Evening star., 1934-12-15
LOAN INSURANCE
ORDERS SENT OUT
F. H. A. Says instructions
Are Dispatched to All
Directors.

Instructions governing the insur-
ance of mortgages on residential prop
erty constructed by operative builders
are being sent to all regional, State
and district directors, it was an
nounced today by the Federal HouS-
ing Administration. Builders who
wish to obtain detailed information
on the subject should inquire at
Office of administration.
The administration recognizes the
operative builder as the largest pro-
ducer Of residential properties and
his contribution as an influential
element in the creation of housing
for rent. rental-purchase agreement
or outright sale. Consequently, every
proper effort will be made to aid
and encourage activity on the part
of the builder who is prepared to
proceed along sound lines.
Encourages Operative Builder.
In particular. the administration
seeks to encourage that type of oper-
stive builder who looks upon the pro-
duction of homes as a manufacturing
and merchandising process Of high
social significance and who, prefer
ably. assumes responsibility for the
product from the plotting Of the
land to the disposal of the completed
dwelling units. based upon policies
which will assure the stable develop
ment of the community over period
of years.
The operative builder. it is made
clear In the instructions, Is eligible
to apply for the benefits Of mutual
mortgage insurance upon the same
general basis as the individual home
builder. and the factors which the
administration will consider in passing
upon his application are in substance
the same. In other words. he may
qualify as an approved mortgagor In
much the same manner as would be
required of an individual home owner.
Because of the larger scale of opera
ton involved however. greater en-
phasis is necessarily placed on GER
tain features of the transaction, par
ticularly with respect to the economic
soundness of the entire project.
As in the case of the individual
builder. each dwelling Of from one to
four family units must be financed
by separate mortgage Each dwelling
must BE- located on q separate plot OF
separately owned.
Financing Operations.
To finance his operations under the
provisions of the Federal Housing
Administration program the operative
builder should secure his financing
from a lending institution approved
by the administrator as a mortgage
which will submit the application to
the administration to secure a COM
mitment for the insurance of the
mortgages on the various properties.
With such a commitment in existence,
he should be able without difiiculty to
obtain construction loans from a COM
mercial bank, since notes securing
loans made under such conditions
are eligible for rediscount at the Fed
eral Reserve banks. a fact which puts
them in a class with the most de-
sirable paper a commercial bank can
have.
Commitments will be obtainable,
either where the operative builder has
a definite buyer for completed prop
erty, in which case the commitment
will be made in the name of the
buyer as mortgagor, or where the
operative builder contemplates that
an unknown buyer will be the original
mortgagor. the commitment being
made contingent upon approval of the
purchasers application for a loan as
mortgagor.
Commitments in Other Cases.
Commitments may also be OBJ
tanned where the operative builder
himself is to be the original mortgagor,
particularly when he is building for
rental or intends to sell on a rental
purchase agreement to a known or
unknown buyer, if the administration
is satisfied he Is able, with his own
capital. to finance any portion of the
cost of the project not financed
through the mortgage loan; that he
will be in a position to carry the
mortgage responsibility; and that the
project is economically sound and
conforms to all other applicable rules
and regulations of the administration.
Operative builders may make ap-
plication for the insurance of mort
cages, through approved mortgages,
at any of the 81 insuring offices of
the Federal Housing Administration.
Where final plans for a project have
not been completed, informal pro-
posals may be submitted for consulta-
ton.