New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1916-02-13


Interests.
A silent revolution is going on in the
mortgage world Of New York City
which bids fair TO replace the old
method of handling mortgages here as
surely s. the railroad replaced the
stagecosch or the newspaper the town
crier. Times change, methods change,
and wise is the man who changes with
them.
From many causes New York real es-
tate has suffered tremendous losses
whenever we have had periods OF man
cial depression; but chief among them
i. the fact that mortgages have been
held BY private individuals and com
NAMES which have been forced by their
creditors. or have been lured by the
chance % gaining higher rates OF IN
torest. 10 call the mortgages or exact
higher rates of interest The unhappy
situation Of the owner has been de-
scribed very aptly by recent writer
on the subject The owner who hnds
himself in the unfortunate position or
having his mortgage fall due at such a
time is compelled 10 reduce the princl-
nal. nav excessive interest rates ana
submit 70 other onerous eHactions as
condition for extension, or he may Do
called upon 10 pay of the entire mort
gage. while every avenue Tor the re-
placement Of the loan has been closed
10 him. with the inevitable result tnat
he is either compelled TO make ire
mendous sacrifices or lose his property
altogether
MANY holders Of mortgages have IN
vested their surplus funds in them,
upon which they were compelled 10
draw as soon as they are pressed by
bad times. The mortgages themselves
may be good enough security, but they
are not marketable IN such times, so
the holders are forced 10 collect the
principal This results in hardship ana
loss 70 property owners, and real es-
state suffers generally. How, tneh'
can we adjust things so that the mort
gage will not be compelled or induced
TO call his mortgage In IN bad tunes
The answer is by providing methou
whereby he can hquidate ms security
without troubling the property owner:
am led 20 believe that a system OF
amortization Of mortgages whereby a
small annual, semi-annual or quarterly
uavrent is made 20 reduce the princi.
nal is the first step. The rate OF
such pavment will depend, Of course,
upon the character OF the property and
other facts, but, generally speaking
the rate in order 70 be acceptable 10
both lender and owner should be that
mart Of the net income which may ne
left after taking out reasonable re-
+urn on the equity. Long term mort
cages arc desirable, bgt hardly pract,
cable generally at present, while rear
estate values change so rapldlY' Dul
tbcv are not necessary under the plan
hereinafter outlined, IS the mortgage
"a likely 70 extend the mortgage read
ilv if the loan has been reduced 10
point of safety. and II he rs ireed from
the pressure which forces hlm 10 Ge-
mand the principal. This Is proved DF
the larger saving banks, when nave
vast number Of short term mortgages
and seldom, If ever, call them. lhey
car check Withdrawals, and their re-
scources are 80 large that they are not
forced 10 call on their mortgages. MS
il not the case with mortgages gener-
ally however, so We must md a way
20 cover the whole mortgage field and
rive security 20 the owner OF property
i'm bad times. The substitution for the
present mortgages, Of debentures
lbonds} issued by large companies,
based On the mortgages in which they
invest. and which they hold, Will iur-
uish a source of investment Tor tne
hubble having the necessary hqulol,S
and insurng safety to the properly
owner. H..
Money IN New York which has refused
20 CO into real estate because the bank
.rs require their investments TO be IN
3 LIQUID form, 30 that they may be
changed into money II need be, either
because of money stringency or me
appearance at times OF more deslraOl'
forms of Investments. If such money
vsre invested in real estate II coulc
not be changed back without loss ant
DELAY. and if IL were invested IN mort
cages II could not be recovered quickly
without possible loss 20 the mortgage
or owner Of the property. As has beei
shown. one Of the chief causes OF trou
HE IN the real estate market In ha'
times IS the calling OF mortgages whel
their replacement IS difficult and cN
pensive: vet there is no other way 10
The mortgagee 20 get his money. EVei
" such banking money were invested
I'm participation certificates, they arr
only shares Zoo individual mortgage
and are not readily marketable m goo
or in bad times.
How then can such money be induce
20 enter the real estate market Evi
IDENTIFY 10 can he done only by atordlni
10 some easily convertible security
based ON real estate When a deposito
puts his money I'm the savings bank h
knows that IL will be invested IN
mortgage. yet he does not expect an.
ownership in the mortgage. W hat h
hae is claim against the bank Tor tn
amount OF his money. His eNpereuc
and public confidence Justify HIM II
looking upon his claim as one OF IN
safest possible forms of Investment. bu
Gala Oh g.
When ne buys railroad bond, secure'
by q mortgage. he does not expect 4
demand his money from the railroad II
bad times. Ills intention IS TO get
good security which is readily salabl
ln the omen market.
Now. suppose his claim were agains
savings bank having SlOO.OOO,OOO 81
gilt edge New York City first mort
cages, each ono being gradually re
duced by amortization and becoming
better security, and such saving
bank were 10 issue It's bonds or de
bentures TO the amount Of S75,00000I
payable IN ten or twenty years az
slightly less rate Of interest than th
average rate Of it, mortgages, an.
such dcbentures were listed ON Oh,
stock Exchange and examined by thu
Ranking Department OF the State o
New York. would anybody have an
doubt that such bonds would be sal
sblcq or course. we know that saw
iugs bank could not DO anything @
fhc sort: but company having larg
capitaI and using the same method
and under the same control as a say
ings bank could do IL. On account O
their security these bonds would bea
low rate Of interest. such bond
would be dealt i'm by bankers. becaus
they would be salable at any time
while the underlying mortgages II
times Of panic would not be disturbc.
- All .nn LnnnLnLdar womb INV