History
During the Great Depression, the banking system failed, causing a drastic decrease in home loans and ownership. At this time, most home mortgages were short-term (three to five years), no amortization, balloon instruments at loan-to-value (LTV) ratios below fifty to sixty percent. The banking crisis of the 1930s forced all lenders to retrieve due mortgages. Refinancing was not available, and many borrowers, now unemployed, were unable to make mortgage payments. Consequently, many homes were foreclosed, causing the housing market to plummet. Banks collected the loan collateral (foreclosed homes) but the low property values resulted in a relative lack of assets. Because there was little faith in the backing of the U.S. government, few loans were issued and few new homes were purchased.
In 1934, the federal banking system was restructured. The National Housing Act of 1934 was passed and the Federal Housing Administration was created. Its intent was to regulate the rate of interest and the terms of mortgages that it insured. These new lending practices increased the number of people who could afford a down payment on a house and monthly debt service payments on a mortgage, thereby also increasing the size of the market for single-family homes.
The FHA calculated appraisal value based on eight criteria and directed its agents to lend more for higher appraised projects, up to a maximum cap. The two most important were "Relative Economic Stability," which constituted 40% of appraisal value, and "Protection from adverse influences," which made up another 20%.
During World War II, the FHA financed a number of worker's housing projects including the Kensington Gardens Apartment Complex in Buffalo, New York.
Read more about this topic: Federal Housing Administration
Famous quotes containing the word history:
“No one is ahead of his time, it is only that the particular variety of creating his time is the one that his contemporaries who are also creating their own time refuse to accept.... For a very long time everybody refuses and then almost without a pause almost everybody accepts. In the history of the refused in the arts and literature the rapidity of the change is always startling.”
—Gertrude Stein (1874–1946)
“Those who weep for the happy periods which they encounter in history acknowledge what they want; not the alleviation but the silencing of misery.”
—Albert Camus (1913–1960)
“Like their personal lives, women’s history is fragmented, interrupted; a shadow history of human beings whose existence has been shaped by the efforts and the demands of others.”
—Elizabeth Janeway (b. 1913)