Evening star., 1934-05-02
IMPROVED HOMES
SEENBY U.S.L0ANS
John H. Fahey Discusses
Federal Aims in Radio
Forum Address.
Continued From Eighth Page)

SJralR0L mortgage lOT 9oiUUU dI pei
cent, pays $50 every six months as
interest At the end of only three
years he is obliged to pay off, or to
renew, his entire $4,000 principal. If
the loan falls due In time of general
depression or of reduced personal
earnings, the home owner will have
serious difficulty in paying or renewing
it, and may lose his home through
foreclosure.
If. on the other hand, the home
owner had made his $4,000 loan at
the same interest rate of pS cent
on 15-year amortized basis, he would
simply paw S2532 each month as
combined principal and interest, for
Is years He never has to make
single payment of more than S25.32
month. At the end of the Is years
he has paid off the entire $4,000. The
widespread use of the short term
mortgage loan" by the banks and
other mortgage lenders has been one
of the principal causes for the diff
culties of home owners in recent years
and has intensified the depression
greatly. 1 would suggest that you
bear in mind the vital Importance of
this evolution toward the amortized
loan as stronger and more practical
form of investment to say nothing
of it's desirability for the borrower
himself
Now let US consider the new legiSla-
ton which has just been passed by
Congress to amend the home owners
loan act 1t greatly strengthens the
entire structure of the Home Owners
Loan Corporation, the Federal Home
n A. CO.. NFpC
& Loan Associations. Five features
of this amendment are Of special i'm
portance to home owners.
Government Guarantee.
First of all, the United States Gov
ernment has now placed its full and
unconditional guarantee on both
principal and interest of the bonds
of the Home Owners Loan Corpora
ton. which until now have been guar
anteed as to interest only. This
change means that any lender who
has been carrying a home mortgage
which was in default or in serious
difficulty may now effect the exchange
of that mortgage for a bond that is
a direct obligation of the United
States. provided the new loan is ap-
proved by corporation officials
In that connection the second most
important provision of the new act
is one which strictly limits loans made
by the corporation to those home own
ers who were in involuntary default
on their mortgages as far back as
June 13, 1888 or whose default If
1t took place at a later date, was
due to circumstances entirely beyond
the borrowers control, such as un-
employment The corporation abso-
lutely will not make loans unless the
applicant can prove that such de-
fault has developed in spite of every
thing that he could do to avoid it,
This new restriction automatically
limits the Home owners Loan Corpo-
ration to loans where relief is actually
needed. 1t makes it impossible for
either a borrower or lender to take
unfair advantage Of the corporation
without mourning the risk of severe
penalties for Misrepresentation. It
means that a home owner who delib-
erately commits default on his original
mortgage in order to get loan from
the corporation at a lower rate of
interest cannot obtain the loan. He
simply wrecks his credit standing in
his own community by applying for
such assistance. BY such willful de-
fault and repudiation he also runs
the prompt risk of foreclosure action
and loss of his home
Prevents Unfair Pressure.
This part of the amendment like
wise prevents a lender from bringing
unfair pressure on the borrower by
asking him to reduce the principal of
his loan when that loan already is in
sound condition. In recent weeks be-
cause of the high cash value of the
corporation bonds, certain lenders
have tried to force their borrowers
into distress by demanding a reduc-
tion of the principal of their loans
when there was no good reason for
such action and have urged borrowers
to apply for help from the Home
Owners Loan Corporation. The new
amendment puts stop to this.
The third vital section of the new
amendment authorizes $1,000 600, 900 to !
be advanced by the Home Owners
Loan Corporation for repairs and
modernization of the properties on
which it makes loans Nearly all of
the half million homes on which the
corporation expects to grant loans will
require some expenditure for repair
and maintenance to make up for long
deferred upkeep and the effect of
wear and tear on the property.
A surprising proportion of our
American homes are today long way
from being what they should be- In
a country possessing the wealth and
resources which we command our peo- /
pie should have the best homes in the |
world at the lowest cost. In dealing |
with the housing problem for people !
OF moderate income we are far behind |!
some of the older European countries. |
A large proportion of our present /
homes can be improved greatly and |
brought up to date at very moderate |
cost.
New Debts Not Encouraged.
The Home Owners Loan Corpora
tion can now advance money for this !
work on the homes on which it makes |
loans wherever the situation of the |
borrower justifies this course. It !
would be unwise for the corporation
to encourage people to assume new |
debts which they would be unable to !
pay. 1t is not helpful to entice man
into contracting a debt he can never
o1Scnarge ana thus add 10 MS anxiety |
and trouble. The corporation does not |
intend to pursue such a policy. 1t
will, however, be prepared to finance |
within reasonable limits the improve
ment and modernization of the homes
on which it takes mortgages. This |
undertaking should be helpful in DEM
onstrating to many communities what |
surprising things may be done to an |
old house at little cost to make it |
more modern and hvable.
This S200,00O,0 900 fund is restricted !
to a relatively small proportion of |