(The prepared statement of Mr. Buchanan follows:)

TESTIMONY OF W. EVANS BUCHANAN, PRESIDENT, NationAL ASSOCIATION OF HOME BUILDERS

Mr. Chairman and members of the committee, my name is W. Evans Buchanan and I am an active homebuilder in the metropolitan area of Washington, D.C., and in the State of Maryland.

I appear here today as president of the National Association of Home Builders to present to you our views on the bills S. 810, S. 811, and S. 2130 upon which this hearing is being held.

As you may know, the National Association of Home Builders is composed of some 40,000 members affiliated in 375 local and State associations in all of the 50 States, Puerto Rico, and the Virgin Islands.

The association headquarters and our staff of 145 are located here in Washington in our national housing center at 1625 L Street, NW. The housing center serves as a meeting place for all segments of the housing industry and as a showcase to exhibit the latest developments in building methods, equipment, and materials.

This association is the sole spokesman for the organized homebuilding industry. We estimate that our members build about 80 percent of all single-family homes constructed by professional builders, which is about 70 percent of the total volume of new one-family housing. In addition, our members build onethird or more of the new multifamily housing, which currently occupies about 35 percent of all new construction. Thus we estimate, conservatively, that NAHB builders account for at least 62 percent of the total nonfarm housing starts in the United States.

CONVENTIONAL FINANCING OF MAJOR SIGNIFICANCE

In recent years, increasingly, our industry has learned to use and rely upon conventional mortgage financing. These are mortgage loans which do not depend upon insurance by the Federal Housing Administration or a guarantee by the Veterans' Administration.

Today such conventional lending is an overwhelming force in the mortgage market. Let me illustrate this:

As of March 1963, FHA-VA financing accounted for roughly $52.8 billion of the estimated mortgage debt outstanding on nonfarm, 1- to 4-family homes. Conventional financing accounted for $108.9 billion of such debt-63 percent. At the end of 1962, records of nonfarm mortgages of $20,000, or less, showed that 77 percent were conventional. FHA accounted for only 15 percent and VA for just 8 percent.

In the first 5 months of 1963, similar mortgage recordings also show that 77 percent were conventional. Again, FHA accounted for only 15 percent and VA for 8 percent.

It is interesting to note that the same pattern is reflected in the total volume of mortgage lending in 1962. For example, of the $34.2 billion of home mortgage lending in 1962, 77 percent was on a conventional basis. Looking closer at the sources of mortgage funds, it is equally of interest to observe the following:

About 94 percent of all mortgage lending by savings and loans was on a conventional basis.

Approximately 75 percent of mortgage lending done by insurance companies was conventional.

Roughly 67 percent of the mortgage lending from mutual savings banks was conventional.

About 79 percent of mortgage lending by commercial banks was on a conventional basis.

And about 97 percent of all mortgage lending done by individuals, pension funds, and other miscellaneous sources was on a conventional lending basis. Most FHA-VA loans originated with or through mortgage banking or brokerage companies, where only 27 percent of mortgage lending was conventional and about 73 percent was insured or guaranteed by FHA or VA.

A BETTER CONVENTIONAL MORTGAGE MARKET WILL AID HOUSING

Historically this association has always favored proposals for new legislation which will advance, in a sound manner, new ideas for improvements of the mort

gage markets. Therefore, when the proposals which are now before this committee, in the bill, S. 810, were first presented in preliminary form to our association, we gave them every consideration and the tentative support of our industry. There are some very good reasons why we are interested in an improved mortgage market, including better conventional lending. Clearly a stronger conventional loan market would assist some of the specialized types of housing, such as vacation or second homes, homes in smaller towns and semi-rural areas, etc. We believe that an improved conventional mortgage system would result in more mortgage funds being made available in areas where, even today, investment funds are used for other purposes and are not available for long-term mortgages. We are also interested in reducing the costs of mortgage financing through a more efficient operation of the mortgage market, which improvements in the conventional segment would definitely assist.

Finally, we think efforts, such as embodied in S. 810, to make it possible for small lending institutions to enter the mortgage market in a more substantial way will be of real help to communities with limited supplies of mortgage capital. At present and in past years, even with an excellent supply of mortgage funds, many smaller lending institutions are simply afraid to enter the mortgage market in any major way because they believe they cannot afford to tie up their capital funds in a long-term, nonliquid investment.

I am happy to say that I had the privilege of serving on the National Mortgage Market Committee of the American Bankers Association which then developed the basic ideas now in this proposal. Also, as individuals, our former NAHB presidents, Thomas P. Coogan and Richard G. Hughes, served on this committee together with Nathaniel H. Rogg, our director of economics, and Joseph B. McGrath, our director of governmental affairs.

In Chicago at our annual convention last December, our board of directors, composed of some 500 builders, approved unanimously a resolution of general support for the objectives and purpose of the proposals advanced by the American Bankers Association. A copy of this resolution is attached to my statement. (See attachment A.)

There is little doubt in our minds that a substantial improvement in the flow of conventional mortgage funds and in the marketing of conventional mortgages would be of real assistance to the construction of new housing. This is especially true in those areas of the country, particularly those in the South, Southwest, and Far West, where, periodically, mortgage funds are in short supply.

As you might expect, we have no established policy on the related proposal contained in S. 2130, introduced for the first time last week. As I understand it, this would enable the Federal National Mortgage Association to expand its operations. The bill would authorize FNMA to include certain classes of conventional mortgages which are insured privately or otherwise meet market standards set by FNMA.

Without committing NAHB on the details of S. 2130, I can say that our association has never been opposed to the concept of expanding the FNMA to include conventional mortgages. On the other hand we need more time to consider carefully what limitations and safeguards are necessary for such a proposal, as well as the results in the general mortgage market which might spring from its adoption by Congress.

We think S. 2130 is certainly a worthwhile proposal to be considered at this time in addition to, or independently of, S. 810. It seems to be a supplementary proposal which might beneficially improve the usefulness of FNMA.

In much the same manner, we would like to reserve judgment with respect to the proposal before you in the bill, S. 811. As we understand it, this would expand the usefulness of the Federal home loan banks and their member institutions. It would do this by establishing, in effect, a secondary marketing facility for participations in conventional home mortgage loans. Our association has adopted no specific policy with respect to this bill and we will examine the testimony now being presented on it with interest.

We find ourselves in much the same position as those of you on the Senate committee; we are anxious to learn more about and examine carefully all of the operating details of these proposals as they are presented to you in testimony given at these hearings. It is our intention to study all of the statements presented before this committee and to be prepared to give our detailed views next year, when we understand further hearings on mortgage finance and housing legislation will very likely take place.

We are deeply committed to explore all avenues of improvement for conventional as well as FHA-VA mortgage financing. I was particularly instructed. by our board's resolution (attachment A) to establish a special subcommittee within our association to study the details of the proposals which now appear in S. 810.

To assist the officers and executive committee of our association, and to carry out the resolution of our board of directors, I appointed a special task force on private mortgage insurance headed by a good friend of your committee and a former president of our association, Mr. Thomas P. Coogan.

With your permission I should like to turn the rest of this testimony over to Mr. Coogan. He will supplement my statement with a report to your committee from his notes on the activities and meetings of his task force. As you know, he is one of our association's distinguished past presidents, he has served as an adviser on housing matters to a number of governmental agencies, and he has testified before this committee on many prior occasions.

Mr. Coogan has been a homebuilder of high standing in the State of Florida and is currently active in mortgage financing as president of Housing Securities, Inc., of New York City. Following Mr. Coogan's statement we will be happy to answer any questions which may arise. I appreciate this opportunity to give our views to the committee and I am very pleased indeed to present to you Mr. Thomas P. Coogan.

[Attachment A]

RESOLUTION ADOPTED BY THE BOARD OF DIRECTORS OF THE NATIONAL ASSOCIATION OF HOME BUILDERS AT ITS ANNUAL CONVENTION, CHICAGO, ILL., DECEMBER 1962 Whereas we are in favor, generally, of all sound proposals to improve and enlarge the existing systems of conventional mortgage finance; and

Whereas there is now pending a proposal advanced by the American Bankers Association, which would set up a private insurance system, federally chartered, for conventionally financed mortgages and also one which would set up a secondary mortgage market for such conventionally financed mortgages: Now, therefore, be it

Resolved, That we favor generally the purpose of the proposal advanced by the ABA, and that we believe a subcommittee within this organization should be appointed to study the details of the proposals as presented to the new Congress so that a complete report on its details can be presented to this committee and to the board.

Senator SPARKMAN. This concludes the hearing for this morning. The committee will stand in recess until 10 o'clock tomorrow morning.

(Whereupon, at 12:25 o'clock p.m., the subcommittee adjourned, to resume at 10 a.m., Wednesday, September 18, 1963.)

SECONDARY MARKET FACILITIES FOR CONVENTIONAL

MORTGAGES

WEDNESDAY, SEPTEMBER 18, 1963

U.S. SENATE,

SUBCOMMITTEE ON HOUSING OF THE

COMMITTEE ON BANKING AND CURRENCY,

Washington, D.C.

The subcommittee met, pursuant to adjournment, at 10 a.m., Hon. John J. Sparkman (chairman of the subcommittee) presiding. Present: Senators Sparkman and Douglas.

Senator SPARKMAN. Let the committee come to order, please.

We expect some other Senators to come. Due to the pressure of time, I think we had better get started. We are working under some difficulty having a committee meeting at this time with the Senate already in session. We have permission of the Senate to hold these hearings.

Our first witness this morning will be Mr. Richard C. Farrer, chairman of the Washington Realtors' Committee.

We are glad to see you, and to have you with us. We have a copy of your statement. You may present it in any way you see fit.

STATEMENT OF RICHARD C. FARRER, VICE CHAIRMAN, REALTORS' WASHINGTON COMMITTEE, NATIONAL ASSOCIATION OF REAL ESTATE BOARDS

Mr. FARRER. Mr. Chairman, I appreciate this opportunity to present the views of the National Association of Real Estate Boards with respect to S. 810, a bill to authorize the Federal chartering of (1) privately owned and financed mortgage insuring companies and (2) privately owned and financed secondary market corporations. Representatives of our association served on the industrywide National Mortgage Market Committee which developed the essential elements of the proposal incorporated in S. 810. However, while our association endorses the bill in principle, we do have some reservations with respect to certain provisions. We will bring these out in the course of our testimony and recommend modifications or specific amendments.

S. 810 has as its primary objective the shaping of the conventional residential mortgage market to meet the demands which will be made on this market in future years.

We shall not attempt to expand on the persuasive arguments already advanced by the American Bankers Association for new tools needed to organize more effectively the conventional mortgage market.

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