Mortgage Insurance Continued bv Federal Housing Administration

The Federal Housing Administration will continue insuring mortgages on exist-ing homes as the result of legislative action by Congress. Authority to insure mortgages- on other thin new homes was to have ended July 1, but Consress has removed from Title II of the National Housing Act both the termination date and the limitation of insurance on existing homes to 35% of all insurance.

"Sound finan-ing of the purchase of existing homeg-i.s essential to a stabli national mortgage system," says EHA Commissioner Raymond M. Foley. 'In permitting FHA to continue insuring such mortgages, Congres-s has- recognized that the availabilitv of FHA-insured financing for existing homes is a stronlly stablizing factor in the market, esiecially under curreni conditions of inflation in real estate.

"Confining FHA insurance to new homes alone would have producld a permanent disequilibrium in the mortgage mark6t and disiriminated against buyers of older-type homes.

"This year the volume of FHA mortglage ins.urance,on existing -homes has been larger than ever before," Mr' Foley Jaid, "providing evidence that -the home-buying public is lookirrg to FHA as protection against excessive prices." '

Sittce the start of its program, the FHA has insured 550,000 mortgages on existing properties in a total amount of about $2,300,000,000.

Mr. Foiey pointed out that existing homes are the only ones availal,t.i to families who do noi qualify for veterans' preference in the purchase of new homes. The demand for homes of all kinds, he said, has resulted in heavy mortgage financing and has pushed up prices of older homes at an alarming rate.

When the National Housing Act was passed in June, 1934, it contained no termination date for insurance of mortgages on existing homes under Section 203 of Title II. Amendments to the Act in 1938 provided for termination of this authority on July l, 1939. This date was extended first to 1941, then Io 1944, and finally to t946. The new amendment strikes out the termination date, as well as removing the limitation as to the proportion of total insurance applicable to existing homes.

In accordance with requirements of Title II of the National Housing Act, mortgages insured must be on properties considered economically sound in accordance with appraisals of long-term values. Technicalily traine4 valuators, appraisers, and inspectors of a local FHA office examine the location, the neighborhood, and the entire mortgage transaction in considering a property to be financed with an FHA-insured mortgage

FH,A-insured mortgages for the purchase of existing homes designed for one to four families may amount to 8O% of. FHA's appraisal up to as much as $16,000 and may run for as long as 2O years. Maximum interest which may be charged by the lending institution is 4rl/o annually on declining balances, plus I of.lVo FHA mortgage insurance. Loans are repaid in regular monthly instailments which cover principal and interest, mortgage insurance premium, hazard insurance, and real estate taxes.