Evening star., 1935-01-05
F. \. A. KEEPS FREE.
OF DEBT RELATION.
Acts to Insure Lender and
Aid Borrower When
Default Occurs.
(Continued From First Page.)

further sum from the ultimate sale by
the administrator.
This provision, new to the mort
gage lending business, which is part
of the act and the regulations. and
therefore binding upon the admins
TRAITOR, permits the mortgage ana
mortgagor (the borroWer) to tender
all their interest in the mortgaged
property to the administrator in lieu
of a foreclosure. If the mortgage
also agrees to release the mortgagor
from all obligations under the mort
gage, the administrator may accept
the property and shall at once comply
with the provisions for payment OF
insurance to the mortgage. The ad-
nlinistrator further agrees to hold the
property for a period of four months,
plus the statutory redemption period,
if there is such a period in that State
where the property is located. During
this time the mortgagor may regain
his property by paying sum sub
stantially equal to the mortgage debt.
Thus he will. in effect. redeem his
property without bearing the almost
prohibitiye costs of foreclosure.
Establish Policy.
One of the great difficulties con-
fronting the administration has been
the establishment of procedure. fair
to both mortgage and mortgagor, by
which the mortgage can realize the
benefits of the mutual mortgage in
surance provided for by Title II Of the
national housing act, If the home
owner definitely becomes unable to
carry the burden of his mortage.
On the part of the lender of money,
cumbersome and costly foreclosure
proceedings and lengthy redemption
periods lessen the attractiveness of
mortgage loans. Especially has this
been emphasized by the administra-
ton, for the larger investing institu-
tionS are loath to make loans in GER
tain States where recent costs Of fore
closures have been from Is to 25 per
cent of the principal amount of the
mortgage Indebtedness. The admin
istration has been informed that the
experience of mortgages, in few
States, has been such that they can
not afford to make loans to the full
amount provided for by the national
housing act unless foreclosure laws are
changed or some method of foreclosure
can be discovered which will permit
mortgages to acquire the security in
reasonable time and without too
great expense, in order to turn it over
to the administrator and realize the
insurance benefits.
ic io1
full consideration be given to the
difficulties facing delinquent mort
gagor. In times of economic distress
leniency to property owners becomes
necessary from social standpoint.
Moratorium laws, such as now exist
in many States, are serving their pur-
pose. But these are emergency meas
ures only, and in the long run will re-
act unfavorably by increasing the cost
Of mortgage financing.
Periods Of Grace.
In ordinary times there is likely
to be a short period in the life of
every family during which sickness,
injury or temporary unemployment
causes a financial crisis. In such
cases a period of grace is highly
desirable. Occasionally, however, a
family attempts home ownership on
the basis of an income which, for
some reason or other, is not sustained
throughout the life of the mortgage
obligation. Some mortgages may,
and probably will, be made and in
sured by the administrator, which
are we'll within the means of the
mortgagor, but a subsequent decrease
in income will cause the occupancy
of the home to be luxury which the
mortgagor will not be justified in con-
tinuing. In such an event it is not
only sound business practice, but to
the interest of the mortgagor, that
he find less extensive home in which
to live with his reduced income. A
cheap and speedy foreclosure would
be benefit to him, as well as to the
mortgage, since the foreclosure costs
are charges against the mortgagor,
and make the possibility of redemp-
ton more remote.
The administration realizes, how
ever, that by far the larger per-
centage OF foreclosures occur during
periods Of economic depression. when
there is practically no market for
property, and no available mortgage
money to refinance. Periods of re-
demption are worthless in these times.
For five years redemptions in the
United States have been practically
unheard Of. If mortgagor could pay
off his Indebtedness during these
times he would need no redemption
statute to assure him that the mort
gagee would return his property in
exchange for the money. The mort
gagee would be delighted to get his
money back.
Protection Given.
The national housing act provides
protection for the mortgagor during
these periods by preserving an inter-
est for him in the property indefinite
ly. It is contemplated that if the
mortgage, having foreclosed, turns
the property over to the administra-
tor, as he must do in order to obtain
the benefits of insurance, the admin
istrator will hold the property indef1-
nitely until market for real estate
again develops. If at that time the
property sells for an amount more
than sufficient to pay OFF the indebt-
edness plus the costs Of foreclosure
and any expense incurred by the ad-
ministrator 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 mortgage is thus
apparent.
Under the new regulation an agree
ment between the lender and the bor-
rover to turn over the property to
the Housing Administration will not
merely reduce the costs of foreclosure
proceedings, but will eliminate them
entirely. The possibility that the
mortgagor will eventually receive
something from the proceeds of the
sale Of the property is, of course, en-
hanced by the substantial reduction
in the total costs Of handling the
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