REAL    ESTATE





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B UILDERS





/ol. CI





NEW   YORK,   JUNE  22,   1918





No. 25





Mortgage Loans and War Time Money Market

Effect of Government  Borrowing  and   Other   Federal   Measures
on   Real   Estate—Conditions    Loaning Companies Must Meet

By FRANK BAILEY
Second Vice-President Title Guaranty and Trust Company





THE position of the owner of a small home in New
York City at the present time is causing those
who are interested in a diversified home owner-
;hip much uneasiness.

First, he is confronted with the rapidly mounting
ax rate. The tax rate, which is now 2.40 per cent, in
^ings and 2.36 in Manhattan, next year promises to
ncrease at least 10 per cent, unless additional sources
)f revenue are obtained, such as an increase in the
'are on the railroads, or personal taxes of some kind.

Every man who loses a home through excessive ta^!
•ates, or through faults which are not his, and some-
:imes even when they are his fault, becomes a disturb-
ng member of society. The most conservative popula-
:ion are those people who have an interest in the real
:state of the city and are not in a position with nothing
:o lose or nothing to gain no matter what the tax rate
nay be. The population of the latter class may be
ippealed.to by the man on the box; the other man
:hinks.

At the present time the small home owner is further
:onfronted with the difficulties of handling a mortgage
ipon his property. Most homes are bought on the
nstallment plan, and the basis of the mortgage is three
yrears. Mortgages which are now maturing are
■enewed as a rule only at 6 per cent., and many are
)eing called for various reasons. One of the favorite
'easons for calling a mortgage is for the purpose of
nvesting in Liberty Bonds. Such patriotism is of a
DOor kind. It does not increase the money available
tor Liberty Bonds, for the owner can only pay in case
le borrows his money elsewhere. Such a practice,
nstead of being patriotic, is decidedly unpatriotic, and
it disturbs rather than aids. It has been pointed out
from the Government standpoint that it is the savings
from which bonds should be purchased and not the dis¬
placement of capital.

Another class are those who think they can obtain
I higher rate of interest and do not care what suffer¬
ing is inflicted upon the borrower.    These people are





tempted by the increasing rate of interest and the high
rate based upon which many good bonds are selling.

The third class are those who must call in order to
meet various exigencies, settling estates, etc.

Now the source of supply of mortgages has prac¬
tically stopped. The only source of supply is the mort¬
gage guarantee companies, who are using their best
efforts to find investors for mortgages and are
endeavoring to prevent a call of the same by the educa¬
tion of the people holding their guarantee.

The bond and mortgage guarantee company which
I represent has, since the breaking out of the war,
taken up $20,000,000 of called mortgages. Now if the
calling of these mortgages shall continue the guar¬
antee companies will be compelled to take the eighteen
months which they are allowed in which to pay their
mortgages, or, no matter whether the security may be
good or not, to foreclose against the homes of the
people in Brooklyn and Queens. In case the guarantee
companies, because of the excessive calHng of mort¬
gages, are unable to adopt any other policy than to start
foreclosure then it would be a sad day for the best
interests of New York City.

These companies can handle about a million dollars
of called mortgages a month, and that should be suffi¬
cient money to meet all real necessities; but if greed is
to step in and to influence the holders of mortgages;
if the charitable institutions are to decide that they
should call these mortgages for the purposes of obtain¬
ing a little higher rate of interest; if the savings banks,
in order to buy Liberty Bonds, continue to call mort¬
gages, as some have done; if those institutions whose
assets are based upon real estate shall do nothing to
aid, but will abet destruction of their underlying
security, then relief should be obtained through the
Government channels.

The Government has already come to the aid of the
merchant and farmer and the railroads, and certainly
home ownership is as important as anything else.

Methods of aid and the next step are another story.





Mortgage Debt Decreased  Since War  Started

By  JOHN  L.  PARISH
Secretary, New York Board of Title Underwriters





ABOUT the only important line of investments that
has not been the recipient of more or less delicate
governmental attention since the beginning of
the war is real property and its securities. Even in
this line the Government's operations have taken away
its normal supplies of credit and forced a liquidation
in mortgages which is not only inconvenient to owners
of mortgaged property, but operates to a more or less
important extent against the best interests of the Gov¬
ernment itself.





Evidence of the diversion of credit from normal flow
in real estate channels is found in a comparison of the
transactions in mortgages and in plans for new build¬
ings for the first five months of this year with those
of the corresponding period in 1912.

Within the period of the war the volume of current
investments in mortgages has declined over 80 per
cent., and is now less than 20 per cent, of what it was
in normal times, while the season's investments in new
construction have declined over 90 per cent., and are