130 



that an extensive mortgage of this kind would be re- 

 garded as a better security than an individual mort- 

 gage, and it is for this reason that the rate of interest 

 of the mortgage might be considerably lower. This 

 form of mortgage is indeed an agricultural cooperation, 

 and is a very primitive form of association among 

 farmers which they can all easily understand and readily 

 take part in. 



LONG-TIME LOAJTS. 



In general it is found that all loans that exceed five 

 years in term are classified as long-term loans. The 

 principal of these loans is not made repayable all at 

 once, but in small annual or semi-annual payments. 

 This latter method of re-payment is generally known 

 as amortization. The issue of land mortgage bonds of 

 this kind, connected with this method of amortization 

 payments, is the distinctive feature of European long- 

 term mortgage credit. In the opinion of the commis- 

 sion this feature should be incorporated in any system 

 of rural credits authorized by Congress for the general 

 benefit of agricultural borrowers of the country. Nat- 

 urally under this system the duration of the loan is de- 

 termined by the rate of partial payments on the amorti- 

 zation scheme. The commission gives the following 

 example : 



If 4 per cent, bonds are selling at par and the bank 

 charges thirty-five one-hundredths of 1 per cent, for adminis- 

 tration, then an amortization rate of fifty one-hundredths of 1 

 per cent, will extinguish the debt in 54 l /2 years; that is to say, 

 the borrower will pay the bank a rate of 4.85 per cent, on the 

 sum borrowed for 54^2 years. The bank divides this payment 

 into three parts; 4 per cent, goes to pay the interest due on 

 the collateral trust bond which the bank issued to secure the 

 money which was loaned to the farmer; fifty one-hundredths 



