The second point to be considered is that mortgage loans ordinarily cover so long a term of years that general financial and commercial depressions during the life of the loans cannot be foreseen, and loans should have margin enough to cover the shrinkage of value due to this cause. A period of general industrial depression has a powerful depressing effect on real estate, but this effect varies greatly on different classes of property. When a mortgage loan is made for a term of years, if the borrower pays his interest and complies with the covenants of the mortgage in regard to taxes, insurance, etc., the principal of the loan cannot be called, nor can additional security be called for, no matter what the decline in the value of the property mortgaged may be. A great distinction is thus apparent between mortgage loans and ordinary bank loans; and when a loan is made for the usual term of five years, it should be borne in mind that the property, to furnish adequate security, should at all times during the five-year period show a comfortable margin above the amount of the loan.

We are familiar with the recurrence of panics every twenty years, with intermediate depressions of less violence at ten year periods. The effect on real estate of these greater and lesser panics is, however, not directly commensurate with the financial and commercial disturbance which they cause. A reason for this is probably to be found in the fact pointed out by Mr. Adna F. Weber, an eminent authority on the growth of cities, that the growth of population of American cities has, ever since the foundation of our government, been conspicuously greater in the alternate decades coinciding with the lesser or intermediate panics. The result of this has been to offset the effect of intermediate depressions, as far as city real estate is concerned, by the abnormal growth of city population coinciding with that general period; while the relatively slow growth of cities during the decades coincident with the greater panics, aggravates the depression of real estate following those panics. During the period of depression following a great panic, every community is forced to restrict its expenditures to the most necessary objects, and the result of this is that the classes of property within a city which maintain their value best are the two indispensable classes of business and residence. All properties devoted to special uses, such as theatres, clubs, hotels, churches, etc., as well as factories and warehouses especially suited to a single line of business, suffer severely. During such a period, also, all properties which on account of the growth or movement of a city, have a value based on expectations of the future, are greatly depreciated, since the future value is largely eliminated. This applies especially to suburban land, or that at the circumference of a city which is just coming into use, and is aggravated if the growth of a section has been artificially stimulated by capitalistic influences.