Custer weekly chronicle. [volume] (Custer City, S.D.) 1890-1931, 1916-07-29
RURAL CREDIT
Legislation Took Shape Last Week in
Form of the Federal Farm
Loan Act.

shape last week in the form of the fed
eral farm loan act, which became a law
on Monday through the signature of
President Wilson. This act aims to pro-
mote agricultural prosperity by enabling
farmers to borrow money on the secur-
ity of farm mortgages at a reasonable
rate of interest and for relatively long
periods Two farm mortgage systems
are provided under the new law; one
operating through regional land banks
and the other through joint stock banks
Both are to be under the supervision Of
a Federal Farm Loan Board in the Treas
ury Department, composed of the Secre-
tary of the Treasury as chairman ex-
oficio and four members appointed by
the President. Under the bill the coun.
try is to be divided into twelve farm
loan districts, in each of which a federal
| land bank is to be established with a
subscribed capital stock of not less than
| S750,0O0, shares being So each. Branch
es may be established by each bank
within its district. Within thirty days
after the stock is offered for sale it may
be purchased by any one; thereafter the
stock remaining unsold is to be bought
by the Secretary Of the Treasury for the
government which, however, will not
receive any dividends on its stock. Pro-
vision is made for transferring the orig
inal stock at par to associations of bor-
rowers, who, it is expected, will ult-
mately own all the stock in the banks.
Loans are to be made by the federal
land banks generally through national
farm loan associations. An association
of this kind may be formed by ten or
more persons who own and cultivate
farm land qualified as security for a
mortgage loan under the act, or who are
about to own and cultivate such land,
provided the aggregate of the loans de-
sired by the members is not less than
$50, 900. Each member must take stock
in his association to an amount equiva.
lent to . per cent. Of the amount he
wishes to borrow, the stock being held
in trust as security for the members
loan. In like manner, an association
when applying to the land bank for
money must subscribe in stock of the
latter to an amount equal to per cent.
Of the sum it wants for its members,
which in turn is to be held by the bank
as security for the loans made through
the association. Where borrower has
no money TO pay for his stock in the as
sociation, he may borrow its price as
part of the loan on his land. Each
stockholder in an association is liable
for its acts up to twice the amount of his
stock
Before obtaining a loan member of
an association must fill out an applica-
ton supplied by the Farm Loan Board
This with other papers, will be referred
to loan committee of the association,
which must appraise the property offer
ed as security. After approval by the
loan committee, the application must be
reported upon by a salaried appraiser of
the federal land bank, who must inves-
tigate the sovency and character of the
prospective borrower as well as the value
of his land. The amount of a loan is
forwarded to the borrower through the
association. Loans may be made only
on first mortgages on farm land, and
only for the following purposes, viz, for
ha Of 70 on ral
uses, or of equipment, fertilizers and
live stock necessary for the proper and
reasonable operation of the mortgaged
farm, or to provide buildings and for the
improvement of farm lands or to liqui-
date Indebtedness of the owner of the
land mortgaged, existing when the first
national farm loan association is estab
lished in the county where the land is
situated, or subsequently incurred for
one Of the purposes already mentioned.
1t may be added that the terms equip
ment" and ''im Drovement' are to be de-
fined by the Farm Loan Board. The
secretarytreasurer of each association
must report any diversion of borrowed
money from the purposes stated in the
mortgage, and the loans of borrowers so
diyerting funds may be reduced or re-
called.
No loan may be made for more than
| 80 per cent, of the value of the land
mortgaged and 20 per cent. of the per-
manent insured improvements upon it,
or can run for less than five or more
than forty years, and no individual can
borrow less than 500 or more than Sl0,-
600 Each mortgage must provide for
the repayment of the loan under an
amortization plan, by fixed number of
annual or semi-annua installments suf-
| ficient to meet all interest and pay off
the debt by the end of the term of the
loan. The amount of the installments
will be regulated in amortization tables
prepared by the Farm Loan Board. In
case of default the bank NAV protect it.
self by recalling the loan in whole or in
part by taking other necessary action.
Interest on loans may not exceed 6 per
cent, or be more than per cent in ex-
cess of the rate paid on the last issue of
bonds by the bank as provided for be-
low. Out of this per cent. margin, to.
gether with such amounts as it can earn
on its paid-in cesh capital the bank
must set aside reserve and meet all its
expenses, and any balance or net profits
may be distributed as dividends to the
loan associations or other stockholders,
and under like conditions the associa-