(d) Organization of national farm loan association by direct borrowers. Each such borrower may covenant in his mortgage that, whenever there are ten or more borrowers who have obtained from a Federal land bank direct loans under the provisions of this section aggregating not less than $20,000, and who reside in a locality which may, in the opinion of the Land Bank Commissioner, be conveniently covered by the charter of and served by a national farm loan association, he will unite with such other borrowers to form a national farm loan association. Such borrowers shall organize the association subject to the requirements and the conditions specified in sections 711-723, so far as the same may be applicable, and in accordance with rules and regulations of the Land Bank Commissioner. As soon as the organization of the association has been approved by the Land Bank Commissioner, the stock in the Federal land bank held by each of the members of such association shall be canceled at par, and in lieu thereof the bank shall issue in the name of the association an equal amount of stock in said bank, which stock shall be held by said bank as collateral security as provided in sections 711-723 of this title with respect to other loans through national farm loan associations. Thereupon there shall be issued to each such member an amount of capital stock in the association equal to the amount which he previously held in said bank, which stock shall be held by said association as collateral security as provided in section 733 of this chapter. The board of directors of said association shall adopt a resolution authorizing and directing its secretary-treasurer on behalf of said association to endorse, and thereby become liable for the payment of, the mortgages taken from its charter members by the Federal land bank. When it shall appear to the satisfaction of the Land Bank Commissioner that all the foregoing conditions have been complied with, and upon the granting of the charter by the Land Bank Commissioner, the interest rate paid by each charter member of such association whose loan is in good standing shall, beginning with his next regular installment date, be reduced to the rate of interest paid by borrowers on new loans made through national farm loan associations in the same farm credit district at the time the said loan was made to such charter member. (e) Charges to applicants and borrowers.-Charges to be paid by applicants for direct loans from a Federal land bank shall not exceed amounts to be fixed by the Land Bank Commissioner and shall in no case exceed the charges which may be made to applicants for loans and borrowers through national farm loan associations under the provisions of sections 761 and 781 of this title. (f) Option to make loan in bonds.-Direct loans made under subsections (a) to (e) hereof, may, at the option of the Federal land bank, be made in bonds of the Federal Farm Mortgage Corporation. (July 17, 1916, ch. 245, § 7, 39 Stat. 365; Mar. 4, 1933, ch. 270, § 1, 47 Stat. 1547; May 12, 1933, ch. 25, § 26, 48 Stat. 44; June 16, 1933, ch. 98, § 80 (a), 48 Stat. 273; Jan. 31, 1934, ch. 7, § 6, 48 Stat. 346; Aug. 19, 1937, ch. 704, §§ 5 (a), 22, 50 Stat. 704, 710.) REFERENCES IN TEXT In the original, "this chapter," as used in the second sentence of this section, reads "this Act," meaning the Federal Farm Loan Act (act July 17, 1916, cited to text). For distribution of said Federal Farm Loan Act in this Code, see note under section 641 of this title. SAVING CLAUSE See note under section 640a of this title. § 724. Loans when association's stock is impaired-(a) Authorization; interest; admission to membership of borrowers under section 723.—Whenever it shall appear that the capital stock of a national farm loan association is impared, the Farm Credit Administration may authorize the Federal land bank of the district in which such association is located to make loans to applicants through such association subject to the requirements and conditions specified for direct loans in section 723 of this title, except as otherwise specifically provided in this section, and may authorize such association to elect to membership borrowers having loans made pursuant to said section 723 on lands situated within the chartered territory of the association. Borrowers admitted to membership in the association pursuant hereto shall be entitled to vote and hold office in the association and the rate of interest on their loans shall be one-fourth of 1 per centum per annum less than the rate of interest provided at such time for direct loans. The association shall endorse all such mortgage loans but it shall not become liable therefor except as hereinafter provided. (b) Effect of admission of ten borrowers with loans in good standing aggregating $20,000.-When there are ten or more borrowers admitted to membership in an association pursuant to this section whose loans are in good standing, as defined by the Farm Credit Administration, and aggregate not less than $20,000; First. Liability of association and members.-The association shall become liable for the payment of said loans: Provided, however, That, any other provisions of law to the contrary notwithstanding, the shareholders who have become members pursuant to this section shall not be held responsible, through the amount paid in and represented by their shares or otherwise, for any contracts, debts, or engagements of the association entered into before the date on which the first member was admitted to the association pursuant to this section and the shareholders of such association who were members prior to said date shall not be held responsible, through the amount paid in and represented by their shares or otherwise, for any mortgages endorsed by such associa tion on or after said date, but this provision shall not be construed to relieve any other liability with respect to stock held by shareholders who were members prior to said date. Second. Reduction of interest rate.-The interest rate paid by each such borrower on each such loan shall, beginning with the next regular installment date, be reduced one-fourth of 1 per centum per annum. Third. Exchange of Federal land bank stock for association stock. The stock in the Federal land bank held by each of said borrowers shall be exchanged for association stock in the manner provided for in section 723 (d) of this title. Fourth. Admission of new members.-The association may thereafter admit new members, endorse their loans, and become liable for the payment of such loans as provided in paragraph "First" of this section. Fifth. Election of loan committee.-At the the next annual meeting of stockholders, and thereafter, the loan committee of such assoication may be elected by the members who become stockholders pursuant to this section and any loan committee so elected shall have the powers specified for loan committees elected as provided in section 747 of this title: Provided, however, That in the event such stockholders fail to elect the loan committee, new members shall be admitted to the association as otherwise provided in this chapter. Sixth. Records and accounts; dividends.-In accordance with rules and regulations prescribed by the Farm Credit Administration, the association shall maintain separate capital-stock records; shall keep all capital losses or gains, reserves (including legal reserves), and dividends received from the Federal land bank on stock owned by the association in connection with loans for which it becomes liable as provided in this section separate and apart from capital losses or gains, reserves (including legal reserves), and dividends received from the Federal land bank on stock owned by the association in connection with other loans of the association; and shall segregate any undivided profits of the association resulting from its business operations in like manner when so required by rules and regulations of the Farm Credit. Administration. Subject to the other provisions of this chapter with respect to the declaration of dividends, dividends may be declared exclusively on association stock owned by borrowers with loans for which the association becomes liable as provided in this section or exclusively on association stock owned by borrowers with other loans through the association. (c) Same; effect of loan not in good standing.—If the loan of any borrower who was admitted to membership pursuant to this section is not in good standing at the time when there are ten or more borrowers with loans aggregating not less than $20,000 which are in good standing, the provisions of paragraphs "First", "Second", and "Third" of this section shall be applicable to his loan at such time as it shall be placed in good standing. - (d) Removal of impairment of stock.-If and when all impairment is removed in the stock owned by shareholders with loans which were made prior to the date on which the first member was admitted to the association pursuant to this section, the holders of such stock and the holders of stock issued on and after said date may, pursuant to rules and regulations of the Farm Credit Administration and consistent with the provisions of this chapter, agree as to the rights, powers, privileges, duties, and liabilities which shall thenceforth attach to their respective shares of stock and otherwise agree as to the future applicability, if any, of the special provisions contained in this section. (Aug. 19, 1937, ch. 704, § 25 (b), 50 Stat. 711.) REFERENCES IN TEXT In the original "this chapter" reads "The Federal Farm Loan Act, as amended" (act July 17, 1916, ch. 245, 39 Stat. 360). For distribution of said Federal Farm Loan Act in this Code, see note under section 641 of this title. SAVING CLAUSE See note under section 640a of this title. CAPITAL STOCK OF NATIONAL FARM LOAN ASSOCIATIONS § 731. Par value of shares.-The shares in national farm loan associations shall be of the par value of $5 each. (July 17, 1916, ch. 245, § 8, 39 Stat. 367.) § 732. Voting privileges.-Effective thirty days after August 19, 1937, every shareholder shall be entitled to one vote, and no more, at all elections of directors and in deciding all questions at meetings of shareholders. (July 17, 1916, ch. 245, § 8, 39 Stat. 367; Aug. 17, 1937, ch. 704, § 23, 50 Stat. 710.) SAVING CLAUSE See note under section 640a of this title. § 733. Borrowers only to be members; application for membership; subscription to stock in association; stock held as collateral; retirement of stock.-No persons but borrowers on farm land mortgages shall be members or shareholders of national farm loan associations. Any person desiring to borrow on farm land mortgage through a national farm loan association shall make application for membership and shall subscribe for shares of stock in such farm loan association to an amount equal to 5 per centum of the face of the desired loan, said subscription to be paid in cash upon the granting of the loan. If the application for membership is accepted and the loan is granted, the applicant shall, upon full payment therefor, become the owner of one share of capital stock in said loan association for each $100 of the face of his loan, or any major fractional part thereof. Said capital stock shall be paid off at par and retired upon full payment of said loan. Said capital stock shall be held by said association as collateral security for the payment of said loan, but said borrower shall be paid any dividends accruing and payable on said capital stock while it is outstanding. (July 17, 1916, ch. 245, § 8, 39 Stat. 367.) § 734. Increase of stock.-Every national farm loan association formed under this chapter shall by its articles of association provide for an increase of its capital stock from time to time for the purpose of securing additional loans for its members and providing for the issue of shares to borrowers in accordance with the provisions of this chapter. Such increases shall be included in the quarterly reports to the Farm Credit Administration. (July 17, 1916, ch. 245, § 8, 39 Stat. 367; Ex. Ord. No. 6084, Mar. 27, 1933.) NATIONAL FARM LOAN ASSOCIATIONS; SPECIAL PROVISIONS § 741. Right of members to loans.-Any person whose application for membership is accepted by a national farm loan association shall be entitled to borrow money on farm land mortgage upon filing his application in accordance with section 733, and otherwise complying with the terms of this chapter whenever the Federal land bank of the district has funds available for that purpose, unless said land bank or the Farm Credit Administration shall, in its discretion, otherwise determine. (July 17, 1916, ch. 245, § 9, 39 Stat. 368; Ex. Ord. No. 6084, Mar. 27, 1933.) REFERENCES IN TEXT In the original, "this chapter" reads "this Act," meaning the Federal Farm Loan Act (act July 17, 1916, cited to text). For distribution of said Federal Farm Loan Act in this Code, see note under section 641 of this title. § 742. 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 of this title. (July 17, 1916, ch. 245, § 9, 39 Stat. 368.) REFERENCES IN TEXT In the original, "this chapter" reads "this Act," meaning the Federal Farm Loan Act (act July 17, 1916, cited to text). For distribution of said Federal Farm Loan Act in this Code, see note under section 641 of this title. § 743. Commissions on interest payments; deduction from dividends; loans by land banks to associations; rate of interest.— Subject to rules and regulations prescribed by the Farm Credit Administration, 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 semi-annually upon the unpaid principal of said loan, any amounts so retained as commissions to be deducted from dividends 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 stockholdings 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 not exceeding 6 per centum per annum. (July 17, 1916, ch. 245, § 9, 39 Stat. 368; Ex. Ord. No. 6084, Mar. 27, 1933.) § 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, ch. 245, § 9, 39 Stat. 368.) CROSS REFERENCE Shareholders not liable on contracts entered into after June 16, 1933, see section 744a of this title. |