must find another borrower. However, one insurance company has $40,000,000 in Western farm-mortgage loans, and the interest thereon is sufficient to pay all its death losses. Another company has $99,000,000 in these loans, scattered over the Mississippi Valley. The larger sums are in Illinois, with about $28,000,000; Minnesota, with $10,000,000; Missouri, $11,000,000; Iowa, $10,700,000; Ohio, $8,000,000, and lesser amounts in a dozen other States. It places approximately 4,000 farm-mortgage loans every year, and has in its history loaned $250,000,000 in this way, with practically no loss. A report in the "Annals of the American Academy of Science" gives the amount of mortgages held by the life insurance companies at $490,632,508, or 27.7 per cent. of the companies' assets. This, however, includes loans on city property as well as those on farms. The percentage is second only to that invested in bonds, indicating the partiality for this form of investment by the most conservative of investors.

The insurance-company loan is safeguarded in every possible way. The interrogatories of the application cover four large pages, and include everything from the the size of the borrower's family to the use he proposes to make of the money. They even inquire into his habits and his standing in the community; for the well-informed investor realizes that the best part of his security is the personality of the borrower.

Thus it happens that the insurance companies have few foreclosures, and practically no losses on this class of investments. Of recent years the value of land has increased so rapidly that every loan-made, as these investments are, on a basis of 40 per cent. of real value—became “gilt-edged," and was the best possible security.

Had the investors who made loans on lands in the high plains, and virtually bought the farms offered as security because the loans were so greatly in excess of the usual limit of 40 per cent. of real value, kept the lands on which they foreclosed, they would have nearly "played even" now. The appreciation of land prices has been so considerable that the loan would have been repaid. Few of the original mortgagees have profited by this advance. Shrewd Westerners have purchased the old mortgages, have hunted up the original owners and secured quitclaim deeds, and have generally cleaned up the old mortgageloan business at a large profit through the subsequent selling of the properties. The original investors have been the losers, though the discouraged settlers, who "moved on after a vain trial at making a living on the open plain, should be likewise given some pity. It was not the settler's fault that excessive loans were made; he shared his exuberant hopes of prosperity

with the real-estate agent. The representative of the loan company, eager for a large commission (based on the size of the loan), was primarily responsible.

Realty loan agents have been, in later years, endeavoring to perfect a plan by which the small investor may have a chance. The man with $10,000 has abundant opportunity to make satisfactory loans. The man with only $200 can with difficulty find a place where he can loan his savings on the best of all security, a good farm property. To meet the needs of the small investor many plans have been devised, some of which have been successful, and some are now being tested.

The introduction in Congress of a bill for the organization of a "national mortgage bank" was along this line. The proposed law was based on the German mortgage-bond methods, and had for its basis the issuing of debentures secured by real estate.

One form of modern mortgage handling is seen in the operations of a Pennsylvania firm that conducts a "mortgage bank." It is really a trust company, empowered by its charter to transact all kinds of trust-company business, but confining its energies to the making and selling of realty loans. In Minneapolis, there is another departure from the old method in a goldbond" system, which, it is hoped, will solve the problem of farm loan-making. It is based on the theory that the borrower should begin to make preparation for payment of his loan as soon as he secures the loan itself. Generally, urge the promoters, the farmer pays interest to the end of the five-year period for which he borrows money, and at the conclusion of that time his loan is as large as in the beginning. The new plan is for the borrower to make a ten-year note, and to pay instalments that each year include the interest and one-twentieth part of the principal, so that at the end of the ten-year period one-half the debt has been liquidated. The mortgages are deposited with a trust company, and serial gold bonds bearing 5 per cent., in denominations of $500 and $1,000, secured by the mortgages, to be paid through the trust company, are issued. The necessary red tape, the fact that the loan is for ten years, the demand for the repayment of part of the principal each year, and the possibility that the trust company might find itself burdened with a large load unless it found a ready market for its bonds are against the scheme. The farmer is conservative, and the simple, plain note, with the privilege of repayment of any part of the principal at any interest-payment date, is likely to be more satisfactory to him than any complicated bond plan. It will be interesting to see how the idea works out.

At Seattle, the center of a rapidly growing portion of the Pacific coast farming country, is found another plan. It is

not yet applied to the farm-loan field, but is devoted rather to city loans. Its basis is a part-ownership theory, on bonds issued for five years against large buildings. The earnings are apportioned up to 6 per cent., and above that two-thirds of the income goes to the bond owners, who are holders of securities in multiples of $100, based on the properties themselves. The interest is paid quarterly, on the coupon system. It is planned to make the bonds negotiable at any bank, and to give them many advantages that shall inure to their success as attractive investments.

In an interior town of eastern Nebraska is conducted a farmmortgage plan on a somewhat similar basis. The farmer, making a loan of, say, $3,000, executes several notes, or bonds, of $500 each, aggregating the amount of the loan. These notes,

or bonds, are secured by a mortgage running to a trustee for all the notes. The majority of holders of bonds on any given property has the right to direct action in the case of forced collection. The bonds bear 5 per cent. interest on the coupon plan, and are convertible into cash on sixty days' notice, making them negotiable at the local banks. Many strong points are included in this form of loan, and the promoters say that they have had little difficulty in placing the notes, or bonds, on the market. They claim that the plan meets the need of the small investor acceptably.

With all these new schemes for transforming the farm-loan business, none has superseded fully the old-fashioned straight mortgage; and, as the West increases in wealth and the older settlers have a larger loan fund for which they seek investment, the borrower finds it easier to get from his neighbor the accommodation he desires. This tendency lessens the amount of borrowing from Eastern capitalists, and, as a local understanding of the conditions is always advisable in the making of a loan, the individual investors in farm loans are becoming more and more the closely interested neighbors and near residents.

As the prosperity of the borrowing sections has increased, the interest rates have necessarily decreased. The mortgage department of an Eastern insurance company has the following table, showing the average return of mortgage loans in the States named:

States.

1880. 1885. 1890. 1895. 1900.

1905.

Per cent. Per cent. Per cent. Per cent. Per cent. Per cent.

The steadily decreasing rate, even in the farther Western
States, is an index of the prosperity that has transformed the
doubtful regions into substantial and permanently resourceful
fields for the investor.

The reliability of the mortgage debtor, the actual value of
the security, the accuracy of the abstract, and the collection of
interest comprise a quartet of difficulties standing in the way
of the timid investor in farm loans. They are, however, by
no means insuperable, and their solution lies in the selection of
a trustworthy agent. In many States the local banker occu-
pies the position of real-estate loan broker, and obviously pos-
sesses many advantages for the position. In others, the real
estate sales-agent also negotiates loans; if he can curb his ex-
uberant estimate of land values, he is a capable one. Whoever
he is, the loan broker must know land values, must understand
something of land laws, and must be financially responsible-
though in these days he does not "guarantee" the loans he places.

With the rapid fluctuation of stock quotations and the desire
for substantial investments, the farm loan has increased in
favor, and to-day is probably rated as high by the conservative
investor as at any time in the nation's history.

Irrigation and Drainage Bonds. A comparatively new class
of bonds, which is just beginning to find favor among Eastern
investors, comprises the .irrigation and drainage bonds which
are being quite extensively issued in the West.

This class of bonds had its origin, not very long ago, in con-
nection with the economic development of the Western States.
They grew out of the realization of the agricultural possibilities
contained in both the low and in the arid lands, which had
hitherto been found unprofitable to improve and cultivate.

Such bonds were naturally, at first, regarded with more or less suspicion; but the operation for which they are issued may now be said to have passed beyond the experimental stage, and irrigation and drainage bonds have now taken their place alongside municipals, which they resemble closely. A few of the characteristics of this class of securities may be pointed out.

The bonds are usually issued by what is known as irrigation or drainage "districts," varying in size from 10,000 to 70,000 and 80,000 acres—oftentimes larger. They not only have a direct lien on taxes, but are a first and paramount lien on all the land in the district. In this respect they do not, of course, differ from municipal bonds. The characteristic which has made these bonds attractive to Western investors in particular, who have bought very freely of them for some time past, is the yield. Five per cent. is the lowest rate at which they are issued, and in most cases they are a 6 per cent. bond, which can be bought to yield from 5 per cent. to 5 per cent.

Among the important considerations for the investor whose attention has been attracted to irrigation and drainage bonds the following may be mentioned:

(1) Character of the farming population of the district. (2) Fertility of the soil and character of products which may be raised.

(3) Location of markets.

(4) Transportation facilities.

(5) General physical conditions.

Besides these there are, of course, the considerations of valuation, tax burden, etc., which obtain in the case of municipal bonds.

Another class of bonds similar to these which have just been discussed" are known as "levee" bonds. They are issued for the same purpose as the others the reclaiming of waste lands for agricultural purposes-and the same considerations may be said to apply to them. They are issued principally in the Southern States.

Since the Eastern investor has very largely come around to the way of thinking of his Western neighbor-namely, that there can be good bonds with a high yield-there has been a growing inquiry in regard to the above classes of securities, and it is likely that they will continue to grow in favor.