The Washington times., 1926-02-20
{ VII ATTENDS
USURY LAWS

So-called lfsury laws In the States
to protect the borrower who is
faced with SOME dire necessity from
the exactions OF extortfonate and
unconscionable lenders, are having
an effect never intended by the legis-
lators upon the use of second mort.
gage loans in the purchase OF
homes, according to a detailed study
of interest laws and junior financ-
ing which has just been made l'v
the National Association Of Real
Estate Boards.
The associations study is the.
basis of its request that laws gov.
erning interest rates on second
mortgages, in States where sucn
laws are in effect, De adjusted 50
as to permit interest rates on sec.
ond mortgages to corresponds e
nearly as possible to the acIu ~
cost of the type OF financing u
Under the law Of supply ana de-
mana fine cost Of such financing IS.
IN most States of the Union,
Greater than the maximum Interest
rate nern1itted by the laws OF those
states resolutions adopted by tie
association state.
Capital Is Hampered
..The effect OF this condition =
"a keep out OF the second mortgage
business much capital that other
wise might be attracted into this
form of investment.
Adjustment Of the laws govern
10 interest rates on second mort
-. .-es s,es is needed IL capital Is %
Re = drawn freely into service 70
sinance the purchase OF homes anu
= the cost of such financing - sto
he kept as low as possible, Ing
association points out.
Second mortgage nnancln "
which has such large part ~
nalying possible the widest ecu s:sla
sion OF home ownership. AZ 49,.
mate and useful. But II u suLts A..
;rttended Is restrict mortgage invest
snenf. 4 report made to the mort
gare and finance division by us
COMMITTEES on Junior financing
states The report. made by Sam.
mel II. Reep, OF Minneapolis. y
based on d study OF second mort
gage financing In b cities
present statutory mRximums are
,aI,oed in amount to first mortgage
erancinr the report brings out:
ME- icnnra the fact that second
mortgage credit, with the h1gner
ma rgin OF risk necessarily involved.
Is worth considerably more tnan
first mortgage credit.
Law Breaking FOstercd
Because second mortgage credit
/. worth more than tine statutory
maximums, second mortgage sinin-
cling cannot be done on 2 business
hasis directly with the borrower
unless it is done In violation Of the
law. where lenders deal directly
with borrowers there are attempts
tn camoufIage the transactions. 60
that the law may be evaded. Ine
vvo,,Id.be eyaders are not aware OF
the fact that usury cannot pe
legally camouflaged In any way
All over the United States, there
fore. because of the fact that NEST
men do not wish either 20 vloia.e
The law or to hazard the drastic
nenalties of the law, the second
mortgage and land contract bust.
ness has become a discount bust
ness.
In other words, instead Of financ-
ing the borrower direct, the lender
viii purchase the second mortgage
and land contract paper, II i mas
been executed. This procedure u
not affected by the usury law. pc
cause any man has the right 70
sell his mortgage or his CONTRACT at
any rate of discount.
If he wishes to do go ne may sven
sell at 100 per cent discount. Wnlcn
would be giving it away. The one
digcountfng such paper, II the
transaction has not been comou.
flaged, is not amendable in any way
whatsoever to the usury law. pro-
vided that the mortgage or con.