The gap between supply and demand of mortgage funds will continue to grow throughout the decade, and strong steps must be taken now to attract new pools of capital if the next generation of young families is to be housed properly, the president of the Mortgage Guaranty Insurance Corp. said this week.
In testimony before the House Banking subcommittee on Housing and Community Development, MGIC President Leon Kendall also predicted that the number of home loans relying on funds from the secondary market will increase rapidly from about one-half now to two-thirds in 1990. MGIC is the country's largest private mortgage insurer.
The home mortgage portfolios of some savings and loan associations will be at about half today's level, and the number of thrifts are likely to decline by as much as 30 percent, Kendall said. "However, nothing indicates that the large will devour the small. The specialized, deposit-gathering, mortgage-lending institution can exist in smaller communities," he added.
Private sources will account for most of the growth in future mortgage funds, Kendall predicted. These will include a surge in investment by life insurance companies, private pension funds, retirement funds, and foreign investors, he said.
"Looking ahead, there seems little doubt that housing will grow and home mortgage debt will be created in great volume in the 1980s. Private markets and private institutions are going to absorb that debt over the next 10 years," he told the subcommittee.
Rep. Henry Gonzalez (D-Tex.), chairman of the subcommittee, saw a very different future for the housing market because of cutbacks in federal credit programs.
"Looking ahead, we can see that the administration is proposing not only to make vast reductions in housing subsidy programs, but planning to make huge cuts in federal credit allocations to FNMA the Federal National Mortgage Association and GNMA the Government National Mortgage Association --the principal source of secondary markets for mortgage instruments.
"This can only mean that there will be less housing of any kind, any price, built and sold in the years ahead, if the administration follows through on its announced plans to divert credit away from housing."
The hearings, which continue Wednesday and Thursday, are intended to gage the long-range prospects for housing and look for solutions to fundamental problems.
Gonzalez credited the FHA and VA loan guarantee programs with enabling most Americans to buy a home by making the 30-year fixed-rate mortgage possible. In 1930, before those programs were started, a five-year mortgage prevailed and put homeownership out of the reach of most, he said.
Kendall, however, credited private mortgage insurance with enabling lenders and builders to provide the alternative mortgage instruments of the 1980s, such as graduated-payment financing and "buy-downs" by which a builder or developer would pay a lender for a lower initial interest rate.
Kendall cited figures showing that private mortgage insurance companies are increasing their share of insured mortgages in 1981. While the private insurers claimed 12 percent in 1970, with FHA and VA providing the rest, the private share rose to 51 1/2 percent in 1978 then dropped back to 39.6 percent in 1980. This year, however, that percent grew to 58 percent in August, Kendall's figures showed.