Congressman OLIN "TIGER" TEAGUE, House of Representatives, Washington, D. C.: PAMPA, TEX., June 10, 1953. Home builders of Texas, Oklahoma, and New Mexico just concluded 2-day conference. There is no new mortgage money available. In 30 days there will be practically no housing under construction throughout the Southwest. All houses will be completed on which we have commitments. VA fees and charges regulation, dated May 18, 1953, must be rescinded or the housing industry will come to a complete standstill throughout the Southwest. I will be in Washington R. G. DICK HUGHES. tomorrow. Hon. PAUL BROWN, ATLANTA, GA., June 16, 1953. House of Representatives, Washington, D. C.: The veterans fees and charges regulation of May 18 is now in hearing in the House. This regulation will gradually eliminate all veterans home loans in Georgia and other States if it is left in effect. I urge you as a veteran of World War II and as a director of the NAHB of the United States to please examine the regulation and I believe that you will see the same as I see and the other people of Georgia that are affected under this regulation. As ever your friend. BEN SMITH, Sr. Hon. OLIN E. TEAGUE, HOUSE OF REPRESENTATIVES, House of Representatives, Washington, D. C. MY DEAR TEAGUE: I am enclosing telegram from Hon. Ben Smith, Sr., Atlanta, Ga., which I hope you will file with your committee. I understand you are giving consideration to the matter he is interested in. Mr. Smith is one of the outstanding men of my State. I certainly will appreciate any consideration given his views. Sincerely yours, PAUL BROWN. Hon. OLIN E. TEAGUE, UNITED STATES SAVINGS AND LOAN LEAGUE, House Office Building, Washington 25, D. C. DEAR CONGRESSMAN TEAGUE: As a member of the Veterans' Affairs Committee you will, I am sure, be interested in the recent activities of the United States Savings and Loan League in support of the GI home-loan program. Savings and loan associations have always been strong boosters of this program and have advanced over $5 billion in GI loans during the life of the program. Perhaps of greatest interest is our recent telegraphic survey indicating that savings and loan associations will make 76 percent more GI loans in the latter half of 1953 than in the last half of 1952. The details of this survey are included in a news release, copy of which is attached. Before the interest rate was raised to 41⁄2 percent the league pledged that its members would actively support the program at the adjusted rate. The very day that rate increase was announced we renewed that pledge. I am enclosing a copy of a statement made at that time by Charles L. Clements, president of the league. A few days later when our executive committee met, we developed a more comprehensive program for the promotion of GI loans which is set forth in another press statement which I am enclosing. We are appointing a special committee of 100 savings association executives which will constitute our "committee to promote homeownership among veterans." It will be the function of this committee to promote GI lending generally and to attempt to channel a greater volume of GI lending into the rural areas. We are now attempting to develop some special programs of liaison between VA officials, veterans organization posts, and our State and local trade groups to develop better means of getting GI loans in the less populated areas. Finally, we have developed and distributed to all savings and loan associations, and made available to other lenders, the enclosed pamphlet entitled "GI Loans are Good Loans." This pamphlet urges lending institutions to make more GI loans and explains why GI loans are "good business." I am just sending you this material to show you how sincerely we in the United States Savings and Loan League are working for the improvement and expansion of GI lending. If you have any questions or suggestions as to how we can better serve the veterans, I would appreciate hearing from you. We feel that Congress has worked hard to develop a sound and favorable program for veterans' home ownership and we want to do our part in carrying this program through to greater success. Sincerely yours, STEPHEN SLIPHER, UNITED STATES SAVINGS AND LOAN LEAGUE CHICAGO, ILL. The United States Savings and Loan League today hailed the rise in interest rates on GI home loans, and said the action would break the "bottleneck" on loans to veterans. The league, through its president, Charles L. Clements, also announced it would undertake a drive among its more than 4,000 member savings associations and cooperative banks "to put the GI home-loan program back in high gear." Clements, commenting on the Treasury's announcement boosting the GI rate to 41⁄2 percent, declared that the increase "automatically" places tens of thousands of veterans in what he described as the "effective home-buying market.” "The downpayments to buy homes required under the GI program are substantially under those required by lending institutions on other types of loans," he asserted. In recent months, downpayments on GI loans have averaged 13 percent of sales price. Meanwhile, downpayments on "conventional" or non-Governmentaided loans have averaged 30 percent of sales price. The league president praised the interest-rate hike as "a courageous step" along the road back to a free economy. A prediction made by the savings and loan leader was that the rise in the GI interest would “revitalize” the postwar home-building boom and thereby bolster the entire economy. "As a result of the increase in the rate, 1953 may well turn out to be the second biggest residential home-building year in history," said Clements. He pointed out that home building is off to a fast start in 1953, and added: "With the aid of higher GI interest rates, the chances are favorable that home production will approach 1,200,000 houses and apartments." The figure forecast by Clements would exceed every previous building year except 1950, when there were 1,396,000 housing starts. Last year was the second biggest building year on record, with 1,131,400 starts. Clements said that the stepup in home building would help to strengthen the overall economy, and would help to take up any slack resulting from a decline in defense spending. UNITED STATES SAVINGS AND LOAN LEAGUE, Chicago 1, Ill., May 12, 1953. The Nation's savings and loan associations and cooperative banks will earmark a billion dollars for GI home loans during the remainder of 1953, according to an announcement by Charles L. Clements, president of the United States Savings and Loan League. Clements made the announcement after the close of a meeting of the league's executive committee during which plans were laid for an extensive drive to boost GI lending among the trade organization's 4,000 member institutions. The league president pointed out that the increase last week in the interest rate on GI loans to 4% percent had removed the "marked competitive disadvantage of veterans home loans to other type of mortgages and investments. "The new rate," he added, "will permit out institutions to place more of their funds in GI loans than has been possible for the past 2 years." Clements is president of the Chase Federal Savings and Loan Association of Miami Beach, Fla. The league president also disclosed that a special committee of 100 savings association managers would be appointed to carry the drive for GI lending into "all areas" of the United States. "We intend to make a determined effort to funnel GI funds into those rural and less populated areas where veterans loans have always been difficult to secure," he said. He said that league leaders will seek an early meeting with officials of the Veterans' Administration and the major veteran organizations to work out details of a lending program for the areas of small population. Clements recalled that back in 1945 when the GI plan was introduced, the United States League took the lead in urging its members to participate in the program, with the result, that savings associations made 80 percent of all GI loans during the first 6 months of the program. "Since the national administration has provided a realistic interest rate on GI loans, it is now up to lenders to make sure that the GI program moves ahead with new life and vitality," he said. The member institutions led by the United States League comprise the largest segment of the home-financing business. Last year, these institutions made 36 percent of all home loans. Since World War II, they have made nearly 900,000 GI loans. UNITED STATES SAVINGS AND LOAN LEAGUE 221 NORTH LA SALLE STREET, CHICAGO 1, ILL. JUNE 7, 1953. A big expansion in home lending for veterans is being mapped by the Nation's savings and loan associations. That optimistic report came today from the United States Savings and Loan League which said that the estimated GI lending by savings associations during the second half of 1953 will be nearly twice that of the same period last year. Reporting on the findings of a nationwide telegraphic survey of more than 200 savings institutions in every section of the country, the league disclosed: 1. The rate of GI home lending, on a national average, will run at the rate of more than $100 million a month for the second half of this year, as compared with $58 million monthly for the second 6 months of 1952. 2. The most noticeable expansion in GI lending by savings associations will take place in the East, the Southeast, the Southwest, and the Midwest, with a slower pace of increase in States bordering the west coast. 3. In general, the most rapid revival in GI lending will occur among the larger institutions in the bigger metropolitan areas. 4. More than 80 percent of all savings associations are planning to make GI loans in the coming months, although the volume will vary percentagewise from institution to institution. 5. A substantial number of institutions which were out of the GI program entirely in 1952 are planning to return. 6. Because the announcement of the rate increase on GI loans was announced only a month, some institutions still have not determined the extent of their participation in the program. The results of the telegraphic poll, released today by the United States league, were described as "greatly encouraging" by Norman Strunk, league executive vice president. He said the favorable response reflected in part efforts of a month-old campaign now being conducted by the league to encourage greater participation in the GI program by the trade organization's more than 4,000 member savings institutions. Strunk said that the poll was taken to secure documentary proof that the GI loan program is rolling again, and to counteract reports that the hike in GI interest rates is failing to bring mortgage lenders back into the market. The league official pointed out that while other types of mortgage lenders are still reluctant to reenter the GI program, "There is every indication that most savings associations are moving back into the GI market quickly. "It is true that a little time will be required in order that some institutions become reaccustomed to making GI loans once more," said Strunk. "However, reports and predictions that the program will continue bogged down are inaccurate and premature." 35186-53-2 The league survey disclosed a broad disparity in the GI lending plans on the part of many of the institutions participating in the coast-to-coast telegraphic poll. Some institutions, whose volume of GI loans had dropped to the vanishing point in recent months, revealed plans for increases ranging upward of 1,000 percent. On the other hand, some associations in the eastern seaboard States and the New England States who had remained active in the GI market, promised gains, although on a less spectacular scale. In some of the smaller towns, the heads of savings associations expressed a willingness to make the loans at the rate now prevailing but complained of a lack of savings. Throughout the Midwest and most of the South, savings associations generally indicated plans to either reenter the GI program, or to expand their GI volume of last year. GI. LOANS ARE GOOD LOANS BY JOSEPH HOLZKA, STATEN ISLAND, N. Y., AND JOE C. JENKINS, GAINESVILLE, FLA., CO-CHAIRMEN OF THE COMMITTEE TO PROMOTE HOME OWNERSHIP AMONG VETERANS AND GI LENDING, UNITED STATES SAVINGS AND LOAN LEAGUE With the increase in the rate on GI loans to 41⁄2 percent and the fact that the GI loan now provides the same return to the lender as an FHA loan, lending institutions are reexamining their policies relative to the making of GI, FHA and conventional loans. The 42 percent return on GI loans is still less than that frequently available on good conventional loans. In most cases, however, it is only 2 of 1 percent lower, and the almost complete freedom from risk in the GI loan and the public relations aspects of it compensate in great part for this differential. Of course, lenders would not want to make all of their loans at 41⁄2 percent However, if all lending other than GI financing was done at a yield of 5 percent, then putting 20 percent of the loan volume in 41⁄2 percent loans would reduce the average yield on the loan volume by only one-tenth of a point. An institution with 90 percent of its mortgage portfolio at 5 percent and the balance at 41⁄2 percent would earn 4.95 percent on its entire portfolio. From every standpoint except this small differential in yield and the slight additional bother and time in making the loan, the GI loan is the best mortgage loan available in the market today. Unless GI loans are granted blindly or the guaranty is carelessly voided, they can be counted upon as safe loans and the loss reserves of the institution need not be built up so rapidly against them as against other types of loans. Practically all lenders have had a very favorable experience with GI loans; all will testify to the promptness with which the Veterans' Administration has honored the guaranty and the extent to which the guaranty has protected the institutions against loss. Aside from the recent increase in rate, there have been a number of important changes in the GI loan program since 1945 which have greatly enhanced the attractiveness of these loans to lenders. These important changes, increasing the desirability of GI loans as an investment, are as follows: 1. The guaranty protection has been increased; it is now $7,500 or 60 percent of the loan, whichever is less. 2. The VA guaranty is incontestable. In 1948, an incontestable clause was added to title III of the Servicemen's Readjustment Act which provides that once VA issues it guaranty certificate to the lender, the eligibility of the loan cannot be contested except for fraud or material misrepresentation. This had added a strong measure of protection which was previously lacking. It has enabled the lender to have confidence that the validity of the VA's guaranty would not be questioned in the future because of mistake or misunderstanding on the part of either the lender or the VA field office. 3. Loan origination charges have been authorized. The VA regulations now permit lenders to charge the veteran borrower an origination charge up to a maximum of 1 percent of a loan, or $50, whichever if higher. This, plus loan charges authorized by the various regional offices of the VA, clearly permit lenders to collect from the borrower all or a substantial part of the cost of putting the GI loan on the books. In addition, a fee of up to 2 percent may be charged the veteran on any construction loan advances. 4. Protection to the lender under foreclosure has been strengthened. The terms under which VA accepts conveyances of property were liberalized from the lender's standpoint by an amendment to the loan guaranty regulations in December 1948. Under these revised terms, the VA does not require possession, the holder is reimbursed for revenue stamps, the VA will accept a title which is generally acceptable to local attorneys and title companies, and the VA will assume custody of property and risk of loss due to property damage immediately after foreclosure even though the title to the property has not yet been conveyed to the VA. An additional point not to be overlooked is that the holder of a GI loan will receive, by means of payments on the guaranty or from the sales proceeds, interest at the rate of 41⁄2 percent up to the date of the foreclosure sale, and if the sale must be confirmed under local law, interest is allowable to the date of such confirmation. Furthermore, the holder of a VA-guaranteed loan may deduct from the sales proceeds all foreclosure expenses reasonably necessary in connection with the foreclosure. The holder of a mortgage guaranteed by the VA is legally entitled to his guaranty payment even though the property is no longer in existence. The holder of a VA-guaranteed mortgage is not liable for waste occurring prior to foreclosure (not committed or permitted by the mortgagee) and may escape all such liability following foreclosure by turning custody of the property over to the VA immediately following the foreclosure sale. 5. The GI loan has gained general acceptability. Unlike the earlier years of the VA loan guaranty program when the GI loan was regarded by many as a new and untried investment instrument, for some time now it has had wide acceptability among all types of lending institutions, including secondary market investors who supply mortgage capital on an interstate basis, although the price at which GI loans can be sold may and does drop below par at times. The outstanding record demonstrated by veterans in repaying their obligations has won admiration and respect among lenders everywhere. Since these loans cost the borrower 4% percent as against 5 percent on FHA loans and 5 percent and more on conventional loans, there is less risk of losing the loan through refinancing when it becomes seasoned. Furthermore, a property so favorably financed can be worth more money in depression times. The longer term at which nearly all GI loans are made, together with the lower interest rate, means that the monthly payments are substantially lower than on most conventional loans. These loans, thus, are easier for borrowers to carry and defaults on them are likely to be at a lower rate in times of recession or depression. From the lender's point of view, veterans of World War II and the Korean war constitute the biggest single market for desirable home-loan business. All of these men are eligible for GI loans. Certainly all lending institutions with an eye toward the good name of the institution and stability of operation will want to give every consideration to taking an active part again in the GI loan program. Mr. AYRES. I think since you have stated these definite figures, and since we have the benefit of having Mr. T. B. King of the Veterans' Administration in the audience-although he will not be officially called until tomorrow-I think it might be advisable, Mr. King, if you could clarify this figure. Have you made 25,000 loans in the last month? STATEMENT OF T. B. KING, DIRECTOR OF LOANS GUARANTY SERVICE, VETERANS' ADMINISTRATION Mr. KING. That is approximately the figure of applications for the month ending May 25, 1953. Mr. BONIN. Mr. King, I am not concerned about applications. I want to know did you make the loans? Mr. KING. Mr. Congressman, we do not make loans, as I am sure you know. We guarantee them. Mr. BONIN. I understand they are guaranteed. Mr. KING. The best indicia is afforded by the flow of applicants. It is the most reliable indicator. |