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ance Co. on a basis of 6 per cent for the first five years, 542 per cent for the next five years, and 5 per cent for the last five years. Because they were amortized mortgages I was able to obtain the interest at a lower rate; and further, Senator, for the reason that it was only a 50 per cent mortgage. I could have borrowed probably several million dollars in the aggregate more than I did on short-term loans at 6 per cent. But I do not think that is sound and safe business, and we do not operate our business upon that plan.

Senator COUZENS. What did the title company charge you for their service?

Mr. MacDOUGALL. Their charges are about 3 to 312 per cent, to include a mortgage tax which in the State of New York we are required to pay, of one-half of 1 per cent.

Senator COUZENS. So in addition to the interest rate they charged you 3 per cent?

Mr. MacDOUGALL. That is their charge. That represents the examination of title, which represents about 144 per cent. That is the charge of the Metropolitan Life-about 144 per cent. They have to examine the chain of title. We do not have in New York, like in some States, a State certificate of title, but they have to examine the chain of title, and that represents, usually, about 114 per cent.

Senator COUZENS. That does not mean that that percentage is each year?

Mr. MacDOUGALL. No. That represents the original cost, and that includes the building loan inspection, and includes all of the charges, the one-half of 1 per cent to the State for mortgage tax, and all that sort of thing.

Senator Watson. Have you any defaults in the payment of interest?

Mr. MacDOUGALL. On apartment houses, yes, sir. We have had to foreclose four or five million dollars worth in the last two years.

I stopped building operations last year. We had $2,000,000 in land sales. Conditions did not look good, so I canceled those, and canceled mortgage financing for about 800 homes-apartments.

Senator WATSON. Did you ever build through the building and loan association ?

Mr. MacDOUGALL. Only when I was first married I bought through the building and loan. I think that is how I became interested in the real estate business. I bought at that time through the building and loan, and I sold and made a profit, and bought another, and sold it and made a profit.

Senator COUZENS. I would like to ask the witness if he understands that this bill applies to these cooperative apartment houses ?

Mr. MacDOUGALL. No; I do not think it does.
Senator COUZENS. Certainly not.

Mr. MacDOUGALL. No; I understood the bill limited the discount to $15,000 in individual homes. But we financed and built some $20,000,000 worth of individual homes, and I have plans now that I have been working on for a year and a half, to build four or five hundred 1-family houses when mortgage financing becomes more favorable.

Senator COUZENS. At what price?

Mr. MacDOUGALL. I think the market for small houses to-day in New York City is to accommodate people that can buy homes costing from five thousand up to fifteen and twenty thousand dollars. I think $25,000 would be the maximum.

Senator COUZENS. So this bill might safely provide then for about $10,000 loans ?

Mr. MacDOUGALL. I do not think so. I think this bill as you have it drawn is merely a step in the right direction. You will learn, I think-the Congress of the United States will learn the requirements of the practical builders of this country, and you will have to amend it to meet their requirements, so that you will ultimately take in mortgages to accommodate people that have to live in apartment houses, as well as individual houses, because, Senator, there is a very great social and economic need in all of our large centers of population where people to-day have to live in apartment houses, for the practical reason that many men and women, wives and husbands, have to work to support their families and an apartment best suits their needs.

As a landlord to-day I am not only giving them housing accommodations in 2 or 3 room apartments—where they formerly lived in 5 and 6 or 7 room apartments—but we are taking care of their babies for them in organizations that we had to develop, because in many instances the wife has to go to work to make a living as well as her husband.

Does that answer your question, Senator?
Senator COUZENS. No. I was not discussing that question at all.
Mr. MacDoUGALL. I thought you were.

If I understood your question correctly it was whether or not you could afford to reduce the maximum in this bill to $10,000, and I said no, and my answer is on the record, for the reasons that I have stated.

Senator COUZENS. Well, you are talking about apartment houses.

Mr. MacDOUGALL. Yes. I think that ultimately your bill should and of necessity will provide for apartment-house loans. The economic necessity and the ultimate success of this legislation will ultimately require you to take in the needs of the apartment-house peop as well as the individual householders.

Senator COUZENS. That was not the question that I asked you, as to whether you should have apartment houses in this.

Mr. MACDOUGALL. You asked the question, sir, as I understood it, whether or not you could afford in this legislation to reduce the maximum to $10,000. Do I state that correctly?

Senator COUZENS. Yes.
Mr. MacDOUGALL. Well, now I have given my answer to it.
Senator COUZENS. No; I did not ask you for that answer.
Mr. MacDougall. I beg your pardon.

Senator COUZENS. I asked you whether or not for individual homes, which this bill contemplates

Mr. MacDougall. Yes.

Senator Couzens (continuing). Whether there was any reason why we could not reduce it to $10,000.

Mr. MacDOUGALL. I do not think so.
Senator COUZENS. Wait until I complete the question, please.
Mr. MacDOUGALL. Now, I will try to give you the correct answer.
Senator COUZENS. Will you wait until I get in the question ?
Mr. MacDOUGALL. Yes. I beg your pardon.

Senator COUZENS. I asked whether or not in this bill, contemplating, as it does, single homes

Mr. MacDougaLL. Yes.

Senator COUZENS (continuing). Whether or not there was any reason why this organization should lend money on a $30,000 home, or whether it could be reduced to a $20,000 home and a $10,000 loan made thereon!

Mr. MacDOUGALL. In answer to that question I would say, first, that a $15,000 loan might be the reasonable maximum amount for a $25,000 house. And there are representative people in the United States, professors and others, who might afford a $25,000 house. I think the legislation should contemplate the necessity of taking care of those people as well as people who can afford something a little less than that.

Senator Watson. What class of people have you been selling to, Mr. MacDougall ?

Mr. MacDOUGALL. Principally executives, Senator. Vice presidents of banks, doctors—a great many doctors.

Senator Watson. You have not been selling to laboring people?

Mr. MacDOUGALL. No, sir. We could not afford to manufacture the goods at a price that the laboring people could afford to buy prior to this date. The cost of construction now has gone down to à point where we are at about the cost of 1920, if the recommendations in our State, or our city, are accepted by the labor organizations, which is about a 25 per cent reduction in their scale.

Senator WATSON. All right, go on now.

Mr. MacDOUGALL. Mr. Chairman and Senators, it is my opinion that this Federal home loan bank bill is designed to meet the situation as presented by this present emergency, and that it will be a permanent help to real estate, saving and providing millions of homes for the citizens of the United States.

When the housing conference was called, general business conditions throughout the United States were apparently favorable for the encouragement of new homes and home ownership. During the past year, and before the conference committee reports were ready to submit to the conference, the general economic conditions changed and were recognized as so serious prior to December 1, 1931, that it was obvious something constructive was necessary.

President Hoover, before the conference reports were received, recommended to the Congress of the United States, as I recall, and to that conference this proposed Federal home loan bank bill.

President Hoover, if I might be allowed to make this reference to his remarks to that conference-I was a member of one of its committees, with Mr. Delano—said:

It was put forward in the confidence that through the creation of an institution of this character we could gradually work out the problem of systematically promoted home ownership on such terms of sound finance as people who have the home-owning aspiration deserve in our country.

It is estimated that in the United States there are $25,000,000,000 invested at this time, exclusive of farm loans, in mortgage loans on houses. It is estimated by the census report of the United

States in 1930 that there were 24,351,000 families in the United States who live in homes of their own. Of this number there are 4,059,593 families who live in homes that are mortgaged. There are 6,522,119 homes that are free of mortgage. The number of families renting is 12,943,598. Many of these that rent homes, in my opinion, are potential home buyers. It is to accommodate the need of this large part of the citizens of the United States that the Federal home loan bank bill was proposed.

Countless home purchases are doomed to failure from the start owing to insufficient equity and lack of sound advice to the prospective home purchaser regarding the financial obligations of his undertaking.

That is quoted, Senators, from Mr. Frederick H. Ecker's report to the housing conference, as chairman of the finance committee to this conference.

Much of the present trouble that has developed in regard to first mortgage loans is due to the demand of liquidity on the part of the banking and mortgage institutions at a time when the public is not prepared to do more than pay interest and taxes in the upkeep and maintenance of their property. I have a number of illustrations to demonstrate that point.

There is a vast sum of money which might be diverted to investment in securities founded upon first mortgages if some form of liquid investment could be devised which is well secured. This form of security is the one which the home loan banks are designed to provide.

Senator Watson. Let me ask you there, Mr. MacDougall. Can you get all the money you want to build houses ?

Mr. MacDougaLL. You can not get any, practically.
Senator Watson. You can not get any?

Mr. MacDOUGALL. You can not get any from the life insurance companies or banks of any kind, no. All they can do is to take care of refinancing people who are in distress. This is the most serious situation that has ever confronted the industry that has to do with building

Senator Watson. The building industry?

Mr. MacDougal. The building industry. If you take the record of the loss to the people of the United States in the sale of mortgage certificates and mortgage securities in the last 10 years, I think it is something like $800,000,000. I do not want to be quoted on that. But it is a figure that is well worthy of the consideration of your committee, Senator, to examine, because this home loan bill will practically put that kind of business out of commission, because they could not compete with your securities.

The aggregate amount of real-estate loans now in the hands of national banks, State banks, and trust companies is estimated at this time at about $4,000,000,000.

The relieving of the commercial banks, which are reservoirs of short-term credits, from a large proportion of their real estate mortof great benefit, not only to owners of real estate, but to the comgage loans to the hands of permanent investors will certainly be mercial world as well, and should free that much of their funds for financing commerce and industry. While these results will také time to bring about, the general trend will be toward standardized mortgage conditions throughout the United States, a free flow of mortgage money and a ready market to investors in the premier real-estate security.

It has been suggested that the proposed amendments by Senator Glass, recently made to the Federal reserve bank law and the establishment of the Reconstruction Finance Corporation, would meet all reasonable requirements for discounting mortgage loans to meet the present emergency.

In a statement recently made by the American Bankers Association, hasty action was opposed, as I understand, to this Glass banking bill, for the reason that the Reconstruction Finance Corporation will be in a position to give the needed relief; with the exception. of course, of aid in stimulating the buildng of new homes, whch it would not seem advisable to encourage at this time. Moreover, it was held to be unwise public policy for the Federal Government to create an additional banking corporation of a permanent character of this sort. That was the suggestion of the American bankers.

The relief that might be afforded by the Federal reserve banks and the Reconstruction Finance Corporation will, in my opinion, be required pending the organization of the home-loan banks. The establishment of the home loan bank is required as a permanent institution, not one of temporary character, and as a practical means of reducing the expense and facilitating the mortgage loan business in the interest of the home owner and home builder of moderate means on terms that will encourage home building.

Mortgage financing on small homes, in my opinion, should run for not less than 10 years, and preferably 15, for the reason that the average family acquiring a home costing with their first mortgage $15,000 and under" (which is the class of mortgages covered by the provision of the home loan bank bill), with the interest on the mortgage, the amortization payments on the second mortgage requires, as a rule, from 10 to 15 years for the transaction to be liquidated. If the home owner is called upon at various intervals during that time for exceptional payments, it is not only embarrassing but very often results in the loss to the family of their home.

From my experience, Senators, for 20 years in handling $50,000,000 worth of houses in New York City, which I claim to you is on the best standards that intelligent planning and building and financing can produce, and it is recognized so by the international town planners throughout the world, I say to you that short-term mortgages are a detriment to home owners, and if you want to encourage people to own their own homes that has got to be corrected. And I think this bill will help do it.

You asked the question, Senator, a moment ago as to whether we had any experience in requiring people to pay on their existing and maturing mortgages. I have a list here which I will leave with your committee, because what I have to say may disturb some financial institutions, so I present the record; there are actual cases there, with the names of the properties, the amounts of the mortgages. I have selected mortgages, practically all of them running from $8,500 to $15,000, the class that Senator Couzens has referred to, where certain installment reductions have been demanded by certain banks. I have 400 such cases that I can furnish this committee. Those people have been called upon to pay, I think it is within the last

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