Reagan's housing panel raises storm of protest

By , Special to The Christian Science Monitor

Last June President Reagan created a special advisory group, the President's Commission on Housing, to study and recommend steps that would ease the plight of home buyers and sellers and aid the troubled housing industry.

Its preliminary report now has sparked a storm of controversy and protests within the industry it was set up to help.

The 30-member commission (increased from 25 members in late January), advocates steps that are heavily weighted toward helping the lending institutions, not home-buying consumers or the housing industry, in the view of many real-estate leaders. At this writing, this wave of protest is accelerating.

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''The commission's preliminary report clearly represents the interests of thrift institutions,'' charges Jack Carlson, executive vice-president of the National Association of Realtors. ''After experiencing the worst depression in housing since the 1930's, with a 52 percent dropoff in sales from peak to trough , we need and should have at least equal time and treatment from the commission, '' he says.

William F. McKenna, chairman of the commission, strongly defends his group's preliminary report and recommendations.

''Our suggested reforms would strengthen the vitality of thrift institutions and channel more funds into the mortgage-finance market,'' he asserts.

Further, he adds: ''This is strictly a preliminary report we have issued. We are still receiving and considering input from many sources and will not complete a final report until late April. That report, which will be nearly 600 pages of information and recommendations, will probably satisfy the real-estate people.''

The preliminary recommendations issued by the commission included major reforms in the operating powers of savings and loan (S&L) associations and other lenders.

Those powers would include, for example, allowing the S&Ls to place all their assets in loans outside of housing, if they so desired. Further, the S&Ls would be given authority to engage in more banklike services, such as investing in secured and unsecured consumer loans as well as commercial loans and corpaorate debt instruments.

The commission also recommends a federal override of state laws that prohibit or limit due-on-sale clauses in home mortgages. If this recommendation is followed, most existing home-mortgage loans could not be assumed by a new buyer.

That would translate into more revenue and profits for lending institutions, but would be a serious blow to home buyers and sellers alike. Nearly half of all sale transactions involving existing homes now incude the assumption of an existing mortgage loan.

In some states, the frequency of loan assumptions is substantially higher. In California, for instance, it's involved in nearly 60 percent of all sales. The commission suggests that the federal government impose certain monetary penalties on states where due-on-sale clauses in home loans are prohibited.

A recent study showed that doing away with the opportunity to assume an existing loan would prevent about 500,000 households from buying a home in 1982 - households that could otherwise purchase and finance a home.

''The essential thrust of the President's Commission on Housing report of financing housing for the future was to effectively remove thrift institutions (such as S&Ls) from their traditional role in home financing,'' says Julio Laguarta, president of the National Association of Realtors. ''That could devastate an already battered housing industry for the longer run.

''The leadership and membership of the commission seems to represent the thrift industry rather than housing.

''While the commission says it was moving to ensure a sound home-financing delivery system in the future, in reality it endorses current pending legislation that would allow savings and loans, which were established to support housing, to abandon housing completely if they wish to do so.''

Commission chairman McKenna has had close ties to the thrift and banking industries over a period of many years. He now is about to retire after a long and distinguished career as an attorney whose firm has specialized in the savings and loan area among others. He graduated from Yale in 1939, and his firm , McKenna & Fitting, has about 140 attorneys.

In 1954 Mr. McKenna was appointed by President Eisenhower to serve as second in command of the Housing Home Finance Agency. He also served as litigation counsel for the Federal Home Loan Bank Board and Federal Savings and Loan Insurance Corporation.

This past January Mr.McKenna was appointed to a four-year term as a member and chairman of the board of directors of the Federal Home Loan Bank of San Francisco, one of 12 regional banks. He has represented federal savings and loan associations in their fight against the imposition of restrictions on their right to exercise due-on-sale clauses in mortgage notes.

''I can understand the apprehension being expressed by brokers concerning our commission recommendations,'' Mr. McKenna says.

''Much of the brokerage activity they now have involve a mortgage assumption. But I think they will be satisfied with our final report to the President.''

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