Evening star., 1934-06-20

lacking, the administrator is author
lied to advance credit to financial IN
stitutions upon the security OF obiiga-
tions that these institutions have OBJ
tanned in return for loans to nome
owners. AS the President may allot
| for this purpose any emergency funds
that have been or are to be appropri-
ated. several billions OF dollars will be
held as potential power house to
supplement private endeavor.
have been speaking Of assistance
| for the renovation and repair of
homes. But in relatively short time
the rundown conditions of today will
be removed, and there should be
swelling demand for the financing OF
new construction. Since most people
do not buy a home outright for cash.
but finance it over a period Of years
by mortgage, the cost OF mortgage
money Is a matter of prime impor-
tance in any attempt to revive the
construction of new homes. 1t Is no
exaggeration to say that the cost of
this financing has In the past been so
high as to be unsupportable in any
thing but the unsound psychology of
a boom era. The thousands of fore
closures and the debt-burdened grief
in which countless home owners now
find themselves Is mute testimony of
this fact. Homes ownership, under
past mortgage practice, has been too
expensive.
This law will rescue millions of
American home owners from a mort
gage system that has been throttling
their economic existence, and that
has had a correspondingly pernicious
effect upon all those engaged in the
mortgage business. According to pre-
vailing practices today. most first
mortgages upon homes are short-term
obligations, covering only from 40 to
so per cent of the value of the prop
erty. They are payable in full at
maturity rather than at we'll diStrib-
uted amortization periods AS a re-
suit, many home owners during hard
times have been unable to meet their
principal payments, thus bringing the
likelihood of foreclosures that are
good for no one. Another result has
been the need for second mortgages,
with their opportunities for exhorbi-
tantly high interest rates which i'm
peril the financial status of the home
owner and thus weaken the security
Of first mortgage investments.
Lightens Terms.
What both the home owner and the
lender need is a reorganization in
mortgage practices which will pro-
vide for one obligation at a reason
able rate and with reasonable periods
for retirement payments. BY provid-
ing system of mutual mortgage in
Surance, under which mortgage in
vestmentS in small homes will be pro-
tected. lenders on such mortgages will
be induced to give terms more lenient
to the borrower and home owner than
was ever possible in the past. For
the borrowers protection, the admin
istrator will not insure mortgages un-
less the mortgage loan is upon terms
OF which he approves. He will not in
sure any mortgage until he is satisfied
with the conditions written into it re-
garding amortization, repairs, taxes,
insurance and the like: and the law
specifically provides that no such
motgage shall bear interest of more
than 5 per cent which may be raised
to per cent at the discretion of the
administrator.
Here indeed is a charter for the
home owner against unrestrained
avarice. And in freeing the borrower
from impossible burdens. We shall also
free the lender from retribution for
his own folly.
cannot overlook the salutary effect
of this law in diminishing foreclosures,
with their demoralizing effect not only
upon families, but also upon the entire
realty world. This was the objective
of the home owners loan act, but that
act although its authorized bond issue