Our membership includes banks and trust companies, title companies, and life insurance companies-all mortgage investors-in addition to our mortgage bankers.

We have been called "brokers." In our judgment, no stigma attaches to the word "broker." Almost every realtor is a broker. But here is the essential difference. When a house is sold, the broker collects his commission and departs, but when a mortgage is made and sold, the mortgage banker, in most cases, continues to service that loan until it is paid in full, possibly twenty years later, making frequent inspections of the property and conferring with the owner on his problems, financial and otherwise; collecting interest and principal and remitting to the investor; supervising the payment of taxes, special assessments, and fire insurance renewals. He is, or he represents, the owner of a half interest in the property who has attested his confidence in the borrower by the investment of funds in that borrower's undertaking, and whatever benefits that borrower or whatever injures that borrower, benefits or injures the mortgage investor and his representative.

Just a word about the 12,000,000 building and loan "members," which include 10,000,000 depositors and. 2,000,000 borrowers. Also their $8,000,000,000 of assets, constantly mentioned in these hearings. Impressive totals, it is true, but if our Mortgage Bankers Association of 300 or 400 actual members, including banks, trust companies, and mutual life insurance companies, counted its membership and its assets by exactly the same process as the building and loan associations count theirs, the total would be over 50,000,000 "members" and our assets would exceed $14,000,000,000. Yet we seek no special consideration because of these striking totals.

Congressman Luce inquired on Monday about the source of our information regarding the construction of 3,000,000 new homes during the next five years if the proposed loan banks are created, and we would appreciate your permission, if Mr. Luce has no objection, to place in the record the article in the New York Times of Sunday, December 6, 1931, quoting reports just made to the Treasury and the Federal Reserve Board. This article also contains some interesting figures taken from the 1910 and 1920 census reports covering the number of families, of "dwellings "-that is, house, apartment buildings, hotels, and so forth-renters, unencumbered homes, and mortgaged homes in the United States.

We have been requested to place in the record this statement from Thomas F. Larkin, past president of the New York State League of Savings & Loan Associations.

Because I am, in point of age and service, the oldest living ex-president of the New York State League of Savings & Loan Associations, I am honored with a request to communicate with you in the name of the still active leaders among the veterans of the savings and home-ownership movement in our State, in opposition to the Federal home loan bank bill pending in your committee.

This course we feel impelled to take because we learn that outside propagandists for the bill are seeking to mislead Congress with the assertion that our State organization has indorsed this bill. It is true that a committee, small in number, and by a divided vote, under the urgency of outside influence, adopted a favoring resolution. This action was taken, I assure you, without authority and without notice to the State league and despite knowledge that, previously, the representatives of 60 associations in meeting assembled had unanimously disapproved the bill in question.

Of 18 living ex-presidents of our State organization, only 2 are known to be in favor of the bill. Eleven of them, including the undersigned, have written to our United States Senators and Representatives expressing belief that the proposed Federal system could be of no service to our institutions and that it would be wasteful and unnecessary in the public interest.

Among those protesting are the most experienced, widely known, and highly respected representatives of the savings and loan movement in the State.

Mr. REILLY. I should judge from your statement that it is your judgment that the mortgage bankers' loans are cheaper to the home

owners.

Mr. CODY. Considerably, when the actual figures are before us. Mr. REILLY. Now, could the mortgage bankers do the work the building and loan people are doing?

Mr. CoDr. No. They are of great use and of great service.

Mr. REILLY. Then, there is an absolute necessity for those building and loan institutions.

Mr. Copy. Not only that, but to encourage and help them in every legitimate way, as long as you do not injure other interests.

Mr. REILLY. What effect has it on this bill whether the mortgage bankers' rates are lower or higher than the building and loan institutions, providing there is a necessity for the existence of the building and loan people to-day ?

Mr. Copr. Just this, Mr. Chairman, that in formulating its judgment the committee certainly would seek to have an accurate and true picture of the mortgage conditions in the country to-day and the actual rates that the home owner is paying. He is the man we are worrying about. What is it costing him? Is he being gouged? Somebody spoke about foreclosures, and some one else mentioned a 60 per cent discount figure and it left that figure in the minds of this committee, and it seemed only fair, and we appreciate the opportunity, to bring you such facts as the building and loan people have published, and the Department of Commerce has compiled, from unprejudiced, impartial sources, so that you should have before you the actual facts, in the interest of fair play, in our rebuttal.

Mr. REILLY. These other statements have no relevancy in my judgment, either one of them.

Mr. CODY. Which other statements?

Mr. REILLy. The statement as to the mortgage banker being a gouger, and such things.

Mr. CODY. It seemed to me that it was unfair to have them in the record, but we did not protest at that time.

Mr. REILLY. Are there any mortgage bankers in favor of this bill. that you know of?

Mr. Conr. Well, it would seem there must be, Mr. Chairman, out of a membership of between three and four hundred. A member of our association from Baltimore testified in the Senate hearings that he did not favor the bill as prepared, but, I think, if the bill were amended in accordance with his Senate testimony and that of the other Baltimore gentleman who was before this committee, he would favor the bill.

Mr. REILLY. You heard the mortgage banker before the committee yesterday, Mr. Monks, from Ohio?

Mr. CODY. Yes; he is a banker, not a mortgage banker. He is vice president of the Guardian Trust Co. of Cleveland, which is primarily a commercial bank, but they have a great many mortgages.

Mr. REILLY. They were in favor of the bill, and thought it would 'be advisable if we just removed some limitations.

Mr. Copy. If the 19 suggestions he made to the committee were accepted, I understood he would favor the bill.

Mr. REILLY. You do not want the bill?

Mr. CODY. We feel it is a dangerous bill in any form.

Mr. REILLY. And your principal objection to it is that it will increase unnecessary home building?

Mr. CODY. I would hardly call that the principal objection, although it has been a source of great concern.

Mr. REILLY. Is not that the big thing you are concerned with? Mr. CODY. I would refer you to Graeme Smith's statement of yesterday. We would rest our case upon the points he made. We thought it one of the best presentations of the opposition to the bill that the committee has had.

Mr. LUCE. For the benefit of the reader of the record, I would like to call attention to the fact that while these figures are helpful and for one I am glad to have them, the averages must be taken with a grain of salt because on the face of it they appear not to be weighted averages, so that if that is the case, Montana, with an excessive interest rate, bears just as much on the average as New York, with many times the number of inhabitants.

If these are weighted averages, I will withdraw my criticism.

Mr. CODY. The averages in Table 1 are weighted averages, worked out by skilled auditors in behalf of the United States League of Building and Loan Associations and include a full statement of every dollar of credit and every dollar of debit that goes in. You will find these averages in the right-hand column, weighted and fully accurate, I am sure.

The premium average of 2.72 per cent per annum, in Table 6, was derived from the Department of Commerce figures, and not "scientifically" prepared, and was computed to give you an idea of the approximate average throughout the country.

Mr. LUCE. That is all right, then.

Mr. REILLY. The committee will adjourn until 10 o'clock to-morrow morning and will meet in the committee room of the Committee on Public Buildings and Grounds.

(Whereupon, at 11.55 o'clock a. m., the committee adjourned.)

CREATION OF A SYSTEM OF FEDERAL HOME

LOAN BANKS

FRIDAY, MARCH 25, 1932

HOUSE OF REPRESENTATIVES,
SUBCOMMITTEE OF THE COMMITTEE
ON BANKING AND CURRENCY,

Washington, D. C.

The subcommittee met this day at 10 o'clock a. m., Hon. Michael K. Reilly (chairman) presiding.

Mr. REILLY. Gentlemen, the subcommittee will come to order. I think Mr. Clark is the first witness we have.

STATEMENT OF THOMAS F. CLARK, VICE PRESIDENT MORTGAGE BANKERS ASSOCIATION OF AMERICA, AND CHAIRMAN OF LEGISLATIVE COMMITTEE, NEW HAVEN, CONN.

Mr. CLARK. I wish first, Mr. Chairman, to make a statement of the position of the Mortgage Bankers Association of America in this situation, which will account for the president, Mr. Cody, and myself here; and as has been stated before, without any lobbying or anything else, we are working in the interest of our membership, who represent billions of invested capital. We are not assuming to represent the unorganized home owners, but we are representing the home owners in general by attempting to protect to-day the investments that have been made by them in their homes during the past number of years.

One of the questions that was presented to you during the testimony or statement by Mr. Bodfish on last Friday was that the demand loan was being made in New England; that we were making them, and whether or not he made the statement, the inference was left with your committee that the demand loan was the cause of much suffering on the part of mortgagees, because of the calling of these mortgage loans. I want to say that we have been making demand mortgage loans for a number of years, and we have loaned a lot of money, just how much I do not know, but I wish to give you information directly from three of the largest savings banks in New England, whose policy is demand mortgage loans. I appreciate the fact that when you speak of a demand mortgage loan to a man from the West or the South, you are speaking of something that, to him, seems impossible, because the thought of a demand loan is always of immediate calling, and subsequent difficulties.

In Connecticut the demand loan is the proper loan, and the home owners want demand loans. There the home owner knows it as a

savings bank loan. We are carrying some for an insurance company made on the demand basis for eight years; we have a great many of them, and we are making them every day.

I want to read you first a letter from A. E. Hunt, assistant treasurer of the Connecticut Savings Bank of New Haven:

MY DEAR MR. CLARK: Your favor of the 19th received.

MARCH 22, 1932.

In reply to your inquiry therein, would say that all mortgage loans made by the bank are in demand form. If interest and taxes are promptly paid they run indefinitely, some having been on our books for 35 years or more, even with change of ownership.

Any foreclosures made by this bank for many years have been mostly on large tenement houses, but very seldom on homes. We collect interest six months in advance, all loans being automatically extended in that way and foreclosures on homes are not started unless the owner owes taxes and becomes one year in arrears on interest payments. In most cases we find that arrears are caused by too large a second mortgage, payments on which being more than the home-owner can swing.

We carry close to 5,000 mortgages, almost exclusively on homes, amounting to $20,000,000.

State laws, as you know, limit a mortgage not to exceed 50 per cent of the value, appraisal being made by men judged competent and loan to be approved by the finance committee of the bank.

Trusting this will give you the necessary information.

Very truly yours,

A. E. HUNT, Assistant Treasurer.

Now I have a letter from the New Haven Savings Bank, of New Haven, Conn., dated March 21, which says:

DEAR MR. CLARK: Your favor of March 19th relative to certain questions in relation to demand notes on mortgage loans held by this bank, was received this morning and I haste to reply.

1. What is the percentage of loans made by your bank on demand?

All of our mortgage loans have a note payable on demand, excepting a very few loans on centrally located business property, in which case a time note for three or five years has been required.

2. The average length of time that these demand loans run for, if interest payments are kept up?

Indefinitely, if taxes, interest, insurance premiums, and property is kept in repair. All property is reappraised at least once in five years and payment on account of the principal may be required.

3. Approximately how many home loans your bank has made, or has a record of at this time?

We have no segregated list of home loans on our books, but would say approximately 90 per cent of our loans are on residences, mostly on one, two, or three families.

4. Approximately amount of these loans?

Approximately 5,000.

5. What is the policy of your bank with reference to demand loans made on homes?

I think the answer to question No. 2 will give our policy with reference to demand loans on homes.

With very kind regards, I remain,

Yours very truly,

WALTER R. Downs, Treasurer.

Now I have a third letter from the National Savings Bank, of New Haven, Conn., dated March 21, 1932, which says:

MY DEAR MR. CLARK: We have your letter of the 19th instant relative to mortgages payable on demand.

We have $4,483,687, in first mortgages, all of which are payable on demand. We were incorporated in 1866 and have always made this form of mortgage. It would be a very difficult matter to state the average length of time these loans run. The oldest mortgage loan that we have was made in August, 1867.