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FEDERAL RESERVE BANK
OF NEW YORK
r Circular N o. 3 6 0 0 ~
1
L O ctober 10, 1950 J

REGULATION X
Effective O ctober 12, 1950
R E SID E N T IA L R E A L E STA TE C R E D IT

To all Persons Engaged in the Business o f Extending Real E sta te Credit
in the Second Federal Reserve District :

Following is the text of a statement issued by the Board o f Governors o f the Federal
Reserve System and the Housing and Home Finance Agency, Office of the Administrator:
F or release in m orning newspapers
o f W ednesday, October 11, 1950

October 10, 1950

Restrictions on residential real estate construction under authority o f the Defense Production A ct
o f 1950 and the President’s Executive Order No. 10161 o f September 9,1950, were announced today on
non-Government-aided private credit, Government-aided loans, and direct Government veteran and
farm loans on one and two-fam ily houses.
Credit restrictions on housing loans not insured, guaranteed, o r extended by Government agencies
are covered under Regulation X issued by the B oard o f Governors o f the Federal Reserve System, with
the concurrence o f the A dm inistrator o f the H ousing and Home Finance A gency. Companion restric­
tions on Government-aided housing finance, on a basis conform ing to those applied to other types o f
private credit, were announced by the H H F A Adm inistrator.
The new regulations will call fo r down paym ents ranging from 10% in the $5,000 and under price
range to 5 0% at $25,000 and over, with preference fo r veterans amounting in most cases to 10 percent­
age points. The regulations are geared to the marketing o f housing production o f not more than 800,000
to 850,000 new housing units next year.
The regulations on both types become effective Thursdaj*, October 12, 1950. They are designed to
help reduce the currently high inflationary pressures by restricting the flow o f fun ds into the mortgage
market and through the reduction o f new home construction activity next year, to assure that materials
and labor required fo r the defense program w ill be available when needed.
The regulations apply to virtually all future loans on new construction o f one and two-fam ily
houses. The restrictions agreed upon, according to Thomas B. McCabe, Chairman o f the Board, and
Raym ond M. Foley, H H F A Adm inistrator, are based on an estimate that, to curb serious inflation in the
housing market and to meet presently estimated defense requirements, housing production in 1951
should be reduced about one-third below the current record level o f home building, or not more than
800,000 units. They are intended, however, to continue, as fa r as possible through control o f credit, the
relative preferences fo r veterans and the price distribution o f housing sought by Congress in its legisla­
tive enactments. The situation will be kept under close review to determine whether defense or inflation­
ary developments require later modifications.
The regulations specify maximum amounts which can be borrowed, maximum maturities, and mini­
mum amortization requirements fo r extensions o f credit on residential construction, including the financ­
ing o f m ajor additions and improvements where the loan amount is more than $2,500. They do not apply
to non-Government-aided loans on construction begun before noon on A ugust 3, 1950, nor to loan com-




mitments made p rior to the effective date. Credits secured by new construction as well as credits
extended to finance the purchase o f homes are subject to the regulations.
F o r those purchasing homes in the lower price brackets, the percentage down payments required
are lower than fo r higher priced structures, and fo r veterans using GI loans the down paym ent require­
ments are low er at each price level than on other loans. A lso, a longer period fo r repayment is per­
mitted fo r those buying homes costing $7,000 or less.
In determ ining the amount that can be loaned, the lender must take into account all credit previ­
ously extended in connection with the property and still outstanding, as well as the amount o f addi­
tional credit being extended. This provision brings supplementary borrowing, as well as first mortgage
loans, within the scope o f the regulation. In other words, minimum down payments must be made from
the borrow er’s own fun ds in connection with extensions o f credit on new residential construction and
not from the proceeds o f supplemental mortgages or personal loans in excess o f the permissible loan
value.
D own payments and maximum permissible loans fo r non-Government loans and FH A -insured
financing are identical and are calculated on the transaction price which is defined by the regulation as
the amount paid or to be paid by the purchaser, exclusive o f prepaid items o f expense, such as taxes or
insurance. U nder the regulation, maximum permissible loan amounts, maximum maturities and mini­
mum amortization provisions are specified.
Properties having a value o f :

M ay have outstanding credit o f :

More than $2,500 but not more than $5,000
More than $5,000 but not more than $9,000
More than $9,000 but not more than $15,000
More than $15,000 but not more than $20,000
Over $20,000

9 0% o f the value
$4,500 plus 6 5% o f excess o f value over $5,000
$7,100 plus 6 0% o f excess o f value over $9,000
$10,700 plus 2 0 % o f excess o f value over $15,000
$11,700 plus 1 0% o f excess o f value over $20,000
but not less than 5 0% o f value

To carry out the requirement that the relative credit preferences for veterans be maintained, down
paym ent requirements on loans guaranteed or made b y the Veterans A dm inistration are 10% lower
than on F H A and non-Government-aided loans in the price range between $6,000 and $12,000, with the
preference narrow ing to 5 % in both the higher and lower price levels. The dow n payments on V A -guaranteed loans, also based on transaction price, are computed as follow s:
Value (transaction price)
$5,000 or less
More than $5,000 but not more than $6,000
More than $6,000 but not more than $9,000
More than $9,000 but not more than $12,000
More than $12,000 but not more than $15,000
More than $15,000 but not more than $20,000
More than $20,000 but not more than $24,250
Over $24,250

Minimum down payment
5 % o f value
$250
$250 plus 2 5% o f excess o f
$1,000 plus 3 0% o f excess
$1,900 plus 5 5% o f excess
$3,550 plus 7 5% o f excess
$7,300 plus 8 5% o f excess
4 5 % o f value

value over $6,000
o f value over $9,000
o f value over $12,000
o f value over $15,000
o f value over $20,000

A ll real estate construction loans are limited to a maximum term o f 20 years, except those made on
properties valued at $7,000 or less under a contract which calls fo r complete amortization o f the loan in
25 years by equal monthly, quarterly, semi-annual or annual payments to principal or to principal and
interest. However, a loan may be amortized on a basis that provides fo r annual reduction o f principal
at a minimum rate o f 5 % p er year o f the original amount o f the balance, and such loans are exempt
from further amortization when the outstanding balance has been reduced to not more than 50% o f the
value o f the p roperty as o f the time the credit was extended.
A lthough the regulation provides that a person must be registered to engage in the business of
extending real estate construction credit, all persons engaged in the business w ill automatically be
deemed to be registered fo r present purposes and no action on their part to secure registration is now
required. However, the regulation provides that the B oard may later, b y public announcement, require
registration statements to be filed by persons affected.
D u rin g the form ulation o f Regulation X , and the regulations on Government-aided housing credit,
consultations and meetings were held with representatives o f various groups affected. This includes
manufacturers o f and dealers in building supplies and materials, labor and veterans’ and other con-




sumer organizations, banks and trust companies, savings banks, savings and loan associations, and
building associations, mortgage bankers, insurance companies, builders, real estate dealers, and others
interested in construction and mortgage finance.
The new regulations apply only to residential real estate credit on one and two-fam ily houses. H ow ­
ever, consideration is being given to the early issuance o f regulations applying to construction credit
relating to rental-type projects, non-residential properties, and other real estate credit.
Inquiries in regard to Regulation X should be directed to one o f the 12 Federal Reserve Banks
and their 24 branches, through which the regulation will be administered.
Instructions to field offices fo r processing Government-aided housing loans under the new regula­
tions will be issued shortly b y the Federal H ousing Adm inistration, the Veterans Adm inistration, and
the Department o f A griculture in their respective fields.

A copy of Regulation X is enclosed so that you may acquaint yourself with its provisions
and determine whether you or a particular transaction involving the extension o f real estate
credit is subject to the regulation.
Section 4 (c) o f the regulation provides that no registrant shall extend any credit unless
he is satisfied and maintains records which reasonably demonstrate on their face whether
such credit is or is not real estate construction credit. One method of showing compliance
with this provision where no real estate construction credit is involved is a statement made
by the borrower to the effect that the credit in question is not wholly or partly secured
by, or fo r the purpose of purchasing or carrying, or fo r the purpose o f financing, or one
which involves the right to acquire or use new construction on real property or real property
on which there is new construction (or that such new construction, if any, is not a residence
or a m ajor addition or major improvement to a residence). Such a statement, if accepted
in good faith by the registrant, will be acceptable if stamped on the face of the borrow er’s
note and the note is thereafter signed by him or, if made by the borrower in a letter,
application form , or in any other written form whatever.

Forms of Statement of the

Borrower are now in process of preparation and copies will be furnished, when available,
to interested persons.
A ny inquiries you may have concerning Regulation X should be addressed to this Bank
at the Federal Reserve P. O. Station, New Y ork 45, N. Y.
Additional copies of this circular and of the regulation will be furnished upon request.




A

llan

S proul,

President.

B O A R D OF G O V E R N O R S
o f th e

F E D E R A L R E S E R V E SY STE M

RESIDENTIAL REAL ESTATE CREDIT




R E G U L A T IO N X
E ffective O c to b e r 1 2 , 1 9 5 0

< ^ J1/L BBS?;
r. 4

INQUIRIES REGARDING THIS REGULATION
A ny inquiry relating to this regulation should be addressed
to the Federal Reserve Bank o r Federal
Reserve branch bank o f the district
in which the inquiry arises.




FOREW ORD
Tliis regulation applies to real estate construction credit with
rcspect to property on which a new residence, or a m ajor addition or
m ajor improvement to an existing residence, is begun after 12 o ’clock
meridian, August 3, 1950. The regulation applies, in general, to
banks, savings and loan associations, insurance companies, mortgage
companies, loan companies, finance companies, real estate companies,
or other institutions or individuals who are engaged in the business
o f extending real estate credit. In order to determine whether a
particular institution or individual or a particular transaction is
subject to this regulation, reference should be made to the provisions
o f the regulation itself.




CONTENTS
Page
S e c . 1. S c o p e

S e c . 2. D

R e g u l a t i o n ....................................................................

1

e f i n i t i o n s .................................................................................................................................

1

and

A p p l ic a t io n

of

(а)
(б )
(c)
(d)

“ Person”
“ Registrant”
“ Credit”
“ Extending credit” , “ extension of credit”
credit”
(e)
“ Real estate construction credit”
( /)
“ New construction”
(< ) “ M ajor addition” or “ major improvement”
7
(h) “ Real property”
(i)
“ M axim um loan value”
O') “ Bona fide sale price”
( k) “ Residence”
(I)
“ Residential property”
(m) “ Farm property”
S e c . 3. G

eneral

(а)
( б)
(c)

R

S ec. 6. M

of

e g i s t r a t i o n .......................................... .

...

4

C r e d i t .........................................................................................................

5

and

E x c e p t i o n s ........................................................................................

8

M inim um Am ount
Short-Term Construction Credits
Disaster Credits
Medical Expenses, etc.
Casualties
Contracts to Sell
Contemplated Construction
Labor and Material
Credits Secured by Life Insurance Policies
Farm Property

is c e l l a n e o u s

(0)
(b)
(c)
(d)
(e)
(J)
(g)
(h)
(1)
(j)

R

A m oun t; M aturity; Amortization
Secondary Borrowing
Statement of the Borrower

S e c . 5 . E x e m p t io n s

(a)
( 6)
(c)
(d)
(e)
( /)
(g)
(h)
(i)
(j )

and

“ extends

General Requirements
Registration
Suspension of Registration

S e c . 4. E x t e n s io n

(a)
(b)
(c)

e q u ir e m e n t s

and

P r o v i s i o n s ............................................................................................

10

Evasions
Outstanding Contracts and Obligations
Real Property Outside the United States
Preservation of Records; Inspections; Administrative Reports
D efault and Foreclosure; Serviceman’s Preinduction Debt
Right of Registrant to Impose Stricter Requirements
Reliance upon Statem ent of the Borrower
False Statements
Statutory Penalties
Enforceability of Contracts

Supplem ent




14

REGULATION X
Effective October 12, 1950

RESIDENTIAL REAL ESTATE CREDIT
S E C T IO N

1. S C O PE A N D A P P L IC A T IO N

OF R E G U L A T IO N

This regulation is issued by the Board o f Governors o f the Federal
Reserve System (hereinafter called the “ B oard” ), with the concurrence
o f the Housing and Home Finance Administrator, under authority
o f the “ Defense Production Act o f 1950” , approved September 8, 1950
(hereinafter called the “ A ct” ), and Executive Order No. 10161, dated
September 9, 1950.
This regulation applies to any person who is engaged in the business
o f extending real estate credit, including any person who acts as agent
in arranging for such credit. For the purposes of this regulation, a
person shall be deemed to be engaged in the business o f extending real
estate credit if, during the current calendar year or during the preced­
ing calendar year, he extends or has extended real estate credit more
than three different times and such extensions of credit, during the
current calendar year or during the preceding calendar year, aggregate
more than $25,000. F or the purpose o f determining whether a person
is engaged in extending real estate credit, real estate credit shall be
deemed to include not only “ real estate construction credit” , as here­
inafter defined, but also credit with respect to any real property
whether or not. there is any new construction thereon, and whether
or not such credit is extended, insured, or guaranteed by the United
States or any agency thereof, and whether or not such credit is exempt
from this regulation.
S E C T IO N

2 . D E F IN IT IO N S

F or the purposes of this regulation, unless the context otherwise
requires:
(a)
A ct.1

“ Person” has the meaning given it in section 702(a) o f the

'S e ctio n 702(a) of the Act provides: “ T h e word ‘ person’ includes an individual,
corporation, partnership, association, or any other organized group of persons, or
legal successor or representative of the foregoing, and includes the United States
or any agency thereof, or any other government, or any of its political sub­
divisions. or any agency of any of the foregoing: Provided, T hat no punishment
provided by this Act shall apply to the United States, or to any such govern­
ment. political subdivision, or government agency.”




1

2

R E G U L A T IO N

X

S kc. 2

(6 )
“ R eg istra n t" means a person who is registered pursuant to
section 3 of this regulation.
(c) “ C red it” has the meaning given it in section 6 0 2 (d )(2 ) o f the
A ct.2
(d ) “ E xten d in g cre d it” , “ exten sion o f cr ed it ” and “ exten d s cred it”
shall include extending or maintaining any credit, or renewing, revis­
ing, consolidating, refinancing, purchasing, selling, discounting, or lend­
ing or borrowing on, any obligation arising out of any credit, or ar­
ranging as agent for any o f the foregoing, and also shall include a
sale of, or other transfer o f title to, real property if the vendee or
transferee assumes, or takes such property subject to, indebtedness
secured by a mortgage or other lien upon such property.

(e) “ R ea l esta te con stru ction c red it” means any credit, hereafter
extended, which
(1)
(2)
(3)
(4)

is wholly or partly secured by, or
is for the purpose of purchasing or carrying, or
is for the purpose of financing, or
involves a right to acquire or use,

new construction on real property or real property on which there
is new construction, if such new construction is a residence or a m ajor
addition or m ajor improvement to a residence, whether such credit
is extended before or after such new construction is begun; but the
term “ real estate construction credit” shall not include any loan or
loans made, insured, or guaranteed, in whole or in part, by any depart­
ment, independent establishment or agency in the executive branch of
the United States, or by any wholly owned Government corporation,
or by any mixed-ownership Government corporation as defined in
the Government Corporation Control A ct. as amended (including any
loan evidenced by obligations of any local public agency or public
“ Section 6 0 2 (d )(2 ) of tho Act provides: “ ‘Credit’ means any loan. mortgage,
deed of trust, advance, or discount; any conditional sale contract; any contract
to sell or sale or contract of sale, of property or services, either for present or
future delivery, under which part or all of the price is payable subsequent to the
making of such sale or contract; any rental-purchase contract, or any contract
for the bailment, leasing, or other use o f property under which the bailee, lessee,
or user has the option of becoming the owner thereof, obligates himself to pay
as compensation a sum substantially equivalent to or in excess of the value
thereof, or has the right to have all or part of the payments required by such
contract applied to the purchase price of such property or similar property; any
option, demand, lien, pledge, or similar claim against, or for the delivery of
property or m o n ey ; any purchase, discount, or other acquisition of. or any credit
under the security of, any obligation or claim arising out of any of the foregoing:
and any transaction or series of transactions having a similar purpose or effect.”




S kc . 2

R E G U L A T IO N X

3

housing agency which national banks may purchase pursuant to the
provisions o f section 602(a) o f the Housing Act o f 1949).
(/I “ New construction" means any structure, or any m ajor addition
or m ajor improvement to a structure, which is or has been begun after
12 o ’clock meridian, August 3, 1950. Construction will be deemed to
have been “ begun" when essential materials which are to be an in­
tegral part of the structure have been affixed to or incorporated on
the site in a permanent form.
(g I “ Major addition” or “ major improvement" means an enlarge­
ment, reconstruction, or other alteration to an existing structure, or
any other addition or improvement which becomes or is to become
physically attached to and a part of the structure, if the cost or esti­
mated cost of such addition or improvement exceeds $2,500.
ih) “ Iieal property" includes leaseholds and other interests in such
property.
(?) The “ maximum loan value" o f any property shall be the amount
which is computed in the manner prescribed in the Supplement to this
regulation. In making such computations:
(1) F or a m ajor addition or m ajor improvement to a residence,
‘‘value" shall be the cost or estimated cost o f such m ajor addition
or m ajor improvement;
(2) For residential property, other than m ajor additions or major
improvements:
(A ) In the case o f an extension o f credit in connection with a

bona fide sale o f residential property, “ value” shall be the bona
fide sale price;
(B ) In the case o f any other extension o f credit with respect
to residential property:
(i) I f the entire cost o f the property to the borrower has
been incurred by him not more than 12 months prior to the
extension of credit or is to be incurred by him after such exten­
sion o f credit, “ value” shall be the bona fide cost o f the property
to the borrower, including a bona fide estimate o f the cost of
completing new construction on such property when the exten­
sion o f credit is for the purpose of financing such new con­
struction ;
(ii) I f any part o f the cost of the property to the borrower
has been incurred prior to such 12-month period, or if any part
o f such property has been acquired by gift, exchange, or inheri­




4

R E G U L A T IO N

X

S u es. 2. 3

tance, “ value” shall be the appraised value as determined in
good faith by the Registrant;
(3)
For an extension of credit which is for the purpose of financ­
ing the construction of a residence on farm property, “ value” shall
be the total of (A ) the cost or estimated cost of such new construc­
tion, and (B ) 5 per cent o f such cost or estimated cost.'*
(;’) “ Bona fide sole price” means the amount paid or to be paid
by the vendee in money or its equivalent. It includes, in addition to
cash, (1) the value of any property accepted in part payment, (2)
the unpaid principal amount of any indebtedness incurred or assumed
by the vendee or to which the property remains subject, (3) the
amount o f any liens for taxes or special assessments which are in
default or currently due and payable, (4) the amount o f any me­
chanics’ liens or other liens which the vendee is required to discharge,
(5) the amount which the vendee agrees to pay for any alteration
or other modification made or to be made to the property as an inci­
dent to the sale thereof, and (6) any amounts paid by the vendee for
closing costs which are customary under local practices. It docs not
include any prepaid charges, or any accrued rents which will be paid
to the vendee.
(A-) “ R esidence” means any structure at least one-half o f the floor
space o f which is used, serving or designed for dwelling purposes, if
such structure does not include more than two fam ily units. Houses
connected by common walls and com m only known as “ row houses”
or “ semidetached houses” shall be considered separate structures.
(I)
“ Residential prop erty” means any real property, other than farm
property, on which there is or is to be a residence or residences.
(m ) “ Farm prop erty” means any real property, located outside o f
urban areas, which is principally used for the production of crops,
livestock or other agricultural commodities.
S E C T IO N

3.

G E N E R A L R E Q U IR E M E N T S A N D R E G IS T R A T IO N

( a ) General R equirem ents. — N o person engaged in the business
o f extending real estate crcdit shall extend real estate construction
credit unless (1) he is registered pursuant to this section, and (2) lie
has no knowledge of, and has no reason to know, any fact by reason
o f which such credit fails to com ply with any applicable provision of
this regulation.
:1The 5 per cent is added when the extension of credit is for the purpose of
financing (lie construction of a residence on farm property in order to take ac­
count of the value o f the land upon which the residence is to he constructed.




Shxs.3,4

5

REG U LA TIO N ' X

(b I Registration.— Every person engaged in tlie business o f ex­
tending real estate credit shall be deemed to be registered pursuant to
this regulation from the effective date hereof until such time as the
Hoard, by public announcement, may require registration statements
to be filed by all, or any specified classes of, such persons. Should the
Board require such registration statements, a person shall continue to
be registered after the time such statements are required only if he
shall have complied with the requirements o f the B oard’s announce­
ment. Every person who is registered in accordance with the pro­
visions o f this subsection is referred to in this regulation as a ' ‘ Regis­
trant."
(r) Suspension o f Registration.— A ny Registrant may. after rea­
sonable notice and opportunity for a hearing, be suspended by the
Board, as to all or as to particular activities or particular offices and
for specified or indefinite periods, because o f any willful or negligent
failure to com ply with any provision o f this regulation.
A suspension for a specified period will terminate upon the expira­
tion o f such period. A suspension for an indefinite period may be
terminated by the Board, in its discretion, if the Board is satisfied that
its action would not lead to further violations o f this regulation by
the suspended Registrant and would not be otherwise incompatible
with the public interest.
S E C T IO N

4.

E X T E N S IO N

OF CRE D IT

(a)
A m o u n t; M aturity; Amortization.^— Except as otherwise per­
mitted by this regulation, no Registrant shall, either in connection with
a sale or otherwise:
(1) Extend real estate construction credit with respect to resi­
dential property (other than major additions or m ajor improve­
ments) if the amount of credit outstanding with respect to the
property (including any credit exempt from, or not subject to the
prohibitions of, this regulation) exceeds, or as a result o f such
extension o f credit would exceed, the applicable maximum loan
value of such property;
(2) Extend real estate construction credit for the purpose o f financ­
ing a m ajor addition or m ajor improvement to a residence if the
amount o f credit outstanding for the purpose o f financing the major
addition or m ajor improvement (including any credit exempt from,
or not subject to the prohibitions of, this regulation) exceeds, or as




6

R E G U L A T IO N

X

S ec. 4

a result o f such extension o f credit would exceed, the applicable
maximum loan value o f such m ajor addition or m ajor improvement;
(3)
Extend real estate construction credit for the purpose of
financing the construction o f a residence on farm property if the
amount o f credit outstanding for the purpose o f financing the con­
struction of the residence (including any credit exempt from, or
not subject to the prohibitions of, this regulation) exceeds, or as a
result o f such extension o f credit would exceed, the applicable maxi­
mum loan value o f such residence;
(41 Extend real estate construction credit if such credit would
have a maturity which exceeds the applicable maximum maturity
provisions, or would be repaid in any manner which does not conform
with the applicable amortization provisions set forth in the Supple­
ment to this regulation;
(5) Purchase, discount or lend on any credit instrument evidenc­
ing real estate construction credit which is subject to and not exempt
from this regulation, unless the terms o f such credit conformed with
the provisions o f the Supplement to this regulation when such credit
was originally extended or conform with the provisions o f the Supple­
ment at the time o f such purchase, discount or loan; but for the
purposes o f this paragraph credit shall be considered to be subject
to the regulation even though extended by a person other than a
Registrant;
(6) I f the Registrant is acting as principal— sell, or transfer title
to, residential property on which there is new construction (which
is a residence or a m ajor addition or m ajor improvement to a resi­
dence) and with respect to which the vendee or transferee assumes,
or takes such property subject to, indebtedness secured by a mort­
gage or other lien upon such property, if the amount o f outstanding
credit (including any credit exempt from, or not subject to the pro­
hibitions of, this regulation) which was extended after the effective
date o f the regulation with respect to the property exceeds, or as a
result o f such sale or transfer would exceed, the applicable maximum
loan value o f such property, or if any outstanding real estate con­
struction credit (subject to and not exempt from this regulation)
with respect to such property does not conform with the provisions
of this regulation and the Supplement thereto.
(b )
Secondary B orrow ing. — Except as otherwise permitted by this
regulation, no Registrant shall extend real estate construction credit
if he knows or has reason to know that there is, or that there is to be.




S ec. 4

R E G U L A T IO N

X

7

any other credit extended with respect to the property 111 which,
when added to the credit proposed to be extended by the Registrant,
would cause the total amount o f credit outstanding with respect to the
property (including any credit exempt from, or not subject to the pro­
hibitions of, this regulation t to exceed the applicable maximum loan
value o f such property, or (2) which, if it is real estate construction
credit subject to and not exempt from this regulation, does not or
would not com ply with the applicable maximum maturity and amorti­
zation provisions set forth in the Supplement to this regulation.
(c)
Statement o f the Borrow er.— N o Registrant shall extend any
credit unless he is satisfied, and maintains records which reasonably
demonstrate on their face, whether such credit is or is not real estate
construction credit. If the Registrant accepts in good faith a signed
Statement o f the Borrower stating that the credit is not wholly or
partly secured by, or for the purpose o f purchasing or carrying, or
for the purpose o f financing, or one which involves the right to acquire
or use, new construction on real property or real property on which
there is new construction (or that such new construction, if any, is
not a residence or a m ajor addition or m ajor improvement to a resi­
dence), such Statement shall be deemed to be com pliance with the
requirements o f this paragraph.
N o Registrant shall extend real estate construction credit unless lie
has accepted in g(*od faith a signed Statement o f the Borrower (1 i stat­
ing whether the credit is with respect to (A> residential property,
(B l a residence on farm property, or (C ) a m ajor addition or a major
improvement to a residence; and (2) stating, if the Registrant claims
that such credit is exempt from this regulation, the reason for such
exemption; and, if the credit is not exempt, (3i stating the amount
of credit previously extended and outstanding, and the amount of
any other credit to be extended, with respect to the residential prop­
erty, the residence on farm property, or the m ajor addition or major
improvement to a residence, (4) stating, if the Registrant in com put­
ing “ value” relies upon cost or estimated cost to the borrower (where
such cost or estimated cost m ay be used for this purpose), the bona
fide amount o f such cost or estimated cost to the borrower, and
(5) stating, if the extension o f credit is in connection with a sale,
the sale price, that the sale price was bona fide, and the value and a
brief description o f any property accepted in part payment. If the
extension of credit is in connection with a sale, such Statement shall
state that the vendor o f the property has or will have no financial




8

R E G U L A T IO N

X

S k cs. 4 .5

interest in such property or in the proceeds o f any subsequent dispo­
sition thereof, except such interest as may be fully disclosed to the
Registrant. The amount o f any such financial interest o f the vendor
retained in the property or any proceeds o f the disposition thereof
shall be deemed to be real estate construction credit extended with
respect to such property. The Statement o f the Borrower may be
made, if desired, on a form obtainable at any Federal Reserve Bank
or branch.
S E C T IO N

5 . E X E M P T I O N S A N D E X C E P T IO N S

(a)
M inim um A m ou n t. — The prohibitions o f this regulation shall
not apply to any extension of credit if the total amount thereof, in­
cluding all outstanding credit which was granted after the effective
date o f this regulation with respect to the same property, is not in
excess of $2,.500.
(b l Short-Term Construction Credits.— The prohibitions o f this
regulation shall not apply to any credit which is for the purpose of
financing the construction of a residence or residences or a major
addition or m ajor improvement, if the maturity of such credit is not
more than 18 m onths; provided that this exemption shall not be con­
strued to permit any renewal, revision, consolidation, or refinancing
o f such credit except on terms which conform with the provisions o f
this regulation and the Supplement thereto. I f (1) the initial purpose
o f an extension of credit having a maturity exceeding 18 months is
the financing o f the construction of a residence or residences or a
m ajor addition or m ajor improvement and (21 an agreement with
respect to the credit requires that upon (A ) the com pletion o f such
construction or (B ) the expiration o f a period o f not more than 18
months after the extension o f the credit, whichever shall first occur,
such action must be taken by the parties as may be necessary to make
the terms of the credit conform thereafter with the applicable maxi­
mum loan value and the applicable maturity and amortization pro­
visions set forth in the Supplement to this regulation, then in such
event the prohibitions of this regulation shall not apply to such
credit until the occurrence of one of the events specified in (A ) or (B )
above; but if at any time after the date of the extension o f such
credit, a Registrant sells or transfers title to the property with respect
to which the credit is extended, such sale or transfer of title must con­
form to the provisions o f this regulation and the Supplement thereto.
(ci Disaster Credits.— The prohibitions o f this regulation shall not
apply to any extension o f real estate construction credit with respect




S kc. 5

R E G U L A T IO N

X

9

to real property in any area in which the Federal Reserve Bank o f
the district may declare that an emergency exists because o f a flood,
fire or other disaster affecting a substantial number o f the inhabitants
o f the stricken ar^a. This exemption with respect to any area so
designated shall apply only to extensions o f credit of such character
and during such period as the Federal Reserve Bank may prescribe.
(d ) Medical Expenses, Etc.— The prohibitions o f this regulation
shall not apply to any extension of real estate construction credit as
to which the Registrant accepts in good faith a signed Statement o f
the Borrower certifying that the proceeds thereof are to be used for
bona fide medical, hospital, dental, or funeral expenses, or to pay
debts incurred for such expenses, and that the proceeds of the exten­
sion are to be paid over in amounts specified in such Statement to
persons whose names, addresses and occupations are stated therein.
(el Casualties.— The prohibitions o f this regulation shall not apply
to any extension o f real estate construction credit as to which the
Registrant accepts in good faith a signed Statement of the Borrower
certifying that the proceeds thereof are to be used solely for the re­
placement, reconstruction or repair of a residence destroyed or sub­
stantially damaged by flood, fire or other similar casualty.
( /) Contracts to Sell. — The prohibitions o f this regulation shall
not apply to any contract to sell real property (\ I which does not pro­
vide for the payment of any part of the purchase price, or of any
amount to be subsequently applied to such price, except a deposit o f
earnest money, before the transfer of title to such property, (2) which
is to be performed b y a transfer o f title to such property within six
months after the date on which the contract was entered into, and
(31 which provides for the subsequent transfer o f title to such property
on terms which conform to the provisions o f this regulation and the
Supplement thereto in effect on the date the contract was entered into.

(</ > Contemplated Construction.— Any builder or other person who
had made substantial commitments or undertakings before August 3,
1950. with a view to the building o f new construction and who asserts
that his inability to obtain credit to finance such new construction
on the basis contemplated by him and by the Registrant prior to
August 3. 1950, would cause him substantial hardship, m ay apply to
the Federal Reserve Rank o f the district in which the new construc­
tion is contemplated for an exemption from this regulation for such
new construction, showing all the facts and submitting all necessary




R E G U L A T IO N

1 0

X

S ec s. 5 .6

supporting documents with respect to his commitments or under­
takings and why com pliance with the regulation would cause him
substantial hardship. I f such Federal Reserve Bank after consider­
ation of the application and supporting documents determines that
substantial commitments were made prior to August 3, 1950, and
that substantial hardship would result from the application o f this
regulation in such case, it m ay issue to such builder or other person a
certificate approving such application and thereupon any extension
o f credit to such builder or other person by any Registrant with
respect to the new construction that may be specified in such certifi­
cate shall be exempt from the prohibitions of this regulation.
{h I Labor and M aterial.— N o person shall be required to register
pursuant to section 3 of this regulation because of the fact that he
performs labor or furnishes material for new construction on an open
account, unless he shall be otherwise engaged in the business of
extending real estate credit.
O’ I Credits Secured by Life Insurance Policies. — The prohibitions
o f this regulation shall not apply to any extension of real estate con­
struction credit which is fully secured by the loan value or cash sur­
render value o f a life insurance p olicy; and, notwithstanding any other
provisions o f this regulation, a Registrant in determining the amount
o f credit which he may extend under the provisions of section 4 of
the regulation need not take into account any credit which is secured
in the manner specified in this paragraph.
( j i Farm Property. — The prohibitions o f this regulation shall not
apply to any extension o f real estate construction credit with respect
to farm property unless the extension o f credit is for the purpose o f
financing the construction o f a residence on farm property or a m ajor
addition or m ajor improvement to a residence on farm property.
.SECTION

6.

M IS C E L L A N E O U S P R O V IS IO N S

(a ) Evasions.— N o extension o f real estate construction credit com ­
plies with the requirements of this regulation if at the time it is made
there is any agreement, arrangement, or understanding, of which the
Registrant knows or has reason to know, by which credit is or is to be
extended in violation o f this regulation, even though such extension
o f credit is or is to be made indirectly, or which would otherwise
evade or circumvent, or conceal any evasion or circumvention of,
any provision o f this regulation or the Supplement thereto. N o Regis­




trant extending credit subject to this regulation shall divide such
credit into two or more parts, or enter into any agreement or under­
standing with any other person as a result o f which two or more
credits are extended, when the purpose or effect o f such action is to
circumvent or avoid the amortization or maturity provisions o f this
regulation or the Supplement thereto.
(b ) Outstanding Contracts and O bligations.— The provisions of
this regulation shall not apply to or affect any credit extended prior
to the effective date of this regulation, or pursuant to any firm com ­
mitment to extend credit made prior to such date. F or this purpose,
a firm commitment means either (1) a written agreement under which
the Registrant is required without option or discretion on his part to
extend credit upon demand by the borrower or upon com pliance by
the borrower with one or more conditions referred to in such agree­
ment; or (2) any other agreement to extend credit which has been
entered into in good faith by the parties and in reliance upon which
the prospective borrower has taken specific action prior to the effective
date of the regulation, if the Registrant within 30 days after the
effective date of this regulation shall have sent to the Federal Reserve
Bank of the district in which he does business a letter or other state­
ment reciting the facts with respect to such agreement and the specific
action taken by the prospective borrower prior to the effective date
of the regulation.
(c) Real Property Outside the United States.— The prohibitions
of this regulation shall not apply to any extension o f real estate con­
struction credit with respect to real property in Alaska, the Panama
Canal Zone, or any territory or possession outside the continental
United States.
Preservation o f R ecord s; Inspections; Administrative Re­
ports.— For the purpose o f determining whether or not there has been

com pliance with the provisions o f this regulation, even- person extend­
ing real estate credit shall preserve for a period o f three years after
each extension o f credit such accounts, correspondence, memoranda,
papers, books, and other records, or photostats thereof, as are relevant
to establishing whether such person is engaged in the business of
extending real estate credit; whether each credit extended is or is not
real estate construction credit with respect to residential property,
a farm residence, or a m ajor addition or m ajor improvement to a resi­
dence; and whether each extension o f real estate construction credit




12

R E G U L A T IO N X

Sue. 6

conform ed with the provisions of this regulation and the Supplement
thereto. Every such person shall permit the Board or a Federal
Reserve Bank, by its duly authorized representatives, to inspect such
records and business operations as the Board or a Federal Reserve
Bank m ay deem necessary or appropriate; and when ordered to do so,
shall furnish, under oath or otherwise, such reports, information, or
records relevant to extensions o f credit as the Board or a Federal
Reserve Bank m ay deem necessary or appropriate for the enforcement
and administration of this regulation.4
(e) Default and F oreclosure; Servicem an's Preinduction Del>t.
— Nothing in this regulation shall be construed to prevent any Regis­
trant from taking such action as he shall deem necessary in good
faith (1) with respect to any extension o f credit to any member or
former member o f the armed forces of the United States which was
made to him prior to his induction into such service and assignment
to active duty, or (2) for the Registrant’s own protection in connec­
tion with any credit which is in default and is the subject of a bona
fide collection effort by the Registrant. The prohibitions o f this regu­
lation shall not apply to an extension o f credit by a Registrant in con­
nection with a sale o f property acquired by him through foreclosure
proceedings if such credit does not exceed the unpaid principal amount
o f the foreclosed credit and the costs o f acquisition through foreclosure.
(7 1 Right o f Registrant to Im pose Stricter R equirem ents.— Any
Registrant, if he desires, may refuse to extend credit, extend less
credit than the amount permitted by this regulation, or require that
repayment be made within a shorter period or in larger instalments
than prescribed in the Supplement to this regulation.
((/I Reliance upon Statement o f the Borrow er.— The facts sot
forth in any signed Statement of the Borrower which a Registrant
accepts and relics upon in good faith shall be deemed to be correct
for the purposes of the Registrant.
ih) False Statements.— The making or submission by any person
o f any false, fictitious or fraudulent statement or representation pur­
suant to, or which is intended to conform to, or show com pliance with,
any requirement or provision of this regulation, shall be a violation
o f this regulation.
‘ The reporting and record-keeping requirements o f this regulation have been
approved b y the Bureau o f the Budget in accordance with the Federal Reports
Act o f 1942.




Sec. 6

R E G U L A T IO N

X

13

(i)
Statutory Penalties. — The A ct provides that “ Any person who
willfully violates any provision o f section * * * 602 (relating to real
estate construction credit) or any regulation or order issued there­
under, upon conviction thereof, shall be fined not more than $5,000
or imprisoned not more than one year, or both.”
0 ) Enforceability o f Contracts.— N othing in this regulation shall
affect the enforceability o f any contract.




SUPPLEMENT TO REGULATION X
M axim um Loan V alu e. — F or the purposes o f Regulation X , maxi­
mum loan values for all residential property, farm residences, and
m ajor additions and m ajor improvements are prescribed as set forth
in the following table. In the case o f credit extended with respect to
residential property or farm residences involving more than one struc­
ture. the maximum loan value may be applied separately with respect
to each such structure or with respect to the entire property or all
such residences, at the election o f the Registrant.

If the value (determined as
provided in section 2(i)
______ o f the regulation) is______

T h e maximum loan
value is

M ore than $2,500 but not more
than $5,000

90% o f the value

M ore than $5,000 but not more
than $9,000

$4,500 plus 65% o f excess of
value over $5,000

M ore than $9,000 but not more
than $15,000

S7.100 plus 60% o f excess of
value over $9,000

M ore than $15,000 but not more
than $20,000

),700 plus 20% o f excess of
value over $15,000

Over $20,000

11,700 plus 10% o f excess o f
value over $20,000 but not less
than 50% o f value

Maturity.— F or the purposes o f Regulation X the following maturity
requirements are prescribed: N o credit subject to the regulation shall
have a maturity o f more than 20 years from the date such credit is
extended except that a credit extended with respect to property having
a value (determined as provided in section 2 (?) o f the regulation I
o f $7,000 or less may have a maturity o f not more than 25 years if
it is to be fully repaid at or before the date o f maturity through
amortization on the basis prescribed in clause (2) o f the following
paragraph relating to amortization:
Am ortization.— For the purposes o f Regulation X , the following
amortization requirements are prescribed: With respect to every credit
subject to the regulation, amortization payments shall be required
which either (1) will annually reduce the original principal amount of
such credit by not less than 5 per cent until the outstanding balance




14

SUPPLEM ENT

TO R E G U L A T IO N

X

15

of such credit has been reduced to an amount equal to or less than
50 per cent o f the value o f the property with respect to which such
credit was extended or (2) will fully liquidate the original principal
amount o f such credit not later than the date o f the maturity o f the
credit through substantially equal monthly, quarterly, semiannual, or
annual payments covering principal and interest or through substan­
tially equal m onthly, quarterly, semiannual, or annual payments o f
principal. The value referred to in the preceding sentence shall be
determined as o f the date the credit was extended in the manner
provided in section 2 (i) o f the regulation. I f the amount o f the credit
when extended is not more than 50 per cent o f such value, such credit
shall not be subject to the amortization provisions o f this paragraph.





Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102