On page 25, section 25, there is this sentence:

Foreclosure by power of sale under the provisions of said sections is an optional method of foreclosure, and is in addition to foreclosure by suit, action or proceedings in court.

I leave that to you as to whether or not a person would go into court and get an equity proceeding rather than to have this seven months' uncertainty. This is an optional method, and therefore I do not know what it means.

Mr. LOOFBOUROw. Well, that is plain enough. He could go into

court.

Mr. ADDISON. He could go into court and it would be much more advantageous to do that than to act under this option; and therefore why the law?

Mr. LOOFBOUROW. How can they? Mr. ADDISON. They can now. They can do it quicker this way. Mr. LOOFBOUROW. It is the only method you have now? Mr. ADDISON. No. We can go under the deed of trust. Mr. LOOFBOUROw. That is the way it is commonly done? Mr. ADDISON. That is the way it has been done for a hundred years. I know it has been done for 30.

Mr. LOOFBOUROw. You do not fall back on the equity power?

Mr. ADDISON. No, sir. The net result is it is much more plain when you view them as to the contract; that as far as the foreclosure is concerned it has not been a hardship on the home buyer. We have more buyers of homes in Washington for the population than in any other city I know of. We sell them on very small cash payments down that make it possible for them to buy homes. The conveyance has been done for 1 per cent commission, the renewals for 1 per cent, and no other charges. When a foreclosure takes place it can be done for $50. In Maryland it is $75 more than it is here; all of which is added to the borrower's cost. All of this very sad stuff that has happened here in Washington has not been the result of foreclosures.

Mr. LOOFBOUROW. It has been the result of fraud?

Mr. ADDISON. It has been the result of definite fraud or legitimate mistake as to value; and I would rather take the first clause as the reason for it.

Now, here is another inconsistency, and then I am through as far as this bill is concerned, Mr. McLeod: Section 27 on page 26, Releases to enable refinancing. It provides in here:

In the event a mortgagor shall find it necessary or deem it advisable to refinance any mortgage which is a first or superior lien on the premises mortgaged, and where there are second or other inferior mortgages upon such premises he may require the owner, holder, or trustee of any such inferior lien or encumbrance

That includes a judgment—

to release such mortgage pending the recording of the new mortgage constituting a substitute for the existing first mortgage: Provided, however, That such new mortgage does not exceed the amount of the superior mortgage indebtedness

Then he deletes "at the time the inferior mortgage was recorded " and he substitutes

which it supersedes; and the second or other inferior mortgage shall then be reinstated of record by the recorder of deeds of the District of Columbia

without loss of priority over any other lien, debt, judgment, or claim to which it was superior before such release, and without impairing the validity, security, or priority,

And so forth.

Gentlemen, I would have no objection to that provision in there were it not for the weakness of section 27a, which did not take that into consideration. I know of instances wherein people have had a first trust and a second trust and the first-trust people wanted the money and the second-trust people have refused to release and permit the recordation of a new first trust, working hardship-not often. But in order to prevent that I would have no objection; although I think every real-estate man would like to know that the buyer of a home would not be subjected to the yes or no answer to the second lienor as to whether he could refinance his first mortgage. In ninety-nine times out of a hundred the second-mortgage person wants it that way because he does not want to take the property; he simply wants his money as it is provided to be paid; but there have been times when he has come in, hence this thing. So it clearly says that the note being secured shall be reinstated.

Then he comes over here and says:

SEC. 27a. No release by a trustee or mortgagee shall affect or impair the lien of a note or other evidence of indebtedness secured by the instrument released, unless the note, bond, or other evidence of indebtedness secured shall be presented to the recorder of deeds of the District of Columbia and be by him stamped "Canceled and released "

Under the penalty of a fine. I say that there should have been inserted in there "except as provided in section 27." Now, under this you can not release a note because they say, in section 27, that no release would stop because of the making of a new first trust, with section 27a saying it will not be released on their lien unless it has been stamped by the recorder of deeds; and certainly there should be put in there "except as provided in section 27," following the word "released" on line 18. I think you will agree with me, Mr. McLeod, that would be rather a dangerous thing. No title company would pass title if that note had not had this stamp on it. I do not raise the question as to whether the recorder of deeds is competent, but I will say this to you, that within the last four or five years there were two sets of crooked deals perpetrated that were done by the method of duplicating original notes. The mortage was for $6,000, and there were half a dozen sets of notes outstanding identical with the original-not forged, but duplicates by the man who did it. It is easy enough to do. He walks in and hands one of these notes, and the recorder of deeds has no way in the world of knowing whether that is a genuine real-estate note or whether that is a forged realestate note or whether that is in fact a duplicate note.

Mr. LOOFBOUROW. How do they secure the signature to it?

Mr. ADDISON. The man that makes the mortgage is a crooked man. We will take, as an illustration, that he is a promoter.

Mr. LOOFBOUROW. How do they persuade the man who is borrowing money to make two sets of notes?

Mr. ADDISON. The man who borrows the money is the man who lends the money; in other words in his office. He both makes the loan and sells it to his clients. I would just take an illustration, without any reflection on an attorney whatever and not intended as

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such. I just use the word "attorney "; it may be a banker or real estate office; but suppose an attorney has a piece of property and that attorney desires to raise money and he calls in his client and says, "I want to put a $1,000 mortgage on my property. Will you buy it?" You look at the property and say Yes." He makes out a deed of trust and executes it and acknowledges it. You go out, and he gets in touch with the title company, and the title company comes down and shows that is a good trust; but before he delivers that to you he makes an exact copy of every one of those papers, six different times, and he calls in six different clients and each of those clients thinks and believes that he is buying a first mortgage on that property. Not a one of them can tell which is the original. That happened out in Montgomery County here; nobody can tell which is the original mortgage. It is putting a duty on the recorder of deeds, and I doubt whether he is equipped to properly do it, although I would like to see it prevented.

Mr. LOOFBOUROw. You can not provide against individual fraud of that kind.

Mr. ADDISON. No.

Mr. LOOFBOUROW. That is a crime?

Mr. ADDISON. Yes. That is what they did, but it is putting that burden on the recorder of deeds, and I have no objection to it. As a matter of fact I think it is a very good thing if this does not become inconsistent with section 27 there; and all through the bill, where he provided for attorneys or trustees, then he brings in this which upsets it all: section 27c.

The title company certifies a properly sold note. That is sent for settlement to the title company, and the title company registers on that note. This is the note described in the deed of trust. There is the protection we now have; and the marshal under this has no way of acting.

In section 27c, on page 28, I raise this one question :

It shall be unlawful for any natural person or any firm, corporation, or association, except a bank, trust company, or building and loan association doing business under the supervision of the Comptroller of the Currency, to act as trustee of a trust mortgage when the principal sum secured exceeds $25,000, and any act of such person, firm, corporation, or association shall be null and void

And so forth.

Now, in the District of Columbia there are maybe eight national banks that have qualified under the Federal reserve act to act as trustee. There are five trust companies. The law here specifically states that no corporation shall act in the capacity of trustee unless they have a capital of $1,000,000 and have a certificate from the clerk of the court to that effect. I believe that your section 30 here is amended so that we who do not have those trust powers may possibly do so. I do not believe the building association has a charter right, and I doubt if the other banks have a charter right to act as trustee, and yet they may do so. A bank that has not trust powers under the District Code can act as trustee under this. Is that right? I question that it is.

Then they go on to say, in section 31:

Sections 539 and 545 of the Code of Laws of the District of Columbia are hereby repealed except as to mortgages existing at the time the act takes

effect, and all acts or parts of acts applying to the District of Columbia inconsistent with the provisions of this act are hereby repealed.

I believe it repeals the provisions of the code.

Mr. LOOFBOUROW. What are those specific provisions?

Mr. ADDISON. Sections 539 and 545 have to do with costs of foreclosure that are not provided for within the terms of the instrument itself.

Mr. LOOFBOUROW. So as to permit these marshal's costs to be taxed? Mr. ADDISON. Yes. Section 30 reads:

The provisions of this Act shall not apply to mortgages made and delivered and/or agreements made and entered into before this Act takes effect.

But that does not include trustees.

I then raise this one question, and this is further under section 27, a, b, and c: This provision applies only to instruments that have been acknowledged and executed subsequent to the date of this becoming law; but whether this is to be an entirely new matter and is supposed to apply to all releases hereafter executed, is not clear.

Gentlemen, I have tried as fast as I could to give you a resume of what we feel are not clear points.

Mr. MCLEOD. Let me ask you one question. In your opinion is there a need for immediate legislation along this line?

Mr. ADDISON. No, sir; not in foreclosures of mortgages.

Mr. MCLEOD. There is not?

Mr. ADDISON. No, sir.

Mr. LOOFBOUROW. Has this all come about simply through these two cases that have come up here recently?

Mr. ADDISON. Yes, sir. I know of no case where an auctioneer has imposed on anybody. I know of no case wherein he should be put out of office after being in office this length of time. I know of no case wherein the

Mr. LOOFBOUROw. Let me ask you this: What do your trust deeds ordinarily provide about redemption?

Mr. ADDISON. Nothing whatever.

Mr. LOOFBOUROw. That is when the deed provides that it shall be done at the direction of the trustee by some person acting as auctioneer?

Mr. ADDISON. Yes, sir.

Mr. LOOFBOURow. And as soon as he sells he makes the necessary certificate, does he?

Mr. ADDISON. Yes, sir.

Mr. LOOFBOUROW. A certificate of sale.

Mr. ADDISON. He makes a deed of conveyance as trustee on the deed. I make this statement to you

Mr. LOOFBOUROW. It is just an informal memorandum?

Mr. ADDISON. Simply like giving you a memorandum of a sale within 15 days. I say to you, if you look at any foreclosure you will find that when something is being done about waste, every effort to collect is made before the foreclosure. You can follow out your expiration of the mortgage about that date.

Mr. LOOFBOUROW. And then you record?

Mr. ADDISON. And then you record your conveyance.
Mr. LOOFBOUROW. On auctioneer's certificates?

Mr. ADDISON. No, sir; the auctioneer's certificate does not go on record at all. We record nothing but the deed and the fact that the trustees have advertised the property in such-and-such paper for so many days and under default it was sold to the purchaser for a given amount.

Mr. LOOFBOUROW. And that makes the chain of title?

Mr. ADDISON. That makes his chain of title complete.
Mr. MCLEOD. Are there any further questions?
Mr. LOOFBOUROW. I have not any.

Mr. ADDISON. We have, sir, prepared a bill to comply with Mr. Brinkman's request of us to-day to include something that would be formal, something that would be a law to govern the foreclosures. Mr. LOOFBOUROW. Let me ask you if any of you gentlemen are interested in this thing to-day, and if they represent the people of this District?

Mr. ADDISON. I would like to say, in answer, that Mr. Lawson of the Washington Real Estate Board; Mr. Petty, secretary of the Real Estate Board; Mr. Carlisle, president of the Bankers' Association; Mr. Bell of the Bell (?) Realty Co.; Mr. Lusk, who is with the Cooperative Building Association, Mr. James of the Building Association; Mr. Flather of Glover & Flather, realtors; Mr. Quinter of the Citizens' Association and also the Building Association; and this gentleman here-I do not know his name the Building Association counsel have all been in conference on the study of this. I think if you ask the question whether they concur in what I say, that they will answer in the affirmative or give their own opinions.

Mr. LOOFBOUROW. Has anyone representing any considerable portion of people of the District come forward to advocate this particular form of bill?

Mr. ADDISON. Not one person that I have heard of. There was quite a number of witnesses in the Shapiro case telling of how they had been deceived, but this bill was not then drawn. It had to do entirely with the public hearing as to the need of legislation, but none of them knew anything or advocated anything because they did not even know enough to order title.

Mr. LOOFBOUROw. This view that you aired here, as to the conduct of the sale in the hands of a public officer, and the notice to be given to persons not required to be notified in the trust deed and that there shall be a six months' period of redemption-those are the principal changes you advocate, are they not?

Mr. ADDISON. Those are.

Mr. LOOFBOUROw. Which are attempted by this bill.

Mr. ADDISON. Which are attempted by that bill, except it is entirely drawn from the point of view of protecting the man who borrows the money when it will have just the reverse effect, in our opinion.

Mr. LOOFBOUROw. Of course, you can go too far.

Mr. ADDISON. You can go too far, and money will not be attracted to it. There is one danger this bill would bring about, and that is this: On the present sale, on small installment monthly payment notes, so a person can by paying a small installment acquire a home over a period of years, no man could afford to sell a house built for sale unless he got a substantial cash payment on giving a deed, but