New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1916-01-02
Expert Sees Plan for
Reducing Mortgage
Loans Coming.
DECLARES 1T NEVER
WILL BE UNIVERSAL
Conditions Here Different from
European Cities, Where
System Is Adopted.
By E c. BENEDICT,
OF Charles +. Moves Company.

The subject Of amortization Of mort
gage loans which is being so freely
discussed BY local real estate interests
is one which. once started, leads into
an endless chain Of speculative thought
There are many reasons why the
amortization Of loans would be gooo
for real estate interests. There are a.
many, or more. reasons why - wonlG
be difficult to work out IN practicsi
way considering local conditions.
In theory the plan Is good, as Il not
only constantly increases the equity o.
the owner. but 10 also continually
eweetens the security OF the lender,
can readily see. however, where am
culties begin that are so great that We
need 60 no further IN the discussion
until we have found a way 20 oDvlAte
them.
The plan In g modified form Is GER
tain 70 come, but it can never De unl-
veresl for many reasons. savings
banks and estates will continue 20
loan for three 30 FIVE years at what
ever rate prevails az the time OF max
ing the loan, and at the end OF ehen
period they should and necessarily Will
have the opportunity 70 revise their
loan as 20 amount. Il there has been q
depreciation or appreciation IN the
value Of the property. and as TO rate' II
the prevailing conditions JusNIy
higher or lower rate.
We should not forget that q very
large proportion Of property owners
invest for the sole purpose Of securing
better returns than they would receive
II investing in long term bonds or OF
deposits az low rates IN savings bahKs::
Obviously, Il we adopted plan OF
amortization whereby the interest on
the loan and the payments on aceoun;;
Of principal consumed practically az
OF the income Of the property It would,
instead Of having o beneficial erect, De
a harder blow 70 real estate than an!
other you could deal
Those OF US who have had an experl,
ence extending over long term OF
wears realize that the local conditions
are different from those existing IN
any OF the large European cities
where. I understand, amortization mas
for many years been advantageousiy
adopted.
The greatest danger confronting the
lender on local real estate is that re-
fulting from shifting business centres
There are a number Of districts IN
New York to-day, about which 1t is IN
necessary 10 particularize, wnere me
property is not worth one-half what u
was FIVE years or less ago. Some OF
these districts that have IN mind have
had the most astonishing change, one
that the wisest experts never imagined
could take place
The greatest security and safety that
mortgage investors had In these dis
tricts was that they had bette. op'
portunity 70 get out as q result OF the
short term loan than they would have
Rad they made twenty-year loans, even
~ the amortization Of the same hac
been es high os Q per cent per annum
In cases where an individual puT'
chnses q residence for his own occu-
pancy & long term amortized loan IS
undoubtedly proper, as IN the course OF
his life time the owner is reasonably
certain 70 entirely hQuidate the mort
gage and ss old age creeps over HIN
be provided with home when ne most
needs Il.
In the case Of investment properti es
amortization provides for an enforced
saving. which as stated before IS equal.
" attractive 10 the lender as IT
eweetens his security and 10 the
owner as Il increases his equity, but
this plan should be worked out on
such basis that the entire income OF