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the honest operator and would benefit the consumer. I mean, there are loopholes. We have certainly learned the lessons of where they are, not all of them, but a good number of them.

Chairman AsHLEY. Well, I am at a bit of a quandary on that. I suspect from your standpoint there is every reason to accept that as being persuasive. But I think it is very difficult to be able to reach a sound judgment on a piece of legislation that has not been enforced. And now we come in and say, well, we can improve the law.

It just doesn't make any sense to me in many respects. Ms. HyNEs. Well, I think-you know, you can look at the theory of whether you look back and see whether the fraud has been committed or whether you have preventive legislation—and I think in this area, when you are talking about SEC and the Interstate Land Sales Act, which was fashioned after the SEC statute, that you are very much talking about preventive legislation, in terms of trying to deal with the situation before the horse is out of the barn and not deal with the situation looking back and saying, now, what can we do and should we have effective enforcement.

Yes, we should. But I certainly think that we should also focus on preventing these situations from happening again in a balanced way, and in a way that is not going to be overly burdensome to a legitimate operator. And I think that some of these proposals would not be really opposed by the legitimate operators. I don't think it would have a great deal of effect on some legitimate operators.

I would be encouraged—I mean, I would be interested to hear from some of the developers who don't rely on the tactics that the less reputable ones relied on. I think the impact of these proposals would not be very substantial on them.

Chairman Ashley. Well, I will tell you what I will do. I will send you their testimony, and it will be soon, because we intend to hear from them within the next day or so.

Ms. ALLAN. Could I add one thing to what Ms. Hynes said? In the case of the subdivisions that we studied, where a company was prosecuted, be it by the Federal Trade Commission or the SEC or the district attorney of Pueblo County, in most cases, except for the criminal case, the remedy that resulted from the prosecutions, the remedies were very much what is proposed by the Minish bill: Money was put in escrow, the company had to provide the funds for the services that it had promised and not put in, advertising had to be changed to conform to the reality.

So, in fact, the result of those cases was just to create for a specific subdivision what the Minish bill would create for the whole industry, which would be good.

Chairman Ashley. Well, that is a pretty good point. You're stipulating in advance that there probably won't be much enforcement, so you just write the conditions into the law that take that into account. But you do the same thing when you are talking about the bureaucracy and the fact that they could not be trusted to review advertising. Because obviously you are saying that gives the sales pitch fellow an opportunity to say: Well, we have submitted to HUD the advertising. And you are saying is: Yeah. And you know where that advertising is? It is what you are saying is: Yeah. And you know where that advertising is? It is in a file drawer some place, and somebody is out for a coffee break.

Well, you have been very helpful in your testimony, and I mean that. And I always play devil's advocate for at least 2 or 3 minutes.

The subcommittee will stand in recess until 10 o'clock tomorrow morning.

[Whereupon, at 3:15, the hearing was adjourned, to reconvene at 10 a.m. on Wednesday, August 2, 1978.]

THE INTERSTATE LAND SALES FULL DISCLOSURE ACT

AMENDMENTS

1

WEDNESDAY, AUGUST 2, 1978

HOUSE OF REPRESENTATIVES,
COMMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS,
SUBCOMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT,

Washington, D.C.
The subcommittee met at 10:10 a.m. in room 2212 of the Rayburn
House Office Building, Hon. Thomas L. Ashley (chairman of the sub-
committee) presiding.
Present: Representatives Ashley, Gonzalez, AuCoin, Brown, and
Kells.

Chairman Ashley. The subcommittee will come to order. The hearings on the Interstate Land Sales Full Disclosure Act will continue this morning. During this session we will hear from the Honorable Toney Anaya, attorney general of New Mexico; and Mr. James Barnes, deputy attorney general of the State of Nevada, representing Attorney General Robert List. And we will also hear, following that, from Mr. Herman Smith, vice president of the National Association of Home Builders; David D. Roberts, vice chairman of the legislative committee, National Association of Realtors, accompanied by our old friend, Al Abrahams, vice president for Government affairs; and Mr. J. B. Belin, Jr., president of the American Land Development Association.

I have a slight problem this morning, gentlemen, in that a number of members will be somewhat delayed in getting here. But they will, as their other committee responsibilities permit them, join us. I have a funeral at 11, so I am not going to be able to be with you all morning. I will say to all of the witnesses that I read your statements last night, each and every one in their entirety. While I may not be here to put questions to you and discuss some of the points raised in your testimony, you can be sure that I will direct questions to you in writing and will, hopefully, receive responses in a timely fashion so that they may be a part of the record.

I think we will proceed, then, with the testimony of the distinguished attorney general of New Mexico, the Honorable Toney Anaya.

STATEMENT OF HON. TONEY ANAYA, ATTORNEY GENERAL OF THE STATE OF NEW MEXICO, ACCOMPANIED BY HON. JOE CANEPA, ASSISTANT ATTORNEY GENERAL

Mr. Anaya. Mr. Chairman, thank you very much. I am Toney Anaya, the attorney general of the State of New Mexico, appearing here in my official capacity.

For the record, I would also like to introduce one of my staff members, Assistant Attorney General Joe Canepa, who works in the area of land fraud.

Mr. Chairman, I would like to submit my entire statement for the record, as well as a resolution that was adopted by the National Association of Attorneys General in June of this year, endorsing some of the legislation.

Chairman ASHLEY. That will be done.
Mr. ANAYA. Thank you very much, Mr. Chairman.
Mr. Chairman, I just will highlight my statement.

Land fraud is a national problem, with its victims increasing by the day. The victims of fraudulent land schemes are scattered throughout the country, even though much of the land itself is in New Mexico. We have estimated in New Mexico, Mr. Chairman, that we have over a million and a half subdivided acres, and in the past 15 years we have estimated that approximately $1 billion in subdivided land sales have been made in our State.

Mr. Chairman, of the acreage in New Mexico, we estimate that roughly about a half a million subdivided lots in New Mexico are presently registered with the Office of Interstate Land Sales Registration and, Mr. Chairman, no one can really estimate how many unregistered subdivided lots there are in our State. Just taking the registered lots alone, we estimate that if they were all fully developed and a family of four moved into a subdivided lot, that our population in New Mexico would almost triple overnight. This is a preposterous proposition in itself, but, nonetheless, new subdivisions are being carved out almost daily.

I think if investors really recognized the extent of the land that is already subdivided there, I do not think that very many investors would be too anxious to buy land in New Mexico. Most of this land, Mr. Chairman, is in remote areas; it is very dry with sparse vegetation, not even fit for cattle-grazing in most cases.

Chairman Ashley. Let me interrupt you, Mr. Anaya, and ask you why your State legislature tolerates a situation of that kind ?

Mr. ANAYA. Mr. Chairman, unfortunately-and this is an indictment on my State legislature

Chairman Ashley. Well, we will not let the word get back to the them. (Laughter.]

Mr. Anaya. I am sure that it will, and it has. But it is no secret. I have made this statement back home. Our State legislature has, in the past, been very heavily lobbied by the real estate industry. The real estate industry is a very large and powerful lobby in the State, and because of that lobbying, the State legislature has not come to grips with the problem. In fact, a law which was passed 3 years ago gives us some protection, but it was adopted only after a great deal of compromising and a great deal of backroom negotiation. But even the act that we presently have is a very weak, one, with hardly any sanctions at all.

Frankly, one of the reasons that I am here today is to plead with this subcommittee and plead with the Congress to give us some Federal legislation.

Chairman ASHLEY. A legislative body that is not subject to pressure of any kind. I can see your point. [Laughter.]

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