Evening star., 1934-06-02
PRIVATE CREDITS
FAVOR RENOV|z|NC.
Home Owners Watch De.
veIopments With Idea of
Entering Contest.
Continued From First Page.)

with sound banking that the banks
of the country cooperate with the
public in making these loans when
applied for and qualifying"
The publicity that would be given
the administration program probably
would be its principal asset If the
home owner can be induced to go to
the lending agency; if the barrier that
appears to have existed between bor-
rover and lender for so long, can be
overcome, the biggest part of the
problem, it is felt, will have been
solved.
The Federal set-up, as explained
to the District Bankers Association
this week by Mr. Fleming would fol-
low along these lines:
An Improvement Committee would
be organized in each community
sponsorship of the Federal Govern
ment, for the purpose of indutingth
greatest amount of deferred mainte-
nance work by property owners where
such work is justified.
100000, 900 Corporation
"a corporation, known as the Home
Credit Insurance Corporation, would
be organized with capitalization OF
S200.000.000 to be prepared, upon ap-
plCation to insure any reputable
private lending agency commercial
bank. savings bank, trust company,
finance or acceptance company, or
building and loan association against
losses incurred through the purchase
of promissory notes given by property
owners in connection with recondi-
tioning. These private lending agen-
cies can qualify for this insurance
upon execution of an insurance con-
tract with the Home Credit Insur-
ance Corporation. which contract will
provide that the loans made will come
up to certain qualifying standards.
There will be no charge for insuring
these loans, no premiums are to be
paid by the lending agencies, and the
insurance will cover 20 per cent of
the volume of the reconditioning
notes that are taken by the lending
agencies.
In other words, a lending agency
lending 100000 on such recondition-
ing notes would be protected against
loss up to $4,000.
These loans would run in amount
from a minimum of 5000 to a maxi
mum of $4,000 to any one borrower
and would be repaid in monthly in
stallmentS of minimum Of $40. The
maximum term of the note would be
five years and the rate of interest
charged by the lending agency be
per cent true interest per annum on
decreasing balances, plus a service
charge which the Government recog-
nizes is necessary in this type of paper
to cover the cost of handling and
investigation of the credit.
This service charge runs from $3.50
on loans from S201 to $500 for Pc
Rod Of one year or less. to s82 on
loans from S751 to $4,000 running
from four to five years
When loan is defaulted, it would
be necessary for the lending agency
to take all reasonable steps to collect
the sum and upon its determination
of the uncollectibility of the defaulted
note covered by the insurance con-
tract, it would then take the necessary
legal steps to reduce it to judgment
(although securing of actual Judgment
would not be required) before claim
can be made upon the insurance cor
poration. Cost Of the legal steps in
going through the necessary procedure
to reduce the note to judgment would
be borne by the insurance. corpora
ton"