94*8 READINGS IN RURAL ECONOMICS 



funds through the sale of debenture bonds. Through unscru- 

 pulous management and lack of public supervision many of these 

 companies were led into careless and excessive loaning which 

 involved them and their gullible investors in the collapse of the 

 early '90s. Some, however, were conservatively managed and 

 are still in existence, and at present mortgage companies are 

 playing an important role in the making of farm loans, although 

 the issue of debenture bonds has been practically given up. 



There are two classes of mortgage companies. The first class 

 are really mortgage brokers. They are without resources and are 

 therefore not in a position to assume financial responsibility. 

 They receive the farmer's application, appraise his property, draw- 

 up the papers and, on finding a purchaser of the mortgage, pay 

 over the sum to the farmer. As agents, they collect the interest 

 and generally supervise the loan. The objections to such com- 

 panies are that the farmer must wait for his loan until a pur- 

 chaser can be found, and that in case of defaulted interest or of 

 foreclosure the inconvenience falls on the investor. 



The second class of mortgage companies occupy the position 

 of underwriters. On the farmer's application the company makes 

 an appraisal of his farm and if willing to grant the loan, does 

 this, after the necessary preliminaries, in its own name and from 

 its own resources. It then sells the mortgage to the investor and 

 endorses it to him. But if the loan is too large to be made by 

 a single investor, the company itself retains the mortgage and 

 sells serial bonds issued against it. The company guarantees the 

 title, collects the interest and advances it in case of delay, and 

 generally supervises the loan. It keeps the investor's money 

 constantly employed by reinvestment in new mortgages as the 

 old ones become due. 



(6) The building and loaning associations, which are now found 

 in practically all parts of the country and which have rendered 

 great service to home buvers in our smaller cities and towns, 

 until very recently took mortgages on urban property only ; but 

 in the older parts of the country they are now attempting to 

 extend their activities to the country districts, and in some locali- 

 ties their loans to farmers have bejrun to assume considerable 



