HOME OWNERS' LOAN AND NATIONAL HOUSING ACT WEDNESDAY, MARCH 20, 1935 UNITED STATES SENATE, BANKING AND CURRENCY, The subcommittee met, at 10:30 a. m., pursuant to call, in Room 301 of the Senate Office Building, Senator Robert J. Bulkley presiding. Present: Senators Bulkley (chairman of the subcommittee), McAdoo, Townsend, and Steiwer. Present also: Senator Reynolds, of North Carolina. Senator BULKLEY. The committee will be in order. The hearings this morning are in connection with S. 1771 and H. R. 6021, which we will have printed in the record. This legislation as originally introduced in the House was known as H. R. 5531 and identical in language with S. 1771. After committee consideration the bill was amended and reintroduced as H. R. 6021. It was further amended on the floor of the House and comes to us now in the form finally agreed upon in the House of Representatives as H. R. 6021. (The bills S. 1771 and H. R. 6021 are printed in full as follows:) [S. 1771, 74th Cong., 1st sess.] A BILL To provide additional home-mortgage relief, to amend the Federal Home Loan Bank Act, the Home Owners' Loan Act of 1933, and the National Housing Act, and for other purposes Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the Federal Home Loan Bank Act as amended be further amended by striking out the word "three" from the fifth line of subsection (6) of section 2 thereof, and inserting in lieu thereof the word "four". SEC. 2. Section 6, subsection (k), of the Federal Home Loan Bank Act as amended is amended to read as follows: "(k) All stock of any Federal Home Loan Bank shall share in dividend distributions without preference." SEC. 3. Section 7, subsections (a), (b), and (c) of the Federal Home Loan Bank Act as amended is amended to read as follows: "SEC. 7. (a) The management of each Federal Home Loan Bank shall be vested after 1935 in a board of nine directors, all of whom shall be citizens of the United States and bona fide residents of the district in which such bank is located. "(b) Three of such directors shall be appointed by the Board. The terms of the two such directors heretofore provided by law shall expire at the end of 1936 and 1937, respectively, and the third such director shall be appointed at the end of the year 1935 for a term of three years, and their successors shall be appointed by the Board for terms of three years. "(c) Upon the expiration of the term of the directors elected under the provisions of subsection (d) of this section, whose terms expire at the end of 1935, no successors to such directors shall be elected. After the year 1935, six of such directors, two of whom shall be known as class A directors, two of whom shall be known as class B directors, and two of whom shall be known as class C directors, shall serve. Upon the expiration of the terms of the directors elected to serve until the end of 1936, and until the end of 1937, respectively, their successors shall be elected as is provided in subsection (d) of this section for terms of two years. Thereafter all such directors shall serve for terms of two years." SEC. 4. Section 10, subsection (a), of the Federal Home Loan Bank Act is further amended to read as follows: 1 "SEC. 10. (a) Each Federal Home Loan Bank is authorized to make advances to its members upon the security of home mortgages, or obligations of the United States, or obligations fully guaranteed by the United States, subject to such regulations, restrictions, and limitations as the Board may prescribe. Any such advances shall be subject to the following limitations as to amount: "(1) If secured by a mortgage insured under the provisions of title II of the National Housing Act, the advance may be for an amount not in excess of 90 per centum of the unpaid principal of the mortgage loan. "(2) If secured by a home mortgage given in respect of an amortized homemortgage loan which was for an original term of eight years or more, or in cases where shares of stock, which are pledged as security for such loan, mature in a period of eight years or more, the advance may be for an amount not in excess of 65 per centum of the unpaid principal of the home-mortgage loan; but in no case shall the amount of the advance exceed 60 per centum of the value of the real estate securing the home-mortgage loan. "(3) If secured by a home mortgage given in respect of any other homemortgage loan, the advance shall not be for an amount in excess of 50 per centum of the unpaid principal of the home-mortgage loan; but in no case shall the amount of such advance exceed 40 per centum of the value of the real estate securing the home-mortgage loan. "(4) If secured by obligations of the United States, or obligations fully guaranteed by the United States, the advance shall not be for an amount in excess of the face value of such obligations." SEC. 5. Section 10, subsection (b), clauses numbered (1) and (2) of the Federal Home Loan Bank Act as amended are amended to read as follows: "(1) the home-mortgage loan secured by it has more than twenty years to run to maturity, or "(2) the home mortgage exceeds $20,000 or ". 66 SEC. 6. Section 13 of the Federal Home Loan Bank Act as amended is amended by inserting after the word bank in the second line thereof the words: "or consolidated Federal Home Loan Bank bonds or debentures ". SEC. 7. Section 19 of the Federal Home Loan Bank Act as amended is amended by the addition of the following: "The receipts of the Board arising from assessments upon the Federal Home Loan banks and all other receipts of the Board from whatever source derived shall be deposited in the Treasury of the United States, and may be from time to time withdrawn therefrom to defray the expenses of the Board, and the salaries of its members and employees, whose employment, compensation, leave, and expenses shall be governed solely by the provisions of this Act, specific amendments thereof, and rules and regulations of the Board not inconsistent therewith, and funds derived from such assessments or from other sources shall not be construed to be Government funds or appropriated moneys." SEC. 8. The first sentence of section 4, subsection (c) (1) of Home Owners' Loan Act of 1933, as amended, is further amended to read as follows: "(c) (1) In order to provide for applications heretofore filed, the Corporation is authorized to issue bonds in an aggregate amount not to exceed $4,500,000,000, which may be exchanged as hereinafter provided, or which may be sold by the Corporation to obtain funds for carrying out the purposes of this section or for the redemption of any of its outstanding bonds, and the Corporation is further authorized to increase its total bond issue for the purpose of retiring an amount of its outstanding bonds equal to the amount of the increase; such retirement to be at maturity or by call or purchase or exchange or any method prescribed by the Board with the approval of the Secretary of the Treasury: Provided, That no bonds issued under this clause shall have a maturity date later than 1952: Provided further, That the total bond issue shall not be increased by the amount of any bonds retired from the proceeds of the collection of principal on loans." SEC. 9. Section 4, subsection (m) of Home Owners' Loan Act of 1933, as amended, is amended by striking out" $300,000,000" and inserting in lieu thereof " $400,000,000". SEC. 10. Section 4 of the Home Owners' Loan Act of 1933, as amended, is further amended by the addition of a new subsection, as follows: "(n) The Corporation is authorized to purchase Federal Home Loan bank bonds, debentures or notes, or consolidated Federal Home Loan bank bonds or debentures. The Corporation is also authorized to purchase full paid income shares of Federal Savings and Loan Associations after the funds made available to the Secretary of the Treasury for the purchase of such shares have been exhausted. Such purchases of shares shall be on the same terms and conditions as have been heretofore authorized by law for the purchase of such shares by the Secretary of the Treasury, provided that the total amount of such shares in any one association held by the Secretary of the Treasury and the Corporation shall not exceed that heretofore authorized to be held by the Secretary of the Treasury. Of the total authorized bond issue of the Corporation $250,000,000 shall be available for the purposes of this subsection, and bonds of the Corporation not exceeding such amount may be sold for the purposes of this subsection." SEC. 11. Section 6 of Home Owners' Loan Act of 1933 is further amended by adding the following sentence at the end thereof: "For the purposes of this section the Secretary of the Treasury is authorized and directed to allocate and make immediately available to the Board out of the funds appropriated pursuant to section 5 (g) the sum of $200,000, which sum shall be in addition to the funds heretofore appropriated or made available pursuant to this section, and shall be subject to the call of the Board and shall remain available until expended." SEC. 12. Section 8, subsection (d), of the Home Owners' Loan Act of 1933 is amended to read as follows: "(d) The provisions of sections 29, 30, 32, 35, 37, 39, 112, 113, and 117 of the Criminal Code of the United States (U. S. C., title 18, secs. 73, 74, 76, 82, 83, 88, 91, 202, 203, and 207), insofar as applicable, are extended to apply to the Home Owners' Loan Corporation, its contracts or agreements, and an association under this Act which, for the purposes herein, shall be held to include advances, loans, discounts, and purchase or repurchase agreements; extensions and renewals thereof; and acceptances, releases, and substitutions of security therefor." SEC. 13. Section 8 of Home Owners' Loan Act of 1933 is further amended by the addition of a new section as follows: "(f) No person, partnership, association, or corporation shall directly or indirectly solicit, contract for, charge, or receive, or attempt to solicit, contract for, charge, or receive, from any person applying to the Corporation for a loan, any moneys, check, note, or other form of obligation, representing payment of any difference which may exist between the market value and the par value of the bonds of Home Owners' Loan Corporation. Any person, partnership, association, or corporation violating the provisions of this subsection shall, upon conviction thereof, be fined not more than $5,000, or imprisoned not more than two years or both." SEC. 14. Section 402, subsection (c), paragraph (5) of the National Housing Act is amended by adding the following sentence at the end thereof: "The Corporation shall be entitled to the free use of the United States mails for its official business in the same manner as the executive departments of the Government, and shall determine its necessary expenditures under this Act and the manner in which the same shall be incurred, allowed, and paid, without regard to the provisions of any other law governing the expenditure of public funds." SEC. 15. Section 403, subsection (b) of the National Housing Act is amended by striking out the words "ten years" from the third line from the end thereof and inserting in lieu thereof the words " twenty years" and is further amended by adding at the end of said subsection words as follows: " Provided, That for any one year dividends may be declared and paid when losses are chargeable to such reserves if the declaration of such dividends in such case is approved by the Corporation." SEC. 16. Section 403, subsection (d) of the National Housing Act is amended to read as follows: "(d) Any applicant which applies for insurance under this title after the first year of the operation of the Corporation shall pay an admission fee based upon the reserve fund of the Corporation, which, in the judgment of the Corporation, is an equitable contribution." 66 SEC. 17. Section 404, subsection (a) of the National Housing Act is amended by striking out the words "one-fourth" from the fourth line thereof and inserting in lieu thereof the word one-eighth ", and subsection (b) of said section is amended by striking out the word "one-fourth" from the second and third lines from the end thereof and inserting in lieu thereof the word "one-eighth ". Said section 404, subsection (a) of the National Housing Act is further amended by the addition of the following words at the end thereof: "Each insured institution which has paid an insurance premium based on the rate prevailing before this amendment takes effect shall be credited on its future premiums with the difference between what it has paid and what its premium would have been at the rate provided in this amendment." SEC. 18. Section 406 of the National Housing Act is amended by the addition of a new subsection as follows: "(f) In order to prevent a default in an insured institution or in order to restore an insured institution in default to normal operation as an insured institution, the Corporation is authorized, in its discretion, to make loans to purchase the assets of, or make a contribution to an insured institution or an insured institution in default.' SEC. 19. The last sentence of section 2 of the National Housing Act is amended to read as follows: "No insurance shall be granted under this section to any such financial institution with respect to any obligation representing any such loan, advance of credit, or purchase by it in excess of $2,000 for the purpose of financing alterations, repairs, and improvements on real property other than apartment houses, hotels, office and other commercial buildings, hospitals, and manufacturing or industrial plants; and no insurance shall be granted under this section to any such financial institution with respect to any obligation representing any such loan, advance of credit, or purchase by it in excess of $50,000 for the purpose of financing alterations, repairs, and improvements on real property improved by apartment houses, hotels, office and other commercial buildings, hospitals, and manufacturing or industrial plants, including installation of new permanent equipment and machinery in such manufacturing or industrial plants; nor unless the obligation bears such interest, has such maturity, and contains such other terms, conditions, and restrictions as the Administrator shall prescribe." SEC. 20. Section 301, subsection (d) of the National Housing Act is amended to read as follows: "(d) No association shall transact any business except such as is incidental to its organization until it has been authorized to do so by the Administrator. Each such association shall have a capital stock of a par value of not less than $2,000,000, and no authorization to commence business shall be granted by the Administrator to any such association until he is satisfied that such capital stock has been subscribed for at not less than par and paid in full in cash or Government securities." SEC. 21. Section 302 of the National Housing Act is amended to read as follows: SEC. 302. Each national mortgage association is authorized to issue and have outstanding at any time notes, bonds, debentures, or other such obligations in an aggregate amount not to exceed (1) fifteen times the aggregate par value of its outstanding capital stock, and in no event to exceed (2) the current face value of mortgages held by it and insured under the provisions of title II of this Act, plus the amount of its cash on hand and on deposit and the amount of its investments in bonds or obligations of, or guaranteed as to principal and interest by, the United States. No national mortgage association shall borrow money except through the issuance of such notes, bonds, debentures, or other obligations, except with the approval of the Administrator and under such rules and regulations as he shall prescribe." SEC. 22. No obligations, contingent or absolute, shall be incurred for the expenditure or other disposition of funds heertofore, hereby, or hereafter appropriated, or otherwise obtained for the carrying out of functions of Home Owners' Loan Corporation, Federal Savings and Loan Insurance Corporation and Federal Housing Administration unless within estimates of such obligations and expenditures approved by the Director of the Budget; and, to the extent that the Secretary of the Treasury may consider practicable and under such rules and regulations as he may prescribe, there shall be maintained on the books of the Treasury Department such accounts as may be necessary to give full force and effect to this provision. Nothing in this paragraph contained shall in any way affect the liability of the Federal Housing Administrator for the payment of insurance written by him under the provisions of the National Housing Act. [H. R. 6021, 74th Cong., 1st sess.] AN ACT To provide additional home mortgage relief, to amend the Federal Home Loan Bank Act, the Home Owners' Loan Act of 1933, and the National Housing Act, and for other purposes Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the Federal Home Loan Bank Act, as amended, is amended by striking out the word "three" from the fifth line of paragraph (6) of section 2 thereof, and inserting in lieu thereof the word "four". SEC. 2. Subsection (k) of section 6 of the Federal Home Loan Bank Act, as amended, is amended to read as follows: "(k) All stock of any Federal Home Loan Bank shall share in dividend distributions without preference." SEC. 3. The Federal Home Loan Bank Act, as amended, is amended by inserting a new section following section 8 to read as follows: "SEC. 8A. There is hereby created a Federal Savings and Loan Advisory Council, which shall consist of as many members as there are Federal Home Loan Bank districts. Each Federal Home Loan Bank, by its board of directors, shall annually elect a resident of such bank district interested in thrift and the financing of homes as a member of said Council, to serve without compensation other than traveling expenses. The Federal Savings and Loan Advisory Council shall meet at Washington, District of Columbia, at least two times a year and oftener if requested by the Federal Home Loan Bank Board. Said Council may meet at other times and other places as it may deem necessary and may select its own chairman and vice chairman and secretary and adopt its own method of procedure. The directors of the Federal Home Loan Banks shall elect members of the Council for a one-year term and shall fill vacancies that may occur. The Federal Savings and Loan Advisory Council shall have power 1. To confer with the board or the trustees of the Federal Savings and Loan Insurance Corporation on general business conditions or special conditions affecting the Federal Home Loan Bank System or its members or the Insurance Corporation. 2. To make representations concerning matters within the jurisdiction of the Board and the trustees. 3. To request information and make recommendations in reference to the Federal Home Loan Bank System or its members, or the Insurance Corporation. 4. To recommend the elimination of all unnecessary routine and procedure in the conduct of the Home Loan Bank System or the Insurance Corporation and make suggestions in the public interest as to the program and policies of these two operations. The recommendations here directed shall be printed as a part of the Annual Reports to Congress of the Federal Home Loan Bank Board and the Insurance Corporation." SEC. 4. Subsection (a) of section 10 of the Federal Home Loan Bank Act, as amended, is amended to read as follows: "(a) Each Federal Home Loan Bank is authorized to make advances to its members upon the security of home mortgages, or obligations of the United States, or obligations fully guaranteed by the United States, subject to such regulations, restrictions, and limitations as the Board may prescribe. Any such advance shall be subject to the following limitations as to amount: "(1) If secured by a mortgage insured under the provisions of title II of the National Housing Act, the advance may be for an amount not in excess of 90 per centum of the unpaid principal of the mortgage loan. "(2) If secured by a home mortgage given in respect of an amortized home mortgage loan which was for an original term of six years or more, or in cases where shares of stock, which are pledged as security for such loan, mature in a period of six years or more, the advance may be for an amount not in excess of 65 per centum of the unpaid principal of the home mortgage loan; but in no case shall the amount of the advance exceed 60 per centum of the value of the real estate securing the home mortgage loan. "(3) If secured by a home mortgage given in respect of any other home mortgage loan, the advance shall not be for an amount in excess of 50 per centum of the unpaid principal of the home mortgage loan; but in no case shall the amount of such advance exceed 40 per centum of the value of the real estate securing the home mortgage loan. "(4) If secured by obligations of the United States, or obligations fully guaranteed by the United States, the advance shall not be for an amount in excess of the face value of such obligations." SEC. 5. Clauses numbered (1) and (2) of subsection (b) of section 10 of the Federal Home Loan Bank Act, as amended, are amended to read as follows: "(1) the home mortgage loan secured by it has more than twenty years to run to maturity, or (2) the home mortgage esceeds $20,000 or". SEC. 6. The Federal Home Loan Bank Act, as amended, is amended by inserting a new section following section 10 to read as follows: "SEC. 10b. Each Federal Home Loan Bank is authorized to make advances to nonmember mortgagees approved under title II of the National Housing Act. Such mortgagees must be chartered institutions having succession and subject to the inspection and supervision of some governmental agency, and whose principal activity in the mortgage field must consist of lending their own funds. Such advances shall not be subject to the other provisions and restrictions of this Act, but shall be made upon the security of insured mortgages, insured under title II |