Evening star., 1938-11-05
Moratorium Laws
Gradual Abolition
Is Asked
Topering-Off Process to
Insure Repoyments
Is Requested

Is Requested
The gradual abolition Of the mort
. gage moratorium laws passed during
the crisis years, and still in force
In many States, has been recon-
mended In statement issued by the
Twentieth Century Fund in behalf
Of its committee on debt adjustment
THE present situation does not
warrant immediate removal of exist
Ing mortgage moratoria," the COM
mittee report finds, ''but plans
should be laid for their gradual
elimination by tapering off process
to begin as soon as business condi-
tlons improve enough to justify it,.
In two related recommendations
announced at the same time, the
committee urged that plans for the
repayment of debts should be re-
lated to the probable economic life
and earning power of underlying
assets" and that the appraisal of
assets underlying debts should be
made more systematic and objec-
tive"
These recommendations on public
policy are part of a series based by
the committee on the findings of a
staff OF research specialists, who
for three years pursued an investi-
cation into thei Nations debt struc-
ture during the late postwar era.
Many Payments Overdue.
The committee report points out
that many urban mortgage debts
are still in bad condition, despite
the improvement in business from
1888 to 1887, and that continued I'M
employment has prevented many
debtors from paying interest and
taxes on schedule With most pre-
depression mortgages running only
for few years, payments on the
principal of large proportion of
existing mortgages are now past
due-dammed up behind moratoria
Taking these facts into account
together with the business decline
which started in 1887. it is plain
that immediate removal of the nu-
merouS State mortgage moratorium
laws which are still in force would
work serious hardships," the COM
mlttee report says. On the other
hand. permanent moratorium
would create an impossible situation
Public policy should therefore aim
at an orderly and gradual elimina-
ton of moratorium restrictions.
"As soon as business activity and
employment rise again to a reason
ably satisfactory level and a mar
ket for new loans is developed, steps
should be taken to resume payments
on mortgage principal. But, after
such a long suspension, creditors
cannot safely be granted the right
to demand the whole principal at
once where mortgages are past due.
If possible, the moratorium should
be tapered off and linked with scien-
tlflc amortization. The amount of
principal which creditors should be
allowed to claim ought to be at
least enough to reduce the debt to
the bare value of the site within the
economic lifetime of the buildings.
In any case, the removal of mora
toria will require transition period
OF several years.
Many Mora toria Renewed.
The findings of the committees
research specialists show that in
1928, following the widespread
collapse in farm prices, the rate of
foreclosure rose to twice it's pre-
depression dimension, as a result,
% States, particularly in the Middle
West, where the mortgage crisis was
most acute, passed moratorium laws
delaying foreclosure sales, and other
wise protecting a large proportion
of the Nations farm and home
owners.
About $5O0O,0OO 900 of the total
mortgage debt was rednanced dur
ing the depression years under the
various Federal credit agencies; but
q substantial proportion of the re-
naming s25 ,O0O,000,OoO in farm and
home mortgages is still covered by
State moratorium laws.
Most of the State emergency
laws" the study observes. have
been renewed from time to time
According to information received
from the attorneys general of 16
of the % States with moratorium
laws, l3 we're still in force at the
end of 1887 and three lin Idaho.
New Hampshire and Oklahoma) had
been allowed to expire
Two Weaknesses Cited.
Turning to its recommendation
on the repayment of debts, the COM
mittee report sees two weaknesses
Of long standing in our debt ma
turlty structure. On the one hand,
many debts of individuals and busi-
ness firms are nominally short term,
even though the debtor has no
means or intention of paying them
off except by refinancing. On the
other hand, many debtors-particu-
larly railways and owners of real
estate-have tended to treat many
debts as perpetual. Such a policy
is apt to lead to disaster if, as
may ordinarily be expected. the
value of the property and prospects
of future income from which to
pay debts eventually show a de-
cIipcn