Full text of Federal Home Loan Bank Review : May 1937, Vol. 3 No. 8

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Vol.3

No. 8

FEDERAL
HOME LOAN BANK

REVIEW
MAY
1937

ISSUED BY
FEDERAL HOME LOAN BANK BOARD
WASHINGTON D . C .

Federal Home Loan Bank Review

TABLE OF CONTENTS
Page

The Bank System offers its debentures
Home ownership and income

249
,

252

Construction loan procedure

255

The future of suburbs

258

Deficiency judgments

259

Appraisal methods and policies

260

Appraisal forum planned

263

Indexes of small-house building costs

264

Monthly lending activity of savings and loan associations

266

Residential construction activity and real-estate conditions

268

March index of foreclosures in large urban counties

270

Federal Savings and Loan System

274

Federal Home Loan Bank System

275

Interest rates on advances to member institutions

275

Growth and trend of lending operations

275

Federal Savings and Loan Insurance Corporation

276

Home Owners' Loan Corporation

278

Subscriptions to shares of savings and loan associations

279

Summary of operations of the Reconditioning Division

279

Directory of member, Federal, and insured institutions added during March-April

281

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 States, 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

Federal Home Loan Bank Board
JOHN H. FAHEY, Chairman
WILLIAM F. STEVENSON

T. D. WEBB, Vice Chairman
F. W. CATLETT

H. E. HOAGLAND

OFFICERS OF FEDERAL HOME LOAN BANKS
BOSTON:
B. J. ROTHWELL, Chairman; E. H. WEEKS, Vice Chairman; W. H. NEAVES, President;
H. N. FAULKNER, Vice President; FREDERICK WINANT, JR., Secretary-Treasurer; L. E.
DONOVAN, Secretary.

NEW YORK:
GEORGE MACDONALD, Chairman; F. V. D. LLOYD, Vice Chairman; G. L. BLISS, President;

F. G. STICKEL, JR., Vice President-General Counsel; ROBERT G. CLARKSON, Vice PresidentSecretary; DENTON C. LYON, Treasurer.
PITTSBURGH:

E. T. TRIGG, Chairman; C. S. TIPPETTS, Vice Chairman; R. H. RICHARDS, President; G. R.

PARKER, Vice President; H, H. GARBER, Secretary-Treasurer.
WINSTON-SALEM :

G. W. WEST, Chairman; E. C. BALTZ, Vice Chairman; 0 . K. LAROQUE, President-Secretary;

G. E. WALSTON, Vice President-Treasurer; Jos. W. HOLT, Assistant Secretary.
CINCINNATI:

H. S. KISSELL, Chairman; L. A. HICKMAN, Vice Chairman; W. D. SHULTZ, President; W. EJULIUS, Vice President; A. L. MADDOX, Treasurer; DWIGHT WEBB, JR., Secretary.
INDIANAPOLIS:

F. S. CANNON, Chairman-Vice President; S. R. LIGHT, Vice Chairman; FRED T. GREENE, President;
B. F. BURTLESS, Secretary-Treasurer.
CHICAGO:

H. G, ZANDER, Chairman; MORTON BODFISH, Vice Chairman; A. R. GARDNER, President; JOHN
BARDWICK, JR., Vice President; E. H. BURGESS, Treasurer; CONSTANCE M. WRIGHT, Secretary

•
DES MOINES:
C. B. ROBBINS, Chairman; E. J. RUSSELL, Vice Chairman; R. J. RICHARDSON, President-

Secretary; W. H. LOHMAN, Vice President-Treasurer; J. M. MARTIN, Assistant Secretary;
A. E. MUELLER, Assistant Treasurer.
LITTLE ROCK:

J. GILBERT LEIGH, Chairman; W. C. JONES, JR., Vice Chairman; B. H. WOOTEN, President;

H. D. WALLACE, Vice President-Treasurer; J. C. CONWAY, Secretary.
TOPEKA:

W. R. MCWILLIAMS, Chairman; G. E. MCKJNNIS, Vice Chairman; C. A. STERLING, President-

Secretary; R. H. BURTON, Vice President-Treasurer.
PORTLAND:
F. S. MCWILLIAMS, Chairman; B. H. HAZEN, Vice Chairman; C. H. STEWART, President;
IRVING BOGARDUS, Vice President-Treasurer; W. H. CAMPBELL, Secretary; MRS. E. M.

SOOYSMITH, Assistant Secretary.
Los ANGELES:

C. H. WADE, Chairman; D. G. DAVIS, Vice Chairman; M. M. HURFORD, President; F. C. NOON,

Secretary-Treasurer.

The Bank System Offers its Debentures

HE Federal Home Loan Bank System was
created by Act of Congress in July 1932. It
grew out of one of the lessons of the depression
which clearly indicated the need for a central
reserve for institutions engaged in mortgage
financing. While it was recognized that it would
be quite impossible, and even undesirable, to set
up machinery to insure complete liquidity for
thrift funds loaned on a long time basis, it was felt
that a great deal could be done toward providing a
measure of such liquidity and also toward cushioning the disastrous effects which resulted from the
complete lack of such facilities during the recent
debacle. The commercial banks had long had
their protection in the Federal Reserve System.
Agriculture, through the Land Banks and Intermediate Credit Banks, had for several years
realized the benefits of such facilities. In creating
a reserve system for urban home financing, the
Congress simply took the logical step to complete
the national organization of credit.
GROWTH OF SYSTEM

IN THE five brief years of its existence, the
growth of the Federal Home Loan Bank System
has been an interesting confirmation of the position
that such an instrumentality was urgently needed
in the home as well as in the farm and commercial
fields of national finance. Inaugurated in July
of 1932, the System has grown from 118 members with resources of $217,000,000 as of December 31 of that year to 3,799 members with
$3,300,000,000 resources as of March 31, 1937.
Its advances to members have increased as of
the same dates from $837,000 to $142,700,000.
The framers of the original legislation setting
up the Federal Home Loan Bank System discarded the theory of a central mortgage bank of
discount as unsuited to a country of such wide
May 1937

frontiers and such pronounced differences in the
background and psychology of its people. They
preferred to place the emphasis on local thrift
and local responsibility and with that in mind
they created a system singularly impregnable
from the standpoint of risk but at the same time
sufficiently wide in its authority and powers to
knit together the many classes of institutions
engaged in home financing. Their aim was to
provide for that measure of liquidity which the
industry so urgently needed and also to set up a
mechanism for the easy transfer of funds from
areas of abundance to areas of scarcity.
FEDERAL CAPITAL
CARRYING out this conception it was provided
that the Government should advance original
capital up to $125,000,000 to supplement the
capital furnished by the private member institutions. This was to testify to the Government's
interest and concern in the new System and to
give impetus to the first experimental steps in a
new field. While strong requirements of liquidity
were thrown around the investment of member
deposits and member subscriptions for capital
stock, the Government's funds invested in the
System were made immediately available for
either long- or short-term loans. The wisdom of
this latter provision becomes apparent when it is
realized that the Government's stock interest of
$120,000,000 as progressively subscribed has made
possible five years of valuable experience and a
reasonable maturity before the System presented
itself in the market place for funds with which to
enlarge and develop its services.
In a way it may be said that with its first public
financing, which is now at hand, the Federal
Home Loan Bank System comes of age. It passes
from the period of its neophytage and dependence

249

upon the Government Treasury to one of independence and of competency based upon five
years of steady growth. Because of the rigid
conservatism with which this youngest of the
reserves was set up, it is in a singularly fortunate
position to ask for funds with which to carry on
its work. By law and regulation it cannot borrow more than five times its paid-in capital and it
can never have outstanding any indebtedness in
excess of the amount of the secured notes of its
members. Collateralized advances to members
are by law limited to 65 percent of the unpaid
principal balances or 60 percent of the appraised
value of the properties, whichever is less, and in
some instances the permissible ratios are even
lower. The one exception is made in the case of
FHA loans which are insured by the United
States Government, and upon which the System
will loan to 90 percent of unpaid principal balances. No loans to members may exceed 12
times the borrower's stock ownership in the System. Because of the mutual nature of the great
majority of member institutions, present advances
of some $140,000,000 constitute a first claim on
the assets of borrowing institutions whose total
resources in the aggregate are over $2,000,000,000.
The System has an inconsequential delinquency
record. Its net earnings since its inception total
$11,157,791, of which $2,045,336 has been set
aside as reserves, $2,302,136 as undivided profits,
and $6,810,319 has been paid in dividends to the
owners of the stock. Its present earning rate is
2.72 percent and dividends are being paid by the
various regional banks ranging from 1 percent to
2 percent.
PREVIOUS EXPERIENCE
SOME months ago when it became apparent
that the Bank System's expanding demand for
advances would necessitate the issuance of public
securities, the Board instituted a survey of the
general problem with particular attention to any
precedents which might exist. Fortunately, the
Land Banks and the Intermediate Credit Banks
had several years of experience to be drawn upon
in this connection. There was also available to
the Federal Home Loan Bank Board the invaluable advice of the officials of the United States
Treasury and the Federal Reserve Banks. Com-

250

mercial bankers in New York and other financial
centers were of great assistance.
In any approach to this problem of financing, it
is early discovered that a primary consideration
is to understand the wide difference which obtains
between a Reserve Banking System and a commercial enterprise. The same fules do not apply.
The Bank System does not operate as an adventure for profit but as the servant of its members.
It should, of course, pay its way and accumulate
certain reserves, but its main concern is not its
earnings but the proper performance of its function
to the industry and to the public. The amount
of its advances is not the criterion of its success
any more than the total discounts of the Federal
Reserve measure the usefulness of that institution in the realm of commercial banking.
IDEAL BALANCE

T H E ideal financial situation in the field of home
financing would be one in which the total public
savings available for long-term mortgage lending
just about balanced the legitimate demand for
such funds. Under such a condition the advances
of the Federal Home Loan Bank System would be
limited to seasonal and local demands for liquidity
and to the transfer of cash balances to smooth out
the geographical inequalities of supply and
demand.
For some time there has been no such desirable
balance in the home-financing market. We have
been passing through one of the great depressions
of history. It was inevitable that during the
black days of that period there should develop a
passion for liquidity, and that thrift funds should
be withdrawn from their conventional function
in the long-term market. They naturally sought
refuge in Postal Savings and other demand deposit
institutions, where they could be immediately
turned into cash without notice. During such
a period it was obviously the duty of the Federal
Home Loan Bank System to make long time
funds available at low rates, thus filling the gap
left by the flight of normal capital and permitting
the industiy to carry on.
There are now some encouraging signs that
private capital is returning to the mortgage
market. This vitally affects any long range
financing plan for the System. If this return
Federal Home Loan Bank Review

trend of private capital develops into a sustained
movement and the member institutions once again
accumulate the peoples' savings in amounts
sufficient to meet the demand for home financing,
the basic policy of the Federal Home Loan Bank
System must be amended accordingly—its longterm rates raised above the market cost of longterm funds, and its influence exercised toward the
reduction of such member borrowings as can be
replaced by private share investment. This will
be only the normal protection which a reserve
system should set up for its members against the
recurrence of a downswing in the business cycle.
With these many and various considerations in
mind, the specific questions to be answered in developing an initial financing program may be
stated as follows:
1. Should the offering be made in the form of
consolidated or individual bank debentures?
2. Should it be secured or unsecured?
3. What financing intervals?
4. Should the issue be short or long term?
There is very little difficulty with the first two
questions. The advantages of a consolidated issue
are compelling from the various viewpoints of convenience, expense, and market rate. As to collateralization, investigation has proved it unneces"
sary. The provisions of the law are so strong that
practical collateralization is achieved without
physical pledging of assets. The market advantage of any specific pledge has been found to be nil,
and the cost prohibitive.
QUARTERLY PERIODS

I N THE matter of financing intervals judgment
becomes more difficult. Obviously, the shorter
the intervals between offerings the less excess cash
the regional banks will have to carry and the
closer can be their estimates of requirements. On
the other hand, the market must not be worn out
with too frequent issues, and the program must
mesh with the practice of the Treasury and the
Intermediate Credit Banks. The quarterly
periods decided upon, while not as close as desired, should not impose unduly burdensome cash
requirements on the banks. They should permit
reasonable estimates of requirements.
May 1937

As to the question of maturity: Several members of the Advisory Council and of the regional
bank directorates have expressed themselves in
favor of a long-term initial issue. This opinion
is based on the theory that the Bank System's
function is primarily the making of long-term
advances, and its short-term function merely
incidental. However, a careful analysis of five
years of operation rather indicates the importance
of the short-term phase of the System's work and,
as pointed out above, this function may well
increase as recovery quickens and thrift funds
return to the member institutions. At the present
time $55,570,304 of the System's $142,719,537
advances are due within one year. During the
last six months cash repayments to the regional
banks have averaged $5,973,535 monthly.
Under these conditions expert opinion leans
heavily toward an initial offering of 1-year paper,
to be followed by similar maturities at quarterly
intervals until the total approaches the amount
of the System's liquids plus its advances due
within the 1-year period. Beyond that amount
maturities of offerings should be gradually extended to conform to the System's expected repayments. This would seem to be entirely
orthodox financing. I t is sanctioned by the most
conservative Wall Street practice.
There is one other consideration of importance
in connection with these present plans. Under
the provisions of the Home Owners' Loan Act of
1933, As Amended, the HOLC is authorized to
invest up to the sum of $300,000,000 in Federal
Home Loan Bank debentures and/or the shares
of State and federally chartered savings and loan
associations. Up to the present time this fund
has been used solely to purchase savings and loan
shares but there remains an unexpended balance
of $152,466,700, any or all of which can be
diverted to meet the needs of the Bank System
should the occasion arise. The ability to draw
on this fund is comfortable insurance that irrespective of market conditions, the System will be able
to dispose of its securities at its convenience and
upon reasonable terms.
EDITOR'S NOTE: The $25,000,000 issue of the first deben-

tures of the Federal Home Loan Banks was offered at one
and one-half percent on May 5, and oversubscribed within
a few hours.

251

Home Ownership and Income
This article, dealing with a metropolis, is the first in a series which will discuss home ownership and income in cities of
various sizes.

HAT types of families offer the homefinancing institution its greatest opportunity in the promotion of home ownership?
The answer may be partially provided for cities
of every population group by the "Study of Consumer Purchases", for which field surveys were
recently completed by the Bureau of Labor
Statistics and other Federal agencies.
If the families that do not own homes in a
community are classified first by the amount of
their income, and next by the type of their occupation, a savings and loan association can then
judge among which groups it can most profitably
expand its lending activities. How much each
type of family pays for rent, how large a proportion of each type own their homes, and how the
cost of shelter is related to other items in the
family budget are three of the many questions
that the Study of Consumer Purchases will help
to answer when final figures become available.
For practical purposes, the savings and loan
association wants information about groups of
families as near as possible like those which are its
potential customers, rather than national averages
in which such information is diluted with data
about families of entirely different types. The
Study of Consumer Purchases answers questions
with respect to specific income and occupational
groups in 50 cities. The data on each should be
of value to business men in cities of comparative
size.
DATA ON CHICAGO
T H I S series of articles will give data selected
from statistics gathered by this Study on specific
cities of various sizes, beginning in this number
with a metropolis, Chicago. The figures are based
on a survey during 1935-1936 of every tenth
family in the city. All data given in this article

252

refer only to those native white families that
include both husband and wife.
H I G H MEDIAN INCOME

T H E median income of families thus selected at
random in Chicago is comparatively high, since
half of the families received an annual income of
Proportion of home owners to all families in Chicago,
classified by income and occupational groups x
Non-relief native white families with both husband and wife, 1935-1936
[Based on a 10-percent random sample]
[Source: U. S. Bureau of Labor Statistics, Urban Study of Consumer
Purchases]

Percent of home owners
Income group

Wage
All occupations earners

Under $500
$500 to $750
$750 to $1,000
$1,000 to $1,250
$1,250 to $1,500
$1,500 to $1,750
$1,750 to $2,000
$2,000 to $2,250
$2,250 to $2,500
$2,500 to $3,000
$3,000 to $3,500
$3,500 to $4,000
$4,000 to $4,500
$4,500 to $5,000
$5,000 to $7,500
$7,500 to $ 1 0 , 0 0 0 . . . .
$10,000 and over

20.8
17.7
13.1
13.5
16.6
18.4
18.9
21.7
25.8
33.3
33.8
33.6
36.5
39.4
35.9
41.0
33.6

14.4
13.1
11.9
12.8
15.2
18.1
20.9
25.5
32.3
38.2
47.7
51.2
52.9
46.0
70.2

Cleri- Business
and procal
fessional
9.8
15.6
7.4
10.4
13.0
14.8
15.8
19.3
24.0
32.7
32.2
33.0
39.3
35.6
34.6
27.3
57.1

21.1
25.1
21.6
18.1
25.8
21.6
17.6
17.5
17.6
27.4
25.6
26.1
28.7
39.1
33.0
42.3
32.7

1
These preliminary figures are based on a survey of
28,520 families.

$1,683 or more. Only 22.9 percent received less
than $1,000. Only 20.1 percent of the families
owned their own homes, but the tendency to buy

Federal Home Loan Bank Review

a home when economically practicable is illustrated by the fact that home ownership increases
along with increases in the family income. For
example, only 13.1 percent of the non-relief families with incomes of between $750 and $1,000
owned their homes, but 36.2 percent of those with
incomes of $5,000 or more were home owners.
The inclination to home ownership is not something that is present only in the business and professional man, although his income tends to be
higher. Wage-earning families, who make up 45
percent of the non-relief native white families,
are most likely to own their homes when their
incomes are high enough to make it practicable.
In every one of the $250 income brackets from the
$1,750 level up, the proportion of home owners
among wage earners is higher than the proportion
for corresponding groups of those in clerical occupations, or in business and professional occupations. Even below the $1,750 level, the proportion of wage earners owning homes exceeds that of
clerical workers who are home owners. The fact
that the business and professional families with
less than $1,750 income are more often home
owners is probably partially explained by the
ownership of joint commercial and residential
properties.
LOW-COST MARKET
SINCE more than two-thirds of the non-relief
wage-earning families receive between $1,000 and
$2,500 annual income, it would be reasonable to
infer that homes within their financial reach
would find a ready sale. This possibility adds
emphasis to the current trend toward the lower
cost residential market.
The immediate economic addition to income
effected by home ownership is illustrated by the
findings of this study. In computing the effective income rather than the nominal money income of families, the Bureau of Labor Statistics
added to the money income of home owners the
amount by which the net rental value of their
homes exceeded the expense of home ownership.
This resulted in increasing the total family income figures for all home owners by 9.5 percent,
raising most of them from one $250 income bracket
into the next higher one. Certain qualifications
to this argument for home ownership must be

May 1937

mentioned. The computation does not take into
account the depreciation in the investment in a
home, the risk involved in fluctuations in neighborhood values, nor the cost to the home owner of
services occasionally covered by the rental payments. In computing income it takes into consideration the full rental value of the owned
home, and after deducting only interest, taxes,
and repairs, adds the remainder to the net money
income. The rental value of the homes in quesRent paid in Chicago by renting families, classified
by income and occupational groupsl
Non-relief natire white families with both husband and wife, 1935-1936
[Based on a 10-percent random sample]
[Source: U. S. Bureau of Labor Statistics, Urban Study of Consumer
Purchases]

Amount of average monthly rent
Income group
All occu- Wage
pations earner

$25. 90
22. 90
22. 80
26.00
28.10
30. 80
34. 20
36. 80
40. 60
42.10
47. 40
53. 60
55. 40
64.90
70. 00
87. 20
125. 40

Clerical

$20. 70 $29. 60
20. 601 26.10|
20. 70] 25.60
23.20 28.201
25. 901 30. 50|
28. 50| 32. 50
31.00 36. 20|
33. 501 37.70
36. 00 41. 201
37. 20 43. 30
39. 20 46. 90]
44. 00] 52.80
40.70 55.20
44.40 57.00
59. 901 64.60
75. 60
79. 00]

Business
and professional
$29.10
26.90
29.20
32.30
33.00
35.50
38.20
41.60
45.80
45.60
51.50
56.70
58.40
64.70
71.30
88.10
127.40

1
These preliminary figures are based^on a survey of
28,520 families.

tion was calculated by checking carefully the
owners' estimates against the rents paid for homes
of the same size and type in the same neighborhood.
The increase in the effective income of home
owners is, however, in consumer's enjoyment
rather than cash savings. The home owner
prefers to take his saving in better housing
accommodations rather than in money. Thus
the renting family with an income of $1,000 to
253

$1,250 pays $26.00 monthly rent, and the renting
family with an income of $1,500 to $1,750 pays
$30.80. But the home owner with an effective
income of only $1,000 to $1,250 has a home practically as desirable as that of the renting family
with $500 more income, for his home is appraised
at a monthly rental value of $30.06.
The burden of rent payments on lower income
families is shown by this study. Rent took 23.5
percent of total income of all renting families.
In terms of dollars, there was practically no
difference in the amount of rent paid by families
with net incomes between $250 and $1,000,
and so the difference in rent in terms of percentage of income consequently varies tremendously. Families with incomes of between $1,000
and $3,000, which made up three-fifths of the
total, spent 22.6 percent of their incomes for rent,
whereas at the $7,500 income level, rent took
only 11.2 percent of family income. In each
income class over $500, the business and professional group paid the highest rent, and the wageearning group the lowest.
RENT PROPORTION RISES
IN CONNECTION with these proportions, it is
interesting to note that although incomes rise as
cities increase in size, the proportion of income
spent for rent also increases. Preliminary figures
show, for example, that while the median family
income for Chicago is $1,683, and for Gastonia,
North Carolina, only $1,100, yet the Chicago
family receiving between $1,500 and $1,750
income paid 23.1 percent of its income for rent,
while the Gastonia family paid but 10 percent of
its income. In spite of the sectional differences,

254

these preliminary figures are of general interest.
The levels of rent in large cities would obviously
add to the desire of wage-earning families to buy
low-cost homes that would be sound investments.
ENCOURAGING TRENDS

THE general trends shown by the Chicago survey
will encourage those who believe that home ownership is desirable and practicable for families in our
metropolitan cities, where renting has been most
prevalent. As Chicago families become more
financially able to buy homes, they do so in greater
proportions. The greatest tendency to home
ownership at the various income levels is generally
found among wage-earning families. These families, however, are most often in the lower-middle
income groups, where home ownership has been
financially more difficult than for the more fortunate families. Those who do manage to own
their homes have been willing to make special
efforts to obtain better standards of shelter and
environment.
Since metropolitan wage-earning families, as
compared with families in smaller cities, spend a
larger proportion of their larger incomes for rent,
the opportunity for the home-financing and homebuilding business seems clear. As soon as neighborhood stability assures the thrifty wage earner
of the soundness of his residential investment, and
homes are built within his financial reach, a tremendous market will be opened to the homefinancing institutions in our metropolitan cities.
The next article in the series will deal with the
city of about 300,000 population.

Federal Home Loan Bank Review

Construction Loan Procedure

H E steadily rising graph of residential construction is pointing the attention of homefinancing institutions more directly each month
toward the subject of construction loans. The
increased responsibilities that such loans involve,
however, require greater attention to a proper
procedure. The lending institution, by advancing
a considerable proportion of the funds needed to
build a home, in effect accepts a measure of responsibility for the coordination of the local technical
facilities for construction.
A lender who advances money for the purchase
of a home already completed accepts responsibility
for the quality of its construction, although he had
no control over it while it was being built. By
making a construction loan, the lender is in a better
position to control, through careful supervision,
the cost and quality of the security on which the
mortgage loan is to be made. Such control has
become more important since longer term loans
became a matter of course. The quality of security for a 15-year loan is obviously more
important than the quality of security for a 5-year
loan. To insure the proper quality, a lending
institution should apply checks that will go far
toward coordinating the various phases of the
business of providing buyers with homes.
Because local laws and requirements vary, a
local thrift institution is best able to perform this
service and to handle the loans which result.
Certain fundamental points of sound procedure,
however, must be observed. It may be of interest
here to examine the procedure followed by several
savings and loan associations which have been
especially successful with construction loans in
the past. This article will deal only with the
additional problems which are encountered in
construction loans, omitting those involved in
ordinary lending activity as well.
PLANS AND SPECIFICATIONS

a borrower submits a formal loan application, he should of course include with it the plans
and specifications of the proposed home. Some
WHEN

May 1937
141011—37

institutions give considerable preference to applications when the plans have been drawn by a
competent architect. The blueprints should be
accompanied by detailed specifications, showing
exactly what materials are to be used. These
plans and specifications should be checked by an
individual qualified to appraise them, whether a
member of the lending association's staff or a fee
employee. One association has the city building
inspector, as well as its own staff appraiser, check
the plans submitted.
An alternative method is to arrange for the
plans, specifications, and cost estimates to be
checked, and the construction and disbursements
supervised, by an independent local architect or
technical organization. In this way control can
be maintained without unduly increasing the
burden on the association's staff.
CHECK ON CONTRACTORS

A VARYING amount of reliance must naturally be
placed on the reputation of the contractor who is to
build the home. It is better practice, however,
to consider a good reputation as an additional
safeguard in dealing with a builder, rather than
to assume that it will be an adequate substitute
for detailed plans and specifications. More businesslike procedure in this respect is a help rather
than a hindrance to the competent contractor.
I t is desirable to have more than one contractor's
bid on a job, and as many as three bids are occasionally required. These bids must be carefully
checked by a competent architect or appraiser,
however, unless the lender is willing to depend
entirely on the borrower's and builder's character
to prevent collusion. A contractor's bond is an
extra safeguard that some associations consider
well worth the additional expense.
Of particular interest is the system devised by
one association on the Pacific Coast. This association has drafted a standard set of supplemental
specifications, which it requires both borrower
and contractor to sign in addition to the ordinary
plans and specifications. The supplemental form
255

is designed to insure proper construction and to
eliminate any loopholes in the ordinary specifications submitted. The contractor, whose credit
standing and reputation are checked with a local
service, must also fill out an estimate sheet furnished by the association, giving the amounts of
all sub-bids, material costs, and payments for
labor. All this material is then submitted to an
appraiser and an architect, working on a fee basis,
who propose any desirable changes in the details
and check on the estimated costs. Thus as complete a control as possible is maintained over the
quality of the plans for the home that is the
mortgagee's security.
Neighborhood influences must always be considered in appraising property. But in making a
construction loan the lender must be sure that
special technical attention is given to the relationship between the house and the lot, for it is
more difficult to envisage this relationship with
respect to blueprints than to a house already constructed. Homes which are in harmony with the
neighborhood, and which are well adapted to the
size and topography of the lot, are more reliable
values than misplaced and misfit dwellings.
Homes designed by architects are usually superior
in this respect to those built according to even the
best stock plans, since they are designed for the
specific lots on which they are to be constructed.
SUPERVISION OF CONSTRUCTION
CAREFUL checks on the various stages of construction are necessary if the lender is to be sure
that the home is sound security. Whether
administered by a fee architect or appraiser, or
an employee of the lending institution, supervision can be a real service to the borrower without
being expensive. Some associations have found
it desirable to arrange for the public building
inspector to check on the construction as well as
on the plans and specifications of the residence.
At least five or six inspections are necessary for
thoroughness. The lender may either charge a
fixed sum for this service, or furnish it along with
other technical services for a percentage of the
loan. Special care must be taken to avoid investment of more money in a home than is warranted
by the present and future characteristics of the
neighborhood, and the size and shape of the lot.

256

Any changes made in plans or specifications during
construction should be approved by the lending
institution, which should report to the borrower
any failure to comply with the details of the
contract.
When construction cost is to be greater than the
amount of the loan, some associations depend on
the credit rating of the borrower, and on the
accuracy of the contractor's estimates, to insure
that enough money will be available to complete
construction. The lending institution can be
more certain, however, by requiring the borrower
to put his cash equity in escrow, or to put it on
deposit with the amount of the loan.
If this method is followed, the association must
decide, when it has credited the amount of the loan
to the "Loans in Process" account, at what time
the borrower's cash equity should be paid out
with relation to the disbursement of the loan.
Some associations put additional funds supplied
by the borrower in escrow merely to cover unforeseen contingencies. Others disburse them along
with the amount of the loan. Still others advertise to the prospective borrower the advantages
of a third procedure, in which the association
disburses the borrower's deposit first, in order to
save him a certain amount of interest charges.
With the last method it is appropriate to charge
interest only on each advance from the date that
it is actually disbursed, rather than on the full
amount of the loan from the date that it goes on
the books. This policy offers a special inducement to the borrower to invest his equity first in
the construction, and thereby gives the association
some extra margin of protection.
An alternative method, which provides somewhat less control by the association, is to permit
the borrower to pay the bills as they become
due until he has expended the required amount
of his cash equity. When this is done, the
association should take steps to assure itself
that such payments have actually been made,
and that their full value has gone into the house
in question.
PRIORITY OF L I E N

from the usual legal safeguards taken to
make sure that there is a clear title to the property
and no lien prior to that of the lender, special care
is needed in handling a construction loan. If

ASIDE

Federal Home Loan Bank Review

work on the house is already in progress, the
association must make sure that all outstanding
debts have been settled, or that provision to
settle them will be made. If work has not been
begun, the lender should secure evidence that no
work has been done on the property, and no
materials delivered to it, before the lending institution's lien is recorded. Some associations go
so far as to photograph the site immediately after
having the mortgage or trust deed recorded, and
to include with the photograph an affidavit by an
inspector to the effect that nothing has been done
on the property which might affect the lien of
the association. If any lien has attached, it is
essential that no disbursement be made until a
waiver has been signed by all possible lienors.
In connection with the subject of liens on the
property, before the procedure of disbursement
is discussed, it should be emphasized that particular care is needed to prevent mechanics' liens
from attaching to the property during course of
construction. Since the proper precautions are
closely linked with the method of disbursement
of the loan, they will be discussed in that
connection.
DISBURSEMENTS
DISBURSEMENTS of the loan must be made only
on the authority of both the borrower and the contractor or architect who is responsible for the construction. When any disbursement is made,
proper receipts should be obtained, and waivers
of mechanics' liens with respect to any labor or
material provided in the process of construction.
There are several possible methods of accomplishing this. One is to make checks for disbursements payable to both the borrower and to the
builder, so that both must endorse them. Canceled checks and receipted bills then furnish a
valuable record for the loan docket.
A more detailed procedure to obtain such receipts and waivers which is of special interest is
as follows: The borrower is required to authorize
the association to make loan disbursements upon
order of the contractor. He is then furnished
with a book of non-negotiable orders against the
association, which are drawn by the contractor in
favor of the subcontractor or materials dealer,
describing the work done and specifying the
amount to be paid. On the reverse side of the

May 1937

order the party to whom it is payable signs off all
lien rights as a condition of the payment, and
attaches to the order receipted bills for materials
furnished and labor releases signed by all those
employed in the work.
In some places the materials and supply dealers
maintain a credit bureau where the contractors
and sub-contractors must make affidavits as to
the materials purchased and to their payroll
requirements.
There are various methods of arranging for
periodic disbursements during the course of
construction. Some associations make weekly
payments for the labor payrolls, and intermittent
payment for materials whenever they are actually
delivered on the premises. More popular is
the plan of making a specified number of disbursements at specific stages of construction.
When this is done, the association may tie its
schedule of disbursements in with its schedule
of supervision, and thus obtain more effective
control over the methods and quality of the construction.
Perhaps the four stages at which payment is
most frequently made are: first, when the foundation is in and the floor joists or rough floors have
been laid; second, when the frame is completed and
the roof on; third, when the building is plastered
and all mechanical equipment except lighting is
installed; and fourth, when the work is absolutely
completed. Occasionally as many as six payments are made, with the two extra payments
occurring most frequently when the cabinet and
interior work is completed after the building is
plastered, and also at the date when the lien period
has expired, or until all liens are definitely cleared.
It is desirable to obtain from the borrower a
written approval of the work before making the
final settlement with the contractor.
The proportion of the total cost to be disbursed
at each stage of construction depends, of course, on
the amount required at that degree of completion.
If one payment is held back until the date when
the lien period has expired, or until all liens have
definitely been cleared, it may well amount to at
least the proportion of the cost that will be the
contractor's profit.
An unusually close control of the construction
and disbursements may be maintained if the
(Continued on p. 280)

257

The Future of Suburbs

HE problems in the development and future
growth of residential suburban areas, where
improved transportation facilities have let urban
employees escape urban congestion, are of particular
significance for mortgage lenders. In these areas
a large part of the best mortgage loans are made.
And today, with mortgage loans being made for
periods up to 20 years, the stability of these areas
assumes a new importance.
These suburban problems, along with the general subject of urban development, were under
discussion in the March issue of the Annals of the
American Academy of Political and Social Science,
which was devoted entirely to "Current Developments in Housing". This issue contains two
dozen articles presenting the opinions of as many
authorities on the diverse aspects of housing.
Some of these opinions bear directly on the problems and the future of the mortgage lender, especially if he holds a portfolio of suburban loans.
The first factor bearing directly on the suburbs
is population fluctuations. Warren S. Thompson,
Director of the Scripps Foundation for Research
in Population Problems, in his article on population growth estimates that the housing demand for
the country as a whole will be approximately 35
percent greater in 1955 than in 1930, in spite of
the fact that the population will have increased
only 19 percent. He bases his argument on the
fact that the birth rate is declining and we are
rapidly becoming an older population. As regards
the suburbs specifically, census figures show that
in the past there has been a decided drift to these
areas. The rate of increase in population of rural
satellite districts between 1920 and 1930 was
almost 2.5 times as great as the rate of increase in
the population of the cities themselves. Mr.
Thompson concludes "that the housing demands
of these less densely settled areas around the great
cities may soon surpass those of the central areas."
There are, however, several contrary factors
which must be considered. Suburban development was in part an escape from blight and city
congestion, but in many cases little was learned
258

from the cities' mistakes. The very fact that the
population of satellite areas has increased so
rapidly has encouraged the same unplanned subdivision that doomed the urban areas, and the
same rash of jerry-building that endangers stability. In the words of Miles L. Colean, who contributes the article on "Economic and Social
Significance of Housing Design", city dwellers
were "planlessly endeavoring to escape from planlessness." But no one could foresee the extent of
expansion, so rigid rectangular street patterns
were laid out which provided for the necessities of
the hour without providing permanent stability.
TREND OF INDUSTRY

ONE trend which may change the very character of suburban communities and may contribute to uncertainty is the gradual change in
the location of industries, according to Edgar M.
Hoover's article on "Industrial Location and the
Housing Market." It is his argument that as
staple goods become less expensive through improved technology there is greater demand for
services, trading facilities, and accessories. Since
the service and trade groups of industry by their
very nature demand central location, they are
forcing the heavy industries into the suburban
zones that zoning laws fail to protect. Mr.
Hoover says that there is no likelihood of a general
scattering of manufacturing to small cities and
towns outside the industrial urban areas. The
trend is rather toward the suburban zones on the
periphery of cities. There are, of course, many
other factors that are contributing to this decentralization. Some of them are: high land
costs in urban centers, the differences in the cost
of living and in wage levels between urban and
suburban areas, greatly improved transportation for both men and materials, and the increased
use of electricity for power.
This evolution in the character of cities makes
the estimation of housing demand much more
complex. Some suburbs, especially the less
(Continued on p. 281)

Federal Home Loan Bank Review

Deficiency Judgments

HEN a borrower defaults on a mortgage
debt, a deficiency judgment may be the
last resort for the protection of the lending institution, since by this legal means it may be able to
collect that portion of its loan which the proceeds
of a foreclosure sale fail to cover. In obtaining
and enforcing such judgments, a well-considered
policy is necessary to do justice to both parties
and insure sound bookkeeping. The laws of the
various States offer little guidance toward a
uniform policy, however, for they vary considerably. Two variations of particular interest are
those that pertain to the length of the period
within which a deficiency judgment may be
enforced, and the amount that can be obtained
thereby.
When it is impossible to collect a deficiency
judgment immediately, the lending institution
must decide whether there is enough chance that
collection will be profitable in the future to justify
carrying the debt on its books. In many cases,
failure to write off a bad debt of this kind means
refusal to admit an unpleasant fact, and involves
inaccurate accounting. State laws, however, permit a wide variety of practice. In Connecticut,
for example, a lending institution must move for a
deficiency judgment within 10 days; in Iowa, it
may wait two years; in some cases, its right is
affected only by the general statute of limitations.
In a number of States the deficiency judgment
follows the sale as a matter of course, and the
statute of limitations then runs against it.
When the mortgagee buys the property at foreclosure sale for less than the amount of the debt
and much less than its true value, he must decide
how much to try to collect. In some cases, he
may be permitted to collect the entire difference
between the amount of the debt and the sale
price at foreclosure, whether or not such sale
price reflected the property's true value. If, for
example, the mortgagee buys a property fairly
appraised at $3,500 for $500 at a foreclosure sale,
May 1937

and the mortgage debt was $4,000, it may be
possible for him to claim $3,500 when he applies
for a deficiency judgment. From a long-range
point of view, however, greater leniency is both
more equitable and economic, since all sound
lending must be based on fair dealing between the
parties concerned.
REQUIRED BY LAW

SUCH leniency is now required by law in a
number of States. In Pennsylvania, for example,
the deficiency judgment may be granted only
for the difference between the amount of the
mortgage claim and the value of the mortgaged
property, as determined by appraisers appointed
by the court. In Idaho, the amount granted by
the deficiency judgment is determined in a
similar manner, except that the court itself has
final discretion. An Alabama statute of 1935
provides that the debtor may set off against his
debt the fair market value of his security, no
matter what the amount obtained at foreclosure
sale, and this provision has been upheld by the
Supreme Court of the State. Statutory provisions and judicial practice are gradually bringing
about similar policies in a number of States.
On the other hand, there is a very definite limit
to the benefit that borrowers in general will
receive from leniency in the law on deficiency
judgments. It is to the interest of both borrowers
and lenders that a deficiency judgment should
protect the lender up to the exact amount of the
obligation, so that he may confidently lend as
much, at as low a rate of interest, as the borrower's
security and credit justify. But when the legislation or practice makes the collection of deficiency
judgments unduly difficult or impossible, as it is
becoming in several States, the lender may not
be willing to extend as liberal terms as he otherwise would.
In contrast to the variety of policies prescribed
by statute and custom, the Home Owners' Loan
(Continued on p. 277)

259

Appraisal Methods and Policies
This is the seventh in a series of articles.

HE cost of reproducing a house, when properly interpreted, is a significant indicator of
its value. It is important, however, that the
appraiser realize that it is only an indicator, not
final and conclusive proof.
The cost of replacement of any property ordinarily establishes an approximate upper limit to its
value. While property may under some circumstances be sold for more, an appraiser is seldom
justified in valuing it at a higher figure, for such
circumstances may be uncertain and temporary.
It is recognized, of course, that there are houses
that have a historical or sentimental interest that
gives them a value greater than the cost of
physical replacement but in such cases there are
intangible elements of value in the property that
cannot be reproduced.
The sound, reasonable appraisal value of property that has only residential utility rarely exceeds
its replacement cost, although it may often be
below it. Unless the house is new, some allowance must be made for depreciation. And even
if new, it may not be worth what it would cost to
replace it, if it has been improperly designed,
planned and located. Likewise, unusual boom
conditions or distress periods, of short or long
duration, may cause fluctuations in the cost of
material, labor or land which will tend to distort
the "cost" picture to such an extent that comparatively few students of appraising, after
studying economic and cost trends far beyond their
immediate vicinity and period, are capable of correctly interpreting their normal position. Thus,
the appraiser's task is not ended when he has
estimated the value of the lot and computed the
cost of reproducing the house. The method of
appraisal, in which the value of the property is
determined by adding together the value of the
house and the value of the lot, each of which has
been appraised independently of the other, is
justly condemned by good appraisers and appraisal organizations. The house and the lot
must be viewed in their relationship to each other,
260

and as a unit, before a final valuation is placed
upon them.
It should be noted that the cost-of-replacement
method is not concerned with the original cost of
constructing a. house, but rather with the cost of
reproducing it anew at the present time with the
prevailing costs, methods, and efficiency. The
prices of existing goods in a free competitive
market must always adjust themselves to current
changes in the cost of production. Thus it is
reproduction cost rather than actual cost which
the appraiser must determine. In the case of new
construction, however, which has been produced
with average efficiency and at prevailing costs, this
differentiation between reproduction and actual
costs is unnecessary.
With this understanding of the part which cost
plays in the determination of value and of the
limitations upon the use of costs as an evidence of
value, we may proceed to a consideration of the
various methods of dwelling-cost estimation.
Four general methods of estimating the cost of
reproducing a house are available to the appraiser.
They may be designated as follows:
1. Detailed cost estimates.
2. Inplace unit method.
3. Cost per square foot method.
4. Cost per cubic foot method.
The use of either of the first two of these methods
is most practicable in appraising a newly constructed house or one before it is built, upon the
basis of plans, specifications, and construction bids.
In the case of newly constructed buildings an exact
record of all expenditures incurred in the construction process may be available to the appraiser.
The appraiser, however, should never accept such
figures as the basis of his appraisal without carefully checking their accuracy and reasonableness.
Collusion between unscrupulous real-estate operators and contractors in submitting fictitious and
inflated cost estimates or expense accounts as a
means of securing excessive loans has not been
Federal Home Loan Bank Review

entirely unknown. If the operators and contractors have an estabUshed reputation for being
honest and capable builders, their figures can
naturally be accepted with more confidence and
with less need of detailed checking.
In making construction loans the association
should insist upon having plans, specifications, and
construction bids on the proposed building before
passing upon the application. Unless plans and
specifications are submitted, there is no basis
upon which an appraisal can be made. Construction bids are an aid to the appraiser and an assurance to the association that the house will be completed within a certain cost limit. The appraiser
should carefully check the bids against the plans
and specifications to determine whether they are
fair and reasonable. If he considers them to be
excessive, his appraised value would then be less
than the proposed cost, unless lower bids could
be obtained. Incidentally, such an appraisal
service not only protects the association against
making insecure, excessive loans but also protects
the borrower against having to pay unreasonably
high construction costs.
T H E INPLACE U N I T PRICE METHOD

T H E inplace unit price method is based upon the
determination of unit costs for the construction of
the various parts into which the house for this
purpose may be divided. These parts, in the
method as it is used by the Federal Housing Administration in estimating replacement cost, are
as follows: (1) excavation, (2) foundations, exterior steps, and chimneys, (3) floors and ceiling,
(4) roof and sheet metal, (5) exterior walls, (6)
interior partitions, (7) millwork, (8) plumbing,
(9) heating, and (10) electric light and power.
In excavation the unit is the cubic yard and the
cost per unit is determined simply upon the basis
of contractors' charges or estimates. In items (2)
to (6) above, the square foot is adopted as the
unit of cost. The appraiser carefully estimates,
for example, the cost of constructing one square
foot of the foundation wall, including in the cost
labor, materials and necessary wastage and incidentals. The quantity of material necessary for
constructing one square foot of a certain part of
the house is termed the factor for that part. Thus
if in constructing one square foot of a 12-inch
May 1937

foundation wall, the cost of the brick, stone or
concrete inplace price for a cubic foot would be
determined; for example, in constructing one
square foot of a 12-inch brick foundation wall
19.5 bricks are used, that number becomes the
factor. If the appraiser finds that the "inplace"
cost of one brick, including the price of the brick
itself and the cost of the labor and mortar used, is
3 cents, the square-foot unit cost is 58.5. If the
wall was 4 or 6 inches thick, the quantity required
for each square foot of surface would be 0.33 or
0.50 cubic foot and the factor would be 0.33 or
0.50. The square-foot unit cost would then be
determined by multiplying the cost per cubic foot
by the factor 0.33 or 0.50.
I t is obviously impossible to reduce items (7)
to (10), as listed above, to square-foot unit costs
and so their actual costs, fully installed, are carefully calculated or are determined upon the basis
of contractors' bids or estimates. Thus in determining the cost of an exterior door, the price of
the door itself and the cost of the frame, trim,
hardware, labor and paint would be estimated
separately and then added to secure the "inplace"
cost of the door.
The cost of garages and other outbuildings
would be determined in the same way as that of
the main building, although since there are fewer
parts the process would be simpler.
Unit costs for the various types of construction
commonly used in a community should be calculated, and revised from time to time, as changes
in material or labor costs may make it necessary.
In applying this method, after the unit costs have
been compiled, it is simply necessary to secure
the measurements of the house being appraised,
and the other quantity data, reduce them to the
square-foot or other units used, and multiply by
the proper unit price.
Because of variations in the quality of the
workmanship or of the materials it may be necessary to make an adjustment in some cases,
which can usually be done satisfactorily by increasing or decreasing the total cost by a certain
percentage. Included in the final total cost
should be an allowance for builder's overhead and
profit and the architectural fee, all of which
should be calculated at the rate customary in the
locality.
261

The accuracy of the method depends chiefly
upon the care with which the unit costs are determined and kept up-to-date. Costs determined
with reasonable accuracy require an amount of
detailed and painstaking calculation that is likely
to deter anyone but a professional appraiser from
undertaking the task. The method is practical
for the nonprofessional appraiser only if a central
appraising bureau or some other interested organization makes the necessary unit cost data
available to him. An excellent detailed presentation of this method is to be found in the Underwriting Manual of the Federal Housing Administration.
THE CUBIC- AND SQUARE-FOOT COST METHODS

the cubic- and square-foot methods are
less accurate than the inplace unit price method,
they are more practical for the nonprofessional
appraiser and therefore are more widely and
commonly used. The cubic-foot method is
commonly considered to be the more accurate
of the two and if only one method is used, it is
to be preferred. However, some appraisal authorities strongly recommend that both methods
should be used in estimating reproduction costs,
using one method as a check against the other.
With either method the first step is the selection
of certain standard types and sizes of houses,
which can be considered as typical of all those
which the appraiser is likely to be called upon to
evaluate, such as a 5-room brick bungalow, a
6-room 2-story frame, etc. What these selected
standard types should be will vary, of course,
with different communities. The greater the
number of types used, the more accurate will be
the results obtained.
Standard specifications, which should be typical
of those used in the community, should be drawn
up for these houses. The total cost of constructing each of these typical houses must then
be determined. The appraiser may make a
detailed cost estimate himself, or he may secure
estimates on each part from one or more reliable
contractors. If estimates are obtained from a
number of different sources and averaged, excluding any which are excessively high or low,
the result can be accepted with greater assurance
than if only one is used.
WHILE

262

The number of square feet or of cubic feet contained in each of the typical houses must then be
determined. Measurements should extend to the
outer surface of exterior walls and to the lower
surface of the basement floor, and should include bays, dormers, exterior chimneys, inclosed
porches, and built-in garages.
The actual number of cubic feet inclosed by the
house thus measured is then easily determined.
Noninclosed porches may then be added at a
fraction of their total volume, the fractions commonly used being one-half if the porch is an extension to the house and two-thirds if it is within
the house.
To determine the number of square feet, the
finished and livable floor area above the basement,
measured as indicated above, is calculated. Finished portions of the basement, such as a game
room or servants' quarters, and semifinished parts
of the attic should be included at half their area.
Noninclosed porches should be counted at onehalf or two-thirds of their area.
The square-foot and cubic-foot costs of the
standard houses can then easily be determined by
dividing the total cost of each by the number of
square and cubic feet that it contains.
In applying these methods, the number of cubic
feet or of square feet, or both, which the house
under appraisal contains should be determined in
the same way and the result multiplied by the
proper unit cost of the most similar standard
house. In many cases, however, before the final
reproduction cost is fixed, adjustments must be
made for particulars in which the appraised house
differs from the standard one. If the difference is
in size, the price per cubic foot, or per square foot,
may be varied slightly. For example, 1 cent
may be added for each 5,000 cubic feet below, or
subtracted for each 5,000 cubic feet above the
standard size, as the cost of construction does not
increase in exact proportion to the size.
It may also be necessary to make adjustments
for differences in finish and equipment between
the standard house and the one being appraised.
The latter, for example, may have an oil burner
while the former has a coal furnace, or a wood
floor in the bathroom instead of tile. Such adjustments may be made by estimating the actual
differences in cost, and then adding the amount
Federal Home Loan Bank Review

to the total cost, or subtracting it from it, as the
case may be.
Many appraisers, however, prefer to make the
adjustment by varying the cost per cubic or
square foot. Thus, if the house has an oil burner
instead of a coal furnace, 1.5 cents may be added
to the cubic-foot cost, or 0.2 cents may be subtracted because of the wood floor in the bathroom.
The exact amount to be added or subtracted would
vary, of course, with the size and type of house.
In place of using one unit price for the total
volume of the house, some appraisers believe more
accurate results can be obtained by calculating
separate unit costs for the basement, the main
section, and the roof volume. In the actual
appraisal by this method of a 5-room brick bungalow in St. Louis (reported in the Real Estate
Analyst for April 1936), the cost per cubic foot
of the basement was found to be 9.4 cents; of the
main section, 32.6 cents; and of the roof volume,
11.5 cents, resulting in an average cost for the
whole house of 19.8 cents. But if that figure
should be used as a standard and applied to a
house in which the volumes of the three parts
were in quite different proportions, the result
would be considerably in error. While granting
that this refinement of the cubic-foot method may
produce more accurate results, many appraisers
feel that it is not necessary, inasmuch as the reproduction cost, however carefully calculated, is
only an estimate of one indication of the value
of the house and in most cases must be modified
by other factors in a degree largely dependent
upon the judgment of the appraiser.
As was emphasized in the beginning of this
article, an appraisal should never be based upon
replacements costs alone. In the case of a newly
constructed house, deductions may be necessary
because it has been poorly planned or designed or
because it is poorly adapted to its location. With
older houses, depreciation due to obsolescence or
physical depreciation must be taken into consideration. The following article in this series will be
devoted to a discussion of depreciation allowances.

PERMANENT office for the accumulation
and distribution of appraisal data is being
established in Washington through the cooperation of three Federal agencies with three private
organizations. The Society of Residential Appraisers, the American Institute of Real Estate
Appraisers, and the National Association of
Housing Officials are cooperating with representatives of the Federal Home Loan Bank
Board, the Federal Housing Administration, and
the Farm Credit Administration in a "Joint Committee on Appraisal and Mortgage Analysis",
which is preparing to classify appraisal data,
indicate sources of such material, and make it
available for private use.
The first annual National Appraisal Forum, to
which representatives of such organizations as the
United States Building and Loan League, the
Association of Life Insurance Presidents, and the
National Association of Savings Banks will be
invited, will be held this September in Washington. It is expected that the collaboration of
these representatives with leading academic
authorities will furnish lending institutions with
appraisal material of considerable value.
The Committee intends to list the sources and
set forth the types of data which should be used
by both large lending institutions with specialized
appraisal departments, and by small organizations
which must handle their appraisal work with a
very limited personnel. Lending institutions are
invited to submit any questions dealing with
appraisal or mortgage analysis to the Committee,
which will either answer them or refer them to the
proper sources of information.
The Committee may be addressed through any
of its three officials: Frederick M. Babcock, of
the Federal Housing Administration, chairman;
E. L. Ostendorf, of the American Institute of Real
Estate Appraisers, first vice-chairman; and Donald
H. McNeal, of the Federal Home Loan Bank
Board, second vice-chairman.

263

May 1937
141011—37

Appraisal Forum Planned

Indexes of Small-House Building Costs

HE cost of building the standard house rose
between January and April in 25 of the 26
cities reporting for these two months. The
increases reported were substantial, ranging from
2 percent to 16 percent, and causing the most
drastic fluctuations in cost levels reported since
the Indexes werefirstcompiled.
This general increase was due in greater part to
a rise in the price of materials than in the cost of
labor. This tendency is corroborated by the
steady month-by-month increase during the past
year in the cost of wholesale building materials, as
reported by the national index compiled by the
Bureau of Labor Statistics. Wholesale prices of

building materials during March were higher than
the 1929 average for the first time since that year,
and they exceeded their level for March 1936 by
more than 10 percent.
The standard house rose in cost to $7,125 in
Great Falls, increasing 9 percent since January.
This figure is the highest reported since the
compilation of these Indexes was begun. The
only other case in which the $7,000 mark was
exceeded was in the Chicago report for February
1937. The sharpest proportionate increases over
the previous months were shown in Detroit, with
a rise of 16 percent, and in Seattle, Atlantic City,
and Albany, each with 10-percent increases.

Cost of building the same standard house in representative cities in specific months
NOTE.—These figures are subject to correction.
[Source: Federal Home Loan Bank Board]

Federal Home Loan Bank
Districts, States, and
cities

No. 2—New York:
New Jersey:
Atlantic City
Camden. . . .
Newark
New York:
Albany
Buffalo
Syracuse....
White Plains

Total building cost

Cubic-foot cost
April
1937

April
1936

April
1937

$0. 279
.244
.267

$0. 240
.215
.241

$6, 702
5,864
6,400

$6,107
5,489
6,071

.254
.255
.245
.254

.216
.228
.232
.238

6,098
6,108
5,890
6,100

5,569
5,820
5,575
6,137

January
1937

October
1936

January
1936

July
1936

April
1936

$5, 641
5,183
5,811

$5, 725
5,073
5,794

$5, 768
5,170
5,787

$5, 860
5,101
5,771

5,302
5,661
5,567

5,341
5,680
5,580
5,779

5,198
5,483
5,580
5,718

5,218
5,487
5,628
5,652

5,777

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 on first floor; 3 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, a fireplace, essential heating, plumbing, and electric wiring equipment, and complete insulation. I t does not include wall-paper
nor other wall nor ceiling finish on interior plastered surfaces, lighting fixtures, 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, financing charges, nor sales costs.
In figuring costs, 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.

264

Federal Home Loan Bank Review

The only city of the 26 that went contrary to the
general trend was White Plains, which reported
a 1-percent decrease in costs. Grand Rapids
maintained its January position by reporting the
lowest cost of $5,547. The next lowest totals
were reported by Kansas City and Evansville.
The April cost level in each of the cities was
higher than that reported for the same month in
the previous year. St. Paul showed the greatest
increase over the preceding year by reporting a
rise of 22 percent in the total cost. The next
greatest increases for the year were reported by

Detroit, 20 percent; Seattle, 19 percent; and
Albany, 17 percent. On the other hand, the
least increases were reported by the following
cities: Indianapolis, 3 percent; Evansville, 4 percent; and Sioux Falls, 5 percent.
Although the national trend toward higher
costs is unmistakable, local variations are considerable. The fluctuation is obviously not a
sectional one. The greatest increases in cost for
the period of April 1936 to April 1937 were reported by four cities, one of which is located in each
of the four Bank Districts represented.

Cost of building the same standard house in representative cities in specif ]c months-—Continued
Cubic-foot cost
Federal Home Loan Bank
Districts, States, and
cities

No. 6—Indianapolis:
Indiana:
Evansville
Indianapolis
South Bend
Michigan:
Detroit
Grand Rapids
No. 8—Des Moines:
Iowa:
Des Moines
Minnesota:
Duluth
St. Paul
Missouri:
Kansas City
North Dakota:
Fargo
South Dakota:
Sioux Falls
No. 11—Portland:
Idaho:
Boise
Montana:
Great Falls
Oregon:
Portland
Utah:
Salt Lake City
Washington:
Seattle
Spokane
Wyoming:
Casper...

May 1937

Total building cost

April
1937

April
1936

April
1937

January
1937

October
1936

$0. 242
.247
.265

$0. 232
.240
.243

$5, 816
5,921
6,349

$5, 518
5,540
6,180

.262
.231

.219
.216

6,278
5,547

.269

.253

.250
.268
.239

July
1936

April
1936

$5, 586
5,558
5,906

$5, 585
5,802
5,849

$5, 570
5,755
5,844

5,398
5,294

5,297
5,138

5,293
5,174

5,265
5,174

5,136

6,444

6,090

6,246

6,130

6,072

6,003

.234
.220

5,990
6,442

5,697
6,049

5,765
5,628

5,671
5,523

5,616
5,284

5,287

.221
.249

5,731
6,590

5,387
6,227

5,240
5,918

5,311
5,915

5,304
5,976

5,229
5,997

.230

6,002

5,743

5,524

5,614

5,529

5,491

.237

5,999

5,839

5,716

5,711

5,688

5,655

.259

.241

6,214

6,045

5,691

5,604

5,784

5,750

.297

.270

7,125

6,548

6,540

6,598

6,474

6,457

.248

.220

5,951

5,591

5,561

5,307

5,277

5,278

.257

.241

6,166

5,820

5,915

5,793

5,778

.277
.273

.233
.238

6,659
6,543

6,045
6,375

5,977
6,173

5,690
5,712

5,587
5,712

5,575

6,381

6,253

6,445

6,255

.275
.250
.250

.266

January
1936

$5, 739
5,894

265

Monthly Lending Activity of Savings and
Loan Associations

EPORTS from 2,833 savings and loan assom ciations from every State, Hawaii, and the
District of Columbia show that 31.8 percent of
the total amount of new mortgages on 1- to 4family nonfarm homes made by these associations
during March was for loans on new construction.
Loans for home purchase accounted for 35.8 per-

cent of the total; for refinancing, 26.1 percent;
and for reconditioning, 6.3 percent.
Of the total number of associations reporting,
2,290 made loans during the month amounting to
a total of $50,513,500. Mortgage loans on 1- to
4-family nonfarm homes accounted for $45,802,900 of this sum.

Monthly lending activity and total assets as reported by 2,833 savings and loan associations in March 1937
[Source: Monthly reports from savings and loan associations to the Federal Home Loan Bank Board]
[Dollar amounts are shown in thousands of dollars]

Number of associations

Federal Home Loan
Bank Districts and
States

Loans made in March according to purpose
Mortgage loans on 1- to 4-family nonfarm homes

Construction
Submit- Reporting
ting
loans
reports made

Refinancing and
reconditioning 2

Loans for all
other purposes

Total loans, all
purposes

Amount
Number

State-member. . .
Nonmember. . . .

Home purchase l

Number Refinan- Recon- NumAmount
Amount Numdition- ber Amount Number
cing
ber
ing

Tota 1 assets
March 31,
1937 3

Amount

2,833

2,290 4,277 $14,580.0 6,554 $16,369.4 7,770 $11,964.1 $2,889-4 3,325 $4,710.6 21,926 $50,513.5 $2,747,784.5

1,170
1,071
592

1,059 2,607
873 1,430
358
240

9,172.1 3,103
4,780.6 2,758
627.3 693

7,759.9 4,041 6,298.3 1,483.8 1,290 1,835.4 11,041 26,549.5 841,859.3
7,091.6 3,020 4,988.4 1,035.9 1,573 2,194.9 8,781 20,091.4 1,446,213.6
677.4 369.7 462
1,517.9 709
680.3 2,104 3,872.6 459,711.6

156

134

180

840.7

364

1,201.7

493

861.7

259.7

225

226.4 1,262

3,390.2

312,190.8

28
20
89
10
5
4

22
15
81
10
4
2

51
7
103
8
11
0

204.0
20.0
548.0
19.8
45.4
3.5

23
27
200
33
68
13

66.8
59.7
740.3
70.4
222.2
42.3

53
35
310
42
48
5

197.5
43.3
505.7
50.4
58.9
5.9

22.4
11.9
190.6
21.3
13.1
0.4

3
7
136
32
39
8

4.1
2.2
156.9
23.4
32.0
7.8

130
76
749
115
166
26

494.8
137.1
2,141.5
185.3
371.6
59.9

23,131.4
11,617.8
236,399.1
12,945.9
25,643.6
2,453.0

340

186

254

999.6

355

1,185.5

408

791.6

263.3

152

168.6 1,169

3,408.6

420,428.8

195
145

67
119

27
227

130.4
869.2

68
287

241.5
944.0

72
336

149.1
642.5

54.8
208.5

53
99

54.5
114.1

220
949

630.3
2,778.3

179,386.0
241,042.8

No. 3—Pittsburgh...

247

150

224.0

260

710.6

185

288.7

86.2

89.6

597

1,399.1

107,533.2

Pennsylvania
West Virginia. . .

7
216
24

7
125
18

2
38
24

4.5
152.9
66.6

19
215
26

68.7
596.1
45.8

8
119
58

20.8
219.7
48.2

2."
48.8
34.5

11
57
20

3.5
80.5
5.6

40
429
128

100.4
1,098.0
200.7

5,913.5
90,318.9
11,300.8

No. 1—Boston
Massachusetts . .
New Hampshire.
Rhode Island
No. 2—New York. . .
New York

1
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 that part of all recast loans
involving
no additional investment by the reporting institution.
8
Assets are reported principally as of Mar. 31, 1937.

266

Federal Home Loan Bank Review

Monthly lending activity and total assets as reported by 2,833 savings and loan associations in March 1937—
Continued
Loans made in March according to purpose

Number of associations

Federal Home Loan
Bank Districts and
States

Mortgage loans on 1- to 4-family nonfarm homes

Construction
Submit- Reporting
ting
loans
reports made

Amount
Num- Amount Num- Amount
ber
ber

No. 4 — WinstonSalem
District of Co- 1
Florida
North Carolina..
South Carolina..
No. 5—Cincinnati...
Ohio
No. 6—Indianapolis..

Illinois
No. 8—Des Moines..
Iowa
North Dakota...
South D a k o t a . . .
No. 9—Little R o c k . .
Louisiana

New M e x i c o . . . .
Texas
No. 10—Topeka

No. 11—Portland.... |
Idaho

No. 12—Los Angeles. 1

Hawaii

May 1937

Number Refinan- Recon- Numdition- ber Amount Numcing
ber
ing

642 $1,499.4!

326

15.5

15.4

118

158.2

5,210.2

264 1,011.4
192.6
106
144.3
1341
127.5
83
160.6
197
64.6
75
96.4
91

39.3
70.3
46.1
25.6
72.3
21.8
39.6

30
39
36
48
89
37
34

83.2
89.7
28.8
98.2
112.1
39.6
63.6

366
371
355
320
602
300
226

1,692.3
1,280.2
624.3
768.4
976.7
529.3
460.9

93,703.2
21,374.5
12,659.7
43,929.6
32,949.8
9,739.8
20,331.7

1,686.6 1,623

4,483.5 1,449 1,955.6

628.8

622

904.7 4,140

9,659.2

523,129.0

118.7 226
1,348.8 1,358
39
219.1

251.4
572.9 259
3,832.8 1,041 1,533.5
77.8 149
170.7

139.4
405.3
84.1

87
506
29!

1,205.9
7,849.5
603.8

50,829.2
457,786.3
14,513.5

306

123.5
610
729.1 3,219
52.1
311
303.2 1,634

2,493.5

197,155.6

167.8 1,187
135.4
447
468.3 1,751]

1,478.5
1,015.0

113,148.6
84,007.0

230.3

212
94
226

4,636.0

213,148.7

181.4
48.9

143!
83

328.4 1,373!
378
139.9

3,726.7
909.3

145,535.1
67,613.6

786.4

183.1

203

217.0 1,293

2,593.5

122,989.5

134.1
211.5
392.8
29.8
18.2

31.8
66.4
75.8
4.9
4.2

270
354
551
80
38

425.0
832.1
1,165.3
120.1
51.0

18,018.5
28,447.0
65,174.7
8,797.6
2,551.7

617

672.7

185.1

36
42
91
27
7
268

372.1 1,806

3,403.1

143,173.1

62.5 100
419.9 112
32.6
34
9.6 1 15
390.0 356

97.6
107.3
35.3
18.5
414.0

L 25.3
72.0
11.3
6.9
T69.6

44
83
9
9
123

52.2
176.5
10.7
7.3
125.4

242
446
92
45
981

363.5
1,009.8
127.5
78.9
1,823.4

9,690.9
67,820.9
3,841.8
3,302.0
58,517.5

513

604.4

196.2

422

583.5 1,817

3,645.1

167,548.8

238.5
63
286.9 155
244.8 148
472.7 1 147

89.7
134.4
212.8
167.5

13.0
69.7
66.8
46.7

48
88
122
164

161.5
117.9
137.7
166.4

264
492
435
626

708.1
827.1
874.7
1,235.2

19,282.4
53,847.2
44,089.5
50,329.7

35.9

42.0

11
49
45
72
45
36
32

11
46
40
51
43
34
25

48
152
83
47
162
125
49

429.6
684.6
202.0
181.0
327.8
269.5
152.6

24
74
102
142
154
63
52

128.8
243.0
203.1
336.1
303.9
133.8
108.7

395

343

446

62
298
35

52
261
30

38
314
94

180

163

206

611.1

494

839.4

628

525.7

214.1

129
51

122
41

107
99

212.3
398.8

384
110

484
144

323.1
202.6

178.6
35.5

288

238

176

631.2

582

596.7
242.7
1,636.2

767 1,670.0

202
86

167
71

101
75

372.6
258.6

494
88

1,397.8
238.4

635 1,446.5
223.5
132

196

171

197

622.2

375

784.8

518

50
44
77
16
9

32
52
92
10
11

89.7
214.7
283.9
19.4
14.5

90
105
155
19
6

135.8
270.1
341.6
29.8
7.5

112
155
213
24
14

262

42
38
69
15
7
226

462

1,258.6

459

914.6

40 i
66
25
14
117

37
56
22
11
100 1

50
76
28
13
295

125.9
234.1
37.6
36.6
824.4

48
175
21
8
207

208

174 1

291

1,018.1

591

33
64
30
47

54
86
54
97

205.4
218.2
212.6
381.9

99
163
111
218

395 |~1,11873

137
1
134
1
1

^1
8
12
21
9
49

131
1
128
1
1

Amount

49.4

Total assets
March 31,
1937

998 $1,846.8 $330.5

692 $2,283.0

267

116

Total loans, all
purposes

8
13
27
9
49

Oregon
Utah

Loans for all
other purposes

308

37
79
41
51 1

Kansas

Refinancing and
reconditioning

Home purchase

1,242.9

$530.6 2,658 $6,490.3 $239,898.5

33.6
69.4
71.2
36.2
6.6

370

723.3

609

893.6

179.1

259

428.3 1,633

3,342.6

84,537.1

28
24
80
46
207

67.5
54.0
262.6
168.9
529.3
36.0

16
21
54
29
235
15

21.4
32.3
112.4
73.7
458.1
25.4

38
35
124
69
325
18

26.2
14.5
44.6
23.9
57.2
12.7

11
7
52
19
159

7.5
63.8
36.1
60.9
220.9
39.1

144.8 i
211.5
662.0 1
412.4
1,765.4
146.5

4,805.3
6,942.1
21,383.8
10,209.5
37,622.3
3,574.1

914

3,286.6

439

1,147.5

585

22.2
46.9
206.3
85.0
499.9
33.3
1,066.9

9
903
2

44.2
2
3,239.4 1 437
3.0
0
o.o

7.2
1,140.3
0.0
0.0

17.5
5
580 1,049.4
0.0
0
0.0

93
87
310
163
926
54

133.0 1 228

418.3 2,166

6,052.3

216,051.4

0.0
133.0
0.0
0.0

0.2
17
418.0 2,146
0.0
2
1
0.1 1

69.1
5,980.1
3.0
0.1

970.3
214,767.6
153.3
160.2

1
226
1

267

Residential Construction Activity and
Real-Estate Conditions

HE volume of residential construction, as
measured by the estimated number of family
dwelling units authorized by building permits
issued in cities of 10,000 population and over, has
risen sharply, along with the cost of building
materials and of construction, during both the
past year and the past few months. The number
of dwelling units provided in March 1937 was 92
percent higher than the number for the same
month in 1936. It amounted to 19,962, at an
estimated total cost of $78,000,000, as compared
with the February figures of 15,156 units at a cost
of $58,000,000.

UNITS PROVIDED

THE 1-family dwelling has provided the bulk of
the increase of 4,800 between February and
March in the number of dwelling units provided.
The number of dwelling units in buildings containing three or more units decreased about 5
percent. The number of 2-family dwellings and
of joint home and business buildings both increased slightly.
The increase between March 1936 and March
1937, on the other hand, has been due in about
equal proportion to 1-family dwellings and multi-

CHART I.—NUMBER AND COST OF FAMILY DWELLING UNITS FOR WHICH PERMITS WERE GRANTED, BY MONTHS. IN CITIES OF
10,000 OR MORE POPULATION; 1936 COMPARED WITH SELECTED PERIODS
[Source: Federal Home Loan Bank Board.

NUMBER

OF UNITS

Compiled from residential building permits reported to U. S. Department of Labor]

PROVIDED

/
\ /
10

40,000

*-.
•

50.000
14

30.000

12.5/-J^5 AYJL

/
/-

60.000

/
/
J

70.000

-t

70.000

~7H <

19 36
19 37

60.000

1936

« 37

OF UNITS

90.000

COST

100.000

8
6
N
N

20.000

60,000

y
\^

IJL31-1 5 A ££

>
—-/

—- ^

, . . ^,
\

10.000
2
0

268

Federal Home Loan Bank Review

family dwellings. In the latter month, 1-family
dwellings amounted to 61 percent of the total
number authorized, and multifamily dwelling
units to 33 percent.
When pictured on a graph adjusted for seasonal
variation, however, on the basis of an index
number^of 100 for 1926, the March activity, as
compared with that of February, showed a distinct drop.

CHART ENLARGED
CHART 2, which pictures the relationship between residential real-estate conditions and industrial production, has been enlarged to include
other factors affecting the real-estate market. In
this issue it shows fluctuations in wholesale prices
of building materials and in manufacturing payrolls as well as the movement of residential con-

CHART 2.—COMPARISON OF RESIDENTIAL REAL-ESTATE CONDITIONS AND INDUSTRIAL PRODUCTION IN THE UNITED STATES
[1926-100]
1

RES IDEN1riAL

REAL

D0NS1 RUCT ION

(NUUSER 0F FAMIL r DWELL IN8 UNI

ESTATE

450

FORECLOSURES L
IN
II

SEVENTY-EIGHT LARGE URBAN COUNTIES

f ^

125
350

300
z

Y
1

200

150

too
town t -reoe*
1926

1927

1928

•OARO

°/BO**M
192»

1932

1930

RIAL

1933

1934

1935

1936

1937

1
••
1
I
1
1
1
SaUUCfr-FEDERAL HOME LOAN lANK »OAR» (COUNTY REPORTS)

1926

1927

1928

1929

PROD UCTIO N

1930

MUR
1926

E-FEOER

u. ffium

1927

1928

w VWTt1
1929

"1930

1927

May 1937

1928

1929

Ax /v
'v

J•

TO » 2 « • ASS

1931

1932

1934

1935

1936

1937

1935

1936

1937

1935

1936

1937

RENT ALS

HAL COM? R E I K I •<

•out

1933

(934

(935

1936

1937

1926

1927

1928

1929

1932

1933

1934

1931

<•*«•« o

1932

1933

1934

UNUFA CTURI M6 PAYROLl ,S

>M RASE)

E - U S 0 PT OF LA OR (90HVE

1931

ERIC* T<

1930

[
1
ERIAL PRIC ES
LDIN6 MAT

1930

1933

1926

1932

SING

HOU

IN DUST

1931

1935

1936

1937

1926

1927

1928

1929

1930

1931

1932

1933

1934

269

struction, industrial production, real-estate foreclosures, and housing rentals. The building
material price index is based on materials used in
both residential and other construction. The
movement of this national index since the first
part of 1936, however, has closely parallelled the
fluctuations in the cost of materials as reported
for the Indexes of Small-House Building Costs,
published each month in the REVIEW. The
graph of manufacturing payrolls has been included to show fluctuations in purchasing power.
It is not necessarily coincident with the graph of
industrial production.
FORECLOSURES

reaching, in February, the lowest point
since 1930, the index of foreclosures in 80 large

AFTER

Comparison of real estate conditions and
industrial production
[1926=100]
Per- March PerMarch Feb. cent
cent
1937 1937 change 1936 'change
Residential construction
Foreclosures
Industrial production
Rentals
Building material
prices
Manufacturing payrolls

36 42 -14
230 196 + 17
109 108 + 1
83 82 + 1
96 93 + 3
98

19
302

+89
-24
86 1 +27
74 + 12

+ 13

+34

urban counties rose 17 percent in March to an
index of 230. It was still 24 percent below the
March 1936 index of 302. The 17 percent increase

270

compares with the normal seasonal increase for
March of 14 percent, an increase which is quite
apparent on chart 2.
Of the 80 urban counties which reported foreclosures for March, 51 reported increases over February, and 30 reported increases over March 1936.
As may be seen in table 2, New York continued
to lead the country in the volume of building
activity during March by authorizing the construction of 5,695 dwelling units with a total
value of $20,467,000. This number was 10 percent less than that reported for New York during
February, but 170 percent more than the number
for March 1936. California was second during
March with 3,295 units—an increase of 65 percent
over her February figure.
In rate of building, as distinguished from volume
of building, however, the California activity put
the Los Angeles Bank District far in the lead.
The larger number of building permits granted
there during March raised the number of dwelling
units provided per 100,000 population to unprecedented levels. In March, 79 dwelling units were
provided for each 100,000 of population. The
comparable figure for February was 48, and for
March 1936, 49.
The New York District was the only one to
report a decrease in rate of building, showing a
drop of 4 units per 100,000 population. All other
Districts reported substantial increases, four of
them doubling their rate for February. As a
result, the United States average jumped from
24 to 32 units per 100,000 population between
February and March. The marked increase during the past year is shown by the fact that the
rate for March 1936 was only 17 units.

Federal Home Loan Bank Review

CHART 3.—RATE OF RESIDENTIAL BUILDING IN THE UNITED STATES AND IN EACH FEDERAL HOME LOAN BANK DISTRICT,
BY MONTHS
Represents the estimated number of family dwelling units provided per 100,000 population; based upon building permit records for all cities
of 10,000 or more population.
[Source: Federal Home Loan Bank Board. Compiled from reports to U. S. Department of Labor]
OISTRICT I- BOSTON

DISTRICT 2-NEW YORK

OISTRICT 3-PITTSBURGH

DISTRICT 4-WINSTON SALEM
60

r!9i
im-m

s-1936

40
30
T37

f~r936
I

r~lip^J

1931-35

AVG.-*—^.

ft937 '
I —

20
,

rl93

—J

^ h
1931-35 AV& >--

AV&-^"

-X."1931-35 AVG — L .

TITfinTUT
DISTRICT 5-CINCINNATI

ITITiTTfTiTI
OISTRICT 6-INOIANAPOLIS

imiTilTgTi

TfTuTUJYW
DISTRICT 7-CHICAGO

DISTRICT 8-DES MOINES
60
50
40
30

ftS37
20
10
1931-35

AVG.Sr\

'^-1931-35 "/iPg"" —u.-

OISTRICT 9-LITTLE ROCK

M 1 1 i 3 4 1ftS § 8

IfiSlS43kSiB
DISTRICT IO-TOPEKA

DISTRICT 11-PORTLAND

DISTRICT 12-LOS ANGELES
r-7J0

S7'936.

\l937
—1

50
40
30
20

£T

hoJl

rrrriTTTsTFi

20
r-J

\93/-35

AVG. X - ^

10
^/93/-35

AVB.'"^—

ITITrnTrilT
UNITED

May 1937

L x

~i'\r1931-35- AVG

i s m i = !*§§§

seHiS^sssss

STATES

271

TABLE 1.—Number and estimated cost of new family dwelling units provided in all cities of 10,000 population

or over, in the United States, in March 1937 *
[Source: Federal Home Loan Bank Board.

Compiled from residential building permits reported to U. S. Department of Laborl

Number of family units
provided

Total cost of units (000 omitted)

Average cost of
family units

Type of structure

All housekeeping dwellings
Total 1- and 2-family dwellings.
1-famjly dwellings
2-family dwellings
Joint home and business 2
3- and more-family dwellings. ..

Percent
change

March
1937

March
1936

Percent
change

March
1937

March
1936

19, 962
13, 328
12, 246
988
94
6,634

10, 381 + 92.3 $78, 709. 5 $40, 606. 8 + 93.8
8,273 +61.1 57,479.1 34, 847. 7 +64.9
7,616 +60.8 54,402. 6 33, 033. 5 +64.7
1, 627.4 +67.8
2,731.4
608 +62.5
186.8 + 84.7
345.1
49 +91.8
5, 759.1 +268.6
2,108 +214. 7 21, 230. 4

March
1936

March
1937

$3, 912
4,212
4,337
2,677
3,812
2,732

$3, 943
4,313
4,442
2,765
3,671
3,200

1
Estimate is based on reports from communities having approximately 95 percent of the population of all cities with
population of 10,000 or over.
* Includes 1- and 2-family dwellings with business property attached.

TABLE 2.—Number and estimated cost of new family dwelling units provided in all cities of 10,000 population

or over, in March 1937, 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]

All 1- and 2-family dwellings

All residential dwellings

Number of fam- Estimated cost (thou- Number of fam- Estimated cost (thouFederal Home Loan Bank Districts ily dwelling units
ily dwelling units
sands of dollars)
sands of dollars)
and States

UNITED STATES

March
1936

March
1937

March
1936

19, 962

10, 381 $78, 709. 5 $40, 606. 8

13,328

March
1937

March
1936

March
1937

March
1936

8,273 $57, 479.1 $34, 847. 7

955

373

4, 948.4

2, 240. 6

855

373

4, 771. 8

2, 240. 6

194
48
543
17
147
6

86
12
210
6
54
5

1,123. 9
162.4
2, 908.4
45.9
673.0
34.8

530.6
39.9
1, 415. 3
8.9
212.9
33.0

188
42
455
17
147
6

86
12
210
6
54
5

1,107. 3
152.4
2, 758. 4
45.9
673.0
34.8

530.6
39.9
1,415. 3
8.9
212.9
33.0

6,091

2,383

22, 805. 2

8, 808. 5

1,428

1,126

7,169. 6

5,028. 9

396
5,695

279
2,104

2, 337. 8
20, 467.4

1, 708. 2
7,100. 3

288
1,140

237
889

1, 958. 3
5, 211. 3

1, 540. 2
3, 488. 7

No. 3—Pittsburgh

907

531

4, 392.0

2, 651. 9

810

508

4, 219.0

2, 569. 9

Delaware
Pennsylvania
West Virginia

38
764
105

15
458
58

194.0
3, 833.4
364.6

75.4
2, 339. 8
236.7

38
684
88

15
449
44

194.0
3, 707.4
317.6

75.4
2, 291. 8
202.7

2,373

1,382

8,106. 2

4,466.1

1,779

1,044

6, 607. 7

3, 695. 9

149
690
455
212
212
294
137
224

41
391
317
116
140
164
72
141

289.6
2, 611.7
1, 710.0
502.0
846.6
850.2
410.0
886.1

89.2
1, 535. 6
889.7
242.9
569.0
444.5
174.8
520.4

126
233
434
208
212
254
133
179

27
142
273
110
140
160
72
120

257.7
1, 451. 2
1, 641. 3
500.0
846.6
735.6
403.0
772.3

60.2
938.8
821.0
220.3
569.0
435.4
174.8
476.4

No. 1—Boston
Connecticut
Maine
Massachusetts
New Hampshire
Rhode Island
Vermont
No. 2—New York
New Jersey
New York

No. 4—Winston-Salem
Alabama
District of Columbia

Florida
Georgia
Maryland
North Carolina
South Carolina
Virginia

272

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 March 1937, by Federal Home Loan Bank Districts and by States—Continued
All 1- and 2-family dwellings

All residential dwellings

Number of fam- Estimated cost (thou- Number of fam- Estimated cost (thou*
Federal Home Loan Bank Districts ily
ily dwelling units
sands of dollars)
dwelling units
sands of dollars)
and States
March
1937

March
1936

$2, 656.1

807

346.5
3, 725.1
408.0

278.7
2, 092. 7
284.7

631

5, 802. 6

228
889

117
514

686

Illinois
Wisconsin
No. 8—Des Moines

March
1937

March
1936

No. 5—Cincinnati

941

Kentucky
Ohio
Tennessee

March
1937

March
1936

467

$4,022. 6

$2, 622.1

135
525
147

71
292
104

346.5
3, 272. 6
403.5

278.7
2, 058. 7
284.7

3, 601. 5

1,117

610

5, 802. 6

3, 561.0

942.2
4, 860.4

548.9
3, 052. 6

228
889

109
501

942.2
4, 860.4

536.9
3, 024.1

325

4, 582. 3

1, 894.4

601

295

3,886.5

1, 822. 6

490
196

206
119

3, 510.1
1, 072. 2

1, 296. 5
597.9

414
187

181
114

2, 853.3
1, 033. 2

1, 236. 2
586.4

602

450

2, 204. 6

1, 741.0

555

425

2,113. 3

1, 689. 9

Iowa
Minnesota
Missouri
North Dakota
South Dakota

125
139
294
14
30

79
74
275
1
21

530.3
560.8
1, 012.1
48.3
53.1

295.2
324.2
1, 091.0
2.7
27.9

125
134
257
14
25

70
74
259
1
21

530.3
551.5
937.6
48.3
45.6

281.1
324.2
1,054.0
2.7
27.9

No. 9—Little Rock

1,428

962

3, 950. 4

2, 482. 0

1,303

904

3, 704. 8

2, 344.0

Arkansas
Louisiana
Mississippi
New Mexico
Texas

35
171
151
53
1,018

35
131
20
18
758

92.3
479.4
244.4
137.6
2, 996. 7

113.1
405.4
68.5
49.7
1, 845. 3

35
149
128
53
938

35
120
20
18
711

92.3
446.1
210.2
137.6
2, 818. 6

113.1
355.2
68.5
49.7
1,757. 5

No. 10—Topeka

696

451

2, 506. 8

1, 590. 9

666

425

2, 418.4

1,565. 8

192
151
103
250

85
118
42
206

845.4
465.3
383.0
813.1

377.3
347.0
156.9
709.7

178
142
100
246

85
103
38
199

782.4
446.9
381.0
808.1

377.3
333.6
149.4
705.5

811

355

2, 635. 8

1,116. 4

641

. 355

2, 212. 6

1,116.4

33
49
302
96
302
29

25
56
70
46
129
29

95.4
166.5
1, 023.2
330.5
912.9
107.3

74.9
131. 7
246. 5
139.1
392.5
131.7

23
49
166
89
293
21

25
56
70
46
129
29

75.4
166.5
669.7
309.5
896.2
95.3

74.9
131.7
246.5
139.1
392.5
131.7

3,355

2,059

12, 295. 6

7, 357. 4

2,766

1,741

10, 550. 2

6, 590.6

40
3,295
20

29
2,011
19

139.0
12, 030. 2
126.4

100.1
7,158. 2
99.1

40
2,706
20

29
1,696
16

139.0
10, 284. 8
126.4

100.1
6,409.4
81,1

No. 6—Indianapolis
Indiana
Michigan
No. 7—Chicago

Colorado
Kansas
Nebraska
Oklahoma
No. 11—Portland
Idaho
Montana
Oregon
Utah
Washington
Wyoming
No. 12—Los Angeles
Arizona
California
Nevada

May 1937

March
1937

March
1936

479

$4,479. 6

135
656
150

71
304
104

1,117

273

Federal Savings and Loan System

EEPING in step with the general seasonal
advance in residential construction, the
1,157 identical Federal savings and loan associations reporting for both February and March
made a larger volume of mortgage loans during
the latter month than at any time in their history.
Their loans during March amounted to $26,380,800, which was 44 percent more than during
February, and approximately 3 percent of
their assets. As a result of this unusual lending
activity, mortgage loans outstanding had increased at the end of the month 2.6 percent, to
$626,906,700.
The general growth of all Federal savings and
loan associations is reflected most strikingly in
figures comparing their activity during the first
quarter of 1937 with that during the same period
in 1936. For the first quarter of 1937 they made
combined loans in the amount of $60,693,000.
TABLE

This is 40 percent more than the $35,777,000 they
loaned during the first quarter of 1936. Roughly
half of this increase may be attributed to growth
in number of associations; the remainder is due to
increased activity—the growth of the associations
themselves.
These reporting associations, besides increasing
their lending activity during March, received
substantial increases in share investments, and
attracted numerous new private holders of share
accounts. During the month, private investments increased $5,000,000 and H. O. L. C.
investments $7,000,000. On the other hand, the
volume of repurchases in March decreased by
comparison with the amount reported for February. The number of holders of private share
accounts increased at a greater rate during
March than during any month since January 1936.
(Continued on p. 275)

1.—Monthly operations of 1J57 identical Federal savings and loan associations reporting during
February and March 1937
February

Share liability at end of month:
Private share accounts (number)
Paid on private subscriptions
Treasury and H. O. 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

274

March

Change
February
to March

698, 537

708, 742

Percent
+ 1.5

$511, 217, 600
158, 938, 500

$516, 223, 500
165, 864, 000

+ 1.0
+4.4

670,156,100

682, 087, 500

+ 1.8

11, 498, 000
7, 974, 500

11, 952,100
7, 222,100

+4.0
—9.4

6,165, 200
5, 053,400
4, 684, 700
943, 800
1,455, 200

9,127, 000
7, 684, 000
6, 263, 800
1, 479, 400
1, 826, 600

+48.0
+52.0
+33.7
+57.0
+25.5

18, 302, 300
611, 211, 500

26, 380, 800
626, 906, 700

+44.2
+2.6

56, 584, 900
1, 801, 700

58, 260,100
1, 709, 900

+3.0
—5.0

58, 386, 600

59, 970, 000

+2.7

815, 243, 600

835, 318, 000

+ 2.5

Federal Home Loan Bank Review

Federal Home Loan Bank System

H E balance outstanding of advances made
by the 12 Federal Home "Loan Banks to
member institutions increased during March,
reflecting the seasonal expansion of home-building
activity. During the month, members borrowed
$8,591,000 and repaid $7,077,000, leaving a net
increase of one and one-half million dollars. On
March 31 the balance outstanding was $142,719,000, the estimated borrowing capacity of members
was almost one billion dollars, and the Banks had
made'cumulative advances of $301,353,000. During March, the number of member institutions of
the Banks was increased by 28, bringing the total
at the end of the month to 3,799.
Growth and trend of lending operations
[000 omitted]
Month

December 1935
June 1936

Loans ad- Repay- Balance outments
standing at
vanced
monthly monthly end of month
$8, 414
11, 560
13,473

$2, 708
3,895
5,333

$102, 795
118, 587
145,401

6,570
4,260
8,591

8,225
6,800
7,077

143, 745
141, 205
142, 719

1937
January
February
March

The Indianapolis Bank is the only one which
has reported a change in interest rates from those
published in the April BEVIEW. This change is

Federal Savings and Loan System
[(Continued from p. 274)

Of the total mortgage loans made during
March, 34.6 percent were for new construction.
During February, 33.6 percent of total loans were
for this purpose. This reflection of a continued
demand for funds for new home building comes in
spite of a considerable increase in building costs
as shown by the Bank Board's index on page 264
of this issue.
Of the total loans made, home purchase
accounted for 29.2 percent; refinancing accounted
for 23.7 percent; and reconditioning for 5.6
percent. Federal Home Loan Bank advances to
May 1937

slight, affecting only the way in which long-term
advances will be written. Secured advances for
three months or over will be written at 3% percent,
but interest will be collected at 3 percent. Secured advances for three months or less will remain at 3 percent, and unsecured advances, none
of which may be made for more than six months,
will remain at 3K percent.
1936

MORTGAGE LENDING

I N THIS connection, estimates compiled for the
Federal Home Loan Bank Board show that the
position of the savings and loan associations in
the mortgage lending field improved considerably
in 1936, since such associations made 34 percent
of the total home mortgage loans in that year as
compared with 24 percent of the total during 1935.
The estimates show that the savings and loan
associations' 1936 total of mortgage loans was
approximately $667,000,000. This figure is 55
percent greater than the corresponding sum for
1935. Of the 1936 total, 28 percent, or $186,000,000 was for new construction.
The part played by members of the Federal
Home Loan Bank System in this activity has
been considerable. Member associations provided 78 percent of the 1936 total of mortgage
loans by all associations. State-chartered member
associations loaned $310,000,000, and Federal
savings and loan associations loaned $208,000,000
on home mortgages in 1936.
Federal associations increased. 3 percent during
the month. At the end of March total advances
to them represented 40.8 percent of total Bank
advances outstanding to all members.
TABLE 2.—Progress in number and assets of Federal
savings and loan associations
Number
Feb. 28, Mar. 31,
1937
1937
New
Converted

645
595

Total

1,240

Approximate assets
Feb. 28,
1937

Mar. 31,
1937

644 $169,255,240 $169,262,020
605 678,838,868 682,901,485
1,249 848,094,108 852,163,505

Federal Savings and Loan Insurance
Corporation

ORTGAGE loans made during March by
281 State-chartered savings and loan
associations insured by the Federal Savings and
Loan Insurance Corporation amounted to 45.5
percent more than the loans made during February
by the same institutions. The March total was
$7,751,200, in comparison with the February figure
of $5,329,100.
That insured State member associations are participating in the general increase in home construction activity is shown by the fact that their
mortgage loans for new construction rose from
$1,590,300 during February to $2,152,200 during
March. Mortgage loans for other purposes also
rose considerably. Home purchase loans were up
48.9 percent over February; refinancing loans,
62.6 percent; reconditioning loans, 16.8 percent;
and loans for other purposes, 48.2 percent.
The Home Owners' Loan Corporation's new
investment in insured associations in March repreTABLE

1.—Institutions insured by the Federal Savings and Loan Insurance Corporation

State-chartered associations.
Converted F. S. and L. A . . .
New F. S. and L. A
Total

sented about one-third of the net increase in their
mortgage loans outstanding during the same
period. Repurchases exceeded the sum of private
share investments during the month.
The number of institutions insured by the
Federal Savings and Loan Insurance Corporation
increased, between March 15 and April 15, by 25.
Of this number, 16 were State-chartered associations and 8 were converted Federal savings and
loan associations. The assets of insured institutions rose, during the March-April period, by
$120,312,031, from $1,247,645,996 to
$1,367,958,127.
The number of investors in all insured institutions has grown during the past eight months from
1,100,102 to 1,432,394, an increase of 322,292, it
was recently announced. During that same
period, savings accounts in the same associations
increased in volume from $962,000,000 to
$1,367,958,127, or $405,958,127.

Cumulative number at specified dates

Number
of shareholders

Assets

Share and
creditor liabilities

Dec. 31, Dec. 31, Dec. 31, Mar. 15, Apr. 15,
1937
1936
1937
1934
1935

Apr. 15,
1937

Apr. 15, 1937

680, 059
620, 203
132,132

$532,140,103
670, 392, 810
165,425, 214

$466, 779, 729
613, 244, 786
155,109, 342

1,675 1,432, 394 1,367, 958,127

1, 235,133, 857

4
108
339

136
406
572

382
560
634

425
588
637

451

1,114

1,576

1,650

441
597
637

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 Dec. 31 each year.

276

Federal Home Loan Bank Review

TABLE

2.—Monthly operations of 281 identical insured State-chartered savings and loan associations
reporting during February and March 1937
February

Share liability at end of month:
Private share accounts (number)

March

Change
February
to March
Percent

428,030

424, 754

+0.2

$291,195,400
16,478,200

$290, 881, 900
17, 575,100

—0.1
+ 6.7

307, 673, 600

308, 457, 000

+ 0.3

Private share investments during month
Repurchases during month

4,435, 200
4,444,100

4, 675, 000
5,041, 400

+ 5.4
+ 13.4

Mortgage loans made during month:
a. New construction
b. Purchase of homes
c. Refinancing
d. Reconditioning
e. Other purposes

1, 590, 300
1, 849,000
988, 800
307, 200
593, 800

2,152, 200
2, 752, 500
1, 607, 500
358, 800
880, 200

+ 35.3
+48.9
+ 62.6
+ 16.8
+48.2

5, 329,100
254, 221, 200

7, 751, 200
257, 553, 200

+45.5
+ 1.3

15,129, 200
1, 997, 900

14, 755, 000
2, 059,100

-2.5
+ 3.1

17,127,100

16, 814,100

-1.8

385, 246, 300

387, 252, 700

+ 0.5

Paid on private subscriptions
H. 0. L. G. subscriptions
Total

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

Deficiency Judgments
(Continued from p. 259)

Corporation has found a uniform national policy
desirable. The soundness and liberality of this
national policy, forged from experience with loans
under the legal procedure of every State, make it
worth consideration by private lending institutions. In the first place, it does not retain a deficiency claim on its books when there is no reasonable prospect of realizing on a judgment, and when
there has been no wilful default. In such a case,
after foreclosure and the expiration of any redemption period, it writes off the remainder of the claim
as a bad debt and accepts its loss. Next, it does
not try to collect the entire difference between the
sale price and the amount of the debt when it has

May 1937

been able to buy the property at less than the
amount that it considers a fair value. It instead
reduces the claim to the difference between the
debt and the appraised value of the property.
The appraisal is not on the probable sale price for
cash in the current market, but the price that
could be obtained in a sale for 10 percent cash,
with the balance amortized at 5 percent interest
over a 15-year period.
These specific terms, however, may be of less
interest to private lending institutions than the
general policy on which they are based. That
policy, which involves an equitable adjustment
with the borrower and an early adjustment of the
books, may point the way to somewhat more
uniform practices in the difficult questions arising
under deficiency judgments.

277

Home Owners' Loan Corporation

UBSCRIPTIONS by the Home Owners' Loan
Corporation to the shares of Federal savings
and loan associations, and of State-chartered
associations that are members of the Federal
Home Loan Banks or insured by the Federal
Savings and Loan Insurance Corporation, have
proved an excellent investment in addition to
supplying lending institutions with additional
funds.
To the end of 1936 these share investments,
made primarily to increase the resources of associations, had yielded a return of 3.45 percent a
year, or a total amount of $2,332,278 on a cumulative investment to December 31,1936, of approximately $125,000,000. By April 20, 1937, a

declaration of dividends at the end of the year the
Home Owners' Loan Corporation is able to show
returns from them as of December 31,1936. The
State-chartered associations, however, show no
such regularity in declaring dividends so the
closing date was moved forward one month to
January 31, 1937 to include reports made at odd
periods. These dividends have, of course, been
TABLE

1.—Properties acquired by the Home
Owners' Loan Corporation l
Properties
acquired
by voluntary deed
and foreclosure *

Period

H. 0, L. C. investments in Federal savings and loan
associations and in State-chartered savings and Prior to 1935
loan associations, and cumulative dividends
received to Jan. 31, 1937

,
1935

Jan. 1 through June 30
Rate of
H. O. L. C. Cumulative earning
investment dividends (dollar
day
(cumulative) received
basis)

Federal associations. $109,493,700 $1,977,193
State-chartered asso355, 085
ciations
22, 479, 900
131, 973, 600 2, 332, 278

Percent
3.49
3.28

3.46

cumulative total of $155,386,500 had been
allocated out of the fund of $300,000,000 set up
for that and other purposes by Act of Congress in
1935, to the purchase of such share investments.
The accompanying table gives the cumulative
dividends received from Federal savings and loan
associations and from State-chartered savings and
loan associations. As the former uniformly make

278

114
983

July 1 through Dec. 31
1936
Jan. 1 through June 30
July 1 through Dec. 31
1937
January
February
March
Grand total to Mar. 31, 1937

4,449
15, 646
3,059
3,290
4,143
31, 693

1
Figures prior to 1936 are as of the month in which the
action took place. Subsequent figures are as of the month
in 2which the action was reported in Washington.
Does not include 14,735 properties bought in by
H. O. L. C. at foreclosure sale but awaiting expiration of
the redemption period before title and possession can be
obtained.
In addition to the total of 31,693 completed cases, 157
properties were sold to parties other than the H. O. L. C.
and 4,124 cases have been withdrawn due to payment of
delinquencies by borrowers after foreclosure proceedings
have been entered.

Federal Home Loan Bank Review

computed on the basis of the actual time the
H. 0. L. C. funds were invested in the associations. Consequently no deductions can be made
directly from the cumulative amoimt invested in
them.
The cumulative amount received in dividends
from Federals was $1,977,193 at an annual rate of
3.49 percent. Seven investments in Federal
TABLE

associations were made too late to receive dividends, and no dividends were declared on 11
subscriptions. All but one of the subscriptions in
State-chartered associations received a dividend,
although the average return was 3.28 percent.
Six subscriptions were made too late to receive
dividends.

2.—H. 0. L. C. subscriptions to shares of savings and loan associationsRequests and subscriptions *
Uninsured Statechartered members
oftheF.H. L.B.
System

Insured Statechartered associations

Federal savings and
loan associations

Total

Number
Number
Number
Number
Amount
Amount
Amount
Amount
(cumu- (cumulative)
(cumu- (cumulative)
(cumu- (cumulative)
(cumu- (cumulative)
lative)
lative)
lative)
lative)
Requests:
Dec. 31, 1935
June 30,1936
Dec. 31, 1936
Jan. 30,1937
Feb. 28, 1937
Mar. 31, 1937
Apr. 20, 1937
Subscriptions:
Dec. 31, 1935
June 30, 1936
Dec. 31,1936
Jan. 30, 1937
Feb. 28, 1937
Mar. 31, 1937
Apr. 20, 1937
1

27
60
89
97
99
109
117

$1,131, 700
2, 506, 700
3, 845, 710
4,105, 910
3, 762, 910
4, 230, 710
4, 820, 710

33
130
279
297
317
356
373

$2,480, 000
10, 636, 200
21,016, 900
21, 921, 900
23, 341, 900
25, 622, 800
26, 503, 800

553
1,478
2,617
2,746
2,874
3,061
3,181

$21,139,000
56, 880, 600
108, 591, 900
113, 794, 300
120, 320, 300
130, 816, 500
136, 784, 500

613
1,668
2,985
3,140
3,290
3,526
3,671

$24, 750, 700
70, 023, 500
133,454, 510
139, 822,110
147,425,110
160, 670, 010
168,109, 010

2
21
45
46
50
55
60

100, 000
689, 000
1, 688, 000
1, 738, 000
1, 553, 200
1, 828, 200
2,106, 000

24
118
262
280
300
322
349

1, 980, 000
9, 636, 600
19,455, 900
20, 741, 900
21, 746, 900
23,159, 400
24, 738, 800

474
1,392
2,538
2,663
2,771
2, 928
3,043

17, 766, 500
500
52, 817,100
1,531
104, 477, 400 2, 845
109, 493, 700 1 2,989
115,156, 200
3,121
122, 545, 700 ! 3,305
128, 541, 700 | 3,452

19, 846, 500
63,142, 700
125, 621, 300
131, 973, 600
138,456, 300
147, 533, 300
155, 386, 500

Refers to number of separate investments, not to number of associations in which investments are made.

TABLE

3.—Reconditioning Division—Summary of all reconditioning operations through Apr. 15, 1937l
Contracts awarded
Period

June 1, 1934 through Mar. 17, 1937
Mar. 18, 1937 through Apr. 15, 1937
Grand total through Apr. 15, 1937

Cases received 2

Jobs completed

Number

Amount

Number

Amount

766, 818
4,544

425, 633
2,876

$81, 783,155
640, 527

417, 019
2,881

$79,172, 628
538,799

771, 362

428, 509

82,423, 682

419, 900

79, 711,427

Allfiguresare subject to correction. Figures do not include 52,269 reconditioning jobs, amounting to approximately
$6,800,000,
completed by the Corporation prior to Jhe 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.

May 1937

279

Construction Loan Procedure
(Continued from p. 257)

association prepares an estimate sheet, classifying
in detail the amounts of all sub-bids, materials
and labor costs, and furthermore specifying the
amount under each classification which will be
distributed to the various subcontractors or
materials dealers out of each of the prearranged
disbursements. One association which follows
this procedure reports that the contractors, far
from considering this detailed supervision a
burden, welcome the use of these estimate sheets
because it gives them a convenient means by
which to plan the detail of their work in advance.
AFFIDAVIT USED
BEFORE final disbursement is made, it is desirable
to obtain a sworn statement by the contractor as
to the amount of bills outstanding, if any. One
association prepares for the contractor's signature
such a statement in affidavit form. The affidavit
folds so as to form an envelope, addressed to the
association, and requiring no postage to be paid
by the sender. When the contractor signs such
an affidavit and mails it to the association, he is
liable, if he submits an untruthful statement, to
charges of perjury and of using the mails to defraud.
To make sure that neither the borrower nor
lender will suffer loss from damage to the building,
it is necessary to see that fire insurance policies,
properly endorsed to protect the lender, should
always be adequate to cover possible loss at any
stage of construction. The same warning applies
with respect to windstorm insurance insofar as
the local risk of such damage exists.
The careful handling of the detail involved in a
construction loan requires additional effort on the

280

part of a savings and loan association or other
home-financing institution, and sometimes makes
necessary the employment, probably on a fee basis,
of additional personnel. The Federal Home
Building Service Plan was devised to equip such
lending institutions to make construction loans
safely without expanding their regular staff, or
buying extra equipment. In those sections where
the Plan has been tried, it has given associations,
at a moderate charge to their borrowers, both
responsible technical supervision of construction
and assurance that disbursements will proceed
only in proportion to the work completed.
RESPONSIBILITY AN ASSET

BUT the additional responsibility involved in
construction loans should not be considered a
liability to the association. On the contrary, it
is a definite asset, because it offers a distinct
service and appeals to the prospective borrower,
while insuring adequate security to the lender.
Homes built by those who have no permanent
interest in them, and financed by institutions
which consider a home as a mere bookkeeping
transaction rather than a continuing responsibility, may well prove to be poor security, because inferior structurally. Homes built without
sufficient attention to financial and legal procedure
may contain unjustified expenditures in their total
cost. In either case, they will be poorer security
for a permanent loan than if the technical phases
of their construction had been coordinated by a
responsible local institution, with an active interest
in the soundness of the social and economic
values of its investment. The more fictitious
values that can be eliminated from a home by
careful supervision of its construction, the safer
it will be to accept it as security for a high percentage, long-term loan.

Federal Home Loan Bank Review

The Future of Suburbs
(Continued from p. 258)

desirable, unprotected ones, will become industrial and lose their value as residential districts.
Others, because of the mobility of their population and their freedom from encroaching industries, will have their future doubly assured.
Of particular interest to the savings and loan
association are the sections on "The Production
of Housing" and "Special Aspects of the Housing

Market" in this number of the Annals. In the
former section are seven articles, dealing with the
economic factors involved, the problems of industrial organization, and other subjects. In the
latter section are the three articles cited above,
with two others: J. Bion Philipson's "Consumption Standards and Housing", and Ira S-JRobbins'
"Methods of Holding Residential Property".
The symposium brings together a number of
political and social points of view on problems
of considerable interest to the mortgage lender.

Directory of Member, Federal, and Insured Institutions
Added during March-April
I.—INSTITUTIONS ADMITTED TO MEMBERSHIP IN THE FEDERAL HOME LOAN BANK
SYSTEM BETWEEN MARCH 22, 1937, AND
APRIL 17, 19371
(Listed by Federal Home Loan Bank Districts, States, and cities)
DISTRICT NO. 1
MASSACHUSETTS:

Boston:
Faneuil Co-operative Bank, 598 Washington Street.
Meeting House Hill Co-operative Bank, 240 Bowdoin Street.
North Dorchester Co-operative Bank, 39 Savin Hill Avenue.
Dorchester:
Godman Co-operative Bank, 563 Washington Street.
Milton:
Milton Co-operative Bank, 541 Adams Street.
West Roxbury:
Bellevue Co-operative Bank, 1882 Centre Street.

DISTRICT NO. 5
KENTUCKY:

Catlettsburg:
Catlettsburg Building, Loan & Savings Association.
OHIO:

Cincinnati:
Spring Garden Loan & Building Company, Corner Westwood
& Harrison Avenues.
Cleveland:
Progress Building, Savings & Loan Company, 5454 Broadway.
Columbus:
Lilley Building & Loan Company, 150 EastTState Street.
Scioto Building & Loan Company, 44 East Broad Street.
London:
Citizens Loan & Savings Company, 1 South Main Street.
Painesville:
Lake County Savings & Loan Company.
Sharon ville:
Peoples Building & Loan Association Company.
Strasburg:
Strasburg Savings & Loan Company.
DISTRICT NO. 7
ILLINOIS:

Taylorville:
Home Building & Loan Association of Taylorville, Illinois.
WISCONSIN:

DISTRICT NO. 2
N E W JERSEY:

Englewood:
Englewood Mutual Loan & Building Association, 33 Park
Place.

N E W YORK:

Bellmore:
Bellmore Savings & Loan Association, East Grand Avenue.

Milwaukee:
West Side Building & Loan Association, 2800 West Lisbon
Avenue.
DISTRICT NO. 8

IOWA:

Cedar Rapids:
Bohemian Savings & Loan Association.

MINNESOTA:

DISTRICT NO. 3
PENNSYLVANIA :

Kane:
Kane Building & Loan Association.
Philadelphia:
Front & Huntingdon Building & Loan Association, 2558
North Front Street.
Roxborough Building & Loan Association, 2809 Queens Lane.
Visitation-Meteor Building & Loan Association, 4618 North
Eighth Street.
DISTRICT NO. 4

MARYLAND:

Baltimore:
Sterling Permanent Savings & Loan Association of Baltimore
County, 2407 Fairmount Avenue.
SOUTH CAROLINA:

Clinton:
Citizens Building & Loan Association of Clinton, 1 Broad
Street.
1

During this period 4 _ Federal savings and loan associations were
admitted to membership in the System.

May 1937

Minneapolis:
Mutual Building & Loan Association of Minneapolis, 829 Marquette Avenue.
DISTRICT NO. 9

LOUISIANA:

New Orleans:
Central Homestead Association, 400 Audubon Building.
Commonwealth Homestead Association, 615 Maritime
Building.
Globe Homestead Association, 820 Maison Blanche Building.
Guaranty Savings & Homestead Association, 612 Gravier
Street.
Home Building & Loan Association, 625 Common Street.
DISTRICT NO. 10
OKLAHOMA:

Durant:
Durant Building & Loan Association.
DISTRICT NO. 11
WASHINGTON:

Tacoma:
American Savings & Loan Association, 305 Rust Building.

281

DISTRICT NO. 12
CALIFORNIA:

Albany:
Albany Guarantee Building & Loan Association.

WITHDRAWALS FROM THE FEDERAL HOME LOAN BANK
SYSTEM BETWEEN MARCH 22, 1937, AND APRIL 17,

1937
CALIFORNIA:

Montebello:
Montebello Building & Loan Association, 424 Whittier Boulevard.

TERRITORY OF HAWAII:

Honolulu:
First Federal Savings & Loan Association of Honolulu, 929
Fort Street (charter canceled on account of consolidation
with the First Federal Savings & Loan Association of
Hawaii, Honolulu, Hawaii).

III.—INSTITUTIONS INSURED BY THE FEDERAL
SAVINGS AND LOAN INSURANCE CORPORATION BETWEEN MARCH 22, 1937, AND APRIL
17,1937 *
DISTRICT No.

IL—FEDERAL SAVINGS AND LOAN ASSOCIATIONS CHARTERED BETWEEN MARCH 22,
1937, AND APRIL 17, 1937
DISTRICT NO. 1
MASSACHUSETTS :

Cambridge:
Cambridge Federal Savings & Loan Association, 1295 Cambridge Street (converted from Inman Co-operative Bank).
DISTRICT NO. 3

PENNSYLVANIA :

Irwin:
First Federal Savings & Loan Association of Irwin, 53 Broadway Street.
DISTRICT NO. 4
NORTH CAROLINA:

Greenville:
First Federal Savings & Loan Association of Greenville.

Ambridge:
Ambridge Building & Loan Association, 500 Merchant
Street.
Philadelphia:
Forty Third Ward Building & Loan Association, Northwest Corner Sixth Street & Erie Avenue.
Stephen Girard Saving, Loan & Building Association,
1604 West Oxford Street.
Pittsburgh:
Steel City Building & Loan Association, 433 Fourth
Avenue.
DISTRICT No.

OHIO:

Bowling Green:
Mutual Federal Savings & Loan Association of Bowling
Green, 129 East Court Street (converted from Mutual
Savings & Loan Company).
Cincinnati:
Northside Federal Savings & Loan Association, 1612 Hoffner
Street (converted from North Side #449 Building Association Company).
TENNESSEE:

Nashville:
Fidelity Federal Savings & Loan Association of Nashville,
405 Union Street.

Cuyahoga Falls:
Falls Savings & Loan Association, 2140 Front Street.
Miamisburg:
Miamisburg Building & Loan Association, 24 East Central Avenue.
DISTRICT N O . 6
INDIANA:

Mishawaka:]
Mishawaka Building & Loan Association, 115 South Church
Street.
Terre Haute:
Phoenix Building, Loan & Savings Association, 17 South
Sixth Street.
DISTRICT N O . 9
LOUISIANA:

DISTRICT NO. 7

DISTRICT No.

ILLINOIS:

Mount Vernon:
King City Federal Savings & Loan Association, Ham National Bank Building (converted from King City Building
& Loan Association).
DISTRICT NO. 9

OHIO:

SOUTH CAROLINA:

Clinton:
Citizens Federal Savings & Loan Association, 1 Broad Street
(converted from Citizens Building & Loan Association of
Clinton).
DISTRICT NO. 5

PENNSYLVANIA:

KANSAS:

Pleasanton:
Linn County Savings & Rural Credit Association.

OKLAHOMA:

Muskogee:
Victor Building & Loan Association, 224 Wall Street.

MISSISSIPPI:

Laurel:
Laurel Federal Savings & Loan Association.
DISTRICT NO. 12

CALIFORNIA:

Compton:
Compton Federal Savings & Loan Association, 501 East
Compton Boulevard (converted from Compton Building &
Loan Association).
North Sacramento:
Fort Sutter Federal Savings & Loan Association of North
Sacramento, 1454 Del Paso Boulevard (converted from
Fort Sutter Building & Loan Association).

CANCELATIONS OF FEDERAL SAVINGS AND LOAN ASSOCIATION CHARTERS BETWEEN MARCH 22, 1937, AND
APRIL 17, 1937

DISTRICT No.

MONTANA:

Billings:
Security Building & Loan Association, 2701 Second Avenue,
North.

WASHINGTON:

Kelso:
Commercial Savings & Loan Association, 106 South Second
Street.
DISTRICT No.

CALIFORNIA:

Los Angeles:
Coast Mutual Building-Loan Association, 530 West Sixth
Street.
> During this period 12 Federal savings"and loan associations were
insured.

MISSOURI:

Kansas City:
Home Federal Savings & Loan Association of Kansas City,
108 West Eleventh Street (charter canceled on account of
dissolution and merger with the First Federal Savings &
Loan Association of Kansas City).

282

Federal Home Loan Bank Review
U . S . COVERNMENT PRINTING OFFICE: 1937

FEDERAL HOME LOAN BANK DISTRICTS

M M BOUNDARIES OF FEDERAL HOME LOAN BANK OISTAJCTS.
•
FEDERAL HOME LOAN BANK CITIES.

Full text of Federal Home Loan Bank Review : May 1937, Vol. 3 No. 8

FRASER