The Federal Home Loan Bank Board and the National Credit Union Administration are instituting regulations aimed at increasing the amount of mortgage funds available for low- and moderate-income homebuyers.
Starting in a month, the bank board will allow federal savings and loan associations to service loans made by public housing corporations and private non-profit organizations. Under present law S&Ls are allowed, with few exceptions, to service only those loans they own outright or in part.
The organizations for which S&Ls may service loans must have as their sole objective direct or indirect providing of housing services, including financing, particularly for families of low or moderate income.
The action followed a decision by the bank board to allow S&Ls in Pittsburgh to participate in that city's home improvement program. Ten S&Ls and three banks there have agreed to originate and service $14 million in FHA Title I loans, which will then be repurchased by Pittsburgh's Urban Redevelopment Authority.
The financial institutions will provide 3 percent home improvements loans to homeowners will annual incomes of no more than $13,750. The loans will be subsidized by community development funds. Those in the $13,750 to $25,000 income bracket will be eligible for non-subsidized loans at 8 percent. The money will be raised by issuing revenue bonds.
The credit union administration is allowing federal credit unions to sell mortgages on the secondary market. It authorizes sales to the Federal National Mortgage Association, the Government National Mortgage Association, the Federal Home Loan Mortgage Corp. as well as federal, state and local housing agencies.
The purpose of the action is to allow credit unions expanded lending capabilities. In this way, NCUA reasoned, persons of low and moderate means, who in the past have not been able to obtain mortgages, will find a source of available funds from their credit union.
Credit unions, like savings and loans, have had to curtail lending during the current mortgage crunch because demand has been so heavy. NCUA administrator Lawrence Connell noted recently that loans outstanding had expanded by an estimated $5.3 billion by the end of June, compared with a $3.9 billion increase in savings. Borrowing increased to meet excess loan demand of $1.4 billion.
To assist federal credit unions in obtaining funds, legislation has been introduced to establish a central liquidity facility, or a central bank for credit unions. The bill would provide the facility with a total financing capability of $2 billion to $3 billion, although NCUA estimates that actual lending over the next five years would not exceed $300 million a year.
Federal credit unions have increased their size dramatically during this decade; their assets now total $54 billion.