The Democratic advocate. [volume] (Westminster, Md.) 1865-1972, 1915-12-24
SOLVING THE PROBLEM
OF LAND MORTGAGES
How the German Farmers Secure Long
Term Loans Through Their Own
Land Mortgage Associations.
II. ,. BOMBERGER,
Maryland Agricultural College.

Association Of Germany is co-opera-
ive union OF landholders within a
limited district for the purpose OF Sc
curing long time loans for its mem
bery On their land by issuing bonds
against the collective value OF the
lands OF the members. Anyone who
owns from ten to twenty-five acres Of
land within the district may become
member. The association elects it,
own oficers and, through an elective
Executive Committee and Audltive
Committee, carries on its own affairs,
but it iS always under the regulation
and supervision or the government
A landholder wishing to borrow
money through tho Landgchaft, makes
his application setting forth the
amount desired and the use which he
intends to make Of the money. The
title 20 hi land ls examined; and, -
II ~ satisfactory he In permitted TO
borrow up to two-thirds Of the assessed
valuation OF his land, by giving TO the
Landschaft Q first mortgage on the
land for the amount he borrows. TO
prevent fraud or loss three separate
appraigals OF the land are made.
The association ts not a bank and
has no supply of funds on hand, it does
not, therefore, lend him the money di-
rectly; but it issues to him mortgage
bonds of On amount equal to the face
value OF the mortgage. These bonds
I'll Iryf hn hnr calq ar
more usually, by the Association In
the open market Thus the funds are
secured for the borrowers use.
Are Best Of Security.
This mortgage bond IL secured by
all the property Of the Landschaft, is
made payable to bearer and il trans
| ferable at any time without endorse.
ment Although these bonds do not
run for any definite length Of time and
are not payable on demand, the Land.
schaft may call them in and pay them
Off at any time. The amount OF bonds
outstanding at any time cannot exceed
| the amount OF the mortgages held by
| the Association. So careful is the
management OF these Landschaften
and so strict Is the governmental
supervision that, although the average
| rate OF interest on thees bonds is very
low, ranging from go to 4To, they are
regarded a. the very best form OF in
vestment for trust funds, savings
bank funds, etc Thus On June 1S.
| 1913, while German Government 4%
i bonds sold at 96 Landschaften 40
bonds sold at 100; and on the same
date Government 80 bonds sold at
74.80 while Landschaften $50 bonds
sold at $780, Each Of these Land
schaften or Mortgage Associations IA
united with others to form central
or Provincial Mortgage Union, the
function OF which il to provide wider
market for the bonds.
Mortgage II Gradually Paid OFF.
One of the most valuable features
or the loans secured through these -
sociations is the gradual amortization
or cancellation Of the debt by means 81
small periodical payments make at the
time when the interest installments
are paid These small annual Or semi
annual payments, which range from
one-fourth to three-fourths OF one pei
cent, are obligatory upon the Dor
rover. Thus on a loan at per cent
W. or one per cent. il added fol
amortization or cancellation and one
fourth per cent. IL added to cover the
operating expenses OF the Association
making total Of 59o. by paying this
amount annually for from forty tc
forty-five years the whole loan will be
paid OH. I'm other words, the Land
schaft requires the borrower, by max
i'm small payments, to accumulate
sinking fund which will, in the term 81
years of the mortgage, amount tC
enough To pay the principal debt. The
longer the term of the mortgage the
lower will b. the amortization fee.
Necessary Capital Easily Secured.
OF course, If the borrower desires at
any time to pay off the loan before
the mortgage il due, H. may do %
The average length OF time for which
loans run in the Province of Saxony il
| about twenty-five years. In most cases
provision is made that when 1919 o.
the original loan il amortized and ad
ditional loan for the same amount ma!
be made on the same land.
In each district is local officer o.
the Landschaft, elected at their an
nual meeting, who assists members il
getting loans and looks after the in
terests of the Landschaft in the d.
trict. IF borrower IL misusing thu
money borrowed, this officer serves a:
the agent of the Landschaft In tht
matter of the foreclosure of the mort
gage The expense Of operation n
these Associations is exceedingly
small The result il that German
farmers are able to secu-a ample capi
tai, for long terms, at small rates Q
interest with the assurance that, *
long as the interest and small amort
ization fee j. paid, the principal deb
~ slowly but surely being paid OF.