Evening star., 1935-03-23
DEPRESSION OVER
FOR REAL ESTATE
Washington Board Told of
National Improvement by
President Schmidt.

The depression in the real estate
business has been left behind, waiter
S. Schmidt of Cincinnati, president
of the National Association OF Real
Estate Boards, told members OF the
WASHINGTON board in a meeting Tues
day night in the Mayflower Hotel.
Schmidt said the problem today is
to retain the real progress made in
past eras, to eliminate the mistakes
of our recent prosperous one and to
push ahead to new advance, material
and social, using all the good that
survives. Sound principles and prac
tices and forward looking policies as
regards real estate will be the back
bone Of that advance"
The severity and long duration of
our troubles" Schmidt continued
were unquestionably due in large
measure to an inadequate protection
of our banking system. particularly
in the matter of long-term or mort
gage credit. Government recognized
the fact and has established various
great agencies. For its sympathetic
consideration of realty distress II de-
serves our gratitude. These agenc. es
the Home Loan Bank, the Fedora!
Housing Administration and the
Housing Division of P. w. A.-have
all extraordinarily competent person.
mel To the Housing Administration
we are especially indebted for truly
national campaign promoting the de-
STABILITY of real estate ownership and
value restoration.
Caution and Compromise.
IF the measures adopted are not
all they should be it must be renem-
berec that the approach was cautious
and the bills themselves filled with
compromise. What exists is there.
Instead of criticizing let us be CO.
operative and work conStructively
for such remodeling as will make the
agencies of the greatest value.
With that orientation l make
these proposals:
First. Remodel the home loan bank
act so that this agency, designed to
lend on mortgages of members, may
and shall serve all such lenders of
money. At the time, due to conditions
in the enabling legislation, none but
building associations with one or two
EXCEPTIONS use the system other
mortgage investors find it impossible
or diSadvantageouS to join. Building
associations have been valuable in
strumentalitieS, but, if the total of
private lending, never properly esti-
mated in statistics, is taken into ac-
count, their volume represents but
a nf he fnf NJ
mortgages.
Next. Make these changes in the
national housing act:
Il. Revise the insurance so that it is
real insurance, either cash or deben-
lures bearing the same interest and
terms as the laSt-iSsued Federal Sc
curities selling at par. The idea be-
hind the insured mortgage was to
make the investment attractive, but if
the insurance is not real the plan in
wolves expense to the lender without
commensurate advantages.
20. Revise the cost of the insurance
so that this cost is not fixed at a per-
centage of original face, but on the
amount due in principal at the COM
mencement of each year. The insur-
ance becomes more and more expen-
sive as the mortgage is paid down, a
strange anomaly. The whole mutual
feature is an encumbrance rather than
an advantage.
g. Dissociate the ideas of ability
to service and financial RESPONSE
bility' in fixing the basis for deter
mining eligible mortgages. Any pos
SCISSOR Of money should be an eligible
mortgage, capable of owning an in
sured mortgage. 1t need be required
only that the mortgage be serviced by
an approved agency, and unnecessary
restrictions against holding an insured
mortgage and transferring it should be
removed. At this moment no indi-
Vidual can own an insured mortgage
none but State and Federally in
spected institutions. The wording of
the law is such as to leave the ad-
ministrator little alternative but to
adopt such regulations
Federal Mortgage Bank.
Finally, create Federal mortgage
bank empowered to buy sound mort |
cages from any holder without recourse |
against the sellers on any kind of |
urban property, not merely residences. |
II desired, the purchaSable mortgage |
on business property can be limited in |
amount to say S250,000, if there is
fear Of larger sums The mortgage
bank should be empowered to sell
bonds against mortgages it owns. If |
the United States does not wish to /
guarantee these bonds so that they
can be sold on a basis of low interest
yield, then a sufficient capital. say a
billion dollars, should be pledged by
the Government. Thus. the bonds
issued would have the necessary Sc
curity to find public acceptance at the
low yield required for successful oper-
alton. The actual funds needed would
be small, say 10 per cent of the pledged
subscription. as the corporation would
meet its money needs by sale of its
own securities.
The bank could be empowered to buy
the stock and guarantee the bonds of
mortgage associations provided under
the national housing act These mort