Evening star., 1935-01-12
ARDREY EXPLAINS
RULES OF F. H. A.
Tells Chicago Appraisers
How Mortgage Insurance
Plan Was Drafted.

The policies of the Federal Housing
Administration In evaluating residen-
tial property under the long range in
sured mortgage program represent the
first time that the Government has
sought to create a unified system of
appraising of real property from a ma
tional standpoint, j. Howard Ardrey,
deputy administrator, F. H. A., said
in an address before the Illinois Chap
ter of the American Institute of Real
Estate Appraisers in Chicago last
night.
The subject of real property valu-
alton has been given more attention
in Washington during the past few
months" Mr.. Ardrey said, than in
any other time Of our history. Sound
appraisals have proven significant in
many of the projects undertaken by
the Public Works Administration. in
low cost housing plans: in subsistence
homestead developments; and payticu-
larly in the mortgage insurance por-
ton of the national housing program.
In forming its policies, the Federal
Housing Administration has seen eye
to eye with your organization on many
of its theories. 1t is therefore fitting
that I should have the pleasure of
talking with you tonight although you
could have chosen some one better
equipped to deal with your particular
part of our economic scene.
Trained Appraisers Urged.
"You have long championed the idea
that honesty is one of the requisites
OF a good appraiser, but that good
intentions are not enough. We of the
Federal Housing Administration agree
with you, and are also in accord with
your belief that correct measurement
of property values is the backbone of
our mortgage structure, and obtainable
only through the services of men who
are more than honest. They must
also be adequately compensated, thor
oughly trained, technically competent
professional men.
In choosing the men who will pass
judgment on dwellings for which in
sured mortgages. under Title II Of the
national housing act, are desired, we
have provided that they must boast
at least ten years of practical expe-
rience and complete, intelligent un-
derstanding of present and future VAL
ues in the real estate and mortgage
fields. Beyond this, we have given
each of our appraisers a comprehen-
sive education in a training school re-
Gently maintained by us in Wash
ington.
1T might be interesting to you to
know why the Federal Housing Ad
ministratlon regards proper assessment
of residential property as one of the
keystones in its insured mortgage plan
Traces Case.
Remembering that the insured
mortgages can be utilized. under GER
tain regulations, either to refinance
Indebtedness upon dwelling or to
assist in its purchase, we will consider
what happens to the mortgage Bill
Jones of Evanston desires in order
that he may buy home.
He approaches mortgage lending
institution approved by the Federal
Housing Administration. If the lend
ing agency decides, after its appraisal
that the property represents sufficient
collateral for loan, and that Bill is
q good credit risk request is made
to the Federal Housing Administra-
tion for commitment that the mort
gage will be insured.
1.-The Federal Housing Administra-
ton then sends out two trained eX-
perts, one competent appraiser and
the other a competent architect.
Their analysis not only safeguards
the Federal Housing Administration,
but also provides a valuable service
to the lending agency in checking
upon the nature of its investment.
IF all is well. Bill can borrow up
to 80 per cent of the appraised valu-
alton. On a $4,000 property, he lays
down ST 200 in cash and secures
mortgage for $4,000 repayable in
monthly installments on an amortized
basis for a period not exceeding 20
years.
S35 Per Month.
Interest will be per cent on the
unpaid balance Of his mortgage, since
he is purchasing his home. On 20
year loan, Bill can refund his debt of
$4,000 by remitting $35.02 month.
This amount does not include the ap-
proximate monthly cost of $40 for |
taxes and other assessments, but it
does include an annual insurance
premium of one-half of per cent |
on the face value of the mortgage.
THE insurance premiums are gath |
cred into fund administered by the
Federal Housing Administration, from |
which are deducted its operating ex-
penses and the cost of insuring the |
mortgages.
The insurance is in the form of |
an Understanding debenture, repre- |
senting the unpaid principal of a de- |
faulted mortgage on foreclosed prop |
erty, plus any taxes and insurance !,
that may have been paid on the prop
erty by the mortgage.
If an insured mortgage remains in |
good standing. there is a possibility |
that the mortgage may desire to turn |
1t into cash. Under Title III of the |
national housing act there can be es-
tablished national mortgage associa- |
tons, to provide a resale facility for
insured mortgages. which then become !
the security for debentures issued by
the national mortgage association.
This resale facility represents, in i
effect, Federal reserve system for
the residential mortgage field"