The Waterbury Democrat., 1937-11-29


 to a point where larger volume, longer employment, and higher annual earnings are possible is one that must be solved in major part by the building industry It. self. The government, however, can take the initiative y bringing about a reduction of financing costs. by making 1t easier for for families of moderate means to buy or rent new houses, and by providing mechanisms to make 1t practicable for private enterprise to engage in large-scale housing operations for the mass market.
 In order, therefore, that gov- ernment may give the fullest en- couragement to broad revival of building, l recommend that the congress adopt at this time meas ures to facilitate the financing of every type of housing construc- ton, whether for sale or for rent, and ranging from the small house to entire residential communities and large low rent apartment buildings. In addition to meas- ures to stimulate new construc- ton, recommend that provision be made for an extensive program of repairs and modernization.
 Enlarge Housing Act
 As a practicable means of en- couraging and facilitating @ more effective operation of private en- terprlse and private capital in the housing field, l am suggest ing enlargement of the frame- work of the National Housing Act in the light of actual experience. This legislation, enacted by the congress in 1894, provided a new financial mechanism applicable to all types of lending institutions that make loans for housing pur- poses. Enabling legislation giving effect to this new mechanism was subsequently, enacted by all the states. Within the limits of the types of housing to which 1t ap- plies, 1t has proved to be both popular and practical.
 Under the national housing act the congress established the Fed. eral Housing Administration, which insures mortgages on cer. tain types of housing, but itself makes no loans. The agency is designed to become self.sustain- ing through the operation of mortgage insurance fund, into which premiums are paid by bor- rowers who obtain loans under the provisions of the act from private lending institutions. An ultimate guaranty of loans that may de- fault Is given by the federal gov- ernment. ut this guaranty be- comes operative only in the event that recoveries from the sale of defaulted properties, together with all the months in the insurance fund, should be insufficient to pay the insured claims. Hence, even if any cost should result to the government because of this guar anty, 1t would eb negligible when measured by the volume of con- struction and employment in- duced by the fact that the guar anty is there should 1t ever have to be availed of.
 Many Benefits
 The benefits of financing under the national housing act apply to two main classes of transactions-- namely, those in which Q single house becomes security for a loan and those in which @ limited- dividend company otains a loan in order to develop a rental hous- ing project. The amendments which I am suggesting are of three kinds: CD To effect further reductions in financing costs; (O To extend the insurance of mort- gages to types of housing opera. tons not now adequately provided for in the act; (3l To make the funds of institutional and individ- ual investors more easily avail- able for the financing of large- scale operations.
 Because 1t takes the average buyer of 6 house or investor in housing a long time to pay for the property, the cost of financing Is in the long run one of the larg- est items in housing costs. In the case of rental housing 1t is a de- termining factor, first in whether construction shall be undertaken at all. and second in arriving at the scale of rentals to be charged.
 Institutions making loans to be insured by the Federal Housing Administration are now permitted by regulation. to make an interest charge up to s per cent and serv. ice charge of l-2 of per cent, or @ total of 5 1-2 per cent per a1- mum. It is proposed to reduce this to 6 per cent net by amending the administrative regulations.
 Lower Interest Rates
 As 6 means of further reducing the cost to the borrower however, would ask the congress to auth. prize the Federal Housing Admin- Istrator to fix the mortgage iilsur- ance premium as low as 1-2 of 1 per cent on the diminishing bal- ance of an insured mortgage in- stead of on the original face amount as now required by the act. Further, as Q means of giv- Ing special encouragement to the of small, moderately. priced houses, I would ask the con- yress to authorize the Federal Housing administrator to fix the mortgage insurance premium as low as l.4 of 1 per cent on the diminishing balance of an insured mortgage in cases where the es- tiinated value of the property to be built does not exceed e0,OOO and