Evening star., 1951-06-30
voluntary Plan
Seen Curbing
Home Credit
Restruint Request
Aimed at Looms
On Existing Houses
By Robert J. Lewis
Reol Estois Editor Of the Sfor

The Federal Reserve Boards
Voluntary Credit Restraint Com
mittee's recent move calling ont
lending institutions to follow Regu-
lation x terms in financing the
sale Of existing houses is expected
in real estate and lending circles
here to make it considerably more
difficult for persons TO buy such
houses in the future.
Congress specifically exempted
existing houseS-as distinguished
from houses begun since August
8. 1950-from the provisions of
Regulation x and its companionI
curbs. The Credit Restraint Com
nittee, however, hopes now tol
have the curbs applied on a vol
u1tary basis.
Regulation K was issued last
October to limit the amount of
mortgage credit that could be pro-
vided In the sale Of new houses.
1t set up sliding scale Of higher
down payments that were some
what more liberal for veterans
than for non-veterans.
Cash down payments for vet
Grams under the mortgage curb
regulation range from 13 per cent
on houses costing $4,000 to 45I
per cent for houses costing over
$24,250. For non-veterans, down
payments range % per cent onl
the $4,000 house to SO per cent
on the house costing $24.250 orI
more.
Actual Payments Higher.
Actual down payments. how
ever, are often greater under the
regulation than they would ap-I
pear to be on the basis Of thel
sliding percentage scale.
The reason for this Is that the
regulations down payment ratios
are based on the sale price of the
house. In case a lending inStitu-
tion's appraisal for loan purposes
Is lower than the sale price. the
down payment must cover the diff
ference between the sale price and
the amount of the mortgage.
In contrast, lending institutions
have been legally entitled to make
much more liberal mortgage loans.
accompanied by lower down pay
mentS, on houses started before
August 8, 1850.
Urges Conservative Policy.
Though conceding that most
lending institutions have been
following conservative lending
policies ON existing residential
properties. the Reserve Boards
Credit Restraint Committee issued
a request two weeks ago which
said:
"The committee urges all fin-
ancing institutions to follow such
conservative policies, and in no
case to make a loan on existing
property in an amount which
would cause the total amount of
credit outstanding tprimary and
all other credit combined) with
respect to the property or with
respect to the transaction to ex-
ceed the limits which Regulation
x imposes as to new construction.
Regulation K terms are in ef-
feet for existing property financed
through FHA and VA, but not
for that financed on a conven-
tional basis. 1t would be this
financing that would be covered
by the Voluntary Credit Com
mittee's PROPOSAL.
Observers pointed out that the
practice of owners in taking back
a second trust would be prevented
by the voluntary program where
observed. Thus, many buyers would
have to put up somewhat higher
down payments than generally
were needed heretofore in buying
existing houses.
A number of men in Washing
ton real estate and financing
circles were critical of the Credit
Restraint Committees recon-
mendation. One commented he
didn't see how such policy would
save materials and men needed
for defense activity. Others said
they agreed it would have an ef-
feet on the ability Of some families
to purchase, but said they would
not want to express opposition to-
1t owing to its announced anti
infiationary purpose.
Many sections of the financing
and zeal estate industry seemed to
be unaware Of the recommends
tion, however. One well known
mortgage man said that while he
had learned Of it recently he had
no idea as to how uniformly it