726 AGRICULTURAL ECONOMICS 



in the hands of the investor. This option, in case of non-guaranteed 

 loans, has been made a source of considerable profit to some com- 

 panies. Many companies, however, adopt the invariable rule of 

 taking the land. The best and most conservative companies have 

 made large profits by the sale of lands, by themselves taking title to 

 all foreclosed tracts. 



Various means have been adopted for negotiating these securities 

 in the East. As stated above, the mortgage is sometimes made 

 directly to the investor; sometimes to the company, and then assigned. 

 In the latter case, it is sometimes assigned without guaranty, some- 

 times with a partial guaranty, and sometimes with a full guaranty. 

 Of late, what is called the debenture system has been much in vogue. 

 The company issues its own promises to pay, and secures them by 

 assigning to a trustee bonds and mortgages whose par value somewhat 

 exceeds the face value of its promises. 



The eastern investor in western mortgages runs some risks. 

 Speculative values will often be given to farm land at first in a new 

 country, before experience has determined its real interest-earning 

 value. This has been shown in many counties in eastern Kansas and 

 Nebraska, where values are now lower than when settlement was first 

 being made. 



Again, the mortgage-loan company itself is constantly in danger 

 of being imposed upon. Many local agents work on commission. 

 Their earnings depend on their making loans, and the size of the com- 

 mission depends upon the size of the loan. Local agents and exami- 

 ners from the home office are sometimes bribed to overvalue the land. 

 The sworn appraisement by householders resident in the county where 

 the land lies by no means secures in every case what it is meant to 

 secure. The dishonest borrower always knows who in the community 

 entertains the wildest notions about the future of his county or town, 

 and this man makes the sworn appraisement; and there is a wide 

 difference between the appraisal made by really honest men "for loan 

 purposes," and the appraisal made by the same men in their actual 

 buying and selling. Bad loans made and foreclosed injure good secu- 

 rities by throwing upon the market properties to be sold below their 

 real productive value. 



The risk of the investor from failure of title is small. The titles 

 are simple. With few exceptions, they may be traced directly from 

 the federal government. Every investment company employs an 

 attorney to examine titles to the properties that are to be pledged, 



