Senator WATSON. When did foreclosures begin? Mr. ERMON. In 1930 they began in volume. My association is typical of the rest of them, and I will tell you that in this way. We have $1,336,000 worth of loans to-day that are in absolute good order. In round figures, 66% per cent, or 70 per cent, are in good order. We have 15 per cent of them that are subject to foreclosure under a strict interpretation of our law. Many of those are three months behind, or four months behind, on the principal, but are uniformly behind. That is, they have not gone any further behind for the last year. We have taken over in property, since 1929, upwards of $300,000 worth of property. I should say 90 per cent of that property was turned over to us in satisfaction of our debt and the other 10 per cent we were forced to foreclose on at an expense. That property we have repaired and we have rented, and it is not an expense to us at the moment. I would like to have you gentlemen really understand our system. We have for fifty and odd years supplied, in practically every case, 80 per cent of the appraised value of the homes, and in many cases 90 per cent. Of that 90 per cent, for 141⁄2 years, during that period where we supplied 90 per cent, we had not one foreclosure in the Equitable Homestead Association. At a meeting in New Orleans recently of 300 homestead leaders, after having been supplied with a mimeographed copy of this bill, the assembly there unanimously indorsed this bill in toto. We had anticipated for some time something of this kind would eventuate, and in 1930 we passed a law in our legislature giving us affirmative authority to subscribe for stock in a Federal bank of this kind. We were influenced in that by the success that the New York Home Loan Bank held. In short, we realized that with a bank operated in the State meeting with the success that bank had had, with its limits clearly defined, if a national bank of that character were set up, the benefits would be untold. My profession is that of traffic specialist, and I know the benefits that come from the car-service rules, for example, which is the same thing as a national institution. Money, when needed in one part of the country and not needed in another, can be transferred immediately for the benefit of all, just as the car supply of the Nation is transferred to-day, to the great benefit of all. May I digress at this moment? I am sorry Senator Couzens is not here. I would like to have him here to hear this part of my testimony, as a traffic specialist. According to my memory, about 122 per cent of the traffic the rail carriers handle in this country is building materials. We will have to assume that half of that goes into homes, and the other half goes into buildings, factories, office buildings, and so forth. So that 614 per cent of the rail traffic of this Nation consists of materials which go into homes. Certainly such a substantial amount would start the wheels going, and would benefit our railroad friends, and ultimately make it possible for them to pay dividends and interest on their bonds. I estimate that the home building in this Nation represents in value $1,000,000,000. With 120,000,000 people and with an average of 4 to a family, that means that there are 30,000,000 homes. Therefore, if we assume that the homes average $3,000 to $3,500, we have $100,000,000,000 and odd. This is the first opportunity this Nation has had to do something for an industry of that kind. Just picture what is done by the Nation for the carriers. I do not have to go into details, except to tell you that the Interstate Commerce Commission, at a cost of $1,000,000, is maintained by this Government in order that the carriers may prosper, in order that they may charge reasonable rates, that they may not be at each other's throats, cutting rates, and consequently making it impossible to earn the interest on their bonds and dividends on their stock. Think what the Government does with commercial attachés all over this world, making it possible for commerce to move. There is just one thing that comes to my mind, that is maintained by the Government at tremendous cost. That is the test scale cars that go around the Nation testing track scales, in order to make certain that accurate weight is obtained, and that freight is paid on the accurate weight, in order that business may move along more smoothly. What we are asking for here is simply $500,000 for expenses, and the use of $150,000,000 for three or four years-an insignificant amount, when measured by even the Shipping Board expense. I could go along with a lot of other examples. It is useless to give cumulative evidence of that kind. Senator WATSON. Do you have any trouble getting money to finance your institution? Mr. ERMON. Yes, sir. I was just coming to that. Mr. ERMON. Under the Louisiana law, homestead associations can borrow up to 50 per cent of their mortgage paper. I took the trouble, before coming here, to go to the office of the State banking department, and the supervisor of building and loan associations. I went back for 12 years, and found that at no time had the building and loan associations owed, in the aggregate, more than 10 per cent of their mortgage paper. Those figures were taken at a time when the ratio was high, necessarily high. December 31 is the period when the building and loan associations owe the greatest amount of money. Immediately following the first of the year, the bills payable are reduced. I believe that the average that the building and loan associations would owe in our State would certainly not exceed 7 per cent, taking every month in the year. The reason we have not owed more money is on account of the fact that we are not able to get any long-time loans. Our loans with the banks are all made on demand, and I would like to say here that the banks in many cases have urged the homestead associations to borrow money and to build homes in our community-especially the Whitney Bank. Our association owed the bank $6,000,000. We owed $2,000,000 to other individuals, in large part the officers and directors of our own association. We owe $8,000,000. Were it possible for us to get long-time accommodations, such as proposed in this bill, we certainly would have little difficulty in financing all the loans that we would reasonably want to get. If I were testifying before the Interstate Commerce Commission I would say to you gentlemen that I adopt as my own testimony the testimony of the gentleman who was the managing editor of the Ladies' Home Journal, who testified yesterday. I deny that there is an overbuilding of homes of the character that white people should live in, but even if that were so, the urge for a woman to move into her own home is still there, and while we have had the doubling up of families, down in our section we have but little separation. When there is a marriage they usually add on another room, or something of that sort. We do not have separations, such as they do in the North here. Our folks, especially in the Creole sections, usually hang onto mama and papa for a long time, whenever that is possible, by the addition of another room. But the urge for her own home is in the heart of every woman, be she white or black, Democrat or Republican, and when we get to the point where we have taken care of the situation as we now see it, we are going to have a still further demand for modern homes. Personally, I would not encourage the building of homes at this time, but rather, my association and the other associations at New Orleans, urge the remodeling and renovating of our older homesmodernizing, as we call it-putting in baths and other conveniences that did not exist in the homes that were built 40 or 50 years ago. Senator WATSON. Do you think, if this becomes a permanent institution, that 12 banks can be made to pay in this line alone, after all these other financial arrangements have been enacted into law that we have in contemplation, along with those that have already been provided for? Mr. ERMON. Absolutely. Let us take New Orleans alone. We owe $8,000,000 to-day; $5,000,000 is sufficient to run them under this bill. We guarantee that we will owe more than $8,000,000, especially if the lines of our bank are made coterminus with the farm loan banks, and we have Mississippi and Alabama in with us. I might say something on that point. I am glad you mentioned it. I want to urge you gentlemen not to split a State, because that is an awkward situation, especially in view of the different laws governing building and loan associations in different States. would not further complicate the matter by having half of a State under one jurisdiction and the other half under another jurisdiction. In the very nature of things, you would want to bring about uniformity in the laws first, in those particular districts. Ultimately, it is our hope that we will get somewhere near uniformity, although I never expect to see uniformity in anything. I I do not recall anything that I have omitted, except that I want to emphasize the fact that for 141⁄2 years, at a time when these mutual companies and associations in our State were lending up to 90 per cent, my company did not have a foreclosure, and foreclosures were as scarce as hen's teeth in the whole State of Louisiana. The insurance companies do not operate very extensively in dwellings in New Orleans, because they have so many restrictions thrown around the loans that it is utterly out of the question for a man to acquire a home. For instance, they will not lend over 50 per cent. They will lend only in certain new sections. They absolutely refuse to lend in the so-called French quarter, and a man would have a hard time getting a home if he expected to rely upon the insurance companies. These insurance companies have plenty of money available for mortgages, without takers, when they loan not over 50 per cent, and when the man has to go to some shark to get a second mortgage to take up the difference. Senator TOWNSEND. What effect, if any, will this law, when carried into effect, have on commercial banking, permanently? Mr. ERMON. In the case of New Orleans alone, it will release $8,000,000 instantly for banking pursuits, to the banks, which should be commercial banks. They should not be permitted to invade our field. Some banks down our way have actually gone so far as to go into the the ticket brokerage business, buying ocean tickets from steamship companies. They have gone into the insurance business, and have got their fingers burned. Real-estate loans which they have taken are the source of a lot of trouble to-day, because we can not finance them. Senator BULKLEY. Is your business entirely inside the city of New Orleans? Mr. ERMON. And environs. We go to Jefferson Parish and St. Bernard Parish. My particular homestead association is located in New Orleans, but under the law we can go into the adjoining parishes. Senator BULKLEY. Your experience with lending a large percentage of the appraised value is particularly good, is it not? Mr. ERMON. Yes, sir; and it always will be that way with mutual companies. Senator BULKLEY. Is that due to any peculiar condition in New Orleans, or do you attribute it to the fact that it is a mutual company? Mr. ERMON. I think it is entirely because they are mutual companies, and very well operated. I believe we ought to have a longer period of time for amortization, and we probably will have. I think 15 years, Senator, will permit, in actual practice, a payment no greater than exists to-day, but the amount will be sufficient to take care of the taxes, insurance, and possible unemployment. Senator WATSON. How often ought there to be a reappraisal? Mr. ERMON. We reappraise, after a fashion, every year. We reappraise critically when the loan gets behind. As long as the loan is up to date, it is not a source of trouble, of course, but when we are going on other appraisements, if we have a property in that particular neighborhood, we invariably look at all our property in that neighborhood. We suggest to the owners that they should paint their houses. In Shreveport, they are quite critical. That is one of the best associations, the largest in the South. It is run by a man who just lives and dies with the homestead and building and loan associations. He is the second vice president of the National League, and he makes it his personal business. I think perhaps he inspects them twice a year. I am sure he does once a year. There is no fixed rule for that. Each association followed its own practice. Senator WATSON. If there are no further questions, we are very much obliged to you. STATEMENT OF JOSEPH H. REASS, SECRETARY WHEELING (W. VA.) SAVINGS AND LOAN ASSOCIATION Senator WATSON. What is your business? Mr. REASS. I am secretary of the Wheeling Savings and Loan Association, which is a building and loan association. We call them savings and loan associations. Senator WATSON. How big is it? Senator WATSON. How many homes are you building? Mr. REASS. We have over 400 loans. Senator WATSON. Have you studied this bill? Mr. REASS. Yes, sir. Senator WATSON. Are you in favor of it? Mr. REASS. Yes, sir. I will say every association in the State of West Virginia is. Senator WATSON. Without change? Mr. REASS. Yes, sir. We think it is a very good piece of work. Senator WATSON. Do you have any trouble in financing yourselves? Mr. REASS. We have always had that trouble. Senator WATSON. How old is your association? Mr. REASS. Ten years. On behalf of the West Virginia association, we have gone East any number of times to the life insurance companies and mortgage companies hunting funds. We never were able to get enough to satisfy the demand. As an example of the restrictions, particularly of the life insurance companies, let us take the city of Wheeling. We have the seventh ward, which is an island. In 1884 there was a flood, and in 1913 there was a flood. It comes under the ban of the life insurance companies, and some 10,000 homes are out of the running. The same thing occurs in South Wheeling, but there has never been a home washed out in that territory. All over the State there is some excuse along that line. Senator WATSON. Have you had many defaults? Mr. REASS. We have 120 delinquents at the present time that we are carrying. Senator WATSON. How do you carry them? Mr. REASS. Either refinance them, or reduce the payment, or get them to pay the interest-there are a hundred and one different methods. We try to help the borrower. Senator WATSON. What do you do with property when you foreclose? Mr. REASS. We have to take it back at the present time, and that is a thing we do not want to do. Senator WATSON. Then what do you do with it after you get it? Mr. REASS. Yes, sir. Senator WATSON. Are you carrying many now in your section? Mr. REASS. About half a dozen. Senator WATSON. Is there anything you want to say particularly about this, in addition to what you have said? Mr. REASS. In West Virginia, we have never had second-mortgage money. We have a usury law in West Virginia, that limits the rate |