The Fargo forum and daily republican. [volume] (Fargo, N.D.) 1894-1957, 1917-04-09
York journal of Commerce.
Effect of Standard Rate,

The effect of a standard per cent
rate. uniform for the whole country, is
equivalent to that Of declaring mort
gage security equally acceptable, no
matter where the land may be located.
This would apparently place the bor-
rover situated in Montana or Texas
on a parity with the borrower upon
farm lands located in New England
or New York. Such a situation Is one
that may have some ar-reaching con-
sequences. One Of them would seem
likely to be that of encouraging the
borrowing of funds for the develop
ment of the less advanced sections of
the country and of giving these re-
sources to those sections for use at
rates much lower than those fixed
under conditions Of competition. The
outcome Of such situation may be
that of encouraging the application of
capital in those states at rates rela-
lively good deal higher than in the
older states. where the general level
of interest is lower. Another indicated
result of the situation may be that of
giving to the farm land banks almost
the entire mortgage business of these
high interest states. inaSmuch as the
average man will. Of course, never
borrow from private lenders at high
rates when he can get his accommoda-
ton at low ones from the new banks.
Effect on Old Mortgages.
The effect of the new institutions
upon the Old or outstanding mortgage
Indebtedness already referred TO is
likely to be interesting. The expecta-
ton of many has been that under the
new system. the old mortgages would
be cancelled and the Indebtedness
more or less quickly moved over into
the new system. the old holders Of
mortgages being paid off with the pro-
ceeds of new loans. There are some
obstacles to this process, in the act it
self. but it would seem that such a
shift could be effected indirectly IL not
directly. The question whether it
would or would not be made depends
largely on the saving in interest rates
that can be effected. In some states,
as the table already given shows. a
good many mortgages are evidently
carrying rates that will make 1t very
little worth while for a borrower to try
to make any such shift as is thus con-
templated. In the newer and less
developed states the inducement to
make the shift will be strong, so that
1t might be anticipated that. if per-
mitted. there would early be a good
deal of shifting of Indebtedness in
such states. the old obligations being
converted into farm loan indebted
ness.
Situation of 5ondhoIder.
These facts would suggest that very
possibly the western land banks may
be good deal more active than the
eastern, and that in consequence the
bonds issued against mortgages may
be. secured overwhelmingly upon
western mortgages. or course, any
such shifts Of indebtedness as here
referred to could be made only il bond
buyers appeared to take up the bonds
offered. The question then would be
whether the prospective investor
would be content with the rate Of 4
per cent or even per cent on bonds
protected by western mortgages so
largely. and whether he would not buy
eastern mortgages yielding him the
same or even a little more. II he
should take that point OF view. the
question how rapidly the capital to
take up these new bonds would be
furnished would become matter of
Immediate significance. and might
possibly necessitate a readjustment Of
the rate Of interest