HAS Deq/ 4 A 3k. 2 UNITED STATES DEPART! 1EET 07 AGE. I CULTURE Bureau of .Agricultural Economics PABM- MORTGAGE IEVESTiElITS OF LI EE IivSUHAiJCE COiJPALIES By Harald C. Lars en Senior Agricultural Economist ' OF PL II "WTS DE Washington, D. C. Eecd/mer 13^3 CONTENTS Page Introductory 1 Amount of farm-mortgage investments of insurance companies 1 Relative importance of insurance companies as lenders on farm mortgages U Concentration of loans 8 Amount held by States 8 Amount held relative to other lenders, by States 10 Loan concentration among life insurance companies .... 10 Composition of farm-mortgage investments 13 Amount of purchase-money and regular mortgages 13 Average size of outstanding farm mortgages l6 Average size of purchase- money and regular mortgages 19 New farm-mortgage loans made 22 Mortgage recordings 2U Principal repayments cn farm-mortgage loans 27 Delinquent l<)ans 29 Foreclosures A 29 Summary 3^ FARM-MORTGAGE INVESTMENTS OF LIFE INSURANCE COIPANIES By Harald C. Larsen, Senior Agricultural Economist INTRODUCTORY For several decades, life insurance companies have "been a major insti- tutional factor in the financing of agriculture. They are one of the principal sources of long-term mortgage credit for farmers, and they currently hold up- wards of one-sixth of the total f arm-nortgage debt. Furthermore, they have a substantial additional investment in the unpaid principal of sales contracts which is significant, "both from the standpoint of farmers' long-term debt and from the standpoint of institutional real estate holdings. Investments of these companies in real estate held, together with their real estate acquire- ments and disposals since the early thirties, have significantly influenced the tenure pattern in certain farming area.s and have substantially affected the recent trends of the real estate market. Currently (January 1, 19^3) their real estate holdings are nearly three-fourths of the total holdings of the major institutional lenders. Life insurance companies remain a potential source of a large part of the funds needed to finance agriculture and their current policies with respect to "both farm loans and farm real estate will have a significant influence on the future financial soundness of a large number of farmer borrowers. Recognition of the importance of insurance companies in farm financing led to a study designed to provide additional and more detailed information on their loan and real estate operations. This report deals principally with the former and discusses in some detail the amount, composition, and distribution of regular and purchase-money mortgages, together with certain related material. A subsequent report will deal with insurance company investments in sales con- tracts and real estate held outright. AMOUNT OF FARM- MORTGAGE INVESTMENTS OF INSURANCE COMPANIES The investment of life insurance companies in farm-mortgage loans for January 1, 19H3 is estimated at $S9l,UUl,000, 1/ a decrease of $15,700,000 from S907,lUl,000 on January 1, 19^2 (table l). This decrease is a reversal 1_/ Book value or admitted asset value. For individual mortgages this figure may be somewhat larger or smaller than the unpaid principal; for the entire portfolio, however, this figure is believed to approximate the unpaid principal, although it may be biased downward to some extent, particularly for purchase- money mortgages. -2- Table 1.- Total farm-mortgage debt and investments of insurance companies in farm mortgagee, sales contracts, and real estate, January 1, 1910-43 Tear Total farm- mortgage debt Insurance company in y«b truants 1/ 7arm-mortgage loans outstanding Sales con- tracts and real estate Total Percentage loans are of total agricultural investment Amount 2 / Percentage of mort- gage debt Percentage of admitted asset* jj Amount 2/ Amount Percentage of admitted assets 1,000 1,000 1,000 1,000 dollars dollars Percent Percent dollars dollars Percent Percent 1910 3,207,863 386.961 12.1 , 1911 3,522,121 423.454 12.0 1912 3.929.758 479.653 12.2 11.5 1913 4.347.679 550.158 12.7 19l4 4,707.358 597.462 12.7 1915 4,990,785 669 . 934 13.4 1916 5,256,425 765.571 14.6 15.6 • 1917 5«825,85i S6l,l44 14.8 191S 6,536.860 955.591 14.6 1919 7.137.365 1,018,163 14.3 1920 8,448,772 974.826 11.5 19a 10,221,126 1.205.778 11.8 16.5 1922 10,702,257 1.432,367 13.4 18.0 1923 10,785,6a 1.556.203 14.4 18.0 132k 10,66^,919 1.792.145 16.8 19.0 1925 9,912,650 1,942,624 19.6 18.7 1926 9.7l3.a3 2,030,301 20.9 17.6 1927 9,658,422 2,123,664 22.0 16.4 192S 9.756,957 2.172,863 22.3 15.1 14.0 96.0 1929 9.756,559 2,138,980 a. 9 13.4 88,305 2,227,285 1930 9,630,768 2.105.477 a. 9 -*- •«/ 12.0 120,020 2,225,497 12.7 94.6 1931 9.458,281 2,059.2a a. s 10.9 I51.229 2,a0,450 11.7 93.2 1932 9,a4,oo4 2,007.361 a. 8 10.0 a9.947 2.227. 308 11.0 90.1 1933 8.638.383 1,869,160 a. 6 9-0 316,931 2,186,091 10.5- 85.5" I93U 7.887,119 1,661,046 a.i 7.9 465,072 2,126,118 10.2 78.1 1935 7.785,971 1.258.900 16.2 5.8 600,873 1.859.773 8.5 67.7 1936 7,638,867 1.054.770 13.8 4.5 646,280 1.701.050 62.0 1937 7.389.797 936.454 12.7 3.8 713.166 1.649,620 6.6 56.8 1938 7.a4,i38 895.470 12.4 3.4 705.207 1.600,677 6.1 55.9 1939 7.070.896 887.336 12.5 3.2 i/702.961 1.590,297 5.7 55.8 19U0 6,909.794 883. 4i4 12.8 3.0 700.530 1.583.944 5.4 55.8 19U1 6,824,126 890,516 13.0 2.9 673.600 l,564,u6 56.9 19*2 6.713.835 907. i4l 13.5 2.8 597.796 1.504.937 60.3 19U3 6.350.263 89l,44i i4.o 2.6 487.731 1.379.172 4.0 64.6 \J Based upon direct reports fron insurance companies, official reporte eubaitted to State commission- ers of insurance, and "Best's Life Insurance Reports." 2j Book value or adalttea asset value. 3/ Amount of total admitted assets of life insurance companies obtained fro« Proceedinge of the Asso- ciation of Life Insurance Presidents. U/ Includes the book value of real estate held outright plus the hook value of sales contracts. 5/ Revised. - 3 - of the upward trend that had been in evidence since the "beginning of 19^0, when mortgage loans outstanding totaled only $883-,000 , 000 . Between 1910 and 1928, the investment of insurance', companies in such loans increased each year, with the exception of 1919- Holdings of farm mortgages reached a maximum of $2,172,863,000 on January 1, 1928, then decreased to a 23-year low oh ■ ' January 1, 1$^0. In the earlier part of the period 1928-UO, the annual per- centage decrement "became increasingly greater. In 193^, the amount out stand- ■ ing decreased by a fourth. Since 193^. the annual rate of fall decreased until January 1, 19^, when the amount outstanding reached the low of $883,000,000. ... Investments in farm-mortgage loans, however, make up only a part 'of the agricultural investments of insurance companies. In addition, such com- panies have a considerable investment in real estate held outright and in the unpaid principal balance outstanding on sales contracts. As of January 1, 19^3 » their total agricultural investments approximated $1,379,172,000, or about h percent of the total admitted assets. —I Insurance companies also have invested considerable . sums in agriculture indirectly through the purchase and ownership of consolidated bonds of Federal land banks and in guaranteed bonds of the Federal Farm Mortgage Corporation. These bonds are all secured by farm mortgages held by the land banks and the Corporation. On January 1, 19^3, insurance-company holdings of these bonds totaled over $310,000,000, of which about $15,000,000 was in consolidated land bank bonds, and $297,000,000 was in guaranteed Federal Farm Mortgage Corpora- tion bonds. Substantial amounts of both land bank and Corporation bonds are callable in the next succeeding 3 or ^ years and no doubt large amounts of the insurance-company holdings of these bonds will be retired or refinanced within that period. Before the acquirement of a large number of farms during the depression in the early thirties, farm mortgages made up 90 percent or more of the total agricultural investments of insurance companies. On January 1, 1929, the earliest date for which composite figures are available, they ran a,s high as 96 percent. 2.1 At that time total agricultural investments were ik percent of total assets. By 19^-0, following the period during which many of their loans had been liquidated through the acquirement of the security, the proportion of farm-mortgage loans dropped to only 55«8 percent of agricultural invest- ments, and the ratio to total a.dmitted assets had fallen to 5.k percent. With increased real estate sales in recent years, resulting in larger recordings 2/ These figures include the book value of real estate held outright and the b~ook value of sales contracts. In general, the unpaid principal balance out- standing on sales contracts is the same as the book value of sales contracts. However, when a farm is sold at a price in excess of the book value, the book • value of the contract may not reflect this difference. For January 1, 19^3, the remaining principal unpaid on sales contracts was approximately 15. 8 percent larger than the book value for' 10 'insurance companies holding about 6l percent of the total mortgage loans. Similarly, the market value of the real estate may exceed the book value. For 12 companies holding 72.5 percent of the real estate, the market value was estimated to exceed the "book value by 11.7 percent. ^/ Data presented by Norman J. Wall before the Temporary National Economic Com- mittee, February lk, 19U0. Processed report "Farm- Mortgage Debt and Farm In- vestments of Life Insurance Companies," U. S.D. A., Bureai of Agricultural Economics.' - 1+ - of purchase-money mortgages, the proportion of loans to total agricultural investments is again larger - about 65 percent on January 1, I9U3 (table l). This increase is not so great as might have been expected from the reduction in real estate held outright. Because of the popularity of sales contracts - which are not included in the statistics of mortgages - as a method of financ- ing the sale of property, reductions of real estate held outright have not resulted in a corresponding increase in purchase-money mortgages. Since 1932, the total agricultural investment of insurance companies, including the asset value of real estate held outright and the book value of sales contracts as well as their mortgage investment, has declined continu- ously. In the years immediately following 1932, the decrease in farm loans was larger than the increase in investment in the form of real estate held outright and sales contracts. This was due in large degree to the substantial amount of insurance-company loans refinanced during this period by the Federal land banks and the Land Bank Commissioner. The Farm Credit Administration in its annual reports shows the estimated percentage of loan proceeds of th© Federal land banks and the Land Bank Commissioner used to refinance loans held by insurance companies for all the years, 1933-^L except 1935 • By applying these percentages to the total amount of loans closed by these agencies it is possible to indicate with a fair degree of accuracy the amount of insurance- company loans liquidated through such refinancing (table 2). If the amount so liquidated is in turn related to total amount of principal liquidated on insurance-company loans as determined by adding total mortgage recordings for insurance companies to the outstanding loans at the beginning and subtracting outstanding loans at the end of the year, it is found that about 39 percent of the total principal liquidated for insurance companies in 193^ w as refinanced by the land banks and the Commissioner. No figures are available for 1935 t but in 1936 the figure was nearly 13 percent. In the following years it con- tinued to drop, so that for 13kl - the latest date for which such data are available - it was only 5.2 percent.—/ In the more recent years, the total investment in loans and in real estate and sales contracts has declined. These decreases are due in large degree to increased principal repayments out of increased farm income, savings, and other sources of funds and substantial down payments received on the farms that were sold. RELATIVE IMPORTANCE OF INSURANCE COMPANIES AS LENDERS ON FARM MORTGAGES Although farm-mortgage investments of life insurance companies decreased moderately during 19^-2, this lender group held a relatively larger proportion of the total farm-mortgage debt on January 1, 19U3 than it held a year earlier (fig. l). In other words, the percentage decrease in loans held by life insur- ance companies was less than the percentage decrease which occurred in the total f arm-mortgage indebtedness. This is a continuation of the increased relative importance of insurance companies as lenders on farm mortgages in evidence over the last 6 years (table l). On January 1, 1938, the ratio of insurance- company mortgage investments to total farm-mortgage debt was 12. k Wj The recording figures no doubt include varying amounts of insurance-company loans refinanced by themselves. 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It then rose gradually to l4.0 percent for 'January 1, 1943. Fur- thermore, on January 1, 1937 » "the proportion was at about the same level as the average for January 1 of the years 1910-14. Between 191*+ and 1938, how- ever, the proportion increased to a high on January 1, 1928 of 22.3 percent, with over $2,173,000,000 outstanding in farm mortgages and then dropped to 12. 4 percent on January 1, 1938.5/ The current relationship is about the same as that which existed' during World War I. However t during World War I "both the farm-mortgage debt and insurance-company holdings were increasing, whereas for 19^3, both the total farm-mortgage debt and. the loans held by insurance companies pre continuing to decline. The total mortgage debt appears to be falling sufficiently faster in 1943 than the holdings of insurance companies to enable these lenders to more than maintain their relative position. 2/ The reduction in outstanding loans of insurance companies relative to other lenders during the first 8 years of the 1930 's is due to several factors, some of which are common with the factors responsible for the decrease in absolute amounts. The primary factor, as previously mentioned, is the re- financing of insurance-company loans by the Federal land banks and the Land Bank Commissioner. This refinancing had the double effect of decreasing the relative position of insurance companies and concurrently increasing the rela- tive position of the Federal agencies. But other factors also entered into the changed relationship between lenders during this period. The new loans being made by insurance companies were lessening and at the same time fore- closures were in substantial volume. Both of these factors, as well as the amount being refinanced, tended to decrease loans held, whereas for the Federal agencies new loans made increased from 23 million dollars in 1932 to 222 million in 1933 and to 1,284 million in 193^« In addition to those refinanced for life insurance companies, these new loans include new and increased mortgages grow- ing out of the funding of short-term debt as well as mortgages refinanced by the Federal agencies for other lenders. The increased proportion of the total farm-mortgage debt held by insur- ance companies in 1942 reflects principally a substantial decrease in new loans made by the Federal agencies and a maintenance of the level in new loans 5/ For historical data on farm-mortgage debt held by insurance companies, 1910-40, see "Farm- Mortgage Credit Facilities in the United States," Miscel- laneous Publication 478, U. S. Department of Agriculture, 1942, p. 12. For current data see "Agricultural Finance Review," U. S. Department of Agricul- ture, Bureau of Agricultural Economics, Nov. 1942, appendix table 1 and release, "Accelerated Decline in Farm Real Estate Debt During 1942," U. S. Department of Agriculture, Bureau of Agricultural Economics, Aug. 19^3 • 6/ Reports from the Association of Life Insurance Presidents, covering 36 member companies whose assets represent 82 percent of the total admitted assets of all United States legal reserve life insurance companies, show that the mortgage investments of these companies on June. 36, 1943 were about 2 per- cent less than for January 1, 1943, whereas preliminary figures on total farm- mortgage debt for June 30 , 1943 indicate a reduction of slightly more than 3 percent. - 8 - nade "by insurance companies. This latter factor resulted fron increased pur chase- money mortgages made and a slightly decreased volume of regular mortgages- made. §J conseetkaticn or loans The amount of farm-mortgage loans held "by life insurance companies on January' 1, 19^3 w as concentrated to a large degree in the West North Central States... Moreover, there has "been a decided tendency toward greater concentra- tion, particularly in the Corn Belt proper, in recent years. This tendency can probably he attributed in no small part to the variations, by areas, in the extent to which mortgages were liquidated in the earlier years through refinancing of loans and through involuntary transfers to mortgagees of the real estate securing mortgage loans. In the Great Plains, where foreclosures and involuntary transfers were relatively heavy, outstanding loans held by insurance companies were reduced to "a greater degree than in the Corn Belt proper. In recent years these farms have been sold and many purchase-money mortgages have been taken back. However, because of greater losses on farms' in the poorer areas, and because many of the farms acquired in these areas have been sold on contract rather than outright, the general tendency toward concentration of mortgage holdings in the Corn Belt was fairly continuous over the last decade. In addition to these factors, it is probable that the ex- perience of insurance companies in the Grea.t Plains has resulted in less emphasis being placed on new loans in this area, and, with more favorable farmer incomes, the relative amount of debt liquidated in the Great Plains continues to be relatively large. Amount Held by States Over 65 percent of the total investment of insurance companies in farm mortgages on January 1, 19U3, or $581,672,000 out of $891,41+1,000, was in the six States of Minnesota, Iowa, -Jllinois, Indiana, Missouri, and Texas. The addition of four States - Nebraska", Kansas, Oklahoma, and Ohio - brings this percentage to 80 percent (fig. 2). Similar percentages for earlier years indicate that some shifts have occurred in the area of greatest concentration. On January 1, 1930, the same six States mentioned above accounted for only 58 percent as compared with 65 percent as of January 1, 1943- For the same date in 1940 they accounted for 62 percent. The reverse trend is shown for the States in the Great Plains area - North Dakota, South Dakota, Nebraska, Kansas, and Oklahoma. These five States on January 1, 1930 had 24.4 percent of the total insurance- company loans outstanding. On the same date for 1935 # 1940, and 19H3 they had 23. 1 percent, 16. 5 percent, and l4.2 percent respectively. 7/ New loans made by the Federal land banks and the Land Bank Commissioner during 1942 were only 80.2 percent of those made during 194l. 8/ Purchase-money mortgages are mortgages which are given by the buyer to the seller of a farm to pay all or a part of the purchase price of the property. A distinction is made throughout this report between purchase-money mortgages and other or regular mortgages in order to segregate the influence of real estate sales on the loan portfolio of insurance companies. - 10 - Amount Held Relative to Other Lenders, by States Despite the continued trend toward the concentration of insurance- conpany loans in the Corn Belt, the anount of their loans in this area relative to other lenders decreased during nost of the 1930 's and only in recent years has tended to regain some of this loss. For January 1, 1930, "before the period of maximum refinancing "by the Federal agencies, insurance companies held over 25 percent of the total State farr.- mortgage debt in 11 States and as nuch as Ul.g percent in Iowa (fig. 3). By January 1, 19^0, the percentage for Iowa had dropped from Ul.g percent to 30 percent, with similar reductions for a number of other States. Between January 1, 19^0 and January 1, 19^31 insurance companies have increased their proportion of the total debt in numerous States, whereas a few of the other States have shown continued decreases. Most of the increases, it will be noted from figure 3. are in the West North Central States, with scattered increases occurring in certain other areas. Declines continued in G-eorgia, Tennessee, and Louisiana, with slight decreases also noted in a few other States. Loan Concentration Among Life Insurance Companies With the decline in investments of insurance companies in farm mortgages after they reached their maximum in the late twenties the larger insurance- company investors in farm mortgages have tended to hold an increased proportion of the total loans outstanding. On January 1, 1930, the 5 largest investors, as determined by their holdings on January 1, 19^3 held U6.2 percent of the total, and the 10 largest held 66.9 percent of the total. On January 1, 19^40 , these percentages were 51*9 and 71.0 percent, and for 19^3. 52 and 72.1 "percent (table 3). Even on the basis of the change in proportion for a shorter period, I9UO-U3, the tendency for large investors to hold an increased proportion of the total loans in certain of the geographic divisions is also noticeable. For January 1, 19^0, the 5 largest investors, based on their holdings January 1, I9^3i held 52.6 percent of the total insurance-company investments in mortgages in the West North Central States, whereas 3 years later they held 5k. k percent. However, for the 17 companies holding the largest amount of mortgages there was little change. On January 1, 19^3t these 17 companies held g9«9 percent of the total insurance-company investments in the area and on January 1, 19^0. g9.0 percent. The situation in the East North Central States was the reverse of that in the West North Central States. The 5 largest holders of mortgages in this region accounted for 65-7 percent of the total company loans on January 1, 19^0, and for 62.2 percent on January 1, 19U3 . However, the ten- dency in the South Atlantic States and in the East South Central States is consistent with that in the West North Central. In the South Atlantic States, the 5 largest insurance companies held 52. U percent for January 1, 19^0 and 57-5 percent for January 1, 19^3- In the East South Central States they held 6l. U percent and 67.2 percent for the respective dates. On the other hand, in the West South Central States the holdings of the 5 largest companies were consistent with those of the East North Central States, the decrease being from 27.1 percent to 2U.7 percent. 1 1 u □ in - 12 - 1 1 >s r* t . M ~* *V •ri c£ i"— * CO c* *~> •H rd ctf ■ | -~ 0) Jh *-* rrl Cm CP 4^ CJ - cu ii 60 QQ >|' Mr W cJP Cw Krt CO 5 ♦J CO Q in C3 n-4 1 (L E3 4j? r . *— ■ •r4 to -— »-* r. . r"~ t IT) CO C » J -•— > E0 CD 1 r. , o . . j T3 CO (— < V-t r\ V- i CO ra £3 4-3 O O* £5 w CPv > C rH •H •U a 0) o i-H V. • H rH rH _ x3 c: CU ,=! 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Pur chase- money mortgages have some special significance because they arise directly out of the sale of real estate owned "by the mortgagee. The importance of the distinction "between regular mortgages and purchase-money mortgages "becomes evident when the dif- ferences in trends in outstanding loans and in their size and other character- istics are noted. It will he observed in the following paragraphs, for instance, that the amount of pur chase- money mortgages increased on January 1, 19^3 over that held on January 1, 19^2, whereas the amount of regular mortgages decreased slightly. As the real estate investment is diminished through the sale of farms, fewer pur chase- money mortgages will "be made and the principal repayments on such mortgages may soon equal or exceed new loans. However, this may not occur as soon as might "be expected from the number of farms remaining unsold by insur- ance companies, as the average size of purchase- money mortgages shows an increase on January 1, 19^3 over that for a year earlier. Amount of Purchase-Money and Regular Mortgages Estimates based upon data for 5*+ companies covering more than 87 percent of the total farm-mortgage loans of insurance companies indicate that purchase- money mortgages outstanding January 1, 19^3 were about $177,902,000 or 19.5 percent of the total of $891,^-1,000 for all mortgages held by insurance com- panies. The difference of about $713*539,000 is made up of regular mortgages. The relative amounts of these mortgages, by States, for January 1, 19^-2 and I9U3 are shown in table k. The relationship of purchase-money mortgages to total loans, by States, varies considerably from that of the United States, the proportion being the highest in the South Atlantic and West South Central States, where the per- centages are slightly in excess of 29 and 2k respectively. In these divisions, South Carolina and Georgia show particularly high ratios of 52 and 57 percent. Certain States in other areas also show unusually high ratios. These high ratios reflect principally the number of farms previously held and the extent to which this farm real estate has subsequently been sold. In some of the States the ratios are influenced also by the degree to which the sales con- tract has been used to finance the sale of the properties. However, in general it is noted that those States which show a high ratio of purchase- money mortgages also have relatively large numbers of sales contracts. Fur- thermore, these ratios may also reflect few regular mortgages rather than a large number of pur chase- money mortgages and may therefore indicate areas in which insurance companies are contracting their regular loan business. In the South Atlantic States, purchase-money mortgages were k.8 percent of the total for the United States, whereas these States accounted for only 2.9 percent of the total regular loans (table 5)- These relatives may be compared with the West North Central States where purchase-money mortgages were 52.6 percent and regular mortgages were 5O.8 percent respectively. In Table U.- Outstanding farm-mortgage loans of life Insurance companies: Amount of purchase-money mortgages, regular mortgages, and total by States, January 1, 19U2-1+3 1/ State and dlrlsion January 1, 1942 January 1, 19U3 Pure has e- mortgaj money Regular mortgages fetal Purchase- money Regular mortgages Total Amount Percent- age of total Amount Percent- age of total Amount mortgaj Amount Percent — total Amount Percent- age of total Amount 1,000 dollars Percent 1,000 dollars Percent 1,000 dollars 1,000 dollars Percent 1,000 dollars Percent 1,000 dollars Maine ! u o . - - 0.0 .0 . .0 .0 .0 .0 1 ' "A 7 8 100.0 .0 100.0 100.0 .0 100.0 1 * 1+ 7 8 ... 0.0 .0 .0 .0 .0 • .0 2 7 8 0.0 .0 100.0 100.0 .0 100.0 2 7 8 | .0 20 I 100.0 20 | .0 17 100.0 17 .0 1 .0 2 1 .1 328 I 100.0 88 1 100.0 1.589 1 99.9 328 1 6 88 I 1.591 1 : 5 1 2.3 I 270 .0 1 81 .3 1 1.804 97.7 1 276 100.0 1 81 99-7 J 1,809 Middle Atlantic .. 2 1 .11 2.005 1 99-9 1 2,007 1 11 1 .1*. I 2.155 99.6 1 2.166 Illinois 4,785 9,1+64 10,940 6X2 678 15.. 1+ 16.0 10.0 21. k 7.4 "26,287 1*9,688 98.1+59 2,250 8 , 1+86 81+.6 si+.o 90.0 78.6 92.6 3L072 59.152 109.399 2,862 9 , 16I+ 4.677 10.352 13.658 658 969 15.9 18. 3 12.8 24.6 10.8 24.7U0 46,218 93.045 2,016 7.999 J ills 81*. 1 81.7 87.2 75-4 89 .2 29.417 56.57c 106, 70 1 2,67! 8,96* East North Central 26.U79 12-5 185,170 ' 87.5 211,61+9 30. 314 14.9 "174,018 85.1 204. 33; 6,092 28.673 16,. 857 726 - 1.739 3.950 7.302 10.8 li+.o 28. 1 . 20-9 10.7 9-8 1 5 .2 50.312 176,137 1+3, 13U 2.748 14.513 ' 36.357 fo.736 89.2 86.0 71.9 79.1 89.3 90.2 8V.8 56,1+01+ 204,810 59.991 }.m 16,252- '+0.307 1+8,038 . 8,219 38,1+87 21.288 2,100 3.062 ■ 6,055 ' T',719 14.3 18.1 34.4 43-3 18.5 15. h 18.3 49.260 171.827 40.595 2.749 13.492 33.266 85.7 81. 7 65.6 56.7 81. 5 84.6 81. 7 57.475 210 , 31I 6l, 88- 1+,81+j 16,55' 39.32: 1+2,18: West North Central 65.339 "J 1 iJi 15.2 ■563. 937 sl+. S 1+29,276 86 930 20.0 345. 652 80. 432 58 1 38 % 1 U^i 1.205 5.642 ill 2.9 1.6 13.0 11.8 1U.8 U9.U 55. k 12.2 26 2.355 3.607 j J v 8.352 I.235. 1+.51+2 IP 97-1 98.1+ 87.0 88.2 85.2 50.6 t+U.6 87.8 27 5:31 630 9.803 2,1+1+0 10.18U 966 5 112 . 1+62 67 91+1+ 1.013 . 5,1+63 100 18. 5 5.0 12.1 10.7 11.1 52.6 57.6 11.1 22 2,126 3.353 557 7.560 913 1+.022 800 81. 5 95-0 87-9 89.3 "7 • J 88 9 47. U 1+2.1+ 88.9 2 2,23 3.81 62 8, 50 1.92 9.48 90 South Atlantic . . . 9.061 29.1 21.1+68 70.9 30,529 8.166 29.1 , 19,353 70.9 27,51 1.031 2.488 5I+5 5,240 6.3 22.6 21.7 ?8.8 15.338 . 8.520 1.965 ,12,956 93-7 77-4 78.3 71.2 16.369 11,008 2.510 18. 196 I.O76 2,118 562 4.963 6.7 21.5 25.4 27>7 14,987 7.732 1.6U9 12,955 93-3 78.5 74. 6 72.3 16.06 9.8? 2.21 Kast South Central 9.3.0U 19-2 3*, 779 80.8 1+8.083 8.719 18.8 37,323 81.2 lilol 2.155 2.O65 6,629 20,221 14.7 35-7 25-6 22.2 12.507 3.120 19.265 70,863 S:| 7U.U ,77-8 lU.662 5.785 25.89I+ 91.08U 2.053 1.995 7,060 21,648 l»+.2 37-3 12,406 3.354 17.035 , 67,075 85.8 62.7 70.7 75-6 1U.1+' 5.3l 24, V 88,7. Vest South Central Utah 31.070 22.8 106.355 77-2 137. ^25 32.756 24.9 99.870 75-1 132.6; 738 1,265 38 29U 19U 91 lUl 33-5 18.8 22.5 10.5 10.1 u5'. 5 .0 1.1+6U 5.466 133 2,508 1.725 1.533 175 309 66.5 81.2 77-5 89.5 89-9 9U.1+ 55-5 100.0 2,202 6,731 171 2.802 I.9I? 1.62U 316 1 309 911 1,508 10 322 163 75 150 U2.1+ 23. 1+ 6.3 11-9 1+.2 54.2 .0 1.237 4.937 150 2,388 2.431 1,708 126 143 57-6 76.6 93-7 88.1 93-7 95.8 45.8 100.0 2.1 : 6.1+: l' 2.7 2.5 1.7 2 1 2.761 lg.6 13.313. 81.1+ 16,07!+ 1 3.139 1 21.5 1 13.120 78-5 16.2 1.1+1+7 1.255 10.4 18. 5 5M 12,1+63 5.528 ' 7. 480 89.6 81. 5 6S.7 13,910 I' 1.687 1 13.1 1 11.19U 6.783 1 1,1+1+6 1 22.1 5.097 11.385 4.734 1 U5.2 5.71+0 1 86.9 77-9 54.8 12.8 6.5 10. "J Pacific -m- 15.2 25,471. | 8U.8 1 32.078 1 7.867 18. 3 22,031' 1 81^ 29, « ■in STATU 150.623 16.2 756. 518 I 83.8 1 907.141 1 177.902 1 1 1 1 19-5 1 713.539 1 1 80. 5 1 891. 1 1 \J Book t«] i» of total mortgages outstanding based upon reports in "Best's Life Insurance Reports." 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Of the States in these various geographic areas, only a few show significant changes from the regional trend. In the East North Central States, Michigan recorded an increase of H3.9 percent compared with decreases of 15.6 percent for Ohio, l6.9 percent for Indiana, 1.1 percent for Illinois, and 10.7 percent for Wisconsin. In the West North Central States, Kansas was the only one to show a decrease over 19^1. This decrease amounted to l$.k percent as compared with increases of 11.1 percent in Minnesota, 2.5 percent in Iowa, 3.5 percent in Missouri, 31&.5 percent in North Dakota, 37 percent in South Dakota, and 18. 5 percent in Nebraska. Although certain of the other States in the different areas also showed increases, the inadequacy of the data materially limits its significance. 10/ Data for 1936-^2 obtained from studies of farm-mortgage recordings for selected lender groups by the Economic and Credit Research Division, i'arm Credit Administration. Historical data on the average size of farm-mortgage recordings by States, 1917-35. available in publication entitled "Average Size of Farm- Mortgage Recordings of Selected Lender Groups," U. S. Department of Agriculture, Bureau of Agricultural Economics, November 19U0. - 27 - PRINCIPAL REPAYMENTS ON FARM-MORTGAGE LOANS. Substantial principal repayments* made during 19^2 are chiefly respon- sible for the decrease in outstanding farm- mortgage loans of insurance companies. During 19^-2, the total principal liquidated for 5^ companies amounted to $136,- 639.190 or 17.2 percent of the total loans outstanding at the "beginning of the year (table S). Principal repayments on purchase-money mortgages amounted to $26,216,773. or 20. k percent, whereas principal repayments on regular mortgages amounted to '110,^22,^17, or l6.5 percent. The amount of principal liquidated for these companies was more than $1^,000,000 greater than the additions to the loan^^ccount. In the case of regular mortgages, the principal liquidated exceeded^ tdditions made "by nearlv $ 3^,000, 000, "but for purchase-money mortgages the reverse was the case. Here / additions made were $23,000,000 more than liquidations. Thus it is indicated that principal repayments for insurance companies during the last year have been substantial, with purchase-money mortgages liquidated at a relatively more rapid rate than regular mortgages. The principal liquidations mentioned above are classified in the annual reports of insurance companies as follows: (1) Payments on principal including cash on mortgages refunded. (2) Mortgages foreclosed and transferred to real estate. (3) Mortgages on properties acquired by deed in lieu of foreclosure and transferred to real estate. (k) Decrease in book value of mortgages refunded or by adjustment in book value of mortgages. (5) Amortization of premium on mortgages purchased. (6) Transfers. These items were shown for each type of mortgage - purchase-money and regular. It is fairly clear what items are included in the first three classes; the fourth class apparently is made up of adjustments in the book value of mort- gages outstanding or refunded as a result of a reappraisal of the value of the security and the probable future income-producing capacity of the property. For class five it appears that some of the mortgages are purchased by insurance com- panies at a premium and that this premium is amortized over a period- of years - probably a number of years equal to the remaining term of the mortgage. The sixth class, "transfers," refers chiefly to mortgages transferred from one type of mortgage to another. This may occur when, on renewal, new papers are sub- stituted and the mortgage otherwise qualifies as a regular mortgage in respect to such items as the ratio of unpaid principal to value. In the following data, item 5 was included with item 1, as the amounts in item 5 were insig- nificant - they totaled less than $l6,000 for both types of mortgages. Because of the similarity of items 2 and 3. these were also added together. This left four classes. During 19*+2, principal liquidations in class 1 accounted for 90.7 percent of total liquidations. Class 1 for purchase-money mortgages made up 93«6 percent and class 1 for regular mortgages, 90. percent. Acquirement - 28 - of properties, either through foreclosure or voluntary deed, accounted for k percent, with regular mortgages having a larger percentage of liquidations (U.2 percent) than purchase-money mortgages (2.9 percent). Principal liqui- dated through transfers on all loans was U.9 percent, hut regular loans accounted for 5-6 percent as compared with only 2.0 percent for purchase- money mortgages. Adjustments in hook value were less than 0.5 percent of total liquidations; although for purchase-money mortgages, hook-value adjust- ments were ahout 2 percent. Thus, principal liquidations for purchase-money mortgages, "because of adjustments in hook value and of regular repayments, were relatively greater than for regular mortgages, whereas a larger percentage of the total liquidations on regular mortgages came ahout through acquirement of real estate and hecause of transfers. The total amount of principal liquidated during 19^2 was considerahly ahove that for 19^1, even though the numher of loans outstanding decreased "between January 1, 19^2 and January 1, 19^3- ^ n this latter year, principal liquidations for the 5^ companies totaled $136,639,190, compared with only $106,350.1^- for 19*4-1 or an increase of 28.5 percent. Related to the amount of outstanding loans at the "beginning of 19^1, principal liquidations during that year were 13.6 percent compared with 17-2 percent for 19^2. Similarly, in 19^1 principal liquidations on pur chase- money mortgages were 16.U percent of the outstanding purchase-money mortgages, compared with 20. U percent in 19*+2; and liquidations for regular mortgages were 13.1 percent in 19*+1 and l6.5 percent in 19^2. Besides general increase in principal repayments in 19^2, it is noted that the increase was largely in connection with regular principal payments. Liquidations due to the acquirement of the property decreased from $11,313, 7UI+ in 19U1 to less than half that amount in 19U2. Although only limited data are available hy States on principal repay- ments, some rough indications may he obtained by adding the amount of new loans recorded by insurance companies during 19*+2 to the amount of their outstanding loans at the beginning and subtracting the amount outstanding at the end of 19^2. The sum of the two figures should approximate the gross amount of prin- cipal liquidated during the year. For the United States, principal liquida- tions estimated on this basis would approximate 18.8 percent of the loans outstanding at the beginning of the year compared with the principal liquida- tions of the 56 companies which showed 17.2 percent. In the States in which insurance companies are making new loans in a fairly substantial number, and in which the method mentioned for estimating principal repayments would have the greatest significance, principal repayments as a percentage of loans outstand- ing in these States showed only slight dispersion from the geographic division average. In the East North Central States, for example, the dispersion by States from the average percentage of 19«9 w &s from a low of 19. 5 in Ohio to 21.8 in Michigan. In the West North Central States the average was 18.6 per- cent. In this division, however, North Dakota stands out with a high of 76.8 percent. Otherwise the percentages vary only between l6.1 percent for Missouri and 21.2 percent for Kansas. The South Atlantic States show an average rela- tionship of principal repayments to loans of 23.3 percent. The East South Central and West South Central States record 18.8 percent and 15.7 percent respectively, whereas the Mountain and the Pacific States show 17»5 percent and 23.5 percent respectively. It would then appear that principal repayments were relatively uniform throughout the country, with somewhat higher principal re- payments made in the East and West North Central and Pacific States. - 29 - Delinquent Loans At the "beginning of 19^3. the 17 insurance companies had only $5,750,505 in interest which was delinquent 3 months or more and/or taxes and other liens, delinquent 2 years or more. This amount represents only 0.3 percent of their loans outstanding on January 1, 19^3 > compared with $20,295,201 or 2.8 percent for 191+2; $33,320,317 or U.6 percent for 19UI; and over 25 percent in 1936 (table 10). Moreover, no State shoe's delinquency of as much as 5 percent at the beginning of ?9^3» and in those States in which delinquency approaches 5 percent, insurance companies have relatively few loans. The States in the West North Central Diirision, in which delinquency for 193 ^ w a.s especially high, and in which insurance- company holdings are concentrated, have shown a remarkable recovery. Minnesota then had a delinquency of 30 3 p3rcent compared with O.k percent on January 1, 19^3; Iowa had a delinquency of 26.8 percent compared with O.U percent; and North Dakota, 37-3 percent compared with O.k percent . For January 1, 19^3 - the only data for which there is a break-down between purchase- money mortgages and regular mortgages, delinquency was larger for the regular mortgages than it was for the purchase-money mortgages. Delin- quency on purchase-money mortgages was 0.5 percent of outstanding purchase- money mortgages and 0.9 percent of the outstanding regular mortgages. This relationship appears to be relatively consistent by States, although there are a few exceptions. Foreclosure s As with delinquency, the amount of farm-mortgage loans in the process of foreclosure for recent years is so small as to be relatively insignificant. For the same 17 companies that were used as a sample for delinquency, loans in the process of foreclosure on January 1, 19^3 were only 0.6 percent of the loans outstanding on January 1, 19^3, with only one State, California, showing a percentage in excess of 2 percent. California showed loans in the process of foreclosure equal to 7. k percent of the loans outstanding (table ll). For January 1, 19^2, loans in the process of foreclosure were 1.1 per- cent of outstanding loans on January 1, 19U2 with numerous States showing percentages in excess of 2 percent and with three of the States - California, Wyoming, and Alabama - showing percentages of 10. 5 percent, 20 . k percent , and 7-1 percent respectively. The extent to which farmers have recovered from this financial dilemma of the middle thirties is further evidenced by a comparison with the percent- age of foreclosures in 1936. Many of the States for January 1, 1936 show recorded loans in the process of foreclosure in excess of 20 percent of loans outstanding. For Wisconsin it was 21.0 percent; North Dakota, 20.3 percent; South Dakota, 2U.3 percent; Nebraska, 2k. 8 percent ; Maryland, 31 percent; and Arizona, 23.9 percent. -30- Table 10.- Percentage of farm-mortgage loans of 17 life Insurance companies, classified as delinquent, by States, January 1, 1936-43 £/ Percentage of amount of loans outstanding "Stat e 1943 A 4 «■ 4 a 4 - - UT1810Q 1936 1937 1938 1939 19 uo 19 Ul 1942 Total Purchase- money Regular mo ft gages mortgages — = — P ercent — = — Percent Percent Percent Percent Percent — 5 1 — Percent T> 1 Percent — 5 1 — Percent — — 2 — Percent Haine - - Jenf rAwpaniro • • • _ _ Venaont 0.0 100.0 100.0 0.0 0.0 0.0 0.0 0.0 0.0 Massachusetts . . > > .0 .0 .0 .0 .0 AoOuf 1 s xana. ■ Connecticut Sew England . . • • Hev York ...... .0 .0 .0 .0 .0 .0 .0 2.8 0.0 Sew J er sey • . ■ ■ . 7? 8 .0 .0 .0 .0 .0 .0 .0 .0 Pennsylvania .... .0 .0 .0 .0 4.0 6 3 l!4 .0 l!4 n^uoiQ Atlantic • • 3.S 1.4 .0 l.R QJ^Q 12.0 7.2 R.3 J* J 4.8 3.8 3.2 2.1 .8 .q .8 Indiana ....... Q 3 7.3 R.7 It. 7 3 q 2.6 .1+ .6 .u Till r\r\i m 26.6 12.4 J • c 7.3 4.7 1.4 . R •J .7 • j R Michigan 18. 3 17.2 12.4 9.U 6.0 2.8 2.1 1.1 2.8 •5 Wisconsin ...... ?i 7 12.4 q.O 7.R 6.6 3.8 2.0 •J .0 .R *Vot Hnrth Cflntm.1 K B V JiJI vli w tj u to £ S J- 3.1 1.9 ,R ... - .5 -R W 4 nniilttt 18.1 14.C 9.9 6.3 1.1 .4 .1 ,R 26.8 16. q 16. r 11.8 6.8 3.8 1.3 ,u .1 .u U4 a .AiMi4 27 U 27 7 17 -5 10.4 ■s 6 t, 1 J- 1 1.0 .8 1.1 Sft-rth Ikirnt* UUl Vii arHMtfi . . . . 37.3 23.4 12.1 q.s ■i.l . R .k oouin ^BVEOt* .... q 7R 1 PR R Lit 7 q Q 4.4 1.4 1 7 97 9 22.8 22 .1 17 R •W 'J 10*0 ).o q .7 4 7 18.6 l4.0 10.9 12.9 10.7 8.0 5^1 1.0 1.2 •9 ■ oil jurtii v*jq i« rai 2 7 .8 .4 q Delaware ...... 40.2 7.4 .0 1.8 U.O 1.8 3.7 2.4 .0 2.5 6.6 6.3 5.6 6.6 2.7 1.1 9.1 3.0 ^.6 5.9 2.5 West Virginia .... 4.9 2.1 3-1 l.U 2.5 6.3 3.8 .0 5-2 Horth Carolina . . . 6.4 5.0 2.6 2.0 2.8 1.6 1.5 .4 .5 .4 South Carolina . . . 10.1 7.0 6.4 8.9 .9 .5 2.8 1 -7 .6 .8 16.8 12.0 9.2 9.4 6.4 6.7 14.6 1.4 .6 2.7 22.5 .0 .0 .0 .0 .0 .0 .0 .0 .0 South Atlantic . . 3.5 7.6 1.4 .9 1.7 17.1 13. u 7.8 8.8 7-2 4.2 2.2 .7 1.2 .6 16.6 11.3 7-9 6.1 5-2 3.6 3-4 1.2 .0 1-5 Alabama 16.1 13.8 9-7 8.2 6.9 4.6 5.0 2.0 .0 3.0 29.2 11.5 7-3 4.7 2.7 3-1 1.8 .5 2/ .7 last South Central 3.7 2.4 .8 .2 ,q Altai 22.8 8.3 R.8 3.1 1.7 x. I 3.3 1.6 2/ .0 2/ T>\n1 a 1 ■ a at 16 4 9.6 R.O U.O 2.q 3.3 r 3 2.1 1.6 2% " r " a - aaa 20. 6 18 R 12 4 11.1 8.1 6 3 S 3 1 3 1.8 1.2 33*8 23.0 15.U 10.7 7-5 u 1.0 .4 1.2 R/^wth ^Antral s 1 4.2 1.0 .8 1.1 18.8 lU r 17 U 13 q 4 q TO 6.0 4.0 2.6 .2 4.R 1 lata 7 CJ • 1 10.7 8.6 7 4 1 • t . 4.9 4 3 T.J 1.1 • l.l 51-2 32.5 35.7 5U.5 31.6 35-0 .0 .0 .0 .0 33-8 29.6 23.2 27-3 18. 4 8.1 7-2 4.5 .0 5-1 ■•v Mezlee R3 .8 36.3 28.9 .0 .0 2/ ,R .0 8.1 1.6 1.0 11.5 1-9 .4 .6 .0 .0 .0 40. 5 18.2 15.3 19.7 6.4. 1.1 .0 .0 .0 .0 5.3 4.2 1.8 .1 2.2 16.1 9.6 6.8 6.2 U.6 2-7 2.5 .8 .0 • 9 19. U 14.8 12.2 11. U 8.1 3-9 4.5 1.6 d 1-9 16.0 8.9 6.0 18. 9 18. 9 8.8 2.5 •s .0 Pacific 3.4 3.0 1.0 •3 1.1 otitq rim 25.6 17-1 14.0 11.0 7-2 4.6 2.8 .8 .5 • 9 Tj Bated en annual reports to State coulsslonart of Insurance. Loans classified as delinquent are loans upon which interest is OTerdoe worm ' ■» r. 3 aootha and opon whloh taxes or other liens are delinquent. Division averages not available before )'f'U. 2/ Less than 0.05 p«rcent. -31 - Table 11.- Percentage of farm-mortgage loans of 17 life Insurance companies, In process of foreclosure, by States, January 1. 1936-43 tl Percentage of amount of loans outstanding State and 19*3 _ . division 19^2 1936 1937 1938 1939 1940 19»H Total Purehasa- aoney JXeguXSjl* Mortgages Percent Percent Percent Percent Percent Percent Percent Percent Percent Percent - — — - — — - - - — — ~ - - - 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 - 0.0 - — — .0 .0 .0 .0 .0 - - - - - - _ - - - - - - - - - - - - - .0 .0 A . u .0 A A .0 0.0 .0 .0 ft • A . \J A • V A A A .0 - .0 .0 100 . A • .0 1 k .0 .0 .0 Kiddle Atlantic ... " 1.1 i X«c .0 .0 .0 "♦.8 3.5 2.9 2.3 1 c 1.0 1.4 1 . d .7 1.2 .5 9.1 4.4 1-7 1-5 1.5 1 k 1.4 1.5 1.0 .6 1.1 Illinois 9.6 6.4 2.6 1.3 1.0 .7 .u .2 .2 .3 1 A 1U . a o.o £ R . 0. c 7 Q £•0 1.1 .0 1.5 91 A ill 1 £ 7 b.7 7 R 3.8 7 U 3.H 7 ft 3.0 1 . D • 9 .0 1.0 1.2 Q .6 .0 .6 • 19 ll X«-s *T 0.5 ll Q 7 7 3-3 1 R .2 • 5 .1 17 ? 1 T 7 K If O 15.1 1 A 7 IO.3 7 0.3 1 n X.O • 3 u • 3 1 Q 9 1 1 7 J-. 3 R •3 7 •J .1 2/ .1 OA 7 97 7 07 7 1 O R 13.3 1 ll 1 1H.1 R 3.8 O 7 .7 •5 .8 oh 7 13.3 1 A £ 1ft 1 P O.t £- . 1-7 ll 2.1 2U.S 2U.1 21.0 11.2 8.6 5-7 3.2 1.3 • 7 l.U 1 ( .U 1 9 c R O 3.9 li U R O U A 1-9 1.0 2.1 Vam> Iff. _ f U f» - „ i_ _ "l R «i.3 1 «c •5 .2 .6 _ - - - U.mI _ _ J 71 A 31.0 1 A l 1.9 7 £ 3.0 li a 1 ll 1.*+ A .0 .0 .0 14.6 u.u 3-3 1.8 2.U 3.^ .8 2/ .0 2/ V a a f TT< «• •! ** 4 . 1 7 ft 17.0 A • U 7 li 3-4 1 li A •U .0 .0 .0 O A 1 1 R 1.5 1 li 1.4 1.1 • O • c .1 .0 .1 TO A 5-7 3«3 R a 5.8 • 9 1.6 3.0 .0 0.3 2,0 2.1 2.5 2.8 2*2 2.1 2.0 2.1 1.8 .0 .0 20 .0 .0 .0 .0 .0 .0 .0 .0 South Atlantic .... 2.0 1.0 •9 1.8 .h O 7 5« 3 7 9 1 4.0 3 ll i • .1 .1 .1 .2 7 A 7.0 4. 7 2 '7 li 1.7 l.b i l.c 1.2 .2 1.5 11 7 11. f (J 7. R R 3.5 R A 3.0 ll R t«3 O.D 7-1 1.1 .0 1.6 7 Q hi 1 9 X • c 1 7 1.3 2 •1 •J • 1 .1 .2 .0 i.i — r- .0 .4 .2 .h 12.0 7.2 1.5 1.1 . .5 •3 .1 .6 .0 7 R 7.3 7 O • 9 ft •9 •5 .8 1.2 2.3 .6 5.8 5-0 4.4 4.0 3-9 2.8 2-3 1.7 1-5 1.7 7 ft 3.0 7 (? 7 7 3.7 £.0 . i«7 1.0 e •5 •5 .1 .6 1.* •2 . .7 .7 .8 u 1 R R 130 7 s 7.8 O A 9.0 0.9 C 7 5«7 li li 2.9 1.1 1.5 .8 12.5 7.8 2.8 2-7 3-9 3-6 2.2 .1 .0 .1 18.0 3.5 6.3 .0 .0 .0 20. U .0 .0 .0 Co lorado 0. f 7 1 OeX 7 i 3«1 1-7 .0 1.9 2.5 1:1 .0 15-6 9.U 7-0 1.1 .8 .0 .8 23.9 12.0 9.*» .0 2.0 .0 .0 .0 .0 .0 7.0 29.5 10.7 8.0 3.0 .0 1.5 .0 .0 .0 3.U 2.2 .6 •5 .6 U.i .6 •7 .6 .1* •3 .2 .1 .0 .1 15.6 12.5 6.3 6.8 8.6 t U.6 2.8 .8 .0 1.0 9.2 4.2 2.5 4.0 6A 8.1 10.5 7." 1.7 10. u 1-9 1-5 .7 .2 .8 13.1 U.I 7.6 5.2 3.8 2.0 1.1 .6 .6 1/ Based on annual reports to State commissioners of insurance. Includes properties in the course at voluntary conveyance to the company. Dirislon average* not available before 1941. 2/ Lees than 0.05 percent. - 32 - SUMKABT The following paragraphs summarize "briefly the major developments relative to the investments of life insurance companies in farm-mortgage loans: (1) Insurance companies for several decades have "been one of the farmer's principal sources of long-term mortgage credit, having held as much as $2,172,863,000 on January 1, 1928, or 22.3 percent of the total farm- mortgage debt on that date. On January 1, 19^3. they held farm-mortgage loans estimated at $891, HHl ,000, or about one-sixth of the total farm- mortgage debt. Between January 1, 19^2 and January 1, 19^3. the amount of farm mortgages held declined $15,700,000, "but despite this decrease their holdings on January 1, 19^3 were about $8,000,000 larger than on January 1, 19^+0, reflecting the net effect of an increase in each of the years 19^0 and 19Ul and the decli ne in 19^-2. (2) Insurance companies increased their relative position among the major farm-mortgage lenders during 19^-2 even though there was an absolute decline in their loans held. On January 1, 19^3 they held lU percent of the total farm-mortgage debt, as compared with 13 . 5 percent on January 1, 19^2 and only 12.^ percent on January 1, 193 2. (3) With the decline in the farm-mortgage investments of insurance companies there has been a tendency for the largest insurance companies to hold an increased proportion of the total loans outstanding. On January 1, 19^3. the five companies having the largest holdings of farm-mortgage loans held 52 percent of the total, whereas on January 1, 1930, these same companies held H6.2 percent. (k) The farm-mortgage loans of insurance companies are of two major types - regular mortgages and purchase-money mortgages. On January 1, 19^3 > purchase- money mortgages held are estimated to have been about $177,902,000, or 19.5 percent of the total of $891,^1,000 for all mortgages. During 19^2, purchase-money mortgages held increased 18.1 percent, whereas regular mort- gages held decreased 5.6 percent. (5) The average size of farm-mortgage loans held by insurance com- panies continued to decline between January 1, 19^2 and January 1, , falling from $5,^57 to $5, 1 +21. On January 1, 1931, the average size of outstanding loans was estimated to be $6,U26. (6) The average size of purchase-money mortgages is estimated to have increased from $^,323 on January 1, 19^2 to $U,5U8 on January 1, 19^3. compared with a decrease in the average size of regular mortgages of from $5i770 to $5.67^ between the same two dates. (7) Total additions to the loan account of insuranco companies during 19^2 show little change over those for the preceding year. Estimates based upon the annual reports of 5^ major companies to State commissioners of insur- ance show an increase of a little over 1 percent between 19^1 and 19^2. On the basis of the reports for these same $4 companies, it is further estimated that new purchase-money mortgagos increased 32 porcent during 19^-2 over that of 19U1, whereas regular mortgages docroased 15.8 percent. - 35 - (8) Data on the types of regular mortgages made indicate that the decline in such loans "between I9U1. and 19^2 would have "been even greater had it not "been for transfers, many of which no doubt were transfers from purchase- money mortgages and sales contracts to regular mortgages. (9) Substantial principal repayments appear to he largely responsihle for the decline in outstanding farm-mortgage loans of insurance companies. Tor the 5H companies mentioned above, principal liquidations during 19^2 were 17.2 percent of their total loans outstanding at the "beginning of the year, compared with only 13.6 percent for 19U1. Between 19^1 and 19^2, principal liquidations for these companies increased 28.5 percent. (10) Loan delinquency at the "beginning of 19*+3 w as relatively insig- nificant. For 17 of the largest insurance companies, loan delinquency was only 0.8 percent of their outstanding loans on that date compared with 2.8 percent for 19^2 and 25.6 percent for 1936. Loans in the process of fore- closure for 17 companies were similarly low, being only 0.6 percent of out- standings for January 1, 19^3« (11) The amount of farm- mortgage loans held "by life insurance companies is concentrated to a large degree in the West North Central States. Moreover, there has "been a decided tendency toward greater concentration, particularly in the Corn Belt proper in recent years. Over 65 percent of their total investment in farm mortgages on January 1, 19^3 • w as in the six States of Iowa, Minnesota, Illinois, Indiana, Missouri, and Texas. On January 1, 193^1 the same, six States accounted for only 58 percent. The reverse trend is shown for the States of the Great Plains - North Dakota, South Dakota, Nebraska, Kansas, and Oklahoma. On January 1, 1930, 2U.U percent of the total loans held were in these five States. For January 1, 19^3i only lU-,2 percent were in these States. (12) Although purchase-money mortgages are concentrated largely in the West North Central States, they are a somewhat greater proportion of the total loans in the South Atlantic and the West South Central States. These facts have important implications from the standpoint of the future trend of insurance- company holdings of farm mortgages and are therefore of con- siderable significance in the interpretation of the total farm-mortgage debt. It would appear that insurance companies have maintained their relative importance in the farm- mortgage credit field in recent years, chiefly as a re- sult of increased new purchase-money mortgages made. These mortgages are in turn dependent upon the sale of real estate held outright. With a rapid deple- tion of real estate holdings, a continued increase in purchase-money mortgages, particularly in sufficient volume to offset principal liquidations on such mort- gages, is becoming less likely. On the other hand, real estate held outright as a source of new loans has not been as great for such lenders as the Federal land banks, the Federal Farm Mortgage Corporation, and commercial banks as for insur- ance companies and this undoubtedly has in a large degree accounted for the greater decreases in loans held by these lenders. It would thus appear that the mortgage loans of insurance companies may continue to show substantial decreases during the next few years unless principal liquidations fall off as a result of smaller net farm income or unless a boom in land values should result in increased real estate transfers accompanied by new mortgage borrowing to finance such transfers. In connection with new recordings during 19^3 1 however, it is noted that increased recordings are being shown primarily by commercial banks .and individuals rather than by the federally sponsored agencies and insurance companies. UNIVERSITY OF FLORIDA 3 1262 08921 5171