issue, my understanding is that they have made a decision to get uninvolved and are rapidly phasing themselves out of it. They brought a couple of cases. Those cases were presumably leading to a trade regulation rule which would have and could have set very valuable consumer standards for the industry.

But the procedure for doing that takes several years and a commitment of resources on their part, which they feel they don't have, and it is my understanding that they are not going to proceed with the trade regulation rule, and they expect OILSR to be handling the problem from now on.

I think also OILSR's problem in enforcement is also one of lack of funds and lack of resources. Before you start thinking about jurisdictional problems, I think these agencies could all be doing a lot better job if they had a little bit more money. The question is not do too many people have the powers, but does anybody have the means to use the power.

Chairman ASHLEY. Well, I disagree with you there. One of our problems is we don't run our Government all that effectively, and rather than fund a number of different agencies and continue to give them more money, my thought is that why not centralize responsibility in a specific area, rather than have a proliferation of agencies that claim the same kind of responsibility and come to OMB or others to beef up their budget so they can each do their thing, generally overlapping each other.

That doesn't make any sense to me at all, unless there is a set of circumstances which appears to justify it.

Ms. HALLORAN. Well, unfortunately at this point, the Federal Trade Commission has the powers to substantively regulate the industry, but it doesn't want to commit the resources to it at this point.

OILSR, on the other hand, lacks those powers, although you could give it so that if you gave it more resources; it needs a little more authority.

Ms. HYNES. Mr. Chairman, I would just respond to your question that in my view it would be more economical and more effective to have the jurisdiction centered in HUD to give them the resources and give them the power to set standards for advertising and to give them the enforcement effort. And not to have it split up between HUD and FTC.

There is a considerable amount of expertise involved here, which is the prerequisite to effective enforcement. I just want to make one comment on the Minish bill, where I disagree with one of the provisions in that bill, and that is to submit the advertising to HUD for review.

I believe that HUD should have the power to set standards for advertising and be able to regulate advertising through setting standards, but in my experience in prosecuting the Rio Rancho case, one of the biggest problems we ran into in that prosecution was that in New York State, New York State has a very strong land regulatory scheme. And they require the developer to submit their advertising to New York State.

The developer did that. The AMREP Co. and Rio Rancho submitted their advertising, but nothing was done. Nothing. The advertising went on. It was fraudulent for 15 years, and it was used for 15 years, and there were no substantive changes made that had any effect on the

consumer. But the company was able to say to the consumer: We have submitted every piece of advertising to the State for your protection.

And I am very concerned. If that same situation is going to be the factor when you are submitting it to HUD, that you are going to ask for a lot of people to have to review this advertising, really not knowing enough facts upon which to make any effective changes in it.

And there you are going to create the bureaucracy. So, I think that you should get away from having HUD reviewing advertising, because it is going to be used against HUD and convince the consumer that he is protected, when in fact he is not.

So, I would oppose submitting the advertising to HUD. I think it is not efficient. It will be costly, and it will not be beneficial ultimately to the consumer.

Chairman ASHLEY. You would keep that within the jurisdiction of the FTC?

MS. HYNES. No; there are two separate things. Should HUD be able to issue regulations to say you can and you can't say this in advertising? Yes.

Should advertising be physically submitted to HUD for a review? No; because then you get into the situation of having the developer or the land company say: It has all been submitted for your protection, and you are protected, because HUD has taken a look at this.

So, I say let them regulate it, but don't let them review it. It is not cost-efficient, and it doesn't help the consumer in the long run.

Chairman ASHLEY. What about the property report? We hear from some quarters that this doesn't really provide much help to a purchase, because that purchaser is drowned in information that he or she does not understand very well. I wonder if you have a judgment as to whether or not the proposed regulations do enough to simplify the information that is required to be of some positive help?

Ms. HALLORAN. Yes; we think the proposed regulations are pretty good, as a matter of fact. There is a certain point beyond which information on purchase of land can't be made simpler. There are just a lot of complex facts that you should know before you purchase land. And I think OILSR is now doing a pretty good job of trying to write their regulations so that these property reports will be as understandable and clear and comprehensible to the average person as possible. And I think they are also pretty complete.

Chairman ASHLEY. Do you think that the installment sales contract should be banned or that it should be modified or that consumers simply be warned of the pitfalls apparent in that type of sales contract?

Ms. HALLORAN. I don't think just warning them will do the job, and I can't really see how practically such a warning could be administered. I think the installment contract is inherently-well, in fact, in some of the cases, the FTC has brought, they have described the current installment contract arrangement as an unfair trade practice: that is, in a situation where the consumer gets no refund if they default on payments. That I think is an important minimum. I think the installment contract is structured so that the consumer does have no rights and no right to a refund is, in fact, inherently unfair.

Chairman ASHLEY. Well, that is what I suggested this morning that might be a modification along the lines that the State of Ohio has followed. At least, that is my understanding in the land contract.

Ms. HALLORAN. It is our understanding that the State of Ohio does do this, and it is very unusual in that regard and is to be commended for it.

Chairman ASHLEY. I was surprised Ohio did it. It is one they slipped through the legislature.

Ms. HYNES. Mr. Chairman, the situation you described this morning about the 1929 situation where all of the provisions in the contract really were against the seller and in favor-I mean, against the person who was purchasing the land and in favor of the one who was selling it, is really the situation that pertains today in the contracts. Chairman ASHLEY. Indeed.

Ms. ALLAN. One of the other problems

Chairman ASHLEY. I was just going to say that there is a possibility of modifying the provisions of an installment contract so that that form of financial tool can be used.

But obviously, on a sounder basis-I mean, we are really going pretty far in the eyes of the honest land developer when we say we need 15 to 30 days rescission right, and no installment contracts. I mean that honest developer-and I suspect that they probably outnumber the dishonest ones-is probably paying a fearful price for the fraternity that he is running with and he happens to be operating in. Ms. ALLAN. One of the things

Chairman ASHLEY. All I am saying is: If we could be sophisticated enough in our legislative efforts that the sound, the sensible, the properly motivated land developer that wants to operate in an honest fashion could be accorded legislative treatment that wouldn't really presuppose that he is of the breed that we have been discussing in our hearings today.

That is pretty hard to do, but it does seem to me that there is that kind of concern that we should try to be responsive to.

MS. ALLAN. We found that the developers who have a real product to sell, in fact, do modify the use of the installment contract to conform with the quality of that product, so that, for instance, the Deltona Corp., which is one of the ones we studied, sells contracts of varying durations, so if the purchaser wants to use his land within 2 years, the Deltona Corp. sells it on a 2-year contract and promises all improvements at the end of 2 years and turns the land over and does that for a 4-year and a 6-year and an 8-year period, which is a way of-an internal modification which we found pretty good.

The same thing with DART Industries: we found they actually wanted to get the land used. They wanted people to come to it. They want people to live on it, and they do the same thing.

On the other hand, we found that in the few States that have laws which regulate installment sales, all of those laws exclude installment land contracts. They apply to appliance contracts, every other kind of installment contract, but not land, and we think that perhaps if these laws could be modified to include the land contract, maybe that would go a long way toward helping the problem.

Ms. HALLORAN. There is a way of paying for land on time, which is perfectly legitimate and everyone knows about it. It is known as mortgage. If installment contracts could allow a person to have equity the way you do in a mortgage, it would be a far better instrument.

Chairman ASHLEY. What is required in the registration statement? I am a little unclear on that.

Ms. HALLORAN. That is probably a better question to ask HUD, but it is a lot of information which the examiner uses to see whether the property report is true.

Chairman ASHLEY. I see. So, there is a real purpose to be served by this registration statement, in your judgment?

Ms. HALLORAN. Yes. I think it is an open question, however, whether all of the material now required in the registration statement is really useful and necessary. They do fill drawers and drawers at HUD, and I think in the proposed regulations HUD is making an effort to try to cut down on some of the paperwork and perhaps that could go further. Chairman ASHLEY. Congressman Minish's bill contains a provision permitting rescission at any time during 3 years, if certain conditions aren't met, such as if the contract was signed on the same day the contract was offered and the developer provides financing, and so forth. The industry, and again, this is presumably the honest participants in the industry, have stated that this provision would simply dry up financing.

I wondered if you agreed with that and whether you think the proposal is valuable.

Ms. HALLORAN. I imagine it would dry up financing in some cases and not in other cases. Banks who do make loans to businesses to spend money on something where they think there is a reasonable assurance that the company would be able to make money back-in other words, if the risk is reasonable, a bank will make a loan.

I would think that a legitimate, honest developer onerating on a reasonable scale ought to be able to obtain bank loans to finance basic services and so forth to obtain the capital he needs, in effect, an installment contract.

The subdivider is borrowing the money from the consumer to pay for improvement and to build the subdivision. Why should the consumer have to assume this risk? This doesn't seem fair to me, particularly when the consumer is not necessarily aware of the fact that he is playing this role.

Chairman ASHLEY. Do you know how many cases have been prosecuted in this general area? The complaint has come to us that there has not been much in the way of Government prosecution, and that HUD does not prepare its cases well.

Ms. HALLORAN. Perhaps also Ms. Hynes could comment on that, but the Federal Trade Commission has brought, I believe, less than a dozen cases, the SEC a couple.

Chairman ASHLEY. Well, if there are 3,000 complaints a year, which I think was your testimony, and if my complaint mail is any indication, there are more than just a few. There are 3,000 that indicate there is some legitimacy to the beef.

MS. HALLORAN. I would think so. I would think, in fact, that based on our research it is quite possible that a prosecution similar to the one against Rio Rancho could be brought against quite a number of the companies we studied. This hasn't happened. Partly it is a question of resources; partly it may also be a question of the way efforts are directed and resources are directed.

Chairman ASHLEY. That is very discouraging to me, frankly, because I have to wonder how advantageous it is to consider sweeping changes in the law when we haven't bothered to prosecute on the basis of the law that is on the books.

I mean, how do we have any knowledge or judgment as to how the industry and the bad players in the industry would have responded if they were put on notice, properly put on notice, not just by one case selfgenerated by a charming and delightful and obviously assiduous assistant U.S. attorney, but by HUD referring cases with the insistence that prompt prosecutions be brought.

I just wonder how the industry would have responded over the past 10 years had there been a vigorous enforcement effort and a real commitment to stopping these practices.

MS. HALLORAN. I think that is a very legitimate comment; however I would say that both are needed. Enforcement is a very expensive one by one process, and while there is an important deterrent power to it, the companies know that the Government can afford to bring in only so many cases a year. I think there also needs to be substantive protections that have a much broader impact.

Chairman ASHLEY. Well, we will never know, but what we do know is that the changes in the law that are being suggested are going to apply to the innocent, to the responsible and to the honest participants in the industry as well as the dishonest ones, and they are being in some respect unfairly burdened not only by the conduct of others in their industry who aren't honest, but by the failure of the bureaucrats to properly enforce the law. Had the law been enforced, the need for corrective legislation would be less.

Ms. HYNES. Well, I am not sure about that. I think that the lesson in the Rio Rancho case was that one-let us take some of the very specific highlights of the proposals here the cooling-off period.

If an honest developer has a good product to sell, if somebody gets 2 weeks to think about it, presumably, he will still be as enthusiastic and want to buy that property 2 weeks later.

Chairman ASHLEY. I would say that's fine from your standpoint and mine, but if we were in the private sector running one of those companies and trying to do it honestly, we would find that this created uncertainties that carried over into their ability to finance their product. I mean, we are introducing additional uncertainties.

Certainly it may well be in the public interest, but to say rather blithely that the honest operator simply isn't going to be impacted by the changes that are proposed, strikes me as being-going maybe a step bevond the realm of reality.

Ms. HYNES. I am not saying there is no impact. I am saying that on balance the impact is not so terrible that it would warrant not passing the legislation. I think that while there might be uncertainty for 14 davs, if that is the period that we focus on, and take the shorter period of time, that there is more to be gained by that 2 weeks of uncertainty and in trying to extend the statute of limitations for fraud cases where it is really a fraudulent situation, and you are not talking about the honest

Chairman ASHLEY. But you can't have it both ways, Ms. Hynes. If we are not going to enforce, then we are asking the honest operator to suffer the uncertainties and the changes in his operation which are not changes for the better, for no reason whatever.

I mean, if we are not going to enforce, then there has been no purpose in adding these burdens on the honest operator.

Ms. HYNES. Well, I agree with vigorous enforcement. But I think there are some loopholes that need to be plugged, that would not harm