The states-graphic. (Brownsville, Tenn.) 1???-1984, 1917-02-16
BENEFITS OF LOAN ACT
Ways in Which the New System Fur
nishes Aid to the Farmer in Fin
ancing His Business.

BY reason of the facilities createe
e by the federal farm loan act, which
was passed last summer, it will be cas-
Ter in the future for a farmer to Sc
cure money to make needed improve
{ ments or for the purchase of live stock
!, and it will be easier also for the land
less man to purchase farm, accord
ing to a recent publication of the, Unit
e ed States Department of Agriculture
Farm Bulletin No. 1927 entitled
: How the Federal FARM Loan Act
Benefits the Farmer"
The federal land banks established
under this act will stand ready at an
times, it is expected, to lend money
to farmers on farm mortgage security.
The interest charges will not be more
than per cent, nor more than one
per cent above the rate paid on the
bonds sold by the banks. If IL per
cent bonds should be issued, therefore
the rate charged on loans would be
- per cent or less. There will be
no commission or bonuses. The loans
will be made for periods of time rang
ing from five to forty years, thus do
ing away with the trouble and expense
of frequent renewals.
The payment of certain part of the
principal annually or semi-annualH,
with the interest, will be required. The
total payments, including the interest,
will be the same for each year, and viii.
be just large enough so that the en-
tire principal will be paid off at the
end of the period. The annual pay
ments thus required to pay off loan
of $1,00, with interest at per cent, In
20 years, is $S024. II
After loan has run for FIVE vel Is
the borrower will be permitted to HE
off the whole amount, if he desires, IN
any interest date, or to make parthl
payments in addition to the regdlr
installment.
The requirement of installment pE
ments on the amortization plan, bs
outlined above, will serve, first, to d.
tivate a habit of thrift in the borrower
and second, to make possible the Pic
ing of loans at a lower rate of interfst
since the gradual reduction Of The
principal constantly improves the Sc
curity for the unpaid balance The
privilege of optional payments after
the first five years leaves the borrow
err free to discharge his Indebtedness
before the end Of the loan period, i he
finds it convenient to do So
The Federal land banks will perform
three important services. 1)-They
will convert the security which farm
mortgages afford into a negotiable
form, known as farm-loan bonds. ~
They will furnish additional secarity
for the protection of these bonds, thru
their capital and surplus, and thus
make the bonds more attractive U in
vestors. go They will sell the Hpd- 1
bank bonds in the open invesIik
market, which, for obvious reasons 1
the small farmer could not reach 4, |
advantage.
The bonds are to be issued i'm de
nominations ranging from $25 to$l ,0Dt
and it is expected the bonds of SINAI
! denomination will encourage savihl
through their appeal to individual
who have not been in the habit of max
ing investments. The bonds will be Fe
cured not only by farm mortgage
deposited in trust with a governmeAi
official (the registrar for the lard
bank district but also, as Indicate
above, by the capital and surplus NJ
the twelve land banks.
Both mortgages and bonds will lk
exempt-from all forms of taxation.
Farmers who wish to obtain morey |
from the federal land banks will orAi
nary be obliged to form local loan as
sociations, and get their loans through
! these organizations. The local asso
citation will improve the credit of THEN
members and reduce the cost of theit
farm loans through the performance
of certain definite services, among
which are the following: The commit
tee called the loan committee" Of the
association will appraise the property
offered as security and approve all ap
plications for loans which are sent t.
the land bank. The secretary-treas
urer of the association will transmi
! the papers and carry on all correspon.
dence with the land bank relative to
! the loans. The association will guar
antee the mortgages of its members
the liability of any individual member
however, being limited to the amount
of his capital stock, or approximately
to per cent of his own loan.
One important function of the new
system will be to establish safe stand
ards for the farm mortgage business
of the United States; for it is not pro
posed to extend any credit except OF
the basis of proper security. In add
ton to the endorsement of the local
association, every loan must have the
approval of one of the salaried APP
praisers appointed by the government
| for the several land banks.
Further, not more than $4,000 may
be loaned to one borrower, nor more
than so per cent Of the value of the
land offered as security plus 20 pei
cent of the value OF the buildings; anC
the money must be used for specific
productive purposes, such as the pur
chase of farm land, improvements
equipment, fertilizers, or live stock, OF
for the payment of existing indebted
ness.
The Federal Farm Loan Board of the |
Treasur Department has genera
! ,t,,,.sr, 81 Tho gt,ctaro The Dpnart- 1