Pullman herald. [volume] (Pullman, W.T. [Wash.]) 1888-1989, 1915-08-06


at considerable expense. II, as too
often happens, the debt has been
/ transferred to some greedy miser
who makes necessity his opportunity.
the debt must be paid in full or the
/ land is sold by the sheriff to satisfy
the money lenders claim. One of
the worst features of the existing
/ system is that the borrower never
knows what is doing to happen to
him when his loan is due and he is
without the money to pay it in full.
If he has been fortunate he can pay
his debt and clear his home: if he
has been unable to accumulate saw
ings sufficient to meet his obliga-
ton he must either lose his land
together with the cost of foreclosure
or pay extortionate and outrageous
charges for the renewal of his loan.
1t Is quite evident that terms nf
tho contract through which a farmer
secures loan on his land are as i'm
portant as the rate of interest that
he pays The farmers of the United
States need some agency through
which they can qualify, for product
i've uses, part of their fixed capital.
Such a change in our credit facilities
involves two or three principles that
are new in this country, but have
long been applied to similar prob
lens in Europe. In the first place
the time for which the loan is to
run should be much longer than is
usual here. One reason for the high
rate of interest on American farm
mortgages is that investors are
forced to make new arrangements
for placing their capital every five
years if they like farm MORTGAGES.
To make farm mortgage securities
attractive to the owners of money
looking for safe and rem lucrative
Investments the term of the loans
should not be less than 2E years and
may with safety be 80 years or more
a really sound investment for 30
years Is certainly much more attract
I've to persons who want an income
bearing security than one equally
safe that is for only five years. 1t
is believed that many millions of
dollars would instantly become avail
able for farm loans if the money
could be placed for longer periods
with the same assurance of safety
that such securities now possess.
The long term mortgage would be
an economy, both to the borrower
and to the lender. 1t has automatic
ally reduced the rates of interest
wherever it has been adopted. The
borrower is certain of the possess
sion of his farm as long as he pays
his interest and can make his ar
engagements for production with the
assurance that disturbances in the
money market or depression in bust
ness are not to interfere With his
plans. The lender IS exempt from
the risks, expenses, and losses of in
terest incident to changing his in
Vestments at short intervals. With
out any other new features the ex-
tension of the average term of farm
mortgage credit to 30 or more years
should result in a reduction of at
least one per cent interest rates,
and should practically stop foreclos-
ures. This change would open up
many new sources of capital seeking
permanent investments that are not
available for farm loans. Such
mortgages would be sought by the
trustees Of the endoWments of edu-
cattonal institutions, by insurance
companies as a safe inyestm ent for
reserves, by the executors of estates
looking for securities as the basis of
trust funds, and by the directors of
savings banks. With this greatly
~ OtlhCASd uldl net IuOII6dSOS VI
debentures based on mortgages a
material reduction of interest rates
due to competition among buyers
would be assured.
The second change needed in our
farm mortgage practice in this coun-
try is a provision in the contract en-
aiding the borrower to reduce the
principal of his debt every time he
makes an interest payment. If the
mortgage is to run for 80 years or
more the annual or semi-annual
amortization payment necessary is
considerably less than one per cent
per annum. Americans are not IA
miliar with this principle nor with
the method of debt paying involved
in its application to farm scans.
Amortization payments are simply
small installments on the principal