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is impossible to get rid of such houses at present. There is no market for them.

Senator WATSON. It is a mistake to build that kind of house and to permit them to be built?

Mr. ELLFELDT. In our city we have many old homes that were built 20, 30, and 40 years ago, which, of course, were not modern at that time. But the moment we get hold of them we try to modernize them. We spent over $10,000 in 1931 modernizing our homes, painting, putting in furnace and bathroom and hardwood floors, et cetera, enough to make them salable; and at that they do not sell.

Senator Watson. Have you read this bill?

Mr. ELLFELDT. From beginning to end. I have read it and discussed it many, many times. I know every word of it.

Senator WATSON. With whom have you discussed it?
Mr. ELLFELDT. With our building and loan people.

Senator WATSON. Have you discussed it with any mortgage bankers?

Mr. ELLFELDT. No. I do not believe you would get very far.
Senator WATSON. You would not get very far?
Mr. ELLFELDT. No. The discussion would be all one-sided.
Senator WATSON. Tell us why you favor this bill, Mr. Ellfeldt.

Mr. ELLFELDT. In the first place, there is an absolute necessity for short-term loans for this emergency. I can best answer it by saying, perhaps, that if we had had this set-up for bụilding loan associations in the last three or four years we would not be in this condition. If we or any other association had been able to borrow 50 per cent of our seasoned mortgages, no investor or depositor would have had a fear; he could have got his money immediately and we would not have got into the locked up, frozen condition that we are now; and we can see no end to it. It will not immediately help those that are now in trouble, but we say we want to look to the future, because we are going to have cycles of this kind time and again, such many of us have gone through.

Senator WATSON. You can not rediscount your securities?
Mr. ELLFELDT. Not at all.
Senator WATSON. Nowhere?

Mr. ELLFELDT. Furthermore, our banks in Kansas City are placed in a position where they will not loan us any more money. They did to most of the associations until they got to a certain point where they ran short of funds; they were worried about their own institutions and there is no way now to borrow money. In Kansas City there is perhaps a million dollars borrowed from the banks by building and loan associations, and those banks would be glad to get their money back; now, no association can borrow money.

Senator WATSON. So that when payments were not made when due, you would either carry them along or make foreclosures?

Mr. ELLFELDT. Make foreclosures.

Senator WATSON. Which is not desirable in a building and loan association ?

Mr. ELLFELDT. No. In Kansas City most associations quit lending to new members during the last 18 months. Our own association quit about a year ago, and it is by necessity, because the withdrawals became heavy, the banks would not lend us any more money, and all we can do now is to take care of the taxes, which is a very heary item. During the last year we advanced about $5000 in taxes which had accumulated for 1, 2, or 3 years, also insurance past due, and that is the only help that we can offer to our own members, not to speak of the many applications which we turn down almost daily in our association-calls on the telephone and calls in person. And here is how it comes about: They have short-term loans made by insurance companies, made by banks, who in former times were our heaviest and strongest competitors. To-day, when the mortgages are due, they send them over to us. They do not want to renew them. The banks need the money themselves, or private investors who bought the first mortgages from the banks need the money or are afraid that they might have to take in the property. So they are sent to us; but we in turn tell them we can not help them.

Now, to illustrate further, take the foreclosures in our city years ago. I have lived there 45 years and been in the same line of business many years. We have a daily paper called the Daily Record, where all foreclosures are advertised 20 days. It was customary to see from 30 to 50 foreclosures advertised: very few from building and loan associations. To-day there are from 175 to 225 foreclosures advertised in this paper. These foreclosures do not all take place, but I will say 80 per cent of them are actually foreclosed, and there is no help for that class of home owners who have maturing shortterm loans, they do not know which way to turn.

Senator Watson. How many did you say?

Mr. ELLFELDT. Foreclosures must be advertised for 20 days. Daily there appear in this paper now from 175 to 225 advertisements. Occasionally a man is able to help himself, and of course the advertisement drops out; but we somewhat gauge the foreclosures by the number that are advertised.

Senator Watson. Is there much huddling down in your community!

Mr. ELLFELDT. What do you mean by that?

Senator WATSON. I mean by that where they are crowded into the apartment houses. Mr. ELLFELDT. Indeed, there is considerable.

Senator Watson. Suppose we pass this bill, how are those people that are huddling together in apartment houses or in small homes going to get money enough to avail themselves of the opportunity afforded by this measure?

Mr. ELLFELDT. I would refer again to the fact that the public has a certain fear in their minds, and money is hoarded; as we see in the papers over a billion dollars hoarded. The moment this bill is passed, the moment the public sees there is some outlet, a reservoir for easy money, people will let loose of hoarded money and the public would gain thereby by employing mechanics, painters, carpenters, and other labor; and we believe that would immediately relieve the unemployment situation. It would help the same class of people who are now living with relatives, and so forth; they would be glad to return to their homes or buy new ones.

Senator WATSON. Has there been overbuilding of homes in Kansas City ?

Nr. ELLFELDT. There is an oversupply of homes. I would say up to 1926 at least Kansas City overbuilt. Our own organization has made few loans of that type, we have never encouraged professionals. We have felt they must get their money from the insurance companies or possibly the banks on short-term loans. Our building and Ioan association has never encouraged that type of loan.

Senator Watson. To what type or character or class of citizen do you lend your money personally?

Mr. ELLFELDT. I would say the middle class—the mechanics, the clerks, and business men, and so forth, and small merchants.

Senator WATSON. Railroad men ?

Mr. ELLFELDT. To a small extent. Kansas City is not much of a railroad town.

Senator WATSON. Do you favor this as a temporary measure?
Mr. ELLFELDT. Both, Senator. Absolutely both.

Senator WATSON. Was there a necessity for this kind of a bill or law before the crash of 1929 ?

Mr. ELLFELDT. If we had had such a law, the present situation would never have happened to us in Kansas City. We have never before, for 50 or 60 years, as far as our records go had such times as the present. But if we had an institution like this bill provides three or four years ago-only three years ago—why, this trouble would never have come upon us in Kansas City.

Senator WATSON. Do you know whether or not anybody in the country before that time ever at any time proposed a measure of this character ?

Mr. ELLFELDT. Well, I have in mind the Calder-Nolan bill, which was proposed before Congress and the Senate some years ago.

Senator WATSON. Which bill was that?
Mr. ELLFELDT. It was called the Calder-Nolan bill.

That was a similar measure.

Senator WATSON. I had forgotten about that.
Mr. ELLFELDT. That was about 15, 16, or 17 years ago.
Senator WATSON. Was that along this line?

Mr. ELLFELDT. It was along similar lines, only I think there has been much improvement. There may be some little objections, but I am perfectly willing to leave the details to this committee and later on to the discretion of the board of governors or directors, whoever they may be.

Senator MORRISON. A great many building and loan transactions are followed by the second mortgage, are they not?

Mr. ELLFELDT. To some extent only, Senator. I would say in our part of the country that is not the case, because it would be hard for a man to pay on two installment mortgages, because it is generally understood a second mortgage has to be an installment note, so it does not happen very often. We will say only 5 per cent of our own loans are made that way.

Senator MORRISON. This arises, that a man who owns a lot will let the building and loan association advance him money to build his home and then take a second mortgage for the lot!

Mr. ELLFELDT. You mean the owner of the lot would ?
Senator MORRISON. Yes.
Mr. ELLFELDT. Well, that is not sound business.

Senator MORRISON. I understand that; but in my country it is done very extensively.

Mr. ELLFELDT. Perhaps they do, but I do not believe that is sound buying. I think a man who buys on that basis is not absolutely safe.

Senator MORRISON. I understand; but they are doing it. When the first mortgage has matured, in such cases where they hold a second mortgage, the final payment, except interest, is postponed until the other mortgage has matured out. They are having difficulty in such cases of handling that second mortgage maturing on the expiration of the payment.

Mr. ELLFELDT. That is the trouble at present, but that was not the trouble prior to this

say the last three of four years. That is the very thing that we did do, take up the second mortgage, or part of the first, even. When a second mortgage came due and a first, perhaps, we would take up both.

Senator MORRISON. Exactly. When they paid out the first one, you would make them another loan and they would have another period in which to discharge the second mortgage. You are not able to do that now?

Mr. ELLFELDT. Not now; no. We had been doing that more or less right along. When his first mortgage is paid half way, and the second mortgage is now due, we lend him the additional money, and make a second loan, or a third loan even, which is permissible in our State as long as we hold the first loan.

Senator WATSON. You insist on a man having a fee-simple title to a lot before you lend him money to build a house on it?

Mr. ELLFELDT. We are not as liberal as that; not at all. I do not believe that is sound financing.

Senator WATSON. You make him own the lot, do you not, before you let him have the money to build a house on it?

Mr. ELLFELDT. At least, and then some more. Senator Watson. I was going to ask that in the next question. He must own the lot?

Mr. ELLFELDT. Yes, sir.

Senator WATSON. Únencumbered. Then what percentage of the building-loan associations loaning money for new buildings. In have money?

Mr. ELLFELDT. I might answer in this way: We loan no more than 60 per cent of the total value of the lot and the building, of the commercial value at the time when the loan is made, which, of course, varies from time to time.

I might further inject this thought, which is a little different from some testimony we have had: A great deal has been said about building-loan associations loaning money for new buildings. In some parts of the country this may be the greater portion of the business, but in our association that percentage has been so small, only 3 or 4 or possibly 5 per cent of all of the loans we have made; because we have learned by experience years ago that that kind of loans generally cause grief and trouble—the borrower very seldom provides enough money-our business has been mostly to refinance loans when a first short-term mortgage comes due, that has been most of our business. It has been much safer for our building and loan association, perhaps, and many others; at no time have we ever encouraged overbuilding.

Some testimony has been given here about overbuilding. The gentleman this morning had a stack of telegrams from various parts of the country which seemed to be very impressive that there was no need of new buildings. One telegram particularly interested me, coming from a town of about 2,000 inhabitants, in our neighborhood, Butler, Mo. I do not believe that any evidence of that kind would be of great value. But I will say that building and loan associations are not talking about new buildings. None of us, I believe, desire any more buildings. We have too many now. But let us remodel and put in shape those that are now in existence and not build more homes at present.

Senator Watson. How many people live in apartments in Kansas City ?

Mr. ELLFELDT. I have not given that matter a thought, but I do know from experience in the larger cities as they grow older there is more and more tendency to live in apartments.

Senator WATSON. Is that because of the cost of the individual homes?

Mr. ELLFELDT. Not that so much, but it is a modern tendency; the convenience that the young people have in apartments. For an American citizen I do not believe it is the proper thing, but it is nevertheless a fact in the older cities in this country and especially in Europe. Space finally becomes valuable so that we have to build up in the air, creating apartments.

Senator WATSON. Is that all you care to say, Mr. Ellfeldt? Mr. ELLFELDT. I believe the gentlemen's time is short, and I would like to get back home.

Senator Watson. Thank you very much. Mr. La Roque.

STATEMENT OF 0. K. LaROQUE, DEPUTY INSURANCE COMMIS

SIONER, BUILDING AND LOAN BUREAU, RALEIGH, N. C.

Senator WATSON. Where do you live, Mr. La Roque ?
Mr. LAROQUE. Raleigh, N. C.
Senator_WATSON. What is your business?

Mr. LAROQUE. I am deputy insurance commissioner, and I have supervision of building and loan associations.

Senator WATSON. You are deputy commissioner of the insurance department?

Mr. LAROQUE. Yes, sir.
Senator WATSON. Is that what you are, Mr. LaRoque!

Mr. LAROQUE. Yes, sir; in charge of the building and loan supervision of that bureau.

Senator WATSON. Of the State?
Mr. LAROQUE. Of the State; yes, sir.

Senator WATSON. You have a State supervisory board or department?

Mr. LAROQUE. Yes, sir; a supervisory department.
Senator WATSON. Over building and loans?

Mr. LAROQUE. Yes, sir. It is a bureau of the insurance department, Senator, and I have charge of that particular bureau.

Senator WATSON. So that you are familiar with the condition of building and loan associations in North Carolina?

Mr. LaROQUE. I think so; yes, sir.

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