Evening star., 1935-06-01
NEW HOME LOAN
ACT IS CLARIFIED
Bank Board Statement Out.
lines Functions of Vari.
GUS Units.

To-Day Issued statement SS 10 tne
effect of new Federal home loan act
on the four agencies under its jurtsdic-
tion, and also to correct widespread
public misunderstanding" Of the H. O.
L. C. and the Federal Home Loan
Bank System.
The statement, which also ex-
planned the functions of the four
agencies under the board, Is as fol-
lows:
/. The Federal Home Loan Bank
System, created July ~, 1882, Is q
permanent reserve credit structure In
home mortgage finance, similar to
the Federal Reserve System IN COM
mercial banking. The present MEM
bership of the IL regional home loan
banks includes over $3.50 privately
managed home financing institutions
with over $4,000, 900 900 in resources.
It Is the largest mortgage reserve sys-
TEN in the world. BY making short
or long-term advances at low IN
terest rates to these members, the
home loan banks serve the public by
enabling the home financing inStitu-
tions to maintain a more liquid posi-
ton, thus protecting their millions
of investors and making a greater
volume of funds available for home
loans on liberal terms, for reflnancing.
construction or modernization. The
home loan banks do not make direct
loans to home owners. do not deal with
cases of distressed home mortgages
and have no direct relation to the
Home Owners Loan Corp.
Authority Broadened.
The new act broadenS the powers
OF the Federal home loan banks by
permitting them to make loans to
non-members on the security of home
mortgages insured under title II OF
the national housing act. and to make
loans to members on the security OF
obligations of the United States or OF
obligations fully guaranteed by the
United States, or of amortized mort
gage loans up to 20-year maturity and
up to $50 1000 in amount 1t makes up
to 100000. 900 available for the pur-
chase of bonds, notes or debentures
of the home loan banks. to expand
their loanable resources.
2. The Home Owners Loan Corp
Is an emergency relief agency, created
June 13, 1888, to refinance urban home
owners who otherwise face foreclosure
as q result of involuntary default on
their mortgages. The corporation
confined strictly to instances Of gen.
uine distress, operates by giving the
home owner new mortgage loan, re-
payable in monthly installments over
q period of IS years, paying OF the
original mortgage and other past-due
liens through its own Government
guaranteed bonds. The corporation is
the only emergency agency supervised
by the Federal Home Loan Bank
board which makes direct loans to
home owners.
Bond Issue Raised.
The new act authorizes the corpora
ton for a period of 80 days to accept
new applications, and increases its
total authorized bond issue from S.
000,000,00O to S4,750,000,000. OF the
additional authorization, 00,0O0. .00O
Is available for necessary repairs and
reconditioning Of homes on which it
holds mortgages.
3. Federal savings and loan asso-
Citations are local, private, mutual
thrift and ome-f1nancing institutions
under permanent Federal charter, ope-
rating under uniform Federal super
vision, examination and regulation.
They were provided for by Congress
In June. 1888, to encourage thrift, and
to increase the volume of private saw
ings available for local home loans on
economical terms to borrowers Of
sound credit standing. Approximately
800 such associations have already
been formed as new, or converted for
mer State-chartered, institutions in
$50 cities in 43 States. All Federal
associations are members of the Fed
eral Home Loan Bank System and
each of their investors Is insured
against loss up to $4,000.
The new act strengthens previous
legislation for the development of
Federal associations. It makes up to
$500, 100000 available, at the discre-
ton Of the Federal Home Loan Bank
Board, for the purchase of Federal
Home Loan Bank obligations, or for
direct investment in Federal associa-
tions, or in State chartered institu.
tions which are members of the
Federal Home Loan Bank System, or
are insured under the Federal Savings
and Loan Insurance Corp, in order
to amplify their resources for making
loans to home owners in their COM
munities.
Protection Provided.
4. Federal Savings and Loan Insur-
ance Corp. was created by Congress
June a., 1884. Every investor in a
thrift and home financing associa-
tion insured by this corporation is
protected against loss of his savings
up to $4,000. Insurance is optional
for State. chartered building and loan
associations, but mandatory for all
Federal savings and loan associations.
such insurance is entirely different
from the insurance of individual
mortgages, available under Title II of
the national housing act. The latter
insureS the lending institution against
loss on its insured mortgage loans.
The Federal Savings & Loan Insur-
ance Coro, on the other hand, safe
guards every investor whose savings
are placed in any thrift institution
which it has insured. Institutions in
sured by the Federal Savings & Loan
Insurance Corp. are not obliged to In
sure, under Title n of the national
housing act the individual mortgages
which they make in lending to home
owners. An insured institution is not
required to be a member of the Fed
eral Home Loan Bank System.