The nation's housing industry, already withering under sustained high interest rates on mortgages, is bracing for another potential crisis -- where to find millions of dollars in mortgage money.
While the nation's homebuilders ask "where will our children live," the executive vice president of the Mortgage Bankers Association, a trade group representing a wide range of financial institutions, said his members are asking "where will the mortgage money come from" to lend to prospective home buyers in the 1980s.
The bankers' official, Mark J. Riedy, told the National Housing Conference this week that the new tax-exempt All Savers certificates will not generate new mortgage money as promised but instead will bail out financially strapped savings and loan associations and banks. The certificiates, which Congress authorized with only a 15-month life, are "an attractive short-run expedient to prevent large numbers of S&Ls and savings bank failures," he said.
New laws allowing more workers to create Individual Retirement Accounts will add little to mortgage funds, Riedy told the group of 65 mortgage bankers, homebuilders, government housing officials and lawyers at a luncheon here.
Instead the housing finance industry is eagerly courting the managers of private pension funds who decide how to spend $286 billion in retirement funds. There is another $203 billion in government pension funds, according to the Federal Reserve Board.
"One ray of hope for fresh infusions of mortgage investment lies in pension funds," Riedy said. But while state and local retirement funds have begun buying significant amounts of mortgages from financial institutions, private pension funds "have been more reticent about mortgage investments and need changes in the Employees Retirement Investments Security Act and more education before they will consider residential mortgages seriously."
To tap some of these funds, several housing-related trade associations, such as the National Association of Home Builders, the American Bankers Association, the National Association of Realtors and the U.S. League of Savings Associations, recently formed a task force "to reinforce the drive toward educating penison funds about the value of real estate investments" and to lobby for changes in the retirement investment act to permit such funds to buy mortgages, Riedy said.
A big, new player is needed in the secondary mortgage market because with volatile interest rates, lenders are selling off more and more of their mortgages. Since interest rates on mortgages are usually set for five or more years, they aren't good investments in times of uncertain interest rates.