Evening star., 1934-11-02
Mortgage Financing Outlined
Federal Housing administration Issues Statement
on Plan of Operations-Fnst Time in His.
tory Uniform Basic Interest Rate Is Applied.

'S~y =
TINE Federal Housing Administra-
ton today gave out the follow
ing general outline Of the plan
i of operations under Titles II
and III Of the national hous-
ing act, which deal with residential
mortgage financing:
This is the first time in the history
Of finance that q uniform basic in
terest rate has been applied to private
capital in the United States. Hereto
fore both the legal interest rates by
States as well as the prevailing rates
have varied.
More Favorable Terms.
An opportunity to owners Of dwell
ings to refinance their mortgages on
more favorable terms, and to pros
pective owners to obtain financing on
terms comparable to the payment Of
rent.
Mutual insurance Of mortgages on
existing or new dwellings In amounts
up to 80 per cent Of appraised value,
for as much as $4,000. for periods up
to 20 years, and with the privilege Of
payment by regular periodic INSTALL
mentS.
Loans on such insured mortgages to
be made by lending institutions, such
as banks, building and loan associa-
tions, insurance companies and loan
and trust companies, which are able
to qualify as mortgages approved by
the Federal Housing Administration.
The act authorizes variation in in
terest rates on insured mortgages from
S per cent to 6 per cent. A basic
maximum Of S per cent other than
for refunding, where 51a per cent viii
apply. is fixed In the regulations.
Insurance premiums will vary from
one-half of per cent Of the original
face amount Of the mortgage, on new
financing, to per cent per annum
on refunding.
Periodic Payments.
Regular periodic payments on prin-
cipal will be required at rate sufi.
cient to pay of the mortgage at its
maturity.
Only mortgages on dwellings de-
signed for from one to four families
will be eligible for insurance, except
such mortgages as can qualify under
section 207 Of the act as low-cost
housing projects.
1t is provided in the national hous-
ing act that: mo mortgage shall be
accepted for insurance unless
the administrator finds that the prof.
ect with respect to which the mort
gage Is executed Is economically
sound" Consequently the dwellings
on which mortgages are insured must
be well located in urban communities.
Under title III of the act provision
Is made for the establishment Of ma
tional mortgage associations, each
with a paid-up capital stock of at
least 5000. 900, privately subscribed,
whose business it will be to purchase
insured mortgages and issue deben.
lures against them for sale to the
public.
Approved Mortgages.
It was explained that mortgage
loans will not be made by the Federal
Housing Administration itself but by
the various existing institutions desig-
mated as approved mortgages. An
approved mortgage in o mortgage
otherwise eligible for insurance under
this title, shall: % Be Q chartered
financial institution whose activity in
the residential mortgage field is prin-
cipally that Of loaning funds under
its own control. ca Have succession
for not less than 20 years beyond the
date Of the application for insurance
Of the mortgage. (3) Be subject to
supervision by the governmental
agencies from which its charter pow
ers are derived. a. Have an unim-
paired capital Of not less than $780,
900. (5) Have It's principal ONCE in
city or town Of not less than 5000
population according to the United
States Census Of 1890, and, In all
other respects be responsible and able
to service the mortgage properly.
Designation Of such Institutions -
approved mortgages Is subject to
their application and approval.
Included in Classification.
The above classification includes
among others national and State
banks and trust companies, mutual
savings banks, mutual building and
loan associations, life insurance COM
panies and other such institutional
investors; and, subject to the qualifi-
cations described above, such instttu-
tons as are otherwise eligible -
members Of the Home Owners Loan
Bank and the Federal Deposit Insur-
ance Corporation.
Nothing In the act restricts mort
gagee In the selection Of its employees
and /or agencies by which such proper
servicing is attained. The mortgages
Is the applicant to the administrator
for the mortgage insurance and u
obligated to the administrator for the
annual premium.
Only original mortgages, other ap-
proved mortgages, national mortgage
associations, and such investors In
mortgages as may be hereafter pro-
vided for by regulations and approval,
may hold title to mortgage insurance
under this title.
Qualincstions Listed.
TO qualify under an insured mortgage: :
I. The borrower must have 4 regular