8 



valuation. The borrower does not receive this amount in 

 actual cash, but is given bonds to the specified amount of 

 which he himself then disposes. He may sell them through 

 his own banker, or the banking department connected with 

 the Landschaft will sell them for him in the open market. 

 The one who buys these bonds, and is really the mortgagee, 

 has as security not only this individual mortgage but the pool 

 of all mortgages in the hands of the Landschaft, and, in addi- 

 tion, the reserve fund which the organization is constantly 

 building up. The law provides that the money of widows 

 and orphans may be invested only in government bonds or in 

 Landschaften bonds, the security and stability of which is 

 thus recognized, and is due largely to the fact that the gov- 

 ernment has supervision over the organizations, each of 

 which represents one political district. 



Borrower and lender, then, do not come into any direct 

 personal contact. The lender secures the interest on his in- 

 vestment, not from the borrower, but from the Landschaft. 

 This is payable on the 1st of April and is usually 3I/2 per 

 cent. If at any time he desires to make other use of his prin- 

 cipal he cannot " foreclose," neither can he collect from the 

 Landschaft. He simply sells his bonds in the open market. 



!Kow as to the borrower. The day before the Landschaft 

 has to pay the interest on its bonds it collects the interest 

 from its members who are carrying mortgages. The rate of 

 interest collected is 4 per cent ; the I/2 per cent difference be- 

 tween this and what the lender receives is used to meet run- 

 ning expenses first, and then to build up a surplus or reserve 

 fund. 



Each year the borrower pays also a fixed sum which goes 

 toward the reduction of the principal, until at the end, 

 usually, of either forty-five or fifty-four years the mortgage 

 is amortized or " cancelled." The payments in excess of 

 the running expenses and what goes into the reserve fund are 

 used to buy up the bonds, so that when the mortgage be- 

 comes amortized the entire bond issue upon it has been 

 bought up. If, however, the borrower fails to pay the in- 

 terest, his land may be sold in the open market, and owing 

 to the low valuation which has been placed upon it, a larger 



