New-York tribune., 1919-12-28

'ooNoIIt E"ttY'uHc AUuHSN lut CUC-
ings Bank, Chairman Consnittee
on Amortization of Mortgage
Loans, Sarings Bank Section,
American Bankers Association.
Our American system Of mortgage
iinance, based upon real estate secu-
l'ity, is sometimes declared to be ar
chaic, and of late we have frequently
heard the opinion that it is made
Quate," or even that it has been
''brokcn down" under the stress Of war
conditions.
There may be some difference of
opinion on this point among borrowers,
lenders, real estate middlemen and
theorists
Nevertheless, tho actual facts and
remarkably efficient in meeting the re-
quirements of land tenure and real es-
tate development in America. In fact,
those of widest experience with real
regarding with some suspicion any
scheme for reform which is argued
from the assumptionsof the present IN
adequacy. These bankers find that no
security other than mortgages secured
by real estate have 80 firmly main
tanned their parity in the public opin-
ion. During the war period investors
were ready to sell all other securities
nj RI no bou
their mortgage investments. While
this viewpoint has its disadvantages,
when we consider occasional need for
liquidity of such investments this evil
dence of high popular regard should
not be overlooked-in fact, it should
be capitalized.
This appears to be popular time to
remind all concerned that the present
shifting in values, rents and interest
rates are only Incidents to placing
realty on a sound economic basis. We
must not allow the occasional case of
prohteerlng in rents TO prompt meas
ures that will make ownership un-
profitable and undesirable and 30 pre-
vent an ample flow Of capital into new
construction.
Cautions Against Superficial Thought
The theorst who forms the opinion
that our mortgage method are unsys-
tematic, and even without uniformity.
doubtless has in mind the picture of
great bond issues more or less serial
IN their form, such as result from
the adoption of special projects by
states or perhaps those being issued
under the Federal farm loan act.
The worship of Standardization is
quite III harmony with the general
trend OF thought by those people who
regard human nature and political or
ditlon as the result OF the war and
available for such experiments as their
own limited ability might lead them
to undertake.
"Uniformity" in mortgage securities
and in methods of real estate finance
has been preached for many years. but
definite steps to accomplish this uni
tormity in any broad way have only
been seriously proposed within the
Thus the first accomplishment Of
these mortgage standardizers was the
enactment in 1914 Of the law to chartr,
the Land Bank of the State of New
ork. 1hls act, which was both nm.
sclentlflc and, perhaps, unconstitl-
tiona was enacted as the result of
the then current agitation for rural
credit system. Much was heard about
lhe value OF easier rural credit but. as
a matter OF fact. the membership in
the New York bank is limited to bnild-
ing and loan associations which have
comparatively little interest in apr-
cultural property. The results Of this
experiment and legislation may or NAV
iot be regarded as favorable. for th.
bank has only issued about $500 600
worth of bonds, of which one-half wnre
purchased by four savings banks, and
IL IS rumored that the balance is still
held by the underwriting trust com
pany.
Tax Exemption Proposal
Inc Land Bank OF the State of New
YORK does not enjoy tax exemption for
ITS securities, and in view of present
tax burdens and the recent adoption
by both state and nation of the prjn-
cipie OF direct taxation according 10
ability to pay the Land Bank bonds
should not now be made a source of
personal exemption. The reason for
It's inactivity under war conditions is
explained by the fact that it cannot
sen us bonds at price which will en-
able it to rediscount the mortgages
held by its member associations to
their financial advantage.
The above point of tax exemption is
again met in the bill now pending in
Congress. the so-called Calder Nolan
bill. to establish chain of Federal
home loan banks. the stock of which is
to be held by any of the many vari-
etics OF building and loan associations
which should invest at least 5 per cent
or their rediscounts in the stock of the
bank. The proponents of that bill
start with the assumption that the
present market for mortgages is en-
tirely inadequate, and that it can be
supplied only by funds which are to
enjoy the same degree of tax exemp-
tion under all Federal and state laws
as is now accorded by the Federal farm
loan act. Furthermore. although they
argue that the main purpose of the bill
is to encourage the construction OF
dwellings,, we note that there is no
provision in the bill which requires
that the proceeds of the tax exempt
bonds shall be invested in housing or |
anything pertaining thereto.