The Washington times., 1935-01-05
F FORECLOSURES
To Be GUT BY
FHAACT|ON
"Bugbear of Depression" Seen
Overcome by New Default
system Announcement

DisposSeSsions may not only be
reduced, but may be virtually
eliminated under regulations re-
Gently announced by the Federal
Housing Administration.
The foreclosure problem has not
occupied the attention of the pros
pective borrower as it has that Of
the lender, since the Housing Ad-
ministration started functioning,
with the result that from the be-
ginning there has been a rush Of
loan applicants with the lenders
holding off in the same proper
ton.
While various State statutes on
the manner of foreclosures have
complicated the regulations of the
Administration to large degree,
there is one vital section which
eventually will interest many Dor.
rowers under Title II.
| EVACCAOSuAC
The act itself provided the
means whereby the Housing Ad-
ministrator could elaborate in the
registration itself for liquidating
mortgages, and this he has done
with a view to eliminating the
nightmare of foreclosure.
It must be borne in mind that,
whenever a default occurs in an
insured mortgage loan. foreclosure
proceedings, if any, must be in
Stituted by the mortgage, or
lender, and not the housing ad.
miniStration.
This Set-up, at first glimpse,
made the insurance feature of the
housing act seem like myth to
the banks and other institutions
which handle the housing loans.
1t made the loan seem more at
tractive, but at the same time it
appeared that, in case of default
the lender would have to wait
until the foreclosure had been
actually completed before he could
receive the insurance which in
IDENTIFIED the loan. The unwieldy
foreclosure statutes in many
States made this appear as seri-
Gus obstacle to the making of
loans.
New Regulations
The newly announced regula-
tionS provide that, in case of de-
fault or where the borrower or
mortgagor is definitely unable to
maintain his payments, permit the
mortgage and mortgagor to ten
der all their interest in the prop.
erty to the administration in lieu
of foreclosure. If the mortgagee
also agrees to release the mort
gagor from all obligations under
the mortgage, the Administrator
may accept the property and shall
at once comply with the provisions
for payment of insurance to the
mortgage.
The Administrator further agrees
to hold the property for a period
of four months plus the statutory
redemption period, if there is such
a period in the State where the
property is located. During this
time the mortgagor may regain
his property by paying a sum sub
stantially equal to the mortgage
debt. Thus he will, in effect, re-
deem his property without bear
ing the almost prohibitive costs of
foreclosure.
1t is the belief of the Admin.
istrator that the larger percent
ages of mortgages are foreclosed
during periods of depression,
when there is practically no
market for the property, and no
available mortgage money to re-
finance. For five years, redemp.
tions in the United States as a
whole, have been practically un-
heard Of. If mortgagor could
pay off his Indebtedness during
these times, he would need no
redemption statute to assure
him that the mortgage would
| IcCuIu his property IN exchange
for the mortgage money.
MOrtgagOr Protected
The National Housing act pro.
vides protection for the mortgagor
during these periods by preserv-
ing an interest in the property for
him indefinitely. 1t is contem-
plated that if the mortgage, hav-
ing foreclosed, turns the property
over to the Administrator, as he
must do in order to obtain the
benefits of insurance, the Admin.
istrator will hold the property in.
definitely until market for real
estate again develops.
If at that time the property
sells for an amount more than
sufficient to pay off the indebted.
ness plus the costs of foreclosure
and any expense incurred by the
Administrator in handling the
property, the remaining sum will
be paid to the mortgagor. The
advantage of low foreclosure costs
to the mortgagor under an insured