Mortgage Troubles

With insurance companies suspending farm foreclosures and Federal agencies promising further relief to the mortgage-ridden West, hardly anybody last week noticed a fix that mortgages had got a group of New York companies into--until they slipped out of it. In Manhattan Owen D. Young announced the formation of a Realty Stabilization Corp., with a capital of $10,000,000 and an R. F. C. credit of $100,000,000, to rehabilitate the city's real estate and make it selfsupporting. Immediate purpose of the corporation, however, is to tide guaranteed-mortgage companies through the embarrassing task of meeting--and scaling down--$700,000,000 in maturing mortgages. Savings banks, insurance an a trust companies, which had been acutely conscious of the guaranteed mortgage companies' fix for months, were much relieved. Credit for the job went to New York Trust Co.'s Mortimer Buckner who had been laboring strenuously for several months.

Guaranteed mortgages account for some 35% of the total mortgages outstanding in New York City. There are about 18 companies which have guaranteed this 35% to the extent of three billion dollars. They are protected by an "18-months clause" which permits them to postpone redemption of matured mortgages. Early in 1932 real estate was shrunken in value and property owners hard pressed, so the mortgage companies invoked the 18-months clause. This year real estate values are further shrunken, property owners are harder pressed and the 18 months are nearly up.

Chief function of Realty Stabilization Corp. will be to direct the refinancing of matured mortgages on the basis of present property valuations. The difference between this sum and the face value of the mortgages the corporation will supply from R. F. C. funds, the R. F. C. getting, in effect, second mortgages.

Significant is the fact that the R. F. C. will not provide funds to enable guarantee companies to pay interest on the mortgages they have guaranteed. Result: the guarantee companies must persuade the holders of mortgages to reduce their interest charges. Fortnight ago Frederic James Fuller, new president of New York Title & Mortgage Co., wrote to some of his certificate holders asking them to accept a 4% interest rate in place of the present rate of 5 1/2%. Rapid progress along this line was expected under pressure from Realty Stabilization Corp.

But the difficulty of this task caused the appointment of public-spirited William Church Osborn to head the new organization. Distinguished lawyer-Democrat, in 1918 he ran against Alfred E. Smith in the gubernatorial primary and was so impressed by his defeat that he became one of Governor Smith's stanchest supporters. He was a friend of Woodrow Wilson, is a friend of Franklin Roosevelt, organized the aggressive Democratic Union. In Garrison, N. Y. he has a country place where he sometimes plows with two oxen. In Manhattan, where he owns a house in the East Thirties, he steers clear of Tammany Hall. He is a trustee of the Metropolitan Museum of Art (hobby, art collecting) and of Princeton University (religion, Presbyterian). His tall, thin figure draped in a loosely cut suit has been seen on many a public platform, from which he has issued dignified appeals for charity from behind a mustache which is less voluminous than it once was. His brother is famed Naturalist Henry Fairfield Osborn; his wife was Alice Dodge, which accounts for his directorate in Phelps Dodge Corp.

Upon taking his new job Mr. Osborn lost no time in addressing mortgage holders as follows:

"Strict enforcement of legal rights brings about foreclosures, forced sales and losses to the owner and mortgagees alike. Those familiar with the present situation can see no reason why mortgages should yield 5 1/2% when other securities are yielding 4% and banks find difficulty in lending call money at 1%. Above all things, mortgages cannot be expected to yield in interest more than the productive possibilities of the properties."

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