Section 4. Section 10 of the Federal Home Loan Bank Act of 1932, as amended, is amended

(a) by striking subsection (a) and substituting in lieu thereof the following:

"(a) Each Federal Home Loan Bank is authorized to make advances to its members, upon the security of residential mortgages, or obligations of the United States, or obligations fully guaranteed by the United States, subject to such regulations, restrictions, and limitations as the Board may prescribe. Any such advance shall be subject to the following limitations as to amount:

(1) If secured by a mortgage insured under the provisions of title I, title II, title VIII, title IX or title X of the National Housing Act, or by private mortgage insurance in an amount and by an insurer approved by the Board, or if secured by a mortgage in an older, declining urban area within the meaning of the term used in Section 223 (e) of the National Housing Act and as defined by the Board, the advance may be for an amount not in excess of 100 per centum of the unpaid principal of the mortgage loan.

(2) If secured by a residential mortgage given in respect of an amortized residential mortgage loan, the advance may be for an amount not in excess of 100 per centum of the unpaid principal of the residential mortgage loan; but in no case shall the amount of the advance exceed 80 per centum of the value of the real estate securing the residential mortgage loan.

(3) If secured by a residential mortgage given in respect to any other residential mortgage loan, the advance shall not be for an amount in excess of 100 per centum of the unpaid principal of the residential mortgage loan; but in no case shall the amount of such advance exceed 60 per centum of the value of the real estate securing the residential mortgage loan.

(4) If secured by obligations of the United States, or obligations fully guaranteed by the United States, the advance shall not be for an amount in excess of the face value of such obligations.";

(b) by deleting the word "home" in the title of subsection (b) and substituting the word "residential", and by deleting the words "home mortgage" in the eight other places they appear in subsection (b) and substituting the words "residential mortgage"; and

(c) in the second sentence of subsection (c) by deleting the words "twelve times" in the two places where they appear and substituting the words "twenty times".

EXHIBIT F

REVISION OF RESERVE REQUIREMENTS FOR INSURED ASSOCIATIONS

Section 403, subsection (b), paragraph (1) of the National Housing Act of 1934, as amended, is amended by striking the words "twenty years" in the third sentence and substituting the words "thirty years".

EXHIBIT G

INVESTMENTS OF BANKRUPTS' ESTATES

Section 409 of the National Housing Act of 1934, as amended, is amended by inserting immediately after the phrase "officer or officers thereof,": "for the funds of bankrupts' estates under Title 11, United States Code,".

EXHIBIT H

RATE CONTROL PROCEDURE ACT

A BILL To coordinate rate changes prescribed by the Federal Reserve Board, the Federal Deposit Insurance Corporation, and the Federal Home Loan Bank Board so that changes in such rates shall become effective no sooner than 15 days from the date of announce ment by the first agency making such announcement, to provide improved procedures for the aforementioned federal agencies in advising the affected institutions of significant regulatory changes and for other purposes

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That this Act may be cited as the "Rate Control Procedure Act of 1970".

Section 1. The authority regarding the determination of interest rate ceilings granted to the Board of Governors of the Federal Reserve System (by Sect. 19 of the amended Federal Reserve Act) the Board of Directors of the Federal Deposit Insurance Corporation (by Sect. 18 of the amended Federal Deposit

[nsurance Act) and the Federal Home Loan Bank Board (by Sect. 5B of the mended Federal Home Loan Bank Act of 1932) shall be exercised by these agencies in such manner that any prescribed changes in the rate ceilings of nterest and dividends may not become effective sooner than 15 days from the late of announcement thereof by the agency first making such announcement In any calendar quarter, and that any such changes announced subsequently in a calendar quarter by an agency having already made an announcement in that calendar quarter may not become effective sooner than 15 days from the late of the announcement of said subsequent changes.

In addition, the effective dates of rate changes shall be made to coincide, as nearly as possible with the termination date of quarterly investment periods of the regulated institutions.

Section 2. When authorized agencies (enumerated in Section 1.) announce changes in the rate ceilings of interest or dividends which may be paid by their regulated institutions, such announcements shall be made by publication in the Federal Register, and communicated on the day of publication to the news media in such a manner that the rights of the regulated institutions shall not be prejudiced in any respect. EXHIBIT I

LENDING AREA

Section 1. Section 2 of the Home Owners' Loan Act of 1933, as amended, is amended by deleting subsection (b) thereof and substituting in its place the following new subsection:

"(b) The term 'primary lending area' means (1) all territory located within a radius of 100 miles from the home office of an association, and (2) in the case of an association converted from a state-chartered savings and loan institution, any additional territory within which that institution was authorized to lend on real estate security prior to the date of its conversion, and (3) any additional area within the State in which such home office is located; Provided, That the Federal Home Loan Bank Board shall be empowered, acting in its sole discretion, to provide by rule or regulation that the provision hereof numbered (3) shall not apply to an association having its home office in a State where the Board finds that no savings and loan association, as such term is defined by the Board, chartered by the State is permitted under state authority to lend on security in any portion of such additional area as described in and otherwise permitted by provision numbered (3) hereof.

Sec. 2. Subsection (c) of Section 5 of the Home Owners' Loan Act of 1933, as amended, is amended by striking in the first sentence thereof the words "one hundred miles of their home office" and substituting therefor the words "their primary lending area."

Sec. 3. Subsection (b) of Section 403 of the National Housing Act of 1934, as amended, is amended—

(a) by striking that part of the third sentence thereof prior to the first semicolon and substituting in lieu thereof the following:

"Each applicant for such insurance shall also file with its application on agreement that during the period that the insurance is in force it will not make any loans outside of its primary lending area, except loans which are made pursuant to regulations of the Corporation: Provided, That such agreement shall further provide that any loan made outside of its primary lending area shall also be subject to such regulations"; and

(b) by adding at the end thereof the following sentence:

"The term 'primary lending area' means (1) all territory located within a radius of 100 miles from the applicant's principal office, and (2) any additional territory within which the applicant was operating prior to June 27, 1934, and (3) any addtional area within the State in which the applicant's princpal office is located."

EXHIBIT J

SALVAGE OF ASSETS

Section 5 of the Home Owners' Loan Act of 1933, as amended, is amended by adding at the end thereof the following new subsection: "(m) Right to Act to Avoid Loss.

None of the limitations of this Act, nor those imposed by regulations issued pursuant to this Act, shall be construed as denying to an association the right to

invest its funds, operate a business, manage or deal in property, or take such other action as may reasonably be necessary to avoid loss on a loan or investment theretofore made or an obligation created in good faith."

Mr. BARRETT. Mr. Barba.

STATEMENT OF LOUIS R. BARBA, PRESIDENT, NATIONAL ASSOCI ATION OF HOME BUILDERS; ACCOMPANIED BY HERBERT S. COLTON, GENERAL COUNSEL; JOHN STASTNY, FIRST VICE PRESI DENT; JOSEPH B. McGRATH, STAFF VICE PRESIDENT, AND LEGISLATIVE COUNSEL; MICHAEL SUMICHRAST, CHIEF ECONOMIST Mr. BARBA. I want to make a little comment first, and that is that I appreciate the remark you and my Congressman from New Jersey, Mr. Widnall, made in which you stated that Philadelphia is the city of brotherly love. That is why I am here; our industry needs lots of love.

To my immediate right is Herbert S. Colton, general counsel, and next to him, John Stastny, our first vice president, and on my left is Joseph McGrath, staff vice president and legislative counsel. In back, we have several other staff members, including Michael Sumichrast, our chief economist.

I won't take the time to introduce all of them, but in the event during the questioning they should be able to answer questions better than I can, I will call upon them.

My name is Louis R. Barba. I am a builder and I appear before you today as president of the National Association of Home Builders. I will summarize most of my prepared statement.

Mr. BARRETT. That may be done without objection, so ordered, and all of the statement may be submitted for the record as you desire to submit it.

Mr. BARBA. I think it is important to note at the outset that the housing starts figures for January 1970, which have just been made public, continue a drastic downward trend from last year. The seasonally adjusted annual rate of starts for January fell to 1,166,000 units. Even more significant, we think, is the adjusted rate of building permits for January 1970 which fell to 952,000 units, a drop of 23.2 percent from December

I am submitting for the record and for each member of the committee a copy of the NAHB "Housing Starts Bulletin" dated February 17, 1970, which contains a complete analysis of these starts and building permit figures. (The NAHB Housing Starts Bulletin referred to is attached to Mr. Barba's prepared statement.)

Let me now give you our candid view with respect to this current housing crisis, as set forth on page 2 of our statement.

I cannot overemphasize my alarm and frustration with the current situation. It is appalling to note that the housing and mortgage finance situation continues to deteriorate and the industry drifts towards irreparable damage even though the Congress has responded to the current crisis with significant legislation, and the administration has expressed its serious concern and has taken specific and encouraging actions with respect to FNMA and the Home Loan Bank Board and there have been expressions of genuine concern by two different Chairmen of the Federal Reserve Board with respect to the plight of the housing industry.

It is almost beyond belief that we can allow an industry that has proven to be a great national resource aimed at solving a basic human need for the country to be crippled so seriously.

The effects go far beyond the housing industry. Also crippled is the mobility of our society, for the equity of millions of homeowners is being wiped out and the opportunities for housing choice which have existed for many decades in America are now being destroyed for the average American family. Thus the impact of the current housing crisis is essentially one which thrusts heavy burdens upon the people of the country-in terms of their freedom of movement, their family investments, their housing expenses, and their chance to enjoy an environment of their choosing.

In 1 year, 20 years ago, a less-sophisticated and less-developed homebuilding industry produced almost 2 million units. The current crisis, therefore, does not spring from any failure of national policy and of the financial machinery of the country that is crippling housing productivity.

Solve the financing cost and supply problems soon enough, and most housing production problems can and will be overcome quickly, I can assure you. But if there is a continued failure to cope with mortgage financing costs and money supply, then future housing production problems may reach serious proportions through sheer depletion of skilled labor and management and the disappearance of entrepreneurial incentives in the industry.

The premise that housing is one essential commodity in this country that is postponable has to be rejected, however. Certainly none of us would like to see this industry of small, highly ingenious, thoroughly competent entrepreneurs fade away and be replaced by a heavily subsidized Government-industry complex, replete with sterility and inefficiency. This would be no substitute for an industry that has doubled the housing supply in America in the past 25 years; that has given the American people an enormous range of choices and superior quality in housing, and that has helped so greatly to create a stable society with the firm base of homeownership.

With respect to inflation and housing, we are now being told that the inflationary spiral may have started to flatten out and the restraints imposed by the Federal Reserve Board and the administration may finally be working.

But no one disputes that these restraints have taken a tremendous toll of the housing industry and the housing aspirations of the American people. Total housing starts in 1970 are bound to be less than in 1969, thereby putting us even farther behind the pace necessary to achieve the goals established in 1968. The housing shortage brought on by several years of inadequate production has caused a severe inflation in housing costs in many ways worse than the overall inflation suffered during the past few years. The homebuilding industry along with its employees and suppliers is in a state of shock, having suffered severe drops twice in the past 4 years.

President Nixon recognized this in his statement which he issued on January 21 after a meeting with the national officers of our association. (A copy of that statement follows Mr. Barba's prepared statement.)

In his statement the President pledged that his administration would "take every possible step to solve this most serious housing problem consistent with the overriding need to contain inflation."

He further stated, "The housing of our people is and must be a top national priority."

Congress, of course, recognized this and the seriousness of our current situation in legislation passed last year under the leadership of this committee, as noted on pages 5 and 6 of my statement.

These measures were aimed at easing our present serious situation in mortgage credit. None has so far been used.

We hope, in light of the President's statement, there will soon be positive steps to implement them.

My statement presents our viewpoint in some detail on the four bills now before this committee and also on some other recommendations which we think merit your consideration.

On H.R. 11, we believe the goals and functions of the Federal Reserve System should be revised. I will come back to this shortly. Whether it is necessary to revise completely the structure of the System, we do not know. Nor do we have any specific policy on the detailed provisions of H.R. 11.

We strongly support H.R. 13694, and we urge favorable action on this bill at an early date. We think middle-income Americans should be able to buy a home and this bill will help them to do so.

On H.R. 14639, we have no established policy though we generally agree with its thrust and purpose. The proposal does not in itself, however, constitute a long-range solution to the supply of residential mortgage money because of its limitation to low- and moderate-income housing.

With respect to pension funds and H.R. 15402, we wholeheartedly endorse the concept behind this bill.

A chart in my prepared statement dramatically shows the sad situation with respect to the mortgage holdings of public and private pension funds in relation to their total assets and growth. We think a much greater percentage of assets can and should be invested in residential mortgages or mortgage-related securities.

We favor an approach which would cause these funds to invest in the full spectrum of the residential mortgage market, not just in low- and moderate-income housing as proposed in the pending bill. We urge consideration of the approach contained in H.R. 15660 recently introduced by Congressman Hanna.

There are other bills now pending before this committe or else where in the House which we also believe merit your attention in connection with mortgage finance. These are discussed on pages 13 and 14 of our statement. For example:

We strongly support legislation to establish a national secondary market for conventional mortgages as proposed in both H.R. 14065 and under section 102 of H.R. 13817.

We also believe it would be of great assistance to the industry, as proposed in H.R. 15310 and H.R. 15660, if an exclusion from Federal taxes can be provided for interest earned on funds invested in thrift institutions which are required to place the bulk of their assets in residential mortgages.