Evening star., 1935-11-02
FIJI. A. CLASS|F|ES
REJECTION CAUSES
Four Specific Reasons Are
Usually Found for Turn
:, ina Down Applications.

The experience of private financial
institutions and the Federal Housing
Administration in handling mortgages
proposed for insurance ~ disclosed
the fact that the causes II. ELECTION
fall into definite and frequently recur-
ring classifications.
There are three distinct steps taken
In the examination of proposed
mortgage, according to the administra-
ter, Stewart Mcdonald: Preliminary
examination; inspection of the prop
erty by architects and valuators, and,
finally, mortgage risk-rating.
Preliminary examinations have re-
tealed the following causes for rejec-
ton as those most generally encount-
cred:
l. Lack of sufficient data.
2. Insufficient assured income to
meet monthly payments.
8. Lack of assets necessary to cover
costs of construction.
4. Requests for amounts in excess
Of 80 per cent of the appraised value.
S-' Many Questions Ignored.
Many applicants have made the mis-
take of considering that some of the
questions appearing on the applica-
tion form were non-essential and have
omitted answering them. One lone
omission is frequently the cause OF
delay in acceptance of mortgage and
means that the form must be returned
to the applicant and resubmitted. Un-
S,,ll iy,fn tinY1 ic
given, the mortgage will be rejected.
. For example, there is the case Of
an applicant who considered his in
come, other than salary, was entirely
his own business. He neglected to
state that he had additional income
above his salary and what the amount
was. His mortgage was rejected be-
cause the salary alone was not a
sufficient guarantee to assure the car
rying out of the mortgage contract.
Had the other regular income been
included in the financial statement, as
1t properly should have been, at risk
probably would have been approved.
In cases of new construction, many
applicants desiring to have commit
ments for insured mortgages have
not had the necessary assets to bring
the dwelling to completion, at which
stage an insured mortgage could be
placed on the property. Approval nee
essarily had to be refused, because if
materials and labor had not been paid
for by the time the mortgage became
effective there would have been liens
against the premises. Arrangements
for the complete financing of dwell
ing must be made before an applica-
tion can be acted upon favorably.
Excessive Amount Often Asked.
Often approval is denied because
the amount asked under the mort
gage is in excess of 80 per cent of
the appraised value of the property.
This is due many times to the fact
that the applicant uses the 'cost to
him" as a basis for appraisal. and
he has actually paid an excessive
price for the house.
Income cannot always be accepted
as satisfactory, even though the an
nual total of revenues of the parties
interested in the property appears to
be sufficient. In such cases the ap-
plication will not be accepted.
In other reported cases where the
income was sufficient alimony has
been the ground for refusal Of in
sllrance. A man making $500 a
month but who is liable for $100
per month alimony payment cannot
base his credit position on his gross
income, but on his net. Deducting
this prior claim on his income. it
was found that the assured income
was insufficient to justify granting
the mortgage.