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AND BUILDERS mm 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)