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then their loans are going to occur in Montclair because people with that income

Senator CRANSTON. What were you disagreeing with? Mr. SUTTER. I am saying if you found somebody who wanted to buy a home below $40,000, he could get a Federal mortgage.

Senator CRANSTON. How likely is that situation ?

Mr. COOPER. I am saying that is not possible so you are dealing with people making $7,000, $8,000 a year and banks won't lend too much even with family guarantee.

Mr. CHASTAIN. The average currently is something like $10,500 and there's currently no program that really serves that income level. The closest approach is a 312 loan which has been available only on an extremely limited basis. HUD is proposing to make them available along with homesteading to those cities for homesteading purposes but there is no Federal program that really speaks to the needs of low-income homebuyers at the present time.

Senator CRANSTON. We have pretty good statistics through HUD and the VA on the number of FHA and VA foreclosed homes but we don't have adequate figures on those that had, a conventional mortgage on them.

Has the League of California Cities, Mayor Reading, developed any statistics on that?

Mayor READING. Not to my knowledge but we have a representative on the staff that is suppose to be here. Yes.

Senator CRANSTON. Do you have any statistics on that particular point?

Would you identify yourself for the record, please.
Mr. YOUNG. My name is Stephen Young.
Senator CRANSTON. You are with the League of California Cities!

Mr. Young. Yes. Actually I work for the Institute for Local SelfGovernment but I am appearing today on behalf of the League of California Cities and the County Supervisors Association of California. We were requested to do a report for the league on housing abandonment and we found it very difficult to get figures from private lenders on the number of foreclosed units.

What we did find was basically through the cooperation of HUD, and I think they are the same figures that you have in your statement.

Senator CRANSTON. What figures do you have or do you have figures on the number of homes that have been acquired by cities because of the failure to pay property taxes?

Mr. Young. I do not have figures on that.

Senator CRANSTON. Does the league have any plan to get any such figures?

Mr. YOUNG. The community development committee has forwarded this policy to the board and any policy direction or further word will be forthcoming from the board. I have no instructions to that.

Councilman SUTTER. Senator, I can give you some figures for Oakland.

The East Oakland Housing Committee made a survey of East Oakland-being roughly the area, if I recall correctly, east of 23d Avenue and below MacArthur Boulevard. This survey is now about 1 year old. At that time there were 1,200 abandoned houses. Of those

1,200 abandoned houses, approximately one-third were foreclosure by FHA and VA and the balance private.

Senator CRANSTON. What does the city do when it acquires such homes?

Councilman SUTTER. The city does not acquire such homes under California law. If there is a delinquency by reason of failure to pay taxes, the house would become the property of the State of California.

Senator CRANSTON. Then what happens ?

Councilman SUTTER. And that rarely happens as a matter of fact. *There aren't very many of these homes that fall in that category because you have to be delinquent for 5 years before that happens.

Senator CRANSTON. What happens during the 5-year period normally?

Councilman SUTTER. Well, the house just sits there and there's a big lien on the house for unpaid taxes.

Mr. COOPER. Well, the county is responsible for this, county tax collector, and if the taxes aren't paid for 5 years then a sale is made pursuant to regulation by the State but

Senator CRANSTON. Is that an auction?

Mr. COOPER. Yes; and we have on occasion reduced minimum bid price in order to make sure an abandoned property was sold but those things occur rarely because of the fact most houses have mortgages on them and the mortgage holder will foreclose long before the taxes become 5 years due. The mortgagee requires the taxes to be paid and if the taxes aren't paid—most mortgage payments include the taxes so that the mortgagee is either paying the taxes or payments aren't being made.

Senator CRANSTON. What does a typical mortgagor do when he acquires a home under those circumstances and it is battered and vandalized ?

Mr. COOPER. A number of them are vacant in east Oakland because the usual thing is you sell at a foreclosure sale and what usually happens is the mortgagor bids him out of the mortgage then if anybody wants to bid a higher amount, they will. But by bidding the amount due on his mortgage he will be sure to be paid off. But in areas where there is a market for housing, they will get the bid in the Oakland hills, Alameda and so on.

Senator CRANSTON. Most of those we have seen today in the neighborhood we were in and others that are in that 5-year period will something happen to them before 5 years?

Mr. COOPER. Oh, yes. Well, most of the homes that have been foreclosed and are vacant are foreclosed after 6 months or 8 months of delinquency and so the tax matter would come up only if they are delinquent 5 years and no mortgage holder is going to wait 5 years of delinquency before foreclosure.

Occasionally you will have a situation where there was no mortgage and the property gets run down and the people decide "well we have got 5 years before the county can foreclose on us so we'll just milk whatever we can in the way of rent and then just walk away” but that's rare because most houses have mortgages on them.

Senator CRANSTON. What plans is there now in the city and the county for general areas that are showing very early signs of decay but haven't really reached the point of abandonment? Do you have any early warning signal?

Mayor READING. No. We are coinsidering it, I think this East Oakland task force has addressed itself more to that than anything else. Here you have a community group that is actually continually surveying neighborhood to determine what potential there is.

Councilman SUTTER. There again we have been faced with a withdrawal of Federal funds. We did have a program where we had door to door inspections. Those funds have dried up. Any program like that is useless anyway in my opinion unless it is coupled with a loan program. It doesn't do much good to go around to someone who is making $8,000 or $9,000 or $10,000 a year and say, "Now here's $10,000 worth or repairs you should make to your property and I am sorry we don't have any funds available. There are no loans available and the prevailing interest rate is 11 percent." This is the dilemma that you are faced with. So something like the 312 loan program has to be greatly expanded to be able to avoid the problem of further deterioration in the neighborhood.

Even the ability to get a loan really doesn't resolve the problem. In many cases there isn't the motivation or desire on the part of the owner or the tenant to do anything about it and I also say again that in terms of rental property, it is not economically feasible for a landlord to put an additional amount of money into the house simply because the rentals he receives don't cover costs.

Senator CRANSTON. Does the city or county have any plans for preservation of housing in connection with the urban homestead plan, or do you plan to use section 8 leased housing program in any way with this program?

Mr. CHASTAIN. In the homesteading plan we plan to use 312 loans. We have asked for that as part of the package but we also are anticipating the city's revolving loan fund be used in the program also so that the city would be making funding available and we hope that that program can be expanded beyond simply HUD-acquired properties.

With the East Oakland housing task force, it has been meeting regularly with some local lenders and one of the things we would like to achieve with them is to persuade them that in some cases they would be better off financially and otherwise when they acquire property to cut the price, the sale price, and sell them to a nonprofit organization that can rehabilitate them early instead of hanging onto them in hopes of recouping their losses.

I think as I mentioned in my statement, one of the things that is distressing, as far as the action on the lenders but of HUD is that basic attitude seems to be oriented not to the neighborhood that they are serving but to a short-term attitude of recovery of a maximum amount on the properties that they take back.

I think this is reflected all the way up to congressional hearings where the concern expressed is Congress sees in the HUD insurance programs rather than the effect of this repossessions on neighborhoods and communities.

I think one of the things that has to be recognized is that there is some basic problems underlying housing abandonment, problems of unemployment, underemployment and local income which means that if you were going to do significant lending in areas where those conditions are prevalent, your losses are going to be higher than they are in other areas and that has to be recognized if your program is going to be real.

Senator CRANSTON. Do you have any kind of local zoning program for individual families that are prospective owners of homes?

Mayor READING. Yes. Mr. Chastain will explain that program.

One point of clarification though: When Mr. Chastain refers to city funds being used for subsidies in these programs that he explained, this means community development funds. It does not mean general revenue fund. There is no way we can take our general revenue and cover these subsidies or costs.

Mr. CHASTAIN. Yes. The city recently was certified, this spring, as Housing Council Agency and that agency is being operated by the Redevelopment Agency by-We hired Mr. Scott who has been running a similar program in Richmond for 4 years to head up the program through the SETA program. We have hired 11 counselors who are now engaged in default and delinquency counseling, presale counseling, tenant counseling, fair housing counseling. We expect to continue with that program. It is being funded out of the SETA fund.

Both the homesteading program and the proposed SETA loan program will include counseling services as necessary and beyond counseling, technical assistance for people who want to do their own work.

Senator CRANSTON. What is the city-wide foreclosure rate?
Mr. CHASTAIN. I have never seen figures on that city-wide.

Senator CRANSTON. Have you ever seen them for the East Oakland area?

Mr. CHASTAIN. No. One of the holes in the program, I think, is a lack of that hard kind of data.

Senator CRANSTON. Is there any present program working with financial institutions to convince them to reinvest in these areas or to pool resources for that purpose ?

Mr. CHASTAIN. The savings and loan institutions several years ago set up SAMCO, the savings association mortgage company, which was geared to speak to that problem and they have been working very closely with the neighborhood housing services, among others, which is an organization set up in part with the-consulting with the urban reinvestment task force to address some rehabilitation problems in East Oakland.

Councilman SUTTER, But it is a drop in the bucket, Senator.
Senator CRANSTON. Pardon me?

Councilman SUTTER. But is is a drop in the bucket. SAMCO is a good idea but if you look at the number of loans they have made the last few years it is in the critical area. It is very small.

Mr. COOPER. As I indicated earlier, Mayor Reading and I are working with a local group of banks to try and set up a meeting which we hope will occur shortly with representatives of Federal mortgage agencies to try and get commitments in this area.

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Senator CRANSTON. Pete, should we go on to the next panel or do you have any further questions?

Congressman STARK. I just wanted to come back to a point. We have come all around it. I think the loan fund that has been proposed by the city and by the redevelopment agency is an uxciting concept. My own hope is that the provisions of your bill would really be addressed almost exclusively to neighborhoods that are credit short and I think we have been able to indicate that those are identified. I think the private sector has got the money to make loans in the hills in Montclair and Piedmont and they are not as willing to come into other areas so you have got the best of all worlds.

You are going to be using these quasi-public funds in areas that the private lenders are avoiding anyway and I'd just encourage you, if you can, to write that concept more clearly into the use because I think it is innovative and would be very productive.

Senator CRANSTON, Fred.

Mr. COOPER. If you are getting into urban homesteading with abandoned housing, then it is going to be an area where abandoned housing occurs and, of course, subsidizing that kind of thing would be useful and some cities are subsidizing loans by paying the first thousand. That reduces the amount of monthly payment and interest rate and that's another approach to the problem.

Senator CRANSTON. Thank you very, very much. You have been helpful to be with us and I appreciate it on behalf of the committee.

We will now hear from the second panel consisting of Fran Matarrese, chairperson, East Oakland Housing Committee; Richard Ilgin, director, Oak Center Better Housing; Bard Saladin, regional manager, Great Western Savings and Loan Association, East Oakland Housing Task Force, and Dr. Marjorie Evans, consultant, Bank of America, East Oakland Housing Committee.

Each of you have brief opening statements. We would welcome them. Please summarize whatever statements you have so we have time to ask you questions about your full statements, if you have prepared statements, will go in the record.

Please be sure to use the mike so that all can hear.

Fran, I would like to call on you first and I congratulate you on the very effective work you and your committee have been doing.

Miss MATARRESE. Thank you.



Miss MATARRESE. Senator Cranston, Congressman Stark, ladies and gentlemen, the history of the East Oakland Housing Committee is exciting because over the past 2 years this committee, formed by 28 neighborhood groups here in East Oakland, has seen an issue, namely 1,200 abandoned houses concentrated and scattered throughout our community-from 23d Avenue to the San Leandro border and from MacArthur to the Oakland Estuary. The East Oakland Housing Committee researched the issue and together with thousands of residents has developed what we feel is one of the finest, if not the best

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