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of insurance that he deemed necessary, i.e., 100% insurance for

high risk areas, 95% insurance, 60% insurance, and so on.


Veterans Administration's successful home loan program in which

they guarantee only a portion of a home loan suggests that variations

in FHA's insuring scheme may be acceptable.

These variations would, however, destandardze the FHA mortgage

and probably limit secondary market purchase of these government

insured loans to the fully insured instrument.

It is doubtful

that the nationwide market for government insured loans will be

able to cope with the confusing purchasing problem which will be

presented by a variety of insured loans.

A far better approach would be to keep the present 100% insurance

system and vary the insurance premium rather than to vary the

risk and maintain a fixed premium.

To vary both would produce a

nightmare in the secondary market where variances in yield already

create sufficient chaos.

Much has been written in past MBA statements before this Committee

on the matter of a free interest rate with no discount points.

Discounts are a part of almost every money market transaction,

including the conventional mortgage market as well as the FHA

insured and VA guaranteed market.

It is common in conventional

loans for the buyer and seller to share discount points.

The "discount problem" is the problem of large discounts that

become necessary at time when the fixed rate is far below the

market rate.

But a small discount, up to perhaps four points,

is not a problem.

It serves a different purpose--to make the

fine adjustments necessary to meet individual variations, i.e.,

size of loan, downpayment, location of property and so forth.

Such small discounts are consistent with a free market rate and

if the interest rate is permitted to fluctuate with the market,

discounts will be, as a matter of course, four points or less.

It should also be noted that if the rate is freely determined and

and some discount is available and if the parties to the transaction

are permitted to negotiate as to who pays the discount, the market

is given considerably more freedom and ability to attract investors

in periods where interest rates are high and rising and borrowers

become reluctant to pay the high nominal rate.

During the past year the MBA had a great deal to say about the

need to strengthen the FHA's unsubsidized, market-oriented programs.

Fundamental to this concept is the existence of a properly underwritten

sound FHA insured single family mortgage program.

To the extent

that Title II of the Revised National Housing Act does away with

the Mutual Mortgage Insurance Fund this concept is impaired.


effect is to eliminate FHA's most essential ingredient.

If this

provision is enacted into law it is imperative that the distinction

between actuarilly sound and unactuarilly sound loans be maintained

or the Mutual Mortgage Insurance Fund's successor, General Insurance

Fund will become merely a guarantee program with a poor loss

ratio, constantly in need of appropriations to keep it solvent.

Title III of the proposed Revised National Housing Act appropriately

vests flexible interest rate authority for mobile home loans in

the Secretary, a much needed change from the present Title I

mobile home loan program.

For some time MBA has noted an increasing interest in developing

consistent laws across the country governing foreclosure.


MBA has supported the continuing development of a Uniform Land

Transaction Code, which, among other things, would provide a recommended foreclosure law which balances the many interests

involved in a foreclosure.

Because the proposed Act became

available only a few days ago, we have not been able to study it

with the care and reflection needed.

We would suggest that a

detailed study be made before the Committee acts on any fore

closure law.

The brevity of our review of this entire legislative package

coupled with the enormity of the nation's housing problems and

their as yet unclear solutions makes it incumbent upon the

Association to request additional time within which to analyze

this legislation and submit any additional remarks for this

hearing record.

We hope that the

numerous HUD studies mentioned

by the

Secretary in his testimony will be made available to the

private sector as well as the Committee.

Thank you.




The CHAIRMAN. Thank you very much. We appreciate your assistance. Mr. Anthony A. Henry, National Tenants Organization.



The CHAIRMAN. Mr. Henry, we are glad to have you. We have your printed statement. That will be printed in the record in full (see p. 184).

Now if you can expedite it some way, in laying it before us, we would appreciate it. Personally I have a job to do at 12:30 so I am not going to be able to stay here very long hours.

Senator PROXMIRE. And you are followed by two other witnesses.

Mr. HENRY. Thank you, Chairman Sparkman. I would like to introduce with me Mr. Larry Greene, who is our legal consultant who works with the national housing and economic development law project, and has assisted us in the preparation of this testimony.

To merely highlight portions of our testimony I would like to call your attention to our feeling that the housing allowances experiment is a worthwhile one that should continue as an experiment, although we have some questions about how it will be administered by this administration. We are concerned about the apparent intention of the administration to implement it as a barebones kind of program without the necessary social services and protections for residents that we have been giving people under the present subsidized housing programs.

We are concerned that there will be inflation of rents, that there will be little protection for tenants against illegal action by landlords, that there will not be the necessary social services for low-income families that have been so helpful to them, and that, particularly in the case of the elderly, there will not be the kind of construction of units for them that would meet their needs nor the necessary social services for them. We contend that in the case of the elderly, the present public housing elderly program has been very successful, and is far better adapted to their needs that the administration's proposal.

We are also concerned about the fact that the administration's proposal in fact continues the existing housing moratorium with only one exception as far as the poor is concerned, and that is it would continue the section 23 public housing leasing program. Other than that, the administration, under the guise of developing a program that will better serve the poor, has in fact done a disservice to the poor by taking from them the very programs that have served them in the past without coming up with anything that is really new.

The so-called new housing allowances experiment has been in progress for 3 years already, and has 2 more years to go. It represents merely a promise, and that weighted with many potential problems.

We are also concerned about the portions of the administration's proposals that apply to the existing public housing program, especially those portions that would eliminate the Brooke amendment. For example, the section that would charge minimum rents at 40 percent of the operating cost of public housing units. It is our contention that such minimum rents would be devastating to the poorest families. If one is concerned about the fact that there are tenants in public housing today who because they are extremely poor pay no rents at all, that the best way to deal with this is not to raise rents without increasing their incomes, but to increase their income, so that charging a quarter of that income would result in the payment of rent.

I would point out that in many cities there are no tenants on zero rents, the reason being there are adequate welfare payments there so that no one is that poor. But if you look at a place like New Orleans, La., you will find many tenants on zero rents, because a family of four gets approximately $1,000 a year to live on.

To now say that that family has to pay between $20 and $60 a month rent on top of their struggle to survive in a period of inflated food costs, we feel is unconscionable. We also are concerned about recent efforts in both the House and the Senate to require welfare recipients in particular to pay more than a quarter of their income for rent. This will work an undue hardship on the residents and discriminate against the poorest families, those who are least able to pay for the sole purpose of balancing the budgets of local housing authorities to cover the failure of the administration to provide the necessary subsidies to operate those authorities adequately. The Senate should push the administration into providing the necessary subsidies, and not try to increase the rents of those who are least able to pay. The poor should not be required to pay for the sins of the administration.

We are also concerned about efforts to modify the income definitions as a means of increasing the rents in public housing, and feel that the proposals of the administration are full of contradictions and cultural biases which when looked at closely indicate that its proposals for income definitions will result in far more confusion and injustices than the present income definitions.

We are also concerned about the present trend in public housing that HUD is pushing toward an income mix. We oppose this effort because we see it as an attempt to develop pleasant enclaves of public housing in which you will have higher income tenants at the expense of those families outside who are the poorest with nowhere else to go, and at the expense of the larger community. The community must then allow these families to live in cold, rat-infested slum housing where they will be overcrowded, and where in addition to the problems of housing, you will have the problems of crime, disease, et cetera.

The income mix concept sacrifices the interests of the larger community in an effort to develop pleasant enclaves of public housing. This is unjustified.

Lastly we are urging that the Senate move to change that portion of the Housing Act which states that it is the sense of Congress that no tenant should be barred from serving on the board of a public housing agency because of his tenancy in public housing.

We feel that statement should be strengthened and made into a law instead of the sense of Congress resolution. In New Haven, Conn., and in East St. Louis, Ill., tenants selected by the mayors of those cities with the full support of the community, the residents of public housing and the administrators of the public housing, have been denied the opportunity to serve on their board of commissioners because their State attorney generals have interpreted the laws in those States in such a way that it is a conflict of interest for tenants to sit on those boards.

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