Page:Popular Science Monthly Volume 82.djvu/259

Rh Association. The proportion of the loans made through the association is constantly increasing and within the last six months they have increased 10,000,000 marks, but the time probably will never come when all of the outstanding mortgage loans will be made through the land mortgage associations, as in many cases mortgages are given by members of families in settlements of estates, loans are made within families and through other private interests, so that in no case is it likely that over two thirds of the mortgage indebtedness of a province will be made through a public credit institution.

The Land Mortgage Association of the province of Saxony, which is typical of all other similar institutions in Germany, is a cooperative union of the landowners of this province for the purpose of securing loans for its members on their land by issuing bonds (Pfandbriefen) against the same. The association is not a stock company. No profits are declared to individuals, but go to the reserve funds of the association. Any one may become a member who is a landowner in the province and pays a land tax of at least 90 marks per year, which means owning from 10 to 25 acres of land, depending upon its value.

The articles of the incorporation for the association were approved by the Prussian government and the oversight of the business is under the direction of the Minister of Agriculture of the kingdom of Prussia. The association is independent to conduct its own affairs and to elect its own officers, but the election of the higher officers must be approved by the government. A farmer wanting to borrow through the association makes his application. After examination of the title of his farm and finding it satisfactory he has the privilege of borrowing to two thirds the assessed value of his farm for taxation by giving first mortgage to the association for the amount he borrows. The association does not have the money on hand to make the loan, but secures the same, not by selling the mortgage, but by issuing what is known as a Pfandbrief or mortgage bond of equal amount to the mortgage and selling the bond. There are several features of the Pfandbrief that are characteristic. First, it is not secured alone by the mortgage of the farmer for whom it was issued but by all the mortgages and property of the land mortgage association. Second, it is transferable without endorsement at any time and is an impersonal security payable to bearer. Third, it is not a bond in the sense that it runs for a definite length of time, for there is no fixed time at which it matures. Fourth, the holder does not have the right to demand payment of the face of the bond—that is, to call in the loan—but the issuer—the land mortgage association—has the privilege of paying it at any time. For example, the bond may be called in and paid six months after it is