24 BULLETIN 968, U. S. DEPAETMEISTT OF AGEICULTURE. 



suggested, and no attempt is made to consider details or to anticipate 

 in discussion objections that might be raised. 



Assuming that in many instances it will be necessary for the would- 

 be purchaser to borrow a considerably larger percentage of the value 

 of the property mortgaged than is now possible under the Federal 

 farm-loan system, it is important to inquire whether the entire loan 

 should be made on first-mortgage security or whether the borrower 

 should be allowed to give a first mortgage for approximately the 

 maximum now permitted and to offer a second mortgage for the 

 remainder. 



There are several strong reasons for the latter method. In the 

 first place, the number of loans made to facilitate the purchase of 

 land represents but a small proportion of the total loans on first 

 mortgages. If special credit arrangements should be provided to 

 farmers in becoming owners of their farms, it would not be neces- 

 sary to extend these special advantages to persons borrowing for 

 other purposes. In the second place, there is a well-established mar- 

 ket for conservatively placed first mortgages, in which such mort- 

 gages can be resold by the lender, either directly or by issuing bonds 

 secured by specific mortgages, and it would probablj' be difficult 

 to educate investors to accept mortgages representing a much less 

 conservative margin of credit. In the third place, the borrower is 

 likely to desire, and probably should be required, to repay that part 

 of his loan which exceeds the ordinary margin of credit allowed oa 

 first-mortgage security in a shorter period than is now allowed for 

 first mortgages under the Federal farm-loan system. While this is 

 not impossible when the entire loan is secured by a single lien, it is 

 easier to require it, as distinguished from permitting it, when the 

 excess represents a sejparate contract. In the fourth place, if the 

 Federal farm-loan system were modified to permit a larger credit 

 in some instances, even though such loans represented but a small 

 proportion of the total volume of loans, it is probable that the 

 knowledge of this fact would impair the general market for the 

 bonds based on mortgages as security, and this would probably be 

 the case even though all mortgages exceeding a conservative margin 

 of credit were excluded as a basis for bond issues. Finally, if the 

 system of farm credit should be modified to permit borrowing on a 

 larger proportion of the value of security offered, as a means to 

 home ownership, it would be desirable to provide special restrictions 

 and regulations covering such cases which would not necessarily ap- 

 ply in the case of the larger volume of loans on first-mortgage 

 security. 



In providing a special system of second-mortgage credit in the 

 interest of promoting farm home ownership it would probably be 



