Evening star., 1933-09-09
TRADE COMMISSION
TO HEAR PROTESTS
ON SECURITIES ACT
Mortgage, Realty and Loan
Men Will Present Their
Case October 3.
OBJECTION is RAISED
TO SEVERAL FEATURES
Order Fixing Status of Secured
Realty Notes Is Paralyzing
Business, Operators Ssy.
BY VINCENT TUTCHING.

With the mortgage business in the
District, as well as in many of the
States, virtually at a standstill as a
result of stringent regulations placed
upon real estate notes and bonds by
the Federal securities act Of 1888, the
real estate and mortgage businesses
have succeeded in obtaining g. public
hearing to voice their protest against
certain features of the act.
This hearing has been set by the
Federal Trade Commission, charged
with administration of the act for Oc-
tober 8, and representatives of the mort
gage banking, real estate and loan busi-
nesses are making preparations to pre-
sent their case that date.
Operators in the business are raising
objection principally to the Federal
Trade Commissions order of July 81
last, stipulating the status under the
act of real estate notes or bonds "di-
rectly secured by first mortgage or
deed of trust en- contiguous plot of
real estate or on a leasehold which is
otner than for Oil, gas or mining"
Disastrous Effect Forecast.
This order. they claim. has para
lyzed' the mortgage business, and its
effect. If allowed to continue, will prove
disastrous.
For example. objection is raised to
that section of the commissions ruling
which places restrictions on notes or
bonoS directly secured by first mort
gage when the entire mortgage
cor deed of trust) is transferred, to-
gether with the entire amount of notes
or bonds, to a single purchaser at a
single sale ="
The contention of the mortgage men
Is that this section has no place in the
regulation. since such transactions,
when mortgages are sold in their en-
tirety to one investor. insurance COM
pany or trust company DO not con-
stitute public offerings, being private
transactions between principal and
agent. Such notes, therefore, do not
come within the scope of requirements
for registration under the securities
act, it is pointed out.
The section of the order forbidding
the purchaser Of the notes to reside
more than $50 miles from the real es-
tate secured is seen as especially OBJ
iectionable. Enforcement Of this. it is
declared. would make impossible the
continuance of fiduciary relationships
that have existed for many years. 1t
would deprive investors who may have
lived in one place for a sufficient length
Of time to familiariZe themselves with
its advantages fer investment of the
opportunity to continue to procure such
investments in the locality due to the
fact that they may find it necessary to
shift residence to another State or Sec
tion Of the country, it is pointed out.
Object to Limit on Notes.
Objection also is raised to that Sec
tion of the order which limits the
entire number Of notes or bonds Sc
cured by the mortgage or deed Of trust
to 25. In this. the mortgage men see
the defeat of the purpose of the order
The suggestion is made that if it should
be found desirable to restrict the num-
ber of investors who would participate
in any one loan. it be done by restrict
ing the number of parties who would
participate rather than by limiting the
number of notes.
In this connection, it is explained
that when the papers are prepared for
a transaction about to be closed and
the exact number of investors is not
known, reasonably large number of
notes of varying denominations are
prepared. Experience has shown that
the number of investors may not reach
even small percentage of the num-
ber of notes issued realty men say
Protest is also made against the re-
Cuirement that a note be permanently
stamped with statement that it is a
construction loan. Such feature of
the loan, it is said. always is removed
within a period of from three to six
months after the date of the issuance,
although the term of the loan may be
three, five or ten years. An unneces-
sary encumbrance on the negotiable
securities would result from compliance
with this, it is claimed.
Contention is made that it is not
Continued on Second PaRel