April 21, 1982 Chairman Gonzalez' Opening Statement Our purpose this morning is to begin hearings on H. R. 4787, a bill to restructure the charter of the Federal Home Loan Mortgage Corporation, known more popularly as Freddie Mac, and known by more sober-minded people as simply The Mortgage Corporation. Freddie Mac is an agency designed to provide a secondary mortgage market for conventional loans, which is of course to say loans not guaranteed under the VA or FHA programs. Its operations are similar to those of its corporate cousin, Fannie Mae, the Federal National Mortgage Association. This rechartering bill would change Freddie Mac into a private type of corporation, one that would be racapitalized with private funds. Once the restructuring would take effect, we would then have two former government corporations acting as private market makers for mortgage instruments. Needless to say, the entire financial structure of the housing industry is undergoing radical change. The primary sources of mortgage funds, the thrift banks, are in desperate condition. It does not appear likely that the thrifts would be able to resume a high level of mortgage lending even if interest rates were to drop very soon. In short, the greatest dilemma of the housing industry is the question of where tomorrow's source of mortgage money will come from. If there is trouble in the primary lending business, there is also trouble in the secondary marketplace. The question we confront is how to regain health in both the primary and secondary mortgage markets-- because that is the key to large scale housing production. No one needs to be reminded of the level of demand for housing in the coming ten to twenty years. No one needs to be reminded that both a primary and secondary mortgage market is absolutely essential to make that housing production possible. That brings us to this bill. We have to consider carefully the questions brought to us by the Corporation. First, is a restructuring necessary? Second, if it is necessary, what would be the best form for it to take? Third, what powers should be granted to a restructured Freddie Mac? Fourth, would a restructing have the benefits claimed? Fifth, what should be the relationship between the existing Fannie Mae and Freddie Mac, assuming that the latter is restructured? All of these, and many more questions, will have to receive our most careful consideration. This is not a bill that can be rushed, it is not a matter that can be settled without thorough and thoughtful consideration. Still, it is a question that must be addressed, and we are beginning that process today. 97TH CONGRESS 1ST SESSION H. R. 4787 To establish a Federal Home Loan Mortgage Corporation Charter Act. IN THE HOUSE OF REPRESENTATIVES OCTOBER 20, 1981 Mr. GONZALEZ (by request) introduced the following bill; which was referred to the Committee on Banking, Finance and Urban Affairs A BILL To establish a Federal Home Loan Mortgage Corporation Charter Act. 1 Be it enacted by the Senate and House of Representa 2 tives of the United States of America in Congress assembled, 3 4 SHORT TITLE SECTION 1. This Act may be cited as the "Federal 5 Home Loan Mortgage Corporation Charter Act". 6 PURPOSES 7 SEC. 2. The Congress hereby declares that the purposes 8 of this Act are 9 10 (1) to promote the flow of funds to the conventional mortgage market, to enhance the available sec 2 1 ondary market facilities for conventional mortgages, to 2 3 4 provide that the operations thereof shall be financed primarily by private capital to the maximum extent feasible, and to authorize the Federal Home Loan 5 Mortgage Corporation to (A) create secondary markets in conventional mortgages and provide assistance to the existing secondary market for conventional mortgages by providing a greatly increased degree of liquidity for mortgage investments, thereby improving the distribution of investment capital available for conventional mortgage financing; (B) adopt and foster such programs and policies as shall increase the liquidity of investments in conventional mortgages and thereby attract ad ditional investment capital to conventional mort gage financing; and (C) take such actions and design and implement such policies and programs as may further the purposes for which the Federal Home Loan Mortgage Corporation is chartered as set forth in this Act or in bylaws adopted by the Corporation; and (2) to provide for an orderly transition from the Federal Home Loan Mortgage Corporation, as created 2 3 by title III of the Emergency Home Finance Act of 1970, to the Federal Home Loan Mortgage Corporation as constituted under this Act. 3 4 5 DEFINITIONS SEC. 3. When used in this Act, unless the context oth 6 erwise requires— 7 8 9 10 (1) The term "Corporation" means the Federal Home Loan Mortgage Corporation, as constituted under this Act, and, where stated, also means the Federal Home Loan Mortgage Corporation as created by title III of the Emergency Home Finance Act of 1970. Except as otherwise expressly provided in this Act, the Corporation shall be classified as and considered to be 14 a corporate instrumentality of the United States. 11 12 13 (2) The term "Board of Directors" means the Board of Directors of the Corporation. (3) The term "eligible seller" means an organization authorized to sell mortgages to the Corporation. pursuant to section 6(a)(1) of this Act. (4) The term "eligible servicer" means an organization authorized to service mortgages for the Corpo ration pursuant to section 6(a)(1) of this Act. (5) The term "law" includes any law of the United States or of any State (including any rule of law or of equity). |