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(on Forms HUD 1174 and 9828 when appropriate) plus the total dollar amount of any repair expenditures made in accordance with the Approved Disposition Program, Form HUD-9503, since the time of acquisition. Generally, properties with severe structural deficiencies, serious health or safety hazards, or in need of substantial rehabilitation will not be eligible for sale to former mortgagors. Warranty provisions shall not apply in sales to former mortgagors and appropriate revision shall be made to the Standard Retail Sales Contract, Form HUD-9548, to reflect such condition of sale.

e. Since an active sales program is essential to achievement of the primary PD objective, due consideration must be given in the selection of appropriate disposition approaches to the sales effectiveness of selected approaches as indicated by current experience in the sales market. Approaches which do not produce adequate sales activity must be replaced by authorized approaches which do produce sales results.

f. Formal plans developed in accordance with outstanding instructions for the Planned Program Approach are to be reviewed, and revised where appropriate, to reflect the primary objective of the Property Disposition program and maximum feasible utilization of the as-is sales procedure.

g. Appropriate revisions to the Property Disposition Handbook to incorporate policy and procedural directive material contained in this notice are under development and will be issued upon completion.

H. R. CRAWFORD, Assistant Secretary for Housing Management.

ABANDONMENT DISASTER DEMONSTRATION

RELIEF ACT OF 1975

FRIDAY, AUGUST 29, 1975

U.S. SENATE, COMMITTEE ON BANKING, HOUSING AND URBAN AFFAIRS, SUBCOMMITTEE ON HOUSING AND URBAN AFFAIRS,

Los Angeles, Calif. The subcommittee met a 9:20 a.m., pursuant to call at Will Rogers Memorial Park, 103d Street and Central Avenue, Los Angeles, Calif., Senator Alan Cranston, acting chairman, presiding.

Present: Congressman Mark Hannaford; Carolyn Jordan, Assistant Counsel and Jerimiah Buckley, Minority Counsel, Banking, Housing, and Urban Affairs Committee.

Senator CRANSTON. The hearing will come to order. Last year Senators Hart, Mondale, and I introduced S. 3115, the Housing Abandonment Disaster Demonstration Relief Act, a bill to test a new mechanism for acquiring and disposing of abandoned property and to develop new financial resources for localities affiliated by the disaster of large scale housing abandonment.

Because of the urgency of this problem we have introduced this bill again this year as S. 1988.

Housing abandonment is still a major menacing housing problem in our urban cities. Housing abandonment is a problem of poor people concentrated in overcrowded, unsafe, and unsanitary housing units, of streets scarred by vandalism and fire, of neighborhoods shunned by businesses and investors, of cities with dying central cores.

Housing abandonment is creating housing, crime, health and tax crises in many of the Nation's cities.

The last national survey in 1971 completed by the Library of Congress on national levels of housing abandonment indicated the growing magnitude of this problem.

Conservative estimates on the number of non-Government owned abandoned units, for example, run around 100,000 in New York, 12,000 in Baltimore, 10,000 in St. Louis, and 5,738 in Oakland.

Recent up-to-date figures on HUD-VA owned foreclosed properties in selected cities indicate that this problem continues to haunt our cities. As of May 1975, HUD owned 69,695 single-family properties nationwide and the VA owned 11,345. The following table will illustrate the volume of units that could be turned over to the corporation by HUD and VA in selected cities :

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As of March 1975, the Los Angeles area insuring office of HUD had 3,874 foreclosed single-family homes in their inventory. Of this total, 100 were in Ventura County and the remainder (3,774 units) were in Los Angeles County.

The city of Los Angeles accounted for 1,395 of these units (37 percent). Compton owned 759 (20 percent) units and Pomona had 462 units (12 percent).

Seventy-three other cities within the county accounted for the remaining 1,162 units. The heaviest concentration of units was in the south-central section of Los Angeles where 1,084 units accounted for 78 percent of that city's total in south-central. The VA has 1,105 repossessed properties in the Los Angeles area, 404 in Los Angeles city wide, and 8 in Watts. Exact figures fall short of describing the full magnitude of the housing abandonment problem in terms of the destruction of the quality of life it produces.

The Department of Housing and Urban Development has implemented several programs to rid itself of its growing inventory of repossessed homes. These attempts include: (a) The urban homesteading program announced May 1974, a 1-year experimental program with a projected goal of putting 700 homes in the hands of low-income citizens. This program has been fraught with difficulties because low-income homeowners have difficulties getting financing to repair these units; (b) other HUD programs include the “sale-as-is" program to encourage rapid purchase of HUD repossessions; (c) the "policy release option” program for local governments; (d) the neighborhood housing services program that make available' loan funds for inner-city areas that are deteriorating.

On the local level a few cities have implemented their own urban homesteading program. Overall, very little has been done at the Federal or State level to adequately address the abandonment issue and none of the HUD programs have the necessary elements and flexibility to deal with developing unique solutions to the abandoned housing problem. There is no specific program to stop the housing abandonment wave from gaining momentum in city after city or to repair the destruction abandonment leaves in its wake.

Many different reasons have been given for the abandonment problem but it is difficult to deny that the Federal Government is not at least partially responsible for the problem. Many persons who could not afford housing were allowed to buy units. Little or no counseling for families buying a house for the first time was provided. Kickbacks, schemes, and speculation by realtors, builders, and HUD personnel have also contributed to this problem.

Recognizing that the Federal Government had a hand in creating the abandonment disaster and also recognizing that the Federal Government has a strong interest in the quality of housing generally and specifically in protecting the housing which it has insured or guaranteed mortgages. The Demonstration Relief Act establishes a special Government-sponsored corporation to deal with the problem of abandoned housing units.

The agency, to be called the Neighborhood Preservation Corporation, would work in this manner: It would be empowered to seize and acquire title of abandoned housing units quickly to prevent deterioration of the unit and to stem the spread of abandonment in a neighborhood.

The corporation could renovate, rent, sell, construct, demolish units, repair, refinance, purchase property, condemn, and originate mortgages at interest rates below the going market rate.

The corporation could hold land for redevelopment and construct new housing according to a city's housing plan.

This proposal seeks to turn abandonment disaster into a "plus" by preventing deterioration of abandoned units by securing possession quickly and seeing whether a single-purpose agency in abandonment can bring together with the Federal Government, local officials, lenders, renewal and housing agencies, and community organizations, and others necessary to develop a corporative effort for the improvement of urban life.

This is an open hearing of the Senate Banking, Housing and Urban Affairs Subcommittee on Housing. I will not make any formal statement at this time. I think you're all aware that the legislation that we are considering is the Abandonment Disaster Demonstration Relief Act, S. 1988, which I've introduced in the Senate. This bill provides for creating three neighborhood corporations in three different demonstration communities to be selected by HUD that would launch a program with adequate financing that would begin to secure possession and ownership of many abandoned housing units and taking them over, renovating them, making them available for either sale or local rental to families that need housing, with counseling to insure that families don't get into responsibilities that they cannot handle. The alternative would be to tear down the homes if they were in a hopeless condition and to replace them.

I want to welcome Congressman Mark Hannaford who is going to help carry this bill through the House of Representatives. I'm not certain that the bill that we have introduced will be enacted, but I am confident that we will be able to enact something that will be along the general lines of what we are suggesting.

I want to welcome as our first witness, Gene Jarnagin, who is the loan guaranty officer of the Veterans Administration. I wish that for the record you would introduce those with you; and if you could summarize in just not more than 4 or 5 minutes whatever prepared statement you have and submit that prepared statement for the record. Thank you for being with us.

STATEMENT OF GENE JARNAGIN, LOAN GUARANTY OFFICER,

VETERANS ADMINISTRATION

Mr. JARNAGUN. Mr. Chairman, I'm pleased to have the opportunity to appear before the subcommittee today. With me on my left is Henry Cohn from the General Counsel's Office in Washington. On my right is Mr. Gary Schmidt who is the Chief of Property Management Section, and beyond him is Mr. Gordon Wile, District Counsel in Los Angeles.

Yesterday my colleague, Mr. Frederick Craig, Loan Guaranty Officer of the VA's San Francisco Regional Office, appeared before this subcommittee and presented the views of this agency on-S. 1988 and urged the subcommittee to carefully consider the Department of Housing and Urban Development's objections to the bill.

We concur with that statement. Mr. Craig's remarks are on page 92 of the August 28, 1975, hearing in Oakland on S. 1988.

I'll be happy to answer your questions.

Mr. JARNAGIN. Mr. Chairman and honorable members of the subcommittee, as the Loan Guaranty Officer of the VA's San Francisco office, I am pleased to have the opportunity to appear before this subcommittee today and present the views of the VA on S. 1988.

This bill, entitled the “Abandonment, Disaster, Demonstration Relief Act," is designed to prevent deterioration and destruction of neighborhoods and communities and to hold and assemble parcels of land for orderly development and redevelopment. This being based upon a general finding that the cause of the destruction and deterioration of neighborhoods is to a large extent due to abandonment of properties.

The VA is well aware of the problems with abandoned properties. Unfortunately, we believe this complex bill, as currently drafted, contains many provisions which are ambiguous and subject to varying interpretations, leaves many areas unresolved, and will create many problems. For these reasons, the VA opposes S. 1988.

Our objections to the bill are not to its intent, but rather to potential problems that could result from the vagueness and technical insufficiencies of certain provisions of the bill. These technical problems make it extremely difficult for the VA to take a firm position on the substance of certain of these provisions as we cannot forecast with any degree of certainty the effect that passage of this bill would have upon existing programs.

While not intended to be all-inclusive, the following are some of the specific areas we find objectionable:

Within the three metropolitan housing sections to be determined in accordance and (b) of Section 6 of the bill to take action to declare abandoned residential property forfeited and to seize and take possession of such property. Paragraph 3 of subsection 6(b) of the bill provides such seizer shall be subject to the payment by the corporation of “just compensation” to any person claiming an interest in the seized property.

This paragraph further provides that where the person or agency having an interest is a Federal agency, payment by the corporation shall be in the form of obligations issued by such corporation. The bill does not specify, however, how payment shall be made to persons or other entities that are not Federal agencies. Conceivably, the corporation could make such payment in the form of the same obligations it would issue to Federal agencies. Since the bill provides in section 8(b) (page 20, lines 8 through 14) that such obligations are not guaranteed by the United States and do not constitute a debt

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