Evening star., 1935-08-10
RULES REVISION
: ISSUED BYF. H. A.
"The Amended Moderniza.
tion Credit Plan" Bulletin
Is Published.

Revised regulations and explanatory
material for guidance of private lend
ing institutions operating under the
provisions of the modernization credit
plan have been published by the Fed
eral Housing Administration.
Under the title, The Amended
Modernization Credit Plan," the bull
letin supersedes all previously pub
lished regulations concerning the plan
and contains a discussion of two i'm
portant changes governing loans up to
$4,000; a detailed explanation of the
extension of credit limits for COM
mercial-residential property involving
loans up to $4,000 for modernization
and repairs and the purchase and in
stallation of equipment and ma
chinery, and an exposition of the man
ner whereby institutions, such al
savings, building and loan associations,
and cooperative banks, should they
make loans for longer terms than five
years, may obtain Government inSur-
ance on such loans for the first five
years of the loan period.
Commercial Unit Separate.
While it is an integral part of the
modernization credit plan, the exten-
sion of credit in amounts up to $4,000
to commercial and commercial-resi-
dental properties vii be administered
as a separate unit with its own regula-
tionS which in many ways differ from
the modernization credit plan for
residential properties which limits the
amount of credit available to $4,000.
The primary difference between the
two plans is that under the $4,000
extension the Housing Administra-
ton suggests that security is appro-
pirate, but has not made the taking
of such security obligatory, however,
by regulation.
Hotels, Office, business or other COM
mercial buildings. apartment build
ings, colleges, orphanages, schools and
manufacturing or industrial plants
may obtain modernization loans in
amounts up to $4,000.
Balance Sheet Required.
There is another regulation under
the $4,000 extension not required
under the former plan. The financial
and credit statement required on ap-
plications involving sums up to $50
900 requires the submission of a bal
ance sheet and profit and loss state
ment by the borrower to the lending
institution.
1t is stressed in the bulletin that
the national housing act and its
amendments impose certain definite
limitations from which the admin
istrator may not deviate. The regu-
lations and explanatory material;
therefore. it is explained, are largely
an exposition of the law and 'Wher-
ever they reflect discretionary judg-
ment, are the result of careful analy-
sis of the first years experience with
the modernization credit plan, plus
the whole body of banking and finance
experience in housing and related
fields"
Many important changes by which
It is considered the modernization
credit plan will be made available to
a wider market on a more sinplified
basis are contained in the new regu-
lations.
Free to Determine Credit.
BY these new changes lending in
stitutions are now given power to de-
termine the credit responsibility Of
applicants, free of the arbitrary re-
strictions of the ownership of the
property to be improved and of the
possession of a gross annual income
five times that of the annual outgo
on the insured obligation"
Under the new system lending in
stitutions may decide upon the ad-
visibility of extending modernization
credit on the basis of simple state
ment from the borrower, supplemented
by whatever additional information
may be secured from other sources.
Through these changes private lend
ing institutions over the country
should be able to operate the moderni-
cation credit plan with increased ease
and security and to expand their
efforts as a means of furthering the
return to normal conditions in the
building trades, in the opinion of the
Federal Housing Administration.