require the availability for rental purposes of properties covered by mortgages insured under this title. in such instances and for such periods of time as he may prescribe

RECONSTRUCTION FINANCE CORPORATION ACT, AS AMENDED

SEC. 4.

(c) The total amount of investments, loans, purchases, and commitments made subsequent to June 30, 1947, pursuant to section 4 shall not exceed [$2,500,000,000] $3,500,000,000 outstanding at any one time: Provided, That the aggregate amount outstanding at any one time shall not exceed (1) under subsection (a) (4) $40,000,000, (2) for construction purposes under subsection (a) (3) $200,000,000, and (3) under the last two sentences of subsection (a) (2) $15,000,000.

THE LANHAM ACT, AS AMENDED

SEC. 313. The Administrator shall, as promptly as may be practicable and in the public interest, remove all housing under his jurisdiction which is of a temporary character as determined by him, and constructed under the provisions of this Act. Public Law 781, Seventy-sixth Congress, and Public Laws 9, 73, and 353, Seventyseventh Congress. Such removal shall, in any event, be accomplished not later than [January 1, 1950] January 1, 1951, with the exception only of such housing as the Administrator, after consultation with local communities finds is still needed in the interest of the orderly demobilization of the war effort: Provided, That all such exceptions shall be reexamined annually by the Administrator and that all such exceptions and reexaminations shall be reported to the Congress.

FEDERAL CREDIT UNION ACT AMENDMENTS

OCTOBER 10, 1949.-Committed to the Committee of the Whole House on the State of the Union and ordered to be printed

Mr. SPENCE, from the Committee on Banking and Currency, submitted the following

REPORT

[To accompany H. R. 6185]

The Committee on Banking and Currency, to whom was referred the bill (H. R. 6185) to amend the Federal Credit Union Act, having considered the same, report favorably thereon without amendment and recommend that the bill do pass. The bill was unanimously reported by the committee.

GENERAL STATEMENT

The bill would amend the Federal Credit Union Act, as amended, in three respects. It would increase from 2 years to 3 years the limit for maturity of loans made by a Federal credit union; it would increase from $300 to $400 the limit for unsecured loans; and it would place a ceiling upon the regular reserves required to be maintained by Federal credit unions, and provides that special reserves may also be required when necessary.

Section 1 would amend paragraph 5 of section 7 of the Federal Credit Union Act to increase the maximum time that loans may be made to members of Federal credit unions from 2 years to 3 years. This would be permissive, and its use would be subject to the policy established by the directors of a given credit union as to the length of time that loans might be granted within the 3-year limit. The terms of repayment of loans would be subject to the policy of the board of directors and the approval of the credit committee of the credit union. There are occasions when credit unions could better serve their members if they could extend to them loans for 30 months or 36 months instead of the present limit of 24 months. In many States the time limit for the repayment of credit-union loans is more liberal than that of the Federal act. The following States do not have any limit in this connection: Arizona, Florida, Indiana, Iowa,

Kansas, Kentucky, Maryland, Louisiana, Maine, Michigan, Missouri. Nebraska, North Carolina, North Dakota, Ohio, Oklahoma, Idaho. Minnesota, Rhode Island, Utah, Virginia, and Wisconsin. The maximum time permitted under the Texas law is 5 years. Reports have not been received from all States, but it is believed that generally the others have liberal provisions regarding the maximum time for the repayment of loans. The experience of State-chartered credit unions as to operations with respect to time limit for loan repayments seems to have been very satisfactory.

Section 2 of H. R. 6185 would amend the fourth sentence of subsection (d) of section 11 of the Federal Credit Union Act to increase the unsecured loan limit from $300 to $400. This change is desired by Federal credit unions and it is felt that in view of present_monetary conditions, $400 is a reasonable limit. Originally the Federal Credit Union Act limited unsecured loans to $50. Later, in 1940, an amendment changed this to $100, and in 1946 the unsecured limit was raised to $300 by another amendment. The management of any one Federal credit union, of course, has a right to set a smaller limit based on conditions within the particular group. It is the usual practice for new and young credit unions to have small limits in order to spread loan service to as many members as possible. The experience as regards safety seems to have been as satisfactory when a larger unsecured limit was permissible as when the maximum was smaller.

Section 3 proposes to amend section 12 of the Federal Credit Union Act which relates to reserves.

At present the Federal credit unions must set aside fees and fines and 20 percent of net earnings each year in a reserve fund. This change would make it unnecessary for the Federal credit union to set aside anything in the reserve fund after the reserve fund is equal to 10 percent of the total amount of the members' shares on deposit. It would protect the credit union against the possibility of being compelled to transfer more than fees and fines and 20 percent of its net earnings to the reserve fund during any 1 year. This is a standard provision contained in many State laws. A reserve fund equal to 10 percent of the shares on deposit in the credit union has been found to be ample. At present the reserve fund may be used only to offset those losses which are brought about through bad loans. This amendment provides that the reserve fund may be used to cover any type of loss sustained by the Federal credit union. such as depreciation of securities and so forth.·

CHANGES IN EXISTING LAW

In compliance with paragraph 2a of rule XIII of the Rules of the House of Representatives, changes in existing law made by the bill. as introduced, are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italics. existing law in which no change is proposed is shown in roman):

FEDERAL CREDIT UNION ACT

SEC. 7. POWERS.-A Federal credit union shall have succession in its corporate name during its existence and shall have power

(5) To make loans with maturities not exceeding [two years] three years to its members for provident or productive purposes upon such terms and conditions

as this chapter and the bylaws provide and as the credit committee may approve, at rates of interest not exceeding 1 per centum per month on unpaid balances (inclusive of all charges incident to making the loan): Provided, That no loans to a director, officer, or member of a committee shall exceed the amount of his holdings in the Federal credit union as represented by shares thereof. No director, officer, or committee member shall endorse for borrowers. A borrower may repay his loan, prior to maturity, in whole or in part on any business day. The taking, receiving, reserving, or charging a rate of interest greater than is allowed by this subsection, when knowingly done, shall be deemed a forfeiture of the entire interest which the note, bill, or other evidence of debt carries with it, or which has been agreed to be paid thereon. In case the greater rate of interest has been paid the person by whom it has been paid, or his legal representatives, may recover back, in an action in the nature of an action of debt, the entire amount of interest thus paid from the credit union taking or receiving the same: Provided, That such action is commenced within two years from the time the usurious transaction occurred.

(d) CREDIT COMMITTEE.-The credit committee shall hold such meetings as the business of the Federal credit union may require and not less frequently than once a month (of which meetings due notice shall be given to members of the committee) to consider applications for loans. No loan shall be made unless approved by a majority of the entire committee and by all of the members of the committee who are present at the meetings at which the application is considered. Applications for loans shall be made on forms prepared by such committee, which shall set forth the purpose for which the loan is desired, the security, if any, and such other data as may be required. No loan shall be made to any member which shall cause such member to become indebted to the Federal credit union in the aggregate, upon loans made to such member, in excess of $200 or 10 per centum of the Federal credit union's paid-in and unimpaired capital and surplus, whichever is greater, or in excess of [$300] $400 unless such excess over [$300] $400 is adequately secured. For the purposes of this subdivision an assignment of shares or the endorsement of a note shall be deemed security.

[SEC. 12. RESERVES.-All entrance fees and fines provided by the bylaws any 20 per centum of the net earnings of each year, before the declaration of and dividends, shall be set aside, subject to the terms and conditions specified in the bylaws, as a reserve fund against possible bad loans.]

SEC. 12. RESERVES.-All entrance fees and fines provided by the bylaws and 20 per centum of the net earnings of each year, before the declaration of any dividend, shall be set aside as a regular reserve against losses on bad loans and such other losses as may be specified in the bylaws in accordance with regulations prescribed under this Act: Provided, however, That when the regular reserve thus established shall equal 10 per centum of the total amount of members' shareholdings, no further transfer of net earnings to such regular reserve shall be required except that such amounts not in excess of 20 per centum of the net earnings as may be needed to maintain this 10 per centum ratio shall be transferred. In addition to such regular reserve, special reserves to protect the interests of shareholders shall be established when required (a) by regulation, or (b) in any special case, when found by the director to be necessary for that purpose.

H. Repts., 81-1, vol. 6———▬▬▬75