Evening star., 1936-03-07
new MORTGAGE
PLAN IS HAILED
Discount Arrangement by
R.F. C. Seen Aiding Gen.
trail Agency Idea.

Recently announced arrangement
between F. H. A. and r. F. G. which
opens insured mortgages on new
homes more broadly than before to
discount by the r. F. G. Mortgage
Co., is a step in the direction of a
central discount agency" Edward A.
MacDougall, New York, chairman OF
the committee on real estate finance
of the National Association of Real
Estate Boards, says in brief comment
on scope and effect of the new pro-
vision.
"Set up specially to answer the
question of liquidlty as raised by many
bankers in connection with F. H. A.
mortgages, MacDougall said "the new
discount provision, both by what it
does for limited group and by what
1t does not do indicates the need of
q comprehensive permanent discount
bank or institution that would assure
market ability to all sound urban
mortgages.
Preferably Private Agency.
"Such an agency should preferably
be a private agency, though with
supervision such as is provided for
other parts of our banking and saw
ings structure. This is the kind of
agency we have needed for many
years, as has been pointed out by
the National Association of Real Estate
Boards since 1881. 1t is this kind of
mortgage discount bank which we ask
be authorized by Congress.
The new r. F. CT. H. A. arrange
ment, in effect since February Is,
pledges the r. F. c. Mortgage Co., to
purchase F. H. A. insured mortgages,
under specified conditions. without re-
course, and leaving servicing charges to
the mortgage, where these mortgages
originate in connection with construc-
ton started on or after April l, of
last year. Further. R. F. c. will make
agreement to purchase where F. H. A.
has made commitment to insure.
Funds made available as revolving
fund for above purpose: The S10,-
100000 announced August q, 1885,
as SO available. No mortgages will be
bought except from the original mort
the mortgage. The mortgages must
net r. F. c. AZ per cent. R. F. c.
will get its own outlet by selling
mortgages to such other lenders as
are F. H. A.-approved mortgages.
Liquidity to New Groups.
"The arrangement. terminable, pre-
sumably, at the will of the Recon-
struction Finance Corp, gives liquidity
for the present to the specific group
of new construction mortgages it
covers, although, only so far as they
are still in the hands of the original
mortgage. 1t gives this initiating
lender greater and an assured
market under certain limited condi-
tions. 1t does not give market ability
to the mortgage, even for the decidedly
limited portion of the country's mort
cages which it covers. The vast portion
of the mortgage field, of course, it
does not attempt to cover.
I'VE welcome the r. F. CT H. A.
action both for what it should do to
free funds of lending institutions for
new home building and for the trend
of thought 1t shows. We need discount
facilities wherever there is long-term
lending. Beginning February Is, We
have now, in one field of loans on
new home construction, although for
. very limited group of instruments
and under decidedly narrow possibih-
ties of action, some practical illustra-
ton of what could be accomplished
for all urban mortgage financing and
for mortgage market ability through
. central mortgage discount agency
or bank that would be permanent in
character, privately owned, compre-
hensive in its scope"