The Glasgow courier. [volume] (Glasgow, Mont.) 1913-current, 1917-02-16
OF LOAN ACT
Ways in Which the New System Fur
nishes Aid to the Farmer in
Financing His Business

-- ~eeSS
ton of the United States Department
of Agriculture Farmers Bulletin
1927 entitled "How the Federal Farm
Loan Act Benefits the Farmer"
The federal land banks established
under this act will stand ready at all
times, it is expected, to lend money
to farmers On farm-mortgage secur-
ity. The interest charges will be not
more than 6 per cent, o more than
l per cent above the rate paid on the
bonds sold by the banks. If Az per
cent bonds should be issued, there
fore, the rate charged on loans would
be 5k per cent OF less. There will be
no commissions or bonuses. The loans
will be made for periods of time rang
ing 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 semiannual-
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 off a
loan of $1,000, with interest at s per
cent, in 20 years, is $8O.24.
After a loan has run 5 years the
borrower will be permitted to pay off
the whole amount, if he desires, on
any interest date, Or to make partial
payments in addition to the regular
intallment. q
The requirement of installment pay
ments on the amortization plan, as
outlined above, will serve, first, to Gull
tivate habits of thrift in the borrow
er, and second, to make possible the
placing of the loans at a lower rate
of interest, since the gradual reduc-
ton of the principal constantly i'm
proves the security for the unpaid
balance. The privilege of optional
payments after the first 5 years
leaves the borrower free to discharge
his indebtedness before the end of the
loan period, if he finds it convenient
to do so.
The Federal land banks will per-
form three important services. ~
They will convert the security which
farm mortgages afford into a nego-
table form, known as farm-loan
bonds. (2) They will furnish addi-
tional security for the protection of
these bonds, through their capital and
surplus, and thus make the bonds
more attractive to investors. (3)
They will sell the 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 to
1000, and it is expected that the
bonds of small demonation will en-
courage saving through their appeal
to individuals who have not been in
the habit of making investments. The
bands will be secured not only by
farm mortgages deposited in trust
with a government official (the regis
trar for the land-bank district) but
also, as indicated above, by the cap
ital and surplus of the IL land banks.
Both mortgages and bonds will be
exempt from all forms of taxation.
Farmers who wish to obtain money
from the Federal land banks will or
dinarily be obliged to form local loan
associations, and get their loans
through these organizations. The
local loan associations will improve
the credit of their members and re-
duce the cost of their loans through
the performance of certain definite
services, among which are the follow
ing: The committee called the "loan
committee" of the association will ap-
praise the property offered as secur-
ity and approve all applications for
loans which are sent to the land bank.
The secretary-treasurer of the asso-
| citation will transmit the papers and
carry on all correspondence with the
land bank relative to the loans. The
association will guarantee the mort
cages of it's members, the liability of
any individual member being limited,
however, to an additional sum equal
to the amount of his capital stock, or
approximately to S per cent of his
own loan.
One important function of the new
system will be to establish state
standards for the farm-mortgage
business of the United States; for it
is not proposed to extend any credit
except on the basis of proper security.
In addition to the Endorsement of the
local association, every loan must
have the approval of n of the SAL
aried appraisers appointed by the
government for the several land
banks.
Further, not more than $4,000 may
be loaned to one borrower, O more
than so per cent of the value of the
land offered as security plus 20 per
cent of the value of the buildings;
and the money must be used for speci-
fed productive purposes, such as the