UNITED STATES SAVINGS AND LOAN LEAGUE, Hon. JOHN SPARKMAN, DEAR CHAIRMAN SPARKMAN: The purpose of this letter is to review the legislative status of matters pertaining to savings and loan associations. Since we have not testified on the pending Administration Housing Bill, it might be appropriate to include this letter and its enclosures in the hearing record in order to make our comment available to the Senators and others interested in this area. A number of important provisions, both for the short and long run, were incorporated in the Emergency Home Finance Act of 1970, signed into law on July 24. Our business greatly appreciates the important role you and your Committee played in developing and enacting this significant legislation. At this time, we submit the following for consideration: A. REVISION OF THE FEDERAL HOME LOAN BANK ACT The U.S. League Legislative Program, drafted at the annual Legislative Conference, February 2-3, 1970, contained the following paragraph: "The Federal Home Loan Bank Act, written in 1932 in the depths of the Depression, was geared to the building and loan business' as it existed at that time and needs to be revised for the 'savings and loan business' of today, League committees are studying such revisions and have already noted the possible need to revise the section with respect to stock purchase, collateralization of advances and the possible excessive accumulation of undivided profits and reserves.' This study has resulted in a revised draft of the Federal Home Loan Bank Act, which is attached. Key features of this draft would: (1) simplify the definition of residential mortgage and "mechanics" of borrowing; (2) permit advances of 20 times stock holdings (instead of 12); (3) permit Federal Home Loan Banks to pay dividends out of undivided profits; and (4) reduce Federal Home Loan Banks' allocation to reserves from 20% to 10%. B. BAN ON GIVE-AWAYS AND PREMIUMS The practice of using give-aways, merchandise and other premiums in the solicitation of savings funds has reached unprecedented proportions. Valuable merchandise circumvents the rate ceilings provided by law and regulations. It leads to excessive and disruptive competition and, in many cases, constitutes an undignified and confidence-weakening practice. The League's Executive Committee has endorsed legislation which would prohibit all insured institutions from using premiums to induce the opening or adding to of savings accounts. C. MODERNIZING THE LENDING AND INVESTING POWERS OF SAVINGS AND LOAN INSTITUTIONS Although recent law and regulations have permitted some additional flexibility for savings and loan associations, the following recommendations of the League's Legislative Committee remain pertinent: (1) Federal associations should be given clear authority to the make loans on individual home sites. This would enable families to acquire building lots without the necessity of having specific or imminent construction plans. (2) Federal associations should be authorized to make loans on household furniture and equipment. Such a program would not only broaden the services to the American family, but would provide a type of short-term lending which is more responsive to changes in interest rate levels. (3) Federal associations should be authorized to own and develop real estate in amounts not to exceed 5% of assets or the institution's combined reserves, whichever is the lesser. Savings and loans have the financial capacity and knowhow to directly engage in real estate operations particularly in inner city areas. (4) The authority of Federal associations to exercise salvage powers should be clarified by law. Let me emphasize that we appreciate the actions the Committee has already taken to enable savings and loan associations to better serve the thrift and home financing needs of the nation and hope that the Committee can give consideration to some of the further recommended improvements contained in this letter. Sincerely, STEPHEN SLIPHER, A BILL to modernize the provisions of the Federal Home Loan Bank Act of 1932 by redefining terms, eliminating the concept of nonmember borrowers and revising eligibility requirements, adjusting required stock purchases and collateral requirements for advances, adjusting semi-annual reserve requirements for Federal Home Loan Banks, 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 "Federal Home Loan Bank Act Amendments of 1970." Section 1. Section 2 of the Federal Home Loan Bank Act of 1932 (12 USC 1422) is amended by striking paragraphs (5), (6), (7), (8), and (9) and substituting in lieu thereof the following: "(5) The term 'residential mortgage loan' means a loan made by a member upon the security of a residential mortgage. "(6) The term 'resident mortgage' means a mortgage upon primarily residential property, in fee simple, or on a leasehold, all of which terms may be defined by the Board, and shall include, in addition to first mortgages, such classes of first liens as are commonly given to secure advances on real estate and other property by institutions authorized under this Act to become members, under, the laws of the State in which the real estate or other property is located, together with the credit instruments, if any, secured thereby. "(7) The term 'unpaid principal,' when used in respect to a loan secured by a residential mortgage means the principal thereof less the sum of (1) payment made on such principal, and (2) in cases where deposits or shares are pledged as security for the loan, the payments made on such deposits or shares plus earnings or dividends apportioned or credited thereon. "(8) An ‘amortized' or 'installment' residential mortgage loan shall, for the purposes of this Act, be a residential mortgage loan to be repaid or liquidated in not less than five years by means of regular weekly, monthly, or quarterly. payments made directly in reduction of the debt or upon deposits or shares pledged as collateral for the repayment of such loan." Section 2. Section 4 of the Federal Home Loan Bank Act of 1932 (12 USC 1424) is amended (a) by deleting the words "makes such home mortgage loans as, in the judg ment of the Board, are long-term loans" in the first sentence of subsection (a) and substituting in lieu thereof the words "makes residential mortgage loans"; (b) by deleting the phrase "or a nonmember borrower of" in the two places where they appear in subsection (a); (c) by deleting the words "home financing" in the two places where they appear in the second sentence of subsection (a) and substituting the words "residential financing"; (d) by deleting the words "or a nonmember borrower" in subsection (b). Section 3. Section 5 of the Federal Home Loan Bank Act of 1932 (12 USC 1425) is deleted. Section 4. Section 6 of the Federal Home Loan Bank Act of 1932 (12 USC 1426) is amended (a) by deleting the words "aggregate unpaid loan principal" in the first sentence of subsection (c) (1) and substituting the words "residential loans": (b) in subsection (c) (2) by striking all that follows the paragraph designation "(2)" down to and including the subparagraph designation "(ii)"; (c) by striking the words "twelve times" in new paragraph (2) and substituting the words "twenty times"; (d) by striking subsection (c) (4) and changing paragraph designation “(5)” to "(4)"; (e) by deleting subsection (e); and (f) in subsection (i) by deleting the words "or deprive any nonmember borrower of the privilege of obtaining further advances" and the words "or nonmember borrower" in the three places where they appear in that subsection, and by striking the words “home financing" in the two places where they appear in that subsection and substituting the words "residential financing". Section 5. Section 8 of the Federal Home Loan Bank Act of 1932 (12 USC 1428) is amended by deleting the words “or nonmember borrowers" in the two places where they appear. Section 6. Section 9 of the Federal Home Loan Bank Act of 1932 (12 USC 1429) is amended by deleting the words "on nonmember borrower" the one place where they appear. Section 7. Section 10 of the Federal Home Loan Bank Act of 1932 (12 USC 1430) as 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 striking the word "home" in the title of subsection (b) and substituting the word "residential"; by striking the words "home mortgage" in the eight other places they appear in that subsection and substituting the words "residential mortgage"; by striking the words "real estate" in the three places they appear in that subsection and substituting the word "property", and by striking the words "a sum equal to $40,000 for each home or other dwelling unit covered by such mortgage" and substituting the words "such amounts as the Board may determine by regulation for each home, dwelling unit or other component unit as defined by the Board". (c) by striking subsection (c) and substituting the following: "Notes of borrowing members; interest rate; limitation on loans; lien on stock. Such advances shall be made upon the note or obligation of the member secured as provided in this section, bearing such rate of interest as the board may approve or determine, and the Federal Home Loan Bank shall have a lien upon and shall hold the stock of such member as further collateral security for all indebtedness of the member of the Federal Home Loan Bank. At no time shall the aggregate outstanding advances made by any Federal Home Loan Bank Board to any member exceed twenty times the amounts paid in by such member for outstanding capital stock held by it." 48-279-70-pt. 2- -56 Section 8. Section 16 of the Federal Home Loan Bank Act of 1932 (12 USC 1436) is amended by striking the phrase "semiannually twenty per centum" in the first sentence thereof and substituting the words "annually ten per centum"; by striking the word "semiannually" in the second sentence thereof and substituting the word "annually"; and by inserting in the fifth sentence thereof immediately before the words "net earnings" the words "undivided profits and current". Hon. JOHN SPARKMAN, Committee on Banking and Currency, U.S. Senate, Washington, D.C. AUGUST 1, 1970. DEAR MR. CHAIRMAN: As an interested citizen who has done research in the area of landlord and tenant law, I would like to offer for the Committee's consideration the following proposal to amend the Fair Housing Act of 1968, 82 Stat. 81, 42 U.S.C. 3602: EVICTION OF TENANTS § 1. No action or proceeding to recover possession of rental housing accommodations covered by this Act shall be maintainable by any landlord against any tenant, notwithstanding that the tenant has no lease or that his lease has expired, so long as the tenant continues to pay the rent to which the landlord is entitled, unless (1) Under the law of the State in which the action or proceeding is brought the tenant is (A) violating an obligation of his tenancy or (B) is committing a nuisance or using the housing accommodations for an immoral or illegal purpose or for other than living or dwelling purposes; or (2) The landlord seeks in good faith to recover possession of the property for his immediate and personal use and occupancy as a housing accommodation; or (3) The landlord has in good faith contracted in writing to sell the housing accommodations to a purchaser for the immediate and personal occupancy as a housing accommodation by such purchaser; or (4) The landlord seeks in good faith to recover possession of such housing accommodations for the immediate purpose of substantially altering, remodeling or demolishing them, and replacing them with new construction, and the remodeling is reasonably necessary to protect and conserve the housing accommodation and cannot practically be done with the tenant in occupancy, and the landlord has obtained such approval as may be required by Federal, State or local law for the alterations, remodeling or any construction planned. § 2. Any tenant who shall be injured by reason of the violation by a landlord of any provision of this Act, or by any other action by a landlord covered by this Act to evict a tenant protected by this Act, may sue therefore in any State court of competent jurisdiction and shall recover threefold the damages sustained. and the cost of the suit, including reasonable attorneys' fees. $ 3. Any waiver by a tenant, written or oral, shall be invalid and ineffective to waive his rights under this Act. The purpose of this amendment, Mr. Chairman, is to provide tenants and their families with the same security in their home that is enjoyed by families that purchase their homes. As long as a homeowner makes his mortgage payments. does not use his premises in an illegal manner, and does not create a nuisance, he knows that he will not be required to move his family. Under present state statutory and common law, however, a tenant is liable to be evicted by a landlord "for any reason or no reason at all." The result is an unconscionable situation where, because of a landlord's whim or fancy, a tenant may be required to pick up his family and belongings and move to another dwelling. Brief reflection on what is involved in moving a family demonstrates the obvious unfairness and unacceptability of the present situation. First is the expense of moving which may run as high as several thousand dollars. Second is the emotional trauma involved for all family members. Children will be forced to abandon many of their friends and perhaps have to interrupt their schooling. Working members of the family will be required to stay away from the job in order to handle moving technicalities. Finally, with current housing shortages, the family may be required to move into an entirely new and distant neighborhood with lower quality housing units. The process of moving ones family is a vicissitude that every family must endure at one time or another and is not itself a matter of concern. What is of great concern, however, is the fact that a person can literally be forced to move by someone else. A landlord may, for example, evict a tenant because of his political beliefs or community activities. Or, as more frequently is the case, a real estate management firm or resident manager may decide that a tenant is undesireable for some arbitrary reason. Moreover, while a landlord can protect himself by requiring the tenant to execute a lease for a period of time specified by him and which contains lopsided boiler plate clauses, the tenant has no similar method of protecting his interest and requiring that a lease be renewed or contain reasonable and just provisions. In 1968 Congress reaffirmed the national housing goal of providing "a decent home and suitable living environment for every American family." It is now time for Congress to recognize that an essential element of a "suitable environment" is the security derived from knowing that one will not be arbitrarily forced to move himself and his family by a landlord for "any reason or no reason at all." This is not a minor problem. Today a tenant may not easily move into homeownership. Tight money and a shortage of housing has substantially decreased his available options. Moreover, it is expected that the 1970 Census will show that 30% of all housing is now renter occupied. There is every reason to believe that as the price of land increases and the population increases more and more persons will rent their homes. These people are entitled to the same security in their homes enjoyed by those who buy rather than rent. It is for the above reasons that I urge the members of this Committee to propose and endorse the suggested amendment. The provisions of the amendment are patterned after similar provisions in rent control laws. Thus, there is a large body of case law available to courts to aid in implementing the proposed law. In order for the amendment to be effective, however, the law must include two provisions. The first is a provision that makes any waiver by the tenant of his rights invalid. This is to prevent a landlord from using his superior bargaining position to require a waiver and to avoid fine print circumvention of the amendment in printed leases. The second is a provision creating a cause of action in favor of the tenant for damages against his landlord for violation of the proposed law. This is necessary to make the protection offered by the amendment meaningful and will assure that the landlord does not engage in activities such as rent increases or discontinuation of essential services to rid himself of a tenant contrary to the statute. Your favorable consideration of the proposed amendment will be greatly appreciated by myself and all other persons who rent their homes. Sincerely, SAMUEL A. SIMON, Graduate, University of Texas School of Law. STATEMENT OF C. RANDOLPH WEDDING My name is C. Randolph Wedding. For the last ten years I have been practicing architecture in St. Petersburg, Florida. During the last few years I have been the architect on several multi-family housing projects with more than 2.000 dwelling units which were built under various Government Assistance Programs. I am the architect on several additional multi-family housing projects involving about 3,000 dwelling units which are awaiting approval under various Government Assistance Programs. |