an answer at this hearing. I know the gentleman has worked on it for more than a year now. Mr. WELTNER. The position of the Commissioner is to be against it. But, there is no alternative proposal that I know of. If the chairman desires I will be happy to make available my file of correspondence which sets out the proposal, and very courteous response by Mr. Brownstein. Mr. Brownstein states that although this proposal would protect the seller and the FHA and the mortgagee, that it would not protect the purchaser. I commented back to him that the only thing necessary to protect the purchaser is to assure that he is aware of the proximity to the airport. That could be done very simply by requiring a statement or acknowledgement to that effect. If we are protecting everyone other than the purchaser, then we could easily assure that the purchaser were protected by requiring that his certificate acknowledging on his part the realization that the home was within certain proximity of the airport. That is the only objection in truth that I could discern from this correspondence, and I will submit it and possibly the staff could extract those portions which would be relevant to Mr. Harvey's inquiry. Mr. BARRETT. They may be, without objection, so ordered. (The material referred to follows:) Hon. PHILIP N. BROWNSTEIN, HOUSE OF REPRESENTATIVES, Commissioner, Federal Housing Administration, DEAR MR. BROWNSTEIN: During my short tenure in Congress, I have become increasingly concerned over the plight of homeowners in sections adjacent to federally assisted airports. In my own district, substantial Federal funds have gone to expand the Atlanta Municipal Airport. In so doing, runways have been extended to such proximity to many residents as to create severe noise and vibration problems. The houses, though not within the zone subject to acquisition under the airport construction law, have nonetheless experienced sharp decline in property values. I am aware that the question of FHA insurance for such houses has been considered at length and rejected as actuarially unsound. However, I hope that the consideration might be given to a separate appropriation to create a reserve fund specifically to cover losses in such circumstances. It seems to me when one agency of the Government, FAA, generates action that diminishes residential values, it would be appropriate for another agency, FHA, to remedy the situation in this matter. With the existence of such reserves, normal underwriting procedures could be applied in applications for insurance without regard to noise and vibration features. If FHA incurs higher than normal losses under default and foreclosure proceedings, the special reserve fund would maintain actuarial soundness of overall operations. I am sure you are aware of the widespread existence of the problem. With the expansion of air travel and increased use of jet aircraft, it is only reasonable to anticipate that the problem will worsen in coming years. I should like to have the opportunity of discussing this with you at your early convenience. May I hear from you on this matter? Sincerely, conte with t at the CHARLES LONGSTREET WELTNER, the Member of Congress. any act enting tect no wa een my ot the Hon. CHARLES LONGSTREET WELTNER, Washington, D.C. FEDERAL HOUSING ADMINISTRATION, OFFICE OF THE COMMISSIONER, Washington, D.C., February 18, 1964. DEAR MR. WELTNER: I share your concern with the effect of increasing and noisier air traffic on residential values. The Federal Housing Administration and the Federal Aviation Agency have worked closely to understand and define the factors of the problem, but the fact remains. I agree with you that the basic problem is the sharp decline in property values, and this, of course, reflects the market attitude itself. Houses subject to these noise disturbances and other hazards may be less desirable to the prospective buyer than others which are not so affected, and resales are slow and at reduced prices to meet the competition. The adverse effect varies widely, however, since some communities and some neighborhoods are much more air minded than others. In the latter the effect is sometimes negligible. Other neighborhoods or sections of neighborhoods can be in locations where the noise or even direct physical hazards are such that, by FAA criteria of safety and human tolerance, the health and safety of people living in the area are endangered. In such areas the FHA does not insure mortgages on homes. Otherwise, the FHA does insure mortgages on homes affected by airports, but prices that the typical buyers in the open market will pay for them must be recognized. Otherwise we would be insuring mortgages, to be paid for by the new buyer, greater than the price paid, or inducing the new buyer to pay a price in excess of value. This could relieve the loss in value to the seller but create an unacceptable situation to a prospective buyer of either new or older homes. The major problem then appears to be the loss in value to the homeowners themselves that arises from the changed environmental conditions of their homes. In varying degrees, such changes are not confined to airports but can and do arise from many sources, such as increasing commercial or manufacturing influences, new highways, city growth tendencies, and other factors of our everchanging growth and progress. In the case of airports, however, the change is often comparatively fast, obvious, and dramatic and often appears to arise from the larger necessities of our national progress with little opportunity for local neighborhoods to adjust themselves to these influences. Mortgage defaults may result, but such losses are considered part of the measured risk of mortgage insurance. A separate appropriation to create a reserve fund specifically to cover losses due to mortgage default would serve only to protect the FHA, the mortgagee, and result in some benefit to the seller, but would in no way protect the innocent purchaser of such a property. The problem is a serious one, and of concern to us all. We are constantly reviewing the matter to assure that our policy on the insurance of loans in noise affected neighborhoods is in keeping with our role of an insurer of mortgage loans. Thank you for the opportunity of giving you our position regarding this problem. Please let me know if you desire to discuss the subject further. Sincerely yours, P. N. BROWNSTEIN, Commissioner. FEBRUARY 24, 1964. Hon. P. N. BROWNSTEIN, Commissioner, Federal Housing Administration, DEAR MR. COMMISSIONER: I have your letter of February 18, and have dis- However, the question comes as to its solution. adrised of any active plans to alleviate this situation. To date, I have not been In commenting on my specific suggestion of the reserve fund, you say it would erve to protect "the FHA, the mortgagee, and result in some benefit to the seller, but would in no way protect the innocent purchaser of such a property." It has been my experience that the availability of financing is the primary problem (not the existing noise itself), when purchasers are sought for such an answer at this hearing. I know the gentleman has worked on it for more than a year now. Mr. WELTNER. The position of the Commissioner is to be against it. But, there is no alternative proposal that I know of. If the chairman desires I will be happy to make available my file of correspondence which sets out the proposal, and very courteous response by Mr. Brownstein. Mr. Brownstein states that although this proposal would protect the seller and the FHA and the mortgagee, that it would not protect the purchaser. I commented back to him that the only thing necessary to protect the purchaser is to assure that he is aware of the proximity to the airport. That could be done very simply by requiring a statement or acknowledgement to that effect. If we are protecting everyone other than the purchaser, then we could easily assure that the purchaser were protected by requiring that his certificate acknowledging on his part the realization that the home was within certain proximity of the airport. That is the only objection in truth that I could discern from this correspondence, and I will submit it and possibly the staff could extract those portions which would be relevant to Mr. Harvey's inquiry. Mr. BARRETT. They may be, without objection, so ordered. (The material referred to follows:) Hon. PHILIP N. BROWNSTEIN, HOUSE OF REPRESENTATIVES, Washington, D.C., February 1, 1964. Commissioner, Federal Housing Administration, DEAR MR. BROWNSTEIN: During my short tenure in Congress, I have become increasingly concerned over the plight of homeowners in sections adjacent to federally assisted airports. In my own district, substantial Federal funds have gone to expand the Atlanta Municipal Airport. In so doing, runways have been extended to such proximity to many residents as to create severe noise and vibration problems. The houses, though not within the zone subject to acquisition under the airport construction law, have nonetheless experienced sharp decline in property values. I am aware that the question of FHA insurance for such houses has been considered at length and rejected as actuarially unsound. However, I hope that the consideration might be given to a separate appropriation to create a reserve fund specifically to cover losses in such circumstances. It seems to me when one agency of the Government, FAA, generates action that diminishes residential values, it would be appropriate for another agency, FHA, to remedy the situation in this matter. With the existence of such reserves, normal underwriting procedures could be applied in applications for insurance without regard to noise and vibration features. If FHA incurs higher than normal losses under default and foreclosure proceedings, the special reserve fund would maintain actuarial soundness of overall operations. I am sure you are aware of the widespread existence of the problem. With the expansion of air travel and increased use of jet aircraft, it is only reasonable to anticipate that the problem will worsen in coming years. I should like to have the opportunity of discussing this with you at your early convenience. May I hear from you on this matter? Sincerely, CHARLES LONGSTREET WELTNER, orked on i against i e chairman esponden se by ld prota not protec necessar proxim g a state ng every that the acknowl in certai and p Hon. CHARLES LONGSTREET WELTNER, Washington, D.C. FEDERAL HOUSING ADMINISTRATION, OFFICE OF THE COMMISSIONER, Washington, D.C., February 18, 1964. DEAR MR. WELTNER: I share your concern with the effect of increasing and noisier air traffic on residential values. The Federal Housing Administration and the Federal Aviation Agency have worked closely to understand and define the factors of the problem, but the fact remains. I agree with you that the basic problem is the sharp decline in property values, and this, of course, reflects the market attitude itself. Houses subject to these noise disturbances and other hazards may be less desirable to the prospective buyer than others which are not so affected, and resales are slow and at reduced prices to meet the competition. The adverse effect varies widely, however, since some communities and some neighborhoods are much more air minded than others. In the latter the effect is sometimes negligible. Other neighborhoods or sections of neighborhoods can be in locations where the noise or even direct physical hazards are such that, by FAA criteria of safety and human tolerance, the health and safety of people living in the area are endan th that gered. In such areas the FHA does not insure mortgages on homes. Otherwise, reler the FHA does insure mortgages on homes affected by airports, but prices that the typical buyers in the open market will pay for them must be recognized. Otherwise we would be insuring mortgages, to be paid for by the new buyer, greater than the price paid, or inducing the new buyer to pay a price in excess of value. This could relieve the loss in value to the seller but create an unacceptable situation to a prospective buyer of either new or older homes. The major problem then appears to be the loss in value to the homeowners themselves that arises from the changed environmental conditions of their homes. In varying degrees, such changes are not confined to airports but can and do arise from many sources, such as increasing commercial or manufacturing influences, new highways, city growth tendencies, and other factors of our everchanging growth and progress. In the case of airports, however, the change is often comparatively fast, obvious, and dramatic and often appears to arise from the larger necessities of our national progress with little opportunity for local neighborhoods to adjust themselves to these influences. Mortgage defaults may result, but such losses are considered part of the measured risk of mortgage insurance. A separate appropriation to create a reserve fund specifically to cover losses due to mortgage default would serve only to protect the FHA, the mortgagee, and result in some benefit to the seller, but would in no way protect the innocent purchaser of such a property. The problem is a serious one, and of concern to us all. We are constantly reviewing the matter to assure that our policy on the insurance of loans in noise affected neighborhoods is in keeping with our role of an insurer of mortgage loans. Thank you for the opportunity of giving you our position regarding this problem. Please let me know if you desire to discuss the subject further. Sincerely yours, P. N. BROWNSTEIN, Commissioner. FEBRUARY 24, 1964. Hon. P. N. BROWNSTEIN, Commissioner, Federal Housing Administration, DEAR MR. COMMISSIONER: I have your letter of February 18, and have dis- advised of any active plans to alleviate this situation. To date, I have not been In commenting on my specific suggestion of the reserve fund, you say it would It has been my experience that the availability of financing is the primary ་ properties. Your present procedure requires the acknowledgment by purchasers of certain facts. The proximity to the airport could even be included in such acknowledgment. Further, there seems to be a parallel in the mortgage coverage for relocation housing. It might just as easily be argued that this does not protect the innocent purchaser. In short, I feel that something must be done, and to date, nothing has been done. May I request that you give further consideration to this matter in the light of the above comments. Looking forward to discussing this in person with you, I am, Sincerely, CHABLES LONGSTREET WELTNER, FEDERAL HOUSING ADMINISTRATION, Hon. CHARLES LONGSTREET WELTNER, Washington, D.C. DEAR MR. WELTNER: I am replying further to your letter of February 24, 1964, requesting that FHA study the proposal which you made concerning mortgage insurance to facilitate the sales of certain existing home properties adversely affected by the influence of federally aided airport expansion. Our understanding of your proposal is briefly this: FHA insurance should be made available for the purchase of all existing single-family homes adversely affected by airport expansion at a valuation established as if no airport influences affected the property. Prospective purchasers of such properties would acknowledge in writing that they were aware of the airport influences. In recognition of the fact that FHA would be exposed to unreasonable risks under this proposal, a special reserve for losses would be authorized and funded by the Congress. First, let me say that I do not believe FHA mortgage insurance is the proper vehicle for compensating property owners for losses caused by airport expansion. even though such expansion has been assisted by another Federal agency. If compensation is justified, a more direct method should be sought which would benefit property owners who do not desire to sell as well as those who do. FHA insurance is presently available on some homes adversely affected by airports. However, our policy recognizes that the desirability of properties near airports may be affected adversely by existing or potential hazards of lowflying aircraft, the nuisance of noises, and the possibility of mushrooming nonresidential uses. FHA policy is, therefore, that marketability shall be the strongest indicator of acceptability of such properties, and that valuation shall be determined by market price. If the airport influences directly jeopardize the structural integrity of the properties or the health or safety of the occupants, they are unacceptable to FHA for insurance. For example, if the measured noise levels are such as to be injurious to the occupants' health or to damage the house, or if a house is directly and immediately in the approach or departure patterns of principal airport runways, it is unacceptable for FHA mortgage insurance. In determining the criteria for judging the acceptability of properties near airports, FHA works closely with the Federal Aviation Agency. Beyond these comments, the proposal raises specific questions and problems, among which are the following: 1. The FHA mortgage underwriting requirement of "appraised value" is statutory. The requirement relates to "economic soundness" or, in certain programs, to "acceptable risk." Nevertheless, both of these assume sound principles of underwriting. The proposal would substitute a policy of compensation. Moreover, the national housing policy stated in the Housing Acts of 1949 and 1954 directs FHA to follow sound underwriting practices, and clearly opposes the insurance of properties that endanger the health and safety of the occupants. 2. The purchasers of these adversely affected properties would not be fully protected even though they acknowledged in writing that they were aware of the airport influences. The typical homebuyer would not fully appreciate the effects these influences would have on the value of the property over an extended period of time. The Senate Banking and Currency Committee, in its report on |