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STATEMENT OF GEORGE MCLAIN, CHAIRMAN, CALIFORNIA LEAGUE OF SENIOR CITIZENS

Mr. McLAIN. Mr. Chairman and members of the committee, my name is George McLain. I am chairman of the California League of Senior Citizens with headquarters at 1031 South Grand Avenue, Los Angeles, Calif.

The league is sponsor of two of the largest low-rent, quality housing for the elderly developments in the country. The Senior Citizens Village, located at 1917 South Chestnut Avenue, Fresno, Calif., and the Senior Citizens Village of Antelope Valley, located on M and 65th Street, Quartz Hill area. Both are under the FHA mortgage insurance, section 231, housing for the elderly program.

The membership of the California League of Senior Citizens consists primarily of aged people with low incomes. The league's objective, in its 25 years of existence, has been to seek the solution of economic, health, and housing problems of these people.

There are a number of different types of housing for the elderly in California. Most are for the affluent elderly of substantial income and resources.

I might say that in yesterday's paper was this type of ad which shows the type of housing that is prevalent in California for the elderly people. This is an HHFA insured project with homes of $16,000 for people 52 years of age and over.

The only type of housing the low-income elderly of California can afford would be through construction of public housing subsidized by the community, which is prohibitive or practically made impossible by our State constitution.

Well aware of the crying and desperate need of decent housing for the elderly of low and moderate income the elderly themselves, through the California League of Senior Citizens, set out to prove through means of a private enterprise nonprofit approach, that quality housing at reasonable low rents could be provided for those whose incomes are in the range of World War I pensions, social security, and the State's old-age security payments.

SENIOR CITIZENS VILLAGE

Our Senior Citizens Village in Fresno is an outstanding example of what we have been able to accomplish in this field. Our FHA commitment for this 422-acre development with 557 living units was $4,400,000. Permission to occupy the Fresno Village was granted April 4, 1962. Our vacancy factor averages 2 percent or less, which means that our years of contention that the elderly desire this type of living has been confirmed by actual experience. We have duplicated this village in Antelope Valley to serve the Greater Los Angeles County which contains 40 percent of the State's over 1,600,000 population age 62 and over. The Antelope Valley Village, covering 4712 acres, consists of 81 ranch-style buildings, all one story, and arranged in casual fashion around a 20,000-square-foot community center. Its 557 living units will accommodate almost 1,000 elderly residents and the mortgage is insured by the Federal Housing Administration for $4,660,000.

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While our Fresno Village is teeming with contented and happy elderly people, its counterpart in Los Angeles County has been for the past 12 years a ghost village, overrun with weeks and neglect, and is not, even now, ready for occupancy. Actual construction on this project started June 20, 1961. The building contractor's contract called for an official completion date September 15, 1962.

By this, gentlemen, you can see that something is wrong-seriously wrong. Where a project insured by FHA, always with ample funds for its completion on hand, can be deliberately withheld from occupancy and completion for 2 years-and God knows how much longer. Hundreds of elderly people who had planned to move in have been disappointed and displaced, still pleading with me, asking, "When can I move in?"

This is one of the reasons I appreciate this chance to appear before you gentlemen to give you the benefit of our experience as nonprofit sponsors and owners of some $9,100,000 FHA-insured housing for elderly developments.

FIRST ELDERLY HOUSING

Early in my work with the elderly, my attention was brought to the deplorable and unsanitary conditions the elderly were forced to live in because of their low incomes. After thought, study, and investigation, I realized that only Congress could enact legislation which would enable these people to obtain better housing. I brought these problems to the attention of the late Senator William Langer of North Dakota and, after working out the details in the Senator's office, Senator Langer introduced on March 8, 1946, Senate bill S. 1914 which, I believe, was the first direct-loan program introduced in Congress for housing for the elderly. Of course, it was not until 10 years later the first elderly housing legislation was approved by congressional committees before whom I had the pleasure of testifying.

Immediately after the bill for housing for the elderly became law in October 1956, we started to canvass our membership to learn if they were interested in our sponsoring such housing. We asked their advice about the type of housing they desired, the price range, and with the tremendous encouragement received, in January 1957 we started in the housing business.

In the 7 years since then, we have had the most outrageous and disappointing experiences to be received by any group of citizens who banded together to do a job that I believe rightfully belongs to the Government: the job of creating quality low-rent housing for the elderly. If we had it to do all over again, I'm afraid we would have turned our backs and walked the other way.

DELAYS AND DISAPPOINTMENTS

I won't take your time to recite the frustrating series of delays and disappointments that marked our dealings with the FHA for the 4 years before they issued us a commitment to insure our loan. We were encouraged by their promises to jeopardize our finances by expending $250,000 for payment for land, engineering, architectural

plans, travel to Washington, D.C., to FHA offices, and the assembling of voluminous documents demanded by FHA. After sweating blood these years, imagine our feelings of relief when we were finally able, in December of 1960, to get a commitment to insure from the San Francisco and Washington offices of the FHA, and construction work was started immediately.

The commitment was supposed to be 100 percent financing under section 231 of the Housing for the Elderly Act-but it will interest this committee to know the sponsor, the California League of Senior Citizens, has been required to put up some $442,000 of its funds for bona fide, necessary expenditures to insure the success of the Fresno Village. Despite lack of cooperation of Federal agencies, the village is an outstanding success.

Up until 30 days ago, because of an unreasonable attitude of the San Francisco director, the Fresno Village was suffering a loss of $5,000 a month. This situation has now been resolved and work is proceeding for the installation of capital improvements, et cetera, out of village and sponsor's funds and an increase in the monthly rental, which will save this loss from recurring.

We point out to you gentlemen our projects are entirely rentals. We have nothing for sale; we charge no big so-called admission fee, and our rental charges are based on a nonprofit operation.

That, if you please, will give you a general idea of what we, as sponsors of nonprofit housing for the elderly, are faced with. What can we do about a situation like this? We appeal to Members of Congress the FHA gives them a snow job. Then you gentlemen read in your newspapers or magazines about the mounting foreclosures under FHA-insured projects and you wonder how this can possibly happen.

The trouble, gentlemen, as we view it, is primarly from the manner in which the Housing Act is administered. Most of our problems can be traced to the FHA and CFA rules and regulations, and lack of laws to correct omissions such as I will present to you today.

Senator SPARKMAN. Mr. McLain, may I interrupt right there? I have an appointment to which I must go. I apologize for leaving right in the middle of your testimony. I will gladly read all of it. But I had this appointment for some time and Senator Muskie has agreed to take over for me in my absence.

Mr. MCLAIN. Thank you very much, Senator Sparkman.
Senator SPARKMAN. Thank you.

Senator Muskie.

Senator MUSKIE (presiding). You may proceed.

Mr. McLAIN. When your sponsor or owner finds himself having to contend with bureaucratic capriciousness or a prejudiced attitude against them what can they do? The word of a local FHA director is law. His superior in Washington, D.C., backs him up. Just what can be done under these circumstances, gentlemen?

A provision in the law is needed to grant the sponsor or owner the right to appeal for a fair hearing when dissatisfied with his treatment from the FHA or CFA administrations.

Our experience with the Housing for the Elderly Divison of the Community Facilities Administration on a Washington, D.C., level, leads us to the realization that when it comes to Federal bureaucratsanything could happen.

Right after we began construction on our village in Fresno, under FHA, the direct-loan program under the Community Facilities Administration received substantial funds from Congress and no longer limited their loans to 50 living units.

The House Housing Committee, well aware of our desire to create quality low rentals, and anxious to help, amended section 202 of the 1961 Housing Act by putting in (e) providing for a transfer of FHA mortgage insured projects under section 231, to the direct-loan provisions under section 202 in order to avoid hardship for elderly persons and families who are the prospective tenants of such housing.

RING-AROUND-A-ROSY

On June 22, 1961, we made application to the Housing and Home Finance Agency, Washington, D.C., requesting their consideration under this new section. Commissioner Sidney Spector, Commissioner Sidney Woolner, and Israel Rafkin, Assistant to Woolner, gave our organization and the entire Democratic congressional delegation from California such a ring-around-a-rosy for 14 months, it cost our league alone $35,000 in trips back and forth to plead our cause, and the preparation of reams and reams of material demanded by the CFA. The CFA refused to accept the FHA's word for anything they treated our application as if it was but a gleam in our eyes instead of a completed project-occupied and functioning.

Congressman B. F. Sisk, of Fresno, Calif., member of the House Rules Committee, requested Commissioners Spector and Woolner, in writing and in person, to activate the amendment adopted by both Houses into law-but these two Commissioners contemptuously refused. Finally, their offer of a commitment to us was so restrictive and outrageous we could not and would not accept it. This attitude by President Kennedy's appointees cost the elderly occupants of the village, present and future, a cool $32 million loss in interest.

Now back to our village in Los Angeles County. Whoever heard of a $4,660,000 project being foreclosed by the mortgagee before the completion of construction? The Senior Citizens Village in Antelope Valley carries this dubious distinction. The Great Western Savings & Loan Association is the mortgagee in question. We contend they collaborated with the B. L. Metcalf Construction Co., and his bonding company, the Royal Globe Indemnity Co., to squeeze the old folks out of the picture, foreclose and sell the village to a profitmaking organization, and thereby make more money than they had originally anticipated.

FORECLOSURE AND SALE

Our only recourse was the Federal bankruptcy court, under chapter 11. The referee issued a temporary restraining order against foreclosure and sale of the village. A number of hearings have been held. Another one is coming up in the referee's court on March 6.

The amazing thing is, gentlemen, regardless of submission of proof of our allegations against the mortgagee, the builder, and the bonding company, the FHA advises us they have no authority and, according to a letter from Carl A. S. Coan, staff director, Senate Subcommittee on Housing, the FHA desires no authority to protect the mortgagorowner-who, after all, is the one who pays the freight.

We also asked our Senator Thomas Kuchel to take a look at the documents the FHA has prepared for all parties to sign when their commitment to insure is finalized. Senator Kuchel sent us a copy of a communication he had received from J. H. Killiam, Library of Congress, and I quote:

Careful review of the inclusions and the applicable FHA regulations, has revealed no authority for the agency to step in and act in the event of a case such as Mr. McLain's. In fact, paragraph (10) of the building and loan agreement appeared to visualize the lender as the proper party to take action.

From J. H. Killiam, legislative attorney, Library of Congress, to Hon. Thomas Kuchel, dated December 26, 1963.

After receiving an FHA commitment, the sponsor faces "closing" in the office of the FHA. He will have on hand for the signing of closing documents the mortgagor-owner, the building contractor, his bonding company, the mortgagee, and the title company. FHA requires the mortgagor-owner to sign three FHA forms: (1) Commitment for insurance of advances; (2) building loan agreement; and (3) construction contract.

OWNER HAS NO PROTECTION

A careful scrutiny of these three forms reveal that the mortgagorowner has no protection. All protection has been given to the mortgagee. These documents lack any definite authority permitting the FHA to take action at the mortgagor-owner's request when the mortgagee fails to act in the best interests of the owner.

We understand that years ago there was protection for the mortgagor-owner in these documents. Since that time, we have been told, they have been rewritten by the FHA in favor of the mortgagee. In our case, had there been protection for the mortgagor-owner, foreclosure and bankruptcy proceedings on the Senior Citizens Village in Antelope Valley could have been averted.

While I was in Washington the first of last year, through the courtesy of Congressman Richard Hanna, of California, I conferred with the legislative counsel in drafting H.R. 6533, a bill containing many features I believe from my experience would put the housing for the elderly program back on the track to do the job originally desired by you Members of Congress; that of providing low rent, quality housing for the elderly.

In summarizing my experience as sponsor and mortgagor-owner, I wish to make the following recommendations:

1. The three FHA forms: (1) Commitment for insurance of advances; (2) building loan agreement; and (3) construction contract, be rewritten to afford mortgagor-owner protection and require FHA to take action at the mortgagor-owner's request when the mortgagee fails to act in the best interests of the owner.

2. The two separate housing for the elderly programs be placed under a single Federal Housing Commissioner, thus eliminating costly duplication in administration.

3. Establish a board of appeals to allow applicants for loans, sponsors, and owners an opportunity for a "fair hearing" before such board.

4. Require contract set forth specific deadline for completion of such construction, that appropriate penalties be imposed upon the builder

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