Evening star., 1933-01-21
MORTGAGE FINANCE
PLAN IS SUGGESTED
Merger of Federal Land and
=. Joint Stock Banks
Proposed.
Special Dispatch to The Star.

NEW YORK, January 21.-n there
Is to be q reformation Of the Federal
Land Banks status that will accomplish
what the advocates of farm relief have
in mind, 1t will be necessary to effect
a consolidation between the Federal
Land Bank and the Joint Stock Land
Bank organizations. The Government
will also have to guarantee the interest
on the bonds Of the combined corpora
ton and establish a rate Of interest on
new mortgages materially below that
current.
In the bill introduced in the Senate
by Senator Robinson of Arkansas 1t is
proposed that any existing farm mort
cages held by the Federal Land Banks
limited to per cent and that the bonds
be guaranteed by the United States
Government.
Debts and Property Values
This agrees with the economic philos-
ophy Of the times that the debt burden
and the carrying charges of debts are
now out Of line with property values, as
well as with the income available among
debtors to meet the service Of their
debts. It also conforms in the matter
average at which money Is being bor-
rowed by the Government and the
availability of large supplies of capital
for issues under Government supervision
and guaranty.
As an illustration of this tendency
we have today mortgage company in
Westminster County, New York, asking
the holders Of its guaranteed mortgage
certlfcateS to accept reduction In
their rate Of interest from 51a per cent
to per cent on $50,000,000 of its out
standing obligations.
The situation with respect to the
Joint Stock Land Banks Is such that
an early assumption Of their mortgages
and the administration Of their affairs
by the Federal Land Banks would be
helpful to the entire farm mortgage po-
sition. It is believed that this will take
place during the year. with holders Of
the bonds of the Joint Stock Banks re-
ceiving probably an average Of so cents
on the dollar for their securities and
the stockholding interest being ex-
tinguished.
Banks Criticized.
The confusion in the public mind be-
tween the Federal Land Banks and the
Joint Stock Land Banks has always
been harmful to the credit Of the for
mer. particularly so since facts have
been exposed showing the practices in
which some of the officers and directors
| of several Of the Joint Stock Land
Banks engaged and which eventually
brought their institutions into the bank
ruptcy courts.
There has also been much criticism
in recent months of an alleged prac-
tice of the Joint Stock Land Banks
of forcing foreclosures Of their mort
cages and then buying back their own
bonds at large discounts. Here again
the public has made no distinction
between the Joint Stock Land Banks
and the Federal Land Banks and has
accused the directors of the latter of
exerting undue pressure on mortgagors.
The fact is that, on June 80, 1882,
there were pending in behalf Of the
Federal Land Banks foreclosure pro-
ceedings that involved only per cent
of the number of their delinquent
loans. This record by an organization
that has outstanding loans of nearly
81 ,l50 100000 makes a most favorable
| comparison with that of any other
similarly employed financial institution.
There has been much talk in Con-
gress of enacting legislation that would
! provide for moratorium on farm
| tenn, or by the Federal Land Banks
and the Joint Stock Land Banks. In
view of the direct interest that the
Federal Government has in the Fed
eral Land Banks and its indirect con-
Germ in the policies that the Joint
Stock Land Banks may adopt, it is
not likely that such legislation will be
successful
Relief Is Needed.
On the other hand, it is obvious
that a certain amount of relief must
be given to owners of farms whose
values have deprecated substantially
and the income from which today has
shrunk to nominal figure. The most
logical and permanently helpful method
Of granting this aid would be through
refinancing Of their mortgages on
the basis of current appraisals and
recasting Of the interest rate to
one that conforms with current money
conditions and which would permit the
Federal Land Banks to issue new Sc
| curities in the event that these Sc
curities were guaranteed by the Fed
eral Government. Today they are not
able to sell any new long term bonds
| at prices that would be acceptable to
their directors.
(Copyrisht. 1933)