Mr. HUNT. There has been none.

Senator WATSON. I mean before this, when you rediscounted your paper?

Mr. HUNT. We never have rediscounted any paper prior to now. I have borrowed some money in Omaha through personal friends. Senator WATSON. What is the difference between your condition now, then, and your condition three years ago?

Mr. HUNT. So far as we are concerned, there is practically no difference. We have always, ever since we have been organized, had a demand for reasonable loans on home properties that we have been unable to meet within our territory.

Senator WATSON. Do you think the provisions of this bill, if enacted into law, would enable you to meet a situation of that character?

Senator COUZENS. Do you want to build some more homes in Rapid City right now?

Mr. HUNT. Not necessarily right now, but we would like to be able to when there is a demand for them. We are not overbuilt, how

ever.

Senator TOWNSEND. You favor the bill as to a permanent organization?

Mr. HUNT. Yes, sir; certainly. The very nature of our loans would almost make it necessary for it to be somewhat permanent. Senator COUZENS. Would you you subscribe to the capital stock if this were privately organized?

Mr. HUNT. If it were privately organized?

Senator CouZENS. Yes.

Mr. HUNT. Not as quickly as I would through this medium.
Senator COUZENS. I thought not.

Senator WATSON. But you think the Government ought to be paid its money, do you not? Have it returned and paid back? Mr. HUNT. Certainly.

Senator WATSON. Do you think it ought to have any interest on the money?

Mr. HUNT. Under the conditions I would say no. Others have been financed without a return of interest.

Senator CouZENS. What others?

Mr. HUNT. That is my understanding, that there have been instances of that kind.

Senator TOWNSEND. By the Government?

Mr. HUNT. Yes.

Senator WATSON. Do you know what they are, Mr. Hunt?
Mr. HUNT. No; I am not in a position to state that.

Senator WATSON. You do not think, then, that interest ought to be paid on the Government's money before dividends are paid to the private properties?

Mr. HUNT. NO; I do not. One reason for that would be, in my opinion, that if that should be done, and the Government is finally paid out, as the plan of the bill is, that the present stockholders in the mutual associations-and they are the ones that would most take advantage of this-would be somewhat penalized as compared

with the stockholders that would be members after the Government was paid out. We will have used present holders' funds, in other words, to pay the indebtedness.

Senator WATSON. How many building and loan associations are there in South Dakota altogether?

Mr. HUNT. I believe 24 at the present time.

Senator WATSON. What is their general condition?

Mr. Hunt. Generally good.

Senator WATSON. It is good now?

Mr. HUNT. Yes, sir. With the exception that they do not have an opportunity to discount any mortgages, because you see many of them are not in a position to meet the reasonable community demands.

Senator WATSON. Are there many homes being built now in your country?

Mr. HUNT. Not very many.

Senator WATSON. Do you think there would be more homes under the provisions of this bill?

Mr. HUNT. Not necessarily more, except as a reasonable demand. I do not think it would create an inflation at all.

Senator COUZENS. Do you believe in Federal aid for the unemployed?

Mr. HUNT. Through what medium do you mean, Senator? Senator COUZENS. Well, through some such medium as you are asking us now. You are asking us for Federal aid in this particular proposition. Do you believe in Federal aid for the unemployed? Mr. HUNT. Not in the form of a dole. I would prefer it in the form of public improvement or road building. I am in favor of it under present conditions. Otherwise we have to feed them, anyway, in the counties, and so forth.

Senator WATSON. Do you have any other questions, Senator Couzens?

Senator COUZENS. No.

Senator WATSON. Do you have any further remarks you want to make, Mr. Hunt?

Mr. HUNT. No.

Senator WATSON. All right, that is all, Mr. Hunt. We will next hear Mr. C. A. Sterling.

STATEMENT OF C. A. STERLING, SECRETARY BUILDING AND LOAN ASSOCIATION, TOPEKA, KANS.

Senator WATSON. Will you state your name?

Mr. STERLING. C. A. Sterling.

Senator WATSON. Mr. Sterling, where do you live?

Mr. STERLING. Topeka, Kans.

Senator WATSON. What is your business?

Mr. STERLING. Building and loan.

Senator WATSON. How long have you been in the business?

Mr. STERLING. Twelve years.

Senator WATSON. What is your relation to the building and loan association?

Mr. STERLING. I am secretary.

Senator WATSON. What is the size of your association?

Mr. STERLING. Eleven and one-half million dollars.
Senator WATSON. How old is it?

Mr. STERLING. Thirty-seven years old.

Senator WATSON. What is its present financial condition with reference to mortgages on homes and defaults where they are not capable of paying their monthly payments?

Mr. STERLING. Our survey on December 30 showed that about 27 per cent were delinquent three months or more.

Senator WATSON. Twenty-seven per cent of all your borrowers were delinquent three months or more?

Mr. STERLING. Yes, sir.

Senator WATSON. When did that condition begin?

Mr. STERLING. About a year and a half ago.

Senator WATSON. What was the cause of it, Mr. Sterling?

Mr. STERLING. I would say unemployment principally. We have large shops. The Santa Fe Railway has its general offices there, and large shops, and they began to lay their people off about that time. Senator WATSON. And those men had been borrowers in your association to build homes?

Mr. STERLING. Yes, sir.

Senator WATSON. Had there been any large corporations building many homes, or were these individual home builders?

Mr. STERLING. Principally individual homes. Very few investment companies building any homes, and none on a large scale. Senator WATSON. You say 27 per cent?

Mr. STERLING. Yes, sir.

Senator WATSON. Twenty-seven per cent were behind in their payments three months or more?

Mr. STERLING. Yes, sir.

Senator WATSON. What do you do with them?

Mr. STERLING. We just do all sorts of things. We have to carry some of them along. We carry them just as long as we can. When our appraisal of the property shows that they can not be carried any longer there is only thing to do, and that is to take the property. Senator WATSON. How many foreclosures have you had? Mr. STERLING. We had 34 in 1931.

Senator TOWNSEND. What per cent is that of your total?

Mr. STERLING. Well, that is a very small per cent. We have about 9,000 loans.

Senator WATSON. Is that a higher per cent than usual?

Mr. STERLING. Yes, sir.

Senator WATSON. What is the average loan on a home in your association?

Mr. STERLING. Well, they run close to $3,000, I think.

Senator COUZENS. Are there any second-mortgage loans in that 27 per cent?

Mr. STERLING. None through our association.

Senator COUZENS. I am not asking that.

Mr. STERLING. Individuals have second mortgages on a great many of them.

Senator COUZENS. What percentage of the 27 per cent have a second mortgage on them?

Mr. STERLING. A very high per cent.

Senator COUZENS. Yes. This bill does not help them, does it?

Mr. STERLING. It would help in this way, that our association, where its mortgages are paid down at this time would be able to refinance and take up these second mortgages in a good many cases. Senator COUZENS. What percentage of the value are these second mortgages?

Mr. STERLING. Oh, I would say 7 or 8 per cent.

Senator COUZENS. You mean on a $10,000 home, for example, $700 or $800 would be in second mortgage?

Mr. STERLING. I would think so.

Senator COUZENS. And what rates are they having to pay for these second-mortgage loans?

Mr. STERLING. They pay as high as 812 per cent; as low as 6.
Senator COUZENS. And who do they borrow them from?

Mr. STERLING. Usually from the investment company that built the house, or from the individual who built the house and sold it. Senator WATSON. Eight and one-half per cent?

I would say the average

Mr. STERLING. As high as 82 per cent. I would being about 7 per cent.

Senator COUZENS. Well, before this second mortgage is sold by the builder—and I assume it has been sold by the builder, has it not? Mr. STERLING. Yes, sir.

Senator CoUZENS. Does he not discount it before it is sold to the investor? Does he not have to discount it?

Mr. STERLING. Yes; he does.

Senator CoUZENS. How much does he have to discount it?

Mr. STERLING. Usually about 20 per cent where he is able to sell it. Senator COUZENS. So that that 20 per cent discount must be added to the 82 per cent. So that creates an intolerable situation which I can not conceive of this bill particularly helping. I mean, if you can suggest an amendment whereby it will help that situation, I will be glad to have you do it.

Senator WATSON. What is your opinion about that?

Mr. STERLING. I think you will find that situation pretty general all over the country.

Senator COUZENS. I think that is true. And that is the reason I think the bill would not help it.

Mr. STERLING. I think there are too many of those second mortgages. Entirely too many of them. Too much of a burden on the home owner.

Senator COUZENS. Yes. From your experience, how much would you say a man ought to have before he starts to build a home?

Mr. STERLING. Well, he ought to have pretty close to one-third of its cost. The general trouble is that the man who has a fair amount to pay down is too ambitious. He wants too much of a house. More house than he has the ability to take care of.

Senator COUZENS. And you first mortgage lenders do not try to keep him down to something within reason, I suppose?

Mr. STERLING. We surely do.

Senator COUZENS. One of the previous witnesses suggested that we ought to have a board up here in Washington to do that for him. Do you believe that that would be a good practice?

Mr. STERLING. I do not see how it would be possible.
Senator WATSON. You are for this bill, are you?
Mr. STERLING. Yes, sir.

Senator WATSON. You have studied it?

Mr. STERLING. I have.

Senator WATSON. Have you had meetings of building and loan men in Kansas to discuss it?

Mr. STERLING. We have studied it in our own city. We have six building and loan associations there, and we have studied it most carefully.

Senator TowNSEND. You are united for it, are you?

Mr. STERLING. Yes. We have no opposition to it in our town. Senator COUZENS. Would you invest your capital in this enterprise if it were a private undertaking?

Mr. STERLING. I would.

Senator WATSON. What is the term of your amortized mortgage in the West?

Mr. STERLING. Do you mean the length of time?

Senator WATSON. Yes.

Mr. STERLING. Most of our mortgages are made on 10 or 12 year basis. We have the plan anywhere from 1 to 12 years. The majority run from 10 to 12 years.

Senator COUZENS. Do you loan around 50 per cent of the value? Mr. STERLING. We go higher than that. We go as high as 65 per cent.

Senator COUZENS. Those mortgages could not be discounted here, could they?

Mr. STERLING. Not when they are first made.

Senator CoUZENS. No.

Mr. STERLING. They could when they are paid down some.
Senator WATSON. When they are paid down.

Mr. STERLING. An amortized mortgage pays down quickly to the point where it could be handled.

Senator WATSON. Have you anything further you would like to say to the committee, Mr. Sterling?

Mr. STERLING. No; that is all.

Senator WATSON. That is all, then. Mr. Monks.

STATEMENT OF THOMAS E. MONKS, CLEVELAND, OHIO, VICE PRESIDENT GUARDIAN TRUST CO., REPRESENTING THE OHIO BANKERS' ASSOCIATION

Senator WATSON. State your name to the committee, Mr. Monks.
Mr. MONKS. Thomas E. Monks.

Senator WATSON. Where do you live?
Mr. MONKS. Cleveland, Ohio.

Senator WATSON. What is your business?

Mr. MONKS. I am vice president of the Guardian Trust Co. I am here to-day representing the Ohio Bankers' Association.

Senator WATSON. In the Bankers' Association have you had meetings and discussed this bill?

Mr. MONKS. Yes, sir.

Senator WATSON. How often? More than once?

Mr. MONKS. They have had about three meetings on this, Sena

tor.

Senator WATSON. Where have those meetings been held, Mr. Monks?