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total, the�e areas account for approximately 40 per cent of the total residential area in Minneapolis and Saint F'aul. It is al�o reasoruable to assurrie that the drying up of mortgage funds exiends b�yond �he cie�ig- na.ted boundaries int� many of the "tranaition areas". Viewed from thi� per�pective it is appaxent that lending policies and pract�ces in these areas are of tremendous concern. The me�ropolitan implications axe substantial, particu�arly for the redistribution mf popu- lation, Will these polici�s and practices be significantly altered? What effect will the Title I home improvements loan program emb�died in the 1961 Huusing Act �ave upon the lend�r's attitude? '�hrough interviews, t�ntative answe�s to thes� and relat�d qusstions were sought. Results af the inquiries strongly indicate that the Title I program will not be a.ttractive to lendei�= �our reas�ns for the lenders' at�itude emergPd: the program s ixe maximum interest rate, 2) the lender's ability to glace first niortgages elsewhere at higher returns, 3) the lender's reluc- tance to place loaris in rehabilitati.on areas r and 4) the availability of open end mortgages and Section 220 financing (special mortgage insur- ance to promote new construciion nr rehabilitation of dwellings in urban renewal project areas). Along with these specific reasans is the general background anel orientation of rriost lenders. So much of the lende.r's training, way of viewing propertv, and experience is contrary to the vi�wpoint neces�ary for investing in decli�ing area5. It should be acknowl,�dged that there i5 relatively little experience indicating the results of substantial r. enabilitation investments in a deteriorated area. This means that the lei�der's way of thinking must be reorientecl before he can be expected to enter aggressively into this aspect of lending. Brat the difficulties do not lie entirely with the lender's back�round and experience. Max�y lenders believe that it is more advantag�ous to the borrower to refin�,nce his existing m��rtgage than to take out a new loan. They state that the borrower is spared the usual initial processing and servicing costs and usually can obtain the currez�t interest rate which would be sub�tantially less than what an improvement loan would be. An.other�roblem faced by the borrower, according to many lenders, is his �.bilit�r to carry an additional mortgage. The median annual family . income in most o the de�ignated rehabilitation areas is less than $6, 000. With an inco��ze of $6, 000 a"typical" family devoting 25 per cent o` its effective income to housing would have approximately $100 • per month available ior such expenditures. This wauld enable them to carry a$6, 50Q to $7, 000 mortgage or rehabilitatic�n loan depending on the interest rate amortized over 20 years. (This assumes approximately $50 per month would be spent on taxes, heat, insurance, and utilities. ) Even making an unrealistic assumption that the borrower could obtain a $5, 000 mortgage for 30 years, he still could anly afford, in addition, a inaximum rehabilitation loan of about $2, 700 for 20 years . Closely related to the borrower's ability to carry the mortgage an� e- habilitat�on loan payments is the bas e pric e of the hous e he buys . In 34