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would otherwise be marketed. In order to keep control of the reserve base, the Federal Reserve would have to offest its loans on Federal Home Loan Bank obligations with sales of Treasury securities or forego purchases of Treasury securities it would otherwise have made. Sales of $3 billion additional Treasury obligations in the capital markets would, of course, attract funds away from other uses, including credit that would otherwise finance housing as well as other capital improvements.

Moreover, the Board opposes tapping Federal Reserve credit for specialpurpose lending, no matter how worthy, because it could frustrate the objectives of monetary policy. A $3 billion a year program to help middle-income families buy homes could soon lead to proposals for other types of special lending to state and local governments, small busineses, or others who find it particularly difficult to borrow under conditions of monetary restraint. To compel the Federal Reserve to meet credit needs of these magnitudes would lead at first to a weakened market position for Treasury securities—as the System made offsetting sales of Treasury issues and ultimately to inflation, as it became impossible in practice to offset the expansion of Federal Reserve credit in that fashion, Accordingly, the Board recommends against enactment of S. 3503. Sincerely yours,

ARTHUR F. BURNA.

THE SECRETARY OF HOUSING AND URBAN DEVELOPMENT,

Washington, D.C., March 17, 1970. Subject: S. 3503. Hon. JOHN SPARKMAN, Chairman, Committee on Banking and Currenoy, U.S. Senate, Washington, D.C.

DEAR MR. CHAIRMAN : This is in further reply to your request for the views of this Department on S. 3503, a bill which would channel up to $3 billion a year through the Federal Home Loan Bank System to member institutions and to other regulated mortgage lenders. The funds would be obtained by discounting special Housing Certificates at the Federal Reserve Banks at a rate no greater than 6 percent. These funds would be advanced to member institutions and other regulated lenders at a rate between 6 and 644 percent. The advances could be used only for mortgage loans for housing costing less than $25,000 per unit, with the income of the homebuyer limited to $10,000, and with a maximum interest rate on the mortgage, including all points, not to exceed 612 percent.

The Department of Housing and Urban Development does not recommend enactment of this bill.

We believe the effect of the bill would be discriminatory since it would be of little or no aid to middle income families in many large metropolitan areas where housing units costing less than $25,000 are rare. Also, under this Department's present section 235 homeownership program, the interest rate payable by the homeowner can be reduced to a level as low as 1 percent. The income limits for eligibility range up to $10,000 for families of between 4 and 10 persons in places where incomes are high but are generally much lower for the country as a whole, thus better serving families on a basis of real need. In addition, the families aided under section 235 must themselves make contributions commensurate with their ability to pay. If it were the desire of Congress, although this Department recommends against such a measure, the formula for section 235 income limits could be adjusted upward to the S. 3503 level, accomplishing the objective of the bill in a more efficient and equitable way.

Instead of the approach taken in this bill, we would recommend enactment of S. 3555, a bill which would authorize appropriations for a direct subsidy to the Federal Home Loan Bank System to allow it to adjust the effective rate of interest on short-term and long-term borrowings for residential mortgages. Such an approach would not only be more economical than that taken in S. 3503 but would result in less involvement with the monetary policies of the Federal Reserve Board. Sincerely,

GEORGE ROMNEY.

91st CONGRESS

2D SESSION

S. 3508

IN THE SENATE OF THE UNITED STATES

FEBRUARY 25, 1970 Mr. SPARKMAN introduced the following bill; which was read twice and referred

to the Committee on Banking and Currency

A BILL To create a Federal Mortgage Marketing Corporation, and for

other purposes.

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Be it enacted by the Senate and House of Representa

2 tives of the United States of America in Congress assembled, 3 That this Act may be cited as the “Federal Mortgage

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(a) The term "Board of Directors” means the Board of

8 Directors of the Corporation.

9 (b) The term “Corporation" means the Federal Mort10 gage Marketing Corporation created by this Act.

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(c) The term "law” includes any substantive, pro

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1 cedural, or other law of the United States or of any State

2 (including any rule of law or of equity) now or hereafter

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in effect, and includes any provision of any law.

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(d) The term “mortgage” includes such classes of liens 5 as are commonly given or are legally effective to secure ad

vances on, or the unpaid purchase price of, real estate under

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7 the laws of the State in which the real estate is located, to

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gether with the credit instruments, if any, secured thereby,

9 and includes interests in mortgages.

10.

(e) The term “organization" means any corporation, 11 partnership, association, business trust, or business entity. 12

(f) The term “prescribe” means to prescribe by regula13 tions or otherwise.

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(8) The term “property” includes any property, 15

whether real, personal, mixed, or otherwise, including with

out limitation on the generality of the foregoing choses in 17 action and mortgages, and includes any interest in any of the

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foregoing.

(h) The term "residential mortage” means a mortgage

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which (1) is a mortgage on real estate, in fee simple or under a leasehold having such term as may be prescribed by the Corporation, upon which there is located a structure or struc

a tures designed in whole or in part for residential use, and (2) 24 has such characteristics and meets such requirements as to

amount, tern, repayment provisions, number of families,

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1 status as a first lien on such real estate, and otherwise, as may

2 be prescribed by the Corporation.

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(i) The term "security” has the meaning ascribed to it

4 by section 2 of the Securities Act of 1933, as now in force. 5

(j) The term “State", whether used as a noun or other

6 wise, includes and refers to the several States, the District of

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Columbia, Puerto Rico, and the territories and possessions

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of the United States.

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FEDERAL MORTGAGE MARKETING CORPORATION

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SEC. 3. (a) There is hereby created the Federal Mortgage Marketing Corporation, which shall be a body corporate and shall be under the direction of a Board of Directors com

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posed of the members of the Federal Home Loan Bank

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Board, who shall serve as such without additional compensa

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tion. The Chairman of the Federal Home Loan Bank Board

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shall be the Chairman of said Board of Directors. The prin17

cipal office of the Corporation shall be in the District of 18 Columbia or at such other place as the Corporation may from 19

time to time prescribe. 20

(b) The Corporation shall have power (1) to adopt, 21

alter, and use a corporate seal; (2) to have succession until 22

dissolved by Act of Congress; (3) to make and enforce such 23

bylaws, rules, and regulations as may be necessary or appro

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priate to carry out the purposes or provisions of this Act;

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(4) to make and perform contracts, agreements, and com

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1 mitments; (5) to prescribe and impose fees and charges for 2 services by the Corporation; (6) to settle, adjust, and com

3 promise, and with or without consideration or benefit to

4 the Corporation to release or waive in whole or in part, in

5 advance or otherwise, any claim, demand, or right of, by, or

6 against the Corporation; (7) to sue and be sued, complain 7 and defend, in any State, Federal, or other court; (8) to 8 acquire, take, hold, and own, and to deal with and dispose 9 of any property; and (9) to determine its necessary ex10 penditures and the manner in which the same shall be in

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11 curred, allowed, and paid, and appoint, employ, and fix and 12 provide for the compensation and benefits of officers, em13 ployees, attorneys, and agents, all without regard to any 14 other law except as may be provided by the Corporation or 15 by laws hereafter enacted by the Congress expressly in limi16 tation of this sentence. Nothing in this Act or any other law 17 shall be construed to prevent the appointment, employment, 18 and provision for compensation and benefits, as an officer, 19 employee, attorney, or agent of the Corporation, of any offi20 cer, employee, attorney, or agent of any department, estab21 lishment, or corporate or other instrumentality of the Gov22 ernment, including any Federal home loan bank or member 23 thereof. The Corporation, with the consent of any such de24

partment, establishment, or instrumentality, including any 25 field services thereof, may utilize and act through any such

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