National Association of Mutual Savings Banks, statement of John E. McKenna, William F., general counsel, supplementary statement... National Rural Electric Cooperative Association, statement of- Newark Evening News, reprint of article from_ Page 312 185 262 294 284 353 man_. 348 238 Payne, John C., professor of law, University of Alabama: Letter to Senator Proxmire.... 303 Prepared statement. 297 President Richard M. Nixon, statement on housing, dated Jan. 21, 1970- 197, 209 52 United States Savings & Loan League, statement of Norman Strunk, executive vice president_ Veterans' Administration, Donald E. Johnson, Administrator, letter regarding S. 3442__ Amount of privately financed mortgages supported by tax incentives equal to the net cost of public financing. 273 Cost to Government of maintaining $10 billion in home mortgages at 61⁄2 percent... 273 Credit requirements for new housing units.. 122 Estimated average purchase prices of homes covered by mortgages. 87 338 Monthly occupancy costs... 339 Percentage declines in various types of housing starts during postwar housing downturns_ SECONDARY MORTGAGE MARKET AND MORTGAGE CREDIT U.S. SENATE, COMMITTEE ON BANKING AND CURRENCY, SUBCOMMITTEE ON HOUSING AND URBAN AFFAIRS, Washington, D.C.. The subcommittee met, pursuant to notice, at 10 a.m., in room 5302, New Senate Office Building, Senator John Sparkman presiding. Present: Senators Sparkman, Proxmire, Cranston, Bennett, Tower, and Percy. The CHAIRMAN. Let the committee come to order, please. We are expecting several other Senators to be present, but I think we ought to get started. The hearings starting today and running through the rest of the week are to receive testimony on several bills pending before the Subcommittee on Housing and Urban Affairs on the subject of a secondary mortgage market and related mortgage credit items. The bills before us include S. 2958, which I introduced last year, to help improve the availability of mortgage credit by establishing a secondary mortgage market facility for conventional mortgages within the Federal National Mortgage Association. The FNMA, which is now limited by its charter to deal only in FHA and VA mortgages, would be given authority to buy and sell any sound mortgage with an outstanding balance of 80 percent or less of appraised value or, if more than 80 percent, to purchase such mortgages only if guaranteed or insured. Another bill, S. 3508, would also provide a secondary market for conventional mortgages by authorizing the establishment of a new corporation under the Federal Home Loan Bank Board. This corporation would secure its original capital from the home loan banks. The funds to finance the purchase of mortgages would come from the capital market, the same source from which FNMA would obtain its funds. I introduced each of these bills with the understanding that their provisions would be studied and agreement could be reached on whether one or the other, or both, could be established to improve the marketability of conventional mortgages. A third plan was considered under which a private corporation, established independent of FNMA, could provide the same quality of services, but which would not interfere with FNMA's present FHA and VA responsibilities, nor would it be limited to members of the Home Loan Bank System. In order to establish such a facility some means would have to be developed to purchase its capital stock outside the Government, so that it would not be classified as a Government corporation. Such a (1) facility would also require setting up a new nationwide organization and all that entails in additional manpower and administrative costs. For these reasons and others, I did not introduce a bill to carry out this plan, but I believe it still has some merit and should be kept in mind during the course of our hearings. I may say, a few years ago I did introduce such a bill, but at that time there was no advocacy, or at least little, of changing the existing facilities or setting up a new corporation under the Home Loan Bank Board. Another subject of the hearings is S. 3442, which I introduced to carry out the recommendations of the Mortgage Interest Rate Commission report made to the Congress last year. The most debatable provision of this bill would establish a dual system for FHA and VA interest rate ceilings. Under its terms a lender would have the choice of using the existing system with an administratively established ceiling or an alternative system under which he could charge in excess of the administratively established ceiling provided no discount points are charged. Other provisions of S. 3442 would involve a study of closing costs and new investment authority for commercial banks and Federal savings and loan associations. A fourth bill, S. 3503, introduced by Senator Proxmire, would improve the supply of mortgage credit for members of the Home Loan Bank System for low-cost housing purposes by authorizing the Home Loan Bank Board to issue certificates up to $3 billion at a maximum interest rate of 6 percent. The bill directs the Federal Reserve Board to purchase these certificates through the discount window of the Federal Reserve banks. The funds thus obtained would be made available for low-cost housing for middle-income families by members of the Home Loan Bank System. All of these bills are directed toward improving the mortgage credit supply to finance housing for our people. We all know that the shortage of mortgage credit is the real reason for our present critical housing situation, and that something needs to be done. Each of these bills would help toward that end. (Copies of the bills, reports from the agencies, and explanations of each bill follow :) |