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loans, including farm mortgage loans, as allowed under the FEDERAL FARM
LOAN ACT, in which the principal is extinguished or amortized during the
period for which the loan is made.
Amortization loans are the only kind permitted under the Federal
Farm Loan Act. Before the
enactment of this law, it was customary for farmers to borrow on farm
mortgages as security subject to renewal. Each renewal necessitated the payment of commissions and agent's
fees, and in times of financial stringency, farmers sometimes lost their
farms because they could not get their loans renewed.
the Federal Farm Loan Act, farmers, as members of local cooperative associations
now known as Federal Land Bank associations, may take out loans from the
Federal Land Bank System for as short a period as five years and for as
long a period as 40 years. Payments
are made annually or semiannually so as to liquidate the entire indebtedness
in the period of the loan.
original Federal Farm Loan Board, since succeeded by the Farm Credit Administration,
encouraged the Federal Land banks in establishing a standard 33-year loan.
It did this because this sort of loan was one which simplified
the bookkeeping, made the matter of payments and amortization plain to
everybody, and gave every borrower the chance to turn himself so far as
time was concerned. It spread
the privilege of payment over a generation in time, and met every want
of almost every borrower.