ferent from ours in that no loan is ever disbursed until it goes into the head office, recommended and sent in there, and it has to be approved before it can be disbursed.

Senator STEIWER. Why cannot your institution come to that pretty soon? I appreciate that at one time you were confronting a great emergency. Now that the pressure is off to some extent—or we will say that it will be off before a great while-why can you not administer from Washington rather than from regional offices?

Mr. FAHEY. We will have, when this operation is closed, about 1,500,000 to 1,600,000 loan files and accounts. To attempt to carry on the detail of supervision with respect to such a volume of loans and to service them from one central point in Washington would be a tremendous task.

Senator STEIWER. You will soon be past your big responsibility with respect to lending. Then your problem will be that of supervision and collection, will it not?

Mr. FAHEY. Yes; and servicing.

Senator STEIWER. And you think that could not be done from the central office at Washington?

Mr. FAHEY. It could not. There is one very important factor in this supervision, and that is the question of granting extensions where the home owner claims inability to pay. We have the right to grant extensions under the law up to 6 months. To permit that to be done without supervision would invite a good deal of difficulty; I mean if you just left to local authority without any checking what

ever.

Senator STEIWER. That is, if you permitted the State agency to do it without supervision?

Mr. FAHEY. Yes. There is only one way to do it. That is to have the facts reported and the recommendation made, and the recommendation O. K.'d. To have that done from Washington would be impossible.

Senator STEIWER. How do you propose to do it?

Mr. FAHEY. Through the regional office.

Senator STEIWER. Let us assume that the borrower should apply to the State office for an extension. The State office refers it to the regional office for approval?

Mr. FAHEY. The State office investigates it, reports what are supposed to be the facts, and makes a recommendation. Then that recommendation is approved, or further facts are demanded by the regional office.

Senator STEIWER. And if I understand you correctly, you think the State office could not do that and do a good job?

Mr. FAHEY. It can do the detail work, but it can hardly be relied upon to do it as well as it ought to be done without any supervision. Senator STEIWER. Why is that true, Mr. Fahey? What is the matter with the State offices that they cannot do a simple thing like that?

Mr. FAHEY. Well, because frequently local influences come into the matter, and you have got to provide some machinery so as to prevent favoritism and carelessness, and that sort of thing.

Senator BANKHEAD. How do you obviate that at the regional office several hundred miles away?

Mr. FAHEY. Well, because they are familiar with what is happening. They have the whole file and record of the borrower-his whole story. Somebody has got to check it.

Senator STEIWER. I have no objection to regional offices if they are the economical and proper method of administration. My inquiry is directed to the simple question whether a collection system could be carried out effectively at long distance and long range as well as through the State office. I just wonder what results you obtain in the way of collections supervised through regional offices?

Mr. FAHEY. The answer to that, Senator, is just this: That more than half of these bills are paid practically on the dot just as a result of mail billing. The other thing about it is this: You cannot get into personal collections in a case like this. If you developed a system under which a collector had to go the rounds and make these collections from the home owners you would increase your expenses and your complications enormously.

Senator STEIWER. Would you not increase your collections also? Mr. FAHEY. No. The best method, out of all experience, is to follow up when they get behind, and then the personal factor comes into it. But if you once get into a system of personal collections once a month on this great volume, you would pile up an enormous operating expense.

Senator BULKLEY. Will you tell us in more detail how you do follow up delinquencies?

Mr. FAHEY. First of all we have a series of letters, just as any other collection agency does, and those are sent at intervals. Senator BULKLEY, From the regional office?

Mr. FAHEY. From the regional office. And if they do not bring the result, then the case is reported to the State or district office. Senator BULKLEY. At about what period of deliquency do you refer it to the State office?

Mr. FAHEY. Do you mean, do we send to the offices?

Senator BULKLEY. Well, you say you send out a series of letters from the regional office, and then if they do not get results you turn it over to the State office. If you do not get results then, at what time do you take other action?

Mr. FAHEY. If we do not get a result within 90 days we put it up to the State office.

Senator BULKLEY. So that 90-day delinquencies are referred back to the State office?

Mr. FAHEY. Yes.

Senator BULKLEY. And then what?

Mr. FAHEY. And the State office follows up on it and reports whether or not it can prevail on the home owner to pay.

Senator BULKLEY. The State office then sends a representative to see him personally; is that right?

Mr. FAHEY. Yes; the State office then sends for him or sends a representative to see him personally.

Senator BULKLEY. And then each such case becomes an individual case?

Mr. FAHEY. That is right.

Senator BULKLEY. But the matter is then followed by the State office clear through to collection, is it? It is followed by the State office even to foreclosure?

Mr. FAHEY. That is right.

Senator BULKLEY. And that is done without any further direction from the regional office?

Mr. FAHEY. Well, they recommend foreclosure to the regional office, and if the regional office approves they go ahead.

Senator BULKLEY. So the State office follows it as long as it is their good judgment to follow it; and then, when they think it ought to be foreclosed, they make a recommendation to the regional office and must have authority from the regional office to institute a foreclosure.

Mr. FAHEY. That is right.

Senator STEIWER. How do you define delinquency? What do you call a delinquent loan?

Mr. FAHEY. Well, we call anything after 30 days or so delinquent. Senator STEIWER. Do you not have a regular formula which determines whether a loan should be passed as delinquent?

Mr. FAHEY. Oh, yes; we do.

Senator STEIWER. What is that?

Mr. FAHEY. Well, usually if it is not paid within 15 days or so we classify it as a delinquent.'

Senator STEIWER. You say "usually ", Mr. Fahey. That rather indicates that you do not have a regular formula.

Mr. PRESTON DELANO (General Manager, Home Owners' Loan Corporation). We have certain definite instructions that go out to every State and every regional office defining what a delinquency is, Senator. Technically a loan becomes delinquent 1 day after it is due, but we have a 90-day clause in all our mortgages which corresponds to the insurance clause of grace, so that our practice is in accordance with the usual insurance practice of 90 days after the date due as the time of delinquency. A delinquency technically occurs the minute a bill is out; the date on which that bill is sent. We bill 10 days before the payment becomes due and the account becomes delinquent, but it is not delinquent to the point of personal service until after the period of 90 days of grace. We find as a matter of fact that a great many people take the 90 days.

The difference between the 1-day delinquency and the 90-day delinquency is very marked. We find that it is around 20 percent when we get down to the end of the 90 days. When we get up on the barrel-head delinquency depends a little bit upon our cycle of billing. It is a complicated thing to know just every day, because we bill every day. We have this enormous number of bills pouring out of the regional office every day, so that without stopping the machinery completely or stopping the operation we could not discover what the delinquency is as of every day, but we take it on an average and we do get what we might define a barrel-head delinquency on the basis of the average of these cycle billings. As I said before when we get to the 90 days we find about 20 percent delinquency. We do not consider, and neither does any old-line institution consider a delinquency as existing 1 day after the payment is due, because so much stuff is in the mail, and there is so much disposition to take advantage of the grace period.

Senator STEIWER. It would be unreasonable to count 1-day delinquency as a delinquency merely because it is technically so, but there must be a formula; there must be some time at which you regard a man as actually delinquent, otherwise you could not clear up your loans, and say that so many are current and so many are delinquent.

Mr. DELANO. For the purpose of technical recording we keep the accounts on the basis of the loans that are 1 day delinquent, 30 days delinquent, 60 days delinquent, and 90 days delinquent.

Senator STEIWER. Have you furnished that material to either of the committees of Congress?

Mr. FAHEY. We have brought you here a table as requested the other day. Here is the 90-day delinquency. That is what we consider actually delinquent.

Senator STEIWER. Is it by States?

Mr. FAHEY. Yes; it is by States and by percentage of billings. The average as of March 1 delinquent an even 90 days or more, was 20.3 percent. In other words, approximately 80 percent paid up. Senator STEIWER. I think that table would be of interest, Mr. Chairman. Should that not be placed in the record?

Senator BULKLEY. Yes. The table may be placed in the record at this point.

(The table presented by Mr. Fahey is as follows :)

Accounts delinquent 90 days and more as at Feb. 28, 1935

Accounts delinquent 90 days and more as at Feb. 28, 1935-Continued

Senator BULKLEY. Do you go any further than that and show how much is 6 months delinquent?

Mr. DELANO. Yes; 90 days and more is the way we keep it.
Mr. FAHEY. Yes; 90 days and more.

Senator BULKLEY. Do you have any further break-down?

Mr. DELANO. We could get it that way, Senator, but we do not carry it that way in our records. After 90 days we consider that a sick case, and we start after those people.

Senator BULKLEY. And as a rule those cases are sent to the State office?

Mr. DELANO. Those cases are sent to the State office, and the State office contacts by telephone. We try to do this in as economical a way as we possibly can. We do not like to send people out and spend money for personal visits if we can get the delinquents to come to our offices. The State and local offices try to get the people to come in to the offices, and they go into the whole question of the personal situation. The adjusters there go into the financial ability of the people to pay, their situation, and what they can pay.

Senator BULKLEY. Those adjusters are under the State offices?
Mr. DELANO. Yes.

Senator BULKLEY. The adjusters are direct employees of the State offices? Mr. DELANO. Yes.