The midland journal. (Rising Sun, Md.) 1885-1947, 1916-01-07
SOLVING THE PROBLEM
or LAND MORTGAGES
How the German Farmers Secure Long
Term Loans Through Their Own
Land Mortgages Associations.
f. B. BOMBERGER,
Maryland Agricultural College.

An6 LduubCudLLs OF LaHu A1OIt&d&C
Association OF Germany is a co-opera-.
ivee 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, If
it Is satisfactory he is permitted to
borrow up to two-thirds of the assessed
valuation Of his land, by giving to the
Landschaft first mortgage on the
land for the amount he borrows. To
prevent fraud or loss three separate
appraisa1s 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 the funds are
secured for the borrowers use.
Are Best Of Security.
This mortgage bond is secured by
all the property of the 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 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 $50 to 40, they are
regarded as the very best form of in
vestment for trust funds, savings
bank funds, etc. Thus on June Is,
1913, while German Government 40
bonds sold at 90 Landschaften 40
bonds sold at 400; and on the same
date Government $50 bonds sold at
74.S0 while Landschaften $50 bonds
sold at 1880. Each of these Land
schaften or Mortgage Associations is
united with others to form central
or Provincial Mortgage Union, the
function Of which Is to provide a WIDER
market for the bonds.
Mortgage Is Gradually Paid on.
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
are paid. These small annual or semi
annual payments, which range from
one-fourth to three-fourths of one per
cent, are obligatory upon the Dor.
rover. Thus on a loan at per cent,
u 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 total of $50. 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 1919 Of |
the original loan is amortized and adj |
ditionaI loan for the same amount may
be made on the same land.
/. In each district is q, local officer Of
the Landschaft, elected at their an
nual meeting, who assists members in
getting loans and looks after the In.
terests Of the Landschaft in the dis
trict. If 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, SO