88TH CONGRESS 1ST SESSION

S. 811

IN THE SENATE OF THE UNITED STATES

FEBRUARY 18, 1963

Mr. SPARKMAN introduced the following bill; which was read twice and referred to the Committee on Banking and Currency

A BILL

To enable Federal home loan banks to implement their services to their member institutions by establishing a secondary marketing facility for participations in conventional home mortgage loans.

1 Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, 3 That this Act may be cited as the "Home Mortgage Corpora4 tion Act".

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SEC. 2. As used in this Act

(1) the term "Corporation" means the Home

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(2) the term "Board" means the Board of Directors

of the Corporation; and

(3) the term "mortgage" means a first mortgage on real estate, in fee simple, or on a leasehold (A)

under a lease for not less than ninety-nine years which is renewable, or (B) under a lease having a period of not less than fifty years to run from the date the mortgage was executed; and the term "first mortgage" 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 instrument, if any, secured thereby.

ESTABLISHMENT OF CORPORATION

SEC. 3. (a) There is hereby created a Home Mortgage 16 Corporation which shall have power to buy and sell, and 17 otherwise deal in its discretion with, participations in mort18 gages on residential properties containing not more than four 19 family units.

20 (b) The management of the Corporation shall be vested 21 in a Board consisting of (1) the members of the Federal 22 Home Loan Bank Board, and (2) the presidents of the Fed23 eral home loan banks. The Chairman of the Federal 24 Home Loan Bank Board shall name one of such presidents as Chairman of the Board. The Board shall have power to

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1 adopt bylaws and make general rules and regulations for the

2 organization and operation of the Corporation.

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(c) The Corporation shall maintain its principal office

4 in the District of Columbia and shall be deemed, for purposes

5 of venue in civil actions, to be a resident thereof. Agencies

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or offices may be established by the Corporation in such

7 other place or places as the Board may deem to be necessary

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or appropriate in the conduct of its business.

CAPITAL STOCK

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SEC. 4. (a) The Board shall provide for the issuance of 11 nonvoting capital stock of the Corporation, both common 12 and preferred, in shares of $100 par value each. Upon the 13 call of the Board, from time to time, the Federal home loan 14 banks shall subscribe to such preferred stock in an aggregate 15 amount not exceeding $50,000,000; and each successive 16 partial issue within that aggregate amount shall be so sub17 scribed and issued and paid for by each such bank in pro18 portion to the par value of its outstanding capital at the 19 time of such call.

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(b) Each member of a Federal home loan bank shall 21 be eligible to participate in the activities of the Corporation. 22 Subject to subsection (c), each participating member shall 23 subscribe to and purchase common stock of the Corporation. 24 in an amount approximating 1 per centum of the dollar 25 amount paid by the Corporation for its purchase of partici

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1 pations in home mortgage loans from such member, and each 2 such member shall continue to hold such common stock in 3 an amount not less than 1 per centum of the outstanding 4 balances of such participations it has sold to the Corporation 5 which are still held by the Corporation, except as otherwise 6 authorized by the Corporation. Any common stock held 7 by a member at any time in excess of such 1 per centum 8 minimum shall be redeemed at par value by the Corporation 9 when offered for redemption by the holder, but no such 10 right of redemption shall be exercised at any time when its 11 execution would reduce the capital, surplus, and reserves of 12 the Corporation to less than one-tenth of the dollar amount 13 of the obligations of the Corporation then outstanding.

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(c) The Federal home loan banks and Federal sav15 ings and loan associations are authorized to purchase the stock 16 of the Corporation as herein provided. If other members of 17 the Federal home loan banks do not have legal authority to 18 purchase such stock, until State law is amended to authorize 19 such purchase, such members may sell mortgages to the Cor20 poration and, in lieu of the purchase of such stock, further 21 secure the transaction by the deposit of a sum of money 22 equivalent to the cost of the stock which the seller would 23 otherwise be required to purchase under subsection (b) of 24 this section. Such deposits shall be upon the condition that 25 the depositor shall receive the same amount of interest on

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1 the money deposited as is paid to stockholders in the form 2 of dividends on the same dollar amount of stock. Such de3 positors shall have the same seniority with respect to the re4 payment of such money as stockholders have with respect 5 to the redemption or retirement of their stock, and the claims 6 or rights of such depositors shall otherwise be on a parity 7 with the claims of the stockholders. The obligation of the 8 Corporation to return such funds to the depositors shall be 9 junior to the claims of all other creditors of the Corporation. 10 (d) The Board is authorized to retire any portion or 11 all of the stock of the Corporation if such retirement will not 12 reduce the capital, surplus, and reserves of the Corporation to 13 less than (1) $50,000,000, or (2) one-tenth of the dollar 14 amount of the obligations of the Corporation then outstand15 ing, whichever is the greater. In the event of any such re16 tirement, stock senior as to time of issuance shall have first 17 entitlement to retirement at the election of the stockholder. 18 The Board shall have power in the issuance, redemption, and 19 retirement of capital stock to make any necessary adjustments 20 to full shares.

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(e) After the payment of expenses or provision there22 for, at least 10 per centum of the net earnings of the Corpo-. 23 ration annually shall be transferred to a reserve for losses 24 until such reserve is 50 per centum of its outstanding capital,