of a lifetime. Marriage, the purchase of a home, and death are the three things that stand out, besides the birth. You will learn, that, if you are in close contact with the home owner. I am. I have interviewed thousands of home owners. May I say this? The course of our present situation can be summed up in this way: Overbuilding, overfinancing and overselling. In our city during the years up to 1929 we had six mortgage companies. We have two to-day. The other company has been in business 40 years. They have invested many millions in mortgage financing. They put millions of dollars in financing the construction of homes and have held the mortgages. We have been in business only since 1920. We have not had to foreclose a single house on a maturity date. Senator WATSON. Never have? Mr. CLARK. No. Senator WATSON. And how many houses have you financed the construction of? Mr. CLARK. I should say-oh, the construction? Senator WATSON. Yes. Mr. CLARK. I mean on any loan at all, because when we finance the construction we carry the loan along. Senator WATSON. Yes. Mr. CLARK. We make various classes of loans. This may be news, but we make what is called the demand loan. That is rather difficult for anybody west of New York to understand. Senator WATSON. Tell us what you mean by that, Mr. Clark. Mr. CLARK. We make a demand loan, which is the popular loan with the savings banks in Connecticut. The demand loan may run for 40 years. With our mortgage company we let it run along, say, for 5 years, and then ask the borrower to reduce the principal. other words, we let the loan run along until the borrower has paid off all of the junior liens. When he gets those obligations off, then we ask him to reduce the principal of our loan. In Senator COUZENS. Where are the junior liens all this time this is going on? Mr. CLARK. The borrower is reducing those. Senator COUZENS. I know, but where are they? Mr. CLARK. Either with a private individual, a builder, or a second mortgage company. Senator COUZENS. How do you keep track of the fact he is reducing his junior liens? Mr. CLARK. We keep in touch with the borrower. Senator COUZENS. There are no prescribed rules for that? Senator WATSON. How many loans of that kind have you made in any year? Mr. CLARK. Of the demand loan? Senator WATSON. Yes. Mr. CLARK. I should say a total of fifteen hundred in 10 years. Senator WATSON. Are all your loans demand loans? Mr. CLARK. No. We make 5-year loans with the amortization beginning at the end of the third year, allowing the owner three years in which to reduce or clear off entirely his juuior lien, and then pay 22 per cent on the principal semiannually for the next two years, and we renew that mortgage for another period of five years on an amorti zation basis, if the owner has kept his property in good shape, paid his taxes and his interest. In other words, if he is a good risk. Senator WATSON. How many defaults have you had in the payment of interest? Mr. CLARK. I would have to get that. I do not want to make misstatement. Senator WATSON. Yes. Mr. CLARK. Just what do you mean by that, senator? Senator WATSON. I mean when the interest is due, the fellow fails to pay it. Mr. CLARK. We have no interest delinquent for a period of six months from the due date. We haven't any taxes delinquent that were due during the year 1930. You see we have a town system in Connecticut. We are operating in 22 cities and towns. Senator WATSON. Most of your business is done right in New Haven, isn't it? Mr. CLARK. No, sir; Hartford, Stamford, Waterbury, New Britain. We cover that entire territory. Senator WATSON. Is the situation different in New Haven, in what we call a college town, than it would be in any other? Mr. CLARK. I don't think so. Senator WATSON. You started to say, Mr. Clark, why you built more homes in 1931 than in 1930, and at a higher price. Mr. CLARK. I think we were the only mortgage company doing any construction financing. I told you there were six companies in 1928. There are only two to-day. Senator WATSON. Yes. What became of the others? Mr. CLARK. They overloaned. Senator WATSON. I know, but what became of them? Mr. CLARK. They went into bankruptcy and liquidation. Senator WATSON. Quit business? Mr. CLARK. They quit business, yes. One company got into difficulties with the State and the bank commissioner closed them up. Senator WATSON. You were not hurt by the deflation? Mr. CLARK. I have not been. I haven't lost a cent and the purchasers of our loans have not lost a cent. Senator WATSON. What is your opinion of this bill? You have given a very lucid description of the situation. Mr. CLARK. I think this bill is going to be very bad business. It is going to be bad for the home owner, who thinks he is going to profit by it. It is going to create speculation. It is going to give the builder and the building material man and the realtor a happy day for a short time. But their interest in a proposition expires with the taking of the profit and the taking of the commission; then they step out of the picture. We now have a surplus of homes. It takes five years from the time we reach what we feel is a stopping point in building to absorb the amount in excess of that actually needed. There are enough homes-I am speaking of Connecticut; and I think it is fairly true elsewhere there are enough homes to-day for sale by mortgage companies and by banks to home owners who want to take them, to satisfy any demand that there may be. And, incidentally, they may have them at the amount of mortgage, if they will assume the mortgage, no cash payment, and pay the mortgage off on the monthly installment basis. Incidentally, I meant to have added that we also make a monthly installment mortgage anywhere from 5 to 16 years, where it wipes the mortgage out entirely in that period. Senator WATSON. Do I understand you to say then that there is no occasion for the passage of this bill for new home construction? Mr. CLARK. Absolutely none. Senator WATSON. What is your opinion of it as a permanent institution? Mr. CLARK. There is no occasion for it even as an emergency measure. It certainly ought not to become a permanent institution. It will create speculation. The public would be appealing to the Government to take care of all of its ills. May I make this statement? This is a local condition. Senator WATSON. It is what? Mr. CLARK. It is a local condition, within the State. The New Jersey building and loan associations have met this situation in a fine manner. They are pooling their interests. They are taking care of each other. In other words, they show that they have something besides obligations on their hands. They have ideas as to how to meet those obligations and they can meet them that way. Senator WATSON. If they can take care of each other, then some of them are more prosperous than others. Mr. CLARK. Yes. The well-managed ones are the more prosperous ones. Senator WATSON. And then the stronger take care of the weaker? Mr. CLARK. The stronger take care of the weaker, yes. Senator WATSON. Are there many defaults in building and loan associations in monthly payments? Mr. CLARK. In Connecticut? Senator WATSON. Yes. Mr. CLARK. No. You will rarely hear of a foreclosure. In Massachusetts the cooperative banks and mutual savings banks are forming associations throughout the State and membership in the associations will be compulsory. May I also make this suggestion? I do not think this has been made public. During the past four months any institution, banking, building and loan or anything else that had what was considered sound mortgages could get all the money it needed to make it liquid. The life insurance companies bought $80,000,000 of mortgage loans from commercial banks, trust companies, building and loan associations, mortgage companies, aside from their regular business. I personally have inspected Senator WATSON. Are these mortgage loans of such value that those insurance companies are perfectly safe in the purchases they have made? Mr. CLARK. Yes. My organization took care of two banks in Connecticut that were frozen up. The freezing up is not due to the mortgages. It is due to the lack of foresight. The law says they may loan up to 70 per cent, and if they go up to 70 per cent they are flirting with trouble. Senator WATSON. You say the insurance companies have taken over $80,000,000 of mortgages? Mr. CLARK. Over $80,000,000 of mortgages, yes. Mr. CLARK. Yes. Senator WATSON. And trust companies? We kept Mr. CLARK. And trust companies, building and loan associations, and other institutions. I am working right now on one. two banks from closing. Senator COUZENS. You spoke a while ago of second and third mortgages. Mr. CLARK. Yes. Senator COUZENS. In what way would this bill help the home owner in dealing with second and third mortgages? Mr. CLARK. Not at all. That is our crying need in the country to-day. Senator COUZENS. In other words, there seems to be a public misconception of the extent to which this bill will help the man who desires to build a home. Mr. CLARK. Absolutely. Senator COUZENS. From the telegrams and letters I have received, there seems to be a general conception that this bill is for the purpose of aiding the man in getting a home. Mr. CLARK. Yes. That is a smoke screen. Senator CouZENS. A smoke screen? Mr. CLARK. Yes. Senator COUZENS. I would not go that far, but I do realize that there is a misconception by the public, because of the tenor of the communications I am getting. Mr. CLARK. Yes. Senator WATSON. In my country the general conception is that it helps the fellow who has a mortgage on his home to carry it. Senator COUZENS. That was not the President's proposal, Senator. Senator WATSON. I think that was the secondary view. Senator COUZENS. The secondary view? Senator WATSON. Yes; the secondary proposition. Mr. CLARK. May I suggest this, without taking too much of your time Senator WATSON. This is all very interesting. Mr. CLARK. The savings banks in Connecticut showed an increase of $30,000,000 in their deposits during the year 1931. Senator WATSON. State that over again will you please? Mr. CLARK. The savings banks of Connecticut, according to the report of the banking commissioner, show an increase of $30,000,000 in deposits during 1931. The postal savings department of the Government has shown a tremendous increase. Senator WATSON. We are familiar with that. Mr. CLARK. So there is no lack of money. The Bowery Savings Bank of New York on the first banking day of this year had 1,000 new depositors. There is no lack of money. This proposition is entirely emotional and not factual. Senator WATSON. Based on lack of confidence? Mr. CLARK. Based on lack of confidence; yes. Senator WATSON. Certainly. Else these banks would not be going to pieces all over the country by the hundreds. Mr. CLARK. Many banks that have gone out never should have been started. Senator WATSON. That is quite, true, but they have gone out. Mr. CLARK. They have gone out, yes; and the stockholders have lost money. Senator WATSON. And they are still going out. Mr. CLARK. And they are still going out. Senator WATSON. There is no doubt of that. Mr. CLARK. The situation is entirely within the control of the people within each State. It is not a Federal matter. As the Senator has commented, it is the second mortgage that needs attention. Senator WATSON. What do you mean by "needs attention"? Mr. CLARK. We need an organization locally in each community to create a fund to help the home owner, the purchaser or builder, to get capital enough to finance him between the first mortgage and the equity. Senator WATSON. But that can not be done by a bill of this kind? Mr. CLARK. No. There is where the danger lies. There is not a good second mortgage company to-day anywhere within my knowledge, and I have fairly good knowledge of what is going on in the business. Senator WATSON. You say there isn't a good second mortgage? Mr. CLARK. Yes, I say I don't know of one within my knowledge. The building and loan associations in some parts of the country have gone into the second mortgage business, much to their sorrow, as I understand. I made this proposition to the United States Chamber of Commerce session in April, 1930. I spoke on this same subject at that session. I found at that time that the administration and the chamber were of the opinion that we needed more money for first mortgages. My proposition, which is on record, met that situation fairly. I suggested then that if there was any trouble at all it was in the second mortgage field, and the cure for that was in the hands of each community; that is, the chamber of commerce or an organization similar should have a committee of the bankers, builders, material men, furniture dealers, everybody who had anything to do with contributing to the make-up of the home, that they should create a local organization and loan money on second mortgages. They would control the type of building, and the character of the neighborhood. They would be able to loan money at a much lower bonus charge than at present. Senator WATSON. That would have reference to second mortgages on new construction. Mr. CLARK. It would be second mortgages on everything. Mr. CLARK. Yes, on everything. Our chamber has that proposition right now, and I am chairman of the committee, and we are going to try to put that into effect in our community, which takes in quite a substantial territory. Senator WATSON. You think that this home loan bank proposition, if established, would not be profitable? Mr. CLARK. No; it could not be profitable. |