Pullman herald. [volume] (Pullman, W.T. [Wash.]) 1888-1989, 1913-07-18

The result of this impossibility of
obtaining longtime mortgage loans
in the United States has been that
the farmers have continued to have
their mortgages renewed from two
to four times; have paid commits
sion on each renewal; have scratched
their heads and stinted their fam
lilies to scrape together enough to
meet the principal of the loan when
due; and have fought shy of mort
cages as the devil would fight shy Of
holy water. In comparing the farm
er with the manufacturer we spoke
of the money derived from a mort
gage as being invested in the farm.
SO it should be, but in America
isn't an investment. 1t is
a debt a bad debt at that, and a
thing to be rid of as soon as possible.
But wouldn't this all be changed If
the farmer could borrow his mort
gage upon such terms that he could,
if his improvements increased his in
come for the next 20 years 8 per
cent pay per cent, per cent an
nually on the capital, pocket the /
per cent, and be rid of the entire
debt without further pawn ents at the
end of that time. Under such condi-
fnh 10 #
realization, the mortgage loan would
be a very profitable investment, and
if farmer could see his way clear
by spending ten thousand dollars
oil his farm to increas his income
s per cent year he would
b. very wise in accepting such loan.
Suppose, as matters stand today, he
borrows certain sum on fiNe-year
and improves his land
bring him 8 per cent a year increase
III profits. He pays probably 6 per
cent or at least per cent over in
terest payments and he has to pay
100 per cent to meet the principal or
else have the loan renewed. If
money is tight at the time of renewal
the interest rates may be boosted
Foreclosure may be insisted upon by
his creditor At any rate he has to
pay heavy commissions on the re-
newal.
The next question is that of inter
est to be paid Three factors control
the rate of interest-the soundness
of the security, its negotiability, and
the extent of the market it COM
nands. The farmers mortgage is
sound security, certainly up to so per
cent of the value of the land. The
days of great fluctuations in farm
land values in the United States are
probably ended Statistics show ex-
increases in values for
the country as a whole over 10-year
periods. The mere fact that cheap
new lands and government grants
are disappearing or have disappeared
will steady the market price of farm
land. Even now, on a large scale,
mortgage investments would prob
ably not be safe in the United States
over 80 per cent valuation, but up
to that mark and with few excep-
tons, such loans should be safe even
when aytandod for lone ra,iode Ac
to the negotiability of the farm mort
gage it might almost be said that it
has none. With the exception of
mortgage brokers who grant loans
on mortgages for the express purpose
OF selling them, there is little bust
ness in selling mortgages. Once an
investor obtains a mortgage he does
not, as rule, get his money out of
1t until the term of the loan is up.
The individual character of the mort
gage destroys it's negotiability. And
of course an investor will not accord
as low interest rates on a loan that
ties his money up as on one where
he can get his money out at any time,
as he could, for instance, from a rail-
read or other bond. The individual
character of the mortgage, the neces-
sity of selling it to a person familiar
with the land back of the mortgage,
also prevents the farmer from bene-
fitting from competition. He can
command only the local money mar
ket, whereas the railroad or other
bend is as acceptable to an investor
in San Francisco as it is to one in
London, commands an international
market, and sells wherever money is
cheapest. Only the insurance COM
psnies or few other large institu-
tons can afford through their agents
to have APPRAISERS made of land at
a great distance. and buy the mort
cages of farmers located in distant
states. But the purchases of such
institutions are not enough to bring