Evening star., 1933-12-23
ASKS MORTGAGE
APPRAISAL UNITS
Architectural Forum Writer
Urges State Regulation
of Investments.

State regulation of mortgage invest
ments through the establishment OF
appraisal bureaus is recommended by
William Luther Mowll in the current
| issue of the Architectural Forum. Mr..
Mowll points out that real estate finds
| itself in much the same predicament
which faced the insurance business 80
years ago, at which time State regula-
| ton was successfully imposed.
| Under the Mowll plan the State
| boards would be composed OF real es-
| tate men, architects and contractors,
with general direction coming from
lending institutions. The bureaus would
estimate the value of all properties
submitted as the basis for loans, and
| would act in this capacity for all lend
ing institutions in the State.
After outlining the most important
elements in real estate value, the article
points out that some of these elements
are not even considered. or are de-
emphasized in making appraisals- The
appraisal of any building, Mr.. Mowll
states, should depend first Of all upon
demand for space, In determining the
value of sites, he said sale price or
assessment was not the only factor to
be considered.
THE only manner in which the pos
sible value of bare land can be fairly
ascertained." Mr.. Mowll said, 'is by
planning its development and estimat-
ing the cost and income of an efficient
project"
Depreciation Rate.
The cost of a building considered
separately, he continued. is no clue to
its value; beyond a certain point, added
cost ceases to provide elements which
will add TO the income and begins to
build up charges that lessen the value
of the investment.
The writer also stresses the necessity
of taking into account the probable rate
of amortization. No real improvement
in the status of real estate as a perma-
nent form of investment can be made,
Mr.. Mowll said until provision is made
| to exercise control over the interde-
pendent factors, depreciation, amortiza-
! ton and maintenance.
Regarding the establishment of State
appraisal bureaus, Mr.. Mowli says:
The manner of fixing the size Of
mortgages which has been common has
brought about a condition like that
which existed in the life and fire insur-
ance businesses when the companies
were free to write their own policies,
to make their own rates and to compete
for customers on the basis of special
advantages offered. The duplication of
effort, rate cutting and other detri-
mental practices, and the ensuing losses
which these conditions fostered became
intolerable; and now both these busi-
nesSes are strictly regulated. The
present stability of the fire and life
insurance companies is largely due to
the fact that their policies are uniform
within close limits; and that their rates
are made in as impersonal and scien-
tiflic manner as possible, and beyond
the influence of the company, the agent
or the insured. There Is little doubt
that there was resistance to the sur
render of the weapons of competition,
but there is no possibility that the
officials Of either of these businesses
would wish to return to the conditions
OF the preregulation era.
Value Basis For Loans.
This example suggests that similarly
beneficial results can be secured by the
use of appraisal bureaus Such bureaus
would, in their central Offices or in one
of their branches, estimate the value
of all properties submitted as the basis
for loans; and would perform this func-
ton for all lending institutions doing
business in State. The general direc-
ton might be vested in boards elected
from the boards of the lending insti-
tutions. The executives of the bureaus
would be realtors, architects and con-
tractors: and these heads would select
and direct the necessary staff.
These bureaus would make apprais-
ais only upon formal application on the
part of a lending institution, and would
report their findings only to the appli-
cant and to the bank commissioner or
other designated authority; the lender
would, before the loan became effective,
! file with the same authority report
of the terms of the loan and receive
their approval. AS the operation of the
bureaus would be at all times open to
State examination, any abuses which
might arise in this place could be cor
rected.
"These boards would have no contacts
with mortgages. They would base their
! findings as far as practicable upon
comparative data with respect to all
| items that have been discussed. Fol-
| lowing the example set by the fire
companies. periodical inspections would
be made of the properties held as secu-
rity in order to know of every change
| in their structure, occupancy or expo
sure, and the character of their main-
tenance"
/