WESTERN FARM MORTGAGES

by Daniel R. Goodloe, The Forum vol. 10 (November 1890), pp. 346-355

A MORTGAGE is a dead pledge; so says Blackstone, so say the lexicographers, and so it happens in practical affairs, three times in four. The mortgager makes a deed of his land to the mortgagee, as security for the payment of a sum of money amounting to little more than half the value of the land; oftener than otherwise to less than half. The transfer is on the condition that if the money shall be repaid on or before a given day, then the mortgage shall be canceled; but if otherwise, that the land shall be sold, in order to payoff the accompanying bond, with costs. Originally, if the mortgagor failed to pay on the day named, the land became at once the property of the mortgagee. But at length the English chancery courts interposed, and allowed to the mortgagor an “equity of redemption”; and the practice has been universally followed in this country. The land is advertised and sold at the court-house door, and if it brings more than the amount of the debt and costs, the balance is paid over to the mortgagor.

But the foreclosure of mortgages is apt to take place in hard times; and the consequence often is that the land brings no more than the mortgage bond calls for, with arrears of interest and costs. When mortgages are made under a pressure of circumstances, as is the case for the most part, this disastrous result is almost sure to follow; and the effect of the mortgage is only to postpone the evil day. If the loan is obtained on a mortgage in order that the borrower may engage in business – whether farming, trading, or speculation – he runs all the risks of bad crops, of unfavorable markets, and of fluctuations in prices, to say nothing of inflations and contractions of the currency. During the Civil War, and for fifteen years after its close, debts were contracted, and mortgages were given, when the currency had been greatly depreciated, but was gradually appreciating. The consequence was that in every instance the debts were to be repaid in currency more valuable than that which the mortgagor received. At one time in 1864, a United States note, or “greenback,” was worth only 38 cents in coin. Prices of all commodities rose accordingly, and debts contracted at the time, without a specification of the currency in which they were to be repaid, became twofold more weighty before specie payments were resumed in 1879. And for many years the greenbacks and national-bank bills were far below par. This state of things was highly injurious to the debtor class, and correspondingly advantageous to creditors.

Mortgage debts are apt to be of long standing. The term runs out, and the debtor is unable to pay. He asks for a renewal, and will consent to an increase of the rate of interest, if it is demanded, or to the payment of a bonus, which is the safer plan for the creditor. The mortgagee can afford to renew all the more safely in view of the rapidly-appreciating value of the currency. These disorders in the national currency, which necessarily contributed in a great degree toward involving the people in debt, and toward keeping them in debt, and which would alone have been sufficient to do this, have happily passed away; but the consequences remain. Twenty-five years from the close of the War, and eleven years after the resumption of specie payments, the people still find themselves overwhelmed by debt.

These fluctuations in the currency are by no means all the sources of embarrassment to the borrower. If he is not poor, he is generally behindhand, and if not behindhand, he may be about to enter upon a risky business, and may be in no condition to withstand the consequences of a miscarriage of his plans. If the crop fails, or if the price of the product, or of the articles in which he deals or speculates, falls suddenly, he is ruined, and the mortgage must be foreclosed. The tiller of the soil has been the ideal American citizen, sturdy, honest, fearless, knowing his rights and daring to maintain them; but circumstances have not favored him, in competition with other classes, in the attainment of wealth. His life is secluded and solitary, and his situation is unfavorable to the formation of partnerships. The merchant, the mechanic, the professional man, and the speculator receive almost daily the profits on their investments and labors; but harvests are gathered only once a year, and the farmer must wait and watch, and run the hazards of the seasons and of the markets while crops are growing and maturing. The condition of the borrower and mortgagor is bad at best, but when he is a farmer it is worst of all.

It seems strange indeed, that during a period unrivaled in the history of the country and of the world for the rapidity with which wealth has been accumulated, this cry of distress, of hopeless indebtedness and ruin, should come up from the fertile fields of the West. The towns and cities flourish, but the country languishes. Population concentrates, and wealth concentrates in a twofold sense; it gravitates to the cities, and into the hands of the few. The country population of New England had ceased to increase a decade and more ago, and the recent census will reveal a similar tendency in other parts of the country. The present century is distinguished above all others by inventions which abridge, cheapen, and supersede human labor. The first effect, at least, of every new machine, is to throw thousands of people out of employment. This result is chiefly to be seen in manufacturing operations and in transportation. But machinery has invaded the domain of agriculture also; and the reaper, the mower, the machines for planting, and the steam plow, under the direction of one or two men, are doing the work of scores. This may all be well for men who are able to employ the machinery; but such appliances are out of the reach of the poor, or are to be obtained only by a mortgage on the land or on the crop.

The western States have given more attention to the collection of statistics of mortgages than other parts of the country. The subject is one of great and growing interest, and it is well worth the careful examination of statisticians and statesmen. It is gratifying to know that the census bureau has listened to the appeals of the press on the subject, and that among the duties of the enumerators has been the collection of mortgage statistics. This duty has been performed without putting an impertinent inquiry to any individual, and without giving names or exposing private affairs. All that is found necessary is to go to the office of the register of deeds in each county and city, and to obtain the number of mortgages recorded, and the average length of time and amount of money for which they were given, with other particulars.

The State of Ohio is the oldest of the northwestern States. It has no longer any public lands, and has not had any, except poor remnants, for twenty or more years. The State bureau of statistics reported, for the year 1888, 291,640 mortgages upon real estate, and the amount for which the land is mortgaged is stated to be $330,999,000. The assessed value of real estate was $1,220,262,000. The mortgage indebtedness, therefore, was, within a fraction, one third the value of the whole real estate of Ohio.

Five counties in the State contain considerable cities, in which the mortgage indebtedness may rest, for the most part, upon city lots. These are Cuyahoga County, containing the city of Cleveland; Franklin, containing Columbus; Hamilton, containing Cincinnati; Lucas, containing Toledo; and Montgomery, containing Dayton. The aggregate number of mortgages in these counties was 60,789, the amount of the mortgages was $99,327,000, and the assessed value of real estate was $353,639,000. The proportion of mortgages to real estate was about the same as in the State at large. Deducting these figures from the aggregates will leave 230,851 mortgages for the agricultural counties, with a mortgage debt of $231,671,000, and real estate amounting to $866,622,000.

The biennial report of the Indiana bureau of statistics shows the number of “school and other real-estate mortgages,” and the “satisfactions” or cancellations, by counties, for 27 counties, during the year 1888. There are no public lands in the State, and no recent entries. The number of private mortgages on real estate was 8,010, and the amount $4,605,000. The cancellations were 3,677, and the amount canceled was $2,786,000. There were also 3,008 chattel mortgages, and 438 mechanics’ liens. The aggregate of school, private, real-estate, chattel, and mechanics’ mortgages was 12,337, and the amount of indebtedness was $5,385,000. The cancellations were 4,492, and the amount of debt canceled was $3,000,000. This statement would imply that the 27 Indiana counties were rapidly getting out of debt; but the report of the preceding year, for 26 counties, including nearly all of those reported in 1888, shows a similar result; and the necessary inference is that the “satisfactions” consisted in renewals of the mortgages on the same conditions or on harder ones.

The school indebtedness was only $166,779. Deducting this amount from the aggregate of $5,385,555, leaves $5,218,000 for the indebtedness of the people of the 27 counties. These are far from being average counties. They contain less than one fourth of the population; and it is fair to assume that the aggregate mortgage indebtedness of the people of Indiana is five times as much as that of the 27 counties. We may conclude, therefore, that it is at least $26,000,000. The 27 counties embrace none of those containing a considerable town, except Wayne, which contains the city of Richmond, having 12,742 inhabitants in 1880. Undoubtedly the counties which contain the cities and larger towns are involved in far greater degree than the poor counties. Hamilton County, Ohio, with 313,000 inhabitants, owed a mortgage debt of $30,000,000; and probably Marion, the county embracing Indianapolis, with about one third the population of Hamilton, is mortgaged in equal proportion.

Illinois, like Indiana and Ohio, long ago ceased to have any public lands within its limits. The land offices in these three States were discontinued in 1876, and they might have been dispensed with a dozen years earlier without inconvenience to the public, and with a saving of expense to the government. The mortgages in these States, therefore, have not been made by first settlers on taking possession of 160 acres of land, as has been assumed by those who would explain away the evil. These apologists argue that the pioneer begins his career as an agriculturist by borrowing a few hundred dollars with which to stock his quarter-section of prairie or forest, and that if he is sober and industrious, he will be able in a few years to pay off his mortgage, and will become a free man. But this theory will not account for the heavy indebtedness in the older States, which, for a quarter of a century or more, have had no public lands to be bought or to be settled upon under the Homestead law, except the poor remnants which nobody wants. Neither will the theory apply, as a rule, to first settlers in an entirely new country. Money is not loaned upon the possible products of wild, unfenced, uncleared, or unbroken lands; and the pioneer must first have a house, a barn, fences, and cleared or plowed lands, before he can obtain a loan on a mortgage. Money is not so abundant as to seek investment in wild, unimproved land which costs but $1.25 per acre.

The total number of real-estate mortgages in Illinois in 1887, apart from those on city lots, was 92,777 for the amount of $142,400,000. The over-due interest was $4,919,754, and the total indebtedness of the farmers, therefore, was $147,320,000. The number of acres mortgaged was 8,082,794, and the rate of interest was about 6 ½ per cent. But of course the interest “nominated in the bond” was not all. The agent who negotiates a loan charges up to the borrower all the expense of deeds, promissory notes, and abstracts of title, furnished by a competent firm that makes a business of searching records and of giving certificates; and to these items the agent adds a liberal fee for himself; so that the interest, in one form or another, will rarely fall below 10 per cent.

There were, in addition to these mortgages on farms, 142,750 upon town lots, for the amount of $238,922,000. The interest accrued was $7,782,788, and the number of lots mortgaged was 237,336. The chattel mortgages in Illinois numbered 74,740, for the amount of $20,730,779, with interest due amounting to $1,623,408. The total mortgage indebtedness of the people of Illinois in 1887, therefore, was $416,378,975. The report of the labor bureau shows the amount of land that was mortgaged for loans, as distinguished from mortgages to secure deferred payments on the purchase of the land. But these mortgages were not given, of course, to the government; the purchases were made from railroad companies and from individuals. The figures are as follows: Mortgages given to secure loans, 79,109, amounting to $122,123,728; on deferred payments for the land, 13,668, amounting to $25,196,326. A similar proportion is shown in mortgages to secure loans and deferred payments on town lots and chattels.

Cook County, embracing Chicago, appears to be more heavily indebted than the rural counties. The county outside of the city owed $18,667,000, secured by 2,388 mortgages. There were 77,690 mortgages on city lots, to secure the loan of $191,496,000, with $6,060,000 of interest; and these sums, with 40,822 chattel mortgages, to secure $11,263,000, make up an aggregate of more than half the mortgage debt of the State. Chicago is a wonderful city, with vast resources and energies, and its ability to run in debt is not the least of them. It became necessary in 1871, and in the following years, in consequence of the great fire, to borrow heavily, in order to rebuild; but that necessity has long ago passed away, and still the city finds itself, after nineteen years of wonderful prosperity, more in debt than ever. The foregoing figures belong to the year 1887. A correspondent has obtained at the census bureau additional reports in regard to three counties, which show a great yearly increase of mortgages in Illinois.

The State of Michigan was admitted into the Union in 1837. Her public lands have all been surveyed, and, doubtless, the last acre that anyone wants was appropriated years ago. The annual report of her labor bureau for 1888 shows the following facts: The total number of farms in the State was 90,803, of which 84,488 were occupied by owners and 6,315 by tenants. The assessed value of the former class was $174,593,000; that of the latter $20,261,454. Of the 90,803 farms, 43,079 were mortgaged, their assessed value being $79,713,000, and the mortgage indebtedness $37,456,000. The rate of interest was 7.2 per cent, and the accrued interest $2,701,000. The percentage of mortgages to the assessed value of the mortgaged lands was 46.8. The number of mortgage foreclosures during the year was 1,667, and the number of redemptions 131. The number of sales under execution was 244, and the number of redemptions 33.

The Kansas statistics of mortgages, though incomplete and unofficial, are in some respects more interesting than those of any other State, since they convey a clearer notion of the condition of the people at the present time. The facts were gathered during the last Spring and Summer by the Advocate, a weekly newspaper printed at Topeka, Kansas, in the interests of the Farmers’ Alliance. The editor states that he sent out circulars to all sub-alliances, asking them to make a canvass, and to report upon a blank form which was furnished them. The blank called for a statement of the number of mortgaged, of unmortgaged, and of rented farms belonging to members of the several alliances. The request seems to have been faithfully complied with. Reports had not been received from all the alliances, but a great many more had been furnished than the editor found space for in his paper. He believes that he laid before his readers enough to give a fair estimate of the mortgage indebtedness of the people of Kansas. He rejected every imperfect report, and at the same time made selections from them so as to exhibit the condition of things in every part of the State. The 82 cases published in the Advocate exhibit the conditions of 3,107 Kansas farmers belonging to the Alliance. Of these, 350 held their farms free from mortgage, 1,030 occupied rented farms, and 1,727 held farms under mortgage. The amount of money for which the farms were mortgaged was $1,464,706. The secretaries of some alliances, while giving the number of mortgages, omitted to state the amount of indebtedness; but the average mortgage exceeds $1,000, and, as there were 248 such omissions, the missing amount has been assumed to be $248,000.

Kansas is said to contain 270,000 farms; and on this basis the editor of the Advocate concludes that the total mortgage indebtedness of the State, among the farmers, is $146,563,000. Every report from the sub-alliances is accompanied by a statement of the condition of the farmers; as, for instance, in one case are reported 9 mortgaged farms, 6 unmortgaged ones, 6 renters, and a debt of $3,900. “On all but three of these,” the report states, “the owners cannot pay interest. Most of the renters have owned places and have lost them by mortgages.” The next sub-alliance reports 33 renters, no unmortgaged farms, and 26 mortgaged ones, with a debt of $24,702. The report adds: “A great many have had to borrow interest from the banks, and others have not paid interest for two years.” In many instances the farmers had taken up public lands, but had not “proved up.” The secretary of one sub-alliance writes: “Nineteen homesteads; only two proved up, and these are mortgaged at $400 each. Neither party will be able to meet payment.” Other reports are as follows:

Our school district consists of six and a half square miles. Of this, two square miles have been foreclosed within the last two years. One square mile has passed out of the hands of original owners, and is now owned by absent landlords, who have obtained possession by direct sale instead of by foreclosure. Nearly one half of our district is owned by foreign syndicates. Of the remainder, 921 acres are clear of mortgage.

Two renters; one unmortgaged, and 11 mortgaged farms; debt $13,100. About one half are behind from one to two years with their interest. Others have given chattel mortgages to secure payment of interest.

Ten renters; 5 unmortgaged, and 20 mortgaged farms; debt $39,950. It is hard to give any facts as to who will pay up. About one in ten I think will do so. If times remain as at present, and if crops fail, one fourth will be foreclosed in eighteen months. Some are behind with interest, and others are hard pressed to pay it. I know of several other farmers, not members of the Alliance, that are in as bad shape as those in the list I send. I think they will join us soon.

Eleven renters; 6 unmortgaged, and 26 mortgaged farms; debt $38,750. Several of our members live on farms owned by money-lenders, and three fourths of the others cannot redeem their farms unless prices go up 75 per cent at once, and continue at that height for five years. Several foreclosures are now pending.

Twenty-three renters, 3 unmortgaged, and 41 mortgaged farms; debt $32,425. This township is heavily in debt, largely on chattel security. From one to three mortgages a week are foreclosed, and several just pay their interest and live, to say nothing of the principal.

A member of our alliance says that at the county seat the clerk of the District Court stated that there were 1,100 foreclosures on the docket, and that the judge and the lawyers were staying them, on account of the injury they would do the county, and also to give the government a chance to help the farmers out.

Ten renters, and 5 mortgaged farms; debt $3,900. The rest of the land in our district belongs to eastern capitalists, most of it being taken on mortgages.

Forty-four renters; 7 unmortgaged, and 27 mortgaged farms. The foreclosures in our county are 400 annually, and perhaps as many more farms are deeded without foreclosure. I do not think one half are keeping the interest paid.

All of the eighty-two reports are of like tenor with the above. Not one of them presents a hopeful view of the condition of the farmers. In only one of them did the number of unmortgaged farms exceed or equal that of the mortgaged, and it is but fair to draw attention to that exceptional case. It is as follows:

“Three renters; 14 unmortgaged, and 10 mortgaged farms; debt $10,625. About one half of those that are not mortgaged have not proved up yet. It is doubtful if three of those whose farms are mortgaged can redeem their property. By close management and hard work the rest of us may pay up.”

Other reports state that money was borrowed at 2 per cent per month to pay interest.

The conclusion from this melancholy array of facts is irresistible. The virgin soil of the West is rapidly ceasing to be the home and the possession of the sturdy American freeman. He is but a tenant at will, or a dependent upon the tender mercies of soulless corporations and of absentee landlords. We have abolished monarchy, and primogeniture, and church establishments supported by the state; yet the universal curse of humanity, the monopoly of the earth by the wealthy few, remains. It is related of John Randolph of Roanoke, that when visiting a neighboring planter about seventy years ago, he found his hostess, surrounded by her female servants, making clothing for the Greeks who were struggling for liberty and independence. But while taking leave, he observed a troop of ragged slaves approaching and turning he said to the lady, “Madam, the Greeks are at your door.” And now to America, aglow with sympathy for the Irish, it may be said, “Madam, Ireland is at your door.”

Daniel R. Goodloe

Daniel R. Goodloe, a journalist by trade, was a prominent southern abolitionist, whose anti-slavery writing were praised by John Stuart Mill and were an influence on Abraham Lincoln. Born in North Carolina, Goodloe spent much of his life there, and was the Federal Marshall of North Carolina during Reconstruction from 1865 to 1869.