Evening star., 1938-02-19
MORTGAGE BODY'S
CHARTER|SS SIGNED
Machinery to Make Avail
able ,O00,O 900 for
Financing Started.

Machinery for making 81 900 000.-
900 Of private funds available for
new-home financing was set In mo-
ton when Stewart Mcdonald, Fed
eral housing administrator. signed the
charter authorizing creation Of a ma
tional mortgage association. the first
to be organized under the terms Of
the National Housing Act amend
mentS of 1898.
The association. to be known as
the National Mortgage Association Of
Washington, has initial capital Of
$l0,000,000 and surplus Of $1,000, 900,
paid by the Reconstruction Finance
Corp. The corporation has stated that
1t is prepared. if necessary. to con-
tribute additional sums up to $40.-
100000 to the capital Of this or other
national mortgage associations, thus
providing a total of s50,000,000 as
the base for sl,0o0,000,000 Of private
funds ultimately available for hous-
ing construction and financing.
In order to raise the cash needed
to make loans and purchase mort
cages. the associations may issue their
own obligations up to an amount not
exceeding 20 times their paid-up cap
ital and surplus and not exceeding
the unpaid principal Of insured mort
cages owed, plus their cash and Gov
ernment and Government-guarante
securities. The insured mortgages are
exchanged, in case of default, for Gov
ernment-guarantee debentures of
the Federal Housing Administrator
insurance funds. Commenting on this
method of raising funds for building,
Administrator Mcdonald stated:
Investors Opportunity.
"This not only offers a means OF
maintaining constant flow of money,
from one end of the country to the
other for residential purposes, but in
turn gives the individual investor
an opportunity to place his savings in
a tax-free investment, backed by in
sured mortgages. These obligations
take the place of the old real estate
bond issues which had developed like
a plague in the mortgage market of
the past, and contributed largely to
the collapse of~1929. Individuals will
now be certain of safe and secure
real estate bond investment"
One of the effects of national mort
said, will be to make possible the
application of mass production
methods to residential construction
for those builders able to use them.
The first association has been
chartered only few days after the
President signed the 1888 amend
ments to the National Housing Act
The amendments made national mort
gage association obligations exempt
from normal taxation. placing them
on a parity in this respect with Gov
ernment and Government-guaranteed
bonds. The amendments also re-
moved the time limitation on the
Governments guarantee OF the in
terest and principal of debentures
issued in case of default on mort
cages insured by the Federal Housing
Administration.
Loan Authorization.
National mortgage associations are
authorized by the amended act to
originate real estate loans insured
under Title II and to buy and sell
mortgages insured under Title II
or uninsured first mortgages which
do not exceed so per cent Of the ap-
praised value of the mortgaged prop
erty.
The amended act expressly prohibits
any association controlled or operated
by the Federal Government or its
agencies from making individual home
mortgage loans under section 203 of
the act. The National Mortgage As
sociation of Washington will, how
ever, be able to make loans for con-
structing large-scale rental housing
and homes for rent or later resale
under the multi-family and group
housing provisions of the amended
act. 1t also may buy home mort
cages insured under section 203 from
institutions which originally make
the loans, thus providing these insti-
tutions with funds for further local
lending.
The securities issued by national
mortgage associations are expected
to appeal to individual investors and
to trust companies and other institu-
tions.