One of the primary objects of the bill as I have understood it, and as I have followed it, is to bring about a large amount of repair work, thereby stimulating the building industry and creating employment for many out of work.

As for those finance companies owning mortgages on existing homes and who may seek insurance from Home Credit Insurance Corporation, the bill will not afford them the protection that might be hoped for under section 5, because reliable statistical data shows that there are approximately 11%1⁄2 millions nonfarm mortgaged homes in the United States and that the average mortgage debt is nearly 61 percent of their present appraised value. When we say present appraised value, we allow for an estimated shrinkage of 35 percent in values since 1930, due to both the effects of the depression and an accumulated lack of repairs since 1930.

Title III of the bill obviously provides for the necessary corporate machinery to enable the Home Owners' Loan Corporation to insure the accounts of building and loan, savings and loan, and homestead associations throughout the United States.

This proposal to insure the accounts of the building and loan associations of the country should recall to mind what has happened to the surety companies that guaranteed first-mortgage bonds during the past decade.

I am not qualified to discuss expertly what the effects of the bill will be on the building and loan associations, but I am entitled to express the belief that any tax-exempt concern can win out over all competitors who are subject to the normal tax laws.

In my opinion this bill scraps the private initiative and control of the financing of the Nation's homes, and will entail an enormous expense bill to be borne by taxation, with no direct benefit to flow to the distressed home owner in whose name it is proposed.

That completes about all that I have to say in behalf of the Home Owners' Protective Enterprise, Mr. Chairman. I am glad of the opportunity of saying a few words.

The CHAIRMAN. Did you consider the proposition to establish national mortgage associations?

Mr. FARRINGTON. Yes; I did.

The CHAIRMAN. Are you opposed to that also? Do I understand you to say you do not favor the bill at all, in any respect?

Mr. FARRINGTON. I favor the objects of the bill, but as I conceive the provisions of it, it would seem to me to be prepared primarily in the interest of the lending installment houses engaged in financing. I think that if this bill were to be enacted into law perhaps there could be amendments made, particularly with reference to the rates and terms upon which the Home Credit Insurance Corporation is going to be run, as to installments to repair houses, as to lending to the fellow on notes that they take from the home owners. But I have not prepared any such amendments.

The CHAIRMAN. We will be very glad to have any suggestion by way of amendments you may propose, Mr. Farrington.

Mr. FARRINGTON. I thank you.

The CHAIRMAN. We are very much obliged to you.

Mr. FARRINGTON. And I thank you for the opportunity to be heard.

The CHAIRMAN. The committee will now hear Mrs. John D. Sherman.

Mrs. SHERMAN. Mr. Chairman, might Miss Obenauer precede me? The CHAIRMAN. Very well. Miss Obenauer may come forward to the table and take a seat opposite the committee reporter.

Miss OBENAUER. I thank you.

The CHAIRMAN. State your name, place of residence, and official position or for whom you speak.

STATEMENT OF MISS MARIE L. OBENAUER, JOINT CHAIRMAN, BOARD OF GOVERNORS OF HOME OWNERS' PROTECTIVE ENTERPRISE, BARR BUILDING, WASHINGTON, D.C.

Miss OBENAUER. Mr. Chairman, I am appearing as one of the joint chairman of the board of governors of the Home Owners' Protective Enterprise.

The CHAIRMAN. You may proceed with your statement.

Miss OBENAUER. Beyond the mere statement that the Home Owners' Protective Enterprise is a national, noncommercial, and nonpartisan organization of home owners and that I appear as one of the two joint chairmen of its board of governors, I will defer to the end of my testimony information which the committee may want concerning the structure, scope, membership and methods of our corporation. I will also submit at that time, if the committee so desires, data as to my personal qualifications to discuss this subject with you.

Officers and experts of the Home Owners' Protective Enterprise have given Senate bill S. 3603 the closest possible study as to its direct and indirect effect upon the home-owning family of the Nation. Our conclusions were unanimous that the bill holds little or no relief for the home owner and threatens real harm to the home-owning family. Mr. Farrington, as our attorney and one with long experience in the legal phases of mortgage finance, has singled out for you the sections of the bill upon which his own and our adverse conclusions rest. In discussing the legal structure of the bill Mr. Farrington has made clear some of its economic faults. But breaking down our general conclusions further into concrete and specific objections to Senate bill 3603 we are convinced that first and most fundamental, the bill sets up machinery which heads straight for Federal regimentation of American home-buying, home building, home finance, and home repair.

Mr. Chairman, may I divert from my prepared statement just a moment to say this: There were many reasons why many of us who ordinarily would not like regimentation of industry-and we do not like regimentation of agriculture or any of the other instrumentalities of production-saw reasons under the emergency why it should be done, as an emergency I say. But none of the reasons for which that was done in that character of industry holds good for any bill that will lead to a regimentation of American citizens, to say what he shall do with his individual home.

Now, I will go on with my prepared statement if I may.

Senator BARKLEY. What is there in this bill that regiments American homes?

Miss OBENAUER. I will state it right along here in my prepared statement, Senator Barkley, if I may.

Senator BARKLEY. All right.

Miss OBENAUER. Mr. Chairman and members of the committee, it makes little difference to me as a home owner whether this Federal control comes in the form of a blunt "do or don't telegram" from a board of five men in Washington; or whether my right to keep the home in which I live or abandon it for a new or rented home is taken from me by such a legislative rigging of financial craft that I must steer the course laid out for me by the Federal board in the field of home ownership here in Washington. Concretely, it is all the same to me whether the proposed Federal credit corporation can say to me, "You must not borrow on straight mortgage security"; or whether it is clothed with power to confer such advantages on its creature companies as to drive out of the market the private agencies and private capital from which alone I can get straight loans. It just happens that straight loans suit my purposes much better than any amortized loan. There are hundreds of thousands of home owners in the same position. Just what is the big idea and whose is it of curtailing our right of choice in this matter as Senate bill 3603 does?

I take it that this committee wants the real names of things and groups covered in this bill. Very well, let us call by their real names the various groups who are concerned in the amortized loan which is favored by this bill to the exclusion of straight loans. This amortized type of loan has been the subject of paeans of praise as the nesting place of all that is fine and fair for the home owner.

And, Mr. Chairman and gentlemen of the committee, it is a pathetic and pitiful praise but we hear it every day. It can be just such a nesting place, but it can also be, and is to an amazing extent, the breeding place of the meanest sort of usury. It is the kind of loan in which it can seem to say on its face 6-percent annual interest, while there skulks beneath confusing phrases and tricky stipulations, credit charges running to 10 and 12 percent and over.

I am talking now about regular mortgages and not repairs. Mr. Farrington can take care of that.

It is the type of loan which, though having real advantages for the home-owning family, also carries greater dangers than the straight loan for the simple reason that the entire amount of an amortized mortgage usually becomes due upon default of a single one of the agreed monthly payments. After such default foreclosure is at the discretion of the mortgage holder. If, therefore, a home-owning family suffers loss of income through unemployment or any other reason there are usually just 30 days during which the family can find new employment or other ways to escape the status of a defaulting mortgagor.

Under the straight loan this rescue period usually stretches to 3 or 6 months, depending on whether the contract calls for quarterly or semiannual interest payments. The real names of the unfailing beneficiaries of the amortized loan are the money-lending brokers because such loans keep the principal of loans constantly flowing back for reinvestment with all the profit legitimate and otherwise that attach to the business of real estate financing.

Incidentally, let me call your attention to the fact that building and loan associations in a number of States and in others the amortized loan itself have been made exempt in effect from the State's penalties for usury. Mr. Chairman, is the home owner or the money-lending broker the real name of the beneficiaries of laws which say that build

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ing and loan associations may charge in addition to fixed rates of interest and commissions such premiums as are fixed in their bylaws and may collect the same in advance

That interest to the full amount of the amortized loan may be added to the debt on maturity, and the combined interest and principal divided into monthly installments.

Now that I may not be misunderstood, let me put into the record our conviction that the greatest builders of civic stability are building and loan associations and other commercial lending agencies that usually through fair cost amortized loans, make home ownership possible to the family of limited income. But that is not to say that all building and loan associations and other commercial lending agencies making amortized loans deal fairly, openly, and on a sound basis with home owners in the matter of interest charges. It is for these reasons that we object to this bill's entrenchment of the amortized loan at the expense of the straight loan.

Furthermore, even if this discrimination against the straight loan were eliminated, we object to the bill on the ground that there is no limitation of interest to be charged to home owners by agencies that enjoy the benefit of the act at the expense of all taxpayers, including the victimized home owners.

Through the force of sections discussed by Mr. Farrington this board of 5 to 7 men in Washington can determine what is socially desirable housing in every community in the land, and under the powers conferred they can make their judgments effective. Call it by any name you choose the smell of such regimentation of American homes will be the same in the nostrils of the American home-owning public.

Second only in importance is our objection to this bill on the ground of the other material harm it will do to the home owner and likewise to the actual mortgage holders as distinguished from the lending brokers. For every mite of help that American home owners may get from this bill they will pay many times over in reduced values of existing homes. Mr. Farrington has pointed out to you the sections of the bill which inflict this injury. As a necessary supplement to his analysis of the sinister effect of this 60-percent limitation for mortgages on existing homes as compared with 80 percent on new homes, I call your attention to the following facts revealed by the United States census.

In the decade ending 1930 the population increased approximately 16 percent; the number of family dwellings increased over 22 percent during the same period; immigration has been shut off by law and by economic conditions to a relatively insignificant factor in the housing problem; our birth rate is rapidly declining. In the face of these facts what else but harm to existing home values can come from artificially stimulating new home building beyond the effective demand, as this bill does?

Mr. Chairman, as stated to you, this bill has been studied from the viewpoint of the home-owning family, but I think there will be no successful challenge of the statement that the lifeblood of the prostrated building and building supply industries, and of the home financing business, is the American family's faith in the wisdom of home ownership and in reasonable hope that mortgage-burdened home owners can save their homes without loss to those who have

loaned money on honest terms.

Faith in the wisdom of home ownership is dead in millions of homes-bereft families and in unnumbered others who know of the misfortune through kinship or friendship. It lies mortally wounded in millions of other families now facing the danger of foreclosure, a danger that will be increased by this bill.

Newspaper "bally-hoo" is just about spent. Faith in ownership can be resurrected and hope of saving the home can be restored only by making safe the 20 to 21 billion dollars of private capital now invested in existing mortgages on homes so that there will be no desire to withdraw it.

It is this effort to withdraw money from mortgage investments that is threatening so many homes with foreclosure. Yet investors. do not want to withdraw capital that is safe and yielding a fair return. I am not talking about the brokers who derive income from a continued reflow and turnover of the principal of loans. It is only fear that capital and income will be wiped out that exerts the strong pull from investors to get their money out of homes in which the owners are themselves losing faith.

The fear of the investor will subside and pressure for return of the principal of the loan will ease off as the faith of the home-owning family revives in its ability to keep the family shelter. That faith will come to life only when home owners whose credit in normal times and whose equities warrant, are assured that their mortgages will be extended provided agreed interest payments and taxes are kept up; provided further, that repairs essential to preserve property value will be made; and provided further, that where the home owner does not have the cash, credit will be available at a cost known and limited by law if made from agencies that enjoy the credit facilities of the United States Government.

To divert for a moment from my statement, I should like to call attention to the utterance of the President, just before the last election, that the use of the facilities of the United States for discounting purposes should be conditioned upon the extension of loans and the control of interest. I will submit that statement of the President for the record if you would like it. I think it bears on this proposition. There is not one line in this bill that puts its creature companies or other beneficiaries of this bill or the home-loan-bank law, for that matter-under any compulsion to extend existing mortgages, no matter what the credit or equity of the home owner is. What is more, no mortgages over 60 percent of the market value-and the average and majority are over that can be extended and enjoy the benefits of this bill. Mr. Chairman, who put that in the bill and why? What is the_real name of that provision's beneficiaries?

Now as to the provision for repair and modernization of homes: Neither you nor I facing the loss of the family shelter through foreclosure, with our backs against the wall fighting for a way to live other than by Mr. Hopkins' relief rolls, will put one cent in repairs or taxes on homes we think we are going to lose. Even Chairman Fahey's vivid faith that the right sort of advertising will make either you or me do it isn't convincing. But if I can save my home by making only needed repairs, I will put on the repairs gladly, even though have to draw on reduced earnings or go in a little carefully guarded way further into debt. But this bill holds no such give-and-take facility for me or any other home owner. It does not link mortgage extension with reconditioning. Without such linking there will be