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5 Clearinghouse Rev. 1 (1971-1972)

handle is hein.journals/clear5 and id is 1 raw text is: THE 235 HASSLE: COUNSELING AND PREVENTIVE LAW
by Douglas D. Lambarth, Director of Spokane County Legal Services, and Richard L. Barbieri, Legal Advisor and Gonzaga
Law Student
I.  Introduction
In recent months the Legal Services office of Spokane County, Washington, had a unique opportunity to practice
preventive law. A counseling program was established, designed to prevent low-income families from making serious mistakes
in purchasing homes under the Federal Housing Administration (FHA) §235 subsidy program.' Equally important was the
attempt made thereby to obtain a serious cooperative commitment on the part of private and public agencies to make this
program more viable for the clients of Legal Services and more easily understood by them.
The FHA-administered 235 program became a nationwide issue, if not scandal, within the past four months, culminating
in a critical report issued by Wright Patman's House Committee on Banking and Currency in January.2 The subsequent
suspension by George Romney, HUD Secretary, of the program's operation as it affected existing houses reflected serious
concern for the program at high political levels. Long before this time, however, rumblings had been growing among
low-income groups that the 235 program, which was intended to provide the means of acquiring decent homes by families
who could not otherwise afford them, was instead often resulting in a morass of shoddy workmanship, inflated prices, high

pressure sales and bitterly disillusioned buyers.3 To respond
to some of these major inadequacies, the counseling
program was conceived and established in Spokane.
II. The FHA 235 Program
Section 235 was added to the -National Housing Act4
by § 101 (a) of the Housing and Urban Development Act of
1968.5 It provided that HUD, through local FHA offices,
could approve families to purchase designated houses under
mortgages which carried a government subsidy to bring the
monthly payments within the family's reach.6 The program
had three divisions under which standards were established
for the quality and purchase of newly constructed houses,
substantially rehabilitated houses or standard existing
houses. Though criticism has been leveled at all three
divisions, the rehabilitated and existing houses seem to have
the most potential for abuse and their lower purchase price
makes them more available to families meeting Legal
Services guidelines.
From the beginning, the program represented a hybrid
combination of public and private organizations. The
1. 42 U.S.C. § 1441.
2.  Investigation and Hearing of Abuses in Federal Low and
Moderate Income Housing Programs, Staff Report and Recommen-
dations, Committee on Banking and Currency, H.R., 91st Cong., 2d
Sess. (Dec. 1970).
3.  Examples of published reports are: The Washington Post, Feb.
20, 1971, at B1; Time Magazine, Jan. 18, 1971, at 70; Spokesman
Review, Spokane, Washington, Aug. 7, 1970, at 1; and Oct. 24,
1970, at 1;Seattle Times, Jan. 6, 1971,at 45.
4. 42 U.S.C. § 1441.
5.  Public Law No. 90-448.
6.  For a summary and analysis of definitions and the operation of
§ 235, see FHA Circulars 4441.1 and 4441.3. Both can be found in
National Legal Aid and Defender Association, Home Ownership for
Low-Income Families, Monograph Series No. 3 (1969) at 35.

houses are sold under the program by private owners. These
owners are represented by private realtors. The mortgages
are obtained from private lending institutions. The only
public agency involved is the FHA, which must approve
both the house and the purchaser before the mortgage
payment subsidy is allowed. Even this involvement is
attenuated by the widespread FHA practice of using private
inspectors and appraisers to approve the houses and the
universal practice of having the   lending institutions
complete the applications and service the loans for the
low-income family. George Romney, in meetings with FHA
officials after the Patman Report was issued, is said to have
expressed some amazement at learning that the FHA rarely,
if ever, has any contact with the family buying the house
beyond a review of the application form.7
7.  Romney quoted at meeting of FHA officials, Denver, Colo-
rado, Jan. 26, 1971.
New HEW Hearing Regulations
Outline of the Fair Credit Reporting Act
Federal Aid to Indian Education
White House Conference on Youth

Volume V, Number 1

May 1971


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