acquired, subsequent additions in the form of advances to borrowers and vendees, interest capitalized, and necessary expenditures on properties acquired. During the reporting period, the net balance of loans outstanding and the capital value of properties on hand was reduced from $2,629,952,937 to $2,436,945,645, a reduction of $193,007,292, or 7.3 percent, as compared with a decrease of 5.4 percent during the preceding year. The following table shows the various processes by which this reduction was brought about: Reduction of total debtor and property accounts' in the fiscal year 1940 Balance of loans outstanding and properties on hand, June 30, 1939_.. Plus: Additions during the year: Advances to original borrowers. Unposted advances increase.... 235, 044 $2,629, 952, 937 $69, 296, 326 Advances to vendees.. 1,042, 541 Minus: Receipts during the year: Principal repayments by original borrowers. 175, 796, 316 Principal repayments by vendees and proceeds from property sales--- Miscellaneous capital cash credits.. Total receipts.- Loss on principal sustained during the year_ 45, 404, 119 968, 772 222, 169, 207 2 82, 390, 320 Balance of loans outstanding and properties on hand, June 30, 1940. 2, 436, 945, 646 Debtor accounts include original loans and advances to borrowers, subsequent additions to the original loans, and interest converted to principal by extension; they also include vendee accounts originating from property sales of the Corporation and advances to vendees. Property accounts represent the capital value both of property owned and property in process on which a foreclosure judgment has been obtained or foreclosure sale has been held subject to redemption period; they include unpaid interest on the loan ac counts transferred to property accounts, the cost of initial repairs and improvements, and acquisition costs, taxes, etc., applicable to the period prior to the acquisition of absolute title. Includes sales commissions and selling expenses of $11,520,579. On June 30, 1940, there remained to be recovered $2,436,945,646, distributed as follows: $1,734,883,082 on original mortgage loans, $277,239,129 on vendee accounts, $424,185,212 on properties, and $638,223 on unposted advances. From the beginning of operations through June 30, 1940, the Corporation had made gross investments in loans and properties in the amount of $3,448,189,599. At the end of the reporting period, this total had been reduced by $1,011,243,953, or 29.3 percent. Actual recoveries by virtue of principal repayments on debtor accounts, cash proceeds from property sales, and miscellaneous cash credits accounted for $872,204,868, or 25.3 percent of the gross cumulative investment; and losses sustained in the liquidation were responsible for $139,039,085, or 4.03 percent of the gross cumulative investment. Reduction of total debtor and property accounts through June 30, 1940 The liquidation experience of the Corporation thus far has been very unequal in the different parts of the country. The New York Region, which comprises New York, New Jersey, and the New England States, has shown by far the poorest record with respect to recoveries and losses. In this Region, the ratio of recoveries on loans outstanding and properties to total gross investments has been only 15 percent, while in the other Regions, the ratio ranged from 26.5 percent in Chicago to 34.5 percent in San Francisco. On the other hand, the ratio of losses sustained to gross investments has been 5.6 percent in the New York Region as compared with a range of 2.1 to 4.9 percent in the other Regions (Chart on page 160). The principal reason for this situation lies in the fact that the Corporation has encountered in the New York Region the most difficult home-mortgage conditions of the country. In the States comprising this Region, recovery has lagged far behind the recovery in other sections. This is an area, too, that is characterized by real-estate taxation heavier by far than that carried elsewhere. In New York City and vicinity, in particular, there is the added element that real estate and the mortgage structure are still suffering from the effects of the inflated values and standards which prevailed during the years preceding the 1929 crash. The difficulties of the mortgage situation in the New York Region are reflected in a delinquency and foreclosure experience unparalleled by that in any other section of the country and in market conditions confronting lenders with unusual problems in their efforts to dispose of repossessed properties. In brief, this is an area of continued home-mortgage distress and of continued instability in the mortgage and real estate markets. The San Francisco Region, including the Pacific and Mountain States, and the Dallas Region, including the States of New Mexico, Oklahoma, and Texas, have thus far shown the best records of liquidation. CHART XLVII REDUCTION OF THE GROSS INVESTMENT IN LOANS AND PROPERTIES The reduction of the Corporation's debtor and property accounts was accompanied by a decrease in the bonded indebtedness of the Corporation. Total bonds outstanding on June 30, 1940, amounted to $2,634,808,900, which compares with a peak in bonded indebtedness of $3,047,046,575 on May 31, 1936, shortly before the refinancing operations of the Home Owners' Loan Corporation came to an end. In accordance with the provisions of the Home Owners' Loan Act, all principal repayments by borrowers have been deposited regularly in the Bond Retirement Fund and used only for the retirement of bonds. By Board Resolution, certain other receipts, such as cash proceeds from property sales and repurchases of investments in savings and loan associations have likewise been applied to the retirement of bonds. Through June 30, 1940, repayments of debtors and receipts from property sales amounted to $863,809,859 and other items applicable to the retirement of bonds aggregated $22,550,957, for a total of $886,360,816. Of this amount, $869,598,703 had been deposited in the Bond Retirement Fund through June 30, 1940, and $16,762,113 was deposited during July. The following table shows the disposition of the funds allocated to the Bond Retirement Fund through June 30, 1940: Applied to retirement of bonds... Deposited with U. S. Treasury for retirement of matured bonds on which interest has ceased.... Available for future bond retirement. Amount due Bond Retirement Fund for June 1940 deposited in $834, 531, 705 31, 449, 200 3, 617, 798 869, 598, 703 16, 762, 113 6. ADMINISTRATION AND PERSONNEL 886, 360, 816 Despite the heavy work load resulting from the extension program, which brought additional duties to the legal, accounting, and loan service staff of the Corporation, administrative costs and personnel showed continued reductions during the period from July 1, 1939, to June 30, 1940. Both as a result of increased efficiency and better organization and because of the declining work load attendant upon the normal process of liquidation, the Corporation has been able to effect a continuing reduction in its payroll costs. 8 On July 1, 1940, the personnel of the Corporation numbered 9,843, of whom 1,274 were employed in the Washington office and 8,569 in the field. This compares with a total of 11,007 the year before-a decline of 10.6 percent during the reporting period, with an attendant reduction of $1,639,965 in annual salary cost. At the height of HOLC activity during the period of refinancing operations, the Corporation had employed a personnel of more than 20,000. In other words, the present staff of the Corporation numbers less than one-half the peak. All personnel figures include employees on a per diem basis. The Corporation has inaugurated a carefully developed program for training employees. This program not only improves the quality of performance, but facilitates promotion from within, by enabling employees to qualify for more responsible work as openings occur. Detailed information on the number of employees on July 1, 1940, by departments, divisions, and sections is given in Exhibit 69. As a liquidating organization, the Home Owners' Loan Corporation is faced with the problem of releasing gradually substantial numbers of employees who have given loyal service to the Corporation and have demonstrated a high degree of competence in their positions. The Corporation feels a definite responsibility toward these employees and assists them in securing other employment as expeditiously as possible. Positions are classified in accordance with the requirements of Executive Order No. 6746, of June 21, 1934, which stipulated the rates of compensation for employees in emergency agencies. The classification of positions and the assignment of salary scales are in accordance with the principle of "equal pay for equal work." Classifications are continuously reviewed and positions analyzed in order to take cognizance of changes in duties and procedures. Closely identified with classification is the salary administration program designed to provide equitable rates of pay on the basis of the work performed and the efficiency with which it is carried out. Positions are periodically reviewed for the purpose of making adjustments. A service rating program is conducted twice a year which forms the basis for adjustments and promotions and which provides employees with an appraisal of their work. During the fiscal year 1940, 22 State, divisional, district, and other branch offices were closed, reducing the total number of such offices to 42 at the end of the period. The number of field stations for servicing purposes declined from 110 to 54. This compares with a total |