Part II.

Real Estate Mortgage Indebtedness and Foreclosure Executions.

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 values 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 affirmative 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.

upon whom the burden of taxation is most oppressive, cannot escape."

There has been some very wild guessing respecting the mortgage indebtedness of the country, and as wild conclusions drawn from such an assumed total. The Committee on Mortgage Debtors of the late General Assembly of the Knights of Labor (November, 1889) reported that "though we find no reliable figures concerning the mortgage indebtedness of the country, yet enough is well known to prove beyond a doubt that it is frightfully large and dangerously burdensome." Reference is then made to some " widely published figures in the New York Times and other leading journals, both east and west," which credit seven western States with $4,521,000,ooo of mortgage incumbrance. The report then proceeds to state, that "these statements have been criticised and vehemently disputed by interested parties on the one hand, and partially verified on the other. Striking out one half of the amount to cover errors and silence criticism, we still find the figures and conditions confronting us most appallingly. As a fruitage of these conditions, the mortgage debtors in many places are unable to longer pay the interest on loans, and are utterly without hope of ever being able to pay the principal. This condition is not confined merely to the States named. It exists in city and country in nearly every State in the union. One leading orthodox authority places the mortgage indebtedness of twenty-three States at one-fourth of the value. of the value of their entire real estate."

That such estimates as those cited are exaggerated, the statistics of valuation given in the United States census returns for 1880 make pretty elear. The assessed valuation of the real estate in the fourteen western States is placed at $4,584,048,000 and that of all the thirty-eight States in the union at but little less than thirteen thousand million dollars. As a matter of fact, there are practically no statistics available on which to base reliable deductions of this nature. In the few western States where this line of investigation has been attempted, the results obtained are far from satisfactory, even where the official records of mortgages have been collated. A calculation of the supposed existing indebtedness from the mere record of mortgages is misleading, to say the least. To See official minutes published by the General Secretary-Treasurer, Philadelphia.

obtain the correct number of outstanding mortgages would require the search to be extended back a generation, in order to eliminate those discharged and foreclosed;* and this would not determine the amount still due on mortgages in force, for there is no record of past payments, which are well known to be considerable and to vary according to locality and class of mortgages.

It would also be misleading to conclude simply from a fairly correct estimate of total mortgage indebtedness, however large, based upon the number and amount of mortgages, that the condition of things was bad, and "that a very large proportion of the people seem to be in a financial rut, and are unable to extricate themselves," as it has been expressed. A large amount of the borrowed capital invested in productive industry would have to be first eliminated, and nearly the whole of the vast bulk of so-called purchase-money mortgages, given for property when purchased, or the deferred payments of borrowers in our numerous and rapidly increasing co-operative building and loan associations. This latter class of debtors is large and, where these enterprises flourish, constitutes a considera. ble portion of the total mortgages: the Bureau returns in 1888 showed 5.304 borrowing members of the New Jersey associations, which had over $14,000,000 invested on bond and mortgage. But, excepting these obligations, it cannot generally be learned from the official records which mortgages have been given to secure purchase money, and which for money borrowed. Nor can it be certainly determined from the mere records, that any given mortgaged tract of real estate is farming land-it may be held for speculative purposes, or may be mining property, but at the same time there may be no indications on the face of the mortgage showing this, except, perhaps, its apparently inflated value, which again would not be an absolute test to-day, for land mortgaged in the early '70's, or before.

These and other modifying circumstances largely destroy the value of any estimates of the burden of existing indebtedness, determined by an inspection of the official records only. These must be supplemented by a personal enumeration of the real estate owners a task which is to be undertaken, under a supplementary

* It is generally admitted that a farm mortgage has a long life. See correspondence from leading lawyers, infra.