The Indianapolis times. [volume] (Indianapolis [Ind.]) 1922-1965, 1935-08-21
MOVE OF RFC
WIDENS FIELD
FOR BUILDING
AgenCy'S Mortgage Com
pany to Purchase Paper
Insured by FILA.
By Times Special


WASHINGTON. Aug. 81. = An
nouncement of the reconstruction
Finance Corp. that its recently or
ganized mortgage company is will
ing to purchase without recourse,
under certain conditions, mortgages
insured by the Federal Housing Ad-
ministration, opens the possibilities
of a hitherto untapped reservoir of
credit for residential construction,
in the opinion of officials here.
The funds thus made available
are the assets of the fire, marine
and casualty insurance companies
of the country, for reasons of their
own, always have SHE'D at real es-
tate mortgage investment.
Fire, marine and casualty insur-
ance companies. unlike life insur-
ance companies, never are able to
anticipate the immediate volume OF
their losses. Life insurance COM
panies operate with actuarial tables
worked out over a long period and
found to be constant to an astonish-
ing degree. Sire, marine and cas-
ualty companies, on the other hand
must be ready at all times to meet
obligations of great size, brought
about by some catastrophe.
Quick Assets Sought
For this reason their policy has
been to invest their assets. in the
main, in listed stocks and bonds
which may be converted quickly into
cash. They have recognized that
mortgage investments were not in
all instances considered Immediately
liquid, and that the principles of
their business restricted them in
placing large sums in this type OF
security.
Some life insurance companies
have invested as much as 40 per cent
of their assets in real estate mort
cages. The story of mortgage in
veStment by fire, marine and casu-
atty companies is better understood
by referring to their financial
statements. One company with as
sets of S51 100000 has $1,300,000 in
vested in real estate and mortgage
securities, and that includes it's own
office building. Another, with assets
of $18,OO0,O00 has $250000 invested
in mortgages.
The tradition of this type of mort
gage from an investment not easy
to realize on to one of liquidity is
regarded by the fire, marine and
casualty companies as of the great
est Importance and already num-
Der of them have qualified with the
FILA as approved mortgages. The
companies regard the mortgages as
highly attractive as an investment
because they are capable of earn
ing more than many stocks and
bonds of comparable security.
Interest Rate Flexible
The interest rate of the mortgages
is not fixed, of course, by the FILA.
The rate may be whatever it agreed
on between the borrower and the
approved mortgage, a bank, trust
company, building and loan asso-
citation or other lending institution,
However, the maximum rate allowed
by the FILA is 5 per cent. The COM
panies seeking securities in which
to invest their funds have had diff
ficulty in finding anything sound
and at the same time yielding 5
per cent.
The fire, marine and casualty
companies, because of their business
set up, are not expected to operate
directly with the borrower. Some
have not the facilities, except in
cities where their home Offices and
branches are located, to service the
mortgages, that is, to collect the
monthly payments and apply the
funds to the various accounts, such
as taxes and fire and other hazard
insurance. Most of them propose
to buy from the lending institutions
that have originated the mortgages.
The terms of the sale, naturally will
be arranged between the company
and the institution.