Evening star., 1935-09-14
FIJI. A. MORTGAGES.
GET HIGH RATING
Specialists in U. S. Securi-
ties See Bright Future
for Insured Paper.

insured mortgages as created by the
Federal Housing Administration may
soon prove to be one of the more i'm
portant types of investment for insti-
tutions and should prove profitable to
banks on account of both hquidity and
the relatively high return which they
provide. according to Theodore R.
Goldsmith of Charles E. Quincy g.
Co., specialists in United States Gov
ernment securities, who have prepared
a study of the legislative and financial
aspects of insured mortgages.
The firms opinion with regard to
mortgages insured by the F. H. A. is
expressed in part as follows:
Recent revision of the Federal
Housing Administration program
seems to meet the practical needs Of
our banking system and measurably
improves earning prospects of many
banks. Investments in mortgages in
sured by the F. H. A. offer relatively
higher return than most bank invest
ments. Additionally, considerable in
come may be derived by trust depart
ments that elect to act as trustees in
connection with the servicing of such
mortgages.
Results Disappointing.
1.-The national housing act, designed
TO improve methods of real estate f.
nancing, was signed by the President
on June q, 1884. Although it was
hailed at that time as major recov-
fl,n lfc % Iotn hay
admittedly been disappointing. Only
small portion of the $4,000, 600. 900
of mortgage insurance, the backbone
of the program, authorized under title
II of the act, has actually been util-
lied.
The Importance of the mutual
mortgage insurance program should
not be minimized by the small volume
achieved to date. The act embodied
a theory of financing hitherto un-
tested in this country and prolonged
period of experimentation proved
necessary to draft practicable regula
tions. Certain clarifying and other
amendments to the act and certain
provisions of the banking act of 1885,
passed by the last session of Congress-
are also calculated to give needed i'm
petus to the program.
Banks which gave careful study to
the insured mortgage plan when the
act was first passed and found it i'm
practical, may we'll wish to recon-
slider its possibilities from their view-
point in the light of the recently
adopted changes. We feel that the
Federal Housing Administration is now
In position to make an important
contribution to business recovery and
are encouraged to believe that we are
on the threshold of substantial re-
eovery in residential construction.
Restriction Is Removed.
The restriction which made it i'm
possible for a national bank to place
real estate loans outside its own Fed
eral Reserve district or farther than
100 miles from the bank, has been
rescinded by an amendment to the
Federal Reserve act, which should
gage market and assure fair degree
of hquidity. the study adds.
Until July 80 last, no provision
had been made for the distribution of
insured mortgages to the general pub
nc," the study points out. "On that
date the F. H. A. approved plan
whereby trust departments Of banks
that have qualified as approved mort
cages of the F. H. A. may act as
trustees for holders of mortgages and
obtain a service charge not to exceed
one-half Of per cent per annum for
their work in this connection. This
Is in addition to initial service charges
which may be imposed by the mort
gagee to reimburse itself for the cost
of closing the transaction. Such charge
shall not exceed l per cent of the
original principal amount of mort
gage covering existing construction
and shall not exceed 2la per cent OF
the original principal amount of
mortgage covering property under con-
struction or to be constructed. The
r. H. A. has tentatively approved a
form of living trust agreement that
may be used for this purpose. This
new plan may prove to be of major
Importance in making adequate funds
available. This living trust arrange
ment should now make it possible for
those institutions located in centers
where additional mortgage money is
required to originate and service such
Insured mortgages and to resell them
to 1nstitions in the money centers
as well as TO some of their individual
clients"