[ P U B L I C N o .

47973D CONGRESS]
[H. R. 9620]
AN ACT
To encourage improvement in housing standards and conditions, to provide a
system of mutual mortgage insurance, and for other purposes.

Be it enacted by the Senate and House of Representatives of the

United States of America in Congress assembled. T h a t this Act
may be cited as the " National Housing Act."
TITLE

IHOUSING

RENOVATION
TION

AND

MODERNIZA-

CREATION OF FEDERAL HOUSING ADMINISTRATION

SECTION 1. The President is authorized to create a Federal Housing Administration, all of the powers of which shall be exercised by
a Federal Housing Administrator (hereinafter referred to as the
"Administrator"), who shall be appointed by the President, by
and with the advice and consent of the Senate, shall hold office for
a term of four years, and shall receive compensation at the rate of
$10,000 per annum. I n order to carry out the provisions of this
title and titles I I and I I I , the Administrator may establish such
agencies, accept and utilize such voluntary and uncompensated
services, utilize such Federal officers and employees, and, with the
consent of the State, such State and local officers and employees,
and appoint such other officers and employees as he may find necessary, and may prescribe their authorities, duties, responsibilities, and
tenure and fix their compensation, without regard to the provisions
of other laws applicable to the employment or compensation of
officers or employees of the United States. The Administrator may
delegate any of the functions and powers conferred upon him under
this title and titles I I and I I I to such officers, agents, and employees
as he may designate or appoint, and may make such expenditures
(including expenditures for personal services and rent at the seat of
government and elsewhere, ior law books and books of reference,
and for paper, printing, and binding) as are necessary to carry out
the provisions of this title and titles I I and I I I , without regard
to any other provisions of law governing the expenditure of public
funds. All such compensation, expenses, and allowances shall be
paid out of funds made available by this Act.
INSURANCE OF FINANCIAL INSTITUTIONS

SEC. 2. The Administrator is authorized and empowered, upon

such terms and conditions as he may prescribe, to insure banks, trust
companies, personal finance companies, mortgage companies, building and loan associations, installment lending companies, and other
such financial institutions, which are approved by him as eligible for

Digitized for FRASER

http://fraser.stlouisfed.org/
Federal Reserve Bank of St. Louis

[PUB.

479 J

credit insurance, against losses which they may sustain as a result

of loans and advances of credit, and purchases of obligations representing loans and advances of credit, made by them subsequent to the
date of enactment of this Act and prior to January 1, 1936, or such
earlier date as the President may fix by proclamation, for the purpose of financing alterations, repairs, and improvements upon real
property. I n no case shall the insurance granted by the Administrator under this section to any such financial institution exceed 20 per
centum of the total amount of the loans, advances of credit, and
purchases made by such financial institution for such purpose; and
the total liability incurred by the Administrator for such insurance
shall in no case exceed in the aggregate $200,000,000. No insurance
shall be granted under this section to any such financial institution
with respect to any obligation representing any such loan, advance
of credit, or purchase by it the face amount of which exceeds $2,000:
nor unless the obligation bears such interest, has such maturity, and
contains such other terms, conditions, and restrictions, as the Administrator shall prescribe.
LOANS TO F I N A N C I A L

INSTITUTIONS

SEC. 3. The Administrator is further authorized and empowered

to make loans to institutions which are insured under section 2, and
to enter into loan agreements with such institutions, upon the security of obligations which meet the requirements prescribed under section 2. Such loans or agreements may be made for the full face
value of the obligations offered as security, and shall be at such rates
and upon such terms and conditions as the Administrator shall
determine.
ALLOCATION OF F U N D S

SEC. 4. F o r the purposes of carrying out the provisions of this

title and titles I I and I I I , the Reconstruction Finance Corporation
shall make available to the Administrator such funds as he may
deem necessary, and the amount of notes, debentures, bonds, or other
such obligations which the Corporation is authorized and empowered to have outstanding at any one time under existing law is
hereby increased by an amount sufficient to provide such funds:
Provided, That the President, in his discretion, is authorized to provide suuch x funds or any portion thereof by allotment to the Administrator from any funds that are available, or may hereafter be made
available, to the President for emergency purposes.
A N N U A L REPORT

SEC. 5. The Administrator shall make an annual report to the

Congress as soon as practicable after the 1st day of January in each
year of his activities under this title and titles I I and I I I of this Act.
T I T L E IIMUTUAL MORTGAGE INSURANCE
DEFINITIONS

201. As used in this title

(a) The term " mortgage " means a first mortgage on real estate in
fee simple or on a leasehold (1) under a lease for not less than
SECTION

So in original.

Digitized for FRASER

http://fraser.stlouisfed.org/
Federal Reserve Bank of St. Louis

[PUB. 479J

ninety-nine years which is renewable, or (2) under a lease having a

period of not less than fifty years to run from the date the mortgage
was executed, upon which there *is located a dwelling for not more
than four families which is used in whole or in p a r t for residential
purposes, irrespective of whether such dwelling has a party wall or
is otherwise physically connected with another dwelling; and the
term " first m o r t g a g e " means such classes of first liens as are commonly given to secure advances on, or the unpaid purchase price of,
real estate under the laws of the State in which the real estate is
located, together with the credit instruments, if any, secured thereby,
(b) The term " mortgagee " includes the original lender under a
mortgage, and his successors and assigns approved by the Administrator; and the term "mortgagor " includes the original borrower
under a mortgage and his successors and assigns.
M U T U A L MORTGAGE I N S U R A N C E

FUND

SEC. 202. There is hereby created a Mutual Mortgage Insurance

Fund (hereinafter referred to as the " F u n d " ) , which shall be used*
by the Administrator as a revolving fund for carrying out the provisions of this title as hereinafter provided, and there shall be allocated immediately to such Fund the sum of $10,000,000 out of funds
made available to the Administrator for the purposes of this title.
I N S U R A N C E OF MORTGAGES

SEC. 203. (a) The Administrator is authorized, upon application

by the mortgagee, to insure as hereinafter provided any mortgage
offered to him within one year from the date of its execution which
is eligible for insurance as hereinafter provided, and, upon such
terms as the Administrator may prescribe, to make commitments for
the insuring of such mortgages prior to the date of their execution
or disbursement thereon: Provided, That except with the approval
of the President, (1) the aggregate principal obligation of all mortgages on property and low-cost housing projects existing on the date
of enactment of this Act and insured under this title shall not
exceed $1,000,000,000, and (2) the insurance of mortgages on property
and low-cost housing projects constructed after the passage of this
Act shall be limited to a similar amount.
(b) To be eligible for insurance under this section a mortgage
shall
(1) Have, or be held by, a mortgagee approved by the Administrator as responsible and able to service the mortgage properly.
(2) Involve a principal obligation (including such initial
service charges and appraisal and other fees as the Administrator
shall approve) in an amount not to exceed $16,000, and not to
exceed 80 per centum of the appraised value of the property as
of the date the mortgage is executed.
(3) Have a maturity satisfactory to the Administrator, but not
to exceed twenty years.
(4c) Contain complete amortization provisions satisfactory to
the Administrator requiring periodic payments by the mortgagor
not in excess of his reasonable ability to pay as determined by
the Administrator.
(5) Bear interest (exclusive of premium charges for insurance) at not to exceed 5 per centum per annum on the amount of
Digitized for FRASER
http://fraser.stlouisfed.org/
Federal Reserve Bank of St. Louis

[PUB. 479J

the principal obligation outstanding at any time, or not to exceed

6 per centum per annum if the Administrator finds that in certain areas or under special circumstances the mortgage market
demands it.
(6) Provide, in a manner satisfactory to the Administrator, for
the application of the mortgagor's periodic payments (exclusive
of the amount allocated to interest and to the premium charge
which is required for mortgage insurance as hereinafter provided) to amortization of the principal of the mortgage.
(7) Contain such terms and provisions with respect to insurance, repairs, alterations, payment of taxes, default reserves,
delinquency charges, foreclosure proceedings, anticipation of
maturity, additional and secondary liens, and other matters as
the Administrator may in his discretion prescribe.
(c) The Administrator is authorized to fix a premium charge for
the insurance of mortgages under this section (to be determined in
accordance with the risk involved) which in no case shall be less
"than one-half of 1 per centum nor more than 1 per centum per
annum of the original face value of the mortgage, and which shall
be payable annually in advance by the mortgagee. If the Administrator finds upon the presentation of a mortgage for insurance and
the tender of the initial premium charge that the mortgage complies
with the provisions of this section, such mortgage may be accepted
for insurance by endorsement or otherwise as the Administrator
may prescribe; but no mortgage shall be accepted for insurance
under this section unless the Administrator finds that the project
with respect to which the mortgage is executed is economically
sound.
(d) The Administrator is authorized and directed to make such
rules and regulations as may be necessary to carry out the provisions
of this section.
P A Y M E N T OF I N S U R A N C E

SEC. 204. (a) I n any case in which the mortgagee under an insured
mortgage shall have foreclosed and taken possession of the mortgaged property in accordance with regulations of, and within a
period to be determined by, the Administrator, or shall, with the
consent of the Administrator, have otherwise acquired such property
from the mortgagor after default, the mortgagee shall be entitled,
upon the prompt conveyance to the Administrator of title to such
property satisfactory to him and the assignment to him of all claims
of the mortgagee against the mortgagor arising out of the mortgage
transaction or foreclosure proceedmgs, to receive the benefits of the
insurance as hereinafter provided. Upon such conveyance and
assignment the obligation of the mortgagee to pay the annual
premium charges for insurance shall cease and the Administrator
shall issue to the mortgagee debentures having a total face value
equal to the value of the mortgage on the date of the delivery of
the property to the Administrator, and a certificate of claim, as
hereinafter provided. F o r the purposes of this subsection, the value
of the mortgage shall be determined by adding to the amount of the
principal of the mortgage which is unpiaid on the date of such
delivery the amount of all payments which have been made by the

Digitized for FRASER

http://fraser.stlouisfed.org/
Federal Reserve Bank of St. Louis

[PUB.

479.]

mortgagee for taxes and insurance on the property mortgaged In

accordance with rules and regulations prescribed by the Administrator.
(b) The debentures issued by the Administrator under this section to any mortgagee shall bear interest at a rate determined by
the Administrator at the time the mortgage was offered for insurance, but not to exceed 3 per centum per annum, payable semiannually on the 1st day of January and the 1st day of J u l y of each
r
ear, and shall mature three years after the 1st day of J u l y
ollowing the maturity date of the mortgage in exchange for which
the debentures were issued. All such debentures shall be subject
only to such Federal, State, and local taxes as the mortgages in
exchange for which they are issued would be subject to in the hands
of the holder of the debentures and shall be a liability of the F u n d
only; except that debentures issued in exchange for mortgages insured under this section prior to July 1, 1937, shall be fully guaranteed as to principal and interest by the United States. I n the
event that the amount in the Fund is insufficient to pay upon demand, when due, the principal of or interest on any debentures so
guaranteed, the Secretary of the Treasury shall pay to the holders
the amount thereof which is hereby authorized to be appropriated
out of any money in the Treasury not otherwise appropriated, and
thereupon to the extent of the amount so paid the Secretary of
the Treasury shall succeed to all the rights of the holders of such
debentures.
(c) The certificate of claim issued by the Administrator to any
mortgagee shall be for an amount which the Administrator determines to be sufficient, when added to the face value of the debentures issued to the mortgagee, to equal the amount which the mortgagee would have received if, at the time of the conveyance to the
Administrator of the property covered by the mortgage, the mortgagor had redeemed the property and paid in full all obligations
under the mortgage and those arising out of the foreclosure proceedings. Each such certificate of claim shall provide that there
shall accrue to the holder of such certificate with respect to the
face amount of such certificate, an increment at the rate of 3 per
centum per annum. The amount to which the holder of any such
certificate shall be entitled shall be determined as provided in subsection (d).
(d) If the net amount realized from any property conveyed to
the Administrator imder this section and the claims assigned therewith, after deducting all expenses incurred by the Administrator
in handling, dealing with, and disposing of such property and in
collecting such claims, exceeds the face amount of the debentures
issued in exchange for the mortgage covering such property plus all
interest paid on such debentures, such excess shall be divided as
follows:
(1) If such excess is greater than the total amount payable
under the certificate of claim issued in connection with such
property, the Administrator shall pay to the holder of such
certificate the full amount so payable; and any excess remaining
thereafter shall be paid to the mortgagor of such property.

Digitized for FRASER

http://fraser.stlouisfed.org/
Federal Reserve Bank of St. Louis

[PUB.

1794

(2) I f such excess is equal to or less than the total amount payable under such certificate of claim, the Administrator shall pay
to the holder of such certificate the full amount of such excess.
(e) Notwithstanding any other provision of law relating to the
acquisition, handling, or disposal of real property by the United
States, the Administrator shall have power to deal with, rent, renovate, modernize, or sell for cash or credit, in his discretion, any
properties conveyed to him in exchange for debentures and certificates of claim as provided in this section; and notwithstanding any
other provision of law, the Administrator shall also have power
to pursue to final collection, by way of compromise or otherwise, all
claims against mortgagors assigned by mortgagees to the Administrator as provided in this section.
^f) No mortgagee or mortgagor shall have, and no certificate of
claim shall be construed to give to any mortgagee or mortgagor, any
right or interest in any property conveyed to the Administrator or
in any claim assigned to him; nor shall the Administrator owe any
duty to any mortgagee or mortgagor with respect to the handling or
disposal oi any such property or the collection of any such claim.
CLASSIFICATION OP MORTGAGES A N D REINSURANCE F U N D

SEC. 205. (a) Mortgages accepted for insurance under this title
shall be so classified into groups that the mortgages in any group
shall involve substantially similar risk characteristics and have similar maturity dates. Premium charges received for the insurance of
any mortgage, the receipts derived from the property covered by
the mortgage and claims assigned to the Administrator in connection
therewith, and all earnings on the assets of the group account, shall
be credited to the account of the group to which the mortgage is
assigned. The principal of and interest paid and to be paid on
debentures issued in exchange for any mortgage, payments made or
to be made to the mortgagee and the mortgagor as provided in section 204. and expenses incurred in the handling of the property
covered oy the mortgage and in the collection of claims assigned to
the Administrator in connection therewith, shall be charged to the
account of the group to which such mortgage is assigned.
(b) The Administrator shall also provide, in addition to the
several group accounts, a general reinsurance account, the credit in
which shall be available to cover charges against such group accounts
where the amounts credited to such accounts are insufficient to cover
such charges. General expenses of operation of the Federal Housing Administration under this title may be allocated in the discretion
of the Administrator among the several group accounts or charged
to the general reinsurance account, and the amount allocated to the
fund under section 202 shall be credited to the general reinsurance
account.
(c) Whenever the credit balance in any group account exceeds the
remaining unpaid principal of the then outstanding mortgages
assigned to such group by an amount equal to 10 per centum of the
total premium payments which have theretofore been credited to
such account, the Administrator shall terminate the insurance as to
that group of mortgages (1) by paying to each of the mortgagees
holding an outstanding mortgage assigned to such group a sum

Digitized for FRASER

http://fraser.stlouisfed.org/
Federal Reserve Bank of St. Louis

[PUB.

479.]

sufficient, if such mortgage is in good standing, to pay off such

mortgage in full, the payment in each case being for the benefit and
account of the mortgagor, and (2) by transferring the remainder
of such credit balance to the general reinsurance account provided
for in subsection (b).
(d) If the credit balance in any group account fails to exceed,
until the final year prior to the maturity date of the mortgages
assigned to such group, the remaining unpaid principal of the then
outstanding mortgages assigned to such group by an amount equal
to 10 per centum of the total premium payments which have theretofore been credited to such account, the Administrator shall terminate
the insurance as to that group of mortgages (1) by transferring to
the general reinsurance account provided for in subsection (b)
an amount equal to 10 per centum of the total premium charges
theretofore credited to such group account, and (2) by distributing
the remainder of such credit balance, if any, pro rata to the mortgagees for the benefit and account of the mortgagors of the mortgages assigned to such group.
(e) No mortgagor or mortgagee of any mortgage insured under
this title shall have any vested right in the credit balance in any
such account, and the determination of the Administrator as to the
amount to be paid by him to any mortgagee or mortgagor under
this title shall be final and conclusive.
(f) I n the event that any mortgagee under an insured mortgage
forecloses on the mortgaged property but does not convey such
property to the Administrator in accordance with section 204, or
in the event that the mortgagor pays the obligation under the mortgage in full prior to the maturity thereof, the obligation to pay the
premium charge for insurance shall, upon due notice to the Administrator, cease, and all rights of the mortgagee and the mortgagor
under section 204 shall likewise terminate. Thereupon the mortgagor shall be entitled to receive a share of the credit balance of the
group account of the group to which the mortgage has been assigned,
in such amount as the Administrator shall determine to be equitable
and not inconsistent with the preservation of the solvency of the
group account and of the Fund.
INVESTMENT OF FUNDS

SEC. 206. Moneys in the Fund not needed for the current operations of the Federal Housing Administration shall be deposited in
the Treasury of the United States to the credit of the Fund, or
invested in bonds or other obligations of the United States. The
Treasurer of the United States is hereby directed to pay interest
semiannually on any amount so deposited at a rate not greater than
the prevailing rate on long-term Government bonds, such rate to be
computed on the average amount of such bonds outstanding during
any such semiannual period. T}ie Administrator may, with the
approval of the Secretary of the Treasury, purchase, at not to exceed
par, in the open market, debentures issued under the provisions of
section 204. Debentures so purchased shall be canceled and not reissued, and the several group accounts to which such debentures have
been charged shall be charged with the amounts used in making
such purchases.

Digitized for FRASER

http://fraser.stlouisfed.org/
Federal Reserve Bank of St. Louis

8
LOW-COST H O U S I N G

{PUB. 4704
INSURANCE

SEO> 207. The Administrator may also insure first mortgages, other
than mortgages defined in section 201 (a) of this title, covering
roperty held by Federal or State instrumentalities, private limited
ividend corporations, or municipal corporate instrumentalities oi
one or more States, formed for the purpose of providing housing for
persons of low income which are regulated or restricted by law ox
by the Administrator as to rents, charges, capital structure, rate of
return, or methods of operation. Such mortgages shall contain
terms, conditions, and provisions satisfactory to the Administrator
but need not conform to the eligibility requirements of section 203.
Subject to the right of the Administrator to impose a premium
charge in excess of, or less than, the amount specified for mortgages
defined in section 201 ( a ) , the provisions of sections 204 and 208
shall be applicable to ^mortgages insured under this section: Provided.
T h a t the insurance with respect to any low-cost housing project shall
not exceed $10,000,000.

TAXATION PROVISIONS

SEC. 208. Nothing in this title shall be construed to exempt any

real property acquired and held by the Administrator under this title
from taxation by any State or political subsidivision thereof, to the
same extent, according to its value, as other real property is taxed.
STATISTICAL A N D E C O N O M I C SURVEYS

SEC. 209. The Administrator shall cause to be made such statistical

surveys and legal and economic studies as he shall deem useful to
guide the development of housing and the creation of a sound mortgage market in the United States, and shall publish from time to
time the results of such surveys and studies. Expenses of such
studies and surveys, and expenses of publication and distribution
of the results of such studies and surveys, shall be charged as a
general expense of the Fund.
T I T L E IIINATIONAL MOETGAGE ASSOCIATIONS
CREATION A N D POWERS OF N A T I O N A L MORTGAGE ASSOCIATIONS

SECTION 301. (a) The Administrator is further authorized and

empowered to provide for the establishment of national mortgage
associations as hereinafter provided, which shall be authorized, subject to rules and regulations to be prescribed by the Administrator,
(1) to purchase and sell first mortgages and such other first liens as
are commonly given to secure advances on real estate held in fee
simple or under a lease for not less than ninety-nine years, under the
laws of the State in which the real.estate is located, together with the
credit instruments, if any, secured thereby, such mortgages not to
exceed 80 per centum of tne appraised value of the property as of
the date the mortgage is purchased; and (2) to borrow money for
such purposes through the issuance of notes, bonds, debentures, or
other such obligations as hereinafter provided.

Digitized for FRASER

http://fraser.stlouisfed.org/
Federal Reserve Bank of St. Louis

[PUB.

479.]

(b) Any number of natural persons, not less than five, may apply
to the Administrator for authority to establish a national mortgage
association, and at the time of such application shall transmit to the
Administrator articles of association, signed and sealed by each of
the incorporators and acknowledged before a judge of any court of
record or a notary public, which shall contain (1) the name of the
association, (2) the place where its principal office or place of business is to be located, and (3) such information with respect to its
capital stock as the Administrator may by regulation require. I f the
Administrator is of the opinion that the incorporators transmitting
the articles of association are responsible persons and that such
articles of association are satisfactory in all respects, he shall issue
or cause to be issued to such incorporators a certificate of approval,
and the association shall become, as of the date of issuance of such
certificate, a body corporate by the name set forth in its articles of
association.
(c) Each national mortgage association created under this section
shall have succession from the date of its organization unless it is
dissolved by act of its shareholders, or its franchise becomes forfeited
by order of the Administrator as hereinafter provided, or it is dissolved by Act of Congress, and shall have power
(1) To adopt and use a corporate seal.
(2) To make contracts.
(3) To sue and be sued, complain and defend, in any court of
law or equity, State or Federal.
(4) To conduct its business in any State of the United States
or in the District of Columbia and to have one or more offices in
such State or in the District of Columbia, one of which offices
shall be designated at the time of organization as its principal
office.
(5) To do all things as are necessary or incidental to the proper
management of its affairs and the proper conduct of its business.
(d) No association shall transact any business except such as is
incidental to its organization until it has been authorized to do so
by the Administrator. Each such association shall have a capital
stock of a par value of not less than $5,000,000, and no authorization
to commence business shall be granted by the Administrator to any
such association until he is satisfied that such capital stock has been
subscribed for at not less than par and paid in full in cash or
Government securities.
(e) Each national mortgage association, for the purpose of all
actions by or against it, real, personal, or mixed, and all suits in
equity, shall be deemed a citizen of the State in which its principal
office is located.
(f) No individual, association, partnership, or corporation, except
associations organized under this section, shall hereafter use the
words " national mortgage association ", or any combination of such
words, as the name or a part thereof under which he or it shall do
business. Every individual, partnership, association, or corporation
violating this prohibition shall be guilty of a misdemeanor and shall
be punished by a fine of not exceeding $100 or imprisonment not
exceeding thirty days, or both, for each day during which such
Pub. No. 479

Digitized for FRASER

http://fraser.stlouisfed.org/
Federal Reserve Bank of St. Louis

10

CPUB.479J

violation is committed or repeated. The provisions of section 5243

*)f the Revised Statutes shall not apply to associations created under
this title.
OBLIGATIONS O F NATIONAL, MORTGAGE ASSOCIATIONS

SEO. 302. Each national mortgage association is authorized to

issue and have outstanding at any time notes, bonds, debentures, or
other such obligations in an aggregate amount not to exceed (1) ten
times the aggregate par value of its outstanding capital stock, and
in no event to exceed (2) the current face value of mortgages held
by it and insured under the provisions of title I I of this Act, plus
the amount of its cash on hand and on deposit and the amount of
its investments in bonds or obligations of, or guaranteed as to principal and interest by, the United States. No national mortgage
association shall borrow money except through the issuance of such
notes, bonds, debentures, or other obligations, or issue any such
notes, bonds, debentures, or other obligations, except with the
approval of the Administrator and under such rules and regulations
as he shall prescribe.
I N V E S T M E N T OF F U N D S

SEC. 303. Moneys of any national mortgage association not

invested in first mortgages or other liens as provided in section 301,
or in operating facilities approved by the Administrator, shall be
kept in cash on hand or on deposit, or invested in bonds or other
obligations of, or guaranteed as to principal and interest by the
United States; except that each such association shall keep and
maintain such reserves as the Administrator shall by rules and
regulations prescribe.
MANAGEMENT OF ACQUIRED PROPERTIES

SEC. 804. Subject to such rules and regulations as the Administrator shall prescribe, any national mortgage association shall have
power to deal with, rent, renovate, modernize, or sell for cash or
credit, or otherwise dispose of, with a view to assuring a maximum
financial return to the association, any property acquired by it as a
result of foreclosure proceedings.
EXAMINATIONS AND LIQUIDATION

SEC. 305- The Administrator shall have power to provide for the
periodic examination of the affairs of every national mortgage association and shall have power to terminate the existence of any such
association and order its liquidation and the winding up of its affairs
in any case in which the Administrator finds that the association is
violating any provisions of this title or any rule or regulation thereunder, or in any case in which he finds that the association is conducting its business in an unsafe and unbusinesslike manner. I n
any case in which the Administrator finds, upon examination of the
affairs of any such association, that the capital of such association
is substantially impaired, and i i , within thirty days after the Administrator has notified the association of the existence of such impairment, the capita? is not restored to the satisfaction of the Adminis-

Digitized for FRASER

http://fraser.stlouisfed.org/
Federal Reserve Bank of St. Louis

11

[PUB.479J

trator, he shall terminate the existence of such association and shall

order the liquidation and winding up of its affairs. The expenses
of examination of any such association shall be assessed upon and
paid for by the association in such manner and under such rules and
regulations as the Administrator shall prescribe. F o r the purposes
of this section, examiners appointed by the Administrator shall be
subject to the same requirements, responsibilities, and penalties as
are applicable to examiners under the national banking laws and
the Federal Keserve Act, as amended, and, in the exercise of their
functions, shall have the same powers and privileges as are vested
in such examiners by law.
RULES A N D

REGULATIONS

SEC. 306. The Administrator shall have power to provide by rules

and regulations for the liquidation, reorganization^ consolidation, or
merger of national mortgage associations, including the power to
appoint a conservator or a receiver to take charge of the affairs of
any such association, to require an equitable readjustment of its
capital structure, to release it from the control of a conservator or
receiver, and to permit its further operation.
TAXATION PROVISIONS

SEO. 307. National mortgage associations shall be subject to taxation to the same extent as State-chartered corporations, except that no
State or political subdivision thereof shall impose any tax on any
such association or its franchise, capital, reserves, surplus, loans,
income, or stock, or its securities or the income therefrom, at a
greater rate than that imposed by such State on corporations, domestic or foreign, engaged in similar business within the State. Nothing herein shall be construed to exempt the real property of such
associations from taxation by any State or political subdivision
thereof, to the same extent, according to its value, as other real property is taxed.
DEPOSITARIES OF PUBLIC

MONEYS

SEC. 308. When designated for that purpose by the Secretary of

the Treasury any national mortgage association shall be a depositary of public money, except receipts from customs, under such
regulations as may be prescribed by said Secretary; and it may also
be employed as a financial agent of the Government; and it shall
perform all such reasonable duties as a depositary of public money
and financial agent of the Government as may be required of it*
Any national mortgage association may act as agent for any other
instrumentality of the United States wnen designated for that purpose by such instrumentality.
TITLE

IVINSURANCE OF SAVINGS
ACCOUNTS

AND

LOAN

DEFINITIONS

* 401. As used in this title

(a) The term "insured institution" means an institution whoso
accounts are insured under this title.
SCTION

So In original.

Digitized for FRASER

http://fraser.stlouisfed.org/
Federal Reserve Bank of St. Louis

12

[PUB.4WJ

(b) The term " insured member " means an individual, partnership, association, or corporation which holds an insured account.
(c) The term " insured account" means a share, certificate, or
deposit account of a type approved by the Federal Savings and
Loan Insurance Corporation which is held by an insured member
in an insured institution and which is insured under the provisions
of this title.
(d) The term " d e f a u l t " means an adjudication or other official
determination of a court of competent jurisdiction or other public
authority pursuant to which a conservator, receiver, or other legal
custodian is appointed for an insured institution for the purpose of
liquidation.
CREATION OF FEDERAL SAVINGS A N D LOAN I N S U R A N C E CORPORATION

S E C 402. (a) There is hereby created a Federal Savings and Loan

Insurance Corporation (hereinafter referred to as the " Corporat i o n " ) , which shall insure the accounts of institutions eligible for
insurance as hereinafter provided, and shall be under the direction
of a board of trustees to be composed of five members and operated
by it under such bylaws, rules, and regulations as it may prescribe
for carrying out the purposes of this title. The members of the
Federal Home Loan Bank Board shall constitute the board of
trustees of the Corporation and shall serve as such without additional compensation. The principal office of the Corporation shall
be in the District of Columbia.
(b) The Corporation shall have a capital stock of $100,000,000,
which shall be divided into shares of $100 each. The total amount
of such capital stock shall be subscribed for by the Home Owners'
Loan Corporation which is hereby authorized and directed to subscribe for such stock and make payment therefor in bonds of the
Home Owners' Loan Corporation. The Corporation shall issue to
the Home Owners' Loan Corporation receipts for payment for or
on account of such stock, which shall serve as evidence of the ownership thereof, and the Home Owners' Loan Corporation shall be
entitled to the payment of dividends on such stock out of net earnings at a rate equal to the interest rate on such bonds, which dividends shall be cumulative.
(c) Upon the date of enactment of this Act, the Corporation shall
become a body corporate, and shall be an instrumentality of the
United States, and as such shall have power
(1) To adopt and use a corporate seal.
(2) To have succession until dissolved by Act of Congress.
(3) To make contracts.
(4) To sue and be sued, complain and defend, in any court
of law or equity, State or Federal.
(5) To appoint and to fix the compensation, by its board of
trustees, of such officers, employees, attorneys, or agents, as shall
be necessary for the performance of its duties under this title,
without regard to the provisions of any other laws relating to
the employment or compensation of officers or employees of
the United States. Nothing in this title or any other provision
of law shall be construed to prevent the appointment and compensation as an officer, attorney, or employee of the Corpora-

Digitized for FRASER

http://fraser.stlouisfed.org/
Federal Reserve Bank of St. Louis

(FPB.4TOJ

13

tion, of any officer, attorney, or employee of any board, corporation, commission, establishment, executive department, or
instrumentality of the Government. The Corporation, with
the consent of any board, corporation, commission, establishment, executive department, or instrumentality of the Government, including any field service thereof, may avail itself of
the use of information, services, and facilities thereof in carrying out the provisions of this title.
(d) F o r the purposes of this title, the Corporation shall have
power to borrow money, and to issue notes, bonds, debentures, or
other such obligations upon such terms and conditions as the board
of trustees may determine. Moneys of the Corporation not required
for current operations shall be deposited in the Treasury of the
United States, or upon the approval of the Secretary of the Treasury, in any Federal Reserve bank, or shall be invested in obligations
of, or guaranteed as to principal and interest by, the United States.
When designated for that purpose by the Secretary of the Treasury, the Corporation shall be a depositary of public money under
such regulations as may be prescribed by the Secretary of the
Treasury, and may also be employed as fiscal agent of the United
States, and it shall perform all such reasonable duties as depositary
of public money and fiscal agent as may be required of it.
(e) All notes, bonds, debentures, or other such obligations issued
by the Corporation shall be exempt, both as to principal and interest, from all taxation (except surtaxes, estate, inheritance, and gift
taxes) now or hereafter imposed by the United States, by any Territory, dependency, or possession thereof, or by any State, county,
municipality, or local taxing authority. The Corporation, including its franchise, capital, reserves, surplus, and income, shall be
exempt from all taxation now or hereafter imposed by the United
States, by any Territory, dependency, or possession thereof, or by
any State, county, municipality, or local taxing authority; except
that any real property of the Corporation shallT>e subject to State,
territorial, county, municipal, or local taxation to the same extent
according to its value as other real property is taxed.
(f) The Corporation shall make an annual report of its operations to the Congress as soon as practicable after the 1st day of
January in each year.
(g) No individual, association, partnership, or corporation shall
use the words " Federal Savings and Loan Insurance Corporation ",
or any combination of any of these words which would have the effect
of leading the public in general to believe there was any connection,
actually not existing, between such individual, association, partnership, or corporation and the Federal Savings and Loan Insurance
Corporation, as the name under which he or it shall hereafter do
business. No individual association, partnership, or corporation
shall advertise or otherwise represent falsely by any device whatsoever that his or its accounts are insured or in anywise guaranteed
by the Federal Savings and Loan Insurance Corporation, or by the
Government of the United States, or by any instrumentality thereof;
and no insured member shall advertise or otherwise represent falsely
by any device whatsoever the extent to which or trie manner in
which its accounts are insured by the Federal Savings and Loan

Digitized for FRASER

http://fraser.stlouisfed.org/
Federal Reserve Bank of St. Louis

14

[PUB.

470.]

Insurance Corporation. Every individual, partnership, association,

or corporation violating this subsection shall be punished by a fine
of not exceeding $1,000, or by imprisonment not exceeding one year,
or both.
I N S U R A N C E OF ACCOUNTS A N D ELIGIBILITY PROVISIONS

SEC. 403. (a} I t shall be the duty of the Corporation to insure the
accounts of all Federal savings and loan associations, and it may
insure the accounts of building and loan, savings and loan, and homestead associations and cooperative banks organized and operated
according to the laws of the State, District, or Territory in which
they are chartered or organized.
(b) Application for such insurance shall be made immediately by
each Federal savings and loan association, and may be made at any
time by other eligible institutions. Such applications shall be in
such form as the Corporation shall prescribe, and shall contain an
agreement (1) to pay the reasonable cost of such examinations as the
Corporation shall deem necessary in connection with such insurance,
and (2) if the insurance is granted, to permit and pay the cost oi
such examinations as in the judgment of the Corporation may from
time to time be necessary for its protection and the protection of
other insured institutions, to permit the Corporation to have access to
any information or report with respect to any examination made by
any public regulatory authority and to furnish any additional
information with respect thereto as the Corporation may require,
and to pay the premium charges for insurance as hereinafter provided. Each applicant for such insurance shall also file with its
application an agreement that during the period that the insurance
is in force it will not make any loans beyond fifty miles from its
principal office except with the approval oi, and pursuant to regulations of, the Corporation, but any applicant whicn, prior to the date
of enactment of this Act, has been permitted to maKe loans beyond
such fifty mile limit may continue to make loans within the territory
in which the applicant is operating on such date; will not, after it
becomes an insured institution, issue securities which guarantee a
definite return or which have a definite maturity except with the
specific approval of the Corporation, or issue any securities the form
of which has not been approved by the Corporation; will not carry
on any sales plan or practices, or any advertising, in violation of
regulations to be made by the Corporation; will provide adequate
reserves satisfactory to the Corporation, to be established in accordance with regulations made by the Corporation, before paying dividends to its insured members; but such regulations shall require the
building up of reserves to 5 per centum of all insured accounts within
a reasonable period, not exceeding ten years, and shall prohibit the
payment of dividends from such reserves, or the payment of any
dividends if any losses are chargeable to such reserves.
^c) The Corporation shall reiect the application of any applicant
if it finds t h a t the capital of tiie applicant is impaired or tnat its
financial policies or management are unsafe: and the Corporation
may reject the application of any applicant i i it finds that the character of the management of the applicant or its home financing
policy is inconsistent with economical home financing or with the

Digitized for FRASER

http://fraser.stlouisfed.org/
Federal Reserve Bank of St. Louis

15

[PUB. 4704

purposes of this title. Upon the approval of any application for

insurance the Corporation shall notify the applicant, and upon the
payment of the initial premium charge for such insurance, as provided in section 404, the Corporartion shall issue to the applicant a
certificate stating that it has become an insured institution. I n considering applications for such insurance the Corporation shall give
full consideration to all factors in connection with the financial condition of applicants and insured institutions, and shall have power to
make such adjustments in their financial statements as the Corporation finds to be necessary.
(d) Any applicant which applies for insurance under this title
after the first year of the operation of the Corporation, shall pay an
admission fee based upon the reserve fund of the applicant which,
in the judgment of the Corporation, is an equitable contribution.
PREMIUMS

ON

INSURANCE

SEC. 404. (a) 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 charge for such insurance
equal to one-fourth 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 certificate is issued by the Corporation under section 403,
and thereafter annually until a reserve fund has been established by
the Corporation equal to 5 per centum of all insured accounts and
creditor obligations of all insured institutions; except that under
regulations prescribed by the Corporation such premium charge may
be paid semiannually. If at any time such reserve fund falls below
euch 5 per centum, tne payment of such annual premium charge for
insurance shall be resumed and shall be continued until the reserve
is brought back to such 5 per centum. F o r the purposes of this subsection, the amount in all accounts of insured members and the
amount of creditor obligations of any institution may be determined
from adjusted statements made within one year prior to the approval
of the application of such institution for insurance, or in such other
manner as the Corporation may by rules and regulations prescribe.
(b) The Corporation is further authorized to assess against each
insured institution additional premiums for insurance until the
amount of such premiums equals the amount of all losses and
expenses of the Corporation; except that the total amount so assessed
in any one year against any such institution shall not exceed onefourth of 1 per centum of the total amount of the accounts of its
insured members and its creditor obligations.
P A Y M E N T OF I N S U R A N C E

S E C 405. (a) Each institution whose application for insurance

under this title is approved by the Corporation shall be entitled to
insurance up to the full withdrawal or repurchasable value of the
accounts of each of its members and investors (including individuals,
partnerships, associations, and corporations) holding withdrawable
or repurchasable shares, investment certificates, or deposits, in such

Digitized for FRASER

http://fraser.stlouisfed.org/
Federal Reserve Bank of St. Louis

16

[PUB.47fc]

institution; except that no member or investor of any such institution shall be insured for an aggregate amount in excess of $5,000.
^b) I n the event of a default by any insured institution the Corporation shall promptly determine the insured members thereof and
the amount of their insured accounts, and shall make available to
each of them, after notice by mail at his last-known address as
shown by the books of the insured institution, and upon surrender
and transfer to the Corporation of his insured account, either (1)
a new insured account in an insured institution not in default, in
an amount equal to the insured account so transferred, or (2) at
the option of the insured member, the amount of his account wnich
is insured under this section, as follows: Not to exceed 10 per centum
in cash, and 50 per centum of the remainder within one year, and
the balance within three years from the date of such default, in
negotiable noninterest-bearing debentures of the Corporation. The
Corporation shall furnish to all insured institutions a certificate
stating that the insurance of accounts in such institution is to be
paid in the manner described in this subsection.
LIQUIDATION OF INSURED INSTITUTIONS

SEC. 406. (a) I n order to facilitate the liquidation of insured

institutions, the Corporation is authorized (1) to contract with any
insured institution with respect to the making available of insured
accounts to the insured members of any insured institution in
default, or (2) to provide for the organization of a new Federal
savings and loan association for such purpose subject to the
approval of the Federal Home Loan Bank Board.
(b) I n the event that a Federal savings and loan association is in
default, the Corporation shall be appointed as conservator or receiver
and is authorized as such (1) to take over the assets of and operate
such association, (2) to take such action as may be necessary to put
it in a sound and solvent condition, (3) to merge it with another
insured institution, (4) to organize a new Federal savings and loan
association to take over its assets, or (5) to proceed to liquidate its
assets in an orderly manner, whicnever snail appear to be to the best
interests of the insured members of the association in default; and
in any event the Corporation shall pay the insurance as provided in
section 405 and all valid credit obligations of such association. The
net proceeds which may arise from the orderly liquidation of the
assets of any such association, after reimbursement of the Corporation of all amounts paid by it for such insurance ? shall be distributed
pro rata among the shareholders of the association.
(c) I n the event any insured institution other than a Federal
savings and loan association is in default, the Corporation shall have
authority to act as conservator, receiver, or other legal custodian
of such insured institution, and the services of the Corporation are
hereby tendered to the court or other public authority having the
power of appointment. If the Corporation is so appointed, it shall
have the same powers and duties with respect to the insured institution in default as are conferred upon it under subsection (b) with
respect to Federal savings and loan associations. I f the Corporation
is not so appointed it shall pay the insurance as provided in section
405, and shall have power ( l j to bid for the assets of the insured

Digitized for FRASER

http://fraser.stlouisfed.org/
Federal Reserve Bank of St. Louis

[PUB.

17

47*1

institution in default, (2) to negotiate for the merger of the insured

institution or the transfer of its assets, or (3) to make any other
disposition of the matter as it may deem in the best interests of all
concerned.
(d) I n connection with the liquidation of insured institutions in
deiault, the Corporation shall have power to carry on the business
of and to collect all obligations to the insured institutions, to settle,
compromise, or release claims in favor of or against the insured
institutions, and to do all other things that may be necessary in
connection therewith, subject only to the regulation of the court
or other public authority having jurisdiction over the matter.
(e) The Corporation shall make an annual report to the Congress
of the operation by it of insured institutions in default, and shall
keep a complete record of the administration by it of the assets of
such insured institutions which shall be subject to inspection by
any officer of any such insured institution or by any other interested
)arty, and, if any such insured institution is operated under the
aws of any State, Territory, or possession of the United States,
or of the District of Columbia, such annual report shall also be
filed with the public authority which has jurisdiction over the
insured institution.

TERMINATION OF I N S U R A N C E

SEC. 407. (a) Any institution which is insured under the provisions of this title may, upon not less than ninety days' written
notice to the Corporation, terminate its status as an insured institution upon a majority vote of its shareholders entitled to vote,
or upon a majority vote of its board of directors or other similar
overning body which is authorized to act for the institution,
'hereupon its status as an insured institution shall immediately
cease and all rights of its insured members to insurance under this
title shall immediately terminate; but the obligation of the institution to pay the premium charges for insurance shall continue for
a period of three years after the date of such termination.
(b) The Corporation shall have power to terminate the insured
status of any insured institution at any time, after ninety days'
notice in writing, for violation of any provision of this title, or of
any rule or regulation made thereunder, or of any agreement made
pursuant to section 403. I n the event the insured status of any
insured institution is so terminated it shall be unlawful thereafter
for it to advertise or represent itself as an insured institution, but
the insured accounts of its members existing on the date of such
termination shall continue as such for a period of five years thereafter, and the institution shall be required to continue the payment
of the premium charge for insurance during such five-year period.

T I T L E VMISCELLANEOUS
SECTION 501. Section 10(a) of the Federal Home Loan Bank Act
is amended to read as follows:
" SEC. 10. (a) Each Federal Home Loan Bank is authorized to
make advances to its members, upon the security of home mortgages, subject to such regulations, restrictions, and limitations as

Digitized for FRASER

http://fraser.stlouisfed.org/
Federal Reserve Bank of St. Louis

18

tPuB.4734

the board may prescribe. Any such advance shall be subject to the
following limitations as to amount:
"(1) If secured by a mortgage insured under the provisions of
title I I of the National Housing Act, the advance may be for an
amount not in excess of 90 per centum of the unpaid principal of
the mortgage loan.
"(2) If secured by a home mortgage given in respect of an amortized home mortgage loan which was for an original term of eight
years or more, or in cases where shares of stock, which are pledged
as security for such loan, mature in a period of eight years or more,
the advance may be for an amount not in excess ot 65 per centum oi
the unpaid principal of the home mortgage loan; but in no case
shall the amount of the advance exceed 60 per centum of the value
of the real estate securing the home mortgage loan.
"(3) If secured by a home mortgage given in respect of any other
home mortgage loan, the advance shall not be for an amount in
excess of 50 per centum of the unpaid principal of the home mortgage loan; but in no case shall the amount of such advance exceed
40 per centum of the value of the real estate securing the home
mortgage loan."
SEC. 502. The Federal Home Loan Bank Act is further amended
by adding after section 10 thereof the following new section:
" SEC. 10a. Until J u l y 1, 1936? each Federal Home Loan Bank is
authorized to make advances to its members, in order to enable such
members to finance home repairs, improvements, and alterations.
Such advances shall not be subject to the provisions and restrictions
of section 10 of this Act, but shall be made upon the security of
notes representing obligations incurred pursuant to. and insurable
under, section 2 of the National Housing Act. Advances made
under the terms of this section shall be at such rates of interest
and upon such terms and conditions as shall be determined by the
Federal Home Loan Bank Board."
SEC. 503. Section 11 of the Federal Home Loan Bank Act is
amended to read as follows:
" SEC. 11. (a) Each Federal Home Loan Bank shall have power,
subject to rules and regulations prescribed by the board to borrow
and give security therefor and to pay interest thereon, to issue
debentures, bonds, or other obligations upon such terms and conditions as the board may approve, and to do all things necessary for
carrying out the provisions of this Act and all things incident
thereto.
" (b) The board may issue consolidated Federal Home Loan Bank
debentures which shall be the joint and several obligations of all
Federal Home Loan Banks organized and existing under this Act, in
order to provide funds for any such bank or banks, and such debentures shall be issued upon such terms and conditions as the board
may prescribe. No such debentures shall be issued at any time if
any of the assets of any Federal Home Loan Bank are pledged to
secure any debts or subject to any lien, and neither the board nor
any Federal Home Loan Bank shall have power to pledge any of the
assets of any Federal Home Loan Bank, or voluntarily to permit any
lien to attach to the same while any of such debentures so issued are
outstanding. The debentures issued under this section and outstand-

Digitized for FRASER

http://fraser.stlouisfed.org/
Federal Reserve Bank of St. Louis

[PUB.

m.\

19

ing shall at no time exceed five times the total paid-in capital of all
the Federal Home Loan Banks as of the time of the issue of such
debentures. I t shall be the duty of the board not to issue debentures
under this section in excess ox the notes or obligations of member
institutions held and secured under section 10 (a) of this Act by all
the Federal Home Loan Banks.
"(c) At any time that no debentures are outstanding under this
Act, or in order to refund all outstanding consolidated debentures
issued under this section, the board may issue consolidated Federal
Home Loan Bank bonds which shall be the joint and several obligations of all the Federal Home Loan Banks, and shall be secured and
be issued upon such terms and conditions as the board may prescribe.
" ( d ) The board shall have full power to require any Federal
Home Loan Bank to deposit additional collateral or to make substitutions of collateral or to adjust equities between the Federal Home
Loan Banks.
"(e) Each Federal Home Loan Bank shall have power to accept
deposits made by members of such bank or by any other Federal
Home Loan Bank or other instrumentality of the United States,
upon such terms and conditions as the board may prescribe, but no
Federal Home Loan Bank shall transact any banking or other business not authorized by this Act.
" ( f ) The board is authorized and empowered to permit, or whenever in the judgment of at least four members of the board an emergency exists requiring such action, to require, Federal Home Loan
Banks, upon such terms and conditions as the board may prescribe,
to rediscount the discounted notes of members held by other Federal
Home Loan Banks, or to make loans to, or make deposits with, such
other Federal Home Loan Banks, or to purchase any bonds or
debentures issued under this section.
" ( g ) Each Federal Home Loan Bank shall at all times have an
amount equal to the sums paid in on outstanding capital subscriptions of its members, plus an amount equal to the current deposits
received from its members, invested in (1) obligations of the United
States, (2) deposits in banks or trust companies, (8) advances with
a maturity of not to exceed one year which are made to members or
nonmember borrowers, upon such terms and conditions as the board
may prescribe, and (4} advances with a maturity of not to exceed
one year which are maae to members or nonmember borrowers whose
creditor liabilities (not including advances from the Federal Home
Loan Bank) do not exceed 5 per centum of their net assets, and
which may be made without the security of home mortgages or other
security, upon such terms and conditions as the board may prescribe.
" ( h ) Such part of the assets of each Federal Home Loan Bank
(except reserves and amounts provided for in subsection ( g ) ) as
are not required for advances to members or nonmember borrowers,
may be invested, to such extent as the bank may deem desirable and
subject to such regulations, restrictions, and limitations as may be
prescribed by the board, in obligations of the United States and in
such securities as fiduciary and trust funds may be invested in under
the laws of the State in which the Federal Home Loan Bank is
located."

Digitized for FRASER

http://fraser.stlouisfed.org/
Federal Reserve Bank of St. Louis

20

tPUB. 479.1

SEC. 504. The F a r m Credit Act of 1933 is amended by adding after

section 86 thereof the following new section:
x
" SEC. 86a. With the approval of the Governor of the F a r m Credit
Administration and under rules and regulations to be prescribed
by the Production Credit Commissioner, production credit associations organized under the provisions oi the F a r m Credit Act of
1933 are authorized and empowered (without regard to the provisions of this Act relating to the requirement for the ownership of
Class B stock or any other limitations therein contained) (1) to
make loans to farmers for the purpose of enabling them to make
home alterations, repairs, and improvements, (2) to sell, discount,
assign, or otherwise dispose of any loans made by them under the
provisions of this section, under such restrictions and limitations as
to endorsement and liability as may be approved by the Governor
of the F a r m Credit Administration, (3) to avail themselves of the
benefits of insurance under the provisions of section 2 of the
National Housing Act, and (4) to do all such things as may be
reasonably necessary to carry out the provisions of this section."
SEC. 505. (a) Section 24 of the Federal Reserve Act, as amended,
is amended by adding at the end of the third sentence thereof the
following: " provided. T h a t in the case of loans secured by real
estate wnich $re insured under the provisions of title I I of the
National Housing Act, such restrictions as to the amount of the loan
in relation to the actual value of the real estate and as to the fiveyear limit on the terms of such loans shall not apply."
(b) Section 24 of such Act. as amended, is further amended by
adding at the end thereof the following new p a r a g r a p h :
" L o a n s made to finance the construction of residential or farm
buildings and having maturities of not to exceed six months, whether
or not secured by a mortgage or similar lien on the real estate upon
which the residential or farm building is being constructed, shall
not be considered as loans secured by real estate within the meaning
of this section but shall be classed as ordinary commercial loans:
Provided, That no national banking association shall invest in, or
be liable on, any such loans in an aggregate amount in excess of 50
per centum of Its actually paid-in and unimpaired capital. Notes
representing sucfi loans shall be eligible for discount as commercial
paper within the terms of the second paragraph of section 13 of the
Federal Reserve Act, as amended, if accompanied by a valid and
binding agreement to advance the full amount of the loan upon the
completion of the building entered into by an individual, partnership, association, or corporation acceptable to the discounting bank."
SEC. 506. (a) The first sentence of section 4(c) of the Home
Owners' Loan Act of 1933, as amended, is further amended to read
as follows:
"(c) The Corporation is authorized to issue bonds in an aggregate amount not to exceed $3,000,000,000, which may be exchanged
as hereinafter provided, or which may be sold by the Corporation to
obtain funds for carrying out the purposes of this section or for the
redemption of any of its outstanding bonds called in for retirement;
and the Corporation is further authorized to increase its total bond
issue in an amount equal to the amount of the bonds so called in
and retired."

Digitized for FRASER

http://fraser.stlouisfed.org/
Federal Reserve Bank of St. Louis

IPUB. 479.]

21

(b) Section 4(m) of the Home Owners' Loan Act of 1933, as

amended, is amended by striking out " $200,000,000 " and inserting
in lieu thereof " $300,000,000 ".
SEC. 507. Subdivision (6) of section 2 of the Federal Home Loan
Bank Act is amended so as to read as follows:
"(6) The term 'home m o r t g a g e ' means a mortgage upon real
estate, in fee simple, or on a leasehold (1) under a lease for not
less than ninety-nine years which is renewable or (2) under a lease
having a period of not less than fifty years to run from the date
the mortgage was executed, upon which there is located a dwelling
for not more than three families, and shall include, in addition to
first mortgages, such classes of first liens as are commonly given to
secure advances on real estate by institutions authorized under this
Act to become members, under the laws of the State in which the
real estate is located, together with the credit instruments, if any,
secured thereby."
SEC. 508. (a) Section 2(c) of the Home Owners' Loan Act of
1933, as amended, is amended by striking out " under a renewable
lease for not less than ninety-nine years " and inserting in lieu thereof
"(1) under a lease for not less than ninety-nine years which is renewable, or (2) under a lease having a period of not less than fifty years
to run from the date the mortgage was executed ".
(b) Section 4(c) of such Act. as amended, is amended by striking
out " under a lease renewable for not less than ninety-nine years "
and inserting in lieu thereof "(1) under a lease for not less than
ninety-nine years which is renewable, or (2) under a lease having a
period of not less than fifty years to run from the date the mortgage
was executed ".
SEC. 509. Section 6 of the Federal Home Loan Bank Act is
amended by striking out " $1,500 " in subsections (c) and (e) and
inserting in lieu thereof " $500 ".
SEC. 510. The Act entitled "An Act relating to contracts and agreements under the Agricultural Adjustment A c t " , approved January
25,1934, is amended by inserting before the period at the end thereof
a comma and the following: " the Federal F a r m Loan Act, as
amended, the Emergency F a r m Mortgage Act of 1933, as amended,
the Federal F a r m Mortgage Corporation Act, as amended, the F a r m
Credit Act of 1933. as amended, and the Home Owners' Loan Act of
1933, as a m e n d e d ' .
SEC. 511. Section 22 of the Interstate Commerce Act, as amended,
is further amended by adding at the end thereof the following new
sentence: " Nothing in this Act shall prevent any carrier or carriers
subject to this Act from giving reduced rates for the transportation
of commodities to be specified by the Commission as hereinafter
provided, to or from any section of the country, with the object of
improving Nation-wide housing standards and providing employment and stimulating industry, if such reduced rates have first been
authorized by order of the Commission (with or without a h e a r i n g ) ;
but in such order the Commission shall specify the commodities as
to which this provision shall be declared effective and shall specify
the period during which such reduced rates are to remain in effect.

Digitized for FRASER

http://fraser.stlouisfed.org/
Federal Reserve Bank of St. Louis

22

[PUB.

479.1

PENALTIES

SEC. 512. (a) Whoever, for the purpose of obtaining any loan from
the Federal Housing Administration or the Federal Savings and
Loan Insurance Corporation, or any extension or renewal thereof,
or the acceptance, release, or substitution of security therefor, or
for the purpose of inducing the Administration or the Corporation
to purchase any assets, or for the purpose of influencing in any way
the action of the Administration or the Corporation under this Act,
makes any statement, knowing it to be false, or willfully overvalues
any security, shall be punished by a fine of not more than $5,000, or
by imprisonment for not more than two years, or both.
(b) Whoever (1) falsely makes, forges, or counterfeits any obligation or coupon, in imitation of or purporting to be an obligation or
coupon issued under authority of this Act, or (2) passes, utters, or
publishes, or attempts to pass, utter, or publish, any false, forged,
or counterfeited obligation or coupon purporting to have been so
issued, knowing the same to be false, forged, or counterfeited, or
(3) falsely alters any obligation or coupon so issued or purporting
to have been so issued, or (4) passes, utters, or publishes, or attempts
to pass, utter, or publish, as true, any falsely altered or spurious
obligation or coupon, so issued or purporting to have been so issued,
knowing the same to be falsely altered or spurious, shall be punished
by a fine of not more than $10,000, or by imprisonment for not more
than five years, or both.
(c) Whoever, being connected in any capacity with the Federal
Housing Administration or the Federal Savings and Loan Insurance
Corporation, (1) embezzles, abstracts, purloins, or willfully misapplies any moneys, funds, securities, or other things of value,
whether belonging to the Administration or the Corporation or
pledged, or otherwise intrusted to the Administration or the Corporation, or (2) with intent to defraud the Administration or the
Corporation or any other body, politic or corporate, or any individual, or to deceive any officer, auditor, or examiner of the Administration or the Corporation, makes any false entry in any book,
report, or statement of or to the Administration or tlie Corporation,
or without being duly authorized draws any order, or issties, puts
forth, or assigns any note, debenture, bond, or other such obligation, or draft, bill of exchange, mortgage, judgment, or decree
thereof, shall be punished by a fine of not more than $10,000, or by
imprisonment for not more than five years, or both.
SEPARABILITY

PROVISION

SEC. 513. If any provision of this Act, or the application thereof

to any person or circumstances, is held invalid, the remainder of the
Act, and the application of such provision to other persons or
circumstances, shall not be affected thereby.
Approved, June 27, 1934.

Digitized for FRASER

http://fraser.stlouisfed.org/
Federal Reserve Bank of St. Louis