Evening star., 1932-01-02
HOME LOAN BANK
BILL IS OUTLINED
Follows Proposal Made by
Hoover, Realty ASsoCia-
ton Declares.


The bill providing for establishment
Of IL Federal home loan banks to dis
count residential home mortgages,
which was introduced in the Senate by
Senator Watson Republican, of In
diana, and in the House by Repre-
sentative Luce, Republican, Of Massa-
chusetts, does not differ from the plan
outlined by President Hoover Novem-
Der 13 when he first proposed the new
system, according to the National As
sociation of Real Estate Boards.
reading of the bill discloses two
things to which the realty association
is giving wide publicity: The discount
banks would not deal with individuals;
the discount banks would have no re-
lation whatsoever with the Federal Re
serve and thus no broadening of the
Federal Reserve base is contemplated
in this bill.
Provisions Outlined.
The II banks would be located in
the districts already defined for the
Federal Land Bank system. AS pro-
vided in the bill, the new banks would
operate as follows, according to the
national realtors:
Amortized and unamortized mort
cages would be discounted by the banks.
All mortgages handled must be on
dwellings designed for not more than
two-family occupancy. Discounttng OF
unamortiZed loans will be restricted to
so per cent of the unpaid principal
amount Of the loan, also restricted to
loans having less than five years to
run. For example, if the unpaid bal
ance of the principal is $4,000 the
maximum loan would be $4,000, pro-
viding for possible depreciation.
AmortiZed mortgages will be dis
counted up to 60 per cent of the un-
paid amount, when the original term
is not more than ten years.
Only mortgages having an unpaid
balance of less than $4,000 will be
eligible for discount.
The discount banks will deal with
their members who are defined in the
bill as banks and banking associa-
tions, which would include savings
banks, trust companies, insurance COM
panies, building and loan associations,
and other institutions subject to the
inspection and control Of banking
laws
Handling Of Finances.
Financing will be handled as follows:
A central board composed of five SAL
aried members appointed by the Presi-
dent will determine the amount of
capital stock to be originally set up
for each bank. Members, comprising
the financial institutions described
above, would subscribe to the capital
stock Of these banks an amount equal
to ~ per cent Of home mortgages
held and not less than $2500. The
remainder will be subscribed by the
Government, but the bill provides for
the retirement Of the shares held by
the United States through the pay
ment Of half Of all capital stock paid
in after a suitable amount has been
feached in the opinion Of the Central
Board The total capitalization Of the
IL banks will be not less than $780,
100000.
The discount banks will keep them
selves liquid and in cash through the
sale to the public of taXeXempt notes,
debentures, or bonds, which will be
secured by the mortgages they have
purchased. A margin between the in
terest rate charged member borrow
ers for their loans and the rate paid
by the discount banks on securities
they issue is to provide operation ex-
pense and reserves.
The reserve accounts will be built
up from net earnings, and when they
have reached a certain sum provisions
are made for the payment of divi-
dendS.
Each of the banks may resell ad-
vances on mortgages to any Of the
other discount banks This, COM
ments the association, will provide the
flow of capital for home buying and
building from State to State that is so
greatly needed
Would Employ Examiners.
The bill gives the central Board of
! Supervision authority to make exam
nations of State laws, TO study prop
erty value trends, to order appraisais,
and to put on accredited bank exam
! inerS to investigate the condition Of in
stitutions asking for loans, even though
they are already under State bank ex-
animation. Five members of this board
will be appointed with the advice and
consent Of the Senate" and will be paid