GENERAL COUNSEL OF THE DEPARTMENT OF COMMERCE, Hon. A. WILLIS ROBERTSON, Chairman, Committee on Banking and Currency, DEAR MR. CHAIRMAN: This is in further reply to your request for the views of this Department with respect to S. 811, a bill to enable Federal home loan banks to implement their services to their member institutions by establishing a secondary marketing facility for participations in conventional home mortgage loans. S. 811 would create a Home Mortgage Corporation whose stock would be subscribed to by Federal home loan banks and Federal savings and loan associations. This corporation would buy and sell participations in conventional mortgages on residential properties containing not more than four family units. S. 811 would supplement the financial structure of the Federal Home Loan System which now provides for advances to savings and loan and other institutions on their loan portfolios. Both loan and secondary market facilities are already available on FHA-insured and VA-guaranteed mortgages through the Federal National Mortgage Association. Since this legislation deals with matters of primary concern to the Federal Home Loan Bank Board, the Department of Commerce would defer to the views of that agency with respect to S. 811. We have been advised by the Bureau of the Budget that from the standpoint of the administration's program there would be no objection, to the submission of this report to the committee. Sincerely, ROBERT E. GILES. Hon. A. WILLIS ROBERTSON, COMPTROLLER GENERAL OF THE UNITED STATES, Chairman, Committee on Banking and Currency, DEAR MR. CHAIRMAN: Reference is made to your letter of February 20, 1963, requesting our comments on S. 811 which is entitled "A bill to enable Federal home loan banks to implement their services to their member institutions by establishing a secondary marketing facility for participations in conventional home mortgage loans." If enacted, it would be cited as the "Home Mortgage Corporation Act." Section 3(a) of the bill would create a new corporation within the Federal Home Loan Bank System which would be called the Home Mortgage Corporation. We believe that several provisions of the bill give rise to some question whether the proposed corporation is intended to be a Government corporation or a private corporation and we recommend, therefore, that the bill be clarified in that respect. For example, while financing of the corporation under section 4 of the bill apparently would not require Government funds, thus indicating an intent to create a corporation financed entirely with private funds, we note that section 9 (a) of the bill would amend section 201 of the Government Corporation Control Act (approved Dec. 6, 1945, 59 Stat. 600, as amended, 31 U.S.C. 856), by adding the proposed corporation to the list of Government corporations classified under that act as mixed-ownership corporations. Assuming then that the proposed Home Mortgage Corporation would be a private corporation, we do not understand the purpose of having it included in section 201 of the Government Corporation Control Act. We believe also that paragraphs 6 and 7 of section 5 of the bill which authorize the corporation to utilize the services and personnel of Federal agencies on a reimbursable basis and to use the U.S. mails in the same manner as the executive departments of the Government, give to the proposed corporation privileges not accorded other private corporations chartered by the Congress. Also, we do not understand the purpose of paragraph 8 of section 5 as we are not aware of any provisions of the Government Corporation Control Act relating to determining the necessity for and the character and amount of obligations and expenditures. It is noted that the bill contains no provisions for independent and periodic audits of the proposed corporation. Consequently, we suggest that a provision be included in the bill requiring annual audits in accordance with generally accepted auditing standards by either (1) the Federal Home Loan Bank Board on a reimbursable basis or (2) independent certified public accountants or independent licensed public accountants, certified or licensed by a regulatory authority of a State or other political subdivision of the United States. The bill is silent as to the Federal, State, or local taxes which the proposed Home Mortgage Corporation may be required to pay. Section 13 of the Federal Home Loan Bank Act (approved July 22, 1932, ch. 522, 47 Stat. 735), as amended by section 8 of the act of May 28, 1935 (ch. 150, 49 Stat. 295, 12 U.S.C. 1433), provides in specific terms the extent to which the Federal home loan banks may be subject to Federal, State, or local taxes. Similar provisions relating to the Federal National Mortgage Association, which performs functions similar to those to be performed by the proposed Home Mortgage Corporation, are set forth in section 309 (c) of the Federal National Mortgage Association Charter Act (approved Aug. 2, 1954, ch. 649, 68 Stat. 621, 12 U.S.C. 1723a (c)). While the proposed Home Mortgage Corporation apparently would be subject to taxation on the same basis as any private corporation, you may wish to consider whether a specific provision concerning the tax status of the proposed corporation should be inserted in the bill. Section 6 of the bill grants the proposed corporation authority to issue notes, bonds, debentures, or other obligations. While the United States apparently would not guarantee those obligations, you may wish to consider requiring the corporation to state specifically on all obligations issued that the obligations are not obligations of the United States and are not guaranteed by the United States. Such a requirement presently is applicable to the consolidated obligations issued by the Federal home loan banks (12 U.S.C. 1435). Sincerely yours, JOSEPH CAMPBELL, Comptroller General of the United States. FEDERAL DEPOSIT INSURANCE CORPORATION, Hon. A. WILLIS ROBERTSON, Chairman, Committee on Banking and Currency, DEAR MR. CHAIRMAN: You have requested the views of this Corporation on S. 811, a bill to enable Federal home loan banks to implement their services to their member institutions by establishing a secondary marketing facility for participations in conventional home mortgage loans. The creation of a stronger secondary market for conventional home mortgage loans would be desirable from the standpoint of increasing the liquidity of mortgage investment as well as increasing the funds available in the mortgage market. However, in the opinion of this Corporation, the legislation proposed by S. 811 is too restrictive in that it would restrict participation in conventional home mortgage loans by the proposed Home Mortgage Corporation to those loans originated by members of a Federal home loan bank. We believe that S. 811 should be considered along with the provisions of S. 810 which would create marketing facilities designed to increase the market for conventional and other mortgage loans regardless of the origin of such loans. There would appear to be little, if any, need for the legislation proposed by S. 811 if S. 810 should be enacted into law. It is the view of this Corporation that the legislation proposed by S. 810 would far better serve the existing need for a stronger secondary market for conventional and other mortgage loans than would the more restrictive provisions of S. 811. With respect to the technical aspects of S. 811, this Corporation would deem it more appropriate for your committee to be guided by the views of the Home Loan Bank Board, since the operation of the proposed Home Mortgage Corporation would primarily affect financial institutions within the jurisdiction of that Board. We have been advised by the Bureau of the Budget that it has no objection from the standpoint of the administration's program to the submission of this letter. Sincerely yours, JESSE P. WOLCOTT, Director. FEDERAL HOME LOAN BANK BOARD, Hon. A. WILLIS ROBERTSON, Chairman, Committee on Banking and Currency, DEAR MR. CHAIRMAN: In response to your request the Federal Home Loan Bank Board submits herewith its views with respect to S. 811 of the present Congress, which if enacted would become the Home Mortgage Corporation Act. This bill would create a corporation, to be known as the Home Mortgage Corporation, which would be given power “to buy and sell, and otherwise deal in its discretion with, participations in mortgages on residential properties containing not more than four family units." Such mortgages would be required to be first liens on real estate in fee simple, or on a leasehold under a renewable lease for not less than 99 years or a lease having not less than 50 years to run from the date the mortgage was executed. The management of the Corporation would be vested in a board (referred to in this report as the managing board to distinguish it from the Federal Home Loan Bank Board) consisting of the members of the Federal Home Loan Bank Board (3 in number) and the presidents of the Federal home loan banks (of which there are 11). The bill provides that the Chairman of the Federal Home Loan Bank Board shall name one of such presidents as chairman of the managing board. Under the bill, the managing board is to provide for the issuance of nonvoting capital stock of the Corporation, both common and preferred, in shares of $100 par value. On call of the managing board from time to time the Federal home loan banks are to subscribe to preferred stock in an aggregate amount not over $50 million. Each successive partial issue within that aggregate is to be subscribed and paid for by each Federal home loan bank in proportion to the par value of its outstanding capital stock at the time of such call. The bill provides further that each member of a Federal home loan bank shall be eligible to participate in the activities of the Corporation and that, subject to certain provisions for the making of deposits in lieu of stock purchase, each participating member shall subscribe to and purchase common stock of the Corporation in an amount "approximating" 1 percent of the dollar amount paid by the Corporation for its purchase of participations in "home mortgage loans" from such member. Except as otherwise authorized by the Corporation, each such member would be required to continue to hold such common stock in an amount not less than 1 percent of the outstanding balances of the participations sold by it to the Corporation and still held by the Corporation. Stock held by a member in excess of "such 1 percent minimum" would be required to be redeemed at par by the Corporation when offered by the holder, unless the capital, surplus, and reserves of the Corporation would be reduced to less than one-tenth of its obligations then outstanding. The Federal home loan banks and Federal savings and loan associations would be expressly authorized to purchase stock "as herein provided." Other Federal Home Loan Bank members not having legal authority to purchase such stock would be permitted, "until State law is amended to authorize such purchase," to make "deposits" as set forth in the bill, in lieu of stock purchase. The managing board would be authorized to retire any or all the Corporation's stock if the capital, surplus, and reserves of the Corporation would not be reduced to less than $50 million or one-tenth of the dollar amount of its outstanding obligations, whichever was greater. Stock senior as to time of issuance would have first entitlement to retirement, at the election of the stockholder. For the purposes of the act, the Corporation would have power to borrow money and to issue notes, bonds, debentures, or other such obligations upon such terms and conditions as the managing board might determine, the amount of such obligations outstanding at any one time not to exceed 10 times the capital, surplus, and reserves of the Corporation. Such obligations would be declared legal investments for "federally chartered savings and loan associations"; whether this would apply only to Federal savings and loan associations or also to some or all savings and loan associations of the District of Columbia and the territories and possessions is not clear. The bill would amend the Government Corporation Control Act to include the Home Mortgage Corporation in the list of "mixed-ownership Government corporations" in that act. Since there would not at any time be any Government capital in the Home Mortgage Corporation the reason for such inclusion is not apparent. Further, the effect which such inclusion would have is not clear, in view of the fact that audits of mixed-ownership Government corporations under that act are only for periods in which Government capital has been invested therein and the further fact that a mixed-ownership Government corporation from which Government capital has been entirely withdrawn is not subject, during the period it remains without such capital, to the provisions of that act as to the depositaries for banking or checking accounts, and as to the issuance of obligations and the purchase or sale of direct or guaranteed obligations of the United States. By the title of the bill, its purpose is stated to be to enable Federal home loan banks to implement their services to their member institutions by establishing a secondary marketing facility for participations in conventional home mortgage loans. The Board is of the opinion that at the present time no adequate evidence of need for the establishment of a mechanism for a secondary market in such mortgages has been presented. In any event, the Board believes that a careful and thorough feasibility study should precede a determination as to what if any measures should be taken for this purpose. In particular, the Board doubts the appropriateness of the provision of the present bill, S. 811, for a managing board consisting in minority of the members of the Federal Home Loan Bank Board and in majority of the Presidents of the Federal home loan banks. The banks of which they are Presidents are under the supervision of the Federal Home Loan Bank Board, and the Board feels that it would be an undesirable reversal of roles for such Presidents to be placed in an alternative situation in which they would, in effect, have authority to overrule the members of the Board. For the reasons set forth above, and even more fundamentally for the reasons of an economic nature set forth in my testimony of September 17, 1963, on behalf of the Board before the Subcommittee on Housing of your committee, the Board does not favor the enactment of S. 811 under present circumstances. Informal advice has been received from the Bureau of the Budget that there is no objection to the transmittal of this report from the standpoint of the administration's program. Sincerely yours, JOSEPH P. MCMURRAY, Chairman. MEMORANDUM OF THE SECURITIES AND EXCHANGE COMMISSION ON S. 811 S. 811 would establish the Home Mortgage Corporation, a Federal Corporation with power to buy and sell, and otherwise deal in its discretion with, participations in mortgages on residential properties containing not more than four family units. The management of the Corporation would be vested in a Board consisting of the members of the Federal Home Loan Bank Board and the Presidents of the Federal home loan banks. The Board would have power to adopt bylaws and make general rules and regulations for the organization and operation of the Corporation. The Corporation would be subject to the Government Corporation Control Act as a mixed-ownership Government Corporation and would be required to render annual reports to the Congress. The Corporation would be a depository of public money when designated for that purpose by the Secretary of the Treasury, and could also be employed as fiscal agent of the United States. The Board would be required to provide for the issuance by the Corporation of nonvoting stock, both common and preferred. The preferred stock would be issued to the Federal home loan banks in amounts proportionate to the par value of their outstanding capital. Members of the home loan banks would be required to subscribe for the Corporation's common stock in an amount approximately 1 percent of the dollar amount paid by the Corporation for its purchase from such members of participations in home mortgage loans. Only members of home loan banks could participate in the activities of the Corporation. The Corporation would also be authorized to issue notes, bonds, debentures, and other obligations upon such terms and conditions as the Board determines, but the total amount of such obligations outstanding at any one time could not exceed 10 times the sum of its capital, surplus, and reserves. No restriction as to who may purchase such obligations is contained in the bill. The preferred and common stock which the bill would authorize the Corporation to issue would appear to be exempt from the registration requirements of the Securities Act of 1933 under the exemption contained in section 3(a)(2) of that act. Similarly, the debt securities which the bill would authorize the Corporation to issue would appear to be exempt under section 304 (a) (4) of the Trust Indenture Act of 1939. Furthermore, it would appear that under section 2(b) of the Investment Company Act of 1940 the provisions of that act would not apply to the Corporation. Accordingly, S. 811 does not appear to have any effect on the administration of the Federal securities laws, and the Commission has no comment on the bill. 88TH CONGRESS 1ST SESSION S. 981 IN THE SENATE OF THE UNITED STATES MARCH 1, 1963 Mr. WILLIAMs of New Jersey (for himself, Mr. BURDICK, Mr. CLARK, Mr. DOUGLAS, Mr. HUMPHREY, Mr. INOUYE, Mr. JAVITS, Mr. LONG of Missouri, Mr. McCARTHY, Mr. MORSE, Mr. NELSON, Mr. RANDOLPH, Mr. RIBICOFF, Mr. YARBOROUGH, and Mr. YOUNG of Ohio) introduced the following bill; which was read twice and referred to the Committee on Banking and Currency A BILL To amend title V of the Housing Act of 1949 to assist in the provision of housing for domestic farm labor. 1 Be it enacted by the Senate and House of Representa 2 tives of the United States of America in Congress assembled, 3 4 FINDINGS AND PURPOSE SECTION 1. The Congress finds and declares that (1) an 5 adequate, dependable supply of qualified domestic farm labor 6 is essential to the farming economy of the Nation; (2) 7 farmers utilizing the services of such laborers are often un8 able to obtain financial assistance to defray the construction 9 or renovation costs required to provide adequate housing for 30-944 - 64-6 |