Evening star., 1938-05-28
MORTGAGE FUND
0VERSUBSCR|BED
F. H. A. Administrator Saws
Response Points to
Plans Success.

Heavy oversubscription of the first
onerlng OF. national mortgage asso-
clation obligations points to the sue
cess OF this new mode of providing
funds for home financing and con-
structlon, Stewart Mcdonald, Federal
housing administrator, said today.
Applications for s25.OOO,oOO 2 per
cent hve-year notes of the Federal
national Mortgage Association. re-
Gently offered for sale, approximated
$1,000, 100000. a subscription total
equal to So times the amount offered.
Inc notes, while not guaranteed by
the Federal Government, are backed
by F. H A.-insured mortgages and
are exempt from normal taxation.
The oversubscription was said to be
one of the largest on record for any
issue of securities sponsored by Gov
"ernment agency. The amount of ap-
.plications, which was especially re-
markable in view of the fact that
national mortgage association obliga-
tions had never before been marketed
demonstrates the extent of the public's
acceptance of the mutual mortgage
Insurance system, the administrator
said.
Supervision of F. Ii. A.
The Federal National Mortgage As
sociation, organized with a capital of
$4,000, 600 and surplus of Sl,O00,000,
subscribed by the Reconstruction
Finance Corp. is under the super
vision of the F. H. A. The associa-
tlon is authorized to buy and sell
mortgages insured under the Ma
tional Housing Act and to originate
, insured mortgage loans except on in
dividual homes.
In buying insured mortgages, the
association will transact business with
thousands of lending institutions
throughout the United States which
have been approved as mortgages by
the F. H. A. The association will buy
mortgages on construction started
after January /, 1886, which are in
sured under sections 203, 207 ana 2l0
of the act These include mortgages
on individual homes and loans on
large-scale rental projects and groups
built for rent or resale.
By buying and selling mortgages
from institutions which originate the
s1oans the association will act in a
similar capacity to that of a mort
gage discount bank. Institutions may
sell their mortgage loans to the asso-
citation and use the cash proceeds of
hn 10
locally for residential financing and
construction. In lending on its own
account for rental housing develop
ments the association will provide a
,source of capital for projects of this
type in instances where financing by
private institutions is lacking.
r. F. c. Will Aid.
The association is permitted by law
to issue obligations up to an amount
equal to 20 times its paid-in capital
and surplus, but not to exceed the
amount of its insured mortgages,
Government securities and cash on
hand, or more than 5000 100000 in
relation to its present capital and sur
plus. The r. F. c. has an additional |
$40,000,000 to contribute. should cir
cumstances warrant larger capital
ization. This would give the associa-
ton a capital of s500Oo,000, or the
base for the sale of $l000.000 900 of
obligations with which to supply real
estate funds.
The association will not service the
mortgages it buys, but will expect
selling institutions to make collections
and perform other work in connec-
tion with the loans. The association
will allow selling institutions three
quarters of per cent in most cases,
out of interest collected monthly, as
service fee on individual home loans |
insured under section 203 The asso-
citation will not originate individual |
home loans insured under this section, |
since the act prohibits associations |
controlled or operated by the Federal |
Government or one of it's agencies
from initiating loans of this type.
"a The association will both purchase
and originate loans insured under
sections 2O7 and 2lO for large-scale
rental projects and group housing de-
.Velopments The association will
make loans insured under section 207
at a rate of Az per cent and loans
insured under section 210 at per
rent