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There may be some isolated cases where that is not true, but I think that is generally the situation. However, there is a need

Senator WATSON (interposing). You are able to meet all demands made on you at this time?

Mr. FRIEDLANDER. Do you mean for loans ? Senator WATSON. Yes; for loans. Mr. FRIEDLANDER. No; we are not able to meet any demands at all. The demands being made now are for refinancing of loans that have been made in the past by term-mortgage institutions. There is no money for that purpose. Those people who have built homes and whose notes are maturing—and they are not building and loan association loans because those loans do not mature, being on an amortized basis—but in the case of straight mortgage loans made for definite terms three, four, or five years ago, these loans are coming due, and these home owners are facing foreclosure, are having their homes foreclosed because there is no fund at this time to meet that demand.

Senator Watson. Generally speaking, who holds those mortgages ?

Mr. FRIEDLANDER. A great many of them in our section have been floated through trust companies and mortgage companies and sold to private investors. And those private investors have had their minds so disturbed about mortgage loans as investments under present conditions that they are in the same mad race for liquidity that seems to be abroad generally in the United States, evidenced in the attempt to reduce everything to cash.

Senator WATSON. And they can not come to you and get money to refinance ?

Mr. FRIEDLANDER. They can not come to us or to anyone else at this time and get money for refinancing.

Senator WATSON. And those private investors and trust companies are not willing to tide them over or help them along?

Mr. FRIEDLANDER. They would have to find new investors to take the paper, and they can not find new investors for that purpose at this time.

Senator Watson. And all they can do is to foreclose !
Mr. FRIEDLANDER. Yes, sir.

Senator COUZENS. Of course they are not by any means foreclosing all that are past due, I take it.

Mr. FRIEDLANDER. Oh, no.
Senator WATSON. Of course not.

Senator COUZENS. What have you to say with respect to the clauses of the bill with respect to the advance not being an amount in excess of 60 per cent and 50 per cent of the unpaid principal of the home mortgage loan, nor 40 per cent of the appraised valuation of the real estate securing the home mortgage loan, referred to in the discussion that took place prior to your coming to the table ?

Mr. FRIEDLANDER. Well, I should be absolutely opposed, Senator, to any system proposed for the purpose of helping the institutions and indirectly home owners that would be set up on any unsound basis. I noticed that you had some testimony given before you on yesterday with reference to second mortgages. Of course, if the Government is going into the gift business that would be all right.

Senator WATSON. Well, it would seem that we have been in that business all along.

Senator COUZENS. And we are going into it in this bill, because we are giving half of this capital without return.

Mr. FRIEDLANDER. That would be a small gift as compared to some that you have made. You should set the banks up on a sound basis. The witness who appeared just before me spoke of selling houses on 5 and 10 per cent down payment. That is all right on à rising real-estate market, but we have not a rising real-estate market at this time and probably will not have one for some time to come. Where you sell a home on 5 per cent down, which represents the commission of the real-estate man, you have no margin as security for the money advanced. I think more and more investors in this country from now on are going to demand real security before they turn loose their money, no matter what it may be, foreign bonds or other things.

Senator COUZENS. What is your judgment as to the amount of money a man should have before he starts to secure a home?

Mr. FRIEDLANDER. My judgment concurs with the finding of the home-ownership conference held last month, that a man should have 25 per cent to pay down. He should show some evidence of selfdenial, some evidence of thrift, before he starts out on the long journey of home ownership. Otherwise he will get up against it before he goes very far.

Senator WATSON. Your average loan is $2,700 ?
Mr. FRIEDLANDER. Yes, sir.
Senator WATSON. On a home of what cost?
Mr. FRIEDLANDER. Between $4,500 and $6,000.

Senator Watson. Does that include the house, or the house and lot?

Mr. FRIEDLANDER. Both the house and lot.

Senator COUZENS. What would have been their position if these something like six million or seven million men out of work now had started in on such a thrift plan two or three years ago? What condition would they be in at this time considering that they have been out of work for a year or two? How could they meet their payments at this time even if they had put 25 per cent in their homes?

Mr. FRIEDLANDER. Well, that is the point I made a few minutes ago, that they have been encouraged to do it and a great many have dont it, and to-day many of them find themselves with first mortgages coming due and no opportunity to rearrange or refinance their homes and therefore are facing foreclosure.

Senator COUZENS. What do you see in the future to assure you that they are going to be reemployed and be able to carry out their obligations on their homes?

Mr. FRIEDLANDER. Well, I am an optimist by nature.

Senator WATSON. And being from Texas maybe you hope for a Democratic administration.

Mr. FRIEDLANDER. Well, that might help. I think that by fall, if the Government balances its budget, and the States, cities, and counties do the same thing

Senator WATSON (interposing). What fall?

Mr. FRIEDLANDER. This coming fall; that we will have started toward putting our feet back on the ground. I think that is one of the important steps that must be taken.

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Senator COUZENS. Just what position is such a man in who has reached 45 years of age, and probably paid 75 to 80 per cent on his home, but now finds he has reached the age limit for employment? What condition is he going to be in to carry on?

Mr. FRIEDLANDER. Well, that is a social problem that I should not say

I am qualified to answer. Senator COUZENS. But this whole thing is a social problem. This is the most socialistic legislation that has ever come before the Congress.

Mr. FRIEDLANDER. I think you have had a companion measure in the Federal land banks. I do not think the Nation owes any more in the way of providing a farm for the farmer than it owes in the way of aiding the man who wants to live in his own home in the

city.

Senator COUZENS. I think there is quite a distinction in that the farm is a producer. We maintain the farm to produce food products.

Mr. FRIEDLANDER. Yes.

Senator Cotzens. The farm is like the factory, it produces needed commodities just as the factory produces articles of manufacture. But the home is a static capital investment, is it not?

Mr. FRIEDLANDER. It is. But the Nation certainly is concerned with the matter of providing suitable housing for those who live in cities and towns. I should say that the problem is as great or greater perhaps in the small towns than in the cities. In the small towns you will find no credit facilities at all under present conditions open to the prospective home owner.

Senator COUZENS. Well, I want to assure you that you can find none in Detroit now, where there has been the greatest unemployment problem in the country on account of the condition of the motor-car business. But that is not the point I am raising. No one believes in the home any more than I do. But haven't we got to give the worker some assurance that he is going to be able to pay for a home before we invite him to purchase a home? How is he going to pay for a home if he is hired to-day and fired to-morrow?

Mr. FRIEDLANDER. I quite agree with you that there is something out of joint in our economic system, but that is quite apart from this discussion.

Senator COUZENS. I think not. I think it is fundamental. If we are going to encourage home owning, in which I am heartily in favor, it seems to me we are starting at the wrong end of the matter; that we ought in some way to start out to assure the man that he is going to have adequate income, either by means of stabilization of industry or unemployment insurance or something of that sort. It seeems to me we are attacking this proposition at the wrong end. We are encouraging a man to get a home and then we say to him: We do not know how long you will have a job. He may lose his job to-morrow, and then he will lose his home.

Mr. FRIEDLANDER. That is a very fine viewpoint, but it seems to me if we do not relieve the burden pressing upon those who have already started on the way to home ownership, we are never going to induce this great body of men you are speaking of to ever start out. There is another phase from the building and loan association's standpoint that I think should be considered: We have approximately 13,000,000 people in the United States who are useing these cooperative institutions. They have for years been making investments monthly or by way of lump sums in these institutions, which in turn have been lending to people on homes. If you will take our own institution as an example, we have induced in 10 years about 12,000 people living in Houston to invest their money in our association to the extent of about $10,500,000, and which, we, in turn, have loaned to 3,500 people there to build homes. Then along comes this period of depression, and those people, or some of them, need their funds. This money that we have invested has been placed in what has been considered a prime security, and yet at this time we are unable to take $10,000,000 worth of notes and do anything with them in order to give these people some relief, those people who are needing to recapture a part of their savings. That is quite apart from this purely lending feature of the home loan bank, but it is a very important part of its accomplishment and should enter into the consideration of this bill.

Senator COUZENS. That is entirely the emergency feature of it, and that is what we are trying to draw a line on, that is, between emergency and permanent needs. I think no one denies the need to do something for the emergency. But what some of us are trying io fix in our minds is as to a permanent need for this organization.

Mr. FRIEDLANDER. I think one 'desirable feature would be the low. ering of interest rates; would be the granting of credit at a rate more or less uniform by reason of your central board. We would be enabled to get our bond money at a lower rate of interest, which bond money we in turn could loan to the home owner at a lower rate of interest than we have been able to do by way of getting money from investors in our section. I think that is a very desirable feature from the permanent set-up standpoint.

Senator Watson. How many foreign bonds were sold down in your part of the country?

Mr. FRIEDLANDER. Too many, Senator, but I do not know.
Senator WATSON. A great many?

Mr. FRIEDLANDFR. There have been quite a few sold in Houston, and in the cities.

Senator WATSON. What bonds?
Mr. FRIEDLANDER. South American bonds.
Senator WATSON. Any European bonds?

Mr. FRIEDLANDER. I think very few European bonds. We are closer to South America down there than we are to Europe, apparently. They had a stronger appeal.

Senator WATSON. But proximity did not help you much in the matter of the investment.

Mr. FRIEDLANDER. Perhaps not.
Senator WATSON. Not in every instance.

Mr. FRIEDLANDER. As I stated before, the investing public are going to be more discriminating in the future.

Senator WATSON. Until there is another boom.

Mr. FRIEDLANDER. Well, perhaps that would becloud their judgment. At any rate, until that happens, and I do not see any other boom in sight any time soon, if real estate continues its downward march in deflation it is going to be a rather difficult matter under the present set-ups to get a flow of money back into it.

Senator Watson. That is true. Now, the legislative drafting agent would like to ask a few questions.

Mr. O'BRIEN. Some suggestion has been made in these hearings that in view of the manner the building and loan business is conducted it is going to be impossible to ascertain originally the term of a loan for the purpose of determining whether or not, that loan being an amortized loan, it is for a term of eight years or more, and therefore entitled to an advance equal to 60 per cent of the unpaid principal. I should like to ask you whether in the conduct of your business it is possible for you to know at the time of making a loan, in the case of payments made in respect to shares, how long that loan is going to stand. That is, are you able to tell with reasonable certainty whether that loan will be paid off in 81/2 years or 1012 years or 15 years or whatever it may be?

Mr. FRIEDLANDER. We are not able to arrive at it with mathematical certainty on account of the fact that it depends upon dividends paid by the institution and credited to the shares. But you ought to be able to ascertain fairly accurately as to about the time. However, according to the terms of the bill as I have read them, your limit is 75 per cent of the appraised values amortized mortgage that would be eligible for use as collateral. Now then, you provide that if it runs 8 years or more, the advance would be 60 per cent of that, which would be 45 per cent of the value. Then you have a further limitation that the advance can not run over 40 per cent of the value of the deposited security. Then you have a further limitation that the amount of the mortgages maintained must be at the ratio of 190 per cent of the amount of the bonds, which of course is a further limitation, because you are going to get these mortgages from the individual association borrowers. As I figure that out a building and loan association need not worry much about the 8year minimum because it is only going to get about 30 or 35 per cent anyway. There might be a few loans on the border line and which would have to be eliminated, but as a matter of fact it would have enough acceptable mortgages to come within the limit that it should borrow. Very few loans made on the amortized basis would pay out in less than 8 years.

Mr. O'BRIEN. Then there is no objection to using the phrase eight

years?

Mr. FRIEDLANDER. No.

Mr. O'BRIEN. I understand that in a case where a building and loan organization makes a loan to a member of the organization it is frequently if not usually an amortized loan. Now, the suggestion has been made that amortized ought to be defined for the purpose of this act, and a great deal of trouble has been encountered in defining amortized for the reason, at least in the conception of the House committee, and I do not think the House committee thought an amortized loan was one in which in case it ran 10 years and 1 per cent would be paid off each year and a great big payment or renewal at the end of 10 years—for the purpose of arriving at that result, is there any percentage of the amount of the loan, in the payment of interest and principal, which is prorated over the number of years

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