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

Question

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Passage # 278, Date : 19-Aug-2019
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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

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 
 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 
 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 
 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

Kurtosis · Answer

1) What is the primary purpose of this passage?

The passage introduces HCLA, explains few repayment methods and later states that HCLA did not prove to be effective.

Answer: A

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. - Correct - Can conclude the passage
(B) At the same time, the farming industry was increasingly in the hands of large corporations. - Incorrect. Farming industry?
(C) Even those elected officials who voted against the HCLA were surprised by its unpopularity. - Incorrect. Self contradictory option and cannot be concluded. If they vote against HCLA they need not be surprised with 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. - Incorrect. Opposite
(E) The societal effect of the Tenement Housing Act continues to this day. - Incorrect - Out of scope.

Answer: A

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

Refer: "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."

Answer: B

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

Refer: "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."

Answer: D

FieryLeo · Answer

Veritas ,

Q2 : Which of the following would most appropriately conclude this passage?

I did not understand how A can conclude the whole passage?

Conclusion is derived by the facts and supporting reasonings.Option A not only present new information  but also gives another reason to believe why HCLA did not work.

Second paragraph gives us a reason to conclude that the arrangement of payment made this strategy a less profitable strategy and third para gives us an external factor ( a new law) which indirectly put down HCLA.

How can a answer with loads of new information conclude the above informations?

CrackverbalGMAT · Answer

Here conclusion does not mean the main point of the passage. But it means something that logically follows from the passage.
For answering such questions you have to look at the last paragraph of the passage and see what logically follows.

It talks about the Tenement Act and improvement in urban living conditions. This made urban life more attractive.
The previous paragraph talks about how HCLA proved unpopular with lenders and the failure of government mortgage plans for HCLA.
something that follows this must talk about the failure of HCLA. (We already know that it was ill-fated from the very first sentence of the passage.) 
Only answer option that does this is A.
B - talks about a completely new topic. Does not logically follow from the discussion in the passage.
C - Incorrect. This option basically states that the act proved so unpopular that even those who voted against it were surprised. This sentence then, logically, must be preceded by something that talks about the unpopularity of the Act.
D - Just as option B, this option changes the flow.
E - This cannot follow from the 2nd and 3rd paragraphs. they talk about the various reasons for the failure of HCLA. Logically, what follows these paragraphs must be when the Act failed.

MorningRunner · Answer

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

Not sure how B is the answer... No where in the passage it is mentioned that the borrower would pay smaller amount.. 
It is just mentioned that the repayment could be done in much longer duration of 15yrs and it is not necessary to make larger lump-sum amount at the end.. This doesn't mean borrower could make smaller payment.

Am I missing something?
Can anyone highlight why exactly borrower could make smaller payments?

Thanks in advance....

Vinayak Shenoy · Answer

Hi morningrunner,
These are the lines which will give you the answer
 "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."
These lines states that families could pay smaller amounts while repaying loans.

MorningRunner · Answer

Thanks Vinayak..
But these sentences donot say that people could make smaller payments... It just says that it is not necessary to make larger payments(entire principle) at the end. 
It may be possible that borrowers could make equal monthly payments to avoid burden in the end. But the total amount repaid was not small!

Vinayak Shenoy · Answer

Hi morningrunner,
If you read closely "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." this line suggests that you can longer duration to pay the loan. In the above question the borrowing family is generalized as a borrower.
In the detail questions such as above, answers can be of the reworded form or cut copy form from the passage. Usually it is the former on GMAT. So you got to read closely. 
Also consider the options.
(A) interest rates were lower--- irrelevant in the question context. Not mentioned in the passage. 
(B) the borrower could make smaller payments--- Correct answer (re-worded from passage)
(C) insurance companies, not banks, loaned the money--- Talks in line but not the question context.
(D) the borrower would not be able to default--- Mentioned in the later paragraghs. For detail question type you got to find answer pertaining to context of the question.
(E) the net cost to the borrower was reduced--- Not mentioned in the passage. out

mbaprep2016 · Answer

I got all right, except second ,in 10 min. about second no where its mentioned HCLA repealed less than six years after becoming law.

please explain second

Gnpth · Answer

2nd question is an inference. So basically the para-2 and 3 says the reason for the demise of HCLA. And also tells us when it happened. So A is correct.

KanakGarg · Answer

Can someone help on #4 (options A and D), Though author did not mention the THA provided employment or convinced, it only facilitated. then how to reach to the answer.

GMATYoda · Answer

The last sentence in the 3rd Paragraph of the passage mentions:
 Urban life was now more attractive to men and women who would have otherwise preferred to live in a rural area,

Hence it is safe to infer that " (D) convinced some people to try to find work in the big cities of the United States "

gmatconqueror2018 · Answer

Good passage, lots of detail. 4/4 in 10:52. Solving passages in a shorter period of time takes practice but NEVER jepordize accuracy for an increase in a speed. That has to come naturally. Some passages, depending on the content and questions, might take longer than others. I had to think a few seconds before confirming my answers. Questions 1 and 3 were the biggest time killers for me. Not sure how I even considered choice C for question 1 to be a close contender! If anyone has questions, I'd be happy to help.

JS1290 · Answer

Could someone please explain why option B is incorrect for Q1? I was stuck between A and B and ended up picking option B instead. 
Thanks!

gmatconqueror2018 · Answer

Choice B talks about an overview. The passage goes in greater detail than just an overview. The author talks about why the HCLA was passed and how the act was not able to accomplish what it intended to do. Choice A closely resembles this. Choice B is incorrect because a general overview of a housing situation is incomplete. Hope this helps.

jkbk1732 · Answer

Explanations:

1. What is the primary purpose of this passage?

(A) To describe why the HCLA was passed, and why it proved ineffective -  The first para talks about why HCLA was passed. The second one talks about its cons. And the third one talks about another law which made ppl to migrate to city. 
(B) To provide an overview of the home building situation in the early 20th-century America -  The passage provides a detailed view. In particular about HCLA. So, not in general about the home building situation 
(C) To give an example of a misguided attempt to regulate the urban housing industry -  The passage was about rural housing 
(D) To contrast the HCLA with current housing and home construction laws -  No current laws were talked about in the passage 
(E) To elaborate on the reasons that Americans and foreigners  flocked  to the big cities in the United States during the early 1900s -  Flocked is an extreme word. And this passage was more concerned about HCLA.

(A) is the answer.

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

The conclusion should say that HCLA failed or something along that lines.

(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. -  This falls in line 
(B) At the same time, the farming industry was increasingly in the hands of large corporations. -  Inserts new idea about farming 
(C) Even those elected officials who voted against the HCLA were surprised by its unpopularity. -  Inserts a new idea regd elected officials. And those who voted against generally shouldn't be surprised by its unpopularity. Self-contradicting  
(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. -  Whether it was a shock to young ppl is not the point of the passage 
(E) The societal effect of the Tenement Housing Act continues to this day. -  This seems relevant. But most passage talked about HCLA and if this option said that THA continues to this day and HCLA was repealed then it can be considered.

(A) is the answer.

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

1st Para:  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.

(A) interest rates were lower -  intereset was never talked about in the passage 
(B) the borrower could make smaller payments -  HCLA increased the loan tenure and decreased the amount paid. And hence, this was expected to increase home construction 
(C) insurance companies, not banks, loaned the money -  True but The source was not the problem 
(D) the borrower would not be able to default -  Out of scope 
(E) the net cost to the borrower was reduced -  We never know whether net cost increased or decreased from the passage.

(B) is the answer.

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

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.

(A) provided more employment for people moving to cities from rural areas -  Opposite of the repercussion of the act. The act made moving from rural to cities more attractive. 
(B) had little effect on builders outside of New York City -  We dont know about this 
(C) was abandoned because of its cost to the federal government -  Out of scope 
(D) convinced some people to try to find work in the big cities of the United States -  According to the passage quoted above, this is sensible. Since moving to the city was more attractive, it could have convinced people to move to the city to find work. 
(E) led to the passage of the HCLA -  HCLA was passed before that

(D) is the answer.

-------------------------------------
Kudos are appreciated.

jigar16496 · Answer

question no 2 explanation

Sajjad1994 · Answer

Explanation 2. Which of the following would most appropriately conclude this passage? Difficulty Level: 650-700 Explanation The passage primarily discusses the ill-fated Home Construction Lending Act (HCLA) of 1901, its purpose, implementation, challenges, and the changing dynamics of urban and rural life. The concluding statement should logically connect to this main topic and provide a closing thought that summarizes or adds to the information presented. Option (A) is the most appropriate conclusion because it directly relates to the HCLA and its outcome. The passage discusses how the HCLA was intended to encourage families to build homes in rural areas but faced resistance from lenders and practical challenges. This option appropriately concludes by highlighting that the HCLA could not withstand the migration of people from rural areas to cities and was eventually repealed due to its inability to address this societal shift. The other options do not provide a suitable conclusion to the passage: (B) This option introduces a new topic about the farming industry that is not directly related to the main discussion of the HCLA and urbanization. (C) This option focuses on the surprise of elected officials, which is not the central theme of the passage. (D) This option introduces information about adjusting to urban life that is not elaborated on in the passage. (E) This option shifts the focus to the societal effect of the Tenement Housing Act, which is not the primary subject of the passage Answer: A Also explained here https://gmatclub.com/forum/the-ill-fate ... l#p1742326 https://gmatclub.com/forum/the-ill-fate ... l#p2343166

VerbalBot · Answer

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

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

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