Klamath republican., October 02, 1913, Page 21, Image 21

CALIFORNIA FARMER SECTION
Creating an International Market
for Farm Mortgages
HE moat Important advantage to
agrbulture from the ..rganlsa
that of th««* aocietlea, howwar.
was not In tha low rate of Int«treat ob
tallied. When th« farmer hud been re­
quired to borrow of an Individual h«-
could not taa lu> nan not today In lb<-
t'ulted Hiatus) get a loan for more
than a few years say from three to
five years The money which he bor­
rowed would be spent on Improve­
ments to hia land. Irrigation, draining,
or fertilizing perhaps Willi th>MM Im­
provements the yield |rr acre of hia
lands would be Increased and he would
secure an tncrraae In Income Ku I thia
Increase tn Income of course could
hardly amount to 33 per oent or 20 per
cent a year. Yet at the end of the
three or five years I mi waa expected
to pay back the loan. It was Impas­
sible for him Io do so. The alleruu-
tlve waa to a«*k a renewal of hia loan
For thia he had to pay a oomrulaalon
Thia same thing la happening every
day In the year In the t olled Htatea
The ferment will get a loan ¡U t per
«ent or 7 per cent and ,-onsldor that
thay are receiving a low rate of Inter­ vorraapot.ding amount of his loan. If
est. Than they will renew that loan ever the bonds uf the soc iety drop be­
from two to fl' e timer and pay 1 to I low par. the farmers can buy these
p*r cent In commissions each time bonds aid make |100 for |95 or what­
And If the loan falls du* at a time ever below par the bouds may l«e sell­
when iioney la tight he «III have to ing at.
The American oom ml salon on agri­
pay a higher tale of Inter-it.
He la always to u great extent In cultural co-operation Is studying this
danger of foreclosure
system with a view to determining Its
All of those evils the tierman sys­ adaptability In the United Htatee. It
tem han completely wiped out. The woul«l be an immense undertaking
reason why the individual lender will The first question here that p re se n ts
not grant a loan for more than a few Itself la this
Only a comparatively
yean la tliat ho can't tell what use he aniull percentage of American farm­
may have for hia money In the future. ers at the present time have their
He can’t reaaonably be expected to tie farms moaQragcd Those that have no
Il up for half a lifetime. But the min­ incumbrances and who do not con­
ute the individual la replaced by lhe sider that they need them for the pres­
corporate organization, tha minute tha ent could hurdly be expected to join
organisation does the borrowing and such a society. Tho society must nec-
the lending In place of lhe Individual, essarlly t a society of borrowing
them absolutely disappears nil need farmers
It Is extremely doubtful if
v halever of restricting the life of n one could find many communities of
loan. The organization Is In the busi­ borrowing farmers in tho United
ness for all time. The death of an Hiatus.
How then are these so­
Individual can’t effect It.
It doesn t viet les to bo formed or at least how
matter to tha corporate organization are tho farmers to be cared (or In
wh*tbcr the fanner takes throe year« communities where there are few bor
or fifty years to pay back Ills loan. rowers?
Ho In Germary they have arranged
Tho Germans and the French have
matters so that * farmer may pay hack both solved this problem. In place of
hia mortgage Just as ho receives the the society of borrowing farmers they
profit on the Investment of the bor­ have organized land banks operating
rowed money from hia land Ila no-'d on a cosh capital.
This Is the way
pay no comm lot ions. There la no dan­ such a bank might work In ono of the
ger of foreclosure. Ail that he has lo states.
A bank is formed with a cap­
do Is to spend the money on Improve­ ital of a million dollars. Uy law it is
ments to bls land as ho promised to
given the right to Issuo mortgage
do when ho waa given the money and
bonds up to fifteen times the amount
the society will give him his own time
of Its capital. That Is It can receive
In which to pay back the loan. Mort­
fifteen millions of dollars worth of
gage loans In Germany run for twenty-
mortgages and Issue mortgage bonds
five, fifty, even aeventy-llve ycara. A
father may borrow and a son pay It to a similar amount. The bank la re­
back. If the fanner, however, has a sponsible for the payments both as to
atrink of good fortune and doesn't Interest and principal of tho farmers.
want the loan to run for so many Tho bond holders have nothing to do
They buy their
years, during all of which time he of with the fanners.
course has to pay Interest, ha may go bonds upon tho strength of tho com­
Into the open market and buy up so pany's name. Such a company would
many hundreds of dollnrs worth of tho bo remarkably successful provided the
mortgage bonds and tnrn them In at government supervision over their
par to tho society which will cancel a transactions Is adequate. Some years
T
M arketplace .
fïURMBVKZ^ CfEJCMANY
ago the mortgage company was a pop­
ular Institution In the United States,
but because of lack of supervision they
ran amuck and ruin was the result.
In the first place the government must
see to it that the companies do not,
as they did before, mortgage farms
up to the hilt. A safe maximum
should be set, say BO per cent of the
value of the farm. and beyond
that figure no mortgage should be
granted
No second mortgage should
ever be accepted by such a company
either as an original transaction or In
lieu of interest payments. The system
of appraisal must be laid down upon
safe and
very
conservative lines.
Every mortgage accepted should be
registered in some public office and
every bond Issue the same and the
bond Issue should never exceed the
mortgages accepted.
In Germany
the transactions of such banks are
subject to the most stringent gov­
ernment supervision, an agent of the
government being present at all of th«-
meetings of the boards of directors
and all of the records of the company
bolng easily accessible. The Borts of
property upon which loans can be
gran too should be specified.
When­
ever a loan 1s mnde to a landowner It
should be shown that It is Intended to
expend It upon some productive en­
terprise, some worthy Improvement.
Undoubtedly the creation of such a
system In tho United Htates would re­
quire changes in the present mortgage
laws in some of tho states. Hlnce the
farmers would be relieved of the neces­
sity of paying their loans back tn a
lump sum at tha end of a few years
that would hardly work a hardship
upon them. The great value of such
banks or of the societies above men­
tioned Is that they broaden the field of
sale of a farmer’s security. The far­
mer can only borrow from some one
who knows him, or who at least Is In
a position to judge of the value of his
security. Tho same Is true of the com­
pany. Only as it Is known td be de­
pet dabh- and strong and honestly con­
ducted can It And a readv market for
its bonds. Of course as the company
or society would be probably a state­
wide institution it would be much
easier for it to make itself known. But
If there are tc be forty-eight or more
such societies or companies and the
state laws regulating each are to be
different it will be an Impossible task
to educate the investor to know them
alL
There.ore the greater the uni­
formity of the laws in the various
states regulating such undertakings
the wider will be the market for tha
bonds and the lower the rates of in­
terest nt which they will sell. There
does not seem to be any remain w hy
these American mortgage Kinds could
not command even an international
market and admit the American
farmer to the cheap mo ley markets of
Europe.
Evidently there is this point to be
guarded against.
The system must
not be used as a lure to farmers to
borrow
It will have to be assured
that the farmer cannot borrow with­
out Intending to build up his land.
But if this point Is considered there
Is no doubt but that such a system as
the American commission has seen in
operation In Germany would be of
Inestimable benefit to the farmers It
would make It profitable to place un­
der cultivation the vast areas of un­
used land throughout the country
which only need development to make
them as profitable aa any other farm
land.
It would enable the farmers
throughout the country to adopt in­
tensive cultivation in the way in
which It should be adopted In this
country, through the use of scientific
methods and improved machinery.
It
would be a supplement to the great
work of the department of agricul­
ture and the state agriculture institu­
tions that would bring the knowledge,
which they have at such great expense
spread among the farmers, to practloal
fruition.