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COPY HEGilinSTBIJCIIOX flNANGE CORPORATION TC&SHINOTOX JESSE H JONES CHAIRMAN OF THE BOARD November 23, 1937 Dear Mr* President: Agreeable to your suggestion we had a meeting yesterday attended by Governor Eccles of the Federal Reserve Board, Stewart McDonald, Federal Housing Administrator, John Fahey, Chairman of the Home Owners1 Loan Corporation, and myself• Mr, McDonald and Mr* Eccles explained to us the proposed changes in the Federal Housing Act, and Mr* Eccles stated that he had gone over the proposed changes with you and that they met with your approval• The changes as reported result in a reduction of the total cost of FHA insured mortgage money from 64 per cent per annum to 5j per cent on homes costing |6,000 or less* 5i Ver cen<t f ° r *k e larger mortgages* 1* Insurance on homes costing under $6,000 and started before July, 1939, would be at the rate of one-quarter of 1 per cent per annumj 2* The down payment on homes costing $6,000 or less would be reduced from 20 per cent to 10 per cent; 3» $200,000 the cost on these Mortgages on new apartment buildings up to would be insured to the extent of 80 per cent of but not more than $1,000 per room. The insurance mortgages would be one-half of 1 per cent per annum; U* Groups of buildings could be insured up to 80 per cent for a contractor or builder whether the houses are to be sold or rented* The insurance rate would be one-half of 1 per cent, but as the houses are sold and released from the bulk mortgage the purchaser could get a 90 per cent insured mortgage. 5. Limited dividend corporations can have mortgages insured up to 80 per cent of the cost but not to exceed $1200 per room on buildings or groups of buildings, the loans running from $200,000 to $10,000,000* The rate of insurance would be one-half of 1 per cent and the interest not over 5 per cent* The President Page two 6* Where limited dividend borrowers become in default the holder of the mortgage may transfer i t to the Federal Housing Administration and get a government guaranteed certificate bearing 3 per cent} 7. National mortgage associations authorized under Title I I I of the Federal Housing Act would be authorized to insure twenty times their capital in debentures instead of twelve times as now provided; 8* After April 1, 1958, only mortgages will be eligible for insurance where the insurance i s applied for before the house i s constructed; 9* The present authority of the Housing Administrator to insure up to $1,000,000,000 mortgages on new homes and #1,000,000,000 on existing property will be changed, allowing a revolving amount of outstanding insured mortgages of #2,000,000,000 u n t i l the Act i s repealed; 10• The government to furnish up to #50,000,000 capital for national mortgage associations* The net of the changes i s that the over-all cost of interest and insurance will be 5^ per cent for the home of #6,000 or l e s s , and 5J- per cent for the larger loans* The $ | per cent will be on homes built prior to July, 1939* The Reconstruction Finance Corporation has authority to invest in the stock of the national mortgage associations when requested to do so by the President* I t i s a liberal program and should stimulate building, and with proper administration will cost the taxpayer very l i t t l e * Sincerely yours, (Signed) Jesse H# Jones Chairman The President The White House
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