building out there being occupied by a gang, whether he knows about it or not, or his police force knows about it or not, and he must do something about that, or that neighborhood is uninsurable.

As a practical matter, I am wondering how the communication line works in something like that.

Mr. BROWNSTEIN. It starts, at least in the context in which we are talking, with a prospective mortgagor. If somebody comes into the Federal Government, to FHA, and says I would like to have a mortgage on that building, that has just been taken over by his gang, then I think it puts into process the things we are talking about, Senator Lugar.

But the initial impetus has to come from some private person who is interested in rehabilitating or doing something with that building. Mr. KLAMAN. I am surprised that Mr. Brownstein is willing to answer these questions, Senator. We agreed such questions of this detail we would leave to the technicians. We are just giving you the broad concept.

Actually, you have put your finger on a very difficult question. I think that it isn't necessarily all that difficult or impossible, because we have already in being some form of the kind of programs we are talking about.

Years ago, when I acted as a consultant to Bob Weaver, Phil's predecessor, I came up with a program I called Councils of Urban Rebuilding Enterprise, CURE. This program was not accepted because it seemed to be difficult to put to work. But really it has been put into effect, I think, under the name Neighborhood Housing Services, the Urban Reinvestment Task Force of the Home Loan Bank Board, operating in 35 cities. Lee's constituency is very active in that, and so is ours. We were the first ones in Pittsburgh. We have the mortgage review boards. At the next level, the neighborhoods, we have the Neighborhood Housing Services that we are working with, without insurance. When it becomes necessary, that is important.

I am talking about the broader concept now. I think what you are suggesting is something important that should be worked out in not. only a private-public partnership, but an intrapublic partnership with the local entity, who should provide the initiative in coming to an organization like the Urban Mortgage Insuring Agency and saying we have a program here, we believe it is viable, this is why we believe it is viable, this is the outline of the program by our city planning commission and so forth, this is why we think it will work, because it has all of these amenities, it is going downhill because of this and that, so we have the whole program worked out, we propose to put this and that in place, and now we need more insurance to get private money in here.

Maybe we could work out a system of Federal reinsurance, I think you mentioned that word. Maybe the initial insurance comes from the city or State entity, and the Federal Government provides a layer or

reinsurance.

The concept of reinsurance is well known to take that top layer of risk.

For heaven's sake, I would just make a protest here, you brought it up, and I think rightfully, that word "redlining" should be banned from our vocabulary. I am very unhappy, I want the record to show

it, that there has been established in the U.S. Government some interagency task force, which has some official sanction, as I understand it, called an Intergovernmental Agency on Redlining, or Task Force on Redlining.

For heaven's sake, why do you have to have a task force on redlining. It is just a very negative narrow concept? Why don't we have a task force on urban reinvestment, urban lending, whatever we want to accomplish?

Perpetuating that word, and giving it credence at the Federal level, again, we just go into the trenches and react in a negative defensive way, and it is really making us bitterly resentful. I don't think it is helpful, I think it is negative, and I think it is unfortunate that it was established without any consultation with the groups that should have been involved.

I think this is a very serious mistake, and I wish that thing could be renamed as well as the FHA.

I am in favor of new names to implement new concepts. Let's let people know we are thinking positively and not pointing the finger of blame at some scapegoat because a neighborhood has gone down the tubes.

Senator LUGAR. Mr. Holmes?

Mr. HOLMES. Mr. Klaman doesn't leave much room for additional comments. I would have to concur with his remarks, particularly with his reference to redlining. I understand that we are not the only organization that is somewhat disturbed by a multipage questionnaire that essentially asks, "have you quit beating your wife."

I think we may regret the redlining issue, not for what it in fact was, but for what it has become.

The NHS concept which has been mentioned is I think particularly important. And this committee apparently thought so, too, because they expanded the NHS' operation this year in legislation which has been passed by the Senate, but the committee didn't lock into it the rigidities we have seen in other forms of central government action. Now it remains to be seen how the expansion of the NHS will work. I hope people don't expect it to work too rapidly, because there is, after all, a necessary educational process for the neighborhoods or the communities in which this entity functions.

There was a piece in the paper within the last week or so about Anacostia, which, believe it or not, has an operational NHS. Apparently the community is quite wary of Federal Government involvement in its affairs. That seems to say something. At least it should say to most of us that perhaps all of the answers to our urban problems aren't found in Federal Government programs. Also, I think the other two gentlemen here have expressed the view that perhaps some time has to be allowed for the instrumentalities involved in urban revitalization, including FHA, to better assess the desires of urban neighborhoods before finalizing urban strategies.

I went through some of the business of, let's say, assisting in the development of the Mortgage Review Board in Pittsburgh. It was very interesting. To date they have had no cases presented to them, though there was a lot of concern over the rejection of applicants when the Board was established. I am not sure that we will ever know where those rejected applicants went, but, if nothing else, the lenders, are now

making the loans they were accused of not making and the community including its lenders is very satisfied.

I think the key is, after all, the community, as has been pointed out. We have a lot to do, I think, as private enterprise, in developing a better rapport with the communities. I think that effort is underway

now.

Senator LUGAR. I agree, and I appreciate your testimony, all three of you, this morning.

Thank you, Mr. Chairman.

Senator SPARKMAN. Thank you very much. I may ask one or two other questions.

With reference to coinsurance, I know somebody had something to say about that in your statement. Do we need a coinsurance program to get lenders back into the city with an effective FHA program?

Mr. HOLMES. I couldn't hear the last part of your question because of the buzzer.

Senator SPARKMAN. Do we need a coinsurance program to get lenders back into the city with an effective FHA program?

Mr. HOLMES. I suspect to get the savings and loans back into the city, and I question if that is an accurate statement—if that is a fact— yes, it would ease the stress.

Senator SPARKMAN. It would be helpful?

Mr. HOLMES. It would be most helpful; yes.

Senator SPARKMAN. Do you gentlemen agree?

Mr. BROWNSTEIN. Well, I'm not sure, Senator. I would certainly have no objection to a coinsurance program if it induced inner city lending. I believe, however, that there already are programs, including coinsurance through FHA that could be made workable more rapidly than a new program of any description, and that's where at least the initial emphasis ought to lie.

Mr. KLAMAN. I think put in the context the way you put the question, Senator, I think it's important to say that coinsurance as now exists will get lending done in the city.

What I was suggesting here is that we are willing to accept coinsurance in order to indicate the willingness to take some portion of the risk, but I wouldn't want it to be understood that coinsurance is better than full insurance as we now have. I think you need great flexibility. I hope that we can have flexibility rather than rigidity and, depending upon the risks involved in the particular project, some gradations of coinsurance, full insurance. But it should be an insurance program oriented to the urban areas.

Senator SPARK MAN. I believe it has been suggested by someone in the course of these hearings that coinsurance could lead to a reverse redlining by designating certain areas as high risk. Do you think that would necessarily result or is it likely to result?

Mr. HOLMES. I'm the one that made that suggestion, Mr. Chairman, and I don't think it has to necessarily result. Reverse redlining was the concern of some who felt that the coinsurance proposal that the U.S. League offered almost 2 years ago would, by selecting specific locales in metropolitan areas as coinsurance recipients, mean that other locales couldn't receive the same benefits, and therefore this would be a form of reverse redlining. That was not what we intended at all. We were merely trying to carefully manage this assistance to

attract private credit. We were a little startled by the criticism. Subsequently, the concept of pinpointing areas on the basis of Home Mortgage Disclosure Act statistics which we are required to gather was then developed by Federal Home Loan Bank Board personnel. The idea is that if the Home Mortgage Disclosure Act reports-which we are required to submit to the Federal Reserve System-indicate a severe lack of credit based on some level that is chosen at randomand if it's in fact a residential area, then that would represent a good area in which to use coinsurance or whatever other kind of vehicle is developed to cure that absence of attractiveness for mortgage credit. But I don't really believe it's fair to say that just because you direct a particular program to a particular area that that's a form of reverse redlining. Certainly that was not the intent.

Senator SPARKMAN. Well, thank you very much, gentlemen. We could keep talking and discussing and questioning and answering all day, but I think it's been a very fine session and I express my appreciation to all of you.

The committee stands adjourned.

[Whereupon, at 11:55 a.m., the hearing was adjourned.]