Little Falls herald. [volume] (Little Falls, Morrison County, Minn.) 1889-1950, 1917-02-23
new LOAN ACT HELPS FARMERS
WAYS IN WHICH TIE NEW SY9-
TEN FURNISHES AID IN FL
NANOuNG>. HIS BUSINESS

Federal loan act, which was pasSeC
last summer; it will be. easier in the
future for farmer to secure money
+ to make needed Improvements or fol
the purchase Of live stock, and it vii
be easier for the landless man to pur
chase a farm, according to recent
publication of the United States De
partment Of Agriculture (Farmers
Bulletin 1922, entitled "How the Fed
eral Farm Loan Act Benefits the Farm
err
The Federal land banks established
under this act will stand ready at all
times, it is expected, to lend money tt
The interest charges will not be more
than 6 per cent, nor more than pei
cent above the rate paid on the bonds
sold by the bank. If Az per. cent
bonds should be issued, therefore, the
rate charged on loans would be 5h pei
cent or less. There will be no commits.
sions or bonuses. The loans will be
made for PERIODS Of time ranging from
S to 40 years, thus doing away with
the trouble and expense Of frequent
renewals.
The payment of a certain part of
the principal annually or semi-annual.
ly, with the interest, will be required
The total payment, including the in
terest, will be the same for each year
and will be just large enough so that
the entire principal will be paid off at
the end Of the period. The annual
payment thus required to pay of loan
of $1,000, with interest at 5 per cent,
in 20 years, is $S0.24.
After loan has run years the bort
rover will be permitted to pay off the
whole amount, if he desires, on any in.
terest date, or to make partial pay.
ments in addition to the regular in
stallment.
The requirement Of installment pay
ments on the amortization plan, as
outlined above, will serve, first, to
cultivate habits of thrift in the Dor.
rover, and second, to make possible
the placing of the loans at lower rate
of interest, since the gradual reduc-
tion of the principal constantly i'm
proves the security for the unpaid bal
ance. The privilege Of optional pay
borrower free to discharge his indebt-
edness before the end Of the loan peri
cd, if he finds it convenient to do so.
The Federal Land banks will perform
three important services. l They will
convert the security which farm mort
cages afford into a negotiable form,
known as farm loan bonds. 2 They
will furnish additional security for the
protection of the bonds, through their
eapitat and surplus, anu thus make the
bonds more attractive to investors. 3
They will sell .he land-bank bonds in
the open investment market, which,
for obvious reasons, the small farmer
could not reach to advantage.
The bonds are to be issued In de-
nominations ranging from $25 ia
$1,000, and it is expected that the bonds
of small denominations will encourage
saving through their appeal to indi-
viduals who Lave not been in the habit
of making Investments. The bonds
will be secured not only by the farm
mortgages deposited in trust with q
government official [the registrar fol
the land-bank district), but also, as in
dicated above, by the capital and sur.
plus of the 12 land banks. Both mort
cages and bonds will be exempt from
all forms of taxation.
Farmers who wish to obtain money
from the Federal land banks will ordi.
narily be obliged to form local loan
associations, and get their loans
through these organizations. The local
loan associations will improve the cred
it of their members through the per
formance Of certain definite services
among which are the following: The
committee called the 'loan commit
tee'' Of the association will appraise
the property offered as security and
approve az applications for loans
which are sent to the land bank. The
secretary-treasurer Of the association
will transmit the papers and carry on
all correspondence with the land bank
relative to the loans. The association
will guarantee the mortgages of its
members, the liability of any individ
ual member being limited, however, to
an additional sum equal 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
Of the United States, for it is not pro
posed to extend any credit except or
the basis Of proper security. IN addi
tion to the Endorsement of the loca7
association, every loan must have the
approval Of one of the salaried ap
praisers appointed by the government
for these 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;> and
the money must be used for specified
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 Treasury Department has general
charge of the system. The Department
of Agriculture will cooperate with
this board in supplying information
and rendering assistance to farmers
who desire to take advantage of the
Federal farm loan act, especially with
reference to the organization Of loeaI
loan associations,