Evening star. [volume] (Washington, D.C.) 1854-1972, 1927-02-07
PLAN TO PROTECT
BONDS ON REALTY
Franklin D. Roosevelt Heads
Nationwide Drive-Houses
Agree on Principles.
BY the Associated Press.

By the Associated Press.
NEW YORK. February IA ma
tion.wide movement to insure tle
proper conduct of the real estate uoi'9
business has been lhaus ~ CO -,
through an agreement on certain
nyincinles or canons of procedure by
,ar,,asantatives of six large bonu
houses. If was announced by Frank
lin D. Rooevelt. president OF liie
American Construction CouncIl:
Mr.. Roosevelt was appointed CHAIR
man of a committee OF seven repre-
sentatiVes of first mortgage real
estate bond houses, which mace
survey of general conditions with the
committee of the securities commits
sioners of various States, and at
recent meeting in Chicago the agree
ment of principles was signed by the
following:
Sign Agreement.
Greenebaum Sons Investment Co.,
Chicago; American Bond and Mort
gage Co, Chicago; the r. II. Smith
Co, Washington. d. c.. Federal Bond
and Mortgage Co, Detroit; S. Ulmer
& Sons, Inc, Cleveland, and 5. w.
Straus & Co. New York.
The draft of principles also was
approved in writing by all of the COM
mittee of the National Association
of Securities Commissioners, except
Keyes Winter, deputy attorney gen
eral of New York. He stated that
those portions of the agreement over
which he had jurisdiction were salts
factory in so far as they concerned
to the principles of absolute separa
ton of trust accounts from the risks
of the business, and of notice to bond
holders of defaults.
Duty of Each House.
STIMULATING that all f1rst-mortgage
real estate bonds to be sold shall be
safe and conservative investments,
the agreement states it shall be the
duty of each house:
ID To provide and maintain funds
necessary for, and to make, all pay
ments in connection with the construc-
ton project in accordance with the
terms of the underwriting agreement
~ To check and supervise construc-
ton in order to procure substantial
compliance with the plans and speci-
fications
e To guarantee to the bondholders
completion of the building. free and
clear of prior liens, such guarantee to
be fulfilled at the option of the house
of issue, either by completion of the
building or by the repurchase of the
bonds at the original purchase price
and accrued interest.
Further StipuIations.
1t shall be the continuing duty of
each house:
% To check and enforce the proper
physical maintenance of the security
after completion.
(2) To check and enforce main
tenance of insurance.
CD To check and enforce payment of
all taxes and assessments when due.
"a To check and enforce compliance
by the borrower with requirements of
all laws and ordinances and other
governmental regulations.
(5) To provide for the collection of
principal, interest and income tax pay
ments from the borrower and to pro-
vide adequate facilities for payment
Of same to the holders of securities
as and when the same are due
To carry out the foregoing and
other duties the house of issue shall
either act as trustee or provide trus.
tee to take title under the indenture.
Regarding advances of money, the
agreement provides that, ''irrespec-
tive of subordination, where the bor-
rover fails for a period of Is consecu-
tive months to pay at least one-third
or the aggregate Of principal and in
terest payments maturing during each
period, the house of issue shall notify
all holders of the bonds of the same
issue Of the default"