New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1904-01-17
FRAUDULENT MORTGAGES
Hoe Buyers of Real Estate Are
DeceiOed as to Its Valae.
BIZ PAUL MAYER.

The Criminal Code OF this state provides that oo-
tanning money under false prefences is punishable
with Imprisonment. II the law were rigidly en-
forced there some real estate spectators VINO
would be behind the bars to-day. OF all the frauds
perpetrated, the fictitious mortgage frauds are
the very quintessence Of barefaced swindling- IN
fortunately the law can be ei-cumvented in these
manipuatioEs. In the Borough Of The Bronx
this new form OF swindle is being extensively and
systematically practced- The following -illustra-
lions wiz serve to show how transactions OF this
kind effected:
A Spectator buys house or vacant plot for,
say. Sle.0oO and places a genuine mortgage OF
5000 on it. On taking TUE he gets 'dunlnly
TO figure the owner. The latter then executes
fictitious mortgage on the property of four. I'VE
six thousand dollars which is given to its real
owner. and forthwith promptly recorded In the
Registers Office. A purchaser is next looked for,
and. taking advantage OF the common fallacy OF
the inexperienced, that the value OF 4 property
must necessarily exceed the amount Of the mort
cages against II. il is easy enough 10 find dupe
20 buy the property at price based on a Valu2-
ton OF the fictitious equity created by the second
mortgage
Many an inexperienced investor has been made
victim OF in this manner. and in most cases the
property bought in this way has reverted TO the
original Spectator in the inevitable foreclosure
proceedings which later follow In the
wake of the transaction. The Spectator then pro
coeds 70 look for new victim with the same bait,
ana the same trick may thus be repeated again
and again
OTHER TRICKS OF MORTGAGE BUSINESS.
A little more than a year ago, while IN confer
with well known downtown law firm which
places money mortgages. an application Tor
permanent loan on = certain newly completed up
town apartment house. the value Of which was
represented 20 be $4,000. submitted to me
for my opinion. The builder Of the house wanted
60 per cent Of this valuation, slSo,oOo az per
cent estimated the real value of the property
10 be not more than $4,000 taking irto consid-
Grafton every reasonable prospect TO the future
enhancement Of the value OF the property.
The law firm in question declined to make the
loan. A few days after a we'll known financial in-
stitution advanced a loan Of SS1eo0 for year
the property. the strength of its appraisers
accommodation No bond given by the build-
The building sold shortly afterward for
SIS go. the buyer tuatng himself having
secured q bargain, figuring that, inasmuch a
reputable financial institution had loaned $4,000
the property. he could not make g mistake in
buying !; at the aforesaid price. Pretty soon,
however. the loan fell due, and the corporation
demanded a reduction on it of $4,000. To save the
capital invested in the property there nothing
for the to do but swallow the bitter
pill Up 10 the present time the house is still IN
the investors possession. ali his efforts sell il
at cost price having failed.
The broker who negotiated the temporary loan
and the appraiser Of the loaning corporation who
recommended it to his superior officers pre-
suraably taken Of by the builder. The
DroEei WHO Suiu the LouSe 10 lHNSsloE eCelNeu
his commission, the builder good profit, and the
buyer a costly object lesson.
THE NECESSITY FOR REFORM
The necessity for reform in realty mortgages is
important as the reforms advocated by me in
these columns last Sunday with regard to the gen
eral real estate business. Mortgages accepted by
unoneyed institutions estates private individuals
should not only represent certain percentage OF
the value OF the property but the mortgageor should
be protected against any sudden demand for the
payment CT the loan. A demand of this kind is
never very pleasant and often extremely embar-
RAISING, especially so in times when money is tight.