RURAL CREDITS 793 



payments, provided the total does not exceed the maximum permitted 

 by the security offered. 



Each application for a loan is passed upon by a loan committee 

 of the association, who appraise the land, and make a detailed written 

 report. No loan shall be approved by the directors unless all three 

 members of the loan committee agree upon a favorable report. 

 Before the loan is finally granted, a second examination is made by 

 the appraiser of the federal land bank from which the funds are to 

 be secured. National farm loan associations may loan only upon 

 the security of first mortgages on farm land of their members and not 

 to exceed 5pjper_cent of the value of the land for agricultural purposes 

 and 20 per cent of the value of permanent, insured improvements. 

 Loans may not be less than $100 nor more than $10,000 in amount, 

 and the association will not be given a charter before the total of loans 

 applied for is at least $20,000. No loans shall be made to any person 

 who is not at the time, or shortly to become, engaged in the cultiva- 

 tion of the farm mortgaged, and his borrowing must be for one of the 

 following purposes: (a) to provide for the purchase of land for agri- 

 cultural uses; (b) for the purchase of equipment, fertilizers, and live 

 stock necessary for the proper and reasonable operation of the 

 mortgaged farm; (c) for buildings and improvements of farm lands; 

 (d) to liquidate indebtedness incurred for purposes (a), (b), and (c). 



The manner in which the farm loan association secures funds to 

 loan to its members is as follows: Whenever any national farm loan 

 association desires to secure a mortgage loan for any member, it shall 

 subscribe for capital stock of the federal land bank of its district, to 

 an amount equal to 5 per cent of the amount of the loan desired. This 

 stock is held by the land bank as collateral security for the payment 

 of the loan, but the association shall receive any dividends which it 

 may earn. Having thus affiliated itself with the federal land bank 

 (the resemblance to the federal reserve system is obvious), the farm 

 loan association may indorse the first mortgage which it has received 

 from its member, and turn it over to the federal land bank in exchange 

 for funds. These may be either current funds or farm land bonds, 

 at the option of the borrower. In case of default in the payment of 

 any such mortgage, the national farm loan association is, by reason 

 of its indorsement, still liable and must make good any loss incurred 

 by the land bank. 



Naturally the joint stock land banks are freed from the restriction 

 upon federal land banks of loaning only to members of farm loan 



