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(A) NHC supports s. 1744, the Community Development Assistance Act,

with the amendments set forth in that statement. Until the

authorizations for the Community Development Program become

available on July 1, 1974, there should be an orderly transi

tion from the present categorical grant programs to the special

revenue sharing programs. Accordingly, we recommend authoriza

tions and appropriations for Fiscal 1974, comencing on July 1,

1973, which would equal $3.7 billion to cover the categorical

grant programs that would be consolidated under the Community

Development Program.

(B) Many of the concerns with crime and vandalism now associated with

public housing developments can be eliminated by proposals which

I discussed in my earlier statement.

These are:

(1) The adoption of minimum security standards based on

model security codes developed by the Department of

Justice's National Institute of Law Enforcement and

Criminal Justice; and

(2) For existing assisted projects, funds should be made

available (a) to provide necessary locks, communica

tions systems and space modifications which will be

effective in reducing crime and (b) to meet the cost

of volunteer citizen patrols and resident's meeting

expenses.

CONCLUSION

Finally, Mr. Chairman, in sunuary, referring again to the President's housing message, we have strong objections to its failure to recommend the adoption

of an adequate program now to meet the urgent housing needs of those of low and

moderate incomes.

As substitutes for the battery of housing programs that we

had to work with prior to their suspension by the Administration, we are offered

a limited revived Section 23 program and a limited release of 236 funds.

While

these will help, they are indeed objectionable as wholly inadequate to meet the

need. The promised housing allowance program is objectionable on the grounds

that it is not designed to produce the additional housing that is needed.

As an

experimental program, it will produce few units with little impact on the hous

ing needs of our nation.

We support the President's goal of improving the operation of present pub

lic housing, and look forward to proposed equitable solutions to the problems.

In the interim, however, we ask you to consider NHC's adopted resolutions recom

mending necessary action to meet deficits in public housing projects.

We are pleased also that the $60 million in Section 312 rehabilitation loans

for the current fiscal year will be made available.

Both today and in earlier testimony we have expressed our support of Senator

Sparkman's Community Development Assistance Act rather than the Administration's

Better Communities Act.

We have a history of strong support for equal opportunity

for all Amer icans seeking housing.

We do not support the Administration's apparent belief that we can survive

with virtually no assisted housing programs for another 18 to 24 months.

We urge

this Committee to act to reinstate our existing programs to avoid the disastrous social and economic consequences of no programs. We support s. 2182 with amend

ments as presented in NHC's testimony of July 23, 1973, and today.

We look

forward to early passage.

We deplore the Administration's rhetoric that pretends

that promises are an acceptable substitute for action.

The CHAIRMAN. Mr. Kennon V. Rothchild, chairman, Washington committee, Mortgage Bankers Association of America.

STATEMENT OF KENNON V. ROTHCHILD, CHAIRMAN, WASHINGTON

COMMITTEE, MORTGAGE BANKERS ASSOCIATION, ACCOMPANIED BY LEE B. HOLMES, LEGISLATIVE COUNSEL

Mr. ROTHCHILD. Thank you for inviting us before the committee again. Mr. Chairman, and members of the subcommittee, my name is Kennon Rothschild.

The CHAIRMAN. Your full statement will be placed in the record (see p. 173).

Mr. ROTHCHILD. I have a statement I will read, however, a shorter statement.

Mr. Chairman, I am Kennon V. Rothchild. I am chairman of the board of H. & Val J. Rothchild, Inc., St. Paul, Minn., and the chairman of the Mortgage Bankers Washington committee. Accompanying me is Lee Holmes, MBA legislative counsel.

We appreciate the opportunity to present our views on S. 2507. As background for our comments on the administration bill, we have to say first of all that it is heartening to have the FHA back in business until October of 1974.

For the host of reasons we have given in our statement-but primarily because of a realistic FHA interest rate-long-term lenders have now returned to the FHA market and by providing ample funds have made the FHA loan the single most important home financing vehicle available to most middle-income families.

As a consequence, each time the FHA's operating authority expires and is tampered with, great numbers of creditworthy Americans of moderate means are made to suffer. This is totally unnecessary. Congress, if it does nothing else, should insulate the nonsubsidized FHĂ programs from operating interruptions. In other words, the FHA nonsubsidized insuring authority must be made permanent.

And at this point it is appropriate to repeat MBA's support for immediate, separate action on proposals, including the administration's, that would increase FHA's mortgage limits and liberalize loan-to-value ratios. This would permit the FHA to serve a broader range of middle-income families.

Going more directly to S. 2507, the MBA again supports an enlarged experimental housing allowance program. We think, however, that it should be accompanied by:

(1) A comprehensive well-funded counseling program to help lowincome families make good housing choices;

(2) The continuation in some areas of housing production subsidies—carefully administered and monitored.

In this respect we recognize that paragraph 8(g) of title III is intended to provide housing production in areas of great need. Our initial analysis indicates that this section may be so restrictive that it will fail to accomplish its ends. This section is not yet clear to us.

(3) The acknowledgment, by all, that there will be a high cost in providing adequate shelter for low-income families, regardless of the plan used.

(4) Broadened equal housing opportunity laws so that a housing allowance provides true freedom of housing choice.

S. 2507 proposes in many instances substantial changes in the details of the National Housing Act. These changes deserve a more detailed analysis than we can give here and we ask that you permit us added time to submit such detailed responses to you.

In the interim we have these reactions:

We would welcome the opportunity to consider experimental financing proposals in detail. As mortgage bankers we think we have demonstrated our ability to make good ideas work.

We think section 102(b) which permits the Secretary to choose varying insurance concepts deserves study. To destandardize the FHA mortgage might gravely damage the secondary mortgage market. At this moment then we believe it important to retain the present 100-percent insurance system.

The MBA has made many statements before this committee on proposals which would have a free interest rate but without discounts or points as they are called.

It is clear that we believe a free interest rate to include small discounts. Discounts are a part of almost every money market transaction, and that includes the conventional mortgage market as well as the FHA-VA market. It is in fact common in conventional loans for the buyer and seller to share points.

The discount problem is only that of the larger discounts that become necessary when the fixed rate is far below market rate. Small discounts up to four points are not a problem. They serve to make necessary adjustments in the variation between transactionsvariations arising out of different downpayments, loan sizes, locations, and so forth. Such small discounts are wholly consistent with a fair market rate and in a free market will, as a matter of course, be four points or less.

The MBA has also said to this committee that this country must maintain, even strengthen, the FHA's unsubsidized market programs and that fundamental to that concept is an actuarially sound mutual mortgage insurance fund based on properly underwritten single-family loans. Title II of S. 2507 appears to place that concept in jeopardy.

Title III gives the Secretary flexible interest rate authority for mobile home loans and this is a much needed change from the presen program.

And the MBA supports the continuing development of a uniform land transaction code to include a simplified foreclosure law but we suggest a very detailed study of this procedurally exacting legislation.

Mr. Chairman, because we have had little time to review this legislative package, we may have done it some injustice. In the face of that possibility we ask, again, that you give us additional time in which to analyze the bill and to submit additional remarks for this hearing record. And we add that we hope that the numerous HUD studies mentioned by Secretary Lynn in his testimony will be made available to the private sector as well as the committee.

The CHAIRMAN. Our markup session is next Monday. Time is short, but we will be glad to have any additional material you have.

Mr. ROTHCHILD. We particularly appreciate the additional time, Mr. Chairman, since our most active legislative members will be in town tomorrow for a day-long conference, and we may have additional comments which we could submit.

The CHAIRMAN. Of course you could give us the information even Monday morning, that would be fine. Are there any further questions?

Senator PROXMIRE. I would just like to ask one question. I think this is a fine statement, and I appreciate it very much. Would you argue that the committee should not proceed with the administration program without wanting some of the substantive low- and moderateincome housing programs that you already have so that we can proceed with programs for the people of moderate incomes as well as those with higher incomes?

Mr. ROTHCHILD. Mr. Chairman, I think that is indicated in our statement. I think we feel that the housing allowance program will fill a need and should be continued and then we have said we think we are going to have to continue the other programs that provide units in conjunction with it.

The CHAIRMAN. Senator Brock?
Senator BROCK. I don't have any questions, Mr. Chairman.
(Complete statement of Mr. Rothchild follows:]

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