The Crédit Foncier is permitted to take short-term mortgages and does a big business in that line. But the true purpose of its existence and the greatest part of its operations are the granting of long time loans. These are made on mortgages to individuals and without mortgage to municipalities and public establishments. The periods run from ten to seventy-five years. The annuities required to be paid for amortizing the loan for the average period used are so small as to appear insignificant. The success achieved by the Crédit Foncier in popularizing the amortization principle for real estate loans is the chief cause of its great renown. At present its interest rate for mortgage loans is 4.3 per cent per annum, for public establishments 4.1 per cent, and 3.85 per cent for municipalities. The total annuity, including both interest and amortization sum, for a twenty-five year mortgage loan is a little over 6.5 per cent. With this small annual payment the debt is gradually wiped out, and nothing is left to be paid at the end of the term. The longer the term the smaller the annuity, and vice versa. The loans now exceed $870,000,000. Here is an amortization table of the Crédit Foncier:
_Annuity of a capital of $100, interest at 4.3 per cent, payable semiannually._
Duration. Annuities. 5 years $22.440405 10 years 12.409111 15 years 9.115217 20 years 7.504843 25 years 6.566976 30 years 5.964436 35 years 5.552593 40 years 5.259040 45 years 5.043495 50 years 4.881753 55 years 4.758395 60 years 4.663140 65 years 4.588881 70 years 4.530558 75 years 4.484483
The Crédit Foncier is obliged to keep the interest and amortization payments in separate accounts, the latter going to create a sinking fund for the retirement of outstanding debentures. As stated above, the amounts of the loans and debentures must balance each other; consequently, as loans are paid up debentures must be paid off. Borrowers have the right to pay in advance, which they frequently exercise, so the proper adjustment of the balance is beyond the control of the society. It is for this reason that the debentures, although calculated to be redeemed synchronously with the loans they represent, have no fixed time for maturity and are recallable at option. In each issue a certain number are repayable by lots, with prizes for the lucky holders. A bond last year drew a prize of $40,000. The right to give prizes at the lottery drawings is one of the special privileges of the society. The debentures are of two kinds--those representing the mortgages are called "foncières" and those representing the loans to municipalities and public establishments are called "communales." They are issued in series. The smallest denomination is $20. They may be bought by installments and are the most popular form of investment in France, being held largely by farmers and poor people in the cities. The issue of 1912 for $100,000,000 at 3 per cent, payable within seventy years, was oversubscribed eighteen times. The total land mortgages and municipal indebtedness in France is figured at $2,800,000,000. Nearly one-third of this is represented by the loans of the society.