The Washington herald., 1912-08-03
THE MAN WHO
BUYS MORTGAGES.
Copyright. 1872. by C. NJ. Keys)

| Copyright. 1872, by c. NJ keysJ
Somewhere in this country there are
tucked away altogether somewhere be-
tween S0Oo.0oo.oOo and $4,000. 100000 o!
mortgages which bear interest and which
are held by their owners for the sake OF
Income II Is one of the constant puzzles
of the investment world to discover
where this great aggregate of mortgages
goes and the kind of investors that ouy
them. .
II has been the experience Of the writ
or in intercourse with a good many
thousand investors during the past ten
years, that the direct mortgages on real
| estate and on homes and on factories
are owned in large part by the very best
class of investors in the country. They
are held almost entirely for income and
the men or institutions that buy them
pay no attention whatever to possible
fluctuations in price. because there can
be no such fluctuations: and seldom II
ever think Of the possibility Of default
The holders of mortgages. n fact, are
the most constant and faithful investors.
Close analysis shows that certainly
more than s.. so. 100000. and probably
more than s3. 0oO of farm and realty
mortgages are held by the insurance
companies and banks alone, the insur-
ance companies being the largest holders
These mortgages. of course. are bought
to be held for maturity. They are the
cream Of the mortgage market, being Sc
lected and passed upon by experts In al
most every case. They Weld to their
owners an average rate pretty well up to
per cent on the investment
II one would seek the general mar
ket for farm and realty mortgages one
has to go and study the investment Of
money in other places than in Wall
Street; for In Wall Street for the most
part realty mortgages play only a minor
part IN the business Of investment. In
the country towns local mortgages con-
sutute possibly the biggest and certainly
the best class Of investment securities
Usually the borrower and the lender
know one another: or else they are
brought together through the Services
of a local lawyer or a local bank. The
making OF the mortgage Is a matter Of
routine and the lender of the money
knows exactly what he gets. and has a
fair iden as to how much trouble he will
have collecting the interest and the prin-
cipal.
Naturally there is no open market for
mortgages. A good one made by a sub
stantial citizen can usually be assigned
from one holder to another: but the sale
Is not such an easy and simple matter
as the sale of securities in an open mar
ket. such as exists, for instance. for
stocks and bonds In all the principal
cities or such as would exist for mort
cages IL they were handled in one large
central institution.
A question that is often asked is
whether or not the buying of local mort
cages for investment constitute safe and
sound use of money On the whole. the
reply is favorable to MORTGAGES, though |
much can be said on both sides. I'm
the strongest point in their |
favor is the fact that they are secured ]
by ceratin definite specified properties |
which the lender may know personally /
and which he has the right to levy on by |
law II his debt is not paid. Another |
strong feature is that they are not SUBJ
tect to fluctuations in price. Then again |
they are short term. which Is very often |
a strong point in favor of any security.
The principal objection. Of course. lies
In the fact that a mortgage is in part |
personal obligation. II something goes
wrong and one has to collect principal or
Interest by means of foreclosure the pro-
cess takes on in part the nature OF a
proceeding against a person and the hu-
man element enters into II very largely
This Is particularly true in the case of |
mortgages against homes and small busi-
ness enterprises Sometimes. there are
long and painful delays in the collection
ot interest,", particularly when times are
hard.
1t Is very sound principle for the buy
er OF mortgages to put part OF his funds
nto other forms Of investment. In the
1rst place he should have a part of his
money In such a form that he could turn
Z over and convert 1t into cash In case
II need. In the second place not all of
my FUND should be invested locally; be-
,ause II 1t is it exposes the whole of a
mans principal to local action and local
sonditions- 1t Is quite evident. for in
stance. that the man who has Ali bI.
money Invested in mortgages in a mill
own Is dependent on one industry. and
VII see his whole fund grow weak at one
ime from the standpoint OF security.
This Is just another phase of the doc
rine OF diversity which Is the soundest
u all investment doctrines and which 1t
wen worth while to emphasize over
md over again 1