Our initial proposal suggested that the coinsurance fund could be administered by the Federal Home Loan Bank System. Since savings associations, which would be primary users of 80/20 risk-sharing program, are familiar with our twelve Regional Banks of the System and since the administrative machinery is already in place, this seemed a natural candidate for fund administration. However, the FHLBB was reluctant to endorse this feature of the proposal, due no doubt to uncertainties in Board composition during the past two years and a reluctance to undertake a major new assignment. Some question has also been raised as to how such a plan could be targeted to reach its intended objective of stimulating financing in higher-risk areas. Pinpointing programs, of course, risks a repetition of the "redlining" judgments which characterized FHA-insured housing programs years ago. To address this concern, the FHLBB staff made an interesting suggestion: 80/20 co-insurance could be made available in those areas which, through the use of required Home Mortgage Disclosure Act data, are determined to be suffering from inadequate mortgage credit. While we do not necessarily advocate this approach, we think it merits consideration. Our conviction that coinsurance can be helpful is also demonstrated by an emerging program for rural America-the Farmers Home Administration's guaranteed rural housing program. The FmHA has actively sought the involvement of private financial institutions in this new program, and the U.S. League has responded with clinics and informational materials which have been well received by our institutions operating outside SMSAS. This Committee's contributions as part of the 1977 Housing Act-permitting a negotiated rate, providing an exemption from the "graduation" requirement of other FmHA housing programs, and other changes-should encourage private sector participation in this new program. (We are also working with the FHLBB to amend certain technical rules which make it difficult for Federal S&L's to participate at the present time. The rural housing guaranty program reflects elements that both our business and the FmHA feel are necessary to produce a sound government-sponsored program: coinsurance (on a 90/10 basis), which conceptually is what is provided by the FmHA guaranty; a negotiated, rather than an administered, rate (thus eliminating to the maximum extent possible a need for "points"); and your instruction in the legislative history to accomplish the speedy processing as found in the Veterans' Administration's automatic loan guaranty program. The U.S. League has been most pleased with the sound working relationship that has developed between the FmHA and our business. We feel that this atmosphere of common interest will assure a sound program. Quite frankly, we have not seen this same attitude on the part of the FHA. This is not really meant to be a critical comment; rather, we think it is merely the result of there never having been a real need for the presence of savings associations in the FHA's programs. A much closer working realtionship will, we think, be necessary for any long-term improvement to develop between the business and FHA and we would hope that such a situation is the result of hearings such as these. Before closing, I should also mention the Section 244 coinsurance program of the FHA. The ingrained suspicion of our business for FHA and the lengthy delays in implementing the original statutory authority have deterred any significant savings and loan interest in this program to date. However, we applaud your decision in extending the authorization for this program as part of the '77 Housing Act, since Section 244 is still another possibility for meeting the home credit needs in our urban areas. Mr. Chairman, I have enjoyed this opportunity to discuss these important issues with you and the Committee, and look forward to your questions. This paper will attempt to re-evaluate our urban housing problems and suggest new approaches to address them. These approaches must go beyond the subject of housing, which is the specialty of the savings and loan business. Because so many other forces affect the quality of city life, housing policies and programs can succeed only if developed as parts of a broad attack on urban problems rather than as though housing were an isolated issue existing in a vacuum. Action to address all our urban problems is essential. The outlook for revitalizing our cities will remain dim if unemployment rates for young people in some cities continue to exceed 40%; or if crime and violence continue unabated as a way of life in large areas of some cities; or if some city school systems remain so inadequate that children cannot learn. Nearly every older city in the United States faces a myriad of social and economic difficulties-the flight of families and businésses, more crime and violence, less tax revenue, insufficient health services, deteriorating public works and school systems. Unless effective action is taken on the broadest possible scale, more of our central city areas will decay, leaving more slums in place of today's neighborhoods. The pattern is all too familiar. As businesses continue leaving cities, the well-to-do and middle class also move out. The proportion of low-income, poorly educated, unskilled people has been on the rise in many cities. At the same time that their tax bases are shrinking, cities require higher levels of services for such things as fire protection, police, health and welfare. The higher taxes needed to pay for higher levels of public services only hasten the flight of employers and middle-class residents. Meanwhile, the economic base that remains in many older cities often consists of older, slow-growing, rather than new, dynamic industries. Thus, people who live in some of the larger cities lose employment opportunities both through the relocation of industry to the suburbs or elsewhere and through the increasing obsolescence of those industries which remain. In addition, many urban problems such as air pollution, inadequate public transportation, and racial and economic discrimination transcend any boundaries and require intergovernmental solutions. In short, the problem of urban decline is highly complex and stems from a vast range of social and economic factors. Any simplistic attempt to explain or solve our urban problems will fail. Government officials cannot solve the problems alone. Along with other participants, they are largely trapped by an accelerating sequence of events beyond their control. Similarly, the savings and loan business cannot solve basic urban housing problems alone where the necessary conditions for prudent conventional lending do not exist. Savings and loan associations must fulfill their legal and fiduciary responsibilities to their savers by making loans based upon proper security and credit. Where these requirements are met, conventional loans can be- and aremade in older urban areas. Efforts to bring about a revitalization of our cities must be based upon a cooperative relationship between the public and private sectors. It is an appropriate leadership role of savings and loan associations to help bring together all concerned in the private and public sectors in combined actions to establish and improve neighborhood climates conducive to sound lending and urban revitalization. At the same time, it is incumbent upon the savings and loan business to continue and accelerate the active pursuit of prudent investment opportunities in older urban neighborhoods. Few other segments of society have so large a vested interest in keeping America's cities alive. The savings and loan commitment to the survival and revival of urban neighborhoods arises, however, not only from our billions of dollars of urban investment already in place in these areas, but also from our belief |