The ill-fated Home Construction Lending Act of 1901 (the HCLA) was int

The ill-fated Home Construction Lending Act of 1901 (the HCLA) was intended to help families pay for the construction of their homes. Americans were flocking to rented apartments in big cities (as were immigrants from around the world), and the biggest supporters of the HCLA were builders and real estate firms located in rural areas. Their hope was that a family that could afford to buy property and build a house in a rural area, as opposed to renting an inexpensive, but crowded and possibly dangerous, apartment in a city, would choose the former. Ostensibly, the HCLA would make it easier for potential homeowners to borrow by providing a federally backed guarantee to the lender, which at the time was more likely to be an insurance company than a bank. In other cases, the government would actually buy the property and pay for the construction of the house. A family could move in and make payments to the government over a much longer period than they could if they were repaying a commercial lender. Unlike the typical amortized 30-year mortgage of today, home loans at the time were usually repaid over three or perhaps five years, and the borrower made a balloon payment of the entire principal at the end of the term. An HCLA loan from the government could be repaid—interest and principal—over as many as 15 years, and did not require a large final payment.

Many lenders, however, did not actually want to have their loans guaranteed, and they resisted providing HCLA loans. For these companies, more profit could be realized by repossessing property when borrowers defaulted on their loans. As to the properties bought and resold by the government, the relatively small payments made at a fixed interest rate cost the government money, and this arrangement was abandoned.

In the same year that saw the passage of the HCLA, the Tenement House Act forced builders in New York to improve the condition of their apartments. Lighting, ventilation, and toilet facilities were improved, and the Tenement House Commission was established to enforce the new law. Other cities followed suit. Urban life was now more attractive to men and women who would have otherwise preferred to live in a rural area, but who needed the employment opportunities that the cities could provide.

1. What is the primary purpose of this passage?

(A) To describe why the HCLA was passed, and why it proved ineffective
(B) To provide an overview of the home building situation in the early 20th-century America
(C) To give an example of a misguided attempt to regulate the urban housing industry
(D) To contrast the HCLA with current housing and home construction laws
(E) To elaborate on the reasons that Americans and foreigners flocked to the big cities in the United States during the early 1900s


2. Which of the following would most appropriately conclude this passage?

(A) The HCLA could not withstand this migratory push from rural life to city life, and was repealed less than six years after becoming law.
(B) At the same time, the farming industry was increasingly in the hands of large corporations.
(C) Even those elected officials who voted against the HCLA were surprised by its unpopularity.
(D) Though jobs were to be found in the large American cities, adjusting to urban life was still a shock for many young people who arrived at this time.
(E) The societal effect of the Tenement Housing Act continues to this day.


3. According to the passage, one reason that the HCLA was expected to increase home construction in rural areas was that, under the HCLA, _______.

(A) interest rates were lower
(B) the borrower could make smaller payments
(C) insurance companies, not banks, loaned the money
(D) the borrower would not be able to default
(E) the net cost to the borrower was reduced


4. According to the passage, the repercussions of the Tenement Housing Act _______.

(A) provided more employment for people moving to cities from rural areas
(B) had little effect on builders outside of New York City
(C) was abandoned because of its cost to the federal government
(D) convinced some people to try to find work in the big cities of the United States
(E) led to the passage of the HCLA