Survey of Federal Legislation Affecting Private Home Financing since 1932

Abstract

Reliable estimates indicate that between 192I and I93I the amount of the indebtedness on urban real estate in the United States more than trebled; this debt per capita more than doubled; the ratio of this debt of real estate values more than trebled; and the ratio of the annual charges on this debt to the national income more than doubled.' The burden of the debt was, of course, increased by the decline in income and property values during the depression. By I932 the number of foreclosures in urban areas, which had risen steadily even during the years of prosperity, had mounted to nearly four times the 1926 level.2 New lending had practically ceased. Such demand for loans as existed arose almost entirely from the necessity of refinancing existing obligations, and lending institutions, pressed for liquidity, were unable to meet even this demand. These developments focused attention on certain basic defects which had long existed in this portion of the credit system. The most important of these defects may be listed as follows:3 (i) the instability of real estate values, resulting from population movements and enhanced by the flow of speculative funds into and out of the real estate market, which has caused lenders to restrict their first mortgage loans to rather low percentages of appraised property values; (2) the unsatisfactory, costly, and frequently illegal system of second and third mortgages, resulting from the fact that many families attempting home ownership have not been able to provide from their own funds the difference between the amount of