Audubon Republican. [volume] (Audubon, Iowa) 1894-1925, 1920-02-19

tory of any financial transaction, is
that OF mortgage on a building and
piece OF ground found in one OF
the ancient cities of Babylon. 1t
was a first mortgage on real estate,
and ever since that time first mort
gage on real estate has been cpnsid-
cred the safest security in the world.
There are different forms of real
estate first mortgages. The one
with which people in this part of the
country are most familiar is the farm
mortgage, a most popular investment
in the state of Iowa, and deservedly
so, but nevertheless, we must recog-
nize that the farm mortgage has GER
tain drawbacks. To begin with, the
investor who takes the mortgage us
ually has in his mind the thought of
foreclosure, and the ability to fore
close and the power to foreclose as
the real security for his loan, and of
course, the instances on record are
innuemarble where foreclosure pro-
ceedings have ben taken and still
more numerous are the instances
where the investor has had to wait |
for his principle or interest. A "--
failure, an animal contagin- ..op
less farmer, and n IN "a sun.
%
w. y 20 bring about delay and
ID convenience to the investor in
farm mortgage.
! At this point am going to digress
a little. From time immemorial
there has been some one more con-
4 versant with the subject of invest
ment or loaning money than the av-
1 erage individual who has saved up
81 to
son through the exercise of his abil-
ity and organizing Intelligence has
usually become the banker or money
i loaner of the community in which he
lives, frequently organizing the funds
of his neighbors for united effort,
and for this service, he has fee COM
/ mensurate to the service performed.
This has been done with farm mort
cages and we have examples of large
companies buying farm mortgages
on large scale and retailing them
to the private investor at a small
commission profit usually in the
neighborkood of one percent, this
being about in proportion to the
small sums of money loaned, as the
farm mortgage usually is represented
in sums of less than $4,000.
Chapter ".
There is another form of real es-
tate mortgage which developments
covering the last two generations
have shown to be superior to the
farm mortgage for the average in
weston. This security is first mort
gage on income producing property
in our larger towns and cities. The
record Of this security for safety to
the investor is 100 percent perfect,
and for these reasons.
| In the first place, the tendency of
all city real estate to. increase in
value has been very much greater
than that of farm land, notwith-
standing the great increase in the
value of farm property. For, while
the farms of the country have been
increased from low price per acre
to high price representing several
hundred percent, the real estate in
cities during the same period has in
creased from an acreage basis OF val
ue to front foot basis of value, and
this applies particularly to ground
located in the business sections of
our cities. Buildings have been
erected on this valuable ground with
a large income accruing from many
different sources of activities repre-
sented by the many different bust
nesses engaged in by the tenants,
and the first mortgage on this prop
I erty has had the double security of
the real estate itself and the improve
ments thereon and the earning pow
er or income of the improvement as
represented by the rents paid by the
tenants. l do not believe that there
is single instance of foreclosure
sale on modern office building or
/ structure of similar character in our
cities.
! These loans are usually very
| large. and because of their size are
beyond the ability of the ordinary
private investor to negotiate, and,
for this very reason, phase of in
vestment banking has grown up in
the last thirty or forty years which
has engaged exclusively in the fin
ancing of new modern buildings in
our cities and this business has now
attained an enormous volume. and is
conducted by many companies of
| great prosperity and earning power
for their shareholders, and have an
enviable record of success for the in
vestors who have bought their secur-
| titles.
Chapter w
In our previous chapter, we refer
red to the organization that has
grown up around the financing of
modern improvements in our cities.
| Originally, it was the practice for
the money loaner who was consider
ing a large loan, so large that it was
beyond his means, TO get syndicate
together on syndicate agreement.
The loan would then be made, the
mortgage issued Jointly ito some one
person designated as the manager of
the syndicate, and this mortgage
would be deposited in trust COM
pany. The interest as lit accrued.
and payments on the principle, would
be paid to the Trust Company, and
by them distributed to the syndicate
members.
AS time went on this method prov
ed to be very cumbersome and there
developed a growing tendency on the
part of the syndicate members to dis
pose of a portion of their holdings
to still other investors, and they in
turn, might want 10 sell, at some
time or other, and they then found
that while they had very desirable
security, that it was difficult to me-
gotiate, or to use as collateral. From
this experience, there developed what
is now known as the First Mortgage
Real Estate Bond.
It is now the practice of the COM
pany making the loan to deposit the
mortgage with trustee, and to issue
against this mortgage. a similar
amount of first mortgage bonds.
These bonds being fractions of the
mortgage, and issued in various de-