The proposed amendment would provide that insurance shall be continued for a two-year period and that, whether termination be voluntary or involuntary, two annual premiums shall be paid in advance at the time of termination for such continued insurance. The amendment furthermore requires that notice of termination of insurance be given to insured investors.

STATE LEGISLATION

The Federal Savings and Loan Insurance Corporation has a vital interest in the manner in which an insured institution which has gone into default is liquidated, since the only way in which it can retrieve, at least in part, the amount it has been required to pay to the insured investors is through such liquidation. In view of this interest, it is clear that the most adequate protection exists where the State law provides that the Insurance Corporation shall be appointed receiver or liquidator. At the beginning of the fiscal year 1939 only two jurisdictions were regarded as having adequate laws in this respect. Eight jurisdictions amended their laws during the fiscal year so as to make them adequate, or at least more nearly adequate, in this regard.

During the fiscal year 1939, laws which would authorize investments by savings and loan associations, fiduciaries, banks, savings banks, insurance companies, or public corporations in the shares or accounts of State-chartered institutions insured by the Federal Savings and Loan Insurance Corporation were enacted in 21 jurisdictions. Similar legislation was enacted in 18 jurisdictions with regard to Federal savings and loan associations which are also insured by the Corporation.

VI

Home Owners' Loan Corporation

SIN

SURVEY OF PRESENT ACTIVITIES

INCE June 12, 1936, when the refinancing operations of the Home Owners' Loan Corporation ceased, the activities of the Corporation have been directed toward two main objectives: to assist as many borrowers as possible in their rehabilitation and to carry out a program of gradual liquidation.

In the first three years of the Corporation's existence, from June 1933 to June 1936, the Home Owners' Loan Corporation refinanced the mortgage loans of 1,017,827 home owners' in the total amount of $3,093,450,641. When these loans were closed, the emergency task of the Home Owners' Loan Corporation was far from being completed. The loans were made to home owners in serious distress, and the refinancing itself was only the first step in the Corporation's rescue efforts. In many cases the advantages afforded by the low-cost, fifteen-year amortization loans of the Corporation were sufficient to solve the borrowers' problems. In other cases, however, extensive assistance has become necessary to aid home owners who-although their burden had been relieved to some extent-could not even meet their reduced obligations. True to the intent of the Home Owners' Loan Act to extend relief to distressed home owners, the Corporation attempts to acquaint itself with the exact circumstances of the individual case whenever accumulating arrearages indicate that the borrower is in serious difficulties, and tries to find a temporary or more permanent solution as the case warrants. This activity, included in its "loan service" operations, has continued to absorb a great deal of the Corporation's attention and will remain an important phase of its work. In addition, there are supplementary operations such as the advance of funds to original borrowers for reconditioning, taxes, and insurance, necessary to assist many of these borrowers as well as to protect the Government's investment.

1 The disparity between this figure and the figure of 1,017,948 given in the report for the fiscal year 1938 is due to the consolidation of supplemental loans with original loans made to the same borrower so as to reflect the number of original borrowers rather than the number of original loans made.

In this manner, the Home Owners' Loan Corporation makes available continued assistance to those of its borrowers who need it. At the same time, the Corporation is making regular progress in the recovery of the amounts loaned and in the liquidation of its affairs. The activities involved in the process of liquidation comprise the collection of interest and principal on original loan accounts; the acquisition of properties in those cases where borrowers-despite the liberal collection policy pursued by the Corporation are unable or unwilling to retain their homes; the management, reconditioning, renting, and sale of such properties; the collection of rents; and the collection of interest and principal from purchasers of HOLC properties sold on extended terms of payment (vendee accounts).

STATUS OF BORROWER ACCOUNTS

2

During June 1939 the records of the Home Owners' Loan Corporation showed 798,385 original borrowers in "active status." At the end of June, 27,809 defaulted loans were in various stages of foreclosure proceedings. Past experience would seem to indicate that a number of these foreclosures may be withdrawn and the loans reinstated.

Of the 798,385 active borrower accounts, 672,563 were in satisfactory status, which means that 84.2 percent of all active borrowers were meeting their loan obligations in a fashion acceptable to the Corporation. More than four-fifths of all active HOLC borrowers in June 1939 were thus definitely on the way to home ownership free and clear of debt-a measure of the success with which the Home Owners' Loan Corporation, through its low-cost amortized loans, has assisted home owners who at the time of refinancing were hopelessly unable to retain their properties. Not only are these borrowers meeting their interest payments without serious difficulty, but they are also accumulating substantial equities in their properties.

The group of original borrowers in satisfactory status includes 594,087 borrowers paying on schedule or less than three monthly installments in arrears, and 78,476 borrowers who are more than three monthly installments in arrears, but are reducing their delinquency by regular payments. In view of the fact that on the average more than fifty monthly installments have fallen due since the beginning of HOLC operations, the problem of making up arrearages of less than three months usually presents little real difficulty to the borrower. Also, when defaulted borrowers are making regular payments for the liquidation of their arrearages in addition to their current monthly

Active accounts include all original borrower accounts on which the Corporation is still making collections. In other words, they represent all original loans less those which have been paid in full and those foreclosed or authorized for foreclosure.

remittances, the solution of their problems in the near future can safely be anticipated.

In June 1939 original borrowers who were in default, that is, more than three monthly installments in arrears, and not able to liquidate

their delinquency, numbered 125,822, representing 15.8 percent of the total number of active accounts at that date. However, only 9,708 of these cases were classified as insoluble; in all other cases, efforts were being made to solve the borrower's problems with a view to avoiding foreclosure.

Exhibit 48 presents a classification of the status of borrower accounts, as of June 30, 1939, by HOLC regions and by States.