DOCUMENTS) COMMITTEE ON APPROPRIATIONS CLARENCE CANNON, Missouri, Chairman JOHN H. KERR, North Carolina PRINCE H. PRESTON, JR., Georgia OTTO E. PASSMAN, Louisiana LOUIS C. RABAUT, Michigan DANIEL J. FLOOD, Pennsylvania CHRISTOPHER C. MCGRATH, New York SIDNEY R. YATES, Illinois FOSTER FURCOLO, Massachusetts EDWARD H. KRUSE, JR., Indiana JOHN TABER, New York RICHARD B. WIGGLESWORTH, Massachusetts CHARLES A. PLUMLEY, Vermont ALBERT J. ENGEL, Michigan KARL STEFAN, Nebraska FRANCIS CASE, South Dakota H. CARL ANDERSEN, Minnesota FREDERIC R. COUDERT, JR., New York II GEORGE Y. HARVEY, Clerk A6 8/st HOUSING AND HOME FINANCE AGENCY WITNESSES WILLIAM K. DIVERS, CHAIRMAN OF THE BOARD J. ALSTON ADAMS, MEMBER OF THE BOARD R. R. BURKLIN, DIRECTOR, DIVISION OF FHLB OPERATIONS T. CORCORAN, BUDGET OFFICER N. J. EISEMAN, OFFICE OF THE ADMINISTRATOR Mr. THOMAS. Gentlemen, it is nice to see so many of our friends from the Home Loan Bank Board. We are delighted to have with us the Chairman of the Board, Mr. Divers, together with Mr. Adams, who is a member of the Board, also Mr. Burklin, Mr. Husband, Mr. Baughman, and Mr. Corcoran. We have a supplemental request here in House Document No. 455 for 1950 for $120,000 for the Home Owners' Loan Corporation as follows: HOME OWNERS' LOAN CORPORATION The amount made available under this head in title II of the Independent Offices Appropriation Act, 1950, for administrative expenses of the Home Owners' Loan Corporation, is increased from "$1,823,250" to "$1,858,250"; and the amount made available under said head for expenses in connection with the termination or liquidation of accounts carried on the books of the Corporation is increased from "$300,000" to "$500,000." JUSTIFICATION OF THE ESTIMATE At this point in the record we will insert page 1 of the supplemental justifications, also page 4, all of page 7, and the bottom half of page 8. (The matter above referred to is as follows:) HOME LOAN BANK BOARD, HOME OWNERS' LOAN CORPORATION Exclusion from administrative expenses, HOLC Request (for 4 months from Mar. 1, 1950) Authorization to date--. Expenses to Dec. 31, 1949_. Budget estimate next fiscal year-- $120,000 (1) M707764 To continue, without interruption, through June 30, 1950, the sale or assignment of mortgages carried on the books of the Corporation. Current experience reveals cost per mortgage delivered to be 20 percent more than is provided for in current exclusion. Tempo of program indicates an additional 10,000 mortgages, making a total of 70,000 mortgages, may be delivered in the current fiscal year. Corporation desires to have as many sales or assignments as possible contracted for and delivery commitments made in the current fiscal year. JUSTIFICATION The current exclusion from "Administrative expenses, Home Owners' Loan Corporation," in the amount of $300,000 provides for the estimated sale and assignment of 60,000 mortgages carried on the books of the Corporation, at an estimated cost of $5 per mortgage. The supplemental estimate of $120,000 is based on (1) the actual average cost through December 1949 of $6.38 per mortgage sold or assigned, and (2) increase in the estimated number of mortgages to be sold and assigned in the current fiscal year. Initiation and progress of program The Chairman of the Home Loan Bank Board consulted with the House and Senate Independent Offices Appropriations Subcommittees and also with the chairman of the House Banking and Currency Committee and the chairman of the Senate Banking and Currency Committee regarding the complete liquidation of the Corporation's outstanding mortgages prior to July 1, 1951. Resulting from these consultations, the Board decided to institute a program to sell and assign all outstanding mortgages by publicly offering them for sale on a State-wide basis. Accordingly, the first public offering was made on June 6, 1949, for the sale of the loan portfolio of New York State. Resulting from this offer, a bid was accepted and contract signed on September 1, 1949. Assignment of mortgages was commenced immediately and, under the terms of the contract, will extend into the 1951 fiscal year. Bids have since been accepted and contracts signed for the sale of the loan portfolios of additional States as shown in the following table. It is now estimated that 70,000 mortgages can be delivered during the fiscal year as compared with 60,000 originally estimated and provided for in the current authorization. Cost per mortgage delivered At the time original estimate was made, the Corporation had no experience upon which to base the cost of liquidation by sale and assignment but assumed that it would be comparable to that of regular final payments which averaged $5 per mortgage. Experience has shown that liquidation of mortgages by sale and assignment includes many additional costs not required by routine final payments. As of December 31, 1949, the Corporation had delivered 19, 614 mortgages at a cost of $125,201 which is an average of slightly more than $6.38 per mortgage. This average cost per mortgage delivered would permit the Corporation to deliver only 47,022 mortgages under the present exclusion, deliveries of which could be completed by the end of April 1950. The Corporation expects, through increased efficiency and because of variances in the regulations controlling operations of this type in the respective States, to reduce the cost per mortgage delivered to $6 and this request is based on this reduced cost. Rate of deliveries The program did not get under way until late September. Since that time the daily rate of deliveries has stepped up rapidly and as of December 31 last, the Corporation had delivered 19,614 mortgages. The Corporation delivered 8,550 mortgages in the month of January and can step up this figure to from 9,000 to 10,000 a month, if funds are available to maintain this rate. Summary The program is currently geared to spend at the rate of $300,000 for the fiscal year. If the additional funds requested are approved, the Corporation will gear its operations to spend at the rate of $420,000 for the fiscal year. Early approval of the request will permit the necessary acceleration of delivery schedules to insure delivery in the current fiscal year of an additional 23,000 mortgages having an estimated value of $46,000,000. An analysis of the request, showing number of employees and estimated average salary cost for each department, is presented in the following table. An outline of the departmental functions performed in connection with sales or assignments is also presented. Mr. THOMAS. You want $120,000 additional for 100 employees for the remainder of the fiscal year in connection with your termination or liquidation of accounts. Tell us about that. Mr. DIVERS. There are two reasons for that. One of them is that the cost of handling sales and assignments of mortgages is about $1 more for each mortgage than we estimated when we came before you the first time. You will remember we had had no experience with it. Mr. THOMAS. It is costing you $6 instead of $5? Mr. DIVERS. Yes. The result of that would be that we would not be able to deliver as many mortgages if we proceeded with the money that is now available. We would deliver about 47,000 for this year in addition to the 40,000 other accounts that we close out, which would make a total of about 87,000 accounts. DISPOSAL OF MORTGAGES Mr. THOMAS. With this additional $120,000, you will be able to close out 87,000 accounts altogether? Mr. DIVERS. No. We can close out 87,000 without it and, with it, we will be able to get up, I think, to 110,000. Mr. THOMAS. How many accounts will that leave remaining for 1951 ? Mr. DIVERS. 91,000. Mr. THOMAS. How many of those will you be able to dispose of in 1951 ? Mr. DIVERS. We estimate we will be able to close out all 91,000. You will remember that is the schedule I gave you when we came up and discussed it last year. FACTORS SUPPORTING NEED FOR SUPPLEMENTAL Mr. THOMAS. In making your cost estimate, you had had no experience before. What elements go to make up that 20 percent increase in cost that you did not foresee when you were here before? |