a board of directors involved in the urban coalition and concerned with the city; what should they be doing? Assuming we get this bill passed this year what should they be doing to encourage this section 235 so that we have more than 200 or 300 units and so we can build 1,000 units?

Mr. WEISEMAN. I don't see that the lending institutions can do too much other than make the money available when someone comes in for a loan.

Mr. KASS. Senator, there is merit in publicity. There are religious groups, nonprofit sponsors, cropping up in the city that are seeking money. I don't think they necessarily have to start looking around as Mr. Weiseman has to do with savings and loans.

The CHAIRMAN. Couldn't a bank like Riggs or American Security & Trust go to churches who have accounts in their banks, and say "Why don't you look into these nonprofit corporations?"

Mrs. VETTER. We are doing that. We have been contacting many churches in the city asking them to get together with the banks and work out a way.

The CHAIRMAN. Of course, it would be a little helpful if the banks and savings and loan associations did it from other hands. Would it or would it not?

Mr. WEISEMAN. I can't see them doing it because the money is put in trust at 4 percent and the money is taken out at 8-percent so I can't see the bank is going to give it to us altruistically.

The CHAIRMAN. I don't mean altruistically, but making a loan at 8 percent.

Mr. WEISEMAN. Let's say it is a church that has a million dollars at Riggs in trust with, let's say, 4% or 5 percent in interest. If we went into the same church and if we could offer them an 8 percent loan for that money today then the money would no longer be in Riggs. It would be paid into this mortgage. Riggs would lose a million dollars worth of deposits rather promptly. I don't think that it would emanate from the lending institutions. I think the desire to invest in inner city mortgages would probably have to start in the churches or the people who actually control the deposits. In the first place a bank is not the proper vehicle for obtaining these funds today. Most banks don't have this for investment.

The CHAIRMAN. Would the savings and loan industry?

Mr. WEISEMAN. The savings and loan could do it although they are committed pretty much to non-FHA mortgages today. The CHAIRMAN. How about conventional mortgages?

Mr. WEISEMAN. Conventional. The FNMA route is perfectly satisfactory today, I don't see anything wrong with that except for the points we have to pay because of the way we have to bid.

The CHAIRMAN. What you are saying is, basically, that the criticisms of the banks or the savings and loan associations is not really fair because there is nothing they could do more than they are doing now. Is that correct?

Mr. WEISEMAN. Well, I think what Mr. Terris was getting at has some validity. For instance, if I go into a savings and loan and I say: "Look, I am going to do 20 houses in the inner city, give me permanent mortgages" savings and loan will say: "Well, we have lost umpteen thousands of dollars over the years on these things. We

don't want to invest any more in the inner city or we don't invest in there, for whatever reason, we are going to invest in the counties." Even if you give them a better rate they would still go out to the counties because they feel it is safer.

The CHAIRMAN. Would you say the same thing for the insurance companies?

Mr. WEISEMAN. In my opinion they should because they get the Federal Government to underwrite them.

The CHAIRMAN. I am trying to get some facts from you on the record so we can do something. It seems to me you are answering things on both sides of the question here. What can they do or what should they be doing? That is what I started asking you before and you say there is nothing they can do. What sould they be doing that they are not doing? What can the savings and loan industry do or should be doing?

Mr. WEISEMAN. What they should be doing under existing law today is loaning money at 8 percent.

The CHAIRMAN. Uninsured money?

Mr. WEISEMAN. No; I think it should be insured. I don't think the savings and loans should take their depositors money, put it in an inner city except on an insured FHA loan today. That is my opinion. The CHAIRMAN. What you are saying is that they have been unwilling to make any of these section 235 loans in the inner city. Mr. WEISEMAN. Well, let's put it this way, they haven't done it to date. Now they haven't done it because, in my opinion, they are not willing to do it.

Mr. KASS. Senator, it is very difficult sitting from our side of the fence to determine whether the financial institutions in this community are willing. I hope again this would be another alternative before you pass the legislation to find out, get a commitment from them that in the event you do pass this legislation that they indeed will be putting this money back into the inner city. We are very concerned about this. We are very concerned that when the mortgage representatives earlier testified as to the drop of money coming into the District of Columbia that is not because FHA raised the rates recently. We just honestly don't know. We are not the people to make the interpretations whether the banks and institutions are in fact committed to a city which they think is a very high risk investment. These are the questions we are raising to the committee which we can't answer. Hopefully the study commission that the council has created will attempt to get this information. This is the thing we feel that the committee has the burden to ask these questions of the institutions. The CHAIRMAN. All right.

Gentlemen, thank you very much. We will incorporate your prepared statement in the record in its entirety.

(The prepared statement follows:)

PREPARED STATEMENT OF THE URBAN REHABILITATION CORPORATION

The Urban Rehabilitation Corporation is a non-profit sponsor of housing for ownership by low-income families in the District of Columbia. URC was formed in October 1967 and funded by the Catholic Archdiocese of Washington through its Office of Urban Affairs. The major part of its efforts (67 single-family homes) has been under Section 221(h) of the Housing Act. It has also completed five units under Section 235, and is now seeking permanent mortgage financing for

the last house in that group. Our corporation has been hampered in rehabilitation of other houses we now own or in taking on new projects because of the high costs of money.

In many other parts of the country the mortgage problem has been reduced by the Tandem Plan, whereby Government National Mortgage Association purchases 82% mortgages under Section 235 at 96, and in turn sells them to Federal National Mortgage Association at market value, absorbing the difference in points.

The District's usury law, limiting interest to 8%, makes it impossible to take advantage of the Tandem Plan. So, regardless of our critical housing shortage, efforts of our corporation and of builders in the District are coming to a halt. Immediate action should be taken to forestall this. This impasse could be alleviated if legislation could exempt all Section 235 mortgages from usury laws, since the effective rate to the homeowner is well under 8% due to the interest subsidy.

We have found that homeownership for low-income families under 221(h) and 235 of the Housing Act is a program which has dramatically upgraded living conditions for our homeowners. There are thousands of other families who could participate in this plan. This program needs to continue.

The CHAIRMAN. Is Maribeth Halloran here?

Mr. Green T. Wood, Director of Housing, UPO.

Is Mr. Baylies here of Fair Play? Why don't you come up too, Mr. Baylies. Is Mr. Anthony Roisman here? Would you be kind enough to come up, please, Mr. Roisman.

Mr. ROISMAN. Senator, I have two other people here with me.

The CHAIRMAN. I will incorporate your prepared statements in the record, and I will ask Mr. Wood, the Director of Housing for the UPO, to go ahead and read his statement and then I will ask each person to comment. What we are trying to do is to get new thoughts and ideas. We will have your statements in the record, but we need to get new ideas, new comments, and new prospects into the record to educate me and the other members of the committee a little bit on this subject.

Mr. Wood, please lead off.

STATEMENT OF GREEN T. WOOD, UNITED PLANNING
ORGANIZATION HOUSING COMPONENT

Mr. WOOD. Mr. Chairman, I would really save time and just highlight some of the remarks I have in the statement here.

I certainly agree with you that housing is top priority in the District of Columbia as well as nationally.

I have to agree with you on the statements you made about zoning being a problem here. We have to solve this in order to have places for adequate housing. Also I agree with you but I want to take issue with you on the likelihood if money is loaned at a higher rate that it ought to be more accessible to banks, and so forth, ought to be more accessible to loaning money to people who want to put up houses. Now, from the poor peoples' standpoint, the view which I represent, this would cause the payment on the mortgage to be more than 25 percent of their income if the interest rate is increased and we feel that this will not necessarily help to create more houses in Washington, D.C. We feel there are other things that are more important like, for instance, the zoning, and so forth.

Now, I would like to speak to the savings and loan associations. I have disagreed a great deal about what I heard about savings and loan associations here. But I want to tell you just exactly the way

we see the savings and loan associations as it affects this problem of the raising of the interest rate.

We feel that the savings and loan associations should be permitted to exclude from their reserve and liquidity requirements FHA and VA loans and then they would have these funds available for FHA and VA loans.

Now, in 1969 the total mortgages held by savings and loan associations was around $135 billion. Now, of this amount only 13.4 percent represented FHA and VA mortgages.

This 13.4 percent permanently held by the savings and loan associations could be reduced from the reserve funds and could become immediately available.

The participation of the savings and loan associations has not been in terms with their growth in the District of Columbia.

In 1967 the percentage of mortgages in FHA and VA was 12.5 percent. In 1968 it was 12.9 percent. In 1969 it was 13.4 percent. Now, this shows savings and loans have grown in their assets but there has not been an increase in the FHA and VA participation.

This is true that savings and loan associations are to support and benefit the communities in building. It shows they are more responsive to the sensitivity of interest rates more than anything else. În conclusion, when the interest is increased from 71⁄2 to 8 percent, a lot of people are eliminated that need to be helped. Many currently interested people think, that despite the mandates and goals for a great society, that these increased rates would encourage crime because the poor people interpret this as an effort to deny, not to assist, them. Thank you.

(The prepared statement follows:)

PREPARED STATEMENT OF GREEN T. WOOD, UNITED PLANNING ORGANIZATION HOUSING COMPONENT

Mr. Chairman, we have been asked to appear before your Committee as a legitimate representative of the poor and near poor, the consumer, and the tenant. We are grateful for your concern with the needs of the community. We trust that you will listen to this community, a community that has no representation in Congress, in a country which proclaims to be at the forefront of world democracy. As you know, little money has trickled into the low income housing market in the Washington Metropolitan Area in the past few years. Specifically less than 15% of even Downtown Progress's estimated need for low/moderate income housing has been met. The exact figures are unavailable, simply because of the splintered nature of local Government-which does not know. But we don't really need statistics to tell us that this area has at present a vast unmet demand for housing for families of low and moderate income means.

As you well know, Mr. Chairman, the District of Columbia has traditionally fallen short in providing housing to those most in need. This was certainly true in 1959, as it was true in 1969, and nothing suggests less than a problem in 1979. Today we are asked to speak to the issue of temporarily removing the ceiling in interest rates so that more housing can be built. Certainly, learned legislators, you jest if you think that a removal of the interest ceiling will necessarily advance the cause of housing for low and moderate income people. Surely you are sufficiently conversant in the science of economics to know that factors other than excessively high interest rates are needed to move the low/moderate income housing market. High interest rates do have a great deal to do with building for the poor, and I am sure that you know so. Providing for America's needy has never had the high priority in Congress that it requires.

If your intent is to improve the supply of low/moderate income housing, as you say, please, we implore you to make a complete analysis of all the facts that affect housing for the poor. Look into the real causes of inadequate housing for the needy.

41-305-70- -6

These causes have been more than adequately documented in assorted Presidential reports and studies conducted over the past decades. These causes include racial and economic discrimination, Government inattention, discrimination in delivering such services as water and sewer connections, preferential zoning, and the list of inequities goes on.

But let us put aside the national causes and look for a moment at the local

scene.

For example, look at the banks in the District of Columbia; their earnings and profits have been increasing at an accelerating rate. In addition, these same banks receive Federal subsidies through a variety of free services, from Federal insurance to interest-free bank deposits. What is the banking industry doing for the needy? Is the banking industry doing anything for the non-affluent, non-white community, a community that is taxed without representation, a community whose taxes help subsidize the banking industries?

Mr. Chairman, it is my opinion that we should not be here to discuss removing interest rate ceilings, but rather other items more pertinent that affect housing for the needy.

Again, gentlemen, I submit to you that you must go beyond the focus of the current interest rates and instead deal with the more serious problem of providing adequate housing in the District of Columbia.

STATEMENT OF ANTHONY Z. ROISMAN, GREATER WASHINGTON CHAPTER, AMERICANS FOR DEMOCRATIC ACTION; ACCOMPANIED BY ERIC SIRULNIK, ATTORNEY AT LAW; AND MRS. ANNE B. COTTON, STUDENT

Mr. ROISMAN. Senator, my name is Tony Roisman. I am representing the Greater Washington Chapter of the Americans for Democratic Action. With me are two consultants who have helped us formulate our position on the bills. Mr. Eric Sirulnik, who is a lawyer and senior teaching fellow at George Washington University Law School, and Mrs. Anne B. Cotton, who is a second-year student at Georgetown Law School. They have both just this year completed studies on two different aspects of the mortgage question in the District of Columbia.

The CHAIRMAN. Do they have those studies written up? Mr. ROISMAN. Yes; they do and I am submitting those for the record.

Senator, I want to agree with what Mr. Wood has said for the most part, and you and I are in certain basic agreement. Since I am opposed to the bill S. 3313 perhaps I should state where we agree before we start disagreeing.

The CHAIRMAN. All right.

Mr. ROISMAN. I agree with you there is a rate at which mortgage money will move into the District of Columbia. It may be 40 or 50 percent but there is a rate and I don't deny that we can get money in here if we are prepared to pay those kinds of prices.

I agree with you there is a need to be realistic about the problem. That it is not adequate to merely point to the housing crisis and bemoan the existence of it.

I agree with you that we need more housing in the District of Columbia as well as all over the country. Congress set a goal in 1949. It has been 21 years and we are not even near the goal they set then and there are new goals.

The CHAIRMAN. No; we are losing ground.

Mr. ROISMAN. New goals need to be set. Finally I agree with you there is a great concern about inflation in this country and I think