BETTER FRUIT 



AX ILLUSTRATKD .MAGAZINE PUIILISII KD MONTHLY IN THE INTEREST OF MODERN, PROGRESSIVE FRUIT GROWING AND MARKETING 



Farm Loan Act — U. S. Department of Agriculture 



Provides System for Lending Money on Farm Lands at Reasonable Interest for 

 Relatively Long Periods — Amortization Plan for Easy Repayment Prescribed 



THE Federal Favm Loan Act, popu- 

 larly called the "Rural Credits 

 Law," was signeil by the President 

 and became a law on July 17, 191G. The 

 primary purpose of this act is to pro- 

 mote agricultui'al prosperity by en- 

 abling farmers to borrow money on 

 farm-mortgage security at a reasonable 

 rate of interest and for relatively long 

 periods of time. To attain this object, 

 two farm-mortgage systems are pro- 

 vided: (1) A system operating through 

 regional land banks, and (2) a system 

 operating through joint - stock land 

 banks. To attract money to the farm- 

 loan field, the act provides a method 

 whereby those who have money to lend 

 can find safe investments in the form 

 of debentures or bonds, of small and 

 large denominations, issued by the 

 banks and based on the secui-ity of 

 mortgages on farm lands. These two 

 systems are to be under the general 

 supervision of a Federal Farm Loan 

 Board in the Treasury Department, 

 composed of the Secretary of the 

 Treasury, as chairman ex officio, and 

 four members appointed by the Presi- 

 dent. This board has authority to 

 appoint appraisers, examiners and reg- 

 istrars, who will be public oilicials. 



The Federal Land-Bank System 



Inder the Federal land-bank sysle n 

 the act provides for Federal land banks 

 which make loans, for the first twelve 

 months, exclusively through local 

 national farm-loan associations com- 

 posed of borrowers. These associa- 

 tions shall be shareholders in the 

 banks and in that way the members, 

 who are borrowers, will share in the 

 profits of the bank. The money for 

 the loans is to come partly from the 

 capital of the banks and parth- from 

 the sale by the banks of bonds secured 

 by first mortgages on farm lands. The 

 act defines strictly the purposes for, 

 and the conditions under, which loans 

 are to made, and requires that the rate 

 of interest charged on farm loans shall 

 not exceed 6 per cent per annum. 



Twelve Federal Land Banks 



The United Slates shall be divided 

 into twelve farm-loan districts, and a 

 Federal land bank with a subscribed 

 capital stock of not less than .*7.")II,(III0, 

 each share $."), shall be established in 

 each district. Fach Federal land bank 

 may establish branches in its districts. 

 Within thirty days after the capital 

 stock is offered for sale it may be pur- 

 chased at par by anyone. Thereafter, 



the stock remaining unsold shall be 

 bought by the Secretary of the Treas- 

 ury for the United States. It is pro- 

 vided, however, that the Government 

 shall not receive any dividends on its 

 stock. L'ltimately, it is intended that 

 all the stock in the banks shall be 

 owned by the associations of borrow- 

 ers, and provision therefore is made in 

 the law for transferring the original 

 stock at par to these associations. 



Outline of Farm Loan Act 



The Act provides for the ereatiun of 

 t\vel\'f Federal Land Banks and jjerniits 

 the cstal)lishinent of any number of 

 joint-stock land banks for the purpose 

 of making loans at a reasonable rate of 

 interest, for long periods of time, on 

 farm lands. 



A Federal Farm Loan Board has com- 

 plete control over these banks. 



(A) FEDF.RAL LAND BANKS. 



Twelve Federal Land Banks are pro- 

 vided, one in each of t\\elve districts 

 into which the country will he divided. 

 These banks are empowered to lend un 

 first mortgages on farm lantls in 

 amounts of .$100 to .?10,000 for approved 

 purposes. The loans are to be made 

 through farm loan associations and 

 agents. No loan may be made for more 

 than .")0 jier cent of the value of the * 

 land moitgaged and 20 per cent of tlie 

 value of the jiermanent insured im- 

 piovements upon it. 



Xational Farm Loan A.ssoeialians — 

 local organizations composed exclusively 

 of borrowers — are authorized. These 

 associations must be stockholders in the 

 land banks in proportion to the amount 

 their mendieis wish to borrow. Even- 

 tually ail stock in the Fedeial Land 

 Banks will be owned exclusively by 

 these associations. 



A reasonable interest rale is estah- 

 lishe<l. The Act prohibits the Federal 

 Land Hanks from charging m<n*e thaTi 

 6 per cent on any mortgage, or requir- 

 ing fees not approved by the Farm Loan 

 Board. 



The horroivers adil share in the net 

 profits of the hank because they are 

 stockholders. It is conteniplatecl that 

 ultimately the borrowers will be tlu- 

 only stockholders. 



Lontj term loans are provided b.v 

 authorizing moi-lgages for periods of 

 fi'oin five up to forty years. 



Small annual or semi-anntml pay- 

 ments on the principal are made a re- 

 quired featln'e of all mortgages. 



(HI JOINT-STOCK LAND BANKS. 

 .Toint-stock land banks are authoriz<'d. 

 They are corpcuations for carrying on 

 the business of lending on farm mort- 

 gage security and issuing farm loan 

 bonds. The>' are to be under the super'- 

 vision of the Farm Loan Board, hut the 

 Government \silt not invest in them. 

 Subject to geogi niihit ai iimit.-ilions and 

 subject to tile .'»0 per cent and 20 ]iev 

 cent limitation, these banks can lend to 

 an iiuli\'idnal an.v amount they wish, 

 and for an,\- jmr-p^tse. They cannot 

 charge an inter-est rate exceeding G per 

 cent and slU'h late nnist not exceed by 

 more than 1 tier cent the interest they 

 liave paid on their last issue of bonds. 

 Their n:ortgagcs. however, must jirovide 

 for anu)rtizaticni i-a>inents, T'hese banks 

 are |H-ohibited fi-iun cliarging, under any 

 Tirelexl. fees or commissions other than 

 those authorized by the Act. 



National Farm Loan Associations 



The act provides for the creation of 

 local national farm-loan associations 

 through which it is contemplated thai 

 the Federal land banks shall make their 

 loans. In the event that a local loan 

 association is not formed in any lo- 

 cality within a year, the Federal Farm 

 Loan Board may authorize a Federal 

 land hank to make loans on farm land 

 through apijroved agents. Ten or more 

 persons who own and cultivate farm 

 land ([ualified as security for a mort- 

 gage loan under the act, or who are 

 about to own and cultivate such land, 

 ma\- form such an association, pro- 

 vided the aggregate of the loans desired 

 by the membership is not less than 

 *20,flll0. Each member must take stock 

 in his association to an amount equiv- 

 alent to ,5 per cent of the amount he 

 wishes to borrow. This slock the a.sso- 

 ciation holds in trust as security for the 

 member's individual loan. The associ- 

 ation, in turn, when applying for 

 money from the bank, must subscribe 

 for stock in the bank to an amount 

 e(|uivalent to 5 per cent of the sum it 

 wants to obtain for its members. This 

 stock is held in trust b,\ the bank as 

 security for the loans it makes through 

 the association. If a prospective bor- 

 rower has no money with which to 

 pay for his association stock, he may 

 borrow the price of that slock as a part 

 of the loan on his farm land. Under 

 this plan, then, every borrower must 

 be a stockholder in his local associa- 

 tion, and every association a stock- 

 holder in its district bank. Fach stock- 

 holder in an association is liable for 

 the acts qf that association up to twice 

 the amount of his stock. 



How Loans Are Obtained 



A member of a national farm-loan 

 association, before obtaining a loan, 

 must first fill out an application blank 

 supplied to the loan association by the 

 l'"edei al Farm Loan Boaril. This appli- 

 cation blank and other necessary pa- 

 pers will then be referred to a loan 

 committee of the association which 

 must appraise the property offered as 

 security. Such application as is ap- 

 proved by the loan committee is then 

 forwarded to the Federal land bank 

 and must be invesligaled and reported 

 on by a salaried appraiser of the bank 

 before the loan is granted. This ap- 

 praiser is refpiired to investigate the 

 solvency and character of the prospec- 

 tive borrower as well as the value of 

 I'.is land. When a loan is granted the 



