Consolidated Statement of Condition of the Joint Stock Land Banks at the Close of Business October 31, 1919. Amortization Plan of the Federal System. Loans made by federal land banks or by joint stock land banks. must be made on the amortization plan and no mortgage made on any other plan can be accepted as a basis for any issue of farm loan bonds. This process of paying off an indebtedness by installment payments of a fixed amount, which includes interest and a part of the principal, throughout a period of years, enables a farmer to take a large loan without undue risk. Under the federal plan of amortization a mortgage loan may run from 5 to 40 years at the option of the borrower. The payment of the interest rate and 1 per cent additional per year applied on the principal will wipe out the mortgage in about 36 years. This period may be shortened by making additional payments on the principal, from time to time, as the farmer may find it convenient. The amortization payments may be made annually or semiannually, but the semi-annual system has been adopted as the standard, as it is usually an easier method for a farmer operating a small farm. Thus, the semi-annual payment on a $1,000 mortgage for 36 years at 5 per cent would require a payment of $30 every 6 months. This payment would wipe out the mortgage and discharge it at the end of the thirty-six year period. The farmer always has the privilege of making additional payments after the mortgage has run for a period of 5 years. After that time he can wipe out his loan in whole or in part on any interest pay day. Amortization methods of the federal land banks and the joint stock land banks. The amortization methods of the land banks under the federal system have been standardized, so that it is very easy to make these payments to the land bank from which the loan has been taken. The following table shows the application of succeeding instalments in the payment of interest and principal until the entire indebtedness is amortized. [A loan of $1.000 at per cent interest repayable in 35 years as compared with a straight loan for the same amount and period of loan.] 35 installments, as agreed, paying both interest and principal... $1.925 00 1,000 00 $2,925 00 .$2.272.50 .8852.50 The following method of paying off ahead of time has recently been promulgated by the Federal Farm Loan Board. Its advantages are perfectly plain to any borrower. The regular amortization table can be used during the entire period covered by the mortgage without In the present case, the loan is The amount of interest paid is regular amortized 35-year loan, any puzzling problem in arithmetic. [A 35-years, amortization loan of $1,000 at 5 per cent interest, but with the privilege of repaying succeeding sums that would be regularly applied on the principal.] Application of amortization and interest payments. The law makes the following provision for the application of amortization and interest payments collected on pledged mortgages held in trust: Amortization and other payments on the principal of first mortgages held by a farm loan registrar as collateral security for the issue of farm loan bonds constitute a trust fund in the hands of the federal land bank or joint stock land bank receiving the same, and must be applied as follows: In the case of a federal land bank (a) To pay off farm loan bonds issued by said bank as they mature. (b) To purchase at or below par farm loan bonds issued by said bank or by any other federal land bank. (c) To loan on first mortgages on farm lands within the land bank district, qualified under this act as collateral security for an issue of farm loan bonds. (d) To purchase United States government bonds. In the case of a joint stock land bank (a) mature. To pay off farm loan bonds issued by said bank as they (b) To purchase at or below par farm loan bonds. (c) this act. To loan on first mortgages qualified under section 16 of (d) To purchase United States government bonds. The farm loan bonds, first mortgages, United States government bonds, or cash constituting the trust fund aforesaid, are forthwith to be deposited with the farm loan registrar as substituted collateral security in place of the sums paid on the principal of indorsed mortgages held by him in trust. Every federal land bank, or joint stock land bank, is required to notify the farm loan registrar of the disposition of all payments made on the principal of mortgages held as collateral security for an issue of farm loan bonds, and the registrar is authorized at his discretion, to order any of such payments, or the proceeds thereof, wherever deposited or however invested, to be immediately transferred to his account as trustee aforesaid. Investments in Farm Loan Bonds. Provisions safeguarding investments. Investments in farm loan bonds by the farming population of the country, and by thrifty investors generally, are made attractive by the many safeguards which the law provides in their issue. The following sections indicate that the act gives as careful consideration to safeguarding the interests of investors as it does in promoting the welfare of borrowers: "Application for farm loan bonds. Sec. 18. That any federal land bank, or joint stock land bank, which shall have voted to issue farm loan bonds under this act, shall make written application to the Federal Farm Loan Board, through the farm loan registrar of the district, for approval of such issue. With said application said land bank shall tender to said farm loan registrar, as collateral security, first mortgages on farm lands qualified under the provisions of section 12, section 15, or section 16 of this act, or United States government bonds, not less in aggregate amount than the sum of the bonds proposed to be issued. Said bank shall furnish with such mortgages a schedule containing a description thereof and such further information as may be prescribed by the Federal Farm Loan Board. "Upon receipts of such application said farm loan registrar shall verify said schedule and shall transmit said application and said schedule to the Federal Farm Loan Board, giving such further information pertaining thereto as he may possess. The Federal Farm Loan Board shall forthwith cause to be made such investigation and appraisement of the securities tendered as it shall deem wise, and it shall grant in whole or in part, or reject entirely, such application. "The Federal Farm Loan Board shall promptly transmit its decision as to any issue of farm loan bonds to the land bank applying for the same and to the farm loan registrar of the district. Said registrar shall furnish, in writing, such information regarding any issue of farm loan bonds as the Federal Farm Loan Board may at any time require. "No issue of farm loan bonds shall be authorized unless the Federal Farm Loan Board shall approve such issue in writing. "Issue of farm loan bonds. Sec. 19. That whenever any farm loan registrar shall receive from the Federal Farm Loan Board notice that it has approved any issue of farm loan bonds under the provisions of section 18 he shall forthwith take such steps as may be necessary, in accordance with the provisions of this act, to insure the prompt execution of said bonds and the delivery of the same to the land bank applying therefor. "Whenever the Federal Farm Loan Board shall reject entirely any application for an issue of farm loan bonds, the first mortgages and bonds tendered to the farm loan registrar as collateral security therefor shall be forthwith returned to said land bank by him. "Whenever the Federal Farm Loan Board shall approve an issue of farm loan bonds, the farm loan registrar having the custody of the first mortgages and bonds tendered as collateral security for such issue of bonds shall retain in his custody those first mortgages and bonds which are to be held as collateral security, and shall return to the bank owning the same any of said mortgages and bonds which are not to be held by him as collateral security. The land bank which is to issue said farm loan bonds shall transfer to said registrar, by assignment, in trust, all first mortgages and bonds which are to be held by said registrar as collateral security, said assignment providing for the right of redemption at any time by payment as provided in this Act and reserving the right of substitution of other mortgages qualified under sections 12, 15, and 16 of this act. Said mortgages and bonds shall be deposited in such deposit vault or bank as the Federal Farm Loan Board shall approve, subject to the control of said registrar and in his name as trustee for the bank issuing the farm loan bonds and for the prospective holders of said farm loan bonds. "No mortgage shall be accepted by a farm loan registrar from a land bank as part of an offering to secure an issue of farm loan bonds, either originally or by substitution, except first mortgages made subject to the conditions prescribed in said sections 12, 15, and 16. "It shall be the duty of each farm loan registrar to see that the farm loan bonds delivered by him and outstanding do not exceed the amount of collateral security pledged therefor. Such registrar may, in his discretion, temporarily accept, in place of mortgages withdrawn, United States government bonds or cash. "The Federal Farm Loan Board may, at any time, call upon any land bank for additional security to protect the bonds issued by it. "Form of farm loan bonds. Sec. 20. That bonds provided for in this act shall be issued in denominations of $25, $50, $100, $500, and $1,000; they shall run for specified minimum and maximum periods, subject to payment and retirement, at the option of the land bank, at any time after five years from the date of their issue. They shall have interest coupons attached, payable semi-annually, and shall be issued in series of not less than $50,000, the amount and terms to be fixed by |