Evening star., 1932-11-07
Applications From Over Ma.
ton Fall Short as Officials
Muster Credit.
HUGE FUND TO BECOME
AVAILABLE IN SHORT Time
81 500, 900, 900 Aid offered Only in
Cases Where Reasonable Security
Can Insure Repayment.

Although 1t will soon have available
credit reservoir of 81 500, 100000, appl-
cations received from all sections Of the
country for direct loans to eligible men,
bers of the Home Loan Bank system
have fallen short CT what the new Fed
eral agency anticipated when the II
regional banks began functioning on
October Is
In making this statement today an
official of the mortgage aid system ex-
pressed an opinion that this is one of
the best signs toward recovery that has
yet appeared on the financial horizon" d"
He also said applications for relief
from home owners direct also have
failed to come up to what was predicted
by the Federal board.
1t was stated that the first direct loan
to an eligible member would be forth
coming within fortnight.
Auditors check ON the tock-subscrip-
ton books, which were opened in IS
cites 80 days before the regional banks
began operating. is understood to have
been completed. and the Treasury De-
partment will be called upon this week
to subscribe Sl24,000,000 toward the
S134000,000 capitalization Of the sys-
tenn
$4,000. 900 Subscribed.
The books show, according to this
authoritative source that building and
loan associations savings banks and
life insurance companies subscribed to
approximately sl0,000,000 during the
30-day period. which was the goal of the
board. The Home Loan Bank act speci-
f1es the Treasury vas to subscribe up to
S125 100000.
Although the auditors report has
been completed. it is understood that It
viii not be made public until Franklin
w. Fort. chairman of the board returns
to Washington on Thursday. Because
the new bank act has been political
issue in some Midwestern States. Mr..
Fort has been campaigning in this terri
tory during the last three weeks in
defense of the new system.
The board was reported concentrat-
ing its efforts of selling several hundred
million dollars in bonds at compare
lively low interest. II is understood
the bonds will be 10-year serials, with
10 per cent repaid each year and in
terest semi-annually They will be tax
exempt. except for surtax, inheritance
and gift taxes
In statement by Morton Bodfish.
member of the board. made public YES
terday. he issued warning that these
are days Of claims and counter claims,
eXaggeration and criticism. and the
press and public cannot but be con-
fused by the many spokesmen who
would either present the Home Loan
Bank system as a cure-all for the de-
preston or who raise questions as to the
effectiveness Of its program"
Borrowers Must Meet Test.
Frankly" he added, no sound home
financing system can give relief to home
owners. home buyers. home repairers.
home taxpayers unless they have good
character. some earning power and are
otherwise in position under ordinary
conditions to carry their obligations
The program and policies of the
Home Loan Bank system must meet
every test of sound business practice
and conservative financing. Otherwise,
the system, which in its broad activities
must raise its own capital through the
sale of bonds, will not be able to finance
itself. If the public does not find the
securities to be issued by the IL Federal
Home Loan Banks to be absolutely safe.
the IL banks will not be able to obtain
lIlc IIOllty W pass Oll ~ ilOIile ONU-
erS' financing institutions"
Mr. Bodfish said the bonds would be
secured beyond question Their secur-
ity will rest. he asserted, upon the fol-
lowing fundamental principles and
requirements:
For every dollar of bond. S190 of
unpaid debt on home mortgages, two
for-one collateral pledged plus the value
of the note and stock of the member
institutions
mo advance on a mortgage behind
a bond in excess of 40 per cent of the
value of the real estate, but not to ex-
ceed $4,000, although the mortgage may
have a higher percentage. No mort
cages accepted which have maturity
date of more than Is years, which are
substantially past due or which are on
one. two or three family homes with a
present valuation in excess of $4,000.
Member institutions will pledge prin-
cipally long monthly repayment
first mortgages. These monthly repay
ments on collateral pledged alone are
more than sufficient to pay back the
bond debt, without regard to the very
substantial monthly income from un-
pledged mortgages of the associations.
Loans Carefully Guarded.
Loans primarily to institutions who
have given their notes for a hundred
years to commercial banks, without
dollar of loss in the collection of such
notes"
He further asserted no person who
has placed his savings into IAN Amer
lean home and paid for it should be
faced with one situation we are not
making loans"
of personal sympathies, he does not see
how the system could help the situation
where an individual is employed and
has a mortgage which equals or exceeds
the value of his property"