that counsel certificates that borrower is vested with a fee simple title, free and clear of any and all encumbrances.

(Remarks in relation to street and improvements within six months, encumbrances, etc.):

Appraisal Committee.

REMARKS

PRELIMINARY CERTIFICATE OF ATTORNEY

County and hereby certify that

I have examined the records of

has a good and sufficient fee simple title to the within described property except

and there are no mortgages, judgments, or other liens of record except_-

Date

FINAL CERTIFICATE

Attorney.

This is to certify that all exceptions listed in preliminary certificate above, dated have now been properly canceled of record, and conveyance dated Building and Loan Association $_ --- constitutes a first and prior lien on the property described.

Date

to

Attorney.

Mr. LAROQUE. Here is one reason for that form from the home owner's standpoint: What is known as the installment stock usually matures in seven years. We pay $60 a month on a $4,000 loan, $40 on the stock and $20 on interest. I know Senator Morrison understands that thoroughly, our North Carolina plan. The Ohio plan will loan that man $4,000, and he pays $40 per month, and on each six months' period those payments are used to credit on that mortgage and his interest payments are reduced each six months.

It takes around 11 or 12 years to finally mature the loan, though he has the privilege of entering the association at any time and paying off the entire loan, or he can pay more than $40 a month, if he wishes, and get credit for it by reduction of interest. That is one thing that appealed to me in the Ohio plan, the Dayton plan. There are a lot of details, Senator, and if I may be permitted, I would like to make this general statement of my position on the entire bill.

Senator WATSON. Glad to have you do so.

Mr. LAROQUE. In November of last year the President of the United States, after an exhaustive study of the problem of home ownership and its relation to the stability of American Government announced that he would propose to Congress the establishment of a system of home loan discount banks for the fourfold purpose of relieving the financial strain upon those institutions engaged in

the business of giving credit to people who are desirous of owning homes, place these institutions in position to assist in a revival of home construction with its resultant increase in employment, safeguard against a repetition of the recent experiences of severe demands on those least able to withstand pressure, and the strengthening of such institutions by making available for their use ample funds to care for their legitimate needs without the necessity for reliance on other financial institutions whose function it is to care for the commercial needs of ordinary trade and business.

This announcement brought forth an approving response not as a statement from the spokesman of a great political party, but as an expression from the leader of an organized Government of more than one hundred and twenty million Americans who were despondent and depressed. This statement, together with other plans proposed, brought hope and courage to our people and renewed efforts were made to "carry on" in the belief that Congress would speedily provide the relief so badly needed.

The bill under consideration fully provides this relief through a permanent institution. It goes even further and provides the means through which the home owner now faced with foreclosure and ejectment proceedings may save this home through a refinance of his mortgage without endangering the security of the funds invested by the thrifty savers. When the American home is involved, there is no place for partisanship or the advancement of selfish interests. There are no party lines in this legislation. It is a sound business. proposition and it is my firm belief that the Congress will give little heed to the selfish pleas of those who would oppose this bill because of some possible effect on the profits of their personal business. The home must rise above personal profits, and I offer my full and unqualified endorsement of the bill before your committee. While I know of no angle from which there should be the slightest objection to this legislation, I shall consider the matter more particularly from the standpoint of the building and loan associations, and that great body of citizenship represented by membership in these mutual cooperative organizations.

A building and loan association occupies a rather unique position. in that it does not in any sense compete in the financial field with any other class of business or moneyd capital. It is nothing more nor less than a society formed by a neighborhood group seeking to aid each other in the improvement of their local community through home ownership. The type of its investment is strictly limited and supervised by law and intended to be of such character that there can be no loss so long as the organization is honestly conducted and home life remains as the ideal of the American family. These institutions have withstood the tests of depression in a most commendable manner. From the standpoint of solvency and safety of investment, there is no call for help nor is there hysteria or lack of confidence on the part of the public. These institutions are looked upon as an economic rock on which there may be safe reliance in time of stress, and the investments of their nonborrowing members are not subject to fluctuation from time to time. Their activities are necessarily limited to the weekly or monthly income from dues and interest. They are essentially nonliquid and the main consideration in the investment of funds entrusted to their care is a

certain repayment of the loan and a reasonable return on the investment.

It is not intended that these organizations should finance large real-estate ventures, apartment house investments or mercantile or manufacturing enterprises. The whole plan is based on the ownership of homes and the average loan of these organizations is approximately $3,000. These loans are secured by first mortgages or deeds of trust on homes valued at from $4,000 to $5,000 each, and the properties are occupied by the owners who are interested in making their communities desirable places in which to rear their fam- · ilies.

Under normal conditions there is always a demand for desirable homes and the average association is from six to twelve months behind in closing loans. These delays come from the fact that the associations must accumulate funds to meet maturing stock quarterly or semiannually, and in times of stress the entire income is usually absorbed in meeting withdrawals. For this reason growth is retarded and the applicants for loans, sometimes finding it necessary to seek funds from other sources, in numerous instances must pay large commissions in order to secure these funds.

Were it possible for the associations to secure funds more readily these worthy and desirable cases could be handled promptly, and under the amortization plan the income would be automatically increased, thus expanding the usefulness of these organizations in providing for their members on a more reasonable basis. While it is proper to accord to the prospective home owner every reasonable consideration and encouragement, it is at the same time of prime importance that the trust funds contributed by nonborrowing members shall be amply protected. It is these contributions from the nonborrowing members that make possible the transformation of house renters into home owners. It is important, therefore, that these contributions be safeguarded as a sacred fund, that the thrifty nonborrower may be surely protected against possible loss.

It has been suggested that the bill under consideration does not permit the advancement of funds sufficient to secure the desired results. The bill provides for a board of five members to be appointed by the President, by and with the advice and consent of the Senate. This board is quite properly given broad powers of discretion and I have sufficient faith in the ability of the President and his sympathetic attitude on the subject of home ownership to believe that the administration of this act will, so far as humanly possible, be in the interest of those whose needs are sought to be served.

Under the bill a home appraised at $4,000 will justify a loan in the first instance of $3,000. The organization making this loan will be able to borrow from the home loan bank $1,500 to $1,800. Certainly the organization desiring assistance should not expect aid in a greater amount. The need is for aid rather than charity. My conception of the bill is that it provides assistance for the lending agencies rather than a dumping ground for promoters and what might develop into undesirable loans. If the funds of the home loan bank are not to be amply protected, and its operations conducted on a business basis, then there is no excuse for its existence.

The bill under consideration is the result of a diligent research. The details embody the same general principles carried in the Federal

reserve act and the Federal farm loan act, as well as its affiliated organization, the Federal intermediate credit bank. That these organizations have proven highly successful and rendered real service goes without saying. In measuring the success of governmental organizations, we must consider the service rendered rather than the profits accumulated. The recent legislation creating the Reconstruction Finance Corporation and providing additional aid through the Federal farm loan banks, are emergency measures and will stem the tide of depression and calm the financial sea. The bill under consideration, along with other measures before your committee, will provide permanent relief and act as a preventative against future financial ills and epidemics.

I heartily concur in the view of the President that "there is no element of inflation in the plan but simply a better organization of credit for these purposes." The benefits accruing to the public through the agencies enumerated in the bill will prove of untold value in stabilizing home ownership, thus creating a more patriotic citizenry.

With reference to the matter of appraisals, something has been said about 50 and 60 per cent loans. The gentleman from the Penn Mutual said that 50 per cent was enough. That is fine for the man that is able to handle that proposition, but we are trying to reach the small man. That is not demagogery. I do not mean it in that sense. But I literally really mean the small-home owner. The building and loan associations have suggested at times that we include in our State laws provisions that no more than a certain amount of the appraised value may be loaned. I have opposed it, for the reason that it is of no value whatever. It is easily evaded, because it is so easy to increase the value at any time you want to loan more money, and, incidentally, I may say that it is a matter of common knowledge that there are numbers of cases of insurance loans, second-mortgage loans and wild-cat mortgage company loans, of which the Senator has some knowledge, from information only. Senator MORRISON. I am well acquainted with the victims of a great many of them, sir.

Mr. LAROQUE. Exactly. I happen to know that he is acquainted with some victims.

Senator MORRISON. I certainly am.

Mr. LAROQUE. In those cases I have heard of agents of these companies telling the appraisers, "Get it high in order that we may get as big a loan as possible, because my commission is affected by the amount of the loan."

Senator MORRISON. Is there no uniformity of appraisal? Is there no way to regulate that?

Mr. LAROQUE. I doubt it very much.

Senator WATSON. You are deputy commissioner in North Carolina of the insurance department and the building and loan department? Mr. LAROQUE. Yes.

Senator WATSON. As you go about, do you investigate the question of appraisals at all?

Mr. LAROQUE. Yes, sir.

Senator WATSON. Is there no way to control that original appraisal that is made?

Mr. LAROQUE. I doubt it very much, sir, because human nature is the same the world over. Here is what we do in building and loan associations and here is our position on that and the advantage we have over the mortgage companies and insurance companies generally. I have no fight on either of them by any means. But the mortgage company and the insurance company, located in another city, depends upon some local man to look out for its affairs. Not all local men are in any sense interested or would do anything improper by it, but in numbers of cases they have improper men for that purpose.

The building and loan association in North Carolina is purely a local, mutual, neighborhood affair. The secretary and the directors of that association know everybody in the city or the town, and they know its property, and when a loan is applied for, they inspect it. Incidentally, that form is in that little booklet. The committee makes the inspection for the board, and they come in with their appraisal. They are interested from the standpoint of shareholders in that association, or they could not be directors. They are interested in their fellow shareholders, and they are charged with a responsibility under the law. They make that appraisal on an honest, reasonable basis, and it is perfectly reasonable to accept that appraisal, we think.

When that appraisal is made, it is brought back to the board. The board then discusses it and either approves or rejects the loan. If it is approved, then it is turned over to the attorney for his preliminary certificate, and the loan can not be made until the final certificate is entered in the records of the association. We think we have thrown every safeguard humanly possible around it.

But we have the demand for money, as in the instance I just spoke of, for refinancing, the need for money, and the fact that the banks, of course, can not be expected, and should not be expected in normal times even, to loan the building and loan associations the money. Their funds are needed in the usual channels of business. And we think also that any bank in the commercial banking business only ought to stay out of the real-estate field. As a matter of fact, our national laws prohibit the banks from making loans except on a basis of their time deposits. Those same laws prohibit the making of second mortgages by national banks. Savings banks and trust companies with time deposits quite naturally and properly make real-estate loans. They have their local contacts, of course, and are in position to know something of appraisals.

By the way, a telegram was read this morning by some gentleman telling of the overbuilding of homes in North Carolina. I don't believe the gentleman is here now. It was read as coming from Dave Houston, one of my good friends. It spoke of the overbuilding of homes in North Carolina. He is connected with the Carolina Bond & Mortgage Co. of Raleigh, whose business, as we know, is the making of loans to farmers. Theirs are farm loans, and if his farm homes are overbuilt we have no help for it. We are interested in town property, as building and loan associations. We are not loaning on farms. That is strictly a farm-loan business, and I think that Mr. Houston had an idea that you wanted to know whether farm houses are overbuilt, and I expect from the fact we lost so many farms in North Carolina that farm houses are overbuilt.