An Act to amend the Federal Home Loan Bank Act and title IV of the National Housing Act, and for other purposes
PL 87-210 (H.R.7108), enacted 09/08/1961

482 
PUBLIC LAW 87-210-SEPT. 8, 1961 
[75 ST A T . 
Public Law 87-210 
September 8, 1961 
[H. R. 7108] 
AN ACT 
Federal H o m e 
L o a n B a nlc Act, 
amendment. 
47 Stat. 727. 
12 u s e 1426. 
Capital stock. 
Subscription. 
12 u s e 1424. 
Overs ub s cri p-
tions. 
Limitations. 
12 u s e 1430. 
Cancellation o f 
o ver sub s cript ion. 
To amend the Federal Home Loan Bank Act and title IV of the National Housing 
Act, and for other purposes. 
Be it enacted hy the Senate and House of Representatives 
of the 
United States of America in Congress assemhled^ That subsection (c) 
of section 6 of the Federal Home Loan Bank Act, as amended, is 
hereby amended to read as follows: 
"(c) (1) The original stock subscription of each institution eligible 
to become a member under section 4 shall be an amount equal to 1 per 
centum of the subscriber's aggregate unpaid loan principal, but not 
less than $500. The bank shall annually, as of the close of the calendar 
year, adjust, at such time and in such manner and upon such terms 
and conditions as the Federal Home Loan Bank Board may by regula-
tions or otherwise prescribe, the amount of stock held by each member 
so that such member shall have invested in the stock of the Federal 
Home Loan Bank at least an amount calculated in the manner pro-
vided in the next preceding sentence (but not less than $500). 
If 
the bank finds that the investment of any member in stock is greater 
than that required under this subsection it may, unless prohibited by 
said Board or by the provisions of paragraph (2) of this subsection, 
in its discretion and upon application of such member retire the stock 
of such member in excess of the amount so required. 
Said Board, in 
its discretion, may, by regulations or otherw^ise, provide for adjust-
ments in amounts of stock to be issued or retired in order that stock 
may be issued or retired only in entire shares. 
"(2) The provisions of paragraph (1) of this subsection shall be 
subject to the following limitations: 
"(i) No member which is a member on the date of the enact-
ment of this paragraph (2) shall be permitted to reduce its stock 
to an amount which is less than the amount held by it as of the 
close of such date, except that a member may at any time reduce 
its stock to an amount which is not less than 2 per centum of its 
aggregate unpaid loan principal as of the beginning of the cal-
endar year in which the reduction is made (but not less than 
$500) : Provided^ That if the amount to which such stock is so 
reduced is less than 2 per centum of such member's aggregate 
unpaid loan principal as of the close of the date of the enact-
ment of this paragraph (2) such reduction may be made only 
to such extent as said Board in its discretion may by regulations 
or otherwise provide. 
"(ii) Notwithstanding any other provision of this subsection, 
no adtion shall be taken by any bank with respect to any member 
pursuant to any of the foregoing provisions of this subsection if 
the effect of such action would be to cause the aggregate out-
standing advances, within the meaning of the last sentence of 
subsection (c) of section 10 or within the meaning of regulations 
of said Board defining said term for the purposes of this sentence, 
made by such bank to such member to exceed twelve times the 
amounts paid in by such member for outstanding capital stock 
held by such member. 
"(3) Except as provided in subsection (i), upon retirement of 
stock of any member the bank shall pay such member for the stock 
retired an amount equal to the par value of such stock, or, at the elec-
tion of the bank, the whole or any part of the payment which would 
otherwise be so made shall be credited upon the indebtedness of the 
75 S T A T . ] 
PUBLIC LAW 87-210-SEPT. 8, 1961 
483 
member to the bank. 
In either such event, stock equal in par value to 
the amount of the payment or credit, or both, as the case may be, shall 
be canceled. 
" (4) For the purposes of this subsection, the term 'aggregate unpaid p^i^^^o^^^^j^ci-
loan principal' means the aggregate unpaid principal of a subscriber's pai." 
or member's home mortgage loans, home-purchase contracts, and 
similar obligations. 
"(5) The Federal Home Loan Bank Board, by regulations or other- f„^*P.°^*„^ ^""^ '"" 
wise, may require each member to submit such reports and information 
as said Board, in its discretion, may determine to be nexiessary or ap-
propriate for the purposes of this subsection." 
SEC. 2. Subsection (1) of section 6 of the Federal Home Loan Bank 
64 stat. 257. 
Act, as amended, is hereby repealed. 
Repeal. 
SEC. 3. Subsection (a) of section 404 of the National Housing Act, 
National Housing 
-I T • 
I 
1
^
' 
T T , 
1 
I ' l l 
A c t , 
a m e n d m e n t . 
as amended, is hereby amended to read as lollows: 
48 stat. 12S9. 
" (a) The Corporation shall establish a Primary Reserve which shall 
^
^ use 1727. 
be the general reserve of the Corporation and a Secondary Reserve to 
which shall be credited the amounts of the prepayments made by 
insured institutions pursuant to subsection (d) and the credits made 
pursuant to the first sentence of subsection (e). 
"(b)(1) 
Each institution whose application for insurance is 
approved by the Corporation shall pay to the Corporation, in such 
manner as it shall prescribe, a premium for such insurance equal to 
one-tw^elfth of 1 per centum of the total amount of all accounts of the 
insured members of such institution plus any creditor obligations of 
such institution. Such premium shall be paid at the time the certifi-
cate'is issued by the Corporation under section 403, and thereafter 
1
2 use 1726. 
annually, except that under regulations prescribed by the Corpora-
tion such premium may be paid semiannually. 
"(2) If, at the close of any December 31, the Primary Reserve 
equals or exceeds 2 per centum of the total amount of all accounts 
of insured members and creditor obligations of all insured institutions 
as of such close, no premium under paragraph (1) of this subsection 
shall be payable by any insured institution with respect to its pre-
mium year beginning during the year commencing on May 1 next 
succeeding such December 31, except that the foregoing provisions of 
this sentence shall not be applicable to any insured institution with 
respect to any of the twenty premium years beginning with the pre-
mium year commencing with the date on which such certificate is 
issued. 
"(3) The Corporation is authorized to prescribe such rules and ^.R"i«s andreguia-
regulations as it may determine to be necessary or appropriate to 
accomplish the purposes and provisions of this subsection." 
SEC. 4. Subsection (c) of section 404 of the National Housing Act, 
Repeal, with ex-
as amended, is hereby repealed: Provided, That the repeal effected by '^^P*'""^-
this section shall not affect any right existing on the effective date of 
such repeal. 
SEC. 5. Subsection (b) of section 404 of the National Housing Act, 
as in effect prior to the amendments made by this Act, is hereby 
amended by striking "(b)" at the beginning thereof and inserting in 
lieu thereof "(c)". 
SEC. 6. Section 404 of the National Housing Act, as amended, is 
hereby amended by adding thereto at the end thereof the following 
new subsections: 
"(d) Each insured institution, except as otherwise provided in this 
Additional pre-
section, shall annually pay to the Corporation, at such time and in 
484 
PUBLIC LAW 87-210-SEPT. 8, 1961 
[75 STAT. 
Ante, p. 482. 
A n n u a l 
ings. 
Credits. 
such manner as the Corporation shall by regulations or otherwise 
prescribe, an additional premium in the nature of a prepayment with 
respect to future premiums of such institution under subsection (b) 
equal to 2 per centum of the net increase in all accounts of its insured 
members during the next preceding calendar year, less an amount 
equal to any requirement, as of the end of such calendar year, for the 
purchase of stock of the Federal Home Loan Bank of which such 
institution is a member, calculated in accordance with the provisions 
of subsection (c) of section 6 of the Federal Home Loan JBank Act 
and without regard to any net increase during such calendar year in 
its holdings of such stock, and such prepayments shall be credited to 
the Secondary Keserve: Provided, That m the case of an insured insti-
tution which was not an insured institution at the beginning of such 
next preceding calendar year the 2 per centum aforesaid shall be 2 
per centum of the net increase in all accounts of its insured members 
during that part of said calendar year which begins with the close of 
the day on which such institution becomes an insured institution and 
the amount deducted from such 2 per centum under the foregoing 
provisions of this sentence shall not exceed one-half of such 2 per 
centum as calculated in accordance with this proviso. The Federal 
Home Loan Bank Board shall by regulations or otherwise provide for 
the furnishing to the Corporation of all necessary information with 
respect to Federal Home Loan Bank stock. 
(e) The Corporation, in accordance with such regulations as it 
may prescribe, shall credit to the Secondary Reserve, as of the close 
of each calendar year a return on the outstanding balances of the 
Secondary Reserve during such calendar year, as determined by the 
Corporation, at a rate equal to the average annual rate of return to 
the Corporation during the year ending at the close of November 30 
of such calendar year, as determined by the Corporation, on the invest-
ments held by the Corporation in obligations of, or guaranteed as to 
principal and interest Tby, the United States. Except as provided in 
subsections (f) and (g), the Secondary Reserve shall be available to 
the Corporation only lor losses of the Corporation and shall be so 
available only to such extent as other accounts of the Corporation 
which are available therefor are insufficient for such losses. No right, 
title, or interest of any institution in or with respect to its pro rata 
share of the Secondary Reserve shall be assignable or transferable, 
whether by operation of law or otherwise, except to such extent as 
the Corporation may by regulation or otherwise provide for transfer 
of such pro rata share in cases of merger or consolidation, transfer 
of bulk assets as defined by the Corporation by regulation or other-
wise for the purposes of this sentence, and similar transactions as so 
defined. 
^ 
"(f) If (i) the status of an insured institution as an insured institu-
64's"a** 259; 68 tion is terminated pursuant to any provision of section 407 or the 
'^ '"" 
insurance of accounts of an insured institution is otherwise terminated, 
(ii) a conservator, receiver, or other legal custodian is appointed for 
an insured institution under the circumstances and for the purpose 
set forth in subdivision (d) of section 401, or (iii) the Corporation 
makes a determination that for the purj)oses of this subsection an 
insured institution has gone into liquidation, the obligation of such 
institution to make prepayments under subsection (d) of this section, 
including any prepayments as to which such institution is obligated 
at the time of such termination, appointment, or determination, shall 
cease, and the Corporation shall pay in cash to such institution its pro 
rata share of the Secondary Reserve, in accordance with such terms 
and conditions as the Corporation may prescribe 1^ regulations or 
otherwise, or, at the option of the Corporation, the Corporation may 
Restrictions. 
A s s i g n m e n t or 
transfer. 
Terminatl on of 
insurance. 
Stat. 633. 
12 u s e 1730 
12 u s e 1724. 
75 STAT.] 
PUBLIC LAW 87-210-SEI*T. 8, 1961 
apply the whole or any part of the amount which would otherwise be 
paid in cash toward the payment of any indebtedness or obligation, 
whether matured or not, of such institution to the Corporation, then 
existing or arising before such payment in cash: Provided^ That such 
payment or such application need not be made to the extent that the 
provisions of the exception in the last sentence of subsection (e) are 
applicable. The Corporation in its discretion may provide by regula-
tions or otherwise for the reinstatement in whole or in part-, upon such 
terms and conditions as to payment or otherwise as it may prescribe, 
of the pro rata share of an institution in the Secondary Reserve in the 
event that such status or such insurance is restored by action of the 
Corporation or of a court in reversing or setting aside such termina-
tion, or in the event that, after such appointment or such determina-
tion, an institution is restored to operation as an insured institution, 
and for the payment, waiver, or other treatment in whole or in part of 
any prepayments which, in the absence of the first sentence of this 
subsection, would have accrued under subsection (d) or would be 
payable thereunder. 
"(g) If, at the close of any December 31, the aggregate of the Pri-
mary Reserve and the Secondary Reserve equals or exceeds 2 per 
centum of the total amount of all accounts of insured members and 
creditor obligations of all insured institutions but the Primary Re-
serve does not equal or exceed such 2 per centum, no insured institu-
tion shall be obligated to make any prepayment under subsection (d) 
during the year beginning with May 1 next succeeding such close, 
and each insured institution's pro rata share of the Secondary Re-
serve shall be used, to the extent available, to discharge such institu-
tion's obligation for its premium under subsection (b) for the 
premium year beginning in such year; and the suspension of obliga-
tion to make such prepayments and the use of such pro rata shares 
as provided in this sentence shall continue unless and until the next 
sentence or the last sentence of this subsection shall become operative. 
If, at the close of any December 31 occurring before the last sentence 
of this subsection shall become operative, the aggregate of the Pri-
mary Reserve and the Secondary Reserve is not at least equal to 1% 
per centum, of the total amount of all accounts of insured members 
and creditor obligations of all insured institutions, (i) the obliga-
tion of insured institutions to make prepayments under subsection 
(d) shall resume on May 1 next following such December 31 and shall 
continue unless and until the first sentence or the last sentence of this 
subsection shall become operative, and (ii) the use of any insured 
institution's pro rata share of the Secondary Reserve under the first 
sentence of this subsection shall terminate with respect to its premium 
under subsection (b) for the premium year beginning during the 
calendar year commencing on May 1 next succeeding such December 
31, and such termination shall continue unless and until the first 
sentence of this subsection shall become operative. If, at the close 
of any December 31, the Primary Reserve equals or exceeds such 2 per 
centum, the Corporation shall, at such time (which shall be the same 
for all insured institutions and shall not be later than May 1 next 
succeeding such close) and in such manner as the Corporation shall 
determine, pay in cash to each insured institution its pro rata share of 
the Secondary Reserve and shall not, after such time, accept or 
receive further prepayments under subsection (d)." 
SEO. 7. This Act shall become effective on January 1 next following 
the date of its enactment. 
Approved September 8, 1961. 
485 
Prepayments. 
Suspensilon. 
Effective date.