The daily Gate City and constitution-Democrat. (Keokuk, Iowa) 1916-1922, 1916-08-31

/ association established in or for the
county in which the land mortgaged
is situated or indebtedness subse-
! Quently incurred for one of the pur-
poses 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
cultivate such land are entitled to
borrow.
No one can borrow save for the
purposes stated in the act, and those
who after borrowing do not use the
money for the purposes specified In
the mortgage are liable to have their
loans reduced or recalled. The sec
retary-treasurer of each association is
required to report any diversion Of
borrowed money from the purposes
stated in the mortgages.
No individual can borrow more
than $4,000 or less than 800.
No loan may be made for more than
so per cent. of the value of the land
mortgaged and 20 per cent. of the
value of the permanent insured i'm
pfovements upon it.
The loan must run for not less
than i've and not more than forty
years.
Every mortgage must provide for
the repayment of the loan under an
amortization plan by means of fixed
number Of annual or semi-annual in
stallments sufficient to meet all inter-
est and pay off the debt by the end
of the term of the loan. The Install
ments required will be those publish
ed by the farm loan board.
Interest Paid by Borrower.
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 cent. the rate
paid on the last issue Of bonds.
For example. If the bank pays only
per cent. on an issue of bonds, 1t
cannot charge more than per cent
for the next farm loan it makes.
Out of this margin of not to exceed
per cent. together with such
amounts as It can earn on its paid
in cash capital, the bank must set
aside certain reserves and meet all
its expenses. Any balance or net
profits can be distributed IS dividends
to the loan association or other stock
holders. The loan association from
their bank dividends, after setting
aside the required reserves and meet
ing expenses, can declare association
dividends to their members. In this
way the profits, II any, will be dis
tributed among the borrowers and
will to that extent reduce the amount
Of interest actually paid by them.
The federal land banks are speci-
fcally prohibited from charging in
connection with making loan any
fees or commission which are not
authorized by the farm loan board.
The authorized fees need not be paid
in advance. but may be made part
OF the loan.
Plan Of Repaying Loans.
1t has been said that Ill loans are
to be repaid on the amortization plan.
This plan calls for number Of fixed
annual or semi-annual payments,
which include not only all interest
and charges due the bank, but the
principal as well. These payments
are so calculated as to extinguish the
debt in given number of years.
After five years the borrower has the
right on any interest date to make
additional payments on the principal
in sums of $25 or any multiple there
of, thus discharging the debt more
quickly.
Funds Available for Loans.
After a federal land bank has
loaned to first mortgage $4,000 it
can obtain permission from the farm
loan board to issue $4,000 in farm
loan bonds based on these mort
cages, sell such bonds in the open
market and use the money thus OBJ
tanned to lend on other morlgagc-.
This process of lending on mort
cages and selling bonds in issues of
$4,000 may be repeated until bonds
to the amount of twenty times the
banks paid up capital are outstand
ing. If each bank should have only
its required minimum paid up CAPT.
tai Of $4,000 this plan will provide
eventually. If all the authorized bonds
Of the twelve banks are sold, over
$3.50, 000. 900 to lend on first mort
cages ON farm land. The banks, how
ever. can increase their capital stock
above the required minimum and SO
increased the amount of bonds they
can sell and thus increase the total
amount OI mOuSy dFdAldDIS LUZ iOdlS
on farm mortgages.
To make these bonds attractive to
investors the bonds, together with the
mortgage upon which they are based,
are exempted from federal, state,
municipal and local taxation and are
made legal investments for fiduciary
and trust funds. The capital stock of
the federal land banks is also exempt
from taxation. Federal reserve banks
and member banks of that system are
empowered to buy and sell these
bonds. They are to be issued in de-
nominations of $40, $50, 800, $500
and $1,000.
Organization Of Banks.
The temporary management of the
federal land banks is to be in the
hands of five directors appointed by
the federal farm loan board. As soon,
however, as the subscriptions from
the loan associations total Sl00 600