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does not amount to very much, because we are just developing it. As of that date, we had 20,499 outstanding, of a total value of $659,991, but we are endeavoring to develop that.

Senator WATSON. Then, you have paid-up stock, do you?

Mr. WARREN. Yes. We have paid-up shares, upon which the maturity value is paid in advance, and upon which a fixed rate of profit is paid.

Senator TOWNSEND. What is that return!

Mr. WARREN. Usually 5 per cent, and in some instances, where bank rates are higher than 5 per cent to associations, they have followed the bank rate to some extent and have run as high as 512 or 6, where bank rates have been that high, but that is an unusual situation.

Senator Watson. Is that paid-up stock taxable in your State?
Mr. WARREN. No, sir; it is not.
Senator WATSON. It is free from taxation ?
Mr. WARREN. Yes, sir.

May I say this to you, Senator? Our paid-up shares are not a great factor in our set-up. At the end of 1931, we had $125,000,000. There had been a jump from $117,000,000 at the end of 1929, but that was largely occasioned by the fact that at that time the credit situation became strained. People were unable to further continue paying on their installment shares, and in many instances they switched to the paid-up share, because they were not obliged to further pay, although they did not want to withdraw their investment in the shares.

Our paid-up shares represent, to a very great extent, the matured installment shares where the people do not want to take their money out of the institution, where they have been accumulating their little“ back-log" against trouble. It averages from 135 to 138 months of persistent saving.

Senator WATSON. How much have you been troubled by withdrawals?

Mr. WARREN. Withdrawals in our State, Senator, up until very recently, have been a problem of a comparatively few associations. We are, however, at the present time in a situation where we have got to use very great judgment and obtain a very great deal of credit in order to assist in the stabilizing of the financial institutions in our State, not only so far as associations are concerned, but our banks, because we are intertwined. In our State the associations owed the banks, at the close of business a year ago, $61,000,000, and I think they owed them, as of the close of business last year, something like $63,000,000. Of course, while in some cities that has been considerably reduced, in other places the loans have gone up, but the situation is that we are now suffering from a depreciated income for the reason that our withdrawals have suddenly increased due to the very large number, proportionately, in certain parts of our State, of bank failures in the last six months.

Our associations which, of course, do business with banks and deposit their liquid investment funds in their commercial accounts, have had those funds tied up. Most of our associations, sir, are serial associations.

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and the other half of 1 per cent a upon the pledged shares. Those dues are in money, he dues plus the profits apportioned to those shares at iste as the profits apportioned to the shares of savings reach the maturity value of the shares, the mortgage loan d by that maturity and the matured shares are canceled. It of that has been, as I say, that we have a stable type of inancing in this country, and a type of financing which is or the home owners of our State. e difficulty in this country is evidenced by the editorial in the

ild Tribune of November 16, with reference to this proposal ure this committee. It said:

It is one of the anomalies of real estate mortgage loans that while they are varded as among the safest investments available, they are highly illiquid. This fact, in times of business depression, frequently works serious hardship on the home owner. When he goes to his bank to renew his mortgage he finds that the bank is pressed for cash and that it is not in a position to make such an extension. He may be able to raise the funds elsewhere, but all too fre quently he is not. And the only recourse that is left for the bank is foreclosure, a procedure which may in times such as these see the home owner's entire equity wiped out. The general purpose behind Mr. Hoover's plan is to put banks that are carrying large portfolios of real-estate loans in a more liquid position.

To that purpose we most heartily subscribe. Again, I call your attention to the New York Times of November 17, when Mr. Harry S. Kissell, who was then president of the National Association of Real Estate Boards, in a public statement, said:

The lack of such a plan in the financial structure of the country has been one thing that has retarded home owning. A family purchases a dwelling, takes on a first and second mortgage for a period of years. The picture is perfect in many ways up to the time when one or both of the mortgages run out and refinancing is needed. Then, if times are the least bit bad, and sometimes even when times are very good, the new financing can not be obtained. All that has gone before is wiped out and the home is lost, often forever.

That is an appalling condition which does exist in our country, very largely because of the fact that banks of deposit and other institutions which obligations to their customers are repayable upon demand, have invested in this type of mortgage, and now, in these times when people are endeavoring to recapture their savings, those institutions necessarily, in order to liquidate their assets and keep their obligations to their customers, so that they may be able to remain open and continue to do business, must call these loans for payment.

I might call to your attention a rather significant statement which was made to me by a rather high governmental official here in Washington, just prior to the home-owning conference. He said that among the thousands of letters coming in every day from all over the country telling that mortgages on homes were being called and foreclosed, and homes were being lost, there was not one complaint of an owner of a home in the State of New Jersey upon which there was a New Jersey building and loan mortgage, which was evidence, to my mind, that our type of home financing is right.

We do not subscribe in my State to the plan of financing through building and loan associations of the second lien on homes. That has produced a catastrophic result in the eastern part of Pennsylvania,

d while many building and loan associations have failed in the city

Senator TOWNSEND. Are you familiar with this bill?

Mr. WARREN. Yes, sir, I am; and there are some features to it, as to the mechanics, and so forth, to which I would like to later draw your attention by a memorandum. I do not think it would profit you to go into technical details at this time. If I may have the privilege, I would like to submit a memorandum later. I may say that the leadership of the New Jersey Building and Loan League, which represents the associations of our State, is in disagreement with the bill as it is presently drawn. They suggested some amendment, and we would like to suggest others for the consideration of your committee. We will send them to you.

Senator WATSON. You will put those in the form of a brief? Can you tell us, briefly, what those things are?

Mr. WARREN. Yes, sir. In the first place, we think that there should be a definition of what an amortized loan is.

Senator Watson. We have had that suggestion very often. What is your definition of an amortized loan?

Mr. WARREN. An amortized loan to me, sir, for home-owning purposes, is one which, you might say, is self-liquidating by small periodical payments over a long period of years. May I say to you, sir, that I am not here representing a business. I am representing what is to me a very great social movement.

I am not what you might call a building and loan attorney. I do not profit from building loans in any sense of the word. I am interested in building and loan associations, and have been for many years, because of the great economic and social value to my State and to my community.

I desire to call to your attention what is to me an opportunity which this Government, through this committee and through Congress, has at the present time. That is to write a definition of what is sa fe home financing.

I was listening very carefully to my friend, Mr. Stevenson's discussion, and that seemed to me to be directed to the needs of to-day in saving the homes of to-day, rather than to the building of the homes of to-morrow.

Senator Watson. Let me ask you this. How many defaults have you had in payments by small home owners!

Mr. WARREN. We have had some. We have used every effort, Senator, to recast loans, as we call it, to reduce payments, to waive payments, and, as the borrowers' equity in the shares is increasing monthly on a loan that has been running for some time, the net amount that he is due is far less than the reduced value of his real estate, and we are able to do that, whereas if we had straight mortgages, of course, we could not do that thing.

The deterrent to home ownership in American to-day, as is evidenced by what Mr. Stevenson has said, and as we all know is the case, is the small percentage, straight mortgage loan of a definite term, plus the second mortgage upon that.

I would like to call your attention to the type of mortgage loan which we have in our State, which has resulted in a stable type of homes in our State. We loan up to 80 per cent of the appraised value of the home upon a first mortgage, repayable in shares of the association. Our usual payments are 1 per cent a month of the amount of the loan, 6 per cent of which is interest which goes to

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