After the Cheeseboxes

Federal Housing Chief Albert M. Cole, who in November predicted 1,200,000 housing starts for 1956, last week stood up before the National Association of Home Builders in Chicago and cheerfully ate his words. Said he: "I acknowledge that I was too conservative." Cole's new prediction: 1,300,000 starts, only a shade under 1955.

One reason behind Cole's reappraisal was a series of moves by the U.S. Government to ease housing credit. Explained Under Secretary of the Treasury W. Randolph Burgess: "The threat of overexpansion has subsided." Following the increase in the repayment period of FHA-and VA-secured home loans, the Federal National Mortgage Association (known colloquially as "Fannie May") last week announced a "mortgage repurchase" plan that will free more money for home loans, get more banks and other lenders to use Fannie May's services.

Fannie May buys mortgages from lenders at times and in areas where loan money is scarce, resells the mortgages when and where loan money is plentiful. But since mortgages are a good long-term source of income, lenders have often been reluctant to sell. Under the new plan a seller can get an option to buy his mortgage back within nine months.

The lender is also required to fork out 3% of the unpaid principal in order to buy Fannie May's stock. This requirement, set up in a 1954 move to make Fannie May's "secondary market" operations eventually privately financed, applies any time a lender sells the agency a mortgage. Last week stockholders, who own 25,820 shares, got a pleasant surprise. Fannie May declared a 17-c- stock dividend, its first. The $100-par shares, selling on the over-the-counter market at around $55, are expected to hit $75.

In addition to easing credit, the Federal Housing Administration hopes to push the home-improvement business in 1956 by upping the maximum Title I (repair and modernization) loan from $2,500 to $3,500 and the maximum repayment period from three to five years. Home improvement alone, guessed one builder, might be a $10 billion industry this year. Housing men also expect more higher-priced houses will be built. Said one builder: "People can afford to buy better houses, and we have had to raise standards and prices after ten years of building cheeseboxes."

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