* Conventionally constructed housing starts can be financed with either VA and FHA-insured mortgages or conventional mortgages

** These totals do not include existing or rehabilitated units subsidized -- only newly-built units.

Sources: U. S. Department of Housing and Urban Development, Division of Research and Statistics; and Mobile Home Manufacturers Association.

Does not include existing standard quality units subsidized.

About 172,330 additional such units were subsidized from

July 1968 through June 1972.

2/ Excluding those tied to Section 236.

3/ Through March 1972.

Source: U.S. Department of Housing and Urban Development.

APPENDIX

STATEMENT OF THE AMERICAN BANKERS ASSOCIATION

The American Bankers Association and its 13,000 member banks are firmly dedicated to the effort to provide adequate credit for housing and related requirements for Americans. We are particularly interested in the development of workable programs to refurbish or eliminate substandard, overcrowded or dilapidated housing. We, therefore, commend the President for his actions in authorizing forward commitments, reinstituting the tandem plan and reinstating the Section 23 leased housing program. However, we believe that additional devices could be implemented which would bring more resources into play. For example, if forward commitments were made available through the FHLMC, lenders other than savings and loans could become more involved.

The American Bankers Association supports as a step in the right direction, the provision which would eliminate the ceiling on interest rates in FHA and VÁ programs and would permit these loans to be made at market interest rates. Lenders tend to avoid investment of funds in mortgage loans when competing investments are paying a higher return. However, it is recognized that in some circumstances, allowing intermediaries to charge "points" may be a requirement for a fuller distribution system for mortgage funds, if such intermediaries prefer to receive a portion of their income in this form. We suggest that the discounts that have created difficulties are the large discounts which develop when the ceiling rate is well below the market rate. Minor discounts are normally a part of any secondary market operation. We would, therefore, suggest that the Congress allow lenders to operate under a dual rate system whereby the lender could make the mortgage loan at a market rate if no points are charged or could make it within a ceiling rate and charge points.

The flexible repayment mortgage recommended by the Administration appears to have merit from the social standpoint as it would permit young people to have greater access to FHA insured mortgages. However, we are uncertain as to how attractive the flexible repayment mortgage will be to the investor, but believe this innovation should be encouraged on an experimental basis.

We support the proposed increase in permissible mortgage amounts of FHA insured mortgages as necessary in today's inflated economy. There are many other changes in the FHA mortgage insurance program and we will have to study them in more detail in order to make comment.

The American Bankers Association has not had an opportunity to study the coinsurance provisions in depth and without such a study is most reluctant to venture an opinion with regard to this important change. While the Veterans Administration has been successful in its home loan guarantee program, it has a uniform 60%-$12,500 guarantee. The great breadth of authority that this new proposal would extend to the Secretary of HUD could result in mortgages being insured for different percentages in high risk than in low risk areas. This could lead to less standardization. Standardization is of major importance to the secondary mortgage market. The insurance must be strong enough to help attract funds particularly in high risk areas. It must also be strong enough to make the insured mortgage loan readily saleable without excessive investigation by the permanent investor. Standardization is the major key to acceptance of a guarantee in the national market. A 50 percent guarantee might be acceptable in the suburbs but not be adequate to bring forth capital in high risk areas. It also might cause the loan to be less saleable.

The American Bankers Association has not had an opportunity to study the proposal which would provide for Federal guarantee of private mortgage insurance companies. Our Association hopes to have the opportunity to comment on this proposed legislation at some later time.

The ABA is very much interested in the experiment in a "cash allowance" for housing. We view this program as an alternative to subsidizing brick and mortar, and quite possibly as a long term solution to our low income housing problem. It (341)

does, however, have certain basic limitations. This is a costly program and in order for it to be successful there must be an adequate supply of decent housing available as this type program encourages renovating but does not encourage building of new homes. If a housing allowance program is implemented and the demand for housing exceeds the supply, it will increase the cost of building and escalate the price of the existing housing stock. A housing allowance program will undoubtedly involve administrative difficulties for if cash is given to the homeowner it could be used for nonhousing purposes. We believe that the basic concept in the FHA 235 and 236 programs has merit in a balanced housing program.

The Administration has recommended that institutions investing in residential mortgages be allowed a graduated tax credit that could be as high as 3.5 percent of earned interest if 70 percent of the portfolio is invested in housing loans. To accomplish the objective of diverting more funds to housing, this concept should be changed to provide a uniform charge on the income flow not only from residential loans but from all housing related loans. We believe that the maximum credit suggested of 3.5 percent will not have substantive impact in encouraging all lenders to increase the funds available for housing.

Commercial banks are continuing to support the financing of one-to-four family homes and for the first six months of 1973 originated 31 percent of total residential mortgage loans. In this connection we are attaching a press release which contains additional statistics that were made available to the House Banking and Currency Committee at its September 14 hearing.

The American Bankers Association commends the Administration on its revision of the laws governing FHA insured property improvement and mobile home loans. We are particularly pleased that the statutory ceiling on interest rates would be eliminated and the Secretary would be given authority to adjust the rate so that the program can again become significant and viable.

THE AMERICAN BANKERS ASSOCIATION NEWS RELEASE

HOME LOANS INCREASE AT BANKS

WASHINGTON, September 14.-The gloomy housing outlook has some bright spots Eugene H. Adams, president of the American Bankers Association (ABA), said today.

Adams, citing the latest report released by the U.S. Department of Housing and Urban Development (HUD), pointed to major increases by the nation's 14,000 banks in five areas of mortgage lending for one-to-four family homes. According to HUD figures, banks:

Originated 59 per cent more in long-term loans for the first six months of 1973 compared to the first half of 1972.

Originated 31 per cent ($12.4 billion) of total mortgage loans for the first six months of this year.

Increased their acquisition of construction loans by 14 per cent over the same 1972 period, from $3.75 billion to $4.28 billion.

Put new commitments on the books during June '73 of $1.5 billion for construction and long-term loans-an increase of 5 per cent.

Had outstanding commitments of $7.3 billion for construction and longterm loans at the end of June '73, some 38 per cent above the June '72 total. Adams, who is also president of The First National Bank of Denver, said it is "particularly gratifying to know that commitments to make future loans are holding up extremely well, since this is a good measure of loans actually being made today."

Banks again rank No. 1 on HUD's compilations of holdings of construction loans through June '73 by the major lending groups.

In order were: banks, $14.4 billion; savings and loan associations, $11.7 billion; mortgage investment trusts, $7.2 billion; mutual savings banks, $1.3 billion; state and local credit agencies, $843 million, and life insurance companies, $389 million.

Adams further said that ABA surveys show that banks have more than $90 billion invested in municipal bonds.

"Some $60 billion of these are bonds for roads, sewers, waste treatment facilities, schools, fire and police departments, city hospitals-all the facilities necessary for a community to function," Adams pointed out.