(7) Articles of association; report and affidavit accompanying;

contents.

When the articles of association are forwarded to the Federal land bank of the district as provided in this section, they shall be accompanied by the written report of the loan committee as required in section ten of this Act, and by an affidavit stating that each of the subscribers is the owner, or is about to become the owner, of farm land qualified under section twelve of this Act as the basis of a mortgage loan; that the loan desired by each person is not more than $10,000, nor less than $100, and that the aggregate of the desired loans is not less than $20,000; that said affidavit is accompanied by a subscription to stock in the Federal land bank equal to five per centum of the aggregate sum desired on mortgage loans; and that a temporary organization of said association has been formed by the election of a board of directors, a loan committee, and a secretary-treasurer who subscribes to said affidavit, giving his residence and post office address.

(8) Investigation of solvency, etc., of applicants for incorporation; grant or refusal of charter.

Upon receipt of such articles of association, with the accompanying affidavit and stock subscription, the directors of said Federal land bank shall send an appraiser to investigate the solvency and character of the applicants and the value of their lands, and shall then determine whether in their judgment a charter should be granted to such association. They shall forward such articles of association and the accompanying affidavit to the Federal Farm Loan Board with their recommendation. If said recommendation

is unfavorable, the charter shall be refused. (9) Grant or refusal of charter.

If said recommendation is favorable, the Federal Farm Loan Board shall thereupon grant a charter to the applicants therefor, designating the territory in which such association may make loans, and shall forward said charter to said applicants through said Federal land bank: Provided, That said Federal Farm Loan Board may for good cause shown in any case refuse to grant a charter. (10) Loans to associations from federal land banks; right to.

Upon receipt of its charter such national farm loan association shall be authorized and empowered to receive from the Federal land bank of the district sums to be loaned to its members under the terms and conditions of this Act.

(11) Loans to members of association; subscriptions to capital stock of federal land banks; holding stock subscribed as collateral security for loan; retirement of stock subscribed. Whenever any national farm loan association shall desire to secure for any member a loan on first mortgage from the Federal land bank of its district it shall subscribe for capital stock of said land bank to the amount of five per centum of such loan, such subscription to be paid in cash upon the granting of the loan by said land bank. Such capital stock shall be held by said land bank as collateral security for the payment of said loan, but said association shall be paid any dividends accruing and payable on said capital stock while it is outstanding. Such stock may, in the discretion of the directors, and with the approval of the Federal Farm Loan Board, be paid off at par and retired, and it shall be so paid off and retired upon full payment of the mortgage loan. In such case the national farm loan association shall pay off at par and retire the corresponding shares of its stock which were issued when said land bank stock was issued.

(12) Reduction of capital stock of federal land banks.

The capital stock of a Federal land bank shall not be reduced to an amount less than five per centum of the principal of the outstanding farm loan bonds issued by it. (39 Stat. 365.)

Provisions for election of directors of national banking associations were made by R. S. § 5145, ante, § 9683.

CAPITAL STOCK OF NATIONAL FARM LOAN ASSOCIATIONS

§ 9835dd. (Act July 17, 1916, c. 245, § 8.) (1) Par value of shares. The shares in national farm loan associations shall be of the par value of $5 each.

(2) Voting stock.

Every shareholder shall be entitled to one vote on each share of stock held by him at all elections of directors and in deciding all questions at meetings of shareholders: Provided, That the maximum number of votes which may be cast by any one shareholder shall be twenty.

(3) Borrowers only to be members or shareholders of national farm loan associations; application for membership; amount of stock to be held by borrower; stock held as collateral security by association for loan; retirement of stock.

No persons but borrowers on farm land mortgages shall be members or shareholders of national farm loan associations. Any person desiring to borrow on farm land mortgage through a national farm loan association shall make application for membership and shall subscribe for shares of stock in such farm loan association to an amount equal to five per centum of the face of the desired loan, said subscription to be paid in cash upon the granting of the loan. If the application for membership is accepted and the loan is granted, the applicant shall, upon full payment therefor, become the owner of one share of capital stock in said loan association for each $100 of the face of his loan, or any major fractional part thereof. Said capital stock shall be paid off at par and retired upon full payment of said loan. Said capital stock shall be held by said association as collateral security for the payment of said loan, but said borrower shall be paid any dividends accruing and payable on said capital stock while it is outstanding.

(4) Increase of capital stock.

Every national farm loan association formed under this Act shall by its articles of association provide for an increase of its capital stock from time to time for the purpose of securing additional loans for its members and providing for the issue of shares to borrowers in accordance with the provisions of this Act. Such increases shall be included in the quarterly reports to the Federal Farm Loan Board. (39 Stat. 367.)

NATIONAL FARM LOAN ASSOCIATIONS-SPECIAL PROVISIONS

§ 9835e. (Act July 17, 1916, c. 245, § 9.) (1) Right of members to loans.

Any person whose application for membership is accepted by a national farm loan association shall be entitled to borrow money on farm land mortgage upon filing his application in accordance with section eight and otherwise complying with the terms of this Act whenever the Federal land bank of the district has funds available for that purpose, unless said land bank or the Federal Farm Loan Board shall, in its discretion, otherwise determine.

(2) Loans by federal land bank to members of national farm loan associations to pay for shares subscribed to in association; pay

ment.

Any person desiring to secure a loan through a national farm. loan association under the provisions of this Act may, at his option, borrow from the Federal land bank through such association the sum necessary to pay for shares of stock subscribed for by him in the national farm loan association, such sum to be made a part of the face of the loan and paid off in amortization payments: Provided, however, That such addition to the loan shall not be permitted to increase said loan above the limitation imposed in subsection fifth of section twelve.

(3) Commissions on interest payments on loans; amount; deduction from dividends payable to associations; loans by federal land banks to associations; rate of interest.

Subject to rules and regulations prescribed by the Federal Farm Loan Board, any national farm loan association shall be entitled to retain as a commission from each interest payment on any loan indorsed by it an amount to be determined by said board not to exceed one-eighth of one per centum semiannually upon the unpaid principal of said loan, any amounts so retained as commissions to be deducted from dividends payable to such farm loan association by the Federal land bank, and to make application to the land bank of the district for loans not exceeding in the aggregate one-fourth of its total stock holdings in said land bank. The Federal land banks shall have power to make such loans to associations applying therefor and to charge interest at a rate not exceeding six per centum per annum.

(4) Individual liability of shareholders.

Shareholders of every national farm loan association shall be held individually responsible, equally and ratably, and not one for another, for all contracts, debts, and engagements of such association to the extent of the amount of stock owned by them at the par value thereof, in addition to the amount paid in and represented by their shares.

(5) Admission of new members.

After a charter has been granted to a national farm loan association, any natural person who is the owner, or about to become the owner, of farm land qualified under section twelve of this Act as the basis of a mortgage loan, and who desires to borrow on a mortgage of such farm land, may become a member of the association by a two-thirds vote of the directors upon subscribing for one share of the capital stock of such association for each $100 of the face of his proposed loan or any major fractional part thereof. He shall at the same time file with the secretary-treasurer his application for a mortgage loan, giving the particulars required by section twelve of this Act. (39 Stat. 368.)

APPRAISAL

§ 9835ee. (Act July 17, 1916, c. 245, § 10.) (1) Appraisal of land offered as security for loan by loan committee; report; approval of loan by directors.

Whenever an application for a mortgage loan is made to a national farm loan association, it shall be first referred to the loan committee provided for in section seven of this Act. Said loan committee shall examine the land which is offered as security for the desired loan and shall make a detailed written report signed by all three members, giving the appraisal of said land as determined

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by them, and such other information as may be required by rules and regulations to be prescribed by the Federal Farm Loan Board. No loan shall be approved by the directors unless said loan committee agrees upon a favorable report.

(2) Report of appraisal submitted to directors of land bank.

The written report of said loan committee shall be submitted to the Federal land bank, together with the application for the loan, and the directors of said land bank shall examine said written report when they pass upon the loan application which it accompanies, but they shall not be bound by said appraisal.

(3) Reference of applications for loan to land bank appraisers; investigation and report by appraisers.

Before any mortgage loan is made by any Federal land bank, or joint stock land bank, it shall refer the application and written report of the loan committee to one or more of the land bank appraisers appointed under the authority of section three of this Act, and such appraiser or appraisers shall investigate and make a written. report upon the land offered as security for said loan. No such loan shall be made by said land bank unless said written report is favorable.

(4) Forms for appraisal reports.

Forms for appraisal reports for farm loan associations and land banks shall be prescribed by the Federal Farm Loan Board.

(5) Examinations, etc., by land bank appraisers as to farm loan bonds and first mortgages.

Land bank appraisers shall make such examinations and appraisals and conduct such investigations, concerning farm loan bonds. and first mortgages, as the Federal Farm Loan Board shall direct. (6) Borrowers as appraisers or members of loan committees.

No borrower under this Act shall be eligible as an appraiser under this section, but borrowers may act as members of a loan committee in any case where they are not personally interested in the loan under consideration. When any member of a loan committee or of a board of directors is interested, directly or indirectly, in a loan, a majority of the board of directors of any national farm loan association shall appoint a substitute to act in his place in passing upon such loan. (39 Stat. 369.)

POWERS OF NATIONAL FARM LOAN ASSOCIATIONS

§ 9835f. (Act July 17, 1916, c. 245, § 11.) Enumerated powers of national farm loan associations.

Every national farm loan association shall have power:

(a) Indorsing mortgages.

First. To indorse, and thereby become liable for the payment of, mortgages taken from its shareholders by the Federal land bank of its district.

(b) Receiving advances from federal land banks and loaning to

shareholders.

Second. To receive from the Federal land bank of its district funds advanced by said land bank, and to deliver said funds to its shareholders on receipt of first mortgages qualified under section twelve of this Act.

(c) Acquiring and disposing of property.

Third. To acquire and dispose of such property, real or personal, as may be necessary or convenient for the transaction of its busi

ness.

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(d) Issuing interest bearing certificates against deposits of current funds convertible into farm loan bonds.

Fourth. To issue certificates against deposits of current funds bearing interest for not longer than one year at not to exceed four per centum per annum after six days from date, convertible into farm loan bonds when presented at the Federal land bank of the district in the amount of $25 or any multiple thereof. Such deposits, when received, shall be forthwith transmitted to said land bank, and be invested by it in the purchase of farm loan bonds issued by a Federal land bank or in first mortgages as defined by this Act. (39 Stat. 369.)

RESTRICTIONS ON LOANS BASED ON FIRST MORTGAGES

§ 9835ff. (Act July 17, 1916, c. 245, § 12.) (1) Restrictions on loans enumerated.

No Federal land bank organized under this Act shall make loans except upon the following terms and conditions:

(a) Security by first mortgage.

First. Said loans shall be secured by duly recorded first mortgages on farm land within the land bank district in which the bank is situated.

(b) Agreement in mortgage for repayment on amortization plan. Second. Every such mortgage shall contain an agreement providing for the repayment of the loan on an amortization plan by means of a fixed number of annual or semiannual installments sufficient to cover, first, a charge on the loan, at a rate not exceeding the interest rate in the last series of farm loan bonds issued by the land bank making the loan; second, a charge for administration and profits at a rate not exceeding one per centum per annum on the unpaid principal, said two rates combined constituting the interest rate on the mortgage; and, third, such amounts to be applied on the principal as will extinguish the debt within an agreed period, not less than five years nor more than forty years: Provided, That after five years from the date upon which a loan is made additional payments in sums of $25 or any multiple thereof for the reduction of the principal, or the payment of the entire principal, may be made on any regular installment date under the rules and regulations of the Federal Farm Loan Board: And provided further, That before the first issue of farm loan bonds by any land bank the interest rate on mortgages may be determined in the discretion of said land bank subject to the provisions and limitations of this Act.

(c) Maximum interest rate.

Third. No loan on mortgage shall be made under this Act at a rate of interest exceeding six per centum per annum, exclusive of amortization payments.

(d) Purposes of loans enumerated.

Fourth. Such loans may be made for the following purposes and for no other:

(a) To provide for the purchase of land for agricultural uses. (b) To provide for the purchase of equipment, fertilizers and live stock necessary for the proper and reasonable operation of the mortgaged farm; the term "equipment" to be defined by the Federal Farm Loan Board.

(c) To provide buildings and for the improvement of farm lands; the term "improvement" to be defined by the Federal Farm Loan Board.

(d) To liquidate indebtedness of the owner of the land mortgaged, existing at the time of the organization of the first national