The sun., 1919-10-26
MORTGAGE SYSTEM
MUST Be CHANGED
c. II. Kelsey Says Small Inves-
tor Must Take Place of Big
Lending Companies.

Radical changes in the mortgage sys-
tom Of the United States If the neces-
sary amount of building is to be re-
Sumed we're predicted by Clarence II.
Kelsey president OF the Title Guarantee
ana Trust Company, in a speech before
the recent convention of the New York
state Real Estate Association in this
city.
Alr. Kelsey said the first thing neces-
sary was for the owner to take a larger
equity than heretofore. This, he said.
would help avert the wiping out of
equities and second mortgages, such as
has been witnessed since 1910. 1t will
also kill a certain class OF speculation
which, he said, ought to be killed.
The next thing. he said, was to adopt
Inc European system OF making real
estate mortgages available in small
units for small investors, owing to the
disappearance from the lending market
OF the large life insurance companies,
which, Mr.. Kelsey said. can no longer
afford to accept current mortgage in
terest rates and pay the Federal income
tax on them, after they have made such
heavy sacrifices by way OF investment
IN taxable Liberty bonds.
The speaker urged the passage Of
Federal legislation exempting from the
income and surtaxes the interest on
$4,000 worth of mortgages In any
one PERSONS ownership. This Is known
as the Mclaughlin bill, now before the
Ways and Means Committee in Con-
gtess. He also urged the passage of
State Senator Davenport's measure for
The State income tax. He advised real
estate interests to try to convince Sena-
tor Davenport that II he really wishes
10 relieve the real estate owner of the
"a. sc. -
The tax on other kinds of investments
and also permit the realty owner to
deduct from his gross income all net
income from his investments in real
estate which Mr.. Kelsey declared has
already paid in taxes from 80 to So
per cent of all 1t makes Summing
the situation up Mr.. Kelsey says:
Given the exemption from the income
taxes and surtaxes which the McLaugh-
I'm bill promises and which the State
should also grant, and given the ma
ehihery making 1t easy for the man with
s4'oVO or $4,000 to get good mortgage
investment, the common people win do
INC real estate financing of this country
as they have that of Europe. The busi-
ness Of cutting up the large mortgage
INTO small pieces so that the small in
gestor gets the same high class security
.haI the large investor has been getting
Is being rapidly developed.
The title insurance and mortgage
guarantee companies are putting their
facilities at the service Of the public.
rhey act as great mortgage exchanges.
Ihey are the conduits through which the
money OF the masses can be safely
brought to the mortgage borrowers at
.oW cost and much more uniformly and
steadily than when the market Is de-
pendent on the big institutions.
me Legislature has helped to make
uls possible by making investments in
piece OF mortgage lawful for trustees
PROVIDED the whole mortgage would have
peeh lawful investment for them. As
se' ue mortgages are not likely TO be
,ur very long terms. The demand for
!ohs term mortgages arises largely from
he desire to escape renewal fees. but Il
doubtful from the borrowers own
,s'ahdpoinf whether he should prefer a
.ons term mortgage. Certainly at the
present. Tune the interest rates are too
.iEn 10 make such contract advan-
..aseous' He is likely 10 fare better with
sne opportunity TO readJust the rate at
usqu'nt intervals