Evening star., 1943-03-29
House Plan 10 Force
Liquidation Of Hole
Assai|ed by Fahey
Home Loan Bank Chief
Says Bill Would Cost
U. S. $440, ,000, 900
BY ]. A. OLEARY.

Forced liquidation of the Hom'
Owners Loan Corp. within a year
as voted by the House in the indie.
pendent Offices bill, would cost thu
Government $440,000,OO0 and bt
nothing more than a raid on the
Treasury in the midst of war;" Johr
H. Fahey, chairman of the Fedora,
Home Loan Banks Board, told the
Joint Congressional Committee on
Essential Expenditures today.
Senator McKellar, Democrat, of
Tennessee suggested to Mr.. Fahey
that the HOLC consider liquida-
ito min two years, rather than one.
Mr.. Fahey said the loss could be
held to 1851 100000 if liquidation
were in 1945 and $18O,0OO,O0 if the
corporation continued in business
throughout 1948
Mr.. Fahey said if Congress directs
liquidation within a stated period
I'VE shall Fundamentally devote
ourselves to that purpose 1t is our
responsibility, however, to tell you
that the present proposal means
Give the corporations best loans to
a few private lenders, keep the
worst and pass on to the taxpayers
heavier and more certain losses. 1t
is disguised as war service to the
Government. Actually it is dis
service to the Government, the tax
payers, the general public and to
the corporations borrowers. 1t may
well prove serious liability also to
our real estate and financial insti-
tutions, as many thinking real estate
and financial leaders realize"
Urges "GraduaI' Plan.
Urging that the agency be per-
mitted to continue its gradual
liquidation, he said:
mo one knows exactly how many
unnecessary foreclosures would be
caused. No one knows, in fact, just
how vast number of HOLC bor-
roWers will react when their mort
cages suddenly are handed over
to certain groups-or, for that mat
ter. just what groups will take these
mortgages or on what basis"
Mr.. Fahey said Home Loan Agency
created early in the depression to
prevent foreclosures, already had
liquidated in orderly fashion more
than 48 per cent of its total invest
ment of s3,481 ,0oO,O 900, and by July l
the figure will be so per cent.
From a peak employment of 81
600, Mr.. Fahey placed the personnel
last month at 4,2l8 employees, with a
monthly payroll of S742,725. To a
question by Chairman Byrd, Demo-
crat. of Virginia he said that in the
fiscal year 1914 the staff will be re-
duced to 1882, with an annual pay
roll of $8,173,300.
Bill Awaits Senate Action.
The bill that would force the
agency to wind up by the middle
of 1914 is awaiting action by the
Senate Appropriations Committee.
The corporation cannot liquidate
troubled loans under pressure. ex-
cept far below par. Immediately
borrowers will raise the question:
If you will sell my $4,000 mortgage
to some one else for $4,000 or S2,5O0
why not to me?' The sale of a
mortgage below par to a delinquent
borrower obviously would place a
penalty on every borrower who has
kept in good standing-and the
resulting confusion and protests
would become a serious issue in
every section in the country.
IF good loans are disposed of
and slow loans left on the HOLC
books nothing will have been 'ac-
complished' but to place huge
burden on the United States Treas
ury and taxpayers. More than 70
per cent of HOLC servicing costs
are for slow loans; these costs
would continue. without compen-
sating revenues.
"On December 81, 1912, the HOLC
owned 29.876 properties of which
26,662 were in the Northeastern
part of the country, where there
also remains an excess of unsold
houses in the hands of lending in
for these properties except at vir-
tual auction. Such auctions at de-
pressed prices would have a disas-
trous impact on community real
estate values where HOLC holdings
are concentrated.
Other Efforts Recalled.
The present effort to rush the
HOLC into liquidation is not the
first one. AS early as November
1885 the United States Savings and
Loan League asked the corporation
to sell to private lenders such of its
loans as would meet the specifica-
tions of these lending institutions
A year later, when more than 100000
loans were delinquent the eXecu-
tive vice president of the league
pressed for the sale of such HOLC
securities as were acceptable tc
private investors and trustee insti-
tutions.' A few months later the
league asked President Roosevelt
to transfer the Holes better mort
cages to savings and loan associa
tions or perhaps to other mortgage
lending institutions. In 1887 and
again in 1888 the league again
sought the HOLC mortgages not
only for cash but in exchange for
shares of savings and loan associa-
tionS.
IF any sound plans could have
been developed for the transfer of
the assets of the HOLC to private
inStitutionS-at the same time pro-
tecting home owners, the Govern
ment's investment the stability of
the real estate market and the
country's mortgage credit structure
they would have had the support
of officials of the HOLC. Any such
plan suggested now would get that
support"
A table filed by Mr.. Fahey fol
each part of the country showed
1,466 loans in Washington, on which
the book value is SIS, $40 ,290. Another
table showed HOLC has acquired
only two pieces of property here
having a book value of $l4,714.
Gen. Andrews Presents