Seventy-Tiiikd Annual Report 1211 



them. The ownier of the hoiul of the Credit Foncier does not 

 know or care what is the vahie of the particnlar mort£jai>-e held 

 In- tlie hank. All he knows is that this great company, organized 

 upon sound and conservative principles, loaning by law no more 

 than 50 per cent, of the value of a piece of property, has issued 

 this hond and that its whole great assets — the united assets of 

 hundreds of millions of dollars' worth of French land, and the 

 paid in capital of the company - — stand behind it. Therefore the 

 bond sells in the open market npon the stock exchange as freely 

 as railwav stock or even the bonds of the ffovernment. 



The dithculty in this country is that if a farmer in the South 

 or West wishes to borrow upon mortgage he has to iind someone 

 who has looked over his farm, investigated the title and knows 

 it is clear. Those who pursue this business find it very profit- 

 able. There are several debentnre companies in Scotland which 

 loan money in Texas and other southwestern states and pay 

 regular dividends of 8 and 10 per cent, to their share holders. 

 The rate at which they loan to the farmers ranges from 6 to 7 

 or 8 per cent., without counting the charges when he first negoti- 

 ates the loan and the charges for renewals. But by appealing to 

 the world's money markets, the French, German or Italian farmer 

 is getting his money at the lowest rates at which it can be found 

 in the open markets of the world, instead of paying the high rate 

 for special investigation and for loans which are not readily 

 negotiable. 



A special and important feature of these European mortgage 

 l(ian l)anks is the svstem of amortization. Most of you have heard 

 of that in connection with insurance and perhaps with railroad 

 bonds ; but we have rarely seen it applied in this country to land 

 mortgages. It is a system by which a man who borrows npon a 

 mortgage for 75 years, for instance, has the principal of his obli- 

 gation split up into 75 annual payments, so that almost without 

 knowing it he finds he is steadily extinguishing a small part of 

 the principal of the loan at the same time that he is paying the 

 interest. Seventy-five-year loans form a very large proportion of 

 the loans of the Credit Foncier de France. Fifty years fonn a 

 groat majority; I mean those of fifty years and upwards. Thirty 

 year loans, although a fair proportion, are a small minority. 



