RURAL CREDITS 725 



annually, and is represented by interest coupons that bear interest 

 from maturity at the highest legal rate. The borrower assures the 

 payment of the taxes, and agrees to keep the buildings insured for the 

 benefit of the mortgagee. On default in the payment of interest or 

 in the performance of any of the agreements of the note or mortgage, 

 the lender may declare, the whole amount of principal and interest 

 immediately due. Such being the contract, other sources of profit 

 besides the initial commission will immediately be perceived. The 

 transaction may have such a history as this: the first interest coupon 

 is paid; the second is defaulted. The company remits to the eastern 

 investor, and then declares the whole debt due on account of the 

 default. The borrower wishes to pay up and have the loan reinstated. 

 The company then collects the amount of the defaulted interest, with 

 interest compounded thereon at the highest legal rate and a further 

 commission, or bonus for reinstating or renewing the loan. Or per- 

 haps the company insists upon payment of principal and interest. In 

 that case, the borrower borrows elsewhere; the company is paid in 

 full; the amount is reinvested, earning another 10 per cent commis- 

 sion; and the new mortgage is sent to the investor and the old one 

 canceled. The borrower who for any reason desires to pay off his 

 mortgage before it is due, must do so on such terms as the company 

 may prescribe. He cannot treat directly with the eastern owner of 

 the mortgage, for he cannot ascertain who that owner is; the assign- 

 ment from the company to the investor is not recorded. The bor- 

 rower is usually allowed to anticipate his obligation on payment of a 

 bonus of 2 per cent per annum for the unexpired time. 



Of course it is not always to the interest of the company to take 

 advantage of a default. The security may be so large as to cover 

 principal and interest for the entire term of the mortgage. In such 

 case, should taxes be unpaid, the company will either redeem in 

 behalf of the owner, or buy at the tax sale for itself. In the former 

 case, the amounts paid for taxes under the terms of the mortgage will 

 bear the highest legal rate of interest. In the latter case, such 

 amounts will, under some statutes, bear interest at the rate of 24 per 

 cent. 



If a foreclosure becomes necessary, the company secures it at the 

 lowest possible cost at a wholesale cost. In case of foreclosure, if it 

 has not guaranteed the loan, the company is in this position: it can 

 repay the debt and interest to the eastern investor, who is always 

 ready to receive it, and itself take the land; or it can leave the land 



