REAL   ESTATE







P) AND





LDERS







Vol. CII.





NEW YORK, NOVEMBER 16, 1918





No. 20





Good Supply of Money for R. E. Mortgage Loans

Savings  Banks  Expect  to  Have   No   Difficulty   in   Meeting   All
fitimate  Demands  in   the  Immediate  Future





Legi





By JOHN J.  PULLEYN,
President, Emigrant Industrial Savings Bank





1T is possible now that peace has come to discuss
more freely the relations between the loaning insti-
tutions and real estate than has been possible for
obvious reasons during the last two or three years.
Many matters of importance to both must now be con-
sidered seriously so that we may be prepared for what
is to come.

The end of the war entails on this country and on
England. France and other European countries, and in
fact upon the whole world, financial operations of
enormous magnitude. It is not necessary to go into
details as to what these operations are. They include
the financing of government, the rebuilding of de-
vastated regions and the capitalization of industries
that have been wiped oiit or badly handicapped for want
of money during the war. They may even include the
under-writing of the indemnities that Germany will
have to pay as the penalty for having brought about its
orgy of devastation.

It is, of course, impossible to calculate at the present
time the extent of these operations nor to figure how
long they will have a dominant influence in the money
market. But it is necessary in reviewing the local
situation with respect to the loaning of money on real
estate mortgages to take into consideration the general
conditions prevailing in the world today and whicli ^vill





It will do no hann now to clear up some of the mis-
apprehensions and misinformation that has prevailed
during the war period as to the attitude of loaning insti-
tutions towards real estate. It has been stated, among
other things, that the reason why we have curtailed
loans has been that our resources have been held at the
disposal of the Government for the purpose of financing
the Liberty Loans. Now while this is true to a certain
e.xtent, it was not the sole cause of the withdrawal of
the loaning institutions from the mortgage market.

The government's requirements have been met, and
wiU be met in the future, without serious disturbance
of other financing because our intimate knowledge of
the demands of our depositors for Government securi-
ties enables us very accurately to forecast the amount
of bonds in any issue that we can dispose of and prepare
in advance for handhng the business. Funds involved
in the transactions are tied up for a comparatively short
period of a few months at most and the efĩect on the
general situation is not so great as may have been led
to believe. It is possible to make this admission now
that the war is over and the Liberty Loans successfully
floated.

We know that the Government wiU issue a fifth and
a sixth loan, each for large amounts, and we are already
preparing to handle them.    If real estate had been badly





for years to come afifect all financial transactioTiS'"df'"' handicapped in the past solely by the Government loans,
every kind.                                                                      ^ \"'"ot had to wait until after the Fifth and the Sixth, and

We have entered upon a new era in the world's his-    possibly others, were out of the way, there would not





tory and we might as well recognize the import of the
changes that have taken place. We cannot base our
plans for future action on conditions that prevailed pre-
vious to 1914, nor even to the years immediately before
this country became a belh'gerant. A great many radi-
cal changes have been made in financial and economic
conditions and at least a part of these have become so
firmly estabh'shed that it will be impossible to eflfect a
return to the former state of afifairs.

Normal times are coming again but with this dififer-
ence, that what we used to associate with a state of
normality will not necessarily be included in that period
into which we are just entering. Nornial times used to
be associated with a low rate of interest on real estate
mortgages, for instance. But the ruling rate for money
for this class of investment, and in fact for every kind
of investment, will for a number of years amount to
what would have been called a high rate of interest in
foriner days. This is certain and it comes about because
the general conditions that control the money market
will enforce higher rates of interest, not becaus^ there





be much hope to hold out for the future, But this is
not the case. The coming loans will no doubt be as
successful as the four preceding ones but naturally the
arguments presented to possible buyers of bonds will
be based on dififerent grounds than were used in the first
four loans.

Governmental financing, and I now include that which
other nations besides our own will be coinpelled to un-
dertake in the near future, have only an indirect bearing
on the relation between loanable funds and real estate.
There is, of course, a sentimental influence which should
not be lost sight of and, of course, there is the tighten-
ing of the money market as evidenced in the enforce-
ment of a higher interest rate. But the borrowing of
our own government would not in itself prevent invest-
ments in real estate mortgages. In this connectĩon it is
imp(5rtant to call attention to the fact that savings
banks cannot invest funds in the financial obligation of
foreign governments nor can they participate in the
financing of the reconstruction work of the devastated
region of Europe.    All these operations will be eff'ected





is any change of sentiment towards the value of real by other agencies and savings banks funds will not and
estate mortgages among the group of lending institu- cannot be drawn upon. Naturally the carrying out or
tions of which this bank is representative.         :     , j          these great capital issues, whether by our own or otheY