Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-07-05
LOWER MORTGAGE
/ INTEREST IS URGED
Concessions in Rates Re-
quested by Borrowers
on Real Estate. Ia.
Special Dispatch to The Star.

Special Dispatch to The Star.
NEW YORK, July 4.-The man who
Is carrying a mortgage on his home or
is considering negotiating a loan, and
who is borrowing on business property.
Is beginning to wonder when ne VIII
reap the benefit of the decline in in
terest rates. He has seen quotations
for money this year drop to the lowest
level In a quarter of century. so that
those who are carrying securities have
the advantage Of extremely easy rates.
The same is true of commercial paper,
on which the current quotation is 2
per cent, compared with 3H to 81 per
cent year ago, and about third as
high eS in 1929. Still the traditional
rate In the East of per cent on real
Of cases.
Breaks In Rate.
There have been some breaks in the
rate. There Is now growing insistence
for a concession to borrowers. Some
weeks ago it is understood that Phila-
delphfa real estate interests requested
lenders in that city to reduce the rate
in conformity with the general decline
in interest on other forms Of paper
More recently the largest mutual saw
1ngs bank in Connecticut announced
that, effective July l, it would lower the
rate on mortgages to 5i2 per cent from
per cent. This is understood to be
under discussion by other savings banks
in New England, which feel that the
borrower on real estate is entitled to
more consideration than he has had to
date.
In the period Of low interest rates
In the early part of this century, which
corresponds quite closely to that now
prevailing. there were numerous mort
cages made on a basis of 5 per cent.
The per cent rate, however, has been
in general usage for the greater part
Of the past 20 years. Up to few
months ago the largest and strongest
Of the local guaranteed mortgage COM
panies were selling their mortgages on q
e1k per cent basis. Today they are ad-
vertising this paper at 5 per cent.
It Is believed that an easier interest
rate to the borrower on real estate
would help to quicken the real estate
market and TO encourage more build
ing. The subject is one that is now
receiving a great deal of attention en-
the part of mortgage companies. saw
ings banks and insurance companies,
which are the largest buyers of mort
cages 1t is also extremely pertinent
for the building and loan associations,
which are closer to the conditions in
their own locality than any other SINH
lar agency.
Mortgage Bonds.
The situation with respect to real
estate mortgage bonds which have been
given, or might be afforded, a public
market Is quite different from that de-
scrtbed above. There is no prospect OF
a reduction in the coupon rate of pub
licly distributed real estate mortgage
bonds until the outlook with respect
to the enormous mass OF securities
doated in the past 10 years Is improved.
The proportion of such securities that
will work out at from a few cents on
the dollar to so cents on the dollar IS
so high as to be regarded as one OF
the great tragedies of the deflation
period. little progress is being made
in certain directions, but advantage Is
also being taken of unorganized bond
holders by promoters who have all sorts
Of schemes to get control Of properties
greatly below their actual value. More
hardship to more investors has been
caused by the collapse of publicly sold
real estate securities than by any other
one factor.
President Charles G. Edwards of the
New York Real Estate Securities Elk
change has published letter this week
in the Commercial and Financial
Chronicle, in which he refers to the
unwilIingness Of underwriters and deal
ers in real estate bonds to list their
securities on the Real Estate Exchange,
where the investor in them might have
had the advantage of knowing how
they were being publicly appraised as
to value. 1t is we'll known that GER
tain large real estate bond distributing
organizations refused to have their
securities listed and that theirs are
among the issues that have had the
greatest declines and on which some
Of the largest losses will have to be
taken.
Responsibility Of Seller.
Mr.. Edwards states that mo invest
ment house which sold a real estate
bond issue to its customers should re-
main in business unless it is willing to
90 to the extreme limit in preserving
the integrity of the issue it sponsored"
He also believes that the trustees for
these issues should assume their share
of the responsibility for what has hap
pened land work with the investment
banker and the real estate broker and
appraiser in salvaging as much for the
investor as is possible in every CIR
cumstance."
Copyright, l93l)