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Real Estate Mortgage Indebtedness and
The extent of mortgage indebtedness is a subject which at present is attracting an unusual amount of attention in this country. The alleged increase of real estate mortgages, particularly of those on agricultural lands, is asserted to be one of the dangerous signs of the times, and that, so far as our farmers are concerned, it is a burden which, taken in connection with the falling value of land, bids fair to drive them to the wall, or at least forebodes the substitution in the near future, of the tenant, for the independent small farmer. These alarmist allegations, however, do not pass without question, for it is argued with a considerable degree of plausibility, that the absence of mortgages is not necessarily a measure of the prosperity of either the farmer or manufacturer. On the other hand, it is not denied that, ordinarily, borrowed money applied to productive industry is a benefit to the whole community, the contention being that the position of the farmer and manufacturer in this respect is by no means similar, and least of all at the present day when farming does not pay, the farmer being compelled to borrow, not to extend his business, but to keep his head above water, the interest on his mortgage, especially if made in times of inflated values and high prices, eating up his substance. In the preliminary report of the committee of the State Board
of Agriculture, which lately* investigated the “ causes of the depression of the farming interests of New Jersey," the great fall in land valuest and the rate of interest is complained of, and the “mortgage evil” is incidently referred to in connection therewith. The committee makes a general valuation of from $30 to $60 per acre for New Jersey farming lands, exclusive of waste or swamp lands; and estimates that sixty-five per cent of the farms are mortgaged; “but this does not indicate the aggregate amount comprised in the mortgages as compared with the actual value of the farms for farming purposes.” One of the many replies from the farmers is to the effect that "it is a deplorable fact that our farming lands are so heavily burdened with mortgages. The aggregate amount of this crushing burden is not far from eighty per cent. of the total valuation of the farms.”
Be this as it may, there is an almost entire absence of data on the subject of mortgage indebtedness; certainly there are none of sufficient value to warrant reliable deductions. In only a few of the western states, Michigan, Illinois, Ohio, Indiana and Nebraska, has there been any attempt to gather such statistics. These go to show that the volume of land incumbrances is constantly swelling there, a result which is largely to be attributed to the somewhat overdone “western mortgage" industry, and therefore any conclusions drawn therefrom hardly would hold good in the east where the same conditions do not obtain. A considerable portion of these western mortgages is owned outside of the State affected, which results in the annual drain of interest money from the mortgaged territory. As the Commissioner of the Michigan Bureau of Labor Statistics put it in his fifth annual report (1888), “the foreign money lender having the first mortgage steps in, draws his interest and runs away, leaving the rest to meet the demands for public purposes. The resident capitalist having his money invested in mortgages, which can no longer escape the assessing officer, complains of the injustice of taxing mortgages, and is envious of his non-resident competitor who escapes that burden. The farmer, the mechanic and laboring man, whose property is all in sight, and
* February, 1890.
+ Question 1, (Have farming lands depreciated in your county ?), is answered in the affrmative with but one or two exceptions. The depreciation as averaged by the committee for the whole State is forty per cent. from ten to fifteen years ago.''- Report of Committee, p. 6.