We have all learned by now how tough and complex most of our urban problems are. In the process, I believe, many of us have become less starry-eyed and more tough-minded. Redlining will not disappear with the waving of wand. But given the necessary strengthening of the present law, given a new Federal and State commitment to the housing problems of our cities, I am convinced that those of us in the private, national and community organizations devoted to creating more liveable urban areas will not be found wanting in the determination and resourcefulness that difficult task with require over the next few years. The CHAIRMAN. Thank you very much, Mr. Holman.

Our next witness is Ms. Gale Cincotta, the National Peoples' Action. STATEMENT OF GALE CINCOTTA, NATIONAL PEOPLES' ACTION Ms. CINCOTTA. Thank you. Good morning.

It's encouraging to see the oversight hearings so soon after the Home Mortgage Disclosure Act took effect. It's obvious that the committee sees the act, as we do, as one of the most critical pieces of legislation of 1975. For the first time neighborhood people, Congressmen, city officials, policymakers, indeed any and every citizen has the right to see where some of their money is being invested by financial institutions, and what effect those investments have on the neighborhood, the city, and on the country.

National Peoples' Action has completed a preliminary sample in 25 cities of 1975 mortgage lending data compiled from the disclosure required under the act. The data shows a drastic pattern of redlining in every city. I submit that report to the committee under separate cover. Let me give you just a few examples.

In Chicago, the suburb of Northbrook received over $5 million from the two largest institutions in Chicago while the redlined ZIP code of North Austin received less than $100,000 in home loans from one of these institutions and none from the other.

Lincoln, Nebr. redlined South Salt Creek ZIP code received less than $50,000 in home loans while the southeast Lincoln ZIP code received over $1 million in home loans from the same two institutions.

Last, but not least, three redlined central city ZIP code of Salt Lake City received only $567,000 in home loans while heavily invested suburbs received over $21 million in home loans from the same two institutions in Salt Lake City. These examples demonstrate the national scope of the redlining disinvestment process.

I want to interject here, while meeting with the lenders in Salt Lake City, they just very matter of factly said

We made a decision to invest our money outside of the city.

They hadn't been into the issue long enough to term the decision as a "diversified portfolio" or anything else. I was out there 2 years ago working with the people to get some neighborhood housing service programs in there but it still hasn't started.

I think it's important to note that in compiling this preliminary study we confronted some serious regulatory problems that need to be corrected. I point out that new legislation need not be passed to deal with them. The Federal Reserve Board can make the necessary changes in the regulations governing the Home Mortgage Disclosure Act. However, if the Federal Reserve Board is unwilling, then Congress must amend the law.

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There must be a standardized reporting form. Allowing institutions to report any way they please creates confusion and promotes inaccuracies. I am submitting a separate sheet with my testimony outlining the problem and suggesting solutions. The Federal Government has standard forms for gathering all sorts of other data, not only from financial institutions but from all sorts of businesses and agencies. It only makes good sense to have a standard reporting form for disclosure.

There must be a tight time schedule established by which the Federal Government checks for compliance with the law. The FDIC and FHLBB have told us that they would check for compliance as a part of the regular examining process. That's not good enough. That will take, by their own admission, at least 14 months. By that time, we are into next year's filing. Mr. Warwick, when I asked him how long does the process take told us 14 months. If you follow that kind of standard obviously you're already to the second year of disclosure before you know if the first year has been compiled or turned in.

There must also be a central collection point. It is incomprehensible to us that the Federal Reserve Board is not automatically doing it. This is important data that Congress and other policymakers need. They must have ready access to it.

I must also note that these recommendations are not new. During the period when the Federal Reserve Board was promulgating the regulation, we foresaw these problems and asked them to include our recommendations. They did not, so we are now confronted by them. One of the reasons we ask for central collection and survey and study of the data made by the regulatory bodies is that we knew we were going to be doing our studies as best we could but no matter what we brought in it was always going to be suspect, so we felt the regulatory bodies should compile and analyze this data also. Otherwise, there's nothing to measure it on except saying this is our data and then being told so often it's suspect.

While the Home Mortgage Disclosure Act is proving of tremendous value to all of us, I feel we have just scratched the surface of its potential. In order to realize that potential, the act must be amended. I have three specific recommendations for amendments.

1. A Federal agency must be appointed the task of compiling, computerizing, and analyzing all the disclosure data. One July 16, I testified at HUD hearings on redlining in Philadelphia, Pa., and mode this recommendation. These hearings were held by Mr. James Blair. We have not heard any answer. HUD has not acted. Last June, when Dr. Paul Horvitz, Assistant to the Chairman for Policy, Federal Deposit Insurance Corporation, attended NPA's Neighborhoods First Conference, he signed an agreement that read

Dr. Paul Horvitz, for the FDIC, guarantees and promises that: "We will collect and analyze all disclosure data-and make known all these results to the neighborhoods."

On October 8, NPA again met with Dr. Horvitz at the FDIC offices in Washington-35 NPA leaders from 17 cities were present, as was Robert S. Warwick, Acting Director of the Federal Home Loan Bank Board's Office of Housing and Urban Affairs. That morning, NPA

June to arrange for collection of the data, much less analysis. The regulators, it seems, are not willing to face facts. By ignoring the opportunity to gather and analyze disclosure data, they can continue to avoid the tough antiredlining regulating that's needed. Avoiding the facts is not the intent of the law and it's certainly a position that NPA will not accept, and I'm sure Congress will not either. The main thrust of the regulators at that meeting was, again, what are we going to do with the data once we compile it; what are the new things that we are plotting and planning; and it was again so much not even wanting to look at it but fear that something might be recommended from us that the regulators of financial institutions would not on their own want to do.

2. The act must be amended to include disclosure by mortgage bankers. The market for financing FHA mortgages is dominated by mortgage companies, yet they are not presently included in disclosure legislation. Converted into dollar amount, over $3.9 billion worth of FÍA insured mortgages were initiated by mortgage companies in 1974. That represents 74.5 percent of all institutionally initiated FHA-insured mortgages, in contrast to 8.4 percent for savings and loan institutions, and 7.2 percent for national banks. The fact is that mortgage bankers are not effectively regulated by the Federal Government, and not regulated at all by any State except Illinois at present. A study by HUD: The Supply of Mortgage Credit 1970-74, cites HUD's own difficulties in obtaining data on mortgage bankers—

Owing to the nature of the industry there is very little information on the overall dimensions of the mortgage banking industry.

Even more important in considering the impact of these institutions on urban housing concerns is their relationship to foreclosure rates. This relationship has been persuasively demonstrated in Chicago where it was found that when conventional money withdrew from a community, the chances of a mortgage in that community falling into foreclosure increased by seven times. National figures for 1974 showed that in the Northeastern United States, mortgage bankers foreclosed on 57 percent of FHA serious defaults while other FHA lenders foreclosed on only 18 percent.

Not in include mortgage bankers in disclosure legislation is to miss a large part of the Government insured loan market, a market which has a tremendous impact in many urban areas.

3. The act must be amended to include full investment portfolio disclosure of all financial institutions as defined in the act, and that must include mortgage bankers. Additionally, the data disclosed must be in two forms: yearly and aggregate. This amendment is critical to the future of our country. The Congress, the President, Cabinet officers, all Federal and local policymakers, and the citizens of this country must have this information if we are to develop a rational, workable, domestic, and foreign policy. Today this country is facing spiraling inflation and high unemployment. Just recently, Presidentelect Carter has projected that our high unemployment rate will be maintained for at least another 3 years. To turn this situation around, some very critical decisions must be made. How and where do we stimulate the economy, foreign trade, and unemployment opportuni

ties? Do we raise or lower tariffs? What kinds of new regulations and laws are needed?

To make those decisions we must know where all the private capital is being invested. It makes sense to know what bonds are being purchased, how much of our money is going overseas and for what, are banks investing depositors' money out of the State, how much private money is going toward new construction, land acquisition and development, home loans, and businesses? Where is it being invested now? We need to know.

There was an article in the Tribune yesterday that talked about what we invested in speculation within the poor nations. The international data is $135 billion of loans secured through the United States and I think that our next wave of capital being lost is going to be in foreign loans and we always find out after the fact without ever knowing the whole picture of what's happening.

Just recently and as a result of HMDA, we discovered that 12 Chicago banks were investing over $300 million in home mortgages out of State. Under current disclosure limits, we are unable to find out the locations, dollar amount, or type of loan this $300 million represents. Many Chicago neighborhoods are credit-starved while their deposits go out of State. That's critical information to have when making policy.

Some cutback by the savings and loan industry in home lending has occurred because of the lessening rate of savings deposits available to them. More and more Americans find that both banks and savings and loans meet their savings needs. This is very much a result of a strong market campaign by banks to convince the American public to place their savings in banks. Yet banks have not been reinvesting these monies in housing loans at nearly the rate as savings and loan deposits.

Home mortgage credit unions have been popping up to counteract the lessening availability of home mortgage credit in given areas. What sense is there in creating alternative structures until we have thoroughly analyzed why the old ones are failing us?

Last year's Congress, with considerations of such proposals as the Financial Institutions Act and the Fine study, looked to approval of radical changes in the financial institution structure in this country. These discussions can be expected to continue next year. How can any changes in banking and savings and loan structure, including interstate branching, be intelligently considered without full knowledge of past lending patterns and national pictures of redlining?

Every few months there is a new theory on solving urban problems "triage," "planned shrinkage," "doughnut theory," et cetera. Most of them call for massive urban removal, not urban revitalization. The theories are not based on a knowledge of where the money is going but rather on a lack of that knowledge. Senators, the time is long overdue that we have that knowledge. We need a national audit. The regulation changes and amendments I have just outlined are absolutely necessary if Congress is serious about really using the disclosure data to end redlining and assure that our neighborhoods

In conjunction with that goal Congress must take the next logical step. This country needs legislation that outlaws geographic discrimination in lending. The practice of denying a loan to any individual solely on the basis of the geographic location of the property is the most insidious form of redlining and must be stopped. Such a law should contain strict enforcement provisions and penalties.

Thomas Jefferson insisted that "as new discoveries are made, new truths disclosed *** institutions must advance also, and keep pace with the times." We have taken a good first step. Let's keep up the pace.

Thank you.

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