before the Senate Committee on Banking, Housing and Urban Development on S. 1988, held August 29, 1975, in Los Angeles, California. At that time Mr. Gene Jarnagin, Loan Guaranty Officer, Veterans Administration Regional Office, Los Angeles, who testified on behalf of this agency, lacked specific data to respond to two of your questions.

Your first inquiry concerned the number of properties which return to the VA inventory. From the beginning of the VA Loan Guaranty Program through the end of fiscal year 1975, the Los Angeles Regional Office sold 45,176 VAowned properties with the assistance of VA vendee loans. During the same period, 6,078 properties were reacquired.

You also asked the number of properties sold to investors. Although an inquiry is not normally made as to the purchaser's intended use of the purchased property, a review of our records reveals that in fiscal year 1975 approximately 1% of the VA-owned properties sold by the Los Angeles Regional Officer were purchased by investors.

The above data refer to the entire jurisdictional area of the Loan Guaranty Division, Los Angeles Regional Office, which includes that part of California south of the northern boundary of San Luis Obispo County, plus Lincoln and Clark Counties in Nevada.

Thank you for providing VA with the opportunity to present its views on S. 1988.

Sincerely,

Mr. JARNAGIN. Thank you, sir.

JOHN J. CORCORAN,
General Counsel.

Senator CRANSTON. Mayor Doris Davis of Compton is now with us, and we would like very much to have you come forward, Doris. Doris, we are delighted to have you here.

STATEMENT OF DORIS DAVIS, MAYOR OF COMPTON, CALIF.

Mayor DAVIS. Good morning, and thank you very much. I'm very happy to be with you, and thank you for asking us to make our remarks on the subject that is so vital to the existence and revitalization of our community.

We feel that the problem of abandoned housing ties in with the entire economic development of our city and especially the stability of our city.

We have been very concerned as the city council, as the mayor, to give the emphasis of this particular problem in our community, and we want to compliment you, Senator Cranston, for the introduction of Senate bill 1988.

We've analyzed the bill and have some comments relative to the bill. We have our passouts here that will give you a little background about our city and an idea of the critical problems that are faced in the community of the City of Compton.

Though the City of Los Angeles has the highest absolute number of boarded-up houses, the City of Compton with a population only a fraction of the size of Los Angeles has the second highest number of boarded-up units and the highest number of abandoned properties per capita in the entire State of California.

Presently, Compton has approximately 350 HUD-held properties, 60 VA properties, and an undeterminable number of conventional repossessions totaling between 700 and 1,000 abandoned units.

The problems which are created by abandonment are as follows: the disadvantage, esthetically, of having boarded repossessions appearing in any neighborhood, and especially in neighborhoods, such

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as Compton, which are moderately attractive, middle-income communities, is recognized. Boarded units tend to broadcast a message of deterioration and blight to the potential buyers of other properties in that neighborhood as well as to the remaining occupants of residential property in the vicinity who are working to maintain their properties. They are discouraged and so the stability of the community is deteriorated because we lose many of our stable population because they become discouraged as a result of these boarded units. The boarded structures are sometimes found to be vandalized and often used for the storage of stolen property and drugs. Police are unable to readily view the interiors of boarded units, and public safety is a problem, and fires are often undetected inside a boarded unit, resulting in severe structural damage.

Also, they have a negative bearing on our overall insurance rates for the city. Boarded properties continue to discourage neighborhood, maintenance.

You can see that these spiraling problems continue to result in the loss of tax dollars to the city.

Our primary concern with the high rate of mortgage payment failures and subsequent repossession, especially with federally held property, are believed to be attributable to sales with no down payment or very minimal down payment, over qualification of buyers (which sometimes results in a higher selling price and higher loan commitment nonjustified by the true market value of the property). Over qualifying of buyers makes them unable to maintain the properties because they were not able to actually and in reality enter into the ownership or responsibilities of the ownership of the properties. They feel no real ownership and are not compelled to remain; and, therefore, buyers usually walk away from payments too high for their earning power with no sense of loss, since they have not committed their own funds as equity in the purchase. Inability to meet mortgage payments is parallelled by inability to keep the ownership property in good maintenance and repair.

I think an in-depth analysis of section 221 FHA insurance program is a classic example-as well as some of the other subsidized programs such as 235 and 236-is a classic example of why Compton has experienced problems with repossessed housing. In a report which we have referenced as "Housing Foreclosures and Abandonment in California," prepared by The Institute for Local Self-Government in conjunction with the California League of Cities, it is stated that as of March 12, 1975, Compton had a total of 757 HUD-held properties of which 515 (69 percent) were originally financed under section 221. Now, 69 percent of the abandoned housing means the Federal Government has become the largest slum landlord in our community. I think of these particular properties we have gone on to document the maintenance problems, which we have alluded to in our opening. Although they are HUD-held, the fact is that they are not being maintained, and these types of things of deterioration and blight have caused the great problems.

NUMBER OF HOUSING AND URBAN DEVELOPMENT-OWNED PROPERTIES LOS ANGELES AREA OFFICE-FHA

I'd like to look at our city very briefly. We have a young city. The median age in Compton is approximately 20 years. Close to 50 percent of the population is under the age of 18, and they are attending school.

In an economically deprived area with high unemployment, areas still exist which are as stable as any sections in southern California. The fulfilling of housing needs of the low- and moderate-income population is of immediate concern to us.

FHA-insured loans is the only means by which homebuyers can finance in the Compton areas because of the practices which have been highlighted by the discriminatory lending and mortgage practices, which are referred to as redlining.

Recently, attention has been focused on the fact that Compton is redlined by State charter savings and loans. The dependency on federally insured financing is the only means of homeownership for lowand moderate-income families. This coupled with the fact that Compton's housing problem next to abandonment is property maintenance and overcrowding. Financing either repairs or room additions requires that loans be made.

In terms of the study, by the Center for New Corporate Priorities. Compton receives only $2.41 as compared to $617.03 in Beverly Hills of per capita mortgage dollars. I think the comparison is very apparent in terms of these redlining practices by lending institutions and insurance firms.

These unfair lending practices, unsuccessful FHA insurance programs, are two of the primary reasons why Compton is experiencing the exodus of stable residences and businesses. We need a program which will end the cycle of repossessed housing.

One possible solution, particularly in Compton with its abandoned housing, is the new "urban homestead" provision or section 810 of the Housing And Community Development Act of 1974.

The city of Compton will apply for the demonstration program. If selected, we hope to serve as a prototype for black communities across the country, because we believe what works in Compton will work in any other community similar to ours. We see the program providing: 1. Homeownership opportunities for low- and moderate-income families.

2. Stabilizing neighborhoods experiencing moderate vacancy. 3. Returning tax-delinquent parcel to the city's tax rolls.

4. Increasing the attractiveness of neighborhoods throughout the city.

5. Increasing the inventory of good habitable dwelling units. 6. Preventing the spread of blight.

7. Encouraging movement of owner-occupants into the city.

8. Discouraging abandonment of properties.

It will take the involvement, cooperation, and hard work of HUD, VA, local lenders, the local government and concerned citizens in the community to halt these problems which plague most of the innercities across the country.

I think an important step in this direction has already been taken in this direction with the introduction in the Senate of Senate bill 1988 "Abandonment Disaster Demonstration Relief Act."

We applaud this as one of the best attempts we have seen to arrest the degeneration of the housing stock in metropolitan areas; and we agree with Senator Harts' statement, ". . . It is difficult to deny that the Federal Government is not at least partially responsible for the problem."

May we add to that-and should also assume the responsibility for a solution.

Our concern is that this new effort not repeat the mistakes we have made in the past.

We believe, for example, that a part of the problem has been the absence of local influence in the approval of projects and programs. We note with some pleasure that Senate bill 1988 contains the provision that the proposed Neighborhood Protection Corporation in carrying out its functions must comply with any applicable community development program and comply with any applicable housing plan or program and that lack of coordination has been a real problem, I believe, in the communities.

This provision alone would make the bill worthy of support; but, of course, the bill provides a great deal more than that. It changes the entire thrust of rehabilitation and residential redevelopment and will provide an opportunity to concentrate our efforts on entire neighborhoods, rather than scattered abandoned dwelling units, which we feel is a "Band-Aid" approach and Piecemeal and has a circulatory effect. I believe it has been documented in Los Angeles County that even with the rehab programs it takes approximately 1 year to return to the same status.

Our analysis of the bill revealed only two areas of concern. The first, and rather minor concern, is that we have some difficulty in understanding why the Secretary of Agriculture is proposed as a member of the Board of Directors of a corporation whose responsi-bility is the management of a demonstration housing program in metropolitan areas.

Our second concern is more serious but, perhaps, easily remedied. Section 6 (g) of the bill states that: "*** the corporation shall' determine that the homes themselves are in decent, safe, and sanitary condition at the time of sale."

We would like to add a provision that the houses also meet the requirements of local codes where those codes are more stringent than FHA or VA codes. Such a provision might be qualified in the guidelines to avoid this provision if conformance to local code requirements would increase the price of a rehabilitated unit to a level above the median price for similar housing in the metropolitan area.

I thank you for your attention. I again commend both Senators Mondale and Hart for introducing this desperately needed legislation; and you, Senator Cranston, for being concerned enough to come help us to evaluate and to proceed, we hope, to support and implement this needed legislation.

Thank you all.

Senator CRANSTON. Thank you, Doris, very, very much.

In regard to those figures that you gave on the amount of private money invested in homes in Compton as against Beverly Hills, has the city made any great efforts with private financial institutions, either on an individual or a pool basis, to get them into the city?

Mayor DAVIS. Yes; we have during the last year worked consistently with each of the lending institutions in our community, and also with the larger big three of the State in terms of proven discriminatory practices, especially to our small businessmen. We have cited these statistics. We have tried to get the commitment. We are told that the policies of the head office of these banks are not consistent with this and these obviously must be some loan committeemen's inequities.

We have instances such as a business person who is financing an appliance, a community person, who is deprived of approval of a loan application for a television appliance, for example, through any one of the big three and will go to an adjoining community, such as Huntington Park, with the same application and the same appliance and be approved, and we have documented many sources of these discriminatory lending practices.

We have testified with the Governor's State "Red-Lining" on these types of practices that also are helping to stifle the community's growth.

Senator CRANSTON. Do you have any kind of a preventative or early warning system going so that you know when a house or a street is beginning to reach the point of decay and abandonment?

Mayor DAVIS. No; we have really not been able to develop that because the problems with medium, small-sized cities is with staffing. Now that we are reorganizing under the Community Redevelopment Act, we are able to give more emphasis to this type of analysis, but prior to this we have not had the resources nor the staffing to try to do this kind of preventative work.

How does a person let anyone give a signal that they are in distress in terms of mortgage payments? By the time we look into it, they are gone.

These are the kinds of things we encounter. I wish there were some system, some way that perhaps we could get indications of other things that have been tried throughout the country in other communities, such as ours, that we might try to do that.

Senator CRANSTON. Yesterday in Oakland, Councilman John Sutter suggested that a system be set up, on a voluntary basis, where neighbors in a block would let some central place know when a home had been abandoned, and then there would be some organized group of people who would serve as caretakers and actually move in and live there until the home was transferred to some other family. He suggested this as a way to prevent the empties and the vandalism.