Evening star., 1939-03-25
Continuance eofF.H.A.
Insurance Stressed
By Mcdonald
Meaning Of Amendments
Explained; Steady Flow
Of Capital Necessary

A fair and accurate statement of
the meaning to the country of
amendments now before Congress
would give a continuance of the
present F. H. A. plan of mortgage
insurance on existing homes is that
made by Stewart Mcdonald, Federal
Housing administration, at public
hearings on the amendments, just
closed. the National Association of
Real Estate Boards points out. Un-
less Congress extends the present
measure. that aid to sound, steady
flow of capital for the home buyers
will cease to exist after July of this
year. The association urges imme-
diate extension of the present plan.
"The major effect of the National
Housing Act in the home mortgage
market was to enable all types of
lending institutions for the first
time to make proper, long-term,
amortized, high percentage, single
mortgage loans on residential real
estate" Mr.. Mcdonald points out
The immediate effect of F. H. A. S
discontinuing insuring existing con-
struction would be the elimination of
the participation in almost every in
stance Of insurance companies, banks
both savings and commercial
trust, etc, from the lending field, at
least so far as the high percentage,
long-term amortized loan enacted by
the Congress under the National
Housing Act is concerned.
Huge Assets Available.
"The reservoir of potential funds
for home financing includes life
insurance company assets of about
$4,000, 100000 commercial banks
savings deposits of $1,000, 100000,
and building and loan association
assets of around $6,0OO,000,0OO. At
the present time the greater part of
this amount is potentially available
to support the entire residential real
estate market.
ITO eliminate the F.. H. A. from
insuring mortgages on existing
homes would reduce the potential
funds available, as far as the easy
payment mortgage is concerned, to
the $4,000, 100000 in assets of the
building and loan associations. This
cannot help but have an immediate
deflationary effect on all the 10,000,-
600 old homes today.
There are approximately 10,000,-
900 owner occupied. single family
homes in the United States. Last
years addition to the total was
slightly more than 270,00O. From
the home owners point of view,
therefore. the Importance of keeping
the F. H. A. in existing construc-
ton was exactly in the ratio last
year Of 100000 to 27O,0o0"
Advances Mortgage Security.
AS Mr.. Mcdonald points out. un-
der the existing plan, which Con-
gress is asked to extend, short term
lending and costly cond-mortgage
financing are rapidly disappearing
Sound appraisal practice, serious
consideration of the influence of
neighborhood trends and carefully
weighing the reasonable ability of
the borrower to enjoy. without finan-
cial embarrassment, the home which
he is buying, as we'll as the ap-
parent value of the structure it
self, are now an accepted method
Of procedure. Definite strides are be-
ing made towards placing home
financing In this country on a basis
where never again can the insecur-
ity and the instability Of home own
ership under a mortgage be what 1t
was In 1890
"Of the mortgages insured by F.
H. A. on existing construction more
than half were modernized or other
wise repaired to bring them up to
date in order to meet the insurance
requirements" he states. This re-
juvenation Of existing homes main
tains the neighborhood value, and
the lack of it would be con-
tribution to shrinkage of property
values and slum conditions.