Senator WAGNER. Suppose you first give a little of your background, so that we may have it for the record and may recognize your experience as qualifying you to testify on this matter.

STATEMENT OF D. E. MCAVOY, SECRTEARY OF THE HOME MORTGAGE ADVISORY BOARD, NEW YORK CITY

Mr. McAvoy. Mr. Chairman, I am secretary of the Home Mortgage Advisory Board, which is a volunteer body organized early in 1932, headed by Mr. Frank A. Vanderlip, and which was instituted at that time by Mr. Charles A. Miller, former president of the R.F.C. It is a volunteer organization that is cooperating with the Reconstruction Finance Corporation in the second Federal Reserve district. I am also chairman of the joint home loan committee of metropolitan New York, organized last week, and which is a committee composed of the majority of the chambers of commerce and real-estate boards and mortgage interests.

In order to save the time of the committee I will, if I may, present for your record the names of the members, of the joint home loan committee and their organizations from this clipping from the Herald-Tribune of May 20, 1934.

Senator WAGNER. All right. It may be made a part of the record. (The data furnished are as follows:)

(From the New York Herald Tribune, Sunday, May 20, 1934)

DRIVE LAUNCHED TO WIN MORE DWELLING LOANS--JOINT COMMITTEE ORGANIZED TO PRESS WIDE CAMPAIGN FOR ACTION BY CONGRESS

A joint home-loan committee was organized last week to urge Congress to approve additional home-loan bonds.

Joseph W. Catherine, president of the New York State Association of Real Estate Boards, emphasized the need of additional bonds and stressed the important part that the art was playing in general recovery, particularly alluding to the tax payments that it was effecting.

The meeting also was addressed by Orrin C. Lester, vice president of the Bowery Savings Bank and secretary of the Mortgage Conference, representing the major mortgage interests; George A. Porter, first deputy superintendent of the banking department of the State of New York; and D. E. McAvoy, secretary, Home Mortgage Advisory Board.

Mayor Fiorello H. LaGuardia is in sympathy with the move to forcibly impress Congress with the need of immediate action. The mayor sent the following communication to the meeting:

"Investment in the small homes of our country is the safest and soundest of all the relief appropriations of our Government. The only way to carry out the full intent and purpose of Congress and the wish of our President is additional appropriations, lower interest rate, and a liberal construction of the law."

The joint home-loan committee will organize several hundred associations and organizations in the metropolitan district to petition the President and Congress to authorize at least 2,000,000,000 additional home-loan bonds and to include 10 percent for repairs and modernization, as in the present act.

The executive committee nominated was: Philip A. Benson, president National Association of Mutual Savings Banks; George W. Cassidy, president Queensboro Chamber of Commerce; Herbert L. Carpenter, president Midtown Club of Brooklyn; Joseph W. Catherine, president New York State Association Real Estate Boards; Kenneth Clapp, president Westchester County Real Estate Board; Robert D. Elder, vice chairman of the Home Mortgage Advisory Board; Bracton Goldstone, president New York chapter American Institute of Appraisers; Frank Ledwith, president Brooklyn Real Estate Board; Orrin C. Lester, secretary the Mortgage Conference; William MacDermott, chairman

mortgage and finance commission, Long Island Real Estate Board; Frank O'Hara, president Long Island Real Estate Board; Ray Palmer, special advisory Long Island division Home Mortgage Advisory Board; A. J. Swenson, chairman appraisal division, Long Island Real Estate Board; Louis C. Wills, president Brooklyn Chamber of Commerce; D. E. McAvoy, secretary Home Mortgage Advisory Board, also nominated chairman of the joint home-loan committee.

It was also decided to vigorously prosecute neglected modernization permissible under the Home Loan Act. Such distress cases would not be eligible as a good "credit risk to qualify under the new proposed home renovizing finance plan just announced by President Roosevelt any more than the distressed mortgage cases could possibly qualify either as to risk or coverage by the 60 percent loans proposed on existing structures through the insurance mortgage plan announced in the same program.

Senator WAGNER (presiding). You may proceed with your state

ment.

Mr. McAvoy. I represent primarily the home owner, the great unorganized group, as a volunteer without fees or charges to home owners. I feel I represent as well every other interest in the mortgage world, because equity is the base of any moves I have made in the past or will make in the future. I personally have contacted during the past several years, either personally or through my efforts in the Second Federal Reserve District, over 15,000 home owners in mortgage distress, and through radio broadcasts, either by Mr. Vanderlip or myself, have had letters from throughout the Nation from thousands of people, covering every State in the Union, which has given me an unusual cross-section in making my surveys. First, Mr. Chairman, I might say that in view of the fact that I only received a copy of the bill on Friday evening last, my remarks necessarily will be without the full approval of my organizations, and much of it will be said as my personal opinion, therefore I would state that I have been a home builder since 1901, and particularly since the World War, in the matter of economic lowprice housing. I would particularly speak of 1923, 1924, and 1925, and in the area of Queens I sold some 6 or 8 million dollars worth of small homes. It is primarily to service these customers that I have this deep interest in this bill, to improve the safety of home ownership and the mortgage business so that I may build more homes and sell them. But I should like to do it on a sound basis. Now, Mr. Chairman, if that will suffice for my qualifications I will proceed to a discussion of the bill.

Senator WALCOTT. Mr. McAvoy, are you interested in any contracting business?

Mr. McAvoy. No. Of late years I have devoted myself almost entirely to this work.

Senator WALCOTT. You have no furnishings business or contracting business?

Mr. McAvoy. No, sir. I have conducted a general real-estate business of late years. For years I have qualified as an expert appraiser for court work, such as condemnation proceedings. That has been my chief occupation of late.

Senator BULKLEY (presiding). You may proceed with your state

ment.

Mr. McAvoy. If I might read a short brief that I have prepared which outlines the viewpoint I have of the bill as a whole, then I

should like to refer back to various items of the bill which I will not touch on in detail in this reading.

Senator BULKLEY. All right. You may go ahead.

Mr. McAvoy. My principal objections to the National Housing Act as introduced, is that it encroaches upon, and unless materially revamped, will feed heavily upon the integrity of home ownership, invalidating as well a most important section of the Home Loan Act of 1933.

Its major injury to home ownership lies in title II, permitting the unlimited creation of 5 million-dollar national mortgage associations, and permitting them to purchase foreclosed homes.

Under title III, such cooperative banks could insure these mortgages up to 20 percent of the aggregate of the loans. The act further permits these mortgage associations to sell to the public bonds or debentures to the extent of 15 times their outstanding capital stock, or the current value of mortgages held by them and insured under the provisions of the act. Under this insurance plan with governmental sponsorship, such offerings will find as eager an investment field as guaranteed mortgages once did.

The only way today that the holders of huge numbers of foreclosed homes, from which unfortunate one-time owners have been evicted, can refinance, for it is impossible to resell without an extended mortgage, is to find the former owner, so that an application for redemption can be made to the Home Owners' Loan Corporation. The act as just amended has broadened the scope of this benefit, including homes foreclosed since January of 1930.

Under this redemption benefit it is imperative, I believe, as a a matter of social justice to afford protection to foreclosed home owners, the most of whom are as yet unaware of their privilege.

I believe it to be a matter of national duty to effectively prevent any such Government refinancing, either directly or indirectly, unless suitable safeguards are established to carry out the intent of our President and Congress in regard to the preservation of home ownership in a time of national distress.

Its second major offense against home ownership lies in title I, permitting the Home Credit Insurance Corporation, under the renovizing plan, to similarly insure accounts up to $2,000 for repairs and modernization to buildings other than homes; also to insure amortized mortgages and like liens on other buildings than owneroccupied homes, the bill stipulating as eligible mortgages on lowcost housing projects as well.

This could include flat house construction of the slum-clearance type. Practical men conversant with housing and aware of the rental limitation in slum areas, know that such housing cannot be erected, under present and still rising building costs, without eventual heavy loss unless a subsidy is provided in the way of capital grants or interest reduction to a point not exceeding 2 percent per annum. Nevertheless, insured bonds would readily sell, that is, insured bonds on such construction would readily sell under Government sponsorship.

With such predeterminable losses-and it will be conceded that losses for renovizing will occur more frequently where open credit would be granted on buildings other than homes-it can be seen that the heavy rates of insurance, occasioned by these higher risks, will

burden the home owner, who will thus be taxed yearly, at a moment when the present real estate taxation is threatening their destruction.

I am not opposed to Federal aid in regard to mortgages or renovizing of other structures than homes. In fact, I have contended that it is the only solution for the Nation's mortgage problem, aggregating some 45 billions of dollars, which is too badly involved, complicated and vast for the city or State to solve it.

But, likewise, I have contended for the past several years that the handling of home mortgages should be unconditionally divorced from other mortgage solutions. The superior and dual nature of collateral that homes offer, warrants more generous terms being soundly granted than could possibly be given to other properties. The moment they are combined the burden of losses will fall upon the already overburdened home owner.

The crying need right now for the best good of the entire mortgage world is that Congress immediately appropriate additional home loan bonds to an extent of at least $2,000,000,000, with 10 percent for repairs and modernization, as in the present act. It is a vital need, for the Home Owners' Loan Corporation now has applications for over 4 billion of dollars, and new distress cases are eventuating daily as the savings of the unemployed become exhausted. The vast broken-down guaranteed-mortgage situation is yet to be heard from as to its home needs because of its involved affairs.

I stress that point for the greatest good of all mortgages, for the consequential benefits from the Home Owners' Loan Corporation extend far beyond the home world. In liquidating loaning institutions it permits them to better grapple with mortgage problems not eligible for bond conversion.

I have often said, Senator Wagner, and you will recall that when I appeared in the hearings on the Home Owners' Loan Act in 1933, I said that this feature would do the greatest good in the matter of the recovery program, and I am now seeing evidence of it, and in addition I am hearing it from almost every section, which gives proof of that statement. I was telling this yesterday to its chairman, the honorable Mr. Fahey.

Unfortunately, insufficient bonds have retarded a liberal enough allowance for repairs and modernization. It is in the distress cases that the major field for stimulation to the building trades lies, for only there is there any great accrual, and it is there that modernization for income purposes is so vitally needed. Besides, such work employs a higher percentage of labor, labor averaging 60 percent, material 40 percent. In new construction it is about reversed. If additional bonds are appropriated now, the 400 million dollars then available for such work would far exceed what renovizing would result from the proposed National Housing Act in the next year, certainly as far as concerns the home world. Those owners who can meet the credit requirements have not seen real distress and have kept their homes in fair condition. Certainly distress cases could not qualify on a credit basis.

These objections should not indicate that I am opposed to the Insurance plan, for I advocated and discussed a plan at some length last summer with you, Senator Robert F. Wagner, a devoted sponsor of the Home Loan Act of 1933, that embodied the formation of mutual guarantee companies on a national basis, with branches in every

State. I attach a release for record with a copy of your telegram to Senator Wagner of September 18, 1933, regarding this insurance idea. But they were to be noncommercial and distinctly for the benefit of the home owner. The plan, naturally, is workable in the balance of the mortgage field, but I feel that home mortgages should be kept divorced and separate, just as interest, terms, and generalshould differ from other mortgages-for a different set of economics govern each class.

(The release and telegram are printed at the end of today's proceedings.)

At a meeting last week of the majority of the real estate boards. and chambers of commerce in metropolitan New York, a joint homeloan committee was formed, of which, as chairman and speaking for numerous home-owner groups as secretary of the advisory board. I am authorized to unqualifiedly press for this appropriation of additional bonds at this session as being of paramount importance to the home and to the entire mortgage world.

Now, other points on the bill I should like, if you care to have me do so, to run through it in order to give you or viewpoint in more detail.

Senator BULKLEY (presiding). All right. You may now go through the bill.

Senator WALCOTT. I take it from your statement that you are opposed to this bill as it is, and unless it is considerably amended. Mr. McAvoy. Yes, as it is. But would suggest amendments, as I am in favor of it on general principles.

Senator BULKLEY (presiding). You may go ahead with your state

ment.

Mr. McAvoy. Now, I will take up the bill, page 4, section 3, title I. Renovizing; insurance against losses aggregating 20 percent of credit advances; no collateral; interest rate and terms to be fixed by the board.

From a reemployment angle and as a business stimulant it will not be very productive, I fear, in the near future. The demands of a strict credit standing in lieu of collateral security is not practical in a depression period. It will be like the present bank credit—huge funds available, but those who can qualify as borrowers do not wish to borrow because of the uncertainties.

As a former builder, many years ago, doing a large repair business, I would not extend long-term credits, even on a 20-percent safeguard, without collateral security.

Averages will show that where a person's credit still ranks well, that at no time since 1929 has he known extreme distress. This type of person has kept his properties in fair condition. Therefore it is obvious that the renovizing plan in the National Housing Act touches a minority market, one not likely to avail itself heavily unless liberalized, by either consumer, contractor, or intermediate financial units.

The unknown terms, conditions, and restrictions that may be im posed by the corporation under section 3 of the bill would still have a further bearing on retarding any extensive use of this provision. As Mr. Miller mentioned this morning, it would move slowly, and education would be required on the part of those extending credit. and