The Ely miner. [volume] (Ely, Minn.) 1895-1986, 1938-03-03
1888 Housing Act Amendments
BY FRED SCHILPLIN
Director, Federal Housing Administration for
Minnesota North and South Dakota.


With the signing by the President Of
the National Housing Act Amendment:
of 1898, the way was paved for the re-
duction in cost Of home financing under
the program of the Federal Housing
Administration.
In addition to certain basic changes
in the act, relating to mutual mortgage
insurance, Title has been reenacted
providing for insurance Of loans made
by private capital for the purpose OF
modernization and repairs, and In some
case of the erection of new structures
up to $500.
The Federal Housing Administration
has promulgated rules intended to
stimulate construction of multi-family
and group housing projects.
One section of the new legislation is
designed to promote building of large
scale projects covered by mortgages up
to 100000, and the other is to en-
courage building of smaller develop
ments covered by mortgages ranging
from $4,000 to 100000.
The new FILA regulations provide for
partial Federal insurance of mortgages
not only on multi-family structures bu.
also dwellings consisting of single
family houses. The regulations are de-
signed to be especially helpful in the
building of new detached dwellings
costing $1,000 and less.
Administrator Stewart Mcdonald
characterized the new legislation rs
designed to assist families of moderate
means to obtain decent and adequate
housing on the most favorable terms in
the history of the country" The
amendments make possible a maximum
saving of approximately one per cent
a year to home builders and buyers on
newly constructed homes carrying mort
cages of fifty-four hundred dollars or
less, and on other inSurable mortgages
the saving will be approximately three
fourthS of one per cent. Among the
basic changes to the National Housing
Act providing for Government inSur-
ance of mortgage loans made by pri-
vate capital was the setting of the total
maximum annual carrying charge for
an FILA insured mortgage on which
a commitment is hereafter issued at
five and one-half per cent. This in
cludes five per cent interest and one
half of one per cent mortgage insurance
premium. In case of newly constructed
homes securing mortgages not exceeding
fifty-four hundred dollars and meeting
certain other conditions the premium
will be one-fourth of one per cent
making the total annual carrying charge
to the borrower five and one-quarter
per cent. The insurance premium i'll
the future will be based upon the out
standing balance instead of the original
face value Of the mortgage.
In addition the annual service charge
Of one-haf of one per cent now per-
nitted under FILA regulations will be
discontinued on all mortgages for which
a commitment to insure is issued here
after Changes in the down-payment
or equity requirements include reduction
from 20 per cent to 10 per cent on
homes appraised at six thousand dol
lars or less. On newly constructed
houses appraised at ten thousand dol
lars or less the insurable limit will be
80 per cent of the appraised value ur
to six thousand dollars plus 80 per cent
of the appraised value above six thous-
and dollars. On all other homes hous-
ing from one to four families the in
srrable mortgage limit will remain al
If +Ioo sod Ire n1ft
not in excess of sixteen thousand dol
lars.
One of the important features of the
National Housing Act is the revival OF
Title I, which provides not only fol
the insurance of loans for moderniza.
ton and repair, but also for the in.
surance of loans for the construction O.
new homes costing not in excess o.
$500.
Persons, partnerships and corporation:
are eligible to borrow money under TIT
modernization credit plan from thei
local approved bank, trust companies
building and loan associations and othe
approved institutions. The borrowe
must have an assured income, demon
strate his ability to repay the loan, ant
own the property to be improved O
have lease on it running at least 81.
months longer than the term of tn
loan.
Amounts up to $4,000 may be Dor
rowed to repair or improve existin
structures and amounts up to $500 ma
be borrowed for the erection Of neN
structures.
Repayment of the loans may
spread over a period not to exceed fiv
years for modernization and repai
work and not to exceed ten years TO
the erection of new structures for resi-
Dental use.
Banks and other lending institution
will be insured against losses ZIP
10 per cent of the total loans they max
under the new Title I program.
The financing charge in connectio
with the loans is left TO the discretio
of the lending institutions, but undo
no circumstances will they be perinitte
to make a total charge in excess of a
amount equivalent to SIS discount pr
500 original face value of one yea
note, payable in monthly installment
when the loan is made +or the modern
ization of existing structures. This
true interest rate of 9.72 per cen
which is believed to be the lowest RAJ
ever made available for this type
financing.
If the loan is made for the purpo
Of building new home the financir
charge may not be in excess of S.!