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Seventh Annual Report FEDERAL HOME LOAN BANK BOARD for the period JuLY 1, 1938-JUNE, 30, 1939 covering operations of the FEDERAL HOME LOAN FEDERAL SAVINGS FEDERAL LOAN AND LOAN SAVINGS INSURANCE HOME OWNERS' BANK SYSTEM ASSOCIATIONS AND CORPORATION LOAN CORPORATION Seventh Annual Report FEDERAL HOME LOAN BANK BOARD covering operations of the FEDERAL HOME LOAN FEDERAL SAVINGS AND BANK SYSTEM LOAN ASSOCIATIONS FEDERAL SAVINGS AND LOAN INSURANCE HOME OWNERS) CORPORATION LOAN CORPORATION for the period JULY I, 1938, through JUNE 30, 1939 SI For sale by the Superintendent of Documents, Washington, D. C. - - - - - - Price 35 cents 9414A"~-uu~d* I~~ __ a Pli ja ~ Ir Letter of Transmittal FEDERAL HOME LOAN BANK BOARD, Washington, D. C., October 1, 1939. The SPEAKER OF THE HOUSE OF REPRESENTATIVES. SIR: Pursuant to section 20 of the Federal Home Loan Bank Acty we have the honor to submit herewith the Seventh Annual Report, of the Federal Home Loan Bank Board for the period July 1, 1938, through June 30, 1939, covering the operations of the Federal Home Loan Banks, the Federal Savings and Loan Associations, the Federal Savings and Loan Insurance Corporation, and the Home Owners' Loan Corporation. Section I of the report presents a broad summary of the activities of the Federal Home Loan Bank Board and the agencies under the Board. Section II deals with significant developments in the field of residential construction and home finance during the reporting period. The subsequent sections contain reports on the operations of each of the agencies under the Board for the fiscal year 1939. Mention should be made of three major events affecting the opera tions of the Board and its agencies after the close of the fiscal year. On July 1, 1939, Reorganization Plan No. I became effective, group ing the Federal Home Loan Bank Board, the Home Owners' Loan Corporation, and the Federal Savings and Loan Insurance Corpora tion with certain other Government agencies under the newly created "Federal Loan Agency." By an amendment to the Home Owners' Loan Act approved on August 11, 1939, the Home Owners' Loan Corporation was authorized to extend the amortization period of its mortgage loans from fifteen years to a maximum of twenty-five years, if, in the judgment of the Corporation, the circumstances of the home owner and the condition of the security justify such extension or revision. In addition, the Home Owners' Loan Corporation has made pro vision to accept until further notice interest at the rate of 44% per III IV LETTER OF TRANSMITTAL annum on all payments due on and after October 16, 1939, on the indebtedness of home owners to the Corporation arising from any loan, advance, or sale of property. A further step has thus been taken designed to aid home owners in their rehabilitation. Respectfully, JOHN H. FAHEY, Chairman, T. D. WEBB, Vice Chairman, FRED W. WILLIAM CATLETT, HUSBAND, H. FRANK W. HANCOCK, Jr., Members. Contents Page LETTER OF TRANSMITTAL -------------------------------- I. THE FEDERAL HOME LOAN BANK III BOARD AND ITS AGENCIES ------------------------------------------ Significance of home ownership and home finance- - -Origin of agencies under the Board-----------------Summary of operations 1. Federal Home Loan Bank System2. Federal Savings and Loan Associations---------3. Federal Savings and Loan Insurance Corporation4. Home Owners' Loan Corporation --------------General effects ---------------------------------Importance of coordination-----------------------Supervision and examination ---------------------Operation on a self-supporting basis- ---------------II. SURVEY OF HOUSING AND MORTGAGE FINANCE -------- 1. Residential construction and the real-estate marketExpansion of building activity ---------------Stability of market factors-------------------Recovery of the real-estate market ------------Regional variations of new construction --------Importance of smaller communities and of home building----------------------------------Building for the mass market ----------------The Federal Home Building Service Plan-------Need for rehabilitation----------------------2. Savings and mortgage finance-------------------Increase of individual long-term savings--------Growing competition in the mortgage market - -Reduction of dividends of home-financing institu tions ------------------------------------Moratorium laws--------------------------Home mortgage lending activity --------------Mortgage recording studies- ------------------Increase of home mortgage debt in 1938--------3. Problems ahead ------------------------------- 1 1 2 33---------------33------------7 9 11 14 16 17 18 21 21 21 23 25 29 30 32 34 36 38 38 40 42 44 44 47 50 51 CONTENTS VI Page III. FEDERAL HOME LOAN BANK SYSTEM---------------- 1. Operations of the Federal Home Loan Banks .-----Changes in membership ---------------------Volume of advances ------------------------Types of advances---------------------------Increase in liquidity of the Federal Home Loan Banks-----------------------------------Growth of capital stock ---------------------Debentures and member deposits -----------Income and expenses ----------------------Administration of the Federal Home Loan Bank System ----------------------------------Proposed Federal legislation ------------------2. Operations of member institutions ---------------Increase in assets----------------------------Lending activity ---------------------------Reduction of real-estate holdings- -------------Other financial operations ------------------3. Structural changes in the savings and loan industry Rehabilitation -----------------------------Improvements in management ----------------Improvements in plans of operation ---------More adequate reserves --------------------Greater emphasis on liquidity- ----------------Federal aid ---------------------------------- IV. FEDERAL SAVINGS AND LOAN ASSOCIATIONS ----------- Increase in number and assets of Federal associations-Continued growth in private investments -----------Expansion of lending activity ----------------------Financial operations- -----------------------------Proposed Federal legislation --------------------State legislation----------------------------------Constitutionality of Federal Savings and Loan Associa tions-----------------------------------------V. FEDERAL SAVINGS AND LOAN INSURANCE CORPORATION- Progress of insurance protection- ------------------Community programs ----------------------------Eligibility requirements --------------------------Supervision-------------------------------------Settlements -----------------------------------Operations of the Insurance Corporation ------------Operations of insured associations ------------------- 55 55 55 57 59 62 64 65 66 68 71 72 72 74 77 79 81 81 82 83 86 87 88 91 91 93 96 97 99 101 102 105 105 107 109 110 111 113 114 CONTENTS VII V. FEDERAL SAVINGS AND LOAN INSURANCE CORPORATION Continued. Insurance as a factor in rehabilitation---------------Proposed Federal legislation-----------------------State legislation----------------------------------YI. llomvE OWNERS' LOAN CORPORATION-----------------Survey of present activities ------------------------Status of borrower accounts-----------------------The collection record -----------------------------Loan service-------------------------------------Foreclosure experience of the Corporation-----------Cost of foreclosure -------------------------------Property management ----------------------------Property income and expense ----------------------Vendee accounts ---------------------------------Reconditioning operations -------------------------Appraisals --------------------------------------Investments of the Corporation--------------------Financial operations ------------------------------Bonds outstanding -------------------------------Progress in liquidation ----------------------------Administration and personnel ----------------------LIST OF EXHIBITS------------------------------------------- Exhibits----------------------------------------INDEX------------------------------------------------------ Page 117 121 123 125 125 126 128 130 132 134 136 139 142 142 144 145 146 149 150 154 159 163 231 ORGANIZATION FEDERAL CHART HOME OF THE AGENCIES LOAN OF THE BAN K " 'll ' (Created by Federal Home LoanBankAct -ApprovedJuly 22 1932) FEDERAL HOME LOAN BANK SYSTEM (Cre ad by ederal Home Loan Bank Ad (As Amended) FEDERAL SAVINGS & LOAN INSURANCE CORPORATION ApprovedJuly 22, 1932) (Created by Naetonal Housing Act 1934 - Approved June 27, 1934) (As Amended) A credit reserve organization for thrift and home financing institutions. Regional Federal Home Loan Banks, subject to the regulations of the Federal Home Loan BankBoard Make short term and long-term advances to and accept deposits from their member An instrumentality of the United States est abl.shed to imsure the safety of investment to a mammum of $5000 00 for each investor in each Federal savingsinstitution and loanofassociation andand in eachg state chartered the savings loan association type which applies and is approved. The members of the Federal Home Loan Bank Board constitute the Board of Trustees of the Federal Savings and Loan Insurance Corporation. lnsttutions. GOVERNOR STWELVE FEDERAL j HOME MEMBER I BANKS INSTITUTIONS CAN7K 8 tDNALLT STATECHARTERED A ANDLOAN ASSMj tAV. LOANASNS a LOAN AVING5 5S A BA N KS INDIVIDUAL INVESTORS AND BORROWERS INSURANCE COMPANIE - BOARD -Lp ~ supR V/SIN ^oFiSEDINSTTUTOS FEDERAL SAVINGS & GENERAL MANAGER , ' ,, HOME OWNERS' LOAN CORPORATION (Auhorized by Home Ownear' Lon At - Atpe (As Amended) d Jane Anemergency organization created toextend relief to distressed home owners who were in danger of losing their homes through foreclosure. Since June 12, 1936 has been engaged chiely t serve gttsloans, teli , qudang ouibet d i s asets and and dchargmg dchrging itss resposisbities io bond holders and the Government Members of the Federal Home Loan Bank Board con stitute the Board of Directors of the Home Owners' Loan Corporation. at GENERAL MANAGER LOAN SYSTEM (Authorked by Home Omsner' Lean Act - Approved Jone 13, 1933) (Ac Amended) Local mutual savings institutions, chartered and supervised by the Federal Home Loan Bank Board, and operated under boards of directors elected by their members. They encourage long-term thrift accounts and the financing of homes on long-term amortized first mortgage loans. APPROVED 11-15 39 FERA 183130-39 (Face p. 1) 13. 1933) OELA Chairman, FEDERAL HONE LOAN BANK BOARD I - - -- I The Federal Home Loan Bank Board and Its Agencies T HE Federal Home Loan Bank Board, created by Congress in 1932 to administer the Federal Home Loan Bank System, has been charged with a number of additional functions in subsequent years. In 1933, when the Home Owners' Loan Act was passed, the Federal Home Loan Bank Board was designated to serve as Board of Directors of the Home Owners' Loan Corporation. By the same Act, the Board was authorized to charter, organize, and supervise Federal savings and loan associations. In 1934, the Federal Home Loan Bank Board was directed to act as the Board of Trustees of the Federal Savings and Loan Insurance Corporation, created to insure the ac counts of investors in thrift and home financing institutions. SIGNIFICANCE OF HOME OWNERSHIP AND HOME FINANCE Despite these several functions, the Federal Home Loan Bank Board is primarily concerned with one field of the country's economic and social life: the field of home ownership and the related activities of home finance and thrift. The importance of this field in our na tional economy springs from deep sources. Americans have always cherished the goal of home ownership, and the rise of large industrial and commercial centers has brought but little change in this respect. Home ownership in this country is not confined to a small wealthy class, but is widespread among all classes of the population. The vast majority of our nonfarm families live in one- and two family houses. In 1930, approximately 70 percent of all existing occupied dwelling units in nonfarm areas were single-family houses. Another 15 percent of the existing dwelling units were in two-family houses, and only the remaining 15 percent in multifamily and apart ment houses. Likewise, about eighty out of each hundred dwelling units built since 1930 were in one- and two-family houses. The aggregate value of small houses in the United States represents the largest single item of our national wealth. Naturally, the credit structure built around these properties constitutes a great portion of our total private long-term debt. With an estimated amount of 2 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 $17,721,000,000 in 1938, the mortgage debt on one- to four-family dwellings is the largest single block in the private long-term debt in the United States. The safeguarding of the wealth invested in our homes, and the smooth functioning of credit which serves to finance the building and purchase of homes have only recently become matters of national concern. For a long time the rapid growth of the country in terri tory, population, and resources had tended to obscure existing defects of our home-financing system. It was only during the depression from 1929 to 1933 that serious weaknesses were exposed and recog nized as national problems. It is unnecessary to recite the experience of these years in detail. The mounting number of home owners who lost their properties or were threatened by foreclosure, the freezing up of credit, the break-down of confidence, runs on home-financing in stitutions, the collapse of the real estate market-all this is still fresh in our minds. While the distress of the mass of home owners was due in part to the particular severity of the depression, Congress realized that much of it could have been prevented if better safe guards had been placed around home ownership and thrift, which affect so large a portion of our population. The Federal Home Loan Bank Board and its agencies were brought into existence to provide such added protection. ORIGIN OF AGENCIES UNDER THE BOARD The Federal Home Loan Bank System was created in 1932 to serve as a permanent credit reservoir for thrift and home financing institu tions. It assists both borrowers and investors in such institutions through the supply of money to maintain liquidity or to provide for mortgage lending when local funds are insufficient. With the estab lishment of the Federal Home Loan Bank System, a basic weakness of the American home-financing structure-the lack of any credit reserve facilities-has been eliminated. However, before the Federal Home Loan Bank System began its actual operation, the financial disaster had assumed such proportions that emergency action was needed. In June 1933, Congress estab lished the Home Owners' Loan Corporation to help distressed home owners directly by refinancing mortgages on owner-occupied one- to four-family homes. This was strictly a temporary expedient and in June 1936, the Home Owners' Loan Corporation closed its refinancing operations. To strengthen the home-financing structure, the Home Owners' Loan Act provided for the creation of a national system of thrift and THE BANK BOARD AND ITS AGENCIES 3 home financing institutions, the Federal savings and loan associations. These institutions, including newly established associations in areas theretofore and then inadequately served, and existing associations which applied and were approved for conversion from State to Federal charter, operate under a uniform national charter which seeks to combine the best policies and practices developed by the savings and loan industry as a whole. Today, Federal savings and loan associa tions represent one of the most progressive and serviceable units of the home-financing system. Finally, successful operation of insurance for bank deposits by a Federal agency, introduced in 1933, led to the extension of a similar service to home-financing institutions in the following year. To restore and maintain public confidence in savings and loan associa tions, Congress created the Federal Savings and Loan Insurance Corporation which protects the savings held in such institutions to a maximum of $5,000 for each investor. Insurance of accounts reduces the danger of mass withdrawals of funds in general or local panics and thus fortifies the home-financing system against unusual hazards. This protection represents another permanent safeguard placed around home ownership and thrift. SUMMARY OF OPERATIONS The operations of the various agencies under the Federal Home Loan Bank Board during the fiscal year 1939 are set forth in subsequent chapters of this report. However, in order that their achievements, measured against the predepression defects of our thrift and home financing system, may be more fully understood, a summary of activi ties from the inception of the agencies to date is given at this point. 1. Federal Home Loan Bank System In the seven years of its existence, the Federal Home Loan Bank System has become an integral part of the American financial struc ture. To the credit reserve systems for commercial banks and for farm finance provided by the Federal Reserve System and the Federal Land Banks, the Federal Home Loan Bank System has added a national credit reservoir for another important sector of our credit mechanism: home mortgage finance. On June 30, 1939, the Federal Home Loan Bank System served 3,946 home-financing institutions, with aggregate resources of approx imately $4,600,000,000, located in all the 48 States and in the District of Columbia, Alaska, and Hawaii. At the same date, member institutions were operating in 1,963 cities and towns which contain 4 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 about 85 percent of the urban population of the United States. As most of the members, although strictly local institutions, are em powered to make loans within a reasonably wide radius of their home office, it is evident that by and large, thrift and home financing insti tutions in the entire nonfarm area of the country are provided with the services of the Federal Home Loan Bank System. These services now extend into every sizable community in the United States. Member institutions of the Federal Home Loan Bank System serve an estimated number of 6,500,000 individuals, either savers or bor rowers or both. Since most of these individuals are heads of families, it may be roughly estimated that six million out of the some twenty three million nonfarm families in the United States receive the benefits of the facilities offered by the Federal Home Loan Bank System. On June 30, 1939, the membership of the Federal Home Loan Bank System comprised 3,897 savings and loan associations, building and loan associations, homestead associations, and cooperative banks; 9 savings banks; and 40 insurance companies. Within the field of savings and loan association-the only type of specialized home-financing institution in the country-the Federal Home Loan Bank System today comprises the bulk of the total industry. The assets of the member savings and loan associations represent over 66 percent of the total assets of all savings and loan associations operating in the country, and their mortgage loans outstanding are equal to 72 percent of all mortgage loans held by this type of financial institution. With such a degree of representation, the Federal Home Loan Bank System, in the field of home finance, has attained a place similar to that occupied by the Federal Reserve System in the field of commercial banking where member banks hold approximately 70 percent of the total deposits in commercial banks. In terms of number of member institutions, the Federal Reserve System comprises 41 percent of all banks; the Federal Home Loan Bank System, 47 percent of all savings and loan associations and similar thrift and home-financing institutions. The chief function of the Federal Home Loan Banks is to supply, primarily on first mortgage collateral, funds required by member institutions in order that they may meet the home-financing needs in their communities and withdrawal demands of savers and investors. From October 15, 1932, when the twelve Federal Home Loan Banks first opened for business, to June 30, 1939, advances to home-financing institutions totaled $523,023,390, of which $354,061,827 has been repaid. This indicates the extent to which the Federal Home Loan Bank System has been called upon to serve as a national credit reservoir. Through the Federal Home Loan Bank System, thrift THE BANK BOARD AND ITS AGENCIES 5 and home mortgage finance have been better protected against local and nation-wide economic fluctuations, home ownership has been placed on a more secure basis, and the construction of new homes and the improvement of housing conditions have been encouraged. The establishment of a credit reserve system has brought to home financing institutions not only a larger volume of potential credit, but cheaper money and a type of credit adapted to their special needs. The Federal Home Loan Banks obtain their funds from their capital stock, the proceeds from the sale of their securities to the public, and deposits received from their member institutions. From these sources the Federal Home Loan Banks are able to advance funds to member institutions on long terms up to ten years-in line with the essentially long-term character of the mortgage loans made by these institutions. The interest rates charged on advances have been substantially reduced since the organization of the Banks. In 1932, at the inception of the Federal Home Loan Bank System, when money was still scarce and dear, interest rates on Federal Home Loan Bank advances were from 4 to 5 percent; on June 30, 1939, they ranged from 1% to 3y percent. CHART I ASSETS OF THE TWELVE FEDERAL HOME LOAN BANKS JUNE30,1933 JUNE 30,1939 6 4 %966<2> .A' Figures are Millions of Dollars The resources of the twelve Federal Home Loan Banks have con tinuously grown until at June 30, 1939, they aggregated $296,629,853. On that date, the capital stock, surplus, and undivided profits stood at $173,128,616. The capital stock of the twelve Federal Home Loan Banks is made up by subscriptions of member institutions and of the United States Treasury on behalf of the Federal Government. To assist in the organization of the Federal Home Loan Bank System, Congress authorized the Secretary of the Treasury to invest up to $125,000,000 in the capital stock of the Federal Home Loan Banks. With the growth in number and assets of member institutions, however, the proportion of Federal Home Loan Bank stock held by the United States Treasury to the total stock of the Banks has decreased. On June 30, 1933, this proportion was 82.7 percent, and on June 30, 1939, 75.9 percent. Conversely, the proportion of stock held by mem- 6 REPORT OF FEDERAL HOME LOAN BANK BOARD, 193 9 ber institutions during that period has increased from 17.3 to 24. 1 percent. From the beginning of operations through June 30, 1939, the twelve Federal Home Loan Banks have declared dividends aggre gating $12,498,632, of which $9,849,146 was paid to the United States Treasury and $2,649,486 to member institutions. CHART II CAPITAL STOCK OF THE TWELVE FEDERAL HOME LOAN BANKS JUNE30,1933 JUNE30,1939 i90 430, -,39 6 - Figures ore Millions of Dollars E PAIDIN BYMEMBER INSTITUTIONS Ei PAIDIN BY THE U S TREASURY Through the issuance of bonds and debentures, the Federal Home Loan Bank System has access to the money market of the country. For the first time in the history of American home-mortgage finance, local home-financing institutions have thus been afforded an avenue to the vast general money resources of the Nation. From April 1, 1937, when the first issue of consolidated Federal Home Loan Bank debentures was offered, to June 30, 1939, such debentures were issued in the amount of $142,700,000, of which $52,700,000 had been repaid; on July 1, 1939, an additional amount of $41,500,000 was retired at maturity. The successful issuance of these debentures marked the passing of an important milestone in the history of the Federal Home Loan Bank System. In addition to security issues which permit the tapping of the general credit resources of the country, member deposits furnish a means of transferring funds from localities where money is ample to localities where money is scarce. On the whole, therefore, some elasticity of credit is provided which makes home mortgage lending less dependent on the irregular accumulation of savings in the various individual areas and communities. Evidence of the importance of the Federal Home Loan Banli System in the field of home-mortgage finance is found in the lending activity ,of its member institutions. In the fiscal year 1939, member savings and loan associations of the Federal Home Loan Bank System made mortgage loans in the amount of $687,000,000, which represents 79 percent of the total amount of mortgage loans made by all savings and loan associations, both member and nonmember. Of the total amount of home-mortgage loans made by all institutional lenders in the last few years, mem ber institutions of the Bank System accounted for approximately two-fifths. THE BANK BOARD AND ITS AGENCIES 2. Federal Savings and Loan Associations Federal savings and loan associations have been operating for six years. The record of these operations evidences that the objectives of the Act authorizing the creation of Federal savings and loan associations have been attained in a large measure. Federal savings and loan associations have supplied substantial funds for the financing of homes. From June 13, 1933, to June 30, 1939, these institutions have CHART III made mortgage loans in the amount which of $1,137,000,000, of for new $445,000,000 was PERCENT INCREASE OF PRIVATE REPURCHASABLE CAPITAL IN COMPARABLE FEDERAL SAVINGS a LOAN ASSOCIATIONS FISCAL YEARS 1936-1939 25 construction and reconditioning. Federal savings and loan asso ciations have also encouraged 20 regular and systematic savings which constitute the primary 5 source of home-mortgage finance. On June 30, 1939, about | 1,300,000 individual investors 5 held close to a billion dollars in 0 shares of Federal savings and 5 loan associations. At the same date, share investments of the United States Treasury and the Home Owners' Loan Corporation, designed to stimulate the . 00 1936 1939 1938 1937 DIVISIONOF RESEARCH AND STATISTICS FEDERAL HOME LOAN BANK BOARD flow of private money into this improved type of home-financing institution, totaled $217,025,500, equivalent to approximately one-fifth of private investments in Federal savings and loan associations. The rate at which private investments in Federal savings and loan associations have increased is illustrated by the above chart. At the end of the fiscal year 1939, there were 1,386 Federal savings and loan associations operating in 46 States, in the Territories of Hawaii and Alaska, and in the District of Columbia. They serve wholly or in part 2,867 counties, or 93 percent of the total number of counties in the United States, and through their establishment, thrift and mortgage-lending facilities have been made available to many communities which prior to 1933 had not had the benefit of local home financing institutions. 8 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 The demand for the organization of new Federal savings and loan associations and for conversion from State to Federal charter has been indicative of the need for home-financing institutions in communities not previously served by such institutions, and for the development of a uniform national system of savings and loan associations throughout the country. From the beginning of operations to June 30, 1939, the Federal Home Loan Bank Board has received 769 applications for the creation of new Federal savings and loan associations, of which 636 were approved, 131 rejected, withdrawn, and canceled, and 2 are pending. During the same period, applications for conversion from State to Federal charter numbered 1,197, of which 750 were approved, and 349 rejected, withdrawn, and canceled; 98 applications were pend ing on June 30, 1939. CHART IV NUMBER OF APPLICATIONS RECEIVED AND CHARTERS ISSUED (NET) THROUGH JUNE"30,1939 NEW AND CONVERTEDFEDERAL SAVINGS AND LOAN ASSOCIATIONS 0 APPLICATIONS 500 1,000 2,000 1,197 RECEIVED CHARTERS ISSUED 1,500 I.M NEW Associations 750 L CONVERTEDAssociations Before the issuance of charters to newly organized associations, the Federal Home Loan Bank Board examines the necessity for a new home-financing institution in the community and investigates whether its establishment would unduly injure properly conducted existing local thrift- and home-financing institutions. It also considers the character and responsibility of applicants and the probability of use fulness and success of the proposed association. Hearings are con ducted which provide an opportunity for full discussion of the applica tion. In approving applications for conversion from State to Federal charter, the Board's decision is determined by a thorough analysis of the financial condition and the operation and management of the association. The effects of the establishment of Federal savings and loan associa tions have reached far beyond these institutions themselves. The savings and loan industry as a whole has benefited greatly through the, organization of a national system of such institutions managed under high standards of operation. The improved and simplified savings, and loan plans under which Federal savings and loan associations operate have set an example which is gradually being adopted through amendments to the statutes of many States and in the operations of THE BANK BOARD AND ITS AGENCIES 9 State-chartered institutions; likewise, the Federal requirements with respect to management have paved the way for a general rise in stand ards of management throughout the savings and loan industry. With the establishment of Federal savings and loan associations, the set-up of the home-financing system of the country has followed the development of the banking structure. As there are State-chartered banks operating under State statutes and supervised by State author ities, and national banks chartered under the National Bank Act of 1863 and supervised by the Office of the Comptroller of the Currency, so there are State-chartered savings and loan associations operating under State law and supervised by State authorities, as well as Federal savings and loan associations operating under Federal charter and su pervised by the Federal Home Loan Bank Board. Just as national banks are required to be members of the Federal Reserve System and to obtain insurance of deposits, so must Federal savings and loan associations be members of the Federal Home Loan Bank System and obtain insurance of accounts. In fact, membership in the Federal Home Loan Bank System and insurance of accounts have been im portant factors in the success of Federal savings and loan associations. 3. Federal Savings and Loan Insurance Corporation The Federal Savings and Loan Insurance Corporation closed its fifth year of operations in June 1939. At the end of this five-year period, the Corporation had extended insurance of accounts to 2,170 thrift and home-financing institutions, comprising all savings and loan as sociations operating under Federal charter and 787 State-chartered savings and loan associations which have applied and been approved for insurance. On June 30, 1939, the aggregate assets of these institu tions were approximately $2,339,411,000, individual investors pro tected by insurance of accounts numbered 2,236,043, and their insured accounts totaled $1,657,859,000. It is estimated that 3,500,000 fami lies in the United States are served by insured savings and loan associa tions, either through the lending or savings facilities offered by these institutions. By protecting investments in insured savings and loan associations to a maximum of $5,000 for each investor, the Federal Savings and Loan Insurance Corporation safeguards the typically small investor in home-financing institutions against loss of his savings. As 98 per cent of all accounts in insured associations are not in excess of $5,000, the coverage is virtually complete. Assured that the safety of his investment is guaranteed by an instru mentality of the United States, the insured investor no longer has to 183130-39-2 10 REPORT OF FEDERAL HOME LOAN BANK BOARD, 193 9 fear a recurrence of the critical period of the early Thirties when many people lost their savings through the failure of banks and savings and loan associations. Insurance of accounts has thus strengthened public faith in the basic security of thrift- and home-financing institu tions, has materially, helped to encourage the inflow of money for investment, and has contributed to the restoration of the home -financing system of the country. In addition, a continuing guaranty of safety for savings invested i insured institutions has become a stabilizing factor in the develop ment of the savings and loan industry and home-mortgage finance. Individuals saving money on a long-term basis place safety ahead of return, and insured associations have, therefore, been able to attract private capital in volume at lower rates of return than formerly were possible. This in turn has enabled insured institutions to reduce interest rates on home mortgages, to expand their lending activity, and to meet the present keen competition for sound mortgage loans. The beneficial effects of Federal insurance of accounts are evidenced by the progress of insured savings and loan associations. CHART V ASSETS OF AN IDENTICAL GROUP OF 1,882 INSURED SAVINGS ANDLOAN ASSOCIATIONS AS OF JUNE30,1938 andJUNE30,1939 0 S00 MILLIONS 1,000 OF DOLLARS 1,500 2,000 2,500 -June-30,1938- $1,869,090,300 June30,1939$2,067530,800 A~M; M 1110~ The- Federal Savings and Loan Insurance Corporation has also assisted in the rehabilitation of savings and loan associations-a process that became necessary as an aftermath of the depression. Through June 30, 1939, the Corporation has been instrumental in effecting reorganization, with subsequent insurance of accounts, of 284 savings and loan associations, with aggregate assets of approxi mately $213,000,000 immediately after reorganization, and with $270,000,000 in assets on June 30, 1939. The strength of the protection provided by the Federal Savings and Loan Insurance Corporation lies in a combination of several factors which, in the main, are: wide geographical distribution of risk; reliance of the public upon the resources and integrity of an instru mentality of the United States; strong capital structure and conserva tive operating policy of the Corporation itself; and the assurance of sound operating practices of insured institutions by virtue of proper 11 THE BANK BOARD AND ITS AGENCIES supervision. Among these factors, the diversification of risk over almost all sections of the country may be singled out as of particular importance in view of previous failures and present endeavors to provide insurance protection on a local basis. The number of settlements which the Corporation has had to make during its five years of operation is comparatively small. Through June 30, 1939, the Corporation has settled seven cases and paid losses of $386,000, or about 5.9 percent of total premiums received (taking into consideration recoveries by the Corporation already realized). In all these cases, the settlements were cash contributions to restore the impaired capital of insured institutions. No individual investor protected by the Corporation has lost any portion of his investment in an insured institution. CHART VI RESOURCES OF THE FEDERAL SAVINGS AND LOAN INSURANCE CORPORATION AS OF JUNE 30,1935 and JUNE30,1939 0 June 30,1935 - $101,874,480 June30,1939 - $ I19,400,262 20 MILLIONS 40 OF 60 DOLLARS 80 100 120 n The resources of the Federal Savings and Loan Insurance Corpora tion have steadily grown until on June 30, 1939, they totaled $119,400,262. To the capital stock of $100,000,000-subscribed for by the Home Owners' Loan Corporation-$18,283,344 was added in reserves and surplus within five years, thereby strengthening the Insurance Corporation's resources on which its value to the insured institutions and to the investing public ultimately depends. During the whole period, the interest earned on the reserve fund was sufficient to pay administrative expenses which were only 3.9 percent of total income. 4. Home Owners' Loan Corporation The Home Owners' Loan Corporation in the period from July 12, 1933, to June 12, 1936, completed the immense task of refinancing the mortgage loans of 1,017,827 small-home owners who were in default and threatened with the loss of their properties. This refinancing operation of the Federal Government has protected directly about one-tenth of all owner-occupants of nonfarm homes in the United States against immediate dispossession. The low-cost mortgage loans of the Home Owners' Loan Corporation, repayable in small monthly installments over a fifteen-year period, have afforded 12 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 substantial relief to distressed borrowers and have helped a large number of families to rehabilitate themselves-families which, as a result of the economic collapse in the early Thirties, were in imminent danger of losing their homes only a few years ago. Some borrowers of the Corporation have been unable or unwilling to carry even these low-cost loans made available to them. Up to June 30, 1939, the Corporation was obliged to authorize foreclosures on 171,036 original loans (withdrawals deducted), equivalent to only 16.8 percent of the total number of original loans made. A number of borrowers, on the other hand, were in a position to repay their loans in full prior to the expiration of their loan contracts; as of June 30, 1939, there were 53,676 borrowers, or almost 5.3 percent of the total number of original borrowers, who had thus liquidated their entire indebtedness to the Corporation. Of the some 800,000 original borrowers remaining on the books of the Corporation on June 30, 1939, more than four-fifths were in satisfactory status and have given all indications of being on the road to complete rehabilitation. The results reflected in these figures have been accomplished, in a large measure, by the careful attention and cooperative assistance which is given to those borrowers who find it difficult to meet their obligations, and by the utmost leniency shown in all deserving cases where the borrower has any prospect of "coming through" in the future. Through formal and informal adjustments for the payment of arrearages, and through advances for reconditioning, taxes, and insurance, efforts have been made to aid such borrowers in their rehabilitation. Since the closing of its refinancing operations in June 1936, the Home Owners' Loan Corporation has entered the phase of gradual liquidation. The chart on page 13, which shows the disposition of the original loans at June 30, 1939, illustrates the changes that have occurred through the liquidation program. Of the original refinancing loans made by the Corporation, 77.90 percent were still in active status on the books of the Corporation; 5.70 percent had been removed from the Corporation's records by payment in full, cash sales of properties, and charge-off; 1.55 percent of the total number of original loans were in foreclosure pending judgment or sale; 9.75 percent were on the books as properties owned; and 5.1 percent had returned to the records as accounts of vendees; that is, of purchasers of HOLC properties sold on extended terms of payment. Through repayments on principal by original borrowers and vendees and through cash proceeds from property sales, the Corpora tion has liquidated approximately one-fifth of its gross investment in THE BANK BOARD AND ITS AGENCIES 13 loans and properties, as of June 30, 1939. As was to be expected, the liquidation of mortgage loans made primarily to defaulted borrowers has been attended by losses. After provision of $147,223,168 for past and future losses, the deficit as of June 30, 1939, stood at $59,562,029. In the process of liquidation, the Corporation's activities have changed in nature, but its total work load has remained substantial. The reduction in the number of original borrower accounts, for CHART VII DISPOSITION OF ORIGINAL REFINANCING LOANS MADE BY THE HOME OWNERS' LOAN CORPORATION ON JUNE 30,1939 FORECLOSURES PENDING 1.55 % TERMINATED LOANS 5.70% C PROPERTIES OWNED AND IN PROCESS OF ACQUIRING TITLE....... 9.75 % \ ' VENDEE ACCOUNTS 5.10 % ACTIVE QRIGINAL LOANS S.STILL ON THE BOOKS ::-. .77.90 % DIVISION OF RESEARCH AND STATISTICS FEDERAL HOME LOAN BANK BOARD instance, has been offset in large part by an increase in vendee accounts originating from property sales; and the management, renting, recon ditioning, and sale of the properties which the Corporation has been acquiring has increased rather than diminished in importance and volume. From the beginning of operations through June 30, 1939, the Corporation has acquired 141,752 and has sold 55,303 properties, leaving 87,618 owned on June 30, 1939. In addition, there were 11,736 properties in process of acquisition on that date. The book value of properties owned and in process of acquisition was $549,441,184. On June 30, 1939, there were 76,911 dwelling units rented in properties owned by the Corporation. At the same date, the Corporation's total 14 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 cumulative expenditure for reconditioning, necessary for the pro tection of the Government's interests, reached approximately $140,000,000. Since the beginning of liquidation, the Home Owners' Loan Cor poration has effected drastic reductions in administrative costs as illustrated by the chart below. Total personnel dropped from a peak number of 20,811 in November 1934 to 11,007 on July 1, 1939. These economies were made possible by the elimination and consolidation of field offices, attendant upon the cessation of refinancing operations, and through improvements in organization and efficiency. CHART VIII ADMINISTRATIVE EXPENSES OF THE HOME OWNERS' LOAN CORPORATION Fiscal Year 1936-$ 35,881,600 Fiscal Year 1939 -$ 25,025,000 During the fiscal year 1939, operating expenses 1 of the Home Owners' Loan Corporation were approximately 1.94 percent of the average dollar load in loans and properties in the period. In consider ing this figure, account must be taken of the fact that the average loan made by the Corporation was only slightly in excess of $3,000. The servicing of such small loans made to defaulted home owners, and the management of small properties spread over the whole country, pre sents an administrative task of the first order. In view of these facts, it is evident that operating expenses of less than 2 percent of the total dollar load in loans and properties represents the lowest level consistent with the maintenance of an organization adequate for carrying out the purpose of the Home Owners' Loan Act. GENERAL EFFECTS The combined achievements of the agencies under the Federal Home Loan Bank Board have reached into the entire field of thrift- and home-mortgage lending, and as the financial system of a country is no stronger than its weakest link, they have fortified our financial structure as a whole. The work of these agencies has been instru mental in bringing about far-reaching reforms in home finance-re forms providing one of the bases for the recovery of home-construction and home-mortgage lending which has taken place in the last few years (and which will be surveyed in Section II of this report). 1 Including administrative, general, and property expenses; excluding the cost of money and capital losses. THE BANK BOARD AND ITS AGENCIES 15 The Home Owners' Loan Corporation laid the ground work by arrest ing the avalanche of foreclosures, the deflation of property values, and the freezing up of large numbers of financial institutions. A real estate market which was already suffering from half a million fore closures on urban properties in 1931 and 1932 never could have sur vived the million more foreclosures halted directly by the refinancing operations of the HOLC. Without this refinancing, the stabilization of the real-estate market upon which any sound revival of new con struction is predicated would have been delayed by years or indefinitely. Moreover, the long-term amortization loan plan instituted by the HOLC on a nation-wide scale has set an example which today is accepted by most private mortgage-lending institutions as sound and safe. The existence of a central reserve system for thrift- and home financing institutions, and insurance of accounts in a large number of these institutions, has stimulated confidence and helped to direct the flow of money into home finance and new building. The revival of home-mortgage lending is evidenced by the almost $3,500,000,000 of home-mortgage loans made by savings and loan associations in the five-year period from 1934 to 1938, of which approximately $1,000,000,000 was for new construction. The creation of a new progressive type of savings and loan association, chartered and super vised by a Federal instrumentality, has given added strength to the home-financing industry as a whole. Through rules and regulations laid down by the Federal Home Loan Bank Board, and through supervision and guidance of home-financing institutions, mortgage lending practices and savings plans have been improved, standards of management raised, and costs of home ownership reduced. The adoption of the direct-reduction loan plan by the institutions under direct supervision of the Federal Home Loan Bank Board has brought millions of savings to home owners. Liberal loan limits and longer amortization periods permitted under Federal law have made home ownership available to families of moderate means. At the same time, the gradual transformation of large portions of the short term mortgage indebtedness into long-term amortized loans has reduced unnecessary hazards to borrowers and lenders as well. By all these legislative and administrative measures, thrift and home ownership have been placed on a broader and more secure basis, and a greater degree of uniformity has been injected into a sector of our financial system once characterized by a confusing variety of plans of operations and by lack of national coordination. 16 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 IMPORTANCE OF COORDINATION By concentrating responsibility for the supervision of the Federal Home Loan Bank System and the Federal savings and loan asso ciations, as well as the direction of the operations of the Federal Savings and Loan Insurance Corporation and the Home Owners' Loan Corporation in one governing unit, Congress combined major elements of urban home mortgage finance in the Federal Home Loan Bank Board. Through this provision there was assured a uniformity of policy and direction which otherwise would not have been possible. Coordination under one management has also permitted the utili zation of the experience gained in one agency under the 'Board for the benefit of the others. As Federal activity in the field of home mortgage finance is of such recent origin, this coordination has greatly facilitated the orderly development of sound standards and the gradual training of a staff of public servants chosen to specialize in this important field. Finally, the concentration of management under one Board has resulted in substantial economies. Not only are the administrative expenses of the Board, with the exception of those of the Examining Division, absorbed by the several agencies, but-as will be seen from the Organization Chart facing page 1-ten general service units are at the disposal of all agencies under the Board, with the result that overhead costs as a whole are considerably lower than if each agency had to maintain such service divisions of its own. These divisions include the Legal Department, the Examining Division, the Division of Research and Statistics, the Review Committee, the Public Rela tions Department, the Personnel Department, the Personnel Com mittee, and the offices of the Secretary, the Financial Adviser, and the Budget Officer. To a large extent, a similar system of coordination is in effect in the regional organization of the activities under the Board's jurisdic tion. While the primary function of the Federal Home Loan Banks is that of credit reserve institutions, the officers of the Banks act as agents for the Board in the supervision of Federal savings and loan associations and State-chartered insured savings and loan associations. They also act in an advisory capacity with respect to operating prob lems of all member institutions in their Districts; handle applications for membership in the Federal Home Loan Bank System, for insur ance of accounts, and for theeissuance of Federal charters; and receive and make recommendations on requests for investments by the Home 'Owners' Loan Corporation in member institutions. This procedure reduces the volume of reports, examinations, and other work, not only THE BANK BOARD AND ITS AGENCIES 17 for the agencies under the Board but also for the home-financing insti tutions themselves. It has helped to keep costs at a minimum and to render the Federal Home Loan Banks a source of invaluable informa tion on home-financing conditions in their Districts. SUPERVISION AND EXAMINATION Coordination is of particular value in the field of supervision. The concentration of Federal supervision over home-financing institutions in the Federal Home Loan Bank Board has permitted a great degree of simplicity and uniformity. As already indicated, the Examining Division of the Federal Home Loan Bank Board serves all agencies under the Board. It conducts periodic and special supervisory examinations of Federal savings and loan associations, of State-chartered savings and loan associations which are insured by the Federal Savings and Loan Insurance Cor poration, and of such noninsured member institutions of the Federal Home Loan Bank System as are not subject to State supervision. It also analyzes the financial condition of institutions which apply for membership in the Federal Home Loan Bank System, for insurance of accounts, for conversion from State to Federal charter, or for invest ments by the Home Owners' Loan Corporation. This centralization of examining functions results in many advantages. Federal savings and loan associations are subjected to examination by only one agency. In the case of State-chartered savings and loan associations insured by the Federal Savings and Loan Insurance Corporation, agreements have been reached with 33 States providing for joint examinations in order that overlapping of Federal and State examination may be reduced. If insured State-chartered savings and loan associations apply for conversion to Federal charter or for investments by the Home Owners' Loan Corporation, the data collected by the Board's Examining Division may be used in the consideration of such request. Uniform standards and procedures are being applied in all examina tions and analyses of reports. Supervision is one of the most important functions of the Federal Home Loan Bank Board. On June 30, 1939, there were 2,214 thrift and home-financing institutions with total assets of approximately $2,400,000,000 under the direct supervision of the Board, including all Federal- and State-chartered insured savings and loan associations, and member associations of the Federal Home Loan Bank System that are not supervised by State authorities. In addition, the Board is charged with the semi-annual examination of the twelve Federal Home Loan Banks. 18 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 Thorough and efficient supervision is not only a matter of sound business practice, but a means of safeguarding the savings of more than four million individual investors in the institutions supervised by the Board. It is also instrumental in protecting the large amount ,of funds invested in these institutions and related Federal agencies by the United States Treasury and the Home Owners' Loan Corporation. All together, investments of the United States Treasury and the Home Owners' Loan Corporation in the capital stock of the Federal Home Loan Banks and the Federal Savings and Loan Insurance Corporation, and in shares of member institutions of the Bank System are close to $600,000,000. The responsibility for such supervision as may be necessary to protect the Government interests rests upon the Federal Home Loan Bank Board. The following, table contains a summary of the examinations and analyses conducted by the Exanmning Division of the Federal Home Loan Bank Board during the fiscal year 1939: Number Supervisory examinations----------------------------------------399 Supervisory examinations and audits------------------------------1, 443 Miscellaneous examinations -------------------------------------- 261 Examinations and analyses of applications for membership, insurance, conversion, and HOLO investments ----------------------753 Other services 1----- --------------------------------------------259 Total -------------------------------------------------- 3,115 1Examinations on occasion of mergers; purchase, sale, transfer, or segregation of assets; services to Federal I-ome Loan Banks and Federal Savings and Loan Insurance Corporation; and other services. During the fiscal year 1939, examination costs to the institutions -supervised by the Federal Home Loan Bank Board were materially reduced. A revised, simplified examination report form, which was dIeveloped in conferences by the National Association of State Building and Loan Supervisors, the United States Building and Loan League, and representatives of the Federal Home Loan Bank Board, was adopted in October 1938. Furthermore, the basic rate of per diem charges was decreased by 10 percent, effective January 2, 1939, and charges for assistant examiners were computed at lower per diem rates, effective March 1, 1939. OPERATION ON A SELF-SUPPORTING BASIS Although the Federal Home Loan Bank Board and its agencies are entirely self-supporting, they operate within budgets approved by Congress. The Board derives its incQme from assessments upon the twelve Federal Home Loan Banks, from charges made against the Homeip Ownersq' Loan Corporation and the Federal Savings and Loan THE BANK BOARD AND ITS AGENCIES 19 Insurance Corporation for services rendered by the Board, and from fees received for the examination of home-financing institutions. The greater portion of the Board's operating budget represents expenses of the Examining Division, all of which are reimbursed by the institu tions examined. The Federal Home Loan Banks obtain their income from interest on advances and investments, and the Federal Savings and Loan Insurance Corporation from insurance premiums and interest earned on investments. The Home Owners' Loan Corporation has also been able to operate within the revenue which it collects, although it has sustained some inevitable losses in the liquidation of its emergency loans. At the end of the fiscal year 1939, the personnel of the Federal Home Loan Bank Board totaled 347. Exhibit 1 presents a summary of personnel by departments, as of June 30, 1938, and June 30, 1939. A statement of receipts and disbursements of the Federal Home Loan Bank Board for each of the fiscal years 1938 and 1939 is given in Exhibit 2. II Survey of Housing and Mortgage Finance T HE fiscal year 1939 witnessed notable progress in the fields in which the Federal Home Loan Bank Board operates. Residential construction played a prominent part in the general improvement of business which marked the period from July 1, 1938, to June 30, 1939. The volume of new residential building increased substantially over the preceding fiscal-year period and nearly reached the level of 1929. Moreover, through concerted efforts of private industry and public agencies, a beginning was made in the adaptation of home construction to the broad mass demand. In the real-estate market, rents and vacancies were stable, foreclosures decreased, and the volume of properties involuntarily owned by private financial institutions was reduced. Home-mortgage lending was one of the most active sectors in the private capital market. Whereas in other fields of economic activity new capital investments were slow, housing has become one of the major outlets for the utilization of accumulated savings. The supply of funds for mortgages was plentiful, and because of the steady flow of savings and the lack of other immediate investment opportunities, sharp competition developed in the home-mortgage market. As a result, financing costs for new construction as well as for the purchase and refinancing of homes were brought down to unprecedented levels. 1. RESIDENTIAL CONSTRUCTION AND THE REAL-ESTATE MARKET Expansion of Building Activity Building permits indicate that the number of new nonfarm dwelling units on which construction was started during the fiscal-year period from July 1938 through June 1939 was 429,352 as against 273,742 in the preceding year-an increase of 56.8 percent. With such volume, the current production of new nonfarm dwellings, for the first time since 1929, has approached 500,000 dwelling units, the most commonly accepted estimate of the annual volume of construction necessary to meet the demand created by normal replacements and by increases in the number of families. 21 22 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 The dollar volume of new construction in nonfarm areas shows a somewhat smaller increase, because the average dwelling unit built in 1938-39 cost less than in the previous year. The total cost of new residential building commenced in the fiscal year 1939 is estimated at $1,558,000,000, as compared with $1,051,000,000 for the preceding fiscal year. If allowance is made for the widespread undervaluation of building permits, it is safe to assume that approximately $2,000,000,000 went into nonfarm residential building during the reporting period. CHART IX INDICES INDEX I OF RESIDENTIAL CONSTRUCTION I II 1926= 100 ANNUAL AVERAGE ANNUAL AVERAGE AND INDUSTRIAL PRODUCTION BY MONTHS BY MONTHS 1 DIVISIONOF RESEARCH AND STATISTICS FEDERALHOMELOAN BANKBOARD As will be seen from Chart IX, last year's accomplishments were in the line of a major upward movement of residential building which started in 1935 and has lasted, with some minor interruptions, for nearly five years. In the latter half of 1938 and in the first six months of 1939, the revival of residential building gathered considerable momentum. Apart from the special impetus given by the Federal Government in its spending program approved in April 1938, the revival of resi dential construction was no doubt one of the determining factors in the business recovery from the 1937-38 recession. This recovery is reflected in the increase of industrial production since July 1938, followed by a slight decline during the first few months of 1939. SURVEY OF HOUSING AND MORTGAGE FINANCE The upswing of residential building was accompanied by an expan sion of other construction; but while other construction was due primarily to Government expenditure in connection with the spending program, the recovery of residential building was supported mainly by private activity although assisted by Federal insurance of mortgage loans and-to some extent-by the start of public housing projects under the United States Housing Act of 1937. From July 1, 1938, to June 30, 1939, approximately 27,000 nonfarm dwelling units, or 6.3 percent of the total number of units on which construction was started, were reported as provided by public building. Stability of Market Factors On the whole, the growth of private activity in residential building was well in line with the demand and supply factors that determine the volume of new building as well as of real-estate activity in general. Market factors were favorable, but characterized by a remarkable degree of stability rather than by spectacular movements upward or downward. Generally low vacancies and stable rents indicated that the additional supply of new dwellings was balanced by the increased demand that appears to be the combined effect of the accumulated housing shortage and somewhat higher family incomes resulting from improvement of business after the recession. The level of building costs, on the other hand, remained practically unchanged; and financing costs, which have been moving downward ever since 1934, were further reduced. Chart X on page 24 shows the movement of residential rentals for identical occupied dwellings (U. S. Department of Labor), and for a composite of dwellings including newly built as well as existing units and reflecting more clearly market conditions for new homes (National Industrial Conference Board). The increase of rentals dating from 1934 or 1935 was checked toward the end of 1937, but both rent indices have remained fairly stable in subsequent periods. Sample surveys of the Bureau of Labor Statistics covering 32 cities indicate that all types of dwelling units, one- and two-family houses as well as multi-family structures, shared in the relative stability of rents during the fiscal year 1939. Vacancies vary widely from city to city and even from one sector of a city to another. This serves to emphasize that local rather than national conditions determine the actual housing need in individual communities. However, occupancy statistics for a number of cities suggest that, by and large, vacancies have remained at the level reached in 1937 after several years of steady decline. Of the 60 cities 24 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 CHART X INDICES OF RESIDENTIAL 1926 = 100 RENTALS DIVISIONOF RESEARCHAND STATISTICS FEDERAL HOME LOAN BANKBOARD CHART XI INDICES OF MATERIAL AND LABOR COSTS FOR CONSTRUCTING A STANDARD SIX-ROOM FRAME HOUSE 1936 I 1937 I 1938 I 1939 DIVISIONOF RESEARCHAND STATISTICS FEDERALHOME LOANBANK BOARD SURVEY OF HOUSING AND MORTGAGE FINANCE 25 reporting to the U. S. Department of Commerce, 37 reported vacancies below 3 percent, and 15 reported vacancies between 3 and 4 percent for 1938-39. In most cities, changes in vacancy ratios during the year were within narrow limits reflecting varied local situations. A reduction in building costs, or at least stability of costs in relation to the general price level is a prime requisite for a sustained and sound recovery in residential construction. Only recently has the country experienced the deadly effect of price excesses on building activity. From 1935 to the early months of 1937, when residential building rose rapidly, the expanding volume of construction was accompanied by sharp increases in both labor and material costs. Following these cost increases, the demand for new dwellings and the volume of new building was greatly reduced during the latter part of 1937. Since then, material prices have declined, labor costs have remained almost unchanged, and total costs have been brought down to somewhat lower levels (Chart XI). It is gratifying to see that from July 1938 to June 1939, both material and labor costs were stable or tended even slightly downward despite substantial gains in the volume of con struction. 1 With stable building costs on the one hand, and fairly constant rent levels on the other, the rent-cost relationship was little changed throughout the fiscal year 1939. This is illustrated by Chart XII, on page 26, which shows the index of market rentals together with the index of building material prices as representative of building costs. Recovery of the Real-Estate Market The recovery of the real-estate market from the collapse it suffered during the early Thirties has been slow and incomplete. The number of foreclosures, although no longer as excessive as from 1932 to 1934, remained unusually high in subsequent years, and the huge volume of real-estate involuntarily owned by mortgage lenders has been a con stant drag on the market. However,, since 1937 a gradual improve ment has been noted, and the fiscal year 1939 has seen some further progress. Chart XIII on page 26 evidences that in the first half of 1939, after five consecutive years of decline, foreclosures were back to the level of 1928, and about one-half of what they were in 1934. The reduction in real-estate foreclosures in the fiscal year 1939 was fairly evenly dis 1For actual figures underlying Chart XT, see Exhibit 3. 183130-39--3 26 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 CHART XII INDICES OF MARKET RENTALS AND BUILDING MATERIAL PRICES 1926 = 100 STATISTICS AND OFHOME RESEARCH DIVISION FEDERAL LOAN BANK BOARD Source() Soorce (I) U U S Depont Dept of of Lbor Labor (2) National Industrial Conference Board CHART XIII NONFARM REAL ESTATE FORECLOSURES IN THE UNITED STATES SHOWS NUMBER OF FORECLOSURES PER 1,000 NONFARM DWELLINGS 14 12 0 0 C4 1926 1927 1928 1929 1930 1931 1932 *S1 6 MONTHS(RATE ON ANNUALBASIS) 1933 1934 1935 1936 1937 1938 1939* DIVISIONOF RESEARCHAND STATISTICS FEDERALHOME LOANBANKBOARD SURVEY OF HOUSING AND MORTGAGE FINANCE 27 tributed over the country. All Federal Home Loan Bank Districts and all but ten States reported fewer foreclosures than in the preceding year. 2 The volume of real-estate sales has been expanding, and the expe rience of the Home Owners' Loan Corporation as well as of private mortgage lending institutions indicated that there is a substantial demand for homes in the lower-price brackets. However, the real estate market as a whole showed mixed trends. There was evidence, at least in some areas, that the increase in the supply of newly built dwellings offered at attractive terms tended to depress the prices of "second-hand" properties. This is true, in particular, for the higher priced used homes, the demand for which appears to be limited be cause of changes in the national income and its distribution and be cause of the competition of new dwellings which are more attractive to prospective buyers by reason both of more modern conveniences and more acceptable neighborhoods. In last year's report, the Federal Home Loan Bank Board called attention to the existence of a huge "overhang" of unsold real estate held by financial institutions and other mortgage lenders. Available statistics indicate that during the calendar year 1938, the volume of such undigested real estate owned by private financial institutions was somewhat reduced by increased sales, on the one hand, and by the decline of foreclosures, on the other. The estimated book value of one- to four-family dwellings owned by the principal home-mortgage lending institutions, including savings and loan associations, mutual savings banks, commercial banks, and life-insurance companies, de creased from approximately $1,860,000,000 at the end of 1937 to $1,737,000,000 at the end of 1938, or by 6.6 percent. During the same period, however, the book value of properties repossessed by the Home Owners' Loan Corporation increased from $331,006,820 to $488,997,499, thus more than offsetting the reduction in private holdings. On the whole, the volume of one- to four-family dwellings owned by financial institutions is still alarming, representing, as it does, approximately 20 percent of the total amount of home mortgages held by those institutions. The following table shows the book value of the overhang of all types of residential properties, including apartment houses as well as one- to 2 Exhibit 4 shows the estimated number of real-estate foreclosures for all nonfarm areas and the rate of foreclosures per 1,000 nonfarm dwellings from 1926 to the first half of 1939. Exhibit 5 presents a survey of nonfarm real-estate foreclosures, by Federal Home Loan Bank District and by States, for each of the fiscal years 1938 and 1939. 28 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 four-family dwellings, held by selected financial institutions, as of December 31, 1938: Estimated overhang of residential properties held by selected financial institutions, December 31, 1938 Type of lending institution: Savings and loan associations ------------Mutual savings banks 2------Commercial banks 2 Life-insurance companies 3 Home Owners' Loan Corporation -- Amount $950, 000, 000 500, 000, 000 315, 000, 000 576, 282, 000 488, 997, 499 Total-----------------------------------2,830, 279, 499 1 Estimate based on reports received by the Federal Home Loan Bank Board. 2 Estimates based on the reports of the Comptroller of the Currency and the Federal Deposit Insurance Corporation. The estimate for commercial banks excludes trust departments. 3 Estimate of the Federal Home Loan Bank Board based on a questionnaire survey of the largest life insurance companies. In a consideration of the problems created by the real-estate over hang, it must be taken into account that the above figures represent but one portion of the total overhang in the country. They cover admitted holdings only; they do not include real estate involuntarily owned by individuals, closed banks, closed savings and loan asso ciations, mortgage companies, or trustees of mortgage and real-estate bond companies; nor do they comprise properties acquired by munici palities in tax sales. Estimates place the total amount of repossessed residential real estate held by institutions as well as individuals well above $4,000,000,000. In view of the magnitude of the problem, its bearing on new building and the real-estate market, and its effect on financial institutions throughout the country, the assimilation of the real-estate overhang remains one of the foremost tasks of the future. The holding of hun dreds of thousands of properties for sale by financial institutions retards the full recovery of the real-estate and the home-mortgage markets. Financial institutions which have a large portion of their resources frozen in real estate contribute little to new mortgage lending and are a source of public misgivings, which in turn induces people to hoard rather than to invest. Also, many of the repossessed properties represent nonearning assets. In the last two years, home-financing institutions have begun to realize the necessity for quick and orderly liquidation of the real-estate overhang and have acted accordingly. However, further efforts will be required to bring the problem any where near to solution. In some areas, this task is rendered more difficult by the competition of new dwellings, as indicated earlier, but I~r~ ~slssIl~s~--P aq W~"IIII -~r _---C--PI~ I - ---- -L- - - --- -- 9~-~- g IPI ~-s ~- --- ~--~--~sll~ ~ --- -01111~-~1 - -- - - I - *-I~ ~---- -- __ -- RATE OF RESIDENTIAL BUILDING IN ALL CITIES OF 10,000 OR MORE POPULATION ESTIMATED NUMBER OF FAMILY DWELLING UNITS PROVIDED PER 100,000 POPULATION MONTHLY AVERAGES FOR EACH FEDERAL HOME LOAN BANK DISTRICT T '" N e A -LE GEND 70 60 UNITEDSTATESAVERAGE 50 §40 9 30 20 00 1 0, R-" DIVISON OFR56EARCH AND STATISTICS HOME LOAN SANK BOARD FEDERAL 183130-39 (Face p. 29) SURVEY OF HOUSING AND MORTGAGE FINANCE 29 there is still a broad demand for repossessed homes if they are placed in good condition and offered at competitive terms. The disposition of the real-estate overhang, while being of national importance, is largely a regional problem. Studies made by the Federal Home Loan Bank Board indicate that three States, New York, New Jersey, and Pennsylvania, account for almost one-half of the total overhang in the entire country. Naturally, financial institutions in these States are most affected by the large volume of real estate they own, and particular efforts should be made to cure the situation in these three States. Regional Variations of New Construction Close observation of building activity in recent years reveals two significant features: concentration of residential construction in a few selected regions of the country, and a decline in the average cost of new dwellings placed on the market. The rate of residential construction is never uniform throughout the country. The different degrees of development of the various parts of the Nation, migrations from one region to another, and varying intensities of prosperity cause marked regional variations, and the over-all picture for the Nation therefore gains in significance by obser vation of regional trends. The map between pages 28 and 29 shows the regional distribution of residential construction in all cities of 10,000 or more population, from 1936 through the first half of 1939, by Federal Home Loan Bank Districts, expressed in terms of number of dwelling units built per 100,000 population.2 In the last few years, the relatively largest growth of residential construction was in the Southwest (Los Angeles District) where population pressure has stimulated new building. The second largest gain was in the South (Little Rock District) where the housing need was greatest and the improvement in business conditions most promi nent-partly as the result of industrialization. The same holds true for the Southeast (Winston-Salem District) which ranked third in the rate of residential construction. The New York District showed the fourth largest rate of building, due primarily to the rapid development of suburban areas. Approximately 70 percent of total building activity in 1938 and the first six months of 1939 was concentrated in these four regions. On the other hand, the rate of construction in the Boston, Pittsburgh, Cincinnati, Chicago, and Des Moines Districts was far below the average rate for the entire country. 3For actual figures underlying the bars on the map and for explanatory notes, see Exhibit 6. 30 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 Importance of Smaller Communities and of Home Building Approximately 58 percent of the total nonfarm dwelling units built in the calendar year 1938 was in communities with 25,000 population or less, although these communities represented only 46.6 percent of CHART XIV OF RESIDENTIAL DISTRIBUTION BY SIZE AND TYPE CONSTRUCTION OF COMMUNITY IN 1938 e eEstimated by the Construction and Real Property Section, United States Department of Commerce the total nonfarm population and 46.8 percent of the total number of nonfarm families in 1930. Chart XIV illustrates the distribution of residential construction among cities of more than 25,000 population and cities with 25,000 population or less, in 1938. For the latter cities, building activity is shown separately for "satellite" communities, that is, suburban communities in metropolitan areas where construction is influenced 31 SURVEY OF HOUSING AND MORTGAGE FINANCE by the growth of metropolitan centers, and for "nonsatellite" com munities which are independent and nonsuburban. The higher rate of residential building in smaller communities is due in part to a higher birth rate and faster population growth, and to a cessation of migration to the larger cities. It is also attributable to particularly active building in suburban areas; but about two-thirds of total residential construction in cities with 25,000 population or less CHART XV NUMBER OF NEW NON-FARM, DWELLING UNITS BUILT BY TYPE OF DWELLING; 1920-1938 1,000 --- 1,000 ~250 IO_ 900 900 0 200 800 - , ---- 800 - 700 oo 700 -6 00 I0 - ONE-FAMILYso0 - - - 00JAN-JUN 500 198 JAN-JUN 1939 600 500 400 400 o o 0 3 00 TWO-FAMILY500 X 200 200 0 0 1920 '21 '22 '23 24 '25 26 27 '28 '29 '30 Source'- National Bureauof Economic Research/920 -1936 of Labor /937-1939 U S Department '31 '32 '33 '34 '35 '36 '37 '38 DIVISION OF RESEARCH ANDSTATISTICS FEDERAL HOME LOAN BANKBOARD was in nonsuburban communities and only one-third in "satellite" communities. It is in the smaller communities, both satellite and nonsatellite, that the proportion of one- and two-family homes in total residential construction is highest, and it is in those communities where special ized home financing institutions of the savings and loan type are most numerous. Within the total building activity of the country, home construction and home finance have the foremost place. This is further evidenced by the overwhelming proportion of one- and two-family dwellings in total nonfarm construction throughout the country, as shown in the above chart. 4 4 For actual figures underlying this chart, see Exhibit 7. 32 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 Building for the Mass Market Better adjustment of prices to the consumer's ability to pay was perhaps one of the most important tendencies of the building market in the last fiscal year. Analyses of the income distribution of families have demonstrated that in the past the construction industry has been building homes priced far too high for the mass of American families. This failure to tap the broad mass market has not only impeded the satisfaction of the Nation's housing needs, but it has also limited the volume of new building and consequently economic activity in general. During the early Thirties, the average price of new homes had already dropped. However, this was in a period of a declining general price level and of a decreasing volume of construction. In contrast, the recent reduction in average prices at which new homes are offered occurred in a period of growing volume of construction, and of rising costs of building material and labor in 1937 and only slightly declining costs in 1938. Nevertheless, price reductions were made possible by a greater willingness of home buyers to purchase dwellings of,smaller size and simpler design. Moreover, the building industry has been concentrating more fully in the broad area of mass demand. In the last two years, considerable pioneering has been done all over the country to meet the housing needs of families with moderate incomes, and more of such pioneering is under way. The results thus far achieved are presented in the following table: Average cost of new dwelling units in cities of 2,500 population and over, by types of dwellings 1 Calendar year 1936-----------------------------------------1937------------------------------------------1938-------------------------------------------19392------... ----------------- residential $4, 044 3,995 3,645 3,611 1-family $4, 363 4,307 3,971 3,961 2-family $2,763 2,834 2,625 2,552 3-and-more $3, 639 3, 524 3,224 3,194 1 Based on building permit data of the Bureau of Labor Statistics. Although permit valuations do not reflect the final cost, their movement from year to year may be held to be indicative of the general direction. of costs. 2January to June. From 1936 to the first half of 1939, the average cost of new dwelling units decreased in all types of dwellings, one- and two-family homes as well as multifamily structures; the decline was more than 10 percent for all types of units built. As the volume of public housing through oui that period was comparatively small, the decrease in average cost reflects, to a great extent, attempts of the private building industry to provide simpler and less expensive homes. Despite such progress, the building industry still has a long way to go before the price of its product will be more fully adjusted to the incomes of the majority of our families. The selling price of the SURVEY OF HOUSING AND MORTGAGE FINANCE 33 majority of newly built houses still is above $5,000, if the costs of land and land improvement as well as sales commissions and profits are included. Income statistics for 1935 and 1936, on the other hand, have indicated that only one-fourth to one-fifth of all nonfarm, nonrelief families had an income that would enable them to buy a home priced in excess of $5,000 (under the generally accepted rule of thumb that a family should invest not more than two or two and one half times its annual income in a home). Further adjustments are necessary if the building industry is to reach down into what has been called the "no man's land" of housing. In any analysis of the housing market in general, it must be recog nized that a large portion of our population will always have to look for existing buildings rather than for new structures for the satisfac tion of its housing needs. Even with the greatest volume of construc tion practicable, not more than 3 percent could be added annually to the supplyof existing structures, and the "filtering-up process," which in the past enabled families to move from less to more satisfactory quarters vacated by families in the higher income groups, will remain an important factor in the total housing market. "It is manifestly impossible for economic society to supply all families or the increases in families in all income classes with new units. In nearly all cases, families of low income can be housed more adequately in old but sound units having sufficient space and other facilities for comfortable living than in small and otherwise inadequate structures having the sole advantage of being new." 6 In this connection, it is worth mentioning that the large supply of low-priced homes repossessed by financial institutions provides an important opportunity for housing larger families in the lower income groups on an ownership basis-an opportunity too frequently over looked. The extent to which resales of institutionally owned prop erties may meet the mass demand for low-priced homes is illustrated by the sales experience of the Home Owners' Loan Corporation. Property sales of Home Owners' Loan Corporation,by price brackets, through June30, 1939 Number Percent of ..---------------------------------15, 878 28. 7 12,138 10, 001 6, 573 21 9 18. 1 11.9 4,178 2, 600 7. 6 4. 7 Price range Up to $2,000 $2,001 to $3,000 $3,001 to $4,000 $4,001 to $5,000 ----------------------------------------------------------------------------------- $5,001 to $6,000------------------$6,001 to $7,000 ------------------------------------------ ----------------- $7,001 and over----------------------------------------------------------------.3,935 Total ..-------.------- --..------------------------- 55,303 7.1 100. 0 5"Residential Building", by Lowell J. Chawner, prepared for the Industrial Committee of the National Resources Committee, Washington, D. C., 1939. 34 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 As shown by the table, 50.6 percent of all property sales of the Home Owners' Loan Corporation was in the price classes below $3,000 which generally are within the reach of families with less than $1,500 annual income, and that almost 30 percent was in the price group below $2,000, which may well be classified as being within the reach of "low-income" families. The Federal Home Building Service Plan Building for the families of average income is a matter not only of quantity but of quality. Particularly in the small-home field, in which the agencies under the Federal Home Loan Bank Board primarily operate, there is little gained by large volumes of construc tion if the new homes are built without due regard to sound standards. Bad planning, shoddy construction, carelessly selected neighborhoods, and substandard materials have frequently jeopardized the value of home ownership, and the small-home owner can least afford any hazard to his investment. Likewise, such methods of construction are apt to endanger the funds of home-financing institutions invested in small home mortgages, by virtue of the abnormal depreciation and ob solescence of substandard properties and because of the natural dissatisfaction of the borrower. The extent and the consequences of substandard building in this country were brought to the attention of the Bank Board through the experience gained by the Home Owners' Loan Corporation in refinanc ing more than a million homes. After a careful analysis of this experience-revealing an appalling lack of proper planning and a widespread extent of flimsy workmanship in the small-home field the Federal Home Loan Bank Board, in September 1936, adopted the "Federal Home Building Service Plan" as a means of fostering better home construction in the future. The Plan is designed par ticularly to serve those prospective home owners in the average income groups who in the past have not had the benefit of architectural advice and have been unprotected against the deadly effects of substandard building. The Federal Home Building Service Plan, although sponsored by the Federal Home Loan Bank Board, is operated entirely by local organizations comprising the various elements of the building indus try-mortgage-lending institutions, architects, builders and con tractors, and material dealers. The agencies under the Board participate in the Plan only to encourage and assist local cooperative endeavor. Under the Plan, all planning elements are provided such as home designs, floor plans, working drawings, and specifications, as well as SURVEY OF HOUSING AND MORTGAGE FINANCE 35 the all-important supervision on the job whereby the owner receives maximum assurance of dollar-for-dollar value. Other important features include professional assistance in qualifying contractors, taking of contract bids, and inspection of materials. In short, the small-home builder no longer is forced to "shop" in a field with which he is entirely unfamiliar; he has available a moderately priced technical advisory and supervisory service and a wide variety of economical-to-build home designs intended to make it easier and safer to build a properly planned and soundly constructed home. As all these operations are coordinated, the home builder is spared the multiplicity of contacts previously required to complete his plans. The service thus eliminates many of the difficulties which heretofore have discouraged the prospective builder of a small home. Key items of the Plan are the "Home Selector," a portfolio of home designs chosen for the specific community, and a "Certificate of Registration" which is issued to the home owner as a testimonial of the sound construction of his house. The Federal Home Building Service Plan is a joint industry Government program. Originally designed for the protection of the member institutions of the Federal Home Loan Bank System, the Plan was later broadened to permit other mortgage lenders to partici pate. During the fiscal year 1939, the Plan has obtained the active sponsorship of other important factors in the building industry: the architects and the material producers. The American Institute of Architects, representing the architectural profession, and -the Producers' Council, comprising the Nation's largest materials manu facturers, have both given the Plan their support as an effective means toward eliminating substandard constuction in the small-home field. The retail lumber and building-materials trades and operative builders are also cooperating under the Plan. As of June 30, 1939, 267 home-financing institutions in 76 commu nities had applied for the facilities provided by the Federal Home Building Service Plan, and 440 new small-home plans had been approved at that date, constituting the most comprehensive collection of designs ever assembled in this field. The Plan has been developed and organized after considerable investigation of conditions throughout the country. It is now being aggressively promoted in several areas where definite results are being obtained, and it is expected that the Plan will be extended into many other communities in the near future. 36 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 Need for Rehabilitation As only a small number of dwelling units can be added annually to the existing supply of housing, new building is but one way of im proving housing standards. Large-scale rehabilitation and moderni zation of existing structures that are basically sound are important aspects of a well-rounded housing program. Real-property inventories conducted between 1934 and 1936 by the Works Progress Administration revealed that only 39 percent of the CHART XVI CONDITION OF URBAN RESIDENTIAL STRUCTURES Good Condition ... a :: .: *09:-as 39.0% :.. ..... """: Minor Repairs 44.8% . "j. .. : . ' . Unfit For Use 23% *.*. . .. ," " -Major Repairs M 9 . ® Based on real property inventories conducted as work projects by the Works Progress Administration, 1934-1936 DIVISION OF RESEARCH AND STATISTICS FEDERAL HOME LOAN BANK BOARD more than five million structures examined were in what was termed "good condition." Of the remainder, 44.8 percent needed minor repairs, 13.9 percent required major repairs, and 2.3 percent were unfit for use. The survey of the Works Progress Administration showed also the extent of substandard housing conditions. Of all dwelling units cov ered in the survey, 15 percent had no private indoor flush toilets, 20 percent were without private bathtubs (or showers), and in the South east, 25.4 percent of all dwelling units were without gas or electric lighting facilities and 12.8 percent without running water. These conditions are in part the consequence of neglect in mainte nance and modernization during the last ten years. Residential SURVEY OF HOUSING AND MIORTGAGE FI:NANCEt 37 properties in general have not been maintained at predepression standards and have, therefore, depreciated in value as well as usability at a faster rate than normal; even less has been done to increase their life expectancy and habitability through provision of modern facilities. In the field of one- to four-family homes, the Home Owners' Loan Corporation, which holds mortgages on, or title to, dwellings equiva lent to approximately 10 percent of all owner-occupied nonfarm homes, has done a great deal to arrest the progress of depreciation and obso lescence. From 1934 to June 30, 1939, the Home Owners' Loan Corporation has expended or advanced approximately $140,000,000 for the reconditioning of more than 500,000 dwellings. Rehabilitation is not only a problem of individual properties, but largely a problem of neighborhoods. City surveys conducted by the Division of Research and Statistics of the Federal Home Loan Bank Board have demonstrated that a large portion of our city dwellings is located in neighborhoods undergoing various phases of deterioration caused by bad planning, overzoning for commercial uses, shifts in population, traffic hazards, and many other factors. Such deteriora tion is not only a detriment to housing standards but a threat to prop erty values, tax resources, and the safety of the billions of savings invested in mortgage loans. Every year communities throughout the country suffer a staggering loss from the deterioration of neighbor hoods-a deterioration which, once well under way, cannot be halted. Individual home owners and lending agencies can do very little to avert these trends, and some sort of neighborhood organization under the guidance and control of municipalities and other public bodies is required to carry out a comprehensive program of rehabilitation. Such a program will be of vital importance to the community at large as it will create a mechanism for the prevention Of further blight, provide an effective means of community planning, prevent unneces sary decentralization, and make for a better utilization of existing public utilities, transportation facilities, schools, and other public buildings. During the past fiscal year several attempts have been made to institute rehabilitation progams on a large-scale basis. The Federal Home Loan Bank Board, through its agencies, has offered to cooperate in such programs not only as a matter of sound public policy but also in protection of the properties on which the Home Owners' Loan Cor poration holds mortgages or which it owns, and in protection of the savings entrusted to the financial institutions which the Federal Home Loan Bank Board supervises. As an example of such cooperative 38 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 program, the rehabilitation project for a residential section in Balti more may be cited: Toward the end of 1938, the Baltimore Housing Authority, with the cooperation of the Home Owners' Loan Corporation, the United States Housing Authority, and several municipal agencies and organizations, determined to conduct a survey and planning project for the Waverly area of Baltimore. The project was designed to provide that neighborhood with a detailed inventory and analysis of its present condition and future prospects, and to develop a general plan for protective development and betterment. With the assistance of a WPA project and the contribution of supplies, equipment, and technical personnel services from the above-mentioned agencies, the program was started in March 1939. Covering an area of 54 blocks, containing approximately 1,600 properties, the survey has procured general physical and economic data for each property and for the neighborhood as a whole. The planning project has analyzed and studied the accumulated data, has established the varying degrees of incipient blight present throughout the area, and has determined the isolated spots of excessive deterioration. Furthermore, in order to provide economic protection to the neighborhood in the future, ways and means of arresting blight, of recouping and stabilizing values, and of maintaining good standards have been specified. Paralleling the survey and planning work, there has been conducted a program of encouragement to organizations and parties interested or located in the area to develop an organized determination on the part of the neighborhood itself to undertake rehabilitation and maintenance for mutual protection. A like program, again with the assistance of the Home Owners' Loan Corporation, is being developed for the Woodlawn area of Chicago, and municipal and civic bodies in Cleveland, New Orleans, Memphis, and Louisville have indicated an interest in similar undertakings. 2. SAVINGS AND MORTGAGE FINANCE During the past fiscal year the operations of home-financing institu tions were marked by a continuing influx of savings, on the one hand, and by keen competition in the mortgage market, on the other. More and more, the problem before these institutions has become how to find sound and safe mortgage loans rather than how to obtain funds for such loans. Increase of Individual Long-Term Savings The flow of savings is a matter of primary importance to home finance. For decades the large majority of urban homes in this country have been built out of the savings of the great mass of our people, and each year a considerable portion of individual long-term savings is 'being invested in thrift and home-financing institutions. The trend of such savings over the last decade is indicated in the following table which includes savings in financial institutions either specializing or participating in home finance, and selected types of investments that SURVEY OF HOUSING AND MORTGAGE FINANCE 39 are directly competitive to savings deposits and investments in home financing institutions: Changes in selected types of individual long-term savingsJ [In millions of dollars] Year 1929.---------1930 ..-------------. 1931------------------1932-----------1933------------------- Amount of accumulated savings Increase or decrease during year $44,958 46,059 45,954 42, 829 39,909 $1,101 -105 -3,125 -2,920 Year Amount of accumulated savings 1934 -------1935-----------------1936----------------1937-----------------... 1938----------------- $41,653 43, 934 46,517 49, 515 51,698 Increase or decrease during year $1,744 2, 281 2,583 2, 998 2,183 1 Savings in life-insurance companies, mutual savings banks, all other banks, savings and loan associa tions, postal savings, 2/2 percent postal-savings bonds, and United States savings bonds. For explanatory notes, see Exhibit 8. There has been a very pronounced recovery in these types of savings in the last few years. The annual increases from 1934 to 1938 have more than offset the depression losses in the three preceding years, and at the end of 1938 the amount of accumulated long-term savings reached an all-time high in the history of American finance, exceeding the $50 billion mark. The largest annual increment of savings in this recovery period occurred in 1937. During 1938 the growth was somewhat smaller, reflecting the decline in business activity and in national income in the latter half of 1937 and the first half of 1938. To a large extent, these savings represent the accumulated resources of our middle and lower income groups-a fact which places special responsibility on the institutions to which they are entrusted, and on the public agencies, Federal and State, charged with the supervision of financial institutions. In 1938 the average cash value of life-insurance policies was $300, the average investment per private investor in savings and loan associations, $780, the average savings account in mutual savings banks, $832, and the average savings account in national banks, $421. All in all, the more than 50 billions of dollars of accumulated long-term savings in the country represents approxi mately 115 million accounts. 6 The distribution of accumulated savings over the various types of institutions and investments and the changes during 1938 are shown in Exhibit 8. The largest rate of increase was in holdings of United States savings bonds, which grew by 49.6 percent during the year. Life-insurance companies, which account for most of the growth in the dollar amount of savings during the last decade, showed an increase of 6.6 percent. Private investments in all savings and loan associations rose by 2.6 percent, and savings deposits in commercial banks by 2.5 6 As a number of savers may hold several accounts, this figure includes some duplications. 40 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 percent. The volume of postal savings and postal-savings bonds and deposits in savings banks fell slightly. Within the field of specialized home-financing institutions, the rate of increase in individual long-term savings during 1938 varied sub stantially among the different types of institutions. Federal savings and loan associations, which are of comparatively recent origin, showed the largest rate of increase-21.3 percent for an identical group of 1,309 institutions. Insured State-chartered associations ranked next, with a gain of 6.4 percent for an identical number of 547 associa tions. The flow of private funds into 901 identical noninsured member associations of the Federal Home Loan Bank System grew at the rate of 0.5 percent. All together, private investments in the above-listed member associations of the Federal Home Loan Bank System increased by 10.3 percent.7 Growing Competition in the Mortgage Market The steady increase of savings is partly responsible for the highly competitive conditions that have recently developed in the home mortgage market and that have become more pronounced during the past fiscal year. While financial institutions of all types had an overabundance of funds available for investment, immediate oppor tunities for the profitable employment of such funds were very limited. Low yields on Government bonds, which today constitute a major portion of the portfolio of commercial banks, mutual savings banks, and life-insurance companies, and the scarcity of industrial and com mercial loans have made investments in home mortgages more attrac tive to these institutions. In consequence, they have reentered the field of home mortgage lending to an increasing extent, encouraged in part by Federal mortgage insurance under the National Housing Act of 1934. Similarly, trust and pension funds, endowments, and individuals have been more actively engaged in making home-mortgage loans. In general, there is a growing recognition of mortgage loans as a worth-while long-term investment, and there is a tendency for large insurance companies even to go into direct building; this latter tendency is evidenced by New York State legislation permitting domestic life-insurance companies to invest up to 10 percent of their total assets in housing operations on a full ownership basis. As a result of competition, the financing costs of home ownership, which had already decreased in preceding years, have been lowered further in the reporting period. Interest rates have dropped, amorti 7 See Section III of this report (p. 79). Because of the increase in number of Federal savings and loan associations and insured State-chartered associations during the year, identical groups of associations operating throughout the year provide a more equitable basis of comparison. SURVEY OF HOUSING AND MORTGAGE FINANCE 41 zation periods have been lengthened, and down payments have been reduced by higher percentage loans. All this, coupled with other favorable market factors, has contributed to the revival of new construction and the real-estate market. In many regions of the country, particularly in the Northeast and in the larger communities, nominal interest rates for new home-mort gage loans have fallen to 5 percent, and in the spring of 1939, some savings banks in New York, where interest rates have regularly been lower than in the rest of the country, reduced their rates for selected home mortgages insured under the National Housing Act to 4% per cent. At the same time financial institutions have begun to assume part of the costs incident to the making of the loan, resulting in a reduction of effective interest charges. Through the amendment to Title II of the National Housing Act of February 3, 1938, the maximum nominal rate for insured home mortgages, excluding the insurance premium, has been revised from 5%2 to 5 percent. 8 Together with this reduction in interest rates, the amortization period for mortgage loans on small, new, owner-occupied, one-family homes was lengthened from 20 to 25 years and the maxi mum loan limit raised from 80 to 90 percent of the appraised value of the,property. Although only part of home-mortgage lending was directly affected by this legislation, competition has operated to adjust loan terms more closely to those for insured home-mortgage loans within the limits set by existing State and Federal statutes governing the lending powers of financial institutions. Thrift and home-financing institutions also have more widely adopted the practice of lending at variable interest rates, based on risk rating for each individual mortgage loan, instead of lending at a uniform rate. This has tended to lower interest charges particularly for selected loans. To assist in the reduction of interest rates, the Federal Home Loan Bank Board in May 1939 adopted a regulation under which savings and loan associations obtaining new share investments from the Home Owners' Loan Corporation are required to lend these funds on the direct-reduction plan at an effective interest rate of not more than 6 percent. This rate includes interest, premiums, initial loan fees, and other charges for the use of the money. In comparisons of interest rates, scrupulous care must, of course, be taken to distinguish between nominal and effective rates which include premiums, loan fees, service charges, prepayment penalties, delin 8 Effective August 1, 1939, this rate was further reduced to 4i percent for all home mortgage loans insured under Section 203 of the National Housing Act 183130-39--4 42 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 quency charges, and other items. Also, interest rates vary not only among the different regions of the country but also by localities and neighborhoods. Mortgage rates on homes in selected areas tend to be lower than in deteriorating neighborhoods. Rates in small communi ties are generally higher than in larger localities. With respect to loan terms, mortgage loans on older structures normally require quicker amortization than those on new and modern properties, because they involve a greater risk of obsolescence. Likewise, amortization periods for mortgages on lightly built structures are shorter than for mortgages on solid structures. Only if due weight is given to all these factors can the comparative cost of home financing as between different groups of lending institutions and as between different loan types be appraised. The large number of elements determining interest rates and loan terms explains why over-all comparisons of financial costs are gravely misleading. Another factor is the size of mortgage loans. The initial cost of making small loans and the cost of servicing and record-keeping of such loans is relatively higher than on larger loans. Small loans, therefore, frequently demand a relatively higher rate than large ones. In this connection, the following figures on the average size of new mortgage loans made by the various types of lenders are pertinent: Average size of nonfarm mortgage loans by types of lenders 1 January to June 1939 Insurance companies----------------------------------$4, 957 Mutual savings banks-----------------------------3, 371 Banks and trust companies -----------------------3, 249 -- 2, 519 Savings and loan associations--------------------Individuals-----------------------------------------1, 936 Other mortgagees------------------------------------3, 343 1 Division of Research and Statistics, Federal Home Loan Bank Board. Based on recordings of nonfarm mortgages of not more than $20,000. It is evident from this table that the average size of mortgage loans made by savings and loan associations is lower than that of any other type of financial institution. Reduction of Dividends of Home-Financing Institutions The effects of competition on thrift and home-financing institutions have been manifold. Competition has been an incentive to improve management and efficiency and thus to induce these institutions to operate on a lower spread between cost of money and interest rates charged. A more aggressive attitude toward the acquisition of new lending business has been developed, and advertising is being used to a greater extent. Many institutions have found it useful to simplify SURVEY OF HOUSING AND MORTGAGE FINANCE 43 and modernize their loan plans. In these endeavors, they were greatly assisted by the constructive guidance of the twelve Federal Home Loan Banks. For mortgages on new buildings, a more complete "merchandising technique" has been developed, including selection of suitable designs and building materials, architectural advice, and supervision of construction. The Federal Home Building Service Plan, described in an earlier section of this report, should greatly aid in the develop ment of such services. Finally, the downward trend of interest rates on home mortgages in many cases has led to a reduction in the rate of return paid to investors in home financing institutions. In line with the general downward movement of yields on long-term investments in the last few years, dividends paid by savings and loan associations have gradually been reduced to lower levels. The average annual dividend rate paid by Federal savings and loan associations, for instance, decreased from 3.69 percent in 1935 to 3.50 percent in 1937. In 1938, this tendency toward lower dividends was reflected in decreased average rates in 23 out of the 46 States for which comparable data for Federal savings and loan associations are available. 9 There are also indications that a number of State-chartered associations have revised their dividend rates to conform more fully with present conditions, particularly in combination with insurance of accounts afforded by the Federal Savings and Loan Insurance Corporation. Insurance of accounts naturally provides an effective medium through which long-estab lished dividend rates on share investments can be reduced, by virtue of the greater shareholders' confidence instilled by a Federal guaranty. An increasing number of home-financing institutions recognize that lower dividend rates are necessary to meet the competition for mort gage loans and to secure good loans which are a sound investment protecting the safety of the funds in custody of the institutions. It has also been recognized more widely that savings are entrusted to financial institutions because of the safety of principal and regularity of returns rather than because of expected high returns. Experience has shown that because of the greater emphasis placed on safety, moderate reductions of dividend rates in the long run are unlikely to affect materially the flow of funds into home-financing institutions. To a certain extent, the dividend policy of home-financing institu tions is determined by the rate of return paid on competitive types of savings. United States savings bonds, if held for ten years to matur ity, return a maximum of 2.9 percent. During the fiscal year 1939, the interest paid on postal-savings deposits was a flat 2 percent. * For complete information, see Section IV, pp. 98 and 99. 44 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 Mutual savings banks were paying dividends ranging between 2 and 3 percent, with the average close to 2 percent. Commercial banks insured by the Federal Deposit Insurance Corporation are permitted to pay maximum rates of 2)1 percent on savings deposits, but in many cases the rates are below this maximum. Until recently, the return guaranteed on life-insurance policies of legal reserve companies has usually been about 3 percent, but during the fiscal year 1939, several companies have reduced the return guaranteed on new policies to 2)( percent. A reduction of dividend rates paid by homefinancing institutions to 3 or 31( percent, depending on local condi tions, would still maintain the traditional margin above the return paid on other types of savings, without loss of competitive advantage. Moratorium Laws In view of the full revival of the mortgage market, a gradual removal of the still existing moratorium laws appears to be warranted. Moratoria on mortgages were introduced at the bottom of the depression when incomes were at an extremely low level and refinancing by private mortgage lenders was practically impossible. At that time, moratoria were believed to be well justified to stem the tide of foreclosures and to prevent the dispossession of hundreds of thousands of home owners, in default. These conditions are no longer present, The national income is much larger than in 1932 or 1933, home-mortgage lenders. have plenty of funds ready to invest, and refinancing of extising loans. at advantageous terms is easy. Therefore, no real hardship to home owners is to be expected if moratoria are gradually lifted. On the other hand, the elimination or modification of moratorium laws would. go a long way toward restoring normal conditions in the mortgage. and real-estate market and would thus contribute to the attainment, of full economic recovery. During the past few years, a number of moratorium laws have, expired. In addition, the moratorium laws of Iowa,, Kansas,, Mississippi, and Nebraska have been declared to be' unconstitutional. Arkansas has repealed its moratorium act. However, on June 30, 1939, moratorium laws were still in force in thirteen States: Alabama, Arizona, California, Louisiana, Michigan,. Minnesota, Montana, New York, North Dakota, Ohio, South Dakota,. Vermont, and Wisconsin. Home Mortgage Lending Activity The fact that home mortgage lending is a highly localized activity and, that the average loan involves a comparatively small amount of SURVEY OF HOUSING AND MORTGAGE FINANCE 45 ,money has for a long time tended to obscure the importance of the aggregate volume of home-mortgage lending. However, this total volume has always been considerable, and in the last few years when most other sectors of the private capital market were sluggish and linactive, home-mortgage lending has attained an outstanding place. This is evidenced by the following comparison: the average annual -amount of all corporate securities issued by railroads, utilities, and all other corporations in 1937 and 1938 was only $2,255,000,000, including new securities as well as securities issued for refunding purposes. On 'the other hand, total mortgage loans on one- to four-family dwellings 'made by financial institutions and individuals in each of the calendar -years 1937 and 1938 amounted to approximately $2,500,000,000. With such volume, home mortgage lending has exceeded the aggregate amount of corporate finance. The flow of money into housing is of great national importance not tonly because it enables our population to meet its housing needs to a larger extent, but also because it helps to overcome one of the basic difficulties which our economy is facing. As explained in a previous ,section of this report, the Nation is saving large amounts each year, irrespective of minor fluctuations in economic activity and national income. During the last few years, these savings were only to a limited extent put to productive use. For a number of reasons, long-term capital investments in durable goods, which are normally financed out of accumulated savings, have been small. Large unutilized savings, on the one hand, and small capital investments, on the other, could not but create an unhealthy situation reflected in a low level of employ ment and of economic activity in general. If savings are idle, men and machinery are out of work. The absorption of investible funds by housing may well contribute to a solution of this problem. Normally, investments in housing repre sent a considerable portion of total capital investment. This is evi denced by the fact that in the period from 1919 to 1935, which com prises years of high and low building activity, residential construction, including major alterations and repairs, accounted for more than one fifth of total domestic capital investment; from 1922 to 1928, a period ,of substantial residential building, the share of residential construction in total domestic capital investment exceeded 28 percent. 10 Larger investments in housing which appear to be forthcoming at the present time will, therefore, be an important factor in the much needed 10Total domestic capital investment is equal to "gross capital formation" as estimated by Simon Kuznets in "National Income and Capital Formation, 1919-1935" (National Bureau of Economic Research), after deduction of changes in business inventories, in stocks of gold and silver, and in net claims against foreign 4countjries. Data on residential construction comprise debt financing as well as equity financing. 46 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 establishment of a balance between savings and capital investment in general, and help to restore employment and prosperity. Chart XVII presents the record of home-mortgage-lending activity from 1929 to 1938. The chart illustrates the extent to which home mortgage lending had dropped in the early Thirties and the degree of recovery in recent years; it also shows the extent of the refinancing operations of the Government-owned Home Owners' Loan Corpora tion in relation to the volume of private home-mortgage lending. CHART XVII ESTIMATED VOLUME OF MORTGAGE LOANS MADE ON NONFARM ONE TO FOUR FAMILY DWELLINGS, BY TYPE OF LENDER MILLIONS OF DOLLARS 5,000 - 4,000 3,000 " . S! 1929 1930 1931 1932 1933 1934 1935 S. OMERCINDIVIDUAL 1936 1937 1938 AND STATISTICS DIVISIONOF RESEARCH FEDERALHOME LOANBANK BOARD In a comparison of lending activity in the last few years and the lending volume of 1929 or 1930, account must, of course, be taken of the reduction in real-estate prices which has taken place in the meantime. Average prices per dwelling and dwelling unit have decreased, and a loan volume of $2,463,000,000 in 1938, therefore, means much more in terms of number of properties and mortgages than it would have meant in 1929. Actual figures underlying the above chart are shown in Exhibit 9. Throughout the ten-year period from 1929 to 1938, savings and loan associations represent the largest single group of mortgage lenders on one- to four-family dwellings. With an estimated volume of $798,000,000 in mortgage loans made in 1938, they accounted for 32.4 percent of the total amount of home-mortgage loans made SURVEY OF HOUSING AND MORTGAGE FINANCE 47 during that year. "Individuals and others" ranked next. Home mortgage lending of commercial banks and their trust departments in 1938 is estimated at $560,000,000, and that of life-insurance companies at $242,000,000. Mutual savings banks in 1938 made $105,000,000 of home-mortgage loans. The highest rate of increase from 1935 to 1938 was in the loan volume of life-insurance com panies and commercial banks, due largely to particularly active participation of these institutions in lending on home mortgages insured under the National Housing Act of 1934. Mortgage Recording Studies The figures presented in the above section are revisions of previous estimates prepared by the Division of Research and Statistics of the Federal Home Loan Bank Board. Such revisions have been made possible through the institution of a survey of real-estate-mortgage recordings which has been undertaken each month from December 1938 and will be continued as a regular service. This is the first time that data on mortgage recordings have been collected and com piled in such detail on a nation-wide basis and it is hoped that this service will be a valuable contribution to our knowledge of develop ments in the mortgage field. Because of the lack of adequate data, Government agencies and lending institutions have been too much in the dark in formulating their policies and in analyzing the market in different States and localities. The new mortgage-recording studies permit not only a more exact determination of the share of the various types of lenders in total activity, but also a classification of mortgage lending by States. Through the cooperation of savings and loan associations, the support of the United States Building and Loan League and the Mortgage Bankers Association, and endorsement by the National Association of Title Companies, the coverage of mortgage recording data has gradually been extended until in June 1939 it included 482 counties which contained 52.5 percent of the total nonfarm population and were located in 45 States and in the District of Columbia. The national and State figures given in the following paragraphs are estimated on the basis of statistics received from reporting counties. 1 Mortgage-recording statistics collected by the Division of Research and Statistics include mortgages of not more than $20,000 on non 1 The estimates are based upon original reports received each month from field cooperators. Summaries of these reports are prepared for each State, by type of mortgagee, and from the totals of reported statistics, estimates representing total mortgages recorded in each State are developed on the basis of the relation of the nonfarm population in the sample to the total nonfarm population in the State. Adjustment factors are employed in the calculation to correct for the concentration of type of lenders and for the influence of metropolitan areas. 48 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 farm property. *Within that group they comprise home mortgages as well as other mortgages; they thus cover a broader field than mortgages on one- to four-family homes alone. For this and other reasons 12 the mortgage-recording data are not directly comparable with the data on home-mortgage lending given in Chart XVII and Exhibit 9. Estimated volume of mortgages on nonfarm property recorded each month from January to June 1939 1 Month January ---------------February--------------March---------------- Number 90, 555 85,160 109,873 Amount $244,015,000 226, 991,000 312,465, 000 Month April -------May ----------June----------------- Number 110, 570 125, 604 128, 005 Amount $304,351, 000 349,454,000 360,868,000 1Includes nonfarm mortgages of not more than $20,000. Exhibit 10 presents a classification of mortgages recorded during the first half of 1939, by Federal Home Loan Bank Districts, by States, and by types of lenders, together with the amount of mortgages recorded per capita. The highest per capita figure for that period is in the District of Columbia ($58.19) but this is followed closely by California ($49.89). Florida likewise shows per capita figures far above the national average, which is $19.47. The smallest per capita figures are to be found in Alabama, Arkansas, Tennessee, North Dakota, South Dakota, and Mississippi. The distribution of the total amount of mortgages recorded over the various types of lenders is summarized in the chart on page 49. On the basis of mortgage recordings, we again find that savings and loan associations are the predominant factor, accounting for 30 percent of the total amount of all mortgages recorded under $20,000. Banks and trust companies rank next with 25 percent of the total. Individ ual lenders account for 18 percent of all mortgages recorded-a surprisingly large share in view of the heavy losses sustained by individual mortgagees during the depression, and of the restriction of Federal mortgage insurance to financial institutions. It appears that the continuous lowering of yields on other investments available to individuals has encouraged them to place funds directly in the more profitable investment medium of mortgages. 12 Others reasons are: The period covered by mortgages recorded and loans made is not necessarily the same. Lending statistics are reported as of the date of loan commitment, while recording figures reflect f the actual date of loan reaistration. Further, any alterations in the terms o an existing contract necessitates a new registration. In the case of refinancing an institution's own mortgate, for example, the face amount of the instrument would appear in the recording totals, whereas only that portion which represented an increase in funds loaned would be included in lending figures. SURVEY OF HOUSING. AND MORTGAGE FINANCE 49 In terms of number of mortgages recorded, the share of savings and loan associations is even greater than in terms of dollar amounts. Institutions of the savings and loan type accounted for 33.3 percent, CHART XVIII DOLLAR DISTRIBUTION OF MORTGAGES RECOR DE O BY TYPE OF MORTGAGEE JANUARY 1939 TO JUNE 1939 MUTUAL SAVINGS BANKS) 3.3% COMPANIES DIVISION OF RESEARCH AND STATISTICS FEDERAL HOME LOAN BANK BOARD of the total number of mortgages recorded from January to June 1939, banks and trust companies for 21.3 percent, and insurance companies for 4.9 percent. This reflects the fact that the average mortgage loan made by savings and loan associations is smaller than the average loan made by any other type of lending institution. 50 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 Increase of Home-Mortgage Debt in 1938 For the first time since 1930, the total home-mortgage debt outstand ing showed a substantial increase in 1938. This may well be taken as a symptom of recovery because the reduction of the home-mortgage debt from 1930 to 1937 was due, in great part, to the extraordinary effect of the depression on the home-mortgage structure. The de crease in this period was caused mainly by the large amount of fore CHART XIX HOME MORTGAGE DEBT, 1929-1938 BILLIONS ESTIMATED BALANCE OF OUTSTANDING MORTGAGE LOANS ON NONFARM ONE TO FOUR FAMILY DWELLINGS DIVISION OF RESEARCHAND STATISTICS FEDERALHOME LOANBANK BOARD closures resulting in property acquisitions by mortgage lenders in lieu of debt. It was also caused by large irregular repayments which many lenders required during the financial crisis, and by regular amortization of outstanding mortgages. New mortgage lending, on the other hand, dropped sharply as a result of the decline in construc tion and was insufficient to offset these liquidating factors. Con versely, the net increase of the home-mortgage debt in 1938 exemplifies not only the resumption of new lending activity, but a recovery from the impact of the depression on the real-estate and home-mortgage market. SURVEY OF HOUSING AND MORTGAGE FINANCE 51 From 1930-the peak year-to 1936, the total home-mortgage debt was reduced by approxiniately $4,500,000,000, or almost 21 percent. The decline was most precipitous in 1932 and 1933, but slowed down in subsequent years when the Home Owners' Loan Corporation re financed over $3,000,000,000 of home-mortgage loans, a large portion of which otherwise would also have been liquidated in one form or another. In 1937 the reduction of the home-mortgage debt came to a halt, and in 1938 there was a net increase of $220,000,000, or 1.3 percent over 1937. As will be seen from Chart XIX, the Home Owners' Loan Cor poration has reduced its balance of outstanding mortgage loans since 1935. In contrast, the balance of mortgage loans held by private mortgagees has grown by substantial amounts since 1936. In only two years, this balance has increased by more than $850,000,000. Detailed estimates of the amount of home-mortgage loans outstand ing and of the holdings of the various types of lenders are presented in Exhibit 11. 3. PROBLEMS AHEAD In the seven years which have passed since the formation of the Federal Home Loan Bank Board, energies have been concentrated on curing the ill effects of the collapse brought about by the depression, and on restoring the economic position of home ownership and mortgage finance. The present recovery in these fields is evidence of the progress made. However, the problems which public and private agencies in home building and mortgage finance are facing have not ceased to exist. They have rather changed in nature to an extent that makes them appear as wholly new problems. Large construction activity almost inevitably creates tendencies to reduce building standards, and there are already indications that jerry-building, poor methods of construction, and utilitization of cheap materials are increasing in volume. Building for the mass market is a desirable goal, but if it is achieved at the expense of good material and sound construction, the gain in terms of housing standards is very questionable. Such tendencies not only threaten the value of home ownership but endanger the safety of funds invested in mortgages. Home-financing institutions and supervising agencies, therefore, have a vital interest in well-organized control over building methods. In this lies the particular significance of the Federal Home Building Service' Plan developed by the Board. More than ever, financial institutions have a stake in the structural soundness of the properties which constitute the basic security for their loans, 52 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 because the ratio of loan to property value generally is higher and the term of mortgage loans longer than at any time in the past. This subject also casts some light on the problem of competition. Undoubtedly, the present sharp competition in the mortgage market is benefiting home owners and widening the market for new building. However, the scramble for new loans creates a situation where lend ing institutions tend to lose sight of sound standards of construction,. appraisal, and mortgage lending. With respect to the term of mort gage loans, for example, it is important to keep in mind that the longer the term of the loan, the greater the likelihood that neighbor hoods may change in character and may be encroached upon by less desirable types of structures or dwellers. This indicates that there are limits beyond which loan terms cannot be safely extended. In the last few years, the extension of loan terms as well as the reduction of down payments and similar measures were intended mainly to stimulate new construction. When building gathers momentum, more conservative lending practices, larger down pay ments, and shorter maturities may well be desirable, and steps should be considered to avoid the recurrence of overlending and speculation as experienced in the Twenties. With the establishment of various Governmental agencies in the field of housing and mortgage finance, means of influencing a building boom would seem to be more adequate than in the past. One reliable and effective method of combating depressions is to combat excessive booms. An important aspect of such control is the prevention of sudden price increases. As long as construction draws on ample resources of unemployed labor and on unutilized plants for the production of material, the danger of excessive price increases should be relatively slight. However, a rapidly increased volume of residential building, if coupled with extensive public construction, may give rise to short ages of productive factors. Already, scarcity of skilled building labor is reported in some localities. Since the depression, when the con struction volume was extraordinarily low, building workers have changed their occupation, many have died or passed the age where they can be employed at the site, while comparatively few new work ers have entered the building trades. This means that the present. volume of labor resources available for a sustained recovery of con struction is probably lower than during the Twenties, and if activity increases beyond the limit of available resources, nationally or locally, prices may easily become unsound. Under these circumstances national, regional, and local studies of the present capacity to pro duce, and measures to overcome shortages of productive factors are worth-while subjects for research. In the meantime, close coopera- SURVEY OF HOUSING AND MORTGAGE FINANCE 53 tion between the various public agencies which directly and indi rectly influence a large portion of total construction is needed to avoid dangerous upturns in prices. In addition to such new problems arising from recovery, there re mains the fundamental task of improving-in the broadest sense the market mechanism of construction and mortgage lending. In its 1938 report, the Federal Home Loan Bank Board called attention to the obstacles to housing resulting from the poor organization of the building industry, and from expensive, cumbersome, and antiquated real-estate laws. While during the past year some improvements have been made in the modernization of building operations, progress in the reform of foreclosure and title registration laws has been negli gible. Under present methods of foreclosure, home building and mortgage lending are at a definite disadvantage as compared with other types of production and finance, where rapid, simple, and inex pensive legal methods are used. A reform along the lines of the uni form Real Estate Mortgage Act prepared by the Legal Department of the Federal Home Loan Bank Board for the Central Housing Com mittee is badly needed. The same is true for a modernized, uniform land title registration act. A suggested draft of such a law is being prepared by a subcommittee of the Central Housing Committee. The Legal Department of the Federal Home Loan Bank Board is cooper ating in this work.1 3 is For an analysis of present foreclosure costs and procedures, see the report of the Home Owners' Loan Corporation, pp. 134 and 135. III Federal Home Loan Bank System 1. OPERATIONS OF THE FEDERAL HOME LOAN BANKS Changes in Membership AFTER the rapid expansion in membership during the first six years of its existence, the Federal Home Loan Bank System has entered into a phase characterized by more normal growth. Con solidations and mergers of member institutions, which tended to strengthen the home-financing system, resulted in a net decrease in membership from 3,956 on June 30, 1938, to 3,946 on June 30, 1939. However, the combined resources of member institutions increased from approximately $4,308,000,000 at the close of June 1938 to ap proximately $4,600,000,000 on June 30, 1939, or by 6.8 percent. This growth of resources is all the more remarkable when it is taken into consideration that the assets of a number of member savings and loan associations have been revised downward as the result of consolida tions and reorganizations and by the decrease in assets arising from the elimination of mortgage-pledged shares, attendant upon the more general adoption of the direct-reduction loan plan. During the fiscal year ended June 30, 1939, there were 122 thrift and home-financing institutions admitted to membership, and with drawals from membership numbered 132. These withdrawals repre sent 56 institutions which were merged or consolidated with other members, 58 member institutions which went into liquidation, 2 in stitutions which were removed from membership because of failure to comply with the Federal Home Loan Bank Act and/or the regu lations of the Board, and 16 member institutions which withdrew voluntarily. On June 30, 1939, there were 105 applications for membership in the Federal Home Loan Bank System on file. In the majority of these cases, final action had not been taken because the applicants had not been able to comply with the necessary requirements. 55 56 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 CHART XX GROWTH OF MEMBERSHIP AND RESOURCES OF THE FEDERAL HOME LOAN BANK SYSTEM AS OF JUNE 30 EACH YEAR NUMBER NUMBER OF MEMBER INSTITUTIONS DOLLARS BILLIONS ESTIMATED 5,000 ASSETS 4,000 1,000- 1933 1934 1935 \1936 1937 1938 1939 DIVISION OF RESEARCH ANDSTATISTICS FEDERAL HOME LOAN BANKBOARD The following table presents the number and assets of members, by types of institutions, as of June 30, 1938, and June 30, 1939: ber ber Other members Savings banks -----------Insurance companies-Total------------------- Assets (millions of dollars) beer Assets (millhons of dollars) beN ber Assets (millions of dollars) 3, 909 $3, 700 3, 897 $3, 936 -12 +$236 2, 572 1, 337 2, 487 1, 213 2, 517 1, 380 2, 496 1, 440 -55 +43 +9 +227 ..----------- 47 608 49 664 +2 +56 9 38 203 405 9 40 202 462 0 +2 -1 +57 3,956 4,308 3,946 4, 600 Savings and loan associations 1------State-chartered ---Federally-chartered Net change in fscal year June 30, 1939 June 30, 1938 ----------- ------- -10 +292 1 Includes savings and loan associations, building and loan associations, homestead associations, and cooperative banks. Federal savings and loan associations are required by law to be members of the Federal Home Loan Bank System. Membership is also open to State-chartered savings and loan associations, savings banks, and insurance companies. Exhibit 12 shows the number and estimated assets of member institutions, by Federal Home Loan Bank Districts and by States, as of June 30, 1938, and June 30, 1939. FEDERAL HOME LOAN BANK SYSTEM 57 Savings and loan associations constitute the bulk of the present membership of the Federal Home Loan Bank System, and the great majority of eligible institutions of the savings and loan type are now included in the System's membership. Reports from the Presidents of the twelve Federal Home Loan Banks indicate that on June 30, 1939, member savings and loan associations represented more than 70 percent of the total number of potential members in the savings and loan industry. The assets of these member institutions comprised about 84 percent of the aggregate assets of all potential members of the savings and loan type. Volume of Advances The fiscal year 1939 was marked by a considerable increase in the liquidity of member institutions, caused by the large flow of private savings into share investments in home-financing institutions. As a result, the demand for Federal Home Loan Bank advances was reduced, and many borrowing members were in a position to make substantial repayments on their outstanding advances during the year. Advances made by the Federal Home Loan Banks during the fiscal year 1939 totaled $76,659,075. Repayments of advances aggregated In consequence, the balance of advances outstanding $103,922,449. was reduced from $196,224,937 at the end of the preceding fiscal yepr to $168,961,563 on June 30, 1939. Exhibit 13 shows the aggregate amount of advances and repayments and the balance of advances *outstandingfrom the beginning of operations of the Bank System to June 30, 1939. During the reporting period, the demand for advances varied greatly among the twelve Federal Home Loan Bank Districts (Chart XXII on page 59). On June 30, 1939, the Des Moines and Los Angeles Districts showed an increase in advances outstanding over the preceding fiscal year. Advances outstanding in the New York, Pittsburgh, and Topeka Districts were slightly lower. The Federal Home Loan Banks of Boston, Winston-Salem, Cincinnati, and Little Rock recorded a substantial decrease in outstanding advances ranging from about 20 to 30 percent. A summary of advances outstanding at the end of each fiscal year from 1934 to 1939, by Federal Home Loan Bank Districts, appears in Exhibit 14. The generally reduced demand for advances was reflected in a decreasing number of members borrowing from the Federal Home Loan Banks. On June 30, 1938, borrowing memibers numbered 2,681, or 67.8 percent of the total number of member institutions. On June 30, 1939, the number of borrowing members was only 2,385, or 60.4 percent of the total number of member institutions at that 183130-39-5 58 REPORT OF FEDERAL HOME LOAN BANK BOARD, 193 9 (DNIONVISffIno 33NV7V8) SHV1100 JQ SINOflIA 8 88 a z in z 0 -4 C) -F M 0W w C) z 4 0 w C. z z 0 U) I 0 z U) w 0 z (S1NZ*A~a3&' V S30NVACVIsHVIIOa .40 SNOIW FEDERAL HOME LOAN BANK SYSTEM 59 date. Exhibit 15 indicates the changes in the percentage of borrowing members to total members for each of the twelve Federal Home Loan Bank Districts, from the fiscal year 1935 to the fiscal year 1939. Types of Advances Federal Home Loan Bank advances are made up to ten years on the security of home mortgages, or obligations of or guaranteed by the United States, and up to one year on an unsecured basis. All ad CHART XXII PERCENT CHANGE IN THE AMOUNT OF BANK ADVANCES OUTSTANDING DURING THE FISCAL YEAR 1939 BY FEDERAL HOME LOAN BANK DISTRICTS PERCENT CHANGE ALL BANKS -139 I - BOSTON -22.9 2 - NEW YORK - 3 9 5- PITTSBURGH - 4.2 4-WINSTON SALEM -30.4 5 -CINCINNATI - 30.5 6-INDIANAPOLIS - 13 0 7-CHICAGO - 15 8 8-DES MOINES + 9-LITTLE ROCK -21.0 so PERCENTDECREASE 20 10 PERCENTINCREASE 10 20 30 2.6 10-TOPEKA - It-PORTLAND - 19.0 4 6 12 -LOS ANGELES + 5.7 DIVISIONOF RESEARCHANDSTATISTICS FEDERALHOME LOANBANKBOARD vances, whether secured or unsecured, are collateralized by an invest ment of the borrower in the stock of the Bank to the extent of at least one-twelfth of the total outstanding advances to such borrower. A detailed description of the various types of advances is given in Exhibit 16.1 1 Through an amendment to the Federal Home Loan Bank Act of May 28, 1935, Congress authorized the Federal Home Loan Banks to make advances to nonmember mortgagees approved under Title II of the National Housing Act. The amendment provided that such advances were not to be subject to the other provisions and restrictions of the Federal Home Loan Bank Act, but were to be made upon the security of mortgages insured under Title II of the National Housing Act. To June 30, 1939, Federal Home Loan Banks made advances to three nonmember mortgagees in the aggregate amount of $159,400, all of which, with the exception of $2;805, had been paid in full prior to the fiscal year 1939. During the year the balance of $2,805 was repaid in full and no advances to nonmember mortgagees were made. 60 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 An analysis of the collateral securing Federal Home Loan Bank advances demonstrates that there is a substantial margin of pro tection behind these advances. Of the total amount of advances outstanding at the end of the reporting period, $145,442,668, or 86.1 percent, was secured by mortgages, obligations of or guaranteed by the United States Government, and capital stock of the Banks, while $23,518,895, or 13.9 percent, was unsecured, except for the amount of capital stock of the Banks paid in by borrowers. Unse cured advances were made exclusively to members whose creditor liabilities did not exceed 5 percent of their net assets. The secured advances were collateralized by 146,958 home mort gages with unpaid balances of $333,934,883, and obligations of the United States Government (direct or fully guaranteed) aggregat ing $2,210,625. As additional collateral for both secured and unse cured advances, borrowing members had paid in $22,456,725 on subscriptions to the Banks' capital stock. Exhibit 17 gives detailed information on the trend of secured and unsecured advances by fiscal-year periods, since the beginning of operations to June 30, 1939. Further indication of the soundness of Federal Home Loan Bank advances is the fact that the Federal Home Loan Banks have sus tained no losses on their outstanding advances and that on June 30, 1939, there was only one borrowing member (exclusive of those in liquidation) which was delinquent over thirty days, in the nominal amount of $702. At the same date, eleven borrowing institutions were in liquidation, the liquidation in all but three of these cases being voluntary. These eleven borrowers, as of June 30, 1939, had a total indebtedness to the Banks of $421,304 which was secured by home mortgages with an estimated value of $603,857, and by paid-in stock in the Banks aggregating $72,200. No loss is anticipated on the indebtedness of any of the liquidating borrowers. In accordance with the character of the operations of home-financing institutions, most of the Federal Home Loan Bank advances are on a long-term amortized basis. On June 30, 1939, almost four-fifths of the total amount of outstanding advances was for terms from one to ten years, and only one-fifth for terms up to one year. This is in contrast to the early period of the Federal Home Loan Bank System when a larger portion of the advances outstanding was on a short-term basis. 61 FEDERAL HOME LOAN BANK SYSTEM Distribution of Federal Home Loan Bank advances outstanding, by long-term and short-term advances, as of June 30 Dollar amounts Percent distribution Year ______ Long-term Short-term Long-term Short-term 1933 - - - - - - - - - - - - - - - - - - - - - - - - $17, 460, 425 $30, 203, 405 36 6 63. 4 --1934 - - - - - - - - - - - -- - - - - - - - - - - - - - - - - -- - - - - - - - - - 1935 -3936 - - - - - - - - - - - - - - - - - - - - ---1937 ---------- ------------- - -- - -1938 --- - - - - - -- - - - ---- --- --- - - - - - --- -- - - - - - - - 1939 57,885,363 11,020,430 118,257,737 149, 227.,685 27,262,991 28, 212,084 43, 933. 410 48799,169 46,997, 252 68 64 63 70 76 0 4 0 8 0 32.0 35 6 37 0 29 2 24. 0 133,919.650 35,041,913 79 3 20 7 74, 653, 428 Since the Federal Home Loan Banks have been operating but a little over six years, complete data on the actual life of the long-term advances up to ten years are not yet available. However, there are many inidications that the average life of these advances will be conl siderably less than the stipulated period. Reports obtained from the Federal Home Loan Banks evidence that repayments received on long-term advances have been considerably in excess of the amount of repayments due on such advances. During the past fiscal year, in particular, the increased liquidity of home-financing institutions induced many borrowers to make repayments in excess of amortiza tion requirements or to retire their indebtedness in full. This has naturally contributed to the decline in advances outstanding. Advances from Federal Home Loan Banks are used by member institutions for a variety of purposes, but for the most part, they are obtained to enable home-financing institutions to meet the needs of their communities for mortgage loans on homes when the demand is running at a greater rate than the local supply of funds. Reports from various Federal Home Loan Banks indicate that during the fiscal year 1939 the major portion of the long-term advances, which constitute approximately 80 percent of total advances outstanding, was for the purpose of making mortgage loans, whereas the remainder was used for liquidity purposes. In many cases, of course, the funds advanced for liquidity purposes helped indirectly to maintain normal mortgage-lending activities of member institutions. Interest rates on advances to members are determined by the Boards of Directors of the respective Banks within a range approved by the Federal Home Loan Bank Board. At the end of the fiscal year 1939, such interest rates ranged from 1% to 3% percent for short term, and from 3 to 3%2percent for long-term advances. These rates reflect various reductions made during the year. The Federal Home Loan Banks of Boston and New York revised their rates for short term advances from 3 to 2y percent, and on June 28, 1939, the Federal Home Loan Bank Board approvedna further reduction on sqhort-_term 62 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 amortized advances by the New York Bank to 1Y2 percent. During the fiscal year 1939, the New York Bank also lowered its rate on long-term advances from 3% to 3 percent. The Federal Home Loan Bank of Portland reduced the interest rates on all advances from 3Y2 to 3 percent. The Federal Home Loan Bank of Pittsburgh like wise reduced its rates on all advances from 3} to 3%4 percent, and the Federal Home Loan Banks of Cincinnati and Des Moines from 3)%to 3 percent. The Federal Home Loan Bank of Chicago decreased the interest rate charged on secured advances from 3) to 3 percent and the rate on unsecured advances from 3) to 3Y4 percent. Exhibit 18 contains detailed information on interest rates charged by each Federal Home Loan Bank as of July 1, 1939. At the end of the fiscal year 1939, the borrowing capacity of mem ber institutions-which is the approximate amount for which each member may legally obligate itself, or 50 percent of its net assets, whichever amount is the lower-was close to $1,700,000,000, or about ten times the present volume of advances outstanding. Within the borrowing capacity, each Federal Home Loan Bank has established lines of credit for the individual member institutions, and such credit lines are revised at least annually or more often if deemed necessary. Increase in Liquidity of the FederalHome Loan Banks Financial operations of the twelve Federal Home Loan Banks dur ing the fiscal year 1939 were characterized by a continued growth in total resources, on the one hand, and by the aforementioned decline in advances to member institutions, on the other. As a result, the Federal Home Loan Banks as a whole and each of the Banks separately experienced a substantial increase in liquidity. On June 30, 1939, the consolidated resources of the twelve Federal Home Loan Banks were $296,629,853, compared with $265,770,804 at the end of the preceding fiscal year-a growth of 11.6 percent. The main changes in assets and liabilities which occurred during the reporting period are illustrated in Charts XXIII and XXIV, and a detailed statement of condition for the Banks as a whole and for each of the Banks separately, as of June 30, 1939, is presented in Exhibit 19. The larger liquidity of the Federal Home Loan Banks is shown in the marked increase of cash and investment holdings. On June 30, 1939, cash held by the Banks amounted to $78,205,795 as against $34,334,856 the year before. Investments, which consisted exclu sively of United States Government obligations and securities guar anteed by the United States Government, increased from $34,445,173 63 FEDERAL HOME LOAN BANK SYSTEM to $48,702,247. The par value of these investments as of June 30, 1939, was $47,663,875 and the market value $50,627,051. At the end of the fiscal year 1939, cash and investments totaled $126,908,042, or 42.8 percent of the consolidated assets of the twelve Federal Home Loan Banks; at the close of the preceding fiscal year they were only 25.9 percent of the consolidated assets. Through the retirement of $41,500,000 debentures on July 1, 1939, a substantial portion of the excess cash was absorbed. However, an ample volume of liquid funds remained available to meet the demand for advances by member institutions. CHART XXIII COMPOSITION 0 OF COMBINED 10 20 ASSETS OF THE TWELVE FEDERAL HOME AS OF JUNE30,1938 and JUNE 30,1939 PER C E N T 30 40 50 60 JUNE 70 LOAN BANKS 80 90 100 30 JUNE 30 ADVANCES OUTSTANDING CASH INVESTMENTS III OTHERASSETS DIVISIONOF RESEARCH AND STATISTICS FEDERAL HOMELOANBANKBOARD The following table shows the distribution of securities held by the Federal Home Loan Banks on June 30, 1939, grouped by maturity dates and yields: Distributionof securities held by the twelve Federal Home Loan Banks, as of June 30, 1939 Maturity Amount Percent of total Average weighted yield 1 Under 1 year --------------------------------------$1,653,000 1 to 5 years--- ---------15,311,000 ---------------------------5 to 10 years .-- ------------------------------------9.954,000 10 to 15 years ---.....-----------..----.. 10,327,000 15 to 20 years ----- ---------------------------------- 20 years and over -------------------------------------------------Total ---------- ------ ---------- 6,114,000 Percent 3.5 32 1 209 21 7 1.05 1.26 1 72 244 12 8 2 71 4, 305, 000 90 2 60 47, 664,000 100.0 1 91 1 Based on cost to maturity/callable dates. A detailed statement of security holdings of the twelve Banks, as of June 30, 1939, is presented in Exhibit 20. 64 REPORT OF FEDERAL HOME LOAN BANK BOARD, 193 9 Growth of Capital Stock The growth of resources of the Federal Home Loan Banks was due to increases in capital-stock subscriptions, proceeds from the sale of debentures, and an increased amount of member deposits. On June 30, 1939, the total paid-in capital stock of the twelve Banks stood at $164,327,175, as compared with $161,512,205 the year before. As subscriptions of the United States Treasury to the capital stock have ceased since November 19, 1937, this increase was entirely due to member subscriptions. As of June 30, 1939, the capital stock of the twelve Banks consisted of $124,741,000, or 75.9 percenit of the total,, paid in by the United States Treasury under the terms of the Federal Home Loan Bank Act,' and of $39,586,175, or 24.1 percent of the total., paid in by private member institutions. Each member institution is required to maintain an investment in the stock of the Federal Home Loan Bank of which it is a member to the extent of at least one twelfth of advances outstanding and in an amount of not less than 1 percent of the unpaid principal of its home-mortgage loans, but not less than $500. Despite the decrease in advances, the average amount of Federal Home Loan Bank stock held by each member institution rose from $9,320 to $10,038 during the past fiscal year. The combined capital-stock structure of the Federal Home Loan Bank System, as of June 30, 1938, and June 30, 1939, may be summarized as follows: June 30, 1938 June 30, 1939 Total stock subscriptions: Members -------------------------------------------------------$36,872,000 $39,609,10 Unsted States Government ---------------------------------------124, 741,000 124, 741,000 Paymrents recesved on stock subscriptsons: 36, 771,205 39, 586, 171 Members ------------------------------------------------------TUnited States (Government---------------------------124, 741, 000 124, 741,000 Balance due on above stock subscriptions: -0,9 22, 925 1009 Members----------------------------------------------------------------------- ------------United States Government ------------------------------------ From the beginning of their operations through June 30, 1939, all capital stock of the Federal Home Loan Banks has been sold at par and will continue to be sold at par unless and until a price in excess thereof has been designated by the Federal Home Loan Bank Board. The reserves of the Federal Home Loan Banks have been strength ened materially during the reporting period. On June 30, 1939, 2 Under the terms of tbe Federal Rome Loan Bank Act, the Secretary of tbe Treasury was required to, subscribe on bebalf of tbe United States for sucb part of tbe minimum capital stock of each Federal Home Loan Bank as was not subscrsbed for by members witbin a period of 30 days from tbe date stock-subscrip tion books were opened by tbe Board. On tbis basis, tbe Secretary of the Treasury was commstted to, subscribe for $124,741,000 of stock in the twelve Federal Home Loan Banks, all of wbicb bad been paid in prior to November 19, 1937. 65 FEDERAL HOME LOAN BANK SYSTEM surplus and undivided profits of the Federal Home Loan Banks amounted to $8,801,440 as against $6,469,125 the year before. Debentures and Member Deposits Consolidated Federal Home Loan Bank debentures outstanding increased from $76,500,000 to $90,000,000 during the year. Because of the reduced demand for Federal Home Loan Bank advances and the high liquidity of the Banks, Series E, which matured on July 1, 1939, was retired on that date, leaving a balance of debentures out standing of $48,500,000. While under the terms of the Federal Home CHART XXIV COMPOSITION OF COMBINED CAPITAL AND LIABILITIES OF THE TWELVE FEDERAL HOME LOAN BANKS 0 10 I I f, 20 I AS OF JUNE30,1938 and JUNE 30,1939 P E R C E N T 30 40 50 60 I I I i 70 i JUNE30 1938 80 I 90 100 I 288 24 JUNE30 1939 05A 3004303 CAPITALSTOCKSUBSCRIPTIONS GOVERNMENT MEMBERS> <US MEMBERS US GOVERNMENT MEMBERS' DEPOSITS F.1 DEBENTURES OUTSTANDING III SURPLUSand UNDIVIDEDPROFITS OTHERLIABILITIES DIVISIONOF RESEARCH AND STATISTICS FEDERALHOMELOANBANKBOARD Loan Bank Act each Bank may issue its own debentures, the issues heretofore placed on sale have been consolidated debentures repre senting the joint and several obligations of all Federal Home Loan Banks. A summary of these issues (including retired series) is pre sented in the following table: Consolidated debentures of the Federal Home Loan Banks Date of issue Number of series A I------------------------B 1..- -----.----. .C ---------D ----------E -...------. -----.--..---------- 1 Amount Years _-- Apr. July _ Dec. Apr. July 1,1937 1,1937 1,1937 1,1938 1,1938 Series A, B, and E were retired at their maturity dates. Maturity Term Interest rat& Percent 1 1 3 5 1 Apr. July Dec. Apr. July 1,1938 1,1938 1,1940 1,1943 1,1939 $24, 700,000 28,000,000 25,000,000 23, 500, 000 41,500,000 16 1 4 2 2 1 66 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 The success of the five offerigs made to June 30, 1939, has been most gratifying. Each offering was heavily oversubscribed, and the financial community has quickly become acquainted with the type of security offered by Federal Home Loan Bank debentures. In order to further familiarize bankers and investment dealers with the Federal Home Loan Bank System, a series of meetings was held in financial centers of the country during the fiscal year 1939. The better understanding of the Bank System and the goodwill created through these meetings will be of great value whenever the demand for Federal Home Loan Bank advances increases and new debenture issues may become necessary. Data on the participation of each Federal Home Loan Bank in the debenture issues outstanding on June 30, 1939, are given in Exhibit 21. The liquidity of member institutions during the reporting period was reflected in a substantial increase of member deposits in the Federal Home Loan Banks. On June 30, 1939, such deposits were $32,191,666 as compared to $19,873,357 the year before. Of the total member deposits held by the Federal Home Loan Banks on June 30, 1939, $4,462,258 was in demand deposits and $27,729,408 in time deposits. In view of the increase in the amount of deposits, and the declining demand for advances, several of the Banks found it necessary during the reporting period to limit the amount of the total interest-bearing time deposits of any one member and also to lower the rates of interest paid on such deposits. Exhibit 22 shows the rates of interest paid on time deposits by each of the Federal Home Loan Banks as of July 1, 1939. No interest is paid on demand deposits. Interbank deposits outstanding as of June 30, 1939, totaled $3,300,000, as compared with $15,150,000 at the close of the preceding fiscal year. Such deposits from one Federal Home Loan Bank with another have been arranged to provide an interregional exchange of funds when one or more Banks may have demand for additional funds while others have surplus funds on hand. From the beginning of operations to June 30, 1939, the total amount of interbank deposits aggregated $67,250,000, of which $63,950,000 had been repaid, leaving the above-mentioned amount of $3,300,000 outstanding. Income and Expenses The conjsolidated gross income of the twelve Federal Homne Loan Banks during the fiscal year 1939 was $7,274,390, as compared with $7,260,623 in the preceding period. Expenses, including nonoperat ing charges, moved slightly upward from $2,504,733 to $2,740,149. This left a net income of $4,534,241 as ag-ainst $4,755,891 during2 the 67 FEDERAL HOME LOAN BANK SYSTEM preceding fiscal-year period. The following table presents the con solidated profit and loss account of the twelve Federal Home Loan Banks for each of the fiscal years 1938 and 1939; a detailed statement of profit and loss for each of the Banks for the period July 1, 1938, through June 30, 1939, is given in Exhibit 23. Condensed consolidated statement of profit and loss of the twelve Federal Home Loan Banks Fiscal year 1938 Income: Interest earned on advances. -----..---------------Interest earned on investments.............------------------------...Nonoperating income...................................--------------------------Gross income .--.-------....... --------....--------.. _- .... Less-Charges: Compensation, travel, and other administrative expenses------------Interest on deposits ---............----------------.....----...-------..---...-------.. ... .. ... Interest on debentures -.... Assessments for expenses of Federal Home Loan Bank Board...--... Other expenses---......---------------------------------------..-----.. Nonoperating charges .............--- _----.-.------- ..--.. Total deductions.......................-----------------------------------------------... ............. -..................... Net income --- ------- Fiscal year 1939 $5, 952,844 751,354 556,426 $5, 669,103 891,301 713,986 7,260,624 7, 274,390 890,255 162,109 935,179 302,440 144, 593 70,157 922, 523 250, 276 1,120, 292 300,000 83,168 63, 890 2, 504,753 2, 740,149 4,755,891 4,534,241 The decrease in interest earned on advances reflects the lower volume of advances and the reduction of interest rates, while the increased earnings on investments resulted from the larger security holdings during the year. Nonoperating income consisted chiefly of profits on the sale of securities. Among charges to income, interest on deben tures and member deposits absorbed considerably larger amounts than in the preceding fiscal-year period, due to the increase of debentures and deposits outstanding. The net income of the twelve Federal Home Loan Banks for the fiscal year 1939 was distributed as follows: Allocation to reserves: To legal reserves---------------------------To reserve for contingencies -------------------Total to reserves------------------------Dividends paid: United States Government ------------------Members---------------------------------Total dividends paid_-----------------------2, Balance to undivided profits ----------------------Total net income (consolidated) -------------- $906, 848 473, 656 1, 380, 504 1, 664, 559 537, 367 201, 926 951, 811 4, 534, 241 68 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 An analysis of the surplus and undivided profits of the Federal Home Loan Banks, individually and collectively, as of June 30, 1939, is given in Exhibit 24. Because of the decrease in the volume of advances and the reduction of interest rates charged on such advances, total earnings of some of the Federal Home Loan Banks were lower than in the preceding fiscal year, and five of the twelve Banks reduced their dividend rates. As a result, the annual dividend rate on the average capital stock of the twelve Federal Home Loan Banks for the fiscal year 1939 was approxi mately 1.36 percent as compared with 1.57 percent in the preceding year. The United States Government is receiving the same annual rate of return on its investment in the capital stock of the Banks as is received by the member institutions. Exhibit 25 shows the divi dends declared by each Bank to stockholders for the fiscal year 1939 and cumulative from the beginning of operations to June 30, 1939. Administration of the FederalHome Loan Bank System Under the direction of the Board, the chief responsibility for the administration of the Federal Home Loan Bank System and the supervision of the twelve Federal Home Loan Banks is vested in the Office of the Governor. Each Federal Home Loan Bank is examined twice a year. These semi-annual examinations are conducted in considerable detail for the purpose not only of ascertaining the actual condition of the Banks, but also for the purpose of determining that all disbursements were proper and all requirements of the Federal Home Loan Bank Act and the Rules and Regulations of the Federal Home Loan Bank Board have been adhered to in every respect. After the completion of each semi-annual examination of a Federal Home Loan Bank, a copy of the report of examination, together with a letter of criticism based on such report, is transmitted to the Bank with the request that the Board's Comptroller be promptly advised of the action taken by the Bank to correct the situation which may have been discussed in the report and letter of criticism. The Presi dent of the Bank is also requested to present the report of examination and the letter of criticism to the Board of Directors of the Bank and to incorporate the Comptroller's letter of criticism as well as the Bank's reply thereto in the minutes of the next meeting of the Board of Directors. In addition to the close supervision by virtue of these semi-annual examinations, each Bank is required to furnish the Board's Comp troller with a daily statement reflecting its lending and other transac- FEDERAL HOME LOAN BANK SYSTEM 69 tions, as well as with a detailed monthly report on the operations and condition of the Bank. Each Bank is also required to furnish copies of the minutes of the meetings of its Board of Directors, Executive Committee and Stockholders, and copies of reports of its Advisory and Reviewing Committees. On the basis of this information, the Federal Home Loan Bank Board is able to conduct current analyses of the activities of the twelve Federal Home Loan Banks. Such current analyses are designed to bring to light any undesirable trends or conditions which may be found to exist and enable the Board to keep in close touch with the operations of the Banks, so that such changes in its Rules and Regulations or policies as may be deemed desirable may be made from time to time. The management of each of the Federal Home Loan Banks is vested in a Board of twelve Directors, four of whom are appointed by the Federal Home Loan Bank Board to represent the public interest, while eight Directors are elected by the member institutions in each Bank District in accordance with the terms of the Federal Home Loan Bank Act and the Rules and Regulations prescribed by the Federal Home Loan Bank Board. The respective Boards of Directors elect the executive officers of the Banks subject to the approval of the Federal Home Loan Bank Board. The Bank Presidents' Conference, established by Resolution of the Board and consisting of the executive heads of the twelve Federal Home Loan Banks, held two meetings during the year ended June 30, 1939. At these meetings, administrative and supervisory problems, credit policies, and home-financing conditions in each of the Bank Districts were considered, and in view of the growing importance of Government bonds in the total assets of the Banks, proper invest ment procedures were discussed. The Federal Savings and Loan Advisory Council, created by the Federal Home Loan Bank Act, also held two meetings during the year. This body consists of one member elected by each of the twelve Boards of Directors of the Federal Home Loan Banks and six members ap pointed by the Federal Home Loan Bank Board. The meetings of the Federal Savings and Loan Advisory Council were helpful in the formulation of the Board's policies and in the maintenance of a close contact between the management of home-financing institutions in the various parts of the country and the central administration in Washington. During the year ended June 30, 1939, the discussions of the Advisory Council were focused upon the liquidity of home financing institutions, the determination of interest and dividend rates, and the questions of supervision, competition, and taxation. The 70 REPORT OF FEDERAL HOME LOAN BANK BOARD, 193 9 IIle UU c U) 0 m1z / ex04 0 I LU Iw FEDERAL HOME LOAN BANK SYSTEM 71 Council also considered the Banks' policies with respect to the estab lishment of lines of credit for member institutions and endorsed the legislative proposals sponsored by the Federal Home Loan Bank Board. A list of members of the Federal Savings and Loan Advisory Council attending the two meetings during the fiscal year 1939 is presented in Exhibit 26. ProposedFederal Legislation In order to increase the usefulness of the agencies under the Federal Home Loan Bank Board to thrift- and home-financing institutions, the, Board has supported a series of proposed amendments to the Federal Home Loan Bank Act and other laws governing the activities of the Federal Home Loan Bank Board. These proposals are based on more than six years' experience and deliberation. During these years, the Federal Home Loan Bank Board has made a thorough study of the effects of the existing legislation and has carefully considered improvements regarded as desirable. The amendments now before Congress represent a program which, in the opinion of the Board, will assist greatly in a more efficient performance of the functions of the agencies under the Board, and which will better enable these agencies to meet future emergencies. With respect to the Federal Home Loan Bank System, the proposed amendments include two major items: 1. Broadening of the collateral base for Federal Home Loan Bank advances.-Underthe existing law, mortgages eligible as collateral for Federal Home Loan Bank advances are confined to mortgages on one to four-family dwellings with a maturity limit of twenty years. Under the amendatory legislation as introduced in Congress, any first mort gage would be acceptable as collateral, the maturity limit would be extended to twenty-five years, and the present $20,000 limit on mort gages eligible as collateral for advances to members would be removed. In addition, the Federal Home Loan Banks would be allowed to make advances to members on obligations of the Banks themselves and those of the Federal Savings and Loan Insurance Corporation, as well as on any other obligations, acceptable to the Board, which such mem bers may lawfully have available. The House Committee on Banking and Currency, in reporting the proposed legislation, amended these provisions so that eligible mortgages would have to be on properties designed principally for residential use, and so that a $100,000 limit would be substituted for the $20,000 limit. The pending legislation would broaden the power of the Federal Home Loan Banks to accept as collateral, without undue restriction, those mortgages and obligations which are legal investments for mem- 72 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 ber institutions. It would also enable the Banks to extend more useful services to savings banks and insurance companies which are eligible for membership in the Federal Home Loan Bank System, since savings banks and insurance companies have only a small portion of their funds invested in the types of mortgages and obligations which are at present eligible for acceptance as collateral by the Federal Home Loan Banks. 2. Purchase of Federal Home Loan Bank obligations by the Treas ury.-In order to enable the Federal Home Loan Banks to meet unexpected emergencies, the amendment provides that the Secretary of the Treasury shall be authorized to purchase, at his discretion, obligations of the Federal Home Loan Banks. While other financial systems of the country are protected against unforeseen develop mients-the commercial banks through the authority of the Federal Reserve System to issue currency; and the farm-credit structure through a 2 billion dollar revolving fund guaranteed by the Govern ment to support Federal Land Banks and other corporations of the Farm Credit Administration-no such provision has been made for 'the credit reserve system created on behalf of thrift and home financing institutions. Under normal conditions, such aid to the Federal Home Loan Bank System is unnecessary. However, to prevent the recurrence of a freezing up of financial institutions and the resulting deflationary effects, safeguards are essential in order to enable the Federal Home Loan Banks to obtain funds for advances in times of financial stress when their securities might not be readily marketable. Other provisions of the proposed legislation are designed to clarify the powers of the Federal Home Loan Bank Board with reference to annual reports by, and examination, audit, and supervision of, mem ber institutions; to extend the criminal provisions of the Federal Home Loan Bank Act for the protection of the Banks and member institutions against circulation of false statements in regard to their financial condition; and to strengthen the penal provisions pertaining to misconduct by examiners of the Banks and of member institutions and to the unauthorized disclosure of confidential information con cerning the institutions examined. 2. OPERATIONS OF MEMBER INSTITUTIONS Increase in Assets Operations of member institutions during the fiscal year 1939 showed distinct improvements. Total assets and private investments in member savings and loan associations increased. Mortgage lending 73 FEDERAL HOME LOAN BANK SYSTEM was more active than in the preceding fiscal year. Real estate owned continued to decline. A better liquidity position was indicated by larger cash holdings which permitted substantial repayments of Federal Home Loan Bank advances. On the other hand, the keen competition in the mortgage market referred to in the "Survey of Housing and Mortgage Finance" naturally created new operating problems. The general reduction of interest rates on home mortgages which resulted from such competition required changes in lending policies and dividends paid to investors; and greater efforts had to be made to retain old loans as well as to add new sound loans to the mortgage portfolio. The record of 1938-39 indicates that, in general, member institutions of the Federal Home Loan Bank System were in a position to meet these new conditions successfully. During the fiscal year 1939, all types of member savings and loan associations showed gains in assets. This is revealed by the following figures for an identical group of 2,605 savings and loan members of the Federal Home Loan Bank System, representing approximately 75 percent of the total assets of member savings and loan associations: Growth in assets of 2,605 identical member savings and loan associations, from July 1, 1938, to June 30, 1939 [In thousands of dollars] Total assets Increase during year Number and types of associations June 30, 1938 June 30, 1939 2,605 identical member associations---------.-----. 1,286 Federal savings and loan associations -------596 insured State-chartered associations---------723 noninsured State-chartered associations--------- $2, 740, 1,169, 700, 871, 385 083 008 294 $2,953,605 1, 337,693 729, 838 886, 074 Amount $213,220 168, 610 29,830 14, 780 Percent 7 8 14.4 4. 3 1.7 In this group, Federal savings and loan associations recorded the largest increase in assets during the year, namely 14.4 percent. In sured State-chartered associations ranked next with a gain of 4.3 percent. The 1.7 percent growth in assets of noninsured State chartered member associations, although small, is significant because it marks the reversal of the downward trend which this type of member institution had experienced in preceding years. The growth in assets was general throughout the country, but the rate of growth varied among the different Federal Home Loan Bank Districts. Within the group of 2,605 identical member savings and loan associations, assets of member institutions in the Winston-Salem District showed the largest gain-15.7 percent. Members in the 183130-39-6 74 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 Des Moines District ranked next with an increase of 12.6 percent, Assets of member associations in the Portland and Los Angeles Districts likewise increased more than 10 percent. The smallest increases-slightly below 5 percent-were recorded in the Cincinnati and Topeka Districts. CHART XXV PERCENT INCREASE IN ASSETS OF 2,605 IDENTICAL MEMBER SAVINGS & LOAN ASSOCIATIONS DURING FISCAL YEAR 1939 BY F H L.B. DISTRICTS PERCENT 0 UNITED STATES t- BOSTON 2-NEW YORK 3-PITTSBURGH 4-WINSTON SALEM' 20% 5.9 5.9 15.7 6-INDIANAPOLIS 5.8 7-CHICAGO 6.3 IO-TOPEKA 15% 5.7 4.8 9-LITTLE ROCK INCREASE 10% 7 8 5-CINCINNATI 8-DES MOINES 5% 12.6 7 3 4.3 II - PORTLAND 11 9 12-LOS ANGELES 10.7 AND STATISTICS DIVISIONOF RESEARCH FEDERALHOME LOANBANKBOARD ' Lending Activity The estimated amount of new mortgage loans made by member savings and loan associations of the Federal Home Loan Bank System from July 1, 1938, to June 30, 1939, was $686,697,000, as compared with $629,560,000 in the preceding fiscal year-an increase of more than 9 percent. On the other hand, the estimated amount of mort gage loans made by nonmember associations dropped from $191,126,000 in the fiscal year 1938 to $182,189,000 in the fiscal year 1939. All in all, the estimated volume of mortgage loans made by all savings and loan associations during the reporting period aggregated $868,886,000, compared with $820,686,000 in the preceding fiscal-year period. 75 FEDERAL HOME LOAN BANK SYSTEM While the total increase in lending activity was small, there was a definite improvement over the preceding year for each month from January through June 1939. In the six months' period from January to June 1939, the lending activity of member institutions was 22.3 percent higher than in the first half of 1938, and the lending activity of nonmember associations was 5.3 percent above that period. In CHART XXVI VOLUME OF NEW MORTGAGE LOANS MADE BY SAVINGS AND LOAN ASSOCIATIONS BY TYPE OF ASSOCIATION 0 0 5o STATE MEMBERS 1936 1937 1938 1939 DIVISIONOF RESEARCHAND STATISTICS FEDERALHOME LOANBANK BOARD June 1939, the volume of new mortgage loans made by all savings and loan associations reached a post-depression high. The above chart shows the estimated lending activity of savings and loan asso ciations since January 1936, by months, by types of institutions. 3 During the fiscal year 1939, loans made by member savings and loan associations of the Federal Home Loan Bank System accounted for approximately 79 percent of the total amount of mortgage loans made by all savings and loan associations throughout the country. Among the various types of member associations of the Federal Home IFor actual figures, see Exhibit 27. 76 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 Loan Banks, Federal savings and loan associations accounted for 48.6 percent of the total volume of loans made by members of the savings-and-loan type. State-chartered insured member associations were responsible for 22.3 percent and noninsured member asso ciations for 29.1 percent. The lending activity of savings and loan associations varied widely among the different Federal Home Loan Bank Districts during the year. The largest percent increases in loan volume were in the CHART XXVII PERCENT CHANGE IN ESTIMATED NEW MORTGAGE LENDING ACTIVITY BY SAVINGS a LOAN ASSOCIATIONS DURING THE FISCAL YEAR 1939 BY F.H.L.B. DISTRICTS PERCENT CHANGE 15 UNITED STATES PERCENT DECREASE 0 05 PERCENTINCREASE 5 10 15 + 5 9 I-BOSTON - 2 -NEW YORK + 9.5 3-PITTSBURGH + 90 4 WINSTONSALEM + 9 I 5 - CINCINNATI - 6 - INDIANAPOLIS + II 3 7-CHICAGO + 38 8- DES MOINES + 10 2 9-LITTLE ROCK + 16 9 I 6 1.8 10- TOPEKA + I0 I l-PORTLAND + 7 3 12-LOS ANGELES + 9 4 AND STATISTICS DIVISIONOF RESEARCH FEDERALHOMELOANBANK BOARD Little Rock District where new building was particularly active, and in the Indianapolis, Des Moines, New York, and Los Angeles Districts. The Winston-Salem District, which also recorded an unusual expan sion of construction activity, led in the dollar increase over the 1938 volume of mortgage lending. A survey of the lending activity of savings and loan associations in each of the fiscal years 1938 and 1939 by Federal Home Loan Bank Districts, and the percent change, is presented in Exhibit 28. Of the total amount of loans made by member associations of the Federal Home Loan Bank System in the fiscal year 1939, loans for new construction were $219,726,000, or 32 percent, as compared to 28 percent in the preceding fiscal year-a reflection of the increasing 77 FEDERAL HOME LOAN BANK SYSTEM volume of home construction during the reporting period. The proportion of loans for home purchase and refinancing, on the other hand, decreased from 33 to 32 percent, and from 21 to 20 percent, respectively. The following chart shows the distribution of new mortgage loans made by member associations of the Federal Home Loan Bank System during the fiscal year 1939, classified by purpose of loan: CHART XXVIII DISTRIBUTION OF NEW MORTGAGE LOANS MADE BY MEMBERS OF THE FEDERAL HOME LOAN BANK SYSTEM ACCORDING TO PURPOSE FISCAL YEAR 1939 HOME PURCHASE 31.6 % CONSTRUCTION 320% OTHER 10 4 % REFINANCING 199% RECONDITIONING 6.1% 1/ DIVISION OF RESEARCHAND STATISTICS FEDERAL HOME LOAN BANK BOARD Exhibit 29 gives a detailed account of the distribution of new mort gage loans made by member associations of the Federal Home Loan Bank System, classified by purpose of loan. Reduction of Real Estate Holdings A very significant improvement in the financial condition of member savings and loan associations was the decrease of real-estate holdings, corresponding to the general reduction of the so-called real-estate overhang described in an earlier chapter of this report.4 Consolidated balance sheets of member savings and loan associations for the calendar 4 Survey of Housing and Mortgage Finance, pp. 27 to 29. 78 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 year 1938 evidence a slow but continuous decrease of the absolute amount of real estate involuntarily owned by member institutions, as well as a decline of property holdings in proportion to total assets. Real-estate holdings of all reporting member savings and loan associationsof the Federal Home Loan Bank System 1 Date December 31, 1936...-------------------------------------------.. December 31, 1937---------------....... -----------------------December 31, 1938-------------------------------------- Number of 3, 746 3,890 3,894 Amount $512,116, 00 488, 517, 000 450,139, 000 Proportion of total assets Percent 16. 49 13 77 11. 99 1 Excluding office buildings. The reduction in real-estate holdings marked a definite reversal of the trend from 1929 to 1936, when, as a result of the depression, property holdings mounted to unprecedented levels. On account of such holdings, home-financing institutions in many instances had be come frozen and unable to meet withdrawals and maturities of share accounts, or to make new mortgage loans. Low or negative net yields on property owned had seriously affected earnings, while depreciation and obsolescence had also taken their toll. The gradual disposition of real-estate holdings in the last two or three years is perhaps one of the most important symptoms of the successful rehabilitation of home financing institutions. The progress made in recent years reflects, in part, improved condi tions in the real-estate market, but it is also due to a more realistic attitude of home-financing institutions toward the solution of the problem. In the past, many institutions have been reluctant to dis pose of real estate at a loss. Only slowly has it been recognized that large real-estate holdings are a drag on the active operation of such institutions, that previous book values in many cases were out of line with market prices, and that losses must be absorbed by utilizing reserves already created for this very purpose. Realizing the neces sity for more constructive action, many home-financing institutions have recently revised their sales prices and instituted aggressive real estate sales campaigns. Further progress along these lines is neces sary to strengthen the position of savings and loan associations in the field of home-mortgage finance and to restore the full confidence of savers and investors. The ratio of repossessed real estate to total assets varies widely among the different types of member institutions. At the end of 1938, Federal savings and loan associations, a large number of which were organized after 1933 and have, therefore, been spared the flood of FEDERAL HOME LOAN 79 BANK SYSTEM repossessions in the early Thirties, showed a low ratio of 7.5 percent. On the same date, the ratio for State-chartered insured associations was 11.2 percent, and for State-chartered noninsured associations, 16.1 percent. Other FinancialOperations The consolidated statements of balance-sheet items for member sav ings and loan associations as of December 31, 1937, and December 31, 1938 (Exhibits 30 and 31), show further significant changes. During the calendar year 1938, the private repurchasable capital of member associations grew by $197,000,000, with the result that the ratio of private capital to total resources increased from 71.03 percent at the end of 1937 to 72.40 percent at the end of 1938. Government holdings of shares in member savings and loan associations, on the other hand, rose only by $6,000,000, and their proportion to total resources declined from 7.13 to 6.90 percent. The following table shows the increase of private investments in an identical group of 2,757 member savings and loan associations: 5 Private investments in 2,757 identical member savings and loan associations, as of Dec. 31, 1937, and Dec. 31, 1938 [Dollar amounts in thousands] Increase during year Number and types of associations Dec. 31, 1937 Dec. 31, 1938 ---- Amount 2,757 member associations - ----------1,309 Federal savings and loan associations . ... 547 insured State-chartered associations --------901 Noninsured State-chartered associations-------- $1,716,162 678, 202 462, 278 575, 682 $1, 892, 797 822, 322 492,019 578,456 $176, 635 144,120 29, 741 2,774 Percent 10. a 21. 6.4 0. & Private investments in this group of identical member associations increased 10.3 percent. Of the various types of member institutions, Federal savings and loan associations made the best showing with a growth in private investments at the rate of 21.3 percent. State chartered noninsured members recorded a gain of 0.5 percent. Insured State-chartered associations, with a rise of private investments by 6.4 percent, occupied an intermediate position. Mortgage-pledged shares as reported in the consolidated balance sheets show a decrease of approximately $25,000,000, or more than 12 percent, during 1938. As pledged shares indicate the extent to which associations are operating under the old share-account sinking fund plan, their reduction reveals the gradual abandonment of this 5By the exclusion of newly admitted member institutions and of such associations as were converted from state to Federal charter or were insured during the year, comparisons are on a more equitable basis 80 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 loan plan in favor of the direct-reduction plan which is more advan tageous to borrowers and more adequate to meet the present com petition for mortgage loans. Borrowings of member savings and loan associations remained almost unchanged in absolute amount, but because of the increase in total resources, the ratio of borrowed money to total resources declined from 6.09 to 5.77 percent. The condensed balance sheets reflect an increased tendency to build up larger reserves. During the year, member institutions added $28,000,000 to their general reserves and undivided profits, and the ratio of general reserves and undivided profits to total resources increased from 6.76 to 7.15 percent. On the asset side of the ledger, first-mortgage loans increased by $209,000,000, or from 72.8 to 74.4 percent'of total assets-a signifi cant improvement both from the standpoint of lending volume and of earnings. The $2,800,000,000 in first mortgages held by member associations of the Federal Home Loan Bank System is an increase of 8 percent over the balance at the end of 1937, and represents approxi mately 72 percent of the total amount of mortgages held by all savings and loan associations, both member and nonmember. The reduction of repossessed real estate was accompanied by an increase in real estate "sold on contract"; the ratio of real estate sold on contract to total assets increased from 3.61 percent at the end of 1937 to 3.78 percent at the end of 1938. Sale of property on install ment contracts at liberal terms has proved an effective instrument in the disposition of real estate, particularly for low-priced homes. As a result of the ample flow of funds into member institutions, cash on hand rose by $32,000,000, or more than 25 percent, and the ratio of cash to total assets increased from 3.54 to 4.20 percent. Exhibit 32 shows operating ratios for member savings and loan associations based on reports from 3,094 members for the calendar year 1938. Of the gross operating income of these institutions, 84.24 percent was derived from interest on mortgage loans, 3.82 percent from interest on real-estate contracts, and 3.44 percent from real estate owned and 8.50 percent from other sources. Compensation to directors, officers, and employees absorbed 12.71 percent of gross operating income, interest charges, 9.19 percent, advertising, 2.06 percent, and various other items, 11.17 percent, leaving a net operat ing income of 64.87 percent. After inclusion of nonoperating income and deduction of nonoperating charges, the net income for the year was 64.31 percent of the total income. Almost four-fifths of this went to shareholders in the form of dividends and bonuses, and more than one-fifth was added to reserves and undivided profits. FEDERAL HOME LOAN BANK SYSTEM 81 3. STRUCTURAL CHANGES IN THE SAVINGS AND LOAN INDUSTRY Rehabilitation The current improvement in the condition of home-financing insti tutions obtains its appropriate perspective through a broader review of the revolutionary changes which occurred in this sector of our financial structure during the last five or six years. After the collapse in the early Thirties, rehabilitation of the financial organization of the country was the prime task. Drastic measures were taken in the field of commercial banking, culminating in the temporary closing of all banks in March 1933. Many banks went into liquidation, and a large number of banks were reorganized as individual units or through merger, with the aid of the Reconstruction Finance Corporation and with other Government assistance. Finally, Federal insurance of deposits for the majority of banks, effective from January 1, 1934, helped to revive confidence, but as an aftermath of the depression there were still hundreds of banking institutions closed, liquidated, and reorganized since that date. Likewise, the thrift- and home-financing institutions of the country have gone through a process of rehabilitation. In some respects, this process has been similar to that in the field of commercial banking. Through liquidation of inactive or insolvent institutions and through merger of small or weak institutions, the number of savings and loan associations operating in the country has been reduced from approxi mately 10,500 in 1933 to approximately 8,400 in June 1939. However, a number of the existing associations are inactive and will either be reorganized, absorbed by other institutions, or formally liquidated. These associations are largely concentrated in a few States where the rehabilitation of the savings and loan industry has not as yet come to a close. In connection with its program for insurance of accounts, the Federal Home Loan Bank Board has for some time given particu lar attention to those problem areas and has cooperated with State supervisory authorities in the execution of rehabilitation plans. In several areas a definite improvement is under way. Within the membership of the Federal Home Loan Bank System, the rehabilitation process in the savings and loan industry has been reflected in the liquidation of 107 member associations from the in ception of the Bank System to June 30, 1939; and 185 member associa tions have been merged or absorbed by other members, partly in combination with financial reorganization. Of the associations which have obtained insurance of accounts, 284 associations were insured after reorganization. 6 6 For further information on reorganization of savings and loan associations, see the report of the Federal Savings and Loan Insurance Corporation, pp. 117 to 121. 82 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 However, the elimination of weak or small associations, and mergers and reorganizations were of comparatively minor importance in the rehabilitation of the savings and loan industry. Much more sig nificant have been the fundamental changes in the structure and operations of thrift- and home-financing institutions and the integra tion of these institutions into a national system of home-mortgage finance. Some of these changes are outlined in the following sections. Improvements in Management The savings and loan associations of the country have grown out of small community organizations. Neighbors in small communities banded together and pooled their resources to assist each other in the acquisition of a home. In the more than 100 years of their exist ence, while still preserving their essential local character, the savings and loan associations have gained a place of real importance in the financial structure of the Nation. Their management and opera tions, however, have only slowly been adjusted to the modern age. The majority of associations existing in the early Thirties were still operating under part-time management, at private meeting places or part-time offices, and under antiquated, varying, and complicated loan plans which had served a useful purpose in the past, but were not adapted to the quick and simple handling of financial transactions which is required today. The last few years have witnessed a gradual but radical evolution of the savings and loan industry. Particularly among the member associations of the Federal Home Loan Bank System, part-time, poorly compensated management has been replaced by full-time management through responsible and trained officers who give their undivided attention to the associations' affairs. A clearer division of functions between the manager as the executive officer and the direc torate as the policy-determining and supervising body has evolved. In connection with the granting of Federal charters, and with insur ance of accounts by the Federal Savings and Loan Insurance Corpo ration, more strict and uniform management requirements have been set up, and close supervision of Federal and insured associations has operated to maintain and strengthen standards of management in a large sector of the savings and loan industry. The general level of management in the industry has thereby been raised considerably. Accounting practices have been improved, and a standard accounting system is now used by all Federal savings and loan associations as well as a large number of insured and noninsured State-chartered FEDERAL HOME LOAN BANK SYSTEM 83 associations. Obscure and inconvenient meeting places for the "pay night" or office combinations with other businesses have given way to modern independent offices in ground-floor locations situated in business centers of the community. While many of the smaller asso ciations, particularly in small localities, have still preserved their tra ditional pattern, the more progressive and larger institutions have definitely set the pace, and stimulated by their success, the industry as a whole shows much evidence that it will soon follow their example. Along with these changes has come the realization of the fact that many existing associations are too small to be efficiently operated. Size is not an objective in itself, but to obtain the benefits of full-time management and independent offices, a minimum size is required which, in many cases, is above the present size of home-financing institutions. To maintain and strengthen the position of savings and loan associations in the home-financing field, further progress in this direction through merger and other means would appear to be desir able, particularly in the larger communities. Exhibit 33 shows the number and asset distribution of member, savings and loan associations of the Federal Home Loan Bank Sys tem, by size groups. On June 30, 1939, almost 33 percent of all member associations had assets of less than $250,000, but these small institutions held only 4.6 percent of the total assets of all member associations. More than one-half of the member savings and loan associations were in the asset groups below $500,000, with aggregate assets equal to 12.7 percent of the total assets of all member associa tions. The remainder of 87.3 percent was held by the member as sociations having assets in excess of $500,000, although these institu tions represented only 44.4 percent of the total number of member savings and loan associations. Improvements in Plans of Operation Other changes in operations of savings and loan associations are marked by the gradual disappearance of "serial" associations which issue series of shares at stated intervals. The "permanent" plan of operation under which shares are issued at any time desired has become the standard plan under which the most progressive associa tions operate today. All Federal savings and loan associations are required to operate under this plan, and when insurance of accounts is granted to State-chartered associations by the Federal Savings and Loan Insurance Corporation, these associations are also urged to adopt the permanent plan. 84 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 Together with this change in operations, a clearer separation has evolved between the lending activity of savings and loan associations, on the one hand, and their function as custodians of savings, on the other. In the early days of the savings and loan associations, when the urge to build a home was dominant among their members, investors and borrowers were more or less an identical group. In many cases investors who were not prospective borrowers were not accepted, and vice versa. Today, with a more complex structure of society, with millions of members who want to save for an undefined purpose, and millions of other members who need funds to buy or build a home, conditions are entirely different. In consequence, a large number of savings and loan associations have revised their plans of operation so that they may receive savings from individuals who have excess funds, and lend such funds to other individuals who need loans upon mortgage security. In savings and loan associations operating under Federal charter, the borrowers are not required to be investors or vice versa, and many State-chartered associations have adopted a similar practice. Loan plans of savings and loan associations have also changed considerably. In the past, the majority of savings and loan associa tions have operated under two loan plans, the share-account sinking fund plan and the cancel-and-endorse plan. Under the share-account sinking-fund plan, the borrower subscribes to shares, paid for in monthly installments, which will mature and cancel his loan. Inter est is paid on the full amount of the loan until the value of the entire share subscription, plus earnings credited to the account, equals the amount of the loan. The cancel-and-endorse plan is similar except that as regular payments accrue to the value of one share, that share is canceled and the principal outstanding is reduced by a like amount. Under either of these plans, the term of the loan depends on the time required to mature the shares. In the last few years, chiefly under the influence of the Federal Home Loan Bank Board, these plans have gradually been abandoned and the "direct-reduction plan" has become the standard loan plan under which an increasingly large number of associations operate. Under the direct-reduction plan, the borrower does not subscribe to any shares. His monthly payments are immediately applied to a reduction of the loan and interest is charged only on the diminishing balance of the loan. This type of loan plan is not only less expensive to the borrower, but is also more simple and easily understood. The amortization period is not dependent on factors over which the bor rower has no control, such as the maturity of shares and the profits the association is able to make. FEDERAL HOME LOAN BANK SYSTEM 85 The adoption of the direct-reduction plan has greatly assisted sav ings and loan associations in meeting the increased competition of other home-mortgage lenders during the last few years. By their charter, all Federal savings and loan associations are required to operate under the direct-reduction plan of amortization, with the exception of straight loans permitted up to 15 percent of assets. An increasing number of State-chartered insured associations are adopting this plan for their new lending operations, and in many cases their existing mortgage loans are being recast to conform to the plan. Likewise, State-chartered noninsured associations are changing from their old loan plans, which are no longer competitive, to a direct-reduction schedule. It is roughly estimated that two thirds of all mortgage loans currently made by savings and loan associations are direct-reduction loans. 7 In recent years, a number of savings and loan associations have also adopted the variable-interest-rate plan. Under this plan, the rate charged on each loan is determined on the basis of the risk involved in such loan, the risk being measured by the location of the property, the type of construction, its age and desirability, the income and credit rating of the borrower, the ratio of loan to the appraised property value, the amortization period, and similar factors. By charging variable interest rates, associations are in a position to attract borrowers with the highest type of security in competition with other mortgage-lending institutions, and can at the same time serve worthy borrowers who have good but less desirable security. In the past, many savings and loan associations were accustomed to levy a number of charges on both investors and borrowers. Investors were charged membership fees, fines, and forfeitures for late payments, and fees for the withdrawal of accounts. Originally designed to encourage regular savings, these charges not only were a burden on savers, but complicated procedures and caused confusion and mis understandings. Borrowers were charged premiums, discounts, and commissions in addition to regular interest payments. All these charges resulted in a considerable step-up of effective interest rates above nominal rates and are no longer competitive today. In the last few years these practices have been revised to an increas ing extent. Charges to borrowers and investors have either been eliminated or reduced. Federal savings and loan associations are not permitted to charge fees and fines for late payments by their savers, 7 This estimate is based on the fact that Federal savings and loan associations and State-chartered insured associations account for 55 percent of the total amount of mortgage loans currently made by savings and loan associations, and that a portion of the new mortgage loans made by State-chartered noninsured associations are also direct-reduction loans. 86 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 and they must not penalize borrowers who are behind in their con tractual payments except by a proper charge for interest on the unpaid balance of the loan. They are not allowed to charge excessive premiums or any withdrawal fees. Similarly, the Federal Savings and Loan Insurance Corporation requires that where such charges exist, they must not exceed equitable amounts if insurance of accounts is to be granted. More Adequate Reserves Another vital improvement in the operations of savings and loan associations is the greater emphasis given to adequate reserves. In the early days of the industry, reserves were neither required by State laws nor regarded as necessary by the industry itself. Under the conception that savings and loan associations were cooperative or ganizations designed to provide each member with a mortgage loan, profits were not distributed periodically, and any losses were charged against the common fund. Later, when the savings and loan asso ciations developed into a permanent type of institution, most State laws still failed to recognize the vital importance of reserves. In consequence, many associations had inadequate reserves at their command when they suffered severe losses during the depression, and in some States, they were forced to recapture accumulated profits. This experience, together with more progressive legislation in a number of States and Federal regulation in recent years, has com pletely changed the attitude of the industry toward reserves. Today it is generally recognized that savings and loan associations, like any other type of financial institution, should have sufficient reserves to provide a cushion against losses and contingencies, and many savings and loan associations have built up reserves substantially in excess of the minimum required by Federal or State regulation. By the revised Federal charter, Federal savings and loan associations are required at each dividend date to set aside at least 5 percent of net earnings before dividends are distributed, until they build up aggregate reserves equal to 10 percent of total share capital. Legislation author izing insurance of savings and loan accounts provides that all insured associations, whether operating under Federal or State charter, shall build reserves equivalent to 5 percent of all insured accounts within a reasonable period, not exceeding twenty years. Under regulation of the Federal Savings and Loan Insurance Corporation, insured asso ciations must transfer each year to a reserve for losses at least three tenths of 1 percent of the aggregate of the insured accounts standing on the books of the association at the beginning of the fiscal year until such reserve equals 5 percent of all insured accounts, which ratio must be maintained thereafter. FEDERAL HOME LOAN BANK SYSTEM 87 With respect to State legislation, it is significant that during the twenty-year period, 1919 to 1938, 218 States and the Territory of Hawaii established mandatory reserve requirements for the first time. Of those measures, 12 were initiated from 1919 to 1929 and 10 during the period from 1931 to 1938. During the latter period, 14 States strengthened their reserve requirements. Prior to the 1939 legislative sessions, 39 States and the Territory of Hawaii had established manda tory reserve requirements, while 9 States and the District of Columbia, Alaska, and Puerto Rico still lacked such requirements. At the 1939 legislative sessions, and prior to the end of the fiscal year, Iowa and Vermont adopted mandatory requirements, while Colorado, Michigan, Texas, and Hawaii strengthened the provisions of their laws, and Pennsylvania increased the maximum limits of reserves permitted without special approval by the Department of Banking. Among the State statutes, there is a growing uniformity in reserve requirements. A large and increasing number of jurisdictions require that a minimum of 5 percent of net earnings be transferred periodically to reserves. More than half the States set a minimum measure for the accumulation of ultimate reserves at 5 percent or more of assets or share capital, with a recent trend toward a 10 percent requirement. 9 Greater Emphasis on Liquidity Finally, present operations of savings and loan associations give more attention to the maintenance of liquidity. During the early develop ment of savings and loan associations, liquidity was not considered important. As the assets of such associations were invested in long term mortgage loans, members were required to wait until funds were available to meet withdrawal requests, and penalties were imposed when savers desired to withdraw before the shares matured. Later these penalties were reduced and particularly during the easy-money period of the Twenties, the practice of paying on demand was more widely adopted. The depression, however, brought such unusually heavy withdrawals that many institutions were compelled to place withdrawals on a restricted basis and to withhold the payment of matured shares. With the exception of a few States where savings and loan associations still have pent-up maturities and withdrawals, such unpaid claims have been reduced to negligible amounts in the last few years. 8 This figure includes two States (Tennessee and West Virginia) whose statutes, though mandatory in nature, do not set a minimum measure, and one (Georgia) in which the reserve requirements are set forth in regulations promulgated by the Secretary of State pursuant to statutory authority. , For-detailed Anformation on stattitory reserve requirements and reserve policies ofsayings and loan associations, see Federal Home Loan Bank Revjew, September 1938, November 1938, December 1938, and May 1939. 88 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 Today it is generally recognized that shareholders in savings and loan associations, although their investments are of a long-term nature, desire and are entitled to a reasonable availability of cash funds in case of need. From the point of view of the association, the payment of withdrawals in a manner satisfactory to the investor is necessary for the maintenance of confidence and public support. From the point of view of home-mortgage finance, institutions specializing in long-term home financing will not obtain sufficient funds to serve the needs of home builders or purchasers unless some degree of liquidity is assured. The Federal charter for savings and loan associations provides for a liberal withdrawal schedule, 10 and the Federal Savings and Loan Insurance Corporation expects insured associations in general to meet reasonable withdrawal requests promptly. Liquidity of home-financing institutions, however, presents peculiar problems. The overwhelming portion of the resources of savings and loan associations is invested in long-term home mortgages which naturally do not constitute liquid assets. In this respect, the liquidity of such institutions is necessarily limited. It is in regard to liquidity that the Federal Home Loan Bank System performs one of its im portant services. The Bank System enables member institutions to obtain, without delay, cash on mortgage collateral and thus to meet withdrawals required by investors who are temporarily in need of money. The availability of funds in a central reserve bank reduces the necessity and costs of maintaining large liquid funds within each member institution. By supplementing their own liquidity with a large liquidity reserve, the Bank System places its member institu tions in a position to meet any current or future needs with a greater degree of success than in the past. FederalAid The above review reveals the considerable influence which the agencies under the direction of the Federal Home Loan Bank Board have exerted on the improvements in practices and operations of home 10Charter K contains the following provisions for repurchases of shares: "Holders of share accounts shall have the right to file with the association their written applications to repurchase their share accounts, in part or in full, at any time. Upon the filing of such written applications to repurchase, the association shall number and file the same in the order received and shall either pay the holder the repurchase value of the share account, in part or in full as requested, or, after 30 days from the receipt of such application to repur chase, apply at least one-third of the receipts of the association from holders of share accounts and borrowers, to the repurchase of such share accounts in numerical order; provided, that if any holder of a share account applies for the repurchase of more than $1,000 of his share account or accounts, he shall be paid $1,000 in order when reached, and his application shall be charged with such amount as paid and shall be renumbered and placed at the end of the list of applications to repurchase, and thereafter, upon again being reached, shall be paid a like amount, but not exceeding the value of his account and until paid in full shall continue to be so paid, renumbered, and replaced at the end of the list " FEDERAL HOME LOAN BANK SYSTEM 89 financing institutions. However, the establishment of these agencies in itself was perhaps an even greater factor in the restoration of such institutions. Through the Federal Home Loan Bank System, savings and loan associations have been provided with a central source of financing, the absence of which proved so disastrous during the first few years of the depression. Through the establishment of a national system of savings and loan associations operating under a uniform Federal charter, the Federal savings and loan associations, a more complete geographic distribution of home-financing institutions over the country was achieved. Insurance of accounts through the Federal Savings and Loan Insurance Corporation has helped to revive and maintain confidence in the security and safety of thrift and home-financing institutions. Along with the establishment of Federal agencies in the field of home finance, direct Federal assistance, in the form of investments, has largely contributed to the rehabilitation of thrift- and home financing institutions. Primarily designed to supply immediate funds for home finance at a time when private money sources had dried up, they have helped to develop a better system of home-financing in stitutions, to encourage the flow of private money into such institu tions, and to stabilize the home-mortgage structure of the country. The following table presents a summary of Federal investments in thrift- and home-financing institutions and in permanent agencies under the Federal Home Loan Bank Board designed to assist such institutions: Government investment in home-financing institutions and related Federal agencies, June 30, 1939 Federal Home Loan Bank System -----------$124, 741, 000 100, 000, 000 Federal Savings and Loan Insurance Corporation 2 -----Federal savings and loan associations 3 - - - - - - - - - - - - - - - - -- - - - - - 217, 025, 500 Insured State-chartered savings and loan associations 4---------42, 917, 010 State-chartered noninsured member associations of the Federal Home Loan Bank System 4- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 508, 000 Total-------------------------------- -------- 585, 191, 510 1 Investment of United States Treasury in the capital stock of the 12 Federal Home Loan Banks. 2Investment of the Home Owners' Loan Corporation in the capital stock of the Federal Savings and Loan Insurance Corporation. 3 Investment of the United States Treasury and the Home Owners' Loan Corporation in shares of Federal savings and loan associations. 4Investment of the Home Owners' Loan Corporation in shares of such institutions. 183130-39--7 IV Federal Savings and Loan Associations INCREASE IN NUMBER AND ASSETS OF FEDERAL ASSOCIATIONS DURING the year ending June 30, 1939, the number of savings and loan associations operating under Federal charter increased from 1,346 to 1,386. 1 This net addition of 40 institutions to the Federal system of savings and loan associations was due, in the main, to con versions of State-chartered associations to Federal charter. As by and large the purpose of the Act providing for the establishment of new Federal savings and loan associations in areas not adequately served has been accomplished, the chartering of newly organized associations has naturally diminished in importance. From July 1, 1938, to June 30, 1939, there were 78 charters issued, of which 4 were for new associations, and 74 for associations converting from State to Federal charter. During the same period, there were 38 charters canceled because of merger and liquidation. At the end of the fiscal year 1939 there were 100 applications for the issuance of Federal charters on file. Owing to the continued growth in the resources of existing Federal savings and loan associations, the percentage increase in aggregate assets during the year by far exceeded the percentage increase in the number of associations operating under Federal charter. On June 30, 1939, the total estimated assets of Federal savings and loan associa tions stood at $1,442,069,000, as compared to $1,213,874,000 at the end of the preceding fiscal year-an increase of 18.8 percent. Exhibit 34 presents the number and estimated assets of Federal savings and loan associations, classified by new and converted associations, for each of the fiscal-year periods from June 30, 1934, to June 30, 1939. 1 The difference between the 1,386 Federal savings and loan associations reported as chartered and the 1,380 Federal savings and loan associations listed as members of the Federal Home Loan Bank System is due to the lapse of time between the issuance or withdrawal of Federal charters and the issuance or withdrawal of membership certificates. The difference results from such time lapses mainly in the cases of conversions from State to Federal charter and terminations. 91 92 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 CHART XXIX NUMBER AND ASSETS OF FEDERAL SAVINGS AND LOAN ASSOCIATIONS FIGURES AS OF JUNE 30 NUMBER OF F.S.8 L ASSOCIATIONS ESTIMATED ASSETS 1,400 0 - 1,200 0,oo ______ < 1,0 1.000 2000 1, W 0 600 oo .. 0 --- o 0 2000 1934 1935 1936 1937 1938 1939 1934 1935 1936 1937 1938 1939 Converted Federal Savings and Loan Associations Newly Chartered Federal Savings and Loan Associations DIVISIONOF RESEARCHAND STATISTiGS FEDERALHOMELOANBANKBOARD The following table indicates significant changes in the size distri bution of Federal savings and loan associations during the fiscal year 1939; there was a general shift from the lower to the higher asset brackets, with the result that the number of associations in the asset brackets up to $250,000 decreased from 539 to 454, while the number of associations in each of the higher asset brackets increased. Distribution of Federal savings and loan associations, by size groups Number of associations Asset size group June 30, 1938 June 30, 1939 All associations ---------------- ---- --------- Less than $100,000 -------------------------------------------- ---- $100,000 to $250,000-----------------------------------------------------------$250,000 to $500,000- ----------------------------------------------------$500,000 to $1,000,000 ------$1,000,000 to $2,500,000..---------------------------------------------- Over $2,500,000.--------------------------- 1, 346 1, 386 219 146 320 241 250 218 308 284 264 260 98 124 At the end of the reporting period, 47 percent of all Federal savings and loan associations had assets in excess of $500,000, and 28 percent had assets in excess of $1,000,000. Exhibit 35 shows the number, estimated assets, and mortgage loans outstanding of Federal savings and loan associations as of June 30, 93 FEDERAL SAVINGS AND LOAN ASSOCIATIONS 1938, and June 30, 1939, by Federal Home Loan Bank Districts and by States. During the year, the largest increase in the number of Federal sav ings and loan associations was in the Pittsburgh Federal Home Loan Bank District where there was a net addition of 21 institutions. The Cincinnati, Topeka, and Los Angeles Districts show smaller increases, and in several Districts, among which are Boston, New York, and Little Rock, the number of associations operating under Federal charter remained unchanged. The increase in assets was general throughout the country. Again, the largest relative gain-of more than 50 percent-was in the Pitts burgh District, which recorded the above-mentioned addition of 21 Federal associations. The Los Angeles District ranked next with a growth in assets of Federal associations of 36 percent. Mortgage loans outstanding increased by more than $195,000,000 to well above one billion dollars on June 30, 1939. CONTINUED GROWTH IN PRIVATE INVESTMENTS Ever since their organization, public confidence in Federal savings and loan associations has manifested itself in a large flow of private funds into these institutions. The fiscal year 1939 witnessed a further rapid increase of private investments. The number of private inves tors in Federal savings and loan associations rose from 1,030,096 to 1,299,915, an addition of 269,819 new investors, or 26 percent. The total amount of private investments in shares of Federal savings and loan associations increased from $763,725,000 to $990,872,000, or 30 percent. Some of this growth was, of course, due to the increase in number of Federal associations, but studies for an identical group of associations demonstrate that irrespective of changes in the number of associations, private funds have been entrusted to this youngest sector of the savings and loan industry at a steadily rising rate. Index of private repurchasable capital in comparable Federal savings and loan associations1 [Cumulative; average month 1936=100] Date Private repurhasable capital June 30, 1935 .--------June 30, 1936 ----------June 30, 1937 .------.... Percent increase overDate preceding year 91--------------June 30, 1938 .-----100 10 June 30, 1939-.. 114 14 Private repurchasable capital 133 165 Percent in crease over preceding year 17 24 1 This index eliminates the'effect of conversion of State-chartered into Federally-chartered associations, and the addition of newly established Federal associations during the period. Any growth of associations due to consolidation, merger, or purchase of assets from other institutions is not reflected in the index. 94 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 Exhibit 36 gives a detailed summary of the number of private investors and the volume of private investments in Federal savings and loan associations as of June 30, 1939, by Federal Home Loan Bank Districts and by States. The continuous increase of investments by private shareholders resulted in a diminishing proportion of Government investments in the capital structure of Federal savings and loan associations. Such investments were made until November 1935 by the Secretary of the Treasury, on behalf of the United States Government, in the amount of $49,300,000; when these funds CHART XXX PRIVATE AND GOVERNMENT INVESTMENTS approached exhaustion, the Home IN FEDERAL SAVINGS 8 LOAN ASSOCIATIONS Owners' Loan Corporation was PERCENT DISTRIBUTION BY FISCAL YEAR PERIODS authorized to invest in shares of MoU.S. NA Federal savings and loan associa GOVERNMENT tions and other member institu so tions of the Federal Home Loan Bank System up to $300,000,000. It may be said that these Govern so ment investments in savings and Sloan associations are a parallel 40 to the support given the commer cial banks by subscriptions of the PRIVATE Reconstruction Finance Corpora tion for preferred stock of banks. o In both cases, Government assist ance was designed to strengthen 935 936 1937 1938 1939 the capital structure of financial _ DIVISION OF RESEARCH ANDSTATISTICS FEDERAL HOME LOANBANK BOARD institutions, to encourage the flow of private money into such insti tutions, and to expedite the resumption of lending activity after the financial crisis. As shown in the above chart, the proportion of Government investments in the total share capital of Federal savings and loan associations increased in the fiscal years 1936 and 1937, but declined substantially in the two following years. During the fiscal year 1939, for the first time since the organization of Federal savings and loan associations, Treasury and HOLC invest ments in these institutions declined not only as a percent of total share capital but in absolute amount. At the end of the fiscal year 1938, net investments of the United States Treasury and the Home Owners' Loan Corporation totaled $218,567,000. A year later, such investments were reduced to $217,025,500. This decrease was due to substantial voluntary repurchases of Government investments by 95 FEDERAL SAVINGS AND LOAN ASSOCIATIONS Federal savings and loan associations, and to the policy of the Bank Board restricting new investments by the Home Owners' Loan Corporation to special cases, primarily in connection with reorganiza tions of individual associations and community-wide rehabilitation programs. The terms under which investments were made by the Secretary of the Treasury and the Home Owners' Loan Corporation provide that neither the Treasury nor the HOLC may request the retirement of such investments for a period of five years from the date of the investment, and that thereafter requests may be made at the discre tion of the Federal Home Loan Bank Board, but in no event in an amount exceeding (in any one year) 10 percent of the total amount invested in shares of any association by the Secretary of the Treasury or the Home Owners' Loan Corporation. As of June 30, 1939, the five-year period had expired in the case of 21 Federal savings and loan associations which had been the first recipients of Treasury investments. After having determined that the associations were in a position to meet this request, the Federal Home Loan Bank Board consented to call upon each of these associations to retire 10 percent of the Treasury investments made prior to July 1, 1934. These retirements become effective after the close of the fiscal year 1939. However, a growing number of Federal savings and loan associations have begun voluntarily to repurchase share investments of the Gov ernment prior to the expiration of the five-year period. Particularly during the fiscal year 1939, the increase in private capital supplied the large majority of the associations with ample money to meet the demand for mortgage loans, and many associations had surplus funds available with which to retire shares subscribed for by the Govern ment. The Federal Home Loan Bank Board has permitted such repurchases as a matter of sound policy whenever this was compatible with the condition of the associations in question. Voluntary repurchases of Government investments by Federalsavings and loan associations (cumulative), June 30 Investment byTreasury.-----------.......-----------------..----- HOLC ----------------------------..------------ 1936 1937 1938 1939 $77,000 $1,116, 300 0 $1,497, 300 $5, 308, 300 12, 000 231, 000 1,490,000 Under the rules and regulations prescribed by the Federal Home Loan Bank Board, voluntary repurchases of Treasury and HOLC investments are applicable to the next succeeding requests for re purchase which the Secretary of the Treasury or the Home Owners' Loan Corporation is permitted by law to make. 96 REPORT OF FEDERAL HOME LOAN BANK BOARD, 19 39 New investments of the Home Owners' Loan Corporation in shares of Federal savings and loan associations during the fiscal year 1939 aggregated only $1,649,000, as compared to $18,864,900 in the preceding fiscal year-a reflection of the above-mentioned policy to restrict such investments to cases of special importance where addi tional liquidity is needed. Exhibit 37 presents a survey of share investments by the United States Treasury and the Home Owners' Loan Corporation in Federal savings and loan associations, as of June 30, 1938, and June 30,1 CHARTXXXI1939, CSTIATDXXXIEO MORTGAGE LOANS MADE BY FEDERAL SAVINGS a LOAN ASSOCIATIONS BY FISCAL YEAR PERIODS (MILLIONS OF DOLLARS)Y 3318----------------------------2927 ------------280 by Federal Home Loan Bank Districts and by States. During the calendar year 1938, for which full information on dividend payments is available, Federal savings and loan associa tions distributed $34,660,567 in dividends, of which $26,904,351 went to private shareholders, while $1,688,805 and $6,067,4111. respectively, went to the United States Treasury and the Home Owners' Loan Corporation which receive dividends on their share investments on the same basis, as do the private investors. EXPANSION OF LENDING ACTIVITY 1936 1937 1938 1939' DIVISION OF RESEARCH AND STATISTICS FEDRA HMELOA In the fiscal year 1939, the mort gage-lending activity of Federal savings and loan associations BNKBORDreached a new high. The esti mated volume of mortgage loans made during this period totaled $333,959,000, as compared with $281,851,000 in the preceding fiscal year period. This growth of more than 18 percent in mortgage lending activity is all the more remarkable as the number of associa tions operating under Federal charter increased only slightly during the year. The rapid expansion of their mortgage-lending activity is perhaps the most convincing evidence that the Federal savings and loan associations supply a much needed function. While the success of each association may be due to a variety of conditions, the progress of thep.Federal system of savi-ngs( and loan associations ai; a.whole FEDERAL SAVINGS AND LOAN ASSOCIATIONS 97 has been the result primarily of four factors: the ability to attract ample funds; generally sound financial condition; aggressive and mostly full-time management; and the almost universal operation under one simple loan plan, the direct-reductioa plan. All these factors have enabled Federal savings and loan associations to meet the sharp competition in the home-mortgage macket without difficulty. Of the total amount of mortgage loans made by Federal savings and loan associations during the past fiscal year, $142,412,000, or two fifths of the total, was for home construction, reconditioning, and repair. The following figures show the distribution of mortgage loans written by Federal savings and loan associations during the year, classified by purpose of loan: Estimated volume of mortgage loans made by Federal savings and loan associations during fiscal year 1939, by purpose of loan Purpose Amount Construction---------... .. $123,870,000 HIome purchase---------95,161, 000 Refinancing------------67,444,000 Reconditioning and re . 18, 542, 000 pair----------------.. Percent total of 37.1 28.5 20. 2 Purpose Other purposes-------..... Total------........---.. Amount Percent of total $28,942,000 8.7 333, 959, 000 100. 0 5. 5 A summary of loans made by reporting Federal savings and loan associations during the year ended June 30, 1939, classified by purpose of loans, by Federal Home Loan Bank Districts and by States, is given in Exhibit 38. FINANCIAL OPERATIONS On the basis of the annual reports submitted by Federal savings and loan associations on standard forms, a detailed consolidated state ment of operations has been compiled for the first time since the organization of such associations. The statement for the calendar year 1938, presented in Exhibit 39, shows that 1,355 reporting Fed eral savings and loan associations operating during that period pro duced a gross operating income of $66,666,000. Of this amount, $19,049,000, or 28.6 percent, was used for operating expenses. The aggregate net income (after interest and other charges) amounted to $44,464,000, of which 77.9 percent was distributed in dividends to accountholders and 22.1 percent added to reserves and undivided profits. As in previous years, these aggregate additions to reserves were far above statutory requirements. Among operating expenses, compensation to directors, officers, and employees, and expenditure for advertising are the two largest items. 98 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 Total expense for compensation during the calendar year 1938 amounted to $8,852,000, or an average of $6,533 per reporting asso ciation, and absorbed 13.3 percent of gross operating income. Ex penditure for business promotion totaled $2,086,000, or an average of approximately $1,540 per reporting association, and equalled 3.13 percent of gross operating income. Special studies made during the fiscal year 1939 indicate that savings and loan associations are using the various media of advertising to an increasing extent, and that Federal savings and loan associations play a leading part in this development. 2 The Federal Home Loan Bank Board, through the twelve Federal Home Loan Banks, exercises supervision over the accuracy and fairness of the advertising of Federal savings and loan associations as well as of State-chartered associations insured by the Federal Savings and Loan Insurance Corporation. Efforts have been made to assist insured associations in the development of proper and effective methods of business promotion. As operating ratios vary considerably according to the size of insti tution, an analysis of such ratios, grouped as to size of association, is presented in Exhibit 40. On the basis of this analysis, local manage ments are able to compare the operations of an individual association with those of a representative number of associations in the same size group. The data may also serve as a yardstick for operating budgets. In the last few years, Federal savings and loan associations have made more intensive use of budgets as an instrument of business management and control. Through such budgets, associations are able to set definite goals to be attained in a given year, and to check the results of their operations in a more effective manner. Main factors in savings and loan budgets are the income obtained from mortgage loans and other sources, operating expenses-particularly compensation and advertising, an adequate dividend to attract capital, and the attainment of a strong reserve position. As was pointed out in another section of this report, 3 decreased earnings resulting from the competition in the mortgage market, and the decline of interest rates on home mortgages have caused savings and loan associations in some sections of the country to reduce their dividend rates-in line with the general reduction of investment yields and of the interest paid on savings by other financial institutions. Exhibit 41 shows the average annual dividend rates paid by Federal IFor a detailed survey of business promotion expenditure of savings and loan associations, see Federal Bome Loan Bank Review, May, June, and July, 1939. * Survey of Housing and Mortgage Finance, pp. 43 to 44. FEDERAL SAVINGS AND LOAN ASSOCIATIONS 99 savings and loan associations, by Federal Home Loan Bank Districts ,and by States, for the calendar years 1937 and 1938. Of the 46 States for which comparable data are available, 23 showed decreases in the average dividend rates paid by Federal savings and loan associations, and of the 12 Federal Home Loan Bank Districts, 9 reflected reductions of such rates. The greatest decline was in the Boston District where average dividend rates fell from 3.53 to 3.29 percent. Combined balance bheet items of Federal savings and loan associa tions as of December 31, 1937, and December 31, 1938, are presented in Exhibits 30 and 31. Principal changes during the year were a decrease of real estate owned from 8.41 to 7.46 percent of total assets, an increase of first mortgage loans from 79.39 to 79.80 percent of aggregate assets, and improved liquidity in the form of larger cash holdings. The substantial flow of private money into Federal savings and loan associations is reflected in an increased ratio of private repurchasable capital to total resources; at the close of 1937, this ratio was 61.27 percent and a year later, 65.88 percent. Con versely, the ratio of Government investments to total resources declined from 19.65 to 16.58 percent. PROPOSED FEDERAL LEGISLATION As was mentioned in the preceding section dealing with the Federal Home Loan Bank System, the Bank Board has supported legislative proposals embodying a number of amendments to the laws governing the operations of its agencies. Among these amendments introduced in the Seventy-sixth Congress, the following main provisions refer to the operations of Federal savings and loan associations: 1. Extension of lending and investment powers.-Under the existing statute, mortgage loans made by Federal savings and loan associations are restricted to first liens of not more than $20,000 on one- to four family homes or combinatioh home and business properties, located within 50 miles of their home office. However, up to 15 percent of the total assets of a Federal savings and loan association may be loaned on first liens on "other improved real estate" without regard to the $20,000 and 50-mile limitations. The proposed legislation provides that the Federal Home Loan Bank Board shall be authorized to permit individual Federal savings and loan associations, because of their size or location, to lend within the 50-mile limit but without regard to the $20,000 limitation an additional 15 percent of their total assets on properties designed principally for residential use which may be for more than four families. The legislation as reported by 100 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 the House Committee on Banking and Currency would place a $100,000 limit on the size of any loan made under this provision. Experience has shown that the present limitations on the character of mortgages which Federal savings and loan associations are allowed to make are too narrow for associations located in larger cities. In such cities a substantial portion of the existing dwelling units is in multi-family structures and the building and financing of such struc tures is an economic necessity. The proposed amendment would permit Federal savings and loan associations which have surplus funds to participate more fully in the financing of these multi-family structures. Apart from giving Federal savings and loan associations in large cities an outlet for their funds, this provision will enable these associations to cooperate to a greater extent in the housing program of the Government. Furthermore, the proposed legislation would permit Federal savings and loan associations to participate more fully in the program under Title I of the National Housing Act (insured loans up to $2,500 for alterations, repairs, and improvements, and for new construction). Finally, it is proposed to liberalize the investment powers of Federal savings and loan associations by allowing such associations to invest in those types of securities which are legal investments for trust funds. The Home Owners' Loan Act of 1933 limits investments of this type to obligations of the United States and the bonds of the Federal Home Loan Banks. Under this limitation, they cannot invest idle funds for their reserves or for temporary return in other sound securities. The proposed amendment would place them in a position to make better use of funds which, because of any current low demand for mortgage loans, they are unable to invest in mortgages. Investment would also be permitted in obligations of the Federal Savings and Loan Insurance Corporation. 2. Conversion from Federal to State charter.-There is no express provision in the existing law by which -a Federal savings and loan association may abandon its Federal charter and convert into a State-chartered institution. Many of the State statutes authorize a Federal savings and loan association to obtain a State charter by this process of reconversion. The proposed amendment would expressly permit Federal savings and loan associations to reconvert into State chartered institutions and would thus declare the principle of reciproc ity between the respective States and the Federal Government in the matter of the conversion of home-financing institutions. The amendment also expressly provides that State-chartered insti tutions may not convert to Federal charter if conversion would be in contravention of the State law. This provision merely gives statutory FEDERAL SAVINGS AND LOAN ASSOCIATIONS 101 recognition to the decision in Hopkins Federal Savings and Loan Association v. Cleary, 296 U. S. 315 (1935). STATE LEGISLATION At the beginning of the fiscal year 1939, laws specifically permitting conversion of locally chartered member associations of the Federal Home Loan Bank System into Federal savings and loan associations had been enacted in 40 States and the Territory of Hawaii. During the fiscal year such laws were enacted in Vermont and Wisconsin. Legislation to permit the reconversion of Federal savings and loan associations into State-chartered institutions was enacted during said period in nine jurisdictions, including the two last named. In the reporting period, legislation was enacted in eighteen jurisdictions relative to investment by savings and loan associations, fiduciaries, banks, savings banks, insurance companies, or public corporations in the shares of Federal savings and loan associations. In one State (New York) a provision authorizing State-chartered associations to subscribe to shares of Federal savings and loan associations was repealed. Since many of the legal relations which attach to Federal associations and their shares and accounts depend upon local rather than Federal law, it is considered desirable, for purposes of clarification, that it be expressly provided in the local statutes that such associations and the holders of their shares and accounts shall have the same rights, powers, privileges, exemptions, and immunities as locally chartered associa tions and their shareholders. Legislation on this point, which was regarded as adequately covered in only four jurisdictions at the beginning of the 1939 legislative sessions, was enacted in six additional jurisdictions during the reporting period. The example of the Federal savings and loan associations has been an important factor in shaping the course of State legislation in the savings and loan field since 1933. To an increasing extent the trend of State laws has been toward the modernization of the structure and operations of State-chartered savings and loan associations through the permissive or required use of the direct-reduction loan, through specific statutory authorization of optional-payment shares, through pro hibitions or restrictions on the issue of securities creating a debtor creditor relation or having a definite maturity or rate of return, through mandatory provisions for adequate reserves, and through the reduction or abolition of fines, penalties, and forfeitures. All these are, and from the beginning of the prograrm have been, features of the Federal savings and loan associations by virtue of provisions of the Home Owners' Loan Act of 1933 authorizing the organization of such 102 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 associations, or by virtue of the charters, bylaws, and regulations prescribed by the Federal Home Loan Bank Board. Their adoption for the Federal savings and loan associations was the first instance of their general use throughout the Nation, though each of them had previously been used in particular localities. The reception of these features into the system of FederaL savings and loan associations was also an important factor in bringing about their incorporation into the Uniform Savings and Loan Act. The Uniform Savings and Loan Act is designed to serve as a model for State legislation, and through this channel the practices adopted for the operations of Federal savings and loan associations will play a further part in mold ing the pattern of State legislation. CONSTITUTIONALITY OF FEDERAL SAVINGS AND LOAN ASSOCIATIONS On January 16, 1939, in the case of Martin et al. v. First Federal Savings and Loan Association, 305 U. S. 666, the United States Supreme Court, upon the motion of the Attorney General of Wisconsin and the members of the Banking Commission of that State, dismissed the writ of certiorari to the United States Circuit Court of Appeals for the Seventh Circuit in First Federal Savings and Loan Association oJ Wisconsin v. Loomis et al., 97 F. (2d) 831 (1938). With this dismissal, the decision of the Circuit Court of Appeals, upholding the constitu tionality of the provisions of Section 5 of the Home Owners' Loan Act of 1933 for the chartering and operation of Federal savings and loan associations, has become final. The origin of the case dates back to July 1936, when the State Attorney General and the members of the Banking Commission petitioned the Supreme Court of the State for leave to file in that court an original proceeding in the nature of quo warranto against the association and its directors, alleging that the defendants were illegally conducting a building and loan business in the State without complying with the Wisconsin laws in regard to the organization, incorporation, and operation of building and loan associations. Thereupon, the association filed suit in the United States District Court for the Western District of Wisconsin against the Attorney General and the members of the Banking Commission, reciting, among other things, that defendants had threatened to bring suit and had made public assertions that the association was unlawfully operating in Wisconsin and that Section 5 of the Home Owners' Loan Act of 1933 was unconstitutional and void. The bill prayed an injunction to restrain defendants from interfering with the association FEDERAL SAVINGS AND LOAN ASSOCIATIONS 103 and a declaration that the latter had a lawful right to transact business in the State. The defendants, by their amended answer, substantially admitted the facts alleged, but contended that Section 5 was unconstitutional and beyond the powers of Congress, that the plaintiff association was therefore not legally organized or incorporated, and that it was doing business in Wisconsin without right and in contravention of the laws of the State. The District Court, after hearing the case without testimony, on the association's motion to strike the amended answer, held Section 5 to be constitutional and enjoined the defendants from interfering with the transaction of business in Wisconsin by the asso ciation (First Federal Savings and Loan Association v. Finnegan et al., 19 F. Supp. 678 (1937).) This decision was affirmed by the Circuit Court. In the opinion rendered by the majority of the Circuit Court, it was held that the provision of Section 5 that Federal savings and loan associations shall act as fiscal agents of the United States when desig nated by the Secretary of the Treasury, and may act as agent for any other instrumentality of the United States when designated by such instrumentality, brings such associations within the implied power of Congress to create financial corporations as fiscal agents of the Govern ment. This power, the court stated, has been recognized so often beginning with McCulloch v. Maryland, 4 Wheat. 316, and continuing through Smith v. Kansas City Title and Trust Company, 255 U. S. 180-that it must be regarded as a settled matter. The majority opinion also expressed the view that Section 5 is sustainable under the general welfare clause of the Constitution. After referring to recent cases in which the Supreme Court upheld the validity of certain provisions of the Social Security Act under the authority of Congress to expend money for the general welfare, the majority opinion stated: "To our mind the preservation of home owners and the promotion of a sound system of home mortgage is none the less national in scope than the- provisions for the unemployed and the aged. Its scope, as affecting the welfare of the Nation as a whole, is of equal importance. To say that Congress has the authority to make provision for one class but not the other is to make a distinction justified by neither logic nor common sense. The problem presented in one case is no less national in its aspect than that presented in the other." C V I _ _ Federal Savings and Loan Insurance Corporation PROGRESS OF INSURANCE PROTECTION DURING the fiscal year 1939, the Federal Savings and Loan Insurance Corporation has made further progress in extending protection to investors in thrift- and home-financing institutions. From July 1, 1938, to June 30, 1939, the number of savings and loan associations insured by the Corporation increased from 2,015 to 2,17Q. Of the latter number, 1,383 were Federal savings and loan associations,' and 787 State-chartered savings and loan associations. During the year, new insurance certificates were issued to 176 institutions, with assets of approximately $138,000,000. Of these newly insured associations, 138 were State-chartered institutions, and 38 were institutions operating under Federal charter. In the same period, 21 insured savings and loan associations discontinued operations as independent institutions through merger or liquidation. As a result, there was a net increase of 155 insured institutions for the year. Exhibit 42 presents the number and the approximate assets of insured associations as well as the number of private investors holding repurchasable shares in these institutions, as of June 30, 1939, by Federal Home Loan Bank Districts and by States. The total assets of insured savings and loan associations rose from $1,978,000,000 to $2,339,411,000 during the year-an increase of 18 percent. The number of private investors holding accounts in insured institutions increased from 1,832,764 to 2,236,043 or by 22 percent. Each of these investors is protected by the Corporation against loss of his savings and credited earnings to a maximum of $5,000. The large majority of insured investors are small savers who have accumulated moderate sums in thrift- and home-financing institutions to provide reserves for a "rainy day" or funds for the acquisition of a home. On June 30, 1939, the average account per private investor in insured savings and loan associations was $741. 1 The difference between the 1,383 Federal savings and loan associations reported as insured and the 1,386 Federal savings and loan associations reported as chartered is due to the lapse of time between the issuance or withdrawal of Federal charters and the issuance or withdrawal of insurance certificates. 183130-39- 8 105 106 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1 9.3f9 The extent of insurance protection afforded by the Federal Savings and Loan Insurance Corporation is indicated by the fact that on June 30, 1939, more than 55 percent of the total -number of member savings and loan associations of the Federal Home Loan Bank System were insured. These associations held approximately 60 percent of the total assets of savings and loan members of the Bank System. In many parts of the country, the majority of sound, eligible thrift and home-financing institutions now offer their investors insurance CHART XXXII PROGRESS OF INSURED ASSOCIATIONS JUNE 30, 1935-1939 NUMBER OFASSOCIATIONS NUMBER OF INVESTORS ASSETS 2,170................... (THOUSANDS) 2,236-------------------------- (MIL41ONS) 2,3 2.015...... 1,76 ........ 1,833. ...... ...... 489..........1,579 1,336 ... 1,024.-- 1935 1936 1937 1938 1939 1 9351 93 1937 1938 1939 4 193 13 1937 1938 1939 DIVISIONOF RESEARCH AND STATISTICS FEDERALHOME LOANBANK BOARD protection against loss; in 23 States, more than 75 percent of all savings and loan members of the Federal Home Loan Bank System were insured by the Federal Savings and Loan Insurance Corporation as of June 30, 1939.' As the insurance program proceeds, a larger percentage of applicant associations are found to be in need of improvement in financial condition or management before they are able to meet the eligibility requirements of the Corporation. In a few areas, particularly, a substantial amount of reorganization work will be necessary before the insurance of share investments by the Corporation can be extended. In these areas, there are still considerable numbers of associations 2 For a comparison of savings and loan members of the Federal Home Loan Bank System with associations insured by the Federal Sav ings and Loan Insurance Corporation. hy Bank Districts and by States, see Exhibit 43. FEDERAL SAVINGS AND LOAN INSURANCE CORPORATION 107 which, as a result of the depression, are burdened with excessive holdings of real estate and other assets of doubtful quality, and which therefore cannot qualify for insurance of accounts at the present moment. Naturally, the solution of the involved problems of associations in need of reorganization requires time and effort. This results ini a less rapid increase in the number of insured associations than was the case in the early years of the Corporation's history. COMMUNITY PROGRAMS In the last fiscal year the Federal Savings and Loan Insurance Cor poration, in cooperation with the Federal Home Loan Banks and State supervisory authorities, has devoted much attention to the alle viation of conditions which prevent home-financing institutions in certain parts of the country from operating normally. For several areas where fundamental improvements are necessary, community programs have been developed with a view to providing an over-all solution of the savings and loan situation. These programs are based on a review of general economic and real estate conditions in the community, a determination of the need for savings and home-financing facilities, and a survey of the condi tion of existing savings and loan associations. Based on these anal yses, the programs provide for the voluntary or involuntary liquida tion of associations which should be discontinued, for the merger of weak or small associations, for reorganizations in various forms, and for the ultimate insurance of accounts of eligible associations. In some areas, the execution of community programs has progressed steadily and has brought about a substantial rehabilitation of the local savings and loan industry. In other areas, the development of community programs is under way and will result, in the near future, in the insurance of an appreciable number of sound associations. An example of a well-rounded community program for the reha bilitation of the entire local savings and loan industry is that for the city of New Orleans. At the close of 1934, when the New Orleans program was formulated, there were 53 associations with assets of $87,386,000 operating in the city. As a result of a rehabilitation program executed by the State supervisory authorities in collabora tion with the Insurance Corporation, there remained 32 associations, which on June 30, 1939, had aggregate assets of $57,563,000. All these associations have been insured by the Federal Savings and Loan Insurance Corporation. The beneficial effects of a program such as this are clearly evident in the operating statistics of the present New Orleans associations. From July 1, 1938, to June 30, 1939, the aggre- 108 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 gate assets of these associations increased by 8.17 percent, and their total private repurchasable capital rose by 13.06 percent. The com bined voluime of mortgage loans made by the associations in that period amounted to $11,797,000, and they accounted for two-thirds of all nonfarm mortgages of not more than $20,000 recorded in this lending area. The situation today is in sharp contrast to that exist ing in 1934 when virtually all associations in the city were on a restricted basis with respect to the payment of withdrawals, home financing activity was at a standstill, and many associations were in imminent danger of going into receivership. In the city of Milwaukee where there has been developed a compre hensive program of rehabilitation and insurance, 25 associations were. insured as a group in June 1939. These associations had not been operating normally in the payment of withdrawals and it was there fore felt that simultaneous insurance would do much to foster confi dence. In the first few weeks following insurance, this group of 25 associations, far from being overwhelmed with withdrawal demands, actually recorded substantial net gains in private capital investments. In Baltimore, Chicago, and Philadelphia, city-wide programs to rehabilitate the local savings and loan industry are in various stages of progress. Of these, the Chicago program is perhaps nearest to completion. When this program was originally drawn up, there were 256 associations with combined assets of approximately $105,569,000 operating in the Chicago area. Many of these associa tions were small neighborhood institutions under part-time manage ment and barely able to operate profitably. As of June 30, 1939, the Federal Savings and Loan Insurance Corporation had insured 89 in stitutions with assets of $79,739,000, and there remained 54 associa tions, with total assets of $21,234,000, which appeared to be insurable either as independent institutions or on a merger basis. Estimates as of June 30, 1939, indicate that at the conclusion of the Chicago program there will be approximately 125 active associations with combined assets of about $100,000,000, all of which will be sound, normally operating institutions with the majority insured by the Federal Savings and Loan Insurance Corporation. In the State of New Jersey the Insurance Corporation has coop erated in the development of rehabilitation programs for some 64 communities. As of June 30, 1939, there were 56 insured associa tions in that State; a substantial number of these institutions repre sent mergers or consolidations of two or more associations. As the execution of community programs continues, a further increase in the number of sound insured associations in New Jersey is expected. FEDERAL SAVINGS AND LOAN INSURANCE CORPORATION 109 ELIGIBILITY REQUIREMENTS 'On June 30, 1939, there were 222 applications for insurance of ac counts pending. Of these, 30 were undergoing examination in Wash ington, and 192 were awaiting action in the field, divided as follows: -conditionally approved cases, where the applicant association had not yet complied with previously imposed requirements, 106; await ing field examination, 19; and deferred or in suspense, 67 cases. As a protection to the Government, which has provided its capital stock, and as a safeguard to the investing public and to the institu tions which are already insured, the Federal Savings and Loan Insur ance Corporation maintains minimum eligibility requirements which must be met before insurance can be obtained by applicant associa tions. Through these requirements, which are based on the best ,practices developed by the industry itself, the general quality of -management and operations of the savings and loan business through rout the country has been raised substantially. As efficient management is a prime requisite to the continued suc cessful operation of a financial institution, the Corporation requires in general that full-time executive management be provided. Under modern conditions the growth and development of an association in a measure commensurate with the opportunities in its community usually demand the full time and attention of an association's man agement. Full-time executive management also tends to eliminate the combination of savings and loan management with that of other businesses such as real estate, insurance, or the practice of law-a ,relic in many parts of the country of the early days of the savings and loan industry. Where "necessary, improvement in the quality of management is a condition for the insurance of accounts. In re .organization cases, the Corporation requests changes in management -and directorate whenever this is dictated by the past record of opera tions. The Corporation urges insured associations in all but the smallest ,communities to establish full-time office quarters in a location com jmensurate with the needs of a financial institution, and desires that such offices be dissociated from any other business enterprise. For obvious reasons, the Corporation insists in every case that the insured association shall not share space with any savings and loan association or other financial institution accepting funds from the public not insured by the Corporation itself or by the Federal Deposit Insurance Corporation. Another requirement of the Corporation, designed to strengthen public confidence, is the elimination of unpaid withdrawals and 110 REPORT OF FEDERAL HOME LOAN BANK BOARD, 19 3 9 maturities and the submission of evidence that the applicant associa tion will be willing and able to meet withdrawal demands promptly. As membership in the Federal Home Loan Bank System is the best assurance of an association's ability to meet unusual cash require ments, membership in the Bank System is regarded as desirable for all associations applying for insurance. The Corporation advocates the adoption by insured associations of a few uniform, basic types of share investments. In past years there was a tendency among savings and loan associations in certain parts of the country to offer installment savings facilities exclusively and to refuse lump-sum investments. In other sections so many different types of share accounts were made available to investors that the public was confused. In its requirements relative to forms of security, the Insurance Corporation has endeavored to take a middle course between these extremes. It has encouraged the use of simple types of share accounts providing opportunity for lump-sum invest ments and for installment payments, either regular or optional. The Corporation requires that all forms of security issued by an insured institution shall be approved by the Corporation and shall not contain any language which might in any way serve to confuse or mislead investors. The Corporation encourages all insured asso ciations either to eliminate penalties for withdrawals of share invest ments or at least to adopt a reasonable dividend-retention schedule which will not work an undue hardship on the withdrawing investor. SUPERVISION As a means of protecting its own interests as well as those of the insured investors, the Federal Savings and Loan Insurance Corpo ration exercises close supervision over insured institutions. This supervision extends not only to the annual examination and audit of each insured savings and loan association and to matters of statute and regulation, but includes constant study of the progress of each insured institution through an analysis of monthly reports and through personal contacts of the officers of the twelve Federal Home Loan Banks, who act as agents of the Insurance Corporation in their respective Districts. While its immediate purpose is to discover unhealthy trends in the operation of insured institutions and to bring about remedial steps before such trepds impair the safety of insured investments, supervi sion attempts at the same time to develop to the maximum degree the usefulness of savings and loan associations to their communities. It undertakes to assist local management with respect to sound lending and savings plans and progressive and efficient business FEDERAL SAVINGS AND LOAN INSURANCE CORPORATION 111 practices. The Federal Home Loan Banks which, through their close observation of the operations of hundreds of institutions in each District, have become a storehouse of experience in this field, are doing a great deal of consultation work designed to improve the operations of insured institutions. In a number of Federal Home, Loan Bank Districts, operating budgets have been developed for associations of various sizes to assist in cost analyses and control. With the cooperation of the Insurance Corporation, the Federal Home Loan Banks have also helped in the development of effective adver tising methods and in the organization of joint advertising cam paigns by groups of insured associations in the same community or area. Federal savings and loan associations are examined annually by the Examining Division of the Federal Home Loan Bank Board. For State-chartered insured institutions, joint examinations by the Exam ining Division of the Bank Board and the State supervisory authorities are conducted in all but fifteen States. This should result in keeping the cost and inconvenience of examination to such institutions at a minimum. As was mentioned in an earlier part of this report, 3 the cost of examinations conducted by the Examining Division of the Federal Home Loan Bank Board was reduced materially during the fiscal year 1939. SETTLEMENTS During the reporting period, the Federal Savings and Loan Insurance Corporation completed three settlements, which brought the total number of settlements since its creation to seven. On June 30, 1939, there were three additional cases pending. In all cases hitherto settled, the Corporation has acted under the authority given by Section 406 (f) of the National Housing Act as amended, which reads: "In order to prevent a default in an insured institution or in order to restore an insured institution in default to normal operation as an insured institution, the Corporation is authorized, in its discretion, to make loans to, purchase the assets of, or make a contribution to, an insured institution or an insured institu tion in default; but no contribution shall be made to any such institution in an amount in excess of that which the Corporation finds to be reasonably necessary to save the expense of liquidating such institution." In three of the seven cases settled up to June 30, 1939, the asso ciations, with the aid of cash contributions by the Corporation, liqui dated voluntarily, paying all insured investors in cash immediately. In two instances, the associations, with the assistance of a cash con s Section I, p. 18. 112 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 tribution by the Insurance Corporation, continued operation under new management, and in the remaining two instances, the impaired associations after restoration of their assets were merged with other insured institutions in the community. There follows a brief description of the three cases settled during the fiscal year 1939: Because of poor management and large real estate holdings, a converted Fed eral savings and loan association in an eastern State encountered serious difficul ties resulting in an impairment of capital. After a thorough examination of the association, the Insurance Corporation determined that continued operation of the association under new management was desirable both from the standpoint of the association's investors and the savings and loan business as a whole, and that the needed contribution was less than the cost of liquidation. The Corpo ration made a contribution of $34,083.97 to restore the capital of the institution and interested a progressive group of citizens in serving as directors of the asso ciation. In the six months following the settlement, the assets of the association more than doubled in size, and the association, under new management, has become an important factor in the thrift and home financing activity of the community. That portion of the contribution not needed to cover losses realized in the liquidation of undesirable assets is subject to return to the Corporation. Appraisals of real estate owned by a State-chartered insured institution in a northeastern State reflected an impairment of capital. In cooperation with the ,State supervisory authority, a plan of merger with a near-by insured State chartered institution was developed. Upon determination by the Insurance Cor poration that a cash contribution to restore the association's capital was more desirable and less expensive than liquidation, the Corporation made a contribu tion of $5,000 toward the restoration of the impaired capital of the association. The latter thereupon merged into the neighboring institution. A similar settlement was effected for another State-chartered savings and loan association in the Northeast, in which a considerable impairment developed because of poor management and a decline of real-estate values in the commu nity. A detailed audit of the association and a study of the local situation re vealed that the most desirable and the least expensive method of settlement was restoration of the association's capital and merger into a strong well-managed Federal savings and loan association in the same community. A contribution .of $246,905.35 was thereupon made to the association, and after conversion of the association to Federal charter, the merger was effected. It was agreed that the portion of the contribution ultimately not required to absorb losses is subject to return to the Corporation and if losses are greater than anticipated, the Cor poration will make further contributions to a maximum of $104,629.36, upon approval of its board of trustees. Contributions made during the fiscal year 1939 totaled $285,989.32. Aggregate gross contributions since the beginning of operations to June 30, 1939, were $390,834.82, part of which is subject to recovery in the liquidation of assets. Recoveries of $4,752.74 have already been realized and returned to the Corporation prior to June 30, 1939. FEDERAL SAVINGS AND LOAN INSURANCE CORPORATION 113 OPERATIONS OF THE INSURANCE CORPORATION With the growth in private capital of institutions already insured and the increase in number of insured associations, the potential liability of the Corporation rose from $1,400,000,000 on June 30, 1938, to $1,725,000,000 on June 30, 1939. These figures represent the aggre gate amount of all insured share accounts (up to $5,000) and the total creditor obligations of all insured institutions. It is inconceiv able that the potential liability should all become real, since this could be occasioned only by the failure of every association with no recovery from any asset. Experience has proved that under any but the most abnormal conditions, savings and loan failures are relatively few, and that in the event of failure, a substantial return from the assets may be safely anticipated. On June 30, 1939, the combined net assets of insured associations exceeded the total potential liability of the Corporation by more than $600,000,000. Against the potential liability, resources of the Corporation on June 30, 1939, totaled $119,400,262, or $1 for each $14 of potential liability. In addition to its capital stock of $100,000,000 provided by Congress and subscribed for by the Home Owners' Loan Corpo ration, the Insurance Corporation on June 30, 1939, had a surplus of $2,439,857, a reserve fund as provided by law in the amount of $3,843,487, and a special reserve for contingencies of $12,000,000. As in prior years, all income above expenses was placed in the reserves of the Corporation, and contributions for the settlement of insurance cases were deducted from the reserves. The capital of the Corporation is invested in Government-guaran teed bonds of the Home Owners' Loan Corporation. Reserve funds are invested primarily in United States Treasury bonds, with the remainder in Home Owners' Loan Corporation bonds and in obliga tions of the Reconstruction Finance Corporation and the Commodity Credit Corporation. The Corporation operates on the principle of mutual insurance. Each insured institution pays an annual insurance premium of % of 1 percent of the total of its insurable accounts plus all creditor obliga tions. The annual payment approximates 11 cents for each $100 of assets of the institution. The premium income of the Corporation during the fiscal year 1939 totaled'$2,291,893 as compared with $1,881,450 during the preceding fiscal year. , As a fair contribution to the already accumulated reserves of the Corporation, the institutions which were newly insured during the fiscal year 1939 paid an admission fee equal to 4 cents for each $100 of the aggregate amount of all accounts of an insurable type and 114 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 creditor liabilities. Admission fees aggregated $45,353 as against $65,927 in the preceding year. During the fiscal year 1939, interest earned on investments totaled $3,367,432 as compared with $3,262,774 in the preceding year. In cluding miscellaneous items, the aggregate income of the Corpora tion during the year was $5,729,377, an increase of $519,121 over the preceding period. Administrative expenses were $213,122, including $69,197 for services rendered to the Corporation by the Federal Home Loan Bank Board; and nonadministrative expenses, representing in the main expenses for travel, special examinations, attorneys' fees, and other expenses in connection with settlement cases, totaled $9,873. This compares with total expenses, administrative and nonadministra tive, of $192,848 in the preceding fiscal-year period. Exhibits 44, 45, and 46 present detailed statements of financial condition and of income and expense during the fiscal year 1939. On June 30, 1939, the Corporation's personnel numbered 39 as compared to 41 one year before. This decrease was due to internal adjustments with the Federal Home Loan Bank Board and does not reflect any reduction in work load. In addition to its own staff, the Corporation has available the facilities of the general service divisions under the Federal Home Loan Bank Board, the members of which also act as trustees of the Corporation. In return for these services the Corporation shares in the general expenses of the Bank Board as indicated above. This arrangement has helped to keep administra tive expenses of the Insurance Corporation at the lowest possible level, OPERATIONS OF INSURED ASSOCIATIONS The value of insurance of accounts to home-financing institutions is reflected in the substantial progress of insured savings and loan associations. In general terms, this progress is revealed in Chart XXXIII showingt he trend of "entering assets" and "present assets" of insured associations from the beginning of operations to June 30, 1939. The dotted line on the chart represents the assets as of the date at which insurance was granted; the addition of these entering assets yields a cumulative total at the end of each month. The solid line represents the total amount of assets of insured associations at the end of each month. The spread between the two lines indicates the gain in assets of insured institutions after insurance of accounts was obtained. To provide an accurate account of the growth of associations insured by the Federal Savings and Loan Insurance Corporation, a special study has been made tracing over two years-from December 31, 1936, to December 31, 1938-the operations of associations that had been 115 FEDERAL SAVINGS AND LOAN INSURANCE CORPORATION insured up to December 31, 1936, eliminating the institutions insured after that date and those which were involved in mergers. The results of the study show that during the two-year period, the total assets of 1,383 identical associations increased by 28 percent. Their private repurchasable capital rose by 29 percent, and their first mortgage holdings, by 40 percent. CHART XXXIII BILLIONS OF DOLLARS ASSETS OF ASSOCIATIONS INSURED 25 - 20 20 E MR U SP----- SEP -----MAR J E---SC-MA-JUN PRESENTASSETS*A to SEC. MR JE S 0000 ENTERINGASSETS(CUMULATIVE) 5;:::::7 SDEC MAR '34 JUNE SEPT DEC. MAR. JUNE SEPT DEC 1935 1936 MAR JUNE SEPT DEC MAR JUNE SEPT DEC 1938 1937 JUNE MAR 1939 Estimates based upon current reports from approximately 95% of all insured associations DIVISIONOF RESEARCH ANDSTATISTICS FEDERAL HOMELOANBANKBOARD Increase in selected balance sheet items of 1,383 identical insured savings and loan associations, Dec. 31, 1938, compared with Dec. 31, 1936 __ Amounts Percent increase in 2 Dec. 31, 1936 Dec. 31, 1938 Total assets..... ...--------------------------------------$1, 145, 341, 000 $1,461, 571, 600 First mortgages held....----------------------------------816. 751, 600 1,144, 514, 500 Private repurchasable capital-------------------- ------756,664,000 974, 526, 300 years 28 40 29 One of the causes of the success of savings and loan associations which have obtained insurance of accounts is the cumulative effect of insurance. A survey made for all associations insured up to the 116 REPORT OF FEDERAL HOME LOAN BANK BOARD, 193 9 close of 1936, grouped by year of insurance, evidences clearly that the benefits from insurance of accounts to the institutions themselves are intensified in proportion to the length of time during which insurance has been in force. These benefits are mainly reflected in larger numbers of investors and increased amounts of private share capital. Growth of prtvate investments in all associations insured through Dec. 31, 1936,. during the two-year period 1937-38 Year of insurance Associations insured in1936 --------------------------------------------------------------1935 --------------------------------------------------------------1934 --------------------------------------------------------------- Increase in private investors Percent 15. a 28.1 60.1 Increase in private share capital Percent 16.2, 27.5, 85.7 Those associations which had obtained insurance in 1936 showed a gain in private investors and private capital by about one-sixth during the two-year period under consideration. Those associations which received their insurance certificates in 1935 reported an increase by more than one-quarter during the same two-year period, and the associations insured in 1934 recorded the largest gain. All together,, the 1,529 institutions included in this survey opened new accounts for more than a third of a million investors, and they increased their private share capital by approximately $260,000,000 during 1937 and 1938. Exhibit 47 shows the average increase in private repurchasable capital for these institutions, grouped by year of insurance and by Federal Home Loan Bank Districts. Exhibits 30 and 31 present a summary of combined balance sheet items for Federal savings and loan associations as well as State. chartered insured associations, as of December 31, 1937, and December- 31, 1938. At the close of 1938, private investments in all insured associations totaled close to $1,500,000,000, and Government investments aggregated $258,036,000. During the year, the, ratio of Government investments to total resources of insured associations decreased from 14.3 to 12.1 percent, and the ratio of private invest ments to total resources increased from 68.0 to 70.6 percent-another reflection of the substantial flow of private money into insured asso ciations. With the growth in resources, insured savings and loan associations during the fiscal year 1939 were able to lend substantial amounts on mortgages. All together, the estimated volume of mortgage loans made by insured associations from July 1, 1938, to June 30,1939, was $487,208,000, or approximately 56 percent of the total amount of' FEDERAL SAVINGS AND LOAN INSURANCE CORPORATION 117 -mortgage loans written by all savings and loan associations during -that period. INSURANCE AS A FACTOR IN REHABILITATION Apart from its general effect on the restoration of confidence in home financing institutions, insurance of accounts has become an important factor in the rehabilitation of those savings and loan associations which-in consequence of the general financial crisis in the early Thirties-required reorganization. As institutions which for some time are inactive become a drag on the sound associations in their respective communities, the rehabilitation efforts of the Federal Sav ings and Loan Insurance Corporation will ultimately enhance the stability and progress of the savings and loan industry as a whole. Before the establishment of the Federal Savings and Loan Insurance Corporation, correction of unsound conditions of savings and loan associations by reorganization was seldom attempted. With a few exceptions, those associations which became impaired, or burdened with excessive real-estate holdings and other bad assets, had to go into voluntary or involuntary liquidation-a procedure which was -costly and cumbersome, and generally produced unsatisfactory results ,for the members. With the aid of insurance of accounts, savings and loan associations -were able to undertake effective reorganization measures in a large _number of cases. As soon as the advantages of insurance of accounts -were understood by the general public, shareholders of associations which had become involved in financial difficulties of various kinds evidenced a willingness to support sound reorganization assuring normal operations. From the beginning of operations through June 30, 1939, the Federal -Savings and Loan Insurance Corporation has been instrumental in ,effecting reorganization with subsequent insurance of accounts in the °case of 284 savings and loan associations, with aggregate assets of $338,636,000 prior to reorganization. Of this number, 177 associa tions underwent segregation of assets, -43 accomplished capital reor -ganization through write-down, and 64 strengthened their reserves by means of pledge of shares. In general, segregation of assets has been used where the association is burdened with an excessive proportion of slow assets; write-down where there is a moderate amount of capital impairment coupled with .an otherwise sound asset picture; and pledge of shares where too small a margin of free reserves is indicated without actual impairment of ,capital. 118 REPORT, OF FEDERAL HOME LOAN BANK BOARD, 1939 Of the various forms of reorganization, segregation of assets has to date been the most common. Under this method, the assets are divided into acceptable and unacceptable groups with a corresponding division of liabilities. As a rule, all real estate owned, slow mortgage loans, funds in closed banks, and other assets of a questionable quality are segregated for eventual liquidation. In the majority of earlier segregations undertaken with the co operation of the Insurance Corporation, the unacceptable assets were transferred to liquidating trustees or specially chartered corporations. However, many associations which have undergone reorganization in the past year or two have followed the procedure of transferring the good or acceptable assets to a new association organized specifically for that purpose. Immediately upon completion of the transfer, the newly organized association receives insurance and is ready for normal operation. The old association which retains the unacceptable assets goes into formal liquidation. The method of transferring acceptable assets to a completely new association facilitates the process of re habilitation, since it dissociates the new association from the old insti tution which ran into difficulty. The new insured association is, therefore, in a much better position to attract savings from the general public and to operate normally. Through such segregation of assets, only the form of the members' investment is changed. Investors receive, to the total amount of their accumulated savings and profits, share certificates in the new associa tion and certificates of interest in the old liquidating corporation. They gain, on the other hand, by having such portion of their invest ments as is transferred to the new association insured and withdraw able, while previously their funds were entirely frozen. As a result of its experience over the past five years, the Federal Savings and Loan Insurance Corporation now seldom, if ever, gives its approval to a plan of reorganization contemplating a division of share liability on anything less favorable than a fifty-fifty basis. In many cases it has been possible to raise the original segregation ratio, based on the division of assets, by loans from the Reconstruction Finance Corporation and other sources, secured by the collateral available in the liquidating corporation. The cash proceeds of such loans are transferred to the new association together with the sound loans and other acceptable assets, but the liability for the loan remains in the old association going into liquidation. This procedure permits a material increase in the proportion of share investments which can be transferred to the new insured institution. The experience of associations undertaking segregation of assets as a means of qualifying for insurance generally has been very satisfactory. FEDERAL SAVINGS AND LOAN INSURANCE CORPORATION 119 The 177 institutions which have been insured following segregation had combined assets of $104,155,000 immediately after segregation. As of June 30, 1939, however, this group of associations had total resources of approximately $133,262,000, reflecting an average growth subsequent to segregation and insurance of approximately 28 percent. In contrast to segregation, reorganization through write-down of share capital is a relatively simple matter. In such cases, it merely becomes necessary to determine the actual extent of existing impair ment and the amount of additional free reserves which should be pro vided in the light of the quality of the particular assets in question. To judge from the experience of the Insurance Corporation, this form of reorganization is desirable only if the amount of required write down does not exceed 15 or 20 percent of outstanding capital. Where any greater reserve deficiency exists, segregation has been found to represent a more satisfactory solution. In securing the shareholders' approval for write-down of capital, little difficulty has been encountered once the situation has been fully explained to them. In most cases, the amount of the write-down is equivalent to no more than the dividends declared on shares during the preceding two or three years. As compared with the expense of a long drawn out liquidation or the tying up of a substantial portion of all accounts as a result of segregation, the advantages of an immediate write-down to eliminate the difficulties, once and for all, are quickly apparent. The 43 associations in various parts of the country which were insured following write-down of capital have shown an excellent recov ery from the effects of reorganization. As a group, these institutions had total resources of approximately $44,603,000 immediately after reorganization. In the interval between the time of reorganization and June 30, 1939, their aggregate assets have grown to $60,132,000 an increase of about 35 percent. Where the capital of an association applying for insurance is found to be unimpaired, but the margin of free reserve after allowance for all indicated losses is too narrow in relation to the quality of the institu tion's assets, readjustment of the capital structure through pledge of shares often provides a satisfactory solution. In most instances the amount of the required pledge is not large in relation to the total amount of capital outstanding and it is often possible for the directors and officers themselves to set up the pledge out of their own holdings, thus making it unnecessary to disturb the main body of shareholders. Under this procedure, a group of shareholders, either officers or directors or interested individuals not connected with the manage ment, pledge all or a portion of their share investments as a guarantee 120 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 to the association against losses of any and all kinds which may exceed available reserves. The shares so pledged are ordinarily placed in escrow with the Federal Home Loan Bank serving the area in which the association is located. The pledge and escrow agreement always contains a clause providing for the release of the shares pledged when certain stated conditions have been met. Ordinarily, the condition for release is based upon the transfer to reserves of a predetermined amount out of future earn ings. Occasionally the release is made contingent upon a stated in crease in the percentage of free reserves to net assets. In practically all cases, moreover, there is a further provision in the agreement for release of the pledge at the discretion of the Insurance Corporation if the condition of the association as disclosed by any regular or special supervisory examination appears to justify such action. In some cases where anticipated net earnings are unduly low, the pledge agreement may also contain a waiver of dividends on the part of the holders of the escrowed shares. The 64 associations which have been insured following pledge and escrow of share capital had combined assets of $64,515,000 at the time of reorganization. Since that time to June 30, 1939, their resources have grown to $77,418,000-an increase of approximately 20 percent. Rehabilitation of savings and loan associations in the last few years has been assisted by the investment of Government funds in shares of such associations. As pointed out in other sections of this report, the Home Owners' Loan Corporation was authorized in 1935 to invest up to 300 million dollars in the shares of savings and loan associations which are members of the Federal Home Loan Bank System or which are insured by the Federal Savings and Loan Insurance Corporation. These investments were designed to assist in the rehabilitation of the country's home-financing structure. In the summer of 1937 when such investments by the Home Owners' Loan Corporation had reached approximately 200 million dollars, the Federal Home Loan Bank Board determined that in order most effectively to utilize the remaining 100 million dollars, further investments should be restricted to such asso ciations as were most in need of new capital, either by virtue of their own condition or because of the situation in their communities. A substantial fund was thus set aside for assistance to those asso ciations which, in order to qualify for insurance of accounts, must undergo reorganization. In such cases, share investments by the Home Owners' Loan Corporation, immediately following upon reor ganization and insurance, accelerate the process of reconstruction by enabling the associations to resume active lending operations at a FEDERAL SAVINGS AND LOAN INSURANCE CORPORATION 121 time when they might otherwise be forced to conserve all their cash resources as a reserve against anticipated withdrawal demands. In all rehabilitation cases completed up to now, advances from the Federal Home Loan Banks and the proceeds of collateralized loans from the Reconstruction Finance Corporation or other sources have provided sufficient liquidity to meet even the heaviest withdrawals immediately after reorganization and insurance. In most instances, the initial critical period of shrinkage has been followed by a rapid reestablishment of confidence and an influx of new funds in substantial volume. PROPOSED FEDERAL LEGISLATION As part of the legislative program supported by the Federal Home Loan Bank Board, a series of amendments to Title IV of the National Housing Act governing the operations of the Federal Savings and Loan Insurance Corporation has been proposed. The principal items include the following changes: 1. Reduction of insurancepremium.-The amendments provide that the present premium rate of one-eighth of 1 percent per year shall be reduced to one-twelfth of 1 percent. The lowering of interest rates on home mortgage loans in the last few years has narrowed the mar gin on which thrift and home-financing institutions operate to such an extent that the cost of insurance is an item of appreciable import. A reduction of the premium rate would therefore appear to be desir able. Although it is difficult to measure precisely the premium rate required for sound operation of the Insurance Corporation, the pro posed reduction would seem to be justified in the light of past experience. Under the present law, the Federal Savings and Loan Insurance Corporation may assess annually an additional one-eighth of 1 per cent to cover losses and expenses. It is proposed to reduce this power to assess, which heretofore has not been used, likewise to a rate of one-twelfth of 1 percent. 2. Dividends of the Insurance Corporation.-At the present time the Insurance Corporation is required to pay a cumulative dividend of 3 percent on its capital stock, which was subscribed for by the Home Owners' Loan Corporation. The amendment would change this 3 percent cumulative dividend to a noncumulative dividend payable only after the 5-percent statutory reserve of the Insurance Corpora tion has been established. Until adequate and substantial reserves have been accumulated, the payment of dividends is unsound. The proposed amendment would not mean that the Corporation would be wholly relieved from paying dividends on its capital stock. It would merely modify the dividend provision so that the Corpora 183130-39--9 122 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 tion would be required, when the 5-percent statutory reserve has been accumulated, to pay noncumulative dividends at a rate equal to the current cost of long-term money to the Government. The amendment would not cost the Government any money; the funds would simply be accumulated within the Insurance Corporation to create the 5-percent reserve, instead of being paid over to the Home Owners' Loan Corporation. The reserve belongs to the Government, which owns, through the Home Owners' Loan Corporation, all the capital stock of the Insurance Corporation. 3. Settlements.-In case of default of an insured institution, the present law gives the insured accountholder the option of accepting an insured account in another insured association or a settlement of 10 percent in cash, 45 percent in one-year debentures, and the remaining 45 percent in three-year debentures. These debentures are required to be noninterest bearing. Experience has made it seem desirable to give the Insurance Corporation somewhat more discretion in the manner of settlement. The proposed amendment, therefore, provides that the Corporation, in the event of default, shall make payment of insurance either by tendering to insured account holders other insured accounts in a going institution in the same community, or in such other manner as the Corporation may prescribe. 4. Purchase of Insurance Corporation obligations by the Treasury. The proposed amendatory legislation provides that the Secretary of the Treasury shall be authorized to purchase, at his discretion, obli gations issued by the Federal Savings and Loan Insurance Corpora tion. The reasons for this proposal are similar to those indicated for the proposed amendment to provide for purchase of Federal Home Loan Bank debentures by the United States Treasury (see the report of the Federal Home Loan Bank System, p. 72). This authorization would be an additional safeguard for the stability of home-financing institutions in periods of emergency. 5. Termination of insurance.-The proposed amendments would liberalize the provisions of the law in regard to the termination of insurance. The present law provides that upon voluntary termi nation, an institution and its members immediately lose insurance protection, but must continue to pay a premium for a period of three years. Institutions which have their insurance protection terminated by the Corporation because of violations of the statute or regulations must continue to pay the insurance premium for a five-year period although only those accounts which were insured as of the date of termination continue to have the insurance protection for such five-year period. FEDERAL SAVINGS AND LOAN INSURANCE CORPORATION 123 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 ad vance at the time of termination for such continued insurance. The amendment furthermore requires that notice of termination of insur ance 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 invest ments 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 juris dictions. 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 SINCE SURVEY OF PRESENT ACTIVITIES 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 pro gram 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 I 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 refinancmg 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 indi vidual case whenever accumulating arrearages indicate that the bor rower 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. I 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. 125 126 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 In this manner, the Home Owners' Loan Corporation makes avail able 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 proper ties sold on extended terms of payment (vendee accounts). STATUS OF BORROWER ACCOUNTS During June 1939 the records of the Home Owners' Loan Corporation showed 798,385 original borrowers in "active status." 2 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 satis factory status, which means that 84.2 percent of all active borrowers were meeting their loan obligations in a fashion acceptable to the Cor poration. 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 Own ers'Loan Corporation, through its low-cost amortized loans, has assist ed 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 2 Active accounts include all original borrower accounts on which the Corporation is still making col lections. In other words, they represent all original loans less those which have been paid in full and those foreclosed or authorized for foreclosure. HOME OWNERS' LOAN CORPORATION 127 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 CHART XXXIV STATUS OF ACTIVE BORROWER ACCOUNTS JUNE 1939 4CCOU N S DIVISION OF RESEARCHAND STATISTICS FEDERALHOME LOAN BANK BOARD 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. 128 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 On June 30, 1939, arrearages on all original borrower accounts, active and inactive, totaled $96,215,518. Of this total, $90,114,198 was due and unpaid on principal, and $6,101,320 was due and unpaid on interest. THE COLLECTION RECORD In the fiscal year 1939, the Home Owners' Loan Corporation collected $101,602,160 in interest and $168,482,399 in principal from original borrowers, or a total of $270,084,559. This included the amount of $46,478,954 received during the year for loans paid in full. Cumulatively to June 30, 1939, the Corporation has collected $568,332,553 in interest, and $601,002,640 in principal from original borrowers, aggregating $1,169,335,193. Of this total $125,638,128. represented amounts received for original loans paid in full. CHART XXXV COLLECTIONS OF INTEREST AND PRINCIPAL ON ORIGINAL LOANb CUMULATIVE MILLIONS OF DOL LARS " FROM JULY 1936 TO JUNE 1939 . ... 1,100 1,00 -- ....- 600 700 200 .. - - . ^ ^ AL -- 90 0 YPRINCIPAL 0--- --- REPAMENTS -- --- -- --- -- -- DIVISION OF RESEARCH ANDSTATISTICS FEDERALHOMELOANBANK BOARD Chart XXXV shows cumulative collections of interest and principal on original borrower accounts from July 1936 to June 1939. As will be seen from the chart, the curve representing principal repay ments crossed the curve of interest payments in February 1939, indicating that from that date the collection of principal exceeded the collection of interest. As HOLC loans are based on the direct-reduc tion amortization plan, requiring equal monthly payments, the proportion of principal repayments increases steadily because a HOME OWNERS' 129 LOAN CORPORATION growing percentage of the borrowers' monthly payments is being applied to the reduction of the principal, and the proportion of interest payments decreases continuously because interest is calcu lated on the constantly reducing principal of the loan. Principal repayments are also accelerated by the increasing number of original loans paid in full. The experience of the Corporation has shown that its record of collections follows closely the fluctuations of business in general. CHART XXXVI H.O L C. PERCENT 100 AND COLLECTIONS NATIONAL -RAT/O INCOME oFBILLIONRS OF COLLECTIONS TO CURRENT BILLINGS S(LEFTHANDSCALE) 1' , . / (RIGHTHANDSCALE) 80 70 SEP 1936 DEC I / MAR JUN 1937 SEP 5 T--- --- JUN ' 4. N PAYMENTS INCOME ' DEC MAR 5 ....... .--- _- ; JUN SEP DEC 1938 MAR 1939 4 JUN *ln some months,the ratio exceeds 100% because of the collection of arrearages not Included in current accruals and because of loan repayments in full DIVISION OF RESEARCH ANDSTATISTICS FEDERAL HOME LOANBANKBOARD Whenever employment slackens and family incomes decrease, collec tions from borrowers decline. Whenever economic activity improves and family incomes rise, collections increase. Similarly, the Corpo ration's collection experience varies from one section of the country to another, depending upon the economic conditions that exist in the different areas. In general, the fiscal year 1939 witnessed an improving performance of borrowers as compared with the preceding year, particularly from January to June 1939. This is evidenced by the above chart show ing by months the ratio to current billings of all payments received on "active" borrower accounts. To indicate the close relationship between HOLC collections and general economic conditions, the 130 REPORT OF FEDERAL HOME LOAN BANK BOARD, 19 39 chart shows also aggregate income payments to individuals as com puted by the United States Department of Commerce. The improving situation of HOLC borrowers during the fiscal year 1939 is also indicated by the increasing number of loans repaid in full. In that period 18,769 original borrowers were able to retire their entire indebtedness to the Corporation prior to the expiration of the loan contract, either by means of their own or by private refinancing. In the preceding fiscal year such repayments numbered 15,582. LOAN SERVICE The collection of interest and principal due the Corporation is a task of extraordinary proportions. The operations of the Home Owners' Loan Corporation are unique in their scope as well as in the fact that it is dealing generally with debtors who were heavily in default. The hundreds of thousands of HOLC borrowers are spread over the whole country, and the servicing of HOLC loans, therefore, extends into the smallest communities as well as into large cities in every State of the Union. Furthermore, the Corporation is dealing not with normal mortgage risks comparable to those of private lending institutions, but with distressed home owners whom it assists in their rehabilitation. To achieve its purpose as determined by the Home Owners' Loan Act, the Corporation gives each delinquent borrower every available opportunity to work out his problem and makes certain that it does not foreclose needlessly or prematurely on people who might still have a chance of salvaging their homes. Also, a close study of the circumstances of the individual case is necessary if the Corporation is to guard against a promiscuous granting of unjustified concessions and if the interests of the Government are to be adequately protected. Careful consideration is given to borrowers who are behind in their payments. In the case of serious default the circumstances of each individual borrower are studied in detail on the basis of personal interviews and other information, with a view to bringing the account to a paid-up status or at least to preventing further arrearages. Because it is to the best interest of all concerned to keep the borrower in his home, foreclosure is avoided as long as any possibility remains of restoring the account to a satisfactory standing. Informal adjust ments are made designed to assist delinquent borrowers in the pay ment of arrearages and, where warranted, formal agreements have been concluded since February 1937 in order that borrowers may reduce accumulated delinquencies in a manner adapted to their capacity to pay. HOME OWNERS' LOAN CORPORATION 131 The Home Owners' Loan Corporation has also liberalized its require ments from time to time so as to afford borrowers every reasonable means of avoiding default. For example, proceeds from the sale of part of the property securing HOLC loans or from indemnities on insurance losses may be applied to interest arrearages as well as to a reduction of the principal indebtedness. Advances are made to borrowers for the purpose of reconditioning where necessary to make all or part of the property available for rental, if such additional income will prevent default. Even after foreclosure has been authorized, a payment proposal may be accepted and the foreclosure withdrawn. For the most needy borrowers, attempts are made to find employment or to obtain public assistance. All these procedures are designed to assist home owners who, under more perfunctory and impersonal methods, would have drifted eventually into foreclosure. During the fiscal year 1939, the number of active original loan accounts decreased from 845,284 to 798,385. During the same time, however, the number of vendee accounts trebled. These accounts represent purchase-money mortgages and sales contracts on properties sold by the Corporation. Their steady increase offsets in a large measure the reduction in the work load resulting from the decline in the number of original loan accounts. At the end of the fiscal year 1939, there were 390,410 original borrowers requiring special servicing attention, equivalent to 49 per cent of the total number of original loans serviced. This group comprised 204,298 borrowers who were more than three monthly installments in arrears on loan payments, 74,374 borrowers technically not in default, but representing problem cases, and 111,738 borrowers not in default on loan payments but delinquent in taxes. As of June 30, 1939, there were 81,668 original loan accounts which had been revised to permit liquidation of arrearages over the remaining life of the loan. Of this total, 43,446 agreements were made during the fiscal year 1939. The results of such agreements have been grati fying. Of the 81,668 home owners with whom extension agreements were in effect, 71,674 or about 88 percent have been able to avoid default under the agreement, and of the 9,994 borrowers in default, only 303 were a year or more in arrears on June 30, 1939. A serious problem with which the Home Owners' Loan Corporation is confronted is the handling of taxes coming due on properties securing its loans. On June 30, 1939, there were 115,579 borrowers in default on their loan accounts and delinquent in taxes as well. An additional 111,738 borrowers were delinquent in taxes, although not in default on their loan accounts. While these 227,317 home owners were 132 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 delinquent in taxes an average of less than two years, approximately 10 percent of this number had a considerably greater tax arrearage. The above figures indicate that in the past many borrowers were unable to pay up their tax arrearages and at the same time to maintain the contractual payments on their loan accounts. This situation naturally tended to jeopardize the security behind the Corporation's loans. Furthermore, to obtain information on tax delinquencies the Corporation had to undertake extensive and costly tax searches. This experience has resulted in the adoption of a new policy which should eliminate virtually all tax delinquency and permit considerable savings both to the home owner and to the Corporation. Under the new policy the Corporation continues to encourage all borrowers to bring their taxes current from their own resources; if they are unable to do so, however, the Corporation advances funds for the payment of taxes, on behalf of borrowers, to avoid excessive interest and penalties as well as to protect the Corporation itself against the loss of the security behind the loan. A procedure has been established whereby borrowers may avoid future tax delinquencies by depositing monthly with the HOLC one-twelfth of the estimated annual taxes, and whereby they authorize the Corporation to pay such taxes, when due, out of the funds accumulated in this manner. At the close of June 1939 these arrangements were being made at a rate which indicated that before the end of the fiscal year 1940 the majority of borrowers delinquent in taxes will have availed themselves of the plan. FORECLOSURE EXPERIENCE OF THE CORPORATION In accordance with the purpose of the Home Owners' Loan Act, the Home Owners' Loan Corporation proceeds to foreclose only as a last resort after all efforts to prevent the borrower's default-described in the chapter on Loan Service-have failed. This is evidenced by the fact that the average interest and principal arrearage on original loans foreclosed during the fiscal year 1939 totaled 18.2 monthly install ments at the time foreclosure action was authorized. In other words, in the average foreclosure case the borrower was delinquent to the extent of all interest and principal coming due over more than one year and a half. In many cases, the borrower was also in serious default on taxes. HOME OWNERS' 133 LOAN CORPORATION The following figures show the percentage distribution of all fore closures brought during the fiscal year ended June 30, 1939, by accu mulated arrearages prior to foreclosure: Percent of all cases authorized and dis patched for action Arrearages before foreclosure: 21. 3 Less than 12 months---------------------------3 12 to 17 months--------------------------------28. 27.6 18 to 23 months-----------------------22.8 24 months and over----------------------------Total_-------------------------------------- 100.0 In 78.7 percent of all foreclosure cases, the arrearage accumulated prior to foreclosure was 12 monthly intallments or more, and in 50.4 percent of all cases, it was 18 monthly installments or more. . From the beginning of operations through June 30, 1939, the Home Owners' Loan Corporation has authorized 189,908 foreclosures on original loans, of which 18,872 were withdrawn. The net foreclosure authorizations of 171,036 represent only 16.8 percent of the total number of original loans made by the Corporation-a ratio which compares not unfavorably with the experience of private mortgage lending institutions during the period in question, despite the fact that in general the HOLC borrowers were in serious financial distress or default when they obtained their refinancing loans from the Home Owners' Loan Corporation. Exhibit 49 presents, cumulatively, to June 30, 1939, net foreclosure authorizations and the ratio of authori zations to the total number of original loans, by HOLC regions and by States. The chart on page 134 shows the number of foreclosures authorized by the Corporation on original loans, the number of cases withdrawn, and the net volume of foreclosure authorizations, by months, from January 1936 to June 30, 1939. The chart reveals a characteristic feature of the Corporation's fore closure operations. The bulk of foreclosures was concentrated in the period from July 1936 to June 1937, when the average age of the loans was approximately two years. With a mortgage portfolio comprised entirely of refinancing loans to more than one million distressed home owners-loans granted over an emergency period of three years-it was to be expected that the Corporation should have to eliminate a number of hopeless cases in the early period of operations. Where a loan was definitely beyond the borrower's capacity to carry or where the borrower ignored his obligations, the situation generally was re vealed within two years or so after the granting of the loan. Since the summer of 1937, net foreclosure authorizations have been on a 134 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 much lower level. During the period July 1, 1938, to June 30, 1939, foreclosure authorizations, after deduction of withdrawals, numbered 32,599 as compared to 40,602 in the fiscal year 1938 and 70,864 in the fiscal year 1937. CHFART XXXVII FORECLOSURE NUMBER OF FORECLOSURES BOOOJTII I I I I I I OPERATIONS .--- 6,000 I1 NETAUTHORIZATIONS. 2,000 - i OO00 DEC MAR JUN 1936 SEP -- - DEC -- MAR CASES WITHDRAWN | | 1 ---| JUN 1937 SEP DEC - MAR %----- JUN SEP 1938 -- DEC MAR 1939 JUN DIVISIONOF RESEARCH AND STATISTICS FEDERALHOMELOANBANKBOARD Foreclosure authorizationson original loans Fiscal year Foreclosures authorized 1934 1935 --1936 -- - 6 564 27, 081 Net foreForeclosures with- closures authorized drawn 0 14 666 6 550 26,415 Fiscal year Foreclosures authorized 1937 ----1938----1939---- 76,896 47, 745 37,616 Net fore Foreclosures with- closures au thorized drawn 6,032 7,143 5,017 70,864 40, 602 32, 599 A detailed summary of foreclosures on original loans, by fiscal-year periods, is presented in Exhibit 50. In addition to properties acquired through foreclosure, the Corporation has acquired 24,690 properties by deed in lieu of foreclosure. Where such deeds were taken, the personal obligations of the borrowers were canceled. COST OF FORECLOSURE The Home Owners' Loan Corporation attempts to keep foreclosure costs at a minimum. When foreclosure operations began, a fair fee schedule was developed. Members of the bar were interviewed in the various States and reasonable fees in accordance with the volume HOME OWNERS' LOAN CORPORATION 135 of foreclosures were established. A further reduction of foreclosure costs is dependent on a greater simplification and unification of fore closure procedures under the various State laws, and on the elimina tion of excessive cost elements in many States. For a number of years, the Corporation has made extensive studies of the cost and time of foreclosure. The results of these studies are given in Exhibit 51. Highest foreclosure costs are found to exist in those States where foreclosure by court action is the predominant method. This method is followed in 30 States. Under the power-of sale method, used principally by the Corporation in 18 States, costs are much lower. The foreclosure costs were highest in Illinois, where the average cost per case was $349.59, and in New York, where the average cost per case was $280.94. On the other extreme, Maine and Missouri had an average foreclosure cost of only $21.29 and $54.08, respectively. These extremes indicate the wide diversity of foreclosure costs in the various parts of the country. The average time required to complete foreclosure action likewise varies considerably among the different States. The time required from the date foreclosure was dispatched for action until date of acquisition of title ranges from'36 days in Mississippi to 25 months and 23 days in Alabama. Again, the period generally is shorter in those States where the power-of-sale method is primarily used. Re demption of foreclosed properties is permitted in 22 States and the redemption periods range from 6 to 24 months. Where deeds were obtained in lieu of foreclosure, the total costs per case were generally lower than in the case of foreclosure. For the period from December 1, 1937, to June 30, 1939, the approximate 3 total cost of deeds in lieu of foreclosure was $34 per case. After the expiration and elimination of a number of moratorium laws affecting the Home Owners' Loan Corporation, such laws were still in force on June 30, 1939, in South Dakota, Vermont, and Wis consin. The Supreme Court of Wisconsin decided in May 1939 that the legislature had no right to make the moratorium act retroactive so as to affect loans made by the Corporation prior to its passage. The moratorium acts expire March 1; 1941, in South Dakota and Vermont, and April 1, 1941, in Wisconsin. Under the Vermont act the moratorium provided is, in effect, a postponement of the foreclo sure sale, under the judgment, for a period of three months, which may be extended at the discretion of the court. While the Wisconsin moratorium act expires April 1, 1941, foreclosure may be delayed under its terms until April 1, 1942. 3For cost data on deeds in lieu of foreclosure, by States, see Exhibit 52. 136 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 PROPERTY MANAGEMENT Although the Home Owners' Loan Corporation has found it necessary to acquire but 13.9 percent of the homes which it had refinanced, the management, reconditioning, renting, and sale of these properties has become one of the major activities of the Corporation. This is in line with the experience of all mortgage lending institutions during the last decade, but the wide scope of HOLC operations and the particular type of properties acquired by the Corporation present unusual problems. These properties are widely scattered over the country and are located in every State of the Union. They are, in the main, small one- to four-family dwellings; many of them are in a bad state of repair when acquired; and a large number are obsolete and in deterio rating neighborhoods. Few, if any, public or private institutions ever were confronted with the problem of managing, reconditioning, renting, and selling a large number of properties of this type on a nation-wide scale. It is the policy of the Corporation to dispose of its properties as speedily as is consistent with the Government's interests and with conditions of the real estate market. To hold its properties indefi nitely would be inconsistent with sound business practice, particularly for a liquidating agency of the Federal Government. To sell its properties under pressure and below current market prices would not only entail tremendous losses, but depreciate the mortgage collateral behind all the loans made by the Home Owners' Loan Corporation and depress the mortgage and real estate markets in general. The Corporation, therefore, attempts to avoid either of these extremes, and offers its properties for sale at current market levels even if sales prices are below book values. The Corporation entered the fiscal year 1939 with 82,987 properties owned and 20,145 properties in process of acquiring title,4 or a total of 103,132 properties. The combined capital value 5 of these proper ties was $516,206,401. At the end of the fiscal year, the Corporation owned 87,618 properties, and 11,736 properties were in process of acquiring title, or a total of 99,354 with a combined capital value 5 * Properties in process of acquiring title are those where the foreclosure action has been advanced to the point of judgment or sale but where because of the existence of a redemption period or for other reasons, some additional time must yet elapse before the Corporation can acquire full title. 5The capital value of property is comprised of the following elements: (a) Unpaid principal balance of loans, advances, and interest merged with principal in extension agreements, at the time of foreclosure judgment or foreclosure sale where such sale is not preceded by a judgment; (b) unpaid accrued interest to date of foreclosure judgment or foreclosure sale where such sale is not preceded by a judgment; (c) all fore closures and acquisition costs; (d) all expenditures, less all receipts, regardless of nature, applicable to the period between foreclosure as described in (a) and the acquisition of absolute title; (e) initial repairs or reconditioning regardless of nature; (f) assessments with benefits of more than one year; and (g) improve ments or other expenditures which enhance physical value. HOME OWNERS' 137 LOAN CORPORATION of $549,441,184. In total number, properties owned and properties in process of acquiring title showed a decrease during the year-the first decrease since the beginning of operations. This was the result of a declining number of property acquisitions coupled with a rising volume of property sales. Property acquisitionsand sales, by fiscal-year periods Sales Acquisitions Period Number of properties 1 1936-------....---------------5,275 1937....--------------------39,534 -----------55,190 1938----------.. . -------41,743 1939------------Total.---------.-------... ..... 141,742 Aggregate capital value I Number Aggregate of prop- capital value ertiesrice Aggregate ales price Ratio of sales to acquisi tions 2 $23,930,096 181,196,458 303, 226,436 228,932,138 142 2,231 15,159 37,771 $497,117 8,248,929 62,001, 901 166,888,675 $523,055 8,293,100 54,182, 578 130,177,111 2.6 5.4 26. 7 89.1 737, 285,128 55,303 237, 636, 622 193,175,844 38.5 1 Includes all adjustments to June 30, 1939 2 For the purpose of computing the percentage of properties sold to those cumulatively acquired, prop erties sold prior to acquisition, and properties remaining "in process of acquiring title" in Alabama have been added to the number of properties acquired. The Corporation was able to sell 37,771 properties during the fiscal year 1939 as compared with 15,159 in the preceding fiscal year. This increase in property sales is all the more significant in the light of grow ing competition in the real-estate market. Not only have private financial institutions-as pointed out in other sections of this report disposed of larger numbers of properties which they had repossessed in previous years, but with the growing volume of residential con struction there was an increased number of newly built homes offered at attractive terms. As will be seen from the chart on page 138, the volume of property sales began to exceed the number of net foreclosure authorizations in June 1938 and has remained above the level of foreclosures, with the exception of the first three months of 1939. During the months of April, May, and June 1939, the number of sales also exceeded the num ber of properties acquired, thereby reducing the number of properties owned from 90,136 on March 31, 1939, to 87,618 on June 30, 1939. The property holdings of the Corporation, although scattered over the country, are particularly concentrated in a few States. One-fifth of the properties owned and in process of acquiring title as of June 30, 1939, was located in the State of New York and one-eleventh was located in New Jersey. Further points of concentration are Ohio, Massachusetts, Pennsylvania, Wisconsin, Illinois, Indiana, Kansas, Missouri, Michigan, Oklahoma, Texas, and California. All together, 76.5 percent of the properties owned and in process of acquiring title 183130-39---10 138 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 are located in the fourteen States mentioned above. This concentra tion corresponds in many instances to the concentration of the "real estate overhang" held by private mortgage lending institutions.6 Exhibit 53 shows the distribution of properties owned and properties in process of acquiring title at June 30, 1939, by HOLC regions and by States. In accordance with the intent of the Home Owners' Loan Act, the Corporation shows considerable leniency toward its borrowers before CHART XXXVIII NET FORECLOSURES AUTHORIZED AND PROPERTIES SOLD BY MONTHS 8000 7000 JUNE 1936 THROUGH JUNE 1939 _FROM -- - I 6000 - ______ ____ / ,' 500 0 - 140 0 0 I l NET FORECLOSURESAUTHORIZED V__-- ....- ^ - - - -- - --. 3000 2000 __,_ - - - - t,ooo 4 000 CL FISCAL 1937 yr-- -- -- -- FISCAL 1938 FISCAL 1939 it proceeds to foreclosure and permits the defaulted owner to retain his home much longer than would be justified by pure business con siderations. During the period of default, arrearages accumulate on interest and on taxes, and in many cases substantial reconditioning is required upon acquisition. Foreclosure and other acquisition costs must be added to the unpaid balance of the loan. In most instances, therefore, book values after acquisition exceed current market prices, due in part to the capitalization of accruals, and the disposition of properties is accompanied by losses. Property sales through the end of the fiscal year 1939 resulted in a arrverage of approximately of default, orperiod cumulative capital loss of $44,460,778 requirSee Section II, p. 29. 6See Section II, p. 29. HOME OWNERS' 139 LOAN CORPORATION $804 per property, representing the spread between the sales price and the capital value 7 on the books of the Corporation. The cumula tive capital loss to June 30, 1939, was 18.7 percent of the capital value of all properties sold. A detailed statement of profit and losses on property sales by calendar years is presented in Exhibit 54. The majority of HOLC properties have been sold on extended terms for a small down payment with the balance due amortized over a period up to fifteen years. Through June 30, 1939, the average down payment on such sales was 12.8 percent of the purchase price. Property sales through June 30, 1939, by terms Number of properties Term Cash sales ------------------Sales on security instruments ------------------Sales contracts or other instruments in lieu thereof -Total .- -- -.. -- --------- ------------------------------------------ Percent of total 2,999 32, 517 19, 787 5.4 58. 8 35.8 55, 303 100. 0 PROPERTY INCOME AND EXPENSE Of the 115,500 dwelling units in properties owned by the Corporation on June 30, 1939, there were 84,097, or 72.8 percent, available for rental,8 and 76,911, or 91.5 percent of the units available for rental, were rented.9 The following chart shows that the vacancy ratios in HOLC properties available for rental followed, to a certain extent, CHART XXXIX VACANCY RATIOS IN HOLC PROPERTIES PERCENTAGE OF VACANT DWELLING UNITS TO UNITS AVAILABLE FOR RENT, BY MONTHS FROM JUNE 1936 THROUGH JUNE 1939 15 15 Iz 10oc LU 010 wr 0U CL z a. w0 w 0 FISCAL 1937 r 0 w0 0 a0M FISCAL 1938 (L 0) I 0 w 0 FISCAL 1939 DIVISION MANAGEMENT PROPERTY LOAN CORPORATION HOME OWNERS 7 For a definition of capital value, see footnote 5 on p. 136. The capital loss does not include sales brokers commissions and selling expenses which, cumulatively to June 30, 1939, totalled $11,912,362 8 Units not available for rental comprise those held vacant for repairs, those held vacant for exclusive sale, those adversely occupied, and those awaiting report. 9In 959 cases dwelling units could not be rented because the tenants were in the process of eviction. 140 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 the fluctuations in general business conditions. The recession in the latter part of 1937 and the first few months of 1938 was reflected in increasing vacancy ratios, but since March 1938, the vacancy ratio decreased continuously until in June 1939 it dropped to 7.4 percent of all units available for rent.10 CHART XL RENTS AVERAGE RENT PER DWELLING UNIT RENTED IN HOLC PROPERTIES, BY MONTHS FROM JUNE 1936 THROUGH JUNE 1939 FISCAL 1937 FISCAL 1938 FISCAL 1939 PROPERTY MANAGEMENT DIVISION HOME OWNERS LOAN CORPORATION The average rent per dwelling unit rented in HOLC properties has constantly increased-reflecting in part a larger proportion of higher priced properties rented in the last two fiscal years, and indicative also of a more favorable rental market in many communities. A similar improvement is indicated in the upward trend of rental collections. 1 CHART XLI RENT COLLECTIONS PERCENTAGE OF COLLECTIONS TO TOTAL RENT ACCRUALS, BY MONTHS FROM JUNE 1936 THROUGH JUNE 1939 900 090- 0-- 80 80i 0 FISCAL 1937 FISCAL 1938 9w -O FISCAL 1938 DIVISION PROPERTY MANAGEMENT HOME OWNERS LOAN CORPORATION * 1, For figures underlying Chart XXXIX, see Exhibit 55. For figures underlying Charts XL and XLI, see Exhibit 55. HOME OWNERS' LOAN CORPORATION 141 During the fiscal year 1939, the gross operating income derived from the properties owned was $26,353,510, and the gross operating expense on properties owned, $23,161,271, leaving a net operating income of $3,192,239. Cumulatively from the beginning of operations CHART XLII WHERE THE RENTAL INCOME GOES PROPERTY EXPENSES AS PERCENTAGES OF TOTAL PROPERTY INCOME FISCAL YEAR 1939 UNALLOCATED 0.5% PROPERTY MANAGEMENT DIVISION HOME OWNERS' LOAN CORPOR.ATION to June 30, 1939, rent collections totaled $46,672,110 while total property expense was $40,755,699 This resulted in a cumulative net operating income from property of $5,916,411. Chart XLII illustrates the distribution of property expense during the fiscal year 1939. As will be seen from this chart, taxes, over which 142 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 the Corporation has no control, absorbed the largest portion of aggre gate property income, representing approximately 40 percent of total income derived from property. 12 VENDEE ACCOUNTS Through the sale of acquired properties on extended terms of pay ment, the Home Owners' Loan Corporation has to deal with an in creasing number of mortgagors who are not original borrowers. During the fiscal year 1939, the number of vendee accounts on the books of the Corporation rose from 16,572 to 52,022, and collections of interest and principal on vendee accounts aggregated $15,384,286, as compared with $3,115,164 in the preceding fiscal-year period. Cumulatively through June 30, 1939, the Corporation has collected $5,712,564 in interest, and $13,179,398 in principal from vendees. On the whole, the performance of vendees has been satisfactory. Only in a few cases has it been necessary to bring foreclosure against vendees in default who were unable or unwilling to meet their con tractual payments. Cumulatively through June 30, 1939, foreclosures against vendees numbered 596, of which 102 were withdrawn, leaving 494 net foreclosures, or less than 1 percent of the total number of properties sold on security instruments and sales contracts. Through the end of June 1939, there were 319 properties reacquired from vendees, and 25 properties were in the process of acquiring title.' a RECONDITIONING OPERATIONS The reconditioning operations of the Home Owners' Loan Corpora tion are undertaken for two broad purposes. The Corporation has to see that the properties on which it holds mortgages are main tained in such a condition of repair that its security will be protected from serious deterioration during the term of the mortgage. This safeguards the interest not only of the Corporation but of its bor rowers as well. Borrowers who are unable to make necessary repairs or to keep up their property lose interest in it, fall behind in their payments, and easily become subject to foreclosure. In addition, the Corporation has to recondition a large number of properties which it is obliged to acquire. In order to rent or sell these properties, it is necessary to place them in a sound condition suitable for normal 12Operating expenses on all owned properties are charged against the operating income received from those properties which are rented. is These properties are included in the acquisition figures given on p. 137. HOME OWNERS' 143 LOAN CORPORATION habitation. Otherwise they cannot compete with properties in the immediate neighborhood and the Corporation loses revenue both in rentals and in sales. , The following chart gives a survey of the reconditioning activities of the Home Owners' Loan Corporation from the beginning of opera tions to June 30, 1939: CHART XLIII RECONDITIONING 1,200 OPERATIONS . 10 E HMICASES LOANBANKWN BAR| From the beginning of operations to the close of June 1939, the Corporation has completed 729,809 cases of reconditioning, with a total than expenditure $139,349,472. this reconditioning, more 500,000 of small homes have Through been protected against undue deterioration, and between 13 and 14 million days of work have been provided directly for masons, carpenters, plumbers, painters, and others in the building trades. 14 In addition to these reconditioning cases handled by the Recondi tioning Division of the Corporation, certain other expenditures are made by contract management brokers who have authority to pro vide for small maintenance repairs on properties under their manage ment. During the fiscal year 1939, the number of reconditioning contracts completed was 117,698, in the amount of $26,590,243, as compared 14This estimate is based on the generally aecepted assumption that $1,000 of expenditure for repairs represents 100 days of labor. 144 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 with 118,540 contracts, amounting to $23,146,876, in the preceding fiscal-year period. Detailed information on the various types of re conditioning cases completed during the fiscal year 1939 and since the beginning of operations is presented in Exhibit 56. Despite the mass character of its reconditioning operations, the Corporation, through its regional and local offices, considers the re conditioning need of each property individually and applies, where necessary, all the customary construction technique of plans, specifi cations, contracts, and supervision. The Corporation's experience has proved that through the expend iture of a reasonable amount, the marketability for properties on hand has been greatly enhanced regardless of the age of the property or its condition upon acquisition. The results of systematic recon ditioning are evidenced by the large volume of sales of reconditioned properties which, in many sections of the country, must compete with new houses offered to the buying public at attractive terms. APPRAISALS During the fiscal year 1939, the Appraisal Section of the Corporation has completed 101,118 appraisals, or an average of 8,426 per month. This compares with 90,310 appraisals completed in the preceding fiscal year. In the early period of operations, appraisals were needed primarily to arrive at a valuation of each of the more than one million homes refinanced and thus to determine the limit to which the Corporation should make loans on these properties. In subsequent years, appraisal activities have been concentrated on valuations for the determination of sales prices or rents of acquired properties, appraisals for fore closures and deeds in lieu of foreclosure, tax assessments, partial releases, substitution of security, and insurance and disaster losses. Furthermore, appraisals are supplied in litigation cases affecting property values and in cases involving damage to the Corporation's liens through floods, earthquakes, earth slides, blight, and other conditions. Finally, the decisions of the Corporation to improve, recondition, or demolish owned properties are based on careful ap praisals of such properties. As the physical condition of properties, general economic con ditions, and real-estate values change, appraisals made in previous years become obsolete, and reappraisals or supplemental reviews are necessitated to an increasing extent. From the beginning of opera tions through June 30, 1939, appraisals completed totaled 4,926,892. HOME OWNERS' LOAN 145 CORPORATION In addition to its work for the HOLC, the Appraisal Section also renders services to the other agencies under the Federal Home Loan Bank Board, for which the Corporation is reimbursed. Also, under a cooperative arrangement with the Procurement Division of the United States Treasury Department, the Appraisal Section assists that Department in the appraisal of various types of properties throughout the country, particularly old post-office and customhouse structures which are no longer needed for Government use. The Treasury Department reimburses the Corporation for all expenses incurred in connection with this work. INVESTMENTS OF THE CORPORATION In addition to its immediate objective to bring relief to distressed home owners, the Home Owners' Loan Act, as amended, included measures to place the home-financing industry on a more stable basis. With this in view, the Act authorized the Home Owners' Loan Corporation to invest up to $300,000,000 in savings and loan associa tions, either Federal or State-chartered, provided they are member institutions of the Federal Home Loan Bank System or insured by the Federal Savings and Loan Insurance Corporation, and to subscribe for the capital stock of the Federal Savings and Loan Insurance Corporation in the amount of $100,000,000. On June 30, 1939, investments of the Home Owners' Loan Corpora tion in savings and loan associations totaled $216,458,810, as com pared to $211,726,610 at the end of the preceding fiscal-year period. The following table gives a summary of HOLC investments in savings and loan associations for the fiscal year 1939: Investments of the Home Owners' Loan Corporationin savings and loan associations Cumulative Type of association Federal savings and loan associations -----. State-chartered savings and loan associationsTotal ---------- -------- New invest- Repurchases, Cumulative ments,38 July 1, 1938 investments July 1,1938 to to June 30, 1938 June to June 30, 1939 June 30, 1939 June 30, 1939 investments to $170,764,300 40,962, 310 $3, 528, 500 3,623, 700 $1, 259,000 1,161,000 $173,033,800 43, 425, 010 211, 726,610 7,152, 200 2, 420, 000 216,458,810 A detailed statement of HOLC investments in savings and loan associations, by States, is presented in Exhibit 57. During the fiscal year 1939 the Home Owners' Loan Corporation received $7,457,939 as dividends on its investments in savings and loan associations, as against $6,134,331 in the preceding fiscal-year period. 146 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 This represents a return of approximately 3.5 percent on the average amount of HOLC investments during tfie year-a return well above the cost of money to the Corporation. FINANCIAL OPERATIONS Exhibit 58 presents a statement of condition of the Home Owners' Loan Corporation as of June 30, 1939. During the fiscal year 1939, principal changes on the asset side of the balance sheet were characterized by a decrease of original mortgage loans and advances from $2,214,064,318 to $1,928,212,237, by an CHART XLIV DISTRIBUTION 0 10 i i 20 30 i i OF PRINCIPAL ASSETS JUNE 30, 1939 PERCENT 40 50 60 i i -L EG - f--VENDEE INSTRUMENTS AND ADVANCES DISTRIBUTION 0 10 20 30 I PERCENT 50 - L ........ - 100 ------ INVESTMENTS ..... --- ------------ 60 ------- ... ---.....OTHER LIABILITIES 70 80 90 100 E G EN D BONDEDINDEBTEDNESS S..ACCOUNTS PAYABLE,ACCRUALS AND DEFERRED CREDITS 90 .J.CASHINCLUDINGEARMARKEDFUNDS OF PRINCIPAL JUNE 30, 1939 40 30 iL END -ORIGINALMORTGAGELOANSANDADVANCES "-PROPERTIES OWNEDAND IN PROCESS OF ACQUISITION 70 i /.. -----.--.---- .... RESERVES ---.......CAPITAL STOCK LESS DEFICIT DIVISIONOF RESEARCH AND STATISTICS FEDERALHOMELOANBANKBOARD increase of vendee instruments and advances from $50,610,692 to $151,896,337, and by an increase of property owned and in process of acquisition from $516,206,401 to $549,441,184. The bond retirement fund rose from $91,366,431 to $149,217,560, and investments from $311,726,610 to $316,458,810. On the other side of the balance sheet, decreased from $2,952,993,850 to the bonded indebtedness $2,949,305,025, and accrued liabilities, including mainly accrued inter est on bonded indebtedness, declined from $16,431,521 to $7,832,281. HOMVE OWNERS' 147 LOAN CORPORATION The reserve for losses shows a reduction from $99,977,654 $89,488,388, and the deficit an increase from $40,893,292 to to $59,562,029. Detailed statements of income and expense for the fiscal year ended June 30, 1939, and from the beginning of operations to June 30, 1939, as well as an analysis of changes in deficit for the fiscal year 1939, are given in Exhibits 59, 60, and 61, respectively. During the fiscal year 1939 the distribution of income as well as of expenses showed marked changes. Such changes are summarized in the following table which gives a condensed comparative statement of income and expenses for the fiscal years 1938 and 1939, together with provisions for losses and the net deficit in each year. Condensed income and expense statement for the fiscal years 1938 and 1939 Items Operating and other income Interest on original mortgage loans and advances ----------------------Other interest earned - ----------------------------------------------Property income -------------------------------------------------------Dividends on investments in savings and loan associations -----------------------------------------------------Miscellaneous --------------Total income - Operating and other expenses -----------------------------------------Interest on bonds Amortization of discount on refunded bonds ---------------------------Administrative and general expenses Property expenses ------------------------------------------------------Miscellaneous----------------------------------------------------------Total expense -------------------------------------------------------- July 1, 1937, to June 30, 1938 July 1, 1938, to June 30, 1939 $118, 593,929 1,091,450 16,160, 089 6,134, 331 165,816 $103, 263, 288 4,979,590 26, 353, 510 7, 457, 939 201,771 142, 145, 615 142, 256, 098 75, 2, 31, 13, 768, 685 351, 438 984, 320 836, 854 184 72, 199, 2, 638, 27, 853, 23,161, 571 265 484 271 123, 941,481 125, 852, 591 Net income before losses in the liquidation of assets and provision for losses - 18,,204, 134 16, 403, 507 Losses in liquidation of assets and provisions for losses - 38, 051, 800 34, 921,055 19, 847, 666 18, 517, 548 Deficit for period ------------------ ----------------------------------------------- ' Consists primarily of interest on purchase money mortgages and advances and on sales contracts and advances. Because of the decrease in the number of loans outstanding and the reduction in the borrowers' indebtedness, income from interest on original mortgage loans and advances decreased by $15,330,641, or almost 13 percent. This, however, was approximately offset by an increase in property income of $10,193,421, by an increase of interest earned on vendee accounts of $3,897,693, and by an increase of divi dends received on share investments in savings and loan associations of $1,323,608. On the expense side, administrative and general expenses were reduced sharply by $4,130,836, or 13 .percent. Interest paid on HOLC bonds likewise decreased by $3,569,114 because of interest 148 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 savings resulting from refunding operations and because of a reduction in bonds outstanding. Property expenses, however, rose by $9,324,417 due to the increase in property owned. The larger property expenses were mainly responsible for the slight increase in total operating and other expenses. Property income exceeded property expenses by $3,192,239 during the year. CHART XLV DISTRIBUTION OF INCOME DISTRIBUTION OF EXPENSE FISCAL YEAR 1939 FISCAL YEAR 1939 INTEREST ON VENDEE ACCOUNTSDIVIDEN * PROPERTY IN OME CNGENERAL MISC INTEREST ON ORIGINAL 22% "PROPERTY9ADMINISTRATIVE/ . ' y',INTEREST ON BONDS^ DIVISION OF RESEARCH AND STATISTICS FEDERAL HOMELOANBANKBOARD After provision for losses in the amount of $34,921,056 during the year, the deficit for the operations of the fiscal year 1939 was $18,517,548 as against $19,847,666 in the preceding fiscal year. Cumulatively from the beginning of operations to June 30, 1939, the total operating and other income of the Corporation was $699,782,645, and total operating and other expenses $612,121,506, leaving a net income-before deduction of losses in the liquidation of assets and provision for losses which may be sustained in the process of liquida tion-of $87,661,139. After deduction of $147,223,168 for such losses and loss reserve provisions, the net deficit as of June 30, 1939, stood at $59,562,029. As was pointed out in previous sections of this report, the Home Owners' Loan Corporation, in an emergency operation of unprec edented magnitude, refinanced more than one million mortgage loans which had been in default or at the point of default. From the outset, it was to be expected that a number of HOLC borrowers would not be able to carry the cost of home ownership, despite the liberal terms provided by the Corporation, and that the liquidation of defaulted HOME OWNERS' 149 LOAN CORPORATION loans and the disposition of property acquired might be attended by losses. The liquidation experience made by the Corporation to date has confirmed that view. Sound business practice requires the setting aside of reserves to which such losses may be charged. The Board of Directors of the Corporation has, therefore, determined that each year specified amounts be set aside from income, the accumulation of which is in tended to approximate eventually the total losses which may be sus tained in the liquidation of mortgage loans, delinquent interest, and property. Under this provision, reserves were accumulated at the rate of approximately $2,900,000 per month during the fiscal year 1939.1 Analysis of reserves and charges to reserves Cumulative to June 30, 1938 Item Fiscal year 1939 Cumulative to June 30, 1939 $111, 237,153 $34,900,000 $146,137,153 Losses 51,086 On mortgage loans and vendee instruments 1-...-----On capital value of properties sold--------------------7, 753, 334 On property charged off .---------------------------- -------------3, 459,168 Sales brokers' commissions and selling expenses --------- 42, 756 36, 707, 444 181,783 8,453,194 93, 841 44, 460, 779 181,783 11,912,362 11, 263, 588 45, 385,177 56, 648, 765 Allocated to reserves ------------- ---------- Total losses....-------------------------------- -10,485,177 89,488,388 Balance in reserves---------------------------------99,973,565 - ---------4,089 ----------Adjustments to cumulative reserve account for prior years Total balance............---------------------------------..... 1 99, 977, 654 -10, 485,177 89,488, 388 Includes reserve provisions for accumulated interest. As shown in the above table, the balance of reserves for losses on mortgage loans, interest, and properties decreased by $10,485,177 during the fiscal year 1939 because losses charged off during that year exceeded the provisions for such losses. BONDS OUTSTANDING In addition to its capital of $200,000,000, the Home Owners' Loan Corporation has been authorized to issue bonds up to $4,750,000,000 to carry out the purposes of the Act creating the HOLC. Additional bonds may be issued to refund outstanding obligations. The gross amount of bonds issued through June 30, 1939, was $5,766,675,875. 16By Board resolution of November 15, 1938, retroactive effect was given to a charge to reserves for losses sustained prior to June 30, 1938, in the amount of $11,211,150.83 previously charged directly to profit and loss. This amount included $7,749,213.71 for loss on capitalized value of property sold, $3,459,202.24 for commissions and selling expenses on property sales, and $2,734.88 for loss of interest on foreclosure sales, redemptions, etc. Of the total of $11,211,150 83, losses in the liquidation of assets applicable to the fiscal year 1938 amounted to $10,880,999.10. 150 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 Of this amount, $2,383,222,325 was for refunding outstanding issues and $480,048,525 was retired, leaving a net bond liability outstanding of $2,949,305,025 on June 30, 1939, as compared with $2,952,993,850 on June 30, 1938. In addition to bonds retired to June 30, 1939, there was available to the Bond Retirement Fund $149,217,560, and $19,706,646 was earmarked for transfer to the fund in July, for a total of $168,924,206 which may be used for the retirement of bonds. All unmatured bonds outstanding are guaranteed by the United States Government as to principal and interest. The Corporation continued making exchanges of 2% percent bonds for 2%- and 3-percent bonds when favorable market conditions permitted. The cumulative amount of exchanges to June 30, 1939, involved over $1,400,000,000 of the Corporation's bonds, and will result in a net saving in interest to the HOLC of approximately $20,600,000. Of the cumulative total of exchanges, over $247,000,000 were completed during the fiscal year 1939. On June 1, 1939, a total of $325,254,750 Series F, 1%-percent bonds matured, of which $319,669,300 was refunded through an exchange offer into $127,867,400 Series K, %-percent bonds due May 15, 1940, and $191,801,900 Series L, %-percent bonds due May 15, 1941, and provision was made for payment in cash of the balance, amounting to $5,585,450. On May 18, 1939, an announcement was made that 2%-percent Series B bonds of 1939-49 would be redeemed on August 1, 1939, and an offer was made to the holders of same to exchange these bonds for Series M, 1 -percent bonds of 1945-47. A total of $687,266,800 Series B, 2%-percent bonds was accepted for exchange, and the balance amounting to approximately $217,000,000 was paid off in cash on and after August 1, 1939. As a result of exchange and refunding operations, the average interest rate on all bonds was reduced from 2.527 percent as of June 30, 1938, to 2.098 percent as of June 30, 1939. A detailed statement of bonds issued, refunded, and retired to June 30, 1939, and bonds outstanding on that date, is presented in Exhibit 62. PROGRESS IN LIQUIDATION During the fiscal year ended June 30, 1939, the Home Owners' Loan Corporation made substantial progress toward liquidation. This is particularly significant in that it reflects the accelerating rehabilitation of the hundreds of thousands of distressed borrowers who, when refinanced by the, Home Owners' Loan Corporation, were on the average delinquent two years in both principal and interest and between two and three years in taxes. 151 HOME OWNERS' LOAN CORPORATION When the Corporation ceased its refinancing operations, it had loans in the total amount of $3,093,450,641 on its books. Subsequent advances to original borrowers for various purposes and interest converted to principal increased this amount to $3,173,730,305 as of June 30, 1939. At the end of the fiscal year 1939, there had been repaid on this principal $601,002,640, or 18.9 percent of the gross amount of original loans and advances; and $644,515,428, or 20.3 percent of the gross amount of original loans and advances, had been transferred to property and similar accounts representing, for the most part, properties acquired or in process of acquisition. This left a net balance of original loans outstanding, plus advances, of $1,928,212,237 on June 30, 1939. At the end of the preceding fiscal-year period, such net balance stood at $2,214,064,317. Reduction of originalloans Up to June 30, 1938 Original amount of loans closed Advances to borrowers and interest merged with principal in extension agreements Up to June 30, 1939 $3,093, 450, 642 $3,093,450, 641 ..--------------------------------------------------------40,325,427 80,279, 664 Cumulative gross indebtedness of borrowers. ---------------------Less principal repayments--------------------------------------------Less balances transferred to property and similar accounts -------------Balance of original loans and advances outstanding ---------------- 3,133, 776,069 3,173, 730,305, 432, 520, 240 487,191,512 601,002, 640 644, 515,428 2,214,064,317 1,928, 212, 237 To an increasing extent, the reduction of original loans and ad vances has been effected by loan repayments in full. Through June 30, 1939, the loans of 53,676 original borrowers, in the total amount of $125,638,128, had been voluntarily repaid in full prior to the expiration of the loan contract. Of these, 18,769 loans aggregating $46,478,954 were repaid during the fiscal year 1939. The following table gives a summary of all terminated accounts, including, in addition to the above-mentioned payments in full by original borrowers, a number of accounts terminated by other methods: Cumulative number and amount of accounts terminated to June 30, 1938, and June 30, 1939 Up to June 30, 1938 Number Amount Up to June 30, 1939 Number Amount Original loans paid in full or redeemed--------------- 34,907 $79,159,174 53, 676 $125,638,128, Cash sales of acquired properties - - - ----------------Vendee instruments paid in full or redeemed ----------Properties and accounts charged off or consolidated . Total accounts terminated ------------------- 1,025 71 23 36,484 3,735,215 229,944 48,449 84,461,140 3,000 585 91 10,-492, 806 1,585,301 81,341 58,036 139, 715,653 Cash s 4ls at foreclosure -------------- 458 1,288, 358 684 1,918,077 152 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 A more comprehensive measurement of the progress in liquidation is the amount by which the Corporation was able to reduce the balance of its total debtor and property accounts."6 At the end of the fiscal year 1938, the balance of these accounts stood at $2,781,359,590. During the fiscal year 1939, the Corporation received $179,222,497 in principal repayments on original loans and vendee accounts, $21,475,577 proceeds from property sales, and charged off as loss on principal $45,380,102, for a total of $246,078,176. During the same period, $94,671,523 was added to borrower, vendee, and property accounts in the form of advances or capital charges to property, mainly for reconditioning. As a result, the balance of debtor and property accounts on June 30, 1939, was $2,629,952,937, a net decrease of $151,406,653 during the year. All together, through June 30, 1939, the Corporation's gross invest-. ment in loans and properties-aggregating $3,335,226,769 at that date-has been reduced by $705,273,832, or 21.15 percent of the total. Of this reduction, $648,636,965, or 19.45 percent of the gross total investment, is accounted for by sums actually received by the Cor poration in the form of repayments on debtor accounts and of pro ceeds from property sales; $56,636,867, or 1.70 percent of the gross total, represents losses sustained in the liquidation of loans, interest, and property. Reduction of total debtor and property accounts through June 30, 1939 Amount Gross investment in loans and properties, June 30, 1939-------............... Percent $3, 335, 226 769 100 00 Less repayments on original loan accounts through June 30, 1939------.......------601, 002, 640 ---Less repayments on vendee accounts through June 30, 1939-------------... ---....... Less proceeds from property sales through June 30. 1939--------.......----------- 13,179, 398 34, 454,927 Total------------.........-----------------------------------------648,636,965 Less loss on principal sustained through June 30, 1939-----------.. ----------- 19 45 56, 636, 867 1.70 Balance of loans outstanding and properties on hand, June 30, 1939 ---....2,629,952,937 78.85 The progress in liquidation varies considerably among the different regions as indicated in Chart XLVI. As of June 30, 1939, the San Francisco region, including the Pacific and Mountain States, led with a reduction of the Corporation's gross investment by 28.48 percent, including losses sustained in the liquida 16Debtor accounts include original loans and advances to borrowers, subsequent additions to the original loans, and intere t 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 book value both of property owned and property in foreclosure 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 accounts 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. HOME OWNERS' 153 LOAN CORPORATION tion. On the other extreme, the New York region, which comprises New York, New Jersey, and the New England States, was far below the national average with a reduction of only 13.11 percent. It is known that in this area, home owners and real-estate values have been particularly affected by the turn in economic conditions in the early Thirties as evidenced by the excessive volume of repossessed real estate held by private financial institutions in that area. CHART XLVI REDUCTION OF THE GROSS INVESTMENT IN LOANS AND PROPERTIES THROUGH JUNE 30,1939, BY H.O.L.C. REGIONS 0 5 10 PERCENT 15 20 25 30 UNITED STATES I -NEW YORK 2A - BALTIMORE 2B - CINCINNATI 3A-ATLANTA 3B - MEMPHIS 4A - CHICAGO 4B - DETROIT Omni 5A - OMAHA 5B -DALLAS 6 -SAN FRANCISCO Sums Received Losses Sustained DIVISIONOF RESEARCH AND STATISTICS FEDERALHOMELOANBANK BOARD Along with the realization of assets, the bonded indebtedness of the Corporation has been gradually reduced. 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, 1939, repayments of borrowers on their principal indebtedness amounted to $614,182,038, and other items applied to the retirement 183130-39--11 154 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 of bonds aggregated $34,790,380, for a total of $648,972,418. Of this amount, $629,265,772 had been deposited in the Bond Retirement Fund through June 30, 1939, and $19,706,646 was deposited during July. The following table shows the disposition of the funds allocated to the Bond Retirement Fund through June 30, 1939: Applied to retirement of bonds --------------------------$480, 048, 211 Deposited with U. S. Treasury for retirement of matured bonds on which interest has ceased ------------------------------1, 356, 425 Available for future bond retirement ----------------------147, 861, 136 629, 265, 772 The net reduction of the bonded indebtedness has been below the gross retirement of bonds as required by principal repayments of loans. The peak of bonds outstanding was reached on May 31, 1936, at about the same time the refinancing operations of the Home Owners' Loan Corporation were discontinued. At that date, bonds outstanding tothled $3,047,046,575. On June 30, 1939, bonds out standing aggregated $2,949,305,025-a net reduction of $97,741,550 over about three years. The discrepancy between the net reduction of the bonded indebtedness and the gross receipts applied to the retirement of bonds throws an interesting light on the liquidation problem of the Corporation. In the process of liquidation, the Home Owners' Loan Corporation has been obliged to acquire a substantial volume of properties and to expend considerable amounts on reconditioning, taxes, and insurance; it has sold many of these properties on extended terms of payment and has thus acquired vendee instruments in lieu of the original mortgage loans; and it has made advances to original borrowers and vendees for various purposes. Also, the Corporation has increased its investments in savings and loan associations-as authorized in the Home Owner's Loan Act during the last few years. All these factors have offset, in part, the reduction of original loan balances and have naturally tended to retard the liquidation of the bonded indebtedness. ADMINISTRATION AND PERSONNEL Up to the end of the fiscal year 1939, the process of liquidation has involved shifts in the Corporation's activities rather than an appreci able reduction of its work load. It was shown in preceding pages how the decrease in the number of 6riginal loans serviced has been offset in a large measure by an increase in the volume of acquired properties to be managed, sold, or rented, and by a rise of vendee accounts to be serviced. The volume of necessary reconditioning and of appraisal HOME OWNERS' LOAN CORPORATION 155 work is still high; foreclosure cases, although.less than in previous years, are still substantial in number. Again it should be borne in mind that the particular type of bor rowers and properties with which the Home Owners' Loan Corporation has to deal, and the nation-wide operations of the Corporation present administrative problems of immense magnitude. The original bor rowers of the Corporation were in heavy default and still require, in a large number of cases, considerable assistance in their efforts to re habilitate themselves. The Corporation's activities, therefore, include many services for borrowers not normally required in the operations of private mortgage-lending institutions. Furthermore, the handling of the typically small loans made by the Corporation is relatively expensive since overhead expenses on an average mortgage loan of $3,000 are approximately the same as on an average l9an of $30,000. Finally, the Corporation services loans in almost every one of the 3,073 counties of the United States, and the properties it had to acquire are similarly spread over the whole country. Despite the magnitude of its task and the continued complexity of its liquidation problem, the Corporation in the last few years has operated under steadily decreasing administrative costs brought about by contractions in organization and reduction in personnel, attendant upon the cessation of its refinancing operations, and by greater efficiency of management. This is illustrated by the following figures: In November 1934, when the peak in the number of offices main tained by the Corporation and in personnel was reached, there were 458 offices operating in the field, including regional, State, division, district, and other branch offices. On June 30, 1939, the number of administrative or supervisory offices of the Corporation was reduced to 66, including 10 regional, 52 State, division, and territorial offices, and 4 district offices. In addition, the Corporation maintained 110 field stations at that date. Such stations have been established at points of loan concentration where collection facilities are needed but where no full offices are required. They permit close contact with the Corporation's borrowers at a minimum of expense. Most of these stations are in post office space or in the homes of HOLC representa tives and involve no rental cost to the Corporation. On November 30, 1934, the personnel of the HOLC numbered 20,811, of whom 2,762 were employed in the Washington office, and 18,049 in the field. On July 1, 1939, this number was reduced to 11,007, of whom 1,318 were employed in the Washington office, and 9,689 in the field."7 17 All these figures include employees on a per diem basis 156 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 Administrative expenses, which include all salaries, reached their peak in the fiscal year 1936, in which the lending operations of the Corporation ceased; in that year they amounted to $35,881,600. In the fiscal year 1939, they were only $25,025,000, or approximately 70 percent of the 1936 peak. The above data include various reductions in offices and personnel made during the fiscal year 1939. In that period the Boston Regional Office was closed and its operations transferred to the New York CHART XLVII TOTAL NUMBER OF EMPLOYEES* BY MONTHS, JULY 1935-JUNE 1939 1935 1936 * Includes W.A.E. Employees 1937 1938 1939 DIVISIONOF RESEARCH AND STATISTICS FEDERALHOMELOAN BANKBOARD Regional Office. Furthermore, 15 divisional, district, and subdistrict offices were closed, and the number of field stations was reduced by 63. In the Washington office, the organization was simplified by abolition of the general supervision over the six territorial districts through Assistant General Managers; since September 1, 1938, super vision of territorial and field operations has been exercised by the General Manager through the department heads in charge of the operating divisions of the Corporation. From July 1, 1938, to July 1, 1939, the number of employees dropped from 13,140 to 11,007-a decrease of 2,133 employees, or by more than 16 percent, with an attendant reduction of $2,713,720 in annual salary cost. Detailed information on the number of em- HOME OWNERS' 157 LOAN CORPORATION ployees on July 1, 1939, by departments, divisions, and sections, is given in Exhibit 63. In its personnel policy, the Home Owners' Loan Corporation is faced with a difficult problem. In the process of liquidation, the Corporation is forced to reduce its staff by large numbers each year; on the other hand, it needs a well trained personnel to carry out highly specialized tasks requiring experience and skill. With the prospect of continuous reductions in personnel because of liquidation, and with the increase in building activity and mortgage lending in CHART XLVIII NUMBER OF EMPLOYEES IN PRINCIPAL DEPARTMENTS® BY MONTHS, JULY 1935-JUNE 1939 5,000 LO AN SERVICE - - 4,000 --w 3,000 \ W S ' S 0 PROPERTY / 2,000 ... 110 00 -- OW dft MANAGEME e P ........ " " . NG a APPRAISAL RECONDITION -- - -- - - -- -- L EGAL - -- FED - L HOMELOANBANKB -- - .. - the last few years, many HOLC employees have sought and found positions in private business at better pay and have therefore volun tarily resigned. The number of such voluntary resignations during the period from July 1, 1937, to July 1, 1939, was 3,058. It thus becomes increasingly difficult for the Corporation to retain its trained personnel against the competition of private employers who avail themselves of the opportunity to obtain employees well versed in the various economic, legal, and technical aspects of mortgage finance. The personnel policy of the Corporation, therefore, places growing emphasis on the development of incentives to more and better work by a fair plan of advancement and promotion, and on a more accurate adaptation of employees' ability to the Corporation's work through training on the job. 158 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 Salaries paid by the Corporation are based upon the classification of positions as required in the President's Executive Order of June 21, 1934. All positions, both in the field and in the home office, have been classified. Salary schedules have been worked out which provide steps within the grade and, except in cases in which a probationary period is obviously in order, new employees are started at the minimum of the range of the appropriate grade. Increases in salary are based upon ability and performance. An important factor in this process is an employee service rating plan which periodically records opinions of responsible supervisors concerning quantity and quality of work performed. _ __ _U__ I List of Exhibits THE FEDERAL HOME LOAN BANK BOARD AND ITS AGENCIES Page 1. Comparative statement reflecting, by offices, the number of Board employees as of the close of the fiscal years 1938 and 1939 ------------------------------------2. Statement of receipts and disbursements of the Board for the fiscal years 1938 and 1939------------------ 163 163 SURVEY OF HOUSING AND MORTGAGE FINANCE 3. Indices of total building cost, and of cost of materials and labor used in construction of standard six-room frame house -------------------------------------4. Nonfarm real estate foreclosures in the United States, 1926 to 1939---------------------------------------5. Estimated number of nonfarm real estate foreclosures, by Federal Home Loan Bank Districts and by States - ---6. Rate of residential building in all cities of 10,000 or more population ---------------------------------7. New nonfarm residential building in the United States 8. Changes in selected types of individual long-term savings9. Estimated volume of mortgage loans made on nonfarm one to four-family dwellings, by type of lender ----------10. Summary of estimated nonfarm mortgage recordings, Janu ary to June 1939---------------------------------11. Estimated balance of outstanding mortgage loans on non farm one- to four-family dwellings --------------- 164 164 165 165 166 166 167 168 170 FEDERAL HOME LOAN BANK SYSTEM 12. Number and estimated assets of member institutions, June 30, 1938, and June 30, 1939------------------13. Advances and repayments for periods indicated, and the balance of advances outstanding at the close of such periods ------------------------------------------- 159 171 172 160 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 Page 14. Advances outstanding by Bank Districts at the close of each fiscal year, 1934 to 1939-----------------------173 15. Percent of members borrowing as of June 30 -----------174 16. Types of advances made by the Federal Home Loan Banks 174 17. Statement reflecting the trend of collateralized and un collateralized advances outstanding by half-year periods------------------------------------------175 18. Interest rates charged to member institutions for advances as of July 1, 1939 --------------------------------176 19. Statement of condition as of June 30, 1939 -------177 20. Investment holdings at the close of the fiscal year 1939-183 21. Statement of consolidated debentures outstanding, June 30, 1939 ----------------------------------------- 184 22. Interest rates paid to member institutions for time de posits as of July 1, 1939 ---------------------------23. Statement of profit and loss for the fiscal year ended June 184 30, 1939 ----------------------------------------- 185 24. Analysis of surplus and undivided profits for the fiscal year ended June 30, 1939 ------------------------------25. Total dividends declared through June 30, 1939, and the annual rates paid semi-annually for the fiscal years 1938 and 1939----------------------------------------26. Members of the Federal Savings and Loan Advisory Council ----------------------------------------27. Estimated volume of new mortgage loans made by all sav ings and loan associations, by months, July 1936 to June 1939---------------------------------------28. Estimated volume of new mortgage loans made by all savings and loan associations during the fiscal years 1938 and 1939, by Federal Home Loan Bank Districts29. Distribution of new mortgage loans made by all savings and loan members of the Federal Home Loan Bank System, according to purpose ----------------------30. Combined balance-sheet items for savings and loan mem ber institutions of the Federal Home Loan Bank System as of December 31, 1938, compared with December 31, 1937-------------------------------------------31. Percentage distribution of balance-sheet items for all savings and loan members of the Federal Home Loan Bank System, as of December 31, 1938, compared with December 31, 1937--------------------------------- 189 190 191 192 193 193 194 195 161 LIST OF EXHIBITS Page 32. Operating ratios for savings and loan member institu tions of the Federal Home Loan Bank System, -calendar year 1938 ----------------------------------------33. Number and asset distribution of member savings and loan associations of the Federal Home Loan Bank System, by asset size groups, as of June 30, 1939----------------- 196 197 FEDERAL SAVINGS AND LOAN ASSOCIATIONS ~34. Number and estimated assets as of the end of each fiscal year, 1934 to 1939 --------------------------------35. Number of associations chartered, mortgage loans out standing, and assets, by Federal Home Loan Bank Districts and by States, June 30, 1938, and June 30, 1939--------------------------------------------36. Private investors in repurchasable shares and private re purchasable capital, by Federal Home Loan Bank Districts and by States, June 30, 1938, and June 30, 1939--------------------------------------------37. Investments of the United States Treasury and the Home Owners' Loan Corporation, by Federal Home Loan Bank Districts and by States, June 30, 1938, and June 30,51939-----------------------------------------38. Summary of new mortgage loans made by reporting asso ciations during year ended June 30, 1939------------39. Consolidated statement of operations for 1,355 reporting Federal savings and loan associations for the year ended December 1938-----------------------------------40. Operating ratios of 1,345 Federal savings and loan associa tions grouped as to size of association --------41. Average annual dividend rates declared for the calendar years 1937 and 1938 ------------------------------- 197 198 200 201 203 204 206 206 FEDERAL SAVINGS AND LOAN INSURANCE CORPORATION 42. Number and assets of all insured associations and number of private investors in repurchasable shares, by Federal Home Loan Bank Districts and by States, June 30, 1939 43. Comparison of all savings and loan members of the Federal Home Loan Bank System with all insured savings and loan associations, by Federal Home Loan Bank Districts and by States, June 30, 1939 ------------44. Financial statement as of June 30, 1939----------------- 207 210 212 162 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 Page 45. Income and expense statement for the period July 1, 1938, to June 30, 1939----------------------------------46. Expenses for the period July 1, 1938, to June 30, 1939---47. Average increase in private repurchasable capital of 1,529 identical insured institutions during 1937 and 1938 ---- 213 214 214 HOME OWNERS' LOAN CORPORATION 48. Status of borrower accounts (original loans only), June 1939--------------------------------------------215 49. Net foreclosure authorizations on original loans, cumula tively to June 30, 1939, by regions and by States -----216 50. Summary of foreclosures on original loans--------------217 51. Average foreclosure costs and average time required to complete foreclosure, by States; original loans only - 217 52. Average cost of deed in lieu of foreclosure, by States; original loans only -------------------------------- 219 53. Properties owned and in process of acquiring title, by regions and by States, as of June 30, 1939 -----------220 54. Profit and loss on sales of real estate, by calendar years --. 220 55. Percentage of vacant units to units available for rent, percentage of rents collected to rent accruals, and average rent per unit, by months--------------------221 56. Reconditioning operations; number of contracts completed221 57. Investments in savings and loan associations, by States, as of June 30, 1939-------------------------------222 58. Balance sheet as of June 30, 1939 ---------------------223 59. Statement of income and expense for the fiscal year 1939 226 60. Statement of income and expense from the beginning of operations-June 13, 1933, to June 30, 1939 ---------227 61. Analysis of changes in deficit for the fiscal year ended June 30, 1939------------------------------------228 62. Bonds issued, refunded, and retired to June 30, 1939, and outstanding as of June 30, 1939 --------------------229 63. Number of employees by departments, divisions, and sections, as of July 1, 1939 ------------------------230 EXHIBIT 1 Federal Home Loan Bank Board-Comparativestatement reflecting, by offices, the number of Board employees as of the close of the fiscal years 1938 and 1939 1938 Offices of Board Members--------...... Office of the Governor: Governor's immediate officeOffice of the Comptroller.... Office of the Chief SupervisorTotal Governor's office..... Office of the Secretary 1939 1938 13 13 9 35 20 -------64 7 33 23 ......----------- Office of Public Relations ....------- Division of Research and Statistics------------------------- 1939 Legal Department--------------. 17 Review Committee- ..-----------. 2 Home Building Service Division ......-------- 11 8 8 63 Examining Division: Washington office------------.. ... Field .............---------------------- 9 184 9 191 16 21 Total Examining Division- 193 200 2 6 14 347 7 17 Grand total------ ---------- EXHIBIT 2 Federal Home Loan Bank Board-Statement of receipts and disbursements of the Board for the fiscal years 1938 and 1939 July 1, 1937, to July 1, 1938, to June 30, 1938 June 30, 1939 Balance at beginning of fiscal year........-------------.........------------------- $256, 593 79 $292, 476 78 Receipts: Assessments upon Federal Home Loan Banks-------.. ......-----------------------150,000. 00 Home Owners' Loan Corporation--.. ...---------------------------- 295,144.14 Federal Savings and Loan Insurance Corporation .......-------------64,615 90 Examining receipts-------.......--......----------------------------783,874. 27 Miscellaneous refunds------------...........--------------------------........ 4, 381.17 225,000.00 125,615.00 69, 257. 28 643,939.19 6, 787.10 Total receipts---.......... ----------------------------------- 1,298,015. 48 1,070, 598. 57 Total cash and receipts.......--............----------.....------------------- 1, 554, 609. 27 1,363,075. 35 Disbursements: Salaries-----------.. --------------------------------------857, 807.09 Supplies and materials ---------------------------------------10, 511 97 Newspapers and periodicals--------------------------------------59.75 Communications...-------------------------------------------28,881. 49 Travel --------------------------------------------------176,876 56 Transportation of things ..............----------------------------------------787.92 Printing and binding-----------.... ..----------------------------13, 756 64 Photographing and duplicating-------------------------------22,979.17 Rents .......................---------------------------------------------------18,514 96 Equipment, furniture, and fixtures..............-------------------------------........... 6, 956.94 888, 650. 32 9, 405.19 101 67 16,011.95 144, 884. 78 861.69 15, 365 17 13,822.36 23,502 14 12,044 97 Total disbursements---- ---------- ......----------....------ ---- 1,137,132 49 1,124,650.24 Repayment to Home Owners' Loan Corporation and Federal Savings and Loan Insurance Corporation for retirement of amounts pre viously advanced by the Corporation-------------.........---------------- 125,000.00 Total disbursements and repayments...................------------------.....-----... 1, 262,132. 49 1,124,650. 24 292,476. 78 238, 425. 11 Balance at end of fiscal year --------- ---------------------------- 0 163 164 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 Statement of cash receipts and disbursements of the savings and loan promotion fund for the year ended June 30, 1939 Balance as of June 30, 1938---------------------- $34, 063. 98 Receipts- 0 Total cash and receipts ---------Disbursements: Travel-----------------------7. 34, 063. 98 89 Balance as of June 30, 1939----------------1 34, 056. 09 1 This balance reverts to the general fund of the Treasury Department as of June 30, 1939. EXHIBIT 3 Indices of total building cost, and of cost of materials and labor used in construction of standard six-room frame house [Average month 1936= 100] Materials Labor 98.7 99.0 99.1 99.2 99.4 99.5 99.9 100. 3 100. 4 100.7 101.4 102.5 981 98 1 98 2 988 99.4 99.9 1003 100. 5 101.0 101.5 102 0 102 2 98. 5 98.7 98.8 99.1 99.4 99.7 100 1 100. 4 100 6 101.0 101.6 102.4 1937 January -104.0 February --105.6 March .-------- 107.7 April--------109.1 May .---------110.0 June --------110. 2 July--------110.5 August -1106 September ---1103 October --------109.8 November---------1092 December.-------108.1 102. 7 103. 4 104 7 106.7 107.7 109. 5 1106 110.9 111.0 111.2 111 2 111.0 103. 6 104.9 106 7 108.3 109.2 110.0 110.5 110.7 110.5 110.2 109 9 109.1 1986 January---------February--------March April--------May ---June ---------July ---------August --------September-------October ------November -----December ----- Total Materials Labor Total " 'W 1938 January---------February ----March --------April -----------May-------------June -----------July---------August- ----------September ----- ----October -------November ----------December----------- 107. 2 106.5 105.7 105. 2 104.8 104.6 104.2 103 4 103 4 103 3 103. 2 103.1 110. 9 111.0 111.4 111.4 111.3 111.5 112 0 112. 3 112. 4 112.1 112.1 112.1 108.4 108.0 107.6 107.2 1069 106.9 106.8 106.4 106.4 106.2 106.1 106.1 1939 January ------------February -----------March -------------April----May--------------- . June------ 103.0 103. 0 103.0 102. 9 102. 7 102. 5 111.9 112. 2 112.4 111.9 111.5 111.3 106.0 106.0 106.1 105.9 105.6 105.4 Source: Division of Research and Statistics Federal Home Loan Bank Board. EXHIBIT 4 Nonfarm real estate foreclosures in the United States, 1926 to 1939 Year Number Rate per 1,000 non- farm Year Number 68,100 91,000 116,000 134, 900 150,100 193,800 248,700 3.60 4.80 6.10 7.10 7.90 10 20 13.10 1933-------------------1934-------------------1935-------------------1936-------------------1937-------------------1938-------------------19391------------------- 1 January to June; rate on annual basis. Source: Division of Research and Statistics, Federal Home Loan Bank Board. farm dwellings dwellings 1926 --------------------1927--------------------1928-------------------1929 1930 --------------1931 -------------------1932 .-------------------- Rate per 1,000 non 252.400 230,988 229,550 186,993 153,025 119,290 (56,953) 13.34 12.21 12.13 9.88 8.09 6.31 6.02 165 EXHIBITS EXHIBIT 5 Estimated number of nonfarm real estate foreclosures, by Federal Home Loan Bank Districts and by States State and Bank District Year ending June 30, 1938 Year ending June 30, 1939 United States- 133, 568 112, 241 No. 1-Boston..--.. Connecticut -Maine ---------Massachusetts New Hampshire Rhode Island Vermont-------- 13, 642 2, 406 904 8, 485 423 1,134 290 12, 614 2, 686 977 7, 786 330 681 174 No. 2-New York - New Jersey -New York- 26,406 7,828 18,578 25,915 No. 3-Pittsburgh .... Delaware-----Pennsylvania West Virginia -- 16, 666 216 15, 096 1,354 13,685 249 12,875 561 13,403 11,013 1,868 1, 704 483 1, 793 1,317 2, 552 2, 649 794 1,947 384 1,612 1, 494 1,860 2, 230 399 1,330 No. 5-Cincinnati --Kentucky ------Ohio-------Tennessee------- 15,823 1,615 11,717 2,491 10, 783 1,357 7,274 2,152 No. 6-Indianapolis Indiana--------Michigan------.. 8, 786 5, 360 3, 426 6, 596 2, 453 4,143 No. 4-Winston ----Salem--Alabama-------District of Co lumbia -------Florida -----Georgia ------Maryland ------North Carolina South Carolina Virginia ---- 5,501 20, 414 State and Bank District Year ending Year ending June 30, 1938 June 30, 1939 No. 7-Chicago ..-- 8, 864 7,989 5, 596 3,268 4, 769 3, 220 No. 8-Des Moines- 7,947 6, 744 ------- 1,065 4, 349 379 665 1.093 1,030 3,894 223 504 Illinois . ..---Wisconsin------- Iowa 1,402 Minnesota -Missouri -------North Dakota -- South Dakota - No. 9-Little Rock_- 5,235 4, 727 Arkansas-----.. Louisiana------Mississippi-----New Mexico -Texas --------- 668 1,004 816 170 2,577 387 906 503 227 2, 704 No. 10-Topeka ----- 7,202 4,817 Colorado-------Kansas---------Nebraska ------ 574 1,508 2,117 3,003 383 1,271 1,392 1, 771 No. 11-Portland -- 2, 705 1,868 Wyoming------- 106 218 529 400 1, 402 50 94 124 515 191 749 195 No. 12-Los Angeles 6,889 5, 490 Arizona-------...... California-----Nevada-------- 377 6,491 21 181 5,292 17 Oklahoma ------ Idaho -----Montana-------Oregon---------'Utah-- ...---... Washington ----- Source: Division of Research and Statistics, Federal Home Loan Bank Board. EXHIBIT 6 Rate of residential building in all cities of 10,000 or more population-Estimated number of family dwelling units provided in each FederalHome Loan Bank District, per 100,000 population, monthly averages 1 United States No. No. No. No. No. 1936 1937 1938 19392 19.4 21.9 ----12. 0 28. 0 10. 5 33. 1 13. 4 28.0 31. 0 11. 4 44.6 11. 7 37. 5 12. 6 12. 9 35. 5 15.4 47. 6 150 1-Boston_---.--10.2 2-New York- ..-24. 0 3-Pittsburgh ..-8. 8 4-Winston-Salem. 31. 0 5-Cincinnati---- 12.0 No. No. No. No. No. No. No. 6-Indianapolis---7-Chicago-------8-Des Moines 9-Little Rock --10-Topeka ------11-Portland 12-Los Angeles---- 1936 1937 1938 14.0 7.2 14. 1 31.7 19.7 21. 8 48 3 16. 6 8.1 14. 1 34 0 23. 1 27.2 53. 1 20.9 8.1 18.2 46.4 22.8 29 0 64.9 19391 28.3 11.2 22.0 58.2 31.0 34 2 84.1 1In the compilation of this material, building-permit data collected by the U. S. Department of Labor has been used; publicly financed units are excluded. In order to provide a basis for comparison of resi dential building activity between various sections of the country, a ratio of the total number of new family dwelling units to existing population has been computed instead of the absolute number of dwelling units provided. Population estimates used in computing the rate of building are based on the U. S. Census of 1930, with adjustment for population increases since that time. 2 Monthly average, January to June 1939. Source: Division of Research and Statistics, Federal Home Loan Bank Board. 166 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 EXHIBIT 7 New nonfarm residentialbuilding in the United States [Thousands of dwelling units] Year Year 12Apartfamily family ment Total o Year 12Apart- Total family family ment 1922 1923 1924 -------------- 437 513 534 146 175 173 133 183 186 716 871 893 1933 -----1934 -------1935 ----- 1925 1926 1927 ------------------- 572 491 454 157 117 99 208 241 257 937 849 810 1936----------------207 1937----------------. 225 1938--------------260 436 316 78 51 239 142 753 509 January 185 28 73 286 147 61 21 6 44 7 212 74 1928 --1929 1930 --------------- 1931 -------1932-------- 39 42 110 4 3 6 11 10 28 54 55 144 10 14 17 65 54 70 282 293 347 8 25 151 52 233 to June 1938---------- 118 January to June 1939------------171 10 Source: For 1922 to 1936- National Bureau of Economic Research. For 1937, 1938, and 1939- Department of Labor, on the basis of building permit reports for cities of 2,500 population or over. EXHIBIT 8 Changes in selected types of individual long-term savings 1937 1938 Change Life insurance companies 1 --------$20,509,.978,554 Mutual savings banks 2 ------- -- ----10,185, 271,000 All other banks3 -------------------......................... 11,996, 594,000 Savings and loan associations 4............................ 4,472,913,000 Postal savings -----------------1,267,673,740 2j percent postal savings bonds --------------119,086,360 U. S. savings bonds 7..----- -------------------------963, 735, 743 $21,857,993,609 10,145, 790,000 12, 291, 525,000 4, 591, 484,000 1,251, 799,180 118,065, 420 1,441, 547,895 Percent +6.6 -0.4 +2. 5 +2.6 -1.3 -0.9 +49.6 49,515,252,397 51,698, 205, 104 +4 4 Total..-------------------------------------- 1 Estimated accumulated savings in U. S. life insurance companies. Represents reserves plus unpaid dividends and surplus to policyholders, except that deduction is made of policy notes and loans and net deferred and unpaid premiums. Source: Spectator Life Insurance Year Books and Proceedings of the Association of Life Insurance Presidents. Figures as of Dec. 31. 2 Deposits evidenced by savings passbooks. Source: Annual reports of the Comptroller of the Currency. Figures as of June 30. 3 Deposits evidenced by savings passbooks. National banks, State commercial banks, loan and trust companies, stock savings banks, and private banks. Source: Annual reports of the Comptroller of the Currency. Figures as of June 30. 4 Estimated private investments in savings and loan associations, including deposits, investment securi ties, and shares pledged against mortgage loans. Includes estimates for private investments in State chartered savings and loan associations in Maryland, South Carolina, Colorado, Idaho, and Arizona. Source: Compilation by FHLBB Division of Research and Statistics of reports by FHLB System on Federal savings and loan associations and by State banking commissioners on State-chartered savings and loan associations. Figures mostly as of Dec. 31. 5 Balance to credit of depositors. Source: Annual Report of the Postmaster General on Operations of the Postal Savings System. All figures as of June 30. 6 Source: Annual reports of the Secretary of the Treasury for years prior to 1935. For 1936 and 1937 Treasury Daily Statement. All figures as of June 30. 7 Current redemption value. Source: Treasury Daily Statement All figures as of Dec 31. 167 EXHIBITS EXHIBIT 9 Estimated volume of mortgage loans made on nonfarm 1- to 4-family dwellings, by type of lender [Millions of dollars] Type of lender 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 ,'I- Savings and loan associations---------Insurance companies Mutual savings banks --------------Commercial banks and their trust de partments------------------------Home Owners' Loan Corporation ----Individuals and others--------------Total ----....---------..... .. $1,791 $1,262 525 400 612 484 $891 169 350 $543 54 150 1,040 670 364 170 1, 120 720 40C 175 5,088 3,536 2,175 1,092 $414 10 99 $451 16 8C 110 110 103 2,116 150 100 264 722 443 430 154 605 $897 232 120 500 27 723 $798 242 105 560 89 669 836 2,923 2,150 2,184 2,499 2, 463 Source: Division of Research and Statistics, Federal Home Loan Bank Board. $564 $755 77 140 80 100 168 REPORT OF FEDERAL HOME LOAN BANK BOARD, cc I S .0 04 z 0m1r-00000-1 100 )t O0 <730000700000110C)0-0--i0 r-4 r-4 t-00 0-0 1 0001 004 0000o oo o r-4 = j"10 00 x zCT 00 m 00 0000000 xom -0=0w 00 000o 00C 00co0t- 0 mr-4 o co 000000000000 04 -o 0 M C 0 0 0) 0 0 00 C) 00 q I4dqLO C 0m 00 000ft00oC000000 00 -4 00m.000.i 00000 t0---- 000to0co 0-f4 C6 cc 00000 c00C00000 O = 000"0to CD t0-100t 00000 00040 00 0000000000 I1 -i= 00000r C6 006 00 D 000 z 00 4 0 0009 000 00 000000 00 0q V M00RI0000)00-0M00 - 0000 )00 l0:100000 a0000 4 CD0c00cc0t 0 C)00000 cqe' 0000 L-0C> 000000C)00 I 000000 t0 =_ OOM _4= 00 C0000m0000-00 _ 0 _ _-m 000 0000 00(== l-C Idr 0 0 t00 000 t00 .00$m0t-00t-0La 000 0t 00000o00CI0D0 0 00000 000000 ( RM 4,q= 00 00- 00000-00 00q000 00 00 00 001,4 N__00_ ___ 040- C0000 000 000000 0000000000T00 000000000 YDq -0010 00000 000 0000,000000000000000000 00000- 04--La -4-D ) C140000 0 0 0040000 000 c00cc00-q10 0__ 02 00 0000ldqC:-o C tI-0C:mt001 0000000000c 0000(M00000 LO0cc to =0Xr 1144 = -4 ::I O0DL- 000000000 1.0000000 mCI' 0t 0 Cc0000000 0000000 0 .0 cqCezr--4 r-I 00000000000000L CD 0 4 =r-4Y-4MM 0000 m t000000 C.)00 0000 0000 IT" =MM 00 40606o-I r"orq r-- < 000N CCK54 C14 _ rc_ii4 -,- I00 'IV C40 .1 com 0- >00 -RZ 00 0000000000000000 cq to C>t cliCYD 00 C) IR14 m CIA Cq r--q w00000000qC 00000 to00 C11 C) I4- to __ cccli 000000 000-0-000000C 00C1400 S m [oo 000 4o GO -jq r-4 w1> 0 o UZ 00-0 cy C6 00 -01 P" 0s 0 C11 00 00000i0004M00 00't0000 0000 000000000000i C 04 04 0000000000000000-Z4 C1 000000000000= 0 or, 40000000x -00 (= (M 10 0000C 00 00 193 9 ___ c00000000o0 00000000000 co 00-0r00!0 a C1" 0 00t 0- co00010t0000 :,t0040000000 )=r 00 00 Z4,0 0 00 00 00750000 0066 000000X 0 0000-0000000 0000 -00000000) 000co=0000000000 0 40-00 0-6 07X 400 c -0000 00 __ 000000 00-00000* 00 C00000 0 0000 4-4 0) 00 0000- ~~ c CO I t- cr "000000 000m 000-4 )I C40644 0000 0000 00 00-0C -000 ,0000-0o 00 oo t 44" _ co0 _ 00000000000 -00t 0000000cc000- m _ 00 000000 -0-00 t- o 4r-4O r.- 0000000000000Q00 to00 4 4.' w Nt ::' Cc z 1i010*U 00 CII 6 z z z 0000 -00 0t000N In 0o z 0 0c, u?: 04 -0 0000m oCDoi06 oi -I Io6 -Tt t 0000000000qUl) 044 J.4 0 Ir f (Zw00 000 -00000000000c 000-000 0C4000-00 000000 Q0-00M H I0 c0641 00 10 L , . 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COC-1 1 cqC C9 r0=' C~ C- r-Cq Oo r0 CC i t-C9o Co 1COCOC 0 COCCO CCOo0'01 0 CCOC-oc- CtoOO 1v1CCCo C- OO0 C 0 Oq 4C zc'$o to Ntj C- 0C"OMCCOor.-4 C MCO Mo"OC M="o MO"o_4C-C COI&O00C=OtCC to Co COCOC 00Co"OC4O o01C I r-CoI1=C-CO 01NCO COCCt C006 o01CCCOC41CC 4 C-C01o 01C O01CC" 0 ClU6C"i CO01CovCO =C0 1-4 _:C .4 6 CA06C "o s Co i oRV C- -01 0C- t- O C = uCo1'CC01 ~~C ' 01 U'.)coo ,:V C C> "4O CoI 4I:4'-- 0 03 C)t-C COOC cqCOc C- 01 4-z o2C~ Co N-CO OO CO a 0 0 C-* 16 0C CO," O 01 Coi zC oN COCM coO CT~ 4Q C1C 00cc ,0c 0 CO4 CC 011DCO o COE g o01CoC--,CO,"-C-CoOo CC CO CC Cco Co COCCoCO= C CO144CO Co01 CO COO 1CO 1CO-CCOC O r4CO01OCCC aI1C O 4 C6iC COCOC a Co CCOO0 Co N4O ,dOO 1 'oCOA MOICOC COOC .4 L66 e COO 000 V O 11M 4CO =CCC> Co 01U rC: O C~Co MC t ~ C CO tO1 1 OCO N01Co to-D C> OCO Mo"OCO01-C-CC C"-C0-CO4 O OCO-OOCO O-O 4 01 U) z-g 0 041, 0 CIE10 CO 7-1 1-0 o COCO4 M Cc-iI o 7-4 CCM CCC (CtN oo10M = 0 o' '''''0 CO C- CCO01CoCC Co OCO COMoCO _4 ra7-4 c 0 qo 6 Mc _ 1 _C ~l=t 114 CoCO x OCCCCCC "4 1OvCO COC-COCO CCO01CC 01 C M =o N74t vt '0'r1:0'1 l4 0to''" 41616 CC6CC6 V:CC4 a..)I 183CS3V-39-1--- -.0_ C ,d40 =__ti__0__Mt-_0 C ___00_=_t_ pp~1 ''' o=I I COcC ~ r-4 cq =="=__ tCCtCOMOCOCO CO CCI--oC M M C I o U 0'' c'' I I t I+ CCo4 - q0 vt-r-'-41' CCCC: ~ oco t 0 CO ~ 01 0elic 10 00 CO l 170 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 EXHIBIT 11 Estimated balance of outstandingmortgage loans on nonfarm 1- to 4/-family dwellings 1 [Millions of dollars] Type of mortgagee 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 Savings and loan associations $7,008 $6, 984 $6,485 $5, 756 $5, 906 $4,012 $3, 467 $3, 361 $3, 480 $3, 630 Insurance companies 1, 731 1, 844 1, 899 1, 835 1,767 1, 547 1, 415 1, 358 1, 343 1, 320 Mutual savings banks 3, 225 3, 300 3, 375 3, 375 3, 200 3, 000 2, 850 2, 750 2, 700 2,670 2 -------Commercial banks ------- 2, 500 2, 425 2,145 1, 995 1, 810 1, 189 1,189 1,230 1,400 1,600 Home Owners' Loan Corpora tion . -------------------103 2, 209 2, 897 2, 763 2, 398 2,169 Individuals and others 3 --7,200 7, 400 7,500 7, 000 6,700 6,200 6,000 6,000 6,180 6,332 Total _---- 21, 664 21, 953 21, 404 19, 961 18, 486 18, 157 17,818 17, 462 17, 501 17, 721 1 The estimates of the outstanding balance of nonfarm home-mortgage loans by type of institution for 1938 and the revised statistics for the immediately preceding years have been developed from exhaustive studies of recent surveys of mortgages recorded throughout the country by type of mortgagee. These comprehensive analyses have been used in conjunction with reported statistics of the mortgage holdings of savings and loan associations, life-insurance companies, mutual savings banks, commercial banks, and the Home Owners' Loan Corporation The figures for the Home Owners' Loan Corporation reflect the actual balance of mortgage loans held and advances outstanding. The figures for savings and loan associations are based on a compilation of the annual reports of Federal savings and loan associations to the Federal Home Loan Bank Board, and of the annual reports of State-chartered savings and loan associations to their supervisors and to the Federal Home Loan Bank Board. The estimates for life-insurance companies were developed from study and summary of detailed reports which were received from a sample group of insurance companies holding more than 85 percent of life-insurance-company assets. These schedules provide a detailed break-down of their mortgage-loan portfolios. The estimates for mutual savings banks were developed by applying to the total mortgage holdings of these banks, as reported by the Comptroller of the Currency. additional material collected by the Division of Research and Statistics of the Federal Home Loan Bank Board. As a result of this investigation, it was possible to segregate mortgage holdings of mutual savings banks into the farm and nonfarm element and further to separate the nonfarm element into mortgages on homes and other-than-home property. The project covered mutual savings banks in the States of New York and Massachusetts, and involved institutions containing more than 50 percent of all mutual savings bank assets. For commercial banks, use was made of a study conducted at the end of 1934 by the Federal Housing Administration in conjunction with the Comptroller of the Currency, the Federal Reserve Board, and the Federal Deposit Insurance Corporation. This canvass segregated mort gages on homes from other nonfarm real-estate holdings of the reporting banks. The relationships shown then have been applied to total mortgage holdings of the banks for earlier years. In recent reports the Comptroller of the Currency has provided a segregation of mortgage holdings by national banks. Adjust ments have been made in the estimated data on the basis of the Comptroller's reports as well as the FEA reports indicating increased mortgage lending by commercial banks. Finally, m the case of individuals and other types of mortgagees, estimates have been developed for recent years on the basis of studies of mortgage recordings by type of mortgagee conducted by the Division of Research and Statistics of the Federal Home Loan Bank Board For earlier years the estimates have been prepared after reviewing many studies, bulletins, and researches of various Government and private agencies. Included in these sources are the Financial Survey of Urban Housing, the refinancing operations of the Home Owners' Loan Cor poration by type of mortgagee, local surveys conducted by the National Association of Real Estate Boards, special surveys of the Federal Home Loan Banks, figures supplied by the New York State Mortgage Com mission, sundry reports of the Mortgage Bankers Association, hearings of the Sabath Committee investi gating real estate bond holdings committees 2 Does not include trust department of commercial banks. 3 Includes trust department of commercial banks, fiduciaries, real-estate, bond companies, title and mortgage companies, philanthropic and educational institutions, fraternal organizations, construction companies, RFC Mortgage Company, etc. The first figure of the 1933 column should read $4,906,000,000 instead of $5,906,000,000. 171 EXHIBITS EXHIBIT 12 Federal Home Loan Bank System-Number and estzmated assets of member institutions, June 30, 1938, and June 30, 1939 Number of members 1938 United States -- -------------- No. 1-Boston---------------------------------------------------Connecticut Maine ---------------------------------------Massachusetts -------------------------------New Hampshire -----------------------------Rhode Island --------------------------------Vermont -_---------------------------------- Assets of members 1938 1939 1939 3, 956 3, 946 $4, 308,104,000 $4, 600, 318,000 208 216 621,377,000 649, 203,000 46 21 118 15 4 4 48 22 123 15 4 4 79, 455,000 17, 869,000 467,888,000 26,404,000 25,967,000 3,794,000 85,315, 000 18,373,000 485, 581, 000 27, 556,000 28,159,000 4, 219,000 419 420 474,085,000 474,561,000 New Jersey -----------------------------------------------New York 295 124 296 124 246, 014,000 228,071,000 219, 708,000 254,853,000 ---------------- 569 548 236,695,000 244,955,000 7 530 32 7 510 31 2, 209,000 216,813,000 17,673,000 2, 485,000 223.435,000 19,035,000 428 417 462,836,000 535,129,000 23 18 53 57 86 112 40 39 22 20 53 57 75 114 40 36 24,526,000 114,803,000 41, 713,000 25, 367,000 50, 599,000 153, 921, 000 23,105,000 28,802,000 29,221,000 125,949,000 53,803,000 30, 342,000 53, 771,000 182, 589, 000 27,484,000 31,970,000 564 579 790, 350,000 841, 697,000 94 93 88, 852,000 93, 554,000 428 42 444 42 647,697,000 53,801,000 686, 295,000 61,848,000 - 208 214 239,983, 000 250,887,000 Indiana--------------------------------------Michigan------------------ 156 52 159 55 141,847,000 98,136,000 151,833, 000 99,054,000 482 477 389, 555, 000 405, 353, 000 353 349 239, 507,000 258,193,000 129 128 150,048,000 147,160,000 243 246 178,300, 000 197,402,000 61 40 115 14 13 66 39 114 14 13 33, 525,000 36, 152, 000 89, 776, 000 9,363,000 9, 484,000 39,204.000 44, 689, 000 93, 794, 000 9,787,000 9,928,000 293 288 332, 862,000 364, 532,000 41 70 28 16 138 41 69 27 15 136 14, 743, 000 124,074,000 20, 043,000 4,969,000 169, 033,000 16, 380,000 129, 217,000 22, 570, 000 5,249,000 191,116, 000 232 234 181, 520,000 188, 703,000 40 105 35 52 40 104 35 55 27,105, 000 61,179,000 39, 448, 000 53, 788, 000 29,044,000 58, 779,000 43, 607, 000 57, 273, 000 No. 2-New York-------------------------------- No. 3-Pittsburgh ------------- Delaware ------------------------------------Pennsylvania --------------------------------------------West Virginia No. 4-Winston-Salem Alabama ------------------------------------------------------District of Columbia Florida---------Georgia Maryland-----------------------------------North Carolina------------------------------South Carolina-----------------------------Virginia -------------------------------------No. 5--Cincinnati --------Kentucky----------------Ohio----- . Tennessee----------------------------------No. 6-Indianapolis -------------------- No. 7-Chicago Illinois ----------------------------------- ---Wisconsin----------------------------------No. 8-Des Moines-----------------------------Iowa Minnesota-----------------------------------Missouri ---------------------------------- North Dakota ----------South Dakota No. 9-Little Rock-----------Arkansas-----------------------------------Louisiana------------------------------------Mississippi----------------------------------------New Mexico -------------Texas No. 10-Topeka------------------------Colorado-----------------------------------------------------Kansas----------------Nebraska ------. -Oklahoma - 11 1 172 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 Federal Home Loan Bank System-Number and estimated assets of member institutions, June 30, 1938, and June 30, 1939-Continued Number of members 1938 No. 11-Portland ----- 1939 Assets of members 1938 1939 137 134 114,194,000 128,017,000 Montana--------------------Oregon-------------------- 9 13 29 8 12 30 117,000 6,523,000 8,989,000 Washington----------------- 10 65 6,985,000 9,700,000 29,167,000 10 63 25,807,000 13,410,000 14.252,000 63, 235, 000 Idaho Utah ----------- Wyoming-------------------- 10 Alaska------------------------ 1 1 4,047,000 160,000 173 173 286,347,000 319,879,000 3 164 2 4 3 163 3 4 2,334,000 280,711,000 732,000 2,570,000 3,078,000 312,997,.000 794,000 3,010,000 No. 12-Los Angeles Arizona --California ---Nevada---Hawaii --------- ------------------------------------------------------------------------------------------------------------------ 10 55,301,000 4,518, 000 EXHIBIT 13 Federal Home Loan Banks-Advances and repayments for periods indicated, and the balance of advances outstanding at the close of such periods Advances Fiscal year: ------------------1933 -----------1934 ...... - ------ ...... 1935 --------------- 1936 ...---------------------1937...---------------------1937-July-----------------------------------10, August -------------------------------------------September ----------------------October ----------November- - -----------December --------1938-January ---------------------February March ---------------------------April - --------May -----------------------June Total, fiscal year 1938-------------------- Repayments $48,894, 602.41 62,871,970. 22 36, 683,308. 61 78,195, 224. 32 114,287,052.41 $1. 230, 772.82 25, 387,445. 72 42, 599,148. 52 38,840,900. 50 65,817,003.85 $47,663,829. 59 85,148, 354.09 79,232, 514.18 118, 586,838.00 167,056,886.56 221,429. 84 11,116,419.02 9,330, 371.28 8,991,254.84 7,001,123.74 17,590, 772.89 3,722,730.00 4,070, 622. 57 4,900,573.80 6,088,928.11 7,551,480.00 14, 846, 451.86 7,707,421.76 5,080,175.81 5,426,303.27 4,461,350.20 3,706,692.48 4,831,686.17 13,279,451.72 7,090,461.42 9,293,152.19 5 464, 846. 38 4,791,230.17 5,131,335. 58 169, 570,894. 66 175, 607,137. 85 179, 511, 2,5. 86 184,041,110.50 187,335,541.76 200,094, 628.48 190,537,906.76 187, 518,067. 91 183,125,489. 52 183, 749, 571.25 186, 509,821.*8 196, 224,937. 36 105,432,157.95 76264,107. 15 4,944,007.35 ------------------------------1938-July ---4,293,884.00 August----------------------------------------------6, 561, 499.04 September 4,735,722. 66 October--------------------------------5,246,902.10 November------------------------------.------------ 14,995, 541.90 December - 2,922,785.00 1939-January--------------------------------2,333,900. 00 ----------------------------February - -3,898, 200.00 March ---------------------------------3, 580, 641.91 -------------April---6, 307, 000. 00 ---------May --June-----------------------------------16,838,990. 66 9, 276, 755.82 6,768,425. 78 6, 428,884.85 5,065,948. 26 4,779,461.97 5,840, 579. 58 22, 913, 631.53 10, 571,147.80 12, 898, 951.04 8, 018.005. 31 5, 572,017. 37 5, 788, 639. 57 76, 659,074.62 103,922,448. 88 523,023,390 54' 354,061,827 44 Total, fiscal year 1939---------------Grand total through June 30, 1939 ----... - Balanceout 191,892,188. 89 189, 417, 647.11 189, 550, 261.30 189, 220, 035. 70 189, 687, 475.83 198,842,438.15 178,851, 591.62 170, 614,343.82 161,613, 592. 78 157,176,229.38 157,911,212.01 168,961, 563.10 EXHIBITS vsC06Oo 6-:v 06 t- == f" O cc -Co00ktq q -v ka mm _- _- t mcc t- =o cc 14000 C o -CO = 00 ItC=cc ai C6or, C 4t4-; C C6ot-4 co liCDto t 'V, m m 0C oC eqC>o ~C) 10 CO :v 0 IfZ " = " ot.o V- in00 t- cq <Do (Z M Co Cocx~lo Co-Q =r N "C) -C VM M R 00 M L M00CO Wc-00coC-'CO U'Co Co L mC C4 Co COCoiocoi 10 m0!14 O t- coCm 0 Cocq=00-oo=oo 00 -- "CO CoLO " MCLOCzoCOo Co U Co &0 o to LO oCC'4CCO U-.) 00 C tomO=OCOCOCDOCCo *-co (=c C 00cco CCo -0 CoC tm C t~ooo o 10 COo-~~o lt 0014C o OoCo-4Co OCOOC-C =% mC-COoc Co C4 Co m CU -41.1400to m V-o o- C 0CO CDCt o Co-qr ""5 r4 r-, C '"0'1Qr- LOO-"t00MCx coC-CI-=0MCC) " Co C Co m 44 oCo:V -tiq MM 00oU.)Ot= ciC5C6 C6oC.6'ci to- o.) O =qC;00 00 U.)00C1100 r-4roq "toco 4)CoCOC)U.(=OOOcq = LO 0 00 r-4 M w r- = r- oM .11" 00 CcOqo-m0C= r-4 C o0 ~oC U) Co =o 009Oo~~~oC 0 Co3 ~w1l (2 . nr 173 174 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 EXHIBIT 15 Federal Home Loan Banks-Percent of members borrowing as of June 30 1935 1936 Boston ...------------------------------..--------. 28.9 New York- ..---------------------------------54.8 Pittsburgh-------------.... -----------------71.0 Winston-Salen..---------------------55.8 Cincinnati- ---------------------52 2 Indianapolis--..--------------------------------43 5 Chicago-----------------------------73.1 Des Moines-----------------------------------51.7 Little Rock----------------------------------Topeka ..------------------------------------Portland-------------------------------------55.8 Los Angeles...--------------------------------. 33.1 42.5 Total---------------------------------- - 40 4 60.3 76.1 61.7 55.6 54.1 80.5 60 7 1937 1938 44 0 61.7 80.4 65. 7 54. 8 70 5 82 4 68.7 39.9 63 2 80 8 71. 7 56 0 66.8 81.1 68.7 1939 32.4 60.5 78.1 56. 6 46.8 59.3 75.3 65.0 46.9 59.5 63 2 60.6 61.3 62.7 67 5 67.2 68.2 60.1 66.8 69.3 73.4 51.7 58.5 53.0 71.1 54.6 63.6 67.3 67.8 60.4 EXHIBIT 16 Types of advances made by the FederalHome Loan Banks The twelve Federal Home Loan Banks may make the following types of advances: ADVANCES TO MEMBERS (a) Up to ten years on the security of home mortgages or obliga tions of or guaranteed by the United States. Such advances up to one year need not be amortized, but when made for more than one year, must be amortized on a monthly or quarterly basis, and are subject to the following limitations as to amount: 1. If secured by a mortgage insured under the provisions of Title II of the National Housing Act, the advance may be for an amount not in excess of 90 percent of the unpaid principal of the mortgage loan. 2. If secured by a home mortgage given in respect of an amor tized home mortgage loan which was for an original term of six years or more, or in cases where shares of stock, which are pledged as security for such loan, mature in a period of six years or more, the advance may be for an amount not in excess of 65 percent of the unpaid prin cipal of the home mortgage loan; but in no case shall the amount of the advance exceed 60 percent of the value of the real estate securing the home mortgage loan. 3. If secured by a home mortgage given in respect of any other home mortgage loan, the advance shall not be for an amount in excess of 50 percent of the unpaid principal of the home mortgage loan; but in no case shall the amount of such advance exceed 40 percent of the value of the real estate securing the home mortgage loan. 175 EXHIBITS 4. If secured by obligations of the United States, or obliga tions fully guaranteed by the United States, the advance shall not be for an amount in excess of the face value of such obligations. (b) Up to one year on securities other than obligations of or guar anteed by the United States, providing such securities constitute an investment which the member is legally authorized to make, have a readily ascertainable market value and are not in default with re spect to payments of interest or principal. Such advances cannot be in excess of 80 percent of the market value or the principal amount of such securities, whichever is less. (c) Up to one year without security or on any kind of security to members whose creditor liabilities (not including advances from the Federal Home Loan Bank) do not exceed five percent of their net assets. (d) Up to thirty days on an unsecured basis or on any kind of security. Such advances must be repaid at maturity or refunded with eligible collateral. In making such advances, there is no re quirement that the creditor liabilities of the member do not exceed five percent of its net assets. ADVANCES TO NONMEMBER MORTGAGEES Up to ten years on mortgages insured under Title II of the National Housing Act. Advances for more than one year must be repaid on a monthly or quarterly amortization basis. EXHIBIT 17 Federal Home Loan Banks-Statement reflecting the trend of collateralized and uncollateralized advances outstanding by half-year periods Collateralized advances Uncollateralized ad vances Amount out- Percent standing of total Amount outstandmug Total ad vances out standing June 30, 1933.------------------------- $47, 663, 830 85,427, 254 Dec. 31, 1933..-------------------------June 30, 1934---------------------85,148,354 Dec. 31, 1934--------------86, 658, 313 June 30, 1935--------------79, 232, 514 Dec. 31, 1935....-------------------------102, 794, 588 June 30, 1936------------------------118, 586, 838 Dec. 31, 1936------------------------145,400, 730 June 30, 1937 ------------------167.056,887 Dec. 31, 1937 -------------200, 094, 628 June 30, 1938--------------196, 224, 937 Dec. 31, 1938 ------------198, 842,438 June 30, 1939 -- -----------168,961, 563 $16, 521, 239 84., 299, 622 82, 740,248 82,032,059 68, 045,199 77, 212, 211 90,893, 235 111, 596, 594 130,944,112 159, 255, 784 163, 386,013 167, 239, 646 145,442, 668 97. 6 98. 7 97. 2 94. 7 85. 9 75.1 76 6 76.8 78. 4 79.6 83. 3 84 1 86.1 $1,142, 591 1,127, 632 2,408,106 4, 626, 254 11,187,315 25, 582,377 27,693,603 33,804,136 36,112, 775 40, 838,844 32, 838,924 31,602, 792 23, 518,895 Percent of total 2.4 1. 3 2.8 5 3 14.1 24.9 23. 4 23.2 21.6 20. 4 16. 7 15.9 13 9 176 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 EXHIBIT 18 Federal Home Loan Banks-Interest rates charged to member institutions for advances as of July 1, 1939 Long term Short term Short term secured secured unsecured Percent Boston 1 ..-----------------------------------------------3 New York ---------------------------------- --------------3 Pittsburgh...--.---------------------------------------------3% Winston-Salem....-----------3 Cincinnati-------------------------------------------------3 Indianapolis------------------------------------------------3 Chicago ..---------------------------------------------------3 Des Moines-...------------------------------------------3 Little Rock--............--------------------------------------------3 Topeka ----------------------------------------------------3 Portland --------------------------------------------------3 Los Angeles........-----------------------------------------------3 Percent 2 or 3 1or3 3 3 3 3 3 3 3 3 3 3 1 To obtain the lesser rate the advance must be repaid in installments within 1 year. Percent 2Y2 or 3 1Y or 3 3% 3 3 3Y 3 3 3 3 3 3 177 EXIBITS C) C) 6 T-4 XC.) 61ca. 0000C 4VD00 C)m C co '0S4 160 o66 00000=C 6=-- 1 C>0 CII400 oC-1 0Z (Z00400(= 00 Q 11,4 0C) 0c O C 6 c; 00 (:::;6c =;o 4= 0to 0004to k00000040(=> t- 0000m 6 o 440 0 0 6 e 00000c; z ; 0 4 0 LO0'0 C) 040N qiCD o6 a6 00 C; e000040co 6 Co6 C 00 0- o - 0 000 06 40G00 0- 00) 0 C600c4 X 14L r 00 ) 66 C 00 440 - 0 X C 0 r04 0 00 6 6 0 00 00 0Cc "-d N4 6 o0 0- 0000 00 -00 Ci 00 -000 00 IRV 00 00-U:'LC04 C 00 -R; 0001 C 0m 000 00co0t-0 m00 r-1400000 00 0 00 t-4000 a0o(::6-4 0 6o C6 000m0 m0010X0 ( 0C0) 0=) 00 16 0- 00D 0- 040o00 ) 0- 00 00 00 100 00 00 00C6 (:: 00 .,.100100 t0 4-D00C00t00 0)D 00 - 000 000 0 CD "0 o -4v o00 0 0 00:040 :0)00 -l 0000 o0 00 i 0000C 0 =0000 06 00 0 H I: X6 0=000 C -0 00 0 0 00o ' m4G4 =1 6 00 00 c X0 m r-4 I C) 00000 0:t- 4= 004r-i0 0 Cc0 m0 6s 6 0 C > C) D0-40 6 66oo - 440-44+0 4 ~ 444004 c-a 4 i06 0 0- oct (Z oi 00oCD 0 t:0 0000 oX0 4-4 pq ,0 00 0= 0 0 X040 to4 X000000000 6 0 c 40 40coc00N00 4C)00D'04 I- = e04 0 -:'04 06 c00-d 0 00 m0N 0000 00 to : 008 0000 00 6-000 t6-oC)- 00 01 0- 00 X00144C 0 00V ; -:Cj- I0 0 c*L* t: C c 044400 to044 4 400 40) 10 1 4 14 1~0 1400 04 44 0400) 004+0 IPAo C; r40 10 Oo 40 C 0)3) 0 0 40 40 4q 4-a ' 00- 0 000 ~~00 .104 900 W 40 p))4 ;> ;>, Aq p -40 p-,0 0)0 .0 Q +0 go0 00 000 .0 0 0 178 REPORT OF FEDERAL HOME LOAN BANK BOARD, CY3 m 0)tC) COC cc 0 00 CO O C t- .3c~i )OIQC) C C0 0 0 O CD 4 CO M, 0 OO rCDO c 1 C C00 6 6 CO COt0 O IToilC U'-)L00 CO6 - OC 0co O CO CO CO CO4 CO 4COXC 0-C1 0 C I- vCO O I o0-- C O O CO OCCO CO C 0 00 CO CO 0000 00COCO iqCO q00 X0CO CO00 0o toC kO CO C 00OO tCCO C000o )006 0> 00 CCO6 000 000 0 C 01 O OCOCO 3O-CO CO CO CO C CCOICOCOC- 0000 C000 D0 C000) C0D r~ 06 o0 OCC '"CqOt- CO CO X6OCz6COC IC>XVcc10co r- CO CO160 OCOm CO OCCOCO 00t- <000 C)O0000 0 CO CO6 mCO COC 0 COCO CO,o _ _ __ ICO.4 COCtC-.::eC i___ OO;CCCO O COO00 I-CO 0I oOC = tw 00cOcO t COC4OCO -G C) C6O I CC9 101 CO COCOC=O O CO (D m MCOC->O 10 C9 CcCO0 CO-tCOt t-CdiCOmO OO C) 0001 C mO 4n.CgC N q CO C e.0C C D COCON0 COL C 00 a c O 6CO,6e -:ZO NOCOC1 0 C 00) 1n LCOOO00 )00 C oCOOC> 1CtCO ____ 0C t= 0 C (0 0-10 - CO C0C C000 oC)C cq0 X0 100=( COOO 0C) 000) => CCO C)Cq= (CO C o6 r-4 10C CCO=C jI = 00 000) a C)C)0( cq I 00 C0 0Ce CLO C)6C t-: 06 C14 -o0,3 00C) +0 4-2 (= co C) 4zo 00 Ili 193 9 X6O CO C-CO CO _ CO O CO COO 0 C COO 1:COq O 06 CO - 4CO v I I _ _ _ _ 666 _ a65o-i a)=0 000 0 (CC000 0 0 kCDOCO > 'OC U C COCeO C00 (= C> 00 COCO CO m CO CC I _Im CO 0 CO C) CD 10 kO CO CO CC~ C C CCC C COC~ 0 ICC ~CC+0 ICI .60) 1-4 3 C ~CO CO Cq C;. 'O 4)c'0' 0 Q CO 10 C+0 0 Co COO0 ~CO co 4Q ro CCCC ICoO COO ~CO rCO 0- 0*~ 0)0) C)C-C 7i Zu 3+0 -4-- 9O EXHIBITS 00 00000 66 66 cq00 66 c 000 e66 4m C)00 C)(= 66 00m (M4d4 LO 0N0t o 00 0t N X0 x0 ml6 6 0 t00 0000 La 00 00 w 'o t- cc t 00 cc000q r40.d0 u00 0=, 00 00= w 0 00) CDCD 66 6C5 oC) '00 Cq N0c m t-_-_ t_ 66 0000000-4 00 000IO q ( = ___ m 6 0 10 00(= 000C) 0 I0400V0400-10C 00 t- t- 00 -0000 00 N o ~ CD0 0 00) 004 C6 00O 0 000 le000 =0C000 c00 50000 00 COD 00 C60C6 6l 66C66e 00 000 00 o1 C C 1 t t C.6 0000S 000'S 0000d0000N 0 - q m000 000 (M b00 I 0 00>0000 00 1 LoL6L6 004 0 00 t-IV0 0 0 00 0 00 0 00C) 0CC 0000-4 00-4 00 C)00 000 00 r00 C0000 C00 L00 C0000 00m - 0 0000I 0- 00 00 00 00 00 =000 L000 D00 00 -0 0m 00 000 -0 0 0 m N000 0000q 000 00 00 00k 00 6C5C; c0 146 r44 000 t 000 66 C C00 0m 000 66 66 64 0000 000I00I0I000 00 00) 0 00( 66 X6 0 00 ' 6q 4 4 000000o 66C;C;6 004 000- r-400 4 X0_o__ _ <6C666 t: 46 0 t.0(=> K I- 0a)0 0000 100 t- 00 N ) C oo C 66o 60 66qe 000 C 6> 0 I 0 06 66C1 k66C 6q 001 00000 C-6-1 0 '0 '0 '0~ 0 00 C3 ca)0 0) '0 00 02 E-q ri2 A10 0) 4-) 0, 0 'E- 0 00 C/) C) 0) 00 o o *~ 4-) (2) 00 0 C) 4-4 179 180 REPORT OF FEDERAL HOME LOAN BANK 6 CO i C>C OeC.0 BOARD, .0 COC 19 39 oo m(= 0 CCO0 ICO m 0616i 40 44 06 C- 0 1 ql, cq 00C)41) ) 00 ~ 0 -4 =100 6 C6 6 D , 06 C6 C0 0 r-1qCD C Q CO 0CoC 4 C = COC9 C3-Rl -4-DCOCO00 co ) OCD 0 O0CO"1 O C O0 C 0 OC e (01IC4 CO CC - 4.) 0 0 cq 0 _ _ - 0D Q0 CO 0 CO O COO c __ _ 0o Co e _ CO e Ci0 C5 eq C) f CO C co 6061 aC CO C W CACOCCCID C 4OCCO C C) CO C) o CO oi 0 CO m C o 4 C) C 10 44~ 0O CO mC-CC cc C0>CO-COCC CO5c,-6oo XC - 000 CCO C (CO r4 t-0 cOcO C4 VD O s-)t-COO 00 01 0 mCCCO CCO m O C-4 o C- ( ) t c' q D Lo C-r- CO O CO5 C c C k c -0 C 1 94 C) C.' CO 00 CO C)'' C ~CO C)C '0 C WC 02CD CO) 0 to C C CO oo C- CCDq I- eCO 0CO 00CoC CO CXOC> cCC lOC CX0 CO' CoC M 9O Occ 6Co - C) C - (C> -0 0 Ot CO I O 'A 0 C1q" CD06CC cli 0 C) 0 -4 Co COCOR14 C'r: C) t CO C = 10 = 00 CC4 O 0 C COIt CO 0 00 C, 6 c C 0 1 LCD CO IMCV COm ) "-I &IC _ CO > CO 181 EXHIBITS C11 C C> Cltl cio a) C4 C cli1=5 C CD CDa) to co LO C) to coocl (= Im CD r-.4 c6) C6 C) "-.) 4' 000 0010 Ic: 0000 0000CZ C) C) C) (= i c, (=5C:,c::> p p CD .,- 6 1 cit C) C'D m C:om cq 00== C) LO I 00 I 0 Ci I C'! 0- X0 C-1 ?-4 C I CDI-_= C) = C 0000 01000 C)O C00 0000 00 010 C00C0010 100 00 (=00 1 to0 co 0 oQR 0 00 - (M000 C00 00 -44f coy Coo1 coC o in C00 C666-)C I 000 ( co 00 00 X00 C90010 0005 0000D =00D 000 C mC> 01D (= 6 001t01 C) <=0( I C-1 Cq C) m clil (=)(= c C A4 0100 10 03 10 00 cd 000000 000000 4z+. 1. 0 0 2 o00 4-:1 S.01 - '0 0)10 C4~ COO 0001 ot c~ 4 0 0000 OC10 E-4 4'A 0 0 0 0) 00 0) 0 00 010 0 0)0) 0)1~ 0) 182 REPORT OF FEDERAL HOME LOAN BANK BOARD, 00 00 C CO 00 00= 00 0 X6 C to 1001i N r- I 000- ko (=~ 0 -zCCC ), C) co 6c. >0 00 00 10 0 6o( 4) 00 C)-0 o6,4 CC 0 C cc 0o Cq-- CNc C4 N 00 00 00C 0td p4 0 It C) 0=0C 00 0 0 o C5 C36C 00 +0 4 0 o 00 00Q0Q CoC) 10 CD Co j 0 ci 0 Cyi 0 I'- C 0fC4,i Col o 0 1- : CJ 5 KImmcrI o 00) 0) o- C9 N N- 00 CC 0 C,00 4-Z 00) e~ca 0 "-4 C m 0to000 0 '-4 c66f C6 coo 1- I~ oo- 10 ccq 0 6~ c Cc C C0 C> a m C co m 00 0 rd C'0 0D C)a (20 a 04 0LO m CC Cm i OOMc- ~ 0 0 Q o 0 C0 00 0m LOcCi 1- - a -40--4 t 001 AfD R 0 a 000- - O '1 C 4a00 ti-: 0 00 00 0 01000 00 fOM OC jOC e C4 t-: 0000010 IC ca 0 rl Cq e 0 -4 rd CC 4Z0 0 aC CCn It 0 C) 10-a 0 0 CCo d6 616 C)C) C) r 6 00 10 En' 0 ciz 00 03 00 0 00 Ia 01 CC 0 0 '0 0 =0 Lod 000 00 C)D C) CC 04o 10 too 0 0-0 ms - c Cd c 0 0 .+01 0 0 caC,~r ca C CO 0) W 0 P4 CC45 "C c CCQ 0 C C 01 m W 0 4Z) L0 m CC -4 E- 0-4 0 401 .- 4 00. C 0 0 19 39 183 EXHIBITS EXHIBIT 20 Federal Home Loan Banks-Investment holdings at the close of the fiscal year 1939 Interest rate Face value U. S. Treasury bonds June 15, 1943-40-------------------------------------38 $150,000 3-Aug. 1, 1941---...----------------------------------------------------------3 150,000 June 15, 1947-43-....-------------------------...---...------------------3 200,000 Oct. 15, 1945-43 ....-------------------------------------------------3 650,000 Apr. 15, 1946-44--......----------------------------------------------3 850, 000 Dec. 15, 1954-44-----------------------------------------------------4 500,000 Sept. 15, 1947-45----------------------- -- -----------2% 2, 050, 000 Dec. 15, 1945..-------------------------------------------------..... 2 235, 000 Mar. 15, 1956-46 --------------------------------. 34 200,000 June 15, 1948-46-------------------------------------------------3 1, 650, 000 June 15, 1949-46-------------------------------------------------3Y 900,000 Dec. 15, 1947 -------------------------------------------------2 350, 000 Mar. 15, 1951-48------------------------------------------------2 1,195,000 Sept. 15, 1948 2 2------------------------------------------------200,000 Dec. 15, 1952-49-----------------------------------------------3Y 300,000 Dec. 15, 1953-49......--------------------------------------------------2 3,900,000 Sept. 15, 1952-50 -------------------------------------------------2 2,850,000 June 15, 1954-51 ... ...... .. ...-------------------------------------------------2 3,137,000 Sept. 15, 1955-51-------------------------------- ------ -----------3 140,000 Mar. 15, 1960-552-------------------------------------------------5,176,000 Sept. 15, 1959-56-------------------------------------------------2 938,000 Dec. 15, 1965-602--------------------------------- --- -------------4,305, 000 Total........---------------------------------------------------------------U. S. Treasury notes: Dec. 15, 1939 ... ......----------------------------------------------------Mar. 15, 1940 . ....----------------------------------------------------... June 15, 1940----------------------------------------------------Mar. 15, 1941.. ..---------------------------------------------------Dec. 15, 1941 .....................----------------------------------------Mar. 15, 1942....................--------------------------------------Dec. 15, 1942--------.... ...---------------....-----------------------------.. June 15, 1943...................----------------------------------------------------Dec. 15, 1943......................-----------------------------------------....------------1 30,026,000 1 1 1 1 1------------1 1------------1 250,000 600,000 450,000 150,000 300,000 500,000 200,000 1,845,000 1,450,000 Total.................--------------------------.-------------------------------------- 5,745,000 Total Treasury issues------................-------------------------------------------- 35, 771,000 Miscellaneous securities. Home Owners' Loan Corporation bonds: Aug 1, 1949-39..-------....----------------------------------------May 15, 1941 --------------------------... .... July 1, 1944-42....-----------------------------------------------May 1, 1952-44------------------------------- ---------------June 1, 1947-45------------------------------------- 2 2 3 1 6,272,875 Total.......-----------------------------------------------------------Federal Farm Mortgage Corporation bonds. Jan. 15, 1947-42-----------------------------------May 15, 1949-44 -------------------------------------- ------------ 3 3 ------- Total..-- ---------------------------------...-------------- --------- 300,000 600,000 900,000 Commodity Credit Corporation notes: Nov. 2, 1939 ....... ...---------------------------------------------------... 200,000 Reconstruction Finance Corporation notes: July 20, 1941.......------------------------------------------------------Jan. 15, 1942 ......------------......----------------------------------------Total.....----. 3,075 120,000 2,975,800 500,000 2, 674,000 480, 000 3,400,000 3, 880, 000 ------------------------------------------------- U. S. Housing Authority notes' Feb. 1, 1944..------------------------------------------------- 1% 640,000 Total miscellaneous issues --------------------------------------- -------------- 11,892,875 Grand total...---.....------------------------ --- 47, 663, 875 184 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 EXHIBIT 21 Federal Home Loan Banks-Statement of consolidated debentures outstanding, June 30, 1939 Total outstanding ing Series "0" 2% 1,due Dec. 1940 Series "D" 2% due Apr. 1, 1943 Series "E" 1% due July 1, 1939 Boston...--------------------------------New York ----------------------------Pittsburgh-------.-----------Winston-Salem -------- --Cincinnati-------------------------Indianapolis--- ---------------Chicago------------Des Moines ------------Little Rock-------------------------Topeka -------------Portland ----------Los Angeles--------------------- 0 0 $8, 500, 000 9, 000. 000 14, 350,000 6, 250, 000 20, 250,000 9, 500.000 4, 000, 000 4, 750, 000 2, 025, 000 11, 375, 000 0 0 $1,500,000 3, 000, 000 2, 750,000 2, 000, 000 8, 000, 000 3,000,000 500, 000 750, 000 0 3, 500, 000 0 0 $4, 000,000 2, 500,000 2, 500, 000 2, 500, 000 3,000,000 4, 500,000 1, 500, 000 2, 000, 000 0 1,000, 000 0 0 $3, 000,000 3, 500, 000 9,100,000 1, 750, 000 9, 250, 000 2,000,000 2, 000, 000 2, 000,000 2, 025,000 6, 875, 000 Total------------------------- 90, 000, 000 25, 000, 000 23, 500, 000 41, 500, 000 EXHIBIT 22 Federal Home Loan Banks-Interest rates paid to member institutions for time deposits as of July 1, 1939 On deposits remaining 30 to 90 days Over 90 days Limitation (whichever is greater) Percent Percent --------$50,000 or 1percent of assets.i Boston .....-----------1 None. New York-----------------------------1----------- 1 Do. Pittsburgh---- ----1 $100,000. Winston-Salem--------------------..----Cincinnati- .. ....-----------------..... ...... -------$100,000 or 5 times minimum stock subscription. Indianapolis-------------------------1 None. 1Y Do. --------1 ChicagoDo. Des Moines-----------------........------------1 No interest paid. Little Rock------------.......................---------... ....-----------1 None. Topeka_------------------------------......... Portland-----------------------------------No interest paid. 1 None. Los Angeles----------- --------- 1 This limitation does not apply to deposits held on Feb. 28, 1939. 185 EXHIBITS 000k V-6O C)6k CD0 .-4 4a 10-i 00t- 0 ) r_4 00 c 02 ool C400 0oo 00 000 0 LO00- 0r- 0100 000 00 (00 0 6 6 to0 o" c 0000 0 C oo6 16 C4 CI oo0 X0 Z c6o6 0 0000 000 oo C> Cc0 f N00 . M X WL 400 ui00 00000( 0q 0000 d r_40 X0 110 0 -4 0 io 0 0 0 m 00 0 0- 00 00 0 -4 co 00 10 6 66 0 00 0 00 00 000 Cq00 r4 0 C'D- 00 ;Qo 00 - 000 X 60 04cy 0 00 6 00 0 C=0 600c L 0- c) 00 0 00 0= 00 C00 o & 0Q0a) o 00 0- (D to t0 00q r4 r_400 00 0 00 0 r00 0)00 0 4 _00 r4 00 C)0 60,4 X0 00) 00 6-4o 00 0000-00-0 0 0 oC6 0 co00 00cc - 0q00 000C! 0 fD=10 00000 w 00LO200 L 0m o(500'or-4a t 0 =00 00 0w0040 00c 46 000L 6 0-0000 00o 00000 Ice 00 44m C66i LO r4 X o06000 0000 0000 CI00 040C co'o'-_ 05 t.to-0000 0000o 4q 00 00 00 00 00 0 00 o 0 00 -4 0 4 r 0;6 06 0C 0 0m (=6 5 0 00 0 r C001 m44oo 0 L006 oQ60 Q Q00 0 0 m 0 0000O 4 0Q cc0 00 Q00 000 oo c00 o 0 0 C6 0q 0P CO 00.Z 0 LO000 02 mO C2q c64 ,'44x o PC r40 000 qr00 6 00 000000 0000 0c oo00tLO 00 X00" 000 000 xo 00 0Q 000 000C4 000 00a ka000 0000 ro (= o 00 yC 0000( N= 0O0100c C ) cqm 000O00 000 000 000 cc00 .)00 00q 1 c Iti 000 D0 004 00000C 0 C) 00 00t 00 00 00 000 00 00 0 3000 004 00 - 00000 0> 00 LO 6 000 0k- 0 00 C00 00 00 k-_ 0000 L00 C00kC00 c kL_00 0 00C000 00000 C) C0) 000 0 k000 0 00 00"-) C0 k00 00 oo 00 0t00o 00 k- 00O 00O 00 00 a C60 00 do 18 0 00 p4 '' C ,ce,~ .0 0 Ho a ''3 P4~~, 00 h04 0 4-4 Io con 41- 0~ 00 ~00 00 co 0 c 0 0 00 &4$ -7, ca e c W):C3 C> '0-4 0) CD CD w09 0n 183130-39-13 0' 0 000 00 00 0 8 00 0) 020 4-52.+Q 0 0 00L00 0)0to 00q 0 0 CO 0) 0 00 0LO 00 6 446 ;4 000 01000000000"C>CDCDco 0 00 00q 00000: tC40 0 000 0000 cc C4664 -1000 0 ~0 0 t .$0004 000)8020 0 0 0 P-4 186 REPORT OF FEDERAL HOME LOAN BANK BOARD, 000CO M000000 000000-CLOm r1>-0 -di00616 000t- 400 )000 00 -q0000000 00C<00 C) ) C I ?q0 00 0-0000 cf t00000> CDCDo C~O =4- 0000) C 00001 6 C;6 ;6 10 CDCDm 0 C) 0 01) 00 00l r4 i--1; o6 0= 14di r( 00 c011001>- L66 o6 c~c,4'G- X6-06 6 C6 ,FO6rt, Z (=>000 CO ,; 4 cyi-o6 0z0 0000) c 6 4 10NO S 64t 110 010100 00 N 4 o":q 0000 010N0tq 00 m 4 000 C) X 00-0( 000101) .0 C t -1 C 0- 010 00C000CO 00000 00 0e 4c6 m CO COm m CO) -4 0:)00-COC: CO110 0 000 CO oo0toCO0r-400L R00 00 0 0000 000001006 0000 0010 00 O c C 0oto O 009 ko00)co q I- E d tCO 6600cc 0 0 00100010 oc 1 k 01, d (=00 C000 c0 C)000100 mCO -4' 6 00cOO 0 00t-001 6C6 - 000 000 0>- o636 60 C) 666)6to 00000C) 00 CO 0-00t c00000LI - r4 to 0- 10 00000ic t00co eteo6 0000 t 001 0m00oCO 00 00C o 00 j q00 4 dq C q qq t 14;q4 COeOOOC01000-0001CO0010 xo 0 cO ,,4 00 C0 0 04 - 000-1 000a) 000100 = 00 )Wqa000 -O c000000 00 = t- 00000L r-0 Co 00000 o LO 00 o o 0a0-0a0a0 0000000 0 CA) 00r4C- 11r4Cq q 00000 Q0 o C6 mcq 00 C5 6 6 xo1100000 'l 01 z 14t 0000- r 00010 .0 10 0 00 l0000 q GO C00m0w 00 r>6 =6c36 CDC qm - to o00 CD D 1 c I00 0000 r-400cC00 04C) (M0 1 ~cil4 ci , 001-100 C>0 0000U-. C 06 6 4 00 t-000 0 00 -ti400 X0co tz t 4 C) cqI-r--lto 11:4C6 6 o 0 q- 0 c)6io; 4 6 10006 *006 6 C*cc -, =-.14O000000t-00w 0cO 0NC) - 0000o 00 CO0004 00 0 0-q C0 CO CO .d;6ci o6 6 6 Z6 L6 c6 00000) 1t- 00 C001>- - di00C)rq00 O N 00000 00 0 00 ILOCO 000 000 >00 qc c 000CZO -4 tomc C 0 001- 0*Z ig> 00 z p xa 4 6 o 10 rd 001tY-0000000 O 0 0 440 O 16 66 6 004O00Y0-00100011> rC000D00000 __CA 0m 00t-00 to00000 C00000000 t- 0000 -o0;6 4o66 &6t: -00000C 00000c) IN 00 0 CO00 CO COm 0 0 -.00 N 1 In 00 om-l t q0 N (=0000000 q mco 6- 161 110 1@4 C3 coo 4-a E-4 6 C01- 193 9 187 EXHIBITS k 00000 00 0~C~ 000 CC 0 0000 0000 0-0 000 0 -01 000C0 Cq t cq4c>io oo000-4 o C C oic06 C00O Co 00~ m cc000 X6 C6 CDo?2-: COOC 0-00o C) 000 0 " 0 00 00o' 00 0o 0 CC C o c;0000c 00 c t- (=(= CC C 0 0 0000 0m0 6C)O 00C0)0 0C) 00o 0 C6C6C N 00 0 C 0O 00 0 0 0D 0 00 m 00 0 tC -0000 - 0 CC C00-q 6000c0 - V-4 0-0to-0 0000 C)0C00 00 0 0 00 00 -: 0 "C x 00C-44 k-0000000 w0x00 0 0000 0000 00 0 C 0- 0CC r-0000X0X0 C00 0 X0 t0000 P4 y LOC 0000i '0 0 I-V00 00000vic> to C 00000 I-0 )000 0 c m 00 C-Z 16 LO C 0 CC -C0000co-000d000C14 CC t- 6 C " tN0 0CC10000 r47 O000 0000= 0)0-0 00 0 0 q m Cc i t 0000000 00 0D 00 >ldi 0000 c 006c) :;C )0C(M C00 000000 0- co0 00 0 0 00 cC 0N 00 00 00 00 0 0 CC 0 cc 00- 00 00000-4 000000" 00 C-4 00 0 00 0000 C 00 000to =0000-4 CO 00001! 000000LO M 0C 00t0-o mt"C :qI'l 0000 C XO 0010 0041 rliN D0000 r00 In0 M00.di 0t00 00 L0 0C 0) 00000 0CD 00 00 00 00 00 0 00 0 000C 000CD 100X000 0000 C 00t000 -0000 t C 00 0o- 0000 00X0 00m 00 0 00 0 00 00 0m 00 co0 00 00 14C000 00C cC cc 00 00 00 0 00o - o 00 CO C6 16 0 X60 9 00 0 0 00 0 0Q 00 Cm 0 00C 0-1c tqI-6 0~C C 0 00C)C ct-00CY 0m 0000 00-000 00 Cr 00000 00000 000000 00 00) C OC 0 6 t00 C-1 fi 00D ) .0 c0C400 00 , 0000000 0 m0C)00- 0000 6o 0 C0 000-o C)o -0 C)00 Lo00 0 0-0 0 14-1 C 000 4-Z0 HoC M0 M0 0 oC 000C 'c 0 C 00 810 00 S S 040 CC .5 CC 00 ;-,4 '0) 0 C ce C 00 0 50) 00 ca 1-4a) PL,0 C 0 rd000 4 00 0 0 C 0 4-;P 0 00 0 00 0 E- S 0 140 P.,01 00) 0 -4 z 188 REPORT OF FEDERAL HOME LOAN BANK BOARD, koC (= to 0c>C:t 0) C- CO C)0000 00000 c toC02 CC 0 021 ooo C C 0C) 1!r--4cc 0000 C) C)oto m0c)Cm mo r-4 00 000 C~- 000 .tdqt0q20 000 .4 00 )o00 -i CY6 C UDt~-0 00 w C -CC 00CC 06C> 'o 0 0N0t- 00 ICC ort- elq CO o0toCt 00000 CCm CN co MI OCC N t r-. m Cri OCo 0)3 C- cm CN I-COIt:"C 0CC C5 6 64 Go 142, o ~ c ooC o cc 'cCr-4 0m00C r- "--i "Mm4 kaCCC " 0 02CCOCOC200 o o N2C3 4 co '10 CO co2 4ca 0 C600 CC14C10C016C 0 O 0m0o C)-00 OCO- o m' 02 N C C (=C>C CO CCCC moCeo N t-Cm 0C>C CC5C5mC020 Co oo -00 C C0 00 C 4C 0 o0 C C C c ,000 C LOccCCC-q t00 000)0mo6 0 0000NNX0 t-0=0m 000 10 cOc-CC0m 00000W 0N 000) ) o-0000Co x6 cc o6 C 0 CI 0 CC-f CC-C) 0oCCoCC 00004 4c o6 t:C6 t N CA) O - 02 020 z ~ 00 00o0m2ooC74CD00 C6C 0CCCC CO C N C22 N CC-22C CC000r-400" -C 000C 0022 Ei 00000) 00CC l~ 0 14 =002v 0 O022 CC 02-C)N 0CCo c c 0C uC c0-420 020m CC0u CC ="=$ tCC00or-imcor-l 02CO000 CC 0 -q' =="0000 CO0CC CO XC c6o6 0-0o0w-0C CCMOCt- Q NN= 0000 0 toC CC ~Ct: "m c 0) cC6 t 0X0 0 0 00C0 00C to00 C- CCCCa)CC - q ro 0tI4 t t k C I 00 0CO 000000000CCl7 0002II20 = t- 10 6C)O d 02D UD00 C m CCC C)CIDc C-4 =1 -03 ,CV CC CC z 0 I - I II -H pq E- 2 r2d co , 2 222 cnrl c 02 C P4 o t CA t 2I020 2 2 CO 0 022 0040V-4 4)00 p.0p0 co E- E-- 193 9 180 E3XHIBITS 10 00 o6 C.0 0 0 Co C- Co00o1o 0 cco oCO C0 0Co0o 0 iCo tc(:;;o ) C)oC 0) X6 "il C .Cq ) c ) o; CC 6C6Co CDom odqCo fC m N 0) m Co C1 Co CoOC-1 C D (o o . o Co4o CO C Co-Codq c ) 0 ooo t ( c Co > CoC Cc C-4o coCmC C e - CDCo C C-1m Co Co CSCo) C- -!o0 ComCo)C)CC) Co 00 c~_ _ _ cCo o Co6oo o Co C -m _ LO C-0 C;_1__ _ CXo0C om 00 00Co C00 Cot C1 - C0 coc Co X0Co OC Co0 +3 LO _ C o 00Co 06 0 0 0 Co ~ 0 0 C CoD C 0 0 Co0Co Co o.oC C4 0 Co 0 C i 00 C= c'! ~ 10 Co4 Co Co6 o0 Co mom c!Cm o Co 1 C9o Coj, 000 CDoCo co CoC .0 o C o6o - 0 "IH 0 Co-04C 09 N ,ot4 - 't Co0 Co COO Co M C-C) o Co CO co, Co Co Co Ooo o OCOCo C o~o~~Co CO C0C o oo0 Coo Com o Co -C Co CoO' Co 0 Cod C:- TCo Co Co4Ct-o -Co Co C Co oooo Co X0 C-ComCo Co o co Co co Co m 0-C o r4 ______D CoCD D Co 'C>co 1CC - 0 wCo Co -: CC 6 Co :'Co~CO 4o 1,C7 Co C6 0o C o 0 -Co o t-oCo"I CoCDr oCo1 Co-CovoCo C o Co m 0Co o 01CoC o C6 o Co -Co Co CCi o0.!v i Co 14 ON m 0 q Cq0 1Co Cot--O C Cot-t-C14 CCo o-o Co Co 14 '-C, - Lo ICo oo 0to t- o C.-C.71 co ~~0CCO~o C I Co1 o C o -!q o Co 't 0! 00 Co00 0 i m 0CoCZ C 1 Co C Co o Co Co0 Co COmoXO C o C NC oZC1C m -- 4Co 1Co Co& 0 _ 0 0Co mo o tC-0 0 C> I= - C-NCC11 C X0I-- UCo _ Co Co CoO -q Coo _to __-C) RC>o C0 co Co Co0 Co Co Co ot- o C m :) m r) _______DN C tCo co Co Co6 C o m O -C C o Co Co Co C 0 CoDC Co Co o GomC 0C o Co t0o o C C O Co O Co Co Co 0 Co t Co ZCo 0 CoOCOC O o COIC-1Co 00 1-:Co o 0 C Co 0C Co 0 C CO Co., o q Co C4o 0 0CoCO oOr-4 C Co o - CoCo-o Co CoCDN Co Co c!0to C Co)o _ Co_-Co Col0t-oUo CCoq 01 0 C10 0q Co 0 Co Co 0Co o o I= C co0 _ 0o1Ct C o Co _ Co otC0Co 60 Co 00 LCo 00~ C' > o 4o Co Co -i CoC4o Co'C$ C) Co CC1Co Co 0 I=CmcOcCo Co CoXCo00 Co CoO X0- Co Co 0 IT 0 Co Co 0 Co0 Co00Cm C- CO C11- Co 1C co C 00-Cc:Coil0Co LOCo0C) 0 00 C Co Co I-C t:C o* t-, Co ,m X Co Co 0 xoC CO > Co m td co C1CC4 CoCo4 C o 1o m -C> z C1 Co Co C C Co to CCDo0, Co4CoooCDocoCO0 uCo C 14C r-C o C o Co1CoYoC'-1Co W WCto0Co o ) o Co o CeD000' t-COOC? CCC 4 CO 0 rCoico 6s 0) Co w CC C> oCo .1 DC C) CDot- C C1mC -00 cyD C0 O -I0 C0'C m :a ' C ~o X0CC o0000 OO o 0 c;e0 0 o c £4 f o C 10 Co X0 C o 10m Co 0 oM koCCO11 0 - -d; i 11 1 0Co T C O C Co Co CVo C .O 10 O C: 0 0 1-4 Co Co &030 .. m o0o r 190 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 EXHIBIT 25 Federal Home Loan Banks-Total dividends declared through June 30, 1939, and the annual rates paid semi-annually for the fiscal years 1938 and 1939 Total dividends declared through June 30, 1939 Total U. S. Government Boston--.......-.. $912,180.42 $720,792 11 New York---------- 1,854,442 59 1, 495, 852.75 Pittsburgh--- _ 995,027.34 834,111.39 Winston-Salem---788,117. 25 603,825. 29 Cincinnati .--------. 2, 243, 382 64 1, 563, 506.79 Indianapolis--.... 837,035.56 624,317.09 Chicago----------1,880,765.82 1, 519,948. 45 Des Mones ----_ 825,054.60 680, 531, 44 Little Rock------.... --710,893. 23 595,166. 62 Topeka------------418, 329. 32 349, 920. 56 Portland-----------425, 819.12 372,140. 88 Los Angeles--------... . 607, 583.81 489, 032. 73 Total-----........ Members $191,388.31 358. 589 84 160,915.95 184, 291.96 679, 875.85 212, 718. 47 360, 817. 37 144,523.16 115, 726. 61 68, 408. 76 53, 678. 24 118, 551.08 12,498, 631. 70 9, 849,146.10 2, 649, 485 60 1 Dividends are usually declared on a calendar-year basis. Fiscal year 1938 Fiscal year 1939 July 1, Jan. 1, July 1, Jan. 1, 1937, to Dec. 31, 1937 1938, to June 30, 1938 1938, to Dec. 31, 1938 1939, to June 30, 1939 Percent Percent 1Y 1Y 2 2 1 1 1 1 2 2 1% 1 2 2 2 2 1 1 1 1 1Y2 1Y 12 12 .-------- Percent 12 1 1 1 2 112 2 2 1 1 1Y 1 -- --- Percent 1 1 (1) (1) 2 1Y 2 1Y 1 1 114 _-- ... EXHIBITS 191 EXHIBIT 26 Federal Home Loan Bank System-Members of the Federal Savings and Loan Advisory Council MEETING OF NOVEMBER 1938 Name Federal Home Loan Bank District Elected or Morton Bodfish ---------Chicago ---- -----------------Elected. ----------------------- ---- Winston-Salem ..........---------------------G. W. Bahlke Do. L. A. Boyles ..---- --------Des Moines-----------------------Do. H. F. Cellarius--------------------------- Cincinnati------------------------Do. Albert J. Evers 1 .--------------Los Angeles----------... ----------- Appointed. Charles T. Fisher, Jr.-------------------Indianapolis-----------------------2 L i t t l e R o ck - -- - - - - - - - - - - - -- -- - - - E l e cDo. ted . I. Friedlander ---------------Paul F. Good------------------Topeka----- ----------------- Appointed. Raymond P. Harold ---------------Boston---------------------Elected. Will C. Jones, Jr------------------------- Little Rock--------------------- Appointed. George E. McKinnis ------------Topeka--------...---------------Elected. F. S. McWilliams --------------------Portland--------......------------------Do. James J. O'Malley ------.-------------Pittsburgh------------...... ------------Do. LeGrand W. Pellett---..--------------------New York-----------------------Do. Joseph H. Soliday ------------------ Boston- ----- ----------------- Appointed. Harold B. Starkey------------------------Los Angeles--------... ------------- Elected. E. T. Tripp---------------------------- Pittsburgh.---------------------- Appointed. William C. Walz-------------------- ----- Indianapolis--------------------- Elected. MEETING OF APRIL 1939 Morton Bodfish--------------------------Chicago-----------------------Elected. L. A. Boyles---------------------------- Des Moines-------...----------------Do. H. F. Cellarius---------------------------Cincinnati-----------------------Do. David G. Davis----------------Los Angeles--------------------- Appointed. Charles T. Fisher, Jr ---------- _____------------ Indianapolis------------------------Do. I. Friedlander 2 Little Rock--------------------- Elected. Paul F. Good------Topeka------------------------Appointed. Raymond P. Harold ------------------- Boston-------------------------Elected. George E. McKinnisTopeka----------------------------Do. James J. O'Malley---------------------------- Pittsburgh-----------.......-------------Do. LeGrand W. Pellett--------------New York------------------------Do. Joseph H. SolidayBoston------------------------ Appointed. Harold B. Starkey ---------------------------Los Angeles--------------------- Elected. William C. Walz -------------------------Indianapolis-----------..... ------------Do. J. T. S. Lyle 3------------------------Portland-------------------------Do. George W. West 4-------Winston-Salem---.....---... --------... --------Do. IAlternate for David G. Davis. 2 Acted as Chairman. 3 Alternate for F. S. McWilliams. 4 Alternate for George W. Bahlke 192 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 EXHIBIT 27 Estimated volume of new mortgage loans made by all savings and loan associations, by months, July 1936-June 1939 Type of association Total loans Federals 1936 July ----------------------------$67, 896,000 208,000 August-------------------------------67, September------------------------ ------- 68,913,000 October ---------------76, 521,000 63,315, 000 -----------------------------November December ------------------------------65, 535,000 State members $21,491,000 21, 571,000 22, 500, 000 23,914,000 19, 771,000 22, 517,000 $27,898,000 26, 773,000 26, 761,000 30, 864, 000 26, 344,000 27, 252, 000 Nonmem bers $18, 18, 19, 21, 17, 15, 507,000 864,000 652,000 743,000 200,000 766,000 1937 January -------------------------------February-------------------March----------------------April --------MayJune. July -------------------August ------------------------------September -----------------------------October-----------------November--December---------------------------- 53,867,000 56, 735,000 77, 214,000 89, 600, 000 89,332,000 92, 211,000 82, 234, 000 77,017, 000 78, 314,000 75, 456, 000 64, 503,000 60,096, 000 17, 543, 000 19, 360,000 27, 829,000 32,915,000 30, 998, 000 31, 577,000 28, 693, 000 26, 768,000 26,189,000 24, 539, 000 20, 829,000 20,038,000 20, 729,000 24, 594, 000 32,177,000 37, 395,000 39, 288,000 39, 965, 000 35, 758, 000 32, 334,000 33, 307, 000 32,104,000 27,113,000 24, 522, 000 15, 595, 000 12, 781, 000 17, 208,000 19, 290,000 19,046,000 20, 669, 000 17, 783, 000 17, 915, 000 18, 818, 000 18, 813, 000 16, 561, 000 15, 536, 000 1938 January--.. ---------------February --------March ----------------April..------------------May -----------------June----------------------------July ----August------------...--------------------September ------------------October---------------November-------------------December-------- 49,102, 000 50, 093, 000 65, 218, 000 73, 307, 000 72, 279, 000 73, 067,000 67, 639,000 74, 709,000 71, 647,000 72,931,000 64, 070,000 63, 934, 000 16, 781, 000 17, 520,000 23, 356, 000 26,107,000 24, 721,000 26, 310, 000 23, 823, 000 26, 858, 000 25, 650, 000 26, 534 000 24, 220, 000 25, 019,000 20, 879, 000 22, 073, 000 27, 835, 000 30, 238, 000 31,196,000 30, 350,000 28,973,000 29, 506, 000 29, 255,000 30, 546, 000 26,115,000 26, 504,000 11,442,000 10, 500,000 14, 027,000 16,962, 000 16, 362, 000 16, 407,000 14, 843, 000 18, 345, 000 16, 742,000 15, 851,000 13, 735,000 12,411,000 1939 January-----------------55, 567,000 February -----------------58, 309, 000 March ---------------------------------73,378,000 April.-----------------------------------83,425,000 May-----------------------------------89,123,000 June-----------------------------------94,154,000 20, 894, 000 22, 298, 000 29,811,000 33, 400, 000 36,358,000 39, 094,000 23,071,000 24,191,000 30,124,000 32, 562,000 35,426,000 36, 465, 000 11,602,000 11,820,000 13,443,000 17, 463,000 17,339,000 18, 595,000 Source: Division of Research and Statistics, Federal Home Loan Bank Board. 193 EXHIBITS EXHIBIT 28 Estimated volume of new mortgage loans made by all savings and loan associations during the fiscal years 1938 and 1939, by Federal Home Loan Bank Districts 1939 1938 District cne $820, 686, 000 $868, 886,000 5. 9 ....... .......--------------------------------------78,951,000 No. 1-Boston -----78,075,000 ------------No. 2-New York 64, 638,000 ------------------No. 3-Pittsburgh 109, 891,000 No. 4-Winston-Salem -----------------------------------137, 424,000 No. 5-Cincinnati ----..------------------------------------------36, 779, 000 No. 6-Indianapolis ..--------------------------------------82,133,000 No. 7-Chicago 48, 438, 000 No. 8-Des Moines----------------------------------45, 877,000 No. 9-Little Rock..........--------------------------------------------------------------42, 956,000 No. 10-Topeka------..-----------------------------------28,241,000 No. ll-Portland..... 67,283,000 No. 12-Los Angeles........--------------------------------- 77, 677, 000 85, 470,000 70, 425, 000 119, 865,000 135,003,000 40,919,000 85,218,000 53,374,000 53, 616,000 43,384,000 30,295,000 73, 640,000 -1.6 9. 5 9 0 9.1 -1.8 11.3 3.8 10. 2 16. 9 1.0 7. 3 9. 4 United States .. ....--------------------------------- Source: Division of Research and Statistics, Federal Home Loan Bank Board. EXHIBIT 29 Distribution of new mortgage loans made by all savings and loan members of the Federal Home Loan Bank System, according to purpose Purpose of loan Fiscal year 1937 Dollars Construction --------------Home purchase ------Refinancing---------------Reconditioning-------------Other--------------------Total.............--------------- Percent Fiscal year 1938 --Dollars Percent Dollars 185, 388, 000 217, 518,000 146, 582, 000 39, 535,000 63, 003,000 28 4 33.4 22 5 6.1 9. 6 177, 548, 000 209, 272, 000 134, 558, 000 41,981, 000 66, 201, 000 28 2 33. 2 21.4 6. 7 10. 5 219, 726, 000 216, 789,000 136, 494, 000 41, 842,000 71, 846,000 652,026,000 100. 0 629, 560, 000 100. 0 686, 697, 000 Source: Division of Research and Statistics, Federal Home Loan Bank Board. Fiscal year 1939 Percent 32 0 31. 6 19. 9 6.1 10. 4 100.0 194 REPORT OF FEDERAL HOME LOAN BANK BOARD9 1939 CO=o Co-Coto -ditC o Co0CO Co to C-! cq mOo C t- COCot- (00(Co --C C (>CD C)Ot o -ot =od4 -COq I _4Jo 0 ,t Lo-f o mX CO CC Co1 xo-4c)00C-C= =-mi)co-00 wV-4CO r-C ) < Io xro t Co-4 4C C)l I I +C)o C CD CoCt CCC ouCo C - Co.CoCo'Co C CoO co CoC)C o oC CmoC r CoD wqCC CO C00C> C - 0Co CoCoot- CoC- Co0COomCOC COCOtoC-COCoC o COCO o CO -CO - -o---o-o-o C 0mC - CO1-vc - CO COCoC C O O C o oCOC 4-D mo '' '' OD 02I rI0 C) CO0CoC 00 coCo Co C- Co.qCo -Co C-C oCoCoComCot-CtoO=Co CqCoC=Co-C CO mC C COXC0Co C6 =COC :06 Co CO~o CC~ Co-dCoCoCoC4Co10 CoCoCoCoCo C~k-4 o Coc C OC COC -dCo C CoCt oC oo oCq C COCo Co Co - 1 J M-414 COZC0L CO1 Co4r-o Cod -1 M 11-di Co C Co C,CO CtCO C-COC(Co"-4 Co- C-C-C-C- C o -C-C CoomCOICO4 Co ot- c- C- CoCoOCo o C C.CorCo COCo CCoNCO0 CocoIw o ' ~3 U cq CON CC 0 C- CO o Co"qo moCwOCto 4T4oI COCF t-CoC Coq oC)ow.dtI- t-CO CoC - C - -- -CO co 0l .4to.d4toC-q mo Co -1sC4O:I C C CCOQ0COLO C-Co1Co o aI CO oOo~~cc I -4Co-o COqo0C t-OooOO o C0 Co o-4 0 CotC-1C CO CCO0o -oio o Co-o 0CC c COXComCO--q CoC-CoCoC-CoCo CCoCCootC- COCo CoCOCoC CoCOCoCCoCO coo C-Co CO4Co Co Coc o qCCoCo 4CC-4CoC toO-4CCOOVocqT-4 ~ 00 CG- C) C) C X6Cl ar: 1Or-oClCC C 9C) HNI -C) C ooo -- CCO4 Coo C 0 oC)o Cmto (Mo00Co =ocOc.dq CO4d4C C Cotm - 7CoC0.dq Cf- C o C m to- Cw o C Co Co r--4 COC (-Cto- Co C(M o cqldX0mtLO -1 - C-z0iC CoCoO--,H0CO COCWC C-mCoDCoCoqCO C-CO CO CoCoMCo CoCO14W00 Co -CO Co C C0C0C C C> Co oto Cr I- CotC'COOXOCo Co(=Co-qCo CO C C) 0C COC Co-CoC C C OC11-iNmc o C)Oto -4o t oC OC - -oOC oC - -0 CoCoO cqCo-o1o OrO-O4o O -C 0$i 0 C-D C) PA) CC C) (2) 0 C C 02 195 EXHIBITS EXHIBIT 31 Percentage distribution of balance-sheet items for all savings and loan members of the FederalHome Loan Bank System, as of Dec. 31, 1938, compared with Dec. 31, 1937 Percentage ratio to total assets All savings and loan members Item StateState Federal saychartered chartered un ings and loan insured say- insured say associations ings and loan ings and loan associations associations 1937 1938 1937 1938 Number of member institutions------------3, 890 3, 895 1,319 Percent 72.82 Percent 74.41 .17 .88 3.61 13. 77 .96 61 3.54 1.18 . 10 .36 1937 1938 1, 362 560 Percent 79.39 Percent 79.80 .15 .79 3.78 11.99 .99 .06 .42 3.33 8.41 1.15 2.12 4.20 1.16 .10 .31 1.68 4.05 1.16 .13 .22 1937 1938 735 2, 011 1, 798 Percent 72.03 Percent 73.42 Percent 69. 07 Per cent 70. 57 .06 .40 3.43 7. 46 1.13 .16 .58 4.55 12. 61 .91 .17 .53 4.83 11.15 .98 .24 1.26 3.45 17.48 .87 .21 1.24 3.54 16. 06 .87 1.26 4 94 1.20 .14 .18 2.90 4.21 1.53 .10 .42 2.38 4.70 1.33 .12 .39 3.07 2.99 1.08 .07 .42 2.67 3 36 1.05 .07 .36 ASSETS First mortgage loans (including interest and advances) -------------Junior mortgage liens (including interest and advances) ---------------Other loans (including share loans)----------...... Real estate sold on contract-------Real estate owned---------------------Federal Home Loan Bank stock Other investments (including accrued in terest)..------------------------------2 Cash on hand and in banks--------.... ------Office building (net) ----------------------Furniture, fixtures, and equipment (net) Other assets-------------------------Total assets---------------------- 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 LIABILITIES AND CAPITAL U. S. Government investment (shares and deposits)----------------Private repurchasable shares ---...----------Mortgage pledged shares -------Deposits and investment certificates --------Advances from Federal Home Loan Bank--Other borrowed money--.-------------------Loans in process-----... --------------------. Other liabilities-----------Capital, permanent reserve, or guaranty stockSpecific reserves---- -- ---General reserves -----------Undivided profits ------------Total liabilities and capital -. - 7.13 6 90 63. 59 65.13 5. 77 4. 80 7. 44 7. 27 5. 59 5. 28 .50 .49 63 .80 1.19 1.12 .71 .71 .69 .----.35 4.87 4.95 1.89 2 20 100.00 19.65 61.27 1.62 .18 9. 31 .21 1.18 1 22 .01 .48 3.47 1.40 16.58 65.88 1.17 .09 8.13 .24 1.37 1 21 0 .36 3.45 1.52 5.42 53 91 2 82 19. 49 5. 21 .41 .64 1.28 2 58 .72 5 69 1.83 .07 68. 56 9.40 7.47 3.45 .69 .29 1.15 .48 .80 5.43 2.21 .05 69.53 8. 67 7. 61 2. 94 .68 .29 .90 . 38 .32 5.75 2.88 100. 00 100. 00 100. 00 100. 00 100. 00 100.00 100. 00 Source: Division of Research and Statistics, Federal Home Loan Bank Board. 5.01 55.09 2.89 18.19 5.36 .51 .90 1.43 2.51 .40 5.78 1.93 196 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 EXHIBIT 32 Operating ratios for savings and loan member institutions of the Federal Home Loan Bank System, calendar year 1938 PERCENTAGE RATIO TO GROSS OPERATING INCOME Item AllreortSsarepornand loan emersn members Reporting Reporting Federal insured savings Statechartered and loan associations members Reporting uninsured State chartered members Number of institutions reporting---------------------- 3,094 1,355 588 1,151 Interest income: On mortgage loans-Ordinary cash collection-....... On real estate sold on contract--------------- ---- Percent 84. 24 3.82 Percent 85.99 3.73 Percent 82.49 5.28 Percent 83.40 2.96 3. 44 8.50 2.39 7.89 3.82 8.41 4.38 9.26 Compensation to directors, officers, employees, etc...- . Rent, light, heat, etc------------------------------Repairs, taxes, and maintenance of office building ...-Advertising --------------------Federal insurance premium.....------- -------------------Other operating expense----......-------.- 12.71 1.54 1.03 2.06 1.24 7.36 13.27 1.84 1.04 3.13 1.92 7.37 13.92 1.42 1. 11 1.92 1.93 9.26 11 27 1.26 .96 .93 0 6.17 Net operating income before interest and other charges-. Interest charges: On deposits, investment certificates, etc------------........ On advances from Federal Home Loan Banks--On other borrowed money---------------------........ Total interest charges---------------------------Net operating income-------------Total nonoperating income-.-------------------------Total nonoperating charges--------------------------Net income for the year...----------------------------- 74. 06 71.43 70.44 79 41 5.70 3.18 31 9 19 64 87 2. 91 3.47 64 31 .06 4.69 .15 4.90 66. 53 2 61 2.44 66.70 13 39 2.78 .37 16 54 53 90 3.25 2 31 54 84 7.06 1.73 .46 9. 25 70 16 3 03 5 39 67 80 0.26 .18 0.05 3.99 0.01 5.67 7. 07 1 12 .29 77.88 7. 70 3. 27 1.03 1 33 74.83 9. 21 6.15 1.94 1.17 81.67 3.35 Net income on real estate owned---------------------Other operating income...------ --- PERCENTAGE RATIO TO NET INCOME Disposition of net income for the year: For bonus on shares -------------. ... .. --------------Legal reserves . ...--------------------------------- Federal insurance reserve...------------------------- 0.12 3....02 3 59 For contingencies ......... .....----------------------------- 5 96 1.41 ........--------------Real estate reserve---------... 83 ...... .....-------------------------For other purposes 78.70 Dividends.----------------------------6. 37 Balance to undivided profits----------------------- 5.50 Source: Division of Research and Statistics, Federal Home Loan Bank Board. 6.29 .04 19T EXHIBITS EXHIBIT 33 Number distribution of member savings and loan associations of the Federal Ilome Loan Bank System, by asset size groups, as of June 30, 1939 All member savings and loan associations Federal associatiassocans - Number Percent of total Number Percent of total Number Percent of total 350 933 886 771 623 213 121 9.0 23 9 22.7 19.8 16.0 5.5 3.1 146 307 281 262 260 74 50 10.6 22.2 20.4 19.0 18.8 5.4 3.6 53 155 181 158 160 52 27 6.7 19.7 23.0 20.1 20. 4 6. 6 3.5 151 471 424 351 203 87 44 8.7 27.2 24.5 20.3 11.7 5.0 2. 6 3, 897 100.0 1,380 100.0 786 100. 0 1, 731 100.0 Insured StateNoninsured State chartered associa- chartered associa tions tions Asset size groups $0 to $100,000_ -------$100,000 to $250,000 -$250,000 to $500,000----------$500,000 to $1,000,000 ----- ---$1,000,000 to $2,500,000----$2,500,000 to $5,000,000 ..----$5,000,000 and over-----------....... Total---........-------------....... Numher Percent of total Asset distribution of member savings and loan associationsof the Federal Home Loan Bank System, by asset size groups, as of June 30, 1939 [Aggregate assets reported in thousands] All member sayings and loan associations Asset size groups Per cent of total Aggre gate assets -1- Aggre gate assets Noninsured State-chartered associations ------ Per cent of total Per cent of total Aggre gate assets 1 04 3.0 $9,638 51,367 100,294 189,451 402,591 250,014 436,633 0 7 3 6 7.0 13.1 27. 9 17. 4 30 3 $3,690 26, 749 65,029 113,639 246,629 182, 242 257, 532 7.3 12 7 27.5 20. 3 28 8 $10,681 79,708 153,522 249,186 319,345 283, 981 502,720 100 0 1,439,988 100 0 895,510 100.0 1,599,143 $0 to $100,000----------------$24, 009 157, 824 $100,000 to $250,000---------------318, 845 $250,000 to $500,000 -$500,000 to $1,000,000-----------552, 276 $1,000,000 to $2,500,000----------968,565 $2,500,000 to $5,000,000----------716, 237 1,196, 885 ------$5,000,000 and over 0 6 4 0 8.1 14.1 24 6 18 2 30 4 Total.----------------- 3,934, 641 Per cent of total Aggre gate assets 1 1 Insured State chartered asso cations Federal associa- 0.7 5.0 9.6 15.6 20 0 17.7 31.4 100.0 EXHIBIT 34 FederalSavings and Loan Associations-Numberand estimated assets as of the end of each fiscal year, 1934-39 of associatistimated Number Number of associations Date ________ Total June June June June June June 30, 30, 30, 30, 30, 30, 1934---------------------1935----------------------1936--------------------1937-----------.... ---------1938 ....--------------------1939....-------------------- assets (in thousands of dollars) 370 851 1,135 1, 286 1,346 1, 386 New 320 554 637 647 640 636 Converted 50 297 498 639 706 750 Total $41,402 304, 569 655,192 986, 297 1,213,874 1,442, 069 New $3,198 36,145 116, 670 222, 528 301, 242 397, 239 Conveited $38, 204 268, 424 538; 522 763, 769 912,632 1, 044,830 198 REPORT OF FEDERAL HOME LOAN BANK BOARD, 193 9 C) C) C) C>(= C> CDC>C) C) C) CD CDCDC>CDCDCD 10 10 r-q C) m cq m CD= C"D 4zoC> m cq a) (m co cc 06, (3) C)000C C0) 10110 SO m o CDC0 C 0=>C000)0 )0 >C)( 0 =cC>000 q m0 IC '0 0 C.0 r.40 0 0 't-00 10 c 00 I _ 00000C)0CC)000 00000N cie6 01 0) 00 t_ _ 000C 00eo 000=t- OCO=)00 ) X000 ri CO- m 00 00r-4 : __r._ DC C --iNX0 _ _ C14~o DCODC)) C 00C)-t"-1O 000000 0 _ oC0 c;CC O~I ) C C) C 0to 0CO 0-0 0- "4T- _ _ 0=00 1) 0 _ _ c:> CD C) C) C) C) C) C)C> 00C)COOa (=C m)V--0 00 C)0 O0 0 C14 et-ze (M 0000000LOCoO t0000 Lete0000 C or- 0 co Cqci, r.-4 II II II 000) ld 0) CO0 0 0000 0M0--0CO 0000i '0 co)C 00000 000c t 00 00 COV--COOm ~cLOCOO X 0 00N00 z lclC6. . .cl, 0 0 -NO 00 t-#ICOi 00? 0) 00 co co CO000000 CO C 00C :,4' co 00000a~iC0000 LOtodq= o 0 00 0 Lox LtX -C.O 0000000 COCO 7-- -4La o = cc 00000 Ii000C 000001 Co0 CC) H 00 00 00 00 C)0 t00000 0000 r-4 (= t 000cyc 00000000<7 t-00 CO1 000?414 C CO 0 C14 0 -A 00 mCOI O MCO 0- ct00000000 - C0) (a) o0 '06,00-Of) )0 00 0 100 rh ( C> cb to00 q 0 0 t m 0 .a 00 0 0 - 00C0O00 d 0-4004 D0q o 00 0C) )T 000 - C- 0 -IqNxmNCo 0C 0004 0 0C) -4 11000-.1CO C C 00 00 00 OOCO-i C1C300 CC ' r- ot q4- V C"l oc 0c I t - - 0 0 I :Ei ,4 I a I I o ~0 '0) 0) ,00 (3) 0000C Q~ZP z 0) 0 PZ-CO z z .0) 0)0) 0 z 0) 199 EXHIBITS 00)IC0 00)I(0 (= C0 6' 000 000 0q 00 6' c6cT 6 0) C) 000 0 00 ) 00000) C C 00000(=) C) CoCD ) C 00000000e --4I6 6l C) 10 % V. 0 00 00 00 000t- 0 ,4'e C)(=C) M 000to t 000 1VD C) C0 t-010 c m00 q - LO 0 I0mN t'- 1:0104 0000 -.44t000 ro 0000DC) - 0 )00 0000 00 000000 0c 1 0000Co04 cC 00r'400000.0000000000000o00 0000 00 00 t-Nq qk t- 00000o to00000N X -I 00 t- M f C 0000 C4 0C 000== 0 00 44 00 0 000= 0000 o( 0 00 ) 0 C00()t 0- 0 OO=00 0 0i 0000000-0-0 o00 00 m 000000000000--I 01 c000000000000 00 00 00r 004 00 00 - r4 ONt-m 0 m0001000 0 Itiq10 0 00 ": 000t-00 0 00D0r-4 000000r- 00 C0 t- O II zm 00 0t 'll00 o 10: t 00 Ct-q 3m I t00 IC) 14= C) if.) 100 La C14 6' m ( 00000 00tN101 000000 00-tq 0 0 'W% 000m00 000 110)" 00C00-00 00 CD 0 C) )00000 C) IT--00000110q C1 00co 00400000O 000000 00000000 : 00000 I r00000 C) C) C: C 00000= ( 00000) C C C>C>C>6CD6C D C) t--oo q0 Go 00 00 0w X0c ooooo4 "400000 Cf 1 c6 00 00 00150N-It000 000t0o 1 0- qL 00o 0-t: tt 0000 0 -o,0000=m 0 0 L0-0 00 0 ko000000 00 q 000U. 0000 m m0 00r-4 X004 C = 0 0mC0'- 0000' ' -- m 0000 4 0m00tr0 000000 m 0c 0 00000t- 00r- oo00q00X0 oe 0000000 w0N000000 00000-0-000-0-0000cqC ir C e.m= 00 c 0w0000000000-0 ltt k 00 0t0100N000C-000co 000 t t00 L 0 0xe 00 0 00 0000 (,00 00 0000 0 00 0 0o0 0000' a) I t- U1 ")I 000m00 000(M 000- t 0 0 00- - 000-0000 11 ="00k 0000x0c0000-qI 0 00 I000000-= N q C) m m 00000 r oIq 4 - ( -IC0t0c00 r- 0i4 -0 0 0 O i 000000000 ___on__t_____________N__10______to__m_________4 ~ 0 N CC-0 (= 0 (=0q 0 I I 0w I0m0-0000.-1100 0 00Y 00 c0000 0t 00 -00 0 I .IY4 zX I ______ r- o 01 N00q 01010000 00 'a ~c0 .) (a) 000 Cd i CO z 0 z6 z5 C,1 Co 200 REPORT OF FEDERAL HOME LOAN BANK BOARD, 19 39 EXHIBIT 36 Federal savings and loan associations-Privateinvestors in repurchasable shares and private repurchasable capital, by Federal Home Loan Bank DistrIcts and by States, June 30, 1938, and June 30, 1939 Number of private investors in repurchasable shares United States -- No. 1-Boston ....-----Connecticut---------------------Maine Massachusetts -------New Hampshire------Rhode Island -----Vermont--------------- Private repurchasable capital Private repurchasable capital June 30, 1938 June 30, 1939 June 30, Jue 30, Increase 1, 030,096 1,299,915 269, 819 $763, 724, 553 81, 720 98, 772 17, 052 74, 387, 313 87, 534, 300 9, 815 473 66, 049 3, 808 537 1,038 14,457 599 75, 330 6, 202 706 1, 478 4, 642 126 9, 281 2, 394 169 440 4, 478, 426 219, 019 63, 927, 252 4, 327, 715 167, 825 1, 267, 076 6, 891, 357, 72, 756, 5, 385, 286, 1, 857, Increase $990, 871, 600 $227, 147, 047 13, 146, 987 600 200 300 100 600 500 2, 413,174 138, 181 8, 829,048 1, 057, 385 118, 775 590, 424 160, 318 185, 205 24, 887 84, 231, 683 105, 576, 800 21, 345,117 New Jersey---------New York------------- 160, 318 185, 205 24, 887 84, 231, 683 105, 576, 800 21, 345, 117 No. 3-Pittsburgh------- 31,665 56,644 24,979 20,447,459 37,850,900 17,403,441 24,580 7, 085 78 47,532 9,034 78 22,952 1, 949 14,589,204 5, 858, 255 151, 000 29,901,000 7, 798, 900 151, 000 15,311,796 1, 940, 645 No. 2-New York------- Delaware-------------Pennsylvania-- ------West Virginia ------ 82, 695 119, 191 36, 496 62, 998, 037 96, 682, 900 33, 684, 863 Alabama-----------District of Columbia Florida--------------Georgia---------------Maryland-----------North Carolina-------South Carolina-------Virginia .---------- 5, 368 6, 998 19, 386 12, 151 14, 104 5, 349 10, 482 8, 257 6, 852 7, 837 29, 822 16, 942 24, 732 8, 373 13, 225 11, 408 1, 484 839 10, 436 4, 191 10, 628 3, 024 2, 743 3,151 3, 477, 873 4, 361,951 14, 289, 075 7, 918, 722 11, 295, 416 4, 403, 507 9, 033. 839 8, 217, 654 4, 476,100 6, 391, 500 25, 678, 600 11, 828, 800 17. 374, 700 6, 869, 300 12, 367, 200 11, 696, 700 998, 227 2, 029, 549 11, 389, 525 3, 910, 078 6, 079, 284 2, 465, 793 3, 333, 361 3, 479, 046 No. 5-Cincinnati-------- 205, 419 255,100 49, 681 176, 713, 319 212, 056, 900 35, 343, 581 37, 249 156,177 11, 993 47, 419 188,160 19, 521 10,170 31, 983 7, 528 40, 564, 956 127, 666, 710 8, 481, 653 47, 061, 400 152, 425, 700 12, 569, 800 6, 496, 444 24, 758, 990 4, 088, 147 No. 4-Winston-Salem-- Kentucky Ohio------Tennessee------------No. 6-Indianapolis . ----- 88, 202 100, 138 11, 936 76, 941, 072 90, 997, 400 14, 056, 328 Indiana--------------...... Michigan----_-----_--- 67, 154 21, 048 70, 291 29, 847 3, 137 8, 799 55, 370,948 21,570, 124 61, 297, 600 29, 699,800 5, 926, 652 8,1-29, 676 No. 7-Chicago.----- - 69, 441 97, 733 28, 292 56,064, 257 73, 511, 500 17, 447, 243 Illinois----------Wisconsin ......----------- 61, 911 7, 530 86, 724 11, 009 24, 813 3, 479 51 442, 491 4, 621, 766 66, 166, 500 7, 345, 000 14, 724, 009 2, 723, 234 No. 8-Des Moines-------- 64, 827 81, 785 16, 958 41, 927, 252 56, 299, 200 14, 371,948 7, 583 32, 337 21, 932 1,818 1,157 10, 867 41, 653 25, 809 2,163 1,293 3, 284 9, 316 3. 877 345 136 4, S93, 781 15, 452, 265 19, 630, 426 1,122,741 828,039 8,169, 000 23, 155, 200 22, 536, 400 1,429,600 1,009.000 3, 275, 219 7, 702. 935 2, 905, 974 306,859 180,961 44, 066 53, 643 9, 577 42, 193, 968 53, 550, 500 11, 356, 532 5, 134 6, 234 2, 915 949 6, 337 7, 003 3, 519 1.130 1, 203 769 604 181 5, 681, 743 9, 262, 662 2, 295, 771 891, 887 Iowa----------------Minnesota-----------Missouri -----North Dakota-------.. South Dakota------... No. 9-Little Rock-....-Arkansas------------Louisiana ....--------Mississippi----------.. New Mexico..---Texas_ ------- 28, 834 35, 654 6, 820 24,061, 905 7, 766, 10, 716, 3, 159, 1, 279, 500 600 200 500 30, 628, 700 2, 084, 757 1,453, 938 863, 429 387, 613 6. 566. 795 201 EXHIBITS Federal savings and loan associations-Privateinvestors in repurchasable shares and private repurchasable capital, by Federal Home Loan Bank Districts and by 1939-Continued States, June 80, 1938, and June 30SO, Private investors in repurchasable shares Private repurchasable capital I June 30, 1938 -- 4 June 30, 1939 No. 10-Topeka .------ Increase June 30, 1938 1 June 30, 1939 Increase - -- 1--------1 1- -1 51,125 68, 103 16, 978 $51, 781,301 $65, 728, 500 $13, 947, 199 Colorado--------Kansas-------------Nebraska-------------Oklahoma------------- 13, 791 7, 465 4,429 25, 440 15,127 17, 857 5, 564 29, 555 1,336 10, 392 1, 135 4, 115 11, 646, 927 5, 032, 105 3, 579, 046 31, 523, 223 13,414,000 13, 571, 600 4, 283, 700 34, 459, 200 1, 767,073 8. 539, 495 704, 654 2, 935, 977 No. 11-Portland---------- 102,257 113,059 10,802 33,454,112 42,828,600 9,374,488 7, 223 508 11,003 8, 352 73, 723 1, 362 86 8, 487 558 13, 725 8, 631 79, 762 1, 717 179 1, 264 50 2, 722 279 6, 039 355 93 3,197, 663 213, 460 5,099, 930 3, 574,467 20, 614, 199 726, 181 28, 212 3, 778, 600 264, 600 7, 298, 000 3, 863, 500 26, 264, 600 1, 280, 200 79,100 580, 937 51,140 2,198, 070 289, 033 5, 650, 401 554,019 50, 888 48, 361 70, 542 22,181 42, 584, 780 68, 254,100 25, 669, 320 1, 453 45, 819 1, 781 67, 657 328 21, 838 858, 120 40,233,386 1, 259,100 65,508,800 400, 980 25, 275, 414 1, 089 1,104 i5 1, 493, 274 1,486, 200 -7, 074 Idaho-----------------Montana-------------Oregon---------------Utah-- ----Washington ---------Wyoming Alaska .------No. 12-Los Angeles Arizona-------------California -. ...-..-----Nevada.........-----------Hawaii .----------- -- Source Division of Research and Statistics, Federal Home Loan Bank Board. EXHIBIT 37 Federal savings and loan associations-Investments of the U. S. Treasury and the Home Owners' Loan Corporation, by Federal Home Loan Bank Districts and by States, June 30, 1938, and June 30, 1939 June 30, 1938 United States__-------No. 1-Boston --------------------------------Connecticut----------Maine-------------- Massachusetts --------New Hampshire_ Rhode Island---------- Vermont--------------No. 2-New York -------------------------------------------------------------------------------------------------------------------------------------- ---------- New Jersey New York ---.. ----------------------------- - ------- No. 3-Pittsburgh.... ----- Delaware------------------------------------------ Pennsylvania----------------------West Virginia ... ------- No. 4-Winston-Salem -------------............. Alabama ------------------District of Columbia -------------.. Florida -----------------------------------------Georgia------.. -- -----------Maryland. -----.. ---------North Carolina ------------South Carolina-----------------------Virginia ........------------------------------------183130-39- 14 June 30, 1939 Increase $218, 567, 000 $217, 025, 500 -$1, 541,500 9, 295, 700 9, 645, 700 350,000 3,132,500 207.000 5, 246, 200 475, 000 185,000 50, 000 3,132,500 257,000 5,446, 200 475,000 285,000 50,000 0 50,000 200,000 0 100, 000 0 29,973, 300 29,143, 300 -830, 000 29. 973. 300 29,143, 300 -830,000 9, 530, 200 9, 868, 700 338, 500 6, 386, 200 6,690,700 3, 144, 000 3,178, 000 304, 500 34. 000 29, 743,800 30, 029, 300 285, 500 1,260,500 50,000 11,832,400 4,449,900 3,825,000 3,013.500 1,922,500 3,390,000 1,310,500 50, 000 11,856,400 4, 396, 900 3, 857, 500 3,093,500 1,922. 500 3. 542,000 50,000 0 24,000 -53,000 32, 500 80, 000 0 152.000 I 2Q2 REPORT OF FEDERAL HOME LOAN BANK BOARD, 19 3 9 Federal savings and loan associations-Investmentsof the U. S. Treasury and the Home Owners' Loan Corporation, by Federal Home Loan Bank Districts and by States, June 30, 1938, and June 30, 1939-Continued June 30, 1938 No. 5-Cincinnati Increase June 30, 1939 $26,708,100 ---------'---------'--------c -$619, $27,327,600 500 ----------- 3,926,000 16,517,000 6,884, 600 3, 631, 500 16, 202, 000 6,874, 600 -294, 500 -315,000 -10. 000 No. 6-Indianapolis------------------ 12, 075, 300 12, 036,800 -38, 500 Indiana--------------------------Michigan-------------------------- 8, 632,b00 3, 443, 300 8, 932, 500 3,104, 300 300, 500 -339, 000 No. 7-Chicago------------------------ 23, 968, 500 23, 372, 500 -596,000 Illinois Wisconsin------------------------- 20,481, 500 3, 487, 000 20, 250, 500 3, 122, 000 -231,000 -365, 000 18, 794,300 18, 793, 300 -1,000 2,447,000 8, 573, 300 7,116,000 305,000 353, 000 2, 482, 000 8, 536, 300 7,107,000 315,000 353, 000 Kentucky------------------------Ohio - Tennessee------------------------- No. 8-Des Mqi1nes-------------------Iowa----------------------------Minnesota ------------------------ Missouri------North Dakota--------------------South Dakota ---------------No. 9-Little Rock ---------------- Arkansas -- -----------------Louisiana .---------------------Mississippi--------- -------------New Mexico----------------------Texas . -------------------- No. 10-Topeka---- ---------- Colorado------------------------Kansas---------------------------Nebraska-------------------------- Oklahoma------------------------ No. 11-Portland--Idaho -------------------- Montana ---------------Oregon ---------------------------- Utah----------Washington_ --------Wyoming------------------------....... Alaska-- ....--.... ----No. 12-Los Angeles Arizona ---------------------------- California ...--------------------. Nevada-.. --------------------Hawaii.......----------- 9, 572, 600 8,881, 600 -691,000 1,924, 500 435, 500 771,500 342,000 6,099,100 1, 650, 000 370,000 754,500 292, 000 5,815,100 -274,500 -65,500 -17,000 -50,000 -284,000 9, 396, 000 9,435, 500 39, 500 2, 615,000 2, 855, 000 1,441, 000 2,485,000 2, 594, 500 3, 255, 000 1, 336,000 2, 250, 000 -20, 500 400, 000 -105,000 -235,000 18, 531, 500 18, 337, 500 2, 325,600 30,000 4, 621,500 1,700,000 8, 813, 000 1. 008,100 33, 300 2,325, 600 30,000 4, 597, 500 1,700,000 8, 643, 000 1,008, 100 33, 300 20, 358, 200 20, 773, 200 590, 000 19, 768, 200 605, 000 20,168, 200 ----- ------- -194,000 0 0 -24,000 0 -170,000 0 0 415,000 15,000 400,000 _ ----------- Source: Division of Research and Statistics, Federal Home Loan Bank Board. 35, 000 -37, 000 -9,000 10,000 0 - - 203 EXHIBITS EXHIBIT 38 Federal savings and loan associations-Summary of new mortgage loans made by reporting associationsduring year ended June 30, 1939 purConstruction Home chase -- United States--No. 1-Boston Refinanc Ing Repairs and recon ditioning Other pur poses Total '- $123, 028, 800 $94, 354, 900 $67,189, 700 $18, 465, 000 $28, 730, 000 $331, 768, 400 7, 038, 000 7, 723, 400 4, 442, 600 1, 797, 000 1, 933, 500 22, 934, 500 829, 300 90, 300 6, 034, 200 263, 900 154, 200 351, 500 783, 900 100, 700 3, 059, 000 255,800 102, 900 140, 300 184, 600 15,300 1, 393, 000 137, 600 7,000 59, 500 31,600 35, 600 1,435,300 373, 700 Vermont ---------- 1, 513, 600 43,300 4, 950, 400 181,600 145, 500 203, 600 57,300 3, 343, 000 285. 200 16, 871, 900 1, 212, 600 409, 600 812, 200 No 2-New York ---- 13, 805, 200 8, 691,000 3, 902, 800 546,100 1, 923, 300 28, 868, 400 Connecticut-------Maine -------------- Massachusetts-----New Hampshire---Rhode Island ------- ----------- New Jersey --------New York ---------- 13,805, 200_ 8, 691,000 3, 902, 800 546, 100 1, 923, 300 28, 868, 400 No 3-Pittsburgh ------ 5, 245, 900 5, 863, 000 3, 237, 800 788, 700 866, 700 16,002, 100 Delaware----------Pennsylvania ------West Virginia --- 57, 000 4,127, 600 1, 031, 300 98, 800 4, 971, 600 792, 600 10, 700 2. 264, 000 963, 100 7, 000 359, 600 422, 100 458, 600 408, 100 173, 500 12, 181, 400 3, 647, 200 No. 4-Winston-Salem-- 19, 621, 800 11, 245, 100 7, 914, 000 2, 245, 000 4,042, 800 45. 068, 700 North Carolina----South Carolina----Virginia-------- 433,400 1, 960, 200 6, 712, 600 2, 031, 800 1, 544, 300 1,912,600 2, 563,100 2, 463, 800 359, 400 738,800 1, 765 000 1, 126, 000 4, 308, 300 789,600 819, 500 1, 338, 500 409, 200 814, 900 1,904, 200 1,410, 700 807, 300 808, 900 833,400 925, 400 137, 500 129, 300 503, 300 382, 700 137,700 324, 400 390, 000 240, 100 181, 200 304, 800 1, 886, 900 380, 700 162, 900 349, 900 448, 300 328, 100 1, 520, 700 3, 948, 000 12, 772, 000 5, 331, 900 6, 960, 500 4, 185, 400 5, 054, 300 5, 295, 900 No. 5-Cincinnati------ 15, 964, 100 53, 272, 800 Alabama --------- District of Columbia Florida------------Georgia------------Maryland---------- 17, 374, 400 11, 552, 600 3,315,100 5, 066, 600 Kentucky---------Ohio-----------Tennessee 2, 379, 700 3,346,600 2,242,400 800, 600 11,156, 500 2,427,900 938,000 9,707,300 13,084, 300 943,500 7, 710, 600 1,599,600 2,073,100 441,400 3, 634, 200 494,400 37,658, 700 5,906,800 No. 6-Indianapolis---- 5, 966, 700 5, 314, 500 4, 201, 200 1, 722, 800 1,832,800 19, 038, 000 Indiana-----------Michigan ----------- 2, 510, 600 3, 456,100 4, 289,800 1, 024, 700 2, 639,100 1, 562,100 1, 440, 200 282, 600 1, 256,100 576, 700 12,135, 800 6, 902, 200 No. 7-Chicago--------- 6, 094, 600 9, 727, 500 7, 772, 900 2, 256, 200 2,495, 600 28, 346, 800 4,829,700 1,264,900 8.411,100 1,316, 400 7,147, 300 625,600 2,027, 400 228,800 2, 255, 500 240,100 24, 671, 000 3,675,800 8, 216, 300 6, 256,100 6,004,700 1, 559, 300 1,823, 300 23, 859, 700 1, 582, 800 4, 624, 800 1, 779, 900 132, o0Q 96, 800 1, 356, 2, 717, 1, 972, 107, 102, 300 300 300 700 500 1, 014, 000 2, 751, 200 2, 093, 800 62, 800 82, 900 357, 500 752, 700 360, 200 59, 700 29, 200 225, 800 1, 219, 500 289, 000 42, 100 46, 900 4, 536,400 12, 065, 500 6, 495, 200 404, 300 358, 300 9, 818, 000 4, 419, 600 4, 063, 200 1, 490, 700 1, 945, 100 21,736, 600 909, 200 1,991,100 575, 700 332, 000 6,010,000 991, 600 635,600 179,700 72, 300 2, 540, 400 534, 600 252,300 480, 700 144,100 2, 651, 500 293, 500 248,300 158, 300 27, 800 762, 800 511,100 313,400 149, 900 28, 000 942, 700 3, 240, 000 3,440,700 1, 544, 300 604, 200 12, 907, 400 5, 541, 900 7, 098, 400 3,908, 300 927, 800 2, 693, 100 20,169, 500 1,309. 833, 711. 2, 688, 1, 661,100 1, 127, 600 358,800 3, 950, 900 1, 247, 800 403,500 303,800 1, 953, 200 288, 800 145, 900 86,100 407. 000 543, 900 309, 900 233,500 1. 605 800 5, 050, 600 2, 820, 600 1,693,200 10, 605, 100 Illinois ------ Wisconsin_-------- No. 8-Des Moines----Iowa--------------- Minnesota Missouri-----------North Dakota-----South Dakota ------ No 9-Little Rock -----Arkansas------------Louisiana-----------Mississippi-----------New Mexico ---------Texas -----------No. 10-Topeka -- ------- Colorado-------------Kansas---------------- Nebraska Oklahoma-------------- 000 700 000 200 SRefinancing of associations' own mortgages includes only the amount of increase in the mortgage. 204 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 Federal savings and loan associations-Summary of new mortgage loans made by reporting associations during year ended June 30, 1939-Continued Construction Home pur- Refinancchase ing No. 11-Portland --- ----- Idaho ----------Montana Oregon---------------Utah----------------Washington ------Wyoming ---------Alaska-----------------No. 12-Los Angeles -------- Repaiditioning $881, 900 Other purposes Total $2,124, 600 $17,495, 400 $6, 233,100 $4,105,600 $4,150, 200 469. 700 48. 900 1,452, 500 587, 200 3,141, 500 418, 400 114, 900 310,100 29, 400 690, 900 295, 600 2, 527, 000 224,100 28, 500 373, 200 16, 400 836, 000 197. 300 2, 538, 700 187 000 1, 600 89, 800 178, 7, 700 7, 169, 500 342, 107, 36. 100 469, 900 1, 360, 95, 600 128, 13, 300 ------ 19, 483, 200 6, 536, 300 6, 039, 400 934, 400 300 900 900 200 200 100 1, 982, 600 1, 421, 110, 3, 491, 1, 223, 10, 037. 1, 053, 158, 100 300 800 400 300 200 300 34, 975, 900 Arizona -498,700 148, 000 143,300 15,400 112, 800 918. 200 18, 706, 000 6, 243, 900 5, 800, 100 894. 900 1, 828, 600 33, 473. 500 California - -------------- ------------ ------------ ------------ ------Nevada----------------144,400 96, 000 24, 100 41,200 584, 200 Hawaii----- -----------278, 500 1 Refinancing of associations' own mortgages includes only the amount of increase in the mortgage. Source: Division of Research and Statistics, Federal Home Loan Bank Board. EXHIBIT 39 Federal savings and loan associations-Consolidated statement of operations for 1,355 reporting Federal savings and loan associationsfor the year ended December 1938 [Dollar amounts in thousands] Ratio to Amount operating Item income GROSSOPERATING INCOME Percent Interest: On mortgage loans-ordinary cash collections----------------------$57,326 85.99 521 .78 On mortgage loans-all other_-------------------------------------On loans on shares, passbooks, and certificates----------------------219 .33 On real estate sold on contract-------------------------------------2, 486 3. 73 566 .85 On investments and bank deposits -------------------------------.10 ------.. 69 Other .---...---------------938 1. 40 Premium or commission on loans (current only) ------1, 470 2 21 Appraisal fees, legal fees, and initial service charges --------------------191 .29 Other fees and fines- --------------------------------------------------(8, 339) (12 51) Gross income from real estate owned ---------------------------------(6, 748) (10 12) Less-cost of repairs, taxes, and maintenance----- -------------------1, 591 2 39 Net income from real estate owned-------------------------------------798 1.20 Gross income from office building------------------------------------------------206 .31 Dividends on stock in Federal Home Loan Bank--------------22 .03 -----------Other dividends --------...---263 .39 ......------------------------------------M iscellaneous operation income .----......... Gross operating income------------. ------------------------ 66, 666 Ratio to net income Percent ------------. --------------------. ---- 100.00 149.93 LESS OPERATING EXPENSE Compensation to directors, officers, employees-----------------------Collection expense (agents, etc.) ------------------------------ Legal services-retainer, travel, and special---------------------------Expense account of directors, officers, and employees------------------------------- ------------------------Rent. light, heat etc---Repairs, taxes, and maintenance of office building------------------------------------------------------Depreciation of office building---------Furniture, fixtures, and equipment including depreciation-----------------------------------------------Advertising---Stationery, printing and office supplies .------------------------------. Telegraph, telephone, postage, and express- ------------------------Insurance and bond premiums--------------------------------- ------------------------ ------Federal insurance premium ....------Audit ..........------............------------------------------ --------------------Supervising examinations and assessments----------------------------- 8,852 116 386 219 1,229 692 311 401 2,086 571 426 418 1, 22 142 368 13. 27 ---.17 --------- .58 ----.33 1. 84---1.04 --.47 .60 3. 13 ---.86 -------. 64 -_-.63 ----.. 1.92 _ ... .21 ...... .55 ---- 205 EXHIBITS Federal savings and loan associations-Consolidatedstatement of operations for 1,855 reporting Federal savings and loan associationsfor the year ended December 1938-Continued Ratio to gross Amount operating income Item LESS OPERATING EXPENSE-continued Ratio to net come Percent Percent .28 -----2.05 ---- Organization dues-------------------------------------------------------Other operating expense --------------------------------------------- $184 1,366 Total operating expense------------------------------------------ 19, 049 28. 57 42. 84 47, 617 71.43 107.09 Net operating income before interest and other charges ---------------- LESS INTEREST CHARGES ... ....------------------------------42 .06 ---On deposits, investment certificates, etc--3,128 4 69 --------On advances from Federal Home Loan Bank--..------------------------On borrowed money-----------------------------------------------------96 .15 ---Total interest.......---------------------------------..---------- 3, 266 4.90 7 34 Net operating income-------------------------------------------------- 44, 351 66.53 99 75 31 Dividends retained on repurchases and withdrawals ------------------ -__ Profit on sale of real estate -------------------------------------1, 229 ---------199 Profit on sale of investments--------------....--------------------281 __-- _ Other nonoperating income -------------------------------......-- .07 2.76 .45 .63 ADD NONOPERATING INCOME Total nonoperating income----.----------------------------Net income after interest and before charges----------------------------- 1, 740 2 61 3 91 46, 091 69.14 103. 66 LESS NONOPERATING CHARGES Foreclosure costs and back taxes on real estate acquired (unless capitalized or charsed to reserves) --------------------------------------Loss on sale of real estate - ...------------------------- Total nonoperating charges ----------------------------------------Net income for the year----------------------------------------.. ----- 77 ---- 965 - -- 40 ----545 ---- Loss on sale of investments----------------------------------------------Other nonoperating charges------ ---------------------------------------- . 17 2 17 .09 1.23 1, 627 2 44 3 66 44, 464 66 70 100 00 LESS TRANSFERS FOR RESERVES AND DIVIDENDS For bonus on shares ---------------------------------------Legal reserves--------------------------------------------Federal insurance reserve------------------------------------------------For contingencies_Real-estate reserve .----------------------------Other -----Dividends --- ------------------ Balance to undivided profits .-- ------------------------------------------------- --------------------------------- 116 -----. 78 2, 444 3,142 -----498 ---------129 34, 629 3,428 --.--------.. Source: Division of Research and Statistics, Federal Home Loan Bank Board. 26 . 18 5. 50 7.07 1.12 .29 77. 88 7 70 206 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 EXHIBIT 40 Federal savings and loan associations-Operatingratios of 1,345 Federalsavings and loan associationsgrouped as to size of association [Based on annual reports for 1938] Number of ingreportassociations Asset groups 0 to $74,999 --------$75,000 to $149,999 $150,000 to $299,999--------$300,000 to $499,999 $500,000 to $749,999------$750,000 to $999,999----$1,000,000 to $1,499,999 ---$1,500,000 to $2,499,999 ---$2,500,000 to $3,999,999 - $4,000,000 to $5,999,999 -- -Over $6,000,000 ..------- Operating income averageto net assets 148 199 266 170 155 99 119 97 37 31 24 6 6 6 6 5 5 5. 5 5 5 4 Operating expense averageto net assets Operating Compensa- Advertising expense tion to gross to gross operatingrossoperating operating income operatingome income 1 68 1. 81 1 79 1 79 1 75 1.73 1 68 1 61 1 46 1 48 1 27 39 44 14 11 98 91 66 63 39 23 89 26 27 28 07 29 22 29.35 29 26 29 31 29 74 28. 55 27 07 28. 37 25 96 14.02 15 15 15 47 15 20 14 91 14.42 13. 90 13. 19 12 08 12. 32 11.78 1.96 2. 09 2 31 2 61 2. 60 3 18 3 42 3.75 3 34 3 28 2.94 EXHIBIT 41 Federal savings and loan associations-Averageannual dividend rates declared for the calendar years 1937 and 1938 1 - 1937 1938 3. 50 3.49. District No. 1------------------- 3.53 3 29 Connecticut----------------Maine2------------------------Massachusetts New Hampshire------------Rhode Island------------------Vermont-- 3 71 294 3 32 4 00 3 00 3 33 3 42 3 19 3 27 3 50 3.00 3.33 2. 65 2.68 ------2. 65 2. 68 United States ------------- District No. 2--- ---- -- New Jersey -----------------------New York District No. 3------------------- 3. 91 3 84 1937 District No. 7 _ ---------- Illinois ----------Wisconsin ------------ 3.50 3.78 3 99 3. 94 3.92 District No. 4----------------------------Alabama District of Columbia-----------------Florida Georgia-------------------Maryland-------------------North Carolina-----------South Carolina-------Virginia--- ---------- 3.94 ------4. 03 4.07 3 53 4 25 4 00 3 97 3 57 3.56 Kentucky --------------------------Ohio--Tennessee-------------------- 3.90 3 42 4 01 3.93 3 39 4.03 District No. 6------------------ 3.10 3.11 District No. 5---------- Missouri-------------------North Dakota------------South Dakota -------------- 3 76 3 04 3.56 3.23 3 93 District No 9------------------- 4.09 4 15 4 06 4.01 4 07 4 46 4 15 4 06 4.02 4.05 4 09 4 24 3 84 3.71 Oklahoma ------------------- 3 51 3.44 3.28 3 99 3.33 3 47 3 22 4 05 ---------- 3 52 3.37 ---------- 4 00 3 70 3 00 3 39 3.78 3.48 3 92 4.00 3 51 3 50 3 38 3 34 3.32 3.91 3.91 3 89 4.00 3.91 4 00 Arkansas------------------Louisiana New Mexico Texas----------------------District No. 10 ----------- Kansas---------------------- Nebraska - District No. 11 Alaska -- -- ----- Idaho---------------------- Montana Oregon---------------------Utah ..... 1 3 11 3 08 3.12 3.09 invested of amcunt by weighted 1Average Average weighted by amount of invested capital. 3 70 3 96 3.38 - Washington----------------Wyoming------------------District No. 12 Arizona --------------------- Indiana-------------------Michigan----------.--------- 3.73 3.77 3.98 3.39 --------- Iowa--------------------------Minnesota- --- Colorado .------------------3.94 capital. 3.98 3 98 3.93 3.60 4.15 4.00 3 98 3.79 3 74 3 04 3 57 3.15 3.95 District No. 8 Mississippi----------------Delaware-------------------------3 84 Pennsylvania---------------4.00 West Virginia--------------- 1938 California ---------------Nevada-------------------Hawaii .----------------- 3 90 3.50 207 EXHIBITS 00 m4-a0 ) o 000000I I--X O 000 00' 00 I 0 00 -rn rn cy 00 0000000000001 C 0000 =0000000000 C "l 001-tti t- cc #O 00C)00 00 0ca. cc0000 _ 10100 -g LID LO _K rp0 00I 0o 0 0 0 00 m110 00 g00 m U-. 0000 C600 I00 C6000 0 0 0001 0:,0 '0000g 11 011 001 00 000C 0000000 cc00- cc-,j Mw00cm00 'c00 M00 0 0t -o0-i 0 00 00t 00000000 O o0-000000t Iq 0 00 02 00 2 w0mc0o oo 4-' (b0 -4 (Z0c ,0 q6) C) 00 K ir.-( m Z (=> 0 N -eD 007 10 0. o 00 -q Ir-0 d I'00 =0 -H 0 0 I 00 -4 000 I IC>( q M ) 0) I 00 0000100"Ili0T 0 o ;-4 00q 0mX00000 0 0 0) o 0000 CDcc Y C) I 00C) 00 0 0 100 - IC0 00 ) -0o 0c00 00000000000to 00 o t ,I 'I0 m 0o) c r0N O 00c ocqC ____GO_ ____0 0 0 0 0Q m 0 c N 00 n m000 Hq cq 0- 0 0 c0o 00 0 0 z -00 I X0 0 000000 00 C 0-N00c000a)0 L00 l-~000 000 00t y 0 0000001c 0 00100000zt40010000000 00 O t-%-' 0NI L '000mm r4M 00 I 0 C 00 C00 C) I ) 00 M 0 I O0a) 00 00 0 0 0 00 11'00 000000t C000 0 005 00 0000 - -, 0 -q 00m O 000000 IC,, )O' 0 t 0 0 00C 0000230 00 000 60000000000O000 .0'4o C*3 00 00 o 00 0000 0 00 00 0000000 t u 0000 M 00~00 10 CA) 04 c00 000000000 -.H 00 r- 0300000o00- 00 0000 N r--q 0 t C t06<= 0M00- 00000000000 cI 000000LO 00 (=0cc 00 00000 m00000 m 00 w0 0)0 LO00 m el0-A00 -1 L0 0000 001000000 00x z 0 rq 000- 0000000000 (=0w 0 w00N00 t-0- V000N p O0 P-1 j0Q o0-o .' W0 00 0 D . c O Zo __LO __ 0;4 m000000000000jq t I0 C ~ ,4 'I 1 rI X i: C)0 - D.t : 4Z-Z 4-D~ 00 In, ,4 e 00Q ca Cl) bZ c 208 REPORT OF FEDERAL HOME LOAN BANK BOARD, 193 9 0o 0000 10L 00 000000lf xot 0oatco . 00C-, C#2 212U3 00 +0 +0C10 C0000 C - 2012 r-4 C0000102+0 020010 C 000a+0 0001 02010000 000000 C) ".., co 1 11Q, +0 +000 0 CO 00 0 N0M0o ot c> t-C- C0 -"+0 t:"00> 00 M CO C601 M I0214V0 o 14 7-0 ~o~ t: 0 o C-w 0 CDC~O 'r~c~ 0 .040 M00+02w0r00 MC1C-+-t NM 00140 td4 0N00+0+000 0 W=o COC11r4 +00010+0 f CO Q "- w+0 01 CO 00CD+t +M0M0W0M Co N0w114m C'200 06 0 0 C6r-1100 N1C (3) 00000 000001 N 0 2 -0-0 1-0 1-0 00 r-4 C- 00N0 00 -C10 001M0to00000 01 +0010N0A-(= 0 r0C4CPCOt N 000000011100 +00toM0 k o 00 0 0 01 01M C00 I00C 0 00 00 0 +q 000 C- 00 (m0 NCO0200M+C7 +0+0LOM 0 -z 0 C C)022 to2000 1 &D (b C-Q00-'0 000000+0 =0$OXO0 020+000-0000 +0 C+0 +0 1 0 0+0 0 0010 000+0 0> ro'', 0 c, 0010 0 0+0010 0 12+ 0Q COD C22 I - +0 V-LO000102+0 0000 0000 00 00C-000 0-0 1-00 00 00200 00 mo00m + = 00 0~0 + 0r CC + =M CO="t, S 11 - 000020M +0 3 2 +01002 0020 NMM74N -vCc 00 ?--4 + ":CV010+ + 0 1 M + MCO0 +00002+002 + 01I +000000 00 0+02 r-40 +0 -q M+00 o0 ro 01 c0o CID0 00 + 0 14 zs o 0000 +0 CC- 01 00 +00000 +0 01+000 t- 0000 10 04C-00 00 000t ~0o~ ~5 ~00 +0 000201 00 0000+ +0O+C-+0 M~ Itl __ D -- t- +0D m_ 0 w 000 R - r I C-oo -4 00C- 0N02+0 "40mw -co0 O r4 000102N 01 C C-I 000001 0 0000020I00 0 0+000- CO 1m+0+00X00 "+0 O+= -- N 0+CC 000+00 C-C-0 C) 0C-______NV_4__-4__-4 M14 N____ 000P-40 00 - +0200 c 01 00 M12t 0 0 000000 = +0Nw C-0N+ 0 020001+001 +++0 -0000+0 1 1+ 0 000+ + C 0 0-102 m+Dw w R -d 000002 0 0 00 NC C+0c N+t00 r-4m C1 RqI04-1 - 01 1+00 +0 0 =0+0N12000 0, 10000t2o+0+000 k00 X0 :q00 100 M000 01 004 00C t- C- ___ C-Co0+0020'n00000 1 0 C 00200+0+ 00 MMN1 l r2. L00 0 '0 I-, V ,020 12 12Z 0e 10 1M ,0 12c '0 0 0 1 1 021 1 $03 112 12 12 00 -4 04 z z z 0 0 4 z -X + 0 00 + 0 a E~XHIBITS 0 0- t- U00 r ?0--q x0 I r0-0x0= 00 00 C -. 00 M 000? r000000010=LO 0 00v I0 <=) 0'' 00 ' 1 tro 0 0000 a .000 .C1400q C>0 000 00 1000 1'r-00 t00 000iN& 'c 00 ' 00- 0060, '00 q ell00 '00 0II 0C 000 C-o 000 000 00 r.-4 C OO 10C) t-0 C) CA CO i m000 r- WV-4 o 0010 0000o "D ,:VW 0 c ".4-0 0 i'- 0 0 0 00 1 '.4'C '00 ' M0 C:0 '0 m w00 0 -000U00) 1M 0 00 00 qC>ca00 ,.; -0 00f CD cc 0 ' 00 'T4 M~0 00 '00 O 'COt 00 0 00 C 4,06~ 00 CO> 000000000000CD CO-o 00-00000O M 000000000-40CO0CO MO c 00000000000- t- t-toto M oo 00 00 00 000m m0 ()CO t cc C9 0000w0(=tCOr 00 0 0 0 CD0C000004CO000000 CO O t-0r 00) CO4 004 :0 q=00 q m 0 0 ''''' 00 0 cc bo 0 C3C z z 209 210 HOME LOAN BANK BOARD, OF FEDERAL REPORT 1939 EXHIBIT 43 Federal Savings and Loan Insurance Corporation-Comparisonof all savings and loan members of the FederalHome Loan Bank System with all insured savings and loan associations, by Federal Home Loan Bank Districts and by States, June 80, 1939 All savings and loan members All insured assoeiations Federal Home Loan Bank Pistrifts and States Number United States ----- Assets Number Assets Ratio of Ratio all assets of insured as- sud sso sociatill eiations savings to assets savings and loan members and loan members 3,897 $3,935,641 2,170 $2,339,411 55.68 59.44 ----- 208 449,841 56 120,246 26.92 26. 73 Connecticut----------------Maine------Massachusetts New Hampshire-----Rhode Island ----------------------Vermont 45 22 122 11 4 4 33, 792 18,373 351,917 13,381 28,159 4,219 20 5 26 2 1 2 15,179 722 94,490 7,015 758 2,082 44.44 22. 73 21.31 18.18 25 00 50 00 44 91 3.92 26.85 52.42 2.69 49.34 420 474,561 150 236,344 35.71 49.80 296 219,708 56 43,505 18.92 19 80 124 254,853 94 192,839 75 81 75.66 547 237,890 165 94,322 30 16 39.64 Delaware-------------------Pennsylvania ---------------West Virginia 7 2,485 1 231 14.29 9.29 509 31 216,370 19,035 139 25 77,229 16,862 27.31 80.65 35.69 88.58 No. 4-Winston-Salem.---------- 402 377,043 251 194,183 62.44 51.50 Alabama ------------------District of Columbia ------ 18 8,481 15 7,181 83.33 84.67 20 125,949 10 25,292 50 00 20.08 Florida ----------Georgia------------------- 55 24,509 47 22,895 29,705 85.45 56.00 93.41 108 39 36 66,057 21,050 31,970 30 34 24 20,780 20, 221 24,082 27. 78 87.18 66 67 31.45 96 06 75.32 575 801,522 318 514,809 55 30 64.22 92 91,632 55 60,921 59.78 66.48 No. 1-Boston ---------- No 2-New York-- --- New Jersey-------------- New York ------ No. 3-Pittsburgh Maryland North Carolina -------------South Carolina...........-------Virginia-------No. 5-Cincinnati Kentucky-----------------Ohio-----------------------Tennessee ----------------No. 6-Indianapolis ....--------- Indiana-------------------Michigan No. 7-Chicago 51 75 45,256 53.771 49 42 44,027 96.08 50.68 97.28 55.24 444 686,295 225 430,419 39 23,595 38 23,469 97.44 62.71 99.46 213 249,715 171 184,934 80.28 74.05 159 54 151,833 97,882 128 43 119,626 65,308 80.50 79. 63 78.78 66.72 476 402,595 249 222,882 52.31 55.36 Illinois ----------------Wisconsin------------------- 349 127 258,193 144,402 177 72 157,797 65,085 50.72 56.69 61.11 45.07 No. 8-Des Momes------------ 244 190,700 155 132,377 63 52 69.41 66 39 113 14 12 39,204 44,689 92,792 9,787 4,228 40 34 66 8 7 15,586 41,064 68, 754 4,731 2,242 60.61 87.18 58.41 57.14 58.33 39.75 91.88 74.09 48.38 53.02 Iowa------------------------.... Montana-------------------..--------------Missouri North Dakota----------South Dakota------------ 211 EXHIBITS Federal Savings and Loan Insurance Corporation-Comparisonof all savings and loan members of the Federal Home Loan Bank System with all insured savings and loan associations,by Federal Home Loan Bank Districts and by States, June 30, 1939-Continued All savings and loan members All insured associa tions Federal Home Loan Bank Districts and States Number No. 9-Little Rock _ Arkansas----------------Louisiana----------- ---Mississippi --------------New Mexico Texas----------------No. 10-Topeka -----------Colorado ---------------Kansas -----------------Nebraska ..----------------Oklahoma---------------No. 11-Portland Idaho-------------------Montana .-------------Oregon------------------Utah -.. ----------Washington WyomingAlaska------------------No. 12-Los Angeles---------Arizona ---------------- California---------------Nevada ----------------Hawaii ----_---------- - Assets Number Assets Ratio of assets of all insured asso ciations to assets of all savings and loan members 276 $204,264 262 $199,486 94.93 97.66 39 68 25 15 129 13,365 91,709 6,069 5,249 87,872 37 68 23 14 120 12,950 90,935 5,241 4,653 85,707 94 87 100 00 92.00 93.33 93 02 96.89 99.15 86 35 88.65 97.54 231 162,391 152 125,469 65 80 77.26 40 104 32 55 29,044 58,779 17,295 57,273 31 61 19 41 25,351 42,904 7,301 49,913 77.50 58.65 59.38 74.55 87.28 72.99 42.21 87.15 133 126,930 110 102, 046 82.71 80.40 8 12 30 10 62 10 1 6,985 9,700 29,167 14,252 62, 148 4,518 160 8 8 22 9 53 9 1 6,985 8,495 13,826 14, 074 55,746 2,760 160 100.00 66.67 73.33 90 00 85 48 90.00 100.00 100.00 87.58 47.40 98.75 89.70 61.09 100.00 172 258,189 131 212, 313 76.16 82.23 3 162 3 4 3, 078 251, 307 794 3,010 3 125 0 3 3,078 206, 893 0 2, 342 100.00 77.16 0 75.00 100.00 82.33 0 77.81 Source. Division of Research and Statistics, Federal Home Loan Bank Board. Ratio all insured as sociations to all savings and loan members 212 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 EXHIBIT 44 FederalSavings and Loan Insurance Corporation-Financial statement as of June 30, 1939 ASSETS Cash in U. S. Treasury--------------------------------_ Accounts Receivable: Insurance premiums due ----Insurance premiums deferred ----------- - $320, 285. 57 $2, 999. 37 616, 343. 44 619, 342. 81 Investments: U. S. Government securities and secur ities wholly guaranteed by the United 117, 576, 500. 00 States_ --------------------------286, 779. 42 Premium less discount on investments --117, 863, 279. 42 Accrued interest: On Investments ------------------------------------Total assets_ -------------------------------LIABILITIES AND 597, 354. 40 119, 400, 262. 20 CAPITAL Accounts payable: For purchases and services-___ ___ $4, 537. 45 Funds held in escrow (Clinton F. S. & -L. A., Clinton, Tenn.)-_-_- 73. 80 4, 611. 25 Deferred income: Unearned insurance premiums Prepaid insurance premiums 1, 112, 282. 57 24. 44 1, 112, 307. 01 Capital and surplus: Capital stock outstanding ---------100, Reserve fund as provided by law-------------- $4, 129, 475. 94 Less contributions to in sured institutions (cur 285,989.32 rent year) ----------3, 12, Special reserve for contingencies -------2, _ Surplus ---------------------------- 000, 000. 00 843, 486. 62 000, 000. 00 439, 857. 32 118, 283, 343. 94 Total liabilities and capital ----------------------- 119, 400, 262. 20 NOTE.-A contingent liability of $140,505.64 exists due to tentative commitments to insured associations 213 EXHIBITS EXHIBIT 45 Federal Savings and Loan Insurance Corporation-Income and expense statement for the period July 1, 1938, to June 30, 1939 Income: Insurance premiumsearned------------ ---------- Admission fees earned-- ------------------------------- 45, 352. 73 Total---------------------------------------------Expenses: 1 Administrative-------------------------------------Nonadministrative------------------------------------- Total-------------------------------------------Net operating income------------------ $2, 291, 892. 74 --------- 2,337,245.47 213, 122. 16 9,873. 48 222, 995. 64 2, 114, 249. 83 Other income: Interest earned on investments----------------------3, 367, 431. 81 Amortization of discount on bonds-----------------------7. 92 Miscellaneous receipts --------------------------------40. 50 Profit on sale of securities- ----------------------------24, 651. 75 Total--------------------------------- --- 3,392, 131. 98 Amortization of premium on securities --------------Charge-off of premium on securities------------------ 53, 686. 29 12, 717. 00 Other deductions: Total--------------------------------------------Other income less other deductions ----------------- 66, 403. 29 - 3, 325, 728. 69 Net income for period-------------------------------------Deduct adjustments of prior years- --------------------------- 5, 439, 978. 52 121. 20 Net income----------------------------------------------Allocated to special reserve for contingencies----------------- 5,439, 857. 32 3, 000, 000. 00 Unallocated income------------------------------------2, 439, 857. 32 1Detail expense accounts are shown in Exhibit 46. 214 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 EXHIBIT 46 Federal Savings and Loan Insurance Corporation-Expensesfor the period July 1, 1938, to June 30, 1939 Administrative expenses: Personal services -------------------------$118, 390. 74 Printing and binding 3, 199. 57 --------335. 29 Supplies and materials Travel expenses-------------------------------------13, 237. 11 Telephone and telegraph---------------------619. 51 Advertising 260. 06 Furniture and fixtures 163. 22 7, 330. 52 Miscellaneous------------------69, 196. 77 Services rendered by Federal Home Loan Bank Board -----Audit by Comptroller's Office of the Federal Home Loan Bank 389. 37 Board--------------------------------------------Total administrative expenses 213, 122. 16 Nonadministrative expenses: Travel expenses-------------------Telephone and telegraph ----------------------------Examining expense------------------------------------Attorneys' fees and expenses----------------------Miscellaneous--_--------------------------------------Total nonadministrative expenses 1, 326. 55. 4, 138. 4, 344. 8. --------------- Grand total_-- 64 84 67 33 00 9, 873. 48 - -- ------ - - 222, 995. 64 EXHIBIT 47 Federal Savings and Loan Insurance Corporation-Averageincrease in private re purchasablecapital of 1,529 identicalinsured institutions during 1937 and 1938 [Thousands of dollars] Institutions insured Institutions insured Institutions insured in 1934 in 1935 in 1936 Federal Home Loan Bank District 1937 United States No. No. No. No. No. No. No. No. No. No. No. No. -------- 1-Boston .------------------------------------2-New York ------. 3-Pittsburgh ---------4-Winston-Salem -------------5-Cincinnati ----- --6-Indianapolis 7-Chicago_ ------------------------8-Des Moines ------9-Little Rock-----------------10-Topeka ------------11-Portland 12-Los Angeles--------------------- 1938 1937 1938 1938 $93 $130 $71 $111 $35 $69 245 180 78 123 200 77 124 39 50 39 93 223 115 431 164 186 198 125 157 63 64 78 97 276 146 77 40 64 117 41 54 26 51 36 67 146 189 233 62 98 123 63 76 132 78 59 138 190 67 44 16 85 -6 -22 73 38 45 0 39 133 102 91 30 102 51 9 82 97 126 3 45 133 Source- Division of Research and Statistics, Federal Home Loan Bank Board. 1937 215 EXHIBITS EXHIBIT 48 Home Owners' Loan Corporation-Statusof borrower accounts (originalloans only), June 1939 Paid on than schedule or More Total in In default 3 install less than in satisfactory and not ments 3 install liquidating status arrears but ments in liquidating arrears Districts and States I- 1 1 594,087 78,536 672,623 125, 762 Region 1A-New York-_ 53, 206 20, 037 73 243 37, 781 Connecticut ------------------------------------------------------------------------------------ 4,410 1,701 7, 546 832 14, 864 20, 673 2, 586 594 1,133 271 2. 559 162 3,333 11,620 746 213 5, 543 1,972 10,105 994 18,197 32, 293 3, 332 807 2,075 589 6, 375 355 6,310 20, 495 1, 241 341 ------------------ 52, 653 6,611 59, 264 12,702 927 1, 293 8,084 35,106 7, 243 203 118 1,153 4.460 677 1,130 1,411 9, 237 39, 566 7,920 210 267 2, 636 8,103 1, 46 64, 435 8, 286 72, 721 14, 766 58, 527 5,908 7,719 567 66, 246 6, 475 13, 597 1,169 40, 294 4, 159 44,453 7, 69Q 9, 935 9,011 9,800 7, 631 3,518 399 1, 217 790 984 817 319 32 11,152 9,801 10,784 8,448 3,837 431 1, 880 1,596 1, 6 0 1,685 727 141 50, 639 5, 072 55, 721 6, 223 6,923 5,719 9,275 5, 580 14, 030 9,112 662 371 1,173 593 1, 523 750 7, 585 6,090 10,448 6,173 15, 553 9,862 605 781 854 595 2, 218 1,170 61,237 10,629 71, 866 12,186 44,954 16,283 7,202 3,427 52,156 19,710 6,910 5,276 87, 272 9, 694 96, 966 13, 965 31, 291 55, 981 3, 926 5, 768 35, 217 61, 749 4, 687 9, 278 56,274 7,610 63,884 8,843 8,209 12,833 9,091 13,524 7,277 2, 200 3,140 858 1,416 1,561 1,998 902 396 479 9,067 14,249 10,652 15,522 8,179 2, 596 3, 619 715 1,385 2,259 1,657 1, 381 70% 743 44, 534 3, 646 48,180 5, 761 1,730 13,485 29, 319 166 1,512 1,968 1,896 14,997 31, 287 227 1,702 3, 832 United States----- Maine-------------- Massachusetts -----New Hampshire New Jersey New York Rhode Island ------Vermont----------- Region 2A-Baltimore- Delaware-- ------------------------------District of Columbia-Maryland Pennsylvania _----------------- Virginia ---..------ . Region 2B-Cincinnati .---------. ---------------------Ohio-------------------West Virginia_Region 3A-Atlanta -------. ------------- Alabama-------Florida--------Georgia ..------------------------- - ------- - North Carolina South Carolina - ------ ---------- Puerto Rico ---------------- Region 3B-Memphis ---------------- - ---- ---- ----- --- Arkansas- --------------. ----Kentucky------------------ Louisiana ---------- - --_-. . ... ------------------- --... ---M ississippi... --- -- Missouri ---------------------------Tennessee -----------....------.. _---Region 4A-Chicago -- -- ...-- ..------------------ Illihnois ---------------------Wisconsin --- Region 4B-Detroit-----------... Indiana- - ------ Michigan _.---- - - __________. . ....---------..-_______- ____ .-..---------.. . Region 5A-Omaha -----------------.. . ---...... ---------------------. ------- Colorado- . --------. Iowa -----------------------------.. ... .. .......... Kansas ----- - -- - -. . . . . . . . . .. . .. ... M innesota -- .N ebraska ...---- ---------------------------- North Dakota -------------.--.---..... . ... South Dakota...---......... Region 5B-Dallas---------...... .......... ........ ... ..------New Mexico. -------------------...... -...-.Oklahoma----... ---------------Texas--- . ----------............. I------------I---------------I --------------- 216 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 Home Owners' Loan Corporation-Statusof borrower accounts (originalloans only), June 1989-Continued Paid on less than install mentsin arrears Districts and States Region 6-San Francisco-- -------------------------- More than 3 installTotal in In default ments in satisfactory and not liquidating status arrearsbut liquidating 83, 543 2,792 86, 335 Arizona------------------------------------4,821 California: Northern Division.----------------------.-39,138 Southern Division--------------------- -------------Idaho_-- ---------------------3, 507 Montana.----------------------------------2, 767 Nevada..----------------------..----------------902 Oregon------------..-------------------------7,249 Utah--------------------------------------7,704 Washington--------------------------------15, 627 Wyoming-----------------------------------1,828 133 4,954 422 1, 288 40, 426 2, 655 191 99 34 172 343 472 60 3, 698 2, 866 936 7,421 8,047 16, 099 1,888 351 272 46 473 620 831 166 5, 836 EXHIBIT 49 Home Owners' Loan Corporation-Netforeclosure authorizations on original loans, cumulatively to June 30, 1939, by regions and by States Net authorized Region and State United States......---Region 1-New York.-----------Connecticut Maine----------------Massachusetts--------New Hampshire------New Jersey--------New York .---------Rhode Island--------.........Vermont-------------- Cumulative Percent of total loans closed Region and State Cumulative Percent of total loans closed 171,036 16 8 Region 4A-Chicago ..---... 15, 284 14. 8 51,079 2,213 511 7,663 320 11,698 27,006 1,378 290 31.1 21. 5 15.0 31.2 17.1 32.2 33.7 22.5 18 4 Illinois_------Wisconsin--------........... 8, 584 6,700 12 3 13, 246 10 2 6,193 7,053 12.7 8.7 ---- 17,154 19.4 Colorado---------------Iowa-------------------Kansas.-------.------Minnesota.-------------Nebraska-------------North Dakota------......-South Dakota..---...... 1, 071 2, 680 4,887 2, 602 3, 406 974 1, 534 10. 2 14 6 27. 7 14 0 26. 8 23.5 26. 6 Region 5B-Dallas.--------.. 13, 283 18.8 New Mexico-----Oklahoma-------------Texas --------- 194 5,810 7,279 7.9 24.2 16 4 Region 6-San Francisco..... 11,886 10. 6 Arizona.--------------California: Northern Division.--... Southern Division-... Idaho_ - --------Montana......-------------......--Nevada---------------Oregon--------------Utah......-------Washington....--------......---Wyoming --------- 820 12. 6 1, 233 3, 967 368 294 57 854 1,536 2,630 127 9.8 10 0 7.8 8.0 4 7 9.0 Region 2A-Baltimore . . Delaware----------District of Columbia--Maryland-------------Pennsylvania.........--------Virginia--------------- 14,364 221 256 Region 2B-Cincinnati ....----------Ohio West Virginia------- 12,978 12,249 3,165 8,770 1,952 729 15.9 13. 4 12.2 19.9 14.9 16.2 12.1 12. 4 8.0 Region 3A-Atlanta ---Alabama.---------.----Florida--- --Georgia- .----------North Carolina.-------South Carolina---------- 7,797 2,866 1,637 1,434 626 17. 2 9.1 11 0 11.6 10.9 Region 3B-Memphis.------Arkansas Kentucky--------------Louisiana--------------Mississippi------------Missouri---------------Tennessee---------------- 13,965 17.2 1,526 14 8 1,373 2,165 1,173 5,799 1,929 14.9 15 1 13.4 23.6 14.0 Net authorized 1,234 12.2 Region 4B-Detroit.-------...... Indiana.-- -------Michigan ------............ Region 5A-Omaha 20 2 14. 2 12.2 5.1 217 EXHIBITS EXHIBIT 50 Home Owners' Loan Corporation-Summaryof foreclosures on origznal loans Cases Properties Fore Fiscal year closuresInprocess authorWithized drawn 1935 -------------------------- 570 27,081 1936 ----------------------1937----------------------- 76,896 47,745 1938 ----------------------37,616 1939----------------------Totals, June 30, 1939---... 189, 908 . Pending judgment or sale I Re ac-demed of a m ti borrower Sold to third party Acquired 14 666 6,032 7,143 5,017 447 22,691 53, 582 38. 237 29,614 6 1,854 44,356 46,322 26,392 0 0 96 178 112 2 29 234 288 224 123 5,432 39, 100 55, 367 42,042 18, 872 315, 602 312, 207 386 777 142, 064 1 At end of period. 2 Cases in which judgment or sale has taken place but a delay for possible redemption or other reasons is before title in absolute fee can be obtained. Figures refer to end of period. necessary 8 Current totals. EXHIBIT 51 Home Owners' Loan Corporation-Averageforeclosure costs and average time required to complete foreclosure, by States 1; original loans only Average foreclosure costs Method of foreclo sure Total Attorney fees 2 S$45.15 197 81 123. 29 149. 74 California -------------- ----- do-------------103. 36 Power of sale -----Colorado--------------114 20 Connecticut.----------Court action ------Delaware -------------- ---- do --- ------- 4137 37 351.52 District of Columbia--- Power of sale -----Florida------ -----Court action------160. 40 Power of sale ------- 454 44 Georgia ---------------Idaho---------------Court action ------152. 63 --------- 349. 59 Illinois----------------- --.. do 186. 19 Indiana ---------------- ----- do ---------- do ------123 08 Iowa ----------------92 95 Kansas --------------- ----- do ---.--------- do ------Kentucky -----------159 67 4128 08 Louisiana -------------- ----- do -----------Maine .-------------21. 29 Powei ofsale----Maryland --------151 63 ----- do----------532 92 Massachusetts --------- ----- do --------Michigan -------------- ----- do ------86 46 Minnesota ------------- ----- do - 96. 79 55.41 Mississippi-------- ----- do----.---Missouri --------------- ----- do--------54 08 169. 12 Montana------------Court action ------107. 90 Nebraska -------------- ----- do ---------4209.79 Nevada ---------------- ----- do----------Power of sale----77 09 New Hampshire-----237 90 New Jersey------------ Court action ----4191 85 New Mexico----------- ----- do -------------New York-------.---- Court action and 280 94 Alabama - ------------Arizona Arkansas ------------- Power of sale-----Court action ----------- do----------- power of sale. See footnotes at end of table. 183130--39- 15 $32.44 112.72 50 00 75.00 50. 00 71.30 25.00 100. 81 29.13 75.80 120 75 100 00 71.26 50.00 75 00 50 00 10 00 50.00 45 00 60 00 35.00 25.74 121 05 50 00 125 00 50 00 89 70 98 67 125.00 Average time to complete foreclosure 3 All other Months Days Redemption period costs $12. 71 85 09 73. 29 74.74 53 36 42 90 112.37 51 52 59 59 25 31 76 83 228.84 86.19 51.82 42. 95 84 67 78.08 11.29 101.63 32.92 41.46 36.79 20 41 28 34 48 07 57 90 84 79 27 09 148 20 93.18 155 94 25 9 5 14 7 5 4 2 3 0 15 19 14 15 13 2 12 2 0 14 13 0 1 14 12 15 1 5 14 3 4 3 2 19 10 11 25 21 27 26 6 12 1 24 24 17 25 0 7 27 28 20 24 14 21 22 2 5 25 27 24 24 months 6 months. None. 12 months 6 months. None. Do. Do. Do. Do 12 months 6 15 months None. 12 months. 6 and 18 months. None. Do. 12 months. None Do. 12 months. Do. None. Do 12 months. None. 12 months. None. Do 9 months. None. 218 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 Home Owners' Loan Corporation-Averageforeclosure costs and average time required to complete foreclosure, by States; originalloans-Continued Average foreclosure costs Average time complete to foreclosure Method of foreclo- Redemption sure Total Attorney fees North Carolina---- Power of sale-..-- $57.42 $30.46 North Dakota-----... -- Court action-----. 104. 53 52.96 Ohio----------..-------do ....----------129.66 52.27 Oklahoma- ..------------- do-- - 4159.35 60. 74 Oregon___-- ------------do-------... -----. 120. 94 69.05 Pennsylvania------.----do .---------132.52 50.00 Rhode Island---------Power of sale----- 542 44 South Carolina----- Court action------132. 01 64.43 South Dakota ------- Power of sale--. 79. 53 36.85 Tennessee--------------do------- ------ 73.14 46.10 Texas------------ ---- do------------ 53.82 --Utah--------------- Court action-------- 158 46 101.88 Vermont--.------------do ---107.52 75. 00 Virginia-------------Power of sale-.. . 87. 53 750 00 Washington----------Court action------- 144. 35 85. 25 West Virginia ------Power of sale-..--.. 57.12 730 00 Wisconsin----------Court action ------.. 165.16 100 00 Wyoming----.------do-..-----------177. 76 105 91 All other Months Days costs $26. 96 51.57 77.39 98. 61 51. 89 82.52 42.44 67. 58 42. 68 27.04 3.82 56.58 32. 52 37. 53 59.10 27.12 65.16 71 85 1 16 4 11 15 2 1 3 13 1 0 9 12 0 16 1 16 10 11 0 22 5 17 18 22 10 11 3 23 2 15 23 2 2 23 25 period None. 12 months. None. Do. 12 months None. Do. Do. 12 months None. Do. 6 months. 12 months. None. 12 months None. 12 months. 6 months. 21 Based on a sample of about 100 representative HOLC foreclosure cases in each State. Average attorney fees are based only on those cases in which fee attorneys were used. Total foreclosure fees paid by HOLC in 8 States- Alabama, Delaware, Georgia, Louisiana, Nevada, New Mexico, Oklahoma, and Vermont-average less than the figure shown because in these jurisdictions salaried attorneys were employed in a portion of the cases. 3 From date petition was filed and first advertisement under power of sale. 4 Both fee and salaried attorneys are used but average costs are based only on cases handled by fee attorneys. 5 All cases are handled by salaried attorneys. 6 The owner has 12 months to redeem and creditors have an additional 3 months from the date of sale. 7 Trustee attorney's fee. 219 EXHIBITS EXHIBIT 52 Home Owners' Loan Corporation-Averagecost of deed in lieu of foreclosure by States; original loans only 1 Average cost per case State Number of cases Attorney fees Other costs 2 Total costs ..--------------------....-----------------5 (3) $5.09 Alabama------Arizona -----...---------------------------- ------------75 (3) 7.81 545 $25.12 5.34 Arkansas .---. -------------------------------------California...-------------------------------------------994 3.62 7.55 251 590 513 Colorado-------------------------------------------Connecticut -----------------------------------------182 18.49 6.00 6.44 Delaware----....-----------------------------------------8 (3) ----. -----District of Columbia ----------------------Florida... -------------------------------------------197 35.33 5. 50 Georgia---------------------------------------------12 3.33 4.59 Idaho ----------------------------------------------104 (3) 5.20 Illinois -------------------------------------2,027 13. 75 7.71 Indiana --------------------------------------------841 (3) 6.21 Iowa ---------------616 11 71 5.09 ----Kansas ---------------------------------------------522 10.65 508 Kentucky --------------------558 24. 37 4 57 Louisiana -------------------------------------------325 22.80 16 10 Maine----------------------------------------------27 (3) 7.00 Maryland ---------------------36.98 7 48 240 Massachusetts -----------------1, 116 (3) 7.00 Michigan ------------------------------------204 (3) 10.01 Minnesota---------------------77 676 8.00 Mississippi ---.------------------210 26. 37 4.15 Missouri -----------304 21.02 4. 89 Montana--------------------------------------------------------------------Nebraska ------------------------------------719 11.40 4.33 Nevada----------------------------30 (1) 9 02 New Hampshire----------------------84 (3) 7.63 New Jersey -----------------------4, 637 39. 57 6 22 New Mexico----------------------72 (3) 5 24 New Yoik------------------------4, 596 39. 82 6. 22 North Carolina --------------5 (3) 7. 26 North Dakota -----------------------112 13.14 8. 31 Ohio -----------10 ----------------(3) 5.42 Oklahoma.. .. . .. . .. . .. . .. . . 1. 388 (3) 4 66 Oregon ------------------------401 (3) 5 32 Pennsylvania ---------------------10 (3) 6.60 Rhode Island------------------------------------------------South Carolina ---------------------192 17. 13 4. 34 South Dakota ------------------273 12.35 9. 49 Tennessee ------------------------6 (3) 5. 41 Texas-----------------------373 (3) 5. 28 Utah ---------------------------------691 (3) 6.24 Vermont.. -------------------------68 (3) 7. 63 Virginia---------------------------------------------------- ------- -.. .. Washington -----------------------------------------652 5.50 4.78 West Virginia------------------------.-------Wisconsin ------------------------------------------898 22.90 6. 33 Wyoming -------------------------------------------33 (3) 5.12 $5.09 7.81 30.46 11 17 11.03 24.49 6.44 40. 83 7.92 5.20 21.46 6.21 16 80 1573 28 94 38.90 7.00 44.46 7. 00 10.01 1476 30. 52 25 91 15. 73 9. 02 7. 63 45. 79 5. 24 46. 04 7. 26 21.45 5.42 4 66 5. 32 6.60 .. 21.47 21.84 5. 41 5. 28 6.24 7 63 10.28 29. 23 5.12 1 Based on cases completed from Dec. 1, 1937, to June 30, 1939. Figures were arrived at by dividing the amount paid out in attorney fees, revenue stamps, and recording fees during that period through the num ber 2 of cases of deeds in lieu of foreclosure. Includes recording fees and revenue stamps 3 Salaried personnel. 220 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 EXHIBIT 53 owned and in process of acquiring title, Home Owners' Loan Corporation-Properties by regions and States, as of June 30, 1939 Properties Prop- in procerties ess of Total owned acquiring title United States ---. Prop erties Prop- in proc erties ess of Total owned acquir lig title 87,618 11,736 99, 354 Region 4A-Chicago--- 5,852 3, 019 8,871 36, 583 704 37, 287 1, 408 Connecticut -----240 Maine-...---------.. 5, 271 Massachusetts ------155 New Hampshire --8, 837 New Jersey ...----19,867 New York----------690 Rhode Island------115 Vermont------------ 2, 721 3, 131 1,503 1, 516 4, 224 4,647 82 62 1,490 Illinois--------------..... Wisconsin.-----.. Region 4B-Detroit ....- 4, 250 2,598 6,848 Indiana -----.. Michigan .----- 2, 471 1, 779 1,016 1, 582 3,487 3,361 Region 5A-Omaha----. 8, 212 2, 424 10, 636 Colorado ---------Iowa ---------Kansas-----------Minnesota----------Nebraska-----------North Dakota . -- 518 906 1, 716 458 954 45 414 988 252 286 177 262 563 1, 320 3, 496 1, 404 2, 002 635 1, 216 4, 774 342 5, 116 37 2,458 2, 279 12 297 33 49 2, 755 2, 312 3, 379 1,051 4, 430 194 69 263 183 1, 055 119 113 3 320 412 956 24 107 350 63 44 6 51 67 289 5 290 1, 405 182 157 9 371 479 1, 245 29 Region 1-New York-..... Region 2A-Baltimore-.. Delaware -----------District of Columbia Maryland--------Pennsylvania-------Virginia------------Region 2B-Cincinnati Ohio --------West Virginia--Region 3A-Atlanta----Alabama----------.. Florida -----Georgia-------------North Carolina-----South Carolina----Puerto Rico -------.. Region 3B-Memphis - -Arkansas-----------Kentucky----...-----Louisiana ----------Mississippi - --- --- Missouri ..-__ _. .. Tennessee--------... 108 410 42 8, 157 302 5,271 155 8, 945 20, 277 690 157 76 52 19 1,816 5,217 1,053 63 6,408 811 8, 233 52 32 1,879 5, 217 1,053 13 South Dakota ------- Region 5B-Dallas- -- 7,219 6,076 332 811 6, 887 332 2, 493 634 3, 127 795 352 713 453 180 634 1, 429 352 713 453 180 7, 510 77 7, 587 738 684 1, 209 629 3, 338 912 27 29 1 765 713 1, 210 629 3,358 912 New Mexico------Oklahoma. ----Texas----_---Region 6-San Francisco Arizona-------------California: Northern Division Southern Division Idaho-----Montana-----------Nevada ----------- __ Oregon----------Utah 20 --- --- Washington--------Wyoming ------ -Hawaii -------.--Alaska ....------ 2, 508 1,152 .... . EXHIBIT 54 Home Owners' Loan Corporation-Profitand loss on sales of real estate, by calendar years Year Number of properties sold at a profit and amount of profit Number 1935-----------------------------1936-----1937 ---------------------------1938----------------------------5, 1939 1-------------1 January to June. 27 366 3,033 761 2,802 Profit $6,926 125, 782 1,218,126 1, 729, 446 817,221 Number of proper ties sold at a loss and amount of loss Number 2 235 2,214 22,957 17,906 Loss $1,528 118, 828 1,381,934 23,123, 114 22,425,131 Total number of properties sold Number Prlofit ( 29 +$5,398 601 +6, 954 5,247 -163,808 28,718 -21,393,668 20, 708 -21,607,910 221 EXHIBITS EXHIBIT 55 Home Owners' Loan Corporation-Percentageof vacant units to units available for rent, percentageof rents collected to rent accruals, and averagerent per unit, by months Year and month VacanColleccies tions 1936 Percent Percent 93 7 18.6 July ----------------92 4 18. 7 August--------------15.9 94 7 September-----------October -------17.1 88.5 18.4 88 8 November-----------17. 5 89.4 December---------... --1937 18 7 January -------------18.3 February ------------17.8 March --------------15.0 April---------------13.3 May-----------.-12.5 June ---------------11.2 July --------_ -------August---------------10.4 10.4 September-----------October--------------10.4 November------------11.2 December-------------12.4 Year and month Averae rent per unit $20 59 20. 75 20 04 21 24 21.26 20.92 96. 2 95.3 92 8 99.5 94 7 96.3 95 5 97.7 97. 3 97.7 97.9 96. 7 22 61 22.90 23 90 23 85 24.60 24 99 25.27 25.48 25. 77 26.10 26.90 26. 75 VacanColletions vies Percent Percent 1938 .. 13 1 93 3 January--------------.. ... 13.5 96 0 February-----------14.3 99 7 March--------------97 2 April---------------12.6 99.2 11.6 May---------------98.8 11.5 June---------------July----------------12.0 98 4 99. 2 11. 0 August--------------98 4 10 3 September------------.. 99 6 9.9 October--------------96 8 November------------10 4 100. 3 December-------------10. 5 1939 January--------------10.9 10 4 February------------9.3 March---------------7.8 April---------------... 7.7 May----------------7.4 June----------------- 98 7 99 4 99.8 99 9 100 0 99.1 rent per Average unit $26.48 27.19 26 91 26.96 27 40 27. 66 27.93 27.99 28 00 28.25 28 69 28.82 29.01 28.95 29.14 29.45 29.33 29.43 EXHIBIT 56 Home Owners' Loan Corporation-Reconditioningoperations; number of contracts completed July 1, 1938, Cumulative through through June 30, 1939 June 30, 1939 Type of case Property management 2- - - - - - - ---------------------- - - - - - -- --- -- ---- Advances ................................................................. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - - - - - - - - - - - - - ....... Insurance 3 - Refinancing 4 ..... ..................... Total .. .............................. - -- -- - - - ------------------------------------------------------ 113,305 2,237 272,466 10,803 2,111 545 29,150 6417,390 117,698 729,809 1 Indicates reconditioning completed on properties under the jurisdiction of the Property Management Division. 2 Cover cases in which reconditioning advances have been granted to borrowers since closing loans. 3 Refers to reconditioning covered by insurance proceeds and performed under the supervision of the Reconditioning Section. 4 Refers to reconditioning loans given in connection with the original refinancing of mortgage loans by the Corporation. 5This figurd represents cases in which, because of legal technicalities or practical difficulties, the execution of reconditioning cases in connection with the refinancing loans made by the Corporation was delayed. 6 Includes 52,269 reconditioning jobs estimated by the Reconditioning Division as having been com pleted by the Corporation before the organization of the Reconditioning Division on June 1, 1934. 222 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 EXHIBIT 57 Home Owners' Loan Corporation-Investmentsin savings and loan associations, by , States, as of June 30, 1939 Federal savings and loan associations State-chartered savings and loan associations State Number Amount Number Amount Alabama--------------------------------------13 $920,500 Arizona---- -------------------2 605, 000 1 $150, 000 Arkansas ------------------------------------24 1,234,000 1 65, 000 California---------------------------------------55 17, 609, 700 10 1, 618, 000 Colorado_ ---------15 2,344, 000 5 800, 000 Connecticut----------------------15 2,775,500 3 71,000 Delaware----------------------....-----Florida--------------------------------------44 9,312,500 . --Georgia..-- --------------------------------------40 3, 352, 000 2 400,000 Idaho----------------------------------6 1,930,000Illinois ..--------------------------------------78 14, 382, 500 19 991, 000 Indiana-- -------------------------- -----------50 7, 626, 500 19 999,000 Iowa----------------------------------------22 1,714,000 4 106, 000 Kansas--- ------------------------------------19 2, 697, 000 17 2,332,000 Kentucky---- ----------------------------------28 3,289,000 Louisiana---------------------------------------6 302, 000 27 6, 267, 600 Maine------------------------------------------5 257,000 .. ... Maryland-------------------------------------19 3,832, 500 3 345,210 Massachusetts----------------------- ------------10 5,007,000 .. . Michigan------------------------23 2,519,300 9 1, 365, 000 Minnesota--------------------------------------26 7,392,600 ..--Mississippi--------------------------------------16 485,000 1 20, 000 Missouri----------------------------------------30 5,134, 000 7 897, 400 Montana---------------------------------------1 30, 000 1 275,000 Nebraska---------------------------------------9 742,000 2 10, 000 Nevada --------------------------------------- ----------------New Hampshire-----------------------------------1 400,000 ------.. New Jersey--- ----------------------------------------------------36 2, 969, 000 New Mexico..--------------------------------------7 148,500 --- ----New York...-----------------------------------55 19, 989,800 15 1, 686, 300 North Carolina-----------------------------------14 2,130, 000 6 242, 500 North Dakota------------------------------------4 244,000 1 600,000 Ohio.--------------------.---------------------55 12,987,000 33 9,720,000 Oklahoma--- -----------------------------------17 2,075,000 1 100,000 Oregon --------------------19 3, 518, 500---------Pennsylvania..------------------------------------48 5, 866,900 14 500, 000 Rhode Island-------------------------------------1 285, 000 .------South Carolina-----------------------------------18 1,219, 000 1 75, 000 South Dakota-------------------------------------4 288,000 3 31, 000 Tennessee ... ....---------------------------------------- 35 5,734.000 .. ---------Texas------------------------------------------65 4,420,100 8 2,400,000 Utah .----------------------------------------6 1,640,000 3 1, 450, 000 Vermont-----------------------------------------1 50,000 . ----------Virginia ----------------------19 3,077,500 --------11 1, 174, 000 -----------23 7,448, 000 -----------------------Washington270, 000 17 2, 348, 000 3 ------------West Virginia--------------------------------------------------------------26 2, 734, 000 36 5,495, 000 Wisconsin Wyoming ---------------------9 853,600 .. ------District of Columbia--------------------- ----------1 50,000 .. ------Hawaii .. -------------------------------------Alaska. ------------------------------------------1 33,300 . ----------Total----------------------------- ------- 1, 002 173, 033, 800 302 43, 425,010 223 EXHIBITS EXHIBIT 58 Home Owners' Loan Corporation-Balancesheet as of June 30, 1939 ASSETS Mortgage loans, advances and sales instruments-at present face value: Original loans and advances $1, 928, 212, 237. 14 thereon- -----------------Vendee instruments (purchase money mortgages, sales con tracts, or instruments used in lieu thereof) ----------------151, 896, 336. 83 Unposted advances on mortgage loans, purchase-money mort 403, 178. 80 gages, and sales contracts -- --------------- ----------------Interest receivable -----------Property: $503, 311, 846. 77 Owned----------------------46, 129, 337. 44 In process of acquiring title ------ $2, 080, 511, 752. 77 10, 298, 300. 93 549, 441, 184. 21 (At amounts represented by the unpaid balances of loans, advances, and unpaid interest; fore closure and other net costs to date of acquisi tion; initial repairs and reconditioning, perma nent additions and betterments subsequent to acquisition. Unpaid interest included in these costs amounts approximately to $32,623,000.00.) Less reserve for losses 1 ------------------------- 2, 640, 251, 237. 91 89, 488, 387. 98 2, 550, 762, 849. 93 Investments-at cost: Federal Savings and Loan Insur ance Corporation (entire capital) Savings and loan associations: Federally chartered- $173, 033, 800. 00 State-char tered--..-43, 425, 010. 00 $100, 000, 000. 00 216, 458, 810. 00 316, 458, 810. 00 Bond Retirement Fund: Cash (including $1,356,425.00 deposited with U. S. Treasury for retirement of matured bonds) ------------------------------ ------ 149, 217, 560. 48 1 The reserve for losses is being accumulated at an annual rate which, it is estimated, will approximate eventually the total losses which may be sustained in the liquidation of mortgage loans, interest, and property. 224 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 Home Owners' Loan Corporation-Balancesheet as of June 30, 1939-Continued ASSETS-continued Cash: Operating funds (includes to payable $19,706,646.06 Bond Retirement Fund in July 1939; $45,900,000.00 restricted to retirement of 2%-percent bonds called for payment Aug. 1, 1939; $1,009,218.75 re stricted to bond-interest pay ments; and $1,567,964.33 de posited by borrowers-see contra) -----Special funds held by U. S. Treasury for payment of in terest coupons (see contra) --- $79, 329, 627. 57 11, 906, 147. 21 $91,235, 774. 78 Fixed assets: Home Office land and building at cost -------- ------Furniture, fixtures, and equip ment-at cost--------Total fixed assets Less reserve for depreciation - - - 2,995, 339. 93 2, 940, 366. 92 5,935, 706. 85 2, 343, 896. 19 3, 591, 810. 66 Other assets: Accounts receivable --------Treasury bonds accepted as re payments (to be retired in July 1939) 135, 287. 44 150. 00 135, 437. 44 Deferred and unapplied charges: Unamortized discount on re funded bonds Unapplied property costs and expenses Miscellaneous 3, 066, 777. 34 99, 419. 70 253, 436. 99 3, 419, 634. 03 Total assets--------------------------------- 3, 114,821,877. 32 225 EXHIBITS Home Owners' Loan Corporation-Balancesheet as of June 30, 1939-Continued LIABILITIES AND Bonded indebtedness (guaranteed as to principal and interest by the United States, except $393,175.00 of unpaid matured 4-percent bonds guaranteed as to interest only): Bonds outstanding--not matured (Bonds maturing within 1 year-$365,554,700.00) ------Bonds matured-on which in terest has ceased ----------- CAPITAL $2, 947, 948, 600. 00 1, 356, 425. 00 $2,949, 305, 025. 00 Accounts payable: Interest due July 1, 1939, and prior thereto (see contra) ---Vouchers payable --------Insurance premiums_-------Commissions to sales brokers-Special deposits by borrowers -Miscellaneous 11, 900, 437. 70 33,563. 03 340, 655. 71 475,579. 05 1,567,964. 33 10, 650. 03 14, 328, 849. 85 Accrued liabilities: Accrued interest on bonded in debtedness Other accrued liabilities ------ 7, 523, 613. 36 308, 668. 14 7, 832, 281. 50 Deferred and unapplied credits: Unamortized premium on bonds sold--------------------Miscellaneous Reserve for fidelity and casualties Capital stock less deficit: Capital stock authorized, issued and outstanding -----------Less deficit after provision for losses in the manner described in footnote 1 on page 223------ 1, 001, 219. 79 916,530. 13 1, 917, 749. 92 1, 000, 000. 00 $200, 000, 000. 00 59, 562, 028. 95 140, 437, 971. 05 Total liabilities and capital -------------- 3,114, 821,877.32 226 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 EXHIBIT 59 Home Owners' Loan Corporation-Statementof income and expense for the fiscal year 1939 Operating and other income: Interest: Mortgage loans and advances ---------$103, 263, 287. 60 3, 167, 362. 22 Purchase money mortgages and advances----------1, 791, 530. 13 Sales contracts and advances---------------------Total ------------------------------------- Special investments ------------------------------ 108, 222,179. 95 20, 698. 24 Total---------------------------------------108, 242, 878. 19 Property income-----------------------------------26, 353, 510. 19 7, 457, 938. 92 Dividends received from savings and loan associations- Miscellaneous--------------------------------------- 201, 771. 20 Total income--------------------------- 142, 256, 098. 50 Operating and other expenses: Interest on bonded indebtedness ----------------Less amortization of premium on bonds sold -------- 72, 207, 569. 56 7, 998. 96 Total ------------------------------------Amortization of discount on refunded bonds Administrative and general expenses ------------------Property expense-----------------------------------Miscellaneous Total expenses- ------------------------ 72, 199, 570. 22,------638, 265. 27, 853, 483. 23, 161, 271. 60 52 99 09 125, 852, 591. 20 Provision for losses: On mortgage loans, interest, and property ---------For fidelity and casualties---------------------------- 34, 900, 000. 00 21, 055. 66 Total---------------------------------------- 34,921,055.66 Loss for fiscal year------------------------------------ 18,517,548. 36 227 EXHIBITS EXHIBIT 60 Home Owners' Loan Corporation-Statementof income and expense from the begin ning of operations-June13, 1933, to June 30, 1939 Operating and other income: Interest: Mortgage loans and advances ----- $626, 347, 693. 23 Purchase money mortgages and advances-------------------3, 925, 299. 97 Sales contracts and advances-----2, 228, 631. 39 Special investments ------- 632, 501, 624. 59 141, 015. 96 Property incomeDividends received-Federal Savings and Loan Insurance Corporation -------Dividends received from savings and loan associations-Miscellaneous ------------------------Total_ ---------------------------------------Operating and other expense: Interest on bonded indebtedness------ $381, 633, 920. 66 Less amortization of premium on bonds sold-----------------------------7, 998. 96 $632, 642, 640. 55 46, 672, 109. 60 3, 035, 326. 09 16, 018, 800. 08 1, 413, 768. 87 699, 782, 645. 19 381, 625, 921. 70 Amortization of discount on refunded bonds---------------------------Administrative and general expense---Property expense-------------------- 6, 531, 551. 97 183, 208, 333. 46 40, 755, 698. 74 612, 121, 505. 87 Net income before losses in the liquidation of assets and pro vision for losses-----------------------------Losses in the liquidation of assets: Loss on sale of furniture, fixtures, and equipment Net income before provision for losses which may be sustained in the liquidation of assets-----------------------------Provision for losses: On mortgage loans, interest and prop erty--------------------------$146, 137, 153. 25 For fidelity and casualties- ----------1, 042, 119. 64 87, 661, 139. 32 43, 895. 38 87, 617, 243. 94 147, 179, 272. 89 Loss for period June 13, 1933, to June 30, 1939-------------- 59, 562, 028. 95 228 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 EXHIBIT 61 Home Owners' Loan Corporation-Analysisof changes in deficit for the fiscal year ended June 30, 1939 Deficit at July 1, 1938--------------------------- $40,893,291. 81 Add: Loss for the fiscal year ended June 30, 1939-------------------------$18, 517, 548. 36 Provision for reserve for losses on mortgage loans, interest and prop erty-equivalent to loss on capital ized value of property sold; commis sion and selling expenses on prop erty sold, and loss of interest on foreclosure sales, redemptions, etc., 11, 211, 150. 83 to June 30, 1938 Administrative and general expenses applicable to prior years 138, 480. 57 Additional property expenses appli 11, 655. 34 cable to prior years 2,873. 86 Adjustments of miscellaneous income 465. 07 Miscellaneous debits 29, 882, 174. 03 Deduct: Losses previously charged to operations transferred to loss reserve: Loss on capital ized value of property sold- $7, 749, 213. 71 Commission on property sales- 3, 204, 504. 71 Expense-sale of 254, 697. 53 property--Losses of interest on foreclosure sales, redemp 2, 734. 88 tions, etc----Total (see above for provisioI for reserve) Rental property income applicable t( prior years-----------------Miscellaneous credits------------ 70, 775, 465. 84 11, 211, 150. 83 1, 578. 69 707. 37 11, 213, 436. 89 Deficit at June 30, 1939 -------------------------------- 59, 562, 028. 95 229, EXHTIBITS 4-0+0 00) Go C'0000 00 000000000C)0000 00r00 to o)r t0000)M00 t r 000 '00)'0000 C500000000CIcq 0)0)0 00)0 000000000000000000000C)C) C 10000U- N00 CD0000000000(=0000 0000000-40C)0D0000000000C t, 0000 (m000000 ) t0.: 00000000000m0 X00 Co 00 (M(m t- GO C) C) C O C C C 0 0r-00t-00 C00C) C 0000 4tl00n 0 0 ' 00)0 X 00 "CR 001(00 000000 0) (M0m00 000000) gm00;200000000000000g0g00000 g cq0~ t0--e.000000(= 000000(= 00000) =( 0 00 H rc - ~ oo0 M W0' 000-l -0 fq0) to I -- C> F2o00 0 00 C1400000 000 10 ' Le Cr) Cm-mcl C 0, I-Je t' tl: C11, r0O r- m't400mt-00 00lc q C C0) 0) 0L 0iq ccm m0 f m-7 m OD0=0mm00 4-'.)4 0, , 'CZ e ce (a) ) P mc 0) +0 -q 00-A0I C-1 0f) I\0000)) I00 I 0) 0) bo 0) MC q qr-jr-qr 0 4)03 0 4-;- 0) 0) 0) 0) 0)' 0) 0 00 :00000 I 000000 ~ '00~ 0 0) t 230 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 EXHIBIT 63 Home Owners' Loan Corporation-Number of employees by departments, divisions, and sections, as of July 1, 1939 Board Members and assistants ---------------------------Secretary's Office----------------------------------------Research and Statistics----------------------------------Public Relations--- ------------------------------------Financial Adviser---Total, Board -------------------------General Manager, staff------------------------------------Property Management- -------------------------------Loan Service---------------------------------------------Appraisal and Reconditioning --------------------------Comptroller and AccountingTreasurer--------------------------------------------Budget_ -----------------------------------------------Auditor----------------------------------------------Insurance ----------------------------------------------Purchase and Supply------------------------------------Total, Management --------------------------------Legal Department-------------------------------------------_ Personnel Department ---------------------------------------Total, HOL 1Includes personnel ---------------------------------------- 1 243 984 2627 2, 2, 472 1,408 1027 1,-------------------------568 12 400 271 73 9,842 735 1 187 211,007 of general service departments which serve all agencies under the Federal Home Loan Bank Board. 2 Includes 21 employees on per diem basis 39 126 60 15 3------------------------------------ INDEX Advances of the Federal Home Loan Banks-See FEDERAL HOME Page LOAN BANKS. Agencies of Federal Home Loan Bank Board------------------------1-19 Facing 1 Organization chart of------------------------------------15, 52 Amortization period, extension of-----------------------------in Home Owners' Loan Act, amendment to--------------------------41 National Housing Act, amendment to----------------------------Assets-See agency concerned. Balance sheets-See agency concerned. 38 Baltimore rehabilitation project ----------------------------------69 Bank Presidents' Conference-------------------- ------------------Bonds-See HOME OWNERS' LOAN CORPORATION. Building and loan associations-See Savings and loan associations. Building costs: Average cost of new dwelling units-------------------------------- 32-33 24 Cost indices for six-room frame house -----------------------26 Index of material prices ---------------------------------------Prevention of cost increases -------------------------------- 52-53 32-34 Relation of selling price to family income ----------------------25 Relation to construction activity --------------------------------Charters-See FEDERAL SAVINGS AND LOAN ASSOCIATIONS. Collections-See HOME OWNERS' LOAN CORPORATION. Community programs--See FEDERAL SAVINGS AND LOAN IN SURANCE CORPORATION. Constitutionality-See FEDERAL SAVINGS AND LOAN ASSOCIA TIONS. Construction, residential: Costs-See Building costs. Distribution of: By regions -------------------------------------------29 By size and type of community ----------------------------30-31 Dollar volume------------------------------------------------22 34-35 Federal Home Building Service Plan --------------------------Index of-------------------------------------------------------22 New nonfarm dwellings: Cost of, total----------------------------------------------22 Number of------------------------------------------------21 By size and type of community----------------------------30-31 By type of dwelling------------------------- -----------31 Obstacles to------------------------------------------------53 Public and private, compared. -------------------------------23 Revival of- ---------------------------------------------21-23 Coordination of agencies under the Federal Home Loan Bank Board ----- 16-17 231 232 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 Debentures, Federal Home Loan Bank-See FEDERAL HOME LOAN ,BANK SYSTEM. Debt: Page Home mortgage debt, 1929-1938-------------------------------50-51 Relation to total private long-term debt22------------------Direct-reduction plan---------------------------------------15, 84-85 Used by Home Owners' Loan Corporation --------------------128-129 Used by savings and loan associations-- ------------------------84-85 Districts, Federal Home Loan Bank, map of--------------------------70 Dividend rates: Federal Home Loan Banks------------------ -----------------6, 68 Savings and loan associations --------------------------42-44, 98-99 Eligibility requirements-See FEDERAL SAVINGS AND LOAN INSUR ANCE CORPORATION. Examinations: Adoption of revised form 18 Coordination under Federal Home Loan Bank Board -------17 Cost reduction -----------------------------------------18 Examining Division of Federal Home Loan Bank Board ---------17-18, 111 Federal Home Loan Banks -------------------------68-69 Federal savings and loan associations 17 Insured savings and loan associations ----------------110-111 Number of examinations --------------------------------18 Exhibits, list of -----------------------------159-162 Federal Home Loan Bank Board and its agencies------------------159 159-161 Federal Home Loan Bank System --------------------------Federal savings and loan associations --------------------------161 161-162 Federal Savings and Loan Insurance Corporation. Home Owners' Loan Corporation- ---------------------------162 Survey of housing and mortgage finance--------------------------159 Expenses-See agency concerned. Families, number of: 9 Served by insured savings and loan associations--------------4 Served by member institutions of the Federal Home Loan Bank System- 88-89 Federal aid to home financing institutions -------------------------- 34-35, 51 Federal Home Building Service Plan --------------------FEDERAL HOME LOAN BANK BOARD AND ITS AGENCIES: 1------------------Administration of agencies 16-17 -----------------Coordination__-----------------------Agencies: 14-15 Achievements of----------- ----------------Operations summarized: 3-6 Federal Home Loan Bank System ---------------7-9 Federal savings and loan associations ----------------9-11 -Federal Savings and Loan Insurance Corporation ------11-14 Home Owners' Loan Corporation -----------------------------Facing 1 -Organization chart of-_ Origin and purpose: 2 -----------------Federal Home Loan Bank System _--2-3 ------------------Federal savings and loan associations 3 Federal Savings and Loan Insurance Corporation --------------2 Home Owners' Loan Corporation __-__-__18-19 ___-------------------------------Self-supporting_ INDEX 233 FEDERAL HOME LOAN BANK BOARD AND ITS AGENCIES-Con. Examinations: Page Adoption of revised form --------18 Coordination --------------------17 Cost reduction 18 Joint examinations ---------------------17, 111 Number of examinations ------------------------------------18 Examining Division -------------------------------------17-18, 111 Federal Home Building Service Plan, sponsored by --------------34-35, 51 Financing of home ownership, significance of--1 Functions of----------------------------------1 Funds, source of-------------------------------------------------18-19 Operations, summary of --------------------------3-14 Origin and purpose 2-3 Personnel of Board -------------------------------------------19 Receipts and disbursements of Board 19 Service divisions of, general--------------------------------------16 17-18 Supervision---------------------------------------------FEDERAL HOME LOAN BANK SYSTEM: Accomplishments of ------------------------------3-5 Activities, summary of -----------------------------------------3-6 Administration of---------------------------------------------1, 68-71 Advances to members-See FEDERAL HOME LOAN BANKS. Areas served by-----------------------3-4 Assets of members--------------------------------------3, 55-57, 72-74 Average assets, by size groups---------------------------------83 -------79-80 Balance sheet items, consolidated statement of, members' Borrowing capacity of members -----------------------62 Districts, Federal Home Loan Bank, map of------70 Examination of members--------------------------------------17 Families served by, number of-------------------------------4 Federal Land Banks, compared with 33--------------------Federal Reserve System, compared with-------------- ----3-4 Federal savings and loan associations as members of -------------9, 56 Functions of----------------------------------------- 4, 16-17 Legislation, Federal, proposed----------------------71-72 Membership: Admissions to- ----------------------------56 Applications for ---------------56 Balance sheet, combined, of member savings and loan associations, Exhibits 30 and 31-----------------------------194, 195 Borrowing capacity of members-----------------62 Borrowing members---------------------------------------57-58 Borrowings of member savings and loan associations ---------80 By types of institutions---------------------------------------4, 56 Cash holdings of member savings and loan associations --------80 Government investments in member savings and loan associations___ 79, 89 Investments in shares of member associations, private ---------40, 79 Mortgage finance, importance of, in_ 6 Mortgage lending by member savings and loan associations------ 6, 74-77 Compared with non-members- --------------- --74 1831.30-39--16 234 REPORT OF FEDERAL HOMVIE LOAN BANK BOARD, 19 8 9 FEDERAL HOME LOAN BANK SYSTEM-Continued. Page Membership-Continued. Operating ratios of member savings and loan associations ----------80 Real estate holdings, reduction of-------------------------------- 77-79 Real estate sold "on contract ---------------------------80 Reserves of member savings and loan associations --------------80 Origin and purpose-------------------------------------2 Self-supporting ---------------------------18-19 Services by, extent of-------------------------------------------3-4 See also FEDERAL HOME LOAN BANKS. FEDERAL HOME LOAN BANKS: Advances to members -----------------4, 57-62 Amounts advanced ------------------------4, 57 Collateral ----------------------------------------------59-60 Demand for, decreased -----------------------57 Interest on-------------------------------------5, 61-62 Outstanding -----------------------57 Repayments of-----------------57 Soundness of. --------------------------------------60 Types of --------------------------------------------------59-61 Long and short term_ 60-61 Secured and unsecured 59-60 Use made of 61 Assets------------------------------------------------------5, 62-63 Capital stock ------------------------------------------------5-6, 64 Cash holdings of------------------------------------------------62-63 Debentures ---------------------------------------------------6, 65-66 Deposits: Demand and time -------------------------------------------66 Interbank --------------------------------------------------66 Interest rates on------------------------------------------66 Districts, map of-----------------------------------------------70 Dividends -----------------------------------------------------6, 68 Examination of-------------17, 68-69 Financial conditions: Balance sheet (combined and separate), Exhibit 19---------------177 Changes in fiscal year 1939 --------------------------------- 62-66 Income and expenses--------------------------------------66-68 185 Profit and loss statement (combined and separate), Exhibit 23-- --67 Profit and loss statement, consolidated ----------------------64-65 Surplus and undivided profits 189 Analysis of, Exhibit 24 ------------4 Functions of---------------------------------------------------5, 64 ------------------Government investments in stock-------62-63 -----------------------------------Investment holdings-_--65-66 Liabilities-------------------------------------------------62-63 Liquidity, increase in--------------69 Management of Officers of, act as agents of the Federal Home Loan Bank Board and the 16 Federal Savings and Loan Insurance Corporation ----------------55-71 Operations of------------------------------------------------- INDtX 235 Page 64-65 Reserves_----------5-6, 64 Stock subscriptions, members and U. S. Treasury 64-65 Surplus and undivided profits -------------------------------See also FEDERAL HOME LOAN BANK SYSTEM. 3 Federal Land Banks ---------------------------------------Federal legislation, proposed------------------------71-72, 99-101, 121-123 Federal Loan Agency, creation ofI---------------------------------II Federal Reserve System- ------------------3-4 Federal Savings and Loan Advisory Council ----69, 71 FEDERAL SAVINGS AND LOAN ASSOCIATIONS: Advertising 98 Areas served by----------------------------------------------7 Asset distribution, by size groups ---------------92 Assets, combined -------------------------91 Balance sheet, combined, Exhibits 30 and 31 194, 195 Budgets, use of --------------------------------98 Charges to borrowers and savers, restricted ----------85-86 --Charters, number of -------------------------8, 91 Constitutionality of----------------------------102-103 Conversions -----------------------------8, 91 Direct-reduction loan plan, required to operate under 85 Dividend rates, paid by ---------------------------------43, 98-99 Effects of, on savings and loan industry- 8-9 Examination of -------------------------------17 Federal Home Loan Bank Board, supervision by 1,17 Federal Home Loan Bank System, required to be members of_ 9, 56 Fees, fines, penalties, etc -----------__ 85-86 Financial condition ---------97-99 Growth of----------------------------------- 91 Income and expenses---------------97-99 Insurance of accounts required ---9 Investments in: Amount of---------------------------------------. 7,93 Number of private investors ----93 Private, rise of-----------7, 93-94 U. S. Government ---------94-96 Dividends paid on-------------- 96 Repurchases of----94-95 Restriction of -----------------95-96 Legislation, Federal, proposed -------99-101 Legislation, State -----------------101-102 Lending activity, mortgage -----96-97 Loans outstanding ---93 Mortgage lending-See Lending activity. Number of associations----------------7, 91-93 Operating ratios---------------97-98 Operations, summary of------------------7-9 Origin and purpose --------------2-3 Reserve requirements 86 Supervision by Federal Home Loan Bank Board9 236 REPORT OF FEDERAL HOME LOAN BANK BOARD, 193s FEDERAL SAVINGS AND LOAN INSURANCE CORPORATION: Page Admission fees ----------------------113-114 Advertising -----111 Applications for insurance ----------------------109 Assets ---------------------------------------11, 113 Associations, insured: Assets of-------------------------------------------- 10, 105, 114-115 Balance sheet, combined, Exhibits 30 and 31 -------194, 195 Dividends, effect of insurance on_ -_ 43 Examination of-------------------------------------17, 110-111 Federal Home Loan Bank System, membership in ---110 Investments, Government ----116 Investments, private, increase in_ 116 Investments, share, types of ---------------110 Investors in, insured9, 105 Number of------------------------------------------__--9, 105 Reserve requirements --------------------86 Supervision of----------------------------------- 17, 110-111 Charges to investors, restricted--------------86, 110 Community programs107-108 Contributions-------------------------------111-112 Cost of insurance --------------------------------------113 Eligibility requirements ------------------------109-110 Examinations -------------------17, 110-111 Cost of----------------------------------------------------18 Families served by, number of ---99-------------------Federal Home Loan Bank Board, acts as board of trustees----------1 Federal Home Loan Bank Board, use of general service divisions of---114 113-114 Financial condition --------------------------Balance sheet, Exhibit 44-------------------212 Income and expenses, Exhibit 45----------------213 Operating expenses, Exhibit 46 --------214 Insurance program, progress of -------------------106-107 Insurance protection: Effects of-----------------------------------------------9-10 Progress of105-107 Legislation, Federal, proposed-----------------------121-123 --123 Legislation, State-- -----------------------------------Liability of, potential ------------------------------------------113 Management, requirements for insured associations ------109 9-11 Operations, summary of ----------------Origin and purpose -------------------------------3 Personnel -----------------------------114 Pledge of shares --------------------------------------119-120 113 Premiums---------------------------------------------------Rehabilitation-See Reorganization. Reorganization: 117-121 Insurance as factor in-------------------------117-120 Methods of -------------------------------------------Participation of Federal Savings and Loan Insurance Corporation 107-108 in programs ---------------------------------------------113 -----------------Reserves INDEX 237 FEDERAL SAVINGS AND LOAN INSURANCE CORPORATION Page Continued. 117-119 Segregation of assets -----------------------------------------114 Service divisions, general -------------------------------------11, 111-112 Settlements -----------------------------------------------119 Write-down of share capital --------------------------------------Fees, fines, and forfeitures-----------------------------------------85-86 Financial statements-See agency concerned. Foreclosures: 134-135 Cost of------------------------------------------------------Home Owners' Loan Corporation-See HOME OWNERS' LOAN COR PORATION. Number of, total, non-farm --------------25-27 Proposed uniform law ----------------------------------------53 Government investments ------------------------------------------89 Federal Home Loan Banks, capital stock of ---------------- 5, 64, 89 Federal savings and loan associations, shares of-------------- 7, 89, 94-96, 99 Federal Savings and Loan Insurance Corporation, capital stock of - _--11, 89, 113, 145 Home Owners' Loan Corporation, investments by, in savings and loan 145-146 associations -----------------------------------------94-95 Retirement of, by Federal savings and loan associations ------------Savings and loan associations, Federal Home Loan Bank members, shares -79, 89, 120-121 in. 5, 7, 64, 89, 94-96 U. S. Treasury, investments by Home mortgage finance: -------III, 15, 40-41 Amortization period, extension of-----40-42, 52 -------------Competition in, growing-------50-51 Debt, home mortgage, 1929-1938-----------------------------15,84 Direct-reduction loan plan ----------Importance of--------------------------------1-2 ---------------------------v,40-41 Interest rates --------Lending activity, volume of: -----------44-47 Home mortgage, total ---------------------------- 74-77 Savings and loan associations ----------------------------------42 Loans, average size of --------50-51 Loans outstanding, volume of ----------------------44 Moratorium laws 47-49 -------------------------Mortgage recordings 51-52 Problems ahead------------------------------Recordings-See Mortgage recordings. ------------------------------41 Risk rating --------------------------------38-51 Survey of Uniform real estate mortgage and foreclosure law, proposed -----53 -------------------------------------- 41, 85 Variable interest ratesHOME OWNERS' LOAN CORPORATION: 151 ----------------------------------------Accounts terminated Achievements, survey of-------------------------------------11-14 Administrationn- --------------------------------------------- 154-158 -- 14, 148, 156 Administrative expenses ---------------------------in Amortization period, extension of--- -----------------------------144-145 Appraisals ----------------------------------------------- 238 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 Page HOME OWNERS' LOAN CORPORATION-Continued. Arrearages, amount of------------------------------------------128 Bond Retirement Fund--------------------------------------153-154 Bonds_ -----------------------------------------149-150,153-154 Borrowers' accounts, status of original -------------126-128 Collections, trend of---------------------------------------128-130 Cost of foreclosure and deed in lieu of foreclosure- ------------- 134-135 Costs, administrative --------------------------------14, 148, 156 Defbtor and property accounts, combined----------------------152-153 Deeds in lieu of foreclosure-- -------------134 ----Deault: Number of accounts in----------------------------------------127 Tax defaults---------------------------------------------131-132 Deficit-----------------------------------------------------147-148 Direct-reduction loan plan, use of----------------------------128-129 Expenses, administrative ------------------------------14, 148, 156 Expenses, operating ------------------------------14 Financial condition: Assets, distribution of principal-----------------146 Balance sheet ---------------------------146-147 Exhibit 58-------------------------------------------------223 Deficit, analysis of changes in, Exhibit 61 ---228 Income and expenses --------147-148 Administrative expenses ------------------------14, 148, 156 Cumulative statement, Exhibit 60 -----------227 Fiscal year 1939, statement, Exhibit 59-------------226 On property owned------------------139-141 Liabilities, distribution of principal- --146 Foreclosures: 12, 132-134 ----------------------Authorized, number 134-135 Cost of and time required for Methods of-----------------------------------------------135 132-134 Operations -----------------------------------------------Pending -------------------------------------------13,126 ----132-133 Percent distribution by arrearages --------133-134 Withdrawn------------------------------------------------iv Interest rate, lowering of-----------------------------------Investments in savings and loan associations: Amount of__------------------------------------------------ 145-146 146 Dividends received on-- ----------------------------------13, 130, 138 Leniency toward borrowers -----------------------------12-13, 150-154 -------------Liquidation, progress in Loan service------------------130-132 Moratorium laws affecting Home Owners' Loan Corporation ------135 Mortgage loans: 125 Amount of original ----------------------------------------Average size of --------------------------------------------14 III-------------------------iv Interest ratel, owering of 125 Number of original----------------------------------------Original, disposition of--------------------------------------13 13, 130, 151 Paid in full------------------------------------------128-130 ---Repayment of principal and interest INDEX 239 HOME OWNERS' LOAN CORPORATION-Continued. Page Mortgage loans-Continued. ----------- 130-132 Servicing of --------------------------------------- 131-132 Tax defaults 155-156 Offices, number of - 11-14 Operations, summary of Origin and purpose ---------------22 ----------125 Original loans, number and amount14,155-158 Personnel-----------------------Property: ----------------Acquired 13,136-137 --------------- 140-141 Expense --------In process of acquiring title --------- 13,136 140-141 Income, gross operating and net Location of------------------------------------------- 137-138 ---------------------------------136-139 Management------------------Owned-------------------------13,136-138 --------------------Reconditioning 142-144 Rents------------------------------------139-140 Sale of 13,136-139 --------By price brackets------------33 -------------------By terms ----------------139 ----------------138-139 Loss through Policy --------------------136 Profit and loss on, statement 139 Vacancies 139-140 -------Reconditioning 13-14,142-144 Rehabilitation of borrowers 12-13,126-127,130-131 Relation to private home mortgage lending ----------------------- 46,51 ------Repayments in full of original loans ----- 12-13, 128, 130, 151 Reserves-------------------------------------- 147,148-149 Savings and loan associations, investments in ----------------145-146 Survey of activities ---------------------------- 125-126 Taxes, delinquent----------------------------131-132 Vendee accounts ----------------------------------------------131,142 Home ownership: Financing costs 14-15, 40-42 Importance of--------------------------------1-2 Housing (See also Construction): Demand for ------------------------------21,32-33 Federal Home Building Service Plan -----------34-35 "Filtering-up process---" ------------------33 Index of residential construction -------------22 Mass market------------------------------------------32-34 Outlet for investments----------------------------------44-46 "Overhang" of repossessed properties- ----------------------27-29 Problems ahead--------------------------------------------52-53 Public and private, compared 23 Real estate, institutionally held ------------------27-29 Rehabilitation, need for -------------36-38 Relation to family income --------------------33 Rents---------------------------------------------------23-25 Supply of new dwelling units -- ------------------------------21 Survey of ------------------ 21-38 240 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 Housing-Continued. Page Trends in--------------------------_ 22-23 Urban structures, condition of-----------------36 Vacancies --------------------------------23, 25 Income and expenses-See agency concerned. Industrial production ----------------------------------------22 Insurance of accounts-See FEDERAL SAVINGS AND LOAN INSUR ANCE CORPORATION. Interest rates: Federal Home Loan Banks -------------------------5, 61-62 Home Owners' Loan Corporation, lowering of -----------iv Trends of_-------------------------------40-42 Variable ----------------------------------------------------41, 85 Labor costs, building--------------25 Legislation: Federal Home Loan Bank System: Federal, proposed --------------------------71-72 Federal savings and loan associations: Federal, proposed-------------------------------99-101 State----------------------_ ------------------------------- 101-102 Federal Savings and Loan Insurance Corporation: Federal, proposed 121-123 State -----------------------------------123 Lending activity-See Home mortgage finance. Letter of Transmittal ------------------------------------------III Liquidity: Federal Home Loan Banks ---------------------------------62-63 Savings and loan associations --------------------------------- 80, 87-88 Loan plans-See Savings and loan associations. Loan service-See HOME OWNERS' LOAN CORPORATION. Maps: Between 29-30 Construction, regional distribution of -----------------Federal Home Loan Bank Districts ----------------------70 44, 135 Moratorium laws_ ----------------------------------------------------47 Mortgage Bankers Association Mortgage loans-See Home mortgage finance. Mortgage recordings- --------------------------------------------- 47-49 18 National Association of State Building and Loan Supervisors ------------47 National Association of Title Companies --------------------------41, 59 National Housing Act---------------------------------------------Operations-See agency concerned. Facing 1 Organization chart of agencies of Federal Home Loan Bank Board - -- "Overhang" of repossessed properties: 77-79 Savings and loan member institutions, owned by-------------------27-28 Volume of, total_-----------------------------------------------Personnel-See agency concerned. Property management-See HOME OWNERS' LOAN CORPORATION. Property sales-See HOME OWNERS' LOAN CORPORATION. Real estate: Foreclosures-See Foreclosures. 27-28 Institutionally held ----------------------------------------------53 Laws, inadequacy of- INDEX241 Page Real estate-Continued. Market, recovery of - - - - - - - - - - - -- - - - - - - - --- 25-29 27-28 "Overhang" of repossessed properties --------------27 Sales, trend of - - - - - - - - - - - - - - - - - - - - - - - - - Urban structures, condition of --- - - - - - - - - - - - - - - - -36-37 Reconditioning: Condition of urban structures------------------- 36-37 Home Owners' Loan Corporation-See HOME OWNERS' LOAN CORPORATION. N eed for - - - - - - - - - - - - - - - - - - --- --- -- - -- 36-38 ---37-38 Programs -------------------------------------94, 118,121 Reconstruction Finance Corporation-----------------------Rehabilitation: HOLC borrowers, of--------------- 12-13,)126-127,7130-131 81-82, 117-121 Savings and loan associations, of ------------- Urban property, of ---------- -------------------- ------ 36-38 Rents: 139-140 Home Owners' Loan Corporation ---------------Trends, recent - - - - - - - - - -- - - - - - - - ------- - 23-25 - - -III Reorganization Plan No. I --- - - - - - - - - - - - - - - --81-82,1117-121 Reorganization of savings and loan associations-------Reserves: 80,286-87 Savings and loan associations, of----------------------See also agency concerned.I Residental construction-See Construction and Housing. Savings, individual long-term --- - - ----- - -- - - -- -- -- 38-40 Savings and loan associations (See also FEDERAL HOME LOAN BANK SYSTEM and Savings and loan industry): __8191 Conversions from State to Federal charter ---------------------Dividends--------------------------------------- 43-44 17-18 Examination of---------------------------------------------Federal-See FEDERAL SAVINGS AND LOAN ASSOCIATIONS. Government investments in-See Government investments. Insured-See FEDERAL SAVINGS AND LOAN INSURANCE CORPORATION. Interest rates - - - - - - - - - - - - - - - - - - - - - -- 111,40-42, 85 Investments in: Home Owners' Loan Corporation, by------------- 89, 94-96,120, 145-146 40, 79 Private, rise of.-------------------------------------------- - - - - - - - - - - 89,294-96 U. S. Treasury, by- - - - -- - - - --Lending activity of-See Home mortgage finance and FEDERAL HOME LOAN BANK SYSTEM-Membership. 87-88 Liquidity, greater emphasis on --------------------- - - - - - - - - - - - - - - - - - ---- 84-85 - - ----Loan plans 4, 57 Members of the Federal Home Loan Bank System, as---------------83-86 Operation, improvements in plans of -----------------Rehabilitation of - - - - -- --- - - -- --- - - -- 81-82,1117-121 -------86 Reserves, more adequate, of. ---------------Savings and loan industry: 8 Federal savings and loan associations in, importance of-------------------82-83 Management, improvements in ------------- 242 REPORT OF FEDERAL HOME LOAN BANK BOARD, 1939 Page Savings and loan industry-Continued. Rehabilitation of --------------------------------10, 81-82, 117-121 Community programs for--------------------107-108 Insurance as factor in ------------------------10, 117-121 Structural changes in---------------------_-------------------81-89 Service divisions of Federal Home Loan Bank Board, general ----------- 16 Settlements-See FEDERAL SAVINGS AND LOAN INSURANCE CORPORATION. Supervision----------------------------------------- 17-18, 68-69, 110-111 Tax delinquencies-See HOME OWNERS' LOAN CORPORATION. Transmittal, Letter of-_-----------------------------------------III United States Building and Loan League------------------------18, 47 U. S. Government, investments of-See Government investments. U. S. Housing Act---------------------------------------------23 23-25 Vacancies.----------------------------------------------------- 0
@FedFRASER