New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1916-01-30
Better No Change than
Absolute Amortization,
Says Petit.
FOR FLEXIBLE LONG
TERM MORTGAGES
Operator Against Making Invest
mcnt Property a Compulsory
Savings Fund.
Franklin pe,tit. the well known real

Franklin Petit. the we'll known real
estate operator at the request OF Birch
Helms. secretary Of the Advisory Coun-
ell of the Real Estate Interests. has cX-
pressed his views IN general way
upon the question OF amortized mort
cages. In his letter to Mr. Helms Mr.
Petit says: "You will understand. OF
course. that these are my personal
views and not to be taken as the views
OF any association or organization with
which am connected" Mr.. Pethts
views on the question follow:
First. let me state most emphatically
that see no real advantage TO the
lender. the borrower OF the real estate
market in general, to be had from the
absolute amortization OF al mortgages.
B II ls not worth while 20 consider amort-
tization or instalmeut mortgages. eN-
cept M connection with long term mort
cages. A. safeguard for the lender
+ in connection with a long term mort
/ gage. some scheme for a gradual reduc-
+ ton Of the mortgage. when conditions
are such rs 10 warrant reduction,
must be provided. Amortization, prop
erlv applied. will provide this safe
guard. Primarily. what the market
needs ia long-term mortgages. If, how
ever. as was recently suggested al Il
meeting of the mortgage interests
called by the Advisory Council OF
Real Estate Interests. all long-term
mortgages are 10 be embarrassed by a
cause providing for absolute or auto
matte amortization, the general market
would be better of TO drift along as
it is at present than to attempt TO
inaugurate any such scheme.
81 am impressed with the fact that
real estate would realize great benefits
i from the common use of long-term
mortgages az the hands Of the invest
inc public. Ny personal experiences has
shown me that the near approach Of
maturity Of a mortgage will frequently
keep an investor from making pur-
chase. II We are 20 put real estate In
Keen competition with other forms OF
investment, IT must be so stabilized as
to make 10 attractive to the Investor
for actual income purposes.
The effect OF absolutely amortlzing
all long-term mortgages, covering de
sirable investment property. would be
% rob IL of its interesting feature as a
reliable source Of income by making 10,
to the extent Of q very substantial part
Of the income 10 produces. compulsory
savings fund. II the funds Of investors
who desire 10 live on the income from
their investments are eliminated from
real estate. the market Will stagnate
and values will decline. This surely
will happen If We undertake to compel
/ these investors TO pay out annually, IN
reduction of the principal OF mort
/ gage, "A very substantial part OF their
income, even though they may be ac-
curing additional equity by so doing.
IL actually places the investor In the
position Of continuing indefinitely 70
purchase real estate on the instalment
plan. This is very Objectionable. and
will make real estate, a. an investment
for income purposes, even less sttrac-
tive than u is Al present.
ar therefore. method can be de-
vised which would eliminate this oh
lection. aud AZ the same time make ~
possible for the lenders TO take long
term mortgages provided with a safe
guard of which they could avail them
selves n and when conditions warrant
ed itI. something will have been accom-
Dlishcd in the right direction. The
lending institutions have felt. and quite
Justly so, that with the changing condi-
tions TO which real estate is subject
they could not with proper safety make
loans Of two-thirds OF the value of in
vcstment property for periods Of more
than from three 10 five years.
II have repeatedly suggested and
still believe that most satisfactory
condition might be developed by inau-
gurating among the money lending IN
stitutiOns the making Of ten, fifteen or
twenty year mortgages, with the pro-
vision for amortization TO begin after a
-tatcd period Of, say. three. four or
Eve wears tho instalment payments TO
become due at the option Of the mort
CaCce trathcr than as an absolute
agreement providing for the payment
by the owner and acceptance ny the
morteaccel. and 20 be arranged upon
iu advance IN such amount, concerning
each property a. would not be likely
TO deprive the owner of substantial
income from the property concerned.
These instalment payments might
be made 10 become due yearly, or even
BOO alternate years, the principal feat
urc however. being that the calls for
instruments shall be within the discre-
ton Of the mortgage, and that the
MORTGAGE shall in turn make II prac-
ticc TO actually waive the call where
there Is no decrease in the value OF
the property concerned. from any
standpoint. and therefore nothing to
warrant reduction of the mortgage at
the particular period. The privilege on
the part of he mortgagoe TO call this
instalmcn- should not be cumulative,
so that, particular instalment having
-
the amount which might be called at
the next lnstalment period would not
be increased.
An arrangement Of this kind would
without doubt have beneficial effect
on the properties themselves and in
duce the owners to keep their buildings
I'm good shape and pay close attention
10 their tenancles ln anticipation OF
the approach OF an instalment period.
II would soon become the custom OF
the lenders 90 waive these instalments
where there Is no depreciation in value
or neglect On the part of the owner in
keeping his property 10 condition. On
the other hand, where depreciation has
taken place. or where an owner has
directly or through his agents neglect
cd his property. he will dcseryedly
suffer the penalty which Will not be
lrhlctcd upon the owner whose prop
crty has been increasing IN value or
VINO has given his property proper care,
and where there has not been deprecis-
tion in value from other causes.
81 think 10 would be- great mistake
for the important money lenders 70 as
sumo tho altitude that all owners Of
real estate shall be compelled without
reference 10 the condition Of their
property or the percentage Of the value
Of the property represented by the
MORTGAGE 20 deprive themselves Of :
very substantial portion Of their in