to, and in fact do, make loans up to 95 percent of the appraised value. The question involved is being able to fit the purchase price of the house and the carrying charges to the income of the applicant. If he is subsidized we will finance him, it does not need to be FHA.

Mr. CURLIN. And you said, I think somebody said, that approximately 80 percent of all housing today is conventionally financed. I have some questions on the 3-year warranty that apparently is a rather hot item.

The CHAIRMAN. You may submit them.

Mr. CURLIN. I thought perhaps I would ask one or two.

Are all of the components that go into a house that a builder buys, are they warranted to him for 3 years, such as the stove, furnace? Mr. WARANCH. They generally are not.

Mr. CURLIN. What is the normal warranty on these items, these components that go into a house?

Mr. WARANCH. Appliances?

Mr. CURLIN. Dishwashers.

Mr. WARANCH. Appliances generally have a 1-year warranty. Sometimes a refrigerator has a 1-year overall warranty, but the compressor is guaranteed for an additional 4 years without labor.

Sometimes the hot water heaters have a 5- or 10-year warranty reducing pro rata as the unit is used.

Mr. CURLIN. Mr. Jackson, I have read the section 906 on page 217 of the bill, the prohibition against kick-backs; of course I think the motives for it are very good and very excellent.

I am a little bit concerned at some of the language used in that particular section. Have you read it with reference to situations that have arisen in my district, a relatively rural area, where the mortgagee, if he does not have a permanent place of business, will engage a local real estate agent to service the loan, to handle the paper work on a 235? I was very interested to find out yesterday from HUD they consider this a kick-back even though the local agent of the mortgagee is performing services rendered.

Do you think that perhaps an amendment would be in order to exclude situations where there are appropriate services rendered and sometimes very complicated real estate closing?

Mr. JACKSON. Yes, sir. In fact, if this section of the bill has any defect, it is the fact that, No. 1, it imposes criminal penalties which, if I understand the lawyers, makes the intent of Congress difficult to express when you get in the criminal area and, two, there is no provision for exclusion of any type of transaction on any basis, no matter how reasonable those bases may be.

Mr. BARRETT. Would the gentleman yield to me at that point? Mr. CURLIN. Yes, sir.

Mr. BARRETT. You are a very intelligent witness here this morning. You talk on the closing costs and you know this is a committee print. There are technical improvements to be made on the closing costs and we hope to do that in the full committee. But if there is any defect in this bill, it is this.

Your statement would be appropriate after the bill would be voted

out.

Mr. JACKSON. Mr. Barrett, I apologize. That was not my intent even though those may have been my words.

The CHAIRMAN. Are you finished, Mr. Curlin?

Mr. CURLIN. I was wondering if perhaps you had any-I am brand new here, I do not know much more about the procedure than you do. I am hopefully trying to present some amendments to clarify this thing before it gets into law. I visualize in several instances under the literal language of the prohibition of kickbacks, very interesting, people that perform services really do not have anything to do with increased cost to the borrower.

In this instance, if the mortgagee does not send an agent down there to close a loan, he is going to have to hire somebody. Nobody is going to be going through the volume of paperwork HUD requires free; and I see my time has expired.

(In regard to Mr. Curlin's questions on section 906 of title IX of the proposed Housing Act, the following letter was received from Mr. Jackson:)

Hon. WILLIAM P. CURLIN,
House of Representatives,
Washington, D.C.

MORTGAGE BANKERS ASSOCIATION OF AMERICA,
Washington, D.C., June 15, 1972.

DEAR MR. CURLIN: In the course of your allotted time for questioning witnesses on the morning of the June 8 Banking and Currency Committee hearings on the 1972 housing legislation you indicated some concern over the effect which section 906 of Title IX might have on mortgage lending in rural areas. Mortgage bankers share your concern that this provision will adversely affect proper mortgage lending activities.

FHA's recently issued kickback regulation has been most effective but it has also permitted mortgage bankers to use agents in rural areas for the purpose of taking loan applications. The new regulation demonstrates that nefarious practices can be effectively eliminated while still permitting mortgage lenders to adequately service less densely populated and lower loan producing areas. It is critical that lenders service such areas and I cannot believe that it is the Committee's intention to legislate restraints on such an important matter. Lee Holmes, MBA's Legislative Counsel, should be in touch with you shortly to discuss possible substitute language for section 906. If the Committee would accept the Secretary's authority to regulate in this area and Title IX were passed in its entirety, all lenders subject to Title IX would then be subject to such HUD regulations. This seems an appropriate resolution to the problem. Please do not hesitate to contact me on this or any other provision which concerns you. Thank you for your interest in this matter. Sincerely,

PHILIP C. JACKSON, Jr.,
President.

The CHAIRMAN. The conference report is to be voted on within 1 or 2 hours and the committee will stand in recess until after the vote on the conference report, and then we will reassemble, and in the meantime we will excuse the members of the panel with the understanding they can supplement their views, if they desire. Unless they are called, we will not ask for their return.

You have been very helpful to the committee. Your testimony is very interesting and constructive and we will excuse you with the thanks of the whole committee.

Mr. WARANCH. We thank you for the opportunity.

(The following letter was received from Mr. Jackson for inclusion in the record:)

MORTGAGE BANKERS ASSOCIATION OF AMERICA,
Washington, D.C., June 16, 1972.

Congressman WRIGHT PATMAN,
U.S. House of Representatives,
Washington, D.C.

DEAR MR. CHAIRMAN: During the June 8 morning session of the Banking and Currency Committee hearings on the 1972 housing legislation you noted that the Title IX provisions of the proposal would in effect provide that lending institutions be required to police settlement activities of other parties to the transaction, such as the seller. You inquired as to whether this was a proper way to resolve settlement cost problems or whether this approach had been taken merely because of the regulatory authority which the federal government has over most lending institutions.

We do not believe that the imposition on private institutions of the responsibility for policing the activities of others, with drastic penalties for imperfection, is a satisfactory solution to the problem. Mortgage lending institutions should and generally do take such steps as they can to insure that all parties to a transaction in which the institution is involved comply with the law. To the extent that some may not, there is adequate authority under present federal law to require them to do so. However, the lender is not in a position to control abuses by others of the standards reflected in Title IX. The enforcement power is just not present.

Should you have any additional questions concerning the statement we have submitted for the record or other matters, please do not hesitate to contact

me.

Sincerely,

PHILIP C. JACKSON, Jr..
President.

(Whereupon, at 12:45 p.m., the committee recessed, to reconvene at 3:40 p.m., the same day.)

AFTERNOON SESSION

The CHAIRMAN. The committee will please come to order.

Our first witness this afternoon will be the Honorable Louis Frev, Jr., a Member of Congress from Florida, and the next witness will be the National Association of Counties, Gladys Spellman, and the third witness will be the National Council of Senior Citizens, Mr. Richard Millman, and the Rural Housing Alliance, Mr. Clay Cochran. Are all four of these witnesses here?

Let's see. Wait just a minute. Here is Mr. Frey and where is Mrs. Gladys Spellman?

Take a chair over here. That will be fine.

And Mr. Richard Millman. All right, take a chair.

Mr. Clay Cochran.

We will hear Mr. Frey first.

STATEMENT OF HON. LOUIS FREY, JR., A REPRESENTATIVE IN CONGRESS FROM THE STATE OF FLORIDA

Mr. FREY. Thank you, Mr. Chairman, members of the committee. Mr. BARRETT. Mr. Chairman, never let it be said that we would let one of our most knowledgeable and capable Members come to this committee and not be commended on for the fine work he has done and the very fine relations he has built up for himself on both sides of the aisle in the House.

Certainly it is very fine to have you here this afternoon, Congressman; we are proud of you.

Mr. FREY. We thank you for your gracious remarks.

The CHAIRMAN. I hope to be proud of him when I hear him. I have not heard his testimony. I am sure from what Mr. Barrett says I will be proud of you. In anticipation, I will say we are glad to have you here.

Mr. FREY. Thank you, Mr. Chairman.

If I have the chairman's permission, I would like to put into the record the statement and copies of the exhibits that I have and then summarize the statement, because I know that the time of the committee is important.

The CHAIRMAN. Without objection, so ordered. When you finish your testimony you may, of course, extend your remarks when you get your transcript to examine.

Mr. FREY. Thank you.

The CHAIRMAN. If you think of something that has not been covered, you may feel free to do so and add anything that is relevant to the discussion.

You are recognized, sir; go ahead.

Mr. FREY. Approximately 6 months or so ago, I became involved in my home area with the problem of mobile homes. In Florida, 77 percent of the people living in mobile homes are senior citizens. The remainder are basically young people.

The average income is about $5,400 a year, which includes social security. Also, I found Florida has some very good laws but, frankly, did not have everything we wanted. Throughout the United States there are many States that do not have any mobile home laws, and there are no Federal laws regarding the safety standards in mobile homes.

I found this a little hard to believe due to the fact that it is close to a $4 billion industry, and 95 percent of the homes built under $15,000 are single-family residences or mobile homes today and approximately 7 million Americans are now living in mobile homes. It is a tremendously growing industry.

The CHAIRMAN. Will you recite those last two statistics again?

Mr. FREY. There are about 7 million Americans living in mobile. homes today; 95 percent of the houses built under $15,000 are mobile homes or single-family housing.

The CHAIRMAN. Go right ahead.

Mr. FREY. Mobile homes and the people in the industry have been doing a good job in providing a good service. They are needed. In many, many cases there is no other way to obtain housing for this type of people within their income. On the other hand, I think there is no question that more has to be done. The industry has taken some important steps.

The American National Standard Institute has come up with a code which has been adopted in approximately 26 States. This code partially establishes safety standards. I do not think that it goes far enough. According to the manufacturers' prepared documents there

are 10 States with no enforcement procedures, and in my State of Florida we have had only three men doing the complete enforcement job but, we have just added three more inspectors.

These are dedicated men, but, they just cannot do the job that is needed.

There are other statistics I think you might be very interested in.

In the first place, the danger to a mobile home during a fire, on the average, is much more than in the regular home. A major insurance company estimated the danger in a mobile home was $1,529 versus $350 for the average home.

This increase in danger has gone from $889 in 1966 to $1,529 this year.

The mortality rate is also higher in mobile homes than in conventional homes.

Now, we do not have adequate statistics throughout the country because they have not been kept in those places where there is no need for them.

For instance, in Oregon the mortality rate is 3.29 to 1 in terms of mobile homes to regular homes.

In Arizona, they estimated eight times that amount.

There is one other problem that we have due to fire. Some of the problems which have come about, for instance, are because there is only one exit and a heater may be between the bedroom and that exit.

The windows, for example, in many mobile homes are not big enough for a person to get through. The industry has recognized this, and they are trying to have a temporary standard passed to rectify this type of problem.

There is another tremendous problem, especially in our part of the country, and that is the problem of tornadoes and hurricanes.

In Boulder, Colo., that has a State code, wind last year destroyed 35 trailers and $800,000 of damage resulted.

In my prepared statement is included a picture of one of these areas where wind has come through and knocked over mobile homes. Some things are now being done in my State to approach this wind problem, but it is not being done nationwide. Since I introduced this legislation with its cosponsors, I have received letters from all over the country, from both firemen and people in the industry, saying they think this would be a good thing for the industry, and a good thing to have uniform safety standards enabling trailers or mobile homes to go from one area to another. The industry would be required to build to the same level of competition. Frankly, Mr. Chairman, in talking about mobile homes as being mobile, you have to smile a bit, because, in many instances, the only mobility is traveling from where they were built or sold to the lot they are going to be on, especially if they are the double or the triple width.

As you know, the building codes in most areas have no controls over them. They fall by the wayside.

Very briefly, what our legislation does is to recognize the importance of the industry, and the need to put out a mobile home at a low