Evening star., 1937-11-27
REPORTFROWNS0N
20-YEAR LOANS
IL Years Held Adequate to
Pay for Homes, With Ex-
ceptions Recognized.

The first major counter thrust to
the prevailing doctrine of making
more home purchasers by stretching
loan terms is found in the report of
the United States Building & Loan
Leagues Committee on Trends, sum-
married. in the current issue of the
leagues official publication. Convic-
ton that the borrowers situation
or 10 years hence must be weighed in
the balance and that the financial
soundness of the mortgage lending
structure must be maintained. mott
Yates the committees recommendation
that II years is usually long enough to
pay for home.
The report, which is the result of
years study of the entire mortgage
loan phrase of the thrift and home
financing business, shows how savings
building and loan associations will, on
the average today. go as much as two
years and three months higher with
> their maximum loans in exceptional
cases than they did seven years ago,
but reports all experienced managers
OF these institutions as wishing to en-
courage shorter term loans.
Public's Desires Probed.
The study went into the actual de-
sires of the public on the matter of the
time to pay out on home. and on
basis of a limited survey found that
more than two-thirds of the people do
not want any more than Is years and
nearly one-third want less than 10
years to eXtinguish the debt on an
average home.
Lengthening the loan term to permit
family to own more expensive
'home than would otherwise be the
case does not necessarily confer a real
benefit on that family, the committee
reports. Under these circumstances
depression conditions are likely to be
doubly hard. both for the borrowing
family and the lending institution.
The study represents the first fruits
OF the leagues determination to get a
composite picture of opinion and ex-
perience about loan terms. Managers
of savings and loan institutions, some
of them with two or three decades of
experience, compose the committee,
and they represent ortgage-lending
institutions in Is different States.
Some 1000 institutions were inter-
viewed in behalf of this committee.
Their recommendation to the industry
is that the ma jority of loans should be
confined to maximum of about -
years with possibilities of some Is
year and even 20-year loans in excep-
tlonal cases. The committee saws that
in no case should a home financing
institution confine its operations to
. loans as lengthy as IS years
Upkeep Costs a Factor.
Where the loan payments on
typical less-than-l2-year plan. along
with taxes and other costs of home
ownership, approach the maximum of
the famlly's income, which should nor
mally be spent for housing, the loan
term should not be stretched merely to
permit acquisition of more expensive
home than would otherwise be posi-
ble,' it is stated The average family
may well prefer to sacrifice a bit more
to pay somewhat larger monthly in
.stallment in order to get out of debt
more rapidly with the increased de-
gree of financial independence which
comes from the debt-free home A
family must always take into con-
slderatlon that if it has a larger mort
penslVe home it has also increased
the other costs of living in that home.
one OF them is increased taxes result
ing from a higher valuation of the
property. SociologiCally significant are
the items which come from a some
what higher standard of living accom-
.panylng the more expensive homes"
In regard to the publics wants the
committee referred to a survey con-
Quoted by public utility company in
New York State. where % per cent of
the 1000 customers who answered
the company's inquiry wanted less
than 10-year loan terms and another
40 per cent wanted only 10 to Is years
as the period of the debt Thus, the
committee held. if home financing in
'stltutlons set an outside limit of is
years on loans, they will be in har-
mony with the deliberate thought of
more than tWo-thirds of the people,
Throughout the report emphasis is
laid upon the difference between start
Ing family on the road to home pur-
chase or building and the eventual
place that the family ends up with the
project.
Consider Widening Field.
1t is quite possible that those
groups which have advocated 2O-vear
loans as matter of public policy have
not been influenced so much by actual
public desires as by the logic that the
longer the loan term the more people
There might be as prospects for homes.
forgetting that if the decision were
based purely on that sort of logic ex-
tension of the loan term to 100 wears
would vastly widen the market" the
committee comments.
Home-lending institutions should
not establish policies as to loan ma.
turtles without relating them to per-
centage loaned and the other fac