Evening star., 1935-10-08
MCDONALD SCORES
MORTGAGE RACKET.
+. H. A. Administrator Hits
Second Liens as "Usury
Trap"

Mcdonald, Federal housing auIIilillS-
traitor, last night urged American rent
payers to "go out and buy home"
Speaking in the National Radio
Forum, arranged by The Star and
broadcast over Nationwide net
work of the National Broadcasting
Co., Mcdonald said there is no rea-
son why a man with decent Job
shouldn't buy a decent home" Under
the Federal Housing Administration
plan, he asserted, a man who has
saved 20 per cent of its cost can buy
q home, paying the balance over a
2o-year period in installments no
larger than his normal rent.
"Usurious Charges"
Proposing the F. H. A. single
mortgage system" as the solution OF
modern home owning problems, the
housing administrator said there Is
no place today for q second mortgage,
which formerly was a convenient
receptacle to squeeze in extra charges
and excessive costs. It was here that
the unseen commissions, usurious
charges and prices way in excess OF
honest appraisement values, as well
as scores Of other traps for the un-
wary, were packed in," he added.
Under the new system. he pointed
out, there is but one mortgage, the
buyer Is given 20 years to pay it off
and the Government appraises the
property and insures the private loan.
Text Of Address.
The text Of McDonalds address
follows:
There are two contracts a man
makes in his life that transcend in
Importance everything else-his mar
riage contract and the contract for
a home. The Federal Housing Ad-
ministration has no desire to change
the procedure In regard to the former,
but we certainly feel that it Is high
time to apply ordinary common sense
to the latter.
These last six years have pretty
well shattered faith in home owner
ship. 1t does no good, however, to
keep looking backward. We all know
what happened. It serves no purpose
to decry home ownership as onerous
There never was, and never will be,
anything wrong with home owner
ship. On the contrary, it is the only
right thing. The trouble was with
the mortgages which were
written under an antiquated system
First mortgages were written for a
short period and came due in three
or five years. They were written for
only so or so per cent of the ap-
praised value Of the property, thereby
necessitating secondhand even some
times third-mortgages on top OF that,
thus creating a wholly fictitious paper
value. And frequently there was
downright usury, or false values, all
packed in here along with bonuses,
expensive renewal fees and a whole
bag Of tricks and other schemes and
skullduggery.
Mortgage lending Is an honorable
business and a very necessary one.
The men of high caliber in that busi-
ness, as well as those engaged in the
business of selling houses, were
among the first who called halt on
this antiquated system. The real
trouble was in a second mortgage.
that never should have been there at
all.
Mortgages as Nightmares"
Thus through the faults Of sys-
tenn the word mortgage became
synonym for nightmare.
Deputy Federal Housing Admins
traitor Arthur Walsh tells of darkey
who had to make his last payment
on a farm. The real estate man came
around to see him and said, Now,
Sam, can give you the deed to your
property"
mo, suh," said Sam in great
alarm. "I don't want no deed.
wants mortgage"
mo, SAM" replied the real estate
man; "you evidently don't know the
difference between a mortgage and a
deed"
"Oh, yes, I does" said Sam. II once
had a deed on the house and another
fellah had the mortgage-and he got
the house-so I don't want no more
deeds"
And none of us want any more Of
that kind Of mortgage.
There Is no blame to attach to the
lender, seller or borrower. They all
took the rap in the collapse Of a sys-
TEN. They all thought it was work.
able. No one dreamed that in coun-
try proud Of its alert financial leader
ship in other lines, so large segment
of It's financial structure could be
based on so fundamentally wrong a
premise.
No one could believe that we were
all contributing to a disorganized and
misdirected contraption Of finance
when we went in for second and third
mortgages on large scale.
Argument for Ownership. .
But that is no argument against
home ownership. There is no reason,
and as a matter OF fact, never will
be, why a man with a decent job
shouldn't buy decent home, If he
has saved as little as 20 per cent of
its cost and can continue to pay for 1t
out of income. Nor Is 1t conceivable
that intelligent financing will jeopar-
die his chances Of home ownership
by compelling him to pay the piper in
high interest rates, bonuses and re-
newal charges, but, in addition, having
the very dickens scared out of him
every three or five years, by the threat
OF mortgage foreclosure.
The very best place for mans
savings is in home, and mortgage
on q home where there are regular,
moderate payments on the principal
and where monthly charges are within
the reasonable ability Of the home
owner to meet, has always been, and
always will be, the safest way to put
money to work. A sensibay written
mortgage has q collateral superiority
over almost any other form Of invest
ment, ranking close to Government
bonds. And you don't find Govern
ment bonds with interest rates like
highly speculative stocks. So why
should mortgages be subjected to
usury, high fees, renewal charges and