price to be charged for such water rights shall be the fair value thereof.

$5.704-01 General principles governing disposal of minerals. This disposal agency is authorized to dispose of mineral interests in land assigned to it for disposal, unless such mineral interests are explicitly assigned to another disposal agency. Fee-owned mineral interests assigned to this disposal agency for disposition shall be disposed of as real property, subject to the provisions of this part.

§ 5.704-02 Priorities. Fee-owned mineral interests acquired by the Government separately from the land are subject to the following priorities in the order stated:

(a) Government agencies;

(b) State and local governments;

(c) Former owners-if interests were acquired by the Government after December 31, 1939; and

(d) Nonprofit institutions.

§ 5.704-03 Leasehold mineral interests. Former owners of leasehold mineral interests acquired by the Government are not entitled to priority rights as such former owners. The cost to the Government of acquiring leasehold interests shall not be included in computing the acquisition price of real property for the purpose of setting a priority price to a former owner of the real property. However, in the appraisal of the real property, any enhancement of value resulting from freeing the propertywhether consisting of surface rights, feeowned mineral interests, or both-from a mineral lease will be reflected in the appraisal. Furthermore, in establishing the adjusted acquisition price of the real property to a former owner, any such enhancement of value may properly be considered the result of action by the United States in purchasing and extinguishing the mineral lease.

§ 5.704-04 Disposal of mineral interests separate from the land. Where leasehold mineral interests acquired by the Government separately from the land are not purchased by priority holders, the disposal agency may exercise its discretion as to whether to sell such interests separately or with the land.

[Preceding section, in small type, superseded by following section during period covered by this Supplement]

§ 5.704-04 Disposal of mineral interests separate from the land. Where feeowned mineral interests acquired by the Government separately from the land are not purchased by priority holders, the disposal agency may exercise its discretion as to whether to sell such interests separately or with the land. [Reg., Sept. 8, 1947, 12 F.R. 6255]

PART 8-FARM CREDIT DISTRICTS Sec.

8.1 District institutions. 8.2 District organization.

AUTHORITY: §§ 8.1 and 8.2 issued under sec. 5 (a), 50 Stat. 704; 12 U. S. C. 640a.

SOURCE: §§ 8.1 and 8.2 contained in Codification, Governor, Apr. 25, 1947, 12 FR. 2702.

§ 8.1 District institutions. The United States is divided into twelve farm credit districts, each served by a Federal land bank, a Federal intermediate credit bank, a production credit corporation, and a bank for cooperatives. These four institutions in each district maintain their offices together. The city in which their offices are located in each district and the area comprising each district are as follows:

Springfield, Mass... Maine, New Hampshire,

Vermont, Massachu setts, Rhode Island, Connecticut, New York, and New Jersey Pennsylvania, Delaware, Maryland, Virginia, West Virginia, District of Columbia, and Puerto Rico. North Carolina, South Carolina, Georgia, and Florida.

Ohio, Indiana, Kentucky,
and Tennessee.
Alabama, Mississippi, and
Louisiana.

Illinois, Missouri, and Arkansas.

Michigan, Wisconsin, Minnesota, and North Da kota.

Iowa, Nebraska, South Dakota, and yoming. Oklahoma, Kansas, Colorado, and New Mexico. Texas.

California, Nevada. Utah, and Arizona. Washington, Oregon, Montana, and Idaho.

§ 8.2 District organization. The activities of the Federal land bank, Federal intermediate credit bank, production

10.223-59 Farm Credit Administration approval of retirement of association or related bank stock.

10.223-61 10.223-62

10.223-60 Classes of borrowers; borrowers' disposition of stock or purchase of additional stock; election to membership and purchase of stock by borrowers not members of an association. Personal liability of borrower. Restrictions on eligibility of borrowers for association membership. 10.223-63 Payment in cash by borrower where amount of stock required is not substantial; additional loan to borrower to provide for payment of stock to be purchased; release by bank of conditional payments in amounts sufficient to cover the purchase of required stock; procedure for purchase of stock by bor

rower.

10.525

Owner of lost bond to file bond

of indemnity.

Consolidated bonds.

10.530-50 Method of calling consolidated 'Federal farm loan bonds. 10.530-51 Call for less than entire issue of consolidated Federal farm loan bonds.

AUTHORITY: §§ 10.1 to 10.530-51, inclusive, issued under 39 Stat. 360, as amended, sec. 6, 47 Stat. 14, sec. 32 (b), 48 Stat. 48, sec. 25 (b), 50 Stat. 711; 12 U. S. C. and Sup., Chap. 7, Subchap. I, II. Additional authority is noted in parentheses following sections affected.

SOURCE: §§ 10.1 to 10.530-51, inclusive, contained in Codification, Governor, Apr. 25, 1947, 12 F.R. 2702, except as noted following provisions affected.

NOTE: In §§ 10.3 to 10.530-51, inclusive, the numbers to the right of the decimal point correspond with the respective section numbers in the Policy and Operations Manuals for Federal Land Banks.

CODIFICATION: Prior to the recodification of the chapter, §§ 10.191-10.194, inclusive, were revised Feb. 12, 1947, 12 F.R. 1023, and § 10.279-50 was added Apr. 3, 1947, 12 F.R. 2215. The text is identical with that set forth in the recodification.

GENERAL PROVISIONS

§ 10.1 Organization of Federal land banks. (a) The twelve Federal land banks, of which there is one in each farm credit district, were organized in 1917 under the Federal Farm Loan Act (39 Stat. 360, as amended; 12 U. S. C. and Sup., Chap. 7, Subchap. I). The location of each bank and the States served by it are given in § 8.1 of this chapter. The activities of the Federal land bank in each district are coordinated with those of the Federal intermediate credit bank, production credit corporation, and bank for cooperatives of the district through the district organization described in § 8.2 of this chapter. The farm credit board in each district elected or appointed under 50 Stat. 704, 12 U. S. C. 640b-j, is ex officio the board of directors of the Federal land bank. This board appoints the officers of the bank and is responsible for the management of

its affairs under the general supervision of the Farm Credit Administration.

(b) Under the provisions of the act it was contemplated that the capital stock of the Federal land banks ultimately would be owned entirely by borrowers through their national farm loan associations and some few direct borrowers, although provision also has been made for subscriptions to such stock by the United States. At present the United States owns stock in only one of the land banks.

[Preceding paragraph, in small type, superseded by following paragraph during period covered by this Supplement]

(b) Under the provisions of the act it was contemplated that the capital stock of the Federal land banks ultimately would be owned entirely by borrowers through their national farm loan associations and some few direct borrowers, although provision also has been made for subscriptions to such stock by the United States. As of July 1, 1947, all United States owned stock in these banks had been retired. [Paragraph amended Nov. 7, 1947, 12 F.R. 7313]

(b)

(c) The Federal land banks, together with the national farm loan associations (see §§ 11.1 and 11.2 of this chapter), constitute a cooperative system known as the land bank system which, since 1934, has been supplemented by the Federal Farm Mortgage Corporation (see §§ 12.1 and 12.2 of this chapter).

§ 10.2 Functions and procedures of Federal land banks—(a) General. The twelve Federal land banks were established as permanent institutions designed to provide long-term farm mortgage credit for agriculture in accordance with the Federal Farm Loan Act (39 Stat. 360, as amended; 12 U. S. C. and Sup., Chap. 7, Subchap. I). Related thereto is the issuance of farm loan bonds to obtain funds with which to make loans, or obtaining such funds otherwise, and investing in Government securities. As a consequence of the large scale lending by the banks, they have acquired properties through voluntary deeds and foreclosure of mortgages securing loans which have broken down, requiring the management and disposal of such properties. In servicing their loans and acquired properties, the banks have in nearly all instances utilized the services and facilities of national farm loan associations. An important objective of the banks has been the strengthening of the

associations both financially and from the standpoint of management.

(b) Agents for Land Bank Commissioner and Federal Farm Mortgage Corporation. The Federal land banks also act as agents in making and servicing Land Bank Commissioner loans on behalf of the Federal Farm Mortgage Corporation.

[Preceding paragraph, in small type, superseded by following paragraph during period covered by this Supplement]

(b) Agents for Federal Farm Mortgage Corporation. The Federal land banks also act as agents in servicing Land Bank Commissioner loans on behalf of the Federal Farm Mortgage Corporation. [Paragraph (b) amended Nov. 7, 1947, 12 F.R. 7313]

(c) Loans. The principal function of the Federal land banks is to make first mortgage loans on farm land to eligible applicants for the purposes and on the terms prescribed in the Federal Farm Loan Act. These bank loans are limited to 65 percent of the normal value of the security and may not exceed $50,000 to any one borrower. The Land Bank Commissioner loans authorized by 48 Stat. 48, as amended, 12 U.S.C. and Sup. 1016, which the banks make as agents, may be made up to 75 percent of the normal value of the property, or 75 percent of the prudent investment value under certain conditions, but not to exceed $7,500 to any one farmer. They are made either as a first mortgage loan or as a second mortgage loan supplementing a first mortgage land bank loan. The maximum term for land bank and Commissioner loans is 40 years, but they are commonly made for a shorter period. The present contract interest rate on Federal land bank loans made through national farm loan associations is 4 percent, and the rate on Commissioner loans 1 percent higher.

A joint application for a loan (bank or Commissioner or both), on a prescribed form available from the banks and associations, is filed with the secretary-treasurer of the national farm loan association in the territory in which the property offered as security is located. The application calls for information regarding the amount and purposes of the loan sought, the security offered, and the applicant's financial condition. As a first step, the Federal Farm Loan Act provides for an investigation as to the character and solvency of the applicant and the sufficiency of the security offered, by the association loan committee or its investigator, and for a written report thereon. The association loan committee may also request a written report on the value of the security by a land bank appraiser, who is a public official appointed by the Farm Credit Administration. Where such a report by an appraiser has been ob

tained, the association may notify the applicant of any loan approved by it, subject to further approval by the Federal land bank.

The application and written report of the association loan committee, as well as any report by a land bank appraiser, are next referred to the Federal land bank; if there has been no report by a land bank appraiser, the bank will then obtain one. No loan may be made by the bank unless the reports of both the association and the land bank appraiser are favorable. On the basis of the association approval and the favorable report by a land bank appraiser, the Federal land bank determines the amount of any loan that can be soundly made. Whether a Land Bank Commissioner loan is to be approved is determined by the bank as agent. The actual passing on applications in each bank is usually done by a loan or executive committee, and notice of its action is duly given to the interested association and the applicant. Loans to livestock corporations in certain circumstances, and land bank loans in excess of $25,000, require the approval of the Land Bank Commissioner which may be given by authorized personnel in the districts (see §§ 3.8, 3.9, 3.10 of this chapter).

There are certain statutory provisions also for direct loans to borrowers by the Federal land banks and loans through agents, where they cannot be made through an association, but the general plan is for the land bank loans to be made through associations. [Preceding paragraph, in small type, superseded by following paragraph during period covered by this Supplement]

(c) Loans. The principal function of the Federal land banks is to make first mortgage loans on farm land to eligible applicants for the purposes and on the terms prescribed in the Federal Farm Loan Act. These bank loans are limited to 65 percent of the normal value of the security and may not exceed $50,000 to any one borrower. The maximum term for loans is 40 years, but they are commonly made for a shorter period. The present contract interest rate on Federal land bank loans made through national farm loan associations is 4 percent.

An application for a loan, on a prescribed form available from the banks and associations, is filed with the secretary-treasurer of the national farm loan association in the territory in which the property offered as security is located. The application calls for information regarding the amount and purposes of the loan sought, the security offered, and the applicant's financial condition. As a first step, the Federal Farm Loan Act provides for an investigation as to the character and solvency of the applicant and the sufficiency of the security offered,

by the association loan committee or its investigator, and for a written report thereon. The association loan committee may also request a written report on the value of the security by a land bank appraiser, who is a public official appointed by the Farm Credit Administration. Where such a report by an appraiser has been obtained, the association may notify the applicant of any loan approved by it, subject to further approval by the Federal land bank.

The application and written report of the association loan committee, as well as any report by a land bank appraiser, are next referred to the Federal land bank; if there has been no report by a land bank appraiser, the bank will then obtain one. No loan may be made by the bank unless the reports of both the association and the land bank appraiser are favorable. On the basis of the association approval and the favorable report by a land bank appraiser, the Federal land bank determines the amount of any loan that can be soundly made. The actual passing on applications in each bank is usually done by a loan or executive committee, and notice of its action is duly given to the interested association and the applicant. Loans to livestock corporations in certain circumstances, and land bank loans in excess of $25,000, require the approval of the Land Bank Commissioner which may be given by authorized personnel in the districts (see §§ 3.8 and 3.9 of this chapter).

There are certain statutory provisions also for direct loans to borrowers by the Federal land banks and loans through agents, where they cannot be made through an association, but the general plan is for the land bank loans to be made through associations. [Paragraph (c) amended Nov. 7, 1947, 12 F.R. 7313]

(d) Bonds. Related to the lending functions of the Federal land banks is the issuance of Federal farm loan bonds to obtain funds with, which to make loans. While the Federal Farm Loan Act provides both for Federal farm loan bonds to be issued by the banks individually, with the approval of the Farm Credit Administration (39 Stat. 375; 12 U. S. C. 841-844), and for consolidated bonds of the twelve banks to be sold through a common selling agency (39 Stat. 377, as amended; 12 U. S. C. and Sup., 875-886), all issues now outstanding are consolidated bonds. The collateral for consolidated bonds is prescribed