a whole, a smaller
1912 POST-WAR ECONOMIC POLICY AND PLANNING
proportion of rural than urban families have homes that meet modern standards,
and a larger proportion live in houses needing major repairs:
Table 4. — Condition of dwellings of urban and rural families, 1940
Urban
Rural
nonfarm
Rural
farm
Percent of dwellings meeting modern standards (not needing major re-
pairs and with private bath)
71
12
36
21
10
Percent needing major repairs
34
Source: U. S. Census, 1940.
The need for sufficient decent housing is not a postponable need, but an im-
mediate one which should be met as soon as war conditions permit. The evidence
of the ill effects of bad housing shows that these bear most heavily upon children.
We shall not be fulfilling our responsibility to the children now growing up if we
allow them to be exposed to disease and delinquency while we work slowly toward
a goal of decent homes for a later generation.
Moreover, the provision of decent homes must precede the destruction of those
which are unfit. It is no solution to the problem of slums to destroy bad houses
if there are no good houses to which their occupants can move. To tear down
slums before additional decent housing has been provided is merely to force
doubling up and the spread of slum conditions. Wherever the values of existing
dwellings are based upon a shortage of decent houses, as is often the case for
slum dwellings which can be rented only because people have no other place to
live, efforts to protect these values should not be allowed to stand in the way of
meeting needs.
II. In order to obtain decent housing, constantly improved standards of
planning, design, construction and maintenance should be established and main-
tained. It will be futile to clear existing slums if we fail to prevent deterioration
into future slums.
Low-income families in the past have often had to depend upon houses built
for a higher-income group which have deteriorated in value because of deteriora-
tion of the property or neighborhood and which have been divided for multi-
family use. The process of pouring new housing in at the top of the housing
market and letting the needs of lower income families be met through this process
of deterioration is highly unsatisfactory, especially since such second-hand
housing is apt to be poorly designed for use by low-income families.
Wherever the Federal Government enters the picture — whether in providing
information for use by home builders or municipalities, in insurance or loans to
encourage private builders, or in the construction of housing financed with
public funds — it should throw its weight behind housing standards that mean good
living. Research on the use of new materials and processes and on the actual
experience of families living under different conditions, which should permit
continuous improvement in bousing standards, is now being carried on in the
Bureau of Human Nutrition and Home Economics, in the National Housing
Agency, and in the National Bureau of Standards. This type of activity should
be extended after the war.
III. Good homes mean good neighborhoods as well as good houses. The
redevelopment of blighted areas is as essential as the elimination of substandard
houses.
The reconstruction and even the replacement of the 38 percent of all nonfarm
houses which, in 1940, needed major repairs or lacked essential facilities would
still not provide conditions for good living if slum congestion remained. Even
cleaning up a block here and an alley there will only serve as a palliative unless
the redevelopment of blighted sections of cities as a whole is undertaken on the
basis of plans which envisage all neighborhoods with sufficient space, adequate
community facilities and children safe from traffic hazards.
In urban redevelopment, as in the construction of decent homes, the needs of
all the people must be met. Families of all sizes, all income levels, all racial and
national groups should have the opportunity to live in good neighborhoods of the
various types which fit their work, play, school and other needs.
Whatever measures may be adopted for redevelopment, they must not allow the
redeveloped areas to revert to slums again. Areas should be so controlled as to
keep them in line with the city's development, and to prevent their being broken
up and allowed to deteriorate piecemeal.
POST-WAR ECONOMIC POLICY AND PLANNING 1913
IV. While housing is primarily a community concern and its problems should, of
course, be met through community agencies, the Federal Government has a
responsibility for what is, after all, a national problem.
Since good housing is basically a single problem with many aspects, it is most
desirable that Federal efforts along various lines be coordinated through an
agency which is in a position to take an over-all view of housing needs and methods
of meeting them.
On the basis of these criteria, our organizations see the need for the following
types of Federal activity:
1. Establishment of a permanent national agency to coordinate Federal housing
functions and integrate efforts to achieve good homes in good neighborhoods for
every family.
2. Measures designed to reduce the costs and improve the quality of housing
production by private enterprise, including research into new processes of pro-
duction and improved home design, and measures to lower the cost of financing
home building.
3. A vigorous public housing program to meet adequately and quickly the
needs of low-income families for which private industry is unable to provide, with
an effective program for slum clearance and the prevention of future slums.
Kathryn McHale, general director, American Association of University
Women; Lelia Massey, executive secretary, American Home
Economics Association; Colston Warne, president, Consumers
Union; Mrs. LaFell Dickinson, president, General Federation of
Women's Clubs; Katharine Armatage, chairman, League of
Women Shoppers Inc.; Gladys Cornell Irvin, National Board,
Young Women's Christian Association; Mar}- Anderson, national
Consumers League; Ruth Craven, executive secretary, National
Council of Catholic Women; Mrs. Gerson B. Levi, chairman of
welfare and war activities, National Council of Jewish Women-
Mary McLeod Bethune, president, National Council of Negro
Women; Daniel Carpenter, chairman, housing committee
National Federation of Settlements; Lester Granger, executive
secretary, National Urban League; Elisabeth Christman, secre-
tary-treasurer, National Women's Trade Union League.
Miss Ware. Mr. Chairman, I ask the privilege of submitting a
brief supplementary statement on behalf of the American Home
Economics Association. They are the professional group among us,
Mr. Chairman, and I ask to be allowed to submit this for the record.
Senator Taft. It may be made a part of the record.
(The statement referred to is as follows:)
Statement on Housing, Prepared for the Senate Subcommittee on Hous-
ing and Urban Redevelopment, by American Home Economics Associa-
tion
The American Home Economics Association has been concerned with housing
ever since its founding in 1909, as an organization devoted to "development and
promotion of standards of home and family life that will best further individual
and social welfare." Housing is one of the association's six subject matter
divisions, in one of which every member of the association is enrolled.
The 1944-45 program of work adopted at the annual meeting last June (attended
by 2,000 persons) included a statement authorizing American Home Economics
Association activity on behalf of legislation that will reduce the cost of housing
and put decent, sanitary homes within the reach of the lower-income groups.
The following measures are in line with association philosophy and objectives:
1. One of the primary functions of any Federal agency concerned with housing
should be to carry on research to the end that American families will have better
homes at lower cost.
(a) That research should be carried on not only in the field of urban housing
but also in rural nonfarm and rural farm housing.
(b) It should determine what the normal activities of American families are
and how they vary in different regions of the country and how houses should be
built in order to facilitate those activities and to improve the quality of family life.
(c) It should aim at elimination of wasteful and outmoded practices, incluaing
obsolete building codes and methods of financing home ownership, which make
home ownership needlessly expensive. ,
1914 POST-WAR ECONOMIC POLICY AND PLANNING
(d) It should deal also with such aspects of housing as methods of housing-
construction, new materials and designs.
(e) It should benefit both the producers and the consumers of housing, bringing
lower costs to the consumer in part through making it possible for houses to be
produced at reduced cost through a stabilized building industry.
2. A single permanent agency should be formed to coordinate all Federal housing
functions, as a return to the pre-war situation of having 16 loosely connected
Federal agencies concerned with housing would be highly undesirable. This
agency should have appropriations sufficient for securing able personnel and for
carrying on whatever housing functions are assigned to the agency.
3. Only where private industry cannot profitably operate, and where the public
welfare is at stake, should the Federal Government concern itself with housing
construction and management.
4. Where private industry is unable to bring about slum clearance, Federal
funds and technical aid (properly safeguarded) should be available to local housing
authorities to accomplish this. much-needed objective.
5. Federal funds should also be available to private citizens, under proper
conditions, for the financing of home ownership.
Miss Ware. And I would like to also submit for the record before
it is closed, Mr. Chairman, a list of the resolutions on the subject of
housing passed by the organizations here making the statement, so
that you may have before you the convention and board actions
which have put those organizations on record.
Senator Taft. We will be very glad to have them. Are there
any questions?
Senator Buck. Miss Ware, how long does your group estimate it
will take to achieve this goal, 10 years, 20 years, or a lifetime?
Miss Ware. Senator, how hard are we going to work toward it?
If you were to ask General Eisenhower how long it will take to defeat
Germany, for instance, I think he would say it depends on how hard
we work to achieve our goal.
Senator Buck. You must have a general idea.
Miss Ware. It is our contention that we should seek to meet this
problem in such a way that the children now growing up should get
the benefit of it.
Senator Taft. They grow up pretty fast.
Miss Ware. Yes; they do. That means we should work fast.
Senator Taft. I don't think we can hope to do the job in less than
10 years.
Miss Ware. If we do it, really do the whole job of good houses in
good neighborhoods for all the people in 10 years, I think, Senator,
we should be proud.
Senator Taft. I think so.
The committee will recess until 10:30 on Friday morning. The
hearings will be held Friday morning and Friday afternoon. I think
that day it will be mostly on the subject of finance, mortgage rates,
interest rates, and so on. Then the hearings will be closed temporar-
ily. We will certainly hold 2 more days of hearings, some time in
the month of February, before finally closing the hearings.
We will meet in this room at 10:30 on Friday morning.
(The matter referred to by Miss Ware is as follows:)
Statements of Policy on Housing by Conventions or Boards op Some of
the Organizations Presenting a Joint Statement on Housing to the
Senate Subcommittee on Housing and Urban Redevelopment, January
17, 1945
AMERICAN ASSOCIATION OF UNIVERSITY WOMEN
The legislative program adopted at the. 1942 convention of the American Asso-
ciation of University Women includes "legislation in the interest of the con-
sumer." The following legislative item to be voted on by convention delegates in
POST-WAR ECONOMIC POLICY AND PLANNING 1915
1945 has been proposed by the national social studies committee, the national
legislative committee, and the national board:
"Establishment of a permanent national housing agency to coordinate Federal
housing functions and integrate efforts to achieve good homes in good neighbor-
hoods for every family; measures designed to reduce the cost of housing produc-
tion by private enterprise; and provisions for public housing for low-income
families, for which private industry is unable to provide."
AMERICAN HOME ECONOMICS ASSOCIATION
At its 1944 convention the American Home Economics Association adopted the
following resolution:
"Whereas decent homes are yet denied to a large percentage of families; and
"Whereas malnutrition and ill health are still desperate both in rural and in
urban regions: Therefore be it
''Resolved, That members of the association take positions of leadership
* * * to secure improved housing and health facilities."
GENERAL FEDERATION OF WOMEN'S CLUBS
The following resolution was adopted at the golden jubilee convention of the
General Federation of Women's Clubs, May 1941:
"Whereas we recognize the close relationship between good housing, public
health, and social welfare; and
"Whereas the sudden industrial growths and shifts of population due to defense
activities, industrial and military, threaten to aggravate already-existing slum
conditions and create a further housing shortage with its subsequent effect on the
health and well-being of our people: Therefore be it
"Resolved, That the General Federation of Women's Clubs urges the State fed-
erations and clubs to study local housing needs and programs; to give active
support and aid to housing programs designed to provide adequate homes for
ill-housed families and benefit all groups of the community; and to seek the inclu-
sion of representative women on State and local housing authorities."
NATIONAL COUNCIL OF JEWISH WOMEN
Resolution adopted at the convention of the National Council of Jewish Women,
1943:
"Whereas slums and poor housing tend to breed discontent and ill health; and
"Whereas adequate sanitary housing should be available for all persons, regard-
less of economic status; and
"Whereas the Government of the United States has recognized the need of
adequate housing for the low-income group and has instituted a program of pub-
lic housing development; Therefore be it
"Resolved, That the National Council of Jewish Women commends the Govern-
ment for the work already accomplished; and be it further
"Resolved, That the National Council of Jewish Women works for the extension
of the present program and for the elimination of poor housing in both urban and
rural areas."
NATIONAL COUNCIL OF CATHOLIC WOMEN
The following resolution was adopted at the national convention of the Na-
tional Council of Cathloic Women, October 1944:
"Inasmuch as the normal development of family life is to some extent dependent
upon proper living conditions, the National Council of Catholic Women urges a
general housing program which will insure decent surroundings for the rearing of
families."
NATIONAL COUNCIL OF NEGRO WOMEN
The 1944 annual workshop of the National Council of Negro Women adopted
the following recommendations:
"Amendments to the National Housing Act * * * the United States
Housing Act of 1937 * * * prohibiting racial discrimination.
"Insertion into existing or proposed legislation for Federal or State urban re-
development assistance provisions to protect racial minority and low-nicome
groups * * *.
"Enactment of Federal legislation to establish a permanent, over-all housing
agency * * *.
1916 POST-WAR ECONOMIC POLICY AND PLANNING
"Appropriation bv Congress of funds necessary for the continuance and expan-
^^ra^m^^v^ff^rp^eto provide housing to meet the needs of
Neg^oes°lecSnTcallyPin a position to purchase or rent privately developed
NATIONAL FEDERATION OF SETTLEMENTS
The following resolution was passed by the board of directors of the National
^^^T^tttati^F^Li of Settlements endorse the statement
issuS by the National Public Housing Conference on Fundamentals for Post- War
Housing.
"Tri»I?e1Si™ Su"7eve?op Sw form, of large-scale.residential enterprise
with modern community planning and moderate rents inaurmg a reasonable
K%lmJZmS^7T^t build a great many more subsidised dwellings
LuS n nunfber and rental^alue to those destroyed must be a fixed pubhe re-
^Sral Sll.e I^^^^^^TS^ available to loeai
homing 'authorities now to prepare des.gns and working drawings for projects to
b^KgealTe\oSusineg ^^humanized, in both public and private projects."
NATIONAL URBAN LEAGUE
The Thirty-fourth Annual Conference of the National Urban League, October
^^e^raTtmen? ^ SSC&S^? Sabhshing a permanent National
HoJsW ATenc^ responsible for national housing policy, and the coordination of
governri^^ourcS to assist private and public agencies in providing adequate
housing for all people ^"^of^^^P^deSl'fcndB to be made available
?rP?EPuStted States Housing AcAf 193?! as amended, to assist local com-
muntti s provide' declnt housing for low-income families whose housing needs
JSnnot be met bv private enterprise without subsidy.
^S^e?SSS1S«^^
or urban redevelopment legislation.
(Whereupon, at 4 p.m., an adjournment was taken until 10:30 a.m.,
Friday, January 19, 1945.)
BOSTON PUBLIC LIBRARY
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