investigation is required to choose good bonds for investment. The insurance companies and the savings banks pay high salaries to experienced men to make investments for these institutions. Their depositors and policy-holders reap the benefit in perfect security, to obtain which they sacrifice a part of the money which is earned on the investment of their money by these institutions. The investor does not possess this ability. to himself in his bond-buying, he may go badly astray. Nor can he afford to pay adequate fees to expert advisers.

Left

Into this situation comes the bond-house, with its organization of experienced investigators, far superior to those employed by the insurance company or savings bank, its large capital and still larger credit. The bond-house buys the bonds of enterprises in which it has confidence with its own money, purchasing them not as a broker or agent, but as an investor, and then resells them at a small profit to private investors, who are in this way able to purchase, with perfect security in both interest and principal, bonds which pay them much higher returns than they can receive from any institution to which they may entrust their savings.

THE

III

CORPORATION

MORTGAGE AND

THE DEED OF TRUST

Most people who have saved money are acquainted with the nature of a mortgage. They understand it as a lien upon property, given to secure a debt. The conditions of the lien are that, in case the debt is not paid at maturity, the lender who holds the lien can force a sale of the property by judicial process, having his own debt paid out of the proceeds, and returning any balance to the borrower.

While the operation and effect of the real-estate mortgage are generally familiar, the nature of the lien conferred by the mortgage is not equally well understood. A mortgage is a conveyance of property by the owner to the lender. It is in form and in effect a deed similar to the ordinary deed by which property is conveyed from one person to another. The conveyance is, however, coupled with the condition that the creditor holds the title to the property, as trustee for the owner. The conditions of the trust are as follows. If the debt

to secure which the conveyance is made is not paid at maturity, or if any other covenant in the mortgage is broken by the lender, the trust, which up to that time has been a "passive" trust, becomes active, and the lender, known as the mortgagee, asserts his title to the property and forces its sale.

The agreement between the parties binds the borrower, the owner of the property, not only to the payment of interest and principal, but also to the performance of certain other covenants of great importance to the security of the debt. For example, the owner must insure the property and make the policies payable to the lender; he must also pay the taxes and deliver the tax receipts to the holder of the mortgage, since a failure to pay taxes might result in a sale of the property by the State, which would deprive the lender of his security. The borrower agrees to keep the property in good repair. He further agrees not to sell any portion of the mortgaged property without the consent of the lender, who will, of course, not allow such a sale to be made unless the proceeds are applied either to the liquidation of the debt or to the purchase of new property of equal value to that sold.

This mortgage or conditional deed which con

veys the title to real property to the lender is given to secure a debt in the form of a bond. This bond is a simple promise to pay a definite sum of money, with interest, at a certain date in the future. It is signed by the owner of the property. The realestate mortgage therefore comprises two contracts: first, a contract to pay money, and, second, a conveyance of real estate to secure the fulfilment of a contract to pay money.

When the conveyance, otherwise known as the mortgage, is copied into a book of record kept in a public office for the inspection of all those who may be interested, it fixes the title of the mortgageholder as against all the world. The owner of the property, who is left in possession so long as he carries out his agreements with the lender, is free to sell his interest in the property. He must sell it, however, subject to the right of the lender to enforce the provisions of his contract. It is impossible, in any other way than by a tax sale, to separate the interest of the lender from the property to which that interest attaches.

We have these principles carried out in the corporation mortgage bond, the universal form of safe investment. There is, first, a promise to pay $1,000,000, $5,000,000, or $100,000,000 in ten,

twenty, or fifty years from date. This promise to pay, executed by the officers of the corporation, is not expressed in the form of a single note, but is divided into 1,000, 10,000, or 100,000 notes, numbered serially from one to the total number, and all identical in form, with the single difference in the numbers. This division of the corporate debt into "pieces" is for purposes of convenience in marketing. It is unusual for one investor to take more than a small portion of a large loan. By dividing a large debt into a number of identical notes, each of small denomination, it is possible for the company to make a wide distribution of its bonds and gather funds from a great number of private investors and institutions.

Just as the corporation bond differs but slightly from the bonds executed in connection with the real-estate mortgage, so the corporation mortgage is practically identical with the more familiar realestate mortgage. Because the creditors of the corporation are numerous, it is impossible to make the conveyance to the lenders-there are too many lenders. It is necessary, therefore, that a trustee should be appointed to act for the lenders, and to hold the property in trust for the securing of these various obligations. Sometimes an individual trus