Evening star., 1935-06-29
PERMANENT VALUE
OF H. 0. |. c. SEEN
Fahey Says Trend to Long.
Term Loans Supple
mentS Aid.

JOIu1 II. TdIlcy, CIldIIIluu Va Vic
Federal Home Loan Bank Board,
today issued a statement on the per-
manent public value Of H. o. L. c.
emergency relief operations through
their influence upon American home
mortgage practices. The statement
follows:
THE expiration at midnight last
Thursday Of the time limit set by
Congress for filing home loan appli-
Corp. foreshadows the end of the
emergency relief efforts Of the Gov
ernment on behalf of distressed urban
home owners. 1t also calls attention
to the way in which the H. o. L. C.
has attacked the problem of devel-
oping sound home loan practices for
the protection of the entire public.
THE Home Owners Loan Corp. was
called into existence in 1883 by the
freezing up of hundreds Of thousands
OF short-term home loans, such as
represented more than two-thirds of
the entire SCI, ,000,000,000 of urban
home mortgages then outstanding in
the United States. Home owners faced
foreclosure because they were unable
to pay those maturing loans in full.
100000 Requests Granted.
1.-THE task Of the H. o. L. c. Is to
save these homes for their owners by
taking over the defaulted loans and
refinancing them as long-term amort-
lied loans, repayable In small monthly
amounts over a 15-year period. In
the past two years, the corporation
has received about 100000 applica-
tions for mortgage loans, nearly 900,-
900 of which have already been
granted, in the amount of $2,700,-
100000.
''Long-term loans have been sue
cessfully in use in Great Britain and
Europe for upwards of $50 years, to
the almost complete exclusion of the
short-term type of home loan. Had
long-term home finance been the rule,
rather than the exception, in the
United States, there could have been
no such serious mortgage crisis in
1888 as actually developed.
The immediate purpose Of the
been to protect great numbers of
distressed home owners against the
loss of their dwellings through FORE
closure. Its main permanent objective
is the encouragement which 1t has
given to the adoption Of the long
term home loan plan, In place Of the
hazardous Short-term loans, formerly
fy ia
companies, mutual savings banks and
other sources of private mortgage
money.
Assures Flow Of Money.
"a vital aspect of the long-term
amortization loan when employed by
private lenders is that it automatically
furnishes a continuous supply of new
mortgage money for new loans to
home owners, whereas the short-term
renewable loan completely locks up
invested capital, to the greater risk
and expense of air concerned. This
can readily be illustrated.
when home owner borrows $4,000
on a short-term Nan, falling due in
full in three years, but actually re-
Movable under normal conditions at
the end Of that time, the $4,000 re-
mains invested in his own particular
property year after year. No other
home owner has an opportunity to use
that same credit, because the loan Is
not repaid except for occasional re-
ductions to Offset depreciation of the
home.
"On a $4,000 12-year amortized
loan, on the contrary, the home owner
begins at once to pay of the original
principal, month by month. At the
end of the first year, he has already
repaid about $i85. After ten years,
more than $2,450 of the $4,000 princi-
pal will have been repaid TO the lend
er. Each monthly payment makes
new credit available for new loans
to other home owners, as a revolving
fund.
THE borrower benefits through the
amortization loan by being able to
clear his property of debt conveniently.
The lending institution benefits by its
steadily increasing equity in the prop
erty and its ability to serve a much
larger number of home owners. The
general public profits from the amorti-
zation loan by the greater activity of
mortgage credit which it assures, re-
gulting in a larger volume Of available
funds, more liberal lending terms to
home owners and more stable pros
perity for industry as whole"