you are not in much peril if you allowed this man to rediscount after he sold the houses. But as a matter of practice, I doubt if he would try to immediately rediscount those things.

Senator COUZENS. Well, I expect that if a man who built 50 houses in 1929 and got a first mortgage loan on them from a trust company er a building and loan association, or a savings bank, that now is the very time that he would ask to rediscount them, because he knows this is the very time he can not sell them.

Mr. ROSE. Yes; but the builder has nothing to do with the rediscount.

Senator CoUZENS. I understand.

Mr. ROSE. It is the savings bank.

Senator COUZENS. Yes; but because he has gone ahead and built 50 houses that he can not sell would have a depressive effect on all other houses.

Mr. ROSE. Yes; but I should think that with an eye always on whether they would sell or not, the rediscounting savings bank would be very cautious about creating that loan in the first place.

And I also see in this, as I said before, this control over building booms, and unwise building. It seems to me it has that value.

Senator COUZENS. Is it not a fact that before a builder started on a program of that size he would be pretty well assured of his financial backing?

Mr. ROSE. Yes, sir.

Senator COUZENS. So he would have gotten the bank or the trust company to commit itself before he started?

Mr. ROSE. Yes; and I should say that you will not find any string of 50 houses with a mortgage on them from a savings bank that are empty. I think the stuff that is empty is where some builders have gone ahead and overbuilt in a new subdivision. I do not think you will find many savings banks in trouble with their mortgages. That is, that kind of trouble. They have people living in homes on which they have mortgages, good honest people who can not pay now. That is their difficulty, and they ought to have some avenue for relief from that sort of thing. I think we are worrying too much about the speculative feature of it.

Senator COUZENS. I am not worrying about the speculators, because they will take care of themselves.

Mr. ROSE. Or be taken care of.

Senator WATSON. They will probably be taken care of.

Senator COUZENS. I am trying to find some need of this as a permanent institution, and I am frank to say that no one has submitted a single bit of evidence of that kind before us, and that is what I have been looking for in this for weeks and weeks.

Mr. ROSE. That is what I am trying to do.

Senator COUZENS. You just guess at it. You do not give me any figures.

Mr. ROSE. From the nature of it, it can not be reduced to figures. The desirability of making these first mortgages a liquid investment, with a steady market-there are no figures for that, Senator. That is just an estimate, necessarily.

Senator CouZENS. You can estimate the volume.

Mr. ROSE. If you want the volume of real estate mortgages in this country, I am sure some of the Government departments can give them to you.

Senator COUZENS. You are assuming that all of them are to be rediscounted, and that is not correct.

Mr. ROSE. NO. There are no figures on how much of this paper is to be rediscounted. It is not to be had.

Senator COUZENS. That has to be guessed at.

Mr. ROSE. I am not guessing, even. I am merely saying this is desirable.

Senator COUZENS. If you brought together any figures it would be guessing?

Mr. ROSE. If you tried it would be; yes. I don't think anyone can try to give such a figure.

I suggested, also, that it should encourage better building. There are no figures on that. That is just a suggestion.

Are there any other questions?

Senator WATSON. Are there any other questions, Senator?

Senator CouZENS. No.

Senator WATSON. Have you any further remarks, Mr. Rose?
Mr. ROSE. No, sir.

Senator WATSON. We are very much obliged to you.

STATEMENT OF JUDSON BRADWAY, REAL ESTATE BUSINESS, DETROIT, MICH., REPRESENTING THE DETROIT REAL ESTATE BOARD AND MICHIGAN ASSOCIATION OF REAL ESTATE BOARDS

Senator WATSON. Will you state your name?

Mr. BRADWAY. Judson Bradway.

Senator WATSON. Where do you live, Mr. Bradway?

Mr. BRADWAY. Detroit, Mich.

Senator WATSON. What is your business?

Mr. BRADWAY. Real estate business.

Senator WATSON. How long have you been in it?

Mr. BRADWAY. Twenty-nine years.

Senator WATSON. What kind of real estate?

Mr. BRADWAY. General brokerage. Building and subdivision and sale of residence and business properties.

Senator WATSON. All city?

Mr. BRADWAY. Yes.

Senator WATSON. No farms?

Mr. BRADWAY. No farms. City and suburban properties outside of Detroit.

Senator WATSON. What is your experience with the building and home-owning phase of our present-day life in this country?

Mr. BRADWAY. Well, I am down here to represent the Detroit Real Estate Board and the Michigan Association of Real Estate Boards, and I feel that we have suffered all of the years that each of us has been in business, from a constantly recurring lack of first-mortgage money.

Senator WATSON. The whole 29 years you have been in business? Mr. BRADWAY. Constantly recurring periods during the 29 years. Senator COUZENS. How many times has it recurred during that 29 years?

Mr. BRADWAY. Well, the acuteness has occurred probably-oh, I would say three or four or five times. It occurs whenever money can go down to the call money market in New York at 10 per cent, or whenever all the money that is available for general purposes is wanted to gamble in the stock market or in the real estate vacantlot market, or when every one in Detroit and Michigan is interested in getting into some new industries, or whatever the attraction is that draws money away from real estate first mortgages; during these periods it is nearly impossible to obtain first-mortgage money. Senator COUZENS. How much money has been drawn away from first mortgages to speculate in subdivision and vacant lots?

Mr. BRADWAY. Do you mean this last year or two?

Senator COUZENS. Well, any time you choose to determine?

Mr. BRADWAY. Well, I think, Senator, that you probably remember that we have had three or four periods in Detroit when we had a very heavy speculation in vacant lots.

Senator COUZENS. Yes.

Mr. BRADWAY. And during those periods every one was finding all the money he could to buy vacant property. And during those very periods first-mortgage money was very difficult to obtain in Detroit.

Senator COUZENS. How many acres of subdivisions are now lying around the city of Detroit unused?

Mr. BRADWAY. A great many. I think for your sake and mine I had better not say.

Senator COUZENS. You do not need to refrain on account of my sake.

Mr. BRADWAY. Well, both coming from that community.
Senator CoUZENS. You could tell the truth.

Mr. BRADWAY. Well, frankly, I do not know.

Senator WATSON. We have gone from vacant lots to vacant stomachs now.

Mr. BRADWAY. Yes. When this bill first came to our attention we were impressed that it was more or less an emergency bill and that bankers probably would not take advantage of it except on occasions of distress, and if they took advantage of it on occasions of distress the money they received from the Federal Home Loan Bank would not get back into mortgages and in that way probably would not help the first-mortgage money market. But after a thorough investigation and after personally talking to several of our leading bankers in the State of Michigan, and making other investigations, I find that almost universally they would make use of this bill if it was in existence during all periods, whether periods of distress or other periods, for the purpose of better serving the needs of their community.

We have a situation, I think, all over the United States-I know we have it in Detroit-of this kind. Thousands of people who have had mortgages made for three to five years have had those mortgages come due during the last year or two, with absolutely no place to refinance. A great many of them have had their places foreclosed and taken away from them. But probably they are in the minority. But there are a number of people who have received letters from the financial institutions, people who are not used to business, which letters have absolutely taken the heart out of them.

People come into my office repeatedly and show me a letter from some financial institution stating that if they do not pay the amortization payment immediately the property is going to be foreclosed. Instead of going down there and talking to the institution they come in and they say "What can you get me for my equity?" They will take almost anything.

Now, these people are not going to hereafter sign three and five year mortgages, as I see it. The mortgages that they sign on their homes are going to be for a long period of time. If they are for a long period of time and the banks take them it is going to make the banks all the less liquid as far as their mortgage holdings are concerned, and if they are going to make them less liquid they are less likely to take first mortgages.

I have talked with three or four bankers who are out in the State, running fairly large banks, who said that hereafter they will never loan up to the legal limit allowed in the State of Michigan on first mortgages because of the experiences they have had during the last year or so fearing every day they are going to have to close, and they blame it all on their holdings of first mortgages which they were unable to discount until the Reconstruction Finance Corporation was recently formed.

Several of these bankers stated that if the Federal Farm Loan bill was in effect they would feel willing to loan up to the legal limit. And they all agreed with me that mortgages have got to be made on homes for a longer period of time.

Senator WATSON. What is the average length of a home mortgage now in Detroit?

Mr. BRADWAY. Three to five years. The banks and trust companies have almost universally stuck to three years, and only during the last few years have they gone to five.

Senator WATSON. What would be a rational limit?

Mr. BRADWAY. What is that, Senator?

Senator WATSON. What would be a rational limit of time? Eight years? Ten years?

Mr. BRADWAY. Well, I think that home mortgages have got to be made for a longer period than eight years. Some of the insurance companies, the Metropolitan, particularly, are making loans for 15 years, and all the way from 8 to 15 years.

Senator WATSON. Amortized loans?

Mr. BRADWAY. Amortized, certainly. That is the new loan that is coming in without any doubt. And I think it a very good thing if it does.

Senator WATSON. Is there overbuilding in homes now in Detroit? Mr. BRADWAY. There is not overbuilding in Detroit.

Senator WATSON. There is not?

Mr. BRADWAY. The vacancy in single houses in Detroit is 3.8 per cent as of December, 1931. In my opinion that is a healthy condition. That is less than 4 houses out of 100 small houses that are vacant in Detroit. We have a surplus in apartments, of course, which is abnormal, but it must be taken into consideration that the population of Detroit has continued to increase every year. According to the school census there were 4,700 more pupils in the schools in Detroit in December, 1931, than in December, 1930.

The vacancy we have in apartments is accounted for by the doubling-up process, and if this undoubling could start due to the beginning of employment we would not have any surplus in Detroit of habitable quarters, even in apartments.

Senator WATSON. Do you think these bonds would find a ready sale?

Mr. BRADWAY. I think they would find a very ready sale.
Senator WATSON. You think they would?

Mr. BRADWAY. Yes.

I have been giving thought and attention to the non-liquidity of mortgages almost from the time I started in business. I was brought up on a belief that a first mortgage was the very last word in a secure investment, and when I started in the real estate and building business I had not been in it long before I found that people would come to me with first mortgages, unable to sell them anywhere, and they no longer thought they were good investments. I have been giving thought to some method of liquifying good first mortgages, making them more negotiable. With all this conversation about first mortgages being good security-and almost no one refutes that that is true-something should be done to make them more negotiable. I think the Government should do somethingapparently nobody else is able to-to liquify mortgages and make them more negotiable.

While this possibly will not go so very far in that direction because of the comparatively small amount of mortgages that will get into this bank compared with all of the mortgages that are in existence, it will do considerable, and will provide a place for people to invest money who want real-estate mortgages and who do not want to look after the title, abstract, and insurance and all that goes with it.

Senator COUZENS. At that point, would you mind telling me how many mortgages you think would come into these banks? You made the statement awhile ago that you thought under this bill there would not be many mortgages go into these banks, and I am wondering just how these banks are going to be maintained, 12 of them throughout the Nation, with the usual overhead that goes with banking, if there is not sufficient business.

Mr. BRADWAY. You either misunderstood me, Senator, or I misspoke. I was talking about the local banks. That the local banks are not going to take these first mortgages because of the long periods for which they will have to be made, unless they will have a place to rediscount them such as this. As far as the number of mortgages that the Federal Home Loan Bank is able to obtain, of course, we would all have to guess on that. But from the conversations I have had with bankers in Michigan, every one of them will make use of this if there was a demand for mortgage money in their local community. The banks in Detroit have stated that they would make use of this Federal Home Loan Bank if there was a demand from their customers that they could not otherwise meet.

Senator COUZENS. You know of the plan in Detroit of pooling these bonds, putting them under a trusteeship and issuing participation certificates, do you not?

Mr. BRADWAY. Yes.

Senator COUZENS. That has been very popular in years gone by in Detroit.