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{
    "localId": "1133411",
    "label": "5/12/75 - National Association of Mutual Savings Banks, Boston",
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    "id": "1133411",
    "sourceUrl": "https://catalog.archives.gov/id/1133411",
    "contentType": "document",
    "title": "5/12/75 - National Association of Mutual Savings Banks, Boston",
    "description": "This file contains material relating to Ginnie Mae, GNMA Tandem Plan, Financial Institutions Act, MIT Study of Variable Payment Mortgage Loans, HUD Study of Costs of Cyclical Swings in Housing Production.",
    "citationUrl": "https://catalog.archives.gov/id/1133411",
    "collections": [
        "Carla A. Hills Speeches",
        "Speeches"
    ],
    "subjects": [
        "Banks and banking",
        "Credit",
        "Economics",
        "Federal aid",
        "Federal budget deficit",
        "Housing",
        "Industries",
        "Legislation",
        "Taxation"
    ],
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        "logicalDate": "1975-05-12",
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        "year": 1975
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{
    "seq": 1,
    "pageIndex": 0,
    "type": "document",
    "url": "https://s3.amazonaws.com/NARAprodstorage/lz/presidential-libraries/ford/grf-0305/656148/1133411.pdf",
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    "ocrText": "The original documents are located in Box 1, folder \"5/12/75 - National Association of\nMutual Savings Banks, Boston\" of the Carla A. Hills Speeches at the Gerald R. Ford\nPresidential Library.\nCopyright Notice\nThe copyright law of the United States (Title 17, United States Code) governs the making of\nphotocopies or other reproductions of copyrighted material. Gerald Ford donated to the United\nStates of America his copyrights in all of his unpublished writings in National Archives collections.\nWorks prepared by U.S. Government employees as part of their official duties are in the public\ndomain. The copyrights to materials written by other individuals or organizations are presumed to\nremain with them. If you think any of the information displayed in the PDF is subject to a valid\ncopyright claim, please contact the Gerald R. Ford Presidential Library.\nFINAL\nNATIONAL ASSOCIATION OF MUTUAL SAVINGS BANKS\nBOSTON, MASSACHUSETTS\nMAY 12, 1975\nAT MY SWEARING-IN CEREMONIES BARELY TWO MONTHS AGO,\nPRESIDENT FORD STATED THAT THEREAFTER ANYONE WHO HAD A\nCOMPLAINT ABOUT HOUSING SHOULD \"HEAD FOR THE HILLS\". THAT\nBIT OF PRESIDENTIAL ADVICE HAS BEEN WELL-HEEDED. IN THESE\nPAST 8 WEEKS I CAN TELL YOU THAT THE COMPLAINTS HAVE NOT\nONLY HEADED FOR, BUT HAVE ARRIVED AT \"THE HILLS\". BUT,\nTHE SOLUTIONS ARE TAKING A SOMEWHAT SLOWER PATH. I AM GLAD\nTO BE HERE WITH YOU TODAY TO SHARE MY THOUGHTS ON THE PROBLEMS\nOF THE HOUSING INDUSTRY,\nTHE HOUSING INDUSTRY FACES BOTH LONG AND SHORT-TERM\nPROBLEMS, OUR SHORT-TERM PROBLEM IS THE CURRENT SLUMP IN\nHOUSING STARTS AND MORTGAGE LENDING, OF WHICH YOU ARE ALL\nTOO WELL AWARE.\nTHAT SHORT-TERM PROBLEM, AS PRESSING AS IT MAY BE, IS\nONLY A SYMPTON OF THE REAL ILLS OF THE HOUSING AND MORTGAGE\nFINANCE SECTORS OF THE ECONOMY.\nGENALD A. FORD LIBRANT\nDigitized from Box 1 of the Carla A. Hills Speeches at the Gerald R. Ford Presidential Library\n-2-\nHOUSING IS A CAPITAL INTENSIVE INDUSTRY. THUS, WHEN\nINTEREST RATES RISE, MONEY FLOWS OUT OF THRIFT INSTITUTIONS\nLIKE YOUR OWN, CREATING A SCARCITY OF MORTGAGE FUNDS AND A\nRESULTING DECLINE IN HOUSING STARTS. THE CURRENT DOWNTURN\nIN THE HOUSING INDUSTRY IS ONLY THE LATEST MANIFESTATION OF\nTHIS CYCLE, THUS, THE REAL PROBLEM OF THE HOUSING INDUSTRY\nIS NOT ITS CURRENT SLUMP, BUT ITS VULNERABILITY TO ECONOMIC\nCYCLES,\nWE ALREADY HAVE THE BASIC TOOLS TO ALLEVIATE THE SYMPTONS,\nTHE EMERGENCY HOME PURCHASE ACT OF 1974 GAVE THE SECRETARY\nDISCRETIONARY AUTHORITY, THROUGH THE GOVERNMENT NATIONAL\nMORTGAGE ASSOCIATION, AFFECTIONATELY CALLED GINNIE MAE, TO\nOPERATE A TANDEM PROGRAM. UNDER THIS PLAN, GNMA MAKES\nCOMMITMENTS TO PURCHASE, THEN PURCHASES FROM LENDERS, MORTGAGES\nWRITTEN AT AN INTEREST RATE DETERMINED BY A STATUTORY FORMULA,\nWHICH, TODAY, IS 8 PERCENT.\nGERALD R. FORD LIRRARY\n-3-\nGNMA THEN SELLS THESE MORTGAGES TO THE FEDERAL NATIONAL\nMORTGAGE CORPORATION, AFFECTIONATELY CALLED FANNIE MAE, OR\nTO PRIVATE INVESTORS, AT AUCTION, ABSORBING THE DIFFERENCE\nBETWEEN THE PURCHASE AND SALE PRICE AS A SUBSIDY. THE TANDEM\nPROGRAM THUS NOT ONLY PROVIDES A SHALLOW SUBSIDY FOR MORTGAGE\nLOANS, BUT ALSO INCREASES THE TOTAL AMOUNT OF FUNDS AVAILABLE\nFOR MORTGAGE CREDIT.\nDURING THE PAST YEAR, GINNIE MAE MADE COMMITMENTS TO BUY\n$12.5 BILLION DOLLARS IN TANDEM PLAN MORTGAGES AT BELOW MARKET\nINTEREST RATES. To DATE, WE HAVE PURCHASED ABOUT $2.5 BILLION\nDOLLARS OF MORTGAGES LEAVING OVER $9.5 BILLION STILL IN THE\nPIPELINE FOR PURCHASE,\nA GOOD PROPORTION OF THE COMMITMENTS HAVE BEEN ALLOCATED\nFOR SPRING AND SUMMER HOUSING STARTS, WHICH SHOULD GIVE A\nDESIRABLE BOOST TO THIS YEAR'S HOUSING CONSTRUCTION.\nHUD SUPPORTS PENDING LEGISLATION WHICH WOULD INCREASE\nOUR TANDEM AUTHORITY AND EXTEND ITS AVAILABILITY FOR ANOTHER\nYEAR, TO OCTOBER 1976. HUD ALSO FAVORS EXTENSIONS OF THE Act\nTO AUTHORIZE THE PURCHASE OF MORTGAGES COVERING MULTI-FAMILY\nPROJECTS, AND INDIVIDUAL CONDOMINIUM UNITS, WHICH ARE NOT\nFHA-INSURED.\nGERALD ?\n-4--\nTHAT EXTENDED AUTHORITY SHOULD GIVE US A FLEXIBLE AND\nLOW-COST MEANS TO ASSIST THE MORTGAGE CREDIT MARKET, WITHOUT\nSIMULTANEOUSLY SETTING THE STAGE FOR FURTHER INFLATION-INDUCED\nMORTGAGE CREDIT SHORTAGES.\nTHE VIRUTE OF THE TANDEM PLAN IS THAT IT IS A MORE SIMPLE,\nAND INEXPENSIVE MEANS OF INJECTING MONEY INTO THE MORTGAGE\nMARKET THAN VARIOUS SUBSIDY PROPOSALS CURRENTLY BEING CONSIDERED.\nAND, MOST IMPORTANTLY, IT CAN BE QUICKLY IMPLEMENTED. HENCE,\nIT IS WELL ADAPTED TO THE RAPIDLY CHANGING MARKET CONDITIONS\nWHICH CHARACTERIZE THE HOUSING INDUSTRY.\nIN CONTRAST, CONGRESS HAS REACTED TO THE CURRENT SLUMP\nWITH A MASSIVE OMNIBUS HOUSING ASSISTANCE BILL, CONTAINING\nA WIDE VARIETY OF NEW, COMPLEX AND EXPENSIVE INTEREST SUBSIDIES\nFOR HOME PURCHASERS, IN WASHINGTON, A CONFERENCE COMMITTEE\nIS HAMMERING OUT THE DETAILS OF THIS MASSIVE NEW SPENDING\nMEASURE. BETWEEN THEM, THE HOUSE AND THE SENATE HAVE PASSED\nPROVISIONS WITH A PRICE TAG WHICH COULD EXCEED $2.4 BILLION\nDOLLARS.\nQUEATO R. FORD\n-5-\nWE DO NOT BELIEVE THAT SUCH MASSIVE NEW SPENDING IS\nREQUIRED. To THE CONTRARY, WE FEAR THAT SUCH SPENDING\nTHREATENS THE INCIPIENT RECOVERY OF OUR ECONOMY AND, MORE\nIMPORTANTLY, HOLDS THE PROMISE OF ANOTHER INFLATIONARY\nCYCLE THAT WILL EXACERBATE THE HISTORICAL SWINGS OF THE\nHOUSING INDUSTRY.\nFORCING TREASURY BORROWING ABOVE A TOLERABLE LEVEL\nWILL DEPLETE AVAILABLE CAPITAL, AND DRIVE UP THE COST OF\nMONEY TO THE POINT WHERE THE ECONOMY WILL AGAIN PLUMMET.\nLEADING THE PLUNGE, AS ALWAYS, WILL BE HOUSING. IT IS\nFEAR OF ANOTHER SUCH PLUNGE THAT ACCOUNTS FOR PRESIDENT\nFORD'S GREAT CONCERN WITH THE PROSPECT OF AN UNRESTRAINED\nBUDGET DEFICIT.\nCONGRESS' REACTION TO THE HOUSING CRISIS REMINDS ME\nOF THE AIRLINE PILOT WHO PROUDLY ANNOUNCES TO HIS PASSENGERS,\n\"WE HAVE A GOOD TAILWIND, PERFECT WEATHER, WE ARE BREAKING\nALL COMMERCIAL SPEED RECORDS.\" \"BUT WE'RE LOST.\" THE BILL'S\nLACK OF FOCUS MAKES ONE WONDER IF CONGRESS REALLY KNOWS WHERE\nIT'S GOING, ALTHOUGH IT'S GOING THERE FULL SPEED AHEAD.\nGERALD R. FORD CIBRANTY\n-6-\nTo ILLUSTRATE, THE SENATE BILL AUGMENTS IIUD's TANDEM\nAUTHORITY WITH AN AUTOMATIC \"TRIGGER\" MECHANISM, WHICH\nGOES INTO EFFECT WHENEVER HOUSING STARTS FALL BELOW A 1.6\nMILLION ANNUAL LEVEL FOR 11 CONSECUTIVE MONTHS.\nIF THAT PROVISION HAD BEEN IN EFFECT OVER THE PAST 11\nYEARS, THE TRIGGER WOULD HAVE BEEN PULLED IN S OF THOSE 11\nYEARS. AT WHAT COST TO THE TAXPAYERS, I CANNOT SAY -- NOR\nCAN I SAY WITH PRECISION HOW MUCH WORSE OUR INFLATION RATE\nWOULD HAVE BEEN BY NOW AS A RESULT. BUT I CAN SAY WE WOULD\nHAVE OFTEN UTILIZED THIS RESOURCE WHEN IT WAS NOT NEEDED.\nTHE TRIGGER WOULD ROB THE \"TANDEM PLAN\" OF ONE OF ITS GREATEST\nASSETS -- ITS FLEXIBILITY, WHICH ALLOWS IT TO ADAPT TO RAPIDLY\nCHANGING MARKET CONDITIONS,\nBEYOND THAT, THE \"TRIGGER\" IS ATTACHED TO A LOADED GUN\n-- WHICH MAY BACKFIRE. SUCH A \"TRIGGER\" MECHANISM WOULD\nENCOURAGE CONSUMERS IN A WEAK MARKET TO DELAY CONTEMPLATED\nHOME PURCHASES -- THUS DRIVING DOWN STARTS AND CAUSING THE\nTRIGGER TO GO OFF AND FIRE A SUBSIDY AT PROSPECTIVE BUYERS.\nGERALD R. FORD\nAPART FROM SUCH GIMMICKS, THE PENDING PROPOSALS PROVIDE\nFOR VARIOUS DIRECT GOVERNMENT MORTGAGE INTEREST SUBSIDIES.\nAs A GENERAL PROPOSITION, I AM CONVINCED THAT TEMPORARY INTEREST\nSUBSIDIES WILL NOT SOLVE THE CYCLICAL PROBLEMS OF THE HOUSING\nINDUSTRY.\nTHE SUBSIDY DISRUPTS THE FINANCIAL MARKETPLACE WITHOUT\nINCREASING THE TOTAL AMOUNT OF CREDIT AVAILABLE FOR RESIDENTIAL\nCONSTRUCTION.\nIN TIMES OF SCARCE CREDIT, AN INTEREST SUBSIDY FOR ONE\nSEGMENT OF THE HOUSING MARKET ONLY SUBSTITUTES THOSE WHO\nRECEIVE THE SUBSIDY FOR THOSE WHO WOULD HAVE BUILT OR BOUGHT\nIF THE PRIVATE MARKET HAD OPERATED WITHOUT INTERFERENCE.\nDESPITE THEIR COSTS, THE PENDING BILLS CURRENTLY PROVIDE\nFOR ONLY 400,000 HOME PURCHASERS TO RECEIVE INTEREST SUBSIDIES.\nTHE MOST PESSIMISTIC PREDICTIONS FOR THIS YEAR ARE FOR THREE\nTIMES THAT NUMBER OF STARTS, so THE SUBSIDY MAY NOT ONLY FAIL\nTO INCREASE BUT MAY ACTUALLY DETER NEW STARTS. SOME HOME\nBUYERS MAY WELL DELAY PURCHASES IN THE HOPES THAT NEXT YEAR\nTHEY WILL BE ONE OF THE LUCKY FEW TO RECEIVE AN INTEREST SUBSIDY.\nP. FORD\n-8-\nTHE DEPTH OF THE PROPOSED SUBSIDY IS ALSO OF CONCERN.\nTHE 6 PERCENT INTEREST RATE PROVIDED FOR IN BOTH THE HOUSE\nAND THE SENATE PROPOSALS IS UNREALISTICALLY LOW, CONVENTIONAL\nMORTGAGES HAVE NOT BEEN AT THAT LEVEL SINCE 1966. THRIFTS\nARE FORCED TO PAY INTEREST ON LONG-TERM ACCOUNTS AT 7 PERCENT\nCR HIGHER. THERE IS NO WAY THEY CAN COMPETE WITH 6 PERCENT\nMORTGAGES. HENCE, PRESSURE WILL BUILD TO EXTEND THE PROGRAM,\nAND THE FEDERAL GOVERNMENT WILL HAVE ALL BUT TAKEN OVER THE\nPRIVATE MORTGAGE CREDIT MARKET.\nTHE PROGRAM IS TERMED \"TEMPORARY\". BUT, AS WE ALL KNOW,\nONCE A \"GIVEAWAY\" PROGRAM IS ENACTED INTO LAW, THE PRESSURE\nFOR INDEFINITE CONTINUANCE IS ALMOST IRRESISTIBLE,\nAND, IT SHOULD BE NOTED THAT THE HOUSE VERSION ALLOWS\nTHE ALTERNATIVE OF A 7 PERCENT INTEREST RATE THROUGHOUT THE\nENTIRE LIFE OF THE MORTGAGE. IN OTHER WORDS, THE PUBLIC\nCOULD BE PAYING FOR THE COST OF A SO-CALLED \"EMERGENCY TEMPORARY\"\nMEASURE FOR THE NEXT 30 YEARS.\nGERALD FL FORD\n-9-\nTHESE INTEREST SUBSIDY PROGRAMS ARE NOT ONLY UNWISE,\nBUT ALSO UNNECESSARY IN VIEW OF RECENT EXPERIENCE. THE\nRECORD SUGGESTS THAT VERY HIGH LEVELS OF DEMAND AND PRODUCTION\n-- WELL OVER 2 MILLION ANNUAL STARTS -- CAN BE SUSTAINED WITH\nINTEREST RATES RANGING FROM 7-1/2 TO S PERCENT. MORTGAGES\nBEARING ALMOST THAT RATE ARE NOW AVAILABLE UNDER THE TANDEM\nPLAN.\nANOTHER DANGER I SEE IN THE PENDING PROPOSALS IS THAT\nTHEIR IMMEDIATE EFFECT MAY BE TO STOP -- RATHER THAN STIMULATE\n-- HOME BUYING. IT WILL TAKE A CERTAIN AMOUNT OF TIME FOR\nTHE MEASURE TO BECOME LAW; AN ADDITIONAL PERIOD IS NECESSARY\nTO DRAFT REGULATIONS TO IMPLEMENT THE LAW; FURTHER TIME IS\nNEEDED FOR APPROPRIATIONS. HENCE THE PROBABLE TIME FRAME\nFOR IMPLEMENTATION IS NEXT FALL -- OR PERHAPS EVEN WINTER.\nIN THE INTERIM, POTENTIALLY ELIGIBLE FAMILIES CAN BE\nEXPECTED TO POSTPONE HOUSING PURCHASES UNTIL THE CHEAPER\nMORTGAGES COME INTO BEING. DURING THAT HIATUS, HOUSING\nCONSTRUCTION COULD GO FROM DEPRESSED TO ALL BUT NON-EXISTENT.\nR. FORD LIBRAIR\n-10-\nFINALLY, CONGRESS' PROGRAMS, DESIGNED TO RELIEVE THE\nCURRENT DOWNTURN, COULD END UP ACTUALLY TAKING EFFECT DURING\nAN IMPENDING UPTURN WHICH CURRENT FORECASTS PORTEND -- JUST\nIN TIME TO DO THE MOST HARM, BY CAUSING ANOTHER INFLATIONARY\nSPIRAL IN HOUSING COSTS,\nCONGRESS HAS DIAGNOSED THE PROBLEM OF THE HOUSING INDUSTRY\nAS BEING HIGH MONTHLY MORTGAGE PAYMENTS, UNFORTUNATELY,\nCONGRESS SEEMS LIKE THE DOCTOR WHO ANNOUNCES THAT HE HAS\nSUCCESSFULLY TREATED THE PATIENT'S SYMPTONS, ONLY TO CONFESS\nTHAT THE PATIENT HAS DIED OF THE UNDERLYING DISEASE IN THE\nINTERIM. THAT UNDERLYING DISEASE MAY BE A HUGE FEDERAL DEFICIT\nAND AN EXACERBATED MORTGAGE CREDIT CRISIS.\nWE DO NOT BELIEVE THAT WE CAN SPEND OUR WAY OUT OF THE\nHOUSING SLUMP, WITHOUT INVITING A NEW AND MORE CRIPPLING\nINFLATIONARY SPIRAL -- IN WHICH HOUSING WOULD BE THE FIRST\nTO SUFFER,\nOZRALO R. FORD\n-11-\nTHERE IS MUCH THAT IS COUNTERPRODUCTIVE IN THE BILLS\nNOW UNDER CONSIDERATION. WE FEEL THAT THERE IS ADEQUATE\nFLEXIBILITY IN OUR CURRENT AUTHORITY TO PERMIT US TO ENCOURAGE\nAND GUIDE THE RECOVERY OF THE HOUSING INDUSTRY. AND, THE\nPENDING BILLS SIMPLY DO NOT REACH THE LONG-TERM CONDITIONS\nWHICH GAVE RISE TO THE CURRENT HOUSING SLUMP.\nTHE ADMINISTRATION is, HOWEVER, LOOKING FOR SOLUTIONS\nTO THE UNDERLYING LONG-TERM PROBLEM OF CYCLICAL FLUCTUATIONS\nIN MORTGAGE CREDIT AVAILABILITY.\nWE ARE URGING PASSAGE OF THE FINANCIAL INSTITUTIONS ACT,\nWHICH CONTAINS MANY PROVISIONS AIMED AT REDUCING THE SEVERITY\nOF FUTURE HOUSING CREDIT CYCLES,\nTHE ACT WOULD PERMIT A DIVERSIFICATION OF SERVICES AND\nINVESTMENTS BY INSTITUTIONS, SUCH AS YOURS, HEAVILY INVOLVED\nIN MORTGAGE FINANCE, REDUCING THEIR VULNERABILITY TO ECONOMIC\nCYCLES,\nTHRIFT INSTITUTIONS WILL BE PERMITTED, FOR THE FIRST\nTIME ON A NATIONAL BASIS, TO OFFER CHECKING AND NOW ACCOUNTS\nAND TO ENGAGE IN CREDIT CARD TRANSACTIONS.\nGERALD R. FORD LIBRARY\n-12-\nTHRIFT INSTITUTIONS WILL ALSO HAVE BROADENED LENDING\nAND INVESTMENT POWERS, TO INCREASE THEIR INCOME AND LIQUIDITY.\nTHIS INCREASED AUTHORITY WILL INCLUDE NOT ONLY CONSUMER\nLOANS, COMMERCIAL PAPER AND CORPORATE DEBT, ON A LIMITED BASIS,\nBUT ALSO CONSTRUCTION LOANS WHICH IS AN AREA OF PARTICULAR NEED\nTO THE HOUSING INDUSTRY. THIS DIVERSIFICATION SHOULD ALSO\nRESERVE THE FINANCIAL COMMUNITY OF MUCH UNNECESSARY GOVERNMENT\nREGULATION, AND INCREASE EFFICIENCY THROUGH THE PRESSURES OF\nINCREASED COMPETITION.\nTHE FINANCIAL INSTITUTIONS ACT ALSO LOCKS TOWARD A POSSIBLE\nABOLITION OF INTEREST RATE CEILINGS, WITHIN 5-1/2 YEARS OF\nENACTMENT, THERE WILL BE A THOROUGH STUDY OF THE FINANCIAL\nMARKET AND THE WAY IN WHICH THE ACT HAS OPERATED. ONLY THEN,\nAND ON THE BASIS OF THE FINDINGS OF THAT STUDY, WILL THE\nADMINISTRATION RECOMMEND TO CONGRESS WHETHER OR NOT TO ABOLISH\nINTEREST RATE CEILINGS.\nTo ENCOURAGE BROADER INVESTMENTS IN RESIDENTIAL MORTGAGES\nTHE ACT PROVIDES A TAX CREDIT OF BETWEEN 1-1/2 PERCENT AND\n3-1/2 PERCENT OF THE INTEREST INCOME RECEIVED FROM MORTGAGE\nASSETS, WHERE AT LEAST 10 PERCENT OF AN INSTITUTION'S PORTFOLIO\nIS MAINTAINED IN QUALIFIED RESIDENTIAL MORTGAGE LOANS,\nFORD a LIBRARY GERALD\n-13-\nBECAUSE THE CREDIT IS SIMILAR TO THE TAX TREATMENT\nCURRENTLY ENJOYED BY THRIFT INSTITUTIONS IN CONNECTION WITH\nBAD DEBT RESERVES, A TRANSITION PERIOD IS PROVIDED.\nINSTITUTIONS SUCH AS YOURS WILL BE GIVEN UNTIL 1979 TO SWITCH\nOVER TO THE CREDIT METHOD OF TAX TREATMENT.\nTHE TAX CREDIT SHOULD ALSO BE AN INCENTIVE TO THE\nSECONDARY MARKET INCLUDING GNMA's MORTGAGE BACK SECURITY\nPROGRAM.\nFINALLY, THE MORTGAGE INTEREST TAX CREDIT HAS A COUNTER-\nCYCLICAL EFFECT BECAUSE THE RATE ADVANTAGE OF MORTGAGES WILL\nRISE DURING TIMES OF TIGHT MONEY MAKING MORTGAGES RELATIVELY\nMORE ATTRACTIVE TO INVESTORS WHEN CREDIT IS SCARCE.\nTHE FINANCIAL INSTITUTIONS ACT HAS BEEN CRITICIZED BOTH\nFOR DOING T00 MUCH AND FOR DOING TOO LITTLE. SOME SAY IT\nCHANGES COMPETITIVE POSITIONS IN THE INDUSTRY WITHOUT GOOD\nREASON, BUT WE SEE THE ACT AS SEEKING TO PROVIDE FOR A LESS\nREGULATED MARKET IN WHICH ALL BANKING INSTITUTIONS CAN COMPETE\nMORE EFFECTIVELY.\nTHE BENEFITS TO BANKING FROM THIS\nDEREGULATION SEEM TO ME TO FAR OUTWEIGH ANY FEATURES WHICH\nARE SEEN ON A SHORT-TERM BASIS TO FAVOR ONE GROUP OF INSTITUTIONS\nOVER ANOTHER.\nFORD a LIBRARY GERALD\n-14-\nDEREGULATION WILL HELP PROVIDE A MORE CONSTANT AND MORE\nADEQUATE SUPPLY OF MONEY WHICH IS ESSENTIAL TO A HEALTHY AND\nSTABLE HOUSING INDUSTRY. A FREER MARKET IS WORTH SEEKING,\nTHOSE WHO SAY THAT THIS ACT DOES NOT DO ENOUGH MUST\nREMEMBER THAT WE HAVE NOT AS YET PASSED THIS AcT. WE CAN\nONLY PROCEED ONE STEP AT A TIME. TAKE THIS STEP, AND IF\nTHE RESULTS ARE AS WE ANTICIPATE, WE CAN TAKE THE NEXT STEP.\nIT IS NOT EASY TO REVERSE THE TREND TOWARD HEAVIER REGULATION.\nMODEST AS SOME MAY THINK THE PROPOSED ACT MAY BE, IT IS A\nSTEP IN THE RIGHT DIRECTION.\nWE ARE TAKING OTHER STEPS WITHIN OUR EXISTING AUTHORITY\nTO EXPAND AND STABILIZE MORTGAGE CREDIT.\nFIRST, WE ARE LOOKING FOR WAYS TO ENTICE INTO MORTGAGE\nFINANCE NEW SOURCES OF INVESTMENT FUNDS WHICH ARE LESS SUBJECT\nTO CYCLICAL PRESSURES, FOR EXAMPLE, LESS THAN 5 PERCENT OF\nTHE $217 BILLION UNION PENSION FUNDS IS INVESTED IN HOUSING.\nWE WOULD LIKE TO SEE THAT INVESTMENT INCREASE.\nGERALD R. FORD LIBRABY\n-15--\nSECOND, WE WILL ASSIST IN THE DEVELOPMENT OF NEW KINDS\nOF MORTGAGE INSTRUMENTS TO SEE IF THERE ARE ALTERNATIVES TO\nTHE LONG-TERM STABLE PAYMENT MORTGAGE WHICH COULD INCREASE\nMORTGAGE INVESTMENT AND BE LESS VULNERABLE TO THE EFFECTS\nOF ECONOMIC CYCLES,\nTHE PURCHASE OF A HOME IS, FOR MOST AMERICAN CONSUMERS,\nTHE LARGEST BUSINESS TRANSACTION OF THEIR LIFETIME. THE\nTERMS OF THIS PURCHASE HAVE A SIGNIFICANT IMPACT UPON CONSUMERS\nAS WELL AS THE FINANCIAL MARKETS THAT SUPPLY CREDIT FOR HOUSING.\nTODAY, MOST OF US TAKE FOR GRANTED THE FULLY AMORTIZED\nLOW DOWN PAYMENT, LOW MONTHLY PAYMENT, LONG-TERM MORTGAGE USED\nTO FINANCE HOME PURCHASES. IT WAS THE FHA MORTGAGE INSURANCE\nPROGRAM THAT BROUGHT ABOUT MARKET ACCEPTANCE OF THAT INSTRUMENT\nIN THE 1930's.\nTHIS INSTRUMENT ASSISTED THE NATION TO RECOVER FROM THE\nDEPRESSION AND SUBSTANTIALLY CONTRIBUTED TO THE DRAMATIC\nEXPANSIONS IN HOUSING PRODUCTION AND HOMEOWNERSHIP WHICH WE\nHAVE EXPERIENCED OVER THE PAST 40 YEARS,\nFORD a LIBRARY GERALD\n-16-\nTODAY, WE HAVE ENTERED ANOTHER PERIOD DURING WHICH\nFUNDAMENTAL CHANGES ARE OCCURRING IN THE ECONOMY, WE DELIEVE\nIT APPROPRIATE TO ASK WHETHER THERE ARE OTHER FORMS OF\nFINANCING TO COMPLEMENT THOSE TRADITIONALLY USED.\nA GOVERNMENT INSURANCE COMPONENT MAY BE USEFUL TO\nENCOURAGE NEW FORMS OF FINANCE THAT WILL AMELIORATE CYCLICAL\nFLUCTUATIONS IN MORTGAGE CREDIT AVAILABILITY,\nTo THAT END, WE HAVE UNDERWAY A STUDY BY THE SLOAN\nSCHOOL OF MANAGEMENT AT MIT ANALYZING A WHOLE RANGE OF\nVARIABLE PAYMENT MORTGAGE FORMS,\nWE ARE IMPLEMENTING THE AUTHORITY CONTAINED IN SECTION\n245 OF THE NATIONAL HOUSING ACT, AS REVISED IN 1974, TO\nEXPERIMENT WITH MORTGAGES AND LOANS WHICH PROVIDE FOR \"VARYING\nRATES OF AMORTIZATION CORRESPONDING TO ANTICIPATED VARIATIONS\nIN FAMILY INCOME.\" THE DEPARTMENT WILL ISSUE IN JUNE AN\nINVITATION TO INTERESTED PARTIES IN THE PRIVATE SECTOR, INCLUDING\nTHE FINANCIAL COMMUNITY, TO SUBMIT PROPOSALS FOR INNOVATIVE\nMORTGAGE INSTRUMENTS WHICH INCLUDE, FOR EXAMPLE, GRADUATED\nPAYMENT MORTGAGES; DEFERRED AMORTIZATION MORTGAGES; OR \"SKIP-\nPAYMENT\" PLANS, IT IS OUR HOPE THROUGH THIS PROCESS TO HARNESS\nTHE EXPERTISE WITHIN THE PRIVATE SECTOR TO DEVELOP FINANCING\nDEVICES APPROPRIATE TO THE NEEDS OF THE CONSUMER AND LENDER TODAY.\nGERALD R: FORD LIBRARY\n-17-\nFINALLY, HUD IS INITIATING A MAJOR STUDY FOCUSING ON\nTHE COSTS, ECONOMIC AND SOCIAL, OF CYCLICAL SWINGS IN HOUSING\nPRODUCTION. SUCH A STUDY WOULD BE AN IMPORTANT COMPLEMENT\nTO OUR RESEARCH STUDIES ALREADY UNDERWAY. THESE STUDIES\nREPRESENT AREAS WHERE YOUR INDUSTRY CAN CONTRIBUTE VALUABLE\nINSIGHTS AND EXPERIENCE,\nGOVERNMENT CANNOT REVITALIZE OR RESTRUCTURE THE HOUSING\nINDUSTRY ALONE. THE COOPERATION, COUNSEL, AND CONSTRUCTIVE\nCRITICISM OF THE PRIVATE SECTOR ARE INDISPENSABLE TO THESE\nENDEAVORS. I WILL NOT HESITATE TO CALL UPON THE MUTUAL SAVINGS\nBANKS ASSOCIATION FOR ASSISTANCE IN THE COMING MONTHS.\nTHANK YOU,\nGERALD R. FORD LIBRANA"
}