all but people who now come in and want to get money for this particular purpose.

Senator BARKLEY. Mr. Fahey, you may now go ahead with your remarks about the bill pending before us.

Mr. FAHEY. It seems to me, gentlemen of the committee, that this problem needs to be considered from three different angles:

1. That of the mortgage-debt problem;

2. From the standpoint of employment; and

3. From the standpoint of the need of better housing in this country.

We on the board of the home-loan bank are convinced that there has been very little appreciation of the seriousness of the mortgagedebt problem and the necessity of attacking it vigorously if we are to avoid increasing troubles in the years to come.

As you gentlemen know, the mortgage debt against urban homes is the largest single block of indebtedness in our national balance sheet. The real-estate debt of the country is something in excess of 35 billion dollars. The debt against urban homes of the amount of $20,000 or less is about 2112 billion dollars.

Senator TOWNSEND. Of the 35 billion dollars you referred to?
Mr. FAHEY. Yes, sir.

Senator BULKLEY. And the 35 billion dollars does not include farm mortgages.

Mr. FAHEY. Oh, no. It is exclusive of them.

Senator TOWNSEND. What are they?

Mr. FAHEY. Farm mortgages, according to latest estimates of Government departments, amount to approximately 8 billion dollars. You will see, therefore, that the debt against urban homes is two and a half times the farm debt in its aggregate. It is about equal to the total debt of the Federal Government and all our State and municipal debts. That 212 billion dollars compares with about 8 billion dollars of commercial loans in all the banks of the country, including the loans against stock-exchange collateral.

So that you gentlemen can see as a debt problem compared with anything else that bulks large it is easily the most serious that we are confronted with. We have been of opinion that we are not going to secure the stability in our financial situation which we ought to have until we have advanced very much further in the solution of the mortgage-debt problem.

I will say that debts represented by these mortgages do not attract the same attention as loans made on stock-exchange collateral, and when they mature and are called for payment they do not have the same effect, of course, as call loans on the stock exchange, which bring about a quick and dramatic change in prices, and liquidation of the sort that create havoc immediately.

On the other hand, the difficulty involved in this mortgage-debt situation is a sort of creeping paralysis. A large part of the loans against urban homes in this country has been made for periods of from 3 to 5 years, and some of them 1 and 2 years. And the theory of the loans made by mutual-savings banks and insurance companies generally was not that those loans should be amortized but that when they came due they could be renewed, and therefore they represent more or less permanent indebtedness.

Our experience since 1929 has showed pretty conclusively that that is not a very sound method of carrying mortgage loans against homes. As those mortgages have matured institutions have been unable to realize on them, generally speaking, except by taking losses; the home owner has not been in position to meet the maturing note in full, and when he was asked to make a substantial curtailment he usually was not able to do it.

Now, of course, as the years have passed since 1929 these difficulties have accumulated, and they have been offset only by the work of the Home Owners' Loan Corporation, or to a very large extent only by the work of that Corporation.

When the Home Owners' Loan Corporation came into existence in June of 1933, 5 billion dollars of mortgages on urban homes were already facing foreclosure in the country as a whole. Before that more than 800,000 homes had been foreclosed and sold, had already been cleaned up. We were facing in closed banks alone more than a quarter million home mortgages eligible for acceptance by the Home Owners' Loan Corporation, amounting to over 650 million dollars. I mean that they were already in the hands of receivers in those banks. In the very month that this bill was signed and the Corporation came into existence an all-time high record of foreclosures was established in the United States. They ran up to nearly 26,000.

Now, comparing that with previous conditions the record shows that in 1926 the total of foreclosures in this country was 78,365. But following the stock-market crash and by 1932 the figure had risen to 273,384. Last year, for the full year of 1933 it was only a little more than 2,000 less. In other words, the total number of foreclosures in the United States last year was 271,996. That is approximately three times any normal record.

Senator BULKLEY. Have you that total separated into the first half and the last half of the year 1933?

Mr. FAHEY. Yes. I think I can give it to you by months, even. Senator TOWNSEND. Have you that information for the months of this year also?

Mr. FAHEY. Yes, sir; we have the data up to date.

Senator KEAN. Can you tell us what happened to those mortgages where there was foreclosure?

Mr. FAHEY. What happened in that case was that the property was sold at a sacrifice price or the mortgagee took it over and recovered it. Now, we have gotten some of these homes back, because under the terms of the original act where the mortgagee was agreeable we could recover that home and hand it back to the home owner. I cannot tell you just how many cases of that sort there have been, because we haven't those figures, have not kept them separately.

Senator KEAN. What I want to know is: When the most of them were foreclosed have they gone again into the ownership of the people occupying the homes, or have the properties become rented properties, or something of that sort?

Mr. FAHEY. It is very difficult to say as to that. You can only generalize about it by reflecting the information and opinions that we get. There are no dependable statistics on the subject. They represent a certain number of vacancies, there is no question about

that. In other cases those homes are now rented. In still other cases they have been purchased or are occupied by people who previously enjoyed higher incomes than they enjoy today, by people who have taken a step down.

Incidentally, if I may digress for a moment, of course the result of all that movement is a greater demand for lower-cost habitation today than under ordinary circumstances. We have to remember in considering this whole problem that the cost of shelter, according to dependable figures of the Government and all other agencies, for many years back is the largest single item in the home budget. It runs about 25 to 26 percent as an average in the country. You will remember that the Filer Foundation figures presented just the other day showed the average for the entire country for the last 30 years was 26 percent expended for home ownership or maintenance or rent. That is in excess of what is spent for food and everything else. Senator KEAN. That has always been so, hasn't it?

Mr. FAHEY. It has always been so.

Senator BULKLEY. I am interested in the separation of the figure for the year 1933 into 6 months' period, because it might show the trend of what your Home Owners' Loan Corporation has been able to accomplish.

is.

Mr. FAHEY. It dropped about 25 percent from the peak.

Senator BULKLEY. I don't quite understand what that percentage

Mr. FAHEY. The peak was about 26,000.

Senator BULKLEY. You gave us a total of 271,996 foreclosures for the year. Now, I should like to know what it was, say, for the 6 months.

Mr. FAHEY. I think I can give you that exactly.

Senator TOWNSEND. Do you mean 26,000 for a month?

Mr. FAHEY. Let me get that data.

Senator BARKLEY. Will you just submit that as a part of your statement?

Senator BULKLEY. He has that data and can give it to us right now, as I understand.

Senator BARKLEY. I thought he might not have the data as fully as he would want it furnished.

Senator BULKLEY. He has that information all right, as I understand him.

Mr. FAHEY. Here are the figures: The high figure was 25,759 foreclosures in June of last year. It declined somewhat during the summer and got down to 20,916 by October. In November and December the figures turned up again. For December it was 22,259. It droppd again in February to 18,453 foreclosures. For the last month as to which we have figures, which is March of this year, it was 20,929, about what it was in April of a year ago. So that you will see it has dropped about 25 percent from the high. But it is still far in excess of what it was in what we may call a fairly normal year, 1926.

Senator BULKLEY. Do you think that drop was due largely to the work of the Home Owners' Loan Corporation?

Mr. FAHEY. I would say it was probably due in part to the Home Owners' Loan Corporation; yes.

Senator BULKLEY. Why do you think we have not been able to prevent still more foreclosures?

Mr. FAHEY. Because, before the Corporation came into action at all there was such an enormous accumulation of difficulties. In the case of farms, of course, you started far back of that. You did not begin on the urban-home problem really until last September, because while the Corporation was organized in June, or I mean it came into existence in June, it really did not get organized and going until August.

Senator BULKLEY. Don't you think the very fact that such a corporation was in existence would slow down foreclosures?

Mr. FAHEY. It has, without any question.

Senator CoUZENS. Did that include foreclosures under the land contract? Did those figures include that sort of contract?

Mr. FAHEY. If you will permit me I should like to ask Dr. Metzke, who has charge of those statistics, to answer that.

Mr. METZKE. They did not include those foreclosures, Senator Couzens.

Senator COUZENS. There might have been a lot of land lost under that contract.

Mr. METZKE. Yes, sir.

Senator COUZENS. And you have no estimate as to what that was? Mr. METZKE. No, sir.

Senator COUZENS. So that in all probability under the land-contract sale plan many homes reverted to the original seller because of default in the land contract.

Mr. METZKE. Yes, sir. Those are not of record, so we have no figures on them.

Mr. FAHEY. There is no doubt about that, because in your State of Michigan, Senator Couzens, among the great mass of applications from that State, we have many, and I cannot tell you the exact number, from those who have lost their homes, and under the provisions of the law they want to get them back.

Senator COUZENS. Can they get them back under the land-contract system, or do they have to have a foreclosure system?

Mr. FAHEY. Well, they can, as I understand it, get them back if the person who owns the land contract is willing. I mean, if it can be negotiated.

Senator BULKLEY. Can you say why you think we cannot bring down still more that number of foreclosures?

Mr. FAHEY. Well, I think that

Senator ADAMS (interposing). Let me ask as a part of that question, what would be your estimate of the point to which foreclosures might have gone in number if it had not been for the Home Owners' Loan Corporation. While it is possible that you have not greatly reduced them from what they were before, yet it is possible you may have prevented an increase in the number of them.

Mr. FAHEY. I not only think, but I know there is no question that with the beginning of the activities of the Corporation thousands of foreclosures have been prevented. There is just no question at all about that. All over the country our experience shows that, because institutions that were getting ready to foreclose on properties have held up foreclosure in thousands and thousands of instances where

applications have been filed with us and there was a chance that we would refinance the mortgages.

Senator BULKLEY. I do not think there is any possible doubt in anybody's mind that the Home Owners' Loan Corporation has done an immense amount of good and has stopped many foreclosures. And the purpose of my question is not to try to put you on the spot or to criticise you at all, but to find out what we can do toward going further with it. That is the line of inquiry I should like to pursue. Mr. FAHEY. I understand you exactly. Now, to just go a little further with the comments I was making relative to the mortgagedebt problem; I should make clear to the committee that as a result of the great accumulation of defaults which had developed before we began to do business at all, applications for relief poured in on us by the hundreds of thousands just as soon as we got our offices opened. And the result was that before the 1st of January we had on hand 719,267 applications, representing a valuation of $2,166,855,269. In other words, before the 1st of January applications had been filed with us in number amounting to nearly three quarters of a million and representing more than the entire resources of the Corporation. I mention these figures only as an indication of the size and character of this mortgage-debt problem.

Senator TOWNSEND. Could you state for our benefit what percentage of loans were made in response to those applications?

Mr. FAHEY. Well, I could give you that percentage exactly, but will say that in the handling of those applications to date between 25 and 30 percent of them have been eliminated because they were not eligible, or because the risk was so bad that we have no right to take them.

Now, on the other hand, this figure of 719,267 applications does not tell the whole story, because they represent only the applications which our managers permitted applicants to file for further investigation. The number who came into offices and wanted to file applications but who represented perfectly hopeless cases or applications that did not come within the purview of the law, would go far beyond that number. That represents applications before January 1 of at least a million in the country as a whole, of people who came in and attempted to file applications and those who were rejected or those who were not eligible.

Now, the difficulty about this situation as we see it is this: The maturing of mortgages is cumulative as a result of so many of them being short term. Also because of the inability of building and loan associations, which make the longer amortized mortgages, to refinance and renew to the extent which they would like to under other conditions, and which they would renew had they the reserves coming in to them to enable them to do it, which they are not doing.

It is perfectly plain, as we see it, that a Government institution like the Home Owners' Loan Corporation cannot face the possibility of refinancing half of all the urban-home mortgages in the United States, or even a quarter of them. It is almost impossible as a financial problem, and we do not feel that it ought to be attempted, it is fraught with such difficulties, and would bring about such complications. But we are convinced it is of the greatest im-