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Real estate record and builders' guide: v. 18, no. 444: September 16, 1876

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Real Estate Record AND BUILDERS' GUIDE. Vol. XVIII. NEW YORK, SATURDAY, SEPTEMBER 16, 1876. No. 444 U 1 -- Published Weekly by C. W. SWEET............President and Tbeasdbeb. PRESTON L SWEET..............Sechetary. TERMS. ONE YEAR, in advance... .$10.00. Communications should be addressed to C. W. SWEET, Nos. 345 AND 347 Broadway. IMORTGAGE LOANS AS SECURITIES. In the midst of the prevailing consterna¬ tion, almost amounting to panic, -which be¬ sets our capitalists of high and lo-w degree, -when stocks and bonds of no mean repute have suddenly become as -waste paper, Vv'^hen whole lines of -what, till recently, were re¬ garded as prime investment securities have been riddled and laid low as by an enemy's mittraUleuse; when government bonds yield but four per cent., and "call loans," those once favorite resting places of capital, yield but one or two per cent, per annum; in the midst, we say, of aU this disaster and con¬ fusion^ we feel an intense satisfaction and strong professional delight in pointing to one security allied to om- special interest, against which no default of interest has been yet recorded, and whose par value knows no shrinkage but is easily negotiable in our best money centers. We refer to the moderate mortgage loan, called in the slang of the sti-eet " gilt-edged." Such, we mean, as may be found by the million in the assets of our most conservative monied institutions, as weU as in the safes of many private capital¬ ists. Such, in fact, as are being offered in limited quantities by our most respectable brokers in mortgage loans, and which bear interest from five to six per cent. To a large class of our capitalists, we are well aware, no word need be said in favor of the weU selected mortgage loan. In these caskets of value, their treasures have been handed down from generation to generation and from family to family without knowing loss, abatement of value, or failure of inter¬ est. The class we would particularly address on this occasion, is thajt which, for the past fifteen or twenty years, has especiaUy affected investments in what they consider first-class railroad stocks and bonds. We re¬ fer to the events of the past two years and notably of the past two weeks, in no spirit of vaunting or exultation, but desire to em¬ phasize, in the light of these events, our ad¬ vocacy of one of the most important factors of our representative interests. We are well aware of the cloud of objec a term of years. That the titles are cumber¬ some, intricate and subject to legal opinions. That the collection of the mortgage involves tedious litigation. That default of interest carries with it no s-wift penalty. That the foreclosure of the mortgage converts the holder of a personal security into a real-estate owner. That multitudes of mortgages are now being foreclosed, and that property is not worth the mortgage placed upon it. To one and all a comprehensive answer is at hand. Well selected mortgages are abso¬ lutely invulnerable to every such objection. By the selection of mortgages we mean the exercise of a sound, clear, conservative judgment, backed by a sufllcient knowledge of real estate values. The titles to property in New York have been searched and re¬ searched so often, that all the knots and snarls are unravelled, and in the active por¬ tion of our city, scarcely a title exists but has received the professional guaranty of half a dozen of our best counsel. When the mortgage represents a small fraction of the total value of the property mortgaged, say fifty per cent or under, the question of the payment of interest becomes a perfectly safe one. No owner of property ha-ving a clear equity of fifty per cent, -would place the same in jeopardy by a failure to pay interest. This equity of fifty per cent, is a good basis for credit at the bank or among friends, so that he can readily raise the sum necessary to discharge the interest, when temporarily embarrassed. The same may be said of the final payment of the principal sum. The equity of redemp¬ tion of the o-wner, over and above the mort¬ gage, ensures the punctual and faithful per¬ formance of all the covenants which he assures. The ultioaate repayment of the loan is also assured by the further consideration that well selected mortgages can always be replaced or negotiated at short notice. Looking at the matter in its worst light, we wiU suppose the holder of one of these "gUt edge" selected mortgages to be driven to foreclosure in order to secure his rights. The instrument which he holds is recognized in the courts as all but an absolute conveyance, qualified only by the conditions of punctual payment of interest and repayment of the principal sum loaned. In default of these pro-visions, the steps necessary to perfect the mortgagee's title to the property are simple, well defined and easily taken. After their consummation, the mortgagee is placed in possession of property avowedly worth twice the amount which he" has paid for it. It is proper to say, that in the case of the care¬ fully selected mortgages, the opportunity to tionsusually. raised.against mortgage loans. !fhat the rate of interest is low and fi?s:ed foy 1 become the owner of property, seldom, if ever, occurs. We can point to lines upon lines of mortgages on property in this city, held by individuals and institutions, that have suffered no default of interest through all the panic and disaster of the past three years; their face value to day is just as re¬ liable as when they were first executed, and then- negotiability is of such an order, that the same face value could be realized without discount or abatement in less than twenty- four hours. One single objection remains to be con¬ sidered—^the rate of interest is comparatively low and defiintely fixed for a term of years. We must remember, as Blackstone has taught us, that high interest involves heavy risks, and as the rate of interest declines the secutity usually increases. This is preemin¬ ently true in regard to mortgages. In good mortgages there is no speculation. The lender secures his principal sum beyond aH perad- venture or doubt; and the rate of interest afforded by these secm-ities, though less than he may hope to derive from speculative ventures and from risks in business, is never¬ theless to-day as it has been for the past two years and as in all human foresight, it is Ukely to continue for five or ten years to come, gjeatly in excess of the interest that can be derived from government bonds, from railroad bonds, from business paper, or from call loans. We assume, that we are addressing a class, who have tasted suflB.- ciently of the exciting risks gro-wing out of the most approved investments in railroad and mining stocks and bonds, and who now seek, above aU things, in the investment of their remaining fortune, security for the principal sum. It is on this ground mainly that we recommend the adoption of this form of investment. It is the one security in all reasonable probability that wiU under¬ go no change or shrinkage during the agony of resimiing specie payment. We therefore ad¬ monish and advise the trustees of institutions and estates, guardians of chUdren, and such capitalists as seek entire imunity from the airxiety of investments to place their funds in the best selected mortgages which they can find. An objection is sometimes made by New York lenders that they are Uable to suffer a diminution of interest by the taxation of personal estate in our city. In answer to this suggestion we would say that the present tax commissioners are known to be averse to the taxation of mortgages, and are disposed to deal very leniently with the holders of those securities. They beUeve that in so doing they are conserving the best interest of our city, and that real estate once taxed should not suffer the burden of another