The sun., 1919-02-23

IN shs FORM OF q mortgage which calls
Tor additional collateral At short inter-
kals-in other words q mortgage on
which the principal 10 reduced periodi-
pally.
The home owner Is ready In many In
stances TO pay increased prices, realizing
that future fluctuations will affect him
pniy slightly. because he r. Interested
primarily in building home. not an in
eestment But tho ordinary investor
pannot permit himself TO be Influenced
BY sentimental considerations. To him
tho proposition remains solely an invest
ment. uninfiuenced by the reasons which
may give It moral support
The initial step In reopening the money
market to home builders should there
fore come from those associations or
societies which lend on the amortization
hlhn These organizations may properly
assume relations, which the trustee In
weston might regard as hazardous. In
our own institution. which for thirty
years has been an exponent OF the
partial payment mortgage theory. we
have added another element to mortga age
tnvestment--the consideration of the
moral hazard. This Is a factor which
in my Judgment must come to have
greater weight where mortgage loans on
homes are concerned.
While the remark has no relevancy to
general building construction, am per-
sonally satisfied that on the security OF
D honse, occupied by the owner as such.
the lender can safely add from to Is
per cent to his investment. determined
by the personal character Of the bor-
Iower. Why should not the home owner
capitalize within moderate limits his
good name and reputation as freely as
a tHrhn
busintfs world can borrow into many
hgares3
n IL my conviction that this element
wiH have increased weight in this par
ticuiar fisid Of real estate investment.
and when coupled with the form OF loan
which gives the borrower an opportunity
= 10 discharge his debt conveniently In
small regular payments, at the same
time Increasing the security OF the
lender. will bring small real estate mort
gage loans back to their proper place In
the list OF desirable investments.
A. the present time lenders on straight
mortgages, that IL TO say. mortga ges made
for q period OF three years, are begin
hfng to consider desirable building loan
applications. but the very terms Of the
loan make Il incumbent upon the mort
Eagee to protect himself against future
uncertainties by restricting the amount
10 very moderate proportions OF the
value Of the completed property.
IN cases, however, where the form oil
the loan Is such as to involve a gradual
reduction. commencing at once. the mort.
sagee can exercise a somewhat more
lib6al attitude; and in those instances
where the personality OF the borrower
A. we'll as the collateral security Is re-
garded. there Is justification for rela'
lively generous policy. Despite thes'
conditions, however. the prospective
home builder must for the present recog
nice the fact that he will have to con
tribute something more to the proposi
ton THIN merely the land on which hi
house Is to stand.
Where heretofore II was entirei,
practicable to secure building loan Il
cover the cost OF a house where sucl
cost ala not exceed three times the valu,
OF the land, Il Is fairer to say that a
present twice the value Of the land fo
. house costing that much Is about thu
maximum which should reasonably b
expected. Exceptional desirability o
location or other factors. such as I hav'
referred to, which would increase tn
stability Of the investment, will Of cours'
permit some latitude in these figures.
II may also occasionally happen tina
the prospective home builder. who pur
chAsed his lots during the dead periot
OF the last three or four years, secure,
them at such a figure as to make thu
present appraised value larger than tn
cost to him. In which case his foresight
and confidence will be OF material ad
vantage.
There 10 q strong desire on the part Q
every real estate institution to stimulat
building as a fertile field for sound In
vestment, Just as soon as II IL safe 70
all parties The situation Is much clesre
than II was six months axo and loan
are beginning to be available"