end up with just one overlay, one more fragment, one more program, and one more Government bureaucracy. This goes to the demonstration program in the three cities. What about the other cities? What about the continuing growth of abandoned houses even as this program goes into effect?

We feel that it is really critical to have a full perspective of this issue rather than just deal with isolated problems. One thing that we are very interested in is a restudy of the financial institutions and their impact on mortgage spending and on homes. We know that the Government programs to date have produced failure. We have not produced an adequate home for every individual.

The House of Representatives has to do a study which we hope will take a new look at housing and what kinds of programs and what kinds of insurance mechanisms should be used. We are wondering if the Senate will do anything in this particular regard, or will it only continue with piecemeal programs?

Just because time is short, I will spend some time talking about some things that I think could improve this particular program, especially if it was used in conjunction with other demanding affirmatives. If this proposed "Abandonment Disaster Demonstration Relief Act" is seen as one facet of a complete revamping of Federal mortgage-lending programs, its impact on the communities selected would be increased by incorporation of the following recommendations:

One: I think it is critical that half of the board members should be selected from public interest, consumer, or community groups and that these groups should represent a broad spectrum of socioeconomic characteristics of the neighborhoods which have demonstration programs. I would like to note that in the particular statement that the designation of chair and vice chair as "chairmen." I certainly hope this is not a sign that the nine-person board will consist of nine men. This is just one example of concern of our kind of organization.

The only criteria which is spelled out for representation on the board is that

*** not more than five shall be members of any one political party *** The composition of this board is critical to the success or failure of the program. A more detailed description of selection criteria should be included in section 4. As I understand it, Carla Hills, who is in charge of HUD, will be on this board.

Two: The national nature of this board places it out of touch with specific community problems. One fault with VA and HUD programs is their lack of concrete knowledge of the houses they insure.

In Los Angeles County, assuming selection, 12 boards should be set up. One for each redlined area in Los Angeles County. Each board should consist of 50 percent public representation and 50 percent private. The present wording of section 5 does not describe the exact way to insure "local cooperation and assistance," and it must be strengthened to allow for local decisionmaking and control. Above all, it is important to set up a local community-based board of directors for each metropolitan area and neighborhood.

Three: The impact of counseling services provided to prospective buyers and owners of property has been proven to make a difference in the success or failure of other credit programs. This inclusion in section 6 is to be commended; and to fulfill its function, we would like it to be extended to last the life of the mortgage loan, regardless of how long the abandonment of these homes may be.

Four: More attention, as Cary Lowe stated, should be paid to ways of insuring that "homes are in decent, safe, and sanitary condition at time of sale." Specifically, present HUD and VA programs have failed to develop adequate safeguards for the buyer. Since the corporation involved would be responsible for the cost of any defect that was not corrected at the time of sale-if I'm reading the proposed legislation correctly-inspection programs must be initiated with more care than under present procedures.

With all these changes and a rethinking of the "Abandonment Disaster Demonstration Act," I think the abandonment asked for is good, and we could make a giant step forward in eradicating housing abandonment in our cities.

Senator CRANSTON. Thank you very, very much.

I want to assure you that Čarla Hills will be there and will see to it that not just males are appointed to the board. [Complete statement follows:]

STATEMENT OF THE CENTER FOR NEW CORPORATE PRIORITIES AND THE
NATIONAL TASK FORCE ON CREDIT POLICY

I am pleased to be here and to see your concern about the growing abandonment of residential structures in Los Angeles and in other cities around the country.

The Center has just released a study of mortgage lending policies in Los Angeles entitled "Where The Money Is," Mortgage Lending in Los Angeles County. Our steady shows that one million people in Los Angeles County live in neighborhoods which are denied mortgage loans. During the first five months of 1974, these neighborhoods received less than one percent of all single-family loan dollars expended by state-licensed savings and loans. The twelve major areas denied mortgage dollars are Compton, Covina, East Los Angeles, Boyle Heights, Echo Park, Highland Park, Long Beach, Pacoima, San Fernando, Pomona, Pasadena, San Pedro, Venice, Santa Monica, West Covina, and South-Central Los Angeles Our study does not include specific research on the magnitude of abandonment in Los Angeles, but if it did, the map of abandonment would duplicate our map of red-lined communities.

Abandonment is a major problem in Los Angeles, FHA and VA owned property in Los Angeles cited in your bill totals 5,845 abandoned houses. We have requested from savings and loans a list of the abandoned properties they hold in Los Angeles County. To date Gibraltar Savings and Loan, the seventh largest in the nation, is the only one to have supplied this information. Their list total 41 and includes not only residential but also commercial and vacant property. Multiply this figure by the number of financial institutions involved in mortgage lending in Los Angeles County, and a picture of the magnitude of abandonment emerges.

But abandonment, while a distressing component in the decline of our cities, is only one element in a multifaceted process. To state that "housing abandonment is still the major housing problem in our urban cities" is to simplify a complex problem. Housing abandonment is one product of our nation's inadequate mortgage-credit policies. We have, over the years, developed a complex system of regulation; direct and indirect subsidies to the buyers, sellers, builders and financers of housing. Taxing mechanisms; government insurance and a myriad of other, often conflicting tools for providing adequate housing at a reasonable price.

While the concept of rebuilding and rehabilitating abandoned housing is a worthy one, the money expended in whatever three cities selected will not be sufficient to eliminate the nation's abandoned housing problem. For even if the program operated optimumly, it would have no impact on abandoned houses in other cities. More important it would have no impact on the abandonment process which would continue unabated throughout the country.

What is needed is a program to eliminate the issues of housing abandonment. First, eliminating the profit which some individuals and corporations make on abandoned housing would eliminate the reasons for misrepresentation of structural conditions on the one hand, or income and credit characteristics on the other.

Second, FHA and VA programs were set up to meet a real need, the need of low-income (but credit worthy) individuals to own their own homes. But these programs have failed. One of the major indicators of neighborhood decline is the presence of government-insured loans in an area. Once FHA- or VA-insured loans are granted in a given community, conventional money dwindles and then disappears altogether. Credit-worthy families are refused conventional loan dollars and are force to contend with government-insured loans-with all their restrictions and red-tape. Housing conditions and structural improvement are misrepresented to innocent buyers who take occupancy and are unable to pay the price to fix substandard conditions and deficiencies. In addition, credit characteristics of potential buyers are gerrymandered and and families who are financially incapable of supporting mortgage payments are given government loans and soon default on them.

The present FHA and VA programs are unfair both to families who could afford conventional loans (but are denied them) and to neighborhoods whose abandoned home result from unscrupulous lending policies.

Without setting up administrative standards to eliminate the abuses found in present HUD- and VA-insured programs the "Abandonment Disaster Demonstration Relief Act" will fail as the number of abandoned homes outsteps all attempts at rehabilitation and redevelopment.

In conjunction with a rethinking of government insurance programs, the "Abandonment Disaster Demonstration Relief Act" might sttand a chance for success. But the tendency of government programs is to superimpose on one faulty mechanism, a new "perfect" mechanism which will prove just as inadequate.

That National Task Force on Credit Policy and its constituent organization is working to destroy myths and build realistic programs for providing sound housing for consumers. The absence of a comprehensive credit program for mortgage lending has meant the failure of years of well-meaning plans such as HUD and VA insurance. So today, as a result, we find that we have not made a dent in our goal of supplying sound housing at a reasonable cost to all sectors of the economy.

It is within this context that we must develop mechanisms of allocating credit to those portions of the population now priced out of the housing market. We have suggested a number of recommendations to achieve greater access to mortgage credit by low- and moderate-income families. Most of these recommendations revolve around the same theme: financial institutions must become accountable to the public, for it is our deposits that are being used to determine housing policies.

First, there must be full disclosure from all financial institutions of the location of their deposits and loans, by census tract. Loans should be broken down by type and purpose and should include a breakdown of conventional vs. guaranteed loans and loans for owner-occupied vs. absentee-owned property. Such data must be publicly available by institution so that consumers can assess the responsiveness of each institution.

Each intitution should make public a periodic "statement of geographical investment pattern." Each should be required also to keep on file copies of all written loan requests for a period to two years, so that the public can assess the extent to which demand is being adequately met.

Second, branching and chartering requirements must be changed to give the public review of the performance of financial institutions. Each institution presently must file extensive information to obtain approval for charters or new branches. We are suggesting a mandatory five-year renewal of charters

of financial institutions, which would be subject to review of the institution's performance in meeting its Affirmative Action Plan. The public should be allowed to challenge both charter renewals and new branch applications on the grounds that "public convenience" has not been met.

Third, all agencies which regulate financial institutions should have at least one-half public representation, made up of individuals with not official or monetary connection with financial institutions.

Fourth, all agencies which regulate financial institutions would be enlisted to monitor and mediate complaints of credit discrimination. If patterns of discrimination were found, regulatory agencies would be authorized to apply sanctions-including: withdrawal of governmental funds, increasing of reserve requirements, levying fines or revocation of licenses.

Finally, the government must develop a conscious credit allocation program to channel mortgage credit into high-priority areas not being served by financial institutions. The exact form is one which required input from other public interest and community groups. We would be glad to supply a list of organization and individuals interested in working towards such a solution.

Senator CRANSTON. The two of you, if you would wait, please. I do want to hear from you, but there are witnesses that were scheduled and who I think may have other time demands on them. I want to ask just a couple of questions before I dismiss this panel.

Mr. Crissman, let me ask you: do you have any idea of how to shorten the vacancy period for HUD-VA acquisitions?

Mr. CRISSMAN. Senator, the private foreclosures conducted by a savings and loan, or in fact by a mortgage-banker in behalf of a principal, can take as little as 120 days. It can string out if you have service people and you can't get service or you can't discover the condition of their service record.

Any further delay in acquiring the property is, I would think, that access of process over process, and it can be shortened and it can be dropped. It seems to me inappropriate for HUD to acquire properties themselves. They ought to be acquired and handed on to the servicers who are qualified to dispose of the property and a loss reconciliation made with HUD later.

Senator CRANSTON. Let me ask you this-and any of you that want to comment, please do so-do you feel that the foreclosure period should be shortened?

Mr. RAPPAPORT. The problem is even really more complicated than it appears on the surface with the last corporate entity involved. There has been-and it's increasing the opportunity to go into bankruptcy courts and ask for a delay that can extend for 1 year, maybe 2 years; especially if there is a little bit of income, it can stretch on and on. There has to be some way some agency can step in immediately. We are talking about a matter of days, not the normal time, because the house can be ripped off in a matter of hours.

Senator CRANSTON. Yes. I think a principal problem that we face with this bill in relationship to the administration and its nonsupport presently or opposition is the creation of a new agency; there is concern about setting up new bodies.

Do any of you have any thoughts to express now, or could you submit to us in writing your thoughts, on how we might integrate this sort of a program into the present structure of HUD, and then at the same time allow for community decisionmaking and input in the process.

I'm afraid we're going to get into a deadlock unless we find some revision of that aspect of this bill, and we need action on this problem.

Mr. RAPPAPORT. Certainly not integrated with HUD.

Senator CRANSTON. Well, what should we do?

Mr. RAPPAPORT. HUD, as we've earlier expressed, is out of sympathy with it, and they couldn't do the job.

Senator CRANSTON. Well, then what about rehabilitation, how could that be intergrated with HUD? HUD has to be involved in it, obviously.

Mr. CRISSMAN. I wonder if there is not some piece of HOLC left around somewhere, or perhaps the Corporation for Housing Partnerships could be given the additional stimulus and the capital suggested here as a vehicle. They are quite good planners. They are associated with the National Institute for Housing and Management; they are the founders of it. They are highly respected, and they have been able to balance their own budget.

Senator CRANSTON. Would you give a bit of that information and submit it in writing to us? We do have a problem with the administration that we have to overcome.

Mr. Lowe. I would be unalterable as to having HUD's administration be over this corporation. My greatest fear is that if that were to happen, not only would it be subject to all the same corruption and all the inefficiency that HUD has gone through, but it would also be liable to become nothing more than a bailout agency for HUD and all of its massive mortgage portfolio that it's stuck with.

I don't want to see this corporation getting saddled with all of HUD's property and ending up literally bailing out HUD financially.

Senator CRANSTON. Thank you very, very much. I deeply appreciate the four of you testifying, and you have been very helpful. The two of you please wait and stay there while we continue with the other witnesses.

May we now have the final panel consisting of Prof. Frederick Case and Prof. Frank Mittelbach.

Let me say that if you could just briefly summarize your testimony, I'd greatly appreciate it.

STATEMENT OF FRED E. CASE, PROFESSOR, REAL ESTATE AND URBAN LAND ECONOMICS, GRADUATE SCHOOL OF MANAGEMENT, UNIVERSITY OF CALIFORNIA

Professor CASE. I'm Fred Case. I'm on the board of directors of a major savings and loan company that has an office in Compton. I'm on the city planning commission, and I've been on the building safety commission for code enforcement. I've been doing research at the university, and I also do consulting with private organizations who want to know what to do with property that's no longer in economic

use.

First, we have done a study of nine different cities, and I offer for your staff this book that I wrote in which we asked what worked in different kinds of cities. At the back we have summarized the thing

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