The Republican. [volume] (Oakland, Md.) 1877-current, 1916-05-04
SOLVING THE PROBLEM
OF LAND MORTGAGES
How the German Farmers Secure Long
Term Loans Through Their Own
Land Mortgage Associations.
F. 3. BOMBERGER,
Maryland Agricultural College.

i've union of landholders within a
limited district for the purpose of Sc
curing long time loans for its mem.
bers 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 a
member. The association elects its
own officers and, through an elective
Executive Committee and Auditive
Committee, carries on its own affairs,
but it is always under the regulation
and supervision of the government.
A landholder wishing to borrow
money through the Landschaft, makes
his application setting forth the
amount desired and the use which he
intends to make of the money The
title to his land is examined; and, IL
it is satisfactory he is permitted to
borrow up to two-thirds of the assessed
valuation of his land. by giving to the
Landschaft a first mortgage on the
land fc~ the amount he borrows. To
prevent fraud or loss three separate
appraisals of the land are made.
The association is 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 an amount equal to the face.
value Of the mortgage. These bonds
are sold by the borrower himself, or
more usually, by the Association in
the open market. Thus tie funds are
secured for the borrowers use.
Are Best Of Security.
This mortgage bond is secured by
all the property of he Landschaft, is
made payable to bearer and is 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 b.
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 g.. to ~, they are
regarded as The very best form of in
yestmenr for trust funds, savings
bank funds, etc. Thus on June -
1913, while German Government IA
bonds sold at SO Landschaften "a
bonds sold at 100; and on the same
date Government 81 bonds sold at
1850 while Landschaften SO bonds
sold at $3.50. Each Of these Land
schaften or Mortgage Associations is
united with others TO form a central
or Provincial Mortgage Union. the
function Of which is to provide wider
market for the bonds.
Mortgage Is Gradually Paid Off
One of the most valuable features
Of the loans secured through these As
sociations is the gradual amortization
or cancellation Of the debt by means OF
small periodical payments make at the
time when the interest installments
al = BtAlNA- ll'ot sinai eli4AAAdl VI SC4Lli
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,
q of one per cent. is added for
amortization or cancellation and one
fourth per cent. is added to cover the
operating expenses of the Association
making a total of 80. By paying this
amount annually for from forty to
fOrty-fve years the whole loan will be
paid off In other words, the Land
schaft requires the borrower, by max
ing small payments, to accumulate
sinking fund which will, in the term OF
years of the mortgage, amount to
enough to pay the principal debt The
longer the term of the mortgage the
lower will be the amortization fee
Necessary Capital Easily Secured.
Of course, if the borrower desires at
any time to pay off the loan before
the mortgage is due, he may do so
The average length of time for which
loans run in the Province Of Saxony is
about twenty-five years. IN most cases
provision is made that when 100 OF
the original loan is amoruzed and ad
ditional loan for the same amount may
be made on the same land
In each district is a local officer OF
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 dis
trict. If a borrower is misusing the
money borrowed this officer serves as
the agent of the Landschaft in the
matter of the foreclosure of the mort
gage. The expense of operation OF
these Associations is exceedingly
small. The result is that German
farmers are able to secure ample CAPT
tai, for long terms, at small rates OF
interest with the assurance that, sc
long as the interest and small amort
ization fee is paid, the principal debt
is slowly but surely being paid off.
The annual short courses at the Agri
cultural College begin January 8, 1916
being as follows: