The CHAIRMAN. Mr. Zinsmeyer. STATEMENT OF JEFFERY ZINSMEYER, ECONOMIST, NEIGHBORHOOD REVITALIZATION PROJECT CENTER FOR COMMUNITY CHANGE, WASHINGTON, D.C. Mr. ZINSMEYER. Mr. Chairman, I appreciate this opportunity to testify for the neighborhood revitalization project, a special program of the Center for Community Change. The project is a nonprofit educational endeavor which focuses on public policy analysis regarding issues affecting neighborhoods. Our approach in selecting issues for analysis is to stay in close contact with several networks of community groups and to respond to their needs and priorities. Recently, we completed a study of the mortgage banking industry entitled, "Opportunities for Abuse: Private Profits, Public Losses and The Mortgage Banking Industry." With your permission, we would like to submit it for acceptance into the record. The CHAIRMAN. Fine. We will be happy to accept it. [A reprint of the study follows:] OPPORTUNITIES FOR ABUSE Private Profits, Public Losses and the Mortgage Banking Industry by Jeffrey Zinsmeyer, Judith Turnock and Andrew Mott Neighborhood Revitalization Project October 1977 The Neighborhood Revitalization Project was formed by the Center for Community Change to be a focal point for interdisciplinary research and public policy analysis on issues affecting America's neighborhoods. It is linked closely to a series of networks of minority, white and integrated community groups, and responds to these groups' needs and priorities as it selects issues for attention. Its primary work to date has related to disinvestment, the role of FHA and VA in neighborhoods, possible improvements in HUD's Community Development Block Grant Program, and the role of the mortgage banking industry. The Project is currently supported by grants from the Needmor Foundation, the New World Foundation, and the Taconic Foundation. In addition, the Project has done some work under contract with the U.S. Department of Housing and Urban Development and the Department of Community Affairs of the Commonwealth of Pennsylvania. CHAPTER I OPPORTUNITIES FOR ABUSE While public attention has begun to focus on the precipitous decline of our cities' neighborhoods, there is still little understanding of the economic forces at work in those communities. "Redlining" has recently become an exception to this rule. It is beginning to be understood as both a cause and an effect of decline. The withdrawal of mortgage and home improvement loans from a neighborhood is now seen to be a prime contributor to falling confidence in a neighborhood's future, a slowdown in normal upkeep and repair of housing, a drop in housing prices, and panic selling. The other economic factors in decline are still neglected. There is remarkably little recognition that people and institutions can actually make money from speeding up neighborhood decline and profiteering from rapid turnover. The roles of various major actors in hastening turnover and decline are equally obscure to most people. These roles are therefore often neglected as government agencies and legislative bodies attempt to reverse downward trends. There is, of course, some understanding of the role which unscrupulous realtors may play in blockbusting, speculation, or selling deteriorating homes at inflated prices to people with inadequate incomes. The role of marginal landlords in "milking" buildings and eventually abandoning them is also widely known. And the redlining controversy has highlighted the effect which overly cautious or biased banks and savings and loan associations can have on housing and neighborhood viability. The role of the mortgage banking industry in determining whether a neighborhood's housing stock will live or die is especially obscure. In fact, a majority of people have only the dimmest notion that there is a vast, influential mortgage banking industry outside of the traditional sources of mortgages and improvement loans the banks and the savings and loans. |