Highland recorder. (Monterey, Highland County, Va.) 1877-1972, 1917-02-16
Benefits Of Loan Act.

farmer To SeCuTC luOuCy W ihahS
needed improvements or for the
purchase of live stock, and
it will be eaiser also for the landless
man to purchase farm, according
to recent publication of the
United States Department of Agrl-
culture (Farmers' Bulletin 1922 en-
titled "How the Federal Farm
Loan Act Benefits the Farmer, :"
The Federal land banks establish
ed under this act will stand ready
at all times, it is expected, to lend
money to farmers on farm mortgage
security. The interest charges
will be not more than 6 per cent.
nor mole than l per cent above
the rate paid on the bonds sold by
the banks. II a per cent bonds
should be issued. therefore, the
rate charged on loans would be 81
per cent or less. There will be no
commission or bonuses. The loans
will be made for periods
Of time ranging from 5 to 40 years,
thus doing away with the trouble
and expense of frequent renewals.
The payment of certain part of
the principal annually or seminar
nually, with the interest, will be
required. The total payment, in
Guiding the interest, 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 off
loan of 81 900, with interest at 5
per cent. in 20 years, is $50 a..
After loan has run 5 years the
borrower will be permitted to pay
off the whole amount, if he desires.
on any interest date, CT to make
partial payments in addition to the
regular installment.
The requirement of installment
payments. on the amortization plan,
as outlined above. will serve, first,
to cultivate habits of thaift in the
borrower, and second, to make pos
sible the placing of the loans at a
lower rate of interest, since the
gradual reduction of the principal
constantly improves the security for
the unpaid balance. The privilege
of optional payments after the first
5 years leaves tie borrower free to
discharge his indebtedness before
the end of the loan period, if he
finds it convenient to do so.
The Fedeaal land banks will per-
form three important services. l.
They will convert the security
which farm mortgages afford into
negotiable form, known as farm
laon bonds 2. They will furnish
additional security for the protec-
ton of these bonds, through their
capital and surplus, and thus make
| the bonds more attractive to in
vestors. 3. They will sell the
land. 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
denominations ranging from S25 to
ST 900, and it is expected that the
bonds of small denomination will
encourage saying through their ap-
peal to individuals who have not
been in the habit of making invest
ments. The bonds will be secured
not only by farm mortgages de-
posted in trust with a government
official (the register for the land
bank district) but also, as indicated
above, by the capital and surplus
of the IL land banks.
Both mortgages and bonds will
be exempt from all forms of taxa
ton.
Farmers who wish to obtain
money from the Federal land banks
will ordinarily be oblidge to form
local loan associations, and get
their loans through these organiza-
tons. The local loan associations
will improve the credit of their
members and reduce the cost OF
their loans through the perfor-
nance of certain definite services,
among which are the following;
The committee called the "loan
committee" of the association will
appraise the property offered as
security and approve all applica-
tions 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 it's members, the liza
bility of any individual member
being limited, however, to an ad-
ditional sum equal to the amount
of his capital stock, or approx
mately to 5 per cent of his own
loan.
One important function of the
new system will be to establish sale