TREASURY DEPARTMENT "F10 1917
FEDERAL FARM LOAN BUREAUNIv. of Mich.
- Llk:RARY -
Circular No. 1. - *.
National Farm Loan Associations
V
ORGANIZATION, MANAGEMENT
POWERS, AND LIMITATIONS
ISSUED BY THE
FEDERAL FARM LOAN BOARD
August 19, 1916
WASHINGTON
GOVERNMENT PRINTING OFFICE .
1916
.
:
&
ſ

Q
>] 'A '/zº Z^* ~/ º -º /••••••••••}/-
4 NATIONAL FARM LOAN ASSOCIATIONS.
MANAGEMENT.
After the charter is granted the applicants no longer act in their
individual capacity, but become merged as shareholders into a
corporation, which has a separate existence created by law, under
the same name which has been chosen and set forth in the original
application and organization certificate. This corporation will have
directors and officers selected by the shareholders to do its business
in accordance with the by-laws which the shareholders make for their
guidance. The active executive officer of the association will be the
secretary-treasurer, and his duties are set forth in section 7 of the
farm loan act.
POWERS.
These associations are organized for the primary purpose of giving
to each borrower the benefit of the combined credit of all its members
to the extent of the capital contributed and the limited liability they
each incur, and hence the associations are required to indorse every
loan made to members. It is also through these associations that
the borrowers will ultimately become the owners of the Federal land
banks. The association decides whether any loan shall be made or
not by refusing the application for every loan which is considered
unsafe or even i. No loan can be made unless it is approved
by the loan committee after examination of the land offered as
security.
The national farm loan associations are not limited as to the
number of their members. After one is organized it may serve an
entire neighborhood by receiving new members. Each association
may obtain in loans for its members twenty times the amount of its
stock in the Federal land bank, no matter how large its holdings of
stock may become by the growth of the association.
LIMITATIONS.
1. No loan may be made except upon the security of first mortgages.
2. The amount of the mortgage can not exceed one-half the ap-
praised value of the land and 20 per cent of the permanent improve-
ments thereon, which must be insured.
3. The proceeds of the loan must be used for the extinguishment
of preexisting indebtedness or for productive purposes, which includes
the purchase of live stock, fertilizers, equipment and improvements
(see section 12, farm loan act).
4. Every mortgage must contain an agreement to P. off the debt
(principal and interest) in fixed annual or semiannual installments.
tº #. amount of each installment may be fixed by the borrower,
but can not be less than sufficient to pay off the debt in 40 years,
nor greater than to pay it off in 5 years. •
6. The rate of interest charged any borrower can not exceed 6 per
cent per annum. -
7. The borrower can not be called upon to pay the debt except by
the installments he originally fixes, unless he defaults, but after five
ears he may pay off the whole or any portion at his option at any
installment period. - -
O