Evening star., 1937-11-29

tne cost OF financing Is IN the long run
one of the largest items in housing
costs. In the case Of rental housing
1t Is determining factor, first In
whether construction shall be under
taken at all, and second in arriving
At the scale OF rentals to be charged
Institutions making loans to be
insured by the Federal Housing Ad-
ministration are now permitted by
regulation to make an interest charge
up to per cent and service charge
OF one-half Of per cent, or a total
Of 5l3 per cent per annum. 1t is
proposed to reduce this to S per
cent net by amending the admins
trative regulations.
As means of further reducing
the cost to the borrower, however,
1 would ask the Congress to authorize
the Federal Housing administrator
to TX the mortgage insurance pre-
MUM as low as one-half Of l per
cent on the diminishing balance of
an insured mortgage, instead of on
the original face amount as now re-
quired by the act. Further, as 4
means OF giving special encourage
ment to the construction Of small,
moderately priced houses. I would
ask the Congress to authorize the
Federal Housing administrator to fix
the mortgage insurance premium as
low as one-fourth Of / per cent on
the diminishing balance Of an in
sured mortgage in cases where the
estimated value of the property to
be built does not exceed So. 900 and
where the mortgage is insured prior
to July /, 1899
Another change that I would ask
the Congress to make in the existing
legislation Is to raise the insura BILE
limit from 80 per cent Of the ap-
praised value OF the property, as
at present, to 80 per cent in the
case of loans to owner occupants,
where the appraised value Of the
property does not exceed $4,000. This
proposal is Of great importance. 1t
recognizes the fact that most persons
who desire to own homes Of their
own cannot make q first payment az
large as 20 per cent of the purchase
price. This is particularly true after
the severe depression Of recent years,
in which the savings Of millions OF
prudent and thrifty families were
depleted.
Majority in Urban Areas
Don't Own Homes,
The fact Is not generally recognized
that the majority Of our urban fami-
lies are not home owners. In the
larger cities the proportion Of rented
dwellings runs from 60 to nearly 80
per cent of the total Accordingly, !
am suggesting for your consideration
measures designed especially to IA
cilitate the construction and fnanc-
ing, under the economies Of blanket
mortgage, Of groups Of houses for rent
or for rent with an option to pur-
chase. Such operations would afford
economies in construction as we'll as
in financing, and would therefore, !
believe, lead to the formation of sub
stantial companies to avail themselves
of the opportunities in this particular
field. These same measures are also
designed to encourage the construc-
ton Of apartment buildings to be op-
Grated on . moderate scale of rentals,
with the mortgage in any case not to
exceed 1900 per room. This is q
type Of apartment property psrticu-
larly adapted TO the requirements OF
our smaller cities.
In the construction of large scale
rental properties, a small but creditable
beginning has already been made
under the existing provisions Of the
National Housing Act applicable to
limited-dividend companies. Those
provisions, however. need to be clari-
ned and simplified in order to en-.
courage . more extensive development
of large rental projects in the larger
communities where they are needed.
Among the most important OF the
measures to which I would invite your
consideration are those designed tt
facilitate the financing Of these large
projects. Here there is a great gar
in our financial mechanisms. The
large projects thus far constructed
under the provisions of the National
Housing Act have been closely regu-
lated rs to rents, charges, capita
structure, rate Of return, etc, and the
excuses and abuses which widely
characterized the financing Of apart.
nent properties in the 1905 have
thereby been avoided. The very size oi
the loans in the case OF these large
projects, however, makes it difficult t.
finance them by means Of q single
mortgage.
I would therefore urge the Con.
gress to liberalize the provisions oil
the act under which the charterina
Of national mortgage associations i.
authorized, and, among other things
to give these associations explicit au-
thority to make loans on large-scale
properties that are subject to special
regulation by the Federal housin,
admtnktrator. The effect Of tn,
change here proposed would be tc
enable these properties to be financed
By national mortgage association,
through the sale of housing bonds q
dsbsnturss amply secured BY the In.
s.irsd mort Ses on the properties.
= eE6ef INT e0e o more such -.