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Mr. CLARK. I have here, Mr. Chairman, briefs of many letters we have. It might bore you to read them all.

Senator WATSON. Do not read the letters. Anybody can write letters. What have you to say about it?

Mr. CLARK. We have here a summary

Senator Watson. Mr. Cody, I may say for the benefit of the committee, was here, and he said he had a statement representing the views of the opposition that he wanted to submit to the committee, summing up the whole situation.

Senator COUZENS. What opposition ?
Senator Watson. The opposition to this bill.
Senator COUZENS. Yes; but what does it consist of?

Senator WATSON. I did not ask him that. I am assuming that he meant mortgage bankers.

Senator BULKLEY. Mr. Clark, can you tell us what it is?

Senator WATSON. I told him he might submit such a statement. He is not here, and Mr. Clark has taken his place.

Mr. CLARK. Yes. I came in this morning. I just got here. This is a summary of the Mortgage Bankers Association in opposition to the bill. I should like to present it at this time.

Senator WATSON. Very well.

Mr. CLARK. Federal home loan bank plans are unsound and dangeroys, because :

1. They do not propose a “home” loan bank. They propose a mortgage discount bank for the relief of institutions which, through practices inconsistent with sound mortgage banking, find themselves in a frozen condition and unable to meet present demands from depositors, shareholders, and borrowers.

2. Depreciation of Federal land-bank bonds should be a warning against creation of such a system. These banks now use funds collected from borrowers to purchase, at a discount, bonds sold to the public at par. They are not meeting the emergencies for which they were intended, and already the Government has had to advance an additional $125,000,000.

3. The plan involves costly administration at a time when Federal Government expenses greatly exceed its income.

4. “Instrumentalities of the Government of the United States," as applied to the bonds of the proposed banks, is a misleading term which appears to imply governmental guaranty. Through the use of this term, the public will be led to believe the bonds are guaranteed by the United States. They would not be so guaranteed.

5. With normal growth of population, several years will be required to absorb the existing surplus of empty houses, yet proponents of the plan proclaim its power to stimulate construction of 3,000,000 new houses within the next five years.

6. Of 273 telegraphic reports received since February 12, 1932, from 112 cities of varying sizes in 37 States, 209, or 77 per cent, reveal a surplus of homes; 64, or about 23 per cent, disclose a normal supply; and 1, or less than four-tenths of 1 per cent, shows a need of new construction.

7. Temporary inflation in the home building market will lead inevitably to sharp deflation in existing home values already seriously depreciated. Increase in foreclosures will naturally follow.

8. The real need is for the type of emergency relief already provided in the Reconstruction Finance Corporation Act.

9. The “home loan bank” plan proposes a permanent establishment for development of new mortgage credit, yet in normal times there is an abundance of such money. In fact, this was the immediate cause of the present overbuilt condition.

10. It would create a subsidized reserve bank owned by a small group of members, which would develop a competitive advantage unfair to other investors in real-estate securities, both large and small.

11. Tax exemption features of $1,800,000,000 in bonds which might be issued by the proposed banks would lead to increased public taxation.

12. As mortgage loan institutions, the banks would not have direct contact with the home owner, thus eliminating the personal element which is always so important in home financing.

13. As mortgages in default could not be carried by the proposed banks, there would arise many occasions in which the Federal Government would be placed in the position of having to foreclose on homes of its citizens. It is no more difficult to meet obligations to one mortgagee than to another. As regards relief for the home owner unable to meet mortgage payments, therefore, the plan fails utterly.

14. The plan would mean a further surrender of the rights of States to regulate local private business.

It is claimed that:

1. It would decrease foreclosures. On the contrary, it would increase foreclosures, due to the lack of any sympathetic interest in local communities, as best evidenced by the fact that the Federal land banks, organized on a basis similar to the one proposed, have foreclosed and taken from the owners millions of dollars' worth of farm homesteads.

2. It is claimed that it would help home buyers to get mortgage credit not now available. On the contrary, mortgage credit not based on sound business judgment is as dangerous to the borrower, as it is to the lender. Överlending on mortgages means inability to refinance at maturity.

3. It is claimed that it would release vast amounts of frozen funds invested by savings banks and building and loan associations in mortgages. We claim that the reconstruction Finance Corporation was created for the purpose of releasing frozen assets and affording other assistance to savings banks and building and loan associations, as well as other institutions needing financial relief, and no additional legislation is necessary.

4. It is claimed that such a system would tend to restore public confidence in home buying, thus giving support to a depressed real estate market. We claim that confidence in home buying can be restored only by proper selling and sound loaning methods, neither of which would develop from the proposed plan.

5. It is claimed that it would create a central credit system for mortgage finance which ultimately would bring about standard practices, stabilize conditions and protect home owners' investments.

We claim that the plan will not provide a workable central credit system for mortgage financing. Its stated purpose is to loan funds to building and loan associations and other institutions.

6. It is claimed that by encouraging long-term home financing, it would tend to eliminate the short-term three and five year loans which now prove so costly and dangerous to the home buyer. We submit that long-term home financing on a semiannual or monthly payment basis for periods ranging from five to sixteen years is, and has been, available for many years for home owners desiring to take advantage thereof.

7. It is claimed that if all home financing institutions became members of the system, funds for home financing would be increased by from 30 to 40 per cent. We submit that home-financing institutions that have been properly managed will not need membership in the system. Institutions that need funds can not afford to purchase membership in the regional bank under the terms specified.

8. It is claimed that enactment of such a bill would hasten the resumption of normal home building. We claim that abnormal home building during the five years prior to 1929 caused by oversupply of mortgage money must be absorbed before new building can be undertaken. There are more homes now than there is demand for.

That is the summary of the Mortgage Bankers Association.

I would like also to submit a part of the report of the Committee on Finance of the President's conference on home building and home ownership, with reference to foreclosures, if I may do that.

Senator WATSON. Certainly.
(The statement referred to is as follows:)



Foreclosure totals are usually by counties, and include first, second, and third mortgages; farm and city loans; vacant property; all types of improvements and all sizes of loans; executions on mechanics' liens and personal judgments; frequently, as in Portland, Oreg., all sales of personal property and collections under execution, and enforcement of liens on automobiles ; often, as in Cuyahoga County, Ohio, collection of delinquent taxes and partition suits; and, in Detroit, Michigan, items reported under Foreclosure of Land ('ontracts” include all landlord and tenant cases, representing 80 per cent of the total, with miscellaneous items representing another 10 per cent, leaving only 10 per cent for actual land contract foreclosures during 1931.

Foreclosure totals do not include cases of voluntary surrender by the mortgagor, or forfeiture of land contracts through a justice of the peace, as in Davenport, Iowa.

Bearing these facts in mind, we note a marked increase during 1929 and 1930 in the number of foreclosure proceedings of all types, but we are glad to observe that in 1931 the total number has increased less than 2 per cent over 1930.

For comparison, we note that the volume of city mortgages owned by 40 leading investors and amounting to $4,865,000,000 increased in the past year 2.44 per cent over the preceding year, and that the population of the United States increases at the rate of 1.35 per cent per annum,

Noting the decreases in some centers and the increases in others, we find some interesting examples, as in Washington, D. C., where the total trustees' deeds for 1931, projected to December 31, show an 18 per cent decrease from the total for 1930, which was about 2 per cent over the 1929 total. And in Cook County, Ill., which includes the city of Chicago, where the number of first mortgage foreclosures of all types, under $10,000, as compared to the number of all first mortgage foreclosures, has declined during 1931, as follows: first quarter, 38.76 per cent; second quarter, 34 per cent, and third quarter, 27.96 per cent. In the same nine months in Cook County, the amount of first mortgage foreclosures under $10,000 represented less than 4 per cent [3.631 per cent) of the total, and only a portion of these foreclosures under $10,000 were for loans on homes as explained in the opening paragraph. An analysis of foreclosures in Cook County, Ill., in April, 1931, by the Chicago Title & Trust Co., shows that 32 per cent of the total number under $10,000 were junior mortgages, and 27 per cent of the total amount were juniors.

The Department of Commerce reports that a group of large investors owning mortgages on homes totaling several hundred million dollars on July 1, 1931, shows an investment in home properties acquired under foreclosure of 0.738 per cent of total outstanding mortgages on homes, and in process of foreclosure in investment amounting to 0.79 per cent of the total outstanding mortgages on homes, with a probability of some redemptions before the completion of pending proceedings.

These facts disclose the predominating influence of the larger bond issue foreclosures in the total figures and the danger of misleading deductions as to home foreclosures when only the total number and total amounts are considered. No one should minimize the seriousness of foreclosures. On the other hand, their significance should not be wrongfully exaggerated by the use of "lump statistics ” of which no proper analysis has been made.

It would be tiresome to read all these letters. It would be just repetition. To save your time, I shall submit them, and if you care to read them, I shall be glad to put them in the record. These represent mortgage bankers, realtors, building and loan associations, and all through

Senator Couzens. You say building and loan associations are against this bill? Mr. CLARK. Yes. Senator COUZENS. How many of them? Mr. CLARK. For example, here is the Nebraska LeagueSenator Watson. I was going to suggest that you read the names of the writers, if you care to.

Mr. CLARK.'S. M. Williamson (Inc.), mortgage bankers, Memphis, Tenn.

Senator COUZENS. Is that a building and loan association?
Mr. Clark. No. They are mortgage bankers.

Senator COUZENS. We do not care about the mortgage banks, of course. You have made a general statement covering them. I would like to have the building and loan associations.

Mr. CLARK. Nebraska League of Savings and Loan Associations. There is one from a realtor [indicating]

Senator WATSON. What is that Nebraska League, and what does it have to say? Mr. CLARK (reading):

OMAHA, NEBR., January 23, 1932. At the midwinter conference of the executive managers and officials of the State League of Nebraska Savings and Loan Associations held at Omaha, January 21, 1932, and representing 70 per cent of the total assets of all Nebraska associations, the following resolution was unanimously adopted :

Resolved, That passage of Senate bill 2959, known as the Federal home loan bank act, or any simlar bills that may be introduced, be emphatically opposed; that the secretary of this league wire this action to United States Building and Loan League, and to each Senator and Congressman from Nebraska, with the request that their influence be used to defeat said bills or similar legislation.


the far west.

Senator COUZENS. They give no reasons, do they? Senator WATSON. No. Mr. CLARK. No. Evidently they are getting along pretty well without it, and they do not see the need of it. We have not known of that in New England at all, so that I am not familiar with their conditions.

Senator COUZENS. There seems to be a great absence of opposition from the building and loan associations.

Senator Watson. Let him pick out the building and loan association letters, and put them in the record.

Mr. CLARK. Yes. That is all I have to submit, Mr. Chairman. (Mr. Clark later submitted the following :)

NIAGARA FALLS, N. Y., February 16, 1932. I firmly believe the proposed Federal home loan bank bill is unsound and is based on wrong assumptions, growing out of conditions in some parts of

ANN E. RAE, Past President United States Building and Loan League. Mr. NELSON. Senator Watson, I wonder if we could ask Mr. Clark one question?

Senator WATSON. If he is willing.

Mr. CLARK. If I am able to answer it, Mr. Nelson, I shall be delighted.

Mr. NELSON. The statement has been made repeatedly that the proponents of this measure propose to build 3,000,000 homes in the next five years. I know of no such statement made by our group, or by the Building and Loan League, or anyone else. This country does not require 3,000,000 homes in the next five years. The best estimates that we have been able to get for the decade 1920 to 1930 indicated an annual requirement of about 500,000 homes. Assuming that during the next five years we will have a somewhat declining population, immigration being cut off, the Department of Commerce and ourselves have figured that 400,000 homes a year would be all that we would require, or 2,000,000 homes as a maximum.

Senator COUZENS. Whom do you represent?
Mr. NELSON. The National Association of Real Estate Boards.

Senator COUZENS. You do not contribute anything to these home loan discount banks, do you?

Mr. NELSON. I do not understand your question, Senator.

Senator COUZENS. I mean, you contribute no capital, under the provisions of the bill?

Mr. NELSON. No, sir; we do not.

Senator COUZENS. Is it not true that a great number of those appearing here in support of the legislation contribute no capital to the banks?

Mr. NELSON. We have a great many members who are themselves engaged in home financing. We have some 40,000 members throughout the country, and some of them are in the mortgage loaning business.

Senator COUZENS. But you represent a real estate board. There is no provision in the bill whereby any real estate boards support this organization in any manner by furnishing any of the capital.

98195—32-PT 3


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