Evening star., 1939-12-16
Fahey Urges Lenders
To Raise Standards
OF Home Building
Can Dictute Sound
Construction and
Design, He Argues

Reward good design and construc-
ton with liberal loans and low in
terest rates, and reject applications
for loans on any other kind of
homes, financing institutions were
urged today.
Lenders hold the purse strings;
IN the final analysis, they can say
whether the American public is to
have good, sound homes or be at
the mercy Of inexperienced or un-
ethical operators" declared John
H. Fahey, chairman of the Federal
Home Loan Bank Board.
Let them give their support to
the ethical contractor, who uses
quality materials and builds houses
on good basic designs, and penalize
the unethical competitor"
Mr.. Fahey, whose board super
vises nearly 1000 thrift and home
financing institutions which are
members of the Federal Home Loan
Bank System, stressed the necessity
of every lending institution having
competent technical advice in pass
Ing on house plans and some means
of checking materials and methods
OF construction.
Sees Confidence as Reward.
"Let the line be clearly drawn be-
tween financing agencies which will
risk their investors funds on any
kind of construction and those
which demand good security" said
Mr.. Fahey. Public confidence in
the sound institutions will soon
overcome any quick business drawn
by those who are willing to grant
loans on poor security.
"The process of wedding out un-
desirable loans should start with the
house plans which are submitted
to an institution. Lenders should
set high standards of design and
warn both contractors and homo
seekers they can't expect loans un-
less the designs are suitable to
family requirements, site and neigh
borhood. They also should be
warned that the lending institution
requires an independent check on
materials and workmanship. The
completed house that passes into a
home buyers hands should be worth
all the money that has been spent
on it.
There is an increasing flow Of
funds into home financing institu-
tions these days. They have won
and deserve public confidence, for
loans on good homes are as sound
as any security that can be found.
But sooner or later, investors are
going to distinguish between in
stitutions which lend on good homes
and those which lend on any kind
OF homes.
Member Banks Warned.
"The Federal Home Loan Bank
Board has consistently urged on
member institutions of the bank
system the duty to closely guard
the security of its mortgages-which
simply means lending only on we'll
designed and soundly constructed
homes. The bank system seal should
mean to investors that such policy
is followed by the institution that
displays that seal.
Public confidence in home owner
ship was undermined by shoddy
building during the 20s. Lending
institutions should see to it that
the home seeker is better protected
in the future than he has been in
the past. The man who builds a
home should be assured it is worth
what he is paying for it."
Every element of the building in
dustry stands to gain from high
standards of design and construc-
ton, Mr.. Fahey pointed out, with
the ethical contractor protected
from unethical competitors, the
manufacturer and seller of quality
materials protected from the rack
eteer.
The Bank Board itself is sponsor
ing a program known as the Fed.
eral home building service plan,
which seeks to link lenders, archi-
tects, materials manufacturers and
dealers and contractors in provid-
ing technical services on design and
supervision of construction. Con-
fined at the present time to six
definite areas, it eventually is ex-
pected to become Nationwide pro-
gram.