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Home Builders, Grand Rapids, MI, May 28, 1970
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The original documents are located in Box D29, folder "Home Builders, Grand Rapids, MI,
May 28, 1970" of the Ford Congressional Papers: Press Secretary and Speech File at the
Gerald R. Ford Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. The Council donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
remain with them. If you think any of the information displayed in the PDF is subject to a valid
copyright claim, please contact the Gerald R. Ford Presidential Library.
Grand Rapids
NOTES FOR HOME BUILDERS SPEECH
may 28, 1970
G.R. Home Builders
I. The problem in the home building industry is largely
a lack of mortgage money.
II. The underlying cause of this lack of mortgage money
is inflation, which has caused XX a run on lendable funds
and has ka caused interest rates to hit record highs.
III. Until inflation can be brought under control and the
money supply canbe expanded at reasonable interest rates,
GERALD
the government must take massive action to assist housing.
That action must be taken now-and is in the works.
2/ Home Bldr Notes
IV. The inflation we now are experiencing is due to
on the part of the previous Administration--policies:
inappropriate economic policies which were geared to spending
far more revenue than we had.
V. Severe monetary restraints have been used in an attempt
to bring the inflationary spiral under control. Regrettably,
housing has received the short end of the deal.
VI. Housing starts have dropped almost steadily from a
temporary annual rate of more than 1.7 million units in the
first quarter of 1969 to about 1.25 million in the first
quarter of
1970. No other economic sector has experienced
such a squeeze.
Digitized from Box D29 of The Ford Congressional Papers: Press Secretary and Speech File at the Gerald R. Ford Presidential Library
3/ Home Bldr Notes
VII.
What
the Nixon Administration and the Congress doing
about it?
A. The Administration has solicited and received a pledge
from commercial banks, life insurance companies and pension fund
trustees of a $2 billion increase in their commitments for
residential mortgages this year. This program is as follows:
1. Commercial banks have pledged a $1 billion increase in
FORD
GERALD
their direct residential mortgage investments this year over last
year's total of $3 billion.
2. Life insurance companies have promised to r aise their
4/ Home Bldr Notes
commitments in residential mortgages by $550 million this year
above the $2 billion figure originally planned for 1970. The
insurances companies will primarily be involved in the
finamcing of multi-family housing, as they have been in recent
years.
3. Corporate and financial institution trustees for
private pension funds have indicated a willingness to invest
$500 million in residential mortgages this year, primarily
through a new mortgage-backed bond being developed by the
Housing and Urban Development Department and the U.S. Treasury.
5/ Home Bldr Notes
The new bonds willbe guaranteed by the Government National
Mortgage Association.
B. The Senate has passed and I expect the House will
approve in the near future an Emergency Home Finance Act which
The House Banking and CurrencyCommittee reported it out
will provide more mortgage money at lower cost.
d'uesday.
Thisis
Administration-backed legislation. It will fortify the mortgage
market and enable more people to become home owners.
1. It authorizes a new subsidy program allowing eligible
middle-income families to buy homes with mortgage loans at
interest
rates as low as 7 per cent. This
involves
6/ Home Bldr Notes
anexpenditure of $60 million a year for three years in
Federal funds. It would allow construction of about 150,000
subsidized homes each year for a total of 450,000 units.
2. The bill also increases mortgage money by:
a. Authorizing FNMA to purchase conventional
mortgages
as well as FHA and VA paper;
b. Authorizing a $250 million subsidy that
Federal Home Loan Banks can use to stimulate mortgage lending
by savings and loan institutions.
c. Giving GNMA more flexibility in its use of
7/ Home Bldr Notes
$1.5 billion in special assistance funds that support the
mortgage market.
VIII. The Emergency Home Finance Act will offer a much-needed
stimulus to the home construction industry and will open
doors for many families who want to buy homes but are priced out
of the market at this time.
IX. This emergency housing legislation must be passed promptly.
Appropriations must also be requested to carry out the program.
Action to assist in obtaining housing is needed now.
X. If projmections are correct, this emergency begislation should
8/ Home Bldr Notes
stimulate $5 to $6 billion of mortgage money while costing the
Treasury only $310 million.
XI. Meantime, we should not lose sight of the fact that emergency
home financing of this kind does not really solve the basic
problem of the housing industry--a steady and adequate flow of
mortgage money on a longterm basis. To achieve that objective
we need to control the inflation inherited by the present
Administration.
######
GERALD FORD LIBRARY
ADMINISTRATION'S 1970 HOUSING PROGRAM
Hyusim
The Administration's 1970 housing program seeks
- - to turn the housing and mortgage market situation around
as quickly as possible and to reach a volume of 1.4 million
housing starts this calendar year; and
-- to strengthen basic features of the mortgage market and HUD
subsidized housing programs so as to make more feasible a
sustained rise in housing activity.
Estimates suggest a need for $20 1/2 billion of net new residential
mortgage lending this year to finance the 1.4 million housing starts
target. The program to secure these funds is summarized below.
Lending Institution
Net New Residential
Program
Mortgage lending
Actual
Objective
(billions of dollars)
Savings & Loan
$9.0
$8-9
$250 million subsidy
Associations
to support Home Loan
Bank advances.
Commercial banks, life
4.0
6-7
Voluntary Program to
insurance companies, private
shift funds to
pension funds, and state
mortgages.
and loan government
retirement funds
FNMA-GNMA
4.4
4
Continued active
support.
Mutual savings banks
1.8
2
Continued active
support.
Other lenders
.6
Same as last year
Total
$19.8
$20+
-more-
-2-
Actions to Meet Immediate Needs
1. Legislation requested authorizing $250 million subsidy for the
Home Loan Bank System. (Emergency Home Financing Act of 1970 passed
Senate 4/16/70).
a. The subsidy will be used to underwrite advances to member
savings and loan associations at a lower interest rate than
would otherwise be possible.
b. Without this subsidy, associations are likely to pay back
outstanding advances and place only $4-5 billion of funds in
mortgages this year. The subsidy should promote the $8-9
billion of mortgage loans needed from this industry.
2. Treasury seeking voluntary support for the mortgage market this year
from commercial banks, life insurance companies, private pension
funds, and state and local government retirement funds.
a. The pledges made to date total over $2 billion dollars. This
additional housing credit for 1970 residential mortgages will
significantly enhance the nation's ability to meet critical
housing needs.
3. Treasury, HUD and Federal agencies developing mortgage-backed bonds
guaranteed by GNMA, to help attract investment in the mortgage market.
4. FNMA's borrowing authority and capital position increased to permit
continuation of heavy direct support of the FHA-VA sector of
the mortgage market.
5. Legislation requested converting $1.5 billion of GNMA Special
Assistance funds into more flexible authority. The funds could
then be used as needed to buttress HUD's "Tandem Plan" Operations,
which assist in financing construction of subsidized housing units
on terms free of excessive discounts.
6. Supplemental appropriation requests submitted to increase contract
authority under the Sections 235 and 236 subsidized housing programs
by $25 million each.
a. Virtually all existing authority has been reserved, and there is
a large backlog of requests which cannot now be met.
b. The 1971 Budget requests an additional $140 and $145 million for
these programs.
-more-
-3-
Long-Range Actions Already Proposed
1. Legislation to create a secondary market for conventional mortgages
in FNMA and the Federal Home Loan Banks, along lines of the
market that FNMA now provides for FHA and VA mortgages.
2. Legislation to strengthen FHA-VA mortgage market by authorizing
experimentation with a dual market system partly free of mortgage
discounts, and exempting such mortgages from usury limitations
imposed by state law.
3. Legislation to consolidate, streamline and strengthen the multitude
of HUD's subsidized housing programs now contained in many narrow
and separate legislative authorities.
4. Appointment of a special Presidential commission to study the basic
structure of the financial system and its institutions.
printe
We
Provisions of the Emergency Home Finance Act of 1970 Passed
by the Senate 72-0 on Thursday, April 16, 1970
1. Title I authorizes $250 million subsidy for the Federal Home
Loan Banks. It will be used to stimulate mortgage lending
through savings and loan associations. Without this subsidy
mortgage lending by these institutions is likely to be cur-
tailed sharply this year (see attachment).
2. Titles II and III provide for a secondary market for conven-
tional mortgages in FNMA and in the Federal Home Loan Bank
System. This will help increase the fluidity of the mortgage
market.
3. Title IV provides more flexible authority for $1.5 billion of
GNMA special assistance funds. This will permit HUD to use
these funds as necessary in its Tandem Plan operations to
support the mortgage market.
4. Title V authorizes a new subsidized housing program to help
middle income families obtain mortgage loans at interest rates
as low as 7%. The Budget authorization is $60 million a year
for the first three years. That should support construction
of 450,000 housing units over a three year period.
5. Title VI authorizes
(a) A dual market system for FHA-VA mortgages, giving more
flexibility to the FHA-VA interest rate.
(ID)
Regulation and study of closing costs.
()
Establishment of a special advisory commission on housing
goals to report annually to the President and Congress.
(d)
A few technical changes in statutes regulating commercial
banks and savings and loan associations, that should be
marginally beneficial to the mortgage market.
()
A perfecting amendment to make good on the promise of
Federal guarantees on loans authorized under HUD's New
Communities program.
An amendment to the public housing and urban renewal
statutes removing a restriction which might have prevented
continued sale of notes and bonds under those programs.
The Administration supports the whole Bill. Speedy enactment is
essential SO that appropriations can be obtained for litles I and
V and the whole program implemented in time to affect this year's
building plans.
Feb. 2 - 25
13. hop 1 hump.
no Committee action motal late MAY.
BRIEF SUMMARY
OF THE
"EMERGENCY HOME FINANCE ACT OF 1970" (H.R. 17495)
AS AMENDED AND REPORTED BY THE
HOUSE BANKING & CURRENCY COMMITTEE
TITLE I
- Reduction of Interest Charges for Members of Federal
Home Loan Bank System
Authorizes appropriation of $250 million to be
used to subsidize FHLBB advances to member associa-
tions; maximum mortgage loan could not exceed FHA
section 203 (b) sales housing and section 207 rental
housing limits; not more than 20 percent of funds
appropriated may be used in any one Federal Home
Loan Bank district.
TITLE II
- FNMA Authority to Provide Secondary Market for
Conventional Mortgages
Authorizes FNMA to buy and sell conventional as
well as FHA and VA mortgages; authority would be
limited to mortgages with maximum loan-to-value
ratio of 75 percent, unless (1) excess over 75 percent
is privately insured or guaranteed, (2) seller agrees
to repurchase or replace the mortgage at any time
the mortgage is in default within a time period to
be negotiated, or (3) seller retains at least 10
percent participation in the mortgage; only 10
percent of conventional mortgages purchased could
be more than one year old at time of purchase;
maximum mortgage limits could not exceed FHA sections
203 (b) and 207 limits; FNMA would not be able to
make public offering of securities to finance its
secondary market operations in conventional mortgages
at any time that HUD Secretary determines that an
offering would unduly inhibit financing of GNMA
special assistance functions.
TITLE III - Federal Home Loan Mortgage Corporation
Establishes FHLMC to operate a secondary market
for FHA and VA and conventional mortgages under
- 2 -
direction of FHLBB; conventional mortgages could
be purchased from any member of Federal Home Loan
Bank system or any other financial institution
whose deposits are insured by a Federal agency;
the Corporation's authority would be parallel to
the FNMA authority in title II of the bill.
TITLE IV - Government National Mortgage Association Special
Assistance Funds
Increases the authorization for GNMA special
assistance purchases (Presidential authority)
by $1.5 billion immediately.
TITLE V
- National Development Bank - KNOCKED OUT IN COMMITTEE
TITLE VI - Flexible Interest Rate Authority
Extends for one year (to October 1, 1971) the
authority of the Secretary of HUD to establish
maximum interest rates for FHA mortgage insurance
and VA loan programs.
TITLE VII - Miscellaneous
(1) Directs HUD and VA to prescribe standards
governing settlement costs on FHA-VA housing and
to study and report to Congress within one year
on actions to reduce and standardize settlement
costs; (2) authorizes HUD to borrow from Treasury
in order to meet obligations incurred in carrying
out the new community guarantee program; (3) permits
HUD (until July 1, 1972), where necessary because
of State law. to charge a rate of 6 percent (instead
of the going Federal rate, as under existing law)
on loans to housing and urban renewal agencies; and
(4) makes it possible for Federal Savings and Loan
Associations that have public funds - State and
local government - to put up collateral for these
public funds (under existing State laws public funds
placed in insured financial institutions must be
backed by collateral) ; (5) authorizes Federally
- 3 -
chartered savings and loans to loan state-wide
where State chartered associations may do so;
(6) authorizes savings and loans to be deposi-
tories for self-employed (Keogh-Smathers Trust)
funds; (7) authorizes 3-year extension of time
for compulsory divestiture under S & L Holding
Company Act; (8) authorizes savings and loan
holding companies to act as consultants for
subsidiary associations in the development of low
and moderate income housing projects; and
(9) authorizes Federal Reserve to permit member
banks to invest portions of their reserves in
Federal agency obligations issued to finance the
construction or acquisition of residential real
estate; (1) allows savings and loans thirty years
instead of twenty years to reach their statutory
5% reserve requirement.
THE HOUSING SITUATION AND THE EMERGENCY HOME FINANCE
ACT OF 1970
This nation is in the midst of a housing crisis.
Housing production has not kept pace with our growing
needs for more than four years. Housing starts dropped
sharply again in April and the production rate SO far this
year is 25% below the pace of a year ago.
Vacancy rates are down. Costs are soaring. Fewer and
fewer Americans can find decent places to live.
The problem is largely a lack of mortgage money -- both
in amount and in reasonable cost.
We all know that the whole problem cannot be solved all
at once; but we should be making a start and yet we continue
to procrastinate.
Mr. Widnall and TO this house intro-
60 other Republican Members of the
duced the Emergency Home Finance Act on April 28, 1970,
This bill makes a good start at providing more mortgage money
at lower cost. It has full Administration support and was
passed by the other body on April 16, 1970, by a unanimous
vote of 72 to 0.
One provision of the bill will enable the Federal Home
Loan Banks to supply lower cost money to savings and loan
associations for relending in the mortgage market. The banks
have already begun to implement this kind of program but they
cannot continue unless the support authorized by this provision
FORD LIDRADO
-2-
is forthcoming. They need it soon.
Another provision of the bill would make available
meet
mortgage money at a rate down to 7% to help the housing
needs of middle Americans. We already have programs for low-
income families, and high-income families don't need Govern-
ment assistance. This new program fills an urgent need.
It would provide assistance on 450,000 houses over three
years. We need to begin now.
In the face of a general decline in housing this past
year, starts under FHA and VA programs are up. This is
of
largely because/the secondary market facilities provided by
FNMA for FHA and VA mortgages. We need a secondary market
for conventional mortgages. The Emergency Bill provides
such a market. We need it in operation soon,
These and other House provisions are in the bill now being
considered by the Banking and Currency Committee. + know
Members of this body are anxious to take whatever action they
can to help bring our nation's mortgage market and housing
sector out of crisis.
# # # #
GERRED FORD LIBRARY
REMARKS OF HONORABLE WILLIAM B. WIDNALL TO ACCOMPANY THE
EMERGENCY HOME FINANCE ACT OF 1970
Mr. Speaker:
I am today introducing legislation identical to The
Emergency Home Finance Act of 1970 which has come to us from
the other body where it was passed by a 72-0 vote.
The title of the act includes the word "emergency," and
it very well should. Our housing situation is critical. We
do indeed face an emergency.
In the past five years, this Nation's total housing
production has fallen more than 1.1 million units short of the
volume needed to keep pace with population growth and losses
of existing units. Vacancy rates are at the lowest levels in
20 years. This is an emergency.
Housing construction is in the doldrums. Mortgage money
has all but disappeared from the market. And the average price
of such new housing as is available has risen to such a point
that the majority of our people are priced out of the market.
The average man can't afford a house, and he has trouble finding
an apartment. All this adde up to an emergency.
The Emergency Home Finance Act responds to this challenge
by fortifying the mortgage market and by making it possible for
more people to become home owners.
BERALD FORD LIBRAB)
- 2 -
It authorizes a new subsidy program that will allow
eligible middle-income families to purchase homew with mortgage
loans at interest rates as low as 7%. Expenditure of $60 million
per year for three years is authorized. This will allow for
construction of about 150,000 subsidized homes each year, for
a total of 450,000 units. This is a substantial number of new
units. This program in itself will not end the housing emergency,
but it moves in the right direction.
The bill also increases the availability of mortgage
money by --
-- authorizing FNMA to purchase conventional mortgages
as well as FHA and VA paper,
-- authorizing a $250 million subsidy that Federal Home
Loan Banks can use to stimulate mortgage lending by savings and
loan institutions;
-- giving GNMA more flexibility in its use of $1.5 billion
in special assistance funds that support the mortgage market.
These provisions of the Act, together with its other
provisions for increasing the flow of mortgage funds, will offer
a much-needed stimulus to our faltering home construction
industry, and- they will open doors for many families who want
to own homes but are priced out of the market. A section-by-section
summary is included for the record.
- 3 -
At this time, I must also express my deep concern over
the fact that the House has not demonstrated any sense of
urgency with respect to our housing problems. The Banking and
Currency Committee held 13 days of emergency housing hearings
between February 2 and February 25. The situation waw so urgent
that we held hearings on Saturday to hear from Chairman Burns
of the Federal Reserve Board. Unfortunately, no action has
followed and since the 25th of February there has been no
concern shown by the Committee for these acute housing problems.
We have before our Committee numerous bills affecting
housing in one way or another, many of which are extremely
controversial, on which it is very unlikely we could take action
any time in the near future. It is my view that we cannot
deady action on the emergency housing bill until the problems
associated with those other measures have been solved. This
emergency housing legislation must be passed and promptly for
appropriations must also be requested and enacted before its
provisions can be made effective. It will not suffice for us
to delay action until the late summer or the fall. Action to
assist in obtaining housing is needed now and I urge all Members
to join in co-spansoring this legislation and urging prompt
action on it.
BERALD FORD LIBRARY
- 4 -
Both the housing industry and the Administration support
this legislation. Some have asked whether the appropriations
requested are consistent with the President't program and I can
assure you that they are and that this measure is fully supported
by the Administration and that we have been assured that upon
its enactment, appropriations will be promptly requested.
BERALD Be FORD VIDRARY
Inflation inherited from the Johnson Administration is
a major contributing factor to the current problems of the
homebuilding industry. There is virtual unanimity from all
quarters that the control of inflation is essential to renewed
flows of mortgage money and the reduction of interest rates.
On the other hand, most also agree that the very efforts
to control inflation tend to have the harshest effect in the
mortgage money market. It follows, therefore, that if we are
to pursue the control of inflation, and we are determined to do
this, and do not want to see the housing industry decimated,
we must seek methods to alleviate the shortage, and price, of
mortgage money. I can assure you we are doing this. Not only
have a variety of administrative steps been taken but various
legislative proposals are in the mill.
In considering legislation, we must walk a tightrope
seeking to achieve the best balance between needed relief and
the continuing efforts to control inflation. It would be simple
enough to appropriate $5 - $10 billion for special assistance
into a cocked hat and be highly inflationary -- thus, it would
tend to be self-defeating. The trick is to find a way to divert
a minimum of federal participation and expense.
The Emergency Home Finance bill which passed the Senate
72 - 0 and will soon be before the House is an innovative effort
fully backed by President Nixon to achieve these objectives.
If projections are correct, it should stimulate $5 - $6 billion
of mortgage money with a budgetary impact of only $310 million.
FOR IMMEDIATE RELEASE:
May 12, 1970
JOINT STATEMENT OF REPUBLICAN MEMBERS OF THE HOUSE BANKING
AND CURRENCY COMMITTEE ON COMMITTEE VERSION OF THE
EMERGENCY HOME FINANCE ACT OF 1970
The Republican Members of the Banking and Currency
Committee are wholeheartedly in favor of the prompt enactment
of an Emergency Home Finance Act. We are fully aware of the
burden which the fight against inflation has imposed on the
housing industry and have been the motivating force in stimu-
lating prompt committee action of a measure which passed the
Senate April 16th by a vote of 72-0. We have urged the
enactment of an identical bill, noncontroversial and with
provisions for relief which can be effective during this build-
ing season.
Therefore, it is with regret that we must, for the
following reasons, oppose the provisions of the title of the
Committee's bill which would establish a new National Develop-
ment Bank to finance housing:
This has knocked now
1. Establishing a new Federal housing bank with
even broader powers than existing Federal housing
assistance programs would be a time consuming process.
been out bill. of The the
By no stretch of the imagination is that emergency
action. It would take at least a year, starting from
scratch, before the new bank could function. Such
action has no place in this emergency housing bill.
2. The real purpose of the proposal is to coerce
private pension funds and foundations into investment
of a significant portion, and eventually all, of their
assets in housing investments.
3. The Bank could enforce its coercive demands for
such investment by assessing court enforceable penalties
for compliance failure in amounts which in the case of
a recalcitrant fund would entirely confiscate the fund
within 10 years and in the case of complying funds
require the investment of all its assets in housing
investments in 40 years. In effect, the provisions
would shift the burden of supporting housing to the
beneficiaries of private pension plans -- such as retired
workers -- and to the legitimate beneficiaries of
foundation grants -- such as our hard-pressed educational
FORD
institutions.
GERALO
- 2 -
4. Application of the provisions would be discrim-
inatory because of a faulty definition of private
pension fund. Many small union and teacher pension
funds would be covered but one of the largest union
pension funds would not. A small $4½ million teacher
fund would be subject to the harsh provisions of the
proposal while a huge union pension fund 40 times larger
than the small teachers' pension fund would be completely
exempt.
5. Since the new Bank could be funded in whole or
in part by Congressional appropriations or by back-door
Treasury borrowing authority and since the obligations
issued by the Bank would be fully guaranteed by the
Federal government, the new Bank clearly would be a
Federal agency under the rules promulgated by the Com-
mission on Budget Concepts. As such a Federal agency,
the funds it pays out through its loan account, irres-
pective of their source, will appear in the Federal
budget as expenditures. At the contemplated target of
$4 billion for the first year of operation of the Bank,
this alone means a $4 billion budget deficit item.
6. The fully government-guaranteed obligations
issued by the Bank will be subject to the Federal debt
limit thereby requiring a substantial upward adjustment
in that limit or a comparable contraction in other
programs to which the Congress has attached a high priority.
7. A provision of the bill would subject income
from the fully government-guaranteed obligations of
the Bank to State income taxes. This would be an
important departure from long established policy under
which States do not tax income from direct or fully
guaranteed Federal securities and the Federal government
does not tax income from State and municipal obligations.
This important shift in basic policy should raise concern
on the part of States and municipalities of the recipro-
cal action imperiling their tax exempt status that might
flow from this shift in policy. Even aside from this
consideration however, subjecting the income of these
Bank obligations to State taxation would increase the
cost of the financing by approximately 1/2 percentage point.
- 3 -
8. Opportunity for hearing of affected parties
has not been given on important sections of the proposal.
For instance, one provision would allow member banks
under regulation of the Federal Reserve Board, to deduct
their investments in Federal housing agency securities
from their required reserve requirements. This is an
interesting proposal but potentially far reaching and
certainly should not be enacted until the Federal Reserve
has given the Committee the benefit of its careful study
of the proposal. Obviously, the Fed would have to take
offsetting action such as increasing reserve requirements
generally or open market operations to avoid an inflat-
ionary impact of the change. Also involved are such
questions as windfall profits to commercial banks and
possible impairment of liquidity of the banking system.
9. Although of not particular concern to us, we
suggest that Members who have been so vocal in the past
about retaining the 4½% ceiling on long-term government
bonds might be concerned about this end run around
their position. A new Federal agency issuing fully
government-guaranteed 50-year bonds at interest rates
comparable to agency securities -- 8 to 8½ in this market --
would certainly be an important breach in the 434% limit.
10. In essence, the new Bank proposal boils down to
a method of altering the tax status of private pension
funds and foundations to coerce their investment in
housing. If there is to be a change, it should be made
open and above board in our tax laws by the Ways and Means
Committee which has exclusive jurisdiction over tax
matters. Should that Committee see fit to make such a
change, we would hope the approach would be on a tax
incentive basis rather than the confiscatory approach
of this bill.
We earnestly urge that the provisions establishing a
National Development Bank be stricken from the bill and will
work toward that end when the bill is before the House.
ADMINISTRATION'S 1970 HOUSING PROGRAM
he Administration's 1970 housing program seeks
-- to turn the housing and mortgage market situation around
as quickly as possible and to reach a volume of 1.4 million
housing starts this calendar year; and
--- to strengthen basic features of the mortgage market and HUD
subsidized housing programs so as to make more feasible a
sustained rise in housing activity.
istimates suggest a need for $20 1/2 billion of net new residential
hortgage lending this year to finance the 1.4 million housing starts
target. The program to secure these funds is summarized below.
Lending Institution
Net New Residential
Program
Mortgage lending
Actual
Objective
(billions of dollars)
Savings & Loan
$9.0
$8-9
$250 million subsidy
Associations
to support Home Loan
Bank advances.
Commercial banks, life
1.0
6-7
Voluntary Program to
insurance companies, private
shift funds to
pension funds, and state
mortgages.
and loan government
retirement funds
FNMA-GNMA
4.4
4
Continued active
support.
Mutual savings banks
1.8
2
Continued active
support.
Other lenders
.6
Same as last year
Total
$19.8
$20+
-more-
Actions to Meet Immediate Needs
1. Legislation requested authorizing $250 million subsidy for the
Home Loan Bank System. (Emergency Home Financing Act of 1970 passed
Senate 4/16/70).
a. The subsidy will be used to underwrite advances to member
savings and loan associations at a lower interest rate than
would otherwise be possible.
b. Without this subsidy, associations are likely to pay back
outstanding advances and place only $4-5 billion of funds in
mortgages this year. The subsidy should promote the $8-9
billion of mortgage loans needed from this industry.
2. Treasury seeking voluntary support for the mortgage market this year
from commercial banks, life insurance companies, private pension
funds, and state and local government retirement funds.
a. The pledges made to date total over $2 billion dollars. This
additional housing credit for 1970 residential mortgages will
significantly enhance the nation's ability to meet critical
housing needs.
3. Treasury, HUD and Federal agencies developing mortgage-backed bonds
guaranteed by GNMA, to help attract investment in the mortgage market.
4. FNMA's borrowing authority and capital position increased to permit
continuation of heavy direct support of the FHA-VA sector of
the mortgage market.
5. Legislation requested converting $1.5 billion of GNMA Special
Assistance funds into more flexible authority. The funds could
then be used as needed to buttress HUD's "Tandem Plan" Operations,
which assist in financing construction of subsidized housing units
on terms free of excessive discounts.
6. Supplemental appropriation requests submitted to increase contract
authority under the Sections 235 and 236 subsidized housing programs
by $25 million each.
a. Virtually all existing authority has been reserved, and there is
a large backlog of requests which cannot now be met.
b. The 1971 Budget requests an additional $140 and $145 million for
these programs.
-3-
Long-Range Actions Already Proposed
1. Legislation to create a secondary market for conventional mortgages
in FNMA and the Federal Home Loan Banks, along lines of the
market that FNMA now provides for FHA and VA mortgages.
2. Legislation to strengthen FHA-VA - mortgage market by authorizing
experimentation with a dual market system partly free of mortgage
discounts, and exempting such mortgages from usury limitations
imposed by state law.
3. Legislation to consolidate, streamline and strengthen the multitude
of HUD's subsidized housing programs now contained in many narrow
and separate legislative authorities.
4. Appointment of a special Presidential commission to study the basic
structure of the financial system and its institutions.