Evening star. [volume] (Washington, D.C.) 1854-1972, 1932-05-28
MORTGAGE LOAN 4
PLAN IS REVIEWED
Refinancing of Paper for
Home Owners Arouses
Public Interest.
Special Dispatch to The Star.

NEW YORK. May 28.-Judging fror.
inquiries received today, Nationwide
interest is being taken in the plan Just
announced by the committee of IL
bankers and industrialists in this Fed
eral Reserve district for making funds
easily available for the refinancing of
mortgages on owner-occupied resi-
dences which are now falling due, and
the holders of which are asking fer
payment. Fortunately New York State
has the machinery for accomplishing
this very purpose ard all hat was
needed was adequate publicity and the
assurance that the necessary money
would be forthcoming
Back in 1914 the New York Legisla-
ture established. as a central bank for
the savings and loan associations of the
state, an institution then called the
Land Bank of the State of New York.
IL Is now known as the Savings 81 Loan
Bank Of the State of New York, the
change Of name being necessary to dis
tlnguish it from the Federal Land
Banks.
Purpose of Institution.
This central institution bears the
fame relation to its members, the say
ing and loans associations, that the
Federal Reserve banks do to their
member banks. II does no business
with the public or with any individual
It's sole purpose to to supply credit to
It's member associations and it accom-
pLsheS this end b. selling its own
bonds, secured By mortgages on homes
deposited by the member associations.
This collateral must at all times
amount to at least 125 per cent of the
principal Of the bond issue. The COL
lateral is deposited with the State con-
troLier and the central banks bonds
are countersigned By him. AS a mat
ter Ct fact, the collateral value aver
ages around l4O per cent.
STOCK IN the central association Is all
owned by the local associations, which
must hold shares of value of at least
per cent of their borrowings. Each
member association is liable to the
creditors Of the central bank-that is,
its bondholders-to an amount double
the value OF its shares therein. Capital
and surplus of the central bank must
be invested in securities legal for saw
lngs banks in the State. Serial bonds
are issued to investors, which include
financial institutions AID State and
municipal sinking funds The bonds
run for 10 years, one-tenth of the total
amount falling due annually.
The test of time has demonstrated
that the plan IS entirely sound. Up to
today not single savings and loan
association in the State of New York
mas Jailed to meet any demands upon
it for Withdrawals At present there
are 166 member associations. which
have roughly three-quarters of the re-
sources of all the associations in the
State. Membership in the central bank
IS optional with the local associations
now, but it is proposed to make it
compulsory.
S52,000,000 Loans Granted.
During the past year the associations
OF the State granted leans in excess of
S52,O00,000, Of which about rs per cent
was Tor reflnancing existing mortgages.
The secretary of the State league is
quoted as saying twice as much could
have been loaned.
The merit of the present proposal
lies in the fact that it will extend to
home owners, the mortgages on whose
property are held by individuals or in
stitutlons on the customary three-year
maturity plan and which are now
about to fall due, the opportunity To
Romance the obligation by application
10 savings and loan association which
Is member of the central body. The
local association can obtain the funds
from the central bank which in turn
Is assured of market for its bonds by
the cooperation of the Federal Re-
serve Committee of Twelve.
Bearing in mind that only owner
occupied homes are acceptable as Sc
cur1ty that the loans are amortized and
self -Hquidating, that the bonds of the
central body have back Of them the
resources Of all the member associa-
tons and that the plan has been tested
by experience, the movement takes on
an Importance which a casual reading
would not give it. The savings and
loan association. like the savings bank
and the life insurance company. forms
a part OF the last line of defense in
the fight against depression. Whatever
strengthens it in the public mind helps
TO restore confidence generally.
The nearest approach to the New
York system is the plan in operation in
massachusetts,. New Jersey is discussing
the general subject. Louisiana has a
Dill In its Legislature for the crganiza-
tion OF a central bank modelled after
the New York idea. A similar move
ment Is under way in Oklahoma. Other
states are watching attentively.
RANE HFrrrc ~----.