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Statement of-

Hon. Royal S. Copeland, a United States Senator from the State of

New York.

Charles O'Connor Hennessy, president Savings & Loan Bank of the

State of New York, 217 Broadway, New York.

Franklin B. Lord, attorney at law, 25 Broadway, New York City
D. E. McAvoy, secretary of the Home Mortgage Advisory Board, 35

Liberty Street, New York City -
Horace Russell, general counsel, Federal Home Loan Bank Board,

Atlanta, Ga.
Walter S. Schmidt, representing the National Association of Real

Estate Boards, Cincinnati, Ohio.-

Henry Woodhouse, 280 Madison Avenue, New York City --

23, 35







Washington, D.C. The subcommittee met, pursuant to call, at 10 o'clock a.m.,

in room 301, Senate Office Building, Senator Robert J. Bulkley presiding:

Present: Senators Bulkley (chairman of the subcommittee), Couzens, and Townsend.

Present also: Senator Copeland.

Senator BULKLEY (chairman of the subcommittee). This is a hearing on Senate 1317, the home loan relief bill that has been approved by the administration.

(The bill S. 1317 is as follows:)

[S. 1317, 73d Cong., 1st sess.) A BILL To provide emergency relief with respect to home mortgage indebtedness, to

refinance home mortgages, to extend relief to the owners of homes occupied by them and who are unable to amortize their debt elsewhere, to amend the Federal Home Loan Bank Act, to increase the market for obligations of the United States, and for other purposes

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That this Act may be cited as the “ Home Owners' Loan Act of 1933."



SEC. 2. As used in this Act

(a) The term “Board” means the Fedtral Home Loan Bank Board created under the Federal Home Loan Bank Act.

(b) The term Corporation' means the Home Owners' Loan Corporation created under section 4 of this Act.

(c) The term home mortgage' means a first mortgage on real estate in fee simple, or on a leasehold under a renewable lease for not less than ninetynine years, upon which there is located a dwelling for not more than three families used by the owner as a home and having a value not exceeding $10,000, and the term first mortgage includes such classes of first liens as are commonly given to secure advances on real estate under the laws of the State in which the real estate is located, together with the credit instruments, if any, secured thereby.

(d) The term “ association ” means a Federal Savings and Loan Association chartered by the Board as provided in section 5 of this Act.


SEC. 3. Subsection (d) of section 4 of the Federal Home Loan Bank Act (providing for direct loans to home owners) is hereby repealed.


SEC. 4. (a) The Board is hereby authorized and directed to create a Corporation to be known as the Home Owners' Loan Corporation, which shall be an instrumentality of the United States and which shall be under the direction of the Board and operated by it under such bylaws, rules, and regulations as it may prescribe for the accomplishment of the purposes and intent of this act,


(b) The Board shall determine the minimum amount of capital stock of the Corporation and is authorized to increase such capital stock from time to time in such amounts as may be necessary, but not to exceed in the aggregate $200,000,000. Such stock shall be subscribed for by the Secretary of the Treasury on behalf of the United States, and payments for such subscriptions shall be subject to call in whole or in part by the Board and shall be made at such time or times as the Secretary of the Treasury deems advisable. The Corporation shall issue receipts for payments by the Secretary of the Treasury for or on account of such stock, and such receipts shall be evidence of the stock ownership of the United States. In order to enable the Secretary of the Treasury to make such payments when called, the Reconstruction Finance Corporation is authorized and directed to allocate and make available to the Secretary of the Treasury the sum of $200,000,000, or so much thereof as may be necessary, and for such purpose the amount of the notes, bonds, debentures, or other such obligations which the Reconstruction Finance Corporation is authorized and empowered under section 9 of the Reconstruction Finance Corporation Act, as amended, to have outstanding at any one time, is hereby increased by such amounts as may be necessary.

(c) The Corporation is authorized to issue bonds in an aggregate amount not to exceed $2,000,000,000, which may be sold by the Corporation to obtain funds for carrying out the purposes of this Act, or exchanged for home mortgages as hereinafter provided. Such bonds shall be issued in such denominations as the Board shall prescribe, shall mature within a period of not more than eighteen years from the date of their issue, shall bear interest at a rate not to exceed 4 per centum per annum, and shall be fully and unconditionally guaranteed as to interest by the United States, and such guaranty shall be expressed on the face thereof. In the event that the Corporation shall be unable to pay upon demand, when due, the interest on any such bonds, the Secretary of the Treasury shall pay the amount thereof, which is hereby authorized to be appropriated out of any money in the Treasury not otherwise appropriated. Upon the payment of such interest by the Secretary of the Treasury the amount so paid shall become an obligation to the United States of the Corporation and shall bear interest at the same rate as that borne by the bonds upon which the interest has been so paid. The bonds issued by the Corporation under this subsection shall be instrumentalities of the United States and shall so state on the face thereof, and 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 or any Territory, dependency, or possession thereof, or by any State, county, municipality, or local taxing authority. The Corporation, including its franchise, its capital, reserves and surplus, and its loans and income, shall likewise be exempt from such taxation; except that any real property of the Corporation shall be subject to State, Territorial, county, municipal, or local taxation to the same extent, according to its value, as other real property is taxed.

(d) The Corporation is authorized, for a period of three years after the date of enactment of this act, whenever requested to do so, to negotiate with home mortgagors and mortgagees for the exchange of its bonds for home mortgages executed and recorded prior to such date and, in connection with any such exchange, to make advances in cash to pay taxes or assessments on the mortgaged property, or to provide for necessary maintenance or repairs; but the face value of the bonds so exchanged plus accrued interest thereon and the amounts so advanced shall not exceed in any case 80 per centum of the value of the property securing the home mortgage as determined upon an appraisal made by the Corporation. In any case in which the amount of the face value of the bonds and accrued interest accepted by the mortgagee upon any such exchange is less than the amount of the unpaid obligation of the mortgagor to the mortgagee, the Corporation shall credit the difference between such amounts to the mortgagor and shall reduce his obligation under the mortgage to that extent. Each home mortgage so acquired shall be refinanced or carried by the Corporation on the basis of the price paid therefor by the Corporation, and shall be amortized by means of monthly payments sufficient to retire the interest and principal within a period of not to exceed fifteen years; but the amortization payments of any mortgagor may be made quarterly, semiannually, or annually, if in the judgment of the Corporation the situation of the mortgagor requires it. Interest on the unpaid balance of the obligation of the mortgagor to the Corporation shall be at the rate of 5 per centum per annum. The Corporation may at any time grant an extension of time to any mortgagor for the payment of any installment of principal or interest owed by him to the Corporation if, in the judgment of the Board, the circumstances of the mortgagor and the condition of his mortgage justify such extension; but the amount of the payments so extended shall not exceed at any one time the amount of the payments required during a three-year period.

(e) The Corporation is further authorized, for a period of three years from the date of enactment of this act, to make loans in cash for the same purposes for which cash advances may be made under subsection (d) of this section, in cases where the property is not otherwise encumbered; but no such loan shall exceed 80 per centum of the value of the property securing the same as determined upon an appraisal made by the Corporation. Each such loan shall be secured by a duly recorded home mortgage, and shall bear interest at the same rate and shall be subject to the same provisions with respect to amortization and extensions as are applicable in the case of obligations refinanced under subsection (d) of this section.

(f) The Corporation shall have power to select, employ, and fix the compensation of such officers, employees, attorneys, or agents as shall be necessary for the performance of its duties under this act, without regard to the provisions of other laws applicable to the employment or compensation of officers, employees, attorneys, or agents of the United States. No such officer, employee, attorney, or agent shall be paid compensation at a rate in excess of the rate provided by law in the case of the members of the Board. The Corporation shall be entitled to the free use of the United States mails for its official business in the same manner as the executive departments of the Government, and shall determine its necessary expenditures under this act and the manner in which they shall be incurred, allowed, and paid, without regard to the provisions of any other law governing the expenditure of public funds. The Corporation shall pay such proportion of the salary and expenses of the members of the Board or of its officers and employees as may be equitable, and may use the facilities of Federal home-loan banks, upon making reasonable compensation therefor as determined by the Board.

(g) The Board is authorized to make such bylaws, rules, and regulations, not inconsistent with the provisions of this act, as may be necessary for the proper conduct of the affairs of the Corporation. The Board is further authorized and directed to retire and cancel the bonds and stock of the Corporation as rapidly as the interest of the Corporation will permit. Upon the retirement of such stock, the reasonable value thereof as determined by the Board shall be paid into the Treasury of the United States and the receipts issued therefor shall be canceled. The Board shall proceed to liquidate the Corporation when its purposes have been accomplished, and shall pay any surplus or accumulated funds into the Treasury of the United States. The Corporation may declare and pay such dividends to the United States as may be earned and as in the judgment of the Board it is proper for the Corporation to pay.

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SEC. 5. (a) In order to provide local mutual thrift institutions in which people may place their savings and invest their funds, and in order to provide for the financing of homes, the Board is authorized, under such rules and regulations as it may prescribe, to provide for the organization, incorporation, examination, operation, and regulation of associations to be known as Federal Savings and Loan Associations”, and to issue charters therefor, giving primary consideration to the best practices of local mutual thrift and home financing institutions in the United States; but no such association shall be incorporated by the Board unless in its judgment the community to be served is insufficiently served by local thrift and home-financing institutions. Such association shall be authorized to make loans upon homes secured by duly recorded home mortgages and to invest their funds in obligations of the United States and in Federal home-loan bank bonds.

(b) Each, such association, upon its incorporation, shall become automatically a member of the Federal home-loan bank of the district in which it is located, or if convenience shall require and the Board approve, shall become a member of a Federal home loan bank of an adjoining district. Such associations shall qualify for such membership in the manner provided in the Federal Home Loan Bank Act with respect to other members.

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