Browning chief. [volume] (Browning, Mont.) 1941-1953, 1947-10-31
DoUn Payments Discussed

the nation.
In the first place, Veterans ad-
ministration is virtually helpless un-
der the law since it places discre-
ton of making any loan in the hands
of the various banks and lending
Institutions
However, VA can voice its disap-
prevail of the practice since the law
intent is clearly to permit veterans
to obtain 100 per cent financing COW
ering their purchase or construction
of homes. VA points out that lenders
who make a practice Of requiring
down payments on homes or farms,
which in some cases run as high as
10 per cent of the appraised value,
are:
defeating the primary pur-
pose of the GIL. bill;
2Virtually inviting the pas
sage of new legislation;
3-Rendering a disservice to
veterans who have right to ex-
pect 100 per cent financing
where credit and other factors
are favorable; and
-Already new legislation is
being considered which would
provide for more direct loans to
veterans in the purchase Of
farms;
5If the price of the property
Is SO high that security factors
would demand a down payment,
the lender would be doing the
veteran a service not to make
the loan at all.
So prone have lenders become in
demanding down payments on gu.
home purchases, Veterans admins
tration has overruled former
policy not to name specific lending
institutions when asked, and will in
the future give veterans all infor-
nation and direct them to lending
institutions which are favorably dis
posed to making G.I. loans without
the necessity of a down payment in
addition to the federal guaranty Of
$4,000.
Veterans administration points
out that in the case of homes selling
for $4,000, as an example, the fed
eral guaranty of up to $4,000 is 40
per cent of the appraised value.
VA says:
"In any case where lender
thinks a cash payment is neces-
sary from a security standpoint,
particularly in the case of loans
under $4,000, then that would
seem to pretty clearly establish
the fact that the particular prop
erty is over-priced and it would
be a greater service to the vet
eran not to make the loan at
all. These veterans loans are
not intended as a convenient con-
duit through which the sale Of
Over-priced houses can be f.
nanced."
Pointing out the fact that the
lender is guaranteed against loss up
to $4,000 Of the amount of the loan,
Veterans administration says:
Assurance against the probable
ity of loss of principal with regard
to loans under $4,000 in particular,
is afforded the lender by the combi-
nation Of the cash guaranty and the
physical property securing the loan.
For example, in the case of a $1,000
amortized loan running for 20 years,
based upon a reasonable value find
ing of $4,000 and which is guaran-
teed for the maximum of $4,000, the
market value of the home, which is
the underlying security for the loan,
would have to decline to a point AZ
per cent below the original amount
of the loan at the end of the first
year of the loan before the investor
would incur loss in case Of de-
fault.
''At the end of the sixth year the
market value of the property secur-
ing the loan would need to sink to a
point more than so per cent below
the original amount of the loan be-
fore the investor would suffer loss.
1t is difficult to see how within the
foreseeable future such drastic de-
cline in real estate values could &C.
cur unless our economy experiences
a depression of extreme magni-
tude.'
Questions and AnsWers
@. l receive S63 month insur-
ance payments for my son, killed
overseas. May l obtain a lump pay
ment of about $1,000 or $4,000 to pur-
chase a home and have the remain
der paid as at present?-A. NJ.
Mansfield, Ohio.
A. No. Payment is made in the
manner the insured designated.
After August. 1916, the veteran was
allowed to change his policy to
lump sum payment; however, this
applied to living veterans only. You
are not eligible for lump sum pay.
men,