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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.

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 exciting 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.

STATEMENT OF FRAN MATARRESE, CHAIRPERSON,

EAST OAKLAND HOUSING COMMITTEE

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 and most effective comprehensive housing program in the country today.

Our research showed us that 1,200 abandoned houses were abandoned because of high interest rates, because of short term high risk payment schedules, because of the unavailability of mortgage loans, the unavailability of rehabilitation loans, the unavailability of conventional financing-in short, redlining. Sellers can't sell and buyers can't buy. The houses were abandoned because of faulty FHA construction and rehabilitation, because FHA sold houses "as is" indiscriminately to speculators, because HUD sold Government repossessed houses not to qualified 235 certificate holders but to "investors" and "speculators," abandoned because counseling and necessary forebearance advocacy in human situations in today's economy were not available, abandoned because of 100 percent insurance to the mortgage houses—and we only have to look at Chicago's $41/2 billion scandal to understand the effect of 100 percent insurance, abandoned because of scare tactics and quick foreclosures. These houses were abandoned because of the paucity of city services, abandoned because some absentee landlords seek capital gain off capital loss, some were abandoned because of inheritance and probate, abandoned because rehabilitation costs, requiring second mortgages, forcing the payment schedule for housing above 25 percent of a family's adjusted income.

Housing is still being abandoned. This morning, ladies and gentlemen, you say houses abandoned this year. And more will be abandoned.

The East Oakland Housing Committee has taken steps, with phenomenal results, to deal with present and future abandoned houses. Just last week, the city council voted $4,645,000 for housing. Just Tuesday evening, the city council unanimously passed a unique homestead proposal and forwarded it to HUD Secretary Hills. This program was developed in a combined community and governmental effort. The city of Oakland is presently preparing enabling legislation to sell Marks Foran bonds for housing and we have already received a tender offer from the Bank of America to purchase those bonds. The city is also preparing a program for participation in the newly created California Housing Finance Agency. The city has already established an excellent counseling agency, certified by HUD and headed by Mrs. Henrietta Scott, to do financial counseling and forebearance advocacy. The city has established an East Oakland Housing Task force made up of representatives of labor, realtors, lenders, contractors, city council, and residents.

The State of California has passed the Gregorio Act insuring the Marks Foran bonds and has also created the California Housing Finance Agency with $450 million Arnold Sternberg, director of State housing and community development told the community at the Mills College meeting that the State would look to Oakland's present housing stock rather than to new construction and also that the 160 houses the State must purchase from HUD for replacement of the Grove Shafter homes would be located in East Oakland. He also assured us that he was anxious to work with Oakland through the California Housing Finance Agency because Oakland is the only California city applying for funds. The State is presently considering a 5-year tax exemption for rehabilitation work up to $12,000 for owner occupants.

HUD, too, is responding. And Mr. Price has taken positive steps. Monday, Mr. Price sent out a press release stating “James H. Price, director of HUD's San Francisco area office, in response to a request from the East Oakland Housing Committee, has announced the expansion of HUD's 518b home repair program to larger areas of Oakland. This program will not require that 50 percent of the houses in a census tract be built prior to 1940; and it also includes, for the first time, the 235 houses as well as the 203's and 221D's. HUD has, as of July 13, been listing their east bay houses in the Oakland Tribune. Prior to that time they were listed in the San Francisco Chronicle. Mr. Price was present at our public meeting at Mills College on June 14 and promised to be an advocate for Oakland homesteading proposal with Carla Hills. In December 1974, Mr. Price granted a 90-day moratorium on “as is” sales and now has developed a special program to place all HUD “as is” houses on Oakland's substandard listings, so they will be required to be rehabilitated prior to occupancy.

The Oakland Board of Realtors has set up and is staffing a counseling office at 98th Avenue and is waving all commissions on HUD "as is" sales in East Oakland. They are presently helping develop a citywide presale inspection program with the Associated Realtors which could see as many as 4,800 houses rehabilitated in 1 year and 48,000 in 10 years.

Labor is developing plans for reactivating the prep and up-grade projects as well as offering to provide free technical assistance for low-income and elderly homesteaders involved in sweat equity.

In May, at the request of Senator Proxmire, I testified before the Senate Committee on Banking, Housing, and Urban Affairs, regarding S. 1281–Home Mortgage Disclosure Act of 1975. Though it is not the entire answer, Senator and Congressman, it will "give local citizens the right to know where their local neighborhood banks or saving and loan associations were making their loans, and I would expect an informed citizenry to do the rest." This bill has been severely changed, but we still favor its passage as Senator Proxmire introduced it. The pressure of this bill has produced results here already

Lenders are beginning to respond. I pointed out above about the Bank of America's tender offer regarding purchase of the city's Marks Foran bonds. But also, we have had several meetings with savings and loan associations, including Security Savings, Imperial, SAMCO, Great Western, Golden West, and American and very positive negotiations are in progress. We are optimistic.

Senator, we have a severe problem, but we have a concerned community that has organized, researched, and taken creative initiative to deal with the issue on all fronts. Because of the action of the neighborhood groups and their East Oakland Housing Committee, results are being realized. Senator, what has happened and is going to happen in Oakland to correct and stop the abandoned housing

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