Masters Theses

Date of Award


Degree Type


Degree Name

Master of Science


Agricultural Economics

Major Professor

B. R. McManus

Committee Members

Charles M. Cuskaden, John R. Brooker


Inadequate housing in rural areas of Tennessee has been a problem for many years. Increases in the quantity and quality of housing must be preceded by increases in the availability and volume of mortgage credit. These increases must be accomplished through firms operating in rural areas. The purpose of this study was to: (1) identify residential credit suppliers in non-SMSA counties in Tennessee; (2) determine the status of the rural home mortgage credit system by examining the relation-ship between the volume of total assets, as a measure of size, of primary credit institutions and selected economic structural variables; and (3) develop alternative delivery systems to facilitate the flow of home mortgage credit from lenders to borrowers in rural areas. Data were obtained by survey and from year-end financial reports of commercial banks and savings and loan associations in rural areas. Although all of the non-SMSA banks and S&L's were surveyed, 85 (35 per cent) of the banks and 23 (46 percent) of the S&L's responded. Year-end financial reports for all non-SMSA banks and S&L's were obtained from the Federal Deposit Insurance Corporation and the Federal Home Loan Bank Board, respectively. In terms of number, total assets, and volume of mortgage credit, banks were the dominant rural credit supplier in non-SMSA counties in Tennessee. S&L's were second. Other institutions such as the Federal Land Banks, Production Credit Associations, Tennessee Housing Development Agency, Federal Home Loan Bank Board, Federal Home Loan Mortgage Corpora-tion, and others were also represented. In general, bank lenders tended to report more conservative atti-tudes than S&L lenders, with respect to loan policies concerning alterna-tive residential mortgage loans. S&L lenders appeared to be more involved with extending home mortgage credit than banks. S&L's had a much higher portion of their assets invested in home mortgages than banks. S&L's had the capability of extending conventional mortgage home loans with relatively longer terms. Although 240 (69 percent) of the 344 Tennessee banks were in non- SMSA counties, these banks only accounted for 47 percent of the bank assets. Similarly, 52 (54 percent) of the 96 Tennessee S&L's were in non-SMSA counties and controlled only 21 percent of the S&L assets. Total assets were not determined to be significantly related to selected structural variables for banks or S&L's in 1979. Therefore, the size was not indicative of the proportion of total assets a bank had invested in home mortgage loans, demanded deposits, savings, or time deposits. As for S&L's, size was not related to the proportion of total assets invested in conventional loans or savings. The usual interest charged on conventional loans, usual repayment period allowed on conven-tional loans, usual percentage of purchase price required as down payment on conventional loans, average closing cost, and escrow were also unre-lated to the size of either banks or S&L's. The study concludes that commercial banks and S&L's were the major component in the home mortgage credit system in non-SMSA areas in Tennessee in 1979. Of these two components, banks were considerably more available to residents in non-SMSA counties; however, S&L's appeared to be more willing to make alternative types of loans and loans for various types of housing. The percentage of assets loaned for home mortgages was relatively the same for the different size banks and S&L's respectively. Unique marketing efforts designed specifically for rural residents could yield benefits for both lenders and borrowers. Simplifying lending procedures, program orientation for lending personnel, employing basic public relations techniques, and, in general, more effective and effi-cient lending could reduce processing time and effort. Thereby, public and private lending programs could be streamlined, reducing the time and cost of loans made to borrowers.

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