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Senator WATSON. Have you made loans right along to home buyers and builders?

Mr. STEVENSON. Yes; up until about a year ago.

Senator WATSON. Why did you quit then?

Mr. STEVENSON. Because we could not finance them.
Senator WATSON. Why couldn't you?

Mr. STEVENSON. Because we could not borrow any more money at the banks, which were our backbone. In Pennsylvania, our building and loan associations are under the supervision of the State banking commissioner. We can borrow up to 25 per cent of our mortgage loans. That is the law; but things sort of closed down, and we discovered that we owed the bank about $70,000, on some $600,000 worth of mortgages, and we naturally had to pay that off; so we have applied ourselves toward the reduction of that. Of course, you could not borrow a dime in a bank to-day in Pittsburgh for practically anything, so far as that is concerned. You can borrow, of course, from some insurance companies, but it is practically shut down as far as the banks are concerned.

Senator WATSON. How many defaults have you had in the monthly payments in your building and loan association?

Mr. STEVENSON. We have had very few, due to the district in which we operate. We operate in a district that is considerably above what would be termed the average district. If you are familiar with Pittsburgh, it is in the South Hills district of the city of Pittsburgh, which is a very substantial middle class of people. Consequently, we have had very few defaults. We have had some in arrears, but we have had only three or four absolute defaults during this year, but those were the first we ever had in this building and lian association, so naturally we are three or four worse off than we

ever were.

Senator WATSON. Have you been bothered much by withdrawals? Mr. STEVENSON. Yes.

Senator WATSON. You sell paid-up stock, do you?

Mr. STEVENSON. No, sir; we do not.

Senator WATSON. It is all on the payment plan?

Mr. STEVENSON. Yes.

Senator WATSON. Everybody pays in?

Mr. STEVENSON. Everybody pays in, and when he has paid out his stock, we request him to withdraw. We do not act as a bank of deposit at all. We operate entirely

Senator WATSON. You do not have paid-up stockholders?

Mr. STEVENSON. No, sir.

Senator WATSON. Then, you are not bothered much by withdrawals?

Mr. STEVENSON. Our withdrawals, as they come along, when their stock is paid up, naturally keep us busy keeping them paid and reducing our obligations in the bank.

I am very glad to answer any question you care to ask me with reference to the building and loan end. I had a few things here to which I wished to call your attention.

Senator WATSON. Go right along in your own way.

Mr. STEVENSON. In our National Association of Real Estate Boards we have a survey here of some 84 cities and towns from 34

different States, which we have completed, showing foreclosures over a period of three years.

Senator TOWNSEND. Beginning when?

Mr. STEVENSON. Beginning in 1928, and up to 1931, eight months of 1931. In other words, the first eight months of 1931 are in here, showing conclusively the tremendous gain of foreclosures as time has gone on.

These, I want you to understand, are house foreclosures, or home foreclosures.

Senator WATSON. Nothing but homes?

Mr. STEVENSON. Nothing but homes and made from as accurate a survey as it is possible for us to gather. It is made out of 84 cities and towns out of 554 where we have real-estate boards, so that we feel it is very reasonably correct.

Senator TOWNSEND. How many States did you say that covers? Mr. STEVENSON. Thirty-four States. This year we feel that there are a great many foreclosures held back, due to the fact that banks and other financial institutions are practically taking the position that they are just about as well off to leave the man alone as they are to foreclose it, because by the foreclosures they are destroying values and tearing down the values of their mortgages that they already own.

Senator TOWNSEND. You think your company has taken the same position as the banks?

Mr. STEVENSON. No. I say that the banks are taking that position. from the survey that we have made through the National Association of Real Estate Boards.

Senator WATSON. Are your people foreclosing any yourselves?

Mr. STEVENSON. We had one foreclosure last month, and one where they gave a deed back. Both of them are small institutions. In our building and loan association we have about $600,000 on firstmortgage loans in a community where we have absolutely the pick of the mortgages. The bank of which I am a director has deposits of approximately $1,000,000. It is only a small community. So that both these institutions that I speak of are relatively small.

Last week we had a meeting in St. Louis at which we drafted a resolution. There were some 600 delegates, scatter well over the United States, from Massachusetts to California. I do not believe there was anyone from Maine. Almost all the States were represented. They passed the following resolution:

Resolved by the delegates of the National Association of Real Estate Boards assembled at its annual midwinter meeting at St. Louis, Mo., on January 22, 1932, That the Congress of the United States be urged to take immediate action in the matter of creating the Federal home loan bank system now pending in Congress.

I simply present that to you for your information.

Senator WATSON. Tell us why you favor it? Have you studied this bill?

Mr. STEVENSON. Yes.

Senator WATSON. You have studied this bill carefully?

Mr. STEVENSON. Yes, sir; I have, and I will say to you, sir, that we are absolutely for it from any angle. I feel that you can come in here and hold hearings for two years and have men coming in and changing this word, that word, and the other word, but the thing we

need for the benefit of the home owners of this country is something to give them absolute relief from the foreclosure of their homes and the destroying of the value of other properties due to that foreclosure.

Senator TOWNSEND. You think this bill will do that thing?

Mr. STEVENSON. I think it will go a long way toward correcting the evil that is now in front of us, and has been our trouble for quite some time.

Senator WATSON. Do you believe in this measure as an emergency relief, or as a permanent proposition?

Mr. STEVENSON. No, sir. I believe in it as a permanent relief, Senator.

Senator WATSON. Do you think it will pay?

Mr. STEVENSON. In what respect?

Senator WATSON. A return on the investment, just like any other thing pays.

Mr. STEVENSON. I think it will, at least, pay in this respect. It will pay in the building of the character of our homes, and the safety and housing of our homes.

Senator WATSON. Yes; but what kind of a financial institution will it be?

Mr. STEVENSON. I think it can not be anything else but sound. The set-up of your bonds can not be anything but the very best. I think they are the soundest bonds-I am not a bond expert at all, but from what they tell me, they have about the soundest set-up of any bonds we can observe.

Senator WATSON. Do you think that after this emergency is over, and we get back to normal times, if such a blessed state ever reaches us again, that these institutions, 12 of them in the United States, could do such a business along this special line that would make each of them financially sound?

Mr. STEVENSON. I certainly do; yes, sir.

Senator WATSON. All right. Proceed with your statement.

Mr. STEVENSON. We have heard about overbuilding. Our vacancy survey shows, in 32 cities, less than 5 per cent vacancies in singlefamily homes to-day. That is taken from a survey made in 32 cities scattered throughout the United States, where they made a vacancy survey. It shows less than 5 per cent to-day in single-family homes, a thing that this bill is designed to aid.

There has gone out a lot of adverse publicity and criticism, to the effect that the bill is designed to aid bad real-estate bonds. That is a very bad and misleading publicity, because this bill is not designed to aid real-estate bonds.

We are familiar with the conditions of the real estate bond market which existed primarily in apartment houses and office buildings. I think there are some $10,000,000,000 of real-estate bonds in the United States, of which one-half are in bad repute to-day, but this has nothing whatever to do with a proposition of that kind. It is not the home that has brought on that trouble. It is the unscrupulous bond houses that have financed these buildings and sold their bonds to the unsuspecting investor, and naturally they have not the sound background back of them, which has caused tremendous losses.

Senator WATSON. That was not due so much to unscrupulous handling as to the vast inflation of the country, and overcapitalization.

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Mr. STEVENSON. Senator, I will have to go back and say unscrupulous handling." I think a great deal of it was caused by that. I can submit a very concrete case, where a building was inflated from $1,200,000 cost to $3,500,000 bond issue, and sold to the public.

Senator TOWNSEND. Are your loans made principally on small homes?

Mr. STEVENSON. I do not make loans, Senator; only in my building and loan association, which is only in small homes.

We believe that the home buyers of the country generally have made good. It is really no fault of theirs that they are caught today in the short market in which they are caught. This condition has existed for some time. They were going along probably fairly well, investing their money in stocks, sailing along all right until this crash came along, which absolutely showed to us the great necessity of something of this kind. I do not mean by that that there has not always been a necessity for it. During all my business life I have been in the real-estate business, and I run just as good a realestate business as any man in the country. I have realized and know the need of just such legislation as this.

Senator WATSON. Is your real-estate business confined largely to home enterprises?

Mr. STEVENSON. Yes, sir.

Senator WATSON. Or do you deal in apartment houses and busi- • ness buildings?

Mr. STEVENSON. Not to any extent.

Senator WATSON. In farm lands?

Mr. STEVENSON. No farm lands.

Senator WATSON. You are fortunate.

Mr. STEVENSON. I own a farm, though, Senator.
Senator WATSON. Then you are not so fortunate.

Mr. STEVENSON. The other fellow has the mortgage.

I want to say in conclusion here, gentlemen, that, generally speaking, we like this bill. Just as I told you before, we can all come in here and ask you to change this idea, or that plan, or the other.

Senator WATSON. Have you any amendment to propose to it? Mr. STEVENSON. I have not an amendment in the world. The only amendment I have to offer, and the only suggestion I have to offer to you is, for God's sake give us quick action and let us save the fellow who is clear out here on a limb, who needs every ounce and every bit of help that it is possible for you to give him.

Senator WATSON. I am a great believer in Providence, but I do not think He has much influence in the United States Senate. [Laughter.]

Mr. STEVENSON. I do not know. I think He will have. If you have observed a few of the fellows around home, out in your particular district, I think you will observe how badly this is needed. It is absolutely a necessity, and we sincerely hope that it will not be lost and held back.

I believe this bill to be good for the home owner, in home financing, and for the whole industry. We are perfectly satisfied with the way you Senators are handling it, but do not lose sight of the fact that we would like to have all the speed possible to get it through.

Senator TOWNSEND. You think it ought to be set up as a permanent. organization?

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Mr. STEVENSON. Most assuredly; yes, sir.

Senator TOWNSEND. And not as an emergency measure?

Mr. STEVENSON. No, sir; it should not be.

Would you like to have this statement [indicating]?

Senator WATSON. Yes. Leave it with the reporter and we will put it in the record.

(The statement referred to faces this page.)

STATEMENT OF JOHN WARREN, DIRECTOR UNITED STATES BUILDING & LOAN LEAGUE, JERSEY CITY, N. J.

Senator WATSON. Will you please give us your name?

Mr. WARREN. John Warren.

Senator WATSON. Where do you live?

Mr. WARREN. Jersey City, N. J.

Senator WATSON. What is your business?

Mr. WARREN. I am a lawyer, sir.

Senator WATSON. Are you making foreclosures?

Mr. WARREN. Very few.

Senator WATSON. Whom do you represent?

Mr. WARREN. I am director of the United States Building and Loan League, representing the district of New Jersey. In New Jersey, we have 1,565 mutual building and loan associations. They have, roughly, $1,211,000,000 in assets.

Senator WATSON. What is the nature of those assets?

Mr. WARREN. As of December 31, a year ago, which is the latest printed commissioner's report, those assets are composed of $19,000,000 of cash in bank, composed partly of our commercial accounts and partly what is known as a liquid investment fund which is set aside for the purpose of endeavoring to do social justice to needy shareholders by paying promptly withdrawals to shareholders upon demand; mortgage loans, with pledge of shares, $1,061,000,000. Those are sinking fund mortgages, repayable in the matured shares of the association which are pledged thereon.

Senator WATSON. Then, how many matured shares have you? Mr. WARREN. When they mature, the shares will cancel that. At that time

Senator TOWNSEND. Do your companies take money on deposit? Mr. WARREN. No, sir; not at all, sir. We are a strictly mutua! building and loan association, averaging rather small, although some of our associations have attained rather great size.

Senator TOWNSEND. Are your loans made principally on small homes?

Mr. WARREN. Principally, sir.

Senator TOWNSEND. What is the number of loans on homes?

Mr. WARREN. It is not classified in the commissioner's report, but I know the practice very well. As of a year ago, we had 280,508 borrowing members, and 919,669 nonborrowing members, or a total of 1,198,177 members of our association.

Senator WATSON. The nonborrowing member is the member who just pays in so much a month?

Mr. WARREN. That is right, sir-not entirely so. That includes some of the children. We have endeavored to inculcate thrift in children, and we have what is known as a juvenile share, which

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