finance from repeated problems of disintermediation.

As we mentioned in our testimony before this Subcommittee a few months ago, the Association had recently appointed a special Ad Hoc Task Force on Mortgage Credit to review the problems of mortgage finance and to devise and recommend methods and remedies primarily by developing alternative non-traditional sources of mortgage finance. The Association's Task Force analyzed a wide variety of alternative proposals to strengthen both the asset and liability structure of financial institutions.

Their proposals have been finalized and include such alternatives to the current structure of mortgage finance as development of a market for conventional mortgage-backed securities, creation of a secondary market for vendors' liens, foreign investment for real estate and modifications for the marketing of taxexempt housing bonds.

For your information we are pleased to include a copy of the report of our Ad Hoc Task Force on Mortgage Credit.

We are pleased to learn that the Federal National Mortgage Association has independent of our suggestions, developed a program for conventional mortgage backed securities. We are hopeful that they will quickly obtain the necessary governmental clearances for prompt implementation. Such a program could do a

great deal to expand the sources of the supply of mortgage finance.

CONCLUSION

This Association, like members of this Committee, is no stranger to the problems of financial reform. Specialized thrift institutions emphasizing mortgage lending have been a means of financial housing for millions of Americans. While we recognize and support the necessity of strengthening

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ese institutions to weather periods of economic fluctuation, we hope to nserve the traditional identity of mortgage lenders.

We feel that requiring all financial institutions to compete equally for vings deposits by paying market rates will inevitably lead to higher mortgage terest rates. The mortgage investment must then be made competitive with her types of investment.

The resultant effect, perhaps higher mortgage interest rates amortized over much longer period, represents a qualitative departure from the way housing s been financed in our economy over the past half century, a departure which is Association feels should not be embarked upon lightly or without full

d extensive public discussion and debate.

We look forward to continuing to work with you and your staff to devise lutions which will both strengthen those institutions and assure an adequate pply of mortgage funds.

We appreciate this opportunity to share our views with you.

Preface

The Ad Hoc Task Force on Mortgage Credit was created to review and analyze proposals to enhance the availability of mortgage funds, particularly in times of credit stringency.

The Task Force met on March 5-7, 1979, on April 19-20, 1979 and on May 3, 1979 for extensive analysis and discussion of alternative proposals. A summary of the preliminary recommendations of the Task Force was also discussed, analyzed, and approved by the Subcommittee on Mortgage Finance of the REALTORS Legislative Committee (RLC) and the full RLC in March. These final recommendations were also reviewed again by the Mortgage Finance Subcommittee in May.

The Task Force wishes to acknowledge the contributions to its work made by John Kokus, Associate Professor of Real Estate, American University; John Wetmore, Consulting Economist, Kaplan, Smith Associates; Richard Marcis, Federal Home Loan Bank Board; Peter Treadway, Federal National Mortgage Association; Warren Lasko, Government National Mortgage Association; Martin Ernst, Arthur D. Little, Inc.; and Daniel Kearney, Solomon Bros.; as well as the assistance provided by the staff of the National Association of REALTORS, Ken Kerin and Paul Maihan of the Economics and Research Division, and Albert E. Abrahams, Senior Vice President, Government Affairs Division, and his staff. The Task Force, of course, accepts sole responsibility for the conclusions and recommendations in this report.

While the Task Force recognized at the outset that no single solution would be a panacea for solving all mortgage finance problems, it hopes that its recommendations will serve as a spring board for not only further exploration and discussion, but for serious consideration and implementation as well.

Proposals Needing Further Study

The Task Force also realized that several proposals which were suggested were worthy of further analysis and discussion than the time available permitted. Among these are:

Use of private mortgage insurance of municipal bonds to finance housing (private mortgage insurance companies; local governments)

Use of local government guarantee of municipal bonds to finance housing (local government)

Mortgage interest tax credit (Congress)

Government guarantee of conventional mortgage backed securities (Congress; GNMA)

Exemption of FHA-VA loan rates from State usury Laws (Congress; State government)

Exemption from State usury laws of all mortgage loans eligible for resale to FMMA or FHLMC (Congress; State government)

We recognize that some of the recommendations could be considered inflationary; however, those points are specifically mentioned in the short-term emergency section. It was an inescapable conclusion that inflation was a major impact in each item discussed. The economy as a whole had direct bearing on discussions as well as affordability and availability of housing. Unemployment and economic downturn were also among the underlying factors while discussing each recommendation.