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BUILDERS

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Vol. CII.





NEW YORK,  SEPTEMBER 21,  1918





No. 12





Proposal to Organize A State Mortgage Bank

FoUowing Successful Operation of Federal Heserve and Farm Loan
Banks, This Plan Put Forward to Stahilize Mortgages





AT the annual convention of the Real Estate Asso-
ciation of the State of New York, held last week
at Buffalo, a paper was read by John W. Paris,
of the Paris-Hencken Company of this city outlining a
plan for the organization of a State Mortgage Bank for
the purpose of liquefying and stabilizing real estate
mortgages. Mr. Paris called attention to the success
of the stabilizing of the banking system of the country
through the organization of the Federal Reserve Bank,
snd of the successful operation of the Federal Farm
I.oan Bank in providing aniple loans to farmers on ap-
proved security at low rates of interest for long and
short terms.

The outline of Mr. Paris' plan for a Mortgage Bank
follows:

To organize a State Mortgage Bank to be iiicor-
porated under a special act of the Legislature for the
purpose of stabilizing the mortgage business of this
State and making the mortgage security more liquid ;
to produce a revenue to the State and give to the public
a more staple mortgage market at a more desirable
rate of interest.

To incorporate a State Mortgage Bank with a min-
imum paid in capital of $1,000,000. Said stock to be
subscribed by those trust companies, mortgage or in-
vestment companies desiring to avail themselves of its
privileges. Trust companies, mortgage or investment
companies operating iinder the banking department and
subscribing to the stock, to have the privilege of de-
positing with the said State Mortgage Bank, first mort-
gages on real estate. made iii conformity to restrictions
hereinafter stipulated, and receiving in return either
cash or bonds from the State Mortgage Bank. Said
securities so deposited to be redeposited by the said
bank with the ComptroIIer of the State of New York,
and said State in turn to guarantee the payment of said
bonds, both as to principal and interest. Mortgages
deposited with the said Mortgage Bank to be guaran-
teed by the companies so depositing them, and when
deposited by the State Mortgage Bank with the Comp-
troller, to be guaranteed to the State by the said State
IMortgage Bank, accompanied by the guarantee from
■.he company from whom received. which guarantee
shall be duly assigned to the State for its protection.

Principal and interest to be collectcd by the said
mortgage companies and all principal pavments up to
the amount advanced on account of said mortgage by
the State Mortgage Bank to be immediately transmit-
ted by the mortgage companies to the State Mortgage
Bank, and interest payments equalling the rate of in-
terest which the bonds of said bank guaranteed by the
State, may bear, plus an additional 1 per cent. The
State Mortgage Bank to turn over to the state comp-
troller cancelled bonds previously issued by it and
guaranteed by the State in amounts cqual to the princi-





pal payments received by it, together with a statement
as to the mortgage or mortgages on which such pay-
ments were made, and likewise interest on the amount
of bonds outstanding, said interest being J^ of 1 per
cent. in excess of the rate of interest which such bonds
bear.

Every trust company, mortgage or investment com-
pany desiring to avail itself of the privileges of the
State Mortgage Bank shall subscribe to its capital stock
and shall be entitled to receive bonds up to fifteen times
its capital subscription, subject to the rules and regula-
tions of the State Mortgage Bank. Stock to be non-
transferable so long as any mortgages assigned by said
institution remain unredeemed.

No trust, mortgage or investment company shall be
jiermitted to subscribe to said stock in excess of 50 per
cent. of its total capital and surplus. Savings banks
may enjoy the privileges of the State Mortgage Bank
without capital subscription, but shall have the priv-
ileges of subscribing, but such stock shall be made a
legal investment for such banks. All profits realized by
the State Mortgage Bank, after paying operating ex-
penses and a dividend not to exceed 6 per cent. on its
ca]Mtal stock, and 2 per cent. to a reserve shall be recog-
nized as the property of the State and shall be turned
cver by the State Mortgage Bank to the State Treas-
urer for general State purposes.

IMortgages to be accepted by the State Mortgage
Bank running for a maximum period of twenty years
f.roviding same are amortized at the rate of 2 per cent.
per year, payable in equal semi-annual payments; or
running for a maximum of fifteen years if amortized
at the rate of l^ per cent. per year, payable in semi-
annual payments ; or for a maximum of ten years if
amortized at the rate of 1 per cent. per year; or run-
ning for a maximum of five years if amortized at the
rate of ^^ of 1 per cent. per year, or for less than five
years without amortization.

The following advances shall be made:
On mortgages of l]ĩ^% to 2% amortization 100%
On mortgages of 1%    to j4% amortization    95%
On  niortgages of no                  amortization    90%

The substitution of securities by either the trust,
mortgage or investment companies to the State Mort-
gage Bank, shall be permitted in licu of cancelled bonds
where principal payments were made.

In all cases wherc the mortgaged property is im-
proved inconie property, the mortgage shall not exceed
60 per cent. of the ascertained valuc thereof. Where
the pr()j)crty is uniniproved and non-income producing,
the mort.sîage shall not exceed 40 per cent. of such as-
certained value. Such bonds shall be frce from all
taxcs from which otlier State bonds are free. The in-
terest on such bonds shall be paid by the State from
(Continued on page 325)