In most of the larger communities mortgage companies are an important factor in home financing. There are two classes of such companies-those lending on first, or senior, mortgages and those lending on second, or junior, mortgages. The latter group is discussed in a later section.
Because of the lack of uniformity in the policies and methods of mortgage companies, no general statements can be made as to how they conduct their lending operations. They are not generally so closely confined in their activities by legal restrictions as are banks, trust companies, and insurance companies, and the use they make of their funds, whether derived from the marketing of company stock, or the sale of their mortgage investments or bonds issued against them, is therefore left more to their own discretion. Companies selling mortgages, the repayment of which they guarantee, and those whose investments are eligible for purchase by savings banks and trustees, will be found the more conservative of this class of lenders. These do not usually lend in excess of 50 per cent of their valuations, at least in the case of "straight" loans. Many of the other companies make loans larger than 60 per cent of the sale price, but usually charge a commission or a higher rate of interest than that borne by more conservative first-mortgage paper. The loans of mortgage companies are made for both short and long terms and on the amortized or straight basis. Many of the companies devote a large percentage of their funds to construction loans.