The following organizations were represented-continued Boston Five Cents Savings Bank, Robert Morgan. Chase National Bank, John J. Scully. Clarke, W. A., Mortgage Co., W. A. Clarke. Congress of Industrial Organizations, Walter P. Reuther. Liberty National Life Insurance Co., Ehney A. Camp. Mortgage Bankers Association, Aubrey M. Costa. National Association of Home Builders, Alan Brockbank and E. M. Spiegel. National Housing Conference, Inc., Ira Robbins. National Association of Real Estate Boards, Ward A. Smith. National Savings and Loan League, Oscar R. Kreutz, Harold P. Braman, New York Life Insurance Co., D. C. Josephs and C. R. Van Anden. Stern, Lauer & Co., J. Maxwell Pringle. United States Savings and Loan League, George L. Bliss and Dr. A. M. MORTGAGE FINANCING WEDNESDAY, FEBRUARY 6, 1952 UNITED STATES SENATE, COMMITTEE ON BANKING AND CURRENCY, Washington, D. C. The committee met, pursuant to notice, at 10:30 a. m., in room 301, Senate Office Building, Senator Burnet R. Maybank (chairman) presiding. Present: Senators Maybank, Robertson, Sparkman, Frear, Moody, Capehart, Bricker, and Ives. The following participated in the round-table discussion: Edward Bartelt, Treasury Department; Alan Brockbank, National Association of Home Builders; E. A. Camp, Jr., Liberty National Life-Insurance Co.; W. A. Clarke, W. A. Clarke Mortgage Co.; Norman Carpenter, Metropolitan Life Insurance Co.; Aubrey M. Costa, Mortgage Bankers Association; Thomas P. Coogan, Defense Department; William K. Divers, Home Loan Bank Board; Raymond M. Foley, Housing and Home Finance Agency; Harry Held, the Bowery Savings Bank; J. G. Jewett, Prudential Insurance Co.; D. C. Josephs, New York Life-Insurance Co.; T. B. King, Veterans' Administration; Oscar Kreutz, National Savings and Loan League; W. McC. Martin and Guy E. Noyes, Federal Reserve Board; Robert Morgan, Boston Five Cents Savings Bank; Robert E. Pratt, Institutional Securities Corp.; Franklin D. Richards, Federal Housing Administration; John J. Scully, Chase National Bank; Ward Smith, National Association of Real Estate Boards; Jesse W. Tapp, Bank of America; and Dr. A. M. Weimer, United States Savings and Loan League. The CHAIRMAN. The meeting will come to order. I am sorry that some of the Senators have been detained, but they will be here in a few minutes. I have a short statement I wish to make. First, I want to welcome you and thank you for agreeing to participate in this round-table discussion before our committee. I know all of you are very busy men who occupy positions of great_importance in your industry and in the several departments of the Government. It is my hope and objective that the sessions during the next 3 days will be most productive in terms of the benefits to Congress, and through them our Nation and its citizens will gain. With so many experts as are assembled here today, we should all learn much and I believe we ought to have a series of most interesting meetings. The problem, gentlemen, that brings us together is the current state of the mortgage market. As you know, over the past several years Congress has been called upon to enact various pieces of legislation directly related to mortgage financing. Such legislation was enacted 1 usually on an emergency, or piecemeal basis. The Congress has never taken the time out to consider the full implication of legislative action in this field, or, as we have on various other proposals that come before the Congress, afforded ourselves the opportunity of exploring fully the direct and indirect problems with respect to such legislation or the policy implications of any proposed action. From all sides we are hearing about the lack of mortgage moneyfrom the builders and mortgage institutions in the critical areas, from the veterans all over the country, and from almost everybody who wants to buy, sell, or finance a house. What should be done about it? Some say do not interfere and the market will take care of it. Others say the market will take care of it if you will only allow it to operate freely. Another large group says just give FNMA enough money and authority to issue advance commitments and your problem is solved. Veterans' groups and their friends urge that the VA directloan program be expanded by direct authorization or by purchase of VA-held mortgages by the national service life-insurance fund. Why go through the farce of making it appear private funds are being used to finance housing; why not be honest and let FNMA finance housing directly and not have to split its profits, is another question being persistently asked. And so it goes. In order to get the best and most-informed opinions regarding these and other proposals and questions, and to fully understand the broad implication of the problem and its solution, I thought that the simplest, most expedient and intelligent way to do it was to bring together in one room the people that, more than any group, make the market and the decisions affecting it, and to encourage them to discuss it fully and from every conceivable angle. While I know it will be difficult for the Senators to restrain themselves from asking a great number of questions and expressing their opinions on such an important problem, my purpose in holding the meetings in the form of a round table was to allow the experts and people in the industry for the most part to do that job for us. Since their views and approaches to the problem will vary, it seemed to me that in this manner we can get the most out of the limited time this committee can give to this question. I know that the Senators will cooperate. Since much of what you gentlemen will be discussing can easily get quite involved and technical, I know you will not mind if we interrupt you from time to time for explanation and clarification. Since there are 24 participating in this round table and only about 7 hours to discuss this problem, there will be only about 15 minutes on an average allowed each participant. While I do not propose to hold a clock on anyone, I would request that no one speak in excess of 5 minutes at any one time. In that way each will get a chance to direct our attention to a point which the others have not yet mentioned, and we shall have in that way a much more lively and interesting discussion. At your place is a topical outline of the various factors to be considered during these discussions. While we might well follow this logical outline in pursuing this discussion, it seemed to me that a less formal and free discussion of what is on your chests would cover the same points. I shall, however, exercise my prerogative as chairman to direct your attention to different aspects of the problem indicated in the outline, and not allow too much time to be spent on one aspect to the exclusion of others. I shall also attempt to see that you all get a chance to speak. If you care to interrupt or comment on any of the other participants' remarks, we shall try to give you that opportunity. The topical outline will, without objection, be inserted in the record at this point. (The outline referred to follows:) TOPICAL OUTLINE FOR DISCUSSION OF MORTGAGE FINANCE PROBLEM AT ROUND TABLE WITH UNITED STATES SENATE BANKING AND CURRENCY COMMITTEE, FEBRUARY 6, 7, AND 8, 1952 I. Demand and supply of long-term investment financing. A. Net demand for long-term investment funds. (a) Budget. (b) Cash deficit. (2) State and local government new issues. (a) Defense plants. (b) Others. (4) Mortgages-farm, nonfarm, residential, nonresidential. (a) Life-insurance companies. (c) Savings and loan associations. (e) United States savings bonds. II. Interest rate structure: A. Rate relationship. (1) Long-term Government mortgages. (2) Long-term Governments versus intermediate and shorts. (3) High-grade corporate bonds and mortgages. B. Factors affecting mortgage rates on mortgages and comparable investments. (1) Risk-guaranteed and insured. (2) Liquidity. (3) Term (maturity). (4) Administrative expenses and net yield. C. Effect of changes in interest rate. (1) On aggregate supply of loanable funds. (2) On demand for loan investment funds. (a) For specific types of investments-mortgages, corporate issues, municipal issues. III. Demand and supply of mortgages in 1952. A. Demand for mortgages. (1) Volume to finance 800,000 new units. (2) Volume to finance existing house purchases. B. Supply of funds for mortgages. (1) Sources and amounts (repayments and net inflow of sav (2) Availability of VA-guaranteed and FHA-insured loans. (a) Volume. (b) Area. (3) Level of backlog of commitments for financing comparable with a year ago. (a) FHA. (b) VA. (c) Conventional. C. Effect of credit regulations. (1) Changes in volume under regulations. (a) Total-FHA, VA, conventional. (b) Changes since September 1, 1950. (2) Terms at which mortgage loan funds are available. IV. Financing for defense housing. A. Need for defense and military housing. B. Financing problems. (1) Long-range marketability-location, city, town, or isolated areas. (2) Servicing of loans-location, volume concentrate. (4) Other. C. Role of FNMA. (1) Prior commitments. (2) Set-aside of funds. V. Structural organization of mortgage markets. (2) Regional concentration. (3) Lack of funds in hinterlands-direct loan areas. B. Servicing organizations, extent of. (1) Branch offices. (2) Correspondents. (3) Centralized mortgage service organizations. (4) Subsidy mortgage organizations. (5) Government organizations. VI. Recommendations. 1. No action. 2. Allow flexible interest rates. 3. Direct VA-loan program. 4. Use of NSLI funds for VA loans. 5. Prior commitments and increased authorization for FNMA. 6. Direct loans by FNMA in critical defense areas and for title VIII loans. 7. Increase in permissible fees on insured and guaranteed mortgages. 9. Revise FHA allowable foreclosure expenses waste provisions. 11. Credit controls and material controls. 12. Administrative changes in HHFA, FHA, HLBB, and VA. 13. Changes in regulations. 14. Other proposals. The CHAIRMAN. Mr. Brockbank, you represent the National Association of Home Builders. You represent the people that build the houses and without financing you cannot do your job. What is your opinion with respect to housing credit at present? Mr. BROCKBANK. Mr. Chairman, members of the committee, and fellow conferees, I first would like to compliment the members of the Banking and Currency Committee for this type of hearing. I am sure we are going to get some real results from this type of hearing, and I hope that it is very successful. Now, in a word, Mr. Chairman, I can say that our problem is a tight money market. If you give us money, we will build the houses. |