The Federal Home Loan Bank Act

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Borrowing From the System

A. Long term borrowing.

(") Members and non-member borrowers can Secure advances up to twelve (L2) times the amount of their stock subscriptions or deposits. (Section 10-c.)

(b) The rate of interest is determined by the Board at the time the loan is made and will be largely dependent on the rates paid on bonds. (Section 11-e.) (Section 10-d.)

(") Security for advances.

1. Home mortgages must be put up as security. (Section 10-a.)

a. No mortgages shall be eligible as security if- a. The Home Loan Bank may loan up to 60/o of the unpaid principal of the mortgage, and b. Up to 4O/o of the value of the real estate securing the mortgage. a. The Home Loan Bank System cannot loan more than 5O/o of. the unpaid principal, and b. Not more than 3O/o of the value of the real estate.

(1) At the time the loan is made the home mortgage has more than fifteen years to run to maturity. (Section 1Gb.)

(2) The mortgage is more than six months past due when presented. (Section 1Gb.)

(3) The value of the real estate mortgage is more than $20,000. (Section lGb.)

2. If the loan was originally made for eight years or more. (Section 1Ga.)

3. If any other home mortgages are put up as security(Section 10-a.)

4. The Home Loan Bank holds the stock of borrowing members. (SectionlO-c.)

(d) Policy of repayment of advances will be determined by the Federal lfome Loan Bank Board. (Section 10-d.)

(e) What is the sour'ce of these long term funds?

1. Each bank has power to issue bonds subject to the approval of the Board. (Section 11-a.)

2. The bonds of ea,ch bank must be se'cured by at least a. The Board has the power to determine rates of interest paid on bonds. For first seven years rate shall not be over 5l/o and thereafter not over 5/o. (Section 11-e.) a. Bonds are exempt from local, state and most Federal taxation. (Sectionl3.)

I%)/o in home mortgages. (Section 11-c.)

3. fnterest rates.

4. Tax exempt.

B. Short term borrowing.

(") Sour,ce of funds-all funds from stock subscriptions and deposits of non-members and members cannot be invested for periods of more than one year and may be used for-(Section 11-i.)

1. Purchase of obligations of the United States.

2. Deposits in banks or trust companies.

3. Loans made to members or non-member borrowers for not more than a year.

(b) Member and non-member borrowers whose creditor liabilities, excluding advances from the Federal Home Loan Bank, do not exceed 5% of. their assets, may borrow for not more than one year without collateralizing mortgages upon conclitions pres,cribed by the Board. (Section 11-i.)

(.) Member and non-member borrowers must subject themselves to examination by the Federal Home Loan Bank from which they borrow and by the Federal Home Loan Bank Board. (Section 22-b.)

Miscellaneous

A. It is unlawful for any associations, corporation, partnership or individual to advertise that he or it is a member of the Federal Home Loan Bank System if he or it is not su,ch a member. (Section 21-d.)

B. Subject to the sanction of the Board if at any time any of the banks have more funds than can be used in advances to members they can be invested in obligations of the United States or in such securities as fiduciary and trust funds may be invested in under the laws of the State where the Federal lfome Loan Bank is located. (Section I 1-j.)