The Washington herald. [volume] (Washington, D.C.) 1906-1939, 1909-01-17
Better Realty Conditions Expected
when Small Investor Becomes In
Observation-Disclosures Believed to Be
Drifting from Railroad Bond to
Loan on City or Farm Property.


than has been solved in connection with
railroad borrowing There are no funda-
mental reasons why it cannot be done
and why such securities should not be-
come as salable as some Of the Other
high-grade investments with which We
are familiar.
Bond Values Uncertain.
It IS nearly an impossible task TO deter
mine the value back OF a railroad bond
The great majority OF investors do not
even know what property secures it. yet
such securities have not only a national
doubts that New York City real estate
has as solid and as real value as our
railroads: in fact, the value Of New
York City contributes TO the value OF
every railroad in the country Il IS safe
TO assume that most people have better
idea Of the intrinsic value OF real estate
than they have OF the intrinsic value
Of railroad It Is. therefore. not a
question Of the safety Of New York mort
cages, neither is il on account OF the il
terest return. because II is conceded that
mortgages yield a larger income than can
be derived from other forms Of investment
OF equal safety Il is fair 10 state that
a bond investment has no advantages
over the real estate mortgage. except
those OF which are due 10 the way
the business IS handled. The wonder Is
that there IS even a local market for
mortgages II one stops TO consider all the
detail such an investment involves, and
Il shows that mortgages must have some
advantages not possessed by other forms
OF securities.
Mortgage Not Popular.
Il viii be impossible TO broaden the
market for mortgages under practices
which are as inadequate as II the rail-
roads had tried 10 borrow their money
by getting sl0.00o from one man on a
particular quarter Of a mile Of track:
$500 from another man on another piece
Of the same length. because that particu-
lar investor did not put as high a value
on the security as the first. or else did
not have quite so much money 10 put
out: $500 from another on q certain rail-
road station, and so on dealing with each
individual lender on particular parts OF
their property
The mortgage business, as generally
to-day. is the same as il was
practiced hundreds Of years ago There
was no change Of Importance in connec-
ton with the local market until the ad-
vent. IN 1883 Of q company which issued
policies eliminating the hazard Of opinion
in regard Il titles and the introduction
in 1880 OF the business Of guaranteeing
the payment OF mortgages which elimi-
mated TIE hazard in regard 10 the value Of
the real estate
Long step in Advance.
These were great steps in advance, and
guaranteed mortgages covering New York
real estate are popular with investors in
many parts Of the country, as the guar
autee eliminates all the trouble and re-
sponsibiIity in regard to the investment.
but it Is Tot enough, as Il is still neces-
sary for the investor TO find mortgage
for the particular amount and terms
which may be desired.
To adopt the bond form OF borrowing 10
real estate. q campaign Of education is
necessary. This can be started only by
those having large real estate interests.
and il would seem logical that the work
should be undertaken by the title and
guarantee companies
The easiest form Of real estate security
through which TO introduce this improve
ment over long-established methods is the
mortgage. because the inves-
tor requires no knowledge of local con-
as he is protected from loss by
the knowledge and resources Of the COM
pany giving the guarantee, IN addition 20
which he is relieved from all the details
connected with the care Of the loan. In
fact, the advent Of the mortgage guar
antee company has removed the greatest
lack or a standard Of quail
ity-to the popularity and stability Of
real estate mortgage bonds.
A plan is now in operation whereby an
ownership Of 500. $780, or 500 may be
acquired in a number Of guaranteed mort
cages which are deposited with a trustee
for the benefit Of the holders Of the
guaranteed first mortgage certificates"
which are in the form Of A registered
bond transferable by Endorsement
For Small investor.
To introduce this form Of investment 10
the greatest number OF people in the
shortest time it was decided TO put them
AZ the disposal OF the smallest investor.
and so a provision was made for taeir
purchase on the installment plan. As new
banks are willing to take the
small deposit. so this new idea has TO
cater TO the small investor. The market
would gradually be worked I'D TO the
arger investors and It would not be such
q long step 10 sales Of issues Of bonds
secured by trust mortgages on individual
properties with payment guaranteed by a
mortgage guarantee company.
The total on one improvement would
make no difference. and the question
IF financing the large improvements on
Manhattan Island would not be as
as It is at present. There
s no reason why such securities should
not be popular with all classes of inves-
ors, both institutional and individual.
In the last few years many Of the pa
,ers. particularly some Of the national
weekly and monthly issues. have carried
N a warfare against the promoters OF
doubtful schemes who have prospered by
getting the money Of those who could
east afford 70 lose One great disadvan-
age this class has Iabored under is that
here have been no legitimate investments
which could be bought in small amounts
IL these certificates do nothing else
1ut save some OF the wage earners'
money they VIII have done something
which all who are interested In this class
hould applaud. It would be an effort
which directly supplements the work
lone by the savings banks and life insur-
lnee companies, to promote thrift and
Ids0uats provision for their families.