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on such homesteaders? Why shouldn't the government become a

self-insurer to that degree.

Such activity would not entail

undue risk if:

1.

the government first drafts and then uses a Federal
statute to foreclose on housing loans in default
and underwritten by Federal programs.

2.

the government creates a tract index or title registration system for use in such areas.

If the government set the ground rules, some rejuvenation of

our central cities might be accomplished for the benefit of

present residents as well as future residents.

The constitu

tional objections to such involvement are in my opinion slight

and unpersuasive.

The merits of the proposal are clear.

In this connection, it should be noted that the President's

Message on Housing of September 19, 1973, noted in passing the need for "easing the Federal burdens in disposing of the large and still growing number of properties re urning to the Govern

ment upon default."

(p.14)

This is a reference to the need for

a Federal Mortgage Foreclosure Act.

The obstacle to such

legislation in the past has been the varied periods of time after a sale of the property during which states allow the borrowe

to upset the sale or refinance his loan, so retaking possession. A few states have procedures disallowing such rights (at the

same time, the borrower is saved from being pursued by the lender

on the

former's personal note).

Courts give this remedy (called

"strict foreclosure") in only a few situations--where the buyer

has not improved the property, where the financing has been close

to 100%, where the down payment was slight, and where the payments

amount to little more than rent.

In effect, strict foreclosure

is readily adaptable to the use of Federal mortgage under

writing programs.

Similarly, after properties have been foreclosed in this

way, a new type of deed registry could be instituted for future

owners.

A system of registration, as opposed to recording,

is possible for "urban homesteaders" without constitutional

objections.

This would mean that the government would establish

a registry for recording and certifying the title to lands and improvements. The certificate issued by the government to the

homesteader would constitute the title itself, instead of merely

being evidence of title

as our recorded deeds are today.

Thus land could be transferred much the way automobiles are,

with no lien or encumbrance on the title becoming valid without

first appearing on the certificate of title.

There is ample precedent for such Federal involvement in

title matters.

The United States government intervened in the

entangling of Spanish land grant throughout the Southwest, it

has given numerous grants to set up title information data banks,

and numerous court cases have said that a land transaction has

effects on interstate commerce.

Points and Front End Loading

It has been the position of the Cost of Living Council that

discount points and closing costs constitute interest.

Realisti

cally, perhaps both are merely the cost of money.

But in the

first instance, closing costs have not, under any of the Four

Phases of the President's Economic Policy, been stabilized

because of a policy judgment that closing costs are merely one

cost of loan money.

So while

States Attorney General

have ruled that points do not constitute interest for purposes

of state usury

laws,

they are held to be a type of interest

in order to exempt them from economic controls.

This situation

is, to say the least, illogical, and perhaps it is the Cost of

Living Council that should take a harder look at the costs of

procuring mortgage money.

In this connection, the President's message to the Congress

on September 19, 1973 proposed to eliminate the point system

for Federally underwritten mortgage loans, allowing such mortgages to be written at market rates of interest; that is certainly

an important first step.

A review of the whole range or mortgage

and title related costs should follow in its wake.

ADMINISTRATION'S 1973 HOUSING PROPOSALS

,

THURSDAY, OCTOBER 4, 1973

U.S. SENATE,
COMMITTEE ON BANKING, HOUSING AND URBAN AFFAIRS,

Washington, D.C. The committee met at 10:20 a.m., pursuant to recess, in room 5302, Dirksen Senate Office Building, Senator John Sparkman (chairman) presiding.

Present: Senators Sparkman, Proxmire, Tower, Brock, and Brooke. The CHAIRMAN. Let the committee come to order, please. We are very pleased to have with us this morning as our first witness Gov. Winfield Dunn, Governor of the State of Tennessee, representing the National Governors' Conference.

Yesterday we had the mayors here. You are going to have to do mighty well, now, to match them. I know you will do it, though.

Governor Dunn. Thany you, Mr. Chairman.
The CHAIRMAN. I think Senator Brock may have something to say.

Senator BROCK. I wanted to take the opportunity, Mr. Chairman, to present my Governor to the Committee. We are very proud of Winfield Dunn in Tennessee. We think he is about as fine à Governor as any State has in the Union, and I am very grateful for the opportunity to have him before our committee. We are proud of him. I look forward to your testimony, Governor.

The CHAIRMAN. I may say we are proud of him down in Alabama. I live pretty close to your State. I might say something else, both my grandfathers came from Tennessee.

Senator BROCK. I think we might as well claim him right now.

The CHAIRMAN. We are very glad to have you, sir, and will you proceed in your own way. STATEMENT OF WINFIELD DUNN, GOVERNOR OF THE STATE OF

TENNESSEE, REPRESENTING THE NATIONAL GOVERNORS' CONFERENCE, ACCOMPANIED BY JOSEPH H. TORRENCE, ACTING EXECUTIVE DIRECTOR OF THE TENNESSEE HOUSING DEVELOPMENT AGENCY, AND RICHARD W. LINCOLN, SPECIAL ASSISTANT, NATIONAL GOVERNORS CONFERENCE

Governor Dunn. Mr. Chairman, and members of the subcommittee, I am Winfield Dunn, Governor of the State of Tennessee, representing both Tennessee and the National Governors' Conference presenting the views of myself and my colleagues on national housing policies.

With me today are Mr. Joseph H. Torrence, acting executive director of the Tennessee Housing Development Agency, and Mr.

(211)

a

Richard W. Lincoln, special assistant with the National Governors' Conference from their Washington office.

The CHAIRMAN. Governor Dunn, your full statement will be printed in the record.

You may treat it as you like. Governor Dunn. You are very kind and I appreciate it, particularly your kind and warm remarks. Senator Brock, I thank you, sir, for your fine words, and I am extremely grateful to be here.

Mr. Chairman, as you know, the lack of adequate housing is a problem which has greatly concerned all conscientious public servants as well as thousands upon thousands of Americans who down through the years have suffered from this great lack.

State government has made a major effort in an attempt to solve the problems of low- and moderate-income families as far as housing is concerned.

At this time I understand 31 States have taken a most significant step ahead in the creation of State housing financing agencies of some sort, which agencies are empowered to provide low- and moderateincome housing on a statewide basis.

Several of these agencies have been operating for a number of years and have achieved truly impressive records. As I am sure Senator Brock knows, our own State of Tennessee recently joined that group of States through the enactment of legislation creating the Tennessee Housing Development Agency. This program has been and will continue to be a major priority of my administration, and I believe it indicates a willingness of our general assembly for State government commitment to the problems and solution of inadequate housing, to meet and ovrcome the problems of inadequate housing.

As the Governor of a State which has taken this positive step in attempting to meet my State's housing needs, I am pleased to welcome the President's initiative in attempting to get the Federal Government to deal more effectively with the housing difficulties which we all face.

I must say that I agree with many of the observers who feel that the present programs have not worked as effectively as they might have in many cases. We have all witnessed, in the past, a number of abuses in the administration of Federal programs and it is incumbent upon all of us to correct these differences whenever we can identify them.

Thus, I fully agreed with former Secretary Romney's conclusion that our entire housing subsidy approach needed to be reexamined in light of past performance and current needs.

Specifically, examining the President's recent housing proposals, I am pleased to endorse his general effort to open up the private mortgage market for middle-income families. The mortgage pinch has had a severe detrimental effect in my State of Tennessee, as it has in most every State and community across the Nation. It has resulted in effectively denying access to housing to not simply a minority of our citizens but, in fact, a significant majority.

For example, the downpayment of a new but modest three-bedroom home valued at $21,000, under the FHA's current interest rate, is over $1,300-an often prohibitive cost for moderate-income households with small cash savings. To continue the example: Monthly costs for taxes, insurance, utilities, and maintenance will average approximately $75 in my State.

Now, that might sound like an enviable sort of cost to some, but in my State it has a significant bearing on our problem at that figure.

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