CONGRESSIONAL RECORD -- SENATE
February 28, 1964
PAGE 3951
AMENDMENT OF SECTION 24 OF FEDERAL RESERVE ACT RELATING TO CERTAIN LIMITATIONS ON REAL ESTATE LOANS BY NATIONAL BANKS
Mr. MUSKIE. Mr. President, I introduce a bill to amend section 24 of the Federal Reserve Act relating to certain limitations on real estate loans by national banks.
Under existing law, national banks may lend up to 75 percent of the appraised value of real estate offered as security, for a term not longer than 20 years. This bill would raise the limitations to 80 percent of the appraised value, for a term not longer than 30 years.
National banks have been unable to effectively compete with other financial institutions not bound by similar limitations. The more liberal lending policies followed by other competing institutions have generally proved sound, and national banks should be permitted to compete more effectively in this important area. This bill would permit them to do so.
This is an administration measure proposed by the Treasury Department. I ask unanimous consent to insert in the RECORD at this point a copy of a letter from the Secretary of the Treasury to the President of the Senate dated July 28, 1963, endorsing the bill.
The ACTING PRESIDENT pro tempore. The bill will be received and appropriately referred; and, without objection, the letter will be printed in the RECORD.
The bill (S. 2576) to amend section 24 of the Federal Reserve Act (12 U.S.C. 371) relating to certain limitations on real estate loans by national banks, introduced by Mr. MUSKIE, was received, read twice by its title, and referred to the Committee on Banking and Currency.
The letter presented by Mr. MUSKIE is as follows:
THE SECRETARY OF THE TREASURY,
Washington, D.C., July 25,1963.
Hon. LYNDON B. JOHNSON,
President of the Senate,
Washington, D.C.
DEAR Mr. PRESIDENT
There is transmitted herewith a draft of a proposed bill, "to amend section 24 of the Federal Reserve Act (12 U.S.C. 371) relating to, certain limitations on real estate loans by national banks," together with a comparative type of the changes in existing law that would be made by the proposed bill.
Pursuant to the provisions of section 24 (12 U.S.C. 371) national banks may lend up to 75 percent of the appraised value of the real estate offered as security, for a term not longer than 20 years if the loan is secured by an amortized mortgage, deed of trust, or other such instrument under the terms of which the installment payments are sufficient to amortize the entire principal of the loan within the period ending on the date of its maturity.
The purpose of the proposed bill is to raise the limitations of this section to 80 percent of the appraised value of the real estate offered as a security and for a term not longer than 30 years. No change would be made in the security requirement.
National banks have found that they cannot effectively meet the competition of other financial institutions such as savings and loan associations and insurance companies who are able to offer mortgages on much more liberal terms. This more liberal policy by these institutions has proved sound. The national banks should be encouraged to compete in this area.
State law on this subject is generally more liberal than the limitations on national banks. Many States have no statutory restrictions relative to real estate loans. In this group are Alabama, Alaska, Arkansas, Delaware, Louisiana, Maryland, Mississippi, Nebraska, North Carolina, South Dakota, Utah, and Washington, a total of 12. Other States have no statutory restrictions concerning loan limits based on a percentage of the appraised value of the real estate offered as security or limitations as to the terms of the loan. States in this category are Arizona, Florida, Kansas, Kentucky, Maine, Minnesota, Missouri, Tennessee, and Wisconsin, totaling nine.
Therefore at least 21 States have no restrictions at all on the percentage that a bank may lend on the security or on the term of the loan. In view of this a liberalization of Federal law in this area is indicated. There is enclosed a comparison of State laws relative to real estate loans.
The Department believes that the proposed legislation is in the national interest and urges its enactment. It would be appreciated if you would lay the proposed bill before the Senate. A similar proposed bill has been transmitted to the Speaker of the House of Representatives.
The Department has been advised by the Bureau of the Budget that there is no objection from the standpoint of the administration's program to the submission of this proposed legislation to the Congress.
Sincerely yours,
DOUGLAS Dillon.