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11/11/75 - United States League of Savings Associations, Miami Beach
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11/11/75 - United States League of Savings Associations, Miami Beach
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This file contains material relating to Waste, Real Estate Settlement Procedures Act (RESPA), Condominiums, Financial Institutions Act.
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Carla A. Hills Speeches
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The original documents are located in Box 1, folder "11/11/75 - United States League of
Savings Associations, Miami Beach" 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States of America his copyrights in all of his unpublished writings in National Archives collections.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
FINAL
UNITED STATES LEAGUE OF SAVINGS ASSOCIATION
MIAMI BEACH, FLORIDA
NOVEMBER 11, 1975
I STAND BEFORE YOU AS THE SECRETARY OF A FEDERAL DEPARTMENT
WHOSE EXISTENCE SEEMS ONLY DIMLY FAMILIAR TO YOU,
THE CURIOUS PART IS THAT MY DEPARTMENT REPRESENTS THE
FEDERAL GOVERNMENT'S PRINCIPAL CONTACT WITH THE HOUSING
INDUSTRY -- AND HOUSING OBVIOUSLY IS OF MORE THAN PASSING
INTEREST TO SAVINGS AND LOAN COMPANIES,
SOMETIMES WE SEEM TO HAVE A LESS FRIENDLY DIALOGUE GOING
THAN BILLIE JEAN KING HAS WITH BOBBY RIGGS, AND I WONDER IF
IT IS BECAUSE YOU DON'T KNOW VERY MUCH ABOUT HUD's OPERATION
OR BECAUSE YOU JUST PREFER IT THAT WAY,
I ASKED A NUMBER OF EXPERTS --- IN AND OUT OF GOVERNMENT --
FOR SOME OPINIONS ON WHAT I MIGHT SAY TO YOU TODAY,
WHAT I GOT WAS A GREAT DEAL OF ADVICE ON WHAT I COULDN'T
SAY AS AN ADMINISTRATION SPOKESMAN EVEN THOUGH IT MIGHT
PLEASE YOU; AND WHAT I SHOULDN'T SAY BECAUSE YOU WOULDN'T
WANT TO HEAR IT.
GERALD A. FORD CIERANT
-2-
BUT, I ACCEPTED THIS INVITATION TO SPEAK BECAUSE I
REALLY FEEL THAT, IN SPITE OF THE PAST, HUD AND THE SAVINGS
AND LOANS HAVE BROAD AND SIGNIFICANT AREAS OF COMMONALITY.
AND, IN THIS ERA OF ECONOMIC QUESTION MARKS, A BETTER EXCHANGE
OF IDEAS BETWEEN US COULD BE OF SUBSTANTIAL MUTUAL BENEFIT.
Now, YOU MAY HAVE HEARD SOMEWHERE ALONG THE WAY -- SINCE
MY CRITICS MADE NO SECRET OF IT -- THAT I DIDN'T CLASSIFY AS
A "HOUSING EXPERT" WHEN I TOOK THE JOB AT HUD.
THAT DUBIOUS DISTINCTION GIVES ME A LOT OF ON-THE-JOB
ADVANTAGES.
LIKE THE CHILD IN THE FABLE OF THE EMPEROR'S CLOTHES --
I'M NOT EXPERT ENOUGH NOT TO QUESTION THINGS THAT ARE
HELD TO BE TRUTHS, SIMPLY BECAUSE A LOT OF PEOPLE WANT TO
THINK THAT THAT'S THE WAY THINGS ARE.
I DON'T MEAN TO BE FLIP, BUT IF THE OLD WAY OF DOING
THINGS IS THE BEST WAY OF DOING THINGS, ONE SIMPLY HAS TO
BE AMAZED AT THE SHAPE OF THINGS IN THE HOUSING INDUSTRY
TODAY,
-3-
THE SAVINGS AND LOAN PRINCIPLE IS ONE OF THE OLDEST
CONCEPTS IN MAKING A REALITY OF AMERICA'S OLDEST DREAM OF
HOMEOWNERSHIP,
WITH 98 PERCENT OF THE NATION'S SAVINGS AND LOAN ASSETS
AND 83 YEARS AS A NATIONAL ASSOCIATION, YOU HAVE MORE COLLECTIVE
EXPERTISE IN THE HOME MORTGAGE MARKET THAN ANY OTHER ASSOCIATION
OR FINANCIAL INSTITUTION IN THIS COUNTRY,
YET, YOU TOO, ARE VICTIMIZED BY ALL THE OLD WAYS --
TO THE POINT WHERE THE FORWARD TO YOUR FUTURE ALTERNATIVES
REPORT, LAST YEAR QUESTIONED "WHETHER ANY OF OUR INSTITUTIONS
CAN LONG SURVIVE" THIS PERIOD OF "DOUBLE-DIGIT INFLATION AND
DOUBLE-DIGIT PRIME INTEREST RATES WHILE AT THE SAME TIME
FULFILLING ITS TRADITIONAL RESPONSIBILITIES."
WELL, I DON'T QUESTION THE ABILITY OF OUR INSTITUTIONS
TO SURVIVE, BUT I DO HAVE SOME INTERROGATIVES ABOUT THOSE
"TRADITIONAL RESPONSIBILITIES",
AND, I'D LIKE TO TALK ABOUT THEM.
-4-
TRADITIONALLY, WE HAVE ACCEPTED THE CYCLICAL NATURE
OF THE HOUSING FINANCE MARKET AND ITS COSTLY EFFECTS ON THE
PRODUCERS AND CONSUMERS OF HOUSING,
TRADITIONALLY, WE HAVE ASSUMED THAT THE PRIVATE MARKET
WAS PROVIDING ADEQUATE PROTECTION AGAINST ABUSIVE PRACTICES
TO HOME PURCHASERS,
TRADITIONALLY, THE FEDERAL GOVERNMENT AS WELL AS THE
LENDING INSTITUTIONS SUPPORTED THE CONSTRUCTION OF THOUSANDS
UPON THOUSANDS OF HOMES IN THE SUBURBS, WHICH ENTICED HOMEOWNERS
TO FLEE THE CITIES.
TRADITIONALLY, WE HAVE IGNORED THE SOCIAL AND ENVIRONMENTAL
COSTS OF SUBURBAN SPRAWL, ALTHOUGH IT WAS CLEAR TO THOSE WHO
WERE WILLING TO LOOK THAT URBAN DEVELOPMENT COSTS 50 PERCENT
LESS IN TERMS OF LAND, CAPITAL, ENERGY AND ENVIRONMENTAL TOLL.
TRADITIONALLY, WE HAVE IGNORED THE BILLIONS OF DOLLARS
OF EXISTING HOUSING STOCK LOCATED IN OUR CITIES AND THE
BILLIONS OF DOLLARS OF SUPPORTIVE ASSETS IN THE FORM OF WATER
AND SEWER LINES, ROADS, TRANSPORTATION SYSTEMS, UTILITIES,
SCHOOLS, HOSPITALS, AND FACTORIES,
-5-
TRADITIONALLY, WE HAVE VIEWED AMERICA AS A CORNUCOPIA
OF INEXHAUSTIBLE RESOURCES, AS WE CONSUMED HER ABUNDANCE,
BUT, TODAY A SCARCITY OF ENERGY, A TIGHTER ECONOMY AND
CONCERNS ABOUT THE QUALITY OF OUR AIR AND WATER AND USE OF
OUR LAND COMPEL US TO WEIGH THE COST OF OUR TRADITIONAL
NATIONAL OVER-INDULGENCE.
WE CAN NO LONGER ACCEPT THE TRADITIONAL NOTION THAT THE
WAY TO DEAL WITH A "USED" HOME IS TO THROW IT AWAY AND BUILD
A NEW ONE SOMEWHERE ELSE,
WE MUST SEEK TO PRESERVE AND RECYCLE THE WEALTH OF
HOUSING THAT WE HAVE IN OUR CITIES AND OUR SUBURBS,
As A NATION WE HAVE PLEDGED TO HOUSE THE 16 MILLION
FAMILIES IN THIS COUNTRY WHO ARE OFFICIALLY CLASSED AS
"THE HOUSING POOR," WHICH IS GOVERNMENT SHORTHAND FOR
THOSE WHO LIVE IN SLUMS OR WHO PAY A DISPROPORTIONATELY
HIGH PERCENTAGE OF THEIR INCOME FOR SHELTER.
THE LAST TWO YEARS HAVE STARKLY DEMONSTRATED THE COSTS
OF THE BROAD CYCLICAL SWINGS WHICH HAVE CHARACTERIZED YOUR
INDUSTRY, WE KNOW WE MUST TAKE STEPS TO ENSURE AN ADEQUATE
SUPPLY OF REASONABLY PRICED MORTGAGE MONEY.
-6-
FINALLY, PUBLIC CLAMOR OVER TRUTH IN LENDING, DISCRIMINATION
IN MORTGAGE CREDIT, SETTLEMENT PROCEDURES AND CONDOMINIUMS
HAVE CAST DOUBT ON WHETHER THE PRIVATE MARKET IS ADEQUATELY
PROTECTING THE CONSUMERS ON WHOM IT DEPENDS FOR SURVIVAL.
GOVERNMENT CANNOT HANDLE THIS AGENDA ALONE, FOR THE
GOVERNMENT ISN'T A WELL FOR INDUSTRY. IN FACT, IT ISN'T
EVEN A VERY PRACTICAL PUMP, GOVERNMENT DECISIONS SIMPLY
CANNOT REPLACE CAREFUL, WELL THOUGHT-OUT BUSINESS JUDGMENTS
MADE BY THOSE WHO LIVE BY AND ENJOY THE BENEFITS OF AMERICAN
FREE ENTERPRISE,
WHAT THE GOVERNMENT SHOULD DO -- AND WHAT IT DOES BEST --
IS TO USE ITS POWERS AND THE TAXPAYERS' MONEY JUDICIOUSLY
TO HELP "PRIME THE PUMP" -- AND LET PRIVATE INDUSTRY TAKE
IT FROM THERE,
CERTAINLY YOU AGREE. FOR WHEN I STUDIED YOUR COMMITTEES'
RECOMMENDATIONS ON FUTURE ALTERNATIVES, I WAS IMPRESSED BY
MORE THAN THE WIDE VARIETY AND WISE REASONING THEY CONTAINED.
OUT OF FIFTEEN RECOMMENDATIONS, ALL BUT TWO, WERE
CONCERNED WITH EXTRICATING YOUR INDUSTRY FROM SOME CODE,
REGULATION OR RESTRICTION PLACED ON IT BY SOME GOVERNMENT ENTITY.
-7-
YOU'RE NOT ALONE, THERE ISN'T A COMMERCIAL ENTERPRISE
IN THIS LAND OF THE "FREE" TODAY THAT DOESN'T HAVE MORE
GOVERNMENT ON ITS BACK THAN IT CAN COMFORTABLY HANDLE -- AND,
ALL TOO OFTEN, MORE THAN IS NECESSARY TO ACCOMPLISH THE
INTENDED PURPOSE.
BUT, IT IS UNREALISTIC TO BLAME THE GOVERNMENT'S BIGNESS
ENTIRELY ON "GOVERNMENT" -- WHOEVER WE DEFINE THAT TO BE.
THEORETICALLY, THE AMERICAN PEOPLE MAKE THE LAWS -- AND
SOME OF THE RULES THAT HAVE BEEN FASHIONED LEAD INEVITABLY
TO THE CONCLUSION THAT THERE MUST HAVE BEEN SOME PAST SHIRKING,
HERE AND THERE, OF "TRADITIONAL RESPONSIBILITIES".
IN TRUTH, THE MAGIC POWER OF THE FEDERAL GOVERNMENT TO
CURE EVERY ILL ON THE SOCIAL RICHTER SCALE HAS BEEN SO OVER-
SOLD TO THE AMERICAN PEOPLE THAT GOVERNMENT HAS BEEN HANDED
EVERY STICKY PROBLEM THE PRIVATE SECTOR DIDN'T SEEM TO HAVE
THE WILL TO FACE AT A TIME WHEN THE NEED WAS PLAIN.
ENTIRE INDUSTRIES HAVE ACTUALLY ENCOURAGED -- BY THEIR
FAILURE OF "TRADITIONAL RESPONSIBILITIES" -- GOVERNMENT TO
STEP IN AND MAKE RULES FOR THINGS THAT THE INDUSTRY KNOWS
FAR MORE ABOUT THAN THOSE WHO ARE DRAFTING THE RULES,
-8-
Look AT THE REAL ESTATE SETTLEMENT PROCEDURES AcT.
RESPA IS A PRIME EXAMPLE OF WHAT HAPPENS WHEN INDUSTRY
AND GOVERNMENT FAIL TO COMMUNICATE. HERE IS A SET OF WELL
INTENTIONED REGULATIONS, ENACTED INTO LAW WITHOUT THE BASIC
INTERCHANGE OF IDEAS NECESSARY TO DETERMINE THE SCOPE AND
NATURE OF THE PROBLEM AND THE MINIMUM DESIRABLE LEGISLATION
TO CORRECT IT.
As A RESULT, WHAT STARTED OUT TO CURB THE ABUSES OF A
FEW, ENDED UP STIFLING THE LEGITIMATE OBJECTIVES OF THE MANY.
Now THAT WE HAVE HAD THAT NEEDED INTERCHANGE -- WE DO
FAVOR A MAJOR OVERHAUL OF THAT LEGISLATION.
UNLESS GOVERNMENT AND INDUSTRY ARE PARTNERS -- TALKING
AND LISTENING TO EACH OTHER, AND WORKING TOGETHER ON TOUGH,
COMMON PROBLEMS -- WE CAN LOOK FORWARD TO THE KIND OF
"SOLUTIONS" THAT WORK TO THE DETRIMENT OF ALL OF US,
TAKE OUR APPROACH TO CONDOMINIUM REGULATION WHICH
ILLUSTRATES HOW AN INTERCHANGE CAN BE THE DIRECT ROAD TO
SOLUTIONS,
-9-
As YOU KNOW, WE CONDUCTED A YEAR-LONG STUDY. DURING
ITS COURSE WE TALKED TO MANY SAVINGS AND LOAN REPRESENTATIVES
AND HELD HEARINGS AROUND THE COUNTRY WHERE YOU AND YOUR CLIENTS
TESTIFIED. WE DID IDENTIFY ABUSES -- SOME OF THEM EXTREMELY
SERIOUS -- BUT MOST OF THEM WERE NOT COMMON ENOUGH ON A NATIONAL
SCALE TO WARRANT FEDERAL REGULATION.
IT WAS ON THE BASIS OF THAT STUDY THAT IN SEPTEMBER I
TESTIFIED BEFORE THE SENATE BANKING COMMITTEE THAT FEDERAL
REGULATION SHOULD BE MINIMAL. I FAVOR LEAVING DETAILED
REGULATION OF LOCAL CONDOMINIUM DEVELOPMENT TO THE STATES
WHICH ARE BEST EQUIPPED TO TAILOR REGULATORY LAWS TO LOCAL
CONDITIONS,
WHILE I SUPPORT A UNIFORM 8-POINT DISCLOSURE REQUIREMENT
WHICH WOULD PROTECT THE CONSUMER AND RELIEVE THE DEVELOPER
NOW BESEIGED WITH A MULTITUDE OF CONFLICTING REGULATIONS, I
OPPOSE CREATING A NEW FEDERAL BUREAUCRACY AND I WOULD LEAVE
ENFORCEMENT TO THE PARTIES AND TO THE STATES.
ALSO ILLUSTRATIVE OF A COOPERATIVE APPROACH ARE OUR
EFFORTS OVER THE PAST TWO YEARS TO MAINTAIN OPPORTUNITIES
FOR HOMEOWNERSHIP WHEN INFLATION DROVE TRADITIONAL HOMEBUYERS
FROM THE MARKET AND SLOWED THE HOUSING INDUSTRY ALMOST TO THE
POINT OF STOPPING.
-10-
HUD -- UNDER ITS SO-CALLED "TANDEM PROGRAM" -- HAS OFFERED
TO BUY $15.5 BILLION WORTH OR OVER 500,000 MORTGAGES -- THAT
BEAR INTEREST BELOW THE MARKET RATE.
TODAY, THE TANDEM RATE IS 7-1/2 PERCENT IN A MARKET
THAT CALLS FOR ABOUT 9 PERCENT ON SINGLE-FAMILY MORTGAGES.
ON A $35,000 MORTGAGE, THE "TANDEM" BORROWER SAVES ABOUT
$20 IN INTEREST CHARGES PER MONTH -- OR ABOUT $9,500 OVER THE
LIFE OF THE MORTGAGE.
USE OF THE TAXPAYERS' MONEY IN THIS WAY EXPANDS HOME-
OWNERSHIP OPPORTUNITY AND ALSO STIMULATES CONSTRUCTION, BUT
IT ALSO -- AVOIDS AN OLD HAZARD -- IT DOES NOT FEDERALIZE
HOUSING,
THE SAME BASIC LOGIC APPLIES TO HUD's HOMEOWNERSHIP
SUBSIDY PROGRAM -- WHICH I REACTIVATED IN SUBSTANTIALLY
REVISED FORM ABOUT THREE WEEKS AGO,
As YOU PROBABLY KNOW, PRESIDENT FORD HAS AUTHORIZED ME
TO RELEASE $264.1 MILLION THAT HAD BEEN IMPOUNDED EARLY IN 1973.
-11-
IN RELATION TO NATIONAL NEEDS, $264.1 MILLION ISN'T
FORT KNOX, BUT IT WILL SUBSIDIZE MORE THAN 250,000 UNITS OF
LOW COST HOUSING -- GENERATE MORE THAN $6-1/2 BILLION IN
CONSTRUCTION ACTIVITY AND CREATE MORE THAN 500,000 NEW
CONSTRUCTION JOBS,
ONE IMPORTANT KEY TO THE REVISED HOMEOWNERSHIP SUBSIDY
PROGRAM IS THAT IT IS TARGETED TO THAT RANGE OF LOWER INCOME
FAMILIES WHO HAVE BEEN AMERICA'S TRADITIONAL BUYERS OF NEW
HOMES -- BUT WHO HAVE BEEN PRICED OUT OF THE MARKET BY THE
INFLATIONARY SPIRAL.
UNDER THE NEW PROGRAM THE GOVERNMENT CAN SUBSIDIZE DOWN
TO 5 PERCENT THE INTEREST ON A MORTGAGE IN THE RANGE OF
$20,000 TO $25,000 HELD BY A PARTICIPATING LOW INCOME FAMILY.
By PROVIDING INTEREST SUBSIDIES UNDER THIS PROGRAM,
GOVERNMENT WILL MAKE HOMEOWNERSHIP AVAILABLE TO MORE AMERICAN
FAMILIES -- WHICH WILL HELP GET THE MACHINERY IN THE HOUSING
INDUSTRY MOVING AGAIN.
THESE PROGRAMS, HOWEVER, DEPEND ON THE PRIVATE MORTGAGE
MARKET AND CONSTRUCTION INDUSTRY TO PROVIDE THE NECESSARY
CREDIT AND HOUSING,
-12-
IN USING THESE PROGRAMS, WE KEEP A SHARP EYE ON THE
NATION'S TOTAL ECONOMY, WE KNOW THAT EXCESSIVE USE OF
OUR "STIMULANTS" COULD BE THE DEATH OF OUR PATIENT -- BY
REQUIRING GREATER TREASURY BORROWING WHICH WILL DRIVE UP
THE COST OF MORTGAGE MONEY AND DRIVE AWAY MANY HOMEBUYERS.
ANOTHER ILLUSTRATION OF THE COOPERATIVE APPROACH IS
THE $2.6 BILLION ON COMMUNITY DEVELOPMENT GRANTS WHICH HUD
DISTRIBUTED TO LOCAL COMMUNITIES LAST YEAR. WITH CITIZEN
PARTICIPATION, LOCAL COMMUNITIES UTILIZED NEARLY 60 PERCENT
OF THOSE FOR NEIGHBORHOOD CONSERVATION, AND A NUMBER OF
COMMUNITIES USED THE FEDERAL GRANTS TO ATTRACT FUNDS FROM
THE PRIVATE SECTOR,
THE LATEST EXAMPLE OF THIS PARTNERSHIP-IN-ACTION IS
HUD's URBAN HOMESTEADING DEMONSTRATION PROGRAM IN WHICH
22 AMERICAN CITIES WILL PARTICIPATE USING $5 MILLION IN
HUD-ACQUIRED PROPERTIES AND AN ADDITIONAL $5 MILLION IN
REHABILITATION LOAN FUNDS,
THE OBJECT, OF COURSE, IS THE VITALLY NEEDED PRESERVATION
AND RECYCLING OF WORN-DOWN URBAN NEIGHBORHOODS -- BUT A CLEAR
DIVIDEND TO THE NATION IS THE SUCCESS OF THE CITIES IN
SECURING PRIVATE REINVESTMENT CAPITAL FOR SUCH AN AMBITIOUS
AND HOPEFUL EXPERIMENT.
-13-
CERTAINLY, IT IS TESTIMONY TO THE THESIS THAT AMERICA
CANNOT SOLVE ITS URBAN PROBLEMS WITHOUT THE COOPERATION OF
ALL AMERICANS.
THAT IS THE THEME OF OUR URBAN REINVESTMENT TASK FORCE
FORMED BY HUD AND THE FEDERAL HOME LOAN BANK BOARD. RECENTLY
THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE COMPTROLLER OF
THE CURRENCY AND THE FEDERAL RESERVE BOARD AGREED TO JOIN,
EACH OF OUR TASK FORCE PROGRAMS HAS A COMMON QUADRANGLE
OF INTERESTED LEADERSHIP: (1) CITIES PROVIDING IMPROVED
PUBLIC SERVICES; (2) FINANCIAL INSTITUTIONS MAKING MARKETABLE
LOANS; (3) PRIVATE AND PUBLIC SOURCES PROVIDING A HIGH RISK
LOAN FUND; AND (4) LOCAL CITIZENS GROUPS PROVIDING NEEDED
ENTHUSIASM AND SWEAT-EQUITY.
THIS LEVERAGING OF PUBLIC FUNDS TO PROMOTE PRIVATE
REINVESTMENT IS THE KIND OF PARTNERSHIP PRINCIPLE THAT CAN
CHANGE URBAN DECLINE INTO NEW URBAN GROWTH.
THE POSSIBILITIES FOR COOPERATION ARE ENDLESS. You
KNOW THAT WE ARE BOTH SEARCHING FOR WAYS TO ATTRACT A
STEADY AND HEALTHY FLOW OF MORTGAGE MONEY,
FORD
-14-
DURING THE 1930 DEPRESSION THE GOVERNMENT FOSTERED
EXPERIMENTATION WITH THE LOW DOWN PAYMENT LONG-TERM MORTGAGE
INSTRUMENT, WHICH GAVE MILLIONS OF AMERICAN FAMILIES A
CHANCE FOR HOMEOWNERSHIP, THE PROBLEMS OF TODAY'S ECONOMY
REQUIRE NEW SOLUTIONS. IT IS AGAIN TIME FOR GOVERNMENT
TO FOSTER EXPERIMENTATION WITH NEW DEBT INSTRUMENTS.
LENDERS HAVE INCREASED THE INFLATION PREMIUM IN THE
INTEREST RATE IN FIXED RATE MORTGAGES TO PROTECT THEMSELVES.
As A RESULT, NEW BORROWERS ARE FORCED TO CARRY THE BURDEN
OF THE LOWER RATES GIVEN PAST BORROWERS, AND, AS RATES
RISE, INCREASING NUMBERS OF AMERICAN FAMILIES ARE PRICED
OUT OF HOMEOWNERSHIP.
RECENTLY, HUD CONTRACTED WITH THE SLOAN SCHOOL OF
MANAGEMENT AT MIT TO STUDY NON-LEVEL PAYMENT MORTGAGES.
THE STUDY FOUND THAT SUCH MORTGAGES CAN HELP TO
STABILIZE THE FLOW OF MORTGAGE CREDIT, THERE ARE PREDICTABLE
PERIODS IN THE LIFE AND TIMES OF THE MORTGAGOR WHEN HE CAN
AFFORD TO PAY OFF LARGER SLICES OF THE MORTGAGE PRINCIPAL.
FORD
-15-
USUALLY, ITS ABOUT THE TIME THAT THE FAMILY STARTS
PRICING A SECOND CAR OR A BOAT. THE NON-LEVEL PAYMENT
MORTGAGE CAN ACCOMMODATE THIS FACT.
A HUD NOTICE PUBLISHED IN THE FEDERAL REGISTER ON
AUGUST 18, INVITED PARTICIPANTS IN THE MORTGAGE MARKET --
PARTICULARLY THE SAVINGS AND LOAN INSTITUTIONS -- TO
SUGGEST FOR EXPERIMENTATION AND STUDY POSSIBLE DEBT
INSTRUMENT IDEAS, INCLUDING NON-LEVEL PAYMENT MORTGAGES,
THAT HUD MIGHT SUPPORT WITH FHA MORTGAGE INSURANCE,
THE RESPONSE WAS REMARKABLY UNDER-WHELMING. ONLY
28 RESPONSES HAVE BEEN RECEIVED AND ONLY ONE WAS FROM
THE SAVINGS AND LOAN INDUSTRY -- NOTWITHSTANDING ONE OF
YOUR OWN STUDY RECOMMENDATIONS ADDRESSES THE VARIABLE
RATE AND RENEGOTIABLE MORTGAGE CONTRACT AND DEVELOPING
OTHER NEW FINANCING TECHNIQUES,
You ALSO RECOMMEND DEVELOPING PRIVATELY ISSUED MORTGAGE
BACKED SECURITIES AND IMPROVING THE SECONDARY MORTGAGE MARKET.
HUD, THROUGH GNMA MORTGAGE BACKED SECURITIES PROGRAM, HAS BEEN
A PIONEER IN THIS AREA. PRESENTLY, OVER 21 PERCENT OF GNMA's
SECURITIES ARE HELD BY SAVINGS AND LOANS, THIS PROGRAM HAS
ALSO ENCOURAGED THE ENTRY OF SUCH NEW SOURCES OF CAPITAL AS
PENSION FUNDS WHICH NOW HOLD 8 PERCENT OF GNMA SECURITIES.
-16-
As WITH FHA's PIONEERING OF THE LONG-TERM MORTGAGE,
THE GNMA MORTGAGE BACKED SECURITIES HAS SERVED AS A PROTOTYPE
FOR PRIVATE INNOVATION. TAKE THE RECENT $50 MILLION OFFERING
BY CALIFORNIA FEDERAL SAVINGS AND LOAN -- OF MORTGAGE BACKED
BONDS TO THE PUBLIC -- SURELY AN EXCITING SOURCE OF FUTURE
OPPORTUNITY FOR YOUR INDUSTRY,
GNMA SECONDARY MARKET OPERATIONS IMPACT ON THE NEW
MORTGAGE FUTURES MARKET. THREE WEEKS AGO, FUTURES CONTRACTS
IN GNMA GUARANTEED CERTIFICATES BACKED BY FHA AND VA HOME
MORTGAGES JOINED PORK BELLIES AND SOY BEANS IN TRADING ON
THE CHICAGO BOARD OF TRADE. THAT DAY ALONE $80 MILLION IN
CERTIFICATES TRADED.
THAT MARKET GIVES A MORTGAGE ORIGINATOR A HEDGE AGAINST
INTEREST RATES RISING BETWEEN THE TIME HE ORIGINATES THE
MORTGAGE AND THE TIME HE MAKES DELIVERY. THE RESULTS SHOULD
BE A REDUCTION IN THE FLUCTUATIONS IN SHORT-TERM INTEREST
RATES, A MORE STABLE SUPPLY OF MORTGAGE CREDIT, AND FEWER
POINTS -- HENCE LOWER PRICES TO THE HOMEBUYER,
-17-
ON A LONG-TERM BASIS, THE ADMINISTRATION IS ALSO BACKING
THE FINANCIAL INSTITUTIONS AcT, WHICH WAS REPORTED OUT OF THE
SENATE BANKING COMMITTEE. THE Act WOULD EXPAND THE POWERS
OF THRIFT INSTITUTIONS TO INCLUDE CONSUMER LOANS, CHECKING
ACCOUNTS AND OTHER SERVICES FROM WHICH THEY ARE NOW BARRED.
IT WOULD ALSO EXPAND THE INVESTMENT OPTIONS OF THRIFT
INSTITUTIONS. THESE CHANGES SHOULD IMPROVE THE MATURITY
IMBALANCES WHICH PLAGUE THE THRIFT INDUSTRY AND IMPROVE YOUR
ABILITY TO RESPOND TO CHANGING INTEREST RATES.
THE Act ALSO INCLUDES A MORTGAGE INTEREST TAX CREDIT,
WHICH INCREASES WITH THE RECIPIENT'S MORTGAGE HOLDINGS,
THIS TAX CREDIT COULD BE AN IMPORTANT STIMULANT TO THE
SECONDARY MORTGAGE MARKET.
THE FINANCIAL INSTITUTIONS Act HAS BEEN CRITICIZED BOTH
FOR DOING TOO MUCH AND FOR DOING TOO LITTLE. SOME SAY IT
CHANGES COMPETITIVE POSITIONS IN THE INDUSTRY WITHOUT GOOD
REASON, BUT WE SEE THE AcT AS SEEKING TO PROVIDE FOR A LESS
REGULATED MARKET IN WHICH ALL BANKING INSTITUTIONS CAN
COMPETE MORE EFFECTIVELY.
-18-
THE BENEFITS TO BANKING FROM THIS DEREGULATION SEEM TO
ME TO FAR OUTWEIGH ANY FEATURES WHICH ARE SEEN ON A SHORT-RUN
BASIS TO FAVOR ONE GROUP OF INSTITUTIONS OVER ANOTHER.
DEREGULATION WILL HELP PROVIDE A MORE CONSTANT AND MORE
ADEQUATE SUPPLY OF MONEY WHICH IS ESSENTIAL TO A HEALTHY
AND STABLE HOUSING INDUSTRY. IT IS BETTER TO HAVE
70 PERCENT OF A MILLION DOLLARS THAN 99 PERCENT OF A
THOUSAND. AND, A FREER MARKET IS WORTH SEEKING,
Now, I REALIZE, OF COURSE, THAT EVERY ITEM ON THIS
"LAUNDRY LIST" OF HUD ACTIVITIES ISN'T GOING TO MAKE YOU
STAND UP AND CHEER.
IN TRUTH, I DIDN'T COME HERE TO "SELL" YOU HUD's
PROGRAMS, BUT I DID THINK IT WOULD BE USEFUL IF I SHOWED
YOU HUD's HAND -- AS AN INVITATION TO THE SERIOUS DIALOGUE --
WHICH THIS NATION so DESPERATELY NEEDS.
I'M NOT WED TO ANY PARTICULAR ANSWER TO ANY OF OUR
PROBLEMS -- EITHER AT HUD OR OUR THERE WHERE ALL ANSWERS
MUST STAND THE TOUGH TEST OF WORKABILITY,
-19-
BUT TIME IS TOO SHORT FOR EITHER NON-ANSWERS OR THE
WRONG ANSWERS,
THE PROBLEMS ARE BIGGER THAN EVEN BIG GOVERNMENT.
INDEED, IF LEFT UP TO GOVERNMENT ALONE, PROBLEMS HAVE A
WAY OF BEING COMPOUNDED.
I FIND IN YOUR RECOMMENDATIONS ON FUTURE ALTERNATIVES
A PRAGMATIC ADMISSION THAT THERE HAS TO BE A BETTER WAY
TO DO THE THINGS THAT MUST BE DONE.
AND I REALLY BELIEVE IT IS TIME WE ALL STARTED DOING
THEM TOGETHER,
THANK YOU VERY MUCH.