Senator CLARK. And how do you feel about this private bill of Senator Hart's, S. 3291, with respect to the Oakdale, Mich., project which we had some pretty interesting testimony on here the other day?

Mr. MASON. Senator Clark, I read the interesting colloquy that went back and forth on this. We have felt up to now since this project is not in default that probably within the agency lies the means of straightening this out. I have talked with the Federal National Mortgage Association's counsel, who is now the owner of this mortgage, and he feels that within the meaning of this bill, which is to do what is in the public interest, that anything can be done directly by the agency.

Again, the people of Oakdale, I think, said things to this committee that they have not said to our people.

But at least we need to work very closely with this, and will, to see if we cannot get this straightened out.

Senator CLARK. Which of your assistants

Mr. MASON. The problem that comes up in this sort of thing comes up because a public housing project or a Lanham Act project which probably should not have been sold at all was sold because the people wanted to buy. The people living there did not want to be moved. Senator CLARK. The people thought they wanted to buy it?

Mr. MASON. They thought they wanted to buy it. Well said, Senator Clark.

As they get in it and find the tremendous cost of maintaining this kind of structure, they are unhappy, and I can understand their unhappiness.

Senator CLARK. Do I understand from you that you think you can work out this problem administratively without legislation?

Mr. MASON. I think we can work it out administratively-anything this bill would permit us to do-unless the Congress wants to set a specific amount that is to be given to these people, and then that is a different matter. But within the public interest I believe

we can.

Senator CLARK. Which of your administrators has this matter in his charge?

Mr. MASON. It is in Mr. Baughman's hands.

Senator CLARK. Mr. Baughman, have you been in touch with Senator Hart about this? Do you know whether he is satisfied?

Mr. BAUGHMAN. We have talked to him. We do not have enough knowledge at the present time to come to any conclusion on the matter. In fact, we are just studying the matter now.

Senator CLARK. All right.

Now I would like to turn to S. 3458, which is my bill to amend section 112 so as to include hospitals. We have had a good deal of testimony on that since you gentlemen were here. Do you have any further comment?

Mr. MASON. I will ask Commissioner Walker.

Senator BUSH. Which one is that?

Senator CLARK. S. 3458.

I know Mr. Walker is very familiar with this problem because of his deep knowledge of the situation in Philadelphia, which is one of the places where this seems to be badly needed.

There are a number of other cities also which are very much in favor of this project.

Mr. WALKER. Senator, this is the section which extends the university or higher education provisions to hospitals, and I testified on May 9 that section 112 provides for a waiver of the normal predominantly residential requirements in such projects and also permits the locality to receive noncash grant-in-aid credit for expenditures made by universities for the acquisition and clearance of property either within or in the immediate vicinity of an urban renewal project.

In effect, section 112 increases the Federal contribution to the urban renewal project, or to other projects in the locality.

If hospitals are added to the category of institutions that can create such credits, there could be justification for adding a long list of other types of institutions, and ultimately the local share of project cost could be reduced to little or nothing.

I would not change my position, Senator. I am still opposed to including hospitals in this.

Senator CLARK. All right, sir.

I wonder if you gentlemen would like to add anything more to your hitherto expressed strong opposition to H.R. 10213, Congressman Rains' bill?

Mr. MASON. Senator Clark, I think we made ourselves quite clear. Senator CLARK. Abundantly clear.

Senator Bennett has introduced S. 3498, S. 3499, and S. 3500, which he introduced at the request of the administration. I assume you gentlemen support them. I do not think we have had any specific testimony on them. Two of these

Mr. MASON. I think, Senator Clark, we did testify. Of course, we are in favor of them. I mean this is obvious.

Senator CLARK. This is to require appropriation authority for two programs which are presently being financed by Treasury borrowing and to make the home repair and improvement program permanent and remove the ceiling on insurance authorization.

Senator BUSH. I do not believe you testified on those bills.

Senator CLARK. Mr. Cash tells me they did.

Mr. MASON. Yes, Senator.

Senator CLARK. I do not remember it.

Mr. MASON. Senator Bush, it was after you left, I am sure, the other day.

Senator BUSH. Was it?

Mr. MASON. Yes.

Senator CLARK. I am going to ask Mr. Cash to ask you a question respecting a bill introduced by Senator Fulbright and Senator Sparkman which has some bearing on this problem.

Mr. CASH. Mr. Mason, S. 3498, one of Senator Bennett's bills, would increase the community facilities loan program by $100 million. Mr. MASON. Yes, sir.

Mr. CASH. But it would permit that amount to be used only subject to appropriation.

Mr. MASON. Yes; that is correct.

Mr. CASH. On May 24, Senator Fulbright and Senator Sparkman introduced a bill, S. 3586, to increase the same program by $100 million but leaving the availability of the funds on its present basis.

Senators Fulbright and Sparkman would like your comment on that bill.

Mr. MASON. The administration is in favor of handling funds before the Appropriations Committee, to have it look at the program, and therefore does not favor the bill of Senators Fulbright and Spark

man.

Senator CLARK. To placate my good friend from Connecticut who took dissent to my using the word "trickle-down" a little while ago, perhaps I could cast a sin upon myself by saying you gentlemen are opposed to back-door financing? Is that right?

Mr. MASON. That is correct.

Mr. CASH. Mr. Mason, could you state for the record whether the existing authorization would be substantially exhausted by applications already on hand?

Mr. MASON. It is substantially exhausted or will be by the end of this fiscal year.

Mr. CASH. Merely by processing applications already on hand? The existing

Mr. MASON. We have applications on hand of about $22 million. Mr. CASH. And you have authority

Mr. MASON. And this will-with the wearing away of it, because they do not all come to fruition-just about meet the amount of money we have, which is $19 million.

Mr. CASH. So if you received one more application you would be out of business.

Mr. MASON. Probably not "one more," sir. They probably will take a million or two more than the $22 million to come to the $19 million.

Mr. CASH. You believe this program should continue under one method of financing or the other?

Mr. MASON. Yes; we do. This is a very helpful program to many small communities.

Senator CLARK. I have just been advised that Senator Williams will not be able to get here with respect to S. 3278, his mass transit bill. Have you gentlemen sent a report on that?

Mr. MASON. Yes; we have. (See p. 56.)

Senator CLARK. And you have also testified in opposition to it, have you not?

Mr. MASON. Oh, no; we testified in favor of it, Senator Clark.
Senator CLARK. You did?

Mr. MASON. Yes. In favor at least of the planning part of it, which we consider the

Senator CLARK. Oh, yes; I remember. You wanted to keep the interest rate a lot higher. That was your principal amendment that you desired?

Mr. MASON. We thought the financing should be different on the actual projects.

Senator CLARK. In other words, you stand on the report you sent to Senator Robertson some time ago on that?

Mr. MASON. May 6. Yes, sir.

Senator CLARK. All right. That brings us down to Senator Murray's bill, S. 3502, which was primarily advocated by a group of witnesses from Puerto Rico. It involves this new kind of condominium financing.

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But there was also a witness or two from the continental United States who thought this bill would be desirable. A mortgage banker and the Home Builders Association were for it. And I would like to have the view of the agency on it now. I do not think you have testified on this before.

Mr. MASON. No; we have not, Senator Clark, and Mr. Zimmerman will speak first.

Mr. ZIMMERMAN. I have a short prepared statement on this particular bill and the concept involved. (See p. 997.)

Senator CLARK. I do not think I did this before, but I think we ought to have the prepared statements of all of you gentlemen made part of the record.

Mr. MASON. Thank you, Senator Clark.

Senator CLARK. You either read that part of it or summarize it, as you may see fit.

Mr. ZIMMERMAN. S. 3502 would authorize FHA to insure mortgages for the purchase of individually owned units in a multifamily structure. Although the word "condominium" is not mentioned in the bill, it is intended to authorize insurance of mortgage loans for the purchase of dwelling units in a condominium. Condominiums resemble cooperatives but differ in a number of ways.

While condominiums are common in Puerto Rico and other countries, they are unusual in this country. The few condominiums that exist in the United States have, in some cases, been formed through the creation of trusts. However, in Puerto Rico and other places condominium ownership is provided for by a condominium law.

Under the law in Puerto Rico each individual unit in a multiunit structure can be owned outright by an individual or other entity. Title can be recorded as if it were an individual home or other piece of property. The unit can be conveyed and encumbered irrespective of the building of which it is a part. Each unit owner also owns a share in the common facilities of the building, such as the land, the foundations, halls, lobbies, stairways, and janitor lodgings. The common facilities remain undivided and are not subject to division. The necessary maintenance of the property and use of the common facilities are governed by agreement between the co-owners of the structure. The common profits and expenses of the buildings are distributed among the owners.

FHA can, under the present law, insure mortgages on one or more single-family homes with little or no problem related to the other owners where the homes are placed side by side with common walls on adjacent lots. With individual ownership of units in a multiunit condominium, however, there is no way in which the mortgage could be insured on one unit without joining in a relationship with all the other owners. FHA's mortgage insurance programs are presently based upon the statutory authority to insure a mortgage on a fee simple or a long-term leasehold interest. A condominium creates what are sometimes referred to as air rights. FHA does not now have authority to insure mortgages on air rights.

Because of the many problems which must be considered FHA believes that the proposal to give FHA such authority should have further study before S. 3502 or similar legislation is enacted. I will give a few examples of the legal questions and practical matters involved.

In case of FHA acquisition of a unit in a condominium as a result of default on an insured mortgage, FHA, under the condominium law in Puerto Rico, would be required to offer the acquired property for sale first to other owners in the condominium. This could delay disposition and increase possibility of FHA losses. While the property is held by FHA, it would be responsible for the prorated maintenance and operation costs of the entire structure. În Puerto Rico when a condominium is entered into, a condominium "regime" is created and a form of public dedication is made whereby the only manner in which the condominium may be abandoned or dissolved is with the consent of all the members. FHA could be in the position of maintaining and operating a majority or a large number of the units as a result of foreclosure action if for any reason it was unable to dispose of the units. So long as there was one owner who remained and wished to continue with the condominimum arrangement FHA would be required to dispose of the properties in accordance with the condominimum concept and would be precluded from disposing of the property in any other manner. This would, of course, be governed by the law of the jurisdiction in which the condominium is located.

It is clear that S. 3502 would need to be amended by changing its definition of "mortgage." Numerous other changes would need to be made in the bill before it became law. Because condominium ownership is unique in this country, and because of the many considerations involved in FHA's mortgage insurance programs, FHA cannot without further study recommend enactment of legislation along the lines of S. 3502.

Senator CLARK. Mr. Zimmerman, as you know, this bill is supported not only by the witnesses from Puerto Rico but by the Home Builders Association, which always testifies before us. It was also strongly supported by Mr. Brown Whatley of Jacksonville, Fla., a former president of the Mortgage Bankers Association of the United States, who testified that he was already making loans, mortgage loans, of this sort on a conventional basis.

It is true, is it not, that before FHA got into the picture to pick up the insured loan the mortgage bankers would be the individuals. most concerned with what would happen on default?

Mr. ZIMMERMAN. I think that is generally true, sir.

Senator CLARK. So if the mortgage bankers are not concerned about making this kind of a loan, why should FHA be so concerned with these objections, which I must say are not very persuasive to me?

Mr. ZIMMERMAN. Senator, I think that any inference that the mortgage bankers generally or any other lenders are not concerned over this particular approach is incorrect. I have talked not only to Brown Whatley but to many others who have on occasion proceeded on these lines, but I have not yet talked with anybody, with the possible exception of the Puerto Rico group, who does not appreciate and react very sensitively to these problems.

This is, as the Senator knows well, a civil law concept which is most unusual and unique.

And I do not mean to infer by my statement that this is not a direction we should go in. But I am sure that you will appreciate the problems that we think have to be faced up to and sort of thought