Rural Home Financing Through the Voluntary Home Mortgage Credit Program

Report Introduction: Improving the availability of credit for buyers of nonfarm homes in rural areas has been a persistent problem. Research by Economic Research Service economists and others has shown that rural people in certain areas have more difficulty getting adequate home mortgage financing than do residents of larger towns and cities. In the rural communities studied, there were fewer lenders, available loans were smaller relative to home values, and repayment periods were shorter. Large urban lending institutions usually did not serve the smaller towns because of higher operating costs, lack of local outlets, or greater risks. The records of the Voluntary Home Mortgage Credit Program (VHMCP) provide loan experience data for most sections of the country. Analysis of these records makes it possible to go beyond the earlier area studies and to discover the extent of the rural home loan credit problem, and how it varies among regions. The program was established by the Housing Act of 1954; legislative authority expired in October 1965. The objectives of the program were (1) to channel mortgage funds from financial centers to undersupplied areas of the housing market, especially to home buyers in small towns and cities; and (2) to channel mortgage funds to members of minority groups. This report is based on the operations of the program in carrying out the first of these two objectives during 1955-61, the program's most active period.