Evening star., 1932-08-06
HOME CREDIT BILL
FEATURE PRAISED
Separation Of Long and
Short Term Loans Held Ben
eficiaI to Borrowers.

In the long view. the most significant
feature of the Federal Home Loan Bank
act is the degree to which it separates
long-term and short-term credit for
home financing, according to Herbert
U. Nelson. executive secretary of the
National Association of Real Estate
Boards.
The measure, signed by President
Hoover July %, is already in process
of being put into effect.
The separation is made in naming
institutions eligible to join the new re-
serve system" Mr.. Nelson said IN
general, institutions which have been
making longterm home mortgages are
included. In general also, those whose
home mortgages have been in erect
chiefly short-term credit have not been
admitted.
"A second push toward separating
short-term and long-term credit comes
in naming the amounts for which mort
cages may be discounted. the new
banks are to be ready to loan greater
amounts on long term amortized mort
cages than on other types.
Steps to Lower Cost.
discriminating home mortgages from
short-term commercial paper Is neces-
sarv if these mortgages are to gain the
stability they should have. 1t IS at the
same time a step toward lowering tneH
costs. g.
THE segregation is here made Tor
the first time on a national scale ana
with a national non-commerclal ma
chinerv. It will have all the effective
ness that comes from being a part OF
Federal banking law. 1t Will insure an
intensely practical but disntereSteo
study of those factors concerning
home mortgage which determine us
security. The actual facts such STUDY
will uncover are of first Importance
both to the borrower and to the lender.
In the end it is those facts which must
determine the cost of mortgage money
and the terms on which it can be
obtained.
establishment of standards and reg
ulations for the new system become
now of first Importance.
APPOINTMENT of the new Federal
Home Loan Bank Board of five mem
bers. to give their full time to the
work. will therefore be awaited with
the greatest interest. Upon the initial
work of this new body depends to
considerable extent the practical re-
such time as books are opened for
stock subscription to the new banks
real estate will also follow with keen
interest the action of institutions ell
gible to membership in the new system
in applying for such membership.
Steadies Money Supply.
"As the new system comes into full
operation it should go far to do these
- Steady the supply of money avail
able for home financing.
80 Eliminate much hazard both for
the family acquiring home and for
the capitalist loaning them the money
to do it.
"3. Set up and enforce certain re-
QuirementS for any mortgage upon
which the new banks will be willing to
make a loan. In SO doing establish
national standard for home mortgages
which should protect both the lender
and the borrower.
a. Make all such standard mort
cages readily eligible to discount, just
as good commercial short-term notes
are ordinarily discounted in our pres
ent commercial banks. IN other words,
make home mortgages of type ap-
proved by the new Federal system much
more liquid than any such qaGt8s&es
now are.
"5. Throw powerful iH0aeDAo
toward the more extensive use of long
term mortgage loans OF the -amortized
or 'installnent' type.
"6. Eventually give the home buyer
and home builder better terms and
lower costs for his mortgage money.
~ Give a much better geographical
distribution of money supply for the
home builder or huVer Send CaDital
in greater safety, from the money CEN
ters to any State. however remote, in
which there is sound use for it.
"8. Draw new capital into service for
home financing as the need develops"