Full text of Marriner S. Eccles Papers : Suggested Memorandum to the Interdepartmental Loan Committee, Box 27, Folder 2, Item 6

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

SUGGESTED MEMORANDUM TO THE INTERDEPARTMENTAL LOAN COFMITTEE

The Subcommittee on Housing is naturally concerned by the
continued relative inactivity of home-mortgage financing, and hence
by the failure of the regular lending agencies to provide a means
for the orderly renewal of existing home mortgages and for the revival of home construction.

This relative inactivity persists not-

withstanding the extent to which the Home Owners1 Loan Corporation
has relaxed the pressure of distress mortgages on the mortgage market,
and notwithstanding the inducements that the National Housing Act
was designed to offer to mortgage investors*
Looking toward the causes of this inactivity, the Subcommittee
believes that these causes are to be found partly in the prevalent
reluctance of lending agencies to make long-term commitments, and
partly by the failure of home owners and mortgage lenders alike to
take advantage of the intended benefits of the home-mortgage insurance
provided for in Title II of the National Housing Act.
As means of overcoming the reluctance of mortgage lenders
to make long-term commitments, and of giving an immediate impetus
to the conversion of existing home mortgages and to the making of
mortgage loans on new construction, the Subcommittee recommends that
certain changes be made in the Federal Reserve Act, in the National
Housing Act, and in the regulations of the Federal Housing Administration governing Title II of the National Housing Act. The changes
recommended are as follows:




Suggested Memorandum to the Interdepartmental Loan Committee -£




1. Amendment of the Federal Reserve Act to make mortgages insured under Title II of the National Housing Act
eligible for borrowing by the Federal reserve banks.
2.

Amendment of the National Housing Act to permit

approved mortgagees to sell insured mortgages to individual
and institutional investors as well as to national mortgage
associations.
5. Adoption by the Federal Housing Administration of
(a) a uniform maximum interest rate of 5 per cent, and
(b) a graduated scale of mortgage-insurance premiums based
on the ratio of original principal o^ -"ort^a^e GO appraised
value of property.
4.

Elimination by the Federal Housing Administration of

the population and capital limitations no?/ applicable to mortgagees, and adoption in lieu thereof of a regulation that would
make lending agencies supervised by a State or Federal authority, including particularly all members of Federal Deposit
Insurance Corporation, eligible mortgagees.
5#

Simplification of the regulations of the Federal

Housing Administration in such a manner as (a) to permit approved mortgagees to pass on the credit of mortgagors, (b) to
place a substantial reliance on approved mortgagees in the
making of appraisals, unless the circumstances are exceptional,
and (c) to leave to the discretion of approved mortgagees whether

Suggested Memorandum to the Interdepartmental Loan Committee -3

amortization payments in any given instance shall be required serai-annually, quarterly, or monthly, instead of
making monthly collections by mortgagees mandatory in all
cases as under the present regulations,
6.

Suspension by the Federal Housing Administration of

the operation of Title H I of the National Housing Act pending a careful study of the considerations, some relating to
the present form of the Title and some to prevailing conditions in the mortgage market, that apparently make extensive
amendment or complete revision of this Title necessary.
These several steps impress the Subcommittee on Housing
as the most important that might be taken at this time in the interest
of home-mortgage financing. Once they were taken, the Interdepartmental
Loan Committee might well consider recommending to the Comptroller of
the Currency, the Federal Reserve Board, and the Federal Deposit Insurance Corporation that they urge all banks under their supervision
to begin the prompt conversion of their mortgage portfolios in accordance
with the facilities and safeguards that would then be available to them.