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le are based upon the revised family composition at the time of reexamina. Every cooperative member is required to make a downpayment so that he I have a financial stake in his cooperative home and community. The downments are kept within the financial reach of the lower- and moderate-income ilies. Generally, such downpayments do not exceed 2 percent of the mortgage ount and these funds are used as working capital, which constitutes an addial reserve for the cooperative. By having an investment in the cooperative ject, the residents develop a sense of pride of ownership and take better care the property.

0. Cooperative members develop a feeling of self-respect and self-reliance in trast to the paternalism that sometimes characterizes rental operations by rches or other institutions.

1. When people work together in the cooperative ownership of housing, they d to work together in undertaking other cooperative activities, including nury schools, kindergartens, adult education, recreational and community servs. These attributes of a cooperative community produce economic savings I social benefits, which enrich the lives of the people and the community. Conclusions of independent survey

The Peoples Gas Light and Coke Co. made an independent survey of housing anced under section 221(d)(3) of the National Housing Act of 1961. The cials of that company wanted to learn whether housing so financed "can p stem the migration of moderate income families from Chicago to the subs." The survey covered 29 projects, including 15 rental and 14 cooperatives 8 cities. In the survey, there was a comparison between cooperatives 1 rental housing projects. It is significant that the survey contained the foling impressions or conclusions:

. On the average, cooperative housing was available at a lower monthly arge than rental housing under section 221(d)(3). The average figures were follows for different size units:

In the cooperatives the survey found there was an average downpayment of 58, while there was no downpayment involved in the rental projects which are - owned by residents.

2. On the subject of community contributions, the survey states: The cooperative housing developments appear not to have experienced the keep and behavioral problems faced by some of the rental projects. Perhaps è element of ownership and the self-governing management arrangement which volves members of the cooperative have tended to create an atmosphere of itual respect."

Senator SPARKMAN. Thank you, Mr. Townsend. It is a very good tement. We are pleased to have it.

Mr. TOWNSEND. Thank you, sir.

Senator SPARK MAN. The next witness is Professor Paul Davidoff, rector of urban research center and professor of urban planning of unter College, New York, accompanied by Mr. David Cohen. Is Mr. Cohen with you?

Mr. COHEN. I am Mr. Cohen, Mr. Chairman. Dr. Davidoff just d to go out for a minute to take care of his child. If you could go to the next witness, I would appreciate it.

Senator SPARKMAN. We would be very glad to.

Mr. COHEN. Thank you, Senator.

Senator SPARKMAN. Mr. E. T. Butler, vice president, Syndicate Credit Corp., Minn., for the National Home Imp Council Lenders Committee.

Mr. Butler, we are glad to have you with us. Do you ha pared statement?

STATEMENT OF E. T. BUTLER, VICE PRESIDENT, INVESTOR CATE CREDIT CORP., MINNEAPOLIS, MINN., ON BEHALF NATIONAL HOME IMPROVEMENT COUNCIL LENDERS COM

Mr. BUTLER. I gave 50 copies to the clerk.

Senator SPARKMAN. Yes. It had not been distributed yet. We have a copy of the statement, Mr. Butler, and it will be in full in the record. You proceed as you see fit.

Mr. BUTLER. Thank you, sir.

Mr. Chairman and members of the committee, I am E. T. vice president of Investors Syndicate Credit Corp., Mini Minn., and I am speaking for the lenders committee of the 1 Home Improvement Council.

WHY PUBLIC INTEREST WILL BE SERVED BY AMENDING TITLE I PROGRAM

Banks, savings and loan associations, and other financial inst have made more than 28 million home improvement loans un FHA program. Thirty years of experience leaves undebata positive benefit to the social and economic welfare of our cou this particular Government-sponsored program. For those 3 title I has been the standard against which all other home in ment financing plans have been measured.

Title I, however, has failed to keep pace with changing ec conditions. The cost to the borrower is the same as that set in 1934, and during this interim the cost of living and the doing business has increased many fold.

For 10 years there have been no changes in title I in the ma amount of loan available or the maximum term of the loan a rapidly declining use of title I is shown in the following tabl

Installment credit extended in repair and modernization loans

The lenders committee of the National Home Improvement C is convinced that unless changes in title I are effected then the d of title I is inevitable. Already its effectiveness has diminished detriment of the consuming public, as indicated by the above tal

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The lenders committee recommends and urges adoption of admination-supported amendment S. 2978 as it relates to property imvement loans, and further recommends that title I be put on a nd competitive basis by increasing the maximum amount from 500 to $5,000 and extending the maximum term from 60 months

84 months.

During the last year the Federal Home Home Loan Bank Board v fit to authorize Federal savings and loan associations to increase ir limit on home improvement loans to $5,000 and 8 years' maturity. This step by the Federal Home Loan Bank Board is in recognition the fact that the cost of home improvements has steadily risen ing the past decade. Today, the consumer needs loans for amounts ater than the statutory limit of $3,500, and the consumer also ds a greater period of time to repay these loans than the statutory it of 60 months. Thus, a steadily growing number of consumers learning that their needs cannot be met under the title I home im

ovement program.

The FHA, an unusually knowledgeable and, insofar as title I is cerned, a supporting agency, is undoubtedly aware of what is going in the money market today. The consumer is the one who suffers any diminution of title I, because title I has not been up-dated to et economic changes. The dealers and contractors, who control the ancing of the majority of home improvement transactions, have ned to other than title I.

These sources meet the requirement for larger amounts and longer ms. However, the cost to the consumer is immeasurably greater. d what is more important, these conventional plans do not have protective devices afforded the consumer by title I. In many of

m:

The consumer is the victim of shady, deceptive, and costly practices;

He may be led into refinancing the mortgage on his home with the inclusion of auto loans, doctor and hospital bills and all manner of obligations which he would be well advised to retire more promptly;

Much too frequently he is the victim of excessive finance charges which often skyrocket to as high as 20 percent, kickbacks to dealers, payment of points for refinancing, brokerage fees, and other hidden costs.

Generally overlooked is this significant fact-that not only is the neowner suffering because of these unconscionable charges, but if se additional costs could be channeled into legitimate production re would be much additional business for suppliers, more honest ofits for dealers, and more work for artisans.

Our present-day economy cannot long withstand the drain which peases these demands in the consumer credit field. A revitalized le I program is a good solution.

Inder some conventional sources of home improvement financing homeowner is often the victim of improper selling practices:

Such as sales inducements wherein the consumer is promised his improved home will be used as a model for advertising or other purposes;

Debt consolidation, inflating the cost of the impro that a loan may be obtained which covers the actua other debts as well;

Promises of rebates, bonuses, commissions, et cetera dangled before the consumer as an inducement to im home:

False guarantees and misrepresentation of products; a Representation that the purchase is on a trial basis. Under a revitalized title I program the consumer would protection against such improper selling practices. Inf from better business bureaus clearly indicates that compl minimal under title I, but have increased immeasurably si has been a lessening of the use of title I and a great use of the unconventional forms of financing. This means that w protective devices of title I are not required and the financin under some of the conventional plans, the consuming publ loser.

The recent interest in consumer protection legislation in by many of the individual State legislatures is clearly indi this trend.

Title I regulations have afforded protective measures for sumer where the contractor arranges the loan for the consume FHA requires:

That the lending institution send an advance notice to rower prior to disbursal of the proceeds, setting out the t the proposed obligation, and informing the borrower th has any question regarding the transaction, he should no lending institution. In no event can the disbursal of the p be made until at least 6 days have elapsed after the no been sent;

The contractor must sign a statement that all bills in tion with the home improvement have been paid or will within 60 days, and this increases the borrower's pro should any claim by a subcontractor arise;

That the lending institution provide safeguards for the of dealers, in the form of proper investigation of the deale check procedures, statistical information, the number and of workmanship complaints and their disposition, et cetera:

Since contractors know that failure to take care of com that are legitimate might cause FHA to restrict their par tion in the title I program, title I is a persuasive force in in ing good workmanship and consumer satisfaction.

In addition to this, title I loans are the most economical f consumer in today's money market.

I might mention that I personally asked the branch managers company to obtain for me rate charts of conventional plans in particular territories. and I received charts that ranged from cent to 12 percent discount which means that the true interes would be somewhere from 10 percent to better than 20 percent in ple interest.

Mr. Chairman and members of the committee, I would like t phasize another point which I believe to be very pertinent to consideration of the legislation which we seek. There have been

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nts to the effect that the operation of the title I program has lent elf to abuses, such as complaints and irregularities. I respectfully mit that such eases are minimal, and that the facts simply do not r out these allegations.

I call the attention of the committee to statistics which support my tention that these cases are minimal, as witnessed by the fact that all the cases filed for claim under title I only 1 percent are caused complaints. When we consider that of all title I volume, less than ercent is filed for claim, then we are talking about 1/100 of the less n 2 percent of the volume. This to me is indicative of the control tures that are protecting the public interest as against other finance ns which such controls do not exist.

Is it any wonder why we feel that title I should be updated to be a competitive basis with other finance plans? It is indeed a matof public interest.

It is quite apparent that unless Congress acts to change title I to et today's needs, the consumer will continue to suffer. Adoption hese recemmonded changes will be a realistic adjustment by Conss of the FHA home improvement program to meet present ditions.

The proposed amendments will increase the protection to the public a revitalization of what has proved to be a workable and acceptable gram, which makes possible the upgrading and improvement of homes of the Nation at the lowest possible level of cost to the

sumer.

Thank you.

Fenator SPARKMAN. Thank you, Mr. Butler.

Let me see if I get it straight. nts of y

f your own, are you?

You are not recommending amend

Ir. BUTLER. Yes, sir. We are. The administration proposal under 2978, as far as title I is concerned, relates to the passing on of the rance fee which the lending institutions have always paid since 4, to put it in line with the mortgage program where the consumer s that one-half of 1 percent.

enator SPARKMAN. Well, you have not submitted language for the endment, have you?

Ir. BUTLER. No, sir. We are only recommending that the technichanges of the increase in amount from $3,500 to $5,000 and the n from 60 months to 84 months be put into the program.

enator SPARKMAN. I see.

Poes your company do a good bit of business in this field?

Ir. BUTLER. Yes, sir. We have outstandings of approximately, oh, ould say $80 million.

enator SPARKMAN. How much?

Ir. BUTLER. $80 million.

enator SPARK MAN. $80 million?

[r. BUTLER. Yes, sir.

enator SPARK MAN. In title I?

r. BUTLER. In title I. We have 18 branches, and we operate t in the middle part of the United States, the Midwest and thwest.

ut the time is coming when we are no longer competitive because ll of these other programs. And I might mention there are some