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people took a terrific beating from the securities sold them by the mortgage bankers? We are going back to the last depression, if you please. If you term cooperative housing the "orphan of depression, for goodness sake, what would you call the mortgage bankers of 1929!

Mr. EPTER. I think I would like to ask you to differentiate between the term that I use in 1950 as mortgage banker and the securities salesman of 1929.

I make that distinction for this reason: In 1950 your mortgage banking field, as such, is one of institutional lenders, totally supervised by Federal and State authorities.

In 1929, at the time of the debacle, which continued right through, and I had a lot of work to do with the liquidation of those mortgages you speak of, they were on the basis of security salesmen selling participations. They were not on the basis where someone had a single home mortgage, and where an agreement could be effectively worked out, because there were too many diversified interests.

You had some mortgages-particularly in New York State, with which I am familiar-known as series F-1, which had something like a $35,000,000 or $36,000,000 capitalization that was comprised of mortgage lending under a blanket or participating system which covered some of our finest apartments, hotels, and office buildings in New York.

When the individual trouble came, No. 1, the reserve system, that was supposedly established by mortgage lending companies, to the extent of setting aside one-half of 1 percent for reserves for contingent losses, was never there. The New York State proceedings are full of that.

Mr. O'HARA. Mr. Epter, I appreciate time is limited. There is only one question that seems to me important in view of the first reason you give for opposing this proposed legislation, and I hope I am fair in concluding that because you place it first you regard it as the strongest reason.

Has any mortgage banker any right to point the finger at cooperative housing or anybody else and say, "You are the orphan of depression”? The real orphan was the mortgage banker, was he not?

Mr. EPTER. That is a matter of interpretation.

Mr. MULTER. You don't mean to infer, do you, that the only losses were taken in the participating mortgages? There were just as many if not more in the mortgages against which no participating certificates had been sold ?

Mr. EPTER. Well, we had an economic situation which reduced values so much that

Mr. MULTER. That is precisely the point Mr. O'Hara is making.
Mr. EPTER. That is correct.

Mr. O'HARA. It is a fact, is it not, that the bankers sold to the American people $15,000,000,000 worth of real-estate bonds that the people who bought them could not even borrow a nickel on. And is it not the fact that the American people were sold down the river by the mortgage and other bankers at that time? I accept your explanation that the bankers have been reformed since then, largely because of the beneficial and protective legislation passed by Democratic Congresses.

Mr. MULTER. And the Government guaranties of those mortgages, Mr. O'Hara.

Mr. O'HARA. Certainly.

The No. 1 reason why they are against this bill is that the poor little housing corporations were the orphans of the depression; when the real orphans were the mortgage and other bankers.

Mr. EPTER. I would like to make a statement in connection with Mr. Multer's statement of just now.

I think you gentlemen, in fairness, in connection with interpretations of this question as to what the Veterans' Administration has done, or what the FHA has done, should examine the State laws covering banking and insurance throughout the entire United States.

You will find that the percentage of loan that any institution can make is specifically limited by law. That is a matter of individual prerogative of each State legislature.

The situation developing here, where the percentage of loans were guaranteed or insured, is a matter which opened the field of investment to mortgage lending institutions, and I am talking particularly of the savings banks and life-insurance companies, where their own State law precluded them the opportunity to make any such percentage of loans.

Mr. MULTER. Guaranties of the Federal Government permitted them to buy those mortgages!

Mr. EPTER. That is right. The State laws were modified to permit the acquisition of those loans only if they maintained that position of guaranty and insurance.

Mr. MUĽTER. How does that affect the situation we are talking about?

Mr. EPTER. Can I clarify my point on this question of cooperatives? Mr. MULTER. Please.

Mr. EPTER. Your cooperative failure could have been cured at any time, right back at the inception of the depression period, provided they were not multiple dwellings.

Nr. MULTER. The cooperative failure, you say?

Mr. EPTER. That is right. Those apartment houses which we know to have been built originally under a cooperative plan.

Mr. MULTER. With the exception of the one cooperative venture in the Bronx, in New York City, did we have a single cooperative house or housing project that housed middle- or lower-income groups ? Either middle- or lower-income groups?

Mr. EPTER. Yes, sir; there were two.
Mr. MULTER. Where were they?
Mr. EPTER. In Brooklyn.
Mr. MULTER. Do you know precisely where?

Mr. EPTER. I can get you the addresses. They were the properties that I first referred to as having been built originally by people of Finnish extraction.

Mr. MULTER. And what were the monthly carrying charges?

Mr. EPTER. I would have to get that from the institution who presently holds those mortgages.

Mr. MULTER. I wish you would submit that.
Mr. EPTER. I will be glad to.

Mr. MULTER. I think you will find they were not lower- or middleincome groups, but were the highest-income groups. There is only one cooperative venture in the Bronx that tried to touch the middle

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income group, in the days we are talking about, when cooperatives did not hold up under the stress of the depression. That is in the city of New York. I don't know of any others outside the city of New York during that period.

Mr. EPTER. Well my knowledge of cooperatives is limited to the city of New York and the surrounding areas.

Mr. DEANE. Is it not true that all classes went to the cleaners during that period of time!

Mr. EPTER. That is true but I think those in cooperative ventures were hurt most, only for one reason, and that is they were totally dependent at all times upon the paying ability of their cooperators.

Mr. DEANE. As you submit your study of the cooperatives in the area mentioned, would you also include the other sections of the country, more or less the rural areas? Most cooperatives in the semirural areas have had a very interesting and successful experience. Mr. EPTER. I will endeavor, through the national association, to

any records are available. I will run it down if I possibly can. Mr. MULTER. You know of course that the underlying

agreements for cooperative housing in the last 5 years are quite different from those which existed in the depression days and in the 1930's in New York? And that today an entire venture would not fail because one or two or three of the occupants cannot carry their share?

Mr. EPTER. That is a question of the contingency reserve provided for in the act. But again it is only a matter of multiple units of nonpayment, that will result in wiping out the whole job. That is why we recommend in the event cooperative housing is established, under this or any other similar law, that it be restricted to free-standing dwellings, so that in the event of trouble those who pay will not lose their equities.

Mr. MULTER. What is the difference between foreclosing the rights of an owner on a free-standing dwelling and foreclosing the rights of an owner to occupancy of a multifamily dwelling if it does not affect the occupancy of the other tenants of the multifamily dwelling.

Mr. EPTER. In other words, you are asking me this, if I understand you correctly:

You say you can foreclose the interest of one shelter unit, in a multifamily dwelling structure, as against foreclosing on the entire structure.

Mr. MULTER. Yes, sir.

Mr. EPTER. I will have to submit to one thing, and that is that as far as I know-and it may very well be that I am not qualified—I do not believe that the law of New York State, which I think I may have some working knowledge of, permits just that.

Mr. MULTER. I think you will find you are wrong, as to cooperatives in New York State and in New York City today. They have overcome the difficulty of being required to foreclose on the entire multifamily dwelling because one or more occupants fall down in their payments.

If you will refer to the New York cooperative experience you will find I am right.

Mr. O'HARA. Mr. Chairman, I cannot permit this statement to go into this record uncontradicted, that cooperative housing, and those who had investments in it, suffered more than the holders of real estate bonds.

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Mr. EPTER. I think, Congressman O'Hara, that Congressman Multer has answered that for me, in his statement that today you can segregate one unit of shelter and not foreclose against them.

Mr. O'HARA. You made the statement that cooperatives suffered more than other housing investments during the depression. I happen to know so much about that, and I have sufficient respect for the memory of thousands and thousands of good, decent, honest men and women who went to their graves broken-hearted because of the real estate bonds they had bought from bankers, that I cannot permit your statement to go by unnoticed. If you want to go back to depression years for a chart for the present and the future you would not find much comfort for the private financing interests. Cooperative housing may have suffered in the depression, but that was merely incidental to the collapse of the entire real estate security market, and the main reason for that collapse was the system of financing employed by the mortgage bankers.

Mr. EPTER. Congressman O'Hara, I think you will find that we made a series of eight or nine recommendations for changes in this bill for the protection, as we saw it, of the middle-income group. Not for the purpose of taking the house away from anybody.

Mr. O'HARA. You said that cooperative housing was the orphan of the depression.

Mr. EPTER. At that time it was and I think I can get you sufficient facts to show it.

Mr. BUCHANAN (presiding). Have you completed your statement ?

Mr. EPTER. The last recommendation which we have of record is. that in order to transfer property ownership, out of the cooperative ownership, even if there is no down payment in the beginning, that the individual cooperator occupants be given the right to withdraw their shelter dwelling from under the lien of the loan, when the amount of cash equity that is required under any sections of 203, FHA, has been equaled at that point. Mr. BUCHANAN. Do you have anything further? Mr. MULTER. Just one thing.

I think you have said this bill provides tax exemption, or you intimated that this bill has some provisions as a result of which Federal Government, or State and municipal government will not be able to collect full taxes?

Mr. EPTER. Except on real estate, and that is what the act says. Mr. MULTER. Where does it say that? The only section I found in this bill on taxes is section 207, on page 23. Or am I wrong?

Mr. EPTER. You mean beginning with line 24?
Mr. MULTER. Yes, sir.

Mr. BUCHANAN. If you read that out of text, you would get that impression.

Mr. EPTER. Is that what you have reference to?
Mr. MULTER. Yes, sir.

Mr. BUCHANAN. If you read the whole section you certainly would not get that impression, do you? If you lift that section out of text, then you would. But certainly not with the original part of section 207.

Mr. EPTER. I will submit that we were in error.

(The following communication was received for inclusion in the record :)

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MORTGAGE BANKERS ASSOCIATION OF NEW YORK, INC.,

New York, N. Y., February 16, 1950. Re H. R. 6618. Hon. BRENT SPENCE, Chairman, House Banking and Currency Committee,

House of Representatives Office Building, Washington, D. C. DEAR CONGRESSMAN SPENCE: During the writer's testimony on February 6, a request was made as to the addresses of the cooperative properties which have had a measure of success in Brooklyn, N. Y. These properties are as follows: 601-611 Forty-first Street, Brooklyn, built in 1917, containing 71 rooms and 20 apartments, and, unit No. 2 containing 72 rooms and 16 apartments; 655-661 Forty-first Street, built in 1925, containing 134 rooms and 32 apartments; 549– 551 Forty-first Street, built in 1927, containing 144 rooms and 40 apartments ; 521531 Forty-first Street, built in 1927, containing 132 rooms and 40 apartments.

All of the occupants are of Scandinavian extraction as the writer testified. The amount of mortgage in each case at the time the loan was made varied from $900 to $700 per room.

We understand that there has been a large percentage of subletting of these. cooperative premises and that many of the cooperator owners are not in possession.

This information was requested by Hon. Abraham Multer, and we would, therefore, appreciate this statement to appear in the record in answer to his request.

May I also ask at this time for permission to correct a noté appearing on the prepared statement of this association which appears on page 3, the next to the last line and refers to page 12 of the banking department report. This should read "page 95.”

We again take the opportunity to thank you for permission to testify and to, answer the additional questions contained therein. Sincerely,

LAWRENCE A. EPTER, President. Mr. BUCHANAN. Are there any further questions? If not, the witness will step aside and we will hear from Mr. C. N. Nichols, managing director of the Northeastern Roofing, Siding and Insulating Contractors Association, Inc., who will comment on H. R. 6742.

You have no comments on H. R. 6618, is that true?

STATEMENT OF C. N. NICHOLS, MANAGING DIRECTOR, NORTH

EASTERN ROOFING, SIDING, AND INSULATING CONTRACTORS ASSOCIATION, INC., NEW YORK, N. Y.

Mr. Nichols. Mr. Chairman, my name is C. N. Nichols. I am managing director of the Northeastern Roofing, Siding, and Insulating Contractors Association, Inc., with headquarters at 12 East Fortyfirst Street, New York City.

On Friday, July 19, 1949, I appeared before your committee and pleaded for a permanent FHA title I of the National Housing Act.

I might say in passing that I am not interested in any section of H. R. 6618, except one part of the amendment of H. R. 6742. That has to do with title I, on home improvements.

Today I am here again to support my original suggestion of last July that FHA title I be established as a permanent department of Government, for the insuring of loans on home improvements. I am happy to know the honorable chairman of this committee has seen eye to eye with my proposal for permanency as indicated by H. R. 6742, which he introduced to the House of Representatives of the Congress of the United States.

I can add no factual arguments or evidence to the statement I personally presented to this committee on July 19 last. With your indul

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