Evening star. [volume] (Washington, D.C.) 1854-1972, 1927-01-22
REAL ESTATE

special committee to study the
matter of real estate bond issues and
TO take action on steps designated to
protect investors against unsound
practices in the issue of real estate
mortgages and bonds will be appoint
ed by the National Association of Real
Estate Boards. according to action
taken at its annual business meeting
just closed in Miami. Fla.
The association adopted resolutions
formulated by it's mortgage and
finance division and constituting a
platform of principles for the making
of sound real estate bond issues.
These principles will be the basis for
the committees work. A resolution
adopted by the association states:
THE sale to the public of bonds
based on real estate securities has
grown enormously in the past few
years, to the great advantage both of
the public and of real estate interests.
While such issues have in an over
whelming percentage of cases proved
desirable investments. nevertheless in
a limited number of cases certain
abuses have crept in, which have been
brought to the attention of this or
ganiZation, and it is felt that no effort
should be spared to keep such bonds
on the highest possible plane and to
protect the investing public from any
losses thereon"
Will Name Committee.
The resolution called for the crea-
ton of committee to formulate a
statement of the general conditions
of sound real estate mortgage bond
practices and authorizes the commit
tee to consider and to take action on
steps designated to remedy certain
practices of some underwriters of
mortgage bonds and to cooperate. so
far as it may deem feasible. with
committees of other organizations
formed to accomplish the same ends.
It asks that the committee take note
of and give careful consideration to
the following expressions of opinion
formally adopted by the mortgage and
Qf-That speculative risks should
finance division of the association:
mot be assumed by holders of first
mortgage bonds.
(2l That money held for specific con-
structfon should be absolutely protect
ed against appropriation for other
purposes.
, 81 That the loans represented by
bond issues sold to the public should
be limited to an amount which expe-
rience has demonstrated is safe and
conservative.
az That circulars and advertise
ments should fully, frankly and ade-
quately disclose all pertinent informa-
ton relative to the issues offered.
Fixing Responsibility.
(5) That the title, First Mortgage
Real Estate Bonds" should be used
only when the bonds are a first lien
on both land and building, and that
lease-hold bonds should invariably be
so chara cterized.
(6) That mortgage houses should
assume full responsibility for ap-
praisals on which they base their
issues.
Cd That every real estate bond issue
should provide for amortization of
the debt, to offset depreciation and
obsolsscence and to liquidate the debt
In an orderly manner.
(8) That all appraisals should be
conservative, taking into account both
physical valuation and earning power
The association further adopted the
report Of a special committee recon-
mending legislation that would put in
the hands of the trial Judge the
power to designate persons to serve as
expert witnesses as to real estate
valuations in court cases. 1t reviewed
the need of adjustment of the Federal
revenue act in regard to real estate
sales, which need it has recently
brought before the finance committee
Of the Senate and the ways and means