care of themselves. We do not feel that there is any direction in which it is possible to move that is productive of greater possibilities than this is. We do not say it is a cure-all. Anybody who studies the problem, in my judgment, is obliged to agree that recovery from depression is not accomplished by writing any one prescription. It must comprehend activities in a great many directions. This is one which, up to now, has been neglected, and it is one of the most important in the lot.

The CHAIRMAN. How many regional banks have you, Mr. Fahey? Mr. FAHEY. Twelve.

The CHAIRMAN. In the different portions of the country?

Mr. FAHEY. Twelve sections of the country.

Senator BULKLEY. How many foreclosures of homes did you say there were in the last month-20,000, was it?

Senator ADAMS. 20,929 in March 1934.

Mr. FAHEY. 20,929.

Senator BULKLEY. How many of those were loans that would not be good enough to be taken over by the Home Owners Loan Corporation?

Mr. FAHEY. It would be impossible to say, Senator. Those represent the cases in which we have not been able to move fast enough. I mean those are cases where the mortgage lender was not willing to wait until it could be seen whether the Home Owners Loan Corporation could take hold or not, or they were hopeless cases.

Senator BULKLEY. What month was that?

Mr. FAHEY. March.

Senator BULKLEY. How many did you take over during that month, if you know?

Mr. FAHEY. In that month we took over 34,331 mortgages, in a total amount of $97,000,000 plus.

Senator BULKLEY. You took over 34,000 and there were 20,000 foreclosures?

Mr. FAHEY. Yes.

Senator BULKLEY. That is a pretty good record, but I am still anxious to probe further into why-

Mr. FAHEY. Hold on a minute. It was better than that. I have the wrong figure. In the month of March, that same month, we took 46,379, amounting to $132,504,523.

Senator TOWNSEND. Go back to February and see how the months compare.

Mr. FAHEY. AS compared with February, that represents an increase of 13,000 loans and $35,000,000 in a month.

Senator TOWNSEND. March exceeded February by that much? Mr. FAHEY. Yes. Of course, it has risen steadily since then. I can give you some idea of the rate at which these loans have gone up, when I tell you this: That for the first months that the Corporation was in operation-that is, up to December 1-we had closed a total of 15,105 loans amounting to $44,518,611. In the following month of December we closed 20,790 loans, or more than double that of all the previous 5 months. The amount of money disbursed was $58,369,211, or about $18,000,000 more than in all the 4 or 5 months previously.

In our next month, January, it stepped up again. A total of 27,119 loans were closed amounting to $76,330,890. In February it

went up $20,000,000 more. We closed 34,331 loans amounting to $97,006,826. In March it increased to 46,379 loans in the amount of $132,504,523.

Senator TOWNSEND. Have you the figures for April?

Mr. FAHEY. Yes. In April it went up again by 13,000 loans, and the figure was 53,823 loans amounting to $164,940,087. In other words, for the month of April alone we closed more than 500 percent more loans than in all the period up to December 1.

Senator GOLDSBOROUGH. Mr. Chairman, I would suggest that it would be helpful if Mr. Fahey were asked to prepare a table giving this information, so that it may be inserted in the record.

Mr. FAHEY. I would be glad to do that, Mr. Chairman.

The CHAIRMAN. Very well. We will have that done. What is the volume of applications now, Mr. Fahey, each month?

Mr. FAHEY. Unfortunately the number of applications still continues strong. Up to May 11 the total number of applications which the Corporation has in hand is 1,343,194.

Senator TOWNSEND. Which have not been acted upon?

Mr. FAHEY. No; that is the total number of applications. I will deduct from that what have been acted upon. The total amount of those applications is $4,300,684,929. Now, in considering those figures it should be explained that out of our experience about 25 or 30 percent of these applications dropped out. Some of them are ineligible. A substantial number we are able to prevail upon the banks and others to refinance. Others are withdrawn for other reasons. So that, generally speaking, we can cut off about one third. At the moment, therefore, we are confronted with demands for a little more than 3 billions in loans. I mean that is the total of the problem as it stands with the Corporation at present, and, of course, the number of applications is continuing to flood in.

Senator BULKLEY. Have you the figure as to how many you have turned down?

Mr. FAHEY. Yes.

Senator TOWNSEND. Are the applications increasing all the time now?

Mr. FAHEY. They increased since the first of the year. March and April represented the heaviest volume we have ever had from the opening of the corporation. They represent about $500,000,000 a month.

Senator TOWNSEND. I beg your pardon for interrupting.

Mr. FAHEY. Answering Senator Bulkley's question, 32,017 applications were withdrawn up to May 11. You may recall that in discussing this question of applications I said that these figures were not fully representative, because in all the offices a large number of people who come in and attempt to apply are not allowed to apply. Consequently these figures of applications represent those that are apparently eligible. When they are allowed to fill out an application, then the application has to be examined to see whether it is eligible or whether it is worthy of being further considered. Out of that up to date 32,017 have been withdrawn and 66,403 have, after examination, been rejected before we made any appraisal. So that, in round numbers, about 100,000 have been thrown out, leaving this

residue that we have at present. That leaves the net amount still, does it not, Doctor? Is that figure before or after?

Mr. MERTZKE. That is before.

Mr. FAHEY. That is before reduction, so that our figure of 1,343,000 is subject to a deduction of 100,000 that are out.

Senator BULKLEY. How many have been acted on favorably?

Mr. FAHEY. The total number of loans closed is 231,968, as of May 11. The amount of the disbursement was $681,052,741.

Senator BULKLEY. That leaves almost exactly 1,000,000 yet to act on, according to that.

Mr. FAHEY. Yes.

The CHAIRMAN. What has been the effect of the legislation under which the Government guarantees the bonds?

Mr. FAHEY. It has facilitated the exchange of bonds for mortgages. The mortgagees who had held off and who had declined to accept the bonds, or who were reluctant about it, of course, are now ready to accept, inasmuch as there is an immediate market for those bonds at better than par.

The CHAIRMAN. It increased your business.

Mr. FAHEY. It certainly increases the facility with which we can do business, because heretofore there has been a long period of wrangling with most mortgagees over the question of the bonds, and we had to sell them the idea that the bonds were worth 100 cents on the dollars, which was the only basis on which we could issue them.

Of course, it should be explained that in a very large proportion of the cases, before we close these loans, our officers have to negotiate reductions of the mortgagee's claims, because such a large proportion of these first and second mortgage claims are out of line with any reasonable valuation based upon our appraisal. That is one of the reasons for delays that we hear about. Of course, we have overcome that delay by increasing the number of competent appraisers and the number of competent attorneys, and speeding up by more rapid consideration of the applications, but there is a certain lag inevitably in the handling of every loan here, and it just cannot be disposed of safely over night.

The CHAIRMAN. One of your purposes, as I understand it, is to stimulate the activities of the building and loan associations, which would have the effect of greatly relieving the demands on you.

Mr. FAHEY. Yes, sir. What we are looking to relative to those measures is not the immediate problem of the Home Owners' Loan Corporation, but forestalling, if we can, the continuation of this demand, or an increase in it next year. We feel that we ought to clear up everything we can here as rapidly as possible, and get out of the purely relief activity.

Senator BANKHEAD. Mr. Fahey, the success of this program will depend largely on the proper organization of the national mortgage associations, will it not?

Mr. FAHEY. Oh, no; not that exclusively, Senator.

Senator BANKHEAD. I did not say exclusively.

Mr. FAHEY. That is only an incident.

Senator BANKHEAD. What importance do you attach to that organization?

Mr. FAHEY. It is difficult to say. It is difficult to say how many of these associations would be formed.

Senator BANKHEAD. Have you explored the field any to ascertain the availability of capital for these organizations, or the prospects of organizing them?

Mr. FAHEY. Mr. Riefler and Mr. Watson and Mr. Eccles, who have devoted the most attention to that phase of the problem, have. I understand that they have talked with a great many interests who feel that if the opportunity is afforded they will be prepared to raise the capital, provide the capital, and to proceed in this field. I am not so familiar with that as these other gentlemen are.

The CHAIRMAN. Is that all, Mr. Fahey?

Mr. FAHEY. It is all that I wish to say, Senator, unless there are some other questions you wish to ask me.

The CHAIRMAN. I think you have covered the ground very comprehensively. We are very much obliged to you.

Mr. FAHEY. As I understand it, the committee would like some figures and charts which will show clearly the operations of the Home Owners' Loan Corporation in the handling of these loans up to date, the figures on foreclosures, and the figures on building permits, and so forth.

Senator TOWNSEND. And applications for loans.

Mr. FAHEY. And applications for loans. We will be very glad to bring to the committee not only some figures but I think we can give you some charts that will show that thing very graphically, and we will be very pleased indeed to do it.

The CHAIRMAN. We will be very glad to have it.

Mr. FAHEY. We are rather proud to say to you, in this connection, by the way, that under Dr. Mertzke, who is the Chief Economist of the Federal Home Loan Bank Board, we believe that we have developed the most comprehensive and reliable source of information, statistically, on this whole housing- and mortgage-loan problem that has yet been developed anywhere in the country. We are glad to say to you that we have received very generous cooperation from the large insurance companies and the bank commissioners and from everybody concerned in attempting to get together reliable information. As a matter of fact, like a great many other things in the field of statistics, until recent years there have been great gaps in the figures, and there has just been a lot of guessing about

A lot of valuable information is still missing, but we have been making steady progress on that, and we will be glad to present to the committee anything that we have that you think you would like to know about.

The CHAIRMAN. Very well. If you will hand that in, we will put it in the record, Mr. Fahey.

(The matter above referred to is as follows:)

Estimated1 number of urban homes foreclosed in the United States, by months, during the years 1926, 1932, 1933, and 1934

1 Based upon reports received monthly by the Division of Research and Statistics of the Federal Home Loan Bank Board from recorders' officers and other local governmental officials in 1,058 communities scattered throughout the United States, and including 54.1 percent of the population of the country.

Number and amount of applications received and loans closed by the Home Owners' Loan Corporation from date of opening to May 18, 19341

1 Prepared by Division of Research and Statistics, Federal Home Loan Bank Board, Washington, D.C

(A chart submitted by Mr. Fahey will be found on page 130.) The CHAIRMAN. Mr. Harry E. Karr, counsel of the Real Estate Board of Baltimore, wants to be heard for a few minutes. Is Mr. Karr here? Our time is very limited, Mr. Karr. We have one or two other people that we want to hear, if we can, before 1 o'clock. STATEMENT OF HARRY E. KARR, REPRESENTING REAL ESTATE BOARD OF BALTIMORE, BALTIMORE, MD.

Mr. KARR. Mr. Chairman, I will try to be just as brief as possible. I have listened with a great deal of interest to Mr. Fahey, and I think what he said in the last 10 minutes is probably one of the keys to the situation; that is, in reference to your unemployment.

I think we are all agreed that the matter of new money for construction is a matter more or less of timidity and a matter of psychology. That there is a real need for rehabilitation is absolutely true. Personally I think the matter of rehabilitation, from the standpoint of the average city, is a most necessary thing, because it goes to the very fundamentals of city government and the economics of the city, because when you have deteriorated property you have less taxation, and you have a gradual moving out into the suburban districts and beyond the city limits probably on the part of the home owner.