The potters herald. [volume] (East Liverpool, Ohio) 1899-1982, 1940-01-18
The Cherry Tree
Where We Hdtchet Out
The Truth
. THE MORTGAGE SHARKS
Q THE ROARING TWENTIES
. NOW RETRIBUTION
. FILA is SAFE

III FHA Is SAFE
Federal Housing Administrator
Stewart Mcdonald is warning home
buyers against possible return of
"discredited financing practices" He's
hitting of course at the mortgage
sharks, with their exhorbitant rates of
interest and renewal charges and Sec
ond and third mortgages.
The roaring 1920's were the heydey
of the mortgage sharks, who flourish
ed and waxed fat, along with many
other racketeers of that lush decade.
No wonder they are loath to give
up their graft and that they hang on,
here and there, despite discrediting of
their financing practices by increasing
popularity of the Federal Housing
Administration plan Of loans.
They were the boys in banks and
other places, who made three-year or
shorter term loans on home mortgages,
at fat 6 per cent or better interest,
and charged exhorbitant fees for MAX
ing the loan. Then when the loan came
due, they charged even more eX-
horbitant fees, if that was possible, on
pain of foreclosure.
Often the victim had no recourse ex-
cept to pay the fees. Howls of an
guish were loud and many, but did no
good.
But the mortgage racket brought
retribution. The public demanded
something better, with the result that
the FHA mortgage plan was inaugur-
ated.
FILA plan of long term amortized
loans, for building of new homes or to
finance purchase of existing houses,
at moderate rates of interest and with
monthly payments covering taxes and
insurance, has Jared the old time
mortgage loan racket.
Now with home building looking
up, the old time lenders are hoping
for comeback, FILA Boss Mcdonald
says. He warns home buyers to look
out for 'em, declaring the single long
term mortgage is now indispensable
for the maintenance of sound home
financing systems.
X X X
Only a few lenders cling to old
fashioned short term renewal mortg-
ages, Mcdonald says, seeming to feel
that loans above SO or 60 per cent of
the appraised value of property or
running longer than 12 years are not
sound.
Revival of such practices, he as
sion of home building or a general
return to the costly second and third
mortgages.
Danger of a return to unsound
financing methods becomes greater,
Administrator Mcdonald thinks, as
home building activity increases.
Despite efforts on the part of the
FHA, lending institutions and others
to popularize the single long term
amortized mortgage and to expose the
weakness of the old system, never
theless when the real estate market
becomes actively competitive, posi-.
bility arises of high-pressure sales
methods being used.
X X
rev llOllleS WOulu Uc Dulll, MCDOH-
aid says, if people could not obtain
loans for the major part of their ex-
penditure since most people have to
pay out of their current income. Only
few families have enough cash to
make more than 10 or 20 per cent
down payment, and they must be al
lowed to pay the balance over a long
term of years.
If first mortgage loans are restrict
ed to small proportion of value, Mr..
Mcdonald said, buyers will necessarily
turn to second and third mortgages.
This generally overburdcns families
with excessive debt and heavy
charges.
"The FILA provides safe financing
method for both borrowers and lend
ers," he added "The FILA is deal
ing with a national mortgage market
and not just series of isolated trans
actions. There can be no sound sus-
tanned home-building program for
families of modest incomes except up
on the basis of system of long term
mortgage loans payable in regular
installments. Home buyers should be-
ware of using any other financing
method unless they purposely choose
to do so after carefully study of the
sound facilities now available"