Evening star., 1934-10-27
LOANS ON REALTY
HELD BIG PROBLEM
Jones, Addressing Bankers,
Terms Investment in
Mortgages Biggest.

Real estate mortgages constitute
the really big problem in the coun-
try today, Jesse H. Jones, chairman
of the Reconstruction Finance Corp,
declared in an address before the
American Bankers Association here
this week.
Mr.. Jones said these mortgages
make up the biggest source of in
vestment. aggregating in all forms
more than S35.000 100000 for urban
loans alone. divided approximately
S7000000,000 by building and loan
associations. $4,000 900 by life insur-
ance companies. $4,000, 900 900 by
banks including mutual savings banks,
$4,000 100000 in real estate bonds,
and the balance by individuals, trus-
tees, educational and charitable in
stitutions, and fire and cauSalty COM
panies.
Farm Mortgages Not Included.
The R. F. C. chairman continued:
The Farm Credit Administration
and the Home Owners Loan Corp
are thawing out and making liquid,
approximately $1,000, 100000 in their
particular fields, but farm mortgages
are not included in the IS billion
total just referred to.
The Federal Housing AdminiStra-
ton has started a program that should
be helpful. but mortgage money for
new construction generally, or for
meeting maturing mortgages, is not
available except from the life insur-
ance companies.
To meet this situation, the R. F. c.
is prepared, upon the request of the
Secretary of the Treasury and ap-
proval of the President. to subscribe
for or lend upon preferred stock in
trust companies authorized to issue
preferred stock, and to buy capital
notes or debentures in trust compan-
les not authorized to issue preferred
stock. if they are specializing, or will
specialize in mortgage lending.
In addition to investing in the pre-
ferred stock or capital notes OF such
companies, We will lend to such in
stitutions on properly secured mort
cages. as well as to mortgage loan
companies.
Many May Be Refinanced.
Numerous cases have appeared
where mortgage loans which are in
default. and mortgage loans that are
about to mature. may be rednanced
in whole or in part, on perfectly
sound basis, greatly to the benefit Of
both the mortgage holder and the
debtor.
Many buildings, such as apart
ments, hotels, Office buildings, stores,
warehouses, factories, etcetera, covered
by mortgage bonds and now in re-
cevership, may be safely reorganized,
both in the interest Of the bond
holders and the equity owners. and
without loss to the new money. Ger
tain types of new building projects
NAV be financed on a sound basis.
There are several important build
ings in this city, now in receivership,
whose bonds have sold at fraction
of their real value, because there was
no fair market for them, and no
money available to reorganize the
properties and take them out OF re-
ceivership.
Can't Afford Losses.
"This is true of the principal cities
of the country, and as rule investors
In these mortgage bonds, or mortgage
certificates, are people who can Ill
afford to lose their savings.
New York City alone had approx
mately s2,OOO,OOO,0OO invested in
guaranteed mortgages and mortgage
certificates, in the hands of the public
when the depression hit. We do not
want a repetition of the mortgage
bond tragedy any more than We want
a repetition of mistakes in other fields
of financing, but first mortgages on
real estate have long been a favorite
form of investment and should be
again.
Billions and billions of mortgages
had been made, sold. and repaid prior
to the depression. and institutions oi
substantial capital and with capable
management should be established tc
again render this service. There
should always be mortgage money
available for needed new construction
and for extensions and renewals. and
sound mortgages for investment.
Many COuld BE Extenoe0.
I'VE have found in many closed
banks, perfectly good mortgages, cur
rent as to taxes and interest. that have
matured or are maturing, which could
be safely extended or taken over by a
going concern. There are also many
frozen mortgage loans in closed banks
and otherwise, that could be revamped
and made current on some basis.
BY the organization or expansion
Of financial institutions lending upon
mortgages, much can be done in the
cause of recovery by assistance to both
creditor and debtor
These mortgage trust companies
or mortgage loan companies should
be privately owned and privately man.
aged. The Government does not want
to participate beyond assisting through
the purchase of preferred stock anc
capital notes, and by lending on tht
mortgages.
"It is not my thought that we car
make liquid all of the mortgages ir
the country, but we can do great
deal in breaking the jam and permit
mortgages to again take their proper