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a cilding and loan attorney. I any sense of the word. I am associations, and have been for Scenomic and social value to my

an what is to me an opportunity this committee and through ConThat is to write a definition of what

duly to my friend, Mr. Stevenson's disme to be directed to the needs of to-day , rather than to the building of the

ask you this How many defaults have

Some owners!

and some. We have sed every effort,

we call it, to reduce payments, to waive werowers' equity in the shares is increasing a has been rubrog de some time, the net

Sur less than the muced rate of his real top je that, whereas (wy za straight mortand me do that thing

came ownership in Ancon Ray, as is eviStenson has saat din is 11. kow is the rainage, straight mog can da deinite .... mirtgage upon that.

sil your attention to the nur State, which has Cut. We loan up to & ipvit a first mortgag sil payments are Cait, & per cent of wà

a mortgage loan i scatur type of → appraised of the

the

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e of the money, 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 te 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 nancing in this country, and a type of financing which is or the home owners of our State.

difficulty in this country is evidenced by the editorial in the ld Tribune of November 16, with reference to this proposal re this committee. It said:

It is one of the anomalies of real-estate mortgage loans that while they are garded 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 frequently 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, nd 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 safe 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

pay for the use of the money, and the other half of 1 per cent a month is dues upon the pledged shares. Those dues are in money, and when the dues plus the profits apportioned to those shares at the same rate as the profits apportioned to the shares of savings members, reach the maturity value of the shares, the mortgage loan is canceled by that maturity and the matured shares are canceled. The result of that has been, as I say, that we have a stable type of home financing in this country, and a type of financing which is safe for the home owners of our State.

The difficulty in this country is evidenced by the editorial in the Herald Tribune of November 16, with reference to this proposal before this committee. It said:

It is one of the anomalies of real-estate mortgage loans that while they are regarded 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 frequently 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, and while many building and loan associations have failed in the city

of Philadelphia, I call your attention to the fact that right across the river, where we confine ourselves a high percentage mortgage, but a first lien, we have not had a failure of a building and loan association in these days of stress. I think our plan is right. I think it is the type of plan of home financing which takes care of the poor man, the wage earner, and makes his home safe. So long as he keeps up his small periodical payments, his home is secure, and his loan is secure. His mortgage loan can not be called.

I think second mortgages upon homes should be done away with I think the straight three and five year term first mortgages on homes should be done away with. I do think that this committee has a fine opportunity of evidencing to the public that type of home financing which is the safe thing for the American wage earner to have upon his home.

I would like to record the appreciation of the New Jersey Building and Loan League, which I represent, and my own, personally, for the attention which the President has directed toward the better type of home financing in his message to the home-owning conference.

The very type of the mortgages of which I speak, which are noncallable, in these times, Senator, produces a rather serious situation, when banks close, when bank credit, upon which we have always relied for payment of maturities and withdrawals, disappears, and when the withdrawals are increasing because of the necessity of the shareholders to recapture savings.

What you have before you to-day, it seems to us, is this. You have a bill which is not limited in its scope to the relief of institutions, to the safeguarding of existing homes, but which is broad enough to permit of the development of new homes, the construction of new homes at the present time. The only new mortgage loans which are required in this country to-day, in so far as I am able to ascertain, are the loans which are needed to refinance the homes upon which the definite-term mortgages are now liens, in order that the home owners will not lose their homes through the calling of these mortgages, and so that they may safely keep their homes by paying off those mortgages over a long period of years.

I may say that some of the loans in our State, Senator, run as long as 17 years. We have the ability to adjust payments.

I fear that this bill-I say "I"; I speak for those whom I represent-in so far as it does not limit the use of money loaned by the member banks to the member corporations to the making of the right type of mortgage loans on homes, which is a high percentage, 75 to 80 per cent loan, without a second mortgage, repayable over not less than 10 years, in order that the loan can be repaid out of the earnings of the borrower-I say, we are fearful of, and consequently object to the bill in so far as it permits of the use of funds received from this source for the purpose of the construction of new homes, because there are more homes to-day than there are owners to occupy them. There are homes for sale, owned by banks, title companies, life-insurance companies, and building and loan associations, which can be purchased to-day for less than the cost of constructing a similar home at the present time, and on terms from 1 per cent down, and repayable over a long period of years.

The building of new homes would interfere with our present law of supply and demand, and would result in the further depreciation

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