Evening star., 1938-06-28

lander and tha borrower than Q so
Per cent mortgage which y nevsr re-
paid.
More important still Is the relation
ship OF these monthly payments TO
the rent borrower would have to pay
for home OF the same type. II the
monthly payments can be held within
. hgure lower than the monthly rent
he might have to pay upon some other
house. then the borrower actuslly ID
saving money.
Reasonable Rattle Of Increase.
It s q basic principle adhered tc
by the Federal Housing Administration
that these monthly payments should
bear reasonable ratio to the monthly
incosne Of the borrower. His home ID
not only his own In such . case, but
it may also be cheaper than renting
some one else's.
This principle has produced . strik-
Ing change IN mortgage lending. In
stitutions have shifted their attention
from the possibility Of recovery In case
Of shipwreck to . more comprehensive
study Of the entire loan transaction.
A lending Institution attains . wider
perspective on the risk involved In ita
loan when 1t keeps In mind the bor-
rower's ability to pay.
In this connection the experience OF
the r H. A. hiss been interesting. Last
year more than half the borrowers on
small home loans insured by the +.
H. A. were the owners of properties
valued 1T less than twice their annual
incomes. Most Of them made mort
gage payments which were less than
Is per cent of their monthly incomes
In fact . substantial number, about
10 per cent. believe, actually paid
out less than 10 Per cent Of their
monthly incomes on their home loans
The modest amounts OF these pay
ments in relation to income greatly
reduce the number Of mortgages which
60 into default and reduce also the
number of homes which must be lost
by their owners.
Neighborhood Factors.
The Federal Housing Admipistra-
ton believes also that neighborhood
factors have an important influence
In satisfactory home ownership expe-
rience. Neighborhoods many times
fall to pieces long before the houses
The r. H. A. insists that loans which
1t insures shall be on homes built
with . sensible regard for this fact
Good mortgage loans can be made al
most anywhere II they fit their sur
roundings. OF course, this does not
include slum areas where the housing
Is so bad 1t should be demolished.
A home being built in any neighbor-
hood should conform In design and
type with other homes. Furthermore,
the cost of . house should be deter
mined by whether the neighborhood
is new or running down at the heel
BY observing these standards, the F.
H. A. often prevents people from
building the wrong homes and saves
them from loss and regret
The National Housing Act is basil
cally designed to promote home own
ership in the lower price brackets
and to provide reasonable financing
terms and good construction for
modestly priced homes Institutions
which make r. H. A. loans not only
know they will be recompensed in
case of loss; they also know that their
loans will be made on houses of sound
value, constructed in suitable neigh
borhoods, and sold to borrowers with
sufncient income to expect to repay
the money.
Confidence In Standing.
People who buy or build homes I'M
der the F. H. A. plan know that the
institution Is lending them money
with . certain confidence in their
credit standing; they know, too, that
the neighborhood in which they build
is adjusted to their own type Of home,
and they know that they are being
protected against excessive financing