Evening star., 1933-09-24
MORTGAGES DETER.
HOME LOAN OFFICE.
Slow to Accept Bonds for
Their CIaims-Dozen
Slated for Help.


coming week-the first to be made In
the Capital under the Governments
home mortgage refinancing plan-the
District Office of the Home Owners
Loan Corporation disclosed yesterday
that consideration of many needy cases
had been dropped.
Refusal of holders of mortgages to
accept bonds Of the corporation in ex-
change for their notes is cited as one
of the principal reasons. Federal aid
was denied in cases where existing en-
cumbrances against the property were
in excess of the most liberal amount
which could be loaned under the act
and also where character reports were
Unfavorable.
The difficulty over exchange of the 4
per cent bonds for the mortgages has
been principally with the individual
note holders. rather than on the part OF
the larger financial institutions. The
latter, according to officials OF the
Washington Office of the corporation
have carefully gone into this question
and without exception have agreed to
exchange their mortgage notes for bonds
in cases where the circumstances war
rant it.
Confidence Expressed.
Charles A. Jones. manager of the
District agency. and Paul Frizzell. assist
ant manager. expressed confidence yes
terday that the hesitancy on the part
of individual mortgage holders. of which
there are many in Washington. would
be cleared up as they became better in
formed as to the market for the bonds
The bonds are quoted today at 50 on the
speculative market, Frizzell said. They
have been as high as 93
Although the bonds are not guaran-
teed by the Government, except as to
interest, officials point out that the
recent opinion Of the Attorney Cen
eral on them constitutes virtual guar
Rntee. The opinion said, in part:
This review of the statutory pro-
visions diScloses that the Home Owners
Loan Corporation is, in everything but
form, bureau or department of the
Federal Government. 1t Is regulated
and directed by Federal officials; all of
its capital and stock is furnished by
the Government; it is given free use
Of the mails.
Valid and Binding"
1T is. therefore. my opinion that
the bonds of the Home Owners Loan
Corporation. when issued in the form
proposed and for the purposes speci-
fed in the home owners loan act of
1888, will constitute valid and binding
obligations of the corporation; that
payment of interest on such bonds will
be fully and Internationally guaran
teed by the United States; and that
they will be tax exempt to the extent
provided in the home owners loan act
OF 1933'
Explaining the turning down of ap-
plicationS where the encumbrance is
excessive, officials said that where pos
sible. in every case of this nature, an
attempt has been made to secure the
consent of the holder of the junior
mortgage to write down the face amount
of his mortgage to the amount which
the corporation would have available
from the proceeds of the loan after
Iiquidating prior obligations. This
method has succeeded in a few cases,
but in others 1t has not. and further
negotiations looking toward assistance
for the distressed home owner were
abandoned.
Character . Factor.
Acting under instructions of the Fed
eral Home Loan Bank Board. the local
office has found it necessary to end
consideration of some cases because the
past record of the applicant. as revealed
by a character investigation. was un-
satisfactory. The management Of the
Washington Office explains that while
1t has been quite liberal in this regard,
'it cannot approve cases where the rec
ord indicates the applicant has con-
sistently refused to meet his obligations
to the limit of his ability"
A definite policy of conserving re-
sources of the Home Owners Loan Cor
poration for those cases for which the
Federal agency will be port of last
resort" has been a factor contributing
to the delay of the District Office in
making actual advances to distressed
home owners. it was explained.
The District Office, according to Friz-
zell. has recognized that the total re-
sources of the corporation are only SUI
flcient to refinance approximately one
hcme in 10 in the United States. and
it therefore has established a policy OF
bending its efforts toward some adjust
fnent between the property owner and
his mortgage that will permit him to
farry on without the necessity of ref-
Hancing, before any consideration Is
given to solving the problem by making
b Government loan.
Last Resort Policy.
The principal reason for this. 1t
WAS explained, is to leave the resources
of the corporation available for those
scases which can only be aided by ref
nancing through the Governments
agency. Also, the working out of cases
in this manner. according to officials
of the office, maintains the relationship
between existing mortgage sources and
property owners. thus continuing in
business organizations that serve
very definite need in our economic fab
ric.'
Many of the 500 applications placed
with the local Office have been handled
in this manner. especially those in
which building and loan associations
are the mortgages. Frizzell said.
Special deed of trust forms for use in
the District were in the hands Of the
corporations attorneys yesterday. and
will be formally turned over for use to-
morrow.
The preparing of this deed Of trust
form also has caused delay. onclals
said. since it contains clauses repre-
senting much study and thought and as
constituted offers more protection to
the corporation than could any other
deed of trust form"
The management of the local office,
an official declared yesterday. "recog-
nizes that it has been criticized in some
quarters and will continue to be. but
finds a great deal Of satisfaction in
having progressed slowly but surely and
in having been able to render its COM
munity service, the need Of which has
been recognized for some time. The
weeks. and has attempted to render its
best efforts to solve problems that have
been several years in the making"
PILOT WRECKS PLANE