Mr. Luce, a member of the House Committee on Banking and Currency, which will hold hearings on the measure, has asked this department to ascertain the probable effects of the system upon the operations of local mortgage-lending institutions. Accordingly, a questionnaire is attached which I hope you may fill in and return.

A full response from local institutions that make mortgages on homes should throw much light on the probable usefulness of the proposed measure. Thanking you for your cooperation in this matter, I am,

Very sincerely yours,

R. P. LAMONT, Secretary of Commerce.

DEPARTMENT OF COMMERCE, Washington, D. C., January 15, 1932.

When you have replied to the following questions, please mail to the Secretary of Commerce, Washington, D. C., in the attached addressed envelope, which requires no postage.

1. Would the facilities provided by the proposed home loan discount banks for borrowing on your home mortgages add desirable flexibility and security to the conduct of your institution?

2. Would operation of the discount banks increase the amount of credit now available for legitimate use in your community?

3. Is there a demonstrable need for actual home construction, either new houses or remodeling work, that could be undertaken in your community if credit facilities were widened at the present time?

If so, could you estimate the probable extent of such contemplated construction?

4. Would the facilities afforded by the proposed discount banks help to relieve the dangers of foreclosures on urban homes and farms?

5. If the proposed system had been in operation, to what extent do you think foreclosures, local bank failures, etc., could have been avoided during the past two years?

6. It would be helpful in interpreting the results of this questionnaire if you furnish the following information for your institution:

Number of home mortgages

Outstanding principal amount of mortgages now held
Total assets

7. General comments:

Type of institution (check one): (1) National bank -; (2) building and loan, savings and loan, homestead association, or cooperative bank, etc. -; (3) mutual savings bank -; (4) stock savings bank -; (5) State bank (6) loan and trust company —; (7)

Signed

Title

Name of institution

Street

-

-

-;

City

State

Now, the original bill, as I was informed since I have been on this investigation, was Senate bill 35, introduced by yourself, Senator. Senator WATSON. That was the original bill, but that has been since modified.

Mr. DEPPE. That is what I mean. Now, in conversation with people, some of them do not get the import of this bill 2959. I think that is the reason that you find some differences that have been noted, and I am fearful that some of the opinions that have been expressed by different persons are based upon the President's statement sent with that letter, rather than on the bill.

One of the leading examples is that of the Ohio Bankers Association. They had approved-I am not speaking for the Ohio Bankers Association, but I am bringing this up to prove the point I am making—

Senator WATSON. Yes; I understand.

Mr. DEPPE. The Ohio Bankers Association had approved the general plan, as given in certain testimony, and wired the President and wired different Senators.. When this bill 2959 was brought to their attention they withdrew from that position. Not, however, withdrawing from approving a bill in principle of this character, but objecting to this bill as worded now and which we are considering. With that preliminary statement I think I can proceed with the few remarks I want to make.

Senator WATSON. Yes.

Mr. DEPPE. The objections to this bill from a banking standpoint have been noted. And in my remarks I might refer to that from time to time.

There are one or two things that I would like to bring especially to the attention of the committee. We have heard so much about foreclosures, and I think that in the running comment that has been made all of us do not get quite a clear conception of this subject of foreclosures.

Now I can speak advisedly and not from theory but from actual experience. Our bank has approximately $35,000,000 savings deposits. We have between $12,000,000 and $13,000,000 mortgages. A great percentage of those are preferentially home mortgages, so that in any statement that I make I am speaking as one from actual experience rather than in theory.

Senator WATSON. Made direct by you to the home builders?
Mr. DEPPE. Yes.

Senator WATSON. Not through the building and loan?

Mr. DEPPE. No. I am just going to define how we make those loans.

Senator WATSON. All right.

Mr. DEPPE. The majority of the testimony here seems to be on the principle or theory that building and loan associations are taking care of the home-building industry in America. We overlook entirely here I do not think the figures have been presented-the mutual savings banks of the country. They have something over $5,800,000,000 of mortgages, mostly home mortgages. That is their business in the local communities. They are mutual concerns absolutely. The depositors get all the profit. There are no stockholders.

The other banks as reported on mortgages-it is pretty hard to bring to a hearing the exact data, not being uniformly reported as to the total amount of these mortgages-the last figures that I have seen show the mortgages in other banks-that is, trust companies, national banks, and others reported through the various banking departments in their annual statements-run, I think, $4.700.000,000. Probably that is the report a year ago or a little over.

That puts the known mortgages of banks somewhere between $10,000,000,000 and $11,000,000,000. A very good percentage of those are based on home loans.

With the insurance companies the reports show figures something over seven billion.

The building associations on the statements that they have filed here show a little less than eight billion. Although in the testi

mony most of them talk about nine billion. But that does not make any material difference for the point we are making.

Objection has been urged that the short-term loan is not to be considered. They are talking about long-term loans. I want to show first how we make our loans, and then, secondly, the foreclosures, so I am going to take actual figures from Hamilton County, Cincinnati, where I am located, taken right out of the sheriff's office, so there can not be any denial of the figures.

We make mortgages just like any other institution. There is no one special way to make a mortgage. We take the application direct from the borrower. We have our own appraisers. And some institutions are probably a little more liberal than others. But our banking law in Ohio prohibits us from lending more than 60 per cent of our appraisal.

Now, the building associations in our State have no limit as to the amount they can loan. The State law in regulating those associations does not prescribe any limits. The limits are made by the associations themselves through their by-laws. A very liberal law. The law has been in existence-I don't know how many years. We will not go extensively into that. I am just giving you the facts as we are operating to-day.

Now we have those applications. And when our appraisers come in with the appraisement we do not loan over 60 per cent. We make mortgages three to five years. We would make a year mortgage. Now, that does not mean by making those terms that the mortgage is paid at that maturity. Every loan that we make is amortized. There may be exceptions-very few. And we have established for years an amortization payment of 8 per cent a year; 2 per cent a quarter. That amortization is paid with the interest, which keeps an even keel.

I can confirm from actual experience some of the statements of the insurance represeentative. Last year the payments that we received the compulsory payments and the voluntary paymentsthey have a right in certain instances to pay more were more than we loaned during the year. That has been the condition for several years. So our mortgages have not increased very much.

Now, with this tremendous amount of money that the banks have in this mortgage loan field, home owners, some home owners, at least I do not want to use the word "competitor "—would rather deal with the bank than with the other agencies. Because our operation is simple. We charge them no commission. The only thing they pay is the fee of the title company, and the fee for registration and filing of the mortgage. We find that we get along very well. If a man has paid down his loan pretty well and is hard up, and can not pay his amortization, why, we do what any good business man would do, continue the loan. "If you have a debtor and he owes you $1,000 and he can only pay you $500, you do not take a sledge hammer and knock him down; you go along with him. That is what we are doing.

Senator WATSON. How many foreclosures do you have?

Mr. DEPPE. That is just the point. I have the figures and I want to give them to you, right here. Now this statement is for 26 weeks, from August 7, 1931 to January 29, 1932. If I had had

any more time, I would have gotten it for a year; I would have gone back two or three years; but I thought this would give you the drift of the operation.

The total foreclosures in Hamilton County during that period of 26 weeks, that is half a year, was $2,237,373.31.

Senator WATSON. Do you know how many individual homes that would be? Are you talking how about homes, or of all foreclosures? Mr. DEPPE. I have a certain point to make here.

Senator WATSON. There is no use of making a point unless I know what the point is. Does that mean all foreclosures in Hamilton County of every kind, every character?

Mr. DEPPE. Yes; 307 foreclosures. That was all there were in Hamilton County.

Now, 36 of those foreclosures were held by the banks as being named in the mortgage. But that does not mean that all those foreclosures are being brought by the first-mortgage holders. Someone has a minor lien, a second or a third mortgage, and forecloses, and we have to go through with it. Those 36 foreclosures amounted to $587,853. I will not give the cents.

The building associations had 243 foreclosures, aggregating $1,404,000.

Senator WATSON. Do you know how many loans the building and loan associations had?

Mr. DEPPE. No; I do not. I can not give you those figures. Mr. Cellarius and other men here can give them to you.

All the others were 28 in number, amounting to $245,000.
That made the total 307, amounting to $2,237,000.

Now, in 171 of the above foreclosures-of course I haven't the time to go in and show whether that is residence property or any other property; I am trying to give you the history as we have it. Senator WATSON. Yes.

Mr. DEPPE. In 171 of the above foreclosures, 221 minor liens were involved, in the amount of $518,000. So back of the $2,237,000 first mortgages there was $518,000 of secondary liens, or third liens or fourth.

Now, as to the new mortgages filed in Hamilton County in the last half of 1931. You have heard a good deal said here about no money for mortgages. In the last half of 1931 there were 3,556 new mortgages recorded in Hamilton County, Ohio.

The banks recorded 456, of an aggregate of $4,777,000.

The building associations recorded 2,860 mortgages, aggregating $13.827,000.

Insurance companies recorded 240 mortgages, aggregating $3,491,000.

That makes a total of $22,000,000 of recorded mortgages the last six months of 1931, in Hamilton County, Ohio.

Senator WATSON. How did that compare with the previous six months?

Mr. DEPPE. I did not get that, Senator.

Senator WATSON. All right.

Mr. DEPPE. I would be glad to get those figures and send them in, but when you are called suddenly you do not have time to get everything. But it shows the trend.

Senator WATSON. Yes.

1

Mr. DEPPE. Now, there are not any foreclosures except when a man gets in bad and can not pay. Just exactly like a lot of commercial concerns have gone out of business through failures. Too little capital. Now, when a home owner has too little capital he must stop. You can not run along. It is good for the economic situation to have some one that has the income that can take up and pay that mortgage. So that with a bill of this character, whether it is this bill or another, no matter how perfect you get the bill, you can never stop foreclosures. The people themselves can stop that. It is due to overlending. And right there I want to say that our banking law, as I stated before, restricts us to 60 per cent of the appraisal. Under our experience we feel that is about right.

Senator WATSON. Well, it would be due to more causes than that, would it not? Suppose all the people that borrow lose their jobs?

Mr. DEPPE. I am going to touch on another phase of that in just a moment. Now, at the present time we feel that on account of the depression we should sometimes drop to 50 per cent of the appraisal. We will make an exception and take new mortgages at 60 per cent, but we are taking the situation as we find it. And sometimes now, as stated, we are not lending over 50 per cent. So when you get up to 75 or 80 per cent mortgages I am just fearful that we will have trouble.

Senator TOWNSEND. Have you plenty of funds to loan on mortgages now?

Mr. DEPPE. We have restricted credit right now for commercial loans, and all loans are restricted. The home-loan people or the mortgage people are not the only ones that are restricted in credit. There is a restricted credit all over the country commercially. It is not only the home-loan people or the mortgage people; the railroads are in it, and others are operating in the red. You can not find an industry that can go out and get all the money they want at this time with the depressed condition. Now that is the situation, the general condition in the country.

Senator WATSON. Does a trust company in Ohio do a general banking business?

Mr. DEPPE. Yes.

Senator WATSON. Just the same as a bank?

Mr. DEPPE. Yes. Now, I have not included in this table I gave you on mortgages the amounts held in the trust departments. This gentleman from Pennsylvania touched on that. Those are figures that you can not get publicly, because the trust departments do not publish the holdings there.

Up to this time in Ohio we have not taken very many mortgages in the trust department on account of the taxation laws. That has been changed now, and with our new taxation system there probablv will be a great many mortgages go in there.

Now, about the loans. We have these applications. There are applications, many of them. And some are turned down. Many are turned down even in normal times. Why? In normal times the only time we ever lose a mortgage when it is presented to us is when a man wants to borrow more money than we can lend. Now, where they get it I do not know.

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