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This file contains material relating to Interest Subsidy, GNMA Tandem Plan, Condominium, Consumer Confidence, Warranty Program.
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5/19/75 - National Association of Home Builders, Washington, D.C.
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5/19/75 - National Association of Home Builders, Washington, D.C.
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This file contains material relating to Interest Subsidy, GNMA Tandem Plan, Condominium, Consumer Confidence, Warranty Program.
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Carla A. Hills Speeches
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The original documents are located in Box 1, folder "5/19/75 - National Association of
Home Builders, Washington, D.C." of the Carla A. Hills Speeches 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. Gerald Ford 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States of America his copyrights in all of his unpublished writings in National Archives collections.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.
Digitized from Box 1 of the Carla A. Hills Speeches at the Gerald R. Ford Presidential Library
NATIONAL ASSOCIATION OF HOME BUILDERS
WASHINGTON, D.C.
MAY 19, 1975
I AM PLEASED TO HAVE A PART IN YOUR SPRING BOARD MEETING.
THE OCCASION IS ALSO A "SPRINGBOARD" FOR ME. IT MARKS MY
FIRST FORMAL MEETING WITH THE DIRECTORS OF THE NATIONAL
ASSOCIATION OF HOME BUILDERS.
I HOPE THAT WITH THIS MEETING WE CAN BEGIN A CONTINUING
DIALOGUE, SEEKING TO ACHIEVE OUR COMMON GOAL -- PROVIDING
"A DECENT HOME AND A SUITABLE LIVING ENVIRONMENT FOR EVERY
AMERICAN FAMILY, "
WITHOUT YOU, THAT GOAL WOULD BE ACADEMIC, A SUITABLE
LIVING ENVIRONMENT MUST FIRST OF ALL BE PREDICATED UPON
THE AVAILABILITY OF DECENT, SAFE AND SANITARY HOMES,
THUS, 'ACHIEVEMENT OF THE GOAL REQUIRES A SPEEDY RECOVERY
FROM THE CURRENT DOWNTURN IN HOUSING PRODUCTION.
GERALD P. FORD LIBRARY
- 2 -
YOUR PRESIDENT NORMAN, IN HIS RECENT INTERVIEW PUBLISHED
IN THE NAHB JOURNAL-SCOPE, WELL DESCRIBED THE HOMEBUILDERS
WHO MAKE UP YOUR ASSOCIATION, QUOTING IIIM:
"THE PEOPLE WHO GO INTO THIS BUSINESS HAVE
TO HAVE COURAGE. WE ALL KNOW THIS IS A
RISK-TAKING BUSINESS. IF WE DIDN'T TAKE
THE RISKS THERE WOULDN'T BE MUCH BUILT.
THE RISKS ARE MUCH GREATER TODAY BECAUSE
OF TINKERING WITH THE SYSTEM BY WHICH
HOUSING IS BUILT AND DELIVERED."
I AGREE WITH HIS ASSESSMENT, AMERICAN BUSINESS STARTED
OUT AND PROSPERED BECAUSE AN ENTREPRENEUR WOULD PUT HIMSELF,
HIS INGENUITY, AND HIS RESOURCES AT RISK TO ENTER INTO
COMPETITION WITH OTHER LIKE-MINDED BUSINESS PEOPLE,
OUR PRIVATE ENTERPRISE SYSTEM, UNENCUMBERED BY GOVERNMENT
TINKERING, IS STILL THE BEST MEANS TO MEET THE AMERICAN PEOPLE'S
NEED FOR DECENT HOUSING,
GERALD R. FORD LIBRANT
- 3 :
UNFORTUNATELY, THE EMERGENCY HOUSING ACT OF 1975, AS IT
EMERGED FROM CONFERENCE LAST WEEK, CONSTITUTES ANOTHER EXAMPLE
OF THE SORT OF TINKERING WHICH CONTRIBUTED TC THE HOUSING
INDUSTRY'S CURRENT PLIGHT, IT WILL NOT PRODUCE A RECOVERY IN
THE HOUSING INDUSTRY.
SHOULD THAT BILL BECOME LAW, WE WILL BE ENCUMBERED BY
ANOTHER COMPLEX NEW GOVERNMENT HOUSING PROGRAM. THE RESULT
WILL BE MORE FEDERAL SPENDING, MORE GOVERNMENT REGULATION,
A FURTHER DEPARTURE FROM OUR FREE ENTERPRISE SYSTEM ----- AND
IN THE LONG RUN, FEWER HOUSES BUILT.
THE BILL HAS A $2 BILLION DOLLAR PRICE TAG. SUCH
MASSIVE SPENDING THREATENS OUR ECONOMIC RECOVERY WHICH IS
JUST NOW BEGINNING,
WORSE THAN THAT, IT CARRIES THE PROMISE OF ANOTHER
INFLATIONARY CYCLE,
GERALD R. FORD LIBRARY
-11-
FORCING TREASURY BORROWING ABOVE A TOLERABLE LEVEL WILL
DEPLETE AVAILABLE CAPITAL AND WILL DRIVE UP THE COST OF
MONEY TO THE POINT WHERE THE ECONOMY WILL AGAIN PLUMMET
DOWNWARD. LEADING THE PLUNSE ...... AS ALWAYS ---- WILL BE HOUSING.
FEAR OF ANOTHER SUCH PLUNGE ACCOUNTS FOR PRESIDENT FORD'S
DEEP CONCERN WITH THE PROSPECT OF AN UNREASONABLY HIGH BUDGET
DEFICIT.
THE SPECIFIC PROVISIONS OF THE PENDING LEGISLATION, FAR
FROM LEADING THE HOUSING INDUSTRY INTO A RECOVERY, MAY
ACTUALLY RETARD HOUSING PRODUCTION.
THE REACTION OF THE CONGRESS TO THE HOUSING CRISIS
REMINDS ME OF AN OLD "GOOD NEWS AND BAD NEWS" STORY, THE
AIRLINE CAPTAIN ANNOUNCES OVER THE PA SYSTEM -- "WE- HAVE
SOME GOOD NEWS AND SOME BAD NEWS, FIRST THE GOOD NEWS:
THE WEATHER IS PERFECT, WE HAVE A STRONG TAILWIND, AND
WE'RE BREAKING ALL COMMERCIAL SPEED RECORDS. Now THE BAD
NEWS: WE'RE LOST,"
GERALD R. FORD LIBRARY
- 5 -
THE NEW HOUSING BILL INDICATES THAT CONGRESS IS
PROCEEDING FULL SPEED AHEAD, BUT ITS LACK OF FOCUS CONVINCES
us THAT IT DOES NOT KNOW WHERE IT IS GOING.
THE BILL, AS DRAFTED, PROVIDES FOR A DIRECT GOVERNMENT
INTEREST SUBSIDY FOR THE FIRST 6 YEARS OF A MORTGAGE. THAT
SUBSIDY WILL NOT SOLVE THE CURRENT PROBLEMS OF THE HOUSING
INDUSTRY, As YOUR EXPERIENCE TEACHES, INTEREST SUBSIDIES
ONLY DISRUPT THE FINANCIAL MARKETPLACE. THEY DO NOT INCREASE
THE TOTAL AMOUNT OF CREDIT AVAILABLE FOR RESIDENTIAL CONSTRUCTION.
AN INTEREST SUBSIDY PROGRAM IS A REAL "MUSICAL HOUSES"
GAME -- WHEN THE MUSIC STOPS, YOU DON'T HAVE MORE HOUSES THAN
BEFORE, YOU HAVE FEWER. AND THAT IS BECAUSE, AN INTEREST
SUBSIDY FOR ONE SEGMENT OF THE HOUSING MARKET MERELY. SUBSTITUTES
THOSE WHO GET THE SUBSIDY FOR THOSE WHO WOULD HAVE BUILT IF
THE MARKET HAD OPERATED WITHOUT INTERFERENCE.
FORD LIBIBRARY a
-6-
THE DEPTH OF THE PROPOSED SUBSIDY IS ALSO A MATTER FOR
SERIOUS CONCERN. SUBSIDIZING MORTGAGES TO 6 PERCENT IS
UNREALISTIC; CONVENTIONAL MORTGAGES HAVE NOT BEEN AT THAT
LEVEL SINCE 1956. RIGHT NOW, THRIFT INSTITUTIONS ARE PAYING
/ PERCENT OR MORE FOR LONG-TERM MONEY; HOW CAN THEY POSSIBLY
COMPETE WITH 6 PERCENT MORTGAGES?
So THE PRESSURE WILL INEVITABLY BUILD TO EXTEND THE
PROGRAM, AND HAVE THE FEDERAL GOVERNMENT FURTHER DISPLACE
THE PRIVATE MORTGAGE MARKET.
TRUE THE PROGRAM IS LABELED "TEMPORARY". BUT AS WE
ALL KNOW, ONCE A "GIVEAWAY" PROGRAM IS ENACTED INTO LAW,
THE PRESSURE FOR INDEFIMITE CONTINUANCE IS IRRESISTIBLE.
THE BILL IS EXPLICITLY ADDRESSED TO TODAY'S LAG IN
HOME BUILDING. BUT A CLEAR DANGER INHERENT IN THE BILL
IS THAT ITS IMMEDIATE EFFECT WILL BE TO DELAY -- RATHER
THAN STIMULATE -- HOME BUYING.
GERALD R. FORD LIBRARY
- 7 -
THE BILL, DESPITE ITS HIGH COST, ONLY BENEFITS ABOUT
400,000 HOME PURCHASERS ANNUALLY, EVEN MR. SUMICHRAST'S
MOST PESSIMISTIC FORECASTS ARE FOR MORE THAN 3 TIMES THAT
NUMBER OF STARTS THIS YEAR,
THAT MEANS THAT THE SIBSIDY WILL NOT ONLY FAIL TO
INCREASE, BUT MAY ACTUALLY DETER NEW STARTS, SOME HOME
BUYERS WILL UNDOUBTEDLY DELAY PURCHASES IN THE HOPES THAT
NEXT YEAR THEY WILL DE AMONG THE LUCKY FEW TO HAVE THEIR
INTEREST PAYMENTS SUBSIDIZED.
ALSO, IT WILL TAKE SOME TIME FOR THE BILL TO BECOME
LAW; ADDITIONAL TIME IS NEEDED TO DRAFT THE IMPLEMENTING
REGULATIONS; AND, STILL ADDITIONAL TIME IS REQUIRED FOR THE
NECESSARY APPROPRIATIONS, THE PROBABLE TIME FRAME FOR
INPLEMENTATION MAY BE NEXT FALL --- OR PERHAPS EVEN WINTER.
WHILE ALL THIS IS DRAGGING ALONG, POTENTIALLY ELIGIBLE
FAMILIES CAN BE EXPECTED TO POSTPONE THEIR HOUSING PURCHASES
UNTIL THE CHEAPER MORTGAGES BECOME AVAILABLE, DURING THAT
PERIOD, HOUSING CONSTRUCTION COULD GO FROM DEPRESSED TO NEAR
NON-EXISTENT,
FORD a OERALD LIBRAR
- 8 -
THE POOR TIMING HURTS, WE LOOK FOR THE BILL TO BECOME
EFFECTIVE RIGHT IN THE MIDDLE OF THE UPTURN WHICH THE ECONOMISTS
HAVE PROMISED US, THAT MEANS IT GOES TO WORK JUST WHEN IT CAN
DO THE MOST HARM BY CONTRIBUTING TO ANOTHER INFLATIONARY SPIRAL
IN HOUSING COSTS,
CONGRESS HAS DIAGNOSED THE PROBLEM OF THE HOUSING INDUSTRY
AS HIGH MONTHLY MORTGAGE PAYMENTS, BUT THAT IS A SYMPTOM, NOT
THE DISEASE.
CONGRESS IS LIKE THE DOCTOR WHO SAYS PROUDLY THAT HE HAS
SUCCESSFULLY TREATED THE PATIENT'S SYMPTOM -- BUT UNFORTUNATELY
IN THE MEANTIME THE PATIENT HAS DIED OF THE UNDERLYING DISEASE,
THAT UNDERLYING DISEASE MAY BE A HUGE FEDERAL DEFICIT WHICH
DRIES UP AVAILABLE MORTGAGE FUNDS,
WE DO NOT BELIEVE THAT WE CAN SPEND OUR WAY OUT OF THE
HOUSING SLUMP WITHOUT SETTING THE NATION UP FOR A NEW AND
CRIPPLING INFLATIONARY SPIRAL --- IN WHICH HOUSING WOULD BE
THE FIRST TO SUFFER.
GERALD R. FORD LIBRARY
- 9 -
NOT ONLY IS THE INTEREST SUBSIDY PROGRAM UNWISE, IT IS
ALSO UNNECESSARY, THE RECENT RECORD INDICATES THAT VERY HIGH
LEVELS OF DEMAND AND PRODUCTION ---- AND I MEAN WELL OVER
2 MILLION ANNUAL STARTS --- CAN BE SUSTAINED WITH INTEREST
RATES RANGING FROM 7-1/2 TO 8 PERCENT. MORTGAGES BEARING
THAT RATE ARE NOW AVAILABLE UNDER CUR TANDEM PLAN.
THE TANDEM PROGRAM IS ONE OF THE TOOLS WE ARE USING TO
ALLEVIATE THE CURRENT HOUSING CRISIS, THE EMERGENCY HOME
PURCHASE ASSISTANCE ACT OF 1974 GIVES THE SECRETARY
DISCRETIONARY AUTHORITY TO OPERATE A TANDEM PROGRAM THROUGH
THE GOVERNMENT NATIONAL NORTGAGE ASSOCIATION -- OR GINNIE MAE.
UNDER THIS PLAN, GNMA MAKES COMMITMENTS TO PURCHASE ---- AND
THEN PURCHASES FROM LENDERS --- MORTGAGES WRITTEN AT AN INTEREST
RATE DETERMINED BY A STATUTORY FORMULA, TODAY THAT INTEREST
RATE IS BELOW 8 PERCENT.
FORD A. OERALD LIBRARY
-10-
GNMA THEN SELLS THESE MORTGAGES AT AUCTION TO THE
FEDERAL NATIONAL MORTGAGE ASSOCIATION --- FANNIE NAE -- OR
TO PRIVATE INVESTORS. GNMA ABSORDS THE DIFFERENCE BETWEEN
THE PURCHASE PRICE AND SALES PRICE AS A SUBSIDY.
THE TANDEM PROGRAM NOT ONLY PROVIDES A SHALLOW SUBSIDY
FOR MORTGAGE LOANS, BUT ALSO INCREASES THE TOTAL AMOUNT OF
FUNDS AVAILABLE FOR MORTGAGE CREDIT. UNLIKE THE "MUSICAL
HOUSES" GAME THAT CONGRESS PROPOSES -- WITH TANDEM, WHEN
THE MUSIC STOPS, THERE IS MORE MORTGAGE MONEY AND MORE HOUSES.
DURING THE PAST YEAR, GINNIE MAE MADE COMMITMENTS TO
DUY $12.5 BILLION DOLLARS IN TANDEN PLAN MORTGAGES AT BELOW-
MARKET INTEREST RATES, To DATE, WE HAVE PURCHASED ABOUT $2.5
BILLION DOLLARS' WORTH OF MORTGAGES, LEAVING MORE THAN $9.5
BILLION DOLLARS STILL IN THE PIPELINE FOR PURCHASE,
THAT MEANS THAT YOU AND YOUR HOME BUYERS STILL HAVE $9.5
BILLION DOLLARS OF FINANCING FUNDS, SOME AT 7 PERCENT, TO
SUPPORT FUTURE TRANSACTIONS, A GOOD PROPORTION OF THE
COMMITMENTS ARE ALLOCATED FOR SPRING AND SUMMER HOUSING STARTS,
THOSE STARTS SHOULD GIVE A DESIRABLE BOOST TO THIS YEAR'S
HOUSING CONSTRUCTION.
GERALD R. FORD LIBRABY
- 11 -
HUD SUPPORTS LEGISLATION WHICH WOULD INCREASE OUR
TANDEN AUTHORITY AND EXTEND ITS AVAILABILITY FOR ANOTHER
YEAR, TO OCTOBER 1976. WE ALSO FAVOR EXTENDING THE ACT
TO ENABLE GNMA TO PURCHASE MORTGAGES COVERING MULTI-FAMILY
PROJECTS, AND INDIVIDUAL CONDOMINIUM UNITS, WHICH ARE NOT
FHA-INSURED.
A GREAT PLUS OF THE TANDEM PLAN IS THAT IT IS A MORE
SIMPLE AND INEXPENSIVE WAY TO PUT MONEY INTO THE MORTGAGE
MARKET THAN THE PENDING SUBSIDY LEGISLATION, AND, IT CAN
BE QUICKLY IMPLEMENTED. HENCE, IT CAN ADAPT TO THE RAPIDLY
CHANGING MARKET CONDITIONS THAT CHARACTERIZE THE HOUSING
INDUSTRY.
By TRADITIONAL STANDARDS, THE HOUSING SECTOR SHOULD
ALREADY HAVE BEGUN A RAPID RECOVERY, FEDERALLY INSURED
SAVINGS AND LOANS HAD MET-IMPLOWS OF NEARLY $10 BILLION
DOLLARS -- DURING THE FIRST QUARTER OF 1975 -- WITH PERHAPS
ANOTHER $4 BILLION DOLLARS COMING INTO MUTUAL SAVINGS BANKS,
MORTGAGE MONEY IS AVAILABLE. INTEREST RATES ARE BELOW LAST
YEAR'S UNUSUAL LEVELS,
GERALD A. FORD LIBRARY
- 12 -
WHAT THEN IS HOLDING NEW HOME BUYERS BACK?
THE ANSWER APPEARS TO BE LACK OF CONSUMER CONFIDENCE.
LAST MONTH SIX OF YOUR 14 AREA VICE PRESIDENT REPORTS
EXPRESSLY MENTION LACK OF BUYER CONFIDENCE, AND MOST OF
THE OTHERS IMPLY THAT SUCH IS THE PROBLEM.
WE KNOW THAT CONSUMERS ARE WORRIED ABOUT THE ECONOMY.
THEIR CONFIDENCE CAN ONLY BE RESTORED WITH A CONVINCING
DEMONSTRATION THAT THE RECESSION CAN BE CONTROLLED WITHOUT
ANOTHER WILD BOUT WITH INFLATION. SINCE WHAT AILS HOUSING
PRODUCTION IS LACK OF CONFIDENCE, NOT LACK OF NORTGAGE MONEY,
THE CURE SHOULD BE LESS GOVERNMENT SPENDING -- NOT NORE. WE
KNOW THAT HUGE ADDITIONAL FEDERAL SPENDING PROGRAMS WILL
MIJH
FUEL THE FIRES OF INFLATION.
екольг
GERALD R. FORD LIBRARY
- 13 -
Now, A RELATED PROBLEM IS THAT TOO MANY CONSUMERS THINK
THAT "THEY DON'T BUILD HOUSES LIKE THEY USED TO". I
DISAGREE; I KNOW YOU BUILD THEM BETTER,
Bur, IT'S UP TO BOTH OF US TO ASSURE THE CONSUMER OF
THE QUALITY HE RECEIVES WHEN HE PURCHASES A NEW HOME.
AFTER ALL, THE PURCHASE OF A HOME IS FOR MOST AMERICAN
CONSUMERS THE BIGGEST BUSINESS TRANSACTION OF THEIR LIFETINE.
YOUR PRESIDENT HAS TAKEN UP THE CHALLENGE. RECENTLY
AMMOUNCING YOUR NEW WARRANTY PROGRAM, HE SAID "WE MUST
START BY BUILDING CONSUMER CONFIDENCE".
FHA ALSO HAS A WARRANTY PROGRAM TO PROTECT HOME BUYERS,
BUT THAT PROGRAM IS QUITE LIMITED. IT HAS ONLY A ONE-YEAR
DURATION AND COVERS ONLY THE HOUSING CONSTRUCTION GUARANTEED
BY FHA, VA OP. FMMA.
YOUR ORGANIZATION'S NEW WARRANTY PROGRAM IS AVAILABLE FOR
A LONGER PERIOD AND FOR A BROADER CATEGORY OF NEW
CONSTRUCTION, YOUR PLAN REPRESENTS AN IMPORTANT STEP IN
BUILDING THE KIND OF CONSUMER CONFIDENCE NECESSARY TO A ROBUST
RECOVERY IN HOUSING,
GERALD R. FORD LIBRABY
- 14 -
YOUR PLAN ALSO TEACHES AN IMPORTANT LESSON REGARDING
THE CAPACITY OF PRIVATE INDUSTRY TO RESPOND IN A CREATIVE
WAY TO CONSUMERS' NEEDS ----- WITHOUT GOVERNMENT INTERVENTION.
THAT IS THE GENIUS OF THE FREE ENTERPRISE SYSTEM.
SINCE WE SHARE A CONCERN FOR THE CONSUMER OF HOUSING,
I OFFER YOU NOT ONLY AN ACCOLADE, BUT A PLEDGE CF OUR
COOPERATION. WE WILL LISTEN TO YOUR IDEAS ON WAYS THAT
WE CAN BE SUPPORTIVE OF CREATIVE PRIVATE SOLUTIONS TO
HOUSING PROBLEMS.
YOUR INSIGHT WILL BE VALUABLE AS TO HOW EXISTING
GOVERNMENT WARRANTY PROGRAMS CAN BEST BE USED TO COMPLEMENT
PRIVATE WARRANTY PLANS.
WARRANTIES ARE BUT ONE EXAMPLE OF THE BROAD RANGE OF
ISSUES UPON WHICH I WANT TO ENCOURAGE A CONTINUING DIALOGUE
WITH GROUPS IN THE PRIVATE SECTOR SUCH AS THE NAHB. THE
GOVERNMENT CAN HELP MAKE IT POSSIBLE FOR HOMES TO BE BUILT, --
BUT ONLY YOU CAN BUILD THOSE HOMES,
GERALD 11/19/17 ? FORD
- 15 -
YOUR INDUSTRY IS JUST BARELY EMERGING FROM A LENGTHY
PERIOD OF LOW PRODUCTION, THE KEY INDICATORS FOR HOUSING
ARE BEGINNING TO POINT IN THE RIGHT DIRECTION. THE ECONOMY
AS A WHOLE IS FINALLY STARTING THE SLOW PAINFUL CLIMB
UPWARDS.
As PRESIDENT NORMAN SAID "(THERE'S) NO TIME FOR MOURNING,
WE'VE COT A GOOD PROGRAM, LET'S GET BUSY!"
I AGREE. WE ALL HAVE A LOT OF WORK TO DO, AND A LONG WAY
TO CO, I HOPE THAT THE NATIONAL ASSOCIATION OF HOME BUILDERS
AND HUD CAN TRAVEL THE ROAD TOGETHER - -- ASSISTING EACH OTHER ---
TO PROVIDE A DECENT HOME FOR "EVERY AMERICAN FAMILY".
THANK YOU.
R. FORD
LIBRARY GERALD