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HOME OWNERS' LOAN AND NATIONAL HOUSING ACT

WEDNESDAY, MARCH 20, 1935

UNITED STATES SENATE,
SUBCOMMITTEE OF COMMITTEE ON
BANKING AND CURRENCY,

Washington, D. C. 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:

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HOME OWNERS' LOAN AND NATIONAL HOUSING ACT

WEDNESDAY, MARCH 20, 1935

UNITED STATES SENATE,
SUBCOMMITTEE OF COMMITTEE ON
BANKING AND CURRENCY,

Washington, D. C. 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

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:

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" 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 guar. anteed 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 ".

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 avail. able 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 foklows:

“(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.”

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

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