AGRICULTURAL CREDIT IN THE UNITED STATES 951 



The period of a mortgage loan is an important element in 

 determining its cost. In the United States, as a whole, the usual 

 period is five years, but in the South small loans are often made 

 for three years and in the best regions of the North some loans 

 are made for ten. In the early history of mortgage loaning, 

 loans were small in proportion to the productivity of the land, 

 and there was some economic justification for the three- or five- 

 year term, since a loan could often be paid off within that time ; 

 but this is no longer the case for a large part of the country, 

 though it still holds true in the South and the newer sections of 

 the West. With so short a term frequent renewals are neces- 

 sary, and the expense and uncertainty involved impose a needless 

 burden on the borrower. The usual excuse for the short term is 

 that, since the mortgage contains no clause providing for fore- 

 closure in the case of depreciation or for partial payments, the 

 short term is the lender's only means of self-defense. But this 

 is a poor argument, since the farmer would doubtless consent to 

 the inclusion of such a clause if he could thereby secure a longer 

 term with the privilege of making partial payments. The real 

 reason for short periods is to be found in the desire of the in- 

 vestor or his agent for commissions on renewals. In partial exten- 

 uation it may be noted that the initial cost of making a loan is 

 often so great that if the hope of future profits from renewals were 

 to be eliminated, initial commissions would have to be made larger. 



Another element of the cost of the mortgage loan is the ex- 

 pense of registration, of searching and perfecting titles, of ab- 

 stracting and so forth. This is sometimes made an extra charge. 

 The registration fee, which in many states is merely nominal, is 

 always paid by the borrower. In some states, however, its amount 

 depends on the length of the document and therefore bears no 

 relation to the amount of the loan. Often it is a grievous burden 

 on the small borrower. Some states have introduced the Torrens 

 system of title registration, thereby reducing the expense to a 

 minimum. In other states abstract companies have done much 

 to reduce these costs. In the South, however, such companies 

 are not common, and since the records must be searched from 

 the beginning for each new mortgage, the cost is high. 



