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APPENDIX C

SAVINGS BANKS AND ASSOCIATIONS

The primary function of these thrift banking associations is to invest the savings of their members in reliable securities. Among the few securities in which they have found the nearest approach to safety are farm mortgages. The State Banking Commissioner of Vermont reported (1916) that the savings banks of that state had invested $45,000,000 in farm mortgages outside the state. Some of the more conservative states, however, forbid these associations to invest in real estate securities outside of a definite radius. The New York Banking Laws, Art. VI, Sec. 239, authorize savings banks to loan on or invest in.

Bonds and mortgages on unincumbered real property situated in this state, to the extent of sixty per centum of the appraised value of deposits and guaranty fund shall be so loaned or invested. If the loan is on unimproved and unproductive real property, the amount loaned thereon shall not be more than forty per centum of its appraised value. No investment in any bonds and mortgages shall be made by any savings bank except upon the report of a committee of its trustees charged with the duty of investigating the same, who shall certify to the value of the premises mortgaged or to be mortgaged, according to their judgment, and such report shall be filed and preserved among the records of the corporation.

The requirements for mortgage loans, abstracts of title or title policy, insurance of buildings, and recording are fully set forth in Sec. 241 of Art. VI, as follows:

In all cases of loans upon real property, a bond secured by a mortgage of the real estate upon which the loan is made, together with a complete abstract of title to such real estate,

signed by the person or corporation furnishing such abstract of title, or a policy of title insurance of a title company authorized to insure titles no real estate in the state of New York, shall be required of the borrower.

Whenever buildings are included in the valuation of any real property upon which a loan shall be made by a savings bank, they shall be insured by the mortgagor in such company or companies as the savings bank shall direct, and the policy of insurance shall be duly assigned to the savings bank, or the loss made payable to the savings bank, as its interest may appear; and any such savings bank may renew such policy of insurance in the same or such other company or companies as it may elect, from year to year, or for a longer or shorter term, in case the mortgagor shall neglect to do so, and may charge the amount paid to the mortgagor. All the necessary charges and expenses paid by the savings bank for such renewal or renewals shall be paid by the mortgagor to the savings bank and shall be a lien upon the property mortgaged, recoverable with interest from the time of payment as part of the moneys secured to be paid by the mortgage.

Every mortgage and every assignment of a mortgage taken or held by a savings bank shall immediately be recorded in the office of the proper recording officer of the county in which the real property described in the mortgage is located.

APPENDIX D

STATE LAND BANKS

Several states have passed special laws providing for land mortgage banks. Among the most conspicuous of these are the special Act of 1914 creating the "Land Bank of the State of New York"; the special Act of 1915 creating "The Missouri Land Bank"; the Massachusetts Law on farm land banks of 1915; the law authorizing land mortgage associations in Wisconsin 1913; and the North Dakota State bank 1919, "for all purposes.'

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While each of these state-banking projects is different in details, the principles and purposes for supplying the farmers long-term credit are similar. None of the state banking schemes, however, have yet sufficiently matured to warrant an outline of their practical work. For the purpose of understanding, in a general way, the aims, legal privileges, and functions of these state land banks, we will present the features of one particular type, that of the "Land Bank of the State of New York."

As authorized by Sec. 421 of Art. X of the New York banking laws, the "Land Bank of the State of New York" has been formed by the subscriptions of savings and loan associations. The number of associations required for organizing the land bank was ten or more, the aggregate resources of which had to be at least $5,000,000, and their aggregate share subscription to the land bank not less than $100,000 paid in cash. Section 424 of the banking laws grants the land bank in its farm mortgage dealings the following general powers:

1. To issue, sell, and redeem debenture bonds and notes secured by bonds and first mortgages made to or held by member associations.

2. To receive money or property from its members and from other persons with whom it has contracts, engagements or undertakings, in installments or otherwise; to enter into any contract, engagement or undertaking with such persons for the withdrawal of such money or property, with any increase thereof, or for the payment to them or to any person of any sum of money, at any time, either fixed or uncertain.

3. To invest its capital and other funds in bonds secured by first mortgages of real estate situated within the territory in which its members are authorized to make loans; and in securities which are authorized as investments for saving banks authorized to invest in section two hundred thirty-nine of this chapter.

4. To receive by assignment from its members and to deposit in trust with the comptroller of the State of New York to be held by him as security for it and their outstanding obligations any first mortgages of real estate and the bonds secured thereby that are legally receivable by savings and loan associations; to empower such savings and loan associations as agents of the land bank, to collect and immediately pay over to the land bank the dues, interest and other sums payable under the terms, conditions and covenants of the bonds and mortgages. Among the restrictions the land bank is forbidden to:

Incur any indebtedness upon notes and bonds in excess of twenty times the amount of its capital, nor issue bonds on behalf of any of its members in excess of twenty times the amount of the shares of such capital held by such member or in excess of eighty per centum of the value of the collateral security pledged therefor to such land bank.

Section 426 of the law provides for the issue and sale of debenture bonds; the pledge of mortgages by associations and the repayment of mortgages as follows:

Debenture bonds shall be issued in series of not less than fifty thousand dollars. All debentures issued by the land bank may be called on any interest day at one hundred and two

and one-half per centum and interest by giving notice of not less than sixty days in a newspaper published in the city of New York. Any member association which is not indebted for borrowed money and has made no investments upon the security of real estate or taken title to real estate upon which there are prior mortgages, liens or encumbrances may pledge seventy-five per centum of its mortgages with the bonds secured thereby, to the land bank, as collateral security for debenture bonds issued on its behalf. Whenever such obligations do not exceed ten per centum of the accumulated capital of the association, fifty per centum of such mortgage securities may be pledged to the land bank; and when such obligations exceed ten per centum of such capital, twenty-five per centum of such mortgage securities may be so pledged. Whenever all the members of a member association shall execute and deliver to such association bonds secured by first mortgages of real estate and shall each 'give his collateral bond to such member association guaranteeing the payment of the bonds and mortgages of all the other members, one hundred per centum of the mortgage securities of such association and the bonds secured thereby may be pledged by such association to the land bank.

The amortization payments upon all mortgages accepted by the land bank collateral security for debenture bonds shall be sufficient to liquidate the debt in a period not exceeding forty

years.

The land bank, its capital and accumulated funds have the same exemption from taxation as other institutions for savings.

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