THURSDAY. AUGUST 23. 1962
MEDFORD MAIL TRIBUNE. MEDFORD. OREGON
Home Foreclosures Increase,
To
Editor's N o t Foreclo
sures of horn mortgages
have climbed sharply since
1959 a period of prosper
ity but government and
housing industry officials
see no cause for undue
alarm. The reasons why are
explained in the following
exclusive dispatch.
By EDWARD COWAN
WashingtorMUPll-An aircraft
factory's contract for bomb
ers is not renewed and 800
men are laid off.
A child is afflicted by a
crippling disease and must
have years of costly medical
attention.
A marriage goes on the
rocks and the family income
of two wage earners is split.
Each case is different. Yet
each shares somthing in com
mon: An unforeseen turn of
the wheel of fate that cuts
deeply into a home owner's
income. He falls behind in his
mortgage payments. One
month, two months, three
months, six months. Until
even the most sympathetic
lender runs out of patience.
The lender's money is tied
up. He has his own obliga
tions to meet, so he fore
closes. Mortgages Foreclosed
In 1061, about 200 mort
gages on non-farm properties
were foreclosed every day.
The total of 73.074 for the
year set the highest mark
since 75,556 In 1940, tail end
of the Great Depression.
Foreclosure means simply
that the lender has exercised
his legal rights and takes
over a property for non-payment
on the loan.
The borrower probably
loses whatever equity he ac
quired through his down pay
ment and monthly payments.
With the liberal terms avail
able on a government-backed
loan, many home buyers have
little or no equity in their
houses.
A down payment of only
$450 is needed to buy a $15,
000 house with a mortgage
insured by the Federal Hous
ing Administration. No down
payment is necessary for an
cx-servlceman with a loan
guaranteed by the Veterans
Administration. Low monthly
payments consist mostly of
interest, so that reduction of
principal is slight. Hence,
equity builds up slowly.
These liberal terms explain
the modern-day walkaways
home owners who have
practically nothing invested
in their house. Behind in
their payments, they drop the
keys in the mail box or on the
back steps, hire a moving van
and pull out.
They don't bother to sell
and they don't bother to tell
the lender they are abandon
ing the house. They may not
even cut off milk and news
paper deliveries.
Nobody knows exactly how
many "walkaways" there
were last year. But by all ac
counts there were more than
ever before, especially in
Florida and Texas, where
there is an oversupply of new
houses.
"Walkaways" are only one
aspect of foreclosures but
they are a symptom. The ba
sic fact is that the number of
foreclosures has risen every
year since it dipped to a post
war low of 18,135 in 1052.
The increase was gradual
until the late 1050's when it
began to speed up. Last year
it leaped by 22,000. A fur
ther increase in 1962, per
haps a smaller one than in
1961, is indicated by figures
for the first few months of
the year.
Opinion among government
officials who watch these fig
ures Is that the problem has
not become very serious. Spe
cific causes of the recent in
creases as distinguished
from general economic dis
tress are one reason for the
lack of worry.
Another is that In relation
to home ownership, foreclo
sures are few. They re up
but still pretty darn low in
relation to what we saw in
the 1930's," Nat Rogg. econo
mics director of the National
Association of Home Build
ers, told UPI.
Millions Fewer
In 1932-33, when there were
millions fewer homes than
now, foreclosures averaged
250,000 a year.
What percentage that was
of all homes has not been
computed by the government,
But it was staggering in rela
tion to the 1961 rate of 36
homes foreclosed in every
10,000. In I860, however, the
rate was only 27 per 10,000.
Housing experts are gradu
ally hopeful that the 1959-61
climb is tapering off. The lat
est available report from the
mortgage bankers association
finds "no substantial change"
in April, May and June from
the preceding three months.
Officials are aware, how
ever, that the economy may
he sliding into a recession.
A business slump could wipe
out the jobs of some of the 16
million home owners with
mortgages and perhaps force
some of them to surrender
their homes.
Limited Cause
So far, housing and finan
cial experts say, general
economic distress has been
only a limited cause of the
rise in home foreclosures. Al
lan F. Thornton, the FHA's
research director, estimates
that only 25 to 30 per cent of
FHA foreclosures have
stemmed directly from loss
of income. He believes that
shoddy family budgeting,
marital difficulties, job and
military reassignment
changes and low, low down
payments have figured heav
ily in the upsurge.
Cutting across all of these
is a leveling off in prices in
the past few years. The hous
ing shortage days of the
immediate post-war years
brought with them substan
tial sometimes spectacular
increases in home prices.
Inflation made it possible for
the home owner in distress to
sell his house, pay off his
debt, get back his equity and
have something left over.
"No longer will inflation
and need provide a false pro
tection for the home buyers,"
FHA Commissioner Neal J.
Hardy said.
Held by FHA, VA
Foreclosed property held
by both the FHA and VA are
bunched in certain areas.
Florida and Texas bulk
large on the lists of both
agencies. Speculative over
building, military shifts, cut
backs in oil production all
have contributed to the surge
of foreclosures in those two
states.
Atlanta and Savannah, Ga.,
Wichita, Kan., and Ports
mouth, Ohio, are other areas
where foreclosures are tied to
cuts in federal spending.
In Detroit, where automa
tion has made It possible ior
fewer workers to turn out
more automobiles, FHA held
1,447 properties at mid-year
and VA has a whopping
3,179, more than in any other
VA district.
Government officials said it
is this geographical bunching
of foreclosures and the some
times special causes of local
economic distress that prove
there is no general foreclosure
problem.
Shift In Market
Contributing to the list of
delinquent home owners has
been a shift to a buyer's mar
ket plus a surplus of home
loan funds. Salesmen some
times have "sold" houses to
buyers who could not afford
them. Lenders, eager to put
idle funds to work, also have
some questionable June 30.
Encouraging
Officials say that all of this
is encouraging. It may indi
cate that the rapid climb of
foreclosures of the past two
made
loans.'
Both FHA and VA have
ordered their field offices and
the commercial firms which
make the credit investigations
to be more cautious.
Neither agency, however,
apologizes for its liberal
terms. And neither is consid
ering tightening them.
"The great . percentage of
people are financially rcspon
sible and will strive to meet
their obligations," said John
M. Dervan, director of VA's
loan guaranty service.
Pointing out that only 91,.
000 or 1.8 per cent, of the 5.8
million loans backed by VA
since 1944 have gone to fore
closure, Dervan argued the
program should be continued
for the sake of the 98 buyers
in every 100 who pay on their
mortgages.
Benefits Great
Paul E. Ferrero, deputy
commissioner of FHA, con
tends that "the benefits of ex
pansion of home ownership
arc great and far outweigh
the cost of foreclosures."
Evidence of a possible lev
eling off in the foreclosure
barometer is offered by both
agencies and is supported by
the mortgage bankers. FHA
took title to fewer properties
in May than in April. De
faults at the end of June ap
proximated 40,000 as against
43,000 at the end of March.
VA's defaults since Febru
ary have been running below
the year-ago level. They dip
ped from a high of 59,000 in
February to 55,000 as of
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ment to new conditions:
tapering off of inflation,
lo w e r down payments and
basic shifts in military
spending.
The abnormally low fore-
years was chiefly an adjust-' closure levels of the early and
middle 1950 s probaby will
not return. Lenders and home
builders will have to learn to
do business in a buyer's mar
ket, at least for a while,
without making imprudent
sales and loans. The buyer
who figured inflation would
bail him out must think
again.
These are the happier pos
sibilities. They look like prob
abilities. But they are not
certainties.
REPEAT BUSINESS-Rlrs. Jo Pearson seems She said it is nothing new since this was the
undisturbed by the car which crashed sixth car in 10 years to come through the
through the plate glass window of the glass. (UPI)
flower shop she operates in Los Angeles.
Priest Attempts To Aid Poverty Stricken Indians
By IRWIN TALBOT
United Press International
Madison, Wis. - IIIHI - Fath
er Daniel McLcllcn calls it
"guerrilla diplomacy'' but it
really boils down to direct
aid fur poverty-stricken La
tin Americans.
Whatever it's called, Fath
er McClcllen sees it as a
means of combatting commu
nists. Father McClcllen has been
up against them in Peru. He
said they are tough, hard
core communists, highly
trained in Prague. The Uni
ted States has given Father
McClcllen s:U0,000 to take
thorn on.
He will
expand a
usv the nullify to
school in Lima.
Peru. Lalin Americans will
be trained there in setting up
credit unions in Central and
South America.
''The communists realize
this is the kind of program
they have to wipe out," the
priest said. "They need mis
cry to live and oppose any
thing that might end it."
South Americans are "sus
picious of everything until
they see it working," Father
McClcllen said. Credit unions
have worked there, he said,
and he has been flooded with
requests for information.
Money To Work
His aim is to "cot small
sums of money working over
a whole country." He already
has set up 1175 erodi' unions
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in Peru, where ''98 per cent
of the people can't get credit"
by any other means. A credit
union establishes credit for
its members, persons who
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Members also receive inter
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Father McClcllen said. Not
enough trickles down to
those who need it. He raid
South Americans want face-to-face
help now, no' plans.
Father McClcllen. who is
the director for all Peruvian
credit unions, attended the
Credit Union National asso
ciation (C U N A) director's
meeting here recently.
At that time, the V. S.
Government announced a
giant of $:) 10.000 to CUNA
for the next two years.
Father McClollan began the
first errdit union seven years
aeo in Punto, an Indian com
munity about 13.000 feet
above sea level. "The people
there live in poverty," lie
said. "The weather is cold
and t he land over-grazed.
Don't Know Difference
"The Indians don't know
the differences between dem
ocracy and communism, they
just know they're hungry
and it's hard to survive."
"If we don't make this
foreign aid work, they are
going to say, 'there's nothing
else to do but go commu
nis!.' '' he said.
To show how effective di
rect aid can he. Father Mc
Clcllen told of a young In
dian who became a big suc
cess usmy credit union loans.
The 18 year-old borrowed
a mall amount of money for
onion seed. He went to Lima
and bought better seed for
less than farmers in his area
After selling the seed, the boy
paid off his loan, then bor
rowed more.
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