The Pensacola journal. (Pensacola, Fla.) 1898-1985, 1919-05-13
HOME LOAN BANK.

HOME LOAN BANK.
Inquiries concerning the plan for organizing
system of Federal Home Loan banks are COM
ing in to the u. S. Department of Labor from
all parts of the country, and general interest is
manifested in the provisions of the bill to be in
troduced at the next session Of congress-
The impression exists in some minds that the
banks when established would make direct loans
of government funds to persons desiring to build
homes. This is mistake The plan contem-
plates the organization of Federal Home Loan
banks as clearing houses for building and loan
associations, which would then be able to realize
on their long time mortgages, and thus to meet
increased demands for loans. The associations
clearing through these banks would be stock
holders in the institutions.
According to the plan group of building and
loan associations could combine for the organi-
zation of Federal Home Loan bank in which
they would deposit block of mortgages taken
in the regular course of business. Against these
mortgages the bank would issue bonds to 30 per
cent of the value represented. The bank would
sell these mortgages in the market, turning over
the proceeds to the association which had de-
posted them, the association executing note
to the bank for the amount thus received.
The mortgages thus deposited as security, are
not to be sold by the association to the bank, but
would remain the property of the association,
which would continue to collect the regular pay
ments from the borrowing members whose mort
cages have thus been deposited, just the same
as before the deposit was made. If borrower
whose mortgage had thus been hypothecated
pays off his loan in full, the association would
recall that mortgage from the bank, either by
turning the cash value of the mortgage
to the bank to be applied on the debt of the as
ISOLATION, or by deposting another mortgage of
equal value
The bonds of the Federal Home Loan banks
would not draw more than per cent interest per
annum and it is believed that they can be sold
at a lower drawing rate, possibly or IL per
cent. The association would pay to the banks
interest on the amounts advanced at the same
rate which the bonds bear, an additional one
half per cent per annum being allowed to cover
the expenses of maintaining the banks. Asso-
Citations would make semi-annual payments on
the money borrowed, thus amortizing their debts.
1t is suggested that the bonds should run twen-
ty years, associations being permitted to repay
their loans at any time within that period
In the Federal Home Loan bank plan the af-
filiation of association would be entirely op-
tional and an association which does not join in
the banking plan would not be affected in any
way by the new system. The business of the
banks would be conducted by boards of direc-
tors elected by member associations. It is the
purpose to provide for the supervision of the
entire system of banks by such federal authori-
ty as congress may approve. This federal sup
ervision would be exercised at the expense Of
the government as is the case with the Federal
Farm Loan system and the Federal Reserve bank
system.
The movement to establish system of Fed
eral Home Loan banks was started when the aft
er-the-war revival of building in all parts of the
country demonstrated the need of a method by
which money could be realized on the long time
mortgages held by the building and loan asso-
Citations.