Evening star., 1933-09-11
HOME LOAN BONDS
STATUS EXPLAINED
Corporation Issues Circular
Outlining Features of
Securities.

Inc Home owners Loan Corpora
ton today issued for distribution to
banks, insurance companies and other
financial institutions and to its Offices
throughout the country formal cir
cular setting forth in detail the fea-
lures Of its bonds which will soon be
issued In exchange for first mortgages
on homes under the provisions of the
home owners loan act" which be-
came law on June 13. last. The
def1nitive bonds are expected to be
available in a short time, to be ex-
changed for the temporary certificates
which now are being issued.
The circular describing the bonds
summarizes the purposes Of the home
owners loan act and explains the con-
ditions under which the corporation
will make loans secured by first mort
cages. 1t Is stated that the regulations
adopted by the board of directors gov
erning appraisals surround the accep-
tance of mortgages with every possible
safeguard and assure ample security for
the bonds. Only first mortgages will
be accepted by the Corporation and
these in each instance must be secured
by real estate worth at least IS per cent
more than the par value of the bonds
exchanged.
Secured Also bv Stock.
The bonds are further secured by
che capital stock of the corporation to
the amount of 5000 100000, all of which
has been subscribed by the United
States Government. The bonds will
run for 18 years, with interest at 4
per cent. payable semi-annually and
the interest guaranteed by the United
States Government. They are exempt
both as to principal and interest from
all Federal. State, municipal and local
taxation, except surtaXes, estate, in
heritance and gift taxes
Under the provisions of the law they
are tenderable at par and must be ac-
cepted by the corporation for the pay
ment of any principal or interest pay
ments on mortgage debts due the cor
poration at any time.
Theyq are acceptable by the United
States Treasury at par as security for
Government deposits and at market
value to secure postal savings funds
The Reconstruction Finance Corpora
ton will accept them as security for
loans made by that corporation at 80
per cent of their par value.
They are acceptable by the United
ruled that these bonds may be held by
national banks in operation when re-
ceiVed from the corporation in ex-
change for home mortgages, and valued.
Tor the present. at par or the value at
which the banks carried such mortgages
at the time of exchange, which ever
is the lesser.
Retirement Provided.
1t Is explained that every asset
owned by the corporation is security
for the bonds, and the corporation has
no power to contract any other debts
except running expenses, which will
be more than covered by the interest
collected from the underderlying mort
gages-the rate being 5 per cent OF
such mortgages while the rate on the
bonds is per cent. The corporation
will retire the bonds progressively as
interest and principal payments accum-
ulate and make funds available for this
purpose.
The corporation has full authority to
purchase and retire the bonds It is
StatedYthat the guarantee of the United
States Government of interest pay
ments will be Endorsed on the face of
each bond and that the Attorney Gen.
eral Of the United States has rendered
an opinion upholding the legality and
regularity of the issue. In connection
with the issuance Of the circular. the
board announces that many States
have, through their legal departments,
declared the bonds as eligible invest
ments for financial institutions under
their supervision, in addition to their
acceptability in exchange for mort
cages. New York and Colorado have
enacted special laws. making them
eligible as investments for savings
banks. State banks and for sinking
funds.
Although many institutions which
will accept the bonds in exchange for
mortgages have indicated that they will
hold the bonds as investments, the
board expects that an open market for
the sale of these securities will be estab-
lished in the near future.