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National Association of Mutual Savings Banks, statement of John E. Page Krout, chairman, Mortgage Investments Committee.-

312 National Association of Real Estate Boards, statement of Charles P. Landt, chairman, Subcommittee on Mortgage Finance

185 National Housing Conference, statement of Nathaniel S. Keith, presidint - 262 National League of Insured Savings Associations:

McKenna, William F., general counsel, supplementary statement.--- 294
Osborn, Willia A., chairman, Legislative Subcommittee on

Secondary Market for Conventional Mortgages, statement before
committee

284 National Rural Electric Cooperative Association, statement of

353 National Rural Housing Coalition, statement of Clay L. Cochran, chair

348 Newark Evening News, reprint of article from.

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.- 246 Richmond, E. R. letter to Senator Sparkman.

353 Treasury, Department of: Eggers, Paul W., General Counsel: Letters regarding: S. 2958_.

7 S. 3442

52 United States Savings & Loan League, statement of Norman Strunk, executive vice president..

197, 209 Veterans' Administration, Donald E. Johnson, Administrator, letter regarding S. 3442_

52 CHARTS Change in housing cost-

339 Credit requirements for new housing units

121 Mortgage interest rates and bond yields

118 Net residential mortgage lending

116 Subsidized housing production.

119 Total new housing production.

120 Total private housing units started, 1968–1970

117

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TABLES

273

Amount of privately financed mortgages supported by tax incentives equal

to the net cost of public financingCost to Government of maintaining $10 billion in home mortgages at 672

percent.--
Credit requirements for new housing units---
Estimated average purchase prices of homes covered by mortgages.
Home building cost, 1949 and 1969-
Monthly occupancy costs_-
Percentage declines in various types of housing starts during postwar

housing downturns..
Production of assisted housing units.
Projected housing starts--
Residential mortgage holdings by major classes of investors..
Total new housing production, fiscal years 1960–1978.

273
122

87 338 339

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86 122 311 271 122

SECONDARY MORTGAGE MARKET AND MORTGAGE

CREDIT

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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 estabsish 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

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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 :)

9187 CONGRESS

1st SESSION

S. 2958

IN THE SENATE OF THE UNITED STATES

SEPTEMBER 24, 1969 Mr. SPARKMAN introduced the following bill; which was read twice and referred

to the Committee on Banking and Currency

A BILL

To authorize the Federal National Mortgage Association to pur

chase conventional mortgages, 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 (a) section 302 (b) of the Federal National Mortgage 4 Association Charter Act is amended

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(1) by inserting “(1)” immediately following “(b)”;

(2) by striking out “each of the bodies corporate named in subsection (a) (2)” and inserting in lieu

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thereof "the Association";

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(3) by striking out“; and the corporation is author

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ized to lend on the security of any such mortgages and

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to purchase, sell, or otherwise deal in any securities guaranteed by the Association under section 306 (g)”;

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and

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(4) by adding tliereto the following new para

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graph:

(2) For the purposes set forth in section 301 and sub7 ject to the limitations and restrictions of this title, the cor8 poration is authorized, pursuant to commitments or other9 wise, to purchase, service, sell, lend on the security of, or 10 otherwise deal in mortgages and in securities guaranteed by 11 the Issociation under section 306 (g). The corporation shall

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not in the regular course of its business purchase or lend on

13 the security of any mortgage which is not insured or guaran14 teed by the Secretary of Housing and Urban Development, 15 the Administrator of Veterans Affairs, or some other officer

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or agency of the Federal Government, unless the outstanding

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principal balance thereof at the time of purchase does not exceed 80 per centum of the amount determined by the corporation to be the value of the mortgaged property, or unless that portion of the unpaid principal balance which is in excess of such 80 per centum is guaranteed or insured by an institu

and under a contract, determined by the corporation to be generally acceptable to other institutional mortgage

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tion,

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investors.

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