mortgages have been written at 7 percent. We know some things are right and ought to be done even though there is not a particular law that covers it. Mr. ST GERMAIN. And it is low because of the location. Mr. GULLEDGE. Because of the location, you can't sell it to the unsubsidized purchaser anywhere near what it cost them to produce it. These are tough questions. The Secretary's basic philosophy, to which I subscribe, is that we in the Department should not be a party to placing anyone in a house that has a mortgage for more than the house is worth, but you have to get out there and find out what it is worth. This becomes difficult when you introduce the subsidy because you get into the real basic question of how to decide what it is worth. Mr. ST GERMAIN. Because of overimprovement. Mr. GULLEDGE. Overimprovement of the neighborhood. And there isn't any expectation that you can resell it to somebody, if it didn't involve subsidy, and get that much for it. That is one way of measuring its worth, but we are endeavoring to see if we can't come up with some formal way that will be a little sharper than the traditional way of arriving at the value. We have a different ball game where you have inner city problems. You have uninformed purchasers. You do have a Federal guarantee and all those things tend to make things worth much more than if they were absent. After all, there was once a practice called redlining, and the net effect was that the property in the redlined area was worth nothing, the FHA wouldn't insure them, and nobody else would. They were worth nothing. You can go to another extreme, as I saw when I was in St. Louis last November. I looked at some property in a rundown neighborhood and was told, "Mr. Gulledge, if you will pay the taxes we will give it to you; however, if you bring in the urban renewal program, it is a different story." The property would then be worth a whole lot because of the Federal involvement and the Federal Government has been taken through the nose for untold billions of dollars at inflated prices merely because of the values created in this fashion. This is merely because the Federal involvement is there; otherwise, the property is worth nothing. When the Federal Government is there, it is worth astronomical figures. This is not something with which we haven't yet come to grips. We don't have the answer yet, but we are trying to come up with an answer. Mr. ST GERMAIN. Mr. Secretary, we had a little discussion-the chairman and some other members here-and at the moment, I am chairing. We are willing, if it is agreeable to you, to try to attempt to finish by 1:30, or we can come back at 2:15. Mr. GULLEDGE. Fine. We can finish now. Mr. ST GERMAIN. Mr. Buckley? Mr. BUCKLEY. Mr. Chairman, with reference to the discussion on the profitability of 236 projects, rather than go further on it, I would like to ask that Dr. Schechter's article, the 10 pages of it on the potential profit on 236 projects, be included in the record after Mr. Gulledge's comments. Mr. ST GERMAIN. I think it should be inserted at that point at which you mentioned it. Without objection, that is so ordered. (The article referred to by Dr. Schechter can be found at p. 501.) Mr. BUCKLEY. Mr. Watson, in response to Mr. Collins' question you described prepurchase counseling. You described the screening process which you go through with 235 applicants to determine whether counseling is needed. That screening is limited to 235, if I understand it correctly? Mr. WATSON. That is correct. Mr. BUCKLEY. But the vast majority of inner city acquisitions are not under the 235 program. What do you propose to do to help the non-235 home purchaser decide whether he should buy, and if he buys, what his responsibilities will be? Mr. WATSON. We are at the present time developing a way to extend that to the 221(d) (2) program, but the problem is that there is a great feeling that we should not expand this counseling program too much until we have got some kind of evaluation. We have requested that proposals be submitted to spend approximately $400,000 on evaluating all of the counseling efforts that have been going on for the past 2 years. We hope to get early feedback to make the evaluation of the program. In the meantime we are moving ahead to get everything set so we can implement the program if the evaluation is favorable. We reacted to the 235 program and actually the inner city 221(d) program was just as much in need of a counseling program. Mr. BUCKLEY. Thank you. Mr. ST GERMAIN. I have some observations here, Mr. Watson. I commend you for not moving too fast. We have wrestled with this problem of counseling. I think it is extremely important to know that we are getting quality out of it by first using a pilot program such as you are doing. Mr. WATSON. There is a history in counseling that worried me. Particularly, in the welfare programs. For example, counseling was not as effective as many people purported it could be, and we have determined to try to make sure that those doing the counseling were qualified. We will have a training program for the counseling agencies also, to strengthen their value, which will be funded from the $3.25 million. Mr. BUCKLEY. Mr. Morley, this subcommittee has received testimony from Lawrence Katz, the former FHA director in Milwaukee. Mr. Katz, despite his excellent record as FHA director, was not appointed area office director when the area office was created in Milwaukee. Now he has been rehired by the Department as a consultant. We were interested in the selection process for area office directors. What type of qualifications do you consider when you are appointing area office directors? Mr. MORLEY. I am not familiar with the particulars in Mr. Katz' case. Yes; we do have a screening process for area office directors. It is through merit staffing principles. In selecting the candidate from the outside or from inside the Government, we review the candidate's eligibility from the standpoint of his qualification for the job against the selective job factors. Since this is a top management position, we look for the management qualifications of a person, not only experience in previous employment but further-his involvement in activities outside of his employment. Mr. BUCKLEY. Could you tell me how many of the area office directors are former special assistants to the Secretary, the Under Secretary, and Assistant Secretaries of the Department? Mr. MORLEY. No; I can't right offhand. Mr. BUCKLEY. Could you supply that information for the record? Mr. GULLEDGE. Mr. Whitbeck and Mr. Thompson. Mr. Whitbeck is in Detroit and Mr. Thompson is in Hartford, Conn. Mr. BUCKLEY. I have met the area office director in Dallas, who was a special assistant to one of the assistant secretaries, I believe, and I wonder if you could supply Mr. WATSON. He was my special assistant. Mr. ST GERMAIN. Mr. Collins? Mr. COLLINS. As to the testimony of Mr. Katz, the office director, I think that one of the things that have impressed me more was the fact that Mr. Katz was imaginative here. After a very careful study of the guidelines, he went into the interpretation of them, and he went beyond them, to the community, and he tailored his programs to meet the community needs and the housing with the present guidelines. Now, as a criteria-and in selecting area offices of the director, on this, this is one of the main things that you should be looking for, rather than a person to carry out the guidelines for-he should be teaching them to meet the needs of the community here. I wanted to add that comment. Mr. STILL. I would like to say that the question that we propounded to you a few minutes ago was brought up during the questioning of Mr. Haynes, as to the directors and to the qualifications, and so forth. I think in simple fairness we should run down the area offices about which the subcommittee has received allegations, largely from the press, concerning improprieties on the part of area directors. This is the reason, basically, for the question. I think it is important that earlier, Mr. Haynes indicated that, since he took over, he was using his staff to remind employees of the standards of conduct expected of them under conflict-of-interest laws and regulations. It seemed to the committee that serious questions have been raised concerning the leadership in a number of area offices. We asked Mr. Haynes about allegations involving area directors in Miami, New Orleans, Baltimore, Chicago, Philadelphia and most recently, St. Louis, in testimony before the Hart committee. Mr. Morley, as the former regional administrator in Kansas City, possibly you have a comment on the St. Louis allegation? We do not think it important to have furnished the names of the area directors, dates of appointments, qualifications and classifications. Mr. MORLEY. I will supply that. (The material referred to follows:) SELECTIVE QUALIFICATION FACTORS 1. Qualified candidates must have had progressively responsible experience in public service or private industry in which they have demonstrated high level administrative or executive ability. 2. Qualified candidates must process a knowledge of customary business practices or public program procedures relating directly or indirectly to the broad fields of urban planning or urban renewal, public housing, community development, mortgage lending, building construction, or real estate, or any combination of these fields. 3. Qualified candidates must have demonstrated abilities to plan programs comparable in scope to those of a HUD area office, and ability to direct, coordinate, and control the activities of a staff of employees engaged in execution of such programs. 4. Qualified candidates must have demonstrated abilities to deal effectively with and gain the cooperation of associates and the public, to organize and conduct conferences and public meetings, and to represent the agency in negotiations with officials of public and private organizations. Lawrence L. Thompson.... Director, Hartford, Conn.. 1. Served as special assistant to the Under Secretary of HUD on special studies and programs dealing with a wide range of housing and urban development programs. A careerist, he served 4 years with the Bureau of the Budget. 2. In the performance of duties of 1, above, he meets the experi- 3. While at the Bureau of the Budget, analyzed and made recom- M. Daniel Richardson...... Director, Boston, Mass... 1. Served as field manager of the human services task force for REGION 11 Philip Sadler... Director, Camden, N.J. James P. Sweeney.. the State of Massachusetts office of planning and coordination. He also served as director of the community organization department of the Roxbury Federation of Neighborhood Centers and associate director of the American Friends Service committee's inner city housing program. 2. In the performance of duties of 1, above, he meets the experience and qualifications for factor 2. 3. In the performance of duties of 1, above, he meets the qualifications for factor 3. 4. In addition to 1, above, he also had experience with mixed social groups, State, county and municipal government and civic organizations on highly emotional and complex problems. 1. Formerly Director of the HUD FHA Insuring Office, covering State, county, and municipal site real estate financing, planning and inspections of construction. In addition, for over 20 years managed a large insurance agency (all types of coverages) in Manchester. 2. In the performance of duties of 1, above, he meets the experience and qualifications for factor 2. 3. In the performance of duties of 1, above, he meets the experience and qualifications for factor 3. 4. In addition to 1, above, he was active in the University of New Hampshire alumni association, serving as president. 1. Served 19 years with HUD and predecessor agencies in progressively responsible positions nationwide in scope. He progressed from Special Assistant to Commissioner of Public Housing to Director of Intergroup Relations. He was headquarters (HUD) coordinator for assisted programs in the office of the Assistant Secretary for Equal Opportunity. 2. In the performance of duties of 1, above, he meets the experience and qualifications for factor 2. 3. In the performance of duties of 1, above, he meets the experience and qualifications for factor 3. 4. Mr. Sadler is past National Treasurer of the National Association of Intergroup Relation Officials. He had planned, developed, conducted and provided leadership in the conduct of conflict and complex national problems. Director, Newark, N.J.......... 1. Mr. Sweeney has 11 years with HUD and its predecessor agencies. Progressed from an intern in 1959 through positions of greater responsibility such as Deputy Assistant RA for Renewal Assistance covering New York and New England States. He was regional manager for Operation Breakthrough, later becoming the Deputy Director for the Newark Area Office. 2. In the performance of duties of 1, above, he meets the experience and qualifications for factor 2. 3. In the performance of duties of 1, above, he meets the experience and qualifications for factor 3. 4. He has demonstrated successfully his ability to deal with the most controversial and complex problems, with militant as well as friendly groups in the New England States and New Jersey-with all levels of government and industry. 71-962-72-pt. 3—7 Frank Cerabone..... John Maylott.. REGION III Analysis Director, Buffalo, N.Y.... 1. Mr. Cerabone served as legislative aide and for the past 7 3. In the performance of duties of 1 and 2, above, he meets the 4. In addition to 1 and 2, above, Mr. Cerabone worked with State, county, and local multiracial groups on complex and difficult matters. Director, New York, N.Y.. 1. Mr. Maylott began a 13-year career with HUD and its predecessor agencies as Director of the Hartford, Conn. FHA Insuring Office in 1957. He became Assistant Director of the Multifamily Housing Insuring and Zone Office covering all multifamily applications for the New England area. Formerly was a developer and homebuilder. Served as president of the chamber of commerce in Torrington, Conn. William B. Patterson....... Director, Philadelphia, Pa. 2. Served as Chief Underwriter in the New York Office-covering the New England area. 3. In the performance of 1 and 2, above, he meets the experience and qualifications for factor 3. 4. The vast majority of these activities covered multimillion dollar housing complexes and dealt with the largest construction firms and communities of all sizes and racial makeup. 1. Mr. Patterson was assistant director of the Lawrence County Charles J. Lieberth...... Director, Pittsburgh, Pa... 1. Mr. Lieberth served as director, Federal program coordination Allen T. Clapp... for the State of Pennsylvania for 3 years. In the performance of the duties of 1, above, he meets the experience and qualification factor number 1. 2. Served as first director of the Pennsylvania model cities pro gram, and as regional director, department of community affairs for 26 counties in Pennsylvania. In performance of the duties of 2, above, he meets the experience and qualification factors for factors 1, 2, 3 and 4. Director, Baltimore, Md.. 1. Mr. Clapp is a career Federal employee beginning as a trainee Terry S. Chisholm....... Director, Washington, Carroll A. Mason..... appraiser in 1952 progressing to a supervisory appraiser with the Veterans' Administration in 1958. He left Government to become chief appraiser for the Baltimore Department of Housing and Community Development. He returned to HUD in 1966 with the Deputy Assistant Secretary for Housing Assistance in rehabilitation programs and was promoted to Director, FHA Insuring Office, Baltimore, Md., in 1967., No. 1, above, meets the qualifications for factor 2. No. 1, above, meets the qualifications for factor 3. No. 1, above, meets the qualifications for factor 4. Additionally Mr. Clapp has met with State, county, and local municipal officials and community groups to present HUD programs and answer questions on difficult problems. 1. Served as the region III, Philadelphia, Pa., representative of No. 1, above, meets the qualifications for factor 2. Director, Richmond, Va... 1. Mr. Mason was assistant city manager of Portsmouth, Va., In performance of the duties of 1, above, he meets the experience and qualification factors for factors 1, 2, 3 and 4. 2. Selected as 1 of the 5 outstanding young men in the State of Virginia, 1969. No. 2, above, meets the qualifications for factor 4. |