In that state the mutual savings banks have invested about one-half of their funds in real-estate mortgages. When a prospective borrower wants a savings bank to advance him a loan on the pledge of his real estate, he first fills out a formal application describing his property. It is then evaluated or appraised by a committee of the trustees, for the loan must not exceed 60 per cent of the value of the property if improved, and not over 40 per cent if unimproved. In estimating the worth of the property, such factors are considered as the cost of construction, the further upkeep, and the income derived from rentals. In examining city property, due consideration is also given to desirability of the neighborhood and extent of transportation facilities. In appraising a farm, quality of the soil, kind of crops, condition of buildings, and nearness to markets are carefully studied. If the report is favorable, the title to property is searched by an attorney or a title company. An abstract is made of the title, from which the bank learns whether the owner has a clear or undisputed right to the property and whether it is free from prior taxes or other claims. The property is then insured against fire, so that payment, in case of loss, is made in favor of the bank as mortgagee. The bank closes the transaction by recording the mortgage in the office of the local government and by sending the borrower a check to cover the loan. While a savings bank in a city rarely extends mortgage loans on distant property, country banks lend quite freely in New York and other large cities because of the scarcity of local loans. Economic conditions and likewise real-estate values are more stable in the country, where the character of the neighborhood changes but slowly and where improvement in transportation seldom alters a community for better or for worse. Although rural property possesses stability, it usually has restricted salability. In this respect, an urban lot and building possesses an advantage, since a buyer can be found more readily. In general, limited marketability is the fundamental weakness of all real estate as collateral, especially when contrasted with government or railroad bonds. These are issued in series of large numbers, of which each bears the same value as any of the others and so possesses a relatively uniform market price to all buyers. However, each building or plot of ground possesses features peculiar to itself and stands as a separate unit. Such property has, therefore, no definite market, but is sold according as it appeals to the particular wishes of the .individual buyer.

Under these conditions real estate at times becomes a collateral from which a bank finds difficulty in realizing its money. It sometimes happens that a borrower who has given a piece of property as security for a loan is unable to repay the money. Through the legal process of foreclosure the property is placed at auction, and if no buyer appears the bank must purchase it in order to escape loss. This situation is unsatisfactory to the bank, especially if it is unable to dispose of the property at a time when funds are needed to meet the demands of depositors for cash. To avoid this embarrassment the bank may have a mortgage guaranteed by a realty company, which for a small charge assumes entire care during the life of the loan and assures the payment of the yearly interest and final principal. This practice is especially favored by country banks investing in mortgages on city property. A bank may lessen the number of foreclosures on property held as security by insisting upon the amortization of the loan. Under this plan the borrower pays off a certain portion of the loan at the end of every year or a shorter interval. Thus at maturity the loan is entirely liquidated or at least the principal is considerably reduced.