Home Owners' Loan Na Tional Housing Act, Hearing Before a Subcommitte of ..., 74-1 on S. 1771 and H.R. 6021 ..., March 20 to 29, 1935

raise the annual premium charge for the group, within the limits provided in this act.

(7) Section 301. (a) Line 5, strike out "to purchase and sell", and insert "to purchase from mortgagees and to sell."

(8) Section 302. Line 6, strike out "and insured under the provisions of title II of this act."

TITLE VI. FEDERAL MORTGAGE BANK

SEC. 602. There is hereby created a corporation to be known as the "Federal Mortgage Bank ", which shall be an instrumentality of the United States, which shall have authority to sue and to be sued in any court of competent jurisdiction, Federal or State, and which shall be under the direction of its board of directors and operated by them under such bylaws, rules, and regulations as they may prescribe for the accomplishment of the purposes and intents of this section.

SEC. 603. The capital stock of the bank shall be $1,000,000,000. Its stock shall be subscribed for by the Secretary of the Treasury on behalf of the United States, and payment of such subscription shall be subject to call in whole or in part by the board and shall be made at such time or times as the Secretary of the Treasury deems advisable. The bank shall issue to the Secretary of the Treasury receipts for payments so made by him for or on account of such stock, and such receipts shall be evidence of the stock ownership of the United States. In order to enable the Secretary of the Treasury to make such payments when called, the Reconstruction Finance Corporation is authorized and directed to allocate and make available to the Secretary of the Treasury the sum of $1,000,000,000, or so much thereof as may be necessary, and for such purpose the amount of the notes, bonds, debentures, or other similar obligations which the Reconstruction Finance Corporation is authorized and empowered under section 9 of the Reconstruction Finance Corporation Act, as amended, to have outstanding at any one time, is hereby increased by such amounts as may be necessary.

SEC. 604. The bank is authorized to issue notes, bonds, debentures, or other like evidences of indebtedness to obtain funds for the purpose of carrying out the intents of this act, in an aggregate amount not to exceed $10,000,000,000. These notes, bonds, or debentures may be used for the purpose of exchange by the Board for mortgages agreed to be purchased; or may be sold by it as required and the proceeds of such sale used for the purchase of mortgages. Bonds may be issued in an amount not to exceed 90 percent of the current value of the mortgages owned by the bank, plus the cash in hand, securities of the United States and unpaid subscription to capital stock, under such regulations and in such denominations as the Board shall prescribe, and shall mature within a period of not more than 20 years from the date of issue and bear interest at a rate not to exceed 4 percent per annum, payable semiannually, or January 1 and July 1 of each year.

SEC. 605. The management of the bank shall be vested in 10 directors, 5 of different agencies appointed by the President with approval of the Senate. The Board shall have power to select, employ, and fix the compensation of such officers, employees, attorneys, or agents as shall be necessary for the performance of its duties under this act, without regard to the provisions of other laws applicable to the employment or compensation of officers, employees, attorneys, or agents of the United States. The bank 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 expenditure of public funds. The bank shall pay such proportion of the salary and expenses of the members of other Federal agencies, of State agencies, and of its officers and employees as the Board may determine to be equitable in proportion to their use by the bank, and may at its discretion establish branch offices; the bank may use facilities of Federal home loan banks, or the Home Owners' Loan Corporation,, or the Federal Housing Administration, upon payment therefor in such reasonable amount as determined by the Board. The Board is authorized to make such bylaws, rules, and regulations, not inconsistent with the provisions of this act, as may be necessary for the proper conduct of the business of the bank. The bank may declare and pay such dividends into the United States Treasury as may be earned by it and as in the judgment of the Board it is proper for the bank to pay.

Section 606: Any person, corporation, partnership, association, banking, or other institution engaged in the business of making first-mortgage loans on urban property for its own account may become a member if, after having first made application in writing requesting the right to become eligible to discount mortgages with the bank, it shall be approved by the Board as being in such financial condition and as conducting its affairs in such manner as to make the applicant a desirable member. Upon approval of the application by the Board and the payment of $1,000 the applicant shall become a member. Members may be dropped at any time by the Board if there is a failure on the part of such member to comply with rules of practice and standards set by the Board to govern the conduct of its members, and the membership fee is thereupon forfeited to the bank, and members in good standing desiring to withdraw from membership may so do, and thereupon shall be repaid one-half the membership fee.

Section 607: The stock of the bank and any and all notes, debentures, bonds, or other such obligations issued by the bank shall be exempt, both as to principal and interest, from all taxation (except surtaxes, estate, inheritance, and gift taxes) now or hereafter imposed by the United States, by any Territory, dependency, or possession thereof, or by any State, county, municipality, or local taxing authority. The bank, including its franchise, its capital, its reserves and surplus, its advances, and its income, shall be exempt from all taxation now or hereafter imposed by the United States, by any Territory, dependency, or possession thereof, or by any State, county, municipality, or local taxing authority; except that any real property of the bank shall be subject to State, Territorial, county, municipal, or local taxation to the same extent according to its value as other real property is taxed. The notes, debentures, and bonds issued by the bank, with unearned coupons attached, shall be accepted at par by the bank in payment of or as a credit against obligation of any debtor of the bank or of any mortgagor whose mortgage it owns.

SEC. 608. Obligations of the Federal Mortgage Bank issued under this act shall be lawful investments and may be accepted as security for all fiduciary, trust, and public funds, the investment or deposit of which shall be under the authority or control of the United States or of any officer or officers thereof. The Federal Reserve banks are authorized to act as depositaries, custodians, or fiscal agents for the Federal Mortgage Bank in the general performance of its duties under this act as amended.

SEC. 609. Mortgage, amortization, and other definitions shall be the same as provided in the National Housing Act except as to provisions hereinafter set forth, except that the term "mortgage" shall not be esteemed to be restricted to a home mortgage. The following classes of mortgages, but with such maximum and minimum limit of amount as the bank by regulation may determine, shall be eligible to discount by members:

(a) Any mortgage insured under title II of the National Housing Act.

(b) Home mortgages (on single, and 2-, 3-, or 4-family homes) not exceeding 20 years of life, amortized at the rate of not less than 12 percent per annum (excepting that during the first 3 years of the mortgage no amortization need be provided) may be discounted up to the face thereof, but not exceeding 55 percent of the fair worth of the property.

(c) Home mortgages unamortized not exceeding 5 years in life, and mortgages amortized at not less than 12 percent per annum not exceeding 15 years of life on multiple dwellings may be discounted up to the face thereof, not exceeding 50 percent of the fair worth of the property.

(d) All other classes of sound mortgages on improved property may be discounted up to the face thereof, but not exceeding 45 percent of the fair worth of the property.

(e) Mortgages on new homes or housing on which construction is started subsequent to the enactment of this bill and prior to January 1938 may be discounted up to the face thereof, but not exceeding 80 percent of the fair worth of the property.

(f) Mortgages on new buildings of any other type on which construction is started subsequent to the enactment of this bill and prior to January 1, 1938, may be discounted up to the face thereof, but not exceeding 70 percent of the fair worth of the property,

Section 610: Mortgages discounted under (e) and (f) above shall be subject to these conditions.

(a) The mortgage shall not exceed 20 years of life, such life to commence from the date the final payment is made the mortgagor by the mortgagee.

(b) The mortgage shall be amortized at the rate of not less than 3 percent per annum during its life.

(c) The fair worth of the property adjudged for the purpose of determining the amount of the mortgage discountable shall not exceed the appraised value of the land plus the cost of the building, which cost may include payments made during the construction period for taxes and interest on payments under the mortgage, the "construction period" in these calculations not to exceed 1 year.

(d) In order that mortgages be eligible for discount at these higher percentages provided for the purpose of encouraging needed new construction, application, accompanied by plans and specifications of the building, must be made to the bank in writing requesting that the mortgage be declared eligible, in the case of homes, at some time prior to completion and final payment by mortgagor or mortgagee; and in the case of other new buildings, prior to the commencement of construction thereof, the bank to refuse commitment if in its sole judgment such other new building is not a needed improvement or the project is not economically sound.

Upon receipt of application the bank may commit that it will discount the mortgage at any time within some named period, but not more than one and one-half years from the date construction commenced, provided the building has been completed in substantial accordance with plans submitted or in an enlarged and bettered manner and is a sound building evidencing good workmanship.

SEC. 611. These provisions as they may apply shall be followed in connection with all mortgages discounted, excepting insured mortgages;

(a) Mortgages to be eligible for discount must not exceed the maximum fixed by regulation nor be less than the minimum in the amount of unpaid principal, and the maker thereof must not be in default for interest or taxes, or in any other of the terms of the mortgage.

(b) The bank shall refuse to discount mortgages the rate of interest upon which exceeds 6 per centum per annum, or upon which the total cost for placement to the original borrower for all charges, including legal fees, title search, and other collateral expenses exceeds 5 per centum of the face of the mortgage or to whose annual interest rate other charges are added: Provided, That such additional charges are not for taxes or insurance costs, properly to be paid by mortgagor. It shall be the obligation of the borrower to present satisfactory evidence to the bank that there have been no commissions, bonuses, discounts, premiums, or other charges made which, after proper allowance for credits of like nature, have raised the cost to the borrower for interest or fee for placement above the amounts set forth herein. This provision so far as the placement cost of mortgages is concerned applies only to mortgages created after the enactment of this Act.

(c) Before discounting any mortgage, the bank shall require the member to furnish satisfactory evidence of the title to, and of the fair worth of, the property given to secure the mortgage. An independent appraisement of the value of the property by actual view, shall be had by the bank before a mortgage is discounted. The mortgage shall be purchased without the right of recourse against the member.

(d) The bank shall arrange for the servicing of mortgages discounted by or transferred to the bank, through appropriate agencies designated by it, at fees to be established by it from time to time. Such fees shall not exceed one-half per centum per annum of the unpaid principal of the mortgage serviced, excepting that a minimum base fee of $24 per annum for each mortgage may be established.

(e) The bank shall charge the member a fee of 1 per centum on the unpaid principal of the mortgage debt when the mortgage is discounted.

SEC. 612. The bank is likewise authorized to subscribe to and purchase stock in National Mortgage Associations created under title III of the National Housing Act, subject to the following conditions:

(a) Either the total stock of such an association, or 51 per centum thereof, must be purchased.

(b) The total of the investment in such stock shall not exceed $100,000,000. (c) If stock in any one mortgage association is purchased, stock must be purchased in a bank located in a principal city of each of the Federal Reserve districts; and only one such purchase shall be made in any particular Federal Reserve district, until purchase has been made of stock in a mortgage association in each Federal Reserve district.

SEC. 613. The bank may guarantee the bonds or debentures of any mortgage association in which it owns stock, on condition that such bonds or debentures are issued against mortgage portfolios, the contents of which meet the same requirements as provided for mortgages eligible for purchase by the Federal mortgage bank. The bond issuing right of the Federal mortgage bank shall be reduced by the sum of such guaranties outstanding upon which it is obligated.

SEC. 614. (a) Whoever makes any statement, knowing it to be false, or whoever willfully overvalues any security for the purpose of influencing in any way the action of the bank or the board upon any application, advance, discount, purchase, or repurchase agreement, or loan, under this Act, or any extension thereof by renewal deferment, or action or otherwise, or the acceptance, release, or substitution of security therefor, shall be punished by a fine of not more than $5,000, or by imprisonment for not more than two years, or both.

(b) Whoever (1) falsely makes, forges, or counterfeits any note, debenture, bond, or other obligation or coupon, in imitation of or purporting to be a note, debenture, bond, or other obligation, or coupon, issued by the bank, or (2) passes, utters, or publishes, or attempts to pass, utter, or publish any false forged, or counterfeited note, debenture, bond, or other obligation or coupon, purporting to have been issued by the bank, knowing the same to be false, forged, or counterfeited; or (3) falsely alters any note, debenture, bond or other obligation, or coupon, issue or purporting to have been issued by the bank; or (4) passes, utters, or publishes, or attempts to pass, utter, or publish, as true any falsely altered or spurious note, debenture, bond, or other obligation, or coupon, issued or purporting to have been issued by the bank, knowing the same to be falsely altered or spurious, shall be punished by a fine of not more than $10,000, or by imprisonment for not more than five years, or both.

(c) Whoever, being connected in any capacity with the bank, (1) embezzles, abstracts, purlions, or willfully misapplies any money, funds, securities, or other things of value, whether belonging to it or pledged or otherwise intrusted to it; or (2) with intent to defraud the bank, or any other body, politic or corporate, or any individual, or to deceive any officer, auditor, or examiners of the bank, makes any false entry in any book, report, or statement of or to the Board or the bank, or without being duly authorized, draws any order or issues, puts forth, or assigns any note, debenture, bond, or other obligation, or draft, mortgage, judgment, or decree thereof, shall be punished by a fine of not more than $10,000 or by imprisonment for not more than five years, or both.

(d) The provisions of sections 112, 113, 114, 115, 116, and 117 of the Criminal Code of the United States (U. S. C., title 18, secs. 202 to 207, inclusive), insofar as applicable, are extended to apply to contracts or agreements of the bank under this Act, which, for the purposes hereof, shall be held to include advances, loans, discounts, and purchase and repurchase agreements; extensions and renewals thereof; and acceptances, releases, and substitutions of security therefor. (e) No person, partnership, association, or corporation shall make any charge in connection with a loan by the bank or an exchange of bonds or cash advance under this Act in excess of the charges authorized herein. Any person, partnership, association, or corporation violating the provisions of the subsection shall, upon conviction thereof, be fined not more than $10,000, or imprisoned not more than five years, or both.

EDWARD A. MACDOUGALL,

Chairman Committee on Real Estate Finance,
National Association on Real Estate Boards,
59 East Van Buren Street, Chicago, Ill.

TABLE 13.-Average value of owner-occupied properties-36 selected cities, 1930, 1933, 1934

[U. S. Department of Commerce, Financial Survey of Urban Housing, 1934]

Number reporting in sample

Jan. 1, 1930 Jan. 1, 1933 | Jan. 1, 1934

Albuquerque, N. Mex.

Asheville, N. C..
Atlanta, Ga..

Austin, Tex..

Baton Rouge, La..
Binghamton, N. Y.
Birmingham, Ala..
Boise, Idaho.

Burlington, Vt.
Butte, Mont.
Casper, Wyo..

Cleveland, Ohio.