Date: 1984-04-11
Speaker: ROBERT F. SMITH (republican)
Chamber: H

I thank the gentleman for yielding this time to me. Mr. Chairman. I rise in opposition to H.R. 4170. I am particularly concerned about the effect that the proposed restriction on qualified veterans mortgage bonds will have on Oregons veterans farm and home loan program. Under the bill. the tax exemption for interest on qualified veterans mortgage bonds is limited to bonds issued prior to January 1. 1989. this is. it will sunset on that date. Additionally. each States ceiling for qualified mortgage bonds is to be reduced by the aggregate amount of qualified veterans mortgage bonds issued in the State during the preceding calendar year. This provision will cripple Oregons veterans farm and hom loan program. While I am aware of the committees concern about the expansion of mortgage subsidy bond programs and the alleged loss of revenue to the Treasury. I believe that it is premature to limit a States ability to issue these bonds now. Oregons veteran farm home loan program was authorized by an amendment to the Oregon Constitution in 1944 and has been in effect for almost 40 years. It utilizes general obligation bonds and serves a significant public purpose. Although Oregon has one of the most active veterans home loan programs In the Nation. it is not without limits. In 1981. the Oregon State Legislature placed a limit on the dollar volume of bonds that could be issued each year and required a bonding limit to be set In the biannual budget. Oregon has recognized that these limits are necessary to insure the States longterm credit rating and the States bond rating. which is itself a limitation. In addition. Oregon has limited the scope of its program. It serves a narrow targeted clientele and provides only one loan per veteran. although with some exceptions. There Is no evidence that veterans programs and the issuance of veterans bonds are proliferating to the point where a cap is necessary. Few States have veterans programs and despite the exemption placed in the 1980 Mortgage Subsidy Bond Act. they have not spread like wildfire. In Oregon. veterans mortgage loans make up a small percentage of total mortgages. Last year. only 8.6 percent of Oregons mortgages were veterans mortgages. This amounted to less than 3 percent of the States total mortgage dollars. For the first half of 1983. only 8.5 percent of Oregons mortgages were made through the veterans program. representing less than 3 percent of the total dollar amount of loans. I would also like to point out that although Oregons veterans farm home loan program constitutes a small percentage of the States total mortgage activity. it makes an Important contribution to home ownership and State economy. It is extremely important to veterans who would otherwise be unable to afford a home and add to our States timberbased economy. In tough years when high interest rates dry up traditional sources of mortgage financing. the veterans program is the only game in town. It helps keep many home builders and mills in business until the market recovers. For example. last year 60 percent of the houses constructed in Oregon were constructed through Oregons veterans farm and home loan program. This program has made a major impact on Oregons timberbased economy at a time when our economy is slow to recover. I strongly believe that it would be a serious mistake to overstate the impact of veterans bonds on the Treasury and underestimate the benefits they provide by Implementing restrictions which would effectively put an end to the veterans home loan program in Oregon. For example. In 1982 the Oregon Department of Veterans Affairs sold $300 million worth of mortgage bonds. If these bonds were not. tax exempt. then they would have generated approximately $36 million in interest income to the bond holders. assuming a bond interest rate of 12 percent. Asstiming an average tax rate of 25 percent. the Federal Treasury would have collected $9 million in revenue. On the other hand. Federal studies show that the multiplier effect for money pumped into the economy is a factor of two. Thus the $300 million of veterans mortgage bonds sold in 1982 generated $600 million in gross economic activity. As you can see. the positive impact on the economy is substantially greater than the loss of revenue. Oregon is not alone in its veterans farm and home loan program. Texas and Alaska began similar programs in 1983. Wisconsin has such a program and Californias program loaned $652 million to its veterans in 1980. All of these programs will be adversely affected by passage of H.R. 4170. I urge you to join me in rejecting this legislation and its callous disregard for the men and women who have given their full measure of devotion to preserve Americps peace and strengt}.