Banks Refusing to Accept Government's Bonds Which Would Help Homeowners Pay Off Loans, 1933

Editorial from the Aug. 11, 1933, issue of The Landmark, Statesville, N.C.

No Legal Compulsion

Complaint is vocal and somewhat vehement that the expected relief for owners of mortgaged homes through their home loan bank is not being realized because mortgagees are refusing to accept the 4 per cent bonds offered by the government for the release of the mortgage. The interest, not the bonds, is guaranteed by the government. Since “times appear to be picking up” as the improvement in business conditions is sometimes expressed, the mortgagees are not disposed to surrender what may prove to be more valuable for less. There is no question of the validity of the bonds offered by the government to the mortgagee for his claim on the property. He gets a lower interest rate but the interest rate is guaranteed. The holders of the mortgages evidently figure that if the improvement continues the mortgagor may be able to meet his payments; or if the mortgagee has to take the property over he will make a good thing out of it with the probable enhancement of real estate values. Neither of which propositions affords relief to the mortgagor. In the last event he loses all, which he home loan bank proposal was created to prevent.

As is usual in such cases, complainants allege that the home loan bank is not meeting the promises made in its behalf and government officials from the President down are being bombarded with demands that something be done about it. It is well known to all who have taken the pains to inform themselves about this matter that it has been made clear all along that the success of the plan depended on the voluntary co-operation of the mortgagee. He can’t be legally coerced. The lawyers who are voicing loud complaints in behalf of clients, their talk leaving the impression that the home loan bank plan is something of a deception, know perfectly well that the power of legal compulsion is lacking. The only remedy in this case is the same that is being applied for the NRA—the force of public opinion. If the mortgagees can’t be reached that way they can’t be reached at all. It is believed that many of them can be moved if the general public feeling about people who take advantage of the present situation to enrich themselves is conveyed to them. That can be done with proper effort.