Washington-area savings and loan associations do not appear to be pouring their gains for All Savers certificates into many new mortgage and construction loans yet, and mortgage interest rates have not been affected by the new instrument, a Washington Post survey indicates.
Many S&L executives said they are using the new money for existing commitments, rather than new loans, and others point out that they have until March to fulfill a legal requirement that 75 percent of their net new funds go into housing. It is far too early to tell just where the All Savers money is going, some said.
At the same time, the S&Ls generally said they plan to use the funds for loans to local home buyers and builders rather than putting the new money into securities offered by secondary mortgage markets. Some in the housing industries fear that the securities may attract the bulk of the All Savers funds--to the detriment of local housing markets.
Congress authorized the All Savers certificate with a dual purpose in mind: to come to the rescue of the money-starved S&Ls and to help housing by making more mortgage money available at lower interest rates.
The amount of All Savers sold thus far by the 17 area institutions contacted range from about $3 million by Community Savings and Loan Inc. in Maryland to $25.8 million by Arlington-Fairfax Savings and Loan Association. Perpetual American Federal Savings and Loan Association, the largest in the District, reported that it sold about $25 million of the certificates, of which about a fourth is "new" money not tranferred from other types of accounts.
The local institutions surveyed--about a third of the S&Ls here reported a wide range of new net money figures, but they generally were between 25 percent to 50 percent.
The law that established the tax-exempt All Savers certificates specifies that 75 percent of all net new money gained from the instrument must be put into housing-related activities or agricultural loans. But purchases of securities of secondary markets, such as the Federal National Mortgage Association or Federal Home Loan Mortgage Corp., can be used to fulfill the requirement.
Some homebuilders and real estate agents have voiced fears that investments in the securities could be a loophole in the law that would nullify the All Savers' intended boost to the housing market.
"We want All Savers to generate money for use right here," said Wayne Lancaster, president of the Northern Virginia Board of Realtors. Putting the funds into Fannie Mae securities "would take away from the neighborhoods where the money is needed most. . . . We are concerned and in some cases apprehensive," Lancaster said.
But most of the S&Ls responding to The Washington Post survey reported that, at least for now, they plan to put the money into new mortgages.
"We want to be in the housing market. We want to help people finance loans," said Robert Barton, president of Interstate Federal Savings and Loan Association, saying that none of his S&L's money would go into secondary market securities.
"You can't get many mortgages with such a small amount of net gain" as many institutions are experiencing, he added. "I'm not sure how much it's going to help housing."
Barton also said that the S&L already has more than enough existing commitments for loans to fulfill the requirement. Thus far his institution has taken in a total of $14 million in All Savers money, but the true net gain has been only about $2 million because most of the funds have been transferred from other accounts, he said.
Others pointed out that the All Savers certificates have only been approved for 15 months, through 1982. They said it would be foolish to commit funds they have for one year to long-term mortgages.
"There is no way in the world we can put these funds into 30-year loans when All Savers is only for one year," said Lucian Vandoren, president of Jefferson Federal Savings & Loan Association in the District, which has sold a total of $4 million of the certificates. Most of this probably will be put into Fannie Mae or Freddie Mac securities, he said.
"People don't put out money for 30 years based on one-year notes," concurred William Walde, president of Dominion Federal Savings & Loan in Virginia.
Other S&L and homebuilder sources speculate, however, that the temporary nature of the All Savers may prompt many institutions to put most of their funds into home loans rather than securities. The S&Ls want to show a good-faith effort to help housing so Congress will make the certificates permanent, these analysts say.
"The secondary market is a cop-out," declared Milton Drewer Jr., president of First American Bank of Virginia. "We have an obligation under law to make loans." None of First American's gains will go into secondary market paper or old commitments, he said.
The National Association of Realtors and the National Association of Home Builders, meanwhile, have announced they plan to watch the S&Ls and banks carefully to make sure they do put the required amounts into housing.
The two groups are counting on their local members to report on area S&Ls, and the Realtors are going to announce their finding at their annual convention in November.
The groups also have written to the members of the Depository Institutions Deregulation Committee asking them to require the S&Ls and banks to specify just how they are fulfilling the housing investment mandate. Under the All Savers law, each institution simply must certify that it has satisfied the requirement in some way.
The Federal Home Loan Bank Board reported this week that between $13 billion and $14 billion of the All Savers certificates nationwide were sold in the first 20 days of October. Of this it was expected that about 30 percent would be "new" money, while the rest would come from passbook accounts or money market certificates or other accounts.
Fannie Mae reported that it sold $300 million through Oct. 26 in special new securities tailored to the All Savers funds. Freddie Mac attributes $8.5 million of its discount note sales this month to All Savers money.
Many caution that it is too early to tell how the All Savers funds will be used and that interest rates are not likely to be affected before the end of the quarter.
But there are a few favorable signs appearing in spots for the housing industry.
Some S&Ls note that it is in their best interest to help the builders who already have construction loans with them to avoid defaults and foreclosures. One Alexandria builder reports, for example, that his bank is offering his customers loans with a base rate of 13 3/4 percent fixed-rate, long-term loans.
"If we don't help the builders out, we're going to end up owning a lot of property," said Edward McAleer, vice president of the Wheaton-based Equitable Savings & Loan Association.
Maryland builders are starting to report that their banks and S&Ls are starting to make more money available at "reasonable" rates, reports Suburban Maryland Home Builders spokeswoman Susan Matlick.
At the same time, some doubt that the long-term effects of the All Savers funds on housing will be substantial.
H.H. McFarlin, president of suburban Maryland's John Hanson Savings & Loan Association, reports that all of the gains from his institution's $8 million in All Savers sales will go to new mortgages. At the same time, he adds:
"When you're a $300 million outfit, bringing in $8 million is not making a dent in anything."