Evening star., 1932-08-16

in the district as its headquarters.
Wf1en we have determined upon the dis
trict boundaries, we are to open sub
scription books for subscriptions to the
carital stock, which Is to be not less
than 5000 900 in each district.
Stock May BE Bought.
This stock may be purchased by
building and loan associations, inSur-
ance companies and savings banks at
the rate of l per cent Of the amount
of home mortgages held by them. We
are to keep the subscription books for
stock open for 80 days. If, by that
time, we have not secured subscriptions
for the full minimum capital we have
fixed for the district, the balance OF
that capital is to be subscribed by the
Reconstruction Finance Corporation
ernment. One hundred and twenty-five
million dollars has been authorized by
Congress as the maximum subscription
by the Government.
1--WE are then to select an original
board of directors of IL in each district
bank, who will serve until January,
when of their successors will be
elected by the stockholders, the other
two to continue to be appointed by the
board. The banks, when set up, are
authorized by law to make loans to
their stockholder members on the Sc
curity of mortgages owned by those
stockholders. The nature and size of
the loans which the Home Loan Banks
can make, however, are strictly limited
In the first place, those loans must be
only on home mortgages.
Home Mortgages.
Home mortgages are defined to be
first mortgages on properties designed
for the dwelling of three families or less
In the second place, in the effort to
promote the long term financing of
home loans, the banks may loan to a
building and loan association, for ex-
ample. If the mortgage was originally
written for 8 years or more, go per cent
of the unpaid principal of the mortgage
not to exceed 40 per cent of the value
of the real estate mortgaged. If the
mortgage was originally written for less
than 8 years the banks may loan only
so per cent of the unpaid principal not
to exceed 80 per cent of the value Of the
real estate mortgaged. OF course, this
will not operate to prevent savings
bank or building and loan association
more than 40 per cent of its value. 1t
simply means that the Home Loan
Bank in the interest of safety will ad-
vance to the savings bank or building
and loan association or insurance COM
pany only the percentages which have
stated. The reason for this strict regu-
lation is in part because it is intended
to raise additional funds for the Home
Loan Bank system by the issuance OF
tax-exempt debentures which are to be
sold to the public. These debentures
will be as high-grade and as strong a
security as anything else in the country
except Government bonds. No deben-
ture can be issued unless there be de-
posted in trust as security $3.50 worth
of advances to building and loan associ-
ations, insurance companies and saw
ings banks for every 100 dollars worth
of debentures issued.
40 Per Cent Limit.
Since the advances may not exceet
| 40 per cent Of the value of the propert.
in any case, the debentures which th'
Home Loan Bank Board will offer t,
the public will be secured, therefore, a
the rate Of about $500 worth OF rea
estate for every $100 of debentureS ant
will have in addition the capital OF al
the banks plus the obligations Of saving
banks, insurance companies and build
| ing and loan associations behind ii
| There are, of course, numerous otbe
provisions of the law affecting both tn
| loans In the first instance, the manage
ment Of the banks and the issuance o
debentures. But I think I have sait
enough to give you the picture Of tn
major outlines of the system. 1t re
mains for us to consider how mos
speedily and effectively we can cause it
provisions to react for the benefit o
| the home.
"You will note first from what hav,
said that we are not concerned with BIZ