Evening star., 1935-11-16
BAD CREDIT RISKS
AVOIDED BYE.H.A.
Financial Habits of AppIi.
cant Sometimes Bring
Rejection.

An important phase of the examina-
ton Of home mortgage application
BY the Federal Housing Administra-
tion's underwriting staff. which is
known as risk rating" has brought
to notice two frequently encountered
causes for the rejection of the appli-
cation These are:
|. Term of mortgage requested
longer than physical condition of
property warrants.
2. Business history Credit record)
OF applicant unsatisfactory.
Due to the extended term of ma
jority of the mortgages written under
the "single.mortgage system" the Fed
eral Housing Administration Is forced
not only to analyze loan, but to
forecast the future of the property in
way that was not thought necessary
under 3. 5 and even &c year mort
cages. Therefore the physical condi-
ton of property under conSidera-
ton is of prime Importance.
BECOMES Gamble Risk.
A house that might be viewed as
sound risk for a mortgage running
only for five years may be so built
that it would be a rank gamble that
its useable lifetime would be 20 years
or even Is.
While the age of property is an
element to be given major considera-
ton, the age of the applicant is not
necessarily a cause for rejection. even
though the Would-be borrower is ap-
preaching the threescore mark. Many
home owners of advanced years are
good business risks and have sound
judgment that directs them to cur
tail the term of the mortgage so that
it will amortize within a span of years
that actuarial figures led them to be-
leve they will complete.
The business history. or the credit
record, of an applicant is naturally a
deciding factor as to whether or not
a mortgage is a desirable one to in.
sure.
Judgments Weighed.
Income alone, although it is appar-
emily sufficient to warrant the loan.
is not always enough, due to the fact
that judgments and prior commit
ments are sometimes not acknowl-
edged.
There are instances that have come
to the notice of the Housing Admin
1Stratlon wherein an applicant, ap-
parently sound by income standards,
was refused mortgage insurance be-
cause he was committed by court
order to pay out in alimony a certain
and substantial portion of his monthly
income.
Another common diSqualifying set
OF circumstances is where a man ap-
parently receives salary adequate to
enable him to discharge a mortgage
debt and who has no outstanding
Judgments against him and yet who
Is not considered a good risk, due 10
his financial habits. While he has
made, and is making, a good and suffi-
clent salary, nevertheless his credit
history shows that he has never saved
anything and that he has been guilty
over and over again of needless ex-
travagances. There is no reason to
suppose that these lifetime habits
will be abandoned when he purchases
a home. Such risk would almost
inevitably get involved in difficulties
and Is therefore rejected.
Poor Location Factor.
BY refusing insurance in such cases
as those cited the Federal Housing
Administration is working to improve
housing standards and protect both
the home owner and the mortgage
investor. If prospective home buyer
investigates property with the view
of placing mortgage on it under the
single mortgage system in the event
OF purchase. and the application is
rejected for any of the reasons covered
In these articles, he realizes that he
should not attempt to go through with
the purchase.
1t is obvious that if poorly located,
poorly planned, and poorly built
houses cannot be financed and sold.
contractors and others will not con-
tinue to erect them. If man cannot
get an insured mortgage on a house
because it is ruled that he cannot
afford the place-that his income is
not commensurate with his desired
mode of living-then he will purchase
home that he can afford, and the
danger of future mortgage debacles
and realty collapSes will be greatly