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Commenta bi nad ovnd erstar 9890)

The FHA insuring office was not receptive initially because o sponsorship. On December 9, 1960, the Director advised the proposal needed the endorsement of the international union and the international to step into the shoes of the local in the ever response, the FHA Director was given a copy of the following passed by the international executive council at a meeting du November 10, 1960:

"I move that this council authorize the use of the name 'inte hood' to the project development outlined to this council by I Pat Sullivan contingent on the determination that there wil liability and that it is a worthy cause with which to have our if investigation determines this to be the case, a letter or res required to indicate that the international brotherhood will p operation and management of the proposed project in Pascag event that lodge No. 693 is for any reason unable to operate and On December 27, 1960, FHA advised this was "entirely sati Date of first payment was February 1, 1964. No payment and the project never occupied. FHA headquarters tried to ge to take over as promised. The new international president, M advised that, while the executive council had endorsed the pr agreed to step into the shoes of the local in the event of def had never been authorized. On December 10, 1964, this matte HHFA compliance. Subsequently, an FBI investigation w Department of Justice found insufficient evidence to warran the investigation.

The mortgage was assigned to the Commissioner on March 1 and title to the property taken on May 28, 1965. The project Centers of Mississippi, Inc., a nonprofit group, on Septem $1,950,000, with a $50,000 downpayment, and a $1,900,000 mortgage.

"In Newark, N.J., after wealthy builder Arthur H. Padula costing $33,000, FHA appraised it for $125,000 and guarant construction loan on a high-rise apartment building. After completed in 1962, FHA let Padula go 3 years without maki principal of his loan" (p. 62).

Project No. 031-00204-Weequahic Park Towers, Newark, N.
Date of feasibility, spring of 1958.

Application received August 1958.

Commitment issued November 10, 1958. Commitment suc culminating in a final amended commitment September 25, 19 Comment

The FHA estimate of land price was made in the summer estimated the land to be worth $125,000. The sponsor's ad not a good indication of value as he held a big piece for ma praisal was appealed and on September 30, 1959, FHA head and concurred in the price as set. The sponsor's contention a was the land had a market value of in excess of $200,000. T excessive by the local office. The local office's estimate of proved.

The loan was closed September 12, 1960, and completed in 1 did not produce sufficent earnings to be self-sustaining and mortgage permitting a deferment to payment to principal v September 1965. The mortgage has been current from th (April 1, 1966).

"This was just the beginning. Padula had paid $36,339 f Newark property which FHA in 1963 appraised at $300,000cent. The FHA guaranteed a loan of $4.5 million to build : house" (p. 62).

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Decription of case

HOUSING LEGISLATION OF 1966

Project No. 003–00289—Weequahic Park Plaza, Newark, N.J.
Commitment issued October 24, 1963.

Comment

45

In June 1963, the Newark office found a market value of $123,750 for the site, but the sponsor appealed this value because the zoning variance he obtained permitted 10 stories additional to the nmber of stories ordinarily permitted in high-rise construction in that area and allowed a 50-percent decrease in the on-site parking requirements. The sponsor sought a value of $365,000.

An adaption of a per unit valuation formula by the multifamily valuation adviser from the Phialdelphia multifamily office produced a figure of $300,000, and this market value was agreed upon in a conference between the sponsor, the director, chief underwriter, and chief valuator of the Newark office, representatives of the Philadelphia multifamily office, and a representative from Washington headquarters.

The problem of land valuation following ordinance variances, which give certain advantages to a particular site, is a difficult one. There are many approaches to estimating these values, depending upon the absence or presence of comparable properties. The ultimate finding is one of personal judgment on the facts assembled. In reviewing this case, Washington headquarters also believed the allowance for land value was questionable.

Reader's Digest quote

ITEM NO. 4

"In Boston a promoter bought a tract for $8,971; the following year, FHA praised it at $131,531" (p. 62).

Description of case

Project No. 023-00029-Bishop Apartments, Inc., Boston, Mass.
Commitment issued in 1957; 108-unit walkup.

Comment

The Boston office judgment, to the effect the land had appreciated in value to the point where $131,531 was, in fact, the estimated fair market value at time of commitment for mortgage insurance, was based on two major changes directly affecting the land involved:

1. The land when acquired was not zoned to permit high-density apart: ment units. A change in zoning from single family to apartment was obtained.

2. A drainage problem which severely limited the value of the land was corrected which in turn made the land more valuable than the cost of the solution to the drainage.

The judgment of the Boston office was reviewed by the chief of headquarters valuation section and approved October 15, 1963. The mortgage is current as of April 1, 1966.

Reader's Digest quote

ITEM NO. 5

"In Chicago the FHA said it would allow $300,000 for a particular tract so a promoter went out and bought it for $212,000 and proceeded to cash in” (p. 63).

Description of case

Project No. 071-00137-3900 Lakeshore Drive, Chicago, Ill.
Comment

The project is a 25-story, high-rise 207 processed in June 1958, at which time the land value was estimated at $8.99 a square foot, or $300,000. The estimate was supported by sales of five comparable sites. The site was originally optioned by representatives of two of the sponsors in March 1957 for $212,000, subsequently purchased at this price in October 1958. The price of $212,000, while the major portion of the cost of acquisition, does not include the cost of the option or any allowance for required additional investment on the part of the sponsors for taxes, interest, or other carrying charges. The cost of this type of site was rising rapidly in Chicago at that time.

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In January 1964, the land value of this case was review personnel and the original estimate of value was found to project was well received by the market and has been a from its completion with virtually no vacancies. The mor current and the building is well maintained.

"FHA has approved marginal or hopeless projects, let p through what GAO calls excessive withdrawal of corpora abandon them*** GAO estimated that one promoter poc FHA paid taxes and insurance for his defaulted project" Description of case

Project No. 054-42043-Savannah Terrace, Inc., North A Comment

We are unable to determine how GAO estimated that ne was available to the mortgagor from February 1957 through J The GAO report of January 1964 makes reference to FHA in real estate and hazard insurance premiums. We review found in the period 1957-62 FHA paid $26,272 in real esta in insurance premiums.

"Moreover, FHA has been letting freeloaders live in re buildings, then writing off their unpaid rents as uncollectib Comment

FHA has experienced a large increase in its property acqu 1960. The increase was primarily in single-family home impact was felt by the agency in its overally property mana tion activities. During this period of increased property had the problem of increasing and improving its own propert in the field and headquarters. We also made very concerte the quality of the contract brokers who manage our rent improve our supervision of these brokers. Inevitably, th will vary according to circumstances, but for the most improvements in our total property management activity. GAO that since receiving their first reports on this subject, 1 internal changes to tighten and improve the procedures to quencies and collections. Much of the delinquent rental FHA took over the projects. Some very positive steps ha these lines and GAO has been completely informed.

The Reader's Digest neglects to point out that a GAO repo 1966, entitled "Need for Increased Efforts to Minimize Ren Acquired Properties," states, on page 3: STI

"These specific actions, if effectively implemented, and the now being directed toward solution of the problem should, to minimize losses and improve control over delinquent rent fore, we are not recommending further action by the agen plan to make further reviews of the management of acqu the control over rental delinquencies."

"In Jacksonville, Fla., for example, Senator George A. S roommate and close friend, Charles E. Commander, Jr., ask build an apartment house. FHA evaluators opposed the 'doomed from the start.' But one evaluator reports he recei telephone calls' from a Smathers assistant demanding ap Smathers denies he had any interest in the project, pres name ultimately prevailed. FHA guaranteed a $1.9 million apartment was built. Naturally enough, it failed; FHA mortgage. For nearly 3 years now FHA has owned this whi

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Project No. 063-00023-Commander Apartments, Jacksonville, Fla.
Initial request for feasibility June 16, 1959.

Site approval August 19, 1959.

Application received November 4, 1959.

Commitment issued June 21, 1960-90 units, $1,926,500.

Comment

FHA is unable to verify the allegation made by the Digest that Senator Smathers asked FHA to help Commander to build an apartment house. FHA has been unable to identify the alleged "evaluator" said by the Digest to have received "at least a dozen telephone calls from a Smathers assistant." The mortgage is now held by FHA and the project is operating under a deferment agreement.

Reader's Digest quote

ITEM NO. 9

"FHA in 1962 also did its best to produce for another politician, Representative Adam Clayton Powell. Powell's nonprofit corporation sought to buy and 'rehabilitate' a Washington hotel on sale for $2,250,000. FHA obligingly decided that a $4,500,000 loan-twice the price of the hotel-would be 'feasible' even though a month later FHA had to admit it had no idea what the 'rehabilitation' actually would cost. The deal fell through after Senator Williams took the Senate floor to expose the outrageous handout" (p. 64).

Description of case

Hotel 2400, Washington, D.C.

Comment

Initial contact with District of Columbia office April 1962. In May 1962, the sponsor was advised of the need for subsidy of $69,000 per year. The proposal by the Adam Clayton Powell foundation on August 1962 reported a total for all rehabilitation costs in the amount of $2,117,500 plus a total acquisition of $2,295,000. This plus financing charges produced a total of $4,850,000.

Preliminary processing indicated that a sponsor subsidy would be required of approximately $12,000 annually provided tax abatement could be obtained. FHA would not proceed with processing unless a tax exemption was obtained for the project and a cosponsor brought in. This was intended to be the Minister's Council for Senior Citizens of Washington. Efforts to get tax abatement were unsuccessful. On March 19, 1963, the application was withdrawn for processing under section 231. A new proposal for insurance under section 207 was submitted. There is no identification of the Adam Clayton Powell foundation with the new proposal. The proposal by the new owners was accepted and committed and insured as Project No. 000-00123, Envoy Towers. Construction has been completed and the mortgage is presently current (April 1, 1966).

Reader's Digest quote

ITEM NO. 10

"In the little Texas town of Weslaco, Methodist Preacher Paul A. Weiss sought to build a grandiose retirement home which FHA technicians declared was predestined to certain failure.

"If this project is built, one and all who see it will categorize it as an FHA folly,' a regional examiner warned Washington, 'And the loss FHA will sustain will be stupendous' " (p. 64).

Description of case

Project No. 115-38005-NP-Wesley Manor, Weslaco, Tex.

Sponsor: McAllen District of the Southwest Texas Conference of the Methodist Church.

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Final endorsement expected approximately April 14, 19 to be endorsed is $2,733,100, the unit limitation. Reductio unit composition during construction. erat villidiens Comment ecer er ta bec

The office found the original proposal not feasible b of about $900,000 between the maximum mortgage and th FHA also had concern about the number of units becaus demand. FHA also had a question about whether the M backing the sponsor churches. Iind of robnammo glod ot ov There were many meetings with the sponsors here and in 1962, Washington headquarters authorized continued pr the Director to encourage the sponsors to recast their pla was overdesigned. The office continued processing and cam tives, concurred in by the zone multifamly housing repre McAllen Methodist District and the Southwest Method agree to subsidize the project, or else submit an applicati 116 units. An application for 150 units was submitted and rejected on March 14, 1963, because it was not subs Subsequently, a meeting was held in Washington heado 1963. It was agreed to consider the application for 15 McAllen Methodist District agreed to subsidize the projec of the district, as guarantor, was reviewed by Washing found acceptable. The district, by resolution of April "In the event that Wesley Manor, Inc., incurs deficits in project, the district guarantees to subsidize the financial tion."

The project is completed, final inspection in Novembe dorsement of the mortgage is expected soon. Initial payn interest were deferred from February 1 to November 1, Iments have been made since November 1, 1965.mot svo

To noitelupos Indo a aufg 003511.22 to note od) a .000,078,43 30 latot a bITEM NO. 11 alon Reader's Digest quote du 02пos at botolbat zabe "But in Washington on January 23, 1962, a special FHA Gerald P. Nye, wrote: 'Vice President Johnson has reve in the Wesley Manor project, and this office has assured possible would be done to expedite the hour when constr (p. 64). EBW Hofter er dorRM HO Teb Tani Tol Inoqon won A Comment oral) asb odt to notesnobi ou pi The quote is an accurate quotation taken from a letter Nye, then the Special Assistant for Housing for the Elderl Weiss, executive director, Wesley Manor project. Mr. N comment to make with reference to the Digest quote:

"The Reader's Digest article would, as is probably inte to believe that Vice President Johnson had personally win FHA approval of the church-sponsored project in his Such was never the case. To the best of my knowledge, n my office had any communication with Vice President Jo

cashe quotation in the article from my letter of Januar been more revealing of fact if only my reference had i the Vice President's staff' instead of 'Vice President Jo I have no positive recollection of any call having been 1 the Vice President's staff concerning the Wesley Manor -view of the fact that I referred to the Vice President in m I am quite certain that I probably had had some type of a tion from a staff member inquiring as to the status of th of this nature would have to have been made in order to reference to the Vice President. 005,000

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