3. ADMINISTRATION AND PERSONNEL The problems encountered in the administration of the Home Owners' Loan Corporation are difficult and in many respects unique. Because the Corporation's loans were made to distressed home owners, it has been necessary to develop special service activities not usually required of private lenders. The cost of handling the Corporation's typically small accounts has also been relatively high since there is little difference in overhead expenses on a mortgage of $3,000 and one ten times that figure. The very fact that the Corporation's loans and properties are located in virtually every county in the United States has made the problem of administering and controlling operations more complex than would otherwise be the case. Nevertheless, as the following figures will show, the Corporation has been able to effect steady reductions in administrative costs during the last several years. 8 On July 1, 1941, personnel employed by the Corporation numbered 7,764, of whom 1,256 were listed on the home office and 6,508 on All personnel figures include employees on a per diem basis. the field payrolls. Included in the figure for home office personnel are 203 individuals who were officially stationed in various field offices. These figures compare with a total of 1,274 home office employees and 8,569 field employees at the beginning of the fiscal year. In other words, during the reporting period, the Corporation was able to effect a reduction of 21.1 percent in number of personnel, with a resulting saving in annual salary cost of $3,831,400. At the height of refinancing activity in November 1934, the total personnel employed by the Corporation numbered more than 20,000. From that period, the staff of the Home Owners' Loan Corporation has been reduced by over 62 percent. This continuing retrenchment reflects the progressive adaptation of the organization to the reduced volume of its work and also the steady introduction of operating efficiencies and improvements as rapidly as developments would permit. Detailed information on the number of employees on the payroll as of July 1, 1941, broken down by departments, divisions, and sections will be found in Exhibit 62. The Corporation has been faced with the difficult problem of maintaining a high morale during a period when it has been necessary to cut down on administrative overhead in view of the over-all responsibility of the Corporation to liquidate its affairs as rapidly and as economically as possible. In order to take advantage of every opportunity to develop and maintain the complete support of its employees, the Board in 1940 authorized the development and publication of a statement of policy governing employee relations. Department heads, supervisors, and employees cooperated in the formation of clearly stated policies to which all agreed, and worked out procedures for an easy, free exchange of ideas and the prompt settlement of problems affecting both employees and management. Probably the most serious personnel problem confronting the Corporation has been the selection of personnel for separation when reductions in force are necessary. Great care has been exercised to develop and administer a uniform procedure for the fair and equitable determination of employees who must be separated. Consideration is given to such factors as efficiency, length of service, versatility, economic need for employment, and veteran's preference. As a public responsibility, the Corporation has assumed the task of assisting employees who must be separated to obtain other employment as rapidly as possible. Few of the employees separated during the reporting period were without employment for any extended length of time, and in the majority of cases, assistance by the Corporation was instrumental in enabling these individuals to find other jobs. In the fall of 1940, it became apparent that the national defense program would require trained personnel in the rapidly expanding agencies of the Government responsible for the problem of housing for defense. In the interests of the broader public welfare, the Corporation immediately adopted a policy of making available its best qualified and most thoroughly seasoned employees for key positions in defense agencies although in many cases this meant a considerable sacrifice on the part of its own organization. Positions with the Home Owners' Loan Corporation have been classified in accordance with the requirements of Executive Order No. 6746 of June 21, 1934, which set compensation scales for employees in emergency agencies. Under the terms of the Ramspeck Act, approved November 26, 1940, the Home Owners' Loan Corporation with a number of other agencies of the Federal Government will begin to operate fully under Civil Service regulations and laws on January 1, 1942. In anticipation of this change in personnel procedures, the Board on May 14, 1941, provided for the adoption of salary rates and grades prescribed for agencies subject to the Classification Act. By this action, the Board is assisting its employees to secure at an early date all of the benefits of the Government service under the merit system. Personnel policies and procedures of the Corporation have been closely correlated with those of the Civil Service Commission since the establishment of the Corporation in 1933. It is, therefore, expected that the transition can be completed with a minimum of work and expense. During the 1941 fiscal year, 21 State, divisional, district, and other branch offices of the Corporation were closed, reducing the total number of such offices to 21 at the end of the reporting period. The number of field stations maintained by the Corporation for servicing purposes was also reduced from 56 to 47. The contraction in field organization brought about during the reporting period was reflected not only in substantial salary savings, but also in reduction of rental and other overhead costs. 4. FINANCIAL OPERATIONS Statement of Condition The financial statement of the Home Owners' Loan Corporation shows further progress in the liquidation of assets during the fiscal year 1941. Aggregate resources declined from $2,790,002,453 on June 30, 1940, to $2,565,932,327 at the close of the reporting period, a decrease of 8 percent. A comparison of the balance sheet on June 30, 1941 (Exhibit 63), with the balance sheet a year previous, shows several significant shifts in major items during the reporting period. Changes in important balance-sheet items from June 30, 1940, to June 30, 1941 Original mortgage loans and advances thereon. Investments.. Liabilities and Capital: Bonded indebtedness.. Accounts payable... Net worth (capital stock minus deficit). -$213, 836, 866 +72, 007, 186 - 105, 451, 211 +11, 044, 501 -20, 170, 850 -215, 200, 100 +7, 000, 527 -21, 439, 806 - 15, 909, 686 Original mortgage loans.-The balance of original mortgage loans outstanding and advances thereon shows a decline during the reporting period from $1,734,883,082 to $1,521,046,216. This decrease is primarily accounted for by principal repayments on the part of original borrowers and to a lesser degree by the transfer of loan accounts to property accounts through foreclosure or deed in lieu of foreclosure. Vendee instruments.-The progress of the Corporation in selling its owned properties on a deferred payment basis is reflected in an increase of vendee instruments outstanding and advances thereon from $277,239,129 to $349,246,315. Property owned.-The capital value of property owned and in process of acquiring title fell from $424,185,211 to $318,734,001 during the reporting period as a result of increasing property sales and declining acquisitions, analyzed in detail on pages 151-155. Bond Retirement Fund.-On June 30, 1940, the cash and security holdings of the Bond Retirement Fund totaled $35,066,998, of which $31,449,200 was represented by cash held in the United States Treasury for retirement of matured bonds. At the close of the current reporting period, the total of such funds, all in cash, amounted to $46,111,498, of which only $10,687,950 represented the portion held against matured obligations. The balance applicable to unmatured bonds consequently increased during the year by $31,805,750. Investments. Investments of the Home Owners' Loan Corporation include the entire capital stock of the Federal Savings and Loan Insurance Corporation in the amount of $100,000,000 and investments in the shares of Federal and State-chartered savings and loan associations. Due entirely to the repurchase of share investments by savings and loan associations, investments of the Corporation declined from $303,024,210 to $282,853,360. Exhibit 64 gives a detailed statement of HOLC investments in savings and loan associations. Bonded indebtedness.-The bonded indebtedness of the Corporation declined from $2,634,808,900 to $2,419,608,800 during the reporting period. Bonds outstanding on June 30, 1941, include $10,687,950 in matured bonds not yet presented for payment for which an equal amount of cash is on deposit with the Treasurer of the United States. Eliminating these bonds, the total liability of the Corporation on unmatured bonded indebtedness totaled $2,408,920,850 on June 30, 1941, and if allowance is made for funds held by or due the Bond Retirement Fund, a net liability of $2,373,497,300 results. All outstanding unmatured bonds of the Corporation are guaranteed by the Government both as to principal and interest. No bonds were issued by the Home Owners' Loan Corporation to the public during the fiscal year ending June 30, 1941. The only securities issued during this period were $5,000,000 of 4 percent, Series N bonds, due October 1940 and $15,000,000, 4 percent, Series O bonds, due October 1941. Both of these series were sold at intervals to the United States Treasury for general corporate purposes and were repaid prior to June 30, 1941. Prior to May 15, 1941, cash totaling $190,837,900, which had been accumulated in the Bond Retirement Fund, was deposited with the United States Treasury for the payment of a like amount of % percent, Series L bonds, due on that date. This reduction in bonded indebtedness represented one of the largest single reductions of debt in the record of Government agencies. A detailed statement of bonds issued, refunded, and retired to June 30, 1941, and bonds outstanding on that date is presented in Exhibit 65 Reserves and losses.-At the beginning of the reporting period, the Corporation's reserve for losses on mortgage loans, interest, and |