New-York tribune., 1919-10-26
Small Investors
Saviollrs of Realty
Loan Situation
C. H. Kelsey Says Money Has
Left Real Estate, Due to
Taxes: Citizens to Take
Place of Large Investors

Any discussion Of the housing prob
san reverts naturally and inevitably to
e money question. The first step
soward any building operation is the
.sttlement of that question, Who're is
the money to come FROM That
settled, the other steps follow in nat
ural equence-detailed plans and spec
fcations, estimates, contracts, con-
structon. But always the money ques-
ton has to be settled first.
The difficulties under which New
York has been laboring for four years
in this respect and the means, or y
means. of overcoming the greatest OF
i,em have not been more clearly or
convincingly stated than by Clarence
II. Kelsey, president of the Title Guar
antee and Trust Company, in his sd
dress to the convention of the Reai
Estate Association of the State Of New
York
Mr. Kelsey's address was carefully
prepared and was read from manu-
script. It was as follows:
"The discussion of real estate finan-
cing' means, | suppose. n discussion Of
what has become of the money which
used to be loaned on mortgage and
what can be done to bring it back into
the market. A committee of the Mer-
chants Association, after careful con-
sideration, has reached the conclusion
that on an average 80 per cent of the
money that goes into a building opera
tior is borrowed money. the first mort
gage lender putting in 60 per cent ap-
proximatclv OF all, the operator or some
second mortgage lender putting in
about 20 per cent, and the builder or
owner the remaining 20 per cent either
in cash or credit
Money Too Plentiful
"Formerly the first mortgages came
largely from the life insurance COM
panies, savings banks, title insurance
and mortgage companies and the indi-
vidual lawyers clients. The loans were
made for one. three or five years, and
the plan worked very we'll while the
big lending institutions and estates
we're seeking mortgage investments. II
became too easy to get money on mort
gage Everybody borrowed the most he
could, instead of the least he could get
along with. The overproduction be-
came so great that rents came down,
vacancies increased and crash came.
Foreclosures multiplied. equities were
wiped out, and the third MORTGAGE and
the second mortgage in succession
faded away. Finally, in many cases,
the first mortgagee became the owner
Of the real estate worth less than its
mortgage, apd the whole real estate
market got very bad name.
"There were many faults in the sys-
TEN, and now that the market is re-
vivng there is much searching for a
better system. Many turn to the Euro
pean system of long time loans, with
regular amortization payments taken
by the great semig government land
banks, which issue their low rate bonds
against them, generally accepted by
trustees and others as about as good as
government bonds.
at has not been found practicab e
here to handle the mortgage busnes:
in that way. At any rate, no one ha;
worked it out successfully. There are
several reasons ~ this, the principa
one, that values are not as stable ano
The fifty Year loan, with the trihine
annual amortization, is too unsafe
with tte erratic changes in value tina
occIT here. When. too, the rates o.
.&erest fluctuate too greatly, as thos.
who have taken fifty year railroat
bonds for the past twenty-five year.
ment has been unwilling to take tn,
responsibility Of supervising the busi
ness so as to authorize trustees t,
lake the securities, and unwilling t,
rust private operation and make tn
securities trust investments withou
insisting on government supervision 0
the business.
Borrower Should have Larger Equit
while, therefore, it seems idle t
expect to see, for the present at least