The sun. [volume] (New York [N.Y.]) 1833-1916, 1906-12-16
TIRE REAL ESTATE MARKET.
Lf0UFDATION THREATENED IN
THE TENEMENT DISTRICTS.
Lenders Are Taxing Advantage az the
Rrundage Clause TO Cali Mortgages
Secured by Property In the Uptown
boom sections Interest Rate High.

Rrundake Clause 20 Cali Mortgages
Secured by Property In the Uptown
Boom sections Interest Rate nigh.
capitaI that ia being invested in Manhattan
real estate just nov is going into business
property. Until quite recently it was
residence property that was in chief de-
mand. However, the principal lending
institutions are Encouraging further
speculation in the fiat INC tenement dis
tricts. Indeed, some of them are with
drawing financial support from those
neighborhoods.
With put few exceptions the mortgages
in force at present contain what is genegPlly
known as the Brundage clause, which
provides that in the event Of any change
In the tax laws the mortgage shall become
payable on thirty days written notice.
A change has u~ndeniably taken place in
the tax laws, but it is one that has probably
benefited lenders more than borrowers,
for all taxes on mortgages have been re-
moved, while the small recording fee which
has replaced them is paid by the borrower
Nevertheless many lenders, including
trust companies and other financial insti-
buttons, are taking advantage OF the Brun-
dage clause to call unexpired loans with a
view to renewing them at the high rates
OF interest which now prevail. II the
properties concerned happen to be in fiat
and tenement neighborhoods borrowers
are forced not only to submit to a raise
of int crest but also to pay OF part OF the
loan.
The policy Of reducing mortgages on
realty in sections where speculation has
been unduly active may in a number OF
instances save lenders from the conse-
quences OF having assisted in promoting
reckless booms, but it is certain to involve
the great err number of mort gagees introuble.
Liquidation, once started, is bound to grow
In volume, for not all mortgagors will be
able to answer the call for more margin,
and holdings will consequently he thrown
upon the market, depressing prices and
impairing the value OF all mortgage in
yestments in the neighborhoods affected.
There is no doubt that the uptown fiat
and districts are overhuilt.
However, the effects Of overbuilding would
disappear gradually in the course of a few
years, leaving prices virtually where they
now are, If existing mortgages remain I'm
disturbed. Most of these have several years
20 run, and by the time they expire the
present motive for wishing them reduced
would probably have disappeared. In any
event, lenders are equally responsible with
borrowers for the condition prevailing up
town and should accept the consequences.
Fortunately, the legality of the Brundage
clause is open to question and a suit Ia about
to be brought in the courts at the instance
of the Real Estate Board of Brokers to put
the matter to an issue. II the clause is
found illegal the uptown residence districts
will at least nave a fair chance TO recover
from past speculation.
Meanwhile, though lenders are assuming
an unfavorable attitude toward these
already exploited districts, they are giving
every encouragement to dealing in business
premises. The substitution Of the recording
Zee for the mortgage tax has attracted new
capital 10 the realty loan market. Interest
rates are still high, but there is not much
difficulty in securing ample loans on prop
erty in the midtown and downtown mer-
camille sections. 1t is there, consequently,
tina the bulk Of he current real estate
activity in Manhattan is to be found.