Evening star., 1933-01-05
cuts IN INTEREST
RATES ARE URGED
New York Realty Firms and
Banks in Move to Re-
duce Charges.
Dispatch to The Star.

Special OlSpatch 10 Inc star.
NEW YORK, January SIT has been
evident for some time that one Of the
first readjustments necessary to bring
about improvement in 1888 would be in
the matter of lower interest rates and
In correcting the present lag in real
estate mortgages between the original
amount Of issue and existing appraised
values.
A step in this direction is about to be
taken in connection with real estate
mortgages In the city of New York.
Here it is proposed to reduce the in
terest rate on new mortgages, set up on
the basis Of current appraisals, from the
present rate of 512 per cent to s per
cent. The movement may go further
and include cut of similar proportions
where old mortgages are presented for
renewal.
Strong Group Backs Program.
Behind this program is a group rep
resenting the guaranteed mortgage
companies in the Greater New York
district that are supported by New York
banks and trust companies as we'll as
by the mutual savings banks. The
active members Of it are the chief ex-
ecutiveS OF two guaranteed mortgage
companies who recently were elected
TO their positions in order not only to
improve the status of their company s
credit but to bring about more CO.
operative spirit among holders of large
docks OF guaranteed mortgage bonds.
1t Is understood that institutions
Which few months ago were taking
the attitude that, as mortgages became
due they must be paid off-a program
which, II carried out entirely, would
nave led to complete Generalization in
the market for guaranteed mortgage
bonds and probably to the Wrecking of
several issurers of such obligations
nave agreed to go along with the policy
OF extending these mortgages. They
have also agreed to make substantial
investments in new mortgages where
the amount of the loan is not over so
per cent Of the present appraised values.
There is among them a general agree
ment that the former rate of 52 per
cent Is working a hardship on mort
gagers and that there should be a
reconciliation Of interest on real estate
paper to the general decline in the cost
Of money.
There has been some suggestion also
that 1t might be necessary to scale
down, by voluntary agreement of hold
ers, the rate Of interest now being paid
on unmatured guaranteed real estate
ponds. This proposal has already been
made by companies outside of New
York and is likely to be a matter Of
active negotiation between creditors
and debtors in the next few months.
vanderlip's Statement.
A statement issued a few days ago
by Frank A. Vanderlip, chairman of the
Home Mortgage Advisory Board, which
is cooperating with the Reconstruction
Finance Corporation to relieve the en-
barrassments of home owners in their
mortgage situation, has attracted much
attention. In one part of it that has
appeared to some to be extremely radi-
cal, and to others commons view
Of the present situation, Mr.. Vanderlip
stated that his committee composed of
men financially prominent, have actual
ly been discussing the advisability of a
temporary poStponement Of mortgage
interest above rate of 8 per cent This
would mean an average cut OF about
SO per cent In the carrying charge Of
SGCLlOI VI IIlc COuIl-
try.
1t is realized that constitutional ques-
tions would be involved in the legal en-
forcement Of such a reduction. These
are times, however, when circumstances
compel new ideas and new measures
to meet new emergencies.
1t has also been suggested that. in
addition to reduction in the interest
rate on mortgages. the face amount
of the mortgage should be scaled down
to the present value and income return
on properties covered by the loan. The
difference between the old and the new
values, under this arrangement, might
be set up in the form of junior par
ticipat:ng mortgage. This, 1t is hoped,
could be reduced eventually from the
surplus earnings Of the property, leav-
ing the first lien at an amount in ac-
cord with valuations in normal times
and with normal incomes.
Copyright, 10330