Page images
PDF
EPUB

Mr. EVINS. You said you had $11 million and $4 million more made $15 million. I total that up to $68.3 million.

Mr. WEAVER. They do not add up

Mr. SLAYTON. That does not take into account what we will receive in applications for the open space land programs for the rest of the fiscal year.

Mr. SHIPLEY. As I understand it, you have $53 million in applications waiting now under the old act.

Mr. SLAYTON. Yes.

Mr. SHIPLEY. And you have not started taking applications under the new parts of this program?

Mr. WEAVER. Under the new act, or new parts of the program?

Mr. EVINS. I asked him how much did he anticipate under the new program.

Mr. SHIPLEY. And he said $11 million and $4 million-$15 million total.

Mr. WEAVER. We are asking under these two new programs $11 million for one and $4 million for the other. That is not what we are anticipating.

Under the old program, we have $53 million already in the pipeline. We anticipate a lot more in that program, and more than $15 million in the other two programs.

Mr. SHIPLEY. That is the point I was trying to get you to bring out. Mr. EVINS. You still have not given us the figure.

Mr. SLAYTON. May I make a point?

The $53 million we have in the pipeline applies to the $60 million we are requesting here under the old space land program.

If we got the $60 million, it would give us $7 million for the rest of the year for new projects.

EFFECT OF INCREASED GRANT RATIO

Mr. JONAS. This increase in applications is directly related, I think Dr. Weaver said, to the increase in Federal participation, from 30 percent to 50.

Mr. WEAVER. That is a part of it. There are two parts.

First, there is the fact the old program has been changed, so where it was first 20 percent to 30, it is now 50. It is double the amount of Federal participation.

Secondly, it has been modified because formerly we could only make grants for land. Now it has been liberalized so we can include in these 50-percent grants the cost of certain improvements.

In addition to that, there are these two new programs:

The program for open space in the central city where you buy, instead of vacant land, improved land, and have small parks in the city; and the program for beautification.

Mr. JONAS. What this means is, the more we liberalize the program, the more takers we have?

Mr. WEAVER. And the more it costs for the same number of takers, in addition to the fact that you get more takers.

Mr. JONAS. If we want to insure wider participation in any of these programs, all we have to do is to liberalize them?

Mr. WEAVER. That helps.

Mr. EVINS. You are going to sell a lot of nursery stock for this beautification program.

Mr. JONAS. Do you think it would cause a slowdown in applications in this program if we would go back to the 30 percent?

Mr. SLAYTON. When the Interior Department's land and water conservation program was before the Congress, we worked out a 40-percent basis for both, but Congress insisted two times by legislation that it be 50 percent, and therefore the programs were equalized on the basis of 50 percent.

Mr. EvINS. Consistent legislation.

Any further questions on the urban beautification and improvements program?

We will turn next to the tab, "Rehabilitation loan funds."

NEW JERSEY WILDLIFE REFUGE

Mr. JONAS. Did you tell us last spring this bird refuge in New Jersey comes under this instead of actual urban renewal?

Mr. SLAYTON. Yes.

Mr. JONAS. How are they coming with that?

Mr. SLAYTON. That is an open space project.

Mr. JONAS. Has that been completed?

Mr. SLAYTON. I do not know if it has been completed.

Mr. JONAS. You are going to give them $900,000 on the cost of buying 2,895 acres?

Mr. SLAYTON. Yes.

Mr. JONAS. Have you disbursed the money?

Mr. SLAYTON. I do not know the extent to which it has been disbursed, but we have entered into a contract. We have approved the project, put it that way.

REHABILITATION LOAN FUND

Mr. EVINS. "Rehabilitation loan fund. We provided $1,362,500 in the original bill and you want $190,000 added.

Insert pages J-1 to J-7.

(The pages follow:)

URBAN RENEWAL ADMINISTRATION

REHABILITATION LOAN FUND

PROPOSED LANGUAGE

"In addition to the amount otherwise available for administrative expenses for the current fiscal year in connection with loans pursuant to section 312 of the Housing Act of 1964, as amended (42 U.S.C. 1452b),$190,000 shall be available from the 'Rehabilitation loan fund' for such expenses."

Summary of budget request

Available, Independent Offices Appropriation Act, 1966 (for admin

istrative expenses).

Requested supplemental_

Revised total_____

$1,362, 500 190, 000

1,552, 500

The supplemental appropriation request includes an additional $190,000 for administrative expenses out of funds already appropriated for fiscal year 1966.

NEED FOR SUPPLEMENTAL REQUEST

The Housing and Urban Development Act of 1965 made two significant changes in the new program of loans for property rehabilitation under section 312 of the Housing Act of 1964 which will require a larger degree of staff effort in administration of the program and a larger amount of administrative expenses. (1) As originally enacted in the 1964 act, loans to individuals and businesses were limited to borrowers who could not otherwise find financing for necessary rehabilitation on "reasonable terms and conditions." The amendment in the 1965 act limits loans to borrowers who cannot find financing on "comparable terms and conditions." Inasmuch as the interest rate on section 312 rehabilitation loans is fixed by law at a maximum of 3 percent per annum, the 1965 amendment provides a very significant broadening of eligibility for rehabilitation loans. (2) The 1965 act also makes loans available to owners of properties in areas covered by code enforcement programs as provided in the new section 117 of the Housing Act of 1949, as amended; under section 312 as originally enacted, loans could be made only covering rehabilitation of property in urban renewal areas. Authorization for appropriations and program level

The Housing and Urban Development Act of 1965 authorized up to $100 million to be appropriated each fiscal year for low-interest rate rehabilitation loans. In its original form, this program was established by section 312 of the Housing Act of 1964, at which time appropriations up to $50 million were authorized. The first appropriation of $10 million was made late in fiscal year 1965. The recently enacted Independent Offices Appropriation Act, 1966, contains an additional $40 million.

Program experience has not yet provided a basis for determining how much of the remaining 1966 authorization of $60 million will be needed during the current fiscal fear. It is expected that a determination of the amount needed will be made in the next few months and that such an amount may be requested in January 1966 supplemental appropriation request.

The change in eligibility for these loans will result in a significant increase in the number of applicants who may be covered under section 312 direct loan program. The provisions of the act reflect the interest of the Congress that it be administered with a highly sensitive balance between the concern for the loan funds and the concern for the accomplishment of project rehabilitation goals. If the program is to make a major contribution to community rehabilitation and conservation, the nature and purposes of these loans will require their use in some risk situations that are marginal to current FHA, SBA, and conventional loan operation. The 1965 amendments do not change the requirement that the applicant must be found to be an acceptable risk. A section 312 loan cannot be approved if the applicant's record shows a disregard for former obligations of this kind or if there is a clear inability to make the payments that will be required.

In many instances, an applicant will be eligible to receive both a supplemental section 312 rehabilitation loan and a direct section 115 rehabilitation grant. Similarly, an applicant who is found not to be an acceptable risk for a section 312 loan will be found to be eligible for a section 115 grant. In reviewing applications for rehabilitation loans, approving officials will often determine, as well, whether the applicant is eligible to receive a rehabilitation grant. Grants under the new section 115 of the Housing Act of 1949, as amended, are described more fully in section G of this justification.

Administration of the program

This program is administered by the Urban Renewal Administration through the HHFA regional offices. A regional rehabilitation loan officer is employed in each regional office, together with an appropriate staff of subordinate loan specialists. In those cities which have the greatest number of properties to be rehabilitated in federally assisted urban renewal or code enforcement programs, local offices staffed with rehabilitation loan specialists and staff with other necessary skills will be needed to provide necessary assistance to local agencies and property owners in developing applications and to minimize delay in processing, once the owner has made the decision to upgrade his property voluntarily. The act provides that the rehabilitation loan program is to be carried

out "*

through the utilization of local public and private agencies where feasible * *." Federal Housing Administration and Small Business Administration technical assistance is fully available in connection with this program, both to advise local agency personnel and to assist in the review of applications. Municipal governments and local public agencies with approved programs or projects involving rehabilitation are required to have a staff of specialists to work with property owners in bringing about the rehabilitation required. This staff provides extensive advisory services of a financial and technical nature, including assisting in determination of work needed, estimating the cost of rehabilitation, securing adequate contract services, assisting applicants to obtain FHA or other financing, and in inspecting the work done for conformity with plans or code requirements. The local agencies are responsible for counseling and guiding property owners and for assembling detailed information necessary for determining the nature and cost of the rehabilitation work to be done and the eligibility of the property, the work, and the applicant.

Loans bear an annual interest rate not exceeding 3 percent of the principal amount outstanding for terms not exceeding 20 years or three-fourths of the remaining economic life of the structures after rehabilitation, whichever is less. Applications and related documents are reviewed by rehabilitation loan specialists to determine whether the applicant is eligible.

Residential loans

Technical processing of eligible applications for residential loans will be conducted with the assistance of the nearest FHA insuring office, though final approval or rejection rests with the rehabilitation loan officer. Residential loan applications over $3,500 are transmitted to the appropriate FHA insuring office to determine whether the applicant is an acceptable risk and for other preliminary processing, including consideration, in some cases, of whether a refinancing loan under one of the appropriate FHA programs might not result in monthly payments better suited to the applicant's income.

Section 312 loans for residential properties are subject to the maximum limits for loans insurable by FHA under section 220(h) of the National Housing Act. The Housing and Urban Development Act of 1965 amends section 220 (h) to provide that the Federal Housing Commissioner may, by regulation, increase the maximum amounts stipulated therein by not to exceed 45 percent in any geographical area where he finds that cost levels so require. Generally, however, the maximum limit for a section 312 loan-whether or not part of the amount refinances all or part of an existing debt secured by the property-will be $10,000 per dwelling unit for the first three dwelling units in the structure with a reduced maximum for additional dwelling units.

Within the applicable maximum limit per dwelling unit:

1. A loan for rehabilitation only may not exceed the estimated cost of rehabilitation.

2. A loan which includes refinancing may exceed the estimated cost of rehabilitation up to the amount of existing debt secured by the property. Other conditions, prescribed in section 220 (h) may act to further reduce the limits described above for some residential loans, but this will occur only in unusual circumstances. Average loans made are estimated at $3,000 per dwelling unit, substantially less than the maximum.

Business loans

Applications and related documents will be reviewed by the rehabilitation loan specialists to determine whether the applicant is eligible. Thereafter, business loan applications are referred to the SBA representative or the nearest SBA office for technical review and recommendation. The SBA will also handle closing, servicing, and liquidation where necessary for loans on nonresidential properties. The maximum loan amount may not exceed the least of: (a) $50,000; (b) the cost of rehabilitation; or (c) an amount which when added to any outstanding indebtedness related to the property creates a total outstanding indebtedness that could be secured by a first mortgage on the property. Average loans are estimated at $25,000, substantially less than the maximum.

Administrative expenses and staffing

As indicated above, significant portions of the total workload involved in the administration of the rehabilitation loan program will be carried out by the local staffs of the Federal Housing Administration and the Small Business Administration. Utilization of the skilled staffs of these two Federal agencies provides for

consistent application of administrative requirements of the program at minimum cost, by those agencies which are best equipped to perform the service.

Development of detailed operating plans has progressed in the period since the original 1966 estimates were compiled for this program. The knowledge thus gained and, particularly, the effect of the amendments in the Housing and Urban Development Act of 1965 indicate that HHFA regional staff will be handling more of the processing of residential loan applications than was originally anticipated. The supplemental estimate includes 38 positions which could not be funded from the amounts provided in the regular 1966 appropriation. Of these, 35 will be in the regional offices or assigned to cities with a large potential volume of applications. The distribution between professional and clerical is 2 to 1, 24 professional positions and 12 clerical. It should be noted that the volume of applications which can be expected far surpasses our original estimates because of the broadening of eligibility in the 1965 act. The table on the following page details the estimate by object of expense.

[blocks in formation]

Mr. EVINS. You say this will require a larger degree of staff effort. Mr. FRANTZ. That is right.

Mr. WEAVER. The reason for this is that the nature of the loans has been changed, and the primary change is that the original law said the loans could be provided if they could not get loans elsewhere at "reasonable" terms, and now the law says "comparable" terms.

COMBINATION LOANS AND GRANTS

Mr. EVINS. It says in addition to the universal application at comparable terms; you say an applicant will also be eligible to receive a supplemental section 312 rehabilitation loan, and a direct section 115 rehabilitation grant.

One is a grant and one a loan?

Mr. WEAVER. Yes.

Take the case where a poor man has to put in some improvements that cost $2,000. To get a $1,500 grant means he has to borrow the

rest.

ADDITIONAL STAFF REQUESTED

Mr. EVINS. How many personnel are you going to add to the headquarters staff in this activity?

Supplemental estimate includes 38 new positions.

Mr. SLAYTON. Thirty-five will be in the field. These are basically field positions.

Mr. WEAVER. Three at home.

« PreviousContinue »