Hon You Can Borruu lUonei lln Long Timi* Basis For 



IMeu Farm Kuildings, Hepairs^ Elertrir Wiring 



and Modprnization 



\J^^H1: experience of several II 

 ^^^-#^ nois farmers who convert 



nil- 

 rted 

 short-term mortgages and 

 notes into a single lien, insured by 

 the Federal Housing Administration, 

 bears out the growing acceptance ot 

 long-term amortized credit advances as 

 a' means of aiding farmers in their 

 financing problems. FHA loans have 

 enabled these borrowers to reduce their 

 necessary indebtedness in acc|uiring a 

 farm, to improve their homes and 

 other service buildings, and to make lor 

 more efficient production. 



The farm mortgage program of the 

 FHA, by way of explanation, is sup- 

 plementary to the short-term, property 

 improvement loans for rural property 

 which the FHA has been insuring for 

 several years. The farm provisions of 

 Title II of the National Housing Act. 

 however, are still so new that many 

 banks and lending agencies, as well 

 as potential borrowers, are not familiar 

 with them. 



The FHA, under recent amendments 

 to the National Housing Act. may in- 

 sure farm mortgages in sums of $16,- 

 000 for as long as 20 years, prniidei 

 at Igiist 15 percent of the face of the 

 loan is spent to repair or construct neu 

 farm homes, barns, and other sen ice 

 buildings or for the installation of cer- 

 tain types of permanent equipment. 



A farm is interpreted by the FHA 

 to mean real estate capable of produc- 

 ing a gross annual income of $330 in 

 cash, kind, or rent, or which derives 

 at least 25 percent of its rental value 

 from agricultural uses or at least 2*) 

 percent of its capital value from its 

 agricultural capacity. 



When a farmer near Peoria, Illinois, 

 who enhanced his income by trucking 

 produce for neighbors, saw the wide 

 difference in the price of corn when 

 it was fed to hogs over what it brought 

 as grain, he decided to pick up odd 

 lots of thin pigs over the territory 

 he covered and feed them out. An 

 obstacle to his plan, however, was the 

 lack of a hog house and a fenced hog 

 lot on the recently acquired 9''-acre 

 farm which he and his father operated. 



And to make matters worse a first 

 and second mortgage on the place made 

 it difficult for him to negotiate a loan 



to finance new building. Then, his 

 banker advised him that a single mort- 

 gage, insured by tlie FHA, would en- 

 able him to convert the two liens into 

 one long term loan, with sufficient 

 additional money for building pur- 

 poses. 



A loan of S.3500 was insured by the 

 FHA, $2800 of which paid off the old 

 mortgages. The remainder was suffi- 

 cient to build a new 20 x iO foot con- 

 crete Mock hog house, to fence a lot 

 adjoining the building, and to shingle 

 the roof of his home and repair the 

 ilamaged ceiling. 



Running for 20 years, the mortgage 

 is being paid off in semi-annual install- 

 ments of approximately $1 10. 



Similar is the experience of a farmer 

 near St. Marie, Illinois, who wanted to 

 pay off the mortgage he had negotiated 

 to purchase a rtO-acre farm adjoining 

 lO acres which he inherited. He dis- 

 covered that this lien and a short- 

 term note given to pay for some build- 

 ing repairs stood in the way of the 

 financing necessary to build a much 

 needed feeding shed and an adjoining 

 corn crib. Both liens were due in two 

 years, and even the possible profits 

 from the load of cattle he bought to 

 feed out would not cover all of his 

 debts. 



With colder weather coming on and 

 his corn ready to husk, the farmer was 

 apparently up against it. Then he 

 learned that under the farm mortgage 

 insurance plan of the FHA he could 

 borrow enough money to erect the 

 barn and crib and convert his loan 

 and mortgage into a single lien repay- 

 able in convenient installments over 

 ,1 period of years. 



An insured mortgage for Si. 000, due 

 in 10 years, and payable in semi-annual 

 installments of approximately $<>■>. was 

 sufficient to tide him over, permitting 

 conversion of the old mortg.ige. the 

 construction of a 1 1 x 20-foot feeding 

 shed and an adjoinint; corn crib measur- 

 ing S X 10 feet, and the repair of sev- 

 eral roofs. 



The ('■O-acre farm which a farmer 

 near Hillview, Illinois, bought two 

 years ago for $21 00 looked like a good 

 buy. but after he cleared away the brush 

 and weeds, repaired the fences, and 



otherwise put the place in shape, he 

 discovered that he needed a poultry 

 house and a cattle barn to carry out his 

 contemplated program. His dwelling 

 was also in need of repairs. 



Having applied all of his savings 

 and earnings on his mortgage in an 

 effort to clear it within its three-year 

 maturity, he figured that a short-term 

 property improvement credit loan, plus 

 the liens, would be more than he could 

 handle as a grain farmer. With cat- 

 tle and hogs to feed and a flock of 

 chickens, things might be different. 



His banker helped him solve his 

 problem by offering to lend him $1700, 

 provided the FHA would insure the 

 mortgage. An application was sub- 

 mitted and witliin a short time an in- 

 surance commitment was issued. The 

 loan, running 13 years, will be paid 

 off in semi-annual installments of $S3 



1 he $1~00 was sutfiiient to pay off 

 the remainder of the original mortgage, 

 some $~00, leaving enough to build 

 a 12 X 2 1-foot poultry house with a 

 concrete foundation, and a new 30 x 

 <0-foot barn, aKo with a concrete foun- 

 dation, and to repair a foundation of 

 his dwelling. Doing part of the work 

 hiniscli as provided by regulations of 

 the FHA, he was able to devote most 

 ot the money to the purchase of mate- 

 rials. 



Farmers whose buildings are in good 

 condition and who may find an insured 

 mortgage with its convenient method 

 of repayment an advantage, can still 

 meet the 15 percent construction or 

 repair requirement by the permanent 

 installation of certain types of equip- 

 ment such as silos, automatic water 

 systems, water storage tanks, either 

 pressure or gravity type, cisterns when 

 serving the home as well as other 

 buildings, barn ventilators, stanchions 

 and stalls, insulation, electric wiring 

 for power and light, fencing, sewerage 

 systems, and similar items. 



I'he III A d"ei not lend money. Ii 

 insures the mortgages made by banks, 

 building and loan associations, life in 

 suranie and mortg.ige companies, and 

 other lending agencies. Hence the 

 farmer or other person desiring an 

 insured mortgage should apply to an 

 approved lending insti'ution. If it is 

 willing to make the advance, the appli- 

 cation, together with an appraisal fee 

 of $5 per $1000 of the amount desired 

 (with a minimum ot $10), is forwarded 

 to the State FHA office. In Illinois, 

 the VH.\ has offices in Chicago. Fast 

 St. Louis, Aurora, Peoria. Rockford, 

 Springfield, and L'rbana. 



Interest on insured mortgages may 

 not amount to more than 5 percent. 

 In addition, a mortg.ige insurance pre- 

 mium of one-half of one percent is 



DECEMBER. 1938 



27 



