The herald., 1897-09-20
How Borrowers Raise
Money on Real Estate
MORTGAGE VS.. TRUST DEED
HOW A LEGISLATIVE ENACT
NENT Is NULLIFIED
Under . Trust Deed the Courts Are
Not Invoked-A Borrower at the
Mercy Of the Lender


There are always people seeking to
borrow money on good, bad or indiffer-
ent security That may be accepted az
an axiom Of finance. In good times they
want to borrow to extend their business
operations, and in bad times to bolster
up the business threatened with col
lapse.
Heretofore the usual way to obtain
Z loan has been to give q promissory
note for the sum borrowed, and in order
to absolutely secure the lender against
loss mortgage was given on piece
Of property generally worth more than
the amount Of the loan, with the ac-
crued interest during the period of time
stipulated for the loan to run. In the
event Of the borrowers falling behind
In the payment Of the interest-a very
common occurrence-or failing to take
up the note at maturity. a suit in fore
closeure followed. These suits have
been the most common of any that have
occupied the attention of the judges in
the several departments. They were
quickly disposed of and judgment en-
tered for the amount Of the loan, the
unpaid interest, an amount generally
ranging about 10 per cent of the total
amount for attorneys fees, costs Of suit,
aud decree of sale against the mort
gagged property given as security. Due
notice having been given of the sale.
the property would be auctioned off by
the sheriff, a sufficient amount Of the
proceeds applied to the liquidation Of the
indebtedness, and the balance-if any
such remained-handed over to the in
dividual unfortunate enough to be
caught in the tolls of the law. The
purchaser Of the property at sheriff $
sale did not get perfect title for six
months from the date of sale, any time
within that limit the foreclosed mort
lgagor could redeem the property.
All of this bore pretty hardly upon
the borrower. The interest charged al
ways ranged from s per cent upwards,
delinquent interest being compounded,
aud setback in business of the fail
ure Of a crop sufficied to ruin the mid
die class man unwise enough to mort
gage his home or his ranch for money
that in the first instance may not have
been absolutely necessary. If it was
absolutely necessary then the borrowers
ruin was all the more complete, for
when the crash came what with attor-
neys' fees, costs Of suit and sale and COM
pounded interest the poor borrower was
generally sold out, kco, stock and bar
rel, and could consider himself fortu-
nate II the proceeds of the sale covered
the amount of the loan, interest and
attendant expenses. Failing that he
would find himself compelled to start
anew In life with delinquency judg-
ment for the shortage hanging over his
head, and this in turn would go on
multiplying interest at a compound rate.
THE LEGISLATIVE REMEDY
All Of this was bad enough, but 1t
was the ordinary method of deing busi-
ness. The last legislature attempted to
more nearly equalize matters between
the borrower and the lender Of money
by extending the time for redemption
Of property from six to twelve months
This was not a very drastic reform and
merely allowed the rancher to have a
chance to recuperate by garnering an
other harvest, OF if city business man.
allowed him time to profit by the harvest
upon which, directly or indirectly, every
business man depends.
But the banking fraternity took UNI
bragg at this action of the legislature
and new way has been devised by
which the enactment is rendered null
and void, and compared with which the
old mortgage plan is fair, equitable and
eminently just
This new device is for the convey
ance OF the property, given as security
for payment Of the promissory note, to
third party by deed of trust. This OBJ
viatee all necessity for mortgage
Rather strange to say there are would
be borrowers who have a horror Of plas-
tering mortgage upon their home, who
yet jump with avidity when the oppor-
tunity il afforded to raise a loan by
giving to "a friend" deed Of trust for
the benefit OF the person or bank ad-
vancing the money. When the day of
reckoning comes such a one learns
wisdom upon finding out that the
.friend" IL impotent to help him and that
the money lender has a lead-pipe cinch
upon the property by virtue Of the deed
Of trust.
All of these deeds of trust are printed
documents much the same in their word
ing, and with vacant spaces to fill in
with description of property, etc Many
Of the stipulations might be commented
upon as unfavorable to the borrower
but, with the simple statement that the
property passes absolutely, in law, from
the posse ssion of the borrower, notice
may be taken Of one or two Of the more
important stipulations.
he second clause of such a deed of
trust reads somewhat as follows:
In case the said part - of the first part
shall well and truly pay, or cause to be
paid when due, in gold coin a aforesaid,
said promissory note-and the interest
thereon as therein provided, and shall up
on demand repay all other moneys secured
or intended to be secured hereby, includ-
Ing the reasonable expenses of this trust,
then the party of the second part, its sue
cessors or assigns, shall reconvey all the
estate in the premises aforesaid to them
BY this instrument granted unto the said
----, his heirs and
assigns, at --- request and cost, or SO
much thereof as shall then be held by said
party Of the second part, its successors or
Assigns
In this clause there are two points
worthy Of note-the INTEREST on the
note and the reasonable Expenses of
the trust''
Some light IL thrown upon these two
points BY the last portion OF the first
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