MORTGAGE FINANCE COMMITTEE

NAHB RESOLUTION

PROPOSALS TO ALLEVIATE MORTGAGE CRISIS

ATTACHMENT "A"

September 22, 1973
New Orleans, La.

WHEREAS, the President's Housing Message of September 19, failed to come to grips with the basic credit crisis confronting home-seeking American families or to provide plans to meet the Nation's housing needs, and

WHEREAS, the President's Message deprecates current housing assistance programs for low and moderate income families which have worked so successfully for more than four years and holds out only the phantom hope of an undeveloped and uncertain program for these families some years hence, and

WHEREAS, the National Association of Home Builders adopted on July 30, a positive 12 point program designed to lower interest rates, relieve the shortage of loanable funds, and increase the supply of housing for all families (program attached),

NOW, THEREFORE, BE IT RESOLVED, that the NAHB Board of Directors reaffirms that 12 point program and calls again for immediate action on its proposals by the Administration and the Congress, and

BE IT FURTHER RESOLVED, that, in view of the continuing worsening conditions since adoption of the program, with mortgage interest rates soaring even higher to a level of 10 percent and beyond, the NAHB further calls upon the Administration and Congress to:

(1) Extend immediately the insuring authorities of FHA and the Farmers Home Administration in order to avoid any interruption of operations and further dislocation of the credit market;

(2) Open the Federal Reserve Board discount window to thrift institutions;

(3) Enact legislation requiring pension funds to invest a substantial portion of their assets in residential mortgages;

(4)

Raise the maximum deposit insurance limits of the FSLIC and the FDIC to $50,000;

(5) Provide full insurance for public funds deposited in thrift institutions;

(6) Cease selling mortgages from the GNMA portfolio in this time of mortgage money shortness; and

(7) Make a firm and unmistakable recommitment to meeting the Nation's housing needs as expressed in the National Housing Goals.

ATTACHMENT "A-3"

RESOLUTION ADOPTED BY THE EXECUTIVE COMMITTEE OF

THE NATIONAL ASSOCIATION OF HOME BUILDERS

ON JULY 15, 1973

A POLICY TO MEET THE HOUSING CRISIS

WHEREAS, the Administration has placed undue reliance on monetary policy to restrain inflation, and

WHEREAS, we are experiencing the highest interest rates in the Nation's history coupled with a tremendous shortage of loanable funds for mortgages at affordable rates and terms, and

WHEREAS, this will result in serious reduction in the supply of new housing at a time of strong demand, resulting in widespread unemployment in the building trades and related industries, and deny needed housing for American families.

NOW, THEREFORE, BE IT RESOLVED:

(1) That an anti-inflation economic policy which relies so heavily on high interest rates to control inflation is self-defeating and inflationary in itself.

(2) To control inflation effectively:

A.

B.

C.

D.

The NAHB urges budget cutbacks in sectors of the economy hitherto
considered inviolate, such as military and space spending, and
the development of a budget balanced so as to establish proper
and equitable priorities for domestic needs.

We urge imposition of selective credit controls to reduce the alarming rate of growth in short-term consumer installment credit and to curtail unrestrained business borrowing, thereby spreading the burden of containing inflation more evenly throughout the economy.

We urge adoption of a temporary personal and corporate income tax surcharge.

We urge that the business investment tax credit be applied in the manner suggested by Chairman Arthur Burns, of the Federal Reserve Board, viz: that the President be authorized to reduce or suspend it, subject to Congressional veto, in times of credit stringency such as this, and raise or reinstate it when needed to stimulate the economy.

E.

ATTACHMENT "A-4"

We urge recision of the interest rate actions of July 5, which
encouraged commercial banks to raise their interest rates, forced
savings and loan associations and mutual savings banks to raise
their interest rate, lessened the "spread" between interest paid
by banks and that paid by S & L's and mutual savings banks, and
introduced the "wild card" certificate, a dangerous new element
with an unlimited interest rate. This has resulted in widespread
disintermediation from thrift institutions. The small benefits
these bring the average saver are far outweighed by the resulting
increased cost of living burden on the consumer.

(3) To provide for the housing needs of American families and relieve inequitable burdens on housing:

A. We urge the enactment of legislation permitting the Federal Reserve Board to establish reserve requirements for commercial banks on classes of assets with lower reserve requirements on assets invested in residential mortgages.

B.

C.

D.

E.

F.

G.

We urge exemption from Federal income taxation of the first $750
interest earned annually by consumers on savings accounts.

We urge the enactment of legislation permitting the Federal Home
Loan Bank System to advance funds to S & Ls at rates low enough
to permit S & Ls to make mortgage loans to middle income families.
Any difference between the cost of funds and the advance rate
charged S & Ls should be covered by appropriations.

We urge that FNMA fully carry out its overriding public purpose
obligations in harmony with the philosophy for which it was
created and vigorously support the mortgage market to the extent
of accepting a temporary reduction in profits.

NAHB urges that the HUD Secretary immediately reinstate all the Tandem Plan Programs suspended on July 1, 1973, at the same support prices then in effect. We further urge that the Congress authorize these programs at higher mortgage amounts that recognize the current housing costs.

We urge that the Secretary of HUD immediately take the lead in
developing effective solutions to the problems of providing a
stable flow of mortgage money at reasonable rates. Even before
it can legally go into force, the proposed FHA interest rate
increase has been clearly demonstrated as it was also demonstrated
in 1970. as an ineffective way either of providing an adequate
supply of mortgage funds or of reducing escalating discount points;
we urge the Secretary of HUD to administer his authority over
interest rates, utilizing devices such as the Tandem Plan or other
appropriate measures, in a manner designed both to provide for an
adequate supply of mortgage money at reasonable rates and to reduce
increasing discount points.

We urge immediate revival of the housing subsidy programs for low
and moderate income families to serve their pressing needs.

WHEREAS, since the present Administration took office, both conventional and FHA/VA mortgage interest rates have risen sharply to all-time highs, and

WHEREAS, the recent partial abdication of Regulation Q has resulted in increased interest rates paid on savings and time deposits, and

WHEREAS, the Federal Reserve Board's actions to control inflation by inhibiting credit availability have resulted in record high interest rates, and

WHEREAS, the above actions together have created enormous outflows of funds from thrift institutions gravely injuring the housing industry and the American public hoping to buy or rent a new home, and

WHEREAS, increases in the FHA/VA mortgage interest rates have never been accompanied by any lasting reduction in points, and

WHEREAS, Administration proposals for changes in the structure of the U.S. financial system would only result in a further decrease in the supply of mortgage funds while permitting enormous windfall profits in tax abatement to lending institutions instead of giving a tax credit to the consumer as NAHB has proposed, and

WHEREAS, the combination of these actions has created complete chaos in the mortgage market, driven mortgage interest rates to historical highs, prevented and will prevent many thousands of American families from obtaining decent housing, and will inevitably have the effect of causing unemployment and higher costs in the housing industry, and

WHEREAS, we do not believe that this Administration had originally intended to produce this chaos but believe that unqualified administrators and mistaken policy has led us to this edge of disaster in contravention of the President's own statement to the effect that "The housing of our people is and must be a top national priority", and

-

ATTACHMENT "B-2"

WHEREAS, this industry recognizes the urgent need for a balanced budget and a halt to inflation and expects to bear its share of the concomitant burdens, but it does not intend to be sacrificed quietly on the altar of bureaucratic ineptitude, and

WHEREAS, we believe that nothing less than immediate action will retrieve the situation and the failure to act now will result in money shortages and housing shortages for the American people for many years to come; and

WHEREAS, we are at a watershed in housing policy and the
Congress and the Executive must act,

NOW, THEREFORE, BE IT RESOLVED, that NAHB gives a vote of no confidence in this Administration's Housing Policy and in the actions of those charged with administering this policy,

and

BE IT FURTHER RESOLVED, that NAHB urges the President of the
United States to personally address himself to the gravity
of the current housing crisis, and

BE IT FURTHER RESOLVED, that NAHB urges the Congress of the United States to preserve the ability of the Nation's thrift institutions to provide an adequate level of mortgage funds.