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Senator STEIWER. How many of the 69,000 properties have you disposed of?

Mr. FaHEY. That is in the record there.
Senator STEIWER. In the House hearings, you mean?
Mr. FAHEY. Yes.
Senator STEIWER. Well, I will not insist on that.

Senator HALE. I think it would be well to have the figures, so we will have them before us.

Senator TOWNSEND. Where will we find it in the House hearings? Senator TRUMAN. It starts on page 1236 of the House hearings. The figures are on page 1294, giving a general statement of the situation.

Mr. Fahey. Well, in any event, Senator, we can get that and put it in the record where you want it.

Senator STEIWER. Supply it later. Mr. Fahey. Just what was it you wanted? Senator STEIWER. Merely the number of properties you foreclosed which subsequently have been disposed of by sale.

Mr. FAHEY. All right.

Senator STEIWER. Another question which is of more interest to me, Mr. Fahey, is involved in the total figures. Your outstanding loans, as I understand the figures, effected a very large decrease from peak.

Mr. FAHEY. Yes.
Senator STEIWER. Decrease of some approximately $700,000,000?
Mr. Fahey. Yes, sir.

Senator TOWNSEND. Does the record of the House hearings show any break-down of that decrease ?

Mr. FaHEY. I think so.
Senator TOWNSEND. Can you give us an estimate of what it is?

Mr. Fahey. I can give it roughly. I do not know that I can give it in exact detail; but roughly it is this.

Senator TOWNSEND. Before you start to answer, I am interested in two items particularly.

I would like to know approximately how much of that decrease is accounted for by repayments of money and how much is accounted for, if any, by charging off due to bad loans.

Mr. FaHEY. Will you answer that, Mr. Russell?

Mr. RUSSELL. About $32,000,000 has been charged off, and we have on hand about $34,000,000. The two added together would make substantially the difference.

Senator STEIWER. Then there is no item for losses charged off?
Mr. FaHEY. No.

Mr. FaHEY. We have set up reserves, but we are not charging off losses, because we do not know until we finally dispose of all the property, Senator, what our losses will be.

Mr. RUSSELL. I presume, Mr. Fahey, some losses have been charged to the reserve.

1 In response to Senator Steiwer's inquiry relative to sales of property Mr. Fahey said: “As of November 30, 1937, the total number of properties sold was 5,239, and the amount received was $19,337,829.36. At the time of sale these properties stood on our books at $19,328,692.93. This sum includes the original amount of the mortgage, accumulations of unpaid

principal, interest, taxes, insurance, cost of repairs and foreclosure costs. The amount received in payment for these properties was $3,136.43 in excess of the amount at which we carried them on our books."

Senator STEIWER. Then I understand that speaking approximately, that the whole decrease is accounted for by cash payments and by properties which have been acquired.

Mr. Fahey. That is right. About $60,000,000 in loans have been paid off in full.

Senator HALE. On page 1344 of the House hearing appears the following: “Sales through the fiscal year 1938 and 1939, on sales, approximately 14,000 properties,” in the fiscal year 1938 and 22,000 in the fiscal year 1939.

I take it that up to the present time you have not disposed of that many properties in a year?

Mr. Fahey. No, we have not.

Senator RUSSELL. On page 1322 you show that 50,731 properties had been acquired as of August 1, 1937, only a portion of which had been disposed of. Of course, that would be some months ago.

Mr. Fahey. On page 1312?
Senator RUSSELL. Yes; in next to the last paragraph.
Mr. Fahey. That is right.

Senator STEIWER. Mr. Chairman, I am very much interested in the justification of the Home Owners' Loan Corporation for the appropriation. I think that the meat of the question before us is the necessity for the appropriation.

As I understand it, the House bill carrius $28,000,000 for the next

fiscal year.

Mr. Fahey. That is right.

Senator STEIWER. But the Budget estimate was $30,000,000. Is that right?

Mr. FaHEY. Yes.

Senator STEIWER. Well, now, that reflects a cut in the Budget estimate of $2,000,000.

Mr. FaHEY. Yes.

Senator STEIWER. Do you care to say anything to this committee as to the practical importance of that in the administration of your agency?

Mr. Fahey. I think the practical importance of it, Senator, is this: The critical period in the liquidation of this Home Owners' Loan Corporation is going to be over the next 2 years.

Senator STEIWER. May I interrupt you there?
Mr. FaHEY. Yes.

Senator STEIWER. I have read what was said in the House hearings, in general terms, as to the justification for the appropriation. The matters which you are now starting to develop, so far as I am concerned, are sufficiently covered, but what is the difference between the $28,000,000 and the $30,000,000; what difference does the $2000,000 make, so far as the practical operations are concerned?

Mr. Fahey. It has its bearing very largely on two of the most vital features of the operations of the Corporation, that is, the maintenance in the field of an adequate number of competent and welltrained field men who are dealing with this question of loan service. That means personal contact with borrowers in order to effect collections.

The problems of the Corporation are largely with the small loans, as you can readily understand.

Let me illustrate that by giving you the figures on it. As of November 30 we had on our books 265,932 accounts which we classified as delinquent accounts. By that we mean all accounts which are in arrears for any amount for more than 90 days; for any part of what is due.

Now, strictly speaking, however, those accounts are not all delinquent accounts, for out of that total of 265,000 there were 191,959 wbere adjustments had been effected with the borrowers, and then they are what we call a liquidating account.

Senator STEIWER. Mr. Fahey-
Senator TOWNSEND. What do you mean by adjustments?

Mr. FAHEY. Well, the borrower gets behind 3, 4, or 5 months, or more; is not meeting his current payments, interest and principal; and we have to go to him. We have to deal with that case through the medium of a man in the field. You cannot deal with it by mail or otherwise. But we try to find out what his condition is, his family income, and what he can do when he is unable to pay in full. Out of that, we attempt to work out a plan with him. Such plans take the form of asking him to pay the current amounts and on installments to pay as much additional from month to month as he can to make up the delinquency. Those we classify as liquidating accounts.

Now, with those loans, the number is large, as I have indicated. The amount of money involved, actual cash involved, is not in the same proportion, because most of them are the smaller loans.

Senator TOWNSEND. May I ask a question right there?
Mr. FaHEY. Yes, sir.

Senator TOWNSEND. How far, under the law, can you go toward relieving them of the interest or any parts of the principal?

Mr. Fahey. We have ample authority to do that on any reasonable basis.

Senator TOWNSEND. Then you have authority under the law, if you so elect, to take over the interest?

Mr. FAHEY. You mean entirely?
Senator TOWNSEND. Yes.
Mr. Fahey. No; we have no authority to do that.

Mr. RUSSELL. The law states, Senator, the Corporation may at any time grant extensions of time on any loan for payment of any installment or interest owed to the Corporation if in the judgment of the Corporation the circumstances of the home owner's condition justifies such an extension.

Senator TOWNSEND. Then you have no authority except as to the length of time.

Mr. RUSSELL. That is the only modification.
Senator TOWNSEND. You cannot modify the interest?
Mr. RUSSELL. We cannot modify the interest.

Mr. FaHEY. We cannot modify the interest or the amount of the loan, but we can make adjustments from time to time in order to meet the needs of the borrower, and that is the process that we are going through constantly.

Senator McCARRAN. That is just as to the time that he has been paying the loan.

Mr. RUSSELL. That is right.

Senator McCARRAN. That just involves the element of time and not the element of money.

Mr. RUSSELL. It does not involve the element of money, so far as the ultimate amount of the loan is concerned. It only postpones payment in part.

Senator McCARRAN. That is what I think.

Mr. FaHEY. And the method is that if the borrower shows a sincere desire to pay what he can within reason and there is a fair chance of his working it out within the term of 15 years, why, we make these adjustments.

Now, of course, it not infrequently happens that the borrower is able to go along on the adjusted basis for several months, 5, 6, or 8 months, if you please, and there is sickness in the family, or the principal bread winner is laid off, and they just have to drop down again. Then we have to go over it again with them.

Senator TOWNSEND. How many employees do you have in the field looking after this?

Mr. Fahey. My recollection is that the total on this type of work and also on the management of properties is somewhere around upwards of 4,000. I do not recall the exact number.

Do you? Mr. RUSSELL. No, sir.

Senator Hale. Mr. Fahey, while in many respects you have been able to cut down the expenses, I see that the expenses have gone up in property management. That is due to the increase in number of foreclosures, is it not?

Mr. Fahey. That is right.
Senator HALE. And will that increase from year to year?

Mr. Fahay. It will probably increase over the next year. I mean, through this fiscal year. It is impossible to say what it will be thereafter. You all realize that a lot depends upon what happens so far as collections are concerned in the course of the next year.

There is a good deal of misconception about it. I mean, men who are not familiar with the operation or the complications of this particular enterprise are likely to say, "Oh, well, you are not making loans any more, and it ought to be possible to cut this expense a very great deal.” The fact of the matter is, that it is much more difficult and expensive to collect loans than it is to make them.

The CHAIRMAN. And more expensive to pay them.
Mr. FaHEY. Pardon me.
The CHAIRMAN. And more expensive to pay them?
Mr. BYRNES. More difficult to pay than to borrow?
Mr. Fahey. Yes; certainly it is.

Of course, the great mass of these borrowers are workers. Our average loan is $3,000, and much depend upon the continuity of employment, on sickness, and on a great many other factors, and you have here a combination of social service and business operation. This is the first time in the history of this country, or any other country, where loans have been made in small amounts, on a monthly installment basis in such a volume and over such a tremendous area. There was no previous experience as a guide in this work. Monthly collections of small installments is a most expensive kind of business. The bookkeeping alone in connection with it, is a very large problem, and extremely expensive.

The necessity of personally following up on these accounts by men in the field going to these borrowers not once, but many times, before an understanding is arrived at, is a slow and costly process. And yet,

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