Evening star., 1937-11-20
FORECLOSURE COST
HIT BY MAGAZINE
F. H. L. B. Review Holds
High Charges Reduce Value
of Mortgages.

The costly, time e-consuming and
often unnecessary foreclosure pro-
cedures required in many States have
hampered mortgage-lending activity,
according to the November issue of the
Federal Home Loan Bank Review.
The high cost of foreclosures in some
States serves automatically to reduce
the value of the mortgage security, the
articles states. Thus, it burdens the
borrower, who must pay higher inter-
est rates and who receives more re-
stricted loan terms.
The Review based these statements
on . study of samples of Home Own
ers' Loan Corp. foreclosures taken
from every State. These samples may
be expected to reflect the cost of pri-
vstely instituted foreclosures, even
though the figures do not include the
cost OF H. O. l.. c. salaried personnel
The H. O. L. c. is one of the agen-
cies administered by the Federal Home
Loan Bank Board.
Held Unjustified
The Review states that "compli-
Gated mortgage and foreclosure laws
benefit neither the mortgage nor the
mortgagor and cannot be justified as
necessary. The average cost of fore
closure to the H. o. L. C. varies from
IS in Texas mot including salaried
attorneys to $3.50 in Illinois. The time
1t takes to complete that foreclosure
varies from % days in Texas to over
two years in Alabama.
In case of foreclosure in court, the
time has been computed from the date
OF the filing of the petition to foreclose
to the date of acquisition of title, free
OF all rights of redemption.
In case of foreclosure under power
OF sale contained in the mortgage or
deed of trust, the time has been COM
puted from the date of the first publ-
cation OF notice of sale or of intention
to forecloSe, where such is required. to
the date of acquisition, free of all
rights of redemption
Costs do not include salaried per-
sonnel, In both Texas and Massachu-
setts salarled attorneys handle fore
closures.
Cost Estimated at 81 Daily.
In Illinois 1t costs over $500 to fore
close a $4,000 mortgage and takes over
year and a half" the Review saws,
The cost of the delay to the mortga-
gee, including interest on the invest
ment, accrued taxes and insurance
and depreciation has been fairly esti-
mated as 81 day. The total cost,
then, is about fourth of the mort
gage.
IL Is obvious that in this State a
lending institution which makes loans
OF more than IS per cent of the an
praised value of the securing property
has inadequate protection 1t is also
OBVIOUS that delinquent borrower
cannot be carried when his accumu-
lated taxes, interest, insurance and
other carrying charges have increased
the total debt to over three -fourths of
value of the security
compare these conditions with
those IN Massachusetts,, where it costs
ABOUT $50 TO foreclose a $4,000 mort
gage and takes only two months The
total cost, including cost of delav
amounts to only 3 per cent of the
mortgage Considering this cost, it is
not surprising that mortgage-lending
institutions in Massa achusetts have for
many years been making loans up to
oo per cent of value Quite simply.
they can afford to-"
AS solution of the problem of find
ing an equitable substitute for existing
foreclosure laws, the Review suggests
tne Nationwide adoption of the uni
form real estate mortgage and FORE
closure law drawn up by the Subcom-
mlttee on Law and Legislation Of the
Central Housing Committee after two
years OF study, which provides ade
ouae protection for both the mort
eagor and the mortgage and elimi-
mates excessive delays and costs