Are you of full age and a citizen of the United States?..

Name of husband or wife if married?.

Is the latter of full age?..

I obtained title....

Existing mortgage.

(Give date).

From.

Who is the mortgagee?.

Mortgagee's address?.

Are there any arrears of dues or interest now unpaid on the mortgage? .

If so, how much? $.

Are the taxes fully paid upon the property? . .

If not, kindly state the amount of unpaid taxes..

Have you a survey of the property made by a civil engineer or surveyor?

If so, give name of civil engineer or surveyor.

Have you any abstract of the title or policy of title insurance or papers relating to the title?.

State the facts.

Where are you at present employed?

In what capacity? ..

How long have you continued in such employment? .

Is your life insured? .

In what company?.

For whose benefit?.

If so, for what amount? $.

The statement and answers above made are strictly true, and are made with the object of procuring the loan hereby applied for. I have read the conditions printed upon the back of this application, all of which are a part hereof and agree to abide by them.

Name.

Address.

Dated: New York.

CONDITIONS

.191

1. This application must be accompanied by $10 (appraisers' fees) and if the property to be inspected is outside the City of New York, the actual traveling expenses for two appraisers must also be deposited.

2. In the case of building loans or loans to complete houses in course of construction, the application must be accompanied by an exact copy of detailed plans and specifications. When a loan is granted, the plans and specifications so filed become the property of the Society, and will not be returned.

3. No owner or builder shall have the right to deviate in any particular from the plans and specifications filed with the Society, without the consent of the Society having first been obtained in writing.

4. In building loans, or loans to complete houses in course of construction, the applicant, after notice that a loan has been granted, must submit to the attorney of the Society a contract with a responsible builder, and a bond or undertaking from said builder, to secure the completion of the house according to contract. Such contract and bond must be in form and terms satisfactory to the attorney of the Society.

5. The Society, through notice by its attorney, may revoke any loan granted before the actual payment of the money, if the examination of the title to the property offered as security or other investigation should develop facts respecting the security or the applicant materially different from those stated in the application, or if the title of the applicant to the property offered as security should at any time before the full amount of the loan has been advanced be not satisfactory to the attorney for the Society. If the applicant is married, the wife or husband of the applicant shall join with the applicant in executing and delivering the bond and mortgage. If the loan is to be a building loan, the applicant hereby agrees to execute and deliver, on request of the attorney for the Society, a building loan agreement with the Society in the form used by the Society and covering the loan herein applied for, and to comply with all the terms of said agreement.

6. When notice of the granting of the loan has been sent to the applicant, addressed to him at his address as given in this application, the applicant shall confirm such acceptance in writing within ten days thereafter and within said time deposit with the Society the sum of $50 as a guarantee of good faith on the part of the applicant, to be applied toward the payment of the expenses of examining the title, and if the expense of examining the title shall be less than the amount of such deposit, the balance of said deposit, after the attorney shall have been paid, shall be returned to the applicant.

FIG. 4

CHAPTER XLVIII

BOND ISSUES

By ALLAN ROBINSON1

First mortgages have always been the prime investment for trust funds, although they have required more attention than most other investments. For one thing, the mortgage holder has the inconvenience of personally seeing that the loan is properly safeguarded in every way; that the taxes are paid on the land and buildings; that insurance premiums are paid; and that necessary repairs are made. In taking the mortgage he has to inspect the title to the property, or hire someone else to do it for him, and acquaint himself with the borrower's credit and his ability to pay off the debt, and, in case of need, he has to make concessions to the borrower temporarily to enable him to conveniently meet the debt when due.

How Bond Issues Facilitate Placing Large Mortgages. -The mortgage methods of the past, however, were not sufficiently flexible to meet the requirements for financing the many large building operations of the present and it was out of the need for their financing that the present-day mortgage 1 Allan Robinson, New York, N. Y., President of the Commonwealth Bond Corporation, of New York. Educated at the University of Rochester, Yale University and Columbia Law School; long associated with public and semi-public works, has held the following positions: President of Allied Real Estate Interests, 1906 to 1915; Member of State Commission to Investigate Torrens System of Title Registration, in 1908; Member of Municipal Commission on Congestion of Population, 1909; Member of Building Heights Commission, in 1913; Chairman of New York City Charter Conference, in 1911; Chairman of Mayor's Committee on Building Inspection, in 1915; President of the City and Suburban Homes Company, from 1915 to 1922; Manager in charge of the Shipyard and Munition Developments of the United States Housing Corporation, in 1918.

bond banking institutions came into existence. It is now possible for individuals, partnerships or corporations to finance through these institutions single building operations involving many millions of dollars, which the old type of mortgage lender had not the facilities for undertaking. The loans are secured by mortgages on land and buildings in the same general form as the old mortgages, only they run from 10 to 20 years or longer, and are so drawn that bonds of different denominations, aggregating the amount of the mortgage, may be issued. These institutions then are not obliged to sell the mortgages which they take to any one investor, but through the medium of coupon or registered bonds they obtain the money from various investors. In these large loans, by issuing bonds of small denominations the investor participates to the exact amount of his funds in one bond issue, or divides them among various issues.

The Trustee Under Bond Issue Plan.-The Mortgage by which bond issues are secured is known as a deed of trust in which the usual mortgage rights are conveyed to a trustee for the benefit of the bondholders. The duties of this trustee are to receive the interest payments and pay the interest coupons on the bonds as they are presented; to receive the moneys for the amortization payments and to retire the bonds as provided in the mortgage; and in some instances to receive moneys which are used in the payment of taxes. Trustees are usually obliged, in addition, to keep a separate account for each bond issue and to deposit the moneys in a bank in a separate account; but many real estate bond issues have been placed where trustees under the mortgage have been given many discretionary powers, leading to the mingling of funds, which is not usually considered to be sound banking practice.

Underwriting a Bond Issue.-The most approved method of underwriting mortgages is illustrated by the following example. Jones and Smith, Inc., real estate operators, wish to erect a modern office building. On this security they make application to the Mortgage Corporation for a building and permanent loan. They apply for a loan over a period of 10 or more years, and indicate fully the cost of the entire project

together with the estimated gross earnings, operating expenses, and resulting net earnings applicable to the payment of interest and amortization.

The application is turned over to the department which is charged with the appraisal of property and the investigation of applications and the assembling of other data which pertains to the application.

The appraisal is usually conducted by officers of the company making the loan and is based upon a personal inspection and familiarity with real estate values, but is often supplemented by independent appraisal made by outside appraisers. Additional investigation comprises matters of the cost of the particular building, the rental value and demand for space in the neighborhood and the desirability of erecting the proposed type of building in the particular locality-a complete check up on the plans and specifications of the building on the one hand and a careful determination of suitability of design and layout on the other. If the loan is on a building already constructed, it takes into account the age of the building and the extent to which it has depreciated, together with other factors affecting value.

These facts are then assembled and presented to the directors of the corporation, who are usually men familiar with real estate, building, and banking. If the loan receives the approval of the board, either for the amount applied or for a less amount, the sum loaned will usually be based on a certain percentage of the appraisal. Under certain conditions this may be 50 per cent, while in other cases it may exceed 60. The application of the modern serial reductions in principal, and the deposit of income in advance to meet interest and taxes, warrants an increase in the percentage loaned on new high-class income-producing property. So, if Jones and Smith accept the amount of the loan as approved by the Board, then the entire transaction is turned back to the loan department for settlement of the final details with the borrower.

If the loan department is satisfied as to these details, the loan is closed by the lenders, who take a first mortgage on the property. As the erection of the building progresses insurance must be placed on it against damage from fire, water,