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Vol.4
No. 7
FEDERAL
HOME LOAN BANK
REVIEW
APRIL
1938
ISSUED BY
FEDERAL HOME LOAN BANK BOARD
WASHINGTON D.C.
FEDERAL
CONTENTS FOR APRIL
1938
HOME
SPECIAL ARTICLES
BANK
Page
232
237
240
242
Mechanics' lien laws
Model mortgage loan dockets
Place of the budget in business management
A new source of investment funds for Federals
Home financing in relation to business
fluctuations
245
REVIEW
STATISTICS
Residential construction and home-financing activity
248
Indexes of small-house building costs
Monthly lending activity of savings and loan associations
Federal Savings and Loan Insurance Corporation
Federal Savings and Loan System
250
252
252
253
Federal Home Loan Bank System
Published monthly by the
FEDERAL HOME LOAN
BANK BOARD
John H. Fa hey, Chairman
T. D. Webb, Vice Chairman
William F. Stevenson
F. W. Catlett
W. H. Husband
FEDERAL HOME LOAN
BANK SYSTEM
FEDERAL SAVINGS AND LOAN
ASSOCIATIONS
Statistical tables
Nos. 1, 2: Number and estimated cost of new family dwelling units
No. 3: Indexes of small-house building costs
253
. . . .
254
254
256
Nos. 4, 5, 6: Estimated lending activity of all savings and loan associations . . 257
No. 7: Monthly lending activity of reporting savings and loan associations . . 259
No. 8: Index of wholesale price of building materials
260
No. 9: Institutions insured by the Federal Savings and Loan Insurance
Corporation
No. 10: Monthly operations of State-chartered insured associations
No. 11: Monthly operations of Federal savings and loan associations . . . .
Nos. 12, 13: Federal Home Loan Bank System
Nos. 14, 15, 16: Home Owners' Loan Corporation
261
261
262
262
263
FEDERAL SAVINGS AND LOAN
INSURANCE CORPORATION
HOME OWNERS' LOAN
CORPORATION
REPORTS
Administrative rulings, Board resolutions, and Counsel's opinions
266
Directory of member, Federal, and insured institutions added during FebruaryMarch
269
SUBSCRIPTION PRICE OF REVIEW. The FEDERAL HOME LOAN BANK REVIEW is the Board's medium of communication with member institutions of the
Federal Home Loan Bank System and is the only official organ or periodical publication of the Board. The REVIEW will be sent to all member institutions without
charge. To others the annual subscription price, which covers the cost of paper and printing, is $1. Single copies will be sold at 10 cents. Outside of the United S tates,
Canada, Mexico, and the insular possessions, subscription price is $1.40; single copies, 15 cents. Subscriptions should be sent to and copies ordered from Superintendent
of Documents, Government Printing Office, Washington, D. C.
APPROVED BY THE BUREAU OF THE BUDGET.
53048—38—1
MECHANICS' LIEN LAWS
. . . .
As They Exist Today:
1. Add fo the costs of construction and financing.
2. Discourage lending for reconditioning and new construction.
3. Increase tendencies to "jerry-building."
4. Contribute to the expense of title examination and title insurance.
•
H O M E - F I N A N C I N G institutions are looking
forward with much interest to the completion of
the draft of the Uniform Mechanic's l i e n Act currently being undertaken by the Sub-Committee on
Law and Legislation of the Central Housing Committee. Mechanics , lien laws in present form have
proved a serious handicap to lending for reconditioning or for new construction, since in many instances
a mechanic's lien may take precedence over a previously recorded lien securing a mortgage indebtedness. Further, the multiplicity of statutory provisions, the technical decisions, and the conflicting
judicial interpretations have vexed owners and prospective owners of small homes, and increased the cost
of financing, reconditioning, or new construction. The
laws in their present form have also encouraged incompetence of contractors in the small construction
field, and have generally added burdens and costs to
the ownership of small homes.
Delay has been the essence of precautionary
measures used to avoid the risks which a homefinancing institution may run under existing mechanics' lien laws. The R E V I E W for M a y 1937 presented
an outline of construction loan procedure in which
it was emphasized that particular care is needed to
prevent mechanics' liens from attaching to the property during course of construction. Proper precautions demanded a carefully planned method of disbursing the loan and other technical procedures.
These cumbersome and hampering procedures in
lending for repairs or for new construction are not
necessary. Much can be done to eliminate them.
Adoption of a satisfactory uniform mechanic's lien
act by the various States would be one method of
reducing the delay and of simplifying present procedures. The history of the growth of mechanics'
Hens, and the diversity in this phase of the law which
exists among the various States, show that legislative
232
action has now become a necessity, and that the
Uniform Act now being drafted merits close attention
and study by home-financing institutions.
R E S U L T S OF MECHANICS' L I E N L A W S
The earlier hen statutes were limited in scope to
the protection of wage earners. To secure their
passage, it was urged that the protection of the wages
of building-trade mechanics through the establishment of a right to a lien against the real estate for
wages unpaid, the hen to have priority over all other
encumbrances, would attract employment to the
building field and aid in the building up of the country. Other States followed the lead of Maryland in
1791 and rapidly enacted similar legislation.
By gradual amendment and enlargement of the
mechanics' lien acts already in force, practically
every segment composing the construction industry—
including contractors, subcontractors, material
dealers, laborers, artisans, architects, landscape
architects, engineers, surveyors—is granted liens of
varying extent under varying conditions for the
labor, services, or materials furnished or contracted
to be furnished for the particular improvement.
These laws grew, and their validity became
established, as the courts held t h a t the building
business did not have the protection inherent in the
widespread distribution of credit risk common to
other businesses, and therefore needed this broader
and special protection. Contractors, subcontractors,
materialmen, and other building groups were frequently obliged to extend credit in larger amounts,
and for longer time, than other businesses. Such
parties might have their entire capital, or a substantial part of it, tied up in one or two, or ten or
twenty, projects under construction.
I n actual practice, these laws have created a
Federal Home Loan Bank Review
number of problems in the field of housing. The
effect of existing laws can be clearly shown by discussing the three parts of a typical mechanic's lien
statute which most vitally affect (a) the owner;
(b) the contractor and parties such as subcontractors and material dealers working with him;
and (c) the lending institution. The three parts
relate to (1) the right to, and the extent and duration
of, a lien; (2) the priority of liens; and (3) the owner's
responsibility and risk in making payments to the
general contractor.
T H E R I G H T TO, AND THE E X T E N T AND DURATION
may take precedence over liens securing a mortgage
indebtedness. Consequently, this has the effect of
increasing the financing cost of reconditioning or
new construction because conservative mortgagelending institutions charging low interest rates find
that they must either forego this type of lending
entirely or else establish extensive service facilities
to make the necessary checks to protect against such
liens. The cost of this service is necessarily passed
on to the owner in the nature of loan service charges.
This increased probability of liens also operates to
increase the cost of title examination as well as the
cost of title insurance.
OF, A L I E N
The statutes are not uniform in specifying who
PRIORITY OF L I E N S
shall be entitled to a lien nor under what conditions,
although practically all statutes give a lien to
In every State, mechanics' liens take priority over
laborers. However, in spite of the many variations
subsequent encumbrances; in seven or more States
existing between differsuch liens, under varyent States, it may be said
ing conditions, even take
generally that present
priority over previously
existing
encumbrances
statutes permit a claimMechanics' lien laws in present form are a
as, for example, Oreant to effect a cloud on
cause of cumbersome and hampering procedures
gon, where a mechanic's
the title to real estate
in lending (or reconditioning or for new construclien for improvements
with comparative faciltion. Effects of existing statutes are briefly
erected on the land
ity.
Moreover, some
analyzed, and a uniform mechanic's lien act
takes priority over an
statutes permit an unproposed to remedy major existing defects is disantecedent m o r t g a g e
reasonable period to
cussed. The Sub-Committee on Law and Legisagainst the land. There
elapse without requiring
lation of the Central Housing Committee is now
are other States which
the claimant to have his
re-drafting the proposed uniform mechanic's lien
follow a "severability"
claim adjudicated. The
act to provide a still more simple procedure.
doctrine which permits
cost of filing a claim is
the a n t e c e d e n t l i e n
nominal, and it is easy
against the land to take
and cheap for a disgrunpriority as to the land, whereas the mechanic's lien
tled and even undeserving claimant to effect a cloud
takes priority as to the improvements only. In
on title. This furnishes the claimant with a strong
States following this view the improvements may
lever to force unfair settlements from the owner,
be
severed and removed when no damage to the land
particularly if the owner needs to clear title in order
will
result.
to mortgage or transfer the property.
The general lack of uniformity in this vital phase
Every State prescribes the place and method for
of the mechanics' Hen laws constitutes a manifest
filing a lien; and the period fixed by statute for
danger from the lenders' point of view. The forefiilng varies from 30 days to six months. Once filed,
going represent only the main theories as to lien
stipulated statutory conditions governing the forepriority. Many States have adapted these theories
closure and enforcement of the claim must be comby introducing variations to meet given local
plied with. Otherwise, a claim loses its legal vitality.
conditions.
The claimant must commence foreclosure at any
time within six years in three States, two years in
six States, and one year in 16 States, and within
REGULATION OF PAYMENTS BY O W N E R TO
periods ranging downward to a minimum of 60 days
CONTRACTOR
in other States.
I n about three-fourths of the States the owner pays
There is a long continuing risk under certain
circumstances in many States that mechanics' liens
the general contractor at his peril. I n these States,
April 1938
233
notwithstanding the fact that the general contractor
may be the only person with whom the owner had a
direct contract for the construction, and even though
the owner may not know the names of potential
claimants and has not been notified of any claims for
hens by unpaid eligible claimants, the owner may
nevertheless have to make double payment unless he
has taken the precautionary measures prescribed by
the statutes.
I n most of the remaining 25 percent of the States,
if the owner makes payments to the contractor before
he receives notice of a claim for lien by an unpaid
and otherwise eligible claimant, he is protected to the
extent of such prior payment. However, a duty is
imposed upon him to apply the unpaid balance as
the statute prescribes. I n some States, there is only
one way the owner can be certain of protection from
loss. He must withhold payment to the general
contractor until the statutory period for filing (not
foreclosing) liens has expired so that he may ascertain
whether hens will arise.
Thus many statutes place a premium on delayed
payments. Under such circumstances, payment is
never a simple task. Moreover, the statutory provisions governing payment are usually wordy, technical, and so involved that an owner lacking experience in such matters may be wholly at sea. Building a home is an enterprise undertaken by the average
citizen but once in a lifetime and the ordinary inexperienced and uninformed person, especially the
prospective owner of a small home, is frequently put
to the expense of engaging an attorney or other
competent agent before he can proceed in what
should be a reasonably simple and expeditious transaction—namely, the payment with safety, of the
cost of constructing his own home.
I n a great many States the mechanics' lien laws
impose upon the owner the responsibility of seeing
to it that his general contractor and others discharge
the debts incurred by them in building or repairing
his home. This condition makes for the continuance
of an unsound credit system at the expense of the
owner, and to the detriment of contractors who
endeavor to operate on an efficient and business-like
basis. I n the small-home field a general credit
laxity to contractors and others prevails—a condition
due in large part to the fact that material dealers
and other creditors realize that the particular improvement can be made available, through the
medium of the mechanic's lien law, to secure the
credit extended.
Under such circumstances, there is but little need
234
for a contractor to manage his business with efficiency
in order to acquire and maintain a credit standing.
The resultant waste is often reflected in higher construction costs or what amounts to the same thing,
construction of a shoddy and unsound character.
A UNIFORM M E C H A N I C ' S L I E N A C T
The complete lack of uniformity in the various
mechanics' lien laws of this country is well illustrated
by the preceding analysis of three important parts
of existing statutes. Naturally, these wide variations have produced general dissatisfaction. In
response to a formal request from the owners of
buildings, trade associations, and leading men in the
construction industry seeking the aid of the Department of Commerce, Mr. Hoover, as Secretary of
Commerce, appointed a Standard Mechanic's Lien
Act Committee in 1924 to consider the question and
to draft a uniform mechanics' lien act.
The Committee concluded that there were two
principal classes of cases in which those who performed labor or other services or who furnished
materials for the building required protection under
lien laws. I n the first class are defaults by the contractor or subcontractor. A solvent owner should
know at once of such failures to make payments, so
that he will not go on making installment payments
to the contractor, which may not be used to pay off
obligations for the particular improvement. The
lien law should enable the solvent owner to proceed
with construction with the least possible delay and
uncertainty.
Cases of the second class usually arise when the
owner becomes insolvent and a forced sale of the
property is necessary to satisfy the claims of lienors.
A lien law should therefore state under what circumstances a lien will take priority over a mortgage,
building loan, or other obligation attaching to the
property, and provide for prompt action so that the
building may be completed without delay.
The Committee then considered the existing diversity in both the substantive and procedural provisions of the laws of the various States to determine
to what extent protection was actually afforded in
these two principal classes of cases. They found that
the various acts could be roughly classified as: (1)
the Pennsylvania type of act, under which hens are
not limited to the price fixed by the contract between
the owner and the general contractor. The owner
might pay his general contractor in full on a $10,000
contract, but still find his property liable for addiFederal Home Loan Bank Keview
tional liens of $2,000 or $3,000 if the general contractor had failed to satisfy claims for materials furnished
or labor performed; (2) the New York type of act,
under which liens are limited to the amount unpaid
on the indebtedness of the owner to the general contractor as determined by their contract at the time
the claimant files his claim of lien. In case liens are
filed, the owner has merely to see that lien claimants
are satisfied up to the amount unpaid to the contractor. In the case of a $10,000 contract, for example, the owner might pay out $8,000 according
to the contract when the work is nine-tenths completed and thereafter be liable to lienors to the extent of only $2,000 although claims later filed might
total $2,500 or more; (3) a third type of act, followed
in the legislation of four States, in general limits the
lien liability of the owner's property to the amount
of the contract price, as does the New York type of
act, but requires in addition that the owner act at
all times in good faith, by obtaining from the contractor at the time of each progress payment a statement under oath disclosing the contractor's indebtedness to those engaged upon the improvement.
The owner is then required, unless waivers of lien
are presented, to withhold from the contractor sums
sufficient to meet the claims of such persons and to
make payment direct to them. Claimants also may
notify the owner of indebtedness to them and the
owner must then withhold the sums claimed.
The Standard State Mechanic's Lien Act Committee of the Department of Commerce found in this
third type of act the nucleus of an orderly procedure
for the protection of the various interests involved
and they used this type of act as a model upon which
to construct their uniform act* The Committee,
in cooperation with a special committee of the National Conference of Commissioners on Uniform
State Laws, concluded its efforts in December 1932
after eight years of study and annual public hearings.
A uniform mechanic's lien act was promulgated which
has since been endorsed by the American Bar Association.
DISCUSSION OF THE PROPOSED UNIFORM ACT
For the purpose of the present survey only the sections of the proposed uniform act will be considered
which bear upon the three phases of the law discussed
in connection with the existing statutes.
Briefly, regarding the first, "The Right to, and
Extent and Duration of, a Lien," the proposed Uniform Act: gives a lien to contractors, subcontractors,
April 1938
materialmen, laborers, architects, landscape architects, and engineers; provides for the lien to be
against both the land and the improvements without
provision for severability; limits the liability of the
owner to the contract price provided he has complied
with the provisions of the Act governing the making
of payments; fixes the "visible commencement of
operations" as the event for the attaching date of the
lien; establishes the period for filing a claim of lien as
not later than three months after final performance
and the period for commencing suit as not later than
one year after filing.
All these provisions appear to be an improvement
over the provisions now found in most laws. It is
believed, however, that better practices in the small
construction field would result, and that the burden
which these acts impose upon small-home owners
would be more tenable, if the time for filing, and the
time for foreclosing after filing, were reduced. A
reduction in the time period would not deprive one of
his lien; it would but require the exercise of more
diligence. This shorter period would also lessen the
likelihood that an owner would be harassed by unworthy claimants seeking to effect a cloud on the
owner's title for purposes of forcing a settlement.
As to the matter of "Priority of Liens," since this
factor is so important, the applicable Section 21 of
the Uniform Act will be quoted:
"Section 21. Priority of Liens. Liens provided by
this act shall have priority over a conveyance, mortgage, building loan contract, attachment, judgment,
or other encumbrance or demand against such real
property which was not recorded, docketed or filed at
the time of the visible commencement of operations.
All liens provided by this act except those of laborers
shall, subject to the provisions of sections 4, 5, and 6
of this act, be on a parity and shall be settled pro
rata; all liens of laborers shall be on a parity one with
another and shall have preference over all other liens
under this act."
The courts of many jurisdictions do not regard a
construction loan as taking lien priority over supervening mechanics' liens which are filed before actual
payout of the loan proceeds. This risk is an element
which increases financing costs for construction loans
and discourages mortgage-lending institutions from
entering the field. Section 21 of the Uniform Act does
not make any distinction between advance-money
mortgages and others. In the absence of clear and
express statutory provision to the contrary, the courts
of these jurisdictions would probably construe Section 21 to limit the lien priority of the lending insti235
tution to the amount actually paid out before the
mechanic's lien claim arose, notwithstanding the fact
that the mortgage institution may have obligated itself to make the entire advance.
It is believed therefore that the language of Section
21 should be strengthened and clarified so that no
doubt can exist regarding this important point.
In dealing with the regulation of payments by the
owner, the Act offers advantages from the viewpoint
of the industry, but the owner himself may find disadvantages. For example, the owner may pay the
general contractor without risk of additional liability, except perhaps for the claims of unpaid laborers, provided that he makes "proper payment" as
defined in the Act before he receives a written notice
of intention to claim a lien, or before a lien claim has
been filed. However, laborers have a continuing
right of lien until the expiration of the 3-month period
for filing claims, and the owner must therefore hold
back sufficient money to meet any claims of laborers
that may be filed during this period.
Another seeming advantage to the owner is the
provision limiting his liability to the contract price,
but here again the provision is surrounded with so
many limitations as practically to nullify it. The
owner must follow the method prescribed in the Act
governing the matter of payments, if he desires protection against liens, but the methods prescribed are
so technical and involved that an ordinary smallhome owner would find it necessary to engage professional advice to ascertain the procedure to be
followed in a given situation.
The general adoption of such a Uniform Mechanic's Lien Act would greatly simplify and improve the existing mechanic's hen procedure of the
various States. It would eliminate many of the uncertainties now inherent in such existing legislation
and afford greater protection both to home owners
and home-financing institutions. In addition, such
uniform mechanic's lien legislation in all the States
would better enable those contractors, subcontractors, and materialmen who now operate on a national
scale to carry on their business.
The objective of the Sub-Committee on Law and
Legislation in redrafting the proposed Uniform
Mechanic's Lien Act is to provide simplicity and
clarity, and to assure a procedure which will protect
all parties which have the right to secure a mechanic's hen, but which at the same time affords
the maximum convenience and protection to the
small-home owner and to the financing institution.
Home mortgage lenders will be particularly interested
in following closely the progress of such a proposed
act. The Sub-Committee will be very glad to receive comments and suggestions with respect to the
proposed draft, as well as statements of the experience of lending institutions under existing statutes.
Communications should be directed to the Editor of
the REVIEW, who will bring them to the attention of
the proper members of the Sub-Committee.
Effective Advertising
A SIMPLIFIED UNIFORM MECHANIC'S LIEN ACT
The Sub-Committee on Law and Legislation of
the Central Housing Committee, after making an
intensive study of the Uniform Mechanic's Lien Act
drafted by the Department of Commerce Committee
in collaboration with the National Conference of
Commissioners on Uniform State Laws, came to the
conclusion that the Act could be improved and simplified.1 It is, therefore, now engaged in redrafting
this Act.
1
Special Report No. 8, "Mechanics* Lien Laws," was prepared on the basis of the legal experience of the Home Owners' Loan Corporation in handling more than 500,000 separate
reconditioning contracts in the small-house field, aggregating
an expenditure of approximately $100,000,000. A copy of
this report may be obtained upon request to the Editor of the
REVIEW, or to the Secretary of the Sub-Committee on Law
and Legislation, Room 7032, North Interior Building, Washington, D. C.
236
•
THEKE are several ways of arousing reader
interest through advertisement by the use of
headlines and illustrations, according to a quotation
from "Why an Advertisement Succeeds or Fails," in
Domestic Commerce.
Effective headlines which can be used for better
advertising are those that contain news, arouse
curiosity, promise the customer something he wants,
or mention the product or service. Certain illustrations and layouts can also be used with sure success. For example, illustrations which invite the
prospect to project himself into the pictured situation, and layouts which, through skillful use of white
space, locate elements in an eye-inviting design, are
ways in which these two important factors in advertising may be used to attract attention and create
public interest.
Federal Home Loan Bank Keview
Model Mortgage Loan Dockets
This is the second in a series of articles discussing means of reducing
examination time and expense.
The first article on "Contractual
Arrearages" appeared in the January issue
•
W H E N an unbiased outsider through his official
filing procedure is followed the mortgage papers may
duties is required to study the method of operabe almost inaccessible and their security seriously
tion of any institution, he may sometimes recognize
endangered. When all the papers connected with a
where procedure could be simplified to advantage.
particular mortgage are not filed together, an adeThis is particularly true if he has previously analyzed
quate check is difficult and sometimes impossible.
the operations of many similar institutions.
The mortgage loan papers are the physical evidence
The examiners of the Federal Home Loan Bank
of the principal security of the savings and loan assoBoard as well as State examiners of building and loan
ciation. I t is through them that most operations
associations are particuevolve.
Consequently,
larly fortunate in this
it is logical that the imrespect. In the course
portant papers connected
of a year, each examiner
with
each mortgage loan
A model mortgage loan docket in use by many
savings and loan associations helps to reduce
studies the books of many
should be filed together,
the time and cost of examination and at the
d o z e n s of associations
as a single unit, and
same time simplifies the daily operations of the
and consequently forms
should preferably be fastassociation using it. The flat folder type filed
opinions as to what seem
ened in some way so that
numerically is widely favored, but most importo him the best practices
no papers may be lost.
tant is the development of a uniform system,
consistently followed.
for s a v i n g s and loan
A model mortgage loan
operation.
docket and filing system
should permit a facile
Best practices from the
technique in handling
examining point of view
documents which in addition to facilitating examinawill quite naturally be those which simplify the
tion would reflect on office routine. I t should provide
business of examination, and consequently reduce its
security for documents and a fair assurance that all
cost, but to be valid they should first of all simplify
necessary transactions in connection with a loan are
the daily business of running a savings and loan assocarried to completion. Further, it should be simple
ciation. If the practices suggested by examiners
in operation and adaptable to the needs of the small
satisfy both these points of view, they should certainassociation as well as the large one.
ly be of interest to savings and loan managers.
The fact that expert opinion is generally agreed
The examiner's viewpoint is foreshortened and inas to the best type of mortgage loan docket indicates
tensified as he must do in a few days the work
that each association need not invent a system for its
which an operator may spread out over an entire
own use. A sensible model has already been worked
year. A procedure which will make the examiner's
out.
task easier will usually save time and effort for the
manager and his assistants as well.
T Y P E OF D O C K E T
Because examiners must study the mortgage loan
There are two general alternatives to the separate
papers of a savings and loan association, the method
filing of mortgage instruments, the jacket or pocket
used in filing those papers is an important determitype and the flat folder. The former requires that
nant of the cost of examination and is frequently
papers be folded or rolled and tied together with a
mentioned as an item tending to raise that cost. I t
cord, the latter that they be filed flat.
is also one which vitally affects the efficiency of operaOf the two, the flat folder of legal size is generally
tion of the association. Further, when no definite
April 1938
237
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REMARKS
DATE
238
Federal Home Loan Bank Keview
considered best because it holds all papers without
folding, except, perhaps, bulky abstracts which
should be filed separately but uniformly in vaults or
other filing space available. With the flat folder,
waiving consideration of the method of fastening the
papers, immediate access may be had to the pertinent
information regarding any mortgage loan. Nothing
needs to be untied or unfolded. Every item is accessible. The dockets may be kept in order in fireproof filing equipment.
The flat type of mortgage loan docket, because of
its simplicity, may be adapted to the needs of any
association, small or large. Also, it is flexible
enough to handle any type of mortgage loan from an
uncomplicated purchase loan to a construction loan
with its paid bills, invoices, lien releases, and other
papers.
The illustration on the facing page is of a flat
folder loan docket supplied for the use of savings
and loan associations by the American Savings and
Loan Institute. In this folder the documents are
clipped to the heavy pressboard cover, and are
separated by clearly marked tabs. Any flat binder
of this type would be satisfactory as long as it is
clearly marked to indicate its contents.
Note that one of the most conspicuous parts of
the folder is the check list or inventory on the first
flap. This permits a record of papers which are
removed from the docket. Some managers, as a
further precaution, insert slips in the place of absent
documents. Note also that the first flap has a place
for the name of the borrower, his address, the type
of property, original amount of the loan, the appraised value of the property, the date of the loan,
and the loan number. Such information might be
even more convenient if placed on the outside of the
docket. However, all such matters will depend on
personal preferences.
A criticism of the flat folder type with the permanent clip at the top is that it does not permit the
easy handling of documents before the loan is closed,
but most such folders have an auxiliary pocket either
at the front or back in which papers may be kept
temporarily until the preliminary business is completed. Then the documents are clipped in, and the
docket filed with the other dockets in its proper
place.
P A P E R S F I L E D IN MORTGAGE LOAN D O C K E T
The purpose of a mortgage loan docket is to provide a place where all papers which support a loan
may be conveniently and safely kept. I t is a place
239
April 1938
53048—38
for pertinent papers, actual documents necessary for
the transaction of the association's business. Consequently, secondary papers such as letters and
memoranda should, in general, be kept out. The
most important factor, however, is that a uniform
system be followed. The documents filed in one
loan docket should be filed in the same order as those
in every other.
Although the papers which should be included depend in general upon the legal requirements under
which the institution is operating, certain of them
have a logical place in the docket. Variations in
needs will certainly exist within the individual institution, but these variations are really compromises
with the easiest and most logical system. For example, some small associations or associations without fireproof equipment may feel that such important
documents as abstracts and mortgages and notes
should be kept in vaults to insure their safety, even
though it would be more convenient to keep all
papers in one place.
From the point of view that the loan docket is a
history of each loan, the first paper which should be
included would be the application which has a logical
place in the docket as it summarizes much preliminary information which may later be of value.
If the association requires a credit report, this
would be the second item. However, many associations in small towns cannot get credit reports nor
do they find them vital in developing the applicant's
history. Such reports assume a much greater importance in large cities where the personnel of the
lending institution do not know many applicants
personally.
The third item would then be the appraisal
report. I n addition, some associations may find it
important to have a property survey made. If this
is done, an engineer's blue print should be included
as evidence that the property lines are correct as
stated in the appraisal.
The next major group of papers which should be
in the docket are those connected with proof oj title.
Kegardless of the regulations under which the association operates, all the important papers in this
group should be included. The title, Torrens certificate, abstract, title insurance policy, attorney's
preliminary and final opinion, each should be included if used.
The sixth group of items in the docket would be
the mortgage or deed of trust and note. These will
have to comply with the regulations under which
(Continued on p. 264)
2
Place of the Budget in Business Management
EXPERIENCE of both manufacturing industries and financial institutions shows that
the budget is steadily becoming an essential instrument of business management.
This introductory article discusses the progress they have made to date and the
results obtained in the development and use of budgets.
The second and third
articles in this series will discuss budgets which have been developed for use by
savings and loan associations.
•
R E C E N T L Y growing interest in the development of adequate budgets for savings and loan
associations shows that the budget, as an instrument
of business management and control, is now definitely emerging from its trial period of experimental
development. Savings and loan associations and
other home-financing institutions are beginning to
experiment with budgetary controls. Many of them
in the past have not formally established budgets
but they have set goals to be attained in a given
year. They have anticipated the return which they
expected from their mortgage loans and from their
real estate during the following 6 or 12 months.
They have attempted to estimate their probable
expenses and to make rough approximations of income and outgo. They have compared their
estimates with actual results.
I n attempting to set up a more formal budget the
difficulty has always been that there have been few
experience records of budgetary control for savings
and loan associations. For that reason, many
associations have been hesitant to attempt to perfect
budgets of their own or have questioned the value
of such controls to them. The experience of other
businesses in manufacturing industries and finance
with budgetary control shows that the budget today
in business management is flexible enough to be of
value to any home-financing institution. Financial
institutions such as commercial banks have proved
that a budget and cost system is of as practical use
to financial institutions as it is to a manufacturing
plant.
T H E G E N E R A L T H E O R Y UNDERLYING A L L BUDGET
PRACTICE
The budget as an active aid to business management is still young. I t was not until after 1900 t h a t
240
governmental and institutional budgets came into
common use in the United States. I t is true that
the early years of the twentieth century found business men experimenting with budgets, especially in
their advertising and sales-development programs,
but it was only in the years following the World
War that the great expansion of budgetary control in
business occurred.
The early history of the use of budgets in business
management in this country is marked by a process
of trial and error development. M a n y businesses
attempting a budget for the first time made the
fundamental mistake of beheving t h a t budgetary
control could replace active management. They
found that the budget is not, and never could be, a
substitute for management, but is rather a tool
which management can use in the more efficient
operation of its particular business. Other businesses confused budgeting with accounting. The
distinction may be drawn that budgeting seeks to
lock the stable door before the horse is stolen, while
accounting merely reports whether the horse has
been stolen or not. I t is for this reason t h a t budgeting is sometimes called "accounting in advance".
Business finds that the main value of a budget is
in securing better internal control. A well-organized budget system provides a number of essentials
to managerial control: (1) I t establishes a definite
goal for a business and for every individual in that
business to attain; (2) I t compels management to
study its costs, its production, its methods and its
services; (3) I t prevents waste in t h a t it regulates
the spending of money for a definite purpose in
accordance with appropriations established by executives. Kesponsibility for such expenditures is definitely assigned; (4) I t places the responsibility for
each operation in the business squarely upon an
Federal Home Loan Bank Review
individual; (5) I t enables management to use cost
data for purposes of control rather than simply as
historical information; (6) I t acts as a measuring
stick to compare actual performances with promises
and with standards. As a guide by which to measure costs, operating efficiency, standards of performance and other major factors entering into business operation, it indicates not only what may be
done, b u t what should be done; (7) I t enables management to make comparisons which are in themselves safety signals for management. They provide
an authentic check on the judgment of executives.
An adequate budget is really a chart by which to
steer the business sea. I t has the advantage that
it can be undertaken by degrees according to the
facilities available. When we speak of budgeting
we should be careful to distinguish several important
steps in the process. The budget itself may consist
simply of assembling information which will affect
operations during a stated ensuing period. True
control, however, will mean applying this information
in order to forecast trends and to formulate a program which is actually employed currently in order
to measure operations.
Executives who have had years of experience with
budgeting readily admit that there are major limitations. I n the first place, a budget must be based on
estimates. Again, any plan which is formulated will
not be automatically executed. I n other words, the
budget can never replace management and administration. A further limitation is that a budget cannot
be immediately perfected. I t has to be instituted by
degrees and shaped to the needs of the particular
business in the light of actual experience.
BUDGETS IN MANUFACTURING INDUSTRIES
During the summer of 1930, the National Industrial Conference Board made a survey of 294 manufacturing companies representing from one to nine
companies in each of 76 industrial groups. Fiftyfive percent of these companies reported that they
were using budgets and there was a practically unanimous verdict that budgetary control was more than
justifying its use. Only four companies reported
unfavorably or were noncommittal.
The survey showed, however, that the development of budgetary control in these manufacturing
companies had occurred in a hit or miss fashion. I t
was notable that among those making the greatest
progress in budgeting were those in which trade
associations had been active advocates of budgetary
practices.
April 1938
The experience in these industries was, irrespective
of the size of the companies, that at the end of the
first year, to the extent that a budget plan was in
operation, it showed whether it were properly designed, whether it were on a sound basis, and whether
it had the support of the managing personnel. At
the end of the second year, the budget showed
financial results justifying time and expense required.
The experience of these reporting manufacturing
companies was further that at the end of the third
and succeeding years such budgetary control showed
results commensurate with, if not actually exceeding,
the original expectations of management.
In manufacturing, the sales budget is the first to
be established in a system of budgetary control so
that it would be natural to look here for the most
favorable results. In actual practice, one company
forecasted its sales quarterly for four quarters in
advance during 1926 through 1929 within an average
of 1.26 percent of actual sales.
Other companies reported that they were able to
budget satisfactorily more than a year in advance.
The American Telephone and Telegraph Company,
for example, has made outstanding use of long-term
budgeting by studying currently all trends affecting
the type, quantity, and location of telephone facilities in the future, such as a shift in industries, as of
cotton manufacturing from New England to the
South, or the redistribution of urban populations in
metropolitan areas. They base their plans on such
studies and translate their plans into terms of costs
and revenues. On the basis of these data, each company prepares an annual budget of expected results,
in detail for one year, and in less detail for several
succeeding years.
E X P E R I E N C E OF FINANCIAL INSTITUTIONS W I T H
BUDGETARY CONTROLS
For some time it was felt that although budgets
could be used extensively in manufacturing industries
where the sales budget was of disproportionate importance, financial institutions did not have this
justification. However, recent years have seen vast
strides in the use of budgetary controls by such
financial institutions as commercial banks.
To
them, a mere statement of estimated income and
expense is no budget in the full sense of the word.
The banks have found that a good cost system must
form the basis of adequate budgetary control in
their operations. Many commercial banks have
developed a cost system which results in the proper
{Continued on page 2^7)
241
A New Source of Investment Funds For Federals
4. Shares or accounts of Federal savings and
OF special interest to Federal savings and loan
loan associations.
associations is the recent amendment to the
Surplus funds means all funds over and above the
Federal Credit Union Act of June 26,1934, authorizamount of the cash reserve, equal to 5 percent of the
ing such Federal credit unions to invest their funds
paid-in capital, maintained at all times to meet
in the share accounts of Federal savings and loan
possible withdrawals.
associations.
Prior to the enactment of these last two provisions,
These credit unions are cooperative associations
the only long-term investment open to Federal credit
organized for the purpose of encouraging thrift
unions was U. S. Government bonds, which, although
among their members and of creating a source of
assuring safety, paid a comparatively small rate of
credit for provident or productive purposes. Memreturn on money invested. Not only are investbership is not open to the general public. The Act
ments in Federal savings and loan associations
limits membership in Federal credit unions to persons
assured of safety but they are currently yielding a
having a common bond of association or occupation,
larger return and are free from market fluctuations.
or to groups within a well-defined neighborhood or
Federal savings and loan associations will be benecommunity. However, by far the largest number
fited by the new set-up as it means an additional
of credit unions serve employee groups.
source of funds for them. From the point of view
Although credit unions chartered by the States
of the community, through investments in local
and the District of Columbia have been in existence
Federal savings and
since 1909, when the
loan associations money
State of Massachusetts
might be retained in the
passed the first law
FEDERAL credit unions may now invest their
community that otherauthorizing the organifunds in the share accounts of Federal savings
wise might be invested
zation of such instituand loan associations. This article discusses
elsewhere. However, the
tions, it was not until
Federal credit unions, their number, assets,
association m a n a g e r
1934 that credit unions
membership, and geographical location. State
Credit Union League managing directors from
should stress to the inwere granted Federal
whom more detailed information may be
vesting credit union the
c h a r t e r s . Comparison
obtained are listed.
importance to the assoshows that State and
c i a t i o n of long-term
Federal credit unions
money, since the funds
are similar. T h i s is
which the association receives are invested almost
not surprising since the law of 1909 is used as
entirely in long-term mortgage loans. Furtherthe basic principle of both types. Whereas Fedmore, it is unfair to the association to incur the
eral credit unions are all alike in their basic pattern
administrative expenses incidental to both investof operation, each State credit union may be slightly
ment and repurchase unless it is to realize some
different, depending on the individual State law
profit through the use of these funds over a
governing such credit unions.
period of years.
With the new amendment in force, a Federal credit
union is given the power to invest its surplus funds in:
Naturally a credit union may experience at certain
1. Loans to members;
periods of the year heavy seasonal demands for
2. Obligations of the United States of America,
funds. However, it can be explained to a prospective
or in securities fully guaranteed thereby as
investing credit union that on such occasions there
to both principal and interest;
is no necessity for the repurchase of its funds in3. Loans to other credit unions in the total
vested in the Federal savings and loan association
amount not exceeding 25 per centum of its
since its share account may be pledged to the assopaid-in and unimpaired capital and surplus,
ciation as security for a loan or may be hypothein accordance with rules and regulations
cated to a reputable local bank for the same
prescribed by the Governor (of the Farm
purpose.
Credit Administration);
Although resources of the average Federal credit
•
242
Federal Home Loan Bank Review
union approximate $8,200, of which $500 to $1,000
could be invested in the shares of Federal savings and
loan associations, depending on the extent to which
funds are needed for loans to members, the assets of
Federal credit unions vary from a few dollars in a
newly organized credit union to about $400,000 in
the largest. However, the older and larger Federal
credit unions will have a greater percentage of
assets available for investments other than in loans
to members.
As will be seen from the accompanying table, in
September 1937 there were approximately 2,300
Federal credit unions located in all 48 States, Hawaii,
and the District of Columbia. This number had
grown to 2,500 by the end of the year—an increase
of about 50 new organizations a month—with assets
of $20,000,000 and a membership of 500,000. Loans
in the aggregate of $50,000,000 had been made to
members throughout the country. Of this amount
less than one-twenty-fifth of 1 percent had been
charged off against the reserve for bad loans.
A large number of Federal savings and loan associations have written to the Farm Credit Administration requesting the names of Federal credit
unions in their respective States. Associations desiring this or other information regarding Federal
and other credit unions are asked to direct inquiries
to the managing director of their State Credit
Union League. For the convenience of association
managers, the names and addresses of all 39 State
League managing directors are listed below.
Alabama Credit Union League,
Clyde C. Parker, Managing Director,
1242 Brown-Marx Building,
Birmingham, Alabama.
Arizona Credit Union League,
William Oldewage, Managing Director,
20 East Second Street,
Tucson, Arizona.
California Credit Union League,
John L. Moore, Managing & National Director,
1307 Harrison Street,
Oakland, California.
Colorado Credit Union League,
Frank L. Hays, Managing Director,
City Hall,
Denver, Colorado.
Connecticut Credit Union League,
Leonard R. Nixon, Managing Director,
46 Hillcrest Avenue,
New Britain, Connecticut.
District of Columbia Credit Union League,
A. W. Thomas, Managing Director,
606 District National Bank Building,
1406 G Street, Northwest,
Washington, D. C.
Florida Credit Union League,
George Gross, Managing & National Director,
Box 149,
Tallahassee, Florida.
April 1938
Georgia Credit Union League,
Moses C. Davis, National & Managing Director,
Box 2044,
Atlanta, Georgia.
Hawaii Credit Union League,
B. M. Johnson, Managing Director,
Box 15,
Honolulu, Hawaii.
Idaho Credit Union League,
George J. Keller, Managing & National Director,
Post Office,
Idaho Falls, Idaho.
Illinois Credit Union League,
Joseph S. Deramus, Managing & National Director,
Room 627,
332 South LaSalle Street,
Chicago, Illinois.
Indiana Credit Union League,
G. A. Millett, Managing Director,
926 North Pennsylvania Street,
Indianapolis, Indiana.
Iowa Credit Union League,
A. Neal Hutchins, Managing & National Director,
510 Securities Building,
Des Moines, Iowa.
Kansas Credit Union League,
G. E. Minturn, Managing Director,
Route No. 1,
Arkansas City, Kansas.
Kentucky Credit Union League,
Garfield Seibert, Managing & National Director,
Federal Building,
Louisville, Kentucky.
Louisiana Credit Union League,
C. F. Wikel, Jr., Managing Director,
Palic Federal Credit Union,
Whitney Building,
New Orleans, Louisiana.
Maine Credit Union League,
Boris Blumenthal, Managing Director,
223 Post Office Building,
Portland, Maine.
Maryland Credit Union League,
James D. M. Marquette, Managing & National Director,
222 Post Office Building,
Baltimore, Maryland.
Massachusetts Cuna Association, Inc.,
Richard L. Courtenay, Managing Director,
5 Park Square,
Boston, Massachusetts.
Michigan Credit Union League,
Karl W. Guenther, Managing Director,
19181 Centralia,
Redford Station,
Detroit, Michigan.
Minnesota Credit Union League,
V. S. Petersen, Managing Director,
Office 6,
1945 University Avenue,
St. Paul, Minnesota.
Missouri Mutual Credit League,
B. F. Hillebrandt, Managing & National Director,
1330 Baltimore Street,
Kansas City, Missouri.
Mississippi Credit Union League,
P. P. McGee, Managing Director,
1618 Twenty-fifth Avenue,
Meridian, Mississippi.
Nebraska Credit Union League,
Lee A. Borders, Managing & National Director,
1408 Woodmen of the World Building,
Omaha, Nebraska.
New Jersey Credit Union League,
Henry Strieker, Jr., Managing & National Director,
1129 Bergen Street,
Newark, New Jersey.
24a
Rhode Island Credit Union League,
Amos L. Lachapelle, Managing Director,
301 Main Street,
Pawtucket, Rhode Island.
South Carolina Credit Union League,
J. Gorman Thomas, Managing Director,
Post Office Building,
Charleston, South Carolina.
Tennessee Credit Union League,
I. A. Martin, Managing & National Director,
Box 763,
Knoxville, Tennessee.
Texas Credit Union League,
G. W. Elder, Managing & National Director,
122 Federal Building,
Houston, Texas.
Utah State Credit Union League,
Karl S. Little, Managing Director,
1064 Lincoln Street,
Salt Lake City, Utah.
Washington Credit Union League,
Paul A. Boberg, Managing Director,
U. S. Post Office,
Spokane, Washington.
Wisconsin Credit Union League,
Joseph Kuemmel, Managing Director,
259 East WeUs Street,
Milwaukee, Wisconsin.
New York State Credit Union League, Inc.,
Sidney Stahl, Managing Director,
55 West Forty-second Street,
New York, New York.
North Carolina Credit Union League,
H. N. Sturdivant, Managing & National Director,
208 North Caldwell Street,
Charlotte, North Carolina.
North Dakota Credit Union League,
E. W. Wolfe, Managing Director,
U. S. Post Office,
Fargo, North Dakota.
Ohio Credit Union League,
Louise McCarren, Managing Director,
519 Main Street,
Cincinnati, Ohio.
Oklahoma Credit Union League,
Haney Hoskins, Managing Director,
c/o Armour & Company,
Oklahoma City, Oklahoma.
Oregon Credit Union League,
Hugh G. Stout, Managing & National Director,
Third Floor, Studio Building,
Portland, Oregon.
Pennsylvania Credit Union League,
Julia D. Connor, Managing Director,
312 Kline Building,
Harrisburg, Pennsylvania.
Number of Federal credit unions, by States
Number
of charters
granted
Sept. 30,
1937
Number
in operation
Sept. 30,
1937
Alabama
Arizona
Arkansas
California
Colorado
10
10
14
163
17
10
9
13
157
17
Montana
Nebraska
Nevada
New Hampshire.
New Jersey
13
19
3
2
111
13
18
3
2
108
Connecticut
Delaware
District of Columbia
Florida
Georgia
116
10
74
88
27
110
10
72
82
26
New Mexico
New York
North Carolina .
North Dakota. _
Ohio
10
280
28
32
128
10
264
23
29
122
Hawaii
Idaho
Illinois
Indiana
Iowa
56
21
45
93
3
56
21
45
91
3
Oklahoma
Oregon
Pennsylvania
Rhode Island
South Carolina..
20
27
272
12
24
20
26
264
11
21
Kansas
Kentucky
Louisiana
Maine
Maryland
13
4
53
21
16
13
4
51
21
16
South Dakota. _
Tennessee
Texas
Utah
Vermont
14
51
157
22
4
13
48
146
20
3
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
57
53
10
10
19
52
52
10
9
18
Virginia
Washington
West Virginia. _.
Wisconsin
Wyoming
49
32
27
1
15
44
31
23
1
13
2,356
2,244
State
State
Total
244
Number
of charters
granted
Sept. 30,
1937
Number
in operation
Sept. 30,
1937
Federal Home Loan Bank Review
Home Financing
in Relation to Business Fluctuations
wages shown in its two charts over the period of the
" I N C O M E is the determining factor in the
last
seven to nine years.
demand for housing. I t fluctuates with the
business cycle . . . Kentals and vacancies, purT H E BUILDING CYCLE IN CHICAGO
chases and refinancing, are elements caught in the
A study of the building permits during the years
resulting vortex."
1913
to 1936 showed that three distinct periods were
This is the conclusion reached by Dr. John H.
evident—normal
years (1913-1920), the frenzied
Cover, Professor of Business Statistics at the Unidecade
(1921-1929)
and the famine years (1930versity of Chicago, in a survey of the Seventh Fed1936).
The
nature
of
the building cycle in Chicago
eral Home Loan Bank District. His study deals
can
be
indicated
by
four
significant observations.
with the trend of wages, of construction and real
estate activities, and of
First, the amplitude and
mortgage foreclosures in
t h e v i o l e n c e of t h e
Illinois and Wisconsin
changes in the construcThe relationships of wages, occupancy, foreclosduring the past two critition cycle were notable.
ures and construction in Chicago during the past
cal decades.
The total average buildtwo critical decades are significant indicators of
ing permit values in the
A special committee of
the cyclical movements of residential construction
second period were over
the directors of the Fedand real estate in general. The chart, which
three times as great as in
eral Home Loan Bank of
presents graphically the building cycle in Chithe first period of "norChicago, in cooperation
cago, 1919-1937, is of particular interest to
mal years" and over 12
with Professor Cover,
home-financing institutions. It shows that occutimes as great as in the
prepared a synopsis and
pancy declined, foreclosures increased, but
"famine years."
analysis of his report. 1
building permit values remained at peak levels
Second, the value of
The c o m m i t t e e subfor several more years in Chicago during the
residential building permitted this synopsis, em"frenzied decade".
mits dropped from an
phasizing the fact that
annual average of 190
there was no liability or
million dollars in the peofficial recommendation
riod 1926-1929 down to an average of 6 million
on the part of the Bank, but with the conviction
dollars in the famine years—a shrinkage of almost
that the data obtained on the cyclical movements of
97 percent.
residential construction and real estate in general deserve very careful study on the part of home-financing
Third, as the income of the wage earners fell during
institutions, because these cycles constantly recur.
this depression, construction also dropped, but to a
far greater extent, until residential construction
INCOME AND KESIDENTIAL CONSTRUCTION
almost disappeared in 1932-1933. In 1933 permits
were issued for only $546,000 of residential building,
A significant part of this analysis is the emphasis
exclusive of additions, alterations, and repairs in
placed upon the rise and fall in average weekly earnChicago, in contrast to a total of over $242,000,000
ings per worker in industries in seven important
in 1926.
cities of Illinois and Wisconsin. To a very large
The fourth significant point which Professor Cover
proportion of our city population, income means
makes is that there has been only the slightest revival
wages. The committee found that practically every
of the construction industry in Chicago in 1934, 1935,
one of its charts relating to the volume of residential
and 1936. No type of building had, up to the end of
building, to occupancy, and to foreclosures could be
1936, made any appreciable approach to the normal
related more or less directly to the fall and rise of
volume of 1913-1920, with total construction in 1936
1
A limited number of copies of the printed summary of the
being only one-fifth of the average for those years.
report are available for general distribution. Requests
The practical disappearance of construction was true
should be directed to the Federal Home Loan Bank of Chiboth of 1-family dwellings and of all residential units.
cago, 7 South Dearborn Street, Chicago, Illinois.
•
April 1938
245
Wages
T H E FRENZIED DECADE IN KETROSPECT
Professor Cover suggests a number of interesting
points for discussion, including the generalization
that construction is more influenced by the alternative rent level than by changes in construction costs.
He makes a very significant comparison between
occupancy, which he regards as the index of effective
demand, and wages. High occupancy, he says, keeps
step with high employment, and he finds the following relationship between the trend of wages in Chicago and the trend of occupancy:
Occupancy
October-November 1931
100
December 1932, January 1933 85
Decrease
84
76
15 (or 15%)
8 (or 10%)
Many home-financing institutions will regard as
highly significant the fact that the boom of the "frenzied decade" in Chicago began in 1921 when there was
an average occupancy of 99.4 percent. The accompanying chart is equally significant, for it shows that
the percentage of occupancy started to go down as
early as 1923 and by the end of 1926 had assumed a
THE BUILDING CYCLE IN CHICAGO: 1919-1937
OCCUPANCY DECLINES; FORECLOSURES INCREASE;
BUT,BUILDING PERMIT VALUES REMAIN AT PEAK LEVELS FOR SEVERAL YEARS
100
y
95
35
$$ too
«*
RESIDENTIAL OCCUPANCY
as
O)
^12 — —
SS
M) - —
ui
o
a,
60
80
FORECLOSURES
20
10
BUILDING PERMIT VALUES
40
300
o
o
u.
O
200
<o
z
o
3
5 100
r
5
z
w
o
200
r"***
_^MM
1919
1920
1921
246
1922
1923
1924
1925
192.6
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
Federal Home Loan Bank Eeview
well-defined trend. Moreover, foreclosures as early
as 1926 had begun to show a significant rise.
Nevertheless, although as early as 1926 there were
data available on the decline in the percentage of
occupancy and the increase in mortgage foreclosures,
which should have indicated the necessity for caution
to lenders of real estate money, the chart shows that
apparently the warning went unheeded. Building
construction in Chicago in 1927 and 1928 was almost
on a par with the peak year of 1926.
SIGNIFICANCE OF THIS STUDY TO ALL
INSTITUTIONS
LENDING
Professor Cover's study and the analysis by the
committee of the Chicago Bank should provoke a
good deal of discussion and thought among the
institutions which are lending funds today upon real
estate security. Professor Cover stresses the fact,
and his analysis bears him out, that mortgage lending
demands a very high degree of managerial talent
both to analyze the trends and to be guided by that
analysis rather than by popular activities. During
the frenzied decade in Chicago, "Everybody is
building, so why shouldn't we?" was the watchword.
Even though the trends were already apparent
which indicated a possible collapse of the building
boom, heavy financing continued during the closing
years of this decade.
Professor Cover concluded his analysis with a
number of suggestions as to policies. Two of the
most interesting suggestions are: (1) "Encourage the
construction of dwellings and emphasize mortgage
loans upon construction at once since production
costs are advancing rapidly and may reach very high
levels by 1939"; (2) "Be relatively more liberal in
financing the small compact dwelling, even in the
suburbs". Professor Cover also sees the financing
of multiple units and of large-scale housing projects
for rental purposes as a healthy development when
regarded as an investment rather than as a speculative venture. In his opinion, this field is in need of a
"building and loan approach."
The Place of the Budget
(Continued from p. 241)
distribution of expenses by departments or by operating functions, or in a similar segregation of gross
income.
A number of commercial banks in this country have
developed extensive accounting systems which are
used as the basis for the budgetary controls which
they employ. A New York bank finds not only that
it knows fairly well in advance what its expenses are
going to be under a budget system, but also finds that
a definite incentive is given to department heads to
keep expenses within estimates. A Boston bank
reported that its actual expenses have been consistently less than conservative budget estimates due to
better internal control. Another bank, by the development and refinement of its budgetary control
over a period of years, can now check actual figures of
department estimates covering every item of expense
so closely that the discrepancies of the actual figures
from the estimate is seldom greater than 1 percent,
and often runs as low as one-tenth of 1 percent.
The essential principles of budgeting for banks are
simply forecasting of income, forecasting of expense,
and a comparison of the estimated and the actual
results. The banks which have followed these p r e -
BUDGETS FOR SAVINGS AND LOAN ASSOCIATIONS
Many savings and loan associations, although not
in a position to require the more elaborate cost
accounting techniques developed by commercial
banks, are anxious to build increasingly accurate forecasts of income and expense, and to use these estimates for comparison with actual results as a means
of effective business control. The second and third
articles in this series will discuss budgets which have
been developed for the use of savings and loan associations, and the specific steps which can be taken to
make effective budgeting possible.
247
April 1938
63048—38
ciples, and have endeavored to perfect them as instruments of operating control, find in general that at
least three major results are obtained: (1) Tests for
advertising expenditures are developed and a definite
program formulated for the New Business department; (2) Further analysis of the profitable character
of accounts is promoted; (3) Ratios of expenses are
established in greater detail. Operating costs and
profits become not matters of historical record but
definite means for improving the operation of the
bank.
3
RESIDENTIAL CONSTRUCTION and HOME-FINANCING ACTIVITY
manufacturing employment and payrolls presaged a
possible spring upturn in business activity by increasing slightly and ending the drastic declines of the
previous six months.
Factors which were less favorable but which give
little indication of an unfavorable spring trend are a
slight falling off of rent levels and a decline for the
second consecutive month in Federal Home Loan
Bank advances outstanding.
Of considerable interest in connection with this
apparent improvement is the response of financing
agencies to the National Housing Act Amendments.
The Federal Housing Administration reports a record
•
THE factors which are analyzed each month in
the REVIEW indicate a favorable trend of residential building and financing in January and
February. The volume of residential construction
and mortgage lending by savings and loan associations
both increased between the two months. The adjusted construction index reveals a 3-month nationwide increase which was previously obscured by the
unusual conditions in New York City, while the
volume of savings and loan lending turned upward
for the first time since June 1937. Also favorable
was a decline in the volume of foreclosures, and in
wholesale building material prices. The indexes of
BUILDING
RESIDENTIAL
ACTIVITY
AND
SELECTED
INFLUENCING
FACTORS
1926 = 100
600 i
]
1
1
j
600
500
1 1
400
/
300
U
500
V
400
1 ^I
300
^FORECLOSURES'
200
200
_..---;
100
90
80
70
60
/
RENTALS1
^HOUSING
BUILDING
MATERIAL PRICES'
\J
K^z
!^i v ...^..." "*-»—
_
J
W^tJ
—,.«•'
J
'
J
100
90
80
70
60
50
^JVUwn»uv=r
-L-^-p.**— — v
St.
— 1 X...as4--* r ' 1—==
l .. p*"-"*'
= 4 - ^ L,•-..."./
l
r-r-^V-
=F=\
"*•.
X
I
^ ^ • J - . »
j ^ > . n __|
50
J
40
1
1
1
MANUF ACTURi NO PAi 'ROLLi
\y.
UJ
*
30
V/
—Jfi
1
20
20
V^
\ \> \> i //
10
i
RE SIDEN
r
IAL
C 7NSTR< tCTION 3
J
10
9
8
7
6
5
4
s/SY ~
7
6
5
4
-
3
2
\ J .I.I..L J . L U . . L J.IJJ-L-
i
D
J
1929
O
11111
J
1930
O
t M 11
M i l l
J
1931
O
Mill
Mill
J
D
1932
i i i t i
J
t i I i I
O
1933
Mill
J
II 1 I I 1 1 1 1 M
1 ill
O
1934
Source:- I. Federal Home Loan Bank Board (County Reports)
2. U. S. Dept. of Labor (Converted to 1926 Base)
3. Federal Home Loan Bank Board (U. S. Dept. of Labor Records)
248
J
D
1935
1 1 1 1 11III
ii i i i
J
J
O
1936
Mill
D
1937
Mill
Mill
J
O
1938
Includes correction for New York City because
of irregular conditions arising from inception
of new building code.
Federal Home Loan Bank Eeview
volume of activity during the week ending March 5.
This response may be some indication of a trend
during the coming year.
For both December and January enough building
permits were issued in New York City alone to throw
the country totals completely out of line. This increase did not represent an improvement in building
activity but was due to a new building code going into
effect and a rush of applicants to come under the old
code. The large volume of permits issued during
these two months will probably be represented by
building during the entire year. Consequently, New
York City has been eliminated from the index of residential construction in the chart on page 248 and
from the total rate of building chart on page 251.
Because of the effect of New York City, Table 1
shows a decrease from 29,017 dwelling units in January to 8,495 in February. Eliminate New York and
the totals are: January—6,231; February—8,173.
This 22-percent increase compares very favorably
with a normal seasonal increase of 8 percent. That
it was nation-wide is shown by the fact that 35 States
and the District of Columbia participated. Further,
in 15 States the February volume was above that of
February last year. The total cost of all the dwellings built in February was $29,145,700.
ESTIMATED
Manufacturing employment was at an index of 101
last August—the 1926 yearly average being equal to
100. Following that high point, it declined until in
January 1938 it stood at 81.1—a drop of nearly 20
percent. The upturn in February was only fourtenths of 1 percent, but it does suggest a break in
the decline.
[1926=100]
Residential construction»
Foreclosures (metro, cities)
Rental market (N. £. C. B.)—Building material prices
Manufacturing employment
Manufacturing pay rolls
Average wage per employee
Feb.
1938
Jan.
1938
8 29.7
157.0
86.7
91.1
81.4
70.9
87.1
2 24.4
170.0
87.0
91.8
81.1
69.0
85.1
Percent
change
+21.7
-7.6
-0.3
-0.8
+0.4
+2.8
+2.4
Feb.
1937
Percent
change
41.6
196.0
81.7
93.3
97.7
92.4
94.6
-28.6
-19.9
+6.1
-2.4
-16.7
-23.3
-7.9
* Corrected for normal seasonal variations.
a Includes a correction for New York City because of irregular conditions arising from inception of new building code.
Factory pay rolls also reached a peak in August
1937 of 100.1—slightly less than employment—and
then declined through January to 69.0. However, in
February pay rolls increased 1.9 points or 2.8 percent.
This correspondingly greater increase is reflected in
an increase in the average wages paid during the
month.
NUMBER AND COST OF FAMILY DWELLING UNITS
IN ALL CITIES OF 10.000 OR MORE POPULATION
PROVIDED
(Source: Federal Home Loan Bank Board. Compiled from residential building permits reported to U. S. Dept. of Labor)
NUMBER OF UNITS PROVIDED
COST OF UNITS PROVIDED
30,
30
28
28
26
26
100
100
90
24
24
22h
1 1938
1 I7
20
n
90
1
80
\*
i
22
I 938
y
/ !
80
70 J!
20
18
18
1* \7
x
60
/937
16
16
50
14
14
12
12
10
10
6
4
J
T
+**
**
2
April 1938
i 93/-< 5 AV6.
1
30
A93Z-35 AV6.
8
/
6
6
X
N
J
™K
1 *
4
10
•
•
/
*--
—
T
60
o
*
50
°
«• I
30
VI
>
3D
20
N
10
2
249
The index of real estate foreclosures in metropolitan
communities for February was 157 as compared with
170 for the previous month. This index is also based
on 1926 as equal to 100. The decrease between these
two months of slightly more than 7 percent, was below the 6-year average January to February drop of
10.1 percent. However, the index is below the 1928
average index and is less than half the index for
February in 1933, 1934, and 1935. It is 20 percent
less than the February 1937 index of 196. For the
first two months of 1938, the index shows foreclosures
to be 21.8 percent less than for the corresponding
period of last year.
Of the 82 communities reporting in February,
36 showed increases in foreclosures from January, 44
indicated decreases, and 2 indicated no change. The
rises and recessions were generally scattered throughout the country.
Wholesale building material prices have been declining since last May according to the Department
of Labor index. However, as Table 8 shows, all
types of materials have not participated in this
decline. Cement and structural steel have remained
stationary during that period—the former at an index
of 95.5 and the latter at 114.9. Other materials have
declined generally so that the average stood in
February at 91.1 percent of the 1926 base of 100.
Between January and February the decline
amounted to 0.8 percent, four of the seven groups of
materials reported declines and three remained the
same. Besides cement and structural steel, plumbing
and heating materials remained stationary at 79.6.
RATE OF BUILDING
The estimated number of family dwelling units
provided per 100,000 population declined in 3 Federal Home Loan Bank Districts and increased in 9
Districts between January and February. The greatest increase was in the Winston-Salem District which
rose from 22 units per 100,000 population to 35 units,
continuing the increase from the December level of
16 units.
There were no very drastic changes in the rate
between January and February except in the New
York District which dropped from 170 units to 7
units, as a result of the large volume of advance
applications for building permits in January to avoid
the new building code in New York City.
Because of this distorted condition the United
States average excluding New York City is shown as
a dotted line for the last three reporting months.
It reveals a reversal of the total trend; there was a
decline in the rate of building during December and
January from 25 to 10 units and an increase in February to 14 units.
Indexes of
Small-House Building Costs
[Table S]
•
BETWEEN December 1937 and March 1938
the cost of building the same standard house declined more than 1 percent in 14 of the 27 reporting
cities and increased more than 1 percent in only 2
cities. In the remaining 11 cities, the changes were
less than 1 percent. This is a continuation of the
falling off in costs which started in the fall of 1937.
The principal cause of the decline was material prices.
The greatest decline between September and
March was reported from Milwaukee, Wisconsin,
where the cost dropped 5.8 percent to $6,351.
Second was Hartford, Connecticut, with a 3.8-percent decrease to $5,869. In Columbia, South Carolina, a city where costs have been consistently low,
a decline of 2.4 percent was reported. The cubicfoot cost in this city went below 20 cents for the first
time since March of 1937.
Tampa, Florida, and Salisbury, North Carolina,
are the only two cities reporting increases in costs.
It is significant that in both these cities the total cost
has in the past been low. The increase of 2 percent
in Tampa brought the total cost to $5,731, and in
Salisbury a 1.3-percent increase raised the total to
$4,608—still the lowest total cost in any of the reporting cities.
Of this group of 27 reporting cities, Springfield and
Chicago, Illinois report the highest total cost, but
costs dropped 2.8 percent in Chicago, making Springfield the highest cost city in this group.
NOTE FOR CHART ON FACING PAGE:
A new building code in New York City, effective January 1938, caused an unusual spurt of applications for permits which
threw the United States total out of balance. The dotted line shows that total excluding New York City for the last three
reporting months.
250
Federal Home Loan Bank Review
RATE OF RESIDENTIAL BUILDING IN ALL CITIES OF 10,000 OR MORE POPULATION
REPRESENTS THE ESTIMATED^ NUMBER OF PRIVATELY FINANCED FAMILY DWELLING UNITS PROVIDED PER 100,000 POPULATION
Source: Federal Home Loan Bank Board.
IS9.6*
— 1
DISTRICT I
BOSTON
Compiled from Building Permits reported to U S Department of Labor.
FEDERAL HOME LOAN BANK
1
|
DISTRICTS
DISTRICT 2
NEW YORK
DISTRICT 3
PITTSBURGH
DISTRICT 4
WINSTON SALEM
U-/«*
Ki
HP
5^/938-
—1
^asi-ssAVA
i—1
1931-35 AY6.-)
0
AIM. SCR OCT NO* OCR
I. F E a M A H . A P f t M A T J U N . J U L . A U f c S E e O C T N O V . O E f i
tisnsn
OCT NOV DEC.
JAN. FE» MAR APR MAY .JUN. JUL. A0«. SEP OCT NOV. K C
I MAY JUN. JUL AUG. SEP OCT NOV OEC
80
UNITED STATES AVERAGE
1930-1938
W
rZ
. p-l
,
JU r k^,
nL
^
%
j
f
J
EXCLUDING M£W YORK C / n \ f c |
set not* on facing page
J
i 1, i i ,t mi t i
I-I
April 1938
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251
Monthly Lending Activity of
Savings and Loan Associations
[Tables 4, 5, 6, and 7]
•
ALL types of savings and loan associations
loaned 5.2 percent more during February than
during January. That is the first time that an increase has been reported between any two consecutive months since the peak was reached in June 1937.
The $43,290,000 loaned in February was, however,
11.8 percent below the volume for February 1937.
An increase in volume of loans made in February
over January was reported by savings and loan associations during both 1936 and 1937 indicating that
the trend this year may be due to a seasonal upturn.
Loans for home purchase made up 80 percent of the
total increase, amounting to $13,632,000 during
February which was 31.5 percent of total loans made.
Other types of loans changed slightly. Construction
and refinancing loans were down; reconditioning and
other purpose loans were up. Whereas 26.2 percent
of total lending in January was for new construction,
24.6 percent was for this purpose in February. Refinancing loans amounted to 23.0 percent, reconditioning loans to 6.9 percent, and loans for other purposes to 14.0 percent.
Estimated savings and loan lending in February
was higher than in January in 8 of the 12 Federal
Home Loan Bank Districts and was higher than
in February 1937 in 3 Districts. The greatest increase over January was in the Des Moines District.
All savings and loan associations in that North Central area loaned $2,704,000 in February. The second
greatest January-February increase was in the Indianapolis District, the third greatest in the Cincinnati
District, and the fourth in the Little Rock District.
State-chartered members of the Federal Home
Loan Bank System made 45 percent of total loans
made in February by all savings and loan associations. Federal savings and loan associations made
41 percent and nonmembers made 14 percent.
Federal Savings and Loan Insurance
Corporation
HOME CONSTRUCTION LOANS MADE BY ALL SAVINGS AND LOAN
ASSOCIATIONS COMPARED WITH HOME BUILDING ACTIVITY
MILLIONS
OF OOLLARS
J F M A M J J A S 0 N 0
1936
(/)
Estimated -cost of all I and 2 family dwellings privately financed in all
cities of 2,500 or more population. Based on building permits reported
to U. S. Dept. of Labor.
0
Estimated for all active associations by Federal Home Loon Bonk Board.
252
[Tables 9 and 10]
•
FOR the first month since April 1937 identical
insured State-chartered associations reported
that the volume of mortgage loans made during the
month showed an increase over the preceding month's
total. This is particularly significant in view of the
upward trend shown during February for identical
Federal savings and loan associations and indicates
that increased activity in the field of home building
and purchase is likely to become more pronounced
during the spring months. Four hundred and fourteen insured State-chartered savings and loan associations reported an 11-percent increase in the
amount of mortgage loans made during February in
comparison with the total amount advanced during
January.
Changes in the proportion of the total amount
loaned are also significant during February. For
this month these identical associations reported that
new construction loans amounted to 26 percent of
the total as compared with 23.9 percent in January.
Home purchase loans increased from 30.7 percent
to 33.4 percent, while loans for refinancing decreased
from 22.1 percent in January to 19.3 percent in
February.
The number of private share accounts and the
amount paid in on private subscriptions remained
Federal Home Loan Bank Review
almost unchanged during February in these associations. Private share investments amounted to a
little less than one-half of the January total and were
slightly exceeded by repurchases.
There was a net increase of 21 in the number of
insured savings and loan associations during February as a result of the insurance of 16 State-chartered
associations and of 5 converted Federal savings and
loan associations. As of February 28, 1938, there
were 1,924 institutions insured by the Federal Savings and Loan Insurance Corporation.
Federal Savings and Loan System
[Table 11]
•
IN February, identical reporting Federal savings
and loan associations advanced 2.9 percent more
on the security of mortgages than during January.
This is the first increase between any two consecutive
months since June 1937. The 1,250 Federals reported $16,971,100 loaned for all purposes in February as against $16,501,100 in January.
The principal purpose for which loans were made
was new construction, but it is interesting that this
was the only category in which there was a decline
between the two months—amounting to 1.8 percent.
New construction loans in February were 31.1 percent
of the total amount made. Loans for the purchase
of homes amounted to 27.7 percent; while refinancing
loans were 24.8 percent; reconditioning loans, 6.5
percent; and loans for other purposes, 9.8 percent.
Compared with the seasonal January flurry of
investments and repurchases, a considerable slowing
down of activity was reported for February. But
the decline was uniform, so investments remained
about 70 percent above repurchases Consequently,
the number of private share accounts increased 1.9
Progress in number and assets of Federal savings
and loan associations
Number
New.
Converted
Approximate assets
Jan.
31,
1938
Feb.
28,
1938
Jan. 31, 1938
Feb. 28, 1938
645
687
645
689
$270, 674, 572
856, 489, 655
$270, 674, 572
862, 341, 073
Total. . 1,332 1,334 1, 127, 164, 227 1, 133, 015, 645
April 1938
percent to a total of 927,362, or an average of 740 for
the 1,250 Federal associations. H. O. L. C. share
investments were practically at a standstill, indicating that present mortgage lending is being financed
almost entirely with private funds.
With share investments increasing steadily, there
was a decline in borrowed money outstanding at the
end of the two reporting months. Advances outstanding from the Federal Home Loan Banks declined 2.9 percent to $90,907,900, and money borrowed from other sources declined 12.0 percent to
$1,744,500.
The assets of associations reporting for December
and January decreased slightly while the assets of
those reporting for January and February made
slight increases. At the end of February they
amounted to $1,098,823,000.
During February three State-chartered savings
and loan associations were converted to the Federal
charter, and two converted Federals were merged.
No new Federals were chartered. On February 28
there were 645 new Federal associations, and 689
converted associations. Together they had $1,133,015,645 in assets.
Federal Home Loan Bank System
[Tables 12 and 18]
•
FOR the second consecutive month, repayments
exceeded new advances made during the
month, which resulted in a net reduction of advances
outstanding by $3,020,000, leaving a balance of
$187,518,000 in advances outstanding as of February 28. Advances made during the first two
months of 1938 were less than they were for the
first two months of either 1936 or 1937, while repayments during the same period exceeded those for
any two months since the beginning of operations.
During February, seven Banks made new advances
in amounts exceeding their new advances during
January. This is in sharp contrast to the reports
for the preceding month, for no Bank during the
month of January made advances which even approached closely its December total.
The New York, Indianapolis, and Chicago Banks
showed slight increases in advances outstanding in
comparison with January 31, while the remaining
Banks reported reductions ranging from 0.3 percent
in the Pittsburgh Bank to 5.5 percent in the case of
Portland.
(Continued on p. 265)
253
Table 7.—Number and estimated cost of new family dwelling units provided in all cities of 10,000
population or over in the United States 1
Source: Federal Home Loan Bank Board.
Compiled from residential building permits reported to U. S. Department of Labor]
Total cost of units (thousands of dollars)
Number of family units provided
JanuaryFebruary
totals
Monthly totals
Feb- Janu- February ary ruary
1938 1938 1937
1-family dwellings
2-family dwellings
Joint home and business 2
3- and more-family dwellings.
Total residential
Private housing.
Public housing 3_
1938
1937
January-February
totals
Monthly totals
February
1938
January
1938
5,785 6, 255 7, 300[ 12, 040 13, 884 $21, 935. 8 $22,
594 1, 110
788 1,704 1, 458 1, 490. 5 2,
501
42|
92
170
182. 9|
83
2, 066 21, 6101 6, 985 23, 676 9, 8701 5, 536. 5 69,
February
1937
1938
1937
701. 9 $32, 453. 8 $44, 637. 7 $61,
579. 71 2, 141. 5 4, 070. 2 3,
119. 6
339. 9
302. 5
975. 5 23, 397. 5 75, 512. 0 31,
432. 9
746. 8
645.7
716. 9
8, 495 29, 017 15, 156 37, 512 25, 382 29, 145. 7 95, 376. 7 58, 332. 7 124, 522. 4 97, 542. 3
8, 495 29, 017 15, 148 37, 512 25, 343 29, 145. 7 95, 376. 7 58, 319. 7 124, 522. 4 97, 416. 7
13.0
0.0
39
0.0
0.0
125.6
0
0
0
1
Estimate is based on reports from communities having approximately 95 percent of the population of all cities with population 2of 10,000 or over.
Includes 1- and 2-family dwellings with business property attached.
1
Includes only Government-financed low-cost housing project units reported by U. S. Department of Labor.
Table 2.—Number and estimated cost of new family dwelling units provided in all cities of 10,000
population or over, in February 1938, by Federal Home Loan Bank Districts and by States
[Source: Federal Home Loan Bank Board. Compiled from residential building permits reported to U. S. Department of Labor]
[Amounts are shown in thousands of dollars]
All 1- and 2-family dwellings
All residential dwellings
Federal Home Loan Bank Districts
and States
Number of family
dwelling units
Estimated cost
February February February
1938
1937
1938
UNITED STATES
No. 1—Boston
___
8,495
Number of family
dwelling units
Estimated cost
February February February February
1938
1937
1937
1938
15, 156 $29, 145. 7 $58, 332. 7
6,429
February
1937
8,171 $23, 609. 2
$34, 935. 2
406
459
1, 701. 7
2, 510. 8
322
443
1, 499. 7
2, 448. 7
95
6
255
29
21
0
118
9
255
15
47
15
465.8
22. 1
1, 069. 1
56.5
88.2
0.0
705.0
37.7
1, 470. 2
44.8
180.2
72.9
92
6
192
11
21
0
114
9
252
15
47
6
457.8
22. 1
899. 1
32.5
88.2
0.0
694. 0
37. 7
1, 457. 2
44. 8
180. 2
34. 8
960
6,614
3, 838. 6
24, 224. 0
487
904
2, 340. 6
4, 189. 7
137
823
233
6,381
690.4
3, 148. 2
1, 260. 0
22, 964. 0
137
350
167
737
690.4
1, 650. 2
1, 079. 0
3, 110. 7
No. 3—Pittsburgh
323
542
1, 755. 9
3, 074. 0
297
522
1, 687. 7
3, 042. 0
Delaware
Pennsylvania
West Virginia
2
271
50
33
443
66
36.8
1, 543. 0
176. 1
150.8
2, 661. 7
261.5
2
253
42
33
439
50
36.8
1, 493. 8
157. 1
150. 8
2, 653. 7
237. 5
Connecticut
Maine
Massachusetts
New Hampshire
Rhode Island-_
Vermont-_ __
No. 2—New York
New Jersey
New York
254
Federal Home Loan Bank Review
Table 2.—Number and estimated cost of new family dwelling units provided in all cities of 10,000
population or over, in February 1938, by Federal Home Loan Bank Districts and by States—Contd.
[Amounts are shown in thousands of dollars]
All residential dwellings
Federal Home Loan Bank
and States
Districts
Number of family
dwelling units
Estimated cost
February February February
1938
1937
1938
N o . 4—Winston-Salem
Alabama
District of Columbia
Florida
Georgia
Maryland
North Carolina
South Carolina
Virginia
1, 792
92
252
378
115
489
200
69
197
__
All 1- and 2- family dwellings
1, 963
78
629
423
152
159
242
108
172
$5, 416.
182.
965.
1, 227.
269.
1, 417.
500.
141.
713.
Number of family
dwelling units
Estimated cost
February February February February
1938
1937
1938
1937
February
1937
1, 105
85
80
351
105
101
174
69
140
1, 338
73
158
374
152
155
200
97
129
$3, 671. 3
163.8
525.0
1, 171. 0
250.9
417.5
465.6
141.0
536.5
2, 377. 0
85.6
2, 009. 9 1
281.5
333
94
162
77
441
18
308
115
1, 411. 0
295.5
904.2
211.3
2, 070.
66.
1, 727.
276.
8 $6, 311. 2
5
156. 9
2, 251. 1
0
1, 311. 6
5
416. 4
4
575. 0
6
658. 7
8
279. 3
0
662. 2
0 j
$4, 692. 2
147.9
978. 1
1, 190. 7
416.4
565.0
593. 8
255. 3
545.0
No. 5—Cincinnati
Kentucky
Ohio
Tennessee
397
98
212 |
87
529
25
385
119
1, 605.
303.
1, 072.
229.
N o . 6—Indianapolis
Indiana
361
79
282
577
76
501
1, 663. 6
282. 2
1, 381. 4
3, 293. 9
320. 9
2, 973. 0
357
75
282 !
564
76
488
1, 656. 6
275.2
1, 381. 4
3, 239. 9
320. 9
2, 919. 0
N o . 7—Chicago
Illinois
Wisconsin
191
121
70
254
176
78
1,100. 0
735.0
365.0
1, 751. 6
1, 329. 2
422.4
187
117
70
227
149
78
1, 093. 3
728.3
365.0
1, 651. 7
1, 229. 3
422.4
308
65
104
127
2
10
260
21
62
165
3
9
1, 077. 0
216.8
445.7
394.7
3. 1
16.7
1, 184. 0
146. 1
282.5
727.9
7.3
20.2
264
47
95
110
2
10
244
21
62
149
3
9
955. 1
163.8
409.7
361.8
3.1
16.7
1, 150.
146.
282.
694.
7.
20.
5
1
5
4
3
2
1,381
53
130
53
43
1,102
1,208
34
137
133
44
860
3, 414. 1
77.3
366.0
84. 1
125.9
2, 760. 8
3, 509. 3
78.7
428.0
271. 6
98.3
2, 632. 7
1,197
46
130
49
39
933
1,132
34
125
123
44
806
2, 754. 8
66.3
366.0
73. 7
114.9
2, 133. 9
3, 321.
78.
392.
248.
98.
2, 503.
3
7
0
8
3
5
275
51
84
14
126
409
84
76
39
210
956. 1
170.5
211. 1
74.7
499.8
1, 431. 9
320.0
285.8
139.5
686.6
249
40
69
14
126
374
68
72
39
195
913.2
156. 1
182.6
74.7
499.8
1, 377.
295.
275.
139.
667.
8
0
8
5
5
299
10
4
76
29
150
30
311
9
9
89
75
119
10
851. 1
20.0
16.2
285.2
70.0
381.3
78.4
1, 005. 3
29.2
17.7
381.9
153.7
386.3
36.5
234
10
4
69
25
120
6
249
9
9
89
35
97
10
707. 1
20.0
16.2
270.2
66.0
306. 3 1
28.4 |
957.
29.
17.
381.
128.
363.
36.
1
2
7
9
0
8
5
1, 802
2,030
5, 765. 8
32
33
87.3
1, 768 j 1,991
5, 666. 4
2
12. 1
6 i
7, 659. 7
110.3
7, 476. 8
72.6
1,397
29
1, 366
4, 918. 8
1,733
25 1
82.5 1
1,702
4, 824. 2 1
12. 1
6
6, 793.
100.
6, 620.
72.
8
3
9
6
__
N o . 8—Des Moines
Iowa
Minnesota
Missouri
North Dakota
South Dakota
No. 9—Little Rock
Arkansas
Louisiana
Mississippi
N e w Mexico
Texas
__
__
__
No. 11—Portland-.Idaho
Montana
Oregon
__
Utah
Washington
Wyoming
No. 12—Los Angeles.
Arizona __ __ _
California
Nevada
__
__
__
N o . 10—Topeka
Colorado
Kansas
Nebraska
Oklahoma
April 1938
_ __
_ _ _
_
1
_
_
0
5
2
3
1
2
5
6
8
1
255
Table 3.—Cost of building the same standard house in representative cities in specific months 1
NOTE.—These figures are subject to correction.
[Source: Federal Home Loan Bank Board]
Total building cost
Cubic-foot cost
1938
March
No. 1—Boston:
Connecticut:
Hartford
New HavenMaine:
Portland
Massachusetts:
Boston
New Hampshire:
ManchesterRhode Island:
Providence-_
Vermont:
Rutland
No. 4—Winston-Salem:
Alabama:
Birmingham
District of Columbia:
Washington
Florida:
Tampa
West Palm BeachGeorgia:
Atlanta
Maryland:
Baltimore
Cumberland
North Carolina:
Asheville
Raleigh
Salisbury
South Carolina:
Columbia
Virginia:
Richmond
Roanoke
No. 7—Chicago:
Illinois:
Chicago
Peoria
Springfield
Wisconsin:
Milwaukee
Oshkosh__No. 10—Topeka:
Colorado:
Denver
Nebraska:
Omaha
Oklahoma:
Oklahoma City.
1937
March
1936
March
1937
1938
March
1936
March
Dec.
Sept.
June
March
$0. 245
.242
$0. 255
.242
.235
,230
$5, 869
5,819
$6, 101
5,857
$6, 355
5,933
$6, 365
5,933
$6, 132
5,804
$5, 647
5,509
.234
.219
.214
5,606
5,756
5,792
5,702
5,252
5,124
.268
.266
.241
6,433
6,625
6,636
6,639
6,384
5,780
.227
.235
.226
5,440
5,611
5,814
5,784
5,641
5,416
.250
.240
.228
5,991
6,000
5,929
5,927
5,768
5,478
.238
.237
.222
5,709
5,808
5,810
5,756
5,685
5,329
.217
6,089
6,089
6,089
6,077
.254
5,210
.260
246
.205
6,232
6,286
6,286
6,234
5,907
4,918
.239
.259
234
264
.224
.245
5,731
6,226
5,621
6,360
5,728
6,405
5,716
6,411
5,619
6,346
.220
218
.202
5,282
5,359
5,570
5,410
5,228
5,379
5,889
4,854
.214
.233
225
236
. 184
.226
5,142
5,603
5,211
5,643
5,428
5,696
5,409
5,743
5,399
5,670
4,427
5,419
.227
.226
. 192
227
, 199
.211
5,446
5,433
4,608
5,449
5,534
4,551
5,656
4,855
4,968
5,580
4,746
5,443
4,778
5,070
. 199
195
193
4,769
4,884
4,883
4,874
4,682
4,634
.220
.233
217
221
207
190
5,277
5,592
5,393
5,639
5,223
5,228
5,248
5,391
5, 207
5,292
4,964
4,566
.293
.280
.294
295
274
289
273
259
271
7,021
6,724
7,056
7,226
6,723
7,178
6,825
7,260
6,817
6,992
7,081
6,566
6,931
6,555
6,212
6,502
.265
.251
275
232
224
229
6,351
6,033
6,740
6,020
6,728
6, 138
6,668
6,072
6,589
5,576
5,386
5,502
.273
260
,254
6,562
6,625
6,762
6,712
6,250
6,098
.243
247
,233
5,830
5,965
6,101
5,954
5,936
5,582
.244
237
,220
5,850
5,850
5,838
5,823
5,693
5,282
i The house on which costs are reported is a detached 6-room home of 24,000 cubic feet volume. Living room, dining room, kitchen, and lavatory onfirstfloor;
bedrooms and bath on second floor. Exterior is wide-board siding with brick and stucco as features of design. Best quality materials and workmanship are used
throughout.
The house is not completed ready for occupancy. It includes all fundamental structural elements, an attached 1-car garage, an unfinished cellar, an unfinished attic,
afireplace,essential heating, plumbing, and electric wiring equipment, and complete insulation. It does not include wall-paper nor other wall nor ceilingfinishon
interior plastered surface, lightingfixtures,refrigerators, water heaters, ranges, screens, weather stripping, nor window shades.
Reported costs include, in addition to material and labor costs, compensation insurance, an allowance for contractor's overhead and transportation of materials,
plus 10 percent for builder's profit.
Reported costs do not include the cost of land nor of surveying the land, the cost of planting the lot, nor of providing walks and driveways; they do not include
architect's fee, cost of building permit,financingcharges, nor sales costs.
Infiguringcosts, current prices on the same building materials list are obtained every 3 months from the same dealers, and current wage rates are obtained from
the same reputable contractors and operative builders.
256
Federal Home Loan Bank Eeview
Table 4.—Estimated volume of new loans by all savings and loan associations, classified according
to purpose
[Thousands of dollars]
Mortgage loans on homes
Month
January
February
January
February
March
April
May
June
July
August
September
October
November
December
January
February
Construction
1936
1937
Home purchase
Reconditioning
Refinancing
Loans for
all other
purposes
Total loans,
all purposes
$155, 463
7,089
7,027
209, 851
11, 884
13, 084
18, 251
22, 098
20, 600
21, 628
20, 283
19, 342
17, 942
17, 114
14, 582
13, 043
$188, 637
9,298
9,680
267, 509
14, 510
16, 629
22, 007
27, 381
28, 831
28, 696
24, 934
23, 172
24, 277
22, 494
18, 227
16, 351
$152, 067
10, 265
10, 845
161, 393
10, 643
11,405
15, 502
15,811
15, 113
15, 905
14, 668
14, 382
12, 919
12, 695
11,000
11,350
$50, 618
2,691
3,229
49, 435
2,583
2,667
3,915
4,949
4,862
5,069
4,472
4,339
4,691
4,527
4,076
3,285
$80, 838
5,995
5,686
76, 301
4,794
5,298
6,501
7,261
7,016
7,369
6,317
6,026
6,582
6,791
5,885
6,461
$627, 623
35, 338
36, 467
764, 489
44, 414
49, 083
66, 176
77, 500
76, 422
78, 667
70, 674
67, 261
66,411
63, 621
53, 770
50, 490
10, 796
10, 628
11, 904
13, 632
10, 057
9,964
2,745
2,989
5,640
6,077
41, 142
43, 290
1938
Table 5.—Estimated volume of new loans by all savings and loan associations, classified according to
type of association
[Amounts are shown in thousands of dollars]
Volume of loans
Month
Total
January
February
January
February
March
April
May
June
July
August
September
October
November
December
Federal
1936.
$627, 623
35, 338
36, 467
$228, 896
11, 764
12, 105
1937.
764, 489
44, 414
49, 083
66, 176
77, 500
76, 422
78, 667
70, 674
67, 261
66,411
63, 621
53, 770
50, 490
307, 278
17, 543
19, 360
27, 829
32, 915
30, 998
31, 577
28, 693
26, 768
26,189
24, 539
20, 829
20, 038
41, 142
43, 290
16, 781
17, 520
Percent of total
State
members
$275, 972
16, 436
15, 206
338,
18,
21,
28,
33,
34,
35,
31,
29,
29,
29,
24,
21,
174
671
509
325
153
616
221
799
866
673
020
524
797
Nonmembers
Federal
State
members
Nonmembers
$122, 755
7, 138
9, 156
36
33
33
44
47
42
20
20
25
119, 037
8,200
8,214
10, 022
11,432
10, 808
11, 869
10, 182
10, 627
10, 549
10, 062
8,417
8,655
40
39
39
42
42
41
40
41
40
39
38
39
40
44
42
44
43
43
45
45
45
44
45
46
46
43
16
19
17
15
15
14
15
16
14
16
16
15
17
41
41
43
45
16
14
1938
January
February
April 1938
17, 885
19, 600
6,476
6,170
257
Table 6.—Estimated volume of new lending activity of savings and loan associations, classified by
District and type of association
[Amounts are shown in thousands of dollars]
New loans
Federal Home Loan Bank District and type of
association
February
1938
United States: Total
Federal
State member
Nonmember
District
1: Total.
Federal
State member
Nonmember
District
2: Total
Federal
State member
Nonmember
District
District
District
District
_ __.
_
3: Total
Federal
State member
Nonmember
- ___
_ __ -
4: Total
Federal
State member
Nonmember
__. ___ _._
-
5: Total
Federal
State member
Nonmember
6: Total.
Federal
State member
Nonmember.
__ __
_.
_
__
__
--
..
_
_-
__ _
.
January
1938
Percent increase, Feb.
1938 over
Jan. 1938
New loans,
February
1937
Percent increase, Feb.
1938 over
Feb. 1937
$43, 290
17, 520
19, 600
6,170
$41, 142
16, 781
17, 885
6,476
+5
+4
+ 10
-5
$49, 083
19, 360
21, 509
8,214
— 12
— 10
—9
—25
3,969
1,128
2,001
840
3,986
1,164
1,939
883
0
-3
+3
-5
4,360
1,087
1,871
1,402
-9
+4
+7
-40
3,110
1,142
894
1,074
3,447
1,007
1, 141
1,299
-10
+ 13
-22
-17
3,612
1,254
996
1,362
— 14
—9
— 10
— 21
2,501
822
881
798
2,836
731
1,127
978
-12
+ 12
-22
-18
2,188
595
852
741
+ 14
+ 38
+ 3
+8
6,316
2,365
2,993
958
6,271
2,394
2,971
906
6,360
2,468
2,695
1,197
—1
—4
+ 11
— 20
6,086
3,147
2,806
133
5,232
2,808
2,272
152
+1
-1
+ 1
+6
+ 16
+ 12
+ 24
-13
9,018
3,555
4,977
486
-33
— 11
— 44
-73
2,450
1,192
1,083
175
2,083
962
915
206
+ 18
+ 24
+ 18
-15
2,895
1,359
1,248
288
-15
-12
— 13
-39
District
7: Total
Federal
State member.
Nonmember
__ _
3,833
1,531
2, 117
185
3,696
1,400
2,012
284
+4
+9
+5
-35
4,895
1,859
2,620
416
— 22
-18
-19
— 56
District
8: Total
Federal
State member
Nonmember
2,704
1,060
942
702
2,175
971
719
485
+ 24
+9
+ 31
+ 45
2,412
1,106
730
576
+ 12
-4
+ 29
+ 22
3,299
1,244
1,821
234
2,873
1,230
1,496
147
+ 15
+ 1
+ 22
+ 59
3,174
1,232
1,606
336
+4
+1
+ 13
—30
2,904
1,185
973
746
2,663
1,267
638
758
+9
-6
+ 53
-2
3,044
1,126
825
1,093
-5
+5
+ 18
—32
_ __
1,732
927
610
195
1,804
992
512
300
-4
-7
+ 19
-35
2,375
1,477
752
146
-27
-37
— 19
+ 34
-
4,386
1,777
2,479
130
4,076
1,855
2,143
78
+ 8
-4
+ 16
+ 67
4,750
2,242
2,337
171
-8
-21
+6
-24
District
.
_ _.
9: Total
Federal
State member
Nonmember
District 10: Total
Federal.
State member.
Nonmember.
District 11: Total
Federal
State member
Nonmember
District 12: Total
Federal __ _ _
State member
Nonmember
258
___
_.
Federal Home Loan Bank Review
Table 7.—Monthly lending activity and total assets as reported by 2,702 savings and loan associations
in February 1938
[Source: Monthly reports from savings and loan associations to the Federal Home Loan Bank Board]
[Amounts are shown in thousands of dollars]
N u m b e r of
associations
L o a n s m a d e i n F e b r u a r y according t o p u r p o s e
M o r t g a g e loans o n 1- t o 4-family n o n f a r m h o m e s
Federal Home Loan Bank
Districts a n d States
ReSubportmiting
ting
reports loans
made
Construction
Home purchase1
Refinancing a n d reconditioning 2
Federal
State member_._
Nonmember
__
N o . 1—Boston
Connecticut
Maine
Massachusetts
New Hampshire..
Rhode Island
Vermont
T o t a l loans,
all p u r p o s e s
Amount
Num- Amount Num- Amount Number
ber
ber
U N I T E D STATES
L o a n s for all
other purposes
RefiRecondinancing tioning
Num- Amount Number
ber
Total
number
T o t a l assets, s a vof
ings
F e b . 28,
and
1938 3
loan
associations *
Amount
2,702
2,198
2,862 $8,559.9
4,122 $9,719.2
5,428 $7,613.7 $2,103.5
1,255
1,058
389
1,119
862
217
1,739
1,004
119
5,342.5
2,924.1
293.3
2,010
1,804
308
4,763.3
4,319.2
636.7
2,943
2,107
378
4,227.9
3,043.9
341.9
1,111.2
802.3
190.0
1,268
1,556
302
1,678.7
2,136.9
314.6
7,960
6,471
1,107
17,123.6
13,226.4
1,776.5
1,109,048.5
1,390,596.0
307,136.8
1,330
2,567
5,866
170
142
151
621.1
319
1,002.7
391
528.2
171.6
245
268.8
1,106
2, 592.4
317,291.9
366
27
24
94
11
8
6
22
21
80
9
6
4
30
4
90
6
17
4
116.3
4.8
394.0
24.4
70.1
11.5
15
18
214
18
45
9
45.7
35.6
716.3
36.3
137.9
30.9
40
37
242
29
30
13
99.1
30.7
321.2
20.8
47.3
9.1
8.8
8.7
137.7
5.0
4.1
7.3
11
32
132
33
26
11
18.2
36.8
138.6
34.3
35.2
5.7
96
91
678
86
118
37
288.1
116.6
1,707.8
120.8
294.6
64.5
19,099.0
13,316.6
239,332.2
11,550.9
29,663. 2
4,330.0
53
42
218
30
9
14
3,126 $4,130.2 15,538 $32,126. 5 $2,806,781.3
9,763
276
162
182
665.4
216
633.8
259
458.6
186.3
137
142.5
794
2,086.6
372,915.1
1,786
N e w Jersey
N e w York
142
134
58
104
9
173
24.4
641.0
44
172
121.8
512.0
47
212
84.5
374.1
20.3
166.0
37
100
14.8
127.7
137
657
265.8
1,820.8
133,333.2
239,581.9
1,498
288
N o . 3.-—Pittsburgh
225
135
72
200.0
188
447.3
177
301.1
57.7
65
134.2
502
1,140.3
102,680.3
2,521
Delaware
Pennsylvania
West Virginia.
5
195
25
2
111
22
0
41
31
0.0
148.0
52.0
11
153
24
36.3
362.3
48.7
0
132
45
0.0
230.6
70.5
0.0
44.0
13.7
10
48
7
11.8
112.9
9.5
21
374
107
48.1
897.8
194.4
4,049.0
84,552.2
14,079.1
43
2,410
68
298
263
468
1,294.9
431
1,106.6
746
1,269.4
214.3
420
832.4
2,065
4,717. 5
257,670.9
1,044
17
13
46
48
58
46
39
31
17
13
42
43
44
44
33
27
12
38
93
50
21
97
102
55
13.6
202.8
346.7
96.3
65.5
195.0
204.0
171.0
11
35
34
63
130
73
34
51
15.1
150.6
121.5
106.1
386.5
133.1
74.9
118.7
29
160
82
114
45
138
78
100
21.1
598.5
106.8
100.2
68.6
149.3
87.2
137.7
9.0
18.0
34.8
41.6
10.9
39.0
26.0
35.0
10
116
47
49
25
102
39
32
9.2
368.8
102.5
47.8
44.8
147.4
70.8
41.1
62
349
256
276
221
410
253
238
68.0
1,338. 7
712.3
392.0
576.3
663.8
462.9
503.5
6,235.9
95,491. 4
30,073.0
16,797.0
37,053.0
31,700.3
16,096.6
24,223. 7
42
28
101
63
450
189
79
92
N o . 5—Cincinnati
387
330
373
1,270.6
738
1,923.5
933
1,187. 7
355.1
537
564.8
2,581
5,301. 7
550,362.3
973
Kentucky
Ohio
Tennessee
58
292
37
47
249
34
45
258
70
110.0
1,010. 7
149.9
110
602
26
270.5
1,612. 7
40.3
193
636
104
240.3
838.1
109.3
59.5
255.1
40.5
90
424
23
93.9
425.7
45.2
438
1,920
223
774.2
4,142. 3
385.2
58,179.4
474,085.6
18,097.3
185
732
56
201
178
142
379.7
537
914.7
517
429.1
179. 5
308
321.4
1,504
2, 224. 4
226, 529.1
379
143
58
130
48
87
55
203.4
176.3
478
59
777.8
136.9
430
87
294.9
134.2
156.5
23.0
230
78
220.8
100.6
1,225
279
1,653.4
571.0
133,105. 6
93,423. 5
304
75
266
212
128
371.4
286
743.8
507
866.9
226.0
256
347.1
1,177
2, 555. 2
224,851. 3
1,070
204
62
165
47
70
58
237.8
133.6
239
47
606.8
137.0
428
79
769.8
97.1
193.8
32.2
201
55
245.7
101.4
938
239
2,053. 9
501.3
175,007.4
49,843.9
863
207
187
157
104
322.8
203
427.7
381
546.6
120.2
173
194.2
861
1,611. 5
125,135.0
447
52
45
64
17
9
45
36
59
10
7
16
46
31
6
5
53.9
167.9
88.0
5.3
7.7
73
43
74
11
2
149.0
108.7
149.2
19.8
1.0
108
85
161
20
7
150.2
136.4
244.7
11.7
3.6
19.0
28.5
60.7
7.6
4.4
34
50
47
35
7
48.2
80.4
25.8
33.9
5.9
231
224
313
72
21
420.3
521.9
568.4
78.3
22.6
26,138. 2
35, 528. 3
52, 204. 2
8,606. 3
2,658.0
100
78
227
24
18
N o . 2—New Y o r k
'
N o . 4—Winston-Salem
Alabama
D i s t r i c t of C o l u m b i a
Florida
Georgia
Maryland
N o r t h Carolina
S o u t h Carolina
Virginia—
__
.._
N o . 6—Indianapolis
Indiana
Michigan
N o . 7—Chicago
Illinois
Wisconsin
N o . 8—Des M o i n e s
Iowa
Minnesota
Missouri
North Dakota
South Dakota
__ |
,
i Loans for home purchase include all those involving both a change of mortgagor and a new investment by the reporting institution on a property already built,
whether new or old.
2
Because many refinancing loans also involve reconditioning it has been found necessary to combine the number of such loans, though amounts are shown separately.
Amounts shown under refinancing include solely new money invested by each reporting institution and exclude chat part of all recast loans involving no additional
investment by the reporting institution.
*Assets are reported principally as of Feb. 28,1938.
,
* The number of member associations of the Federal Home Loan Bank System reported as of Feb. 28, 1938, and the number of nonmembers based upon the
most recent available data for 1936 or 1937, with adjustment for conversion through Feb. 28,1938, except for Maryland where the number of nonmembers is estimated.
April 1938
259
Table 7.—Monthly lending activity and total assets as reported by 2,702 savings and loan associations
in February 1938—Continued
[Amounts are shown in thousands of dollars]
Number of
associations
Loans made in February according to purpose
Mortgage loans on 1- to 4-family nonfarm homes
Federal Home Loan Bank
Districts and States
Construction
ReSub- portmiting
ting loans
reports made
Home purchase
Refinancing and reconditioning
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
_
Total
number
of
Total assets,
Feb. 28, savings
and
1938
loan
associations
Total loans,
all purposes
Amount
Num- Amount Num- Amount Number
ber
ber
No. 9—Little Rock
Loans for all
other purposes
Refi- Recondinancing tioning
Num- Amount Num- Amount
ber
ber
265
241
355
$877.3
482
$985.9
484
$502.2
$225.9
276
$400.0
1,597
$2,991.3
$169,431.2
409
38
71
28
12
116
37
69
25
10
100
31
89
23
8
204
58.0
235.5
29.3
14.2
540.3
38
180
24
6
234
53.0
369.3
41.7
12.4
509.5
60
142
59
11
212
54.4
122.7
55.6
12.8
256.7
19.7
124.5
16.3
3.5
61.9
60
83
18
12
103
55.7
175.4
28.6
16.4
123.9
189
494
124
37
753
240.8
1,027.4
171.5
59.3
1,492.3
10,912.7
83,808.5
5,149.0
3,788.3
65,772.7
66
89
60
22
182
186
158~
149~
424.2
342~
695.1
iiT
390.3
109.3
32T
381.0
1,153
1,999.9
143,417.0
373
32
72
35
47
28
60
25
46
20
47
25
57
45.6
129.6
64.8
184.2
55
96
49
142
108.6
165.3
85.5
335.7
57
105
64
115
91.4
102.4
51.3
145.2
6.9
29.2
27.4
45.8
29
101
75
116
36.4
96.2
82.1
166.3
161
349
213
430
288.9
522.7
311.1
877.2
19,230.4
42,480.3
31,245.3
60,461.0
62
152
90
69
114
101
175
360.6
140
255.7
263
368.0
91.5
175
228.9
753
1,304.7
92,525.7
176
14
9
28
7
69
13
0
29.9
28.9
44.6
16.6
112.9
23.8
0.0
13
16
62
12
152
8
0
5.6
6.6
151.5
18.7
172.6
13.0
0.0
9.3
5.6
17.2
5.5
53.0
0.9
0.0
8
19
28
8
103
9
0
11.7
30.0
38.7
14.5
125.6
8.4
0.0
48
69
167
36
399
34
0
78.2
110.2
360.9
84.9
617.8
52.7
0.0
5,661.1
8,724.0
23,418.5
8,166.4
42,638.0
4,018.7
0.0
13
21
36
20
71
14
1
240
582.5
429
765.6
166.1
213
314.9
1,445
3,601.0
223,971.5
219
0.0
560.7
3.0
18.8
7
418
0
4
8.0
749.5
0.0
8.1
2.0
162.0
0.0
2.1
6
203
0
4
9.2
302.0
0.0
3.7
24
1,404
1
16
46.0
3,504.1
3.0
47.9
2,040.4
219,130.2
616.3
2,184.6
4
198
6
12
8
13
24
8
51
10
0
8
10
23
6
45
9
0
13
25
49
9
75
4
0
21.7
39.1
108.9
30.6
153.7
6.6
0.0
127
119
563
1,771.9
3
120
1
3
3
112
1
3
11
549
0
3
26.8
1,729.9
0.0
15.2
0
234
1
5
Table 8.—Index of wholesale price of building materials in the United States
[1926=100]
[Source: U. S. Department of Labor]
January
February
March
April
May
June
July
August
September
October
November
December
January
February
1937
1938
Change:
Feb. 1938-Jan. 1937.
Feb. 1938-Feb. 1937
260
Paint and Plumbing Structural
paint maand
steel
terials
heating
All building materials
Brick and
tile
Cement
Lumber
91.3
93.3
95.9
96.7
97.2
96.9
96.7
96.3
96.2
95.4
93.7
92.5
89.7
91.0
91.8
94.9
95.0
95.0
95.4
95.5
95.0
93.4
92.9
92.0
95.5
95.5
95.5
95.5
95.5
95.5
95.5
95.5
95.5
95.5
95.5
95.5
93.0
99.0
102. 1
103.0
103.0
102.2
101.3
99.5
99.0
97.3
94.8
93.8
83.7
83.4
83.9
82.9
83.7
83.6
83.9
84. 1
84.6
84.2
81.5
80.2
77. 1
77.4
77.6
78.7
78.7
78.7
78.7
78.8
80.6
80.6
79.6
79.6
104.7
104.7
112.9
114.9
114 9
114.9
114 9
114 9
114 9
114.9
114 9
114 9
92.9
95.0
98.9
99.9
101.3
101.1
101.0
101.0
100.8
100.2
98.7
96.9
91.8
91.1
91.8
91.5
95.5
95.5
92.6
91.0
80. 1
79.2
79.6
79.6
114.9
114 9
95.8
95.3
0.0%
0.0%
-1.7%
-8.1%
-1.1%
-5.0%
0.0%
+ 9. 7%
- 0 . 5%
+0. 3%
-0. 8%
-2. 4%
- 0 . 2%
+ 0. 5%
0.0%
+ 2. 8%
Other
Federal Home Loan Bank Review
Table 9.—Institutions insured by the Federal Savings and Loan Insurance Corporation *
Cumulative number at specified dates
State-chartered associations
Converted F. S. and L. A
New F. S. and L. A
Total
_ ___
Number
of share
holders
Assets
Share and
creditor liabilities
Dec.
31,
1934
Dec.
31,
1935
Dec.
31,
1936
Dec.
31,
1937
Jan.
31,
1938
Feb.
28,
1938
Feb. 28,
1938
Feb. 28, 1938
Feb. 28, 1938
4
108
339
136
406
572
382
560
634
566
669
645
583
676
644
599
681
644
800, 810
718, 448
133, 319
$636, 963, 332
761, 800, 764
166, 979, 495
$553, 497, 351
697, 978, 087
155, 606, 438
451
1, 114
1,576
1,880
1,903
1,924 1, 652, 577 1, 565, 743, 591 1, 407, 081, 876
1
Beginning Dec. 31, 1936, figures on number of associations insured include only those associations which have remitted
premiums. Earlier figures include all associations approved by the Board for insurance.
Number of shareholders, assets, and share and creditor liabilities of insured associations are as of latest obtainable date
and will be brought up to date after June 30 and December 31 each year.
Table 10.—Monthly operations of 414 identical insured State-chartered savings and loan associations
reporting during January and February 1938
January
Share liability at end of month:
Private share accounts (number)
February
Change
January to
February
Percent
+0. 1
532, 141
532, 792
$387, 832, 500
30, 174, 000
$387, 754, 900
30, 214, 300
0)
418, 006, 500
417, 969, 200
0)
Private share investments during month
Repurchases during month
12, 805, 100
12, 391, 100
6, 193, 600
6, 293, 300
-51.6
-49.2
Mortgage loans made during month:
a. New construction. _ _ _ _
_
b. Purchase of homes
c. Refinancing
_ _
__
d. Reconditioning
e. Other purposes
__
1, 276, 500
1, 635, 900
1, 180, 300
435, 300
809, 000
1, 540, 100
1, 978, 600
1, 143, 700
389, 900
868, 900
+ 20. 7
+ 21,0
-3. 1
-10.4
+ 7.4
5, 337, 000
364, 379, 500
5, 921, 200
365, 769, 700
+ 11.0
+ 0.4
24, 663, 500
2, 291, 000
24, 212, 200
2, 167, 500
-1.8
-5.4
26, 954, 500
26, 379, 700
-2. 1
525, 543, 400
526, 919, 300
+ 0.3
Paid on private subscriptions
H. 0. L. C. subscriptions
Total--. _ .
_ _
_ _
__ _
_. _
_
__
Total
Mortgage loans outstanding end of month._
_
_
Borrowed money as of end of month:
From Federal Home Loan Banks
From other sourcesTotal
_
_
Total assets, end of month
1
_ __
+0. 1
Less than one-tenth of 1 percent change.
April 1938
261
Table 11.—Monthly
operations of 1,250 identical Federal savings and loan associations reporting
during January and February 1938
January
909, 917
927, 362
Percent
+ 1.9
$681, 690, 100
211, 400, 000
$688, 800, 700
211, 864, 500
+ 1.0
+ 0. 2
893, 090, 100
900, 665, 200
+ 0. 9
33, 631, 900
19, 618,100
17, 016, 000
10, 170, 500
-49. 4
-48. 2
5, 376, 700
4, 373, 200
4, 136, 700
1, 020, 800
1, 593, 700
5, 279, 900
4, 707, 300
4, 210, 200
1, 109, 300
1, 664, 400
-1.8
+ 7.6
+ 1. 8
+ 8.7
+ 4. 4
16, 501, 100
843, 626, 000
16, 971, 100
850, 993, 200
+ 2. 9
+ 0. 9
93, 571, 000
1, 981, 400
90, 907, 900
1, 744, 500
-2.9
— 12. 0
95, 552, 400
92, 652, 400
-3.0
1, 089, 043, 600
1, 098, 823, 000
+ 0. 9
Share liability at end of month:
Private share accounts (number)
Paid on private subscriptions
Treasury and EL 0 . L. C. subscriptions
Total
Private share investments during month
Repurchases during month
__
Mortgage loans made during month:
a. New construction
b. Purchase of homes
c. Refinancing
d. Reconditioning
e. Other purposes..
_
-
_
-
--
Total
Mortgage loans outstanding end of month
Borrowed money as of end of month:
From Federal Home Loan Banks
From other sources
_-
Total
Total assets, end of month
Table 12.—Federal
Home Loan Bank advances
to member institutions by Districts
Change
January to
February
February
Table 13.—Lending operations of the Federal
Home Loan Banks
[Thousands of dollars]
Federal Home Loan Banks
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 __ __
Total.
262
Advances
made during
Feb. 1938
$142, 000.
994, 000.
461, 050.
421, 000.
478, 750.
132, 500.
512, 722.
127, 000.
295, 000.
210, 600.
108, 500.
187, 500.
00
00
00
00
00
00
57
00
00
00
00
00
4, 070, 622. 57
Advances
made during
Jan. 1938
$178, 400. 00
563, 500. 00
500, 000. 00
592, 200. 00
118, 250. 00
84, 800. 00
287, 180. 00
110, 200. 00
252, 500. 00
635, 500. 00
221, 500. 00
178, 700. 00
3, 722, 730. 00
Repayments
monthly
Balance
outstanding at end
of month
Month
Loans advanced
monthly
December 1935
June 1936
December 1936
$8, 414
11,560
13, 473
$2, 708
3,895
5,333
$102, 795
118,587
145, 401
59, 000
10, 221
11,116
9,330
8,991
7,001
17, 591
37, 344
7,707
5,080
5,426
4,461
3,707
4,832
167, 057
169, 571
175, 607
179, 511
184, 041
187, 336
200, 095
3,723
4,071
13, 280
7,091
190, 538
187, 518
1937
January through June
July
August
September
October
November
December
January
February
1938
Federal Home Loan Bank Keview
Table 14.—H.
O . L. C subscriptions to shares of savings and loan associations—Requests and
subscriptions 1
Uninsured State-chartered members of
the F. H. L. B.
System
1
Federal savings and
loan associations
Total
Number
(cumulative)
Amount
(cumulative)
Number
(cumulative)
Amount
(cumulative)
Number
(cumulative)
Amount
(cumulative)
Number
(cumulative)
27
89
125
125
126
126
127
116
112
113
106
$1, 131, 700
3, 845, 710
5, 400, 710
5, 655, 210
6, 007, 210
6, 082, 210
6, 192, 210
2
5, 757, 210
5, 357, 210
5, 382, 210
5, 197, 210
33
279
473
515
586
623
639
665
666
675
692
$2, 480, 000
21, 016, 900
32, 873, 600
35, 410, 100
39, 633, 420
41, 510, 420
42, 148, 470
43, 308, 470
43, 490, 020
44, 055, 020
44, 816, 020
553
2,617
3,669
3,838
4,088
4,217
4,255
4,285
4,324
4,342
4,360
$21, 139, 000
108, 591, 900
159, 298, 600
166, 884, 100
177, 603, 700
182, 523, 000
184, 052, 200
185, 109, 200
187, 015, 400
187, 668, 400
188, 535, 900
613
2,985
4,267
4,478
4,800
4,966
5,021
5,066
5,102
5,130
5,158
$24, 750, 700
133, 454, 510
197, 572, 910
207, 949, 410
223, 244, 330
230,115,630
232, 392, 880
234, 174, 880
235, 862, 630
237, 105, 630
238, 549, 130
2
45
63
52
48
47
48
38
40
40
36
100, 000
1, 688, 000
2, 381, 000
1, 934, 000
1, 926, 000
1, 901, 000
1, 931, 000
1, 426, 000
1, 526, 000
1, 526, 000
1, 491, 000
24
262
440
465
492
510
535
559
564
573
582
1, 980, 000
19, 455, 900
30, 283, 600
31, 176, 600
32, 950, 600
33, 675, 720
34, 954, 770
36, 086, 770
36, 331, 270
36, 843, 270
37, 073, 270
474
2,538
3,509
3,647
3,742
3,849
3,918
3,950
3,997
4,009
4,024
17, 766, 500
104, 477, 400
150, 368, 400
155, 917, 000
159, 511, 500
164, 226, 200
166, 447, 700
167, 154, 600
168, 762, 300
169, 035, 300
169, 670, 300
500
2,845
4,012
4, 164
4,282
4,406
4,501
4,547
4,601
4,622
4,642
19, 846, 500
125, 621, 300
183, 003, 000
189, 027, 600
194, 388, 100
199, 802, 920
203, 333, 470
204, 667, 370
206, 619, 570
207, 404, 570
208, 234, 570
Requests:
Dec. 31, 1935
Dec. 31, 1936
June 30, 1937
July 31, 1937
Aug. 31, 1937
Sept. 30, 1937
Oct. 31, 1937
Nov. 30, 1937
Dec. 31, 1937
Jan. 31, 1938
Feb. 28, 1938
Subscriptions:
Dec. 31, 1935
Dec. 31, 1936
June 30, 1937
July 31, 1937
Aug. 31, 1937
Sept. 30, 1937
Oct. 31, 1937
Nov. 30, 1937
Dec. 31, 1937
Jan. 31, 1938
Feb. 28, 1938
2
Insured State-chartered associations
2
2
2
Amount
(cumulative)
Refers to number of separate investments, not to number of associations in which investments are made.
Reduction due to insurance or federalization of associations.
Table 15.—Properties acquired by H . O . L C.
through foreclosure and voluntary deed
Period
Prior to 1935.
1935: Jan. 1 through
July 1 through
1936: Jan. 1 through
July 1 through
1937: Jan. 1 through
July 1 through
1938: January
February
June
Dec.
June
Dec.
June
Dec.
Number
30
31
30
31
30
31
Grand total to Feb. 28, 1938
1
1
9
114
983
4,449
15, 646
23, 459
26, 899
4,811
4,334
80, 704
Does not include 19,578 properties bought in by H. O.
L. C. at foreclosure sale but awaiting expiration of the redemption period before title in absolute fee can be obtained.
In addition to the 80,704 completed cases, 441 properties
were sold at foreclosure sale to parties other than the H. O.
L. C. and 10,005 cases have been withdrawn due to payment
of delinquencies by borrowers after foreclosure proceedings
were authorized.
April 1938
Table 16.—Reconditioning Division—Summary of
all reconditioning operations of H . O . L. C.
through Feb. 2 8 , 1 9 3 s 1
June 1,
1934,
through
Jan. 31,
1938
Feb. 1,
1938,
through
Feb. 28,
1938
Cumulative
through
Feb. 28,
1938
8,721
894, 145
Cases received 2
885, 424
Contracts awarded:
8,219
526, 596
518, 377
Number
$99, 032, 451 $1, 704, 140 $100, 736, 591
Amount
Jobs completed:
8,247
517, 378
509, 131
Number
_.
$95, 238, 105 $1, 753, 639 $96, 991, 744
Amount.
1
All figures are subject to adjustment. Figures do not
include 52,269 reconditioning jobs, amounting to approximately $6,800,000, completed by the Corporation prior to
the organization of the Reconditioning Division on June 1,
1934.
2
Includes all property management, advance, insurance,
and loan cases referred to the Reconditioning Division which
were not withdrawn prior to preliminary inspection or cost
estimate prior to Apr. 15, 1937.
263
Mortgage Loan Dockets
(Continued from 'page 239)
the association operates but should thoroughly safeguard both the mortgagor and the mortgagee. Of
course, wherever a short form of mortgage is permitted, such as was described in the November 1937
issue of the R E V I E W , the association would be wise
to adopt it. Some associations use a form which
includes both the mortgage and note in one sheet
with perforations for separation.
Following the mortgage and note would probably
be a copy of the loan settlement statement, or statement of costs to the borrower. The original of this
statement would be sent to the borrower, but a copy
in the files provides a convenient summary of the
costs involved in making and servicing a loan.
If additional collateral is pledged as security for
the loan, it should, of course, be included in the
docket.
The last item to be included would be the current
insurance policies for fire and windstorm including
properly executed loss payable clauses in favor of
the association. Note the fact that it is only current policies which are kept in the docket. Expired
policies should be removed.
Some dockets provide a place for tax and assessment receipts, but as many associations either do not
receive them or return them to the borrower it is not
a vital element.
I t must be emphasized that if a mortgage loan
docket is to serve the association to best advantage
all unimportant papers should be kept out, although
there are optional items such as a photograph of the
property which might be included. Further, the
papers which are included should always be filed in
the same order in each docket. The order listed here
may be satisfactory or the association may prefer
some other; the flat folder system is flexible enough
to accommodate the papers in almost any order, but
the system will be seriously harmed if each document
does not have its well-defined position in each folder.
M E T H O D OF LISTING DOCKETS
Mortgage loan dockets may be listed either alphabetically or numerically. Although some prefer to
264
file by the name of the mortgagor, probably because
the name may be most easily remembered, the
numerical system is generally considered simpler
and more convenient to operate. With a numerical
system, loan dockets are numbered as the mortgage loans are made, the number corresponding to
the number on the loan ledger card. This permits
dockets to be filed chronologically, a considerable
time saver for examiners and for the association's
own auditors and personnel. The ledger card
file may serve as an alphabetical index for the
dockets.
Whenever a mortgage is foreclosed, the docket
may be transferred with the same number to a dead
file and a new docket opened in the real estate file,
in which case, reference will be facilitated by entering
the loan number on the real estate record. On the
other hand, the original loan number and docket
may be retained no matter what the history of the
loan. This system has certain advantages. All the
papers connected with any property are retained in
one docket even though it may pass from the mortgage loan file to the real estate owned file, and then
to the real estate sold on contract file. T h a t one
docket is always represented by a single number—no
number is used more than once during the history of
the association.
To be used most effectively the mortgage loan
docket file should be the responsibility of one person.
T h a t applies regardless of the size of the association,
as a single responsible person consistently checking
the position of documents can provide more uniformity and security than if the files are open to
any number of employees.
Associations which have adopted a modern flat
folder type of mortgage loan docket can testify not
only to its convenience but to its direct value in
assisting the smooth operation of the association's
business. One savings and loan operator testified in
the December 1937 Savings and Loans t h a t :
". . . the convenience to our own staff in the
handling of loan papers is beyond measure. Now
when talking to a borrower about his loan, we know
that all the papers pertaining to it are in this single
folder and what a relief it is to turn directly to the
particular paper desired without having to uncurl a
batch of unruly document files."
Federal Home Loan Bank Review
F. H. L. B. System
(Continued from page 253)
There was a net increase of three members during
February occasioned by 12 additions and nine
deductions in the membership rolls of the Banks.
Four insurance companies became members during
the month. Total membership of the Federal
Home Loan Bank System on February 28 amounted
to 3,938.
INTEREST RATES
The Federal Home Loan Bank of Indianapolis
announced a reduction in the interest rate charged
upon all secured advances, effective February 1,1938.
Although all secured advances will continue to be
written at 3% percent, interest will be collected at 3
percent instead of 3}{ percent until further action by
the board of directors. All unsecured advances to
members whose creditor liabilities to others do not
exceed 5 percent of such members' net assets will be
written and interest collected at the rate of 3% percentum per annum.
THE FOURTH ISSUE OF DEBENTURES
The Governor of the Federal Home Loan Bank
System announced the offering on March 22, 1938
of a new issue of $23,500,000 of 5-year, 2-percent,
consolidated debentures, Series D, of the Federal
Home Loan Banks, due April 1, 1943. This offering
was immediately oversubscribed, as was the case
with the three earlier issues. The debentures were
offered at 100, but shortly after the offering, the
debentures were quoted at a premium of 100% bid,
100% offered.
The books of the Federal Home Loan Bank System
were opened for subscriptions on March 22, and so
great was the demand for the debentures that the
books were closed a little more than an hour after
they were opened. It was announced that the major
portion of the offers to buy these debentures came
from towns and cities aside from metropolitan New
York, with the total subscriptions from such subscribers approximating three times the amount received from New York subscribers. Banks, insurance
companies, corporations and even individuals participated in the eager demand for the new debentures.
The purpose of the issue is to refund the major
part of the $24,700,000 of 1-year, lK-percent debentures of the Banks due April 1. The remainder
of the maturing issue will be met out of current
assets of the Federal Home Loan Banks.
The Governor of the Federal Home Loan Bank
System pointed out in his statement in connection
with this offering that of the $764,000,000 loaned by
savings and loan associations during 1937, approximately 84 percent was advanced by member associations of the Federal Home Loan Bank System.
This was a gain of 4 percent over the 1936 ratio.
New loans made by members of the Bank System
in 1937 aggregated $645,000,000 as compared with
$504,000,000 in 1936.
April 1938
Retail Sales in 1937
•
FINAL estimates compiled by the Market Research Division of the Bureau of Foreign and
Domestic Commerce show that total retail sales in
1937 increased slightly more than 5 percent over the
1936 volume. Of the estimated net sales during 1937,
building materials and house furnishings comprised
11 percent. The lumber, building materials, and
hardware group recorded an increase of 8 percent
for 1937 over 1936, and the furniture and household
appliances group, an increase of 6% percent. However, the 1937 net sales of these two groups amounted
to only about two-thirds of the 1929 level.
All trade groups recorded gains in dollar volume
for 1937 over 1936. The automotive group, which
was second only to the food group in retail sales
volume, recorded a gain of 3% percent. Of each
dollar spent in retail establishments in 1937, more
than one-fifth went for automobiles, auto accessories,
and gasoline.
The automotive group receded relatively further
from 1929 to 1933 than any other group, with a
decrease of 72 percent. The net sales of this group in
1932 were only 28 percent of the 1929 level but increased to 75 percent by 1937. In comparison, the
net sales of the lumber, building and hardware
group, which in 1933 were only 35 percent of their
1929 level, increased to 67 percent in 1937. Likewise, the furniture and household goods group,
with a low of 32 percent of the 1929 level in 1932,
increased to 63 percent in 1937. It is significant
that the automotive group has contributed more
than any of the other groups to the recovery of
retail trade, while the building industry, which has
often been considered the backbone of economic
recovery, has lagged behind.
265
Administrative Rulings, Board Resolutions/ and
Counsel's Opinions
Digest of A-B-C Book Opinion
ANY member may obtain from a Federal Home Loan Bank a copy of any administrative ruling, Board resolution, or the complete text of any opinion of the Legal Department of the Board, the digest of which is printed in the REVIEW. "A" indicates
administrative rulings by the Governor; " B " indicates resolutions of the Board; and " C " indicates Counsel's opinions. In
requesting any such copy, its A-B-C Book reference number and date, as given at the end of each of the following digests, should
be cited. Copies of the A-B-C Book itself are not available for distribution.
POWERS—Incidental and implied. H. 0. L. Act.
Sec. 5(a); Fed. Charter E, Sees. 1, 3, 18; Fed.
Charter K, Sec. 3.
Charter K, Section 3 provides in part that, in addition to the
expressly enumerated powers, "the association shall have
power to do all things reasonably incident to the accomplishment of its express objects and the performance of its express
powers." Section 18 and Section 3 of Charter E confer
substantially the same incidental powers upon associations
operating under Charter E. Section 3 of both Charter E and
Charter K states in substantially the language of Section 5 (a)
of Home Owners' Loan Act of 1933, as amended, that the
objects of a Federal association are to promote thrift and to
provide for the sound and economical financing of homes.
Charter E, Section 1 and Charter K, Section 3 confer various
express powers normally possessed by corporations.
From the above statutory and charter provisions, it is clear
that to justify any more or less unusual act by an association
as being within its incidental or implied powers, it must be
shown that such operation is incidental to or necessary for
the accomplishment of such express objects or powers. In
other wcrds, it must clearly appear that the proposed action
is reasonably connected with the association's efforts to promote thrift and home ownership by providing a convenient
and safe method for saving and investing money and by
providing for the sound and economical financing of homes.
The mere fact that a particular operation would prove beneficial to the association is not sufficient. Reasonable connection with the objects for which the association was incorporated must be shown but the determination of what is and what
is not too remote must depend upon the facts of each particular case. The exercise of incidental corporate power is subject to supervision and regulation by the Federal Home Loan
Bank Board.
Ordinarily, a Federal savings and loan association has no
power, either express or implied, to act as an insurance agent
even though such agency was for the limited purpose of affording insurance protection for property securing loans made
by the association. Insurance protection is essential to sound
lending but acting as an insurance agent cannot be deemed to
be necessary for the accomplishment of the lending purposes
of a Federal association unless there be no other means of
causing property securing such loans to be properly insured.
266
The conduct of a safe deposit vault business as incidental
to the promotion of thrift must be deemed remote to such
object unless there be no other means available within the
community to be served of satisfying a substantial and existent demand on the part of the members of the association
for the services to be rendered by the conduct of a safe
deposit vault business.
Under its incidental and implied powers, a Federal association would have authority to expend its funds for membership in savings and loan leagues, chambers of commerce, and
other similar organizations. Such affiliations give members
up-to-date information as to changing business conditions,
new ideas as to management and operation, and an opportunity to cooperate in developing sound and economical general policies to be pursued.
Contributions to the support of community funds are
ordinarily within the express or implied powers of Federal
associations. Such contributions are in effect a method of
advertising and also the support of the community from such
funds has a direct relationship to the promotion of thrift and
the development of home ownership. Unless some method
is provided whereby the unfortunate of a community may be
cared for, the general thrift of the community and the
development of home ownership is seriously retarded.
Contributions in support of organizations engaged in advertising and promoting savings and loan business are clearly
within the power of Federal associations as one of the legitimate methods of advertising. Any advertising material
which tends to make the inhabitants of a community conscious
of the facilities and usefulness of savings and loan associations must redound to the benefit of each such association in
that community.
Federal associations may not make political contributions.
Section 251 of Title II of the United States Code provides in
effect that any political contribution by any corporation
organized under Federal law is prohibited, that any corporation which violates this section is subject to a fine of not more
than $5,000, and that any officer or director of a corporation
who consents to any such contribution is subject to a fine of
not more than $5,000 or imprisonment for not more than one
year, or both.
This opinion supersedes A-B-C Book Opinions, C-059,
C-120, and C-147.
(A-B-C Book, C-059, November 1, 1937)
Federal Home Loan Bank Review
CREDITOR LIABILITIES—Definition of.
F. H. L. B.
Act, Sec. 11 (g) (4); Bk. Keg., Sec. 4; N. H. Act,
Sec. 404 (a); Ins. Keg., Sec. 12 (a).
The terms "creditor liabilities" and "creditor obligations"
as used in Section 11 (g) (4) of the Federal Home Loan Bank
Act, as amended and Section 404 (a) of the National Housing
Act, as amended, are subject to the same interpretation and
should be treated as synonymous. Section 4 of the Bank
Regulations defines the term creditor liabilities to mean "deposits, investment certificates, certificates of indebtedness,
mortgages and taxes on real estate owned and all forms of
debt." "Deposits," "investment certificates," and "certificates of indebtedness" are self-explanatory. "Mortgages,"
of course, refers to the indebtedness of the institution, secured by mortgage on its property. "Taxes" are creditor
liabilities only when the institution is directly liable therefor
but are not creditor liabilities when the tax is merely a charge
against the real estate. From this definition and from the
words themselves, it is clear that the determination of whether
a particular item not specifically enumerated above constitutes a creditor liability depends upon whether or not a debtorcreditor relationship exists between the member or insured
institution, as the case may be, and the other party by virtue
of such item.
Advance payments by borrowers for taxes and insurance
premiums are normally handled in one of four ways, towit; (1) by placing the payments in a share account in the
borrower's name and withdrawing the same therefrom
when taxes or insurance premiums become due; (2) by
applying advance payments as a direct credit against the
borrower's indebtedness to the institution, the institution
paying or advancing funds to be used in paying taxes
and insurance premiums when the same become due and
then charging such amounts to the borrower's indebtedness; (3) by holding such payments in a special trust
account, ear-marked for the sole purpose of paying taxes
and insurance premiums; and (4) by holding such payments
in an open account, carried on its books as, for example,
"advance payments by borrowers for taxes and insurance
premiums." As none of the above methods of carrying such
payments create a debtor-creditor relationship, they do not
constitute creditor liabilities. When the share account
method is used and at the time the taxes or insurance premiums become due the amounts so paid in cannot be withdrawn under the withdrawal or repurchase rule of the institution, there would be a contractual obligation on the part
of the institution to advance to the borrower the amount so
due, but any such obligation would be founded upon contract and would not be a creditor liability. When advance
payments are applied as a direct credit against the borrower's
indebtedness, there is an obligation on the part of the institution to pay taxes and insurance premiums when the same
become due, but this obligation is also contractual in nature
and failure to perform would entitle the borrower to sue
only for damages incurred through such breach while the
advance payments could not be recovered and would not be
a creditor liability. When advance payments are held in
trust and the institution violates its trust duty by failing to
pay taxes and insurance premiums when the same become
due, the borrower may sue for damages incurred through such
breach of trust and assuming such breach of trust may ter-
April 1938
minate the trust relationship, may sue in assumpsit for money
had and received. If the borrower does not elect, however, to
terminate the trust relationship by such a suit for money had
and received, the trust relationship continues, the association remaining under trust duty thereafter to use such funds
in the payment of taxes and insurance premiums when the
same become due. The borrower's right to terminate the
trust relation arises only because of a breach in the trust
duty. The relationship is not that of creditor and debtor,
although incidentally, as mentioned above, the borrower may
elect, by terminating the trust relation, to sue for money had
and received as though a creditor of the institution. Only
when such election has been made is the item to be deemed
a creditor liability. When the institution holds such payments in an open account carried on its books as, for example,
"advance payments by borrowers for taxes and insurance
premiums," the relationship is, nevertheless, that of a trust,
imposing upon the institution a trust duty to pay taxes and
insurance premiums when the same become due. The
remedies of the borrower, therefore, when the institution
violates its trust duty to pay taxes and insurance premiums
when the same become due, are the same as those mentioned
above. The main difference in the relationship between the
borrower and the institution when, on the one hand, a special
trust account is opened for advance payments of borrowers
for taxes and insurance premiums and, on the other hand,
the holding of such advance payments in an open account,
is as follows: if the institution sets up a trust account, not on
its own books, but by deposit in a bank, and the bank in
which such trust account is held by the institution fails, the
institution (unless it shall have been negligent in the choice
of such bank) would not be liable for a breach of trust duty
if, because of its inability to withdraw such trust funds from
such closed bank, it were not in a position to pay the taxes
and insurance premiums when the same became due, whereas,
if the institution had held the advance payments by the
borrower in a trust account set up on its own books, or in
open account, there is no basis upon which it can avoid the
absolute trust duty of paying the taxes and insurance premiums when the same become due.
When a member or insured institution has lawfully declared
a dividend payable in cash, the institution becomes a debtor
to the amount of the dividend so declared when the dividend
payment date is reached, and upon such date a debtorcreditor relationship is established. When a member or
insured institution has finally declared interest to be paid or
credited to the account of the owner of a deposit, investment
certificate, or certificate of indebtedness of an institution,
such interest becomes a debtor-creditor relationship upon
the date which such institution has declared such interest
to be payable or credited.
When an institution closes a loan in the ordinary course of
business and advances a portion of the money, and carries
the balance in its statement as "due borrowers," such amount
does not constitute a creditor liability. If the institution
refuses to make any additional advances thereunder, the
borrower could not sue for the money but would be compelled to sue for such damage as might accrue to the borrower
as a result of the breach of contract to advance money.
Accordingly, "due borrowers" accounts constitute contract
obligations rather than creditor liabilities.
(A-B-C Book, C-094, November 8, 1937;
267
Resolutions of the Board
AMENDMENT
TO
INSURANCE
OF
INSTITUTIONS
RULES
AND
ACCOUNTS
TO
REGULATIONS
FOR
REQUIRING
INSURED
MONTHLY
REPORTS:
SUBMIT
Adopted March 15, 1938; effective April 15, 1938.
Individual associations as well as the whole
Federal Home Loan Bank System are benefiting by
the operating information obtained from monthly
reports which are now filed by most insured institutions. Because of the importance of these reports
to directors of an association in keeping informed of
its operations, their importance in connection with
both Federal and State legislation, their publicity
value, and the fact that most insured associations
are already filing such reports, the Board of Trustees
of the Insurance Corporation has amended Section
14 of the Kules and Regulations for Insurance of
Accounts to require the filing of a simple form of
report. This form consists chiefly of a balance sheet
with a small amount of easily compiled supplemental
information. A set of blank forms together with a
brief explanatory note is being sent to all insured
associations by the office of the General Manager of
the Federal Savings and Loan Insurance Corporation.
Section 14 of the Regulations was amended by
adding at the end thereof the following:
The officers of each insured institution shall make a monthly
report to the board of directors on forms prescribed by the
Corporation which shall be filed as follows: One copy shall
be forwarded to the Federal Home Loan Bank of the District
in which the insured institution is located and two copies to
the Governor of the Federal Home Loan Bank System,
Washington, D. C.
AMENDMENT
INSURANCE
MINING
AND
TO
OF
RULES
ACCOUNTS
THE AMOUNT
DEFINING
AN
Adopted
immediately.
MEMBER":
OF
AND
REGULATIONS
PROVIDING
FOR
EACH INSURED
" ACCOUNT
March
15,
OF
AN
1938;
FOR
DETERACCOUNT
INSURED
effective
The following amendment to Section 18 (b) of the
Rules and Regulations for Insurance of Accounts is
applicable only to serial associations. I t s purpose is
to eliminate any misunderstanding which may have
existed as to the extent of insurance coverage over
apportioned profits in a serial association. I n
accordance with the revised Section 18 (b), the
members of a serial association are insured up to
$5,000 on the amount standing to their credit in
268
the form of dues payments and their share of apportioned profits.
1. The second sentence of subsection (b) of Section
18 of the Rules and Regulations is hereby amended
to read as follows:
The amount of each insured account will be determined
from the security contract and from the books and records of
the insured institution as of the last dividend or apportionment date, plus payments on, and less repurchases and withdrawals from, such insured account subsequent to such date,
without regard to the actual value of the assets of the insured
institution, without regard to provisions of the security contract which authorize the insured institution to retain or
deduct, in the event of voluntary withdrawal or repurchase,
any amount on account of premature withdrawal or repurchase, without regard to whether or not dividends are subject
to recapture, and without regard to whether dividends are
credited or apportioned to a series (being apportionable to
each share account of the series).
2. The first sentence of subsection (e) of Section 1
of the Rules and Regulations for Insurance of Accounts was amended to read as follows:
An "account of an insured member'' is the total amount
credited (or when dividends are not credited, apportionable
after having been apportioned to a series) to any member in
withdrawable or repurchasable accounts, whether or not such
accounts are subject to any pledge, whether or not such accounts are insured in full, and whether or not dividends are
subject to recapture.
T H E SETTLEMENT OF INSURANCE U P O N DEFAULT
A recent statement by the General Manager of the
Federal Savings and Loan Insurance Corporation is of
interest because it gives pertinent information with
respect to Section 18 of the Rules and Regulations for
Insurance of Accounts which deals with the settlement of insurance upon default.
According to the General Manager, the option as
to a new account or a cash and debenture settlement
belongs to the shareholder. I t is believed that the
majority will demand an equivalent account in an
open, solvent, nearby insured association in that this
will give them what they most desire, namely, a
savings account earning a respectable return and the
reasonable withdrawal privileges which the State and
Federal laws permit.
The first effort of the Insurance Corporation, in
making such accounts available to shareholders, will
be to interest nearby insured associations in issuing
certificates against good assets of the defaulting institution. The amount of the impairment caused by
slow or poor assets would have to be made up from
the funds of the Insurance Corporation.
Federal Home Loan Bank Review
If circumstances prove that there are no such
nearby associations, the Insurance Corporation could
be a party to the establishment of a new sound, wellmanaged association on the foundation of the old one
and it would be the shares of this new association
which would be offered. Business judgment would
require that this new association, or any nearby association participating in the program, be attractive
to the shareholders and that its management and
solvency be above question.
For those who request the cash and debenture
settlement, 10 percent in cash will be promptly supplied and the cash and debentures will be distributed
upon proof of claim and surrender of the shares in the
defaulting association. It would then become the
obligation of the Insurance Corporation to meet
these debentures on their due dates—50 percent one
year after the date of default and 50 percent three
years after the date of default.
This spacing should make the liquidation of the
defaulting institution under normal conditions a
reasonable accomplishment, but regardless of the
conditions or the progress of the liquidation, the
debenture holder would be assured of his money on
its due date by a Corporation today worth over
$111,000,000 and with a yearly net income of approximately $5,000,000, both of which amounts are
increasing steadily.
DISTRICT NO. 7
WISCONSIN:
Madison:
Anchor Savings Building & Loan Association, 101 Saint Hamilton Street.
DISTRICT NO. 8
IOWA:
Waterloo:
Perpetual Building & Loan Association, 329 East Fourth Street.
MISSOURI:
Crystal City:
Crystal City Savings & Loan Association, Crystal City Bank Building.
St. Louis:
Equality Savings & Building Association, 712 Chestnut Street.
Reliable Life Insurance Company, 3639 Olive Street.
DISTRICT NO. 11
WASHINGTON:
Seattle:
Franklin Savings & Loan Association, 1908 Third Avenue.
WL T H DRAWA L S FROM THE FEDERAL HOME LOAN B ANK S YSTEM
BETWEEN FEBRUARY 16, 1938, AND MARCH 15, 1938
ILLINOIS:
Chicago:
Uhland Building & Loan Association of Chicago, 106 North Pulaski
Avenue (merger with Apollo-Uland Building & Loan Association,
Chicago, Illinois).
Union Building & Loan Association, 1126 West Eighteenth Street (voluntary withdrawal).
INDIANA:
Washington:
Industrial Savings & Loan Association of Washington, Daviess County,
15 Northeast Third Street (merger with Home Building & Loan Association of Washington, Indiana).
MARYLAND:
Baltimore:
Alta Building & Loan Association of Baltimore City, 2227 West Baltimore Street (voluntary withdrawal).
David Reus Permanent Loan & Savings Company of Baltimore City,
1024 West Baltimore Street (removal from membership).
Fidelity Permanent Building & Loan Association, Inc., Fidelity Trust
Company Building (voluntary withdrawal).
Utility Savings & Loan Association, Inc., 607 Mercantile Trust Building
(voluntary withdrawal).
MISSOURI:
St. Louis:
Reserve Building & Loan Association of St. Louis, 1710 Railway Exchange* Building (transfer of Bank stock to Roosevelt Federal Savings
& Loan Association of St. Louis, St. Louis, Missouri).
N E W JERSEY:
Hoboken:
Guardian Building & Loan Association, Corner Fourteenth <fe Washington Streets (voluntary withdrawal).
OHIO:
Directory of Member, Federal, and
Insured Institutions
Added during February-March
I. INSTITUTIONS ADMITTED TO MEMBERSHIP IN
THE FEDERAL HOME LOAN BANK SYSTEM BETWEEN FEBRUARY 16, 1938, AND MARCH 15, 1938
[Listed by Federal Home Loan Bank Districts, States, and cities]
DISTRICT NO. 2
N E W JERSEY:
River Edge:
River-Edge Building & Loan Association, Borough Hall.
DISTRICT NO. 4
NORTH CAROLINA:
Lenoir:
Mutual Building & Loan Association, 104 West Avenue.
DISTRICT NO. 5
OHIO:
Germantown:
Germantown Building & Savings Association.
Urbana:
Peoples Savings & Loan Company, 108 North Main Street.
DISTRICT NO. 6
INDIANA:
Crawfordsville:
Montgomery Savings Association, 202 East Main Street.
MICHIGAN:
Port Huron:
Port Huron Loan & Building Association, 505 Water Street.
April 1938
Dayton:
Dayton Building Association (sale of assets to State Federal Savings <fe
Loan Association, Dayton, Ohio).
East Liverpool:
Union Savings & Loan Company, 114 West Sixth Street (voluntary
withdrawal).
PENNSYLVANIA:
Malvern:
Malvern & Duffryn Mawr Building & Loan Association, Corner King
Street & Warren Avenue (voluntary withdrawal).
WYOMING:
Buffalo:
Buffalo Building & Loan Association (voluntary withdrawal).
II. FEDERAL SAVINGS AND LOAN ASSOCIATIONS
CHARTERED BETWEEN FEBRUARY 16, 1938, AND
MARCH 15, 1938
DISTRICT NO. 4
MARYLAND:
Baltimore:
Atlantic Federal Savings & Loan Association, 1617 East Federal Street
(converted from J. F . Wiessner Building Association of Baltimore
City).
DISTRICT NO. 5
OHIO:
Ironton:
Liberty Federal Savings & Loan Association, 313H Center Street (converted from Liberty Building & Loan Company).
CANCELATIONS OF FEDERAL SAVINGS AND LOAN ASSOCIATION
CHARTERS BETWEEN FEBRUARY 16, 1938, AND MARCH 15,
1938
NEBRASKA:
Hastings:
Hastings Federal Savings & Loan Association, Corner Second & Hastings
Streets (merger with Home Federal Savings & Loan Association of
Hastings, Hastings, Nebraska).
NEVADA:
Las Vegas:
Las Vegas Federal Savings & Loan Association (failure to complete
conversion).
269
III. INSTITUTIONS INSURED BY THE FEDERAL
SAVINGS AND LOAN INSURANCE CORPORATION
BETWEEN FEBRUARY 16, 1938, AND MARCH 15,
1938
DISTRICT NO. 2
N E W JERSEY:
Asbury Park:
Keystone Building & Loan Association,' 228 Main Street.
Point Pleasant Beach:
Point Pleasant Building & Loan Association of Point Pleasant Beach,
New Jersey, 701 Arnold Avenue.
Rahway:
Axia Building & Loan Association of Rahway, 1498 Irving Street.
DISTRICT NO. 3
PENNSYLVANIA:
Philadelphia:
Grand Union Building Association, 2036 Seventy-second Avenue.
Walnut Street Federal Savings & Loan Association, 916 Walnut^Street.
Upper Darby:
First Federal Savings & Loan Association of Upper Darby, 7049 West
Garrett Road.
Wyomissing:
Wyomissing Federal Savings & Loan Association, 801 Penn Avenue.
DISTRICT NO. 4
NORTH CAROLINA:
Fayetteville:
Fayetteville Building & Loan Association, 310 Hay Street.
Reidsville:
Rockingham Building & Loan Association, Scales Street.
MICHIGAN:
Bay City:
Mutual Building & Loan Association of Bay County, 808 North Jefferson
Street.
D I S T R I C T NO. 7
ILLINOIS:
Chicago:
Gediminas Building & Loan Association, 4425 South Fairfield Avenue.
Lawn Building & Loan Association, 3517 West Sixty-third Street.
Lithuanian Building, Loan & Savings Association, 1739 South Halstead
Street.
East Peoria:
Tazewell Building & Loan Association, 113 East Washington Street.
Mt. Carmel:
American Building & Loan Association, 418H Market Street.
Springfield:
Merchants and Mechanics Building & Loan Association of Springfield,
602 Myers Building.
Sangamon Building & Loan Association, 312 South Fourth Street.
WISCONSIN:
Madison:
Anchor Savings Building & Loan Association, 101 South Hamilton
Street.
D I S T R I C T NO. 8
MISSOURI:
Springfield:
Systematic Savings & Loan Association, 308 South Avenue.
NORTH DAKOTA:
Grand Forks:
Grand Forks Building & Loan Association, Security Building.
D I S T R I C T NO. 10
SOUTH CAROLINA:
Anderson:
Perpetual Building & Loan Association of Anderson, 207 South Main
Street.
D I S T R I C T NO. 5
OHIO:
Ironton:
Liberty Federal Savings & Loan Association, 313H Center Street.
West Jefferson:
West Jefferson Building & Loan Company, 2 West Main Street.
D I S T R I C T NO. 6
COLORADO:
Denver:
Capitol Federal Savings & Loan Association of Denver, 1665 Broadway
Avenue.
D I S T R I C T NO. 11
MONTANA:
Butte:
First Federal Savings & Loan Association of Butte, 79-81 West Park
Street.
D I S T R I C T NO. 12
CALIFORNIA:
INDIANA:
Noblesville:
Indiana Loan Association, 938 Conner Street.
San Francisco:
Home Mutual Deposit Loan Company, 228 Montgomery Street.
Income of Employees in Finance and Construction
•
I n 1936 the average annual income of employees in the financing business was higher than in any other
industry, according to the survey of national income made by the Department of Commerce. The average is calculated on the basis of full-time employment throughout the year.
I n finance the average was $1,677, whereas the national average for all types of industry was $1,244.
Finance also led in 1933 and 1935, but in 1929 was second with an average of $1,805. Employees in the construction industry had the highest annual average in 1929 of $1,895. This declined to $1,032 in 1933—although it rose to $1,234 by 1936, it was tenth out of the 12 groups listed. This, of course, applies to all types
of construction.
Lowest full-time annual incomes were paid by agriculture; in 1936 the average was $525.
270
Federal Home Loan Bank Review
U. S. GOVERNMENT PRINTING OFFICE: 1938
FEDERAL HOME LOAN BANK DISTRICTS
•i
i
$
BOUNDARIES OF FEDERAL HOME LOAN BANK OISTRICTS
FEOERAL HOME LOAN BANK
CITIES.
I 7-1-15
OFFICERS OF FEDERAL HOME LOAN BANKS
BOSTON
B.
CHICAGO
J. ROTHWELL, Chairman; E . H . W E E K S , Vice Chairman; W . H .
NEAVES,
President;
H.
N.
FAULKNER,
Vice
President;
MORTON
FREDERICK
BODFISH,
BARDWICK,
Vice Chairman; A . R.
J R . , Vice
President;
E.
H.
GARDNER,
President;
JOHN
BURGESS,
Treasurer;
CON-
W I N A N T , J R . , Treasurer; L. E . D O N O V A N , Secretary; P . A. H E N D R I C K ,
STANCE M . W R I G H T , Secretary; LAURETTA Q U A H , Assistant Treasurer;
Counsel.
TJNGARO & SHERWOOD, Counsel.
NEW
GEORGE
MACDONALD,
YORK
Chairman;
F.
V.
D E S MOINES
D.
LLOYD,
Vice
Chariman;
G. L . B L I S S , President; F . G. STICKEL, J R . , Vice President-General
Counsel;
ROBERT
G.
CLARKSON,
Vice President-Secretary;
C. B . B O B B I N S , Chairman; E . J. R U S S E L L , Vice Chairman; R. J. R I C H A R D -
SON, President-Secretary; W . H . LOHHAN, Vice President-Treasurer;
J. M . M A R T I N , | Assistant Secretary; A. E . M U E L L E R , Assistant
Treasurer; E . S. TESDELL, Counsel.
DENTON
C. L Y O N , Treasurer.
PITTSBURGH
LITTLE ROCK
E.
T . T R I G G , Chairman; C . S. T I P P E T T S , Vice Chairman; R. H .
ARDS,
President;
G.
R.
PARKER,
Vice
President;
H.
H.
RICH-
GARBER,
J.
GILBERT
LEIGH,
Chairman;
W.
C.
JONES,
J R . , Vice
Chairman;
B. H . WOOTEN, President; H . D . WALLACE, Vice President; W . F .
Secretary-Treasurer; R. A. CUNNINGHAM, Counsel.
T A R V I N , Treasurer;
J.
C.
CONWAY,
Secretary; W .
H.
CLARK, J R . ,
Counsel.
WINSTON-SALEM
TOPEKA
G. W . W E S T , Chairman; E . C . B A L T Z , Vice Chairman; O. K . L A R O Q U E ,
W. R. MCWILLIAMS, Chairman; G. E . M C K I N N I S , Vice Chairman;
C. A . STERLING, President-Secretary; R . H . BURTON, Vice PresidentTreasurer; JOHN S. D E A N , JR., General Counsel.
President-Secretary;
Jos.
G. E . WALSTON,
Vice
President-Treasurer;
W . H O L T , Assistant Secretary; R A T C L I F F E , H U D S O N & F E R R E L L .
Counsel.
PORTLAND
CINCINNATI
T . H . T A N G E M A N , Chairman; W . D . SHULTZ, President; W. E . J U L I U S ,
Vice
President: A.
L.
MADDOX,
Treasurer;
DWIGHT
WEBB,
JR.,
Secretary; T A F T , S T E T T I N I U S & H O L L I S T E R , General Counsel.
F. S. MCWILLIAMS, Chairman; B . H . H A Z E N , Vice Chairman; F . B .
JOHNSON,
President-Secretary;
Los
INDIANAPOLIS
F. S. C A N N O N , Chairman-Vice President; S. R. LIGHT, Vice Chairman;
FRED
T.
GREENE,
President; B .
F. BURTLESS,
Secretary-Treasurer;
J O N E S , H A M M O N D , B U S C H M A N N & G A R D N E R , Counsel.
IRVING
BOGARDUS,
Vice
President-
Treasurer; Mrs. E . M . SOOYSMITH, Assistant Secretary.
ANGELES
C. H . W A D E , Chairman; D . G. D A V I S , Vice Chairman; M . M . H U R FORD, President; C. E . B E R R Y , Vice President; F . C. N O O N , SecretaryTreasurer;
VIVIAN
SIMPSON,
PATRICK, General Counsel.
Assistant
Secretary;
RICHARD
FITZ-
@FedFRASER