cases which were withdrawn. Including withdrawals the percentage is 19. Mr. MCKEOUGH. What was the primary cause for rejection? Mr. MCKEOUGH. Was there any indication in your studies in connection with the rejection that caused you to be hesitant to guarantee the mortgage if one that you serviced (the mortgagor) was over 40 years of age at the head of a family? Mr. FISHER. We have not made a break-down of the reasons for rejection. Mr. MCKEOUGH. In other words your statistics have not been developed in any way to show that among the reasons for disapproval is that industries are reluctant to employ anyone over 40 years of age? Mr. FISHER. No; we have no such statistics. Mr. MCKEOUGH. In other words, that has not come to your attention? Mr. FISHER. We are preparing such a tabulation now. Mr. MCKEOUGH. That has not developed to the point that you can offer anything to the committee in connection with the proposed new law? Mr. FISHER. There is nothing we can give you statistically, but we can tell you as a matter of general information that the causes of rejection vary widely. Mr. MCKEOUGH. Is there some particular major factor you have recognized in your study? Mr. FISHER. There is nothing that stands out. There is no particular item that stands out in our experience. It may be the location of the property. It may be in some cases the age of the borrower and the probability that he will not be able to carry through the mortgage to its end. It may be the proportion of the mortgage to the value of the property. In many cases we have had to reject, but we have made a counter proposition that instead of insuring for 80 percent on that mortgage we would insure it for 70 percent. Mr. MCKEOUGH. Has your study developed this observation: That those you have approved have an average income of say $2,000 or $2,100 or $2,300 or $2,900, what is your average income of those borrowers that you have approved? Mr. McDONALD. The average is between $2,000 and $2,500 per year. Mr. MCKEOUGH. The average is between $2,000 and $2,500 per year? Mr. McDONALD. There is the chart showing the distribution of income. Mr. MCKEOUGH. So that the possibilities of this enabling legislation which you are now here recommending we consider and adopt will have very little effect insofar as it relates to the benefit of the great mass of industrial workers of the Nation in that their income as usually based on the statistics of the Labor Department is considerably less than the average of $2,000 a year; is that a fair conclusion? Mr. McDONALD. The reason, Mr. Congressman, why I referred to that distribution of income is that the average income is probably deceiving in that it weighs heavily against the high income. A considerable percentage of our mortgagors are receiving an income of under $2,000 and some of them under $1,500, and we have a few cases in which it is under that. Mr. MCKEOUGH. But your higher loans between $2,000 and $2,500 and $1,500 and $2,000, those are the two largest groups. I am concerned not so much in the great protection that is to be set out to the lender. I differ from my colleague from Massachusetts because it has been my experience the lender needs very little protection insofar as his interest needs to be safe-guarded by Government action. It is the borrower we are concerned with and we are concerned with him because there has been a great shortage of housing facilities in this Nation in spite of its being the richest nation in the world, and we want to try to help that. I think that everybody on the committee is convinced if we can regenerate a construction program in this country we will have gone a long way to dispel the depression in business and stimulate industrial activity, but more than that we are making it possible for deserving citizens to own their own homes and the Government has an obligation to do this. What I am concerned with is the $6,000 maximum. I can not visualize that that $6,000 would be of any avail particularly in my city of Chicago, because both material and labor cost will be substantially higher. As I see the situation as applied to the construction of new homes in my city, particulary when I know the average income there as reflected by the Labor Department statistics is lower than shown here I share the views of Mr. Fish, of New York, that the interest rate is the thing that stymies and prevents people from owning their homes, and the thing that encourages me is that in spite of the great sacrifices made throughout the depression years there is still a great desire on the part of the great bulk of our people whom I think are the best people in the world, to own their own homes, and I share the views of Mr. Fish and I hope you can come back during these hearings and put out ways and means to reduce the interest charges even though the down payment is 10 percent. I am willing to go to the point of making no requirement in order that those deserving citizens of our Nation may have their own homes and get the things they should have, and I heartily agree with you, Mr. Fish. The CHAIRMAN. Gentlemen, the committee will stand adjourned until tomorrow morning at 10:30, at which time Mr. Jesse Jones will be with us. Mr. McDonald will resume his statement on Thursday morning. (Whereupon, at 12:30 o'clock p. m., the committee adjourned until 10:30 o'clock a. m., Wednesday, December 1, 1937.) AMENDMENTS TO NATIONAL HOUSING ACT WEDNESDAY, DECEMBER 1, 1937 HOUSE OF REPRESENTATIVES, COMMITTEE ON BANKING AND CURRENCY, Washington, D. C. The committee met at 10:30 o'clock a. m., pursuant to adjournment, Hon. Henry B. Steagall (chairman) presiding. Present: Messrs. Steagall, Goldsborough, Reilly, Hancock, Williams, Spence, Farley, Meeks, Kopplemann, Ford of California, Brown, Clark, Patman, McKeough, Transue, McGranery, Wolcott, Fish, Gifford, Luce, White, Crawford, and Gamble. The committee had under consideration H. R. 8520, the administration housing bill. The CHAIRMAN. The committee will come to order. Mr. Jones, come around please. Gentlemen, I have asked Mr. Jones, Chairman of the Reconstruction Finance Corporation, who needs no introduction to this committee, to discuss this bill, and Mr. Jones, we shall be glad to have you proceed uninterrupted, if you desire to do so, and later the committee may wish to interrogate you. STATEMENT OF JESSE H. JONES, CHAIRMAN, BOARD OF DIRECTORS, RECONSTRUCTION FINANCE CORPORATION Mr. JONES. Mr. Chairman and gentlemen, I have no prepared statement. I really came over as a character witness for Mr. Stewart McDonald. However, I do not see him here. [Laughter.] The CHAIRMAN. Mr. McDonald, I think, is before the Senate committee. Mr. JONES. I would prefer to reply to questions if I could be allowed to do that. I have been rather familiar with the operation of the F. H. A. We have had a good deal of business with it. The CHAIRMAN. I want to direct your attention to that very phase of this legislation, that is to say we would like to have you tell us just what the R. F. C. has been doing under the existing law and what change in your service will be accomplished by the present proposed legislation. Mr. JONES. I think there would be no change as far as the R. F. C. is concerned. I noticed in the President's message he contemplates the R. F. C. will buy stock in the National Mortgage Association up to a limited amount. That we can do under authority we now have. The CHAIRMAN. Let me ask you about that. Just where do you find authority for the purchase of stock in these associations at this time? Mr. JONES. We asked you 3 years ago to give us authority to buy stock in mortgage companies and national mortgage associations with a view to helping the mortgage situation and you gave us the authority up to the limit of a hundred million dollars. We tried to get mortgage companies organized throughout the country, but found no private money willing to go into the business. We therefore organized the RFC Mortgage Co. and under that authority purchased its stock. That company has been making mortgage loans and purchasing F. H. A. insured mortgages. Mr. GOLDSBOROUGH. You do make loans through your own mortgage company? Mr. JONES. We make loans. Mr. GOLDSBOROUGH. What percentage of the appraised value of the property do you loan?. Mr. JONES. It depends entirely upon the character of the property and its earning power. Mr. GOLDSBOROUGH. What would be your range? Mr. GOLDSBOROUGH. What would be your range? Mr. JONES. Our range would be from about 50 to 75 percent. Mr. GOLDSBOROUGH. You do not take many 75-percent mortgage loans, do you? Mr. JONES. Sir? Mr. GOLDSBOROUGH. You do not take many 75-percent mortgage loans, do you? Mr. JONES. I doubt if we have. we have. We have had very few applications for mortgage money to build because of the absence of equity money. People are not disposed to build now because of the many tragedies in real-estate operations in the past, and though they were not as numerous or as severe as the stock market tragedies, nevertheless the stigma seems to last longer. Mr. WILLIAMS. You make those loans on all character of buildings? Mr. JONES. Construction; yes, sir. Mr. WILLIAMS. I mean by that commercial as well as residential. Do you make them on all? Mr. JONES. Yes; we would like to. Mr. WILLIAMS. Well, you do? Mr. JONES. We make some. Mr. WILLIAMS. What is your interest rate? Mr. JONES. Four and one-half percent. It was 5 and we reduced it to 42. Mr. WILLIAMS. To what extent have you made loans on residential construction? Mr. JONES. We have made no loans for construction of small residences, but we purchase F. H. A. mortgages. Mr. WILLIAMS. That is on the large-scale housing projects? Mr. JONES. On small homes. Mr. WILLIAMS. Does it apply also to individual units? Mr. JONES. We purchase F. H. A. mortgages on small units. Mr. JONES. Yes. Mr. FISH. What is the total amount of loans on homes, apartment houses and all construction? The CHAIRMAN. I understood Mr. Jones to say he had made no loans on homes. Mr. JONES. Except the purchase of F. H. A. mortgages. |