Evening star., 1937-05-15
SOUNDM0RTGACES
OPEN TO LENDERS
Federal Housing Admins.
traitor Cites Field of Low
Priced Homes.


volume of unusually sound mortgages
is open to private financial institu-
tions that enter the field of low
priced home financing, Federal Hous-
ing Administrator Stewart Mcdonald
said today. The low-priced home field,
he pointed out, gives the private
lending agency chance to include
In its portfolio an increasing
amount of exceptionally secure mort
cages which past residential mort
gage history has shown to be among
the most desirable of mortgage loans,
There are several salient features
to the loW-priced home mortgage
which lending institutions might well
consider" Mcdonald said. 1T is sig
nlflcant from the standpoint of sound
mortgages that there has never been
a state of 'overbuilding' in the low
priced home field. At the present
time there exists an almost unlim-
1ted demand for this type Of housing.
A recent study shows that approx
mately 70 per cent of the families of
the country cannot afford residential
accommodations costing in excess of
$4,000. Large number of this seq
ment Of the population, however, have
adequate incomes to provide payment
FOR such homes. With such field
open to lenders. the desirability of
this type of Investment should be
obvious.
Strong, Steady Outlet.
During the past year, moreover,
decided impetus to loW-priced resi-
dental construction has become no.
tlceable throughout the opera tive
builder field There has been a de-
clded trend toward a system of large
volume, low unit profit construction,
as a method of approaching the large
and virtually untouched market for
homes costing less than $4,000 The
mortgage lender who is sensitive to
trends, can readily visualize a strong
and steady outlet for sound lending
In this field This is particularly at
tractlVe lnasmuch as large portion
OF the new, low-prlced construction
is being financed under the Federal
Housing Administrations insured
mortgage system
The records of the Housing Admin
1stratlon indicate the trend toward
loW-prlced home purchase in the coun-
Try today. OF all mortgages financed
by private lenders and insured by the
Housing Administration, 36 per cent
are for less than $4,000 and 58.6 per
cent are for less than $4,000. AS
the Nationwide activity in low-priced
construction continues to increase
these percentages will, more than
likely, show additional gains"
Mcdonald referred to a study made
about year ago by Edgar A. Lodge,
prominent analyst, to show that the
soundness of the low-priced home
mortgage is no supposition, but is
based upon actual experience. Mr..
Lodge, author of an authoritative book
entitled "A Mortgage Analysis" dis
covered that the low priced residential
mortgage exhibited the greatest sta
blllty OF all types during the depres-
sion, One of the most Illuminating
results of his findings was that this
conclusion was substantiated by a
study of the percentages of losses on
foreclosed, rent-assignment and other
trouble mortgages, according to type
Of property.
The one-family dwelling MORTGAGES
(the study was confined to all phases
OF the business of the Home Title
Insurance Co. of Brooklyn over a pc
r1od OF % years. amounted to $4,000
600, yet the loss sustained on this
type OF mortgage amounted to only
O.59 per cent. The two-family dwell
ing loss amounted to 13O per cent.
The greatest loss was sustained by
stores with five to eight unit apart
ments. This amounted to 6.35 per
cent.
Average Loan, S7,047.
Figures compiled by Lodge show
the average size of the loan made by
the Home Title Co. to be S7,047.
Ninety-five per cent of the total num-
ber and sixty-eight per cent of the
total amount of loans we're under
$4,000. OF loans, from $1,000 to
$4,000, he reported, 96 per cent were
IN good standing. Loans from $4,000
to $1,000 showed 81 per cent to be in
good standing. In the bracket from
$4,000 to SIS, 900, 81 per cent were in
good standing.
Larger loans showed a declining per-
centage in good standing. For exam
pie, loans Of 100000 and over showed
only 81 per cent in good standing.
From this experience of the Home
Title Co.'S portfolio" Mcdonald said,
ut Is indicated that the type of mort
gage insured by the Federal Housing
Administration is the ideal type of
loan. The housing act limits insured
mortgages to maximum of $4,000,
which is shown to be a sound loan by
the Lodge study. Moreover, the ex-
ceptional soundness of the low-priced
home mortgage is further proved bv
the experience of this company over a