Mr. SPENCE. You are making an average of 42 percent? Mr. FRANK C. FERGUSON. Yes. Mr. SPENCE. Are they insured? Mr. FRANK C. FERGUSON. No. Mr. SPENCE. Do you sell any of that paper? Mr. FRANK C. FERGUSON. Do we sell any of the F. H. A. mortgages that we took? Mr. SPENCE. Yes. Mr. FRANK C. FERGUSON. Yes. Mr. SPENCE. Do you still service them after you sell them? Mr. FRANK C. FERGUSON. Yes. Mr. SPENCE. You continue to service them? Mr. FRANK C. FERGUSON. Yes; we retain the servicing rights. Mr. SPENCE. What percentage of the value of the property do you loan? Mr. FRANK C. FERGUSON. You mean other than F. H. A. mortgages? Mr. SPENCE. Other than F. H. A. Mr. FRANK C. FERGUSON. Fifty percent. We are a national bank, I am talking about. Mr. SPENCE. Is that amortized? Mr. FRANK C. FERGUSON. No; in the old days we did not amortize. We loaned 50 percent of the then value of the property. Mr. SPENCE. That is what you continue to loan on mortgages outstanding? Mr. FRANK C. FERGUSON. We have not made any mortgage loans without Mr. SPENCE (interposing. What has been the percentage of the loss on mortgages to the homes? Mr. FRANK C. FERGUSON. In our section? Mr. SPENCE. In your organization. Mr. FRANK C. FERGUSON. Very heavy, on 50 percent. Mr. SPENCE. On the 50 percent? Mr. FRANK C. FERGUSON. Very heavy; yes. Mr. SPENCE. Has that continued over a long period of time? Mr. FRANK C. FERGUSON. Up to 1929 the losses on such loans were negligible. Since 1929 the losses on 50-percent mortgages have been very heavy. Mr. SPENCE. Are these old mortgages which you made before that period, which you carried along, amortized over a period of 20 years? Mr. FRANK C. FERGUSON. Made in that period, say from ours are made in the period from 1923 to 1929, which we got caught with in 1929; losses on those mortgages have been very heavy. Mr. SPENCE. It is on the old mortgages which you made before 1929 that you sustained your greatest losses? Mr. FRANK C. FERGUSON. That is right. We haven't made any since 1929. Mr. SPENCE. You cannot, under the F. H. A.? Mr. MCKEOUGH. Is that why we have the F. H. A., Mr. Ferguson? Mr. FRANK C. FERGUSON. Yes; that is why you have the F. H. A. Mr. HANCOCK. Mr. Ferguson, what was the average term of your straight mortgage loans? Mr. FRANK C. FERGUSON. We made them all in our section of the country, and I think in New York and New Jersey. I think in New York the banks make loans for 1 year. Mr. HANCOCK. What percent of your straight mortgages were paid at maturity, and what percent of them had to be renewed or refinanced? Mr. FRANK C. FERGUSON. We never bothered to renew them. We ran them along as past-due mortgages. Mr. HANCOCK. You ran them along as past-due mortgages? Mr. HANCOCK. What percent of them were paid off at the end of 1 year? Mr. FRANK C. FERGUSON. Practically nothing. Mr. CRAWFORD. Mr. Ferguson, with reference to this 10-percent purchase by the member banks, assuming that mechanism is completely carried through and the banks thus woven into the mortgage fabric of the Nation, do you feel that that would give the mortgage holder as fair a chance for marketing his mortgage paper from time to time and liquidating quickly, as a stockholder, when he uses the mechanism of the stock exchange to bring about his liquidation? Mr. FRANK C. FERGUSON. I am not following you. I could not follow your question. Give that to me again. Mr. CRAWFORD. If the member banks weave themselves into the mortgage financing fabric of the Nation as you have suggested, do you feel that that would bring about a liquidating mechanism for the mortgage holder, that would come to his rescue in liquidating, as a stock exchange comes to the rescue of the man who holds corporate stock and desires to liquidate? Mr. FRANK C. FERGUSON. No. Mr. CRAWFORD. That is all I have. The CHAIRMAN. Thank you very much, Mr. Ferguson. (Whereupon, at 12:40 p. m., the committee adjourned to 10 a. m., Friday, December 10, 1937.) 33604-37- -12 AMENDMENTS TO NATIONAL HOUSING ACT FRIDAY, DECEMBER 10, 1937 HOUSE OF REPRESENTATIVES, COMMITTEE ON BANKING AND CURRENCY, Washington, D. C. The committee met, pursuant to adjournment, at 10 a. m., Hon. Henry B. Steagall (chairman) presiding. Present: Messrs Steagall, Goldsborough, Reilly, Hancock, Williams, Spence, Farley, Meeks, Ford of California, Brown, Patman, McKeough, Evans, Transue, McGranery, Barry, Wolcott, Gifford, Luce, Crawford, and Gamble. The CHAIRMAN. Gentlemen, there is a witness here from New York who desires 2 minutes. We shall be glad to hear him. STATEMENT OF JOSEPH E. HUGHES, PRESIDENT OF THE WASHINGTON IRVING TRUST CO., TARRYTOWN, N. Y. Mr. HUGHES. Mr. Chairman, we have made approximately 1,200 Federal housing loans--- The CHAIRMAN. Now, who is "we"? Mr. HUGHES. The Washington Irving Trust Co., of Tarrytown, N. Y., of which I am president amounting to about $5,500,000, and in excess of the amount required in our portfolio, we have sold these to about 32 lending institutions, including banks, insurance companies, and charitable organizations located in northern New York, Vermont, Maryland, New Jersey, Indiana, and Ohio. It has been our experience that many institutions are not convinced that these mortgages even at 80 percent of the appraised value and a return of approximately 5 percent are an attractive investment. In other words, it has required considerable salesmanship to dispose of these mortgages, and only a very small percentage of the institutions. that have been contacted have shown any interest in them at all. A great many of the insurance companies have neither made nor purchased any of these loans. In cases where they have bought, they have taken only what would be considered a prime risk, and have paid little attention to the guarantee. Very few of the mortgages have been made by New York City savings banks or commercial banks. While a fair percentage of the F. H. A. loans that have been made in the country have been made in the New York area, the building program of the last few years would not have been possible if banks such as ours had not been able to bring capital to the New York market from other parts of the country where building has not been so active. It has also been our experience that it is much more difficult to sell mortgages on houses under $6,000 than on those over $6,000. I firmly believe that if the risk is increased and the rate of return lowered this market will dry up. The return that these investors will receive in comparison to tax-exempt bonds will not be sufficiently åttractive to offset the risk involved in the additional bookkeeping. It has been our observation that houses in this community sold well until business started to drop off. Lack of confidence in the future and the high cost of labor and materials slowed up building rather than the cost of finance or down payment. I believe that the interest rate in comparison to tax-exempt bonds is not sufficiently attractive, if you reduce it any more, because of the additional risk and the additional amount of bookkeeping required on F. H. A. mortgages. The CHAIRMAN. We thank you very much for your statement. Mr. FARLEY. Mr. Chairman, there is one thing he brought up there, I wish he might explain now. You just made a statement that mortgages under $6,000 were much more in demand than those above? Mr. HUGHES. I said those above $6,000 were more in demand than those below. Mr. FARLEY. I just got it reversed then. In other words a $10,000 mortgage is more in demand than a $6,000 mortgage? Mr. HUGHES. We have found that in our experience. Mr. FARLEY. How does it happen that the Home Owners' Loan Corporation is not having that experience? Mr. HUGHES. I could not answer that. Mr. FARLEY. That is a very important matter before this committee It has already been up for discussion. The Home Owners' Loan Corporation has foreclosed a lot of mortgages. They have very little difficulty selling houses at $6,000 and under, but when it gets up to around $10,000 they cannot sell them at all. Mr. HUGHES. The Home Owners' Loan Corporation houses were of a different type than the ones you are talking about under the Federal Housing. They were the old type of houses. The large mortgages are on large, old houses that are antiquated, whereas your houses here are modern houses, the mortgages of $10,000. Mr. FARLEY. That is all I wanted to ask. The CHAIRMAN. Our next witness is Mr. Bodfish. STATEMENT OF MORTON BODFISH, EXECUTIVE VICE PRESIDENT OF THE UNITED STATES BUILDING AND LOAN LEAGUE, 333 NORTH MICHIGAN AVENUE, CHICAGO, ILL. (Mr. Bodfish presented a typewritten statement including amendments, which is as follows:) STATEMENT RE LEGISLATION TO STIMULATE CONSTRUCTION OF HOMES AND APARTMENTS (H. R. 8520 AND S. 3055) (By Morton Bodfish, executive vice president of the United States Building and Loan League, Chicago, Ill.1) The savings, building, and loan associations of the United States are anxious to do everything practical and possible to encourage the buying, building, and owning of homes and the improvement of housing and employment conditions throughout the United States. These thrift and home-financing institutions consider it most appropriate that the President of the United States should ask the Congress to consider this question at this time. We are in favor of general retrenchment in Government activities and expenditures. We believe that house |