New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1916-01-02
AMORTIZATION
OF MORTGAGES
Never Will Be Applicable
to Manhattan Loans,
Says Expert.
MARKET STIMULATED
BY SMALL BUYERS
Opinions of John Finck In An
swer to Criticism by Frank
J. Parsons.

A letter OF criticism on n recent srti-
Gle by John Finck on amortization OF
Manhattan mortgages has been received
by him from Frank j. Parsons, vice
president Of the United Mortgage and
Trust Company. Mr.. Finck in answer
declares that amortization never has
been and never will be practically ap-
plicable TO Manhattan mortgages and
that small buyers stimulate the market.
His reply follows:
Your chief difficulty is that you fail
TO recognize the difference between
amortization and instalment, a miscon-
ception common 10 the average lender.
Amortization never has been and never
will be practically applicable to Man
haitian mortgages. There is the single
exception Of loans made by building
associations. In reference 70 mort
cages, the term means 70 the point Of
extinguishment.
1t has been the custom, long before
the present agitation, to provide for PEI
riodical payments, particularly where
a mortgage was made in excess of the
amount justified by the equities or APP
prsisals. This is not amortization, but
a simple reduction Of the principal with
the sole view of safeguarding the orig
insl investment.
/ differ with you on your PROPOSE
tion that the buyer who invests on q
small margin il undesirable, for a large
number Of small cash buyers must nee
essarily stimulate the activity Of the
real estate market, and If lenders will
show proper leniency, in times Of dis
tress, a healthy condition will ulti-
mately be created by these transitory
and speculative operators.
The meeting at the Chamber Of Com
merce, attended largely by the repre-
sentatiyes Of the leading financial in
sttutions in Manhattan, leaned in ia
vor Of amortization. This may be good
in theory but bad in practice.
Stewart Browne in his letter 70 you
sets forth MS views clearly and con-
cisely when he writes: ~ I were a
corporate lender would rather make on
New York City realty 5-yesr straight
loan than a l0-year 2 per cent install
ment loan, as ! think the former Is
safer. If were borrower and could
borrow without paying eXtravsgant
commissions, / would rather take a D
year straight loan than a l0-year , per
cent instalment loan, but | would rath-
er. as a borrower, make a l5-year or
a 20-year l per cent instalment loan,
but no corporate lender would make
hus 20 m
crazy, which | don't believe they are
This is cOnfrmatory of my opinion
that this class Of mortgages Is neither
practicable nor desirable.
Lenders and borrowers both recog-
nize the hazards incident 70 a long
term mortgage. The lender subjects
his security TO the danger Of wide
fluctuations In value; the borrower
cannot avail himself Of the possibility
Of securing a mortgage for a larger
amount with the rise In values.
A. present loans are made for three
or five years, and at the expiration Of
the terms extensions usually are
granted, provided an appraisal shows
no serious impairment Of the security.
Safely secured mortgages are seldom
disturbed.
You state that your company rarely
loans above so per cent Of the value,
coupled with amortization or install
ment payments, and that shortly after
the panic Of 1907 you called payment
Of 500 mortgages as fast as they ma
tured, and that with but one exception
you suffered no loss.
| must admit that this situation was
unique. The experience of most lend
ers was the reverse, and from close
personal observation fail 20 see where
owners obtained the money 70 make
these payments, as money was then
selling at a premium
You were singulsrly fortunate In Sc
curing payment, and it would be profit
able TO learn by what miraculous
agency you secured such excellent re-
suits. Il would further be interesting
70 learn the locality Of your securities,
as IL would open a wide field for com
parison with other sections.
Am I correct in assuming that you
stated that the major portion Of these
mortgages were in Manhattan? Does
rot your article show an Inconsistency