Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-09-12
PLAN Of MORTGAGE
BANK IS AMENDED
Proposed Tax Exemption on
Bonds Dropped-Para-
graph ReWorded.

The proposed plan for suggested
central mortgage bank. designed to re-
duce home purchase finance costs, has
been amended in two particulars by the
special committee appointed by the Ma
tonal Association OF Real Estate Boards
to study the matter after the associa-
ton had approved the project in prin-
Ciple at its annual convention.
The original outline Of how such
bank could be formed for the redis-
counting of urban residence mortgages
contained the suggestion that deben-
lures issued by such a bank might be
made tax exempt to individual pur-
chaSerS of amounts up to $4,000. The
original thought was that such exemp-
ton would stimulate purchase by small
investors. and thus start ready flow
of capital into the bank.
Exemption Dropped.
On further study, however. the ASso-
citation Committee states that such eX-
emption would operate to make the de-
bentureS compete with mortgages and
real estate bonds handled by associa-
ton members. even though interest
rates of the debentures would be lower.
In addition. the tax-eXempt clause is
not strictly IN accordance with the as
sociation'S tax program, which at pres
ent Is seeking new tax sources as a
means of relieving realty of the big load
it now carries in this respect. The
Home Financing Committee feels that
buyers of the proposed banks issues
should pay the proper Government as
Sessment.
The clause on tax exemption was
dropped from the mortgage bank plan.
oh Iod tn RI nj n
the paragraph in the plan which de-
scribed the amount that might be
loaned with safety by banks, building
and lean associations and others If this
system could be set up. In the original
document this paragraph reads:
1T should be the policy OF this entire
system by using conservative appraisal
methods and by requiring amortization
payments beginning Immediately when
the loan is made, to increase up to rs
per cent the percentages of value that
may be lent with safety, thus eliminat-
ing the costs and hazards of junior
financing"
Many people have assumed that this
paeA graph meant that the proposed
mortgage bank would purchase loans
up to IS per cent of the value of a
property. which assumption was not in
tended in wording this clause. The
committee points out mat the Dank
probably would not rediScount or buy
more than so per cent mortgages. The
original paragraph meant to point out
that the new system, making rediscount
possible and requiring amortization i'm
mediately. would in time make 1t pos
sble for the local agencies to loan the
rs per cent to borrowers because OF the
stimulation such a system would pro-
vide for the whole field. The para
graph now reads:
Conservative Basis.
1T should be the policy of this entire
system to require conservative apr alsai
methods and amortization payments be-
ginning Immediately when the loan Is
made, so that through the following OF
sound practices the percentage OF value
that may be lent with safety can be
increased, and after the mortgage has
been reduced to the allowable per cent
it would be available for rediScount,
thus eliminating. in many cases, the
costs and hazards of junior financing.
The changes were approved by the
associations Executive Committee that
met in Chicago on August 25. The
members of the Special Committee on
Home Financing are: Harry S. KlSSeIl
president of the association, Springfield
Ohio: Walter S. Schmidt, Cincinnati,
Ohio: Charles G. Edwards, president OF
the New York Real Estate Securities
Exchange, Inc. New York City; Guy
Greene. former president OF the Mlcnl-
gan Real Estate Association, Detroit,
Mich. and Sydney Middleton, Chicago,
chairman OF the associations mortgage
and finance division.