1941 is t'Buyer's Market," Says Governor of Federal Home Loan Bank System--Ample Funds Available as Construction Gains

Washington, Jan. l.-The average American home seeker of 1941 can compare his situation with that which existed only a decade ago and reflect:

He can make a small down payment and obtain a monthly payment, amortized mortgage extending over 15 to 25 years, instead of a "lump" mortgage which must be paid off or renewed, with heavy fees, in three to five years.

He will be charged the lowest interest rate in history on his mortgage.

He has no need for a second mortgage, rvith its extortionate interest rate of 8 to 12 per cent-or a third, at an interest rate of 10 to 15 per cent.

He can obtain protective services which assure him a Detter quality home than ever before.

But even that's not the whole story. He can deal with an institution which can protect him to a degree impossible a decade ago--because that institution, once utterly dependent on its own resources, now has ample credit reserves to fall back upon.

"The whole picture of home financing has changed," declared James Twohy, Governor of the Federal Home Loan Bank System, which provides a credit reservoir for 3,900 thrift and home-financing institutions.

"ft's a home buyer's market, the best in the country's history. The depression brought plenty of grief, but it also resulted in benefits which have set new standards in home ownership. The task of bringing construction costs down to a level where all those of lower income can get the kind of homes they want is far from completed, but the costs of financing have been reduced beyond our fondest hopes of only a few years ago.

. "The results already are apparent. In 1940, it is estimated that the savings and loan associations of the Bank System loaned $1,010,000,000 for the financing of American urban homes. About $360,000,000 of this went for nerv construction. These figures break all records for the institutions of the System:

Comparative Bank System member figures for previous years were:

"Savings and loan associations, as in the past, have been leaders in the financing of American homes," said Mr. Twohy. "But other institutions also have increased their business, as a result of a renewed confidence of the public in home ownership. It is estimated by the U. S. 'Department of Labor that 545,00O new non-farm homes, costing $1,833,0m,000, were constructed in 194O, as compared with 465,000 homes, costing $1,591,000,000, in 1939, and 347,W) homes, costing $1,24,m0,000 in 1938.

"The market hasn't been touched as yet. There is a billion dollars available right now for home financing from member institutions of the Bank System, and as much more can be obtained when necessary for any expansion the future may bring. The savings of those of small and moderate means are flowing into thrift and home-financing institutions at an ever-increasing rate.

"The estimated assets of the member institutions of the Bank System today total $5,050,000,000 as compared to $4,741,000,000 at the end of 1939, and $4,432,000,000 at the end of 1938. This is an increase of 6.5 per cent in 194O over 1939, and an increase ol 7 per cent in 1939 over 1938. Private share investments in savings and loan associations of the System jumped from $2,717,000,000 in 1938 to an estimated $3,190,000,000 in 19CI, an increase of' 17 per cent."

Long before the depression, leaders of the home-financing industry realized that their institutions were isolated units which needed some system of reserves for their own protection and the protection of their investors, Mr. Twohy said. But nothing was done until the crisis was reached in t932.

The Federal Home Loan Bank System then was established. It was too late for it to function in the emergency' however, and it was not until the Home Owners' Loan Corporation took over a large burden of defaulted mortgages and some measure of stability was attained that the Bank System really began to fulfill its purpose. Since 1933, it has grown steadily and today embraces the leading thrift and home-financing institutions of the country.

The Government invested approximately $125,000,000 to establish the 12 Regional Banks of the Bank System; other funds were obtained from purchases of stock by member institutions.

The 12 Banks, located in strategic population centers, now have capital and resources totaling approximately $300,000,000. Funds can be transferred from localities where there is an excess to those where money is needed. Since the establishment of the Banks, they have advanced over $700,000,00O to their member institutions, $50O,000,000 of which has been repaid.

The Banks recently issued debentures totaling $67,000,000, which were greatly oversubscribed. There is an additional debenture issue of $23,500,000 outstanding. All other issues-all oversubscribed as soon as they were announced-have been retired.

"The effects of the Bank System, of course, are not yet apparent to the layman," said Mr. Twohy, "but its development affects every home owner. Through it, the l.rome-financing industry has been made secure-and in a nation where the home mortgage debt amounts to more than $18,000,000,000, the entire economy is threatened unless the home-financing structure is sound.

"There is no better opportunity for cooperation between industry and Government than in the building of good, sound homes at reasonable prices. While the Government must subsidize housing for those who cannot shelter themselves properly, the great job of providing homes for the American people is a function of private industry. The organization of credit reserves for private industry, to permit its expansion and protect it in emergencies, is the Government's primary function as represented by the Bank System.

"We all still have a job before us. Home-financing institutions constantly are offering more protective services to home seekers-better design, the use of better materials, architectural supervision of construction. There is still, however, a real need for the development of soundly constructed homes for the great mass of people whose income limits them to structures costing $2500 and less. This is our job for the f,uture."

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