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1 of this subsection (f), and for this purpose the term “United 2 States" as used in said section 476 shall include the Cor

3 poration. 4 (g) References in this section to sections of title 18

5 of the United States Code shall be deemed to be references

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Sec. 11. Notwithstanding any other law, this Act shall 9 be applicable to the several States, the District of Columbia, 10 the Commonwealth of Puerto Rico, and the territories and

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possessions of the United States.

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CONSTRUCTION AND SEPARABILITY

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Sec. 12. Except as otherwise provided in this Act or as otherwise provided by the Corporation or by laws hereafter

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enacted by the Congress expressly in limitation of provisions of this Act, the powers and functions of the Corporation or of the board of directors shall be exercisable and the provisions of this Act shall be applicable and effective without regard to any other law. Notwithstanding any other evidences of the

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intention of Congress, it is hereby declared to be the control

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ling intent of Congress that if any provision of this Act, or the application thereof to any person or circumstances, is held invalid, the remainder of this Act, or the application of such

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provision to persons or circumstances other than those as

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to which it is held invalid, shall not be affected thereby.

SECTIONAL ANALYSIS OF S. 3508, TO CREATE A FEDERAL MORTGAGE MARKETING

CORPORATION, AND FOR OTHER PURPOSES SECTION. 1. Short Title.-Section 1 gives the short title, “Federal Mortgage Marketing Corporation Act."

SEC. 2. Definitions.-Section 2 contains definitions of terms.

SEC. 3. Federal Mortgage Marketing Corporation.-Subsection (a) would create the Federal Mortgage Marketing Corporation under the direction of a board of directors composed of the members of the Federal Home Loan Bank Board, whose chairman would be the chairman of the board of directors. Subsection (b) sets forth the general powers of the Corporation, including the power to adopt bylaws, to impose fees, to hold property, to employ personnel, etc. Subsection (c) provides that funds of the Corporation may be invested in such investments as the board of directors may prescribe; it also provides that, when designated by the Secretary of the Treasury, the Corporation shall be a depositary of public money and may be employed as fiscal or other agent of the United States. Subsection (d) provides for exemptions from Federal, State, and local taxation of the Corporation and its obligations and securities, except that real property of the Corporation is to be subject to State and local taxation like other real property. However, by reason of the provision that nothing in the section shall affect the applicability of the Public Debt Act of 1941, as amended, the interest, dividends, and other income from obligations and other securities of the Corporation would be subject to Federal income tax in accordance with the provisions of that act. Subsection (e) gives the Corporation clear authority to bring suit in Federal courts, as well as to remove suits to such courts, and prohibits the issuance of any attachment or execution against the Corporation or its property before final judgment.

Sec. 4. Capital Stock.-Section 4 would provide for the issuance and retirement of the capital stock of the Corporation. Preferred stock could be issued only to the Federal Home Loan Banks, which could be required to subscribe and pay therefor up to $100,000,000. Common stock could be issued only in accordance with section 5. Preferred stock would be entitled to cumulative preferred dividends of 2% per annum on the outstanding amounts paid in therefor, and it provided that no dividends shall be declared on common stock in any semiannual period beginning January 1 or July 1 in excess of a total of 1% of the par value thereof (that is, at à rate exceeding 2% per annum) unless all preferred stock not subject to an outstanding call for retirement is accorded a pro rata participation to the extent of the excess. Stock could be retired as set forth in the section, but no common stock could be retired at any time when there was outstanding any preferred stock which had not been called for retirement. No call for the retirement of any stock could be made, and no stock could be retired without call, if the total of the stock not called for retirement and the reserves and surplus of the Corporation would, immediately after such action, be less than $100,000,000.

SEC. 5. Mortgage Operations. Subsection (a) authorizes the Corporation to purchase, and make agreements and commitments to purchase, residential mortgages from any member of a Federal Home Loar Bank, and to hold and dispose of mortgages and interests therein. Any such purchase, and any such sale or other disposition, may be with or without recourse, and may be upon such terms and conditions, including conditions as to resale or repurchase, or as to guaranty, substitution or replacement, as the Corporation may prescribe. Subsection (b) provides that, as a condition to any such purchase, agreement, or commitment to purchase, the selling Federal Home Loan Bank member shall be required to purchase from the Corporation common stock of the Corporation equal to not less than 1% of the unpaid principal of the mortgage or mortgages purchased. The Corporation would not be compelled to require stock purchase if all of the stock of the Corporation had been retired or called for retirement. Subsection (c) would confer legal authority to purchase, hold, and deal with or dispose of such stock on any Federal savings and loan association and on any Federal Home Loan Bank member as to which Congress has power to confer such authority. In anticipation that some State-chartered members of the Federal Home Loan Banks may not have, under their State laws, authority to purchase such stock, the subsection provides that the Corporation is authorized to accept deposits of cash or agreements to make such deposits, in lieu of any purchase or agreement to purchase stock which would otherwise be required, if the member represents to the Corporation, or the Corporation is of the opinion, that such member does not have legal authority to make such purchase of stock or agreement to purchase stock.

SEC. 6. Obligations and Securities.-Section 6 authorizes the Corporation to borrow, to give security, and to issue obligations and other securities. The section further provides that the Corporation may establish prohibitions or restrictions upon the creation of indebtedness or obligations of the Corporation, or of liens or charges upon property of the corporation, and may create liens or charges upon property of the Corporation.

SEC. 7. Eligibility of Obligations as Investments and Security.-This section provides that, subject to any regulatory authority otherwise applicable, obligations and other securities of the Corporation, except stock, shall be lawful investments, and may be accepted as security, for the various types of institutions listed therein.

SEC. 8. Blue-Sky Law8.-Section would except the stock, obligations, and securities issued by the Corporation from general legislation relating to securities, and authorizes the Corporation to make and enforce regulations of that nature which it believes are appropriate for the protection of investors.

SEC. 9. Rights and Remedies of the Corporation.-Section 9 is designed to assure that the rights and remedies of the Corporation with respect to mortgages or other property acquired by it could not be impaired by restrictive laws, such as moratorium laws, which take effect after the Corporation acquired the property. It is also designed to give the Corporation the same immunities and priorities that the Federal Government itself possesses.

SEC. 10. Penal Provisions.-Section 10 contains miscellaneous penal provisions.

SEC. 11. Territorial Applicability. This section would make the Act applicable to the several States, the District of Columbia, Puerto Rico, and the territories and possessions of the United States.

SEC. 12. Construction and Separability.—Section 12 would assure that the provisions of other laws shall not limit the operation of the new act and would provide a separability provision in customary form.

CHAIRMAN OF THE BOARD OF GOVERNORS,

FEDERAL RESERVE SYSTEM,

Washington, D.C., March 16, 1970. Hon. JoAN SPARKMAN, Chairman, Committee on Banking and Currency, U.S. Senate, Washington, D.C.

DEAR MR. CHAIRMAN: I am writing in response to your request for a report on S. 3508, a bill to create a Federal Mortgage Marketing Coporation, and for other purposes.

The Board of Governors recognizes the need to enhance the attractiveness of residential mortgages to private investors. We think that much can be done to improve the characteristics of the mortgage instrument and the institutional practices associated with issuing, holding, and retiring mortgages. Greater standardization of these practices, as well as of the instrument itself, is obviously a prerequisite to creating a more active secondary market for conventional residential mortgages. Such improvements, however, need not await the creation of an additional Federal facility to operate in the secondary mortgage market.

Whether establishment of the Federal Mortgage Marketing Corporation, as proposed by S. 3508, would entail public benefits which would outweight the costs is far from certain. To the degree that this new Federal agency dealt in Government underwritten residential mortgages, it would essentially duplicate the activities of another Federal agency—the Federal National Mortgage Association—which is already operating in this area of the market. To the extent that the FMMC purchased conventional mortgages, it would accumulate assets that lack the protective features of Government underwritten loans. This would obviously raise questions about the liquidity of the mortgage portfolio that FMMC came to hold, and about its ability to finance itself by issuing debt in the private market.

In these respects, the bill would set up no special statutory safeguards that might limit either the agency's risk exposure or its volume of borrowings. FMMC could acquire any mortgage on real estate, to cite the broad language of the bill, "upon which there is located a structure or structures designed in whole or in part for residential use," and with no statutory limit as to the range of prices that might be paid for such assets offered by Federal Home

Loan Bank members. Any loan restrictions on the amount, term, repayment provisions, number of families, or status as a first lien on real estate would be left to the optional regulation of the Federal Mortgage Marketing Corporation itself. Moreover, the amount of debt issued by this new Federal agency, according to Section 6 of the bill, would be limited only by whatever prohibitions or restrictions that the Corporation might choose to adopt. It should also be noted that unlike the case of the Federal Home Loan Bank System itself, neither the amount nor the terms of FMMC's borrowings would be subject to the approval of the Secretary of the Treasury-a provision that would assure closer coordination with broad Government fiscal policy.

Attracting funds into conventional mortgages through the FMMC could mean that funds might be siphoned away from support available for FHA and VA mortgages which finance programs charged with a special public interest, unless the total pool of available housing credit were expanded. The most feasible way to do that is to reduce the demands that the Federal Government makes on private capital markets. The Federal Reserve Board believes, therefore, that proposals such as S. 3508 which would increase rather than diminish the total credit demands of the Government and its agencies should be examined with caution. Sincerely yours,

ARTHUR F. BURNS.

THE SECRETARY OF HOUSING AND URBAN DEVELOPMENT,

Washington, D.O., March 17, 1970. Subject: S. 3508. Hon. JOHN SPARKMAN, Chairman, Committee on Banking and Currency, U.S. Senate, Washington, D.O.

DEAR MR. CHAIRMAN: This is in further reply to your request for the views of this Department on S. 3508, a bill which would establish a Federal Mortgage Marketing Corporation within the Federal Home Loan Bank system.

This Department favors the objectives of this bill—to establish a secondary market facility within the Federal Home Loan Bank system. With respect to the desirability of specific provisions in the bill, we defer to the views of the Federal Home Loan Bank Board. Sincerely,

RICHARD C. VAN DUSEN

(For George Romney).

91st CONGRESS

2D SESSION

S. 3442

IN THE SENATE OF THE UNITED STATES

FEBRUARY 16, 1970 Mr. SPARKMAN introduced the following bill; which was read twice and referred

to the Committee on Banking and Currency

A BILL

To increase the availability of funds for the financing of urgently

needed housing, to authorize the establishment of standards governing the amount of settlement costs allowable in the

financing of federally assisted housing, and for other purposes. 1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 3 That this Act may be cited as the “Mortgage Credit Act of

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8 SECTION 1. Section 3 (a) of the Act of May 7, 1968 9 (Public Law 90–301), is amended

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