Circular

8 742

§ 743

Payment for stock from proceeds of member's mortgage loan.-Any person desiring to secure a loan through a national farm loan association under the provisions of this chapter 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 5 of section 771. (July 17, 1916, c. 245, § 9, 39 Stat. 368.)

Commissions on interest payments; deduction
from dividends; loans by land banks to associa-
tions; rate of interest.-Subject to rules and regula-
tions prescribed by the Farm Credit Administra-
tion, 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 administration not to exceed
one eighth of 1 per centum semiannually upon the
unpaid principal of said loan, any amounts so
retained as commissions to be deducted from divi-
dends 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
(July 17,
not exceeding 6 per centum per annum.
1916, c. 245, § 9, 39 Stat. 368; Mar. 27, 1933, Ex.
Or. 6084.)

"Farm Credit Administration" and "administration" mentioned in the text were substituted for "Federal Farm Loan Board" and "board,' respectively, pursuant to the Executive Order cited thereto, which is set out in full at the beginning of this chapter.

8 9

& 744

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. (July 17, 1916, c. 245, §9, 39 Stat. 368.)

See § 744a of this chapter for provisions modifying this section.

§ 744a

§ 745

Individual liability of shareholders.-Notwithstanding the provisions of section 744, the shareholders of national farm loan associations shall not be held individually responsible for any contract, debt, or engagement of such association entered into after June 16, 1933, but this section shall not be construed to relieve any other liability with respect to stock held by such shareholders. (July 17, 1916, c. 245, § 9, 39 Stat. 368; June 16, 1933, c. 98, § 72, 48 Stat. 271.)

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 771 of this chapter 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 secretarytreasurer his application for a mortgage loan, giving the particulars required by section 771 of this chapter. (July 17, 1916, c. 245, § 9, 39 Stat. 368.)

8751

$ 752

APPRAISAL FOR FARM LOANS

Investigation by loan committee of association; character and solvency of applicant; sufficiency of security offered; report. Whenever an application for a mortgage loan is made through a national farm loan association, the loan committee provided for in section 712 of this chapter, shall forthwith make, or cause to be made, such investigation as it may deem necessary as to the character and solvency of the applicant, and the sufficiency of the security offered, and cause written report to be made of the result of such investigation, and shall, if it concurs in such report, approve the same in writing. No loan shall be made unless the report is favorable, and the loan committee is unanimous in its approval thereof. (July 17, 1916, c. 245, § 10, 39 Stat. 369; Apr. 20, 1920, c. 154, § 2, 41 Stat. 570.)

Submission to land bank of loan application and report of association's committee; consideration of association's appraisal by bank.-The written report required in section 751 shall be submitted

§ 10

$ 753

8754

8 755

8756

to the Federal land bank, together with the applica-
tion for the loan, and the directors of said land bank
shall examine said written report when they pass on
the loan application which it accompanies, but they
shall not be bound by said appraisal. (July 17,
1916, c. 245, § 10; 39 Stat. 369.)

Requirement for appraisal of land offered as security before making land bank loan.-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 656 of this chapter, 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. (July 17, 1916, c. 245, § 10, 39 Stat. 369.)

Joint stock land banks prohibited from making farm loans after May 12, 1933, except such as are necessary and incidental to refinancing existing loans and to sale of acquired real estate. See 810 of this chapter.

Forms for reports.-Forms for appraisal reports for farm loan associations and land banks shall be prescribed by the Farm Credit Administration (July 17, 1916, c. 245, § 10, 39 Stat. 369; Mar. 27, 1933, Ex. Or. 6084.)

"Farm Credit Administration" mentioned in the text was substituted for "Federal Farm Loan Board" pursuant to the Executive Order cited thereto, which is set out in full at the beginning of this chapter.

Examinations 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 mortgage, as the Farm Credit Administration shall direct. (July 17, 1916, c. 245, § 10, 39 Stat. 369; Mar. 27, 1933, Ex. Or. 6084.)

Borrower ineligible as land bank appraiser; association director or committeeman disqualified by interest in loan.-No borrower under this subchapter shall be eligible as an appraiser under this subchapter 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 indi

8 10

§ 10

8 10

8 761

rectly, in a loan, a majority of the board of direc-
tors of any national farm loan association shall
appoint a substitute to act in his place in passing
upon such loan. (July 17, 1916, c. 245, § 10,
39 Stat. 369.)

POWERS OF NATIONAL FARM LOAN ASSOCIATIONS

Enumerated powers.-Every national farm loan association shall have power:

First. Indorsing mortgages. To indorse, and thereby become liable for the payment of mortgages taken from its shareholders by the Federal land bank of its district. (July 17, 1916, c. 245, § 11, 39 Stat. 369.)

Second. Receiving advances from banks and loaning to shareholders. 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 771 of this chapter. (July 17,1916, c. 245, § 11,39 Stat. 369.)

Third. Fixing charges for applications for loans.— To fix reasonable initial charges to be made against applicants for loans and to borrowers in order to meet the necessary expenses of the association: Provided, That such charges shall not exceed amounts to be fixed by the Farm Credit Administration, and shall in no case exceed 1 per centum of the amount of the loan applied for; to acquire and dispose of property, real and personal, that may be necessary or convenient for the transaction of its business. (July 17, 1916, c. 245, § 11, 39 Stat. 369; Apr. 20, 1920, c. 154, § 3, 41 Stat. 570; Mar. 27, 1933, Ex. Or. 6084.)

Fourth. Issuing interest-bearing certificates against deposits of current funds. To issue certificates against deposits of current funds bearing interest for not longer than one year at not to exceed 4 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 subchapter. (July 17, 1916, c. 245, § 11, 39 Stat. 369.)

National farm loan associations authorized to make their services and facilities available to Land Bank Commissioner to aid in administering Subchapter II of this chapter. See § 1018 of this chapter.

§ 771

RESTRICTION ON LOANS OF FEDERAL LAND
BANKS BASED ON FIRST MORTGAGES

enumerated.-No

Restrictions Federal land bank organized under this chapter shall make loans except upon the following terms and conditions:

First. Security by first mortgage.-Said loans shall be secured by duly recorded first mortgages on farm land within the land bank district in which the bank is situated. (July 17, 1916, c. 245, § 12, 39 Stat. 370.)

Second. Agreement for repayment on amortization plan. 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, except with the approval of the Governor of the Farm Credit Administration, 1 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 the mortgagor may, upon any regular installment date, make in advance any number of payments or any portion thereof on account of the principal of his loan as provided by his contract or pay the entire principal of such loan, under the rules and regulations of the Farm Credit Administration: And provided further, That before the first issues 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 subchapter. (July 17, 1916, c. 245, § 12, 39 Stat. 370; Apr. 20, 1920, c. 154 § 4, 41 Stat. 570; June 16, 1933, c. 98 § 73, 48 Stat. 272; Mar. 27, 1933, Ex. Or. 6084.)

Third. Maximum interest rate.-No loan on mortgage shall be made under this subchapter at a rate of interest exceeding 6 per centum per annum, exclusive of amortization payments. (July 17, 1916, c. 245, § 12, 39 Stat. 370.)

Fourth. Purposes of loans.-Such loans may be made for the following purposes and for no other;

§ 12

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