The Washburn leader., 1916-11-17
Provides System For
Lending Money on
Farm Lands at Rea-
soaable Interest For
Relatively Long Pc
riods - Amortization
Plan For Easy Repay.
ment Prescribed -

trust by the bank as security for thu
loans it makes through the association
II a prospective borrower has nc
money with which to pay for his asso
ciation stock he may borrow the price
of that stock as part Of the loan on
his farm land.
Under this plan, then, every borrower
must be stockholder In his local asso
ciation and every association stock
holder in its district bank. Each stock
holder in an association is liable fol-
the acts of that association up to twice
the amount of his stock.
How Loans Ars Obtained.
A member Of national farm loan as.
sociation before obtaining loan must
first fill out an application blank sup.
Piled to the loan association by the
federal farm loan board. This applica.
ton blank and other necessary papers
will then be referred to loan commit
tee Of the association, which must ap-
praise the property offered as security.
Such application as is approved by the
loan committee is then forwarded to
the federal land bank and must be in
vestigated and reported on. by sal.
aried appraiser Of the bank before the
loan is granted. This appraiser is re.
quired to investigate the solvency and
character of the prospective borrower
as well as the value Of his land. When
q loan Is granted the amount is for
warded to the borrower through the
loan association.
The act specifically defines the pur-
poses for which loans may he obtained
These are:
(a) To provide for the purchase Of land
for agricultural use.
(b) To provide for the purchase Of equip
ment, fertilizers and live stock necessary
for the proper and reasonable operation
Of the mortgaged farm. the term equip
ment" to be defined by the federal farm
loan board.
(c) To provide buildings and for the Inn
provement of farm lands. the term ''im-
provement" to be defined by the federal
farm loan board.
(d) To liquidate indebtedness of the own
er Of the land mortgaged existing at the
time of the organization Of the first ma
tional farm loan association established In
or for the county in which the land mort
gagged is situated or Indebtedness subse-
quently incurred for one of the purposes
mentioned in this section.
Loans may be made only on first
mortgages on farm land.
Only those who own and cultivate
farm land or are about to own and cul-
tivate such land are entitled to borrow.
No one can borrow save for the pur-
poses stated in the act, and those who
after borrowing do not use the money
for the purposes specified in the mort
gage are liable to have their loans re-
duced or recalled. The secretary-treas-
urer of each association is required to
report any diversion of borrowed mon.
ey from the purposes stated in the
mortgages.
No individual can borrow more than
$4,000 or less than 500.
No loan may be made for more than
50 per cent Of the value of the land
mortgaged and 20 per cent of the value
Of the permanent insured improve
ments upon it.
The loan must run for not less than
five and not more than forty years.
Every mortgage must provide for the
repayment of the loan under an amor
tization plan by means of fixed num-
ber of annual or semiannual install
ments sufficient to meet all interest
and pay off the debt by the end Of the
term Of the loan. The installments re-
quired will be those published in amor
tization tables to be prepared by the
farm loan board.
The Interest Rate Paid by the eor-
rover.
No federal land bank is permitted to
charge more than 6 per cent per annum
on its farm mortgage loans, and in no
case shall the interest charged on farm
mortgages exceed by more than / per
bonds.
For example, If the bank pays only !
per cent on an issue of bonds, it can
not charge more than per cent for the
next farm loans it makes.
Out of this margin of not to exceed
1 per cent, together with such amounts
as it can earn on its paid in cash cap.
ital, the bank must set aside certain re-
serves and meet all its expenses. Any
balance or net profits can be distrib.
uted as dividends to the loan associ-
ations or other stockholders. The loan
associations from their bank dividends,
after setting aside the required re-
serves and meeting expenses, can de-
clare association dividends to their
members. In this way the profits. II
any, will be distributed among the bor-
rowers and will to that extent reduce
the amount Of interest actually paid by
them.
The federal land banks are specihcal-
ly prohibited from charging in connec-
hon with making loan any fees or
commissions which are not authorized
by the farm loan board. The author
lied fees need not be paid in advance.
but may be made part Of the loan.
Amortization Plan Of Rspayins Loans.
It has been said that all loans are to
be repaid on the amortization plan.
This plan calls for number Of fixed
annual or semiannual payments. which
include not only all interest and