Lapas attēli
PDF
ePub

where the foreclosures are even greater in number than they are in the city of Pittsburgh, and I know I am giving you the actual facts concerning what we would all agree must be a normal city, or one a little above a normal city.

Third, this measure, if adopted, will enable millions of depositors in banks and building and loan associations to once more draw upon their savings in home financing institutions, which they can not now do, thus restoring purchasing power, which will be helpful to the entire business community and aid in restoring normal conditions. Fourth, by aiding home financing institutions to function normally, we believe this measure will stop the rising interest rates on home financing funds which are now everywhere prevalent throughout the country, and which are providing an added obstacle and difficulty for the home buyer.

I would like to add here that I had a letter from Johnstown, Pa., where a writer told me that he had been endeavoring to get some mortgage money and he had finally located a man that they claimed had $700,000. They agreed they would lend on homes, on the condition that the interest rate was to be six per cent, one per cent extra charge for service, and three per cent brokerage fee for one year; in other words, ten per cent first mortgage money for one year.

I honestly believe that were this bill not pending, we would find much more of a "racket" in the mortgage field to-day than we are actually finding.

The proposed system will meet permanent needs, first, because it will facilitate better distribution of home financing funds throughout the country. The bill wisely provides that the regional home loan banks may do business with one another, thus enabling funds to be transferred from regions where there is a surplus to regions where funds are needed. This would correct a present great injustice. There seems to be no good reason why a home buyer in one State, who is a good and sound credit risk, should be compelled to pay two per cent or three per cent higher interest than a similar home buyer in another State, merely because of greater geographical distance from financial centers. Funds accumulated in financial centers are derived from all parts of our country and credit, especially for home buyers, should be made equally available in all parts of the country.

Second, the home loan bank system will at all times stabilize the operations of home financing institutions which are members, thus preventing recurring emergencies.

Third, the reserve system provided would create confidence in home financing institutions, thus encouraging depositors and savings which would provide at all times a more adequate supply of funds.

Fourth, through the supervision provided by the bill, first mortgage financing for homes would tend to become more uniform throughout the country and sound and conservative practices could be_developed.

Fifth, the establishment of a sound basis of first mortgage financing for homes would simplify very greatly the problem of junior financing, whenever it may be necessary. If the first mortgage loan has been made upon a fair valuation and prepayments are distributed over a long enough period of time, so as to not be burden

some, it will be possible for the home owner who needs additional aid to obtain it without the risks which now lead to excessive and usurious charges. The present widespread practice is that too many home buyers assume a short-term first mortgage and a short-term second mortgage, simultaneously, and the burden is often more than they can bear.

Thousands of our members have spent their entire business lives in home financing, and in home development. It is our deliberate judgment that the home loan bank system is more sorely needed as a permanent measure than as an emergency measure. Home ownership throughout the country is receding. We believe that if Congress enacts this measure, it will turn the tide.

We do not feel that the type of credit offered by the Reconstruction Finance Corporation can appropriately be used for long terms, which are necessary to aid home owners. We have also heard it frequently stated that the funds of the Reconstruction Finance Corporation will hardly be adequate to meet the many demands from railroads, banks, and other lorge institutions whose solvency must be maintained.

Every day's delay in the passage of this bill and the creation of the home loan bank system, which it provides for, will mean additional homes lost to their owners and additional discouragement on the part of the substantial average American. Congress has been wise and expeditious in helping to stabilize measures designed to aid the big banks-the great financial institutions. Here is a measure which is designed to help the great masses of our people—the home owner.

Our association asks respectfully that you consider it favorably and that you act upon it as quickly as possible.

Mr. REILLY. That is all you have to offer?

Mr. STEVENSON. Yes, sir.

Mr. REILLY. Thank you.

STATEMENT OF NATHAN WILLIAM MacCHESNEY, GENERAL COUNSEL NATIONAL ASSOCIATION OF REAL ESTATE BOARDS

Mr. MACCHESNEY. Mr. Chairman and gentlemen of the committee, my name is Nathan William MacChesney, of Chicago. I am a lawyer by profession, and am a bank, trust company, and life insurance company director and counsel. I am here representing the National Association of Real Estate Boards, as its general counsel. Mr. REILLY. Did you appear before the Senate committee?

Mr. MACCHESNEY. I did not. I was there, but I did not appear before them. However, Mr. Chairman, I have been over all of the testimony that was offered before the Senate committee, and have been over the various drafts of the bills and the various statements and pamphlets that have been issued with reference to them. It is my purpose to briefly state to you what I regard as the constructive suggestions and criticisms that were made in that testimony, under about 15 or 18 headings, and to suggest to you where we think perhaps the bill might properly be modified to meet those constructive suggestions and where we think the suggestions, as a matter of fact, would harm rather than help the bill.

Mr. REILLY. That is what the committee would like to hear.

Mr. MACCHESNEY. I would like, for the purpose of the record, to call your attention to the text of President Hoover's statement, under date of November 13, in which he stated the four purposes of the

act as

1. For the present emergency purpose of relieving the financial strain upon sound building and loan associations, savings banks, deposit banks, and farmloan banks that have been giving credit through the medium of small mortgage loans upon urban and farm properties used for homes, thereby to relieve pressures upon home and farm owners.

2. To put the various types of institutions loaning on mortgage in a position to assist in the revival of home construction in many parts of the country and with its resultant increase in employment.

3. To safeguard against the repetition of such experiences in the future. 4. For the long-view purpose of strengthening such institutions in the promotion of home ownership particularly through the financial strength thus made available to building and loan associations.

Now, those four purposes we think are served by this proposed legislation, and just a word as to one or two aspects of them.

In the first place, as to the need for strengthening the financial institutions and giving them relief, I think no one will deny that in the light of conditions obtaining throughout the country there is a very large number of financial institutions in distress. There is Ohio, with its 90 or 91 building and loan associations taking notice, and Cook County, where I came from, in Illinois, where Chicago is situated, with 105 or 106 small banks having closed their doors, a very substantial portion of them because they had frozen assets based upon real-estate securities, and that is not in many cases because they have not been soundly managed, as some of the opponents of this proposal would state, but because people have not been in a position to do their normal investing in securities of any kind, so that these institutions, some of which paid out as high as 60 or 70 per cent of their deposit liability before closing their doors, had on hand perfectly sound mortgage securities which in any ordinary times would have been passed onto the investors through purchase by customers of the banks.

With reference to the foreclosure situation, may I state-because I take it you gentlemen prefer to have a man talk about something he knows something about, rather than guess at it-that even in our own county the number of foreclosures in the city of Chicago exceeds that which has ever been known before. The history of foreclosures in Cook County is rather typical, so far as I have been able to check it, of the other communities where our organization has offices, and we have coming through our office, because of our representation of certain communities, mortgage foreclosures very widely scattered over a group of some six or seven States.

The first situation in Cook County was that the speculative buildings got into trouble, the buildings which were built with a very narrow margin, large buildings. Then, in the second year of the depression, the soundly financed, large enterprises of the new type, like office buildings and buildings of that type, where the demand for space had fallen off so that they could not meet their fixed charges, even though soundly financed, got into trouble, and that spread to a point where most of the hotels, for instance, in the city of Chicago, due to a lowered occupancy and operating income, are to-day in trouble-I would hate to say how large a percentage.

I would not claim that our city is in better shape than others, as Mr. Stevenson has with respect to Pittsburgh. I think perhaps that Chicago, due to a variety of circumstances, is in a somewhat worse position.

The large number of foreclosures being filed are with reference to the class of properties dealt with in this bill, of the small-home' owner, because the banks where they normally did their financing are out of business. Their securities are being liquidated. For instance, if I may give one case, the State Bank of Chicago, which was a large institution, we will say with $40,000,000 worth of mortgages on hand, was affiliated through the usual arrangements with a series of small banks. The State Bank of Chicago was consolidated with the Forman National Bank, and the Forman National Bank merged with the First National. As a matter of fact, they went out of business between twilight and dawn, but in order to save a catastrophe the bank which took it over guaranteed $12,500,000. They were largely in the mortgage business. When the woman who made her little mortgage at the small bank, or the State Bank of Chicago, or the Forman, now goes into the First National, she is referred to the liquidating agent at one of the other trust companies, and the usual response is, "We are sorry, but we can not renew the loan," and that is going on all over the country with reference to foreclosures, because the source of credit has been absolutely frozen

up.

It is my observation that the statement that was made that there is plenty of credit money available is absolutely untrue under present conditions. I say that because I know, as a life insurance counsel, that there is a considerable number of life insurance companies in this country where their policy loans have reached a point where they absorb their premium incomes, and they are out of the market. There is another group of companies as to which that is so nearly true that they have practically withdrawn from the market. There is a third group of companies, and I imagine the Metropolitan Life Insurance Co. is one of them, where they have a very large surplus still available for investment, but there are many companies where they recognize that even though they are not in such a position, the demand for premium loans has reached a point where, if it continues, they will be in a position of having to sell their securities in order to realize the money to loan to their policyholders, and under those conditions they realize that if they were mortgage loans they would have to be sacrificed.

I was discussing this question with one of the companies with which we are associated, a life insurance company, with large investments, within a week, and their average policy loan has risen within a period of 24 months over 500 per cent. I think that is rather significant as to the background of need.

One of the other questions covered by the President of the United States in his statement was the question with reference to the promotion of home ownership. It has been claimed that there is no need for the promotion of home ownership at this time, and that the sole effect of this legislation would be to increase still further a bad condition of inflation and of overbuilding. Well, God knows, perhaps what we need to-day is a little moderate inflation, under strict control, to overcome an abnormal deflation; and I am not a

radical when I say that. The finance commission of the House of Lords of England, under the leadership of Lord McMillen, one of the ablest judges of all England, stated that that was the absolute sine qua non in England of a recovery of economic stability, and that is the feeling in many places, but there has been misrepresentation as to the actual conditions with reference to home ownership and occupancy before the committees and in public statements. The fact of the case is that the actual provision for individual family occupancy is not so great as has been contended. I understand that the Department of Commerce states that there are about 30,000,000 families in this country, with 25,000,000 residential units, and about 13,500,000 home owners. The President has called attention to the fact which we know in our own experience that throughout this country there is a huddling of families, so that if the opportunity for employment were to come back shortly, there would be a positive shortage, but the national association had a survey made of the actual present conditions, not based upon hope, but upon the conditions as they exist, and it is stated that

In measuring the present supply of residential space the survey shows that "doubling" of two or more families in units intended for a single family is practically counterbalancing the effect of the present practical cessation of residential construction. It is thus masking what other conditions would in many cities be an undersupply of desirable single family dwellings. With this counterbalance, 84 per cent of the cities report the normal supply or short, 71 per cent showing an equilibrium of supply and demand, 13 per cent an actual present shortage, and 16 per cent an oversupply.

You will find that survey, which I think you would like to examine, at page 550 of part 3 of the Senate hearings upon this bill.

Now, gentlemen, there are two or three headings under which I desire to take this matter up with you, if I may, and in view of some of the questions raised yesterday I should think that if any of the gentlemen have some particular question to ask, it might be well to ask it as we go along, as I am going to deal with certain specific sections of the bill.

May I turn first to one or two queries that were made by the chairman of this committee? I would like to answer them, as I take it that they represent some of the things that the committee is thinking about. I would like to give our impression of this matter first. How will the bill help private mortgagors and mortgagees?

Now, first, it will help the private mortagor because he will be able to go to institutions like the banks or the building and loan associations and renew his loan, because those institutions under this bill will have an outlet and therefore they can without further freezing their assets, and with due regard to their other obligations, renew that loan. That is the way it helps the mortgagor.

As to the private mortgagee, and I assume that that means the man who lends his own money to the so-called mortgagor, I think the bill as written perhaps is not as broad in its terms as it should be, and I want to discuss that in a minute, if I may.

The so-called mortgage banker, as denominated by that term, is not really a banker. Under the laws of various States, he would not be allowed to use the term "bank." He performs a useful function, and is really a broker or jobber. He is a middleman, but he does business mostly upon other people's money. The ordinary mortgage

« iepriekšējāTurpināt »