University of Southern California Dissertations and Theses

Institutional Mortgage Lending In The Los Angeles Metropolitan Area, 1953-1954 And 1957-1958

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Institutional Mortgage Lending In The Los Angeles Metropolitan Area, 1953-1954 And 1957-1958

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Content T h i s d i s s e r t a t i o n h a s boon 6 3 — 2 145 m i c r o f i l m e d e x a c t l y a s r e c e i v e d C O X , J o h n H o b e rt, 1919— IN S T IT U T IO N A L , M O liT G A G I ’ U N DING IN T 1 11 I j()S A N G K L K S M U T R O P i .) I J T A N AH DA, 1 5 5 3 -5 4 AND 1 9 5 7 -5 8 . U n i v e r s i t y of S o u t h e r n C a l i f o r n i a , P h .D ., 1952 h c o n o m i e s , f in a n c e University Microfilms, Inc., A nn Arbor, M ichigan C o p y rig h t by JOHN ROBERT C O X 196 i INSTITUTIONAL MORTGAGE LENDING IN THE LOS ANGELES METROPOLITAN AREA, 1953-5^ AND 1937-58 by John Robert Cox A Dissertation Presented to the FACULTY OF THE GRADUATE SCHOOL UNIVERSITY OF SOUTHERN CALIFORNIA In Partial Fulfillment of the Requirements for the Degree DOCTOR OF PHILOSOPHY (Economics) August 1962 UNIVERSITY OF SOUTHERN C A L IF O R N IA GRAD U A T E S C H O O L UN IV ER SITY PARK LOS A N G E L E S 7. C A L IF O R N IA This dissertation, written by ......... ..John. Robert. C.o .x_______________ under the direction of Aia . Dissertation C o m mittee, and approved by all its members, has been presented to and accepted by the Graduate School, in partial fulfillment of requirements for the degree of D O C T O R O F P H I L O S O P H Y Date AUGUST 1962 i^hairma IJIS S! ' . R ' I All ON COM M I I 'TK K TABLE OP CONTENTS CHAPTER PAGE I. STATEMENT OF THE PROBLEM...................... 1 The General Background for the Problem . . . 2 The Basic Hypothesis ........................ 3 The hypothesis............................ 4 Implied assumptions ........................ 4 Basic Terminology ............................ 6 General economic conditions ............... 7 Institutional mortgage market ............. 9 Groupings of Institutions .................. 9 Mortgage market structure ................. 9 Mortgage lending patterns ................. 10 Plan of the Study............................... 12 Background and setting for the study . . . 13 Changes in the structure of the market . . 14 Examination of mortgage lending patterns . 14 Scope of the Study .......................... 16 Geographical extent of the local mortgage market......................................17 Institutional participants in the local mortgage market .......................... 17 11 lii CHAPTER PAGE Institutional participants In the national market .......................... 21 Classifications of mortgage loans ......... 21 II. BACKGROUND TO THE PROBLEM........................ 23 The National Background ...................... 23 National studies .......................... 24 Emphasis on the national market ........... 31 The Local Background ........................ 37 Overview......................................37 Metropolitan areas In general ............. 38 Importance of the Los Angeles Metropoli tan A r e a ................................... 43 Previous Local Market Studies Related to the Problem................................... 30 Local mortgage market studies in general . 50 The studies by Gillies and Curtis........... 53 III. RESEARCH METHODOLOGY.............................57 Orientation of the Local Market Investiga tion ..........................................58 Institutional mortgage loan holdings . . . 58 Institutional mortgage lending patterns . . 59 Savings and Loan Associations..................61 Life Insurance Companies .................... 62 Mortgage loan holdings .................... 63 iv CHAPTER PAGE Mortgage loans made...........................6^ Commercial B a n k s ................................65 Mortgage loan holdings.................... 67 Mortgage loans made...........................68 Mutual Savings Banks ......................... 68 Sources of National Market Information . . . 69 IV. OVERVIEW OF THE LOS ANGELES AND NATIONAL ECONOMIES......................................... 71 Similarities Between National and Local Economic Conditions ......................... 71 Industrial production and general business activity.....................................72 Employment.....................................75 Yield Rates of Government Securities and Economic Conditions ......................... 78 Yield rateB and Index of Business Activity 79 Yield rates of government securities and employment in the Los Angeles Metro politan A r e a ................................ 82 Yield rates of government securities and lines of help wanted ads appearing in Los Angeles newspapers .................. 83 Yields of government securities, 1953-5^ and 1957-58.................................. 85 V CHAPTER PAGE Summary......................................... 85 Conclusions.......................................86 Changes In economic conditions ........... 86 Implications of the conclusions..............87 V. THE FINANCIAL RESOURCES OF THE LOS ANGELES A R E A ..............................................89 Overview of Institutional Sources of Mort gage F u n d s .....................................90 Location of decision making ................ 93 Location of the savings process ........... 95 Summary........................................ 103 Savings and Loan Associations................. 104 Growth during the 1950's 105 Sources of increases in assets ........... 110 Uses of increases in assets................. 113 Life Insurance Companies .................... 114 Growth during the 1950's 117 Sources of increases in assets ........... 120 Uses of a s s e t s ...............................122 Commercial Banks ............................. 124 Growth during the 1950's 127 Sources of Increases in assets ........... 130 Uses of a s s e t s ...............................134 Summary.......................................... 134 vi CHAPTER PAGE VI. STRUCTURES OF THE LOS ANGELES AND NATIONAL MORTGAGE MARK ETS............................138 Definitions...................................139 Mortgage market structures ................ 1*0 Mortgage classification composition of the m a r k e t .............................. 1*0 Changes in Structures and Compositions . . . 1*1 Los Angeles Metropolitan Area............1*1 United States ................................ 1** Comparisons Between Mortgage Markets .... 1*7 General comparisons ......................... 1*7 Numerical comparisons ....................... 150 Summary........................................156 Los Angeles Metropolitan Area............ 156 United States ................................ 157 Comparative analysis ....................... 157 VII. SAVINGS AND LOAN ASSOCIATIONS.................159 Overview of the Two Periods.................159 Variations between institutional lenders . 160 Similarities between the two periods . . . l6l Implications ................................ 162 Mortgage Loans Made.......................... 163 Mortgage loans made in the Los Angeles Metropolitan A r e a........................16* vii CHAPTER PAGE Mortgage loans wade in the United States . 166 Semi-Annual Increases in Dollar Volume Holdings.......................................168 Los Angeles Metropolitan Are a............... 168 United States ................................ 173 Salient Points ................................ 179 Pattern of loans made--dollar volumes . . . 180 Pattern of loans made--percentage of the total.........................................180 Pattern of net additions to loan holdings-- total loans..................................182 Pattern of net additions to guaranteed- lnsured loans .............................. 183 Conclusions.......................................184 VIII. LIFE INSURANCE COMPANIES.........................185 Overview of the Two Periods ..................185 Variations between institutional lenders . 186 Variations between periods ................ 187 Implications ................................ 188 Mortgage Loans Made............................. 189 Mortgage loans made in the Los Angeles Metropolitan A r e a...........................189 Mortgage loans made in the United States . 192 viil CHAPTER PAGE Semi-Annual Increases In Dollar Volume Holdings......................................195 Los Angeles Metropolitan Area............... 196 United States ................................ 203 Salient Points ................................ 211 Pattern of loans made--dollar volume . . . 211 Pattern of loans made— percentage of the total........................................212 Pattern of net additions to loan holdings --total loans ............................. 213 Pattern of net additions to guaranteed- lnsured loans ............................. 214 Conclusions................................... 214 IX. COMMERCIAL B A N K S ................................. 216 Overview of the Two Periods....................217 Variations between Institutional lenders . 217 Variations between periods ............... 218 Implications ................................ 219 Mortgage Loans Made.............................219 Mortgage loans made in the Los Angeles Metropolitan Area.......................... 220 Mortgage loans made in the United States . 222 Semi-Annual Increases in Dollar Volume Holdings......................................224 ix CHAPTER PAGE Lob Angeles Metropolitan Area............... 224 United States ................................ 234 Salient Points ................................ 241 Pattern of loans made--dollar volume . . . 241 Pattern of loans made--percentage of the total........................................242 Pattern of net additions to loan holdings --total loans ............................. 243 Pattern of net additions to guaranteed- Insured loans ............................. 244 Conclusions................................... 245 X. COMPOSITE MORTGAGE LENDING TRENDS .............. 247 Overview of the Two Periods....................247 Mortgage loans made.......................... 24H Net additions to loan holdings.............250 Implications ................................ 251 Mortgage Loans Made.............................252 Mortgage loans made In the Los Angeles Metropolitan Area.......................... 253 Mortgage loans made In the United States . 257 Semi-Annual Increases In Dollar Volume Holdings ................................... 259 Los Angeles Metropolitan Area............... 259 United States ................................ 265 X CHAPTER PAGE Salient Points ............................... 269 Los Angeles Metropolitan Area.............. 270 United States ............................... 275 Re-Examination of the Underlying Assumptions 278 Los Angeles Metropolitan Area...............279 United States ............................... 280 Summary.......................................282 XI. SUMMARY AND CONCLUSIONS....................... 284 Composite Mortgage Lending Trends ............ 285 Los Angeles Metropolitan Area...............286 United States ............................... 288 Lending Patterns of Individual Groupings of Institutions..............................290 Los Angeles Metropolitan Area.............. 291 United States ............................... 293 Conclusions of the S t u d y ..................... 294 Specific conclusions ....................... 295 Suggestions for further analyses ......... 297 BIBLIOGRAPHY ............................................ 301 APPENDIX A ................................................307 APPENDIX B ................................................320 LIST OF TABLES TABLE PAGE I. Savings and Loan Associations: Increases In Mortgage Loan Holdings, Los Angeles Metropolitan Area--1953-5*1 and 1957-58 . . . 308 II. Life Insurance Companies: Increases In Mortgage Loan Holdings, Los Angeles Metro- Ill. Commercial Banks: Increases In Mortgage Loan Holdings, Los Angeles Metropolitan Area--1953-5*1- and 1957-58 .................... 310 IV. Major Institutional Lenders: Increases In Combined Mortgage Loan Holdings, Los Angeles Metropolitan Area--1953-51 + and 1957-58 . . . 711 V. Savings and Loan Associations: Increases in Mortgage Loan Holdings, United States-- VI. Life Insurance Companies: Increases In Mort gage Loan Holdings, United States--1953-54 VII. Commercial Banks: Increases in Mortgage Loan politan Area--1953-5*1 and 1957-58 309 1953-5*1 and 1957-58 312 and 1957-58 313 Holdings, United States--1953-5*l and 1957-58 ............................. 31*1 xii TABLE PAGE VIII. Major Institutional Lenders: Increases In Combined Mortgage Loan Holdings, United States--1953-54 and 1957-58 ................... 315 IX. Major Institutional Lenders: Volume of Mortgage Loans Made, Los Angeles Metro politan Area--1953-54 and 1957-58 .......... 316 X. Major Institutional Lenders: Volume of Mort gage Loans Made, United States--1953-54 and 1957-58 ......................................... 317 XI. Institutional Mortgage Market Structures, December 31 $ 1952 and December 31# 1956, Los Angeles Metropolitan Area and the United States .................................. 318 XII. Comparison of Structures and Degrees of Importance of Conventional Loan Holdings, Mortgage Markets of Los Angeles Metropol itan Area and the United States, December 31, 1952 and December 31, 1956 319 LIST OF FIGURES FIGURE PAGE 1. Index of Business Activity in Southern Cali fornia and Federal Reserve Index of Indus trial Production, Quarterly Averages, 1950-59.......................................... 321 2. Employment as a Percentage of the Labor Force in the Los Angeles Metropolitan Area and Federal Reserve Index of Non-agricultural Employment (United States), Quarterly Aver ages, 1950-59 ........... 322 3. Index of Business Activity In Southern Cali fornia and Market Yields of U. S. Government 3-Month Bills, Quarterly Averages, 1950-59 • 323 4. Employment as a Percentage of the Labor Force In the Los Angeles Metropolitan Area and Market Yields of U. S. Government 3-Month Bills, Quarterly Averages, 1950-59 324 5. Index of Number of Help Wanted Ads, Los Angeles Newspapers, and Market Yields of U. S. Govern ment 3-Month Bills, Quarterly Averages, 1950-59 ........................................ 325 6. Dollar Volume of Mortgage Loans Made In the Los Angeles Metropolitan Area, by Types of xili xiv FIGURE PAGE Institutional Lenders, Quarterly Totals, 1953-5* and 1957-58 ............................ 326 7. Percentage of Institutional Mortgage Loans Made in the Los Angeles Metropolitan Area by Each of Three Major Types of Institutional Lenders, Quarterly, 1953-5* and 1957-58 .... 327 8. Dollar Volume of Mortgage Loans Made in the United States, by Types of Institutional Lenders, Quarterly Totals, 1953-5* and 1957-58 ......................................... 328 9. Percentage of Institutional Mortgage Loans Made in the United States by Each of Three Major Types of Institutional Lenders, Quar terly, 1953-5* and 1957-58 329 10. Dollar Volume of Combined Mortgage Loans Made by Three Major Types of Institutional Lenders in the Los Angeles Metropolitan Area and in the United States, Quarterly Totals, 1953-5* and 1957-58 ..................................... 330 11. Dollar Volume of Increases in Mortgage Loan Holdings in the Los Angeles Metropolitan Area, by Types of Institutional Lenders, Semi-Annually, 1953-5* and 1957-58 331 XV FIGURE PAGE 12. Dollar Volume Increases in Combined Mortgage Loans Held in the Los Angeles Metropolitan Area, by Three Major Types of Institutional Lenders, According to Classifications of Mortgage Loans, Semi-Annually, 1953-54 and 1957-58 ........................................... 332 13. Dollar Volume Increases in Mortgage Loans Held in the Los Angeles Metropolitan Area by Savings and Loan Associations, According to Classifications of Mortgage Loans, Semi- Annually, 1953-54 and 1957-58 ................. 333 14. Dollar Volume Increases in Mortgage Loans Held In the Los Angeles Metropolitan Area by Life Insurance Companies, According to Classifica tions of Mortgage Loans, Semi-Annually, 1953- 54 and 1957-58 334 15. Dollar Volume Increases In Mortgage Loans Held in the Los Angeles Metropolitan Area by Com mercial Banks, According to Classifications of Mortgage Loans, Semi-Annually, 1953-54 and 1957-58 ...................................... 335 16. Dollar Volume Increases in Mortgage Loan Hold ings in the United States, by Types of Institutional Lenders, As Computed xvi FIGURE PAGE Annually, 1953-54 and 1957-58 ............... 336 17. Dollar Volume Increases In Combined Mortgage Loans Held In the United States by Three Major Types of Institutional Lenders, According to Classifications of Mortgage Loans, Computed Semi-Annually, 1953-5* and 1957-58 .......................................... 337 18. Dollar Volume Increases In Mortgage Loans Held In the United States by Savings and Loan Associations, According to Classifications of Mortgage Loans, Computed Semi-Annually, 1953-5* and 1957-58 .......................... 338 19. Dollar Volume Increases in Mortgage Loans Held in the United States by Life Insurance Com panies, According to Classifications of Mortgage Loans, Computed Semi-Annually, 1953-5* and 1957-58 .......................... 339 20. Dollar Volume Increases in Mortgage Loans Held in the United States by Commercial Banks, According to Classifications of Mortgage Loans, Computed Semi-Annually, 1953-5* and 1957-58 ........................................ 3*0 21. Dollar Volume Increases In Combined Mortgage Loans Held by Three Major Type3 of xvli FIGURE PAGE Institutional Lenders In the Los Angeles Metropolitan Area and In the United States, Computed Semi-Annually, 1953-5* and 1957-58 . . 3*1 22. Dollar Volume Increases in Combined Guaran teed- Insured Mortgage Loans Held by Three Major Types of Institutional Lenders In the Los Angeles Metropolitan Area and in the United States, Computed Semi-Annually, 1953-5* and 1957-58............................... 3*2 23. Dollar Volume Increases in Guaranteed-Insured Mortgage Loan Holdings in the Los Angeles Metropolitan Area, by Types of Institutional Lenders, Computed Semi-Annually, 1953-5* and 1957-58 ........................................... 3*3 2*. Dollar Volume Increases In Guaranteed-Insured Mortgage Loan Holdings in the United States, by Types of Institutional LenderB, Computed Semi-Annually, 1953-5* and 1957-58 3** CHAPTER I STATEMENT OF THE PROBLEM There is general agreement in the United States concerning the sensitive position of mortgage credit in the functioning of the nation's economy. With the exten sive urbanization movement of the past few decades, a growing amount of attention has been drawn to the increas ing importance of the specific mortgage markets of the major metropolitan areas. The present study is oriented primarily toward the all-important Institutional segment of one of these metropolitan area mortgage markets. It is hoped that the results of the study may contribute to the vast body of knowledge needed for a proper understand ing of the complexities of urban mortgage lending, the position of such lending in a cyclically-inclined national economy, and, more specifically, the performance of mort gage credit in a single, dynamic geographical area. Basically, this study attempts to determine whether or not the effects of cyclical economic conditions on local institutional mortgage lending patterns can be related to changes which have occurred in the distribution of funds among major institutional lenders in a local 1 2 mortgage market. It is necessary first, however, to place the problem in its proper perspective. I. THE GENERAL BACKGROUND FOR THE PROBLEM A survey of the great amount of literature which has become available during recent years gives clear evidence of widespread interest in the functioning of mortgage markets. Much of this literature, however, deals with problems stated only in terms of aggregate data for the nation as a whole. The present study recognizes the importance of seeking solutions to broad problems affect ing the nation as a whole. However, the position is taken here that major metropolitan area mortgage market studies can provide valuable supplementary information for uses in formulating policies which are both local and national in scope. Merely for purposes of Introductory clarifica tion, it may be mentioned here that the present study is predicated on a view that judicious decisions related to specific governmental actions--including direct mortgage lending, urban renewal, and possible actions with regard to a proposed central mortgage bank--should be based upon results of local as well as national mortgage market studies. After an introduction to the specific hypothesis of the present study, additional views of the national and 3 local backgrounds to the present research will be dis cussed In Chapter II. II. THE BASIC HYPOTHESIS In a recent study by Gillies and Curtis,1 several tentative conclusions were expressed which relate to the functioning of local mortgage markets. One of these tenta tive conclusions emphasized the importance of the structure of local mortgage markets,2 as an element in determining local mortgage lending patterns. The present research project has been suggested by this assumption of the importance of the structure of local markets; and, the hypothesis underlying the present study is most nearly related to the inference of the following statement by Gillies and Curtis: Acceptance of the proposition that the structure of local mortgage markets is an important element in determining mortgage-lending patterns does not imply that changes in government policies, long-term inter est rates, and over-all investment opportunities do not affect mortgage lending to a considerable degree. However, the effect of these changes in any local 1James Gillies and Clayton Curtis, Institutional Residential Mortgage Lending In Los Angeles County 19^6-51 (Los Angeles” UnlversTtyor California, Lob Angeles, 1956), 202 pp. p These authors defined "structure" In terms of the proportion of the market held by different types of lend ers. This definition has also been used for purposes of the present study; however, only Institutional lenders are considered for present purposes. 4 market will be determined by the structure of the local market and by the extent to which they change the structure of lending institutions' participation in mortgage lending in any one market.3 It is not the purpose of the present study to test precisely the inference of this quotation. However, the basic hypothesis, now stated below, has clearly been sug gested by the views of these authors. The Hypothesis The basic hypothesis of the present study is that the effects of general economic conditions on local mort gage lending patterns will vary in accordance with changes in the structure of the local mortgage market. The assump tion, then, is that with the repetition of cyclical economic conditions in a market area, the repetition or non-repetition of local mortgage lending patterns will depend to some degree upon the structure of the local mortgage market.1 ^ Implied Assumptions Underlying the basic hypothesis are several implied assumptions, which are of significance to the present 3Gillies and Curtis, ojd. clt., p. 171 *. ^For purposes of this Btudy, "lending patterns" are described In terms of dollar volumes of loans made and also net additions to loan holdings. study. It Is not here believed that each of these assump tions must be proven to be completely and precisely valid, in order that the principal hypothesis may lend Itself to testing. However, it is here contended that If at least three implicit assumptions are also examined in the present study, the conclusions with regard to the basic hypothesis will become more meaningful. In essence, the basic hypothesis Implies that each individual grouping of Institutions will react to general economic conditions in a manner which is not only substan tially consistent and predictable, but also unique from the manners in which the other major groupings of institu tions will react to the same economic conditions. Thus, it would seem to follow that the composite pattern of institutional lending would vary with changes in the degree of Influence of any one grouping of institutions, and that the resultant pattern would be predictable, if changes in the structure of the market are known. Consistency of lending decisions of individual groupings.--This assumption, as it applies to the present study, would imply that the nature and characteristics of a specific grouping of Institutions are stable, and are such as to bring about a repetition of changes in its mortgage Investment decisions In response to a repetition of cyclical changes in economic conditions. 6 Differentiations between specific groupings.— This second assumption Implies that basic differences exist between types of Institutions, as to nature and character istics; and, further, that these differences will cause variations to exist, between individual groupings, as to types of responses to cyclical changes in economic condi tions . Consistency as to specific types of mortgage lend ing.— A third general assumption, which is somewhat of an extension of the first two assumptions, concerns specific types of mortgage lending. The opinion is often stated that guaranteed-insured mortgage lending will fluctuate during cyclical economic conditions by a greater amount than will conventional lending. Whereas it is not here the purpose to test the validity of this latter theory, it is assumed, for present purposes, that the three groupings of institutions will each act in a consistent and predict able manner, with regard to the distribution of its loan able funds between conventional and guaranteed-insured mortgage loans. III. BASIC TERMINOLOGY In order that the basic hypothesis may lend itself to any degree of finite interpretation, it is necessary that clarification be presented with regard to the terms 7 which relate to general economic conditions, mortgage market structure, and mortgage lending patterns. General Economic Conditions Since it is not the purpose to test precisely the mentioned tentative conclusion presented by Gillies and Curtis,5 it is also not essential that the specific economic conditions mentioned by these authors be utilized for present purposes. Instead, three different indicators have been chosen which are here believed not only to be representative of general economic conditions but also to be measurable, quantitatively. Initial Investigation indicated that all of the three indicators, which are listed below, were in general agreement as to the pattern of cyclical changes in the economy which took place during the 1950's. And, more specifically, all three of the Indicators pointed to the fact that the pattern of changing economic conditions, during the two-year period of 1953-5^, was to a great extent repeated during the two-year period of 1957-58; and, further, that these repetitive conditions which took place In the Los Angeles Metropolitan Area were similar to those which took place in the national economy as well. 5Glllies and Curtis, loc. clt. 8 Industrial production and general business activ ity . --For the national economy, measurement of Industrial activity has been possible with the use of the Federal Reserve Index of Industrial Production.^ For the Los Angeles Metropolitan Area, since industrial production statistics were not available, it has been necessary to use the Index of Business Activity in Southern Califor nia . ^ Employment.— The employment information used here for the nation as a whole is the Federal Reserve Index of Q Nonagricultural Employment. For the Los Angeles area, the basic information utilized has been Unemployment as a Percent of the Labor Force, In the Los Angeles Area.^ Conditions of the money market.--In order to pro vide some information related to the general money market, the Federal Reserve quotations of the yield rates of United States government securities have been used. ^Board of Governors, Federal Reserve System, Washington, D. C. ^Research Department, Security-First National Bank, Los Angeles. ®Board of Governors, Federal Reserve System, Washington, D. C. ^Research Department, Security-First National Bank, Los Angeles. 9 Institutional Mortgage Market The terra "Institutional mortgage market" has here been defined as to Include three major groupings of institutions, and to encompass only the non-farm mortgage lending activities of these three institutional lenders. The three types of institutions are: (a) savings and loan associations; (b) life Insurance companies; and (c) com mercial banks. Groupings of Institutions In order to introduce simplicity and to relieve awkward sentence structures, the terms "Institutions," "types of Institutions," and "institutional lenders" are used interchangeably with the term "groupings of institu tions," for purposes of referring to savings and loan associations, life insurance companies, and commercial banks. In the event of references to only one business enterprise, one of 3uch terms as "firm," "association," "company," and "bank" has been utilized. Mortgage Market Structure Mortgage market structure is defined In terms of the proportion of the institutional market, as discussed above, which is held by each of the three major institu tional lenders. 10 Mortgage Lending Pattema It la the view of this study that certain short comings would have resulted from the use of only gross volumes of mortgage loans made, for purposes of describing patterns of mortgage lending, particularly with regard to the Los Angeles Metropolitan Area. Thus, it was consid ered advisable to Include two separate representations of mortgage lending patterns. Mortgage loans made.--The first method of deter mining lending patterns Involves the use of the gross volume of mortgage loans made, each quarter year, by the three major institutional lenders. Periodic net additions to loan holdings.--The second method Involves the use of such supplementary Information as is provided by an analysis of the net dollar volume of additional loans made (in excess of repayments), on a period-to-period basis. This method necessitated the use of portfolio holdings Information which could only be obtained for June 30th and December 31st of each year. Therefore, this latter method became one of describing lending patterns In terms of semi-annual net changes In Institutional holdings of mortgage loans. This use of semi-annual net changes is admittedly a less-than-perfect method of describing mortgage lending patterns. However, the use of such information does 11 provide certain valuable Information which la not obtain able In any other manner. First of all, It Is not possible to determine from all institutional lenders the propor tions of their loan recordings which have been in the form of FHA, VA, and conventional loans; and, thus, it is necessary to resort to the detailed portfolio information which becomes available periodically. Secondly, it is not possible to determine from all institutions the distribu tion of their loanable funds between very short-term interim loans and permanent loans; and, the use of semi annual net additional loans provides valuable supplemen tary information during such periods that varying propor tions of quick-turnover interim lending might distort the overall pattern, if such pattern were derived only from gross volumes of loans made. And, thirdly, net additions to loan holdings are advantageous for purposes of describ ing variations in the volumes of new mortgage funds enter ing the market. During periods in which there exists an extraordinarily high volume of refinancing, or even financing with the proceeds of sales in the secondary markets, it would seem that the sole use of gross volume of loans made might lead to erroneous conclusions concern ing patterns of period-to-period additions to mortgage capital. In order to minimize the possibilities of 12 confusion of terms, It must tie mentioned that "net Increases In holdings" are here computed on a perlod-to- perlod basis, for each of the eight semi-annual periods covered In the study. Such a procedure provides Informa tion as to "how and when" the Increases in holdings have taken place. By way of contrast, the term "structure" in the present study refers only to mortgage loan holdings as of any one specific date. The structure of the market is measured as of only two specific dates, December 31# 1952 and December 31, 1956. During the four intervening years, many variations in patterns of semi-annual lending may have taken place. It Is with the patterns of two of these Intervening years, and two subsequent years as well, that the present study is concerned. IV. PLAN OP THE STUDY In view of the complexities involved In local mortgage market studies, and the fact that previous local studies had not been orientated similarly to the present study, it was necessary to include a considerable amount of detailed, original research in the present project. The presentation of the results of the project are also necessarily detailed, but may be separated into three major categories. 13 Background and Setting for the Study Heretofore, mortgage market studlea have dealt primarily with national, rather than local, mortgage mar kets. Therefore, Chapter II, In addition to reviewing the general mortgage market literature available, also presents a view of the need for additional local market studies, with particular emphasis on the importance of the Los Angeles Metropolitan Area market in he circumstances of the dynamic demand conditions of the 1950’s. In light of the substantial amounts of empirical data which had to be obtained for the Los Angeles Metro politan Area mortgage market, it was considered advisable to explain in a separate chapter. Chapter III, the method ology utilized for research purposes. Chapter IV presents data which indicates that general similarity existed between national cyclical economic changes and those which took place In the Los Angeles Metropolitan Area economy during the 1950’s. In addition, a description Is provided of the repetition in 1957-58 of the pattern of changing conditions which existed during 1953-5^. Chapter V provides an Insight into the unique characteristics of the three groupings of institutions which provided a large portion of the total mortgage funds utilized In the Los Angeles area, during the periods covered in the present Btudy. 14 Changes in the Structure of the Market Chapter VI establishes the fact that a definite change took place in the structures of both the national and the local mortgage markets between December 31, 1952 and December 31, 1956, and presents evidence of the rela tively greater degree of change at the local level.10 As further evidence of the change in mortgage market characteristics between these two dates, additional Information concerning the related changes in the distri bution of institutional funds among specific classifica tions of mortgage loan holdings is also discussed in Chapter VI. Examination of Mortgage Lending Patterns In formulating the basic hypothesis of the present study, It was necessary to Imply the validity of several supplementary assumptions. However, in light of the fewness of previous studies, these latter assumptions also had to be substantiated to some degree within the present research project. Thus, it became necessary not only to lOpor both the Los Angeles Metropolitan Area mort gage market and the national mortgage market, "structure" is defined In terms of the proportion of the market held by different types of institutional lenders. 15 examine composite Institutional lending patterns, but also to examine In detail the lending patterns of each grouping of institutions, in order that conclusions concerning the basic hypothesis might be meaningful. Examining the basic hypothesis.--The analysis which is related most specifically to the basic hypothesis appears in Chapter X. This chapter discusses the effects of mortgage market structures on the composite pattern of lending by the three major institutions combined. Such an analysis has necessarily been preceded, however, by three chapters in which the implied assumptions of the hypothe sis have been examined. Examining the implied assumptions.--In each of the Chapters, VII through IX, an examination is made of the mortgage lending patterns of a specific grouping of insti tutions, and the degree of conformance of such patterns with that which would be anticipated in view of the assump tions underlying the hypothesis. In each instance, a com parison is made between the local and national markets, for purposes of checking the results of the research. For purposes of determining whether or not there was consistency of actions with regard to total mortgage lending, it has here been considered necessary to examine both the period-to-period patterns of mortgage loans made and also the period-to-period patterns of net increases 16 in mortgage loan holdings, for each grouping of institu tions . For purposes of determining the degree of differen tiation between individual reactions of specific groupings of institutions, an examination has been made of the period-to-period variations in the percentages of the total institutional mortgage lending which can be attri buted to each individual grouping of institutions. For purposes of determining whether or not there was consistency with regard to specific types of lending, an additional examination has been made of the pattern of guaranteed-insured mortgage lending, for each individual grouping of institutions. V. SCOPE OF THE STUDY Before discussing in detail the scope of the present study, it is most important to note that farm mortgage loans have in no way been included in the research. However, for purposes of simplicity in presen tation of the results of the research, the term "non- farm" has not been used repeatedly to emphasize the omission of this type of loans. Had the term "non-farm" been used, it would necessarily have had to have been repeated throughout the study. This would have added unnecessary monotony and seeming redundancy, particularly 17 In view of the minor Importance of farm lending as a per centage of total lending, In both local and national mortgage markets. Thus, the term mortgage loans In this study consistently refers to "non-farm mortgage loans." Geographical Extent of the Local Mortgage Market As to the geographical district Indicated by the term Los Angeles Metropolitan Area, this area is defined in such a manner as to Include Los Angeles and Orange Counties, California. This Is consistent with the defini tion of this metropolitan area as used for the U. S. Census of Housing, and for most other purposes as well. It Is Important to note that it is the location of the mortgagor’s property, rather than the location of the mortgagee institution which is considered in this study to be bounded by the borders of the two counties. The term "Los Angeles area," which is occasionally used here, Is always synonymous with "Los Angeles Metro politan Area." The shorter form is used only for purposes of simplicity and convenience. Institutional Participants in the Local Mortgage Market One of the principal shortcomings of the present study Is that the Los Angeles Metropolitan Area mortgage loan investments of mutual savings banks could not be included in the study. The lack of success in obtaining detailed data for these institutional holdings is explained below in Chapter III. However, most of these banks' Los Angeles area holdings were in the form of VA mortgage loans; and, even though such holdings of this one type of loan are here believed to have reached a substantial degree of importance by the end of 1958, the total hold ings of these banks were not nearly so substantial in importance in the market. There was indication from the replies to questionnaires sent to savings banks and sav ings bank associations that total savings bank mortgage holdings in the area, as late as the end of 1958, were a little less than $600 millions, and thus only approximately 7 per cent of the combined Los Angeles area mortgage hold ings of the three other major Institutional lenders. Thus, it is believed that the omission of data for mutual savings banks Is Justifiable, and does not occasion serious discrepancies in the related findings. However, it is believed that any detailed study dealing exclusively with VA lending would necessarily have to Include mutual savings banks' activities, even In the Los Angeles area.^ llThe statistics which could be accumulated for the present study indicate that mutual savings banks held almost $500 millions of Los Angeles Metropolitan Area VA loans as of the end of 1958, or approximately 30 per cent of the total volume of such loans held as of that date by the three other major groupings of institutions combined. 19 The three participating Institutions, then, which were considered by this study to be of significant Impor tance In the Los Angeles area mortgage market were: (l) savings and loan associations, (2) life Insurance com panies, and (3) commercial banks. One view of the Impor tance of these institutions comes from an analysis of mortgage loans recorded in the two counties. During 1953 these three institutions accounted for 6^.6 per cent of total recordings, and by 1957-58 this percentage had risen to 65.3 P©** cent.^ Savings and loan associations.— It was assumed by this study that any holdings of Los Angeles area mortgage loans by savings and loan associations located outside of Los Angeles and Orange Counties, at least by the end of 1958, were only negligible in amount. Thus, in regard both to portfolio holdings and to mortgage loans made, the savings and loan associations located within the two counties were considered to have carried out the only savings and loan association lending secured by Los Angeles area properties. Life insurance companies.--As will be explained ^computed by dividing these institutions' combined recordings, as determined in the present study, by the total of all recordings in the two counties, as computed from information furnished by the Residential Research Committee of Southern California. 20 below in Chapter V, by far the greatest percentage of life insurance company lending, which was secured by real properties located in the Los Angeles area, was carried out by companies whose principal offices were located not only outside the two counties, but also outside of the State of California. Most of the life insurance company mortgage lending activities in the area were carried out through mortgage company representatives. And, even though specific reference Is not frequently made in the present study to the important functions of these mortgage com panies, these companies' transactions in behalf of life insurance companies are included in the statistical data as being actually activities of the final lenders--the life insurance companies. Commercial banks.--All of the commercial banks con sidered in the present study were located in the State of California.^ One extremely large bank and one large bank had principal offices outside the two counties; however, as will be explained below in Chapter III, it was possible to arrive at satisfactory estimates concerning the shares of these banks1 holdings of mortgage loans which were 13a few sizeable loans made in Orange County by a Texas commercial bank have not been considered in the present study, since they were presumably Interim loans, and were not so great In volume as to make necessary their Inclusion for present purposes. 21 secured by properties located within the Los Angeles Metropolitan Area* Institutional Participants In the National Market The same three types of institutions were con sidered at the national level, as those which were con sidered at the local level. This might have produced difficulties, had the principal purpose of the study been only to present detailed comparisons between the national and local institutional markets. These difficulties likely would have arisen primarily as a result of the fact that the omitted mutual savings banks were of a greater relative importance in the national market, from a volume of holdings standpoint, than they were In the Los Angeles area market. However, national market statis tics in the present study are used primarily for purposes of checking the results of the local study, and only sec ondarily for purposes of making comparisons between the local and national markets. Classifications of Mortgage Loans Just as is true of most of the literature related to markets In which deeds of trust are utilized exten sively in the place of mortgages, the term "mortgage loan" is defined broadly in order to Include all loans secured by either mortgages or deeds of trust. Hence, even 22 with regard to the Lob Angeles area market, where nearly all real property loans are secured by the latter-mentioned type of instruments, the present study uses the commonly- accepted term "mortgage loans" for purposes of referring to loans secured by both types of financial instruments. As to types of real property involved, included in the present study are all loans secured by mortgages on non-farm properties. Thus, even though residential property loans are of dominating importance, it was con sidered desirable in the present study to Include commer cial and industrial property loans as well. As to relationships of mortgage loans to govern mental programs, all loans were classified as being either PHA-insured, VA-guaranteed, or conventional loans. With reference to these loans, thiB study accepted the classi fication procedures used by the lending institutions themselves, in preparing reports required of them by supervising governmental agencies. CHAPTER II BACKGROUND TO THE PROBLEM The purposes of the present chapter are to empha size the fact that previous studies of mortgage markets have been predominantly national in character, and to present evidence of a need for supplemental studies which are more nearly oriented toward the markets of the Standard Metropolitan Areas. I. THE NATIONAL BACKGROUND Recent studies concerned with mortgage credit have been oriented almost exclusively toward the national mort gage market. This emphasis on broader national problems, however, seems understandable in light of at least three sets of circumstances which exist. First, the responsi bilities for major counter-cyclical actions in the economy now are assumed to rest more with the Federal government than with state and local governments. Secondly, the formal statements of national housing objectives emphasize the dominating role given to the Federal government in achieving national housing goals. And, thirdly, since the markets for government and corporate securities are 23 2K primarily national in scope, it may sometimes be assumed, although somewhat mistakenly, that the markets for mort gage loans are also predominantly national in character. These three classifications of circumstances will be dis cussed after mention is now made of a few of the many publications which deal with mortgage credit on a national basis. National Studies Aggregate national statistics of institutional mortgage credit are readily available in several publica tions furnished by governmental agencies and also associa tions of institutional lenders. Notable among these publications are the Annual Reports of the Federal Deposit Insurance Corporation,1 Savings and Home Financing Source Books,2 Life Insurance Fact Books,3 Savings and Loan Fact Books,^ Federal Reserve Bulletins,5 and various Issues of ^-Federal Deposit Insurance Corporation, Washington, D. C. 2Federal Home Loan Bank Board, Washington, D. C. ^Institute of Life Insurance, New York, N. Y. ^United States Savings and Loan League, Chicago. ^Board of Governors, Federal Reserve System, Washington, D. C. 25 g Housing Statistics. Moreover, supplementary information is often available from the publishers of these listed sources of information, as well as from the Veterans Administration, Federal Housing Authority, Federal National Mortgage Association, and various other govern mental agencies. Published proceedings of the annual conferences of at least two associations also provide a considerable amount of information related to mortgage credit in the United States. The Proceedings of the Annual Conferences for Senior Executives in Mortgage Banking,7 sponsored by the Mortgage Bankers of America in cooperation with New York University, are available for each year during the 1950's. Another, The Proceedings of Annua1 Conferences on Q Savings and Residential Financing,0 sponsored by the United States Savings and Loan League, have become avail able each year commencing with 1958. These two confer ences, and other similar types of meetings, have brought together experts from all over the nation, for purposes of discussing not only current developments in mortgage ^Housing and Home Finance Agency, Washington, D. C. ^Graduate School of Business Administration, New York University, New York, N. Y. ^United Savings and Loan League, Chicago. 26 financing, but also theories underlying the savings and lending processes involved in mortgage financing. Basic statistics as well as penetrating analyses of national mortgage market problems have evolved from these meetings. During the early 1950's, the National Bureau of Economic Research undertook a series of mortgage lending studies under the National Bureau's Urban Real Estate Finance Project. Included among the early studies in this project were Commercial Bank Activities in Urban Mortgage Financing,9 Urban Mortgage Lending by Life Insurance Com panies,*0 and Urban Real Estate Markets: Characteristics and Financing.** These studies made use of public infor mation in part. In addition, however, extensive surveys were made of institutional mortgage lenders, with particu lar emphasis on commercial banks and life Insurance com panies. As comprehensive as the accumulated information was, though, Its present usefulness has diminished to some extent, since it covered a period extending only into the 9carl F. Behrens, Commercial Bank Activities in Urban Mortgage Financing {New York: National Bureau-of Economic Research, 1952), 125 pp. lORaymond J. Saulnier, Urban Mortgage Lending by Life Insu ’ k:National Bureau of **Ernest M. Fisher, Urban Real Estate Markets: Characteristics and Financing (New ^ork: National Bureau of* Economic Research, 1961)* 208 pp. Economic 27 late 1940's. In a later publication, under the same National Bureau program of research, Joseph E. Morton summarized much of the factual material which had been developed in the above-mentioned earlier studies.12 However, this later publication also included supplementary details of the mortgage lending activities of savings and loan associ ations, mutual savings banks, and several less Important lenders as well. The resultant monograph became not only a summary of statistical data, but also a presentation of cross-institutional comparisons which made a significant contribution to the available body of knowledge of the national mortgage market. However, most of the Informa tion was still for a period which extended only into the late 1940's, and did not Include any segregations of data for Individual metropolitan areas. In 1950, the U. S. Census of Housing included a survey of residential financing for the nation as a whole, and for the Standard Metropolitan Areas as well. The pub lication of the results of the 1950 Burvey became avail able early In the 1950's,13 and a similar publication l ^ J o s e p h e. Morton, Urban Mortgage Lending (New York: National Bureau of Economic Research, 19!?o), 187 pp. 13u. S. Census of Housing, 1950* Vol. XV, Residen tial Financing, Part 2, "Large Standard Metropolitan Areas. 28 containing information for i960 Is to be available during the early I960’s. The 1950 survey provided important basic source materials for additional analytic studies subsequently undertaken at both the national and local levels. However, the national studies outnumbered the local studies; and, the most comprehensive analysis of the census data contained almost no information related to mortgage loans outstanding in the Standard Metropolitan l i t Areas. In a monograph published in 1958, Saul B. Klaman provided a very complete set of national statistics on mortgage loans outstanding, and holdings of these mort gages by main groups of investors, for the period 19^5 through 1956.^5 Whereas this publication did not include interpretative text, It did provide the basic statistical data for subsequent national mortgage market studies. A most valuable discussion of mortgage credit in the United States was published In 1958 for the use of the Committee on Banking and Currency of the United States l^Richard U. Ratcliff, D. B. Rathbun, and J. Honnold, Residential Finance, 1950 (New York: John Wiley & Sons, Inc., 1957 J, TBCTppT l^saul B. Klaman, The Volume of Mortgage Debt in the Postwar Decade (New Y'orlc: National Bureau of Economic Research, l95b), 1^3 PP• 29 Senate. ^ This research study was instituted for purposes of answering a question as to whether or not the decade of 1961-70 posed problems in private housing and mortgage mar kets which would require legislation by i960. The pub lished results of the study consists of a series of excellently prepared papers by qualified experts in the field of mortgage credit, from all sections of the nation. However, contributions in the forms of analyses of the unique problems of local mortgage markets were almost com pletely missing from the study. As a result of this study, the Senate Subcommittee on Housing estimated that a minimum of 16 million permanent non-farm housing units should be constructed during the ten years of the i960's. Moreover, the subcommittee provided several suggestions concerning methods of perfecting and supplementing Fed eral housing laws for purposes of aiding in the achieve ment of the goal of 16 million units. In the subcommittee report, however, no estimates were made of the geographi cal distribution of the new housing units. And, the suggestions for further government actions included only a few which were specifically related to the unique problems l^Study of Mortgage Credit, a report of the Commit tee on Banking and Currency, Subcommittee on Housing, United States Senate, 85th Congress, 2nd Session, 1958. (Washington, D. C.: Government Printing Office, 1958), 397 PP. 30 of Individual geographical segments of the national mar ket. Among these few were recommendations for liberaliza tion of urban planning programs and a request that study be undertaken with regard to the role of the Federal National Mortgage Association, or possibly a similar type of organization, in stabilizing the volume of mortgage credit available during the I960's. Another National Bureau of Economic Research study, authored by Leo Grebler, became available in early 1960.17 This monograph Is primarily an appraisal of the effects of governmental housing credit policies and gen eral economic stabilization policies on the national housing and mortgage markets during the years 1953-57. This informative study provides a great amount of informa tion concerning Instabilities In mortgage lending activ ities during these years, and points to a need in the future for a greater amount of coordination between housing credit policies and general counter-cyclical monetary and fiscal measures. These several studies do not by any means consti tute an exhaustive list of the national mortgage market 17Leo Grebler, Housing Issues in Economic Stabili zation Policy (New YorlcT National feureau of Economic Research l^oOJ, 129 PP. 31 literature available. However, It la believed here that they make up a representative sample of such literature, and furnish ample evidence of a recognition at the national level of the Importance of mortgage credit to the economy. Emphasis on the National Market As has been mentioned above, It Is the contention of the present study that the emphasis on the national mortgage market Is understandable In light of at least three circumstances which exist In the American economy, and which now may be discussed under three separate classifications. Counter-cyclical responsibilities.— The Employment Act of 19^6 has left little doubt concerning the Federal governments authority, and also responsibility, for taking steps which are necessary for purposes of promoting stable prosperity for the nation. The tremendous volume of mortgage credit outstanding in the United States, by itself, gives evidence of the potential and actual impact of the mortgage market on the national economy. This mortgage credit outstanding amounted to $62.7 billions as of early 1950* and had increased to $191.2 billions as of the end of 1959.1® And, the Important influence of at l®Federal Reserve Bulletin (various issues), Board of Governors, Federal Reserve System. 32 least residential mortgage credit is recognized in much of the literature dealing with business cycles.*9 However, since most of the fiscal and monetary counter-cyclical measures presently at the disposal of the Federal government are more nearly national than local in coverage, it is understandable that the emphasis should be toward national rather than local mortgage market studies. National housing objectives.--The Housing Act of 19^9 has emphatically emphasized the important role of the Federal government in achieving basic housing objectives for the nation. In the words of this Act, one of these national housing objectives is "the realization as soon as feasible of the goal of a decent home and a suitable living environment for every American family." An opinion of the problems faced In achieving these objectives was expressed by Senator Sparkman, in a letter of transmittal accompanying the 1958 study of mortgage credit prepared for the Banking and Currency Committee of the United States Senate: Net new family formation resulting from the births of the forties, the replacement of units to be demol ished In order to carry out the national housing 19por additional discussion, see for example, Leo Grebler, o£. clt. 33 policy of a decent hone for every American family, the increased nobility of American families, and the higher standard of living toward which we all strive, will require more and better housing facilities in the future.20 And, since most of the housing programs available for uses in attaining the stated objectives are more nearly nationwide than local in nature, the preference for national mortgage credit statistics would seem not only to be understandable, but also appropriate. Since the present study deals with non-residential mortgage lending as well as residential lending, it is necessary to add at this point a note relating to the importance of residential lending to total mortgage lend ing. During the years covered in the present study, the volume of mortgage credit outstanding in the United States which was secured by residential property amounted to approximately 83 per cent of the total non-farm mortgage credit outstanding.21 As for the institutional holdings, at least, in the Los Angeles area this percentage was just slightly over 90 per cent.22 Thus the actions of the Federal government with regard to achieving national 2°Study of Mortgage Credit, op. clt., xv, 21Saul B. Klaman, oj). clt., computed from Tables 2 and 10, p. 40 and p. 62. 22computed from information accumulated for the present study. 3* housing objectives affect a very large segment of the entire mortgage market, both presently and in the fore seeable future. Inter-relationships between credit markets.— Also, it would seem that some of the emphasis on national rather than local mortgage market studies is a result of the fact that most credit markets are to a considerable extent national in character. This characteristic is particu larly apparent in the government securities and in the corporate securities markets. As to the mortgage market, It Is also often contended that it, too, Is In many ways national in scope. It Is of some importance, now, to mention a few points In support of the assumption of the present study that mortgage markets are, at once, both national and local in character. Two aspects supporting the view that local markets are affected by national conditions may now be offered. First, with regard to institutional mortgage lending, It Is true that within the major Institutions’ Investment portfolios mortgage loans compete with government secur ities and corporate securities. And, to the extent that there is fluidity in the flow of funds between mortgage loans and these latter mentioned securities, there Is an Influence of national credit conditions on the local area institutional mortgage markets. And, second, insofar as 35 major institutional lending is concerned, life Insurance company mortgage lending is more nearly national than local in character, generally speaking. Moreover, with regard to mutual savings bankB and savings and loan asso ciations, there is some tendency during recent years toward increasing mobility in the flow of these two types of institutions' mortgage funds between local areas throughout the nation. The growth, during the 1950’s, in the volume of California mortgage loans held by mutual savings banks, almost all of which banks were located in the eastern part of the United States, furnishes one evi dence of a trend toward out-of-state mortgage lending by these institutions.23 As for savings and loan association funds, the increasing importance of mortgage funds flowing between states, at least insofar as California associations are concerned, has occurred concurrently with the growth in importance of holding companies, during the late 1950’s• Such flow of funds has occurred not only as a result of 23lnforroation received from National Association of Mutual Savings BankB indicates that mutual savings banks’ holdings of California mortgage loans Increased from $32 millions as of March, 1951# to $1,621 millions as of September, i960. 36 sales of loans In the secondary markets,24 bUt also as a result of participation of out-of-state associations with California associations In mortgage lending secured by California properties.25 On the other hand, two points may be mentioned which support the view that mortgage markets still are primarily local markets. First, it may be pointed out that In the Institutional segment of the mortgage market, there is declining relative importance of the more nationally-inclined life insurance companies; and, at the same time, there is rapidly increasing relative importance of the savings and loan associations. In spite of the growth of participation lending and secondary market transactions, these associations still may be more accur ately classified as local mortgage lenders. And, second, 2^Along with the growth in importance of holding companies, there has also occurred an increase in the vol ume of sales of loans in the secondary markets, most of which markets are in the eastern parts of the United States. During the years of 1953 through 1957# the average annual volume of sales made by Los Angeles Metropolitan Area associations was Just under $56 millions. In 1953 this increased to $6^ millions, and in 1959 to Just less than $85 millions. However, the approximate $85 millions sold during 1959 still amounted to less than 5 per cent of the $1.8 billions of loans closed during that year by Los Angeles Metropolitan Area associations. 25Another type of funds, "broker funds" from out-of- state sources, is discussed in Chapter V, below. 37 there is increasing relative importance of conventional- type mortgage loans which are by their nature more nearly associated with local lending markets, for the reason that they lack the homogeneity of the more freely-traded guar anteed and insured mortgage loans. II. THE LOCAL BACKGROUND The present study recognizes these circumstances which exist nationally, and does not challenge either the propriety or the validity of the great numbers of studies related to the national mortgage market. It is the posi tion here, however, that supplementary local mortgage mar ket studies now are becoming increasingly necessary for purposes of providing more adequate bases for policy decision-making at both the national and local levels. It becomes appropriate at this point, then, to list a few factors supporting this contention of greater need for local studies. Overview The present study necessarily makes certain assump tions concerning local mortgage market conditions which warrant some Justification. First of all, It is assumed that with the rapid growth of the metropolitan areas of the United States, certain demand factors and supply factors 38 emerge in the related metropolitan mortgage markets which point to a greater need for detailed analyses of metropol itan area mortgage lending. Secondly, it is believed that the mortgage markets of individual metropolitan areas, and the Los Angeles market in particular, are in themselves unique so as to warrant individual market studies for at least the major metropolitan area3. And, thirdly, it is believed that the limited number of local studies which are now available have suggested certain interesting hypotheses which have not yet been properly tested, in light of the information which can be obtained for at least the institu tional segments of local metropolitan mortgage markets. The first two of these points are now discussed in this section. Discussion of the third point, which refers to previous local studies, is postponed until the next following section. Metropolitan Areas in General One evidence of the need for local as well as national studies of economic problems arises from the geo graphical pattern of growth which has occurred with increases in population, and the urbanization movement of the past few decades. In a study recently made, the grow ing relative importance of the major metropolitan areas is dramatically demonstrated, "The growth of the 168 Standard 39 Metropolitan Areas of the United States between 1950 and 1955 as estimated by the U. S. Bureau of the Census, absorbed 97.5 per cent of the total national growth.M26 It is then further pointed out that population figures show that this growth is occurring at an accelerated rate, since these metropolitan areas absorbed 81 per cent of the national growth between 1940 and 1950, and 73 per cent during the entire period of 1900 to 1950.*^ The result of this pattern of growth was that with the doubling of population of the United States during the first half of this century, the growth in the population within these pQ metropolitan areas had increased by 3 1/2 times. ° Demand for mortgage funds.— There can be little doubt as to the important effects of population changes on mortgage market problems. In the all-important residential sector of the market, the relationship between numbers of people and at least the potential demand for homes is 26philip M. Hauser, Proceedings of the Annual Confer- ence for Senior Executives in Mortgage Banking, l95b (New York: New York University Business Series, l§5b), p. 45. 27lbid., p. 46. 2®The higher rate of growth of metropolitan areas is also confirmed in the population statistics of the i960 U. S. Census of Population (Table 31* PP. 1-100, and Table T, pp. 1-3), wKere it has been computed that between 1950 and i960, the populations of the Standard Metropolitan Areas Increased by 26 per cent, whereas the total popula tion of the United States increased by only 18 per cent. 40 readily apparent. In addition to number of people, the rate at which households are formed must also be consid ered a demand factor. As to this latter point, however, Sherman Maisel, In his study of rates and components of household formation, has shown that during the past 69 years over four-fifths of household formation has been due to demographic c h a n g e s . ^9 Thus, It may be shown that changes In the demand for homes, such demand being almost tantamount to a measure of demand for residential mortgage credit, depends to a great extent on changes occurring In the number and geographical distribution of the popula tion. Even In the non-residential sector of the mortgage market, which is considerably smaller from a standpoint of* dollar volume than the residential sector, the effects of population are manifest as a result of the fact that com mercial and industrial property developments follow closely the trends of residential developments. At this point, it is important to recognize that there are other factors than population, particularly changes in personal disposable income, which also affect the demand for homes, and hence mortgage credit. However, in view of the importance of population to such demand, 29Sherman J. Maisel, "Changes in the Rate and Com ponents of Household Formation," Journal of the American Statistical Association, June, 19bO, p. 277. 41 and In the Interests of clarity of presentation, discus sions of other demand factors have been Impounded until Chapter XV of the present study. To return to the topic of metropolitan areas, It Is contended here that along with population trends the demand for mortgage credit for residential, and also com mercial-industrial developments, will be centered in the large urban areas, to an ever-lncreaslng extent, In the foreseeable future. Supply of mortgage funds.— As to the other "blade of the scissors," the supply of loanable funds for real property transactions is also indirectly affected by the shift in population to the Standard Metropolitan Areas. The effects of location of population on supply of mort gage funds would seem to arise partly from the fact that personal savings, even though the basic source of mortgage funds, arrive in the real estate market primarily through the facilities of intermediary institutions. This fact would seem to increase the need for local studies, since the sizes and influences of these institutions may change considerably with the growth of the metropolitan areas. For one reason, some types of these institutions must depend to a greater extent than others on the location of personal savers within a relatively short distance of the main offices of major firms. This is true of the savings 42 and loan associations, all of which depend primarily on the population of the local area as sources of savings c a p i t a l . 30 it Is Interesting to note that coincident with the urbanization movement of the past decade there has also been a growth In the importance of these savings and loan associations In the economy. Summary.--An attempt has been made to show that from standpoints of both demand for and supply of mortgage funds there Is evidence that the most significant mortgage market problems of the future will be those related to the markets of the major metropolitan areas. And, it is here contended that studies of local mortgage markets are important in that they may broaden the body of knowledge necessary to an understanding of not only local conditions, but also the aggregate national market of which they are increasingly important segments. The task of accumulating information related to metropolitan areas might perhaps be relatively simple if the characteristics of the areas were such that their respective mortgage markets could be considered as nearly identical to each other. Major differences appear, 3°This is fundamentally true, in spite of the growth in importance of "broker funds," as discussed in Chapter V, below. 43 however, between specific metropolitan areas; and it has been decided for the present study to examine the charac teristics of one specific local area mortgage market. Importance of the Los Angeles Metropolitan Area If It may be accepted that increasing importance should be attributed to the metropolitan markets, there still remains the problem of determining the proper orien tation of the desired organized studies. For example, should these studies work with aggregate data for all of the Standard Metropolitan Areas combined, or with individ ual statistics for one specific large metropolitan area? The latter course has been taken in the present study for several reasons. For one, the question of the availability of statistical data had to be considered. The choice of only one geographical area was necessary for the reason that empirical research was necessary and such research could only be accomplished through actual contacts with the Individual lending firms. More Importantly, however, the decision to orient the present study toward a specific local market evolved from a belief that many specific metropolitan areas are each unique so as to make Individ ual studies desirable. Some discussion of the subject Los Angeles Metropolitan Area may be necessary in order to support this latter view. 44 In the above discussion of the importance of metropolitan areas, the barest elements of mortgage market supply and demand factors were mentioned. Even though such mention does not in any way exhaust these subjects, some advantages are to be gained by now following the same pattern for purposes of demonstrating how the Los Angeles Metropolitan Area varies considerably from the other metropolitan areas. Demand for mortgage funds.--On the demand side, for the Los Angeles area, the growth in numbers of popula tion in comparison with other areas, during the past decade, gives by Itself some indication that the demand pressures on the Los Angeles mortgage market will be some what different from those present in other areas. Accord ing to official figures,3^- the Los Angeles Metropolitan Area population in i960 numbered 6,742,700, which was 54 per cent higher than such population had been In 1950. As a matter of contrast with other areas, the New York Metropolitan Area showed only a 12 per cent increase, and the San Francisco-Oakland Metropolitan Area Increased by only 24 per cent during the same ten year period.32 31u. s_. Census of Population, i960 (United States Summary). 32Ibid. (Table 31, pp. 1-102, 3, 4). *5 Still on the demand side, in addition to variances resulting from differences in rates of numerical growth, it seems reasonable to believe that changes in the charac teristics of the population will also vary considerably between geographical areas. For instance, it is interest ing to note that of the population growth of 2.4 millions in between 1950 and I960 in the Los Angeles area, 1.6 mil lions (about 66.8 per cent of the 2.4 millions total growth in population) occurred as a result of migration into the a r e a . 33 with such heavy immigration, Los Angeles seems likely to differ from other areas as to characteris tics of population for at least as long as the heavy move ment into the area continues. The Bimple reasoning under lying this suggestion is that not only are migrants of an age group which is different than the age group of natural increases in population, but also those old enough to move into a new area are old enough to bring with them certain views and habits which they have developed in their previ ous environment. Even though it is not primarily the purpose here to analyze population characteristics, it is interesting to note that the percentage of the population which was less 33inforraation furnished by Research Department, Security-First National Bank, Los Angeles, California. 46 than 21 years of age rose much more rapidly for the Los Angeles Metropolitan Area, during the 1950's, than did the corresponding percentage for at least the New York Metro politan Area. Whereas in 1950, 29.6 per cent of the Los Angeles Metropolitan Area population was found to be under 21 years of a g e , 34 this percentage had increased to 37.3 per cent by 1960.35 However, even though the 28.7 per cent of the New York Metropolitan Area population, which was found to be in the under 21 years of age classifica tion in 1950,36 was similar to the percentage noted above for the Los Angeles Metropolitan Area, the percentage In the New York Metropolitan Area had only increased to 33.4 per cent by 1960.37 The existence of a difference in age characteristics, between the population of the two areas, is also borne out by an examination of the respective median ages. Whereas the median age in the Los Angeles Metropolitan Area decreased significantly from 33.5 to 31.0 between 1950 and i960, the median age in the New York 3^0. jS* Census of Population, 1950 (Table 33, pp. 5-72). 35u. S. Census of Population, i960 (Table 20, PP. 6-73)7 ------------- -------- ---- 36u. S. Census of Population, 1950 (Table 33, pp. 32-727. 37u. S. Census of Population, i960 (Table 20, pp. 34-637- 47 Metropolitan Area changed only slightly, from 34.2 to 34.0, during the same ten years.38 One of the conclusions which would seem to follow is that the rate of household formation can be expected to be different in the two areas for which age comparisons have been made above. And, since there Is a close rela tionship between household formations and the demand for housing, and also between the demand for housing and the demand for mortgage credit, It would seem to follow that significant differences will appear in the demand pres sures exerted on the respective mortgage markets of the two mentioned metropolitan areas. Therefore, there is information available to sug gest that demand factors will vary among metropolitan area mortgage markets as a result of any one of several sets of circumstances. Among these circumstances could be included variations in rates of population growth, differ ences in the degree of importance of migration, and at least insofar as New York and Los Angeles areas may be considered representative, as a result of variations in age characteristics of the population. Supply of mortgage fundB.--On the supply side of 38u. s. Census of Population, General Population CharacterTstTcs, 195^ and I960« 48 the mortgage market, the Los Angeles area can also be shown to possess unique and interesting characteristics. This is particularly true in regard to institutional sources of mortgage funds. Whereas many areas, particu larly in the northeastern sections of the nation, have accumulations of personal savings in excess of those needed for meeting the effective demand for such funds, the Los Angeles area is found to be characterized by the reverse of such circumstances. That is to say, this latter area can be shown to be a "capital importing" area, rather than a "capital exporting" area, as found in the eastern sections of the country. In this study, fre quent reference will be made to the apparent necessity for utilizing the savings of other areas for mortgage lending purposes in the subject geographical mortgage market. For purposes of clarity, a detailed definition of the terra "capital importing" is postponed until Chapter V. Let it suffice, at the moment, to suggest that this one characteristic alone, however, might furnish sufficient evidence of need for extensive research related to the Los Angeles mortgage market. In addition to variations between areas as to the current stock of accumulated savings, It is Interesting to speculate concerning the probable effects of such factors as migration and age characteristics of population on the *9 accumulations of savings to be available to metropolitan mortgage markets in the future. In theory at least, it would seem logical to suppose that a relationship could be drawn between personal motivations to migrate and personal propensities to accumulate savings. And further, It would seem Just as logical to assume that savings habits depend at least to some extent on the age characteristics of the population. Concrete evidence of such relationships has not been obtained in the present study; however, the opin ion is offered here that savings accumulations will not only be less among those in the lower age groups but also will be less among at least the more recent Immigrants to a new area. In any event, the disparities which currently exist In the levels of accumulated savings found In the various geographical areas of the nation furnish evidence that the supply of loanable mortgage funds can not now be considered the same for all metropolitan areas. The Los Angeles area is characterized not only by a lower level of accumulated savings than many areas in the eastern part of the United States, but also by a fewer number of intermediary institu tions (notably life insurance companies) In which deposits of savings are customarily made. Summary.— Thus, it would seem that from a standpoint of supply of loanable funds, as well as demand for these 50 funds, there is Justification for local mortgage market research, such as that undertaken in the present study. III. PREVIOUS LOCAL MARKET STUDIES RELATED TO THE PROBLEM The problem which is examined in the present study has clearly been suggested by the views expressed in a few studies of local mortgage markets which were published during the early 1950's. Particularly Important among these studies is the extensive survey of the Los Angeles County residential mortgage market, carried out by Gillies and Curtis, for the years 19^6-51.39 Before discussing the particular relevance of this comprehensive survey, however, it is interesting to mention certain additional studies of various local mortgage markets. Local Mortgage Market Studies in General As a result of variations which occurred in various sections of the nation during the late 19^0's, with regard to the apparent effects of governmental housing programs, it was determined that additional information related to 39james Gillies and Clayton Curtis, Institutional Residential Mortgage Lending in Los Angeles County, 194b-5i (Los Angeles: UnlversTty of California, Los Angeles, 1956), 202 pp. 51 local mortgage market structures would be necessary. As a result, the Housing and Home Finance Agency sponsored three studies of local market conditions In three sections of the nation. These three local areas were San Fran cisco, California; Hagerstown, Maryland; and Jacksonville, Florida.**0 Brief references to these studies will be Included below. Moreover, with the 1950 Census of Housing there was initiated a decennial survey of the characteristics of mortgages outstanding on properties located in the large metropolitan areas.As these decennial surveys are con tinued, there will accumulate a body of useful statistical information, with regard at least to the residential seg ment of metropolitan mortgage market s. **2 San Francisco, California.— It was determined that the commercial banks were the most important residential mortgage lenders in the San Francisco area during the year **°"National and Local Housing Mortgage Market Struc tures," Housing Research (October, 1953)* P* 12. ^U. S. Census of Housing, 1950* Vol. IV, Residen tial Financing, part 2, "Large Standard Metropolitan AreasT" ^2in addition to the local market studies discussed in this section, there are several additional studies not included in the present study for the reasons that they relate to Junior mortgage financing, or relate to non- metropolitan local markets, which are not a part of the HHFA studies. 52 1950. As measured by the number of loans made, these banks originated almost exactly one-half of the total loans originated during that year; Individuals accounted for almost exactly one-fourth of all loans made; and the remaining one-fourth was found to have been made by life Insurance companies and savings and loan associations com bined. Of these two latter mentioned Institutions, the life Insurance companies were shown to have been Just slightly more Important than the savings and loan associa tions, even though there was relative equality between these two Institutions' shares. Hagerstown, Maryland.--As measured by dollar volume, it was found that there was a relatively equal distribu tion of residential loan originations between the three major institutions. During the first eight months of 1950* savings and loan associations accounted for approxi mately 30 per cent of the total loans made; commercial banks accounted for approximately 22 per cent; and another 17 per cent were made by life insurance companies. The remaining approximately 30 per cent could be attributed to individual lenders. Jacksonville, Florida.— For a six-months period in 1950 in Jacksonville, it was found that most of the resi dential loans made were originated by real estate firms, mortgage brokers and miscellaneous others. Over 70 per 53 cent of the dollar volume of such loans were found to have come from these three sources, with real estate firms and mortgage brokers being by far the two most Important sources. The remaining loans made were shared relatively equally between commercial banks, life Insurance companies, savings and loan associations, and Individuals. However, none of these latter four types of lenders contributed more than 9 per cent each of the total volume of loans made. The Studies by Gillies and Curtis As has been mentioned above, the hypothesis of the present study Is closely related to one of the tentative conclusions of the metropolitan area studies made in the 1950's by Gillies and Curtis. One of these studies con sisted of an analysis of the institutional holdings of residential mortgage loans in 25 large metropolitan a r e a s . The other study referred to was a detailed analysis of Institutional residential mortgage lending In Los Angeles County during the years 19^6-51, and this latter study Included some information for the 25 metro politan areas, as well.^ *3james Gillies and Clayton Curtis, "The Structure of Local Markets and Government Housing Programs," Journal of Finance, September, 1955* ^James Gillies and Clayton CurtiB, o£. clt., Table 54 Institutional lending In 2J> Metropolitan areas From the data accumulated in the 1950 Census of Housing, these authors made an analysis of the most important lend ing groups in the Large Standard Metropolitan Areas, and the percentage of FHA and VA loans to all loans for each area.^5 As measured by dollar volume of residential loans outstanding, savings and loan associations were found to be the major institutional lenders in 11 of the 25 areas. Second in importance were life insurance companies, these institutions predominating in approximately 7 areas. These were followed by mutual savings banks, which were the dominant lenders in four areas, and commercial banks which led in three areas.^ The analysis also included a computation of the relative proportions of FHA-insured and VA-guaranteed loans to all loans, for the 25 areas. The mean percentage combined guaranteed and Insured loans was 45.2 per cent in the areas in which commercial banks were the most important lenders. However, this percentage was only 45lbld., p. 198. ^Mutual savings banks have not been Included in the present study, for analytic purposes; however, frequent reference has been made to the increased volume of lending activity of these savings banks, in the Los Angeles Metro politan Area mortgage market, during the periods covered in the present study. 55 30.2 per cent in the areas dominated by mutual savings banks, and 32.3 in the areas dominated by savings and loan associations. The highest percentage was found in those areas in which life Insurance companies held the largest volume of the residential loans outstanding.^7 Institutional residential lending in Los Angeles County.— In this very detailed analysis of the Los Angeles County institutional residential mortgage market, for the years 19^6-51* Gillies and Curtis covered to some degree almost every important aspect of residential lending by the three major institutional lenders. The only facet of such lending not covered comprehensively was the topic of dollar volume of life insurance company holdings of Los Angeles County mortgage loans. However, a considerable amount of information concerning such companies1 residen tial loans made in the area was Included in the study. One of the most Important contributions of the study by Gillies and Curtis, however, was the great number of Interesting inferences made by these authors from the vast amounts of data presented. Prom these inferences, It would be possible to select a number of tentative hypothe ses which warrant further examination with regard to local mortgage markets. ^7james Gillies and Clayton Curtis, loc. clt. 56 As has been mentioned in Chapter I, the basic hypothesis of the present study Is related to one of these authors' tentative conclusions concerning the Importance of the structure of local mortgage markets, as an element in determining local mortgage lending patterns. CHAPTER III RESEARCH METHODOLOGY A very considerable amount of original investiga tion was essential to the accomplishment of the present study. With the exception of Federal Home Loan Bank statistics for savings and loan associations4 there was virtually no information published, on a periodic basis, which related to the details of institutional mortgage lending In the Los Angeles area after 1951* The decennial Census of Housing does Include an analysis of residential mortgage loans outstanding for the Los Angeles Metropoli tan Areas, as well as for the other Standard Metropolitan Areas. However, for studies of lending patterns, the principal value of such census information would seem to lie in the fact that it is available at the end of each ten-year period for purposes of checking the reliability of statistics which must be developed, by other means, for interim periods. The objective of the present chapter Is to explain the methods utilized here in obtaining data for the Los Angeles Metropolitan Area mortgage market. At the end of the chapter, however, brief reference will be made to the 57 58 one, all-inclusive source of national mortgage market statistics for the present study. I. ORIENTATION OF THE LOCAL MARKET INVESTIGATION Two basic types of information were deemed neces sary for the present study. First, details as to the year-end dollar volumes of institutional mortgage loan holdings were needed in order that the degree of structural changes in the mortgage market could be determined. This same type of information, when expanded to include semi annual holdings, provided a means for expressing lending patterns in terms of period-to-period portfolio increases. Secondly, details of the dollar volumes of institutional mortgage loans made, quarterly, were needed in order to complete the analysis of lending patterns. Institutional Mortgage Loan Holdings For the savings and loan associations, adequate information of such associations' holdings could be obtained from the statistical tabulations maintained by the Federal Home Loan Bank of the district. Such statistics are maintained on a basis of the location of the mortgagee association, rather than on a basis of the location of the mortgaged property; however, as explained below, it was assumed here that these Federal Home Loan Bank statistics 59 were adequate for purposes of the present study. For life insurance companies and for commercial banks, however, it was necessary to obtain statistical data directly from the records maintained by the institu tions themselves. This involved the use of questionnaires which were sent to all of the major firms holding mortgage loans secured by Los Angeles area properties. This proce dure, when supplemented by follow-up interviews, provided results which were believed to be satisfactory for present purposes. Additional details of these procedures will be discussed in subsequent sections of the present Chapter. As for the holdings of mutual savings banks, ques tionnaires also were sent to the major firms known to hold mortgage loans secured by properties located in the Los Angeles area. The lack of success in obtaining detailed data will be explained in a subsequent section. However, it is important to note here that it was possible to determine from partial information received that the Los Angeles area holdings of such banks, even as late as 1958, were not so great as to make mandatory the inclusion of mutual savings banks in the present study. Institutional Mortgage Lending Patterns In order to permit detailed analyses of lending patterns, it was deemed advisable to examine semi-annual increases in institutional mortgage holdings, as well as 60 the dollar volume of Institutional mortgage loans made during each quarter. In the process of determining the structures of the market, an examination had been made of year-end portfolio holdings. Then, merely by adding Bimilar type data for mid-years, It was possible to develop indicated patterns of lending, insofar as such lending was represented by semi-annual net increases In these holdings. Introductory reference has already been made to the methods used for obtaining this type of basic information. Thus it is now only necessary to explain the approach used in the investigation of mortgage loans made during each of the three-months periods. Ab was the case with regard to portfolio holdings of savings and loan associations, it was also assumed here that the Federal Home Loan Bank statistics provided ade quate information of loans made by these associations. For purposes of determining the volume of mortgage loans made by life insurance companies and commercial banks, it was necessary to obtain basic data from the mortgage loan recordings in the area by the major firms of each type of institution.1 ^•Data for Los Angeles County are based on listings of recordings in Realty Financing, published monthly by Realty Tax and Service Company, Los Angeles. Data for Orange County are based on listings of recordings in Bul letins of Loan Recordings, published monthly by Security 61 As fox* mutual savings bank lending, It was not feasible, and seemingly not possible, to obtain any mean ingful estimates of loans made during each quarter In the Los Angeles Metropolitan Area. This was primarily for the reason that mortgage loans made In behalf of mutual sav ings banks w e r e almost always recorded in the name of one of these banks * many mortgage company correspondents In the Los Angeles Metropolitan Area. Furthermore, these correspondents also made loans for Insurance companies; and, thus, segregation according to the type of Institu tion which was to be the final lender was not possible. X I . SAVINGS AND LOAN ASSOCIATIONS As for mortgage lending activities of savings and loan associations, almost complete reliance was placed on the statistics made available by the Los Angeles branch of the San Francisco Federal Horae Loan Bank. A relatively small proportion of mortgage lending by Los Angeles Metro politan Area associations was probably secured by proper ties located outside of Los Angeles and Orange Counties. And, moroever, any offsetting mortgage lending in these Title Insurance Company, Los Angeles. (Additional infor mation related to loan recordings In Orange County during 1953-5^ was received directly from major institutional lenders.) 62 two counties by associations located outside the area was probably negligible In amount. However, It was not feas ible in the present study to Isolate from the statistics the relatively small percentage of total mortgage loans which were secured by properties outside the two counties. Exploratory investigations of the activities of ten large associations, which held approximately 40 per cent of all associations' mortgage loan holdings, furnished evidence that the limited modifications necessary would not Justify the complicated procedures involved. To summarize, it was concluded that for purposes of the present study, the Federal Home Loan Bank statistics for Los Angeles Metropolitan Area associations were appro priate. And, it was further believed that any conse quences of slight overstatements of these associations' holdings would not be serious, particularly in light of the fact that the present study primarily involves compar isons between periods for which the sources of data were identical. III. LIFE INSURANCE COMPANIES Sampling methods were necessary in the obtaining of statistics related to life insurance companies1 mortgage lending activities. This was true for both mortgage loans held and mortgage loans made. However, the size of the 63 Bample used in each Instance did not remain the same* for the reason that reliable information for a greater number of companies was available with regard to the volume of mortgage loans held. Mortgage Loan Holdings A list of twenty-five life insurance companies, considered by members of the Southern California Mortgage Bankers Association to be the major holders of the Los Angeles area mortgage loans, was utilized for sampling purposes. All of these twenty-five companies replied to requests made of them regarding the dollar volume of their individual holdings of Los Angeles Metropolitan Area mortgage loans. Statistics from the annual reports made by these twenty-five companies to the California Insurance Commis sioner were utilized for purposes of verifying the informa tion received directly from the companies. In the few cases where the Los Angeles area holdings, as a percentage of California holdings, did not appear to be consistent with the relationship existing between a company's Los Angeles Metropolitan Area recordings and California record ings, follow-up Interviews were held with the respective insurance company or its representative. Reconciliation was possible in all cases. 64 In the absence of data Indicating what percentage of the total Insurance company holdings In the Los Angeles area were held by the twenty-five companies, it was neces sary to rely upon State of California statistics. This appeared to be the most logical procedure, since all of the sample firms engaged In mortgage lending In Northern California, as well as in Southern California. These twenty-five companies of the sample held approximately 88 per cent of the total life insurance company holdings of California mortgage loans, as of the commencing date of 1953* By the end of 1958, this per centage had decreased to approximately 85 per cent. These percentages, together with adjustments for Interim years, and for specific types of loans, were used for the Los Angeles Metropolitan Area. Mortgage Loans Made The statistics of mortgage loans made in the Los Angeles Metropolitan Area were obtained from the record ings of loans by major insurance companies and their representatives. The size of the sample, in terms of percentages, was derived from a procedure which involved the assumption that the recordings of these major firms, as a percentage of total life insurance company recordings, would be 65 consistent with the percentage relationships existing between annual Increases In these sample firms' holdings and the Increases In all life Insurance company holdings, of Los Angeles Metropolitan Area mortgage loans. The size of the sample, as computed in this manner, was approxi mately 64 per cent during 1953, and this percentage had decreased to approximately 56 per cent during 1958. In regard to mortgage loans made, the size of the sample was of a necessity smaller than it was for mortgage loan holdings. This is a result of the fact that record ings were not available for all of the twenty-five major firms. The Los Angeles County recordings of only the one- hundred largest mortgage lenders (among all types of lenders) were readily available on a monthly basis. And, since several of the major life insurance companies had multiple representatives in the Los Angeles area, and often each representative company recorded loans in its own name, many important insurance company lenders could not be identified among the one-hundred largest lenders, for Los Angeles County. TV. COMMERCIAL BANKS Sampling methods were also necessary in the accumu lating of data related to commercial bank lending activ ities in the Los Angeles Metropolitan Area mortgage 66 market. It was possible, however, to confine the detailed analyses of commercial bank mortgage lending to a fewer number of major firms, In light of the greater relative Importance of large firms In the field of commer cial banking. It was determined that approximately 86.5 per cent of the total commercial bank holdingB of Los Angeles Metropolitan Area mortgage loans were held by five commercial banks, as of the commencing date of 1953. By the end of 1958 it could be estimated that this percentage had increased to a little over 90 per cent. In order to arrive at these percentages, it was necessary first to determine the total volume of Los Angeles area mortgage loans held by all banks, as of at least one period In time. As of June 30, 1958* there were forty-seven separate banks which had at least one office In the Los Angeles Metropolitan Area. For the forty-two smaller banks not included in the five-firm sample, the dollar volume holdings of all types of loans combined could be determined from each of their financial state ments, for this date. Confidential Information concerning mortgage loan holdings was also received from banks among these forty-two which held an aggregate of 86 per cent of the total loan holdings of all of these smaller banks com bined. After making adjustments for the remaining few small banks, and adding In the detailed Information from 67 the five large banks, it was possible to make a very close estimate of total bank holdings of Los Angeles area mort gage loans. The percentage of this total which was held by the five sample firms was calculated and then adjusted to other years by making allowances for mergers and other growth experiences of the major banks. Mortgage Loan Holdings The basic sources of statistical data related to mortgage loan holdings were found in the June and December Call Reports prepared by the individual banks. Such reports are made to the Federal Depositors Insurance Cor poration. It was necessary to adjust these figures, how ever, for the volumes of mortgage loan holdings included which were secured by properties located outside the Los Angeles Metropolitan Area. The adjustment procedure was complicated by the fact that two of the six major banks had their principal offices In an area other than the Los Angeles area. However, satisfactory results were obtained with the uses of a combination of confidential Information furnished by the banks, and supplementary ratios developed with the added uses of public recordings of mortgage loans in the Los Angeles Metropolitan Area, as compared with total loans made in California. 68 Mortgage Loans Made The dollar volumes of mortgage loans made In the two counties were determined, as mentioned above, from available monthly publications of loans recorded in Los Angeles and Orange Counties. In the few cases Involving missing data, additional information was made available on a confidential basis by the individual banks. V. MUTUAL SAVINGS BANKS Letters of inquiry concerning mutual savings bank holdings of Los Angeles area mortgage loans were sent to the ten firms which were commonly assumed by leading mort gage bankers to have been the major savings bank holders of Los Angeles Metropolitan Area mortgage loans. Addi tional correspondence was carried out with the National Association of Mutual Savings Banks and the Savings Bank Association of the State of New York. A limited amount of statistical information was received concerning these savings banks1 holdings of California mortgage loans. However, there was not enough additional Information available to warrant any extensive analysis of the Los Angeles area portions of their Cali fornia loan portfolios. From the information available, however, it could be judged that savings banks1 holdings of loans secured by Los Angeles area properties had grown 69 from less than $100 millions as of early 1953 to Just under $600 millions as of the end of 1958. As a percent age of the combined holdings of the three major institu tions, this would have been approximately 2 per cent in early 1953 and approximately 7 per cent as of the end of 1958. VI. SOURCES OP NATIONAL MARKET INFORMATION There is an abundance of Information available related to mortgage lending by the major Institutions In the national market. Most of the national statistics for the present study were obtained from the various issues of the Federal Reserve Bulletin.2 The information found conveniently in this periodical, however, was based upon Information also available from the Federal Home Loan Bank Board, the Institute of Life Insurance, the Federal Depositors Insurance Corporation, and various other govern mental and quasi-governmental agencies. The only estimating procedures which became neces sary, for the national market section of the present study, arose with regard to the volume of loanB made by commercial banks. The statistics here used as a basis for 2Board of Governors, Federal Reserve System, Washington, D. C. 70 such estimates were those relating to the volume of non- farm recordings of $20,000 or less. Such recordings were then adjusted with the use of a factor representing the relative Importance of 1- to 4-family property loans in the mortgage portfolios of commercial banks.3 3Relationship developed from statistical data accumulated by Saul B. Klaman in his study, The Volume of Mortgage Debt In the Postwar Decade (New York: Na'tionaT Bureau of Economic Research, 19$BJ. CHAPTER IV OVERVIEW OP THE LOS ANGELES AND NATIONAL ECONOMIES It is now necessary to note the general economic conditions which prevailed during the 1950's, and thus constituted the background environment within which mort gage lending took place. It is contended in this section that two basic assumptions are valid, with regard to cyclical changes In the Los Angeles and national econ omies. One, It Is believed that the pattern of changes in economic conditions In the Los Angeles area coincided very closely with the pattern of such changes at the national level, during the more significant years of the 1950's. And, two, It Is believed that two years may be chosen, 1957-58* during which a series of definite changes In economic conditions can be shown to have been to a considerable degree repetitious of a series of simi lar changes which had occurred during two earlier years, 1953-5^, at both the national and local levels. I. SIMILARITIES BETWEEN NATIONAL AND LOCAL ECONOMIC CONDITIONS Two Important types of indicators of economic 71 72 conditions are those which relate to general business activity and employment of the working force. The statis tical data available for the two geographical areas to be discussed are not completely parallel, with regard to these two economic Indicators. However, sufficient com parability exists for warranting the drawing of certain conclusions as to similarities between national and local fluctuations in economic conditions. Industrial Production and General Business Activity One of the most widely accepted indicators of economic conditions at the national level is the Federal Reserve Index of Industrial Production.1 And, In the Los Angeles Metropolitan Area, an equally acceptable indicator of economic activity is the Index of Business Activity in Southern California.^ It is Interesting, now, to note the similarities between the patterns of changes as shown by these two Indexes during the 1950's. General trends.--Figure 1 Indicates the close cor relation between the patterns of changes depicted by these two indexes during the 1950's. Relatively insignificant ^oard of Governors, Federal Reserve System, Washington, D. C. ^Research Department, Security-First National Bank, Los Angeles. 73 differences appear during the first two quarters of 1952; however, for almost all of the remainder of the ten years, these indicators of national and local activities closely coincide. Quite frequently the troughs and peaks coincide exactly, and the periods of alternating contraction and expansion are quite similar as to both directions and degrees of change. For the Southern California area, a two-year plateau of activity, characterized by only mild fluctua tions, commenced with the third quarter of 195°. A simi lar type of plateau for the nation commenced one quarter later, and lasted for Just less than a two-year period. Subsequently, after similar expansion periods, both areas reached a peak of activity, almost simultaneously, during the second quarter of 1953- The next trough of activity occurred, for the Southern California area, during the first and second quarters of 195^. During these same quarters, a similar, even though slightly more intense, trough occurred for the United States, and lasted JuBt slightly longer. Both areas had similar and constant per iods of expansion in late 195^ and early 1955; and a plateau of high activity was reached in Southern Califor nia during the third quarter of 1955, which was followed by a plateau for the nation as a whole during the fourth quarter of that year. The plateau of high activity ceased, simultaneously, for both areas during the third quarter of 1957* Then, after periods of rapid contrac tion, similar troughs occurred for both areas during the first half of 1958, even though the trough at the national level was slightly more intense. The rapid expansion periods for the two areas were similar in late 1958 and early 1959; and a new peak in activity was reached for the nation during the second quarter of 1959, which was very closely followed by the peak in Southern California during the third quarter of the same year. 1953-5*1 and 1957-58.— As may be noted from Figure 1, the pattern of changes in the Index of Business Activ ity for Southern California, for the two years of 1957-58, was almost identical to that of an earlier period, the two years of 1953-5*1 • Declining activity commenced during the early parts of both 1953 and 1957, and in both instances lasted Just less than one year. Then, increasing activity commenced during the first half of 195*1 and again this trend was repeated during the first half of 1958; and, in both instances, recovery continued throughout the remainders of the respective two-year periods. At the national level, the pattern of changes in the Index of Industrial Production during 1957-58 was very similar to the corresponding pattern of changes during 1953-5*1* The only significant difference in patterns 75 occurred as a result of the fact that recovery from the 195^ low In business activity did not commence until the third quarter of the year, whereas the recovery from the 1958 low commenced during the second quarter of the year. To summarize, not only was there similarity between the Los Angeles Metropolitan Area and the United States, as to changes In the levels of productive activity during the 1950's, there also occurred in both areas during 1957- 58 a pattern of changes in productive activity which resembled very closely the corresponding pattern of such changes during 1953-5^* Employment In the case of employment of the working force, it is difficult to obtain perfectly comparable statistics for the Los Angeles Metropolitan Area and for the United States as a whole. This is the result, primarily, of the rela tively greater rate of Increase In population in the Los Angeles area. This difficulty of obtaining comparisons Is intensified by the fact that for the latter area the ratio of immigration to new births Is much higher than the same ratio for almost all other sections of the nation. Immi gration, obviously, increases the labor force more rapidly than new births. However, It is possible to draw meaningful 76 comparisons by utilizing percentages of the labor force employed as an indication of employment in the Los Angeles area,^ and then relating this to the more familiar Federal Reserve Index of Non-agricultural Employment, for the United States.1 1 ' General trends.--Figure 2 indicates the close cor relation between the quarterly averages of these two employment indicators, one for the United States and the other for the Los Angeles Metropolitan Area. For both geographical areas, after rising employment in 1950, a plateau was reached in approximately the first quarter of 1951, and this plateau continued until the third quarter of 1952. There was rising employment immediately there after in both of the areas, and even though an abrupt and distinct peak was reached in only the Los Angeles area during the first quarter of 1953t the first three quarters of 1953 for both areas can be classified as a general peak in employment for both Southern California and the United States as a whole. After decreasing employment during late 1953 and early 195^* increasing employment commenced in the Los Angeles area, during the second quarter of ^Research Department, Security-First National Bank, Los Angeles. ^Board of Governors, Federal Reserve System, Washington, D. C. 77 195^; and for the nation a similar increase commenced dur ing the next following quarter of that year. For the Los Angeles area, a new plateau of high employment commenced during the second quarter of 1955 and lasted until approx imately the second quarter of 1957. For the United States, the years 1955 and 1956 were slightly more in the nature of constantly increasing employment, but at a gradual rate, which to some extent approached the rather constant employment in the Los Angeles area. In any event, the sharp decline In employment in the Los Angeles area, com mencing during the second quarter of 1957, was closely followed by a decline In national employment commencing during the next following quarter of that year. The sub sequent sharp trough in employment occurred for both areas during the second quarter of 1958. And, even though the trough of low employment was somewhat more intense in the Los Angeles area, the recovery was more rapid, and a new peak of employment for both areas was reached during the third quarter of 1959. It is also of some Interest to observe, that for both areas the peak in employment during 1959 did not reach the level of the previous peak attained Just prior to the trough of 1957-58. 1953-51 * - and 1957-58.--From Figure 2, It may be noted that the pattern of changes in the percentage of the labor force employed in the Los Angeles area during 78 1957-58 was almost identical to the corresponding pattern of such changes during 1953-5^> for that area, with one exception. This exception is that the low point which occurred during the second quarter of 1958 was consider ably lower than the corresponding low point reached during the second quarter of 195^. For the United States as a whole, the 1957-58 pat tern of changes in the Index of National Employment also resembled very closely the corresponding pattern which had occurred during 1953-5^. The only exception to this simi larity resulted from the fact that rising employment com menced during the second quarter in 1958, whereas the cor responding rise in employment during 195^ had not com menced until the third quarter of that earlier year. By way of summary, there was similarity between the Los Angeles Metropolitan Area and the United States, as to changing levels of employment during the 1950's. And, moreover, for both areas, the patterns of changing levels of employment during 1957-58 resembled very closely the corresponding patterns of change which had occurred during 1953-5^. II. YIELD RATES OF GOVERNMENT SECURITIES AND ECONOMIC CONDITIONS Data has now been furnished which indicates that a 79 similarity existed between the Los Angeles area and the United States with regard to the cyclical changes in busi ness activity and employment which occurred during the 1950's. And, it has also been shown that the changes which occurred during 1957-58 were similar to those of 1953-5^* for both areas. It is now to be noted also that periodic changes in the conditions of at least one segment of the money market coincided fairly closely with changes in the levels of production and employment during the 1950's. The yield rates of 3-month government securities has been chosen as being representative of a significant segment of the money market; however, it is a fact there is close correlation between the yield rates of these short-term securities and other government securities, with the exception that the amplitudes of the variations in short-term yields are normally of greater magnitudes. Since similarities between local and national economic conditions have now been discussed, and also for the reason that the present study is related primarily to the Los Angeles area, it is now considered necessary only to discuss the relationships between national market yield rates of government securities and local market business activity and employment. Yield Rates and Index of Business Activity Qeneral trends.— Figure 3 indicates the relatively 80 close relationship which existed during the 1950's between government securities yield rates and the Index of Business Activity in Southern California. In spite of several minor fluctuations, including slight dips In activ ity during the third quarter of 1951 and the first quarter of 1952, there was a gradual rise in business activity in Southern California during the first three years of the decade. This was followed by a more pronounced Increase In the first quarter of 1953» and a peak of activity dur ing the second quarter of 1953- The yield rates of 3-month bills showed a gradual Increase during this per iod, the only dip occurring during the first quarter of 1952; and, this rising trend also culminated with a peak of highest rates during the second quarter of 1953* After this common peak, both trends were downward, at about the same rate, with a trough of low business activity occur ring during the first quarter of 195^* and a trough of low yield rates closely following during the second quarter of 195^. After similar types of rises, a slight peaking in business activity during the third quarter of 1955 was followed some three months later by an even more slight peaking of yield rates. After slight dips in both trends in the first quarter of 1956, both showed tendencies for increases during the remainder of 1956. During early 1957 there was a levelling off of business activity while yield 81 rates continued to rise very substantially; however, a downturn In business activity during the third quarter of 1957 was quickly followed by an even more pronounced down turn In yield rates. Even though the decline In business activity started levelling off during the first quarter of 1958* and the yield rates continued to decline, the actual low point for both occurred during the second quarter of 1958. After these low points, the yield rates of 3-month bills rose abruptly during the remainder of 1958 and 1959, and the Index of Business Activity rose, even though less abruptly, through the third quarter of 1959* However, this latter index commenced to fall during the fourth quarter of 1959* (It is perhaps of further interest to mention that this fourth quarter downturn in business activity was followed by a downturn in yield rates during the first quarter of i960.) Summary of comparisons.--It can be stated that, in general, the directions and amplitudes of the fluctuations of changes in the yield rates of 3-month bills showed considerable resemblance to similar type measures of the fluctuations of business activity in Southern California. However, there was some indication that the troughs and peaks of the Index of Business Activity tended to precede the troughs and peaks of the yields of 3-month bills, by approximately one quarter of a year. 82 Yield Rates of Government Securities and Employment in the Los Angeles Metropolitan Area General trends.— Figure 4 indicates considerable similarity between the pattern of yield rates of 3-month bills and employment in the Los Angeles Metropolitan Area during the 1950's. It has been mentioned previously that the influx of immigration into the Los Angeles area during the 1950's renders it advisable to utilize employment data which expresses the level of employment for that area in terms of percentages of the labor force. After consistent rises in both yield rates and employments during the early years of the decade, a peak was reached in employment during the first quarter of 1953, and this was closely followed by a peak in yield rates during the second quarter of that year. Then, after steady declines, both the yield rates and employment reached a low point, simultaneously, with the second quar ter of 1954. In the midst of rises in both during the next several quarters, a temporary decline In employment during the fourth quarter of 1955 was followed some three months later by an even less prolonged decline in yield rates. Even though employment was generally at a stable level during 1956 and early 1957, and at the same time yield rates continued to rise, employment took a definite downturn commencing with the second quarter of 1957, and 83 this was followed by a similar downturn in yield rates, commencing a little more than three months later. The bottom of the trough for both employment and yield rates occurred during the second quarter of 1958, and subsequent increases in both were Just as abrupt as the declines of the preceding year had been. In regard to employment, a slight decline commenced during the third quarter of 1959, but yield rates continued to Increase throughout the year. (It may be of some further interest to mention here, how ever, that some two quarters later yield rates also com menced a decline.) Summary of comparisons.--Concerning changes In yield rates and variations in employment, it can be concluded that in directions and amplitudes the fluctuations in these two separate economic Indicators demonstrated a consider able amount of similarity between them, during the 1950's. However, as was mentioned In the previous comparisons with business activity, there Is some Indication that the troughs and peaks of employment also seemed to precede slightly the troughs and peaks of yield rates during the decade of the 1950's. Yield Rates of Government Securities and Lines of Help Wanted Ads Appearing in Los Angeles Newspapers In addition to the above discussions of business 84 activity and employment, it is interesting also to note certain characteristics of the variations in the number of lines of help wanted ads appearing in Los Angeles news papers during the 1950' s.5 Figure 5 depicts the relation ship between changes in the yield rates of 3-month bills and variations in the number of lines of help wanted ads appearing in Los Angeles newspapers during the period. Since considerable detail was utilized in describing the similarities between yield rates and employment above, it is not necessary here to continue with such great detail. However, it is interesting to note that there did exist a very close relationship between these yield rates and lines of help wanted ads, insofar as directions and amplitudes of the fluctuations are concerned. However, unlike the cases above, in which the peaks and ridges of business activity and employment tended to precede the peaks and ridges of yield rates by approximately one quarter of a year, the peaks and ridges of number of lines of help wanted ads usually preceded the turning points for yield rates by approximately two quar ters of a year. This was particularly true during the latter half of the decade. ^information obtained from the Research Department, Security-First National Bank, Los Angeles. 85 Yields of Government Securities, 1953-5^ and 1937-58 As may be noted in Figures 3t **, and 5, the pattern of changes in yield rates of government securities in 1957-58 showed considerable resemblance to the correspond ing pattern of such changes in 1953-5^. The yields were higher in 1957 than they had been during 1953, but the decline commencing in the latter half of 1957 was much more abrupt than the corresponding decline had been in late 1953* Hence, the low point in yield rates which was reached during the second quarter of 1958 was almost at the level of the low point which was reached during the second quarter of 195^. Then, the increase in 1958 was also more abrupt than the increase had been in 195^- Thus, there was a similarity between the patterns of changes, except for the fact that the decline in yield rates which occurred during 1957-58 commenced a little later, and then the decline and subsequent rise in yield rates were both somewhat more abrupt than the correspond ing declines and increases had been during 1953-5^* Summary The present study does not wish to deal with the possible cause and effect relationships between changes in yield rates of government securities and changes in the levels of the traditionally accepted indicators of general 86 economic conditions. However, the data have Indicated that during the decade of the 1950's the fluctuations in the yield rates of 3-month government securities did resemble the fluctu ations in general economic conditions, with the exception of a slight lag in the changes in such yield rates. And, furthermore, it has been pointed out that there was a sub stantial measure of repetition in 1957-58 of the pattern of changes in the yield rates of these securities which had occurred during 1953-5^- III. CONCLUSIONS Specific conclusions related to the economic environment of the 1950's are necessary at this point, before proceeding to the detailed chapters related to mortgage lending activities. Changes in Economic Conditions First, it may be stated that during the 1950's, patterns of changes in the levels of business activity and employment in the Los Angeles Metropolitan Area and in the United States demonstrated close similarities. Second, except for a relatively short lag in the turning points of changing yields of government securities, the patterns of these changing yields in the 195°'s closely 87 resembled the patterns of changes In productive activity and employment in the Los Angeles area. Therefore, it may be stated that during the 1950’s there was considerable similarity between the economic environments of the Los Angeles Metropolitan Area and the United States, with regard to patterns of changing levels of business activ ity, employment, and yield rates of government securities. And, third, the patterns of changing levels of all three indicators of economic conditions during 1957-58 were to a considerable degree a repetition of the corre sponding respective patterns of changing levels during 1953-54. Implications of the Conclusions First, when examining mortgage lending activities In a metropolitan area for which mortgage fund3 are derived from both local and national sources, it seems that It might not only be convenient, but also justifiable, to assume that similarities exist between changes occur ring In the national and local economic environments. Second, it would seem that certain advantages are to be gained through the uses of variations in the yield rates of government securities as one of the measures of changes In the conditions of the general economic environ ment. The roost obvious advantage of such uses, In regard to mortgage market studies, would seem to arise as a 88 result of the possibilities for establishing meaningful relationships between mortgage yields and government securities yields. There are some indications that the impositions of counter-cyclical fiscal and monetary poli cies were becoming more uniformly and predictably applied to repeating cyclical economic conditions during the 1950's. And, there is also evidence that changes in the yield rates of at least short-term government securities were to some extent responsive, in a consistent manner, to changes in the degrees of fiscal and monetary restrictions on the economy. Thus, it would seem possible that in the future generalizations concerning mortgage lending activ ities might be made, if valid relationships can be devel oped between mortgage lending patterns and the yield rates of short-term government securities. CHAPTER V THE FINANCIAL RESOURCES OF THE LOS ANGELES AREA The dominating influence of the three major finan cial institutions may readily be determined from the statistics which are available for the Los AngeleB Metro politan Area mortgage market. The decision to confine the research for the present study to these three institutions — savings and loan associations, life insurance companies, and commercial banks--was based on an assumption that their combined mortgage lending activities accounted for approxi mately two-thirds of the total mortgage lending in the Los Angeles Metropolitan Area. Some Justification for this contention of the impor tance of institutional lending comes from the 1950 Census of Housing statistics for residential loans outstanding in metropolitan areas.1 From this data for 1950, it may be determined that the three major institutional lenders accounted for approximately 65 per cent of the residential mortgage loans outstanding in the Los Angeles Metropolitan ^U. S. Census of Housing, 1950* Vol. IV, Residential Financing, Tart IT, "TiTrge StandarcT Metropolitan Areas." 89 90 Area. Further indication of the importance of these insti tutions may be obtained from an analysis of total mortgage loan recordings in the two counties making up the Los Angeles Metropolitan Area. From the published statistics of total mortgage loan recordings,2 and the findings of the present study with regard to institutional recordings, it can be determined that of the total loans recorded In the area, the percentage recorded by the three major Institu tions varied consistently between 60 and TO per cent during most of the 1950's. Minor exceptions occurred during parts of 1950-51 and 1958-59> at which times the percentages rose to slightly above 70 per cent. As a result of the dominating importance of institu tional mortgage lending, the present discussion of the financial resources of the area will be limited to the three mentioned institutions. After an overview which dis cusses the geographical locations of Institutional sources of funds, these three major Institutions will be discussed in detail. I. OVERVIEW OF INSTITUTIONAL SOURCES OF MORTGAGE FUNDS Institutional funds invested in Los Angeles ^Residential Research Report, Residential Research Committee of Southern California, various quarterly Issues. 91 area mortgage loans are derived from both local and national sources. In assessing the Importance of mortgage capital imported into the area from other parts of the state and nation, it Is not possible to arrive at any one specific estimate of the percentage of total mortgage funds which can be attributed to outside sources. Rather, it Is possible only to suggest an estimated range of percentages. The use of a range Is necessary In order to reflect the many interpretations which may be given to the term "out side sources" of funds. Basically, the problem revolves about a Judgment as to whether It Is (a) the decision making process, or (b) the savings process, which deter mines the geographical source of the institutional funds reaching a local mortgage market area. For the Los Angeles Metropolitan Area, the upper limits of the range of estimates of the importance of Imported mortgage capital would likely be reached with the assumption that It Is the decision-making process which determines the geographical source of institutional mort gage funds. This Is for the reason that the principal offices of almost all of the Important insurance company lenders are located outside of the State of California. And, moreover, the principal offices of two of the six major commercial bank lenders were located during the 1950*3 in areas of California other than the Los Angeles 92 Metropolitan Area. If this classification of funds according to principal offices were to be accepted, the data accumulated for the present study would indicate that approximately one dollar of every two dollars invested in Los Angeles area mortgage loans, as of the early years of the 1950's, was from outside sources. However, as of the later years of the decade, only one dollar of every three dollars of investments in such loans could be attributed to lenders with principal offices located outside the area. The lowest estimate of the importance of imported institutional mortgage capital would seem to arise with the assumption that funds should be classified according to the geographical locations of those placing their savings at the disposal of the major institutions. If such a classification procedure were acceptable, the research for the present study would indicate that one dollar of every five dollars of institutional funds invested in Los Angeles Metropolitan Area mortgages, as of the early years of the 1950's, had come from outside sav ings; and, by the end of the decade, this proportion of imported to local funds was approaching one dollar of every four dollars of such investments. The true importance of imported mortgage capital to the Los Angeles Metropolitan Area would seem to lie between the extremes which now have been mentioned. In the present 93 study, it is only possible, however, to discuss the methods used in arriving at what are here believed to be the highest and lowest percentages which can be attributed to outside sources of mortgage funds during the 1950's. Location of Decision Making In order to arrive at an estimate of the maximum importance which could be attributed to outside sources of mortgage capital, a tentative assumption may be made that all decisions concerning Institutional mortgage lending in the Los Angeles Metropolitan Area were made at the princi pal offices of the individual lending firms. Local offices.--The principal offices of the major savings and loan association lenders were located within the two counties making up the Los Angeles Metropolitan Area. Several holding companies, even financed to some extent with equity capital from other areas, became active In the California savings and loan industry during the latter part of the 1950's, and particularly during 1959. However, the principal offices of the operating associa tions still remained within the Los Angeles mortgage market area. However, only two insurance companies of any appre ciable size had principal offices in the Los Angeles Metro politan Area. And, these two companies supplied only a 94 relatively small percentage of the total life insurance company mortgage Investments in the area. With only minor exceptions,3 an Qf the commercial banks with holdings of Los Angeles Metropolitan Area mort gage loans were found to have had principal offices located in California. At the same time, however, two of the six major banks had principal offices located in San Francisco, rather than in Los Angeles. One of these firms held extremely large volumes of Los Angeles area mortgage loans. However, the second firm was not operating during the early 1950's and had only moderate holdings of such mort gage loans, even after 1954. Local mortgage funds.— Still assuming that the site of a firm's principal office is a proper determinant of the location of the source of institutional mortgage funds, the research for the present study would indicate that imported capital was of very great importance to the Los Angeles Metropolitan Area mortgage market. As a result of the confidential nature of information furnished by large individual firms, estimates of the importance of imported life insurance company funds, as well as the importance of imported commercial bank funds, can not each be disclosed 3a few sizeable loans made in Orange County by a Texas commercial bank have not been considered in the pres ent study, since they were presumably for interim loans, and were not so great in volume as to make necessary their inclusion for present purposes. 95 separatelyHowever, with regard to the composite hold ings of Los Angeles area mortgage loans by the three types of Institutions combined, the data indicates that firms with principal offices in the two counties accounted for just under one-half of the total institutional holdings during the early yearB of the 1950'3. However, with the growth in relative importance of savings and loan associa tions during the 1950'a, the proportion of local institu tional funds to imported institutional funds had almost reached two-thirds by the end of the decade. Any use of such estimates, however, must take into consideration that not only is it possible that some lend ing decisions were made in locations other than the site of the principal offices, but also the fact that substan tial savings were provided to outside institutions by those living in the Los Angeles area. This latter possibility is now discussed in greater detail. Location of the Savings Process In order to arrive at an estimate of the minimum ^Since there were only two important life insurance companies with principal offices in the Los Angeles area, and only two important commercial banks (one of these not in operation during the entire period) which operated in that area, but had principal offices outside the area, the holdings of these few institutions become instantly appar ent In the statistical data underlying the present analysis. 96 Importance which can be attributed to outside sources of mortgage capital, It Is necessary now to make an alternate assumption to the effect that outside funds and local funds may properly be classified according to the geo graphical locations of those furnishing savings to the Institutions lending In the Los Angeles area. Local savings.— It may be estimated that as of late 1959 approximately 82 per cent of the savings and loan associations' assets were derived from local savings. The computation of this percentage Is based primarily on Stanford Research Institute statistics of the geographical locations of savers who had furnished savings to Southern California savings and loan associations, as of February- March i960. According to these statistics, approximately 18.5 per cent of the savings made available to these sav ings and loan associations came from outside California, and another K per cent came from those living 50 or more miles away from the associations' offices (but still In California)And, since approximately 80 per cent of Los Angeles area savings and loan associations' Increases In assets were derived from savings, during the 5c. J. Clawson, F. W. Barsalou, et al, The Savings and Loan Industry In California, a reporF prepared for the Savings and Loan Commissioner, State of California (South Pasadena, California: Stanford Research Institute, i960), p. II-9 and Table XI-1. 97 1950's,^ it can here be computed that approximately 18 per cent of these associations1 assets were derived from outside sources. The only estimate of the volume of savings flowing into the Los Angeles Metropolitan Area market from outside areas, during the early 1950's, comes from the research accomplished by Gillies and Curtis. These authors estimated that approximately 5 per cent of the total increase in savings accounts of Los Angeles county savings and loan associations came from eastern sections of the United S t a t e s . 7 i f it may still be assumed that an addi tional 4 per cent of savings of these associations came from sources located more than 50 mileB from the associa tions ' offices (but still in California), and that 80 per cent of these associations' assets were derived from savings accounts, it may be further computed that approxi mately 7.2 per cent of Los Angeles Metropolitan Area savings and loan association assets were derived from Computed from data furnished by the Los Angeles Branch, Federal Home Loan Bank of San Francisco. For additional details of the degree of Importance of savings as a percentage of the total sources of assets of Los Angeles Metropolitan Area savings and loan associations, see infra, pp. 110-13. 7Gillies and Curtis, oj). clt., p. 60. 98 outside sources, as of 1951. Although estimates of the geographical sources of life Insurance company assets must necessarily be based upon limited data, there is some indication that approxi mately 48.5 per cent of the mortgage capital flowing into the Los Angeles area during the mid-1950,s was derived from savings of those living outside the area. Prom two studies of the distribution of life insurance sales by counties, it may be computed that life insurance sales in the two-county Los Angeles Metropolitan Area made up approximately 3-37 per cent of total life insurance sales in the United States, during 1955-56.® Prom the research for the present study, there is indication that during these same two years, the increase in life insurance com pany holdings of Los Angeles Metropolitan Area mortgage loans amounted to $430 millions.9 This amount of increase constituted 6.54 per cent of the two-year increase in the total nation-wide mortgage loan holdings of life insurance companies. Thus, if it is assumed that funds available 8computed from information for 1956 appearing in County Patterns of Insurance Sales, 1958-59 Ed., (Phila delphia": Tlie Spectator) and information for 1955 received directly from the Spectator Co. ^Estimated from a survey of life insurance companies holding approximately 86.5 per cent of the Los Angeles area mortgage loans held by all life insurance companies during 1955-5 6. 99 for mortgage lending were derived from savings of those living in the Los Angeles Metropolitan Area, in proportion to life insurance sales in that area, the data mentioned above indicates that approximately $335 of every $10,000 of life Insurance company mortgage loans could be attributed to savings from that area. At the same time, the above-mentioned data of mortgage lending indicates that $65^ of every $10,000 of these companies' increased mort gage loan holdings during 1955-56 were secured by Los Angeles Metropolitan Area properties. ThuB, it may be estimated that only 51*5 per cent of life insurance com panies* Los Angeles Metropolitan Area mortgage loan Investments could be attributed to savings emanating from that same local area. Concerning savings placed at the disposal of commer cial banks, the information available Indicates that the savings furnished by those living within the Los Angeles Metropolitan Area were commensurate with the total invest ments made by commercial banks in Los Angeles Metropolitan Area mortgage loans. Interviews with officers of major banking firms indicated particularly that only a small volume of time deposits was received by California commer cial banks from sources outside the state. Of the banks lending in the Los Angeles Metropolitan Area, one very large bank and two other large banks did have branches 100 located throughout most of the state. However, there was no clear-cut evidence of either exportation or Importation of capital by means of interbranch operations within these three individual banking systems. To the contrary, the aggregate statistics of Bavlngs and mortgage lending Indicate that commercial bank mortgage lending in the Los Angeles Metropolitan Area had been carried out with the use of savings from that same area. Some evidence of this could be developed from the combined use of the find ings of the present study and Federal Reserve statistics of bank deposits by counties. For example, the percentage of total California commercial bank time deposits which were located in the Los Angeles Metropolitan Area was approximately the same as the percentage of total Cali fornia commercial bank mortgage loan holdings which were found to be secured by properties located in that metropol itan area. Both of these percentages averaged out to approximately 3^ per cent during the decade of the 1950's.10 And, moreover, with the added use of the reports of the Federal Deposit Insurance Corporation, It could be determined that the ratio of mortgage loans to time 10Mortgage loan holdings estimated from a survey of banks holding between 86 and 91 per cent of Los Angeles area mortgage loans held by all commercial banks. Deposits information from Distribution of Bank Deposits by Counties, Board of Governors, federal Reserve System, published biennially. 101 deposits In the Los Angeles area was almost the same as the corresponding ratio for the State of California- For one specific example, as of June 30, 1956, commercial bank mortgage loan holdings in California amounted to 50.3 per cent of time deposits.11 For the same date, the statistics developed for the present study indicated that the corre sponding percentage was approximately 48 per cent, for the Los Angeles Metropolitan Area.12 Local mortgage funds.— From the information obtained for the present study, it may be assumed that the savings underlying commercial bank mortgage lending in the Los Angeles area originated in that same local area. However, by means of applying to the data contained in Tables I and II the percentages developed above for savings and loan associations and life insurance companies,13 it may be determined that a considerable amount of importation of savings from other areas (In the form of mortgage capital) took place during the 1950's- Of the $3-7 billions of 11Assets, Liabilities, and Capital Accounts Commer cial and Mutual Savings £anks, June 30, 195&J Report Wo. 45, Federal Deposit Insurance Corporation. Computed from information on p. 11. 1 p Estimated from a survey of banks with approxi mately 86 per cent of total Los Angeles Metropolitan Area bank deposits and approximately 89 per cent of total com mercial bank holdings of Los Angeles area mortgage loans. i3S ee supra, pp. 97-98. 102 Los Angeles Metropolitan Area mortgage loans held by the three major Institutions as of December 31, 1952, the closest estimate of those financed by outside savings would be approximately $786 millions, or 21.2 per cent of the total. Of the $8.2 billions held as of December 31, 1958, the amount financed by outside savings could be estimated to be $1.9 billions, or 22.7 per cent of the total. Such estimates are based on assumptions that the ^8.5 per cent of Insurance company funds found to have been imported during 1955-56 was also representative of the remaining years of the 1950's, and that the percentage of savings and loan association savings which were from out side areas Increased at a constant rate from 7.2 per cent in 1951 to 18.0 per cent In 1959. Thus, the most conservative estimate of the impor tance of imported mortgage capital during the early 1950's would seem to be that approximately 20 per cent of the total Institutional Investments In Los Angeles Metropolitan Area mortgage loans could be attributed to savings from outside the area. And, for the last year of the decade, a correspondingly conservative estimate would be that approximately 23 per cent of such Investments could be related to savings originating In other sections of the state and nation. 103 Summary It Is not possible from the present research to state precisely the volume of mortgage capital Imported into the Los Angeles Metropolitan Area during the period covered In the study. However, It is possible to suggest maximum and minimum estimates of the percentages of total institutional mortgage capital derived from outside sources during the 1950*s. The wide disparity between the maximum and minimum estimates is a result of the fact that widely varying Interpretations may be given to the term "Imported capital." If the location of the principal offices of insti tutional lenders is assumed to be a proper determinant of the source of funds, a considerable amount of import\tion of mortgage capital took place during the 1950's. How ever, a much more conservative estimate of the Importance of imported capital is obtained if the source of funds is classified according to the source of basic savings. Even though the estimates made in the present study were based upon limited information, certain Inferences may emerge. First, given the premise that Institutional mortgage lending decisions are made In the principal offices of the firms involved, there Is evidence that there was a constantly Increasing proportion of Los Angeles Metropolitan Area mortgage lending which depended upon 104 locally-Hade decisions, during the years of the 1950's. On the other hand, If the source of the savings underlying mortgage lending Is considered to be of greater signifi cance than the location of the principal office of the institutional lenders, there is evidence that the Los Angeles market was becoming slightly more dependent, rather than less dependent, upon other sections of the state and nation for mortgage funds, during this ten-year period. In any event, there Is conclusive evidence that a substantial portion of the institutional financial resources available for mortgage lending purposes In the Los Angeles Metropolitan Area was derived from sources out side that metropolitan area. Some of the local and national aspects of the three Institutions covered in the present study may now be examined In greater detail. II. SAVINGS AND LOAN ASSOCIATIONS From a standpoint of loans made and Increases In holdings of Los Angeles Metropolitan Area mortgage loans during the 1950’s, the savings and loan associations were the most important Institutional participants In the mort gage market of that area. Fortunately, for purposes of the present study, statistics related to these associa tions' operations are readily available from records 105 maintained by the Federal Home Loan Bank of San Francisco. The present discussion Is based primarily on data fur nished by the Los Angeles branch of this Federal Home Loan Bank. Supplementary information regarding the activities of individual associations was derived from publications of the California Savings and Loan League.^ Growth During the 195Q1s A discussion of the phenomenal growth of the resources of savings and loan associations in the Los Angeles Metropolitan Area can conveniently be separated into three categories. First, the number of associations increased only by approximately 21 per cent during the ten years of the 1950's. Secondly, however, the assets of these associations increased by 661 per cent during these same years. And, thirdly, some increasing concentration in the industry is indicated by the fact that the assets of the five largest associations increased by 1,157 per cent from December 31, 19^9 to December 31, 1959. Numbers of associations.--As of December 31, 19^9, there were 85 savings and loan associations in the Los Angeles Metropolitan Area. These were almost evenly ^Particularly, the various annual issues of Roster of SavingB and Loan Associations, and various monthly issues of Savings and Loan Journal. 106 divided between state and federal associations. By the end of 1959* the number of associations had increased to 103. By this time, however, almost exactly two-thirds of the associations were state chartered. This increasing relative importance of state-chartered associations can be attributed to a combination of an increase from 42 to 67 in the number of state associations, and a decline from ^3 to 36 in the number of federal associations. Interest ing references to the conversion of federal charters into state charters appear in a recent research report authored by Gillies and Mittelbach.15 of particular significance were the findings that a relationship existed between such conversions of charters and the merger movement which took place in California from 1950 to 1957.1^ To some degree, this merger movement contributed to the outstanding growth of the largest associations. And, in turn, the growth of the largest associations played an important role in the phenomenal growth of the savings and loan industry in the Los Angeles area during the 1950's. As for the United States as a whole, there was an increase of only 4 per cent in the number of associations, during the 1950's. This increase, amounting in numbers to 15J. Gillies and F. Mittelbach, Mergers of Savings and Loan Associations in California (Los Angeles: Univer sity of California, Los Angeles, 1^60). 16ibid., p. 25. 107 247 for the ten-year period, resulted from an Increase of 333 federal associations, and a decline of 86 In the number of state associations. Thus, the Increasing relative importance of state associations in the Los Angeles area was not duplicated at the national level. Assets.--The trend toward large-size individual associations is clearly indicated from a comparison of the small growth in numbers of associations and the substantial growth in total volume of assets held by all Los Angeles Metropolitan Area associations. As of December 31, 1949, assets held by associations in the area amounted to approximately $.8 billions. During the ten years following that date, these assets increased to approximately $6.2 billions, such an increase amounting to 661 per cent for the ten-year period. In keeping with the growth In numbers of state- chartered associations, the state associations were also gaining greater Importance Insofar as holdings of assets were concerned. Whereas federal associations as of December 31# 1949# held approximately two-thirds of the total assets held by all associations In the Los Angeles Metropolitan Areas, this proportion had decreased to Just slightly le3s than one-half by December 31# 1959. The growth rate of asset holdings for all savings and loan associations In the United States was only 108 one half the growth rate of asBet holdingB in the Los Angelea Metropolitan Area. For the nation as a whole, the Increase In assets from $14.6 billions to $63.5 billions constituted a ten-year Increase of 334 per cent. As has been mentioned, the corresponding Increase for the Los Angeles Metropolitan Area was approximately 661 per cent, or almost exactly double the increase found at the national level. For the United States, total assets held by all associations were almost equally distributed between state and federal associations, as of December 31* 1949. During the subsequent ten years, however, there was a slightly higher rate of growth in holdings of federal associations, and by the end of 1959 approximately 53 per cent of all savings and loan association assets were held by those associations with federal charters. This was in contrast to the increasing importance of state associations in the Los Angeles Metropolitan Area. Increasing concentration.— A substantial amount of the spectacular growth of the savings and loan industry in the Los Angeles Metropolitan Area can be attributed to the growth of the five largest associations. During the ten years of the 1950's, the assets of these five associ ations increased by the amount of 1,157 per cent. By contrast, the assets of the second five largest 109 associations Increased during the same years by only 361 per cent. As of* December 31# 19^9# the five associations with the highest rate of growth during the 1950's had held approximately 22.5 per cent of the total assets of all savings and loan associations in the Los Angeles Metropoli tan Area. By December 31# 1959# however, these five associations held 37.2 per cent of such assets. As would be expected from the importance of mortgage loans to savings and loan associations, there was also an increasing amount of concentration with regard to mortgage loan holdings in the area. From a 22.4 per cent share of the total mortgage holdings of savings and loan associa tions in the Los Angeles Metropolitan Area, the five largest associations' share had risen during the ten years to 37*2 per cent as of the end of 1959. It is of some further interest to compare the mort gage loan holdings of these same five associations with the total mortgage loan holdings of all savings and loan associ ations in the United States. As of December 31# 19^9# the five large Los Angeles Metropolitan Area associations held in their combined portfolios approximately one dollar of every eighty dollars of mortgage loans held by all savings and loan associations in the United States. By the end of 1959# though, these same five associations held 110 approximately one dollar of every thirty dollars of mort gage loans held by all of the savings and loan associa tions in the nation. Sources of Increases in Assets As has been mentioned above, there was an increase in the assets of Los Angeles Metropolitan Area savings and loan associations from $.8 billions to $6.2 billions dur ing the 1950's. Approximately 80 per cent of the $5*4 billions increase was derived from increases in savings accounts. Three other sources, somewhat equal In impor tance, accounted for the remaining 20 per cent of the Increased resources of these associations. Net Inflow of savings.--During the 1950's, there was a net inflow of savings amounting to approximately $4.3 billions. This represented almost exactly 80 per cent of the total Increase in assets of Los Angeles Metropolitan Area associations during these ten years. In spite of a relatively consistent period-to-period rate of growth of savings accounts there were several semi annual periods during which the inflow of savings accel erated to a considerable degree. Notable among these were the second six months periods of 1956 and 1958. There were also several periods during which the inflow of savings decelerated to some degree. During these latter mentioned periods, however, the Increase In total assets continued, Ill primarily as a result of the increased use of funds bor rowed from the Federal Home Loan Bank. Borrowings from the Federal Home Loan Bank.— Federal Home Loan Bank advances outstanding, on the books of Los Angeles Metropolitan Area associations, Increased in the amount of $390 millions during the 1950's. This amount constituted approximately 7-3 per cent of the total increase in assets of these associations. The periodic increases in such advances outstanding, however, were not by any means consistent from period to period. During about one half of the twenty semi-annual periods, there were decreases rather than increases in FHLB advances out standing. Substantial increases in borrowings occurred during the second half of each of the years 1950, 1952, 1953* and 195^* Then, further increases in borrowings occurred during both semi-annual periods of the years 1955, 1957, and 1959. Particularly significant were the Increases of 1959, when the net additional borrowings from the Federal Home Loan Bank amounted to just over $250 millions. Increases in reserves and undivided profits.— The ten-year increase in general reserves and undivided profits of the associations in the Los Angeles Metropolitan Area amounted to $398 millions during the 1950's. ThiB represented 7*^ per cent of the total increase in assets 112 held by these associations. Thus, general reserves and undivided profits accounted for approximately the same amount of growth as did borrowings from the Federal Home Loan Bank. However, the year-to-year Increases In reserves and undivided profits were relatively uniform throughout the ten years, whereas additions to borrowings varied considerably from period to period. All other sources of assets.— The three foregoing classifications of sources of assets represent the pre dominant means by which the funds of savings and loan associations were Increased. As a result of the accounting procedures used by these associations, however, construc tion loans may appear among the assets at a dollar value equal to the total amount committed for construction pur poses, even though the loan proceeds are customarily advanced to the borrower periodically during the progress of construction. Therefore, a portion of the increases In associations’ assets are in the form of holdings of con struction loans In process. And, since such loans out standing are offset by liabilities to the borrower, the Increasing dollar volume of these liabilities becomes In effect a source of assets. These increasing liabilities accounted for almost all Increases in assets which could not be attributed to savings, FHLB borrowings, and increases In general reserves and undivided profits. This 113 final category, now termed "all other sources of assets," accounted for an Increase In assets amounting to $277 millions for the period from December 31, 1949 to December 31* 1959* As a proportion of total Increases In assets, this represented approximately 5.2 per cent. Uses of Increases in Assets As would be anticipated from the nature of savings and loan associations, approximately 83.5 per cent of the Increase In assetB during the 1950's consisted of Increases in the holdings of mortgage loans. In addition to such loan Increases, however, it is also necessary to note the proportions of total increases in assets which were in the form of Increased holdings of cash, Increased holdings of government obligations, and miscellaneous other increases. Increases in mortgage holdings.--Of the $5*4 bil lions Increase in the assets of Los Angeles Metropolitan Area savings and loan associations, during the 1950's, approximately $4.5 billions were found to be invested in mortgage loans. Thus, Increases in mortgage loans out standing accounted for approximately 83.5 per cent of the increase in associations' assets between December 31* 1949 and December 31* 1959* Increases in cash holdings.--Only a small fraction of the Increased assets were maintained in the form of 114 cash. The $103 millions increase in cash during the 1950's accounted for approximately 1.9 per cent of the associations' total Increase in assets. Increases in holdings of government obligations.— The Increases in dollar volume holdings of government obligations amounted to approximately $424 millions, or 7.9 per cent of the total increase in assets. With the exception of slight decreases in the holdings of government obligations during 1950* there were increases in such holdings during each of the remaining years of the ten- year period, if such increases are computed on an annual basis. It is Interesting to note, however, that on a semi-annual basis there were at least small decreases in such holdings during the second half of each of the years 1953, 1954, 1955, and 1959. Increases in all other assets.— Of the $5.4 billions increase in total assets, only $348 millions were in the form of assets not discussed among the three classifica tions above. This increase In the value of all other assets represented 6.6 per cent of the increase in total assets during the ten-year period. III. LIFE INSURANCE COMPANIES As measured by Increases In holdings of Los Angeles Metropolitan Area mortgage loans during the 1950's, life 115 insurance companies were considerably less Important as mortgage lenders than were the savings and loan associa tions. However, the influence of life insurance companies in this mortgage market was still somewhat greater than that of commercial banks. In the above discussion of savings and loan associ ation resources, it wa3 considered acceptable practice to limit the discussion to the associations located within the Los Angeles Metropolitan Area. The same Is not true for life insurance companies, since most of such companies were located outside of the subject geographical area, and distributed their loanable funds among many Investment markets. Most of the large life insurance companies in the United States were authorized to operate in California. As of December 31* 19^9, those companies admitted in i California held 92.3 per cent of the total assets of all life insurance companies in the United States. As of December, 1959* this percentage had changed only to 92.5 per cent. It Is difficult to estimate the number of com panies authorized to operate In California which were actively engaged in mortgage lending in that state. How ever, of the 118 companies admitted In California as of December 31* 19^9* only 10 were without mortgage loans from some source, in their investment portfolios. Of the 116 200 companies admitted in California as of December 31, 1959, only 30 listed no mortgage loans among their assets. It is interesting to note from the 1959 membership roster of the Southern California Mortgage Bankers Associ ation that 75 of the largest life insurance companies were represented by members of that association. It is logical to assume that these companies, and also others not repre sented by members of the association, held loans secured by properties located in Southern California. Estimates of the volume of life insurance company mortgage lending in the specific Los Angeles Metropolitan Area are presented In Chapter VIII of the present study. Some statistical evidence of the increasing impor tance of total California mortgage loans in the portfolios of United States life Insurance companies comes from an examination of data published in the annual Life Insurance Fact Books. As of December 31, 19^9, Just slightly less than 10 per cent of all life insurance company-held mort gage loans were California loans. However, by December 31, 1959, this percentage had Increased to Just slightly over 13 per cent. l^These publications by the Institute of Life Insurance are excellent sources of Information of life insurance companies' activities at the national level, and include one breakdown of these companies' total mortgage loan holdings by states. 117 Even though there Is very little published informa tion available concerning the portion of total California mortgage loans which is secured by properties located in the individual metropolitan areas, a considerable amount of Information is available which relates to life insur ance company holdings of mortgage loans on a statewide basis. The basic source of detailed Information on mort gage loan holdings, and other financial data as well, is found in the reports furnished annually by life Insurance companies to the Insurance Commissioner of the State of California. The discussion below is based primarily upon information derived from these detailed reports, and the consolidations of such information in the Annual Reports of the Insurance Commissioner of the State of California. Growth During the 195° 1 » There are at least four measurements of the growth of activities of life insurance companies in California which are pertinent to the present study. First, the number of companies authorized to do business in California increased by 70 per cent during the period. Secondly, the total assets of the companies operating in California Increased by 91 per cent during the Base period. Thirdly, in regard to assets Invested in mortgage loans, the total mortgage loan holdings of these companies increased by 218 per cent, and their California mortgage loan holdings 118 increased by 319 per cent, during the ten-year period. And, fourth, along with the growth in total holdings of California mortgage loans, the share of such loans held by the five leading lending companies remained almost the same throughout the 19501s. Number of companies.— Between December 31, 1949 and December 31, 1959, the number of United States life and life and disability companies admitted in California Increased from 118 to 200. This growth in numbers con stituted approximately a JO per cent increase, for the ten years. Of the 118 companies operating as of the earlier date, only 15 had received their charters from the State of California. By December 31, 1959, the number of California- chartered companies had increased only to 24. Moreover, of the California companies, there were only 3 which were of more than negligible Importance during the ten-year period. As has been mentioned above, 75 of the largest com panies listed as operating in California in 1959 had mort gage lending representatives who were listed among the members of one association of Southern California mortgage bankers. Assets.--The ten-year percentage increase in the assets of life insurance companies was only slightly 119 higher than the percentage Increase in the number of com panies. Prom the amount of $55 billions In assets as of December 31, 19^9, the assets of companies operating in California increased by $50 billions to a new total of $105 billions, as of December 31, 1959. This Increase amounted to 91 per cent, whereas the growth in the number of companies had increased by 70 per cent. Mortgage holdings.— The most rapidly increasing assets of life Insurance companies were in the form of mortgage loans outstanding. And, the percentage increase in holdings of California mortgage loans was far greater than the percentage increase in all mortgage loan holdings. As for all loans of this type, the increase from $11 bil lions to $36 billions constituted an Increase of 218 per cent during the ten-year period. However, the increase from approximately $1.2 billions to $4.8 billions in the holdings of California mortgage loans constituted a 319 per cent increase, or almost one and one-half times the rate of increase in holdings of all mortgage loans. Concentration of mortgage loan holdings.— A signifi cant proportion of life insurance company held California mortgage loans were held in the portfolios of five large companies, during the 1950's. However, there was indica tion that the five companies' share of the total had not increased between 1950 and 1959* As of December 31* 1950, 120 these five companies had held California mortgage loans in the amount of $861 millions, or 52.8 per cent of the total held by all life Insurance companies. By December 31* 1959, their holdings had reached $2.54 billions. This amount represented 52.7 per cent of total life Insurance company holdings, or a percentage share which was almost identical to the share held nine years earlier. In regard to the holdings of Los Angeles Metropoli tan Area mortgage loans, the rising relative importance of these five large companies was more substantial. With the use of confidential information provided by these com panies, it was determined that their holdings of Los Angeles Metropolitan Area loans increased from $444 mil lions, as of December 31, 1950, to $1.38 billions, as of December 31, 1959. In terms of percentages of total life insurance company holdings, the corresponding increase in these five companies' share was from 49.6 per cent to 55.2 per cent, during the nine-year period. Sources of Increases in Assets The $50 billions increase in the total assets of life insurance companies operating in California resulted primarily from increases in the reserves of these com panies. In addition, however, small portions of the additional assets were obtained through the incurrence 121 of additional liabilities, and from Increases In paid-in capital and surplus. Increases In net reserves.— The reserves of life insurance companies operating In California Increased by $44 billions during the 1950's, this amount constituting 88 per cent of the total Increase in assets. These reserves Included life, disability, supplementary con tracts, and policy claims classifications. As would be anticipated from the nature of the life insurance industry, the percentage of annual increases in assets which was derived from reserves was quite consistent from year to year, throughout the decade. Increases in other liabilities and reserves.--A very small amount of the ten-year increase in total assets of life insurance companies can be attributed to other liabil ities and miscellaneous reserves which were not included in the net reserves mentioned above. The $1.5 billions increase in other liabilities and miscellaneous reserves represented 3 per cent of the $50 billions increase in total assets. Increases in paid-in capital and surplus.— These two equity sources of assets accounted for $4.4 billions, or approximately 9 per cent of the total increase in assets during the period. Since mutual companies were of greater importance than stock companies, the assets 122 provided by accumulations of surplus were of considerably greater magnitude than those provided by Increases In paid-in capital. Uses of Assets Approximately seven dollars of every eight dollars of increases in life insurance company assets during the 1950*8 represented increases in holdings of mortgage loans and bonds and stocks, combined. This proportion of total increases remained relatively constant from year to year, throughout the ten-year period. At the same time, how ever, there were frequent shifts in emphasis between these two types of investments. Increases in holdings of mortgage loans.--Of the $50 billions increase in assets of life insurance companies operating in California, approximately $24.5 billions represented increases in holdings of mortgage loans. Stated as a percentage, this $24.5 billions constituted 49 per cent of the total. The greater relative Importance of increases in mortgage loan holdings is reflected in the changing structures of Investment portfolios from Decem ber 31, 1949 to December 31* 1959. As of the former date, one-fifth of the assets of the companies operating In California were In the form of mortgage loans. However, by December 31, 1959 this proportion had increased to one-third. 123 As to the year-to-year increases in assets, mort gage loan holdings reached peaks in relative Importance during 1951 and 1956, and low points during 1953 and 1958. Increases In holdings of bonds and stocks.— The $19.2 billions increase in the holdings of bonds and stocks accounted for 38*3 per cent of the ten-year increase in the total assets of life insurance companies operating in California. In spite of the increase, however, bonds and stocks made up a smaller percentage of the portfolios of these companies at the end of the decade than they had as of December 31, 19^9. As of this earlier date, seven- tenths of their assets were in the form of bonds and stocks, but this proportion had decreased to Just a little over one-half, by December 31, 1959- Some evidence that bonds and stocks were alternative investments to mortgage loans may be determined from an examination of the year-to-year variations in relative importance of these two types of investments. As measured by the proportion of total Increases in assets which were represented by bonds and stocks, these two types of secur ities were at peaks in importance during 1953 and 1958, and at low points In Importance during 1951 and 1956. On the other hand, the trends were reversed, with regard to Increases In holdings of mortgage loans. As was mentioned above, additions to mortgage loan holdings reached peaks 124 In Importance during 1951 and 1956, and low points during 1953 and 1958. Increases in all other assets.— The $6.3 billions increase in all other assets during the 1950*3 constituted 12.7 per cent of the ten-year increase in total assets held by life insurance companies operating in California. And, as has been implied in the discussions above, this percentage was relatively consistent from year to year during mo3t of the ten-year period. IV. COMMERCIAL BANKS Commercial banks ranked below the other two major institutional lenders in regard to increases in holdings of Los Angeles Metropolitan Area mortgage loans during the 1950's. However, these banks were still extremely impor tant participants in the Los Angeles market, and the volume of their mortgage holdings remained approximately two-thirds that of the life insurance companies, throughout the period. As a result of the existence in California of large branch banking systems, operating over wide areas, it is difficult to determine with precision the total commercial bank resources which were available in any one metropolitan area. However, from the Federal Reserve publications of 125 bank deposits classified by counties,18 It is possible to determine at least periodically the volumes of deposits which were held by banks in various Standard Metropolitan Areas. As of December 30* 1950, the total deposits in the two-county Los Angeles area amounted to $5.3 billions, which represented 38-8 per cent of the total commercial bank deposits in the State of California. As of June 30, I960, Los Angeles area deposits had increased to $9.1 billions, and by this date such deposits constituted 40.3 per cent of the total for the state. In terms of growth, the $9.1 billions of deposits outstanding in mid-i960 was a little over two-thirds greater than 3uch deposits had been as of the end of 1950. Time deposits, when consid ered in terms of a percentage of total deposits, were of less importance in the Los Angeles area than for the State of California, as a whole. Business and personal time deposits made up approximately 34 per cent of total deposits in the Los Angeles Metropolitan area, but the corresponding percentage for California was approximately 40 per cent. As for the geographical distribution of time deposits, those placed in Los Angeles Metropolitan Area banks constituted 34 per cent of the total deposited in all California banks. As would be anticipated, in l8Distrlbutlon of Bank Deposits by Counties, op. clt. 126 light of the relationship traditionally existing between time deposits and mortgage lending, the mortgage loan holdings of commercial banks in the Los Angeles Metropoli tan Area also made up approximately 3^ per* cent of the mortgage loan holdings of commercial banks in the state. Since reliable statistics concerning the resources of all commercial banks in the State of California are readily available, whereas the corresponding data for the Los Angeles Metropolitan Area must be estimated, it is convenient to utilize such California information as a background for a further discussion of resources available in the Los Angeles Area. At such times that statistics for California may vary significantly from estimates made for the Los Angeles Metropolitan Area, supplementary information for the latter area will be provided. The California statistics for the following discus sion are readily available in the Annua1 Reports of the Federal Deposit Insurance Corporation,^9 and the semi annual Reports of Assets, Liabilities, and Capital Accounts of Commercial and Mutual Savings Banks,g0 also published l^These reports, which include year-end statistical data classified by states, are submitted each year to the U. S. Congress, by the Federal Deposit Insurance Corpora tion . 2°Reports 33 through 53 provide semi-annual statis tical data, classified by states, for the June and December F.D.I.C. call dates, from December, 19^9 through December, 1959. 127 by the Federal Deposit Insurance Corporation. However, statistics for the Los Angeles Metropolitan Area have been estimated with the use of Information obtained on a confidential bals from major commercial banks operating in that geographical area.2- 1 - This information was supple mented by, and also verified by, the Federal Reserve sta tistics of bank deposits by counties. Growth During the 1950'a The characteristics of growth of commercial bank resources can be described in several ways. First, the number of banking offices, including branch offices, increased In California by 44 per cent during the 1950's; however, the total number of banking firms decreased by 44 per cent. A little over one-third of the banking offices were located in the Los Angeles Metropolitan Area. Secondly, the assets of California banks increased at an annual rate of approximately 8.2 per cent, and the assets of banking offices in the Los Angeles Metropolitan Area increased at an annual rate of approximately 9.0 per cent, during the ten-year period. And, thirdly, five leading banking firms held approximately 86 per cent of the 21included in the survey were banking firms whose combined holdings of Los Angeles area mortgage loans varied between 86 per cent and 91 per cent of total holding of such loans by all commercial banks, during the 1950's. 128 Los Angeles Metropolitan Area mortgage loans held by all commercial banks, during the early 1950's; and, by December 31, 1959, this percentage had Increased to 91 per cent. Number of firms and offices.— In the State of Cali fornia, there was an Increase from 1,155 to 1,671 in the number of banking offices during the period from Decem ber 31, 1949 to December 31, 1959. However, there occurred during the same period a decrease in the number of banking firms from 206 to 115. This 44 per cent decrease in the number of firms, in spite of the 44 per cent Increase in the number of banking offices, can be attributed primarily to the merger movement which was taking place In the commercial banking Industry. Of the 115 firms operating in California In 1959, 41 firms, or 35.7 per cent of the total, were operating In the Los Angeles Metropolitan Area. Assets.--The average annual growth in the assets of commercial banks in California during the 1950's was approximately 8.2 per cent. As a result of an abnormally high volume of assets held by these banks as of Decem ber 31, 1959, the $26.1 billions of assets held as of that date would indicate an 84.6 per cent growth for the ten years commencing December 31, 1949. During the first six months of I960, though, there was a decrease of $.6 129 billions in the assets held by California commercial banks. As a result, the alternative use of June 30, i960 as a terminal date would Indicate a growth of only 78.7 per cent for the ten years commencing June 30, 1950. On a year-by-year basis, however, the growth rate approximated an average of 8.2 per cent per year. As contrasted with this average of 8.2 per cent annual growth in volume of assets held by California banks, the assets held by those banking offices operating In the Los Angeles Metropolitan Area increased at the rate of approximately 9.0 per cent. Concentration of mortgage holdings.— Prom Informa tion furnished by major banking firms, It nay be estimated that of the approximate $1 billions of Los Angeles Metro politan Area mortgage loans held by commercial banks at the end of 1952, 86.4 per cent was held by the five largest banking firms. By the end of 1958# the holdings of the five firms were slightly in excess of $1.4 billions, and this amount constituted 90.8 per cent of the total of $1.6 billions of Los Angeles Metropolitan Area mortgage loans held by all commercial banks. Since there were few mergers of consequence during 1959# it seems likely that this percentage increased only to approximately 91 per cent by December 31# 1959- Thus, the data would indicate that five firms held approximately 86 per cent of the 130 bank-held mortgage loans In the Los Angeles Metropolitan Area during the early yearB of the 1950's, and that this percentage had Increased to approximately 91 per cent by the end of the decade. Sources of Increases In Assets Increases In deposits accounted for approximately 90 per cent of the total Increase In assets of commercial banks, both In the Los Angeles Metropolitan Area, and In the State of California as a whole. The remainder of the increase In assets can be attributed to Increases In other liabilities, and Increases In equity funds. The only major dissimilarity between the Los Angeles area and the State of California, in regard to sources of bank assets, was related to the slightly greater Importance of demand deposits, as related to time deposits, in the Los Angeles Metropolitan Area. There fore, it is accurate, as well as convenient, to utilize the more accessible California statistics as an overall background for a general discussion of the sources of assets. When necessary, supplementary information concern ing the greater relative importance of demand deposits in the Los Angeles area is provided. As reported by the Federal Deposit Insurance Corporation, the assets of all commercial banks In California amounted to $14.1 billions as of December 31, 19^9, and had increased by $11.9 131 billions to slightly over $26 billions as of December 31, 1959. Increases In demand deposits.— For the State of California, the $5.6 billions Increase In demand deposits during the 1950's accounted for 47.0 per cent of the total increase In commercial bank assets. However, estimates made from compilations of data furnished by major banking firms Indicate that the corresponding percentage in the Los Angeles Metropolitan Area was 52.6 per cent during this same period. Increases In time deposits.— Of the ten-year Increase In assets of California commercial banks, $5.0 billions can be attributed to Increases in time deposits. This amount represented 42.2 per cent of the total increase in assets of these banks. From data accumulated for banks operating in the Los Angeles Metropolitan Area, it is estimated that increases in such deposits accounted for only 38.1 per cent of the additions to bank assets in that area. Increases In other liabilities.— For the State of California, the $4 billions increase in other liabilities accounted for approximately 3.5 per cent of the total increase In commercial bank assets during the ten-year period. For the Los Angeles Metropolitan Area commercial banks, these other liabilities were even slightly less 132 Important sources of assets. Increases In equity.— The $.9 billions increase in combined capital stock, surplus, and undivided profits represented 7.3 per cent of the total increase in Cali fornia commercial bank assets during the 1950‘s. The corresponding percentage for the Los Angeles Metropolitan Area was almost exactly the same. U3es of Assets Considerable similarity existed between banks in the Los Angeles Metropolitan Area and banks In all of California, in regard to the distribution of their addi tional resources among various categories of assets. However, as might be anticipated from the slightly lesser importance of time deposits in the Los Angeles area, increases in mortgage holdings were in turn slightly less important as investment outlets for the Increased resources of banks In that area. Increases in cash and U. S. government securities. Increases in these liquid assets, amounting to $1.9 billions during the 1950*s, represented 15.9 per cent of the total Increase In assets of California banks during the ten-year period. Similarly, in the Los Angeles Metropolitan Area, increases in liquid assets accounted for 17.1 per cent of total increases. 133 Increases in holdings of mortgage loans.— For com mercial banks in California, the $2.8 billions increase in holdings of mortgage loans accounted for 23.9 per cent of the total Increase in assets. However, there is indication from the data received from major banking firms that increases in mortgage loans made up only 21.1 per cent of the total Increase in bank assets, in the Los Angeles Metropolitan Area. Increases In holdings of other loans and discounts. --The ten-year growth of $5.7 billions in non-mortgage loans and discounts constituted 48.1 per cent of the total increase in California banks' assets during the 1950's. A considerable amount of variation existed from year to year in the degree of importance of non-mortgage loans and discounts. Particularly noteworthy is the fact that there were actually decreases in such holdings during 1954 and 1958. However, during these same two years, there were very substantial increases in the holdings of government securities. And, moreover, there were many other less notable shifts between investments in non-mortgage loans and purchases of government securities, during the 1950's. In contrast, the annual increases in mortgage loans out standing were relatively consistent from year to year. The existence of such a combination of circumstances would seem to indicate that non-mortgage loans, rather than 134 mortgage loans, were alternative Investments to government securities, at such times that variations occurred in the money market. An analysis of the investments of major banking firms indicates the greater relative importance of non mortgage loans and discounts in the Los Angeles area. Whereas increases in such investments represented 48.1 per cent of total increases in bank assets in California, the corresponding percentage for banking offices in the Los Angeles Metropolitan Area was approximately 51 per cent. Increases in other assets.— The $1.5 billions increase in all other assets of California commercial banks represented 12.1 per cent of the total increase in assets, during the 1950's. Similarly, the increase in all other assets in the Los Angeles Metropolitan Area constituted approximately 10.8 per cent of the total Increase In bank assets. V. SUMMARY Even though the present study deals primarily with mortgage lending during 1953-54 and 1957-58, It has been necessary to examine a few basic characteristics of the financial resources available In the Los Angeles area during all of the 1950's, in order that the problems related to the two mentioned periods may be placed in 135 their proper perspective. Almost any study of the Los Angeles Metropolitan Area institutional mortgage market nrust take into consid eration the fact that a considerable amount of the mortgage lending taking place in that area involves the use of funds from other parts of the state and nation. As has been pointed out in the overview section of the present chapter, a very substantial portion of the total Los Angeles Metropolitan Area mortgage loans held by institu tions during the 1950's were held by firms which had principal offices outside of the area. However, it has also been stated above that the portion of the total institutional holdings which was held by outside firms decreased substantially during the ten-year period. By the end of the decade, approximately one dollar of every three dollars of institutional investments in Los Angeles area mortgage loans still could be found, however, in the portfolios of firms which had principal offices outside that area. In terms of the origins of savings underlying institutional mortgage loan holdings, it has been pointed out that the importance of imported mortgage capital would not seem to be quite so great. However, there occurred during the 1950's a gradual increase in the percentage of institutional lending In the Los Angeles Metropolitan Area 136 which could be traced to savings accumulated by those located in other parts of the state and nation. By the end of the 1950's almost one dollar of every four dollars of institutional holdings of Los Angeles area mortgage loans could be attributed to savings originating in areas other than the Los Angeles Metropolitan Area. The spectacular growth in the volume of savings and loan association resources available In the Los Angeles Metropolitan Area mortgage market became clearly apparent in most of the discussions of the present chapter. Par ticularly, from an analysis of the sources and uses of increases In institutional assets, at least two salient facts emerged which pointed to, and explained in part, the greater relative growth in Importance of these savings and loan associations during the 1950's. First, the basic factor underlying the growing influence of these associations in the Los Angeles Metro politan Area mortgage market was the significantly higher rate of growth in total asset holdings of the savings and loan associations. Whereas their assets in the Los Angeles Metropolitan Area increased by 661 per cent during the 1950's, the assets of life insurance companies authorized to operate in California increased by 91 per cent, and California commercial banks' assets increased by approxi mately 82 per cent. 137 And, secondly, principally as a result of the nature of savings and loan associations' basic economic functions, these associations placed a much larger portion of their Increased assets in mortgage loans than did the other two institutional lenders. Whereas savings and loan associations in the Los Angeles Metropolitan Area Invested 83.5 per cent of their increases in assets in mortgage loans, the corresponding percentage of total asset increases which were invested by life Insurance companies in mortgage loans was 49.0 per cent and 23.9 per cent in the case of commercial banks. In spite of the more rapid growth of savings and loan associations, life Insurance companies and commercial banks were still very important participants in the Los Angeles Metropolitan Area mortgage market during the 1990's. In subsequent chapters, a detailed analysis will be made of the structure of the Los AngeleB Metropolitan Area institutional mortgage market, in terms of the per centage share of Buch market held by each of these three institutional lenders, and also in terms of the specific types of mortgage loans held by each. CHAPTER VI STRUCTURES OP THE LOS ANGELES AND NATIONAL MORTGAGE MARKETS This section has as its primary objective the establishing of the fact that in both markets a structural change had taken place between December 31» 1952 and December 31, 1956. Secondary emphasis is placed on comparisons of structural changes in the Los Angeles Metropolitan Area with such changes in the United States as a whole. In addition, brief reference will be made to the possibilities of predicting local market structure and also the distri bution of funds among specific types of loans, by means of extending to future periods the historical relationships between local and national mortgage market conditions. The questions which should be answered in this sec tion may be listed in order of their importance. First, what structural changes took place in the Los Angeles Metropolitan Area mortgage market, and in the national mortgage market, between December 31* 1952 and December 31* 1956? Second, how did structural changes in this local market compare with those which took place at the national 138 139 level? Third, with the use of only national statistics for 1956 could the structure and the mortgage classifica tion composition of the Los Angeles Metropolitan Area market have been estimated as of the end of 1956, by means of extending to 1956 the relationship which existed between national and local statistics as of the end of 1952? I. DEFINITIONS A survey of literature discussing mortgage market structures indicates a wide variety of meanings given to the word "structure," The present study chooses not to use at least one of these deflnltlons--that which describes the structure of a market In terms of the volume of mortgage recordings. This is for the reason that quarter-to-quarter variations in mortgage loans made will here be referred to as being one of two measures of chang ing "lending patterns" rather than "mortgage structure." An attempt will be made to determine whether or not such quarterly and semi-annual lending patterns can be related to existing market structures, as the term "market struc tures" Is used In the present study. Another term, "mort gage classification composition," will also be used, even though only for supplemental background purposes. Mortgage Market Structure For purposes of all of the present; study, mortgage market structure has been defined In terms of the type of Institution holding mortgage loans which are secured by properties located within the market area • And, since the study deals only with three types of institutions, market structure will always refer to the relative proportions of the total institutionally-held mortgage loans which are held by savings and loan associations 9 life Insurance companies and commercial banks, considered, separately, as of a specific date. Mortgage Classification Composition of the Market For purposes of providing additional background information, brief references are made in the present chapter to the relative importance of each of the three major classifications of mortgage loans. In the Los Angeles Metropolitan Area market. The term mortgage classification composition refers to the relative percentages of the total institutionally-held mortgage loans which are in the forms of FHA, VA and conventional loans, as of a specified date. The changes in composition which occurred were not com pletely attributable to the changes which occurred in market structure. However, the relationships between changes in structure and changes in composition were close 141 enough to warrant an Inclusion in the present chapter of a brief discussion of these latter-mentioned changes. II. CHANGES IN STRUCTURES AND COMPOSITIONS Los Angeles Metropolitan Area Mortgage market structures.— As may be noted from Table XI, the structural change occurring between December 31# 1952 and December 31# 1956 can be character ized in general terms as being a change from a condition of relatively equal distribution of institutional holdings to a condition in which there was at least limited domina tion of the mortgage market by savings and loan associa tions. More specifically, savings and loan associations held a portion of the mortgage loans outstanding as of the end of 1956 which was 10.3 per cent (measured in absolute terms) higher than they had held as of the end of 1952. In other words, based on the 36.0 per cent which savings and loan associations had held at December 31, 1952, the portion of the market held by these institutions increased by more than one-fourth, during the subsequent four years, to become the amount of 46.3 per cent as of December 31# 1956. It is also significant that the offsetting loss in share of the market to savings and loan associations was divided relatively equally between life insurance 142 companies and commercial banks. The share of the market held by life insurance companies decreased in absolute terms by 4.9 per cent during these four years. This amount constituted about one-half of the 10.3 per cent gain registered by savings and loan associations. As would be self-evident from the definition of the term "institutional" used in this study, the remaining 5.4 per cent gain (as measured in absolute terms) was offset by a loss in that amount by commercial banks. Thus, the shares of the Los Angeles Metropolitan Area mortgage market held by savings and loan associations, life insurance companies and commercial banks had changed from a 36-37-27 ratio, respectively, to a 46-32-21, between December 31* 1952 and December 31* 1956. With these structures as a background, mortgage lending patterns of these institutions will in later chapters be examined for the two-year period subsequent to December 31, 1952 and the two-year period subsequent to December 31* 1956. Mortgage classification composition.--From Table XI and the year-end information contained In Table IV, it is apparent that the most distinct changes in the relative Importance of each of the three specific classifications of mortgages were in the areas of conventional and FHA mortgage loans outstanding. As of December 31* 1952, conventional mortgage loans made up 58.0 per cent of the 143 Institutional non-farm mortgage loans outstanding; however, this had Increased to 6 2 . 3 per cent a s of December 3 1 , 1956. And, interestingly, all of this Increase was offset by a decline In Importance of FHA loans from 19.2 per cent of the market to 14.2 per cent of the market during the four years. The other type of loans, VA mortgage loans, remained virtually stationary as to relative Importance In the market. There seems little doubt that the greater relative growth of savings and loan associations and their continu ing lack of Interest In FHA loans were the primary causes for the declining Importance of aggregate FHA mortgage loans outstanding In the Los Angeles Metropolitan Area mortgage market between 1952 and 1956. This causal rela tionship is even more substantiated by the fact that com mercial banks were Increasing the proportion of their portfolios Invested in FHA loans, but the effect of such Increasing favoritism for FHA loans was offset by the increasing portion of the total market held by savings and loan associations. Moreover, even though the importance of conventional loans as a portion of savings and loan associations' total portfolio holdings was declining slightly, these associations' high rate of growth and per sisting favoritism for conventional loans are clearly reflected in the overall growth in Importance of aggregate 144 conventional lending In the Institutional market. Another example of the significant effects on the market of slight changes in the preferences of savings and loan associations for specific types of mortgage loans is demonstrated in the case of VA loan holdings. In spite of a decline from 29-7 per cent to 21.7 per cent in the pro portion of commercial bank mortgage loan portfolios which were in the form of VA loans, this decline in favoritism was to a great extent offset by a slight increase in the desire of savings and loan associations to hold this latter type of loans. (As will be apparent from the sections of this study which deal with lending patterns, the increases in holdings of VA mortgage loans by savings and loan asso ciations and life insurance companies occurred during 1955-56 rather than during the period of 1953-5^.) Thus, Los Angeles Metropolitan Area FHA, VA, and conventional loans outstanding had changed from a 19-23-58 ratio, respectively, as of the end of 1952, to a 14-24-62 ratio by the end of 1956. United States Mortgage market structures.— From Table XI, it may be seen that the changes in relative importance of the three types of institutions In the national market were in the same direction as those In the Los Angeles Metropolitan 145 Area, but that the nagnltudea of the changes were consid erably less at the national level. Prom a position of relatively equal holdings as of December 31, 1952, there was a definite trend toward Increasing Importance of savings and loan associations by December 31, 1956. How ever, at this latter date these associations' share still could not be said to have had any substantial degree of domination of the national Institutional market. Yet, the Increase In the share of the national mar ket held by savings and loan associations from 34.8 per cent to 40.8 per cent can be termed very significant, for so short a period in time. For the United States as a whole, both the Insurance companies and commercial banks to some degree shared In what loss of the market there was to the savings and loan associations. However, the share lost by commercial banks was slightly greater than the share of the market lost by life Insurance companies. To summarize, the shares of the United States mort gage market held by savings and loan associations, life insurance companies and commercial banks were In a ratio of approximately 35-37-28, respectively, as of December 31, 1952. However, referring to these institutions in the same order, the ratio had changed to 41-35-24 by Decem ber 31, 1956. Later discussions will be concerned with whether or not the dissimilarities between 1953-54 146 mortgage lending patterns and 1957-58 mortgage lending patterns can In part be explained by the fact that the December 31, 1956 Institutional structure of the national market varied from the structure which had. existed as of December 31, 1952. Mortgage classification composition. As to the composition of the national Institutional mortgage market, In terms of specific types of mortgage loans outstanding, there was a shift in the relative Importance of each of the three types of mortgage loans. Of primary signifi cance was the decreasing Importance of FHA-type loans outstanding. The decrease In Importance or this type loan from 19.5 per cent of the market to 14.9 per cent was accompanied by increases in relative importance of both of the other types of loans. Thus the impact was not so great on either of the other types, because of this sharing of the overall increase between VA and conventional type loans. VA mortgage loans increased In Importance slightly, to become Just over 20 per cent of the roarlcet. Conven tional mortgage loans Increased more significantly, to become almost 65 per cent of the market. To summarize, the one striking change in the mort gage classification composition of the national mortgage market between December 31, 1952 and December 31, 1956 was the diminishing importance of FHA mortgage loans 147 outstanding. Less striking, but still of some signifi cance, were the moderate Increases in importance of the other two types of loans. III. COMPARISONS BETWEEN MORTGAGE MARKETS It is of value at this point to compare in greater detail the structure of the Los Angeles Metropolitan Area and the structure of the mortgage market of the United States. Such a comparison forms a necessary background for later analyses of the comparative effects of local and national structural changes on period-to-perlod lending patterns in the respective geographical areas. Such a comparison of mortgage market structures also provides statistical data for such supplementary uses as measuring the degree of accuracy which would have been attained in estimating local market structures and composi tions by means of merely applying to the readily available national statistics for 1956 the same relationships which had existed between the local and national markets in 1952. General Comparisons Even though substantial structural changes occurred between December 31, 1952 and December 31, 1956 with regard to both mortgage markets, the changes which occurred In the 148 Los Angeles Metropolitan Area were more extensive than those which occurred at the national level. In addition, the relationship between the two markets with regard to Institutional structures was different from the relation ship with regard to mortgage classification compositions. Basically, the Institutional structures of the Los Angeles Metropolitan Area market and the national market differed from each other more at the end of 1956 than they had at the end of 1952. However, the mortgage classification compositions of the two areas showed more similarities between them as of December 31, 1956 than they had shown as of December 31# 1952. Mortgage market structures.— In both markets, the significant change in Institutional holdings of mortgage loans came with the outstanding growth of savings and loan associations. However, in the Los Angeles Metropolitan Area, the share of the market held by these associations Increased to approximately 46.3 per cent of the area market. On the national level, however, these associa tions' share of that market Increased a little over one- half as rapidly, and reached only to a level of 40.8 per cent of the market. The offsetting loss of shares of the market to the savings and loan associations was divided between life Insurance companies and commercial banks similarly in both markets, with the exception of a very 149 slight amount greater loss of the market by commercial banks (than by life Insurance companies) at the national level. And, since the market structures of both areas had been very similar as of December 31, 1952, this tendency toward greater relative growth of savings and loan associ ations in the Los Angeles Metropolitan Area had by the end of 1956 created somewhat of a dissimilarity between the areas as to comparative institutional structures. Prom relatively similar shares of institutional holdings at the end of 1952, by the end of 1956 the relative holdings of savings and loan associations, life Insurance companies and commercial banks had changed to a 46-32-21 ratio, respectively, in the Los Angeles Metropolitan Area, and a 41-35-25 ratio, respectively, for the United States as a whole. Mortgage classification compositions.— Contrary to the December 31, 1952 resemblance between the structures of the Los Angeles Metropolitan Area and the United States mortgage markets, the mortgage classification compositions of these two markets possessed as of that date a moderate amount of dissimilarity between them. As may be noted in Tables TV and VIII, this dissimilarity was the result of the greater relative importance of VA loans and the lesser relative importance of conventional loans in the 150 Lob Angeles Metropolitan Area market, as compared with the national market. As would be anticipated, in light of the traditional preference for conventional loans among savings and loan associations and the higher rate of growth of these associations in the Los Angeles Metropolitan Area, the mortgage classification composition of the local market rapidly approached that of the national market by the end of 1956. However, the increasing importance of conven tional loans could not be attributed to savings and loan associations alone. Actually, as may be noted in Table XI, there was a slight decline in importance of conventional loans in Los Angeles Metropolitan Area savings and loan association portfolios, from the amount of 83.0 per cent to 79.7 per cent. At the same time, there was an increase in the importance of conventional mortgage loans in the portfolios of life insurance companies, from 53.2 per cent to 57. * * per cent. As a result of greater relative importance of savings and loan associations, however, the shift to con ventional loans in the mortgage classification composition of the market was influenced considerably by the growth in these associations' lending activities. Numerical Comparisons It is advantageous at this point to determine by 151 ratio analysis a moire specific relationship between struc tural changes In the two mortgage markets. Furthermore, It Is Interesting to speculate as to whether or not It is possible to generalize concerning local mortgage market structures and compositions, with the use of the abundant amount of national mortgage market Information which is available monthly throughout each year. Hence, in addition to making rather detailed comparisons between the Lob Angeles Metropolitan Area market and the national market in this section, reference will be made to the possibility of estimating local mortgage market structures and composi tions from readily available national statistics. Institutional shares of the markets.--Column 1 of Table XII compares by means of ratios (stated as percent ages) the relative importance of each of the three type3 of institutions in the local and national markets. For example the 103.4 per cent for savings and loan associa tions indicates that the 36.0 per cent of the Los Angeles Metropolitan Area market held by these associations as of December 31, 1952 was 103.4 per cent of the 34.8 per cent of the national market held by such associations as of the same date. Column 5 of Table XII indicates the results which would be obtained in estimating the December 31, 1956 institutional structure of the Los Angeles Metropolitan 152 Area market by such means as applying the ratios for 1952 to the national market statistics for December 31, 1956. As may be seen, the estimate of the distribution of mort gage loans among Institutional lenders does not In any way resemble the actual distribution of such loans In the Los Angeles Metropolitan Area market, as indicated in Table XI. Instead of a continuation of the close to 100 per cent relationship existing as of December 31, 1952 between individual institutional shares of the Los Angeles Metro politan Area market and corresponding Institutional shares of the national market, there were abrupt changes in such ratios during the four years following 1952. For example, the Los Angeles Metropolitan Area savings and loan associ ations' share of that area's institutional mortgage market had increased to such a degree that the new local market to national market ratio had become 113.5 by December 31, 1956. As for the other two types of institutions, the 100.5 per cent relationship found for life insurance com panies in 1952 had fallen to 93.1 per cent, and the 95.0 per cent found for commercial banks In 1952 had fallen to 87.3 per cent, by the end of 1956. Portfolio distributions among types of loans.--As may be noted from the choice of data for Table XII, changes In the importance of conventional loan holdings 153 has been considered for present purposes to be the most significant Indication of changes in the compositions of Individual Institutional mortgage portfolios. However, similar results are obtained when FHA and VA mortgage loans are analyzed in a similar manner. Column 6 of Table XII indicates the results which are obtained in estimating the importance of conventional loans to each of the three institutional lenders in the Los Angeles Metropolitan Area market, when 1952 local market to national market ratios are applied to the national statistics for December 31# 1956. As was the case with market structures, poor results are obtained from this method of estimating. For example the 83-7 per cent share of savings and loan association portfolios which would be estimated to be in the form of conventional loans is not representative of the actual percentage of 79.7 per cent shown in Table XI. Furthermore, similar inconsistencies between estimated and actual percentages for life insurance companies and commercial banks may also be noted when the remaining information in column 6 of Table XII is compared with the actual data appearing in Table XI for all institutions. Similar results are obtained when an attempt is made to estimate the importance of FHA and VA loans in the portfolios of institutions lending in the Los Angeles 154 Metropolitan Area. The poorest results are to be obtained in estimating the importance of FHA loans to commercial banks lending in the Los Angeles Metropolitan Area. This is for the reason that such loans were Increasing substan tially in importance in the portfolios of Los Angeles Metropolitan Area banks, but at the same time were decreas ing slightly in importance in the portfolios of commercial banks in the United States as a whole. Mortgage classification compositions.--Mortgage market compositions, defined in terms of the relative proportions of the aggregate Institutional market made up of the specific types of mortgage loans can be shown to be functions of (l) the shares of the markets held by each of the institutions and (2) the relative importance of the specific types of loans in the portfolios of each of the three institutions. Thus, with the use of the estimated data found in columns 5 and 6 of Table XII, it is possible to compute a weighted average estimate of the importance of conventional loans to the three institutions combined. This procedure and its results, the 61.4 per cent estimate of the proportion of the market in the form of conventional loans, indicates an error of less than 1 per cent from the actual percentage of 62.3 for December 31, 1956. Similar procedures in the case of FHA loans would indicate that an estimated 15*0 per cent of the Los Angeles 155 Metropolitan Area market was In the form of FHA loans as of December 31* 1956. Again the Indicated error is less than 1 per cent since FHA loans actually accounted for 14.2 per cent of the total mortgage holdings by these institutions as of that date. For VA loans, the error would be slightly over 1 per cent since the computed estimate would be 24.9 per cent and VA loans actually made up 23.5 per cent of the Institutional holdings of mortgage loans In the Los Angeles Metropolitan Area as of Decem ber 31, 1956. It may be seen that in spite of the poor success which would have been attained in estimating Institutional structures, some success would have been attained in estimating mortgage classification characteristics for the Los Angeles area, for December 31, 1956, even without obtaining details of that area for more than the one date of December 31, 1952. The same method when used for fore casting December 31, 1954 and December 31, 1953 composi tions produced results which were almost Identical to those described for December 31, 1956. Implications.— The possibility of success in esti mating market compositions is not as fruitful a development as would have been a finding that market structures for local areas might be accurately estimated from national data. The present study is oriented more nearly toward 156 market structures; and most applications to future situa tions of the findings of the present Btudy would require that accurate statistics of local market structures be known. However, for areas characterized by extraordinary rates of growth by one grouping of Institutions, or other irregularities in general growth, it would appear that there is no short-cut through national market data to a determination of the actual structure of the local market. IV. SUMMARY Summary comparisons now may be drawn between the characteristics of the two markets, as of December 31, 1952 and December 31# 1956. Los Angeles Metropolitan Area Market structure.— As for structure of the market, for the four years between these dates there was evidence of a definite increase in the holdings of savings and loan associations as related to the holdings of the other two major institutions. The offsetting loss of portions of the market was shared somewhat equally between life insur ance companies and commercial banks. Mortgage classification composition.--As for mort gage classification composition of the market, it has been pointed out that there occurred in the L03 Angeles 157 Metropolitan Area a definite trend toward Increasing Importance of conventional loans as related to the other two types of loans, and that this Increase was offset entirely by decreasing relative importance of FHA mortgage loan holdings. United States Market structure.— For the United States as a whole, the data Indicates that changes In the structure of the market were related to an Increasing Importance of savings and loan associations In the market, but that the structural changes were not bo great as those found in the Los Angeles Metropolitan Area. Mortgage classlficatlon composition.— As for changes In mortgage classification composition In the national mar ket, the increasing relative Importance of conventional- type loans was not quite so evident as that found at the local level, and also there was during the four years a small Increase in the Importance of VA loans which was not found in the Los Angeles Metropolitan Area. However, as was the case In this latter area, the decline in relative importance was limited to FHA mortgage loan holdings. Comparative Analysis The data Indicates that there was an Increasing amount of divergence developing between the structure of 158 the Los Angeles mortgage market and the structure of the national mortgage market. This mas primarily a result of the extraordinary growth of savings and loan associations in this local area. Along with the growth of these associ ations and a shifting of preferences for specific types of mortgages within all institutional portfolios, the mort gage classification compositions of the mortgage markets of the two areas were becoming more nearly similar to each other. As to the possibilities for estimating local market structures and compositions with the use of previously determined local market to national market ratios, the data indicates that only the mortgage classification composition of the Los Angeles Metropolitan Area market could have been estimated with any degree of accuracy for December 31, 1956. CHAPTER VII SAVINGS AND LOAN ASSOCIATIONS Before proceeding with discussions of composite mortgage lending trends, It Is necessary first to investi gate the specific mortgage lending patterns of the three types of Institutions, for the periods 1953-54 and 1957-58. This investigation Is primarily for the purpose of deter mining the degree of validity of the underlying assumptions of the study, as such assumptions relate to the lending decisions of individual groupings of Institutions. As has been stated previously, the present study Is to Include descriptions of mortgage lending patterns in terms of both variations In volumes of loans made, on a quarterly basis, and net additions to holdings of mortgage loans, on a Bemi-annual basis. Some of the logic underly ing the decision to utilize two means of describing pat terns appears In the overview section below. I. OVERVIEW OF THE TWO PERIODS The statistics of aggregate lending activity, for the two-year period of 1953-54 and the two-year period of 1957-58, furnish evidence of a need for examining period- to-period variations in both "loans made" and "net 159 160 increases in holdings." The differing results which way be obtained through the use of these two indicators of lending activity would seem to be explained by the fact that "payoff characteristics" (broadly defined to Include refinancing and secondary sales) of all mortgage loans are not the same. It is the contention of the present study that c comprehensive study of mortgage lending patterns still may be made, in spite of the apparently differing payoff characteristics of mortgage loans, If mortgage lending patterns are described In both manners. Variations Between Institutional Lenders The following statistics, derived from Tables I through X, indicate that there are at least two separate means of describing the degree of importance of savings and loan associations in the institutional lending market: SAVINGS AND LOAN ASSOCIATIONS* PERCENTAGE OP TOTAL INSTITUTIONAL MORTGAGE LENDING ACTIVITIES Percentage of Total Lending Gross Volume Net Additions Of Loans Made To Loan Holdings LosAngeles Metro politan Area United States 5*.* % *6.0 61.1 % 52.9 LosAngeles Metro politan Area United States 62.0 50.0 7*. 5 60.2 161 The above Information would seem to indicate that the rate of turnover of savings and loan association mort gage funds varied significantly from the other two major institutional lenders. As will be pointed out in Chapter DC, the variation between institutions existed chiefly between savings and loan associations and commercial banks. It may be noted that savings and loan associations were generally less influential in the national market than they were in the Los Angeles area market. However, the relationship of additions to loan holdings to loans made, as measured in terms of percentages of the institu tional market, was approximately the same for both mar kets . Similarities Between the Two Periods The following statistical data, derived from Tables I, V, X, and XI, Indicate that the relationship between loans made and additions to holdings remained generally constant for savings and loans associations considered separately from other institutions, during the two periods covered In the present study: 162 SAVINGS AND LOAN ASSOCIATIONS: RELATIONSHIP BETWEEN LOANS MADE AND MET ADDITIONS TO LOAN HOLDINGS Net Net Additions to Additions Loan Holdings as Loans To Loan a Percentage of Made Holdings Loans Made 1953-54 Millions Millions Los AngeleB Metro politan Area $ 1,620 $ 755 46.6 % United States 16,736 7,806 46.6 1957-58 Los Angeles Metro politan Area 2,420 1,135 46.9 United States 22,746 9,898 43.5 As Indicated In the above information, not only was there a similarity between periods for the Los Angeles Metropolitan Area market, and substantial similarity between periods for the national market, but there was also a considerable similarity between the two markets as well. Implications For purposes of analyzing lending patterns of sav ings and loan associations above, there might have been some Justification for attempting to use only one of the two types of mortgage lending indicators, since there was a quasi-constant relationship between loans made and addi tions to loan holdings. However, it was necessary to consolidate informa tion in the present study for three major groupings of 163 Institutions, and to make comparisons between these Institutional lenders. As a result, it has been necessary to take cognizance of the possibility that a divergence might exist between patterns, as such patterns are described in terms of loans made and additions to loan holdings. The decision was made in the present study to use both indicators of lending activity in order that more comprehensive treatment might be given to the subject. Moreover, the inclusion of semi-annual net additions to loan holdings was necessary in order that a distribution between FHA, VA, and conventional lending could be determined. II. MORTGAGE LOANS MADE In order that uniformity may be achieved in discus sing mortgage lending activities of the three types of Institutions included In this study, it Is necessary to define "mortgage loans made" in such a manner as to be synonymous with "mortgage loans closed" and "mortgage loans recorded." For some institutions one of these terms may be more appropriate than another; however, with the exception of the possibility of a relatively short lag between closings and recordings, there Is little difference in the meanings of the terms. It Is believed here that 164 no errors of any consequence arise from referring to all consummated mortgage loans as being "mortgage loans made." It la necessary at this point to examine in detail the data contained in Tables X and XI, and Figures 6 through 9, in order to determine whether or not saving and loan association lending during the two periods was in conformance with the underlying assumptions of the study. Mortgage Loans Made in the Los Angeles Metropolitan Area In terms of dollar volume, the pattern of quarter- to-quarter variations In loans made by savings and loan associations during 1953-54 was to some extent repeated during 1957-58 in the Lob Angeles Metropolitan Area. How ever, when these dollar volumes are transformed Into percentage shares of the total volume of mortgage loans made by the three institutions, the pattern of the period of 1957-58 differs somewhat from that of the 1953-54 period. Dollar volume of loans.--As may be observed in Table IX and Figure 6, the only significant difference between the patterns of quarter-to-quarter variations In loans made, for 1957-58 and for 1953-54, lies in the fact that the major slump in 1957 continued into the first quarter of 1958, whereas the declining activity In 1953 ended with the fourth quarter of that year. It may be 165 noted that 1957 resembled very closely Its counterpart year (1953), with a peak In the second quarter followed by diminishing activity during the remaining two quarters of the year. Then, 195S also resembled closely its counter part year (195*0, with the exception that the trough in activity extended from the previous year into the first quarter of 1958. As has been mentioned, the 1953 trough did not go beyond the fourth quarter of that year. The last three quarters of 1958, like 195^, were periods of rapidly increasing lending volume for savings and loan associations. Share of three institutions 1 mortgage loans.— If dollar volumes of savings and loan association lending in the Los Angeles Metropolitan Area are converted into shares of the institutional lending market, there is pro duced a pattern of savings and loan association lending which is considerably different during 1957-58 from the corresponding pattern for 1953-5^. Reference to Table IX and Figure 7 will bring out several of these differences. Whereas the second quarter of 1953 was stable at the same percentage as during the first quarter of the year, a definite rise to a peak had appeared during the second quarter of 1957* The latter two quarters of 1953 were periods of Increasing percentages for savings and loan associations, but the latter two quarters of 1957 were, to 166 the contrary, periods of decreasing percentages for these associations. Then, the first two quarters of 1954 indicated decreasing activity, as related to total insti tutional lending, while the first two quarters of 1958 indicated the reverse. To make 1957-58 almost entirely different from 1953-54, the last two quarters of 1958 showed decreasing activity related to the total institu tional market, even though stability prevailed during the last two quarters of 1954. Mortgage Loans Made in the United States As was the case in the Los Angeles Metropolitan Area, lending activity by savings and loan associations in the United States, when expressed in terms of dollar values, displayed in 1957-58 a set of quarter-to-quarter increases and decreases which was similar to those found for 1953-54. But, unlike the conditions in the Los Angeles area market, the national pattern of changes in savings and loan associations' share of the three institutions' loans made also showed increases and decreases in 1957-58 which were similar to those of 1953-54. Dollar volume of loans made.— It is almost impossible to conceive of closer similarity existing between the patterns of loans made in 1957-58 and loans made in 1953-54 by savings and loan associations in the national 167 market. As is indicated in Table X and Figure 8, a description of the pattern of lending in 1953-54 is almost tantamount to a description of the pattern of lending in 1957-58. During the second quarter of both 1953 and 1957, there was rapidly increasing activity followed by only a slight rise in dollar volume of loans made during the third quarter. During the fourth quarter of both 1953 and 1957, as well as the first quarter of both 1954 and 1958, lending activity by savings and loan associa tions decreased rapidly; but this was followed quickly by very rapidly rising lending volume during the second and third quarters of both 1954 and 1958. The only slight difference between the two periods was that the last quarter of 1958 showed a slight dip in activity, while the last quarter of 1954 showed stable activity. Share of three institutions * mortgage loans.— So closely did the 1957-58 pattern of variations in savings and loan associations' share of the described lending market resemble the 1953-54 pattern of such variations that little description is necessary. Reference to Table X and Figure 9 will indicate the plateau of percentages which occurred during the second and third quarters of 1953 and again was repeated in 1957; a trough which com menced with the fourth quarter of both 1953 and 1957 and lasted for two quarters in each instance; the two-quarter 168 plateau which occurred in mid-1954 and again in mid-1958; and the decreasing percentage during the fourth quarter of 195^ which was repeated in 1958. Hence, there was almost a duplication in 1957-58 of the 1953-54 pattern of changes in the share of the three institutions1 lending which was done by savings and loan associations in the United States. III. SEMI-ANNUAL INCREASES IN DOLLAR VOLUME HOLDINGS The discussion of this section will be based entirely upon Tables I and V, and Figures 11, 13, 16, 18, 23 and 24. Since these detailed data are available for ready reference, the emphasis here may be placed on the pattern of high points, low points, and trends of the actual Increases, rather than on the detailed Increases and decreases themselves. As has been the procedure thus far, the Los Angeles Metropolitan Area will be discussed separately from the United States, as a whole. Lob Angeles Metropolitan Area In Chapter VI It was noted that between December 31, 1952 and December 31* 1956, the savings and loan associa tions' share of the three institutions' Los Angeles Metro politan Area mortgage holdings Increased from 36.0 per cent to 46.3 P©** cent. From Table I It may be noted that 169 these associations' holdings Increased by 56.4 per cent during 1953-54, based on December 31, 1952, and by 36.5 per cent during 1957-58, baBed on December 31, 1956. It is necessary now to discuss the period-to-period varia tions In the levels of Increases within the period 1953-54 and the period 1957-58. Lending in the Los Angeles Metropolitan Area was predominantly in the form of conventional mortgage loans. However, in addition to increases in these loans, there were also substantial increases in the dollar volume of VA loan holdings, during the two periods under discussion. And even though changes in FHA holdings were insignificant, as related to the other two types of loans, these FHA holdings were commencing during the latter period to become relatively important in the institutional market, as a result of the tremendous total growth of savings and loan associations in the area. Increases in total holdings of mortgage loans.--The general trend as to variations In the levels of semi-annual increases during 1957-58 did not resemble to any great degree the pattern of such increases during 1953-54, when total mortgage loan holdings are considered. The dissim ilarities which appeared were not in the direction of changes in the levels of Increases, but rather in the degree of Increase, and particularly during one semi-annual 170 period. The Increase during the first half of 1957 was substantially greater than during the first half of 1953. Hence the fall to a lower level during the second half of 1957 was much more abrupt than the fall to a lower level during the second half of 1953. However, there was also a slight fall during the second half-year of the earlier period, and in both cases a trough followed. The slight increase In early 1958 resembled closely the increase in early 195^. During the second half of 1958, Just as was true in the counterpart year (195^), the increase in holdings rose to a much higher level than was found during the earlier part of the year; however, the increase was more abrupt in 1958. Increases in holdings of FHA mortgage loans.— Sav ings and loan association holdings of FHA loans actually decreased slightly during all four Beml-annual periods of 1953-5^, and then increased slightly during all four periods of 1957-58. However, the volumes of these decreases and increases were so low that It may be said that changes in FHA loan holdings during both of the two- year periods were insignificant for purposes of the present study. Increases in holdings of VA mortgage loans.— There was some resemblance between the pattern of VA loan Increases during 1957-58 and the corresponding pattern for 171 1953-5^. The principle exception to this occurred during the first half-year of each of the two periods. Whereas 1957 increases In VA loan holdings were already at a high level during the first half of the year, they were at a relatively low level during the first half of 1953. Dur ing the second half of 1957* the level of Increases had started to fall; but during the second half of 1953, the level was found to be substantially above that of the first half of the year. Prow that point on, though, there was similarity shown between the two periods, with a low point reached during the first half of 1958 which was similar to that of 195^• And in both cases these points were followed by stabilization at this lower level of increases which continued through the last semi-annual period of both 1958 and 195^. Increases in holdings of FHA and VA mortgage loans combined.--Since the volumes of changes in PHA holdings were so low as to be relatively insignificant during both periods, It can be assumed that the comparison of patterns discussed above for VA holdings is likewise applicable to patterns of changes in guaranteed-insured mortgage loans. By way of review, there was similarity between 1953-5^ and 1957-58 insofar as the last three of each of the four semi annual periods were concerned, but dissimilarity existed between the first six months of 1953 and the first six 172 months of 1957. Increases in holdings of conventional mortgage loans.— As to dollar volume of increases in conventional loan holdings, those of the 1957-58 period were consider ably higher than those of the 1953-5^ period. However, with the exception of the first half of 1957, the general pattern of changing levels of semi-annual increases In 1957-58 resembled somewhat the corresponding pattern which developed during 1953-5^. A very abrupt fall In the level of Increases in early 1957 and a moderate fall during early 1953 both culminated with low points being reached during the second half of each of these years. Thereafter, there was a steep rise In the levels of Increases during each of the two-year periods, with a steep rise lasting throughout 1958 just as it had through out 195^ • Summary.--Since the only signfleant changes In dollar volume holdings of mortgage loans by savings and loan associations occurred with conventional and VA loans, a summary can be relatively simple. The rises and fallB occurring in the levels of Increases in total loan holdings reflected to a considerable extent the changes in the all- important conventional segment of savings and loan associ ation portfolios. However, there were a few relatively minor exceptions. 173 The rising level of Increases In VA holdings during the second half of 1953 helped offset the falling level of Increases of conventional loans during that sane period. Thus the level of Increases of total holdings did not fall so low as it would have in the absence of VA holdings Increases. This phenomenon was not repeated in 1957. In both 195*1 and 1958, the low point in the level of Increases of VA loans was reached during the first six months of each year rather than during the immediately preceding semi-annual period, as was the latter case with conven tional loan increases. This one period lag In the case of VA loans caused the rising level of Increases in total loan holdings to be less abrupt than it otherwise would have been during the first half of 1958, and in a similar manner, during the first half of 195* 1. Fundamentally, then, there was a lack of resemblance between 1953-5*1 and 1957-58 as to patterns of increases in Los Angeles Metropolitan Area mortgage loan holdings of savings and loan associations; however, this was primarily for the reason that the Increase In holdings during early 1957 was much higher than during early 1953. United States At the national level, the pattern of increases in total mortgage loan holdings during 1957-58 was almost 174 identical to the pattern which had developed during 1953- 54. However, several variations occurred with regard to changing levels of increases in holdings of the specific types of mortgage loans. Hence, at the national level it is even more important than at the local level to examine the patterns of increases for all categories of loans. Increases In total holdings of mortgage loans. Fundamentally, the pattern of changing levels of increases in total mortgage holdings of savings and loans associa tions at the national level was the same in 1957-58 as the pattern had been during 1953-54. A temporary plateau was reached in the level of Increases during 1957* Just as was true of 1953* with stabilized Increases prevailing during the first and second semi-annual periods of these years. This stabilization was followed by two periods of rapidly and steadily rising levels of Increases during 1958 which resembled the steadily rising levels of 1954. Increases in holdings of FHA mortgage loans.— Even though still relatively small In dollar volume at the national level, savings and loan associations' FHA loan holdings had some significance, particularly during 1957- 58. Even though constituting only about 7 per cent of the Increases In total mortgage holdings, the $720 millions Increases in FHA mortgages during these two years did help offset the decidedly lower levels of Increases in VA loan 175 holdings. The pattern of changing levels of Increases In FHA loan holdings was definitely different during 1957-58 fro* what the pattern had been during 1953-54. There were quasl-stable Increases In such holdings, although at a very low level, during 1953-54. Contrary to this, the pattern changed to that of a series of consistent Increases, even though still low In dollar volune, during 1957-58. Increases In holdings of VA Mortgage loans.--The national pattern of changing levels of Increases In hold ings of VA loans by savings and loan associations was also conpletely different In 1957-58 from what It had been In 1953-54. Although 1953 had been characterized by rising levels of Increases, 1957 was characterized by consistent falls In the level of increases in VA holdings. And, whereas during the first half of 1954 the increases in VA holdings stabilized at the sa»e level as during the pre vious period, the first half of 1958 was characterized by a continued fall in the level of Increases to such a point that there was actually a very slight decrease in VA hold ings during the first six wonths of 1958. The last half of 1954, and the last half of 1958 as well, saw slight rises in the level of Increases in VA holdings, but the rise was less pronounced in 1958 than in 1954. In 176 estimating properly the Importance of the changing pat terns of increases in VA holdings, it may be noted that such increases constituted about 17 per cent of the Increases in total holdings of mortgage loans by savings and loan associations in the United States during 1953-54. However, the relative importance of VA loan holdings Increases, as a share of the total, had diminished consid erably by 1957-58. Increases in holdings of combined guaranteed and insured loans.--As has been pointed out, the patterns of increases in holdings of VA and FHA loans during 1957-58 did not resemble the corresponding patterns of Increases in 1953-54 for either one of these specific types of loans, when each is considered separately. However, when the two types of loans are added together, it may be noted that there was some resemblance between the pattern of Increases in holdings of such combined VA and FHA loans in 1957-58 and that which occurred in 1953-54. The dissimilarity which may be pointed out is that which emerges from a com parison of the first period of 1953 with the first period of 1957. Whereas In 1957 there was a relatively high level of guaranteed-Insured loan Increases during the first half of the year, and this was followed by a fall to a lower level during the second half of the year, the reverse was true in 1953. From a relatively low level of Increase 177 during the first half of 1953, there was a rise to a higher level during the second half of that year. There after, however, there was great similarity between the two periods under discussion. The level of increases fell to a low point during the first half of 1958, as had occurred in 195^, and then there were abrupt rises to new high levels of Increases during the last seal-annual periods of each of these two years. Increases in holdings of conventional mortgage loans.— For the reason that conventional loans make up such a large part of the portfolios of savings and loan associations, it would seem that the patterns of semi annual Increases in holdings of these loans would always be similar to the corresponding patterns for total mortgage loans. Similarity did exist between patterns for conven tional loans and total loans during both 1953-51 * and 1957-58, but for one notable exception which occurred In the second half of 1953. During this latter half of 1953, there was a substantial fall in the level of increases in conventional loan holdings. However, this fall did not produce a similar fall In the level of Increases in total mortgage holdings, for the reason that during the same period there was an off-setting substantial rise in the level of increases of holdings of VA mortgage loans. However, with the exception of this one period, the pattern 178 of Increases In conventional holdings during 1957-38 was Identical to the corresponding pattern of 1953-54, as was the case without any exception for patterns of increases In total holdings. Summary.--The patterns of 1957-58 and 1953-54, with regard to total holdings of mortgage loans, were Identical. In addition, the pattern of Increases In combined FHA and VA loans during 1957-58 very closely resembled the cor responding pattern for 1953-54. However, two significant points related to dissimilarities of patterns need empha sis. In the face of a diminishing volume of Increases In conventional loan holdings during the latter half of 1953* stability In the level of increases in total holdings of mortgage loans was maintained only through a substantial rise In the level of VA mortgage lending. Secondly, In the face of substantial declines in the level of Increases of holdings of VA mortgage during 1957-58, the consistency between 1957-58 and 1953-54 Increases In guaranteed-lnsured holdings was maintained only as a result of rather substantial offsetting Increases in holdlngB of FHA mortgage loans. And, thirdly, stability in the level of Increases in total loan holdings in the second half of 1957, to correspond with similar conditions which occurred during latter 1953, resulted from non- repetition of the 1953 fall in the level of increases of 179 conventional loans together with the fact that the Increases in guaranteed-insured loan holdings In latter 1957 were less than In latter 1953. Thus the similarities between patterns was not a result of complete similarities of patterns for each of the various component specific types of mortgage loans. Rather there were several combinations of dissimilarities, within these specific types of loans, which served to off set each other and thus produce greater similarities when combined into patterns of changes in total mortgage hold ings . IV. SALIENT POINTS It is not possible to arrive at definite conclu sions regarding the basic hypothesis, from an examination of the lending characteristics of only one of the major types of lending institutions. However, it is necessary to accumulate at this point certain information regarding savings and loan asso ciation lending which may prove of value for purposes of arriving at conclusions at a later point in the study. The most pertinent Information from the present chapter relates to the implied assumptions concerning the reac tions of individual groupings of institutions to changing general economic conditions. 180 Pattern of Loana Made--Dollar Volumes The Implied assumption underlying the basic hypoth esis was that an Individual grouping of institutions, when considered separately, would react to the changing condi tions of 1957-58 in a manner which would be similar to the manner in which it had reacted to changing conditions during 1953-5*1. Lob Angeles Metropolitan Area,— In general, savings and loan associations did react to the 1957-58 changing conditions in a manner which was consistent with the manner in which they had reacted during 1953-5*1. However, there was one quarter— the first quarter of 1958— during which a deep decline in the level of loanB made was not consistent with the level which would have been anticipated if there were to be Indications of precise validity of the Implied assumption. United States.— At the national level, complete support of the assumption of consistency of policies was indicated. It is almost impossible to conceive of closer similarity existing between the patterns of loans made in 1957-58 and those made in 1953-5**, by savings and loan associations, in the national market. Pattern of Loans Made— Percentage of the Total The Implied assumption was that an individual 181 grouping of institutions would react differently from other groupings to changing economic conditions. This would imply that the percentage of the market attributable to one type of institutional lender would likely vary, from quarter to quarter, during periods of economic change. Further, even though one type of institutional lender should become more important in the market by 1957-58, its quarter-to-quarter pattern of changes in percentages during 1957-58 should approximate the pattern of changes during 1953-5^- Los Angeles Metropolitan Area.--The first part of this assumption regarding percentages of the market is supported by the findings of the present 3tudy, since the percentage of the total institutional loans made by savings and loan associations did vary from quarter to quarter throughout nearly all of 1953-5^ and 1957-58. However, the data Indicate that there is doubt concerning the validity of the second part of the assump tion, since there was very little resemblance between the pattern of percentages in 1953-5^ and the corresponding pattern for 1957-58. United States.--Both parts of the assumption regard ing percentages of the lending market are supported by the data for loans made by savings and loan associations at the national level. Not only were there changing levels 182 of percentages from quarter to quarter for almost all of the periods, there was almost complete duplication during 1957-58 of the two-year pattern which existed during 1953-5*. Pattern of Net Additions to Loan Holdings--Total Loans As was mentioned with regard to the pattern of loans made, there was an implied assumption that each Individual grouping of institutions would vary its addi tions to loan holdings during 1957-58 in accordance with a pattern which would resemble the corresponding pattern for 1953-5*. Los Angeles Metropolitan Area.— Even though the data may to some slight degree support the validity of the assumption, with regard to the Los Angeles Metropolitan Area market, it 1b difficult to explain in terms of economic changes why the net additions during the first half of 1957 and the subsequent fall in the level of additions varied so significantly from the conditions which prevailed during 1953* Hence, there is indication of a need for further scrutiny of this implied assumption. However, the doubts which arise are primarily a result of the inordinate increases during one half-year, this half- year being this first six months of 1957. United States.--For the national market, there is 183 almost complete support of the assumption discussed above. For all practical purposes, it may be stated that the pattern of net additions during 1957-58 was Identical to the corresponding pattern for 1953-54. Pattern of Net Additions to Guaranteed-insured Loan3 Less pertinent to the present study, but still of Interest from a standpoint of adding meaning to the con clusions of the study, was the Implied assumption related to combined guaranteed and insured loans. This assumption wa3 to the effect that each separate grouping of institu tions would vary its net additions to guaranteed-insured loans in accordance with a consistent and predictable plan, at such tiroes that there was a repetition of cyclical economic changes. Los Angeles Metropolitan Area.--Again, as was the case with additions to total loan holdings, the high level of additions to guaranteed-insured loans during the first half of 1957 gives rise to the only question as to the validity of the assumption concerning consistency of lend ing policies related to this latter type of loans. As to the pattern during the remainder of 1957-58, there was sufficient resemblance to the pattern of 1953-54 to indi cate support of the original assumption. United States.--At the national level, the 184 conditions with regard to the pattern of additions to guaranteed-insured loans were also similar to those found in the Los Angeles area. Thus, the higher level of addi tions in early 1957 raises questions as to complete valid ity of the assumption, even though there was otherwise general similarity between the two subject patterns. Conclusions Even though the data indicate that the implicit assumptions underlying the basic hypothesis were valid, insofar as savings and loan association activities in the national market were concerned, there is room for doubt concerning the complete validity of such assumptions with regard to activities in the Los Angeles Metropolitan Area. Thus, the data indicates that in the process of formulat ing conclusions to the study it is necessary to scrutinize very closely the data of lending activities of savings and loan associations in the Los Angeles Metropolitan Area, particularly during the first half of 1957• CHAPTER VIII LIFE INSURANCE COMPANIES In order to furnish information concerning the validity of the underlying assumptions of the study, it is necessary to continue the discussions of mortgage lending practices of the individual groupings of institutions. I. OVERVIEW OP THE TWO PERIODS As was true with regard to lending by savings and loan associations, the statistics of aggregate lending by life insurance companies, during the period of 1953-5^ and the period of 1957-58, indicate the advisability of des cribing mortgage lending activities in terms of both "loans made" and "net additions to loan holdings." In the case of life insurance companies, there is indication that the "payoff characteristics" (broadly defined to include refinancing and secondary sales) of these companies' loans varied from other institutions' loans during both periods. There Is also indication that such "payoff characteristics" of life insurance company loans varied between those held during 1953-5^ and those held during 1957-58. Consulta tions with representatives of large life insurance 185 186 companies indicated that one of the reasons for the low ratio of increases in holdings to volume of loans made during 1957-58 was the extraordinarily large amount of refinancing during these years. Variations Between Institutional Lenders The following statistics, derived from Tables I through X, indicate that it is possible to attribute two different levels of influence in the market to life Insur ance companies, through the use of two means of measuring lending activities: LIFE INSURANCE COMPANIES' PERCENTAGE OP TOTAL INSTITUTIONAL MORTGAGE LENDING ACTIVITIES Percentage of Total Lending Gross Volume Net Additions Of Loans Made To Loan Holdings It may be noted that the influence of life insur ance companies as measured by loans made was similar to the influence of these companies as measured by additions to loans holdings, during 1957-58 only. In the event that refinancing of insurance company-held loans was at Los Angeles Metro- United States politan Area 20.8 % 25.5 30.0 $ 30.0 Los Angeles Metro- United States politan Area 16.6 21.4 14.5 23.2 187 an extraordinarily high level during theae years, as Indicated by a limited amount of Information available in the present study, the conditions of 1953-5* would likely be more representative of the prevailing character istics of life Insurance company lending. During these two earlier years, the Influence of life insurance com panies in regard to additions to loan holdings was consid erably greater than it was in regard to volume of loans made, particularly In the Los Angeles Metropolitan Area market. Variations Between Periods The following statistical data, derived from Tables II, VI, X, and XI, indicate that the relationship between loans made and additions to loan holdings was not constant, even for life insurance companies, between 1953-5* and 1957-58: LIFE INSURANCE COMPANIES: RELATIONSHIP BETVEEN LOANS MADE AND NET ADDITIONS TO LOAN HOLDINGS Net Net Additions to Additions Loan Holdings as Loans To Loan a Percentage of Made Holdings Loans Made Millions Millions s Angeles Metro United States politan Area $ 620 $ 365 9,290 4,335 58.8 % 46.7 1957-58 Los Angeles Metro- United States politan Area 649 9,677 220 3,887 33.9 40.2 188 Particularly noteworthy In the above statistics Is the fact that even though the gross volume of loans siade Increased slightly during 1957-58# a® compared with the volume during 1953-5^# there was a lower level of Increases In loan holdings during 1957-58. This fall in the level of Increases In holdings was much more pro nounced In the Los Angeles Metropolitan Area market. Implications It would seem from the Information now furnished for life Insurance company lending that It would not he advisable to rely upon only one method of describing mort gage lending patterns. Not only did they vary from other institutional lenders In regard to the relationship between loans made and additions to loan holdings, but also the same relationships did not remain constant from the earlier two years to the later two years, for this grouping of Institutions. It is the view here that an accurate picture of Insurance company mortgage lending may be provided, how ever, through the use of statistics of both additions to loan holdings and also the volume of loans made. It Is the view here, also, that the former method Is at least slightly preferable, for the reason that It provides Information of the net new funds Invested after taking abnormal payoffb Into account. 189 II. MORTGAGE LOANS MADE A determination of whether or not life Insurance company lending was in conformance with the underlying assumptions of the study now requires that a detailed analysis be made of the data Included in Tables X and XI, and Figures 6 through 9. Mortgage Loans Made in the Los Angeles Metropolitan Area When stated in terms of dollar volume, the only close similarity existing between the 1957-58 pattern of life insurance company loans made in the Los Angeles Metro politan Area and the corresponding pattern for 1953-5** was in the volume of loans made during the second years of each of the two periods. Clear dissimilarities existed between the first years of the two periods. As for the pattern of loans made, when such loans are expressed as a percentage of total institutional loans made in the area, a rather narrow range between highs and lows existed throughout both periods. But, in spite of the narrowness of the range, several dissimilarities could be determined when comparing 1953 with 1957, as well as 1951 * with 1958. Dollar volume of loans made.— As may be observed in 190 Table IX, and Figure 6, the pattern of quarter-to-quarter variations In loans made during the first year of the 1953-54 period differed considerably from that of the first year of the 1957-58 period. From a relatively low point in the first quarter of 1953, there was a brief increase during the second quarter in the volume of loans made. However, this was followed by a rapid decline to a low point in loans made during the third quarter of 1953 which lasted through the first quarter of 1954. On the other hand, from a relatively low point during the first quarter of 1957, there was even a decrease in the volume of loans made during the second quarter. Unlike 1953, an abrupt increase during the third quarter of 1957 occurred; and this was followed by a slight increase during the fourth quarter, and then a very abrupt drop to a low level of loans made during the first quarter of 1958. Thus, the first quarter of 1958, like the first quarter of 1954, was characterized by a low level of dollar volume of loans made. And the remaining three quarters of 1958, just like the last three quarters of 1954, were accompanied by very rapid and persistent increases in the dollar volume of loans made. Hence, the second years of each of the two periods were similar to each other, as to patterns of mortgage loans made, even though this was not true for 1953 and 1957. 191 Share of three Institutions1 mortgage loans made.— Since the percentages of institutional mortgage loans made which were made by life insurance companies varied within fairly narrow ranges during 1953-51 * and 1957-58, it is a little difficult to determine a distinct pattern for either of the two-year periods. However, other than for the repetition of a fairly narrow range of variations, there was little similarity between the patterns of 1953-5^ and 1957-58. Prom a share amounting to 21.3 per cent of the three institutions' lending during the first quarter of 1953* the life insurance companies' portion of this market commenced to fall steadily. Thi3 decline reached a low in the third quarter and then remained stable at the low level through the first quarter of 195^* There was an increase which waB only moderate in intensity during the second quarter, and then stability prevailed at this higher level of approximately 23 per cent throughout the remaining two periods. During 1957-58, however, the opening quarter was characterized by only 15*^ per cent of the described three-institution market, and this quickly dropped during the second quarter to a new low of 12.2 per cent. Unlike 1953* however, there was a quick rise during the third quarter of 1957 and a slight rise thereafter during the 192 fourth quarter. During 1958, In contrast with the stabil ity of 195^j the life insurance companies' share showed a slight and irregular decrease throughout this later year. Mortgage Loans Made in the United StateB Table X and Figures 8 and 9 present the statistics of loans made in the national market. In contrast to con ditions existing in the Los Angeles Metropolitan Area, there were moderate similarities at the national level between the pattern of loans made by life insurance com panies during 1953-5^ and the corresponding pattern for 1957-58. These similarities were present for both types of analyses— dollar volume of mortgage loanB made and also percentages of the three institutions' mortgage loans which were made by life insurance companies. Dollar volume of loans made.--Before making any minute examination of life Insurance companies' patterns of quarter-to-quarter variations In loans made, it is interesting to note the peaking effect which took place at the national level during the fourth quarter of each year. This fourth quarter peak appeared consistently during all four of the years covered in this study, and an additional examination of other intervening years indicated a contin uation of this effect during other years of the 1950's as well. 193 The year 1957, like 1953, was characterized by relative stability of dollar volume mortgage lending during the first three quarters, followed in each case by a slight but definite peak during the fourth quarter of each year. Then, this peak was followed by a decreasing volume in each case, although minor differences existed between the time length of this decline in 1958 and that which occurred in 195^. In 195^ the decline was minor and lasted only one quarter; and the last three quarters of 1954 were characterized by steadily Increasing volumes of lending, the volume reaching a new high during the last quarter of the year. 1958 was slightly different in that the decline was more severe during the early part of the year and lasted throughout the first two quarters. How ever, the sharp rise during the last two quarters of the year resembled that of the last two quarters of 195^, and a new high reached in the last quarter of 1958 was approx imately the same In dollar volume as that found for the last quarter of 195^. Share of three institutions 1 mortgage loans made. The fourth quarter peaking effect in dollar volumes, as was found to have existed during 1953-5^ and 1957-58, also was found to have existed with regard to the changing percentage shares of the three institutions1 total loans which were made by life Insurance companies. This peaking 194 effect in these companies' percentages of the described market was not offset by any change in the percentages of total loans made by commercial banks. Rather, the peak was always offset by a fourth quarter decline in the per centage participation in the market by savings and loan associations. The same loss-galn relationship existed throughout both two-year periods. Commercial banks retained approx imately their same share of loans made throughout the two periods; thus, losses of a share of the lending market by life Insurance companies became gains to savings and loan associations, and vice versa. And, as was mentioned in the previous chapter, the pattern of changes in the shares of institutional mortgage loans made by savings and loan associations in 1957-58 resembled very closely the corres ponding pattern of such changes in 1953-54. Hence, as would be true from the very definition of the three- institution market, the changing shares of life insurance companies fell into a pattern in 1957-58 which resembled that of 1953-54, while the commercial banks' share remained stable. During the first quarter of 1953, and again during the first quarter of 1957, the share of the loans made by life Insurance companies was 25 per cent of the total made by the three Institutions combined. For both 1953 and 195 1957, the second quarter-years were accompanied by dimin ishing portions of the total loans being made by life Insurance companies, the third quarters were characterized by stability, and then the peaks occurred during the fourth quarters. The fourth quarter peak of 1957 was at a lower percentage than the peak in 1953, and the general level of the life insurance companies' share of the market subsequently remained less in 1958 than it had been in 195^. However, the changing positions of highs and lows in 1958 still followed a pattern which resembled the cor responding pattern of highs and lows in 195^. Incident ally, the patterns for each of the four years closely resembled each other since changes in life insurance com panies' shares of the described market followed a quasi- seasonal pattern during all of the four years. To return to the specific second years of each two-year period, during both 1958 and 195^ there were relatively high per centages during the first quarter-years followed by declines during the second quarters, stability at the lower levels during the third quarters, and peaking effects during the fourth quarters. III. SEMI-ANNUAL INCREASES IN DOLLAR VOLUME HOLDINGS The discussion of this section is based on the statistical data contained in Tables II and VI. In 196 addition, supplementary Information has been provided in Figures 11, 14, 16, 19, 23# and 24. Since these tables and figures are quite detailed, the discussion now can be one of describing the highs and lows in the levels of increases, and the degree of recurrence of patterns of highs and lows during the time periods covered in the present study. In accordance with previous sections, the discussion here will be divided according to geographical areas. Los Angeles Metropolitan Area In Chapter VI, it was noted that between Decem ber 31# 1952 and December 31# 1956, the life insurance companies' share of the three institutions' Los Angeles area mortgage loans outstanding had decreased from 37.3 per cent to 32.4 per cent. In the overview section of the present chapter, it may be noted that increases in total Los Angeles Metropolitan Area mortgage holdings of life insurance companies during 1957-58 were less than the corresponding increases had been during 1953-54. It is now necessary to examine in greater detail the semi-annual patterns of these increases in holdings of mortgage loans during each of the two-year periods. Increases in total holdings of mortgage loans.— Since the level of increases in insurance company holdings 197 of all Los Angeles Metropolitan Area mortgage loans was considerably lower in 1957-56 than in 1953-54, a brief mention of magnitudes of Increases is necessary. The lowest level of semi-annual increases during 1953-54 occurred during the second six months of 1953, and this amounted to $71 millions. The highest levels of semi annual increases during 1957-58 occurred during both the second six months of 1957 and the second six months of 1958. These increases amounted to $65 millions each, and thus the highest levels of increases during 1957-58 were still lower than the lowest level of increases during 1953-54. As to patterns of changing levels of total increases in mortgage holdings between 1953-54 and 1957- 58, there was little resemblance between the patterns of the two periods. The primary exception to this dissimil arity came from the fact that the rising level of increases during the last half of 1954 was repeated during the last half of 1958. The pattern of 1953-54 presented a rather simple set of changing levels of increases, but the pattern of 1957-58 did not repeat this simplicity. Prom a level of increases approximating $90 millions during the first half of 1953# there was a substantial fall in this level during the second half of that year. Thereafter, however, there 198 was a continuous rise In the level of Increases during both periods of 1954. Conditions were somewhat different during 1957-58. Prom a relatively low Increase of $50 millions during the first half of 1957, there was a moderate and brief Increase during the second half of the year. After this, there was a fall to a new low during the first half of 1958. This waB followed by the rising level already mentioned as having been somewhat similar to that of the last half of 1954; but the Increase during the second half of 1958 only reached the amount of $65 millions. Increases in holdings of FHA mortgage loans.— Since the Los Angeles area mortgage portfolios of life Insurance companies as of the end of 1952 contained 20.0 per cent of the total In FHA mortgage loans, and by the end of 1956 this percentage had fallen to 11.5 per cent, it would at first seem that a complete change had taken place in the desirability of Los Angeles Metropolitan Area FHA loans to life Insurance companies. However, it should be noted that there was again a determinable increase In Interest in these types of loans, for at least the year 1958. There was almost no similarity between the changing levels of these Increases in FHA loan holdings during 1957-58 and those which occurred during 1953-54. During 1953-54, there were slight decreases, rather than 199 Increases, during each of the four semi-annual periods. However, the rate of decrease remained considerably less than 1 per cent of the total FHA portfolio and thus may be termed negligible for these two years. The 1957-58 period commenced in a similar manner with decreases at the rate of one-half per cent each semi-annual period during 1957. Commencing with the first period of 1958* however, there were substantial increases which amounted to 5.0 per cent during the first period and 6.5 per cent during the second period of that year. In dollar volumes these Increases amounted to $12 millions and $17 millions, respectively. Increases in holdings of VA mortgage loans.--The only similarity between the periods1 patterns of Increases in holdings of VA loans was that the first years of both periods were characterized by very low levels of increases which remained almost constant throughout both 1953 and 1957. However, the conditions of 195^, a year In which there occurred substantial increases in holdings of VA loans, were not In any way repeated in 195®. Rather, there was a decrease In holdlngB of VA loans during both six- months periods of 1958. These decreases, even though not of great magnitude, were constant and amounted to about 2 per cent of the total VA portfolio during each half-year period. It might be added that these decreases in VA loan holdings during 1958 very nearly offset the above-mentioned 200 Increase in life Insurance company holdings of FHA loans during the same two periods. Increases in holdings of FHA and VA mortgage loans combined.— Since the changes in holdings of FHA consisted of negligible changes during 1953, 195^, and 1957, it can be said that the above-described changes in holdings of VA loans dominated for these three years the changing levels of increases in holdings of guaranteed-insured loans combined. Moreover, in 1958 the increases in hold ings of FHA loans were offset by decreases in holdings of VA loans, so there was virtually no change in the holdings of combined FHA-VA loans during 1958. From stability of Increases at a very low level in 1953, there was a rising level of Increases in holdings of guaranteed-insured loans throughout 195^. During 1957-58, there was essentially no change in the volume of holdings of this combination of mortgage loans. Increases in holdings of conventional mortgage loans.— As for changes in life insurance company holdings of Los Angeles Metropolitan Area conventional mortgage loans, there was considerable similarity in the patterns of such changes for 1953-5^ and for 1957-58. The only exception to this similarity occurred during the first half year of each of tne two-year periods. During the first half of 1953, there was a substantial increase in 201 the holdings of conventional loans; but, during the first half of the counterpart year of 1957, the Increase in hold ings of this type of loans was at a much lower level. The level of Increases fell slightly in late 1953 and rose slightly in late 1957; however, the increases during the second half of 1957 became about the same in dollar volume as those which had occurred in late 1953. Then, to describe the similarities between 195^ and 1958, it is only necessary to state that there was a substantial fall in the level of increases during the first six months and increases during the second six months of both years. Summary.— There was nothing distinctive about changes in insurance company FHA holdings during the two periods covered in the 3tudy, with the possible exception of the $12 millions and $17 millions increases during 1958. Hence, a summary of changes in mortgage loan port folio holdings of life insurance companies for all prac tical purposes becomes a matter of summarizing changes in conventional and changes in VA holdings of these companies. During the 1957-58 period, there was not much of a repetition of the 1953-5^ pattern of changing levels of* increases in total mortgage loan holdings. However, there was considerable similarity between the 1957-58 pattern of increases in holdings of conventional mortgage loans and the corresponding pattern of changes in holdings 202 of this type of loan3 during 1953-5^, with the exceptions of the increases of the first half-year of each two-year period. Because of the greater relative importance of conventional loans to life insurance companies, the pat terns of changing levels of total mortgage loan holdings increases were to a great extent dominated throughout all but 195^ by the changing levels of increases in conven tional loans. The seeming paradox of consistent patterns of Increases in the important conventional holdings and inconsistent patterns of increases in total mortgage loan holdings can be explained in two manners. One, the sub stantial Increases in VA loan holdings during 1951 * did affect the pattern for that year and thus caused the dis similarities between 195^ and 1958* And, two, it has been mentioned that in spite of other consistencies a disparity occurred between the level of increases in conventional holdings for the first period of 1953 and that for the first period of 1957. This combined with the differences in VA patterns in such a manner as to produce dissimilar ities between 1953 and 1957, insofar as total mortgage loan holdings were concerned. Thus, there was relative consistency between pat terns of changing levels of increases in conventional loan holdings of life insurance companies. However, there was almost complete dissimilarity between the patterns of 203 increases in VA loan holdings between 1953-54 and 1957-58. There were only negligible changes in the holdings of FHA loans except in 1953, and during this year the Increases in FHA holdings were offset by decreases in holdings of VA loans. Therefore, it may be said that guaranteed-insured mortgage lending, and particularly VA lending, caused most of the inconsistency of patterns between 1953-54 and 1957-58. However, with only negligible changes in holdings of these guaranteed-insured loans during 1957-58, the changing levels of increases in conventional loans increas ingly dominated the pattern of increases in holdings of total mortgage loans at least for these latter years. United States From Chapter VI it may be noted that in the national market the life insurance companies1 share of the three institutions* mortgage loans outstanding was 37.1 per cent as of December 31* 1952, and this share had decreased to 34.8 per cent by December 31# 1956. From the aggregate information for both 1953-54 and 1957-58, it may also be noted that the increases in mortgage loan holdings of life insurance companies were greater during 1953-54 than during the later two-year period. With this information as back ground, the discussion now deals with the details related 204 to semi-annual Increases In loan holdings during the two periods mentioned. Increases In total holdings of mortgage loans.— There was moderate dissimilarity between the pattern of changing levels of increases in total holdings of mortgage loans during 1957-58 and the corresponding pattern which had occurred during 1953-54. The exception to this dis similarity was that the general directions of the changes in levels during 1958 did resemble those of 1954. In other words, from a level of moderate Increases during the second half of the previous year, there was a drop to a very slightly lower level of increases In holdings for the first half of 1954. On the other hand, from a similar level of moderate increases during the second half of 1957, there was a fall, but this time a substantial fall, to a new low level of increases In holdings during the first half of 1958. During the last half of 1954, there was a very substantial rise in the level of increases in loan holdings to a new high for life Insurance companies during the second semi-annual period of that year. There was also a rise in the level of increases during latter 1958; however, the rise was not nearly so substantial as that of late 1954, and the new level did not even reach the level which had been reached during the second half of 1957. ThU3, the rises and falls of 1958 were in the same 205 direction as those of 195^* but were far different in magnitudes. As for the comparisons between the first years of these two periods, the dissimilarity in patterns is more obvious. In 1953* from a low point in Increases to loan holdings, there was a moderate rise to a level of approxi mately $1.0 billions during the second half of the year. During 1957* however, from a level of Increases of approx imately $1.1 billions during the first half year, there was a slight fall to a level of approximately $1.0 bil lions during the second half of that year. To summarize, after the first year of each period there did occur some similarity between the directions of changes in levels of increases, but the magnitudes of such changes were considerably different. Thus, it may be stated that there was no similarity between the Increases of 1953 and 1957* and only a small degree of similarity between any parts of the remainder of the two periods covered in the present study. Increases in holdings of FHA mortgage loans.--There was no similarity between the pattern of changing levels of Increases In FHA holdings In 1957-56 and the correspond ing pattern for FHA loans In 1953-5^* Slight Increases In holdings of FHA loans occurred during all four of the semi-annual periods during 1953-5^* and these Increases 206 were so near the sane in dollar volume that the period 1953-5^ can be described as a two-year period of stable increases, even though such changes were at a low level. During 1957-58, however, there was a considerable amount of variability in the levels of semi-annual Increases in holdings of PHA loans. There was actually a small decrease in holdings of this type of loans during the first half of 1957, tout this changed to a substantial increase in such holdings during the second half of 1957. Next, there was a fall to a very low level of increases during the first of 1958, but this was followed by an abrupt rise to a very high level of increases in holdings of FHA loans during the last half of 1958. Thus, from stability at a low level of increases during 1953-5^, the pattern of increases in holdings of FHA loans had changed by 1957-58 to a pattern of substan tial semi-annual increases which varied considerably in magnitudes during the various semi-annual periods of these later two years. Increases in holdings of VA mortgage loans.--The pattern of changing levels of semi-annual increases in VA holdings during 1957-58 was almost exactly the opposite of the pattern of such changes during 1953-5^. From a very low level of increases in holdings of VA loans during the first half of 1953, there was a steady rise in the levels 207 of Increases during each subsequent semi-annual period to a high level of Increases during the second half of 1954. However, commencing with a moderately high level of Increases in VA holdings during the first half of 1957, a trend which was opposite to that of 1953-54 commenced. During the second half of 1957, there was a fall to a very low level of increase in holdings of VA loans, then to a small decrease in holdings of this type of loans In the first half of 1958, and to a substantial decrease In hold ings during the second half of 1958. Increase In holdings of combined PHA and VA mortgage loans.— For FHA and VA mortgage holdings combined, there resulted some similarities in the patterns of changing levels of Increases between the pattern of 1953-54 and the pattern of 1957-58. However, there was one major dif ference in magnitudes which resulted from the fact that during the first half of 1958 even the combining of increases in FHA holdings with VA holdings provided only a negligible increase in total holdings of guaranteed-insured loans. This was far from true during 1954, since there had been very substantial increases in VA holdings during that year. Commencing at a moderate level of increases in com bined guaranteed-insured holdings during the first half of 1957, there was a rise to a higher level during the second 208 half of that year. Similar conditions had prevailed in 1953# since the moderate Increases of the first half of that year had been followed by a rise during the second half of the year. But, the precipitous fall in the level of increase in holdings of guaranteed-insured loans during the first half of 1958 did not resemble at all the contin ued rise in the increase during the first half of 1954. During the latter half of 1958, however, there was a very substantial rise in the level of the increase in holdings of these types of loans combined. This rise was similar to that of the last half of 1954, except for the fact that in 1958 the rise had commenced at a much lower level. It is interesting to note the changing positions of FHA loans and VA loans between 1954 and 1958. The sub stantial increases in holdings of FHA loans of insurance companies during latter 1958 had offset the decreases in holdings of VA loans. However, during latter 1954 it had been the substantial increases in VA holdings which had predominated. Increase in holdings of conventional mortgage loanB.— The variations between semi-annual periods as to changing levels of increases in holdings of conventional loans were 30 minor that the patterns of changes were not distinct during either 1953-54 or 1957-58. However, Inso far as patterns did exi3t, there was no similarity between 209 1957-58 and 1953-54 other than for the repetition of the narrow range within which changes took place. Commencing with a moderate level of increase during the first half of 1953, there followed a slight rise, a slight fall, and another slight rise to complete the pattern of semi-annual increases in holdings of conventional loans during 1953-54. However, commencing with a level of considerable increase during the first half of 1957, there was a subsequent slight fall, stability for one period, and then another slight fall to complete the pattern of increases in hold ings of this type of loans during 1957-58* Hence, even though there was some stability during both periods, the indistinct patterns which emerged were still not similar to each other. Summary.--In dollar volumes, the increases in life insurance companies' holdings of conventional loans were normally greater than Increases In holdings of FHA and VA loans combined, during both 1953-54 arid 1957-58. However, the Increases in holdings of these two latter types of loans combined did have a very considerable effect on the pattern of changing levels of increases in total mort gage loan holdings. This was particularly true during the last half of 1954 and the last half of 1958. During the last half of 1954, increases In holdings of VA loans alone exceeded the Increases In holdings of conventional loans, 210 and there was also a snail Increase In FHA loan holdings during that sane seal-annual period. And, during the last half of 1953, the Increases In holdings of FHA loans alone exceeded the Increases In holdings of conventional loans. However, the Increases In FHA loans during latter 1958 were in part offset by decreases in holdings of VA loans. Thus, even though there was an Indistinct pattern of changing levels of Increases In conventional loan hold ings, there cane about a very distinct pattern of changing levels of Increases In total nortgage loan holdings of life Insurance conpanles. However, the distinct pattern of 1953-5^ did not resemble closely the distinct pattern of 1957-58. The primary cause of dissimilarity between the patterns of these two periods did not lie In the changes in levels of Increases of conventional loans, but did lie In the changing levels of holdings of guaranteed and Insured loans. Semi-annual Increases in these FHA and VA loans showed far more variations than those found In the conventional segments of life Insurance companies' port folios of mortgage loans. And, moreover, had it not been for VA loan increases offsetting lack of Increases In FHA holdings during 1953-5^> and FHA loan Increases offsetting decreases in VA holdings during 1957-58, the patterns of changes in total mortgage holdings would likely have shown an even greater amount of dissimilarities between these 211 two periods. IV. SALIENT POINTS As was true for the preceding chapter, it is now necessary to accumulate from the present chapter those informational points which will be of later use in arriv ing at conclusions concerning the basic hypothesis. Pattern of Loans Made— Dollar Volume Validity of the underlying assumption would be Indicated by a similarity between the patterns of 1953-54 and 1957-58. Los Angeles Metropolitan Area.— Even though the repetition in 1958 of the 1954 pattern of changes in volume of loans made would indicate partial validity of the assumption, the non-repetion in 1957 of the 1953 pattern of changes would cast considerable doubt as to the complete reliability of this assumption of consistency of mortgage lending policies. United States.— At the national level, there was almost complete support of the validity of the assumption regarding similarity of patterns of loans made. The only exception to such support was a minor exception, and this occurred as a result of a slight lag in the volume of loans made during the second quarter of 1958, whereas such 212 had not occurred during the second quarter of 195*1. Pattern of Loans Made— Percentage of the Total Complete support of the assumption made would come from the existence of quarter-to-quarter variations In the percentages of the market controlled by life insurance companies, but at the same time a quasi-repetion of the overall 1953-51 * percentage pattern in 1957-58. Los Angeles Metropolitan Area.--Even though the percentages of the total institutional loans made by life insurance companies did vary from quarter to quarter, the resemblance of the 1957-58 pattern to that which had existed during 1953-5^ was only slight. Thus, there was little to support the validity of this assumption, in the Los Angeles Metropolitan Area market, insofar as life insurance company lending was concerned. United States.--There was complete support of the assumption that quarter-to-quarter changes in the percent age levels would occur, Insofar as the national market was concerned. And, moreover, the very close resemblance between the 1953-5^ and 1957-58 patterns of period-to- period changes in the importance of life insurance com panies in the institutional market was also in support of thl3 basic assumption. 213 Pattern of Wet Additions to Loan Holdings— Total Loans A similarity of patterns between 1953-5* additions and 1957-58 additions would be Indicative of the validity of the underlying assumption. Los Angeles Metropolitan Area.— There was almost no support to the assumption that life Insurance companies1 period-to-period changes in levels of net additions to total loans would be similar In 1957-58 to the changes which took place In 1953-5*• In fact, the only resemblance occurred as a result of the fact that there was a rise in the level of additions during the last half of 1958 which was similar to the rising level of the last half of 195*. United States.— Even at the national level, there was dissimilarity between the 1953 changes in the levels of additions to loan holdings and those changes which took place during 1957. However, there was little change in the magnitudes of these additions during these years, so it is difficult to state whether the indefinite patterns of such changes were or were not in support of the assump tion. However, since the similarities of the 1958 pattern to the 195* pattern were somewhat overshadowed by the differences between 1953 and 1957 patterns, there is room for doubt as to the validity of this assumption. 214 Pattern of Net Additions to Guaranteed-Insured Loans Support of the assumption originally made would be Indicated from a similarity between the changes occurring during 1953-54 and those occurring during 1957-58. Los Angeles Metropolitan Area.--During 1957, as was true for 1953, there was very little change In the holdings of Los Angeles Metropolitan Area guaranteed-insured loans. However, the substantial additions to such holdings during 1954 were not duplicated during 1958. Thus, there is little evidence In the Los Angeles Metropolitan Area mar ket data to substantiate the assumption of consistency of mortgage lending policies for 1953-54 as compared with 1957-58. United States.--A few similarities at the national level between the 1953-54 and 1957-58 patterns of additions to guaranteed-insured loan holdings might indicate support of the assumption mentioned above. However, the very low level of additions to such holdings during the first half of 1958 was far different from the level found during early 1954. Thus, there Is reason to doubt the validity of this assumption concerning guaranteed-insured loans, even at the national level. Conclusions There was very little data in support of the 215 assumptions that the mortgage lending activities of life insurance companies In the Los Angeles Metropolitan Area market would change from period to period during 1957-58 in a similar manner to the manner in which they had changed during 1953-5^• In fact, in such instances when there was clear-cut evidence of validity or non-validity of the basic assumptions, the indications of non-validity were predominant. In the national market, however, there was some indication of validity to the basic assumptions, but thi3 statement is based primarily on the similarity of changes in the volumes of loans made. Thus, a need for further examination of the assumption concerning guaranteed- insured lending was indicated, even at the national level, particularly as a result of the existence of a non- conforming low level of increases in such holdings during the first half of 1958. CHAPTER IX COMMERCIAL BANKS Prom a standpoint of comparative dollar volumes of mortgage loan holdings, commercial banks ranked Just below life Insurance companies, but considerably below savings and loan associations in 1952 and again In 1956. This was true of both the Los Angeles Metropolitan Area and the United States as well. Prom a standpoint of dollar volumes of mortgage loans made, commercial banks were considerably less Important than savings and loan associations, but of slightly greater importance than life insurance companies, in both the Los Angeles Metropolitan Area mortgage market and the national mortgage market. It is now necessary to examine the details of mortgage loans made and increases in portfolio holdings of the various types of mortgages, for commercial banks. Prom such details, a determination may be made concerning the degree of validity of the underlying assumptions of the study, as such assumptions relate to the lending pat terns of individual groupings of institutions. 216 217 I. OVERVIEW OF THE TWO PERIODS In accordance with the procedure used In the two preceding chapters, it is advantageous to examine the two-year aggregate statistics of commercial bank lending, for the two periods, before proceeding with the more detailed analyses of period-to-period changes within each of the two separate periods. Of the three main groupings of Institutional mortgage lenders, commercial banks had the lowest ratio of net additions In holdings to gross volume of loans made. The primary explanation of this would seem to lie in the fact that commercial banks not only engage in a substantial amount of short-term interim lending for construction purposes, but also make portfolio loans which are characterized by shorter periods to maturity than the typical loans of other institutions. It also may be that prepayments of loans are more frequent in the case of commercial bank lending, but no attempt was made In the present study to determine whether or not this was true even for the periods covered In the study. Variations Between Institutional Lenders The following information, derived from Tables I through X, furnishes evidence that two separate measures of the influence of commercial banks are possible: 218 COMMERCIAL BANKS* PERCENTAGE OF TOTAL INSTITUTIONAL MORTGAGE LENDING ACTIVITIES Percentage of Total Lending 1933-54 Gross Volume Net Additions Of Loans Made To Loan Holdings TiOs Angeles Metro- United States politan Area 25.0 % 28.5 9.4 % 17.7 1957-58 'os Angeles Metro United States politan Area 21.4 28.4 11.0 16.2 It may be noted from the above Information that the difference between the percentage of loans made and per centage of additions to loan holdings was greater for the Los Angeles Metropolitan Area market. Also, the differ ence between such percentages was less by 1957-58 for the local market, whereas the difference at the national level remained fundamentally the same for both periods. Variations Between Periods The following statistical data, derived from Tables III, VII, X, and XI, indicate that the ratio of net additions in loan holdings to gross volume of loans made was increasing, for commercial banks In the Los Angeles Metropolitan Area market, but that the corresponding ratio for the national market was decreasing: 219 COMMERCIAL BANKS: RELATIONSHIP BETWEEN LOANS MADE AND NET ADDITIONS TO LOAN HOLDINGS Net Net Additions to Additions Loan Holdings as Loans To Loan a Percentage of Made Holdings Loans Made 1953-54 Millions Mi l'TI on b ------------------ Los Angeles Metro politan Area $ 738 $ 116 15.7 # United States 10,3^9 2,605 25.2 1957-58 Los Angeles Metro politan Area 837 169 20.2 United States 12,861 2,668 20.7 Particularly noteworthy in the above Information is the fact that as a result of differing directions of national and local trends, the 1957-58 ratios of net addi tions In loan holdings to gross volume of loans made had become the same for both markets. Implications As was true in the cases of savings and loan associ ations and life insurance companies, there is an indication that commercial bank mortgage lending patterns may be described in two separate manners. The decision has here been made to use both methods of describing lending pat terns, In order that a more comprehensive study may be possible. II. MORTGAGE LOANS MADE It is now necessary to examine In detail the 220 statistical information contained in Tables X and XI and Figures 6 through 9* in order to determine whether or not commercial bank lending activities were in eonforsance with the underlying assumptions of the study. Mortgage Loans Made in the Los Angeles Metropolitan Area Since several general characteristics of mortgage lending by commercial banks have been indicated in the overview section, concentration may now be plaeed on the highs and lows in lending activity, on a quarterly basis, during these periods. In addition, an examination will be made of variations in the degree of Influence in the market of commercial bank mortgage lending, as measured by variations in these banks' share of the total loans made by the three major institutions. Dollar volume of loans made.--The resemblance between the 1957-58 pattern of quarter-to-quarter varia tions in loans made by commercial banks and the correspond ing 1953-5* pattern was confined to the second years of these two periods. From a relatively low volume of lending during the first quarter of 195** and again from a low level during the first quarter of 1958, the remaining three quarters of each of these two year periods were character ized by substantial and consistent Increases in the volumes of loans made during each quarter throughout the periods. 221 However, in comparing 1953 and 1957 patterns of lending, it may be noted that dissimilarities existed between the first quarter of 1953 and the first quarter of 1957, and dissimilarity again existed between the fourth quarters of these two years. From a low level of mortgage loans made during the first quarter of 1953, there was a substantial rise to a higher volume during the second quarter of that year. However, from a somewhat higher level during the first quarter of 1957, the volume of lending remained stable throughout the second quarter of 1957. The falls to lower volumes of lending during the third quarters of these years did show some degree of similarity between them. However, during 1953 the decreas ing volume continued through the fourth quarter, and then there was a slight rise into the first quarter of 195^. This was not true of 1957, since there was a slight Increase during the fourth quarter of that year and this rise was followed by an offsetting decline in the first quarter of 1958. Hence, there was some measure of similarity between the pattern of quarter-to-quarter variations in volume of commercial bank mortgage loans made during 1957-58 and the corresponding pattern of such changes in 1953-5^. However, several variations from this similarity occurred during the first years of the two periods, notably during the first 222 and fourth quarters of each of these years. Percentage of three institutions1 mortgage loans made.— As to commercial hanks' share of the institutional lending market during 1953-54 and 1957-58, there was com paratively little variation from quarter to quarter througv out both periods, except for a rather substantial increase in the relative importance of mortgage loans made by com mercial banks during the last half of 1958. This marked increase did not in any way resemble the stable percent ages of the market which had obtained during the last half of 1954. Since percentage shares during the first year and one-half of each of the two periods varied between quar ters by only 2 to 3 per cent at the extremes, it might be said that stability was common to both of these one and one-half year periods. Minute examination, even though appearing at this point to be spurious, would Indicate that these small quarter-to-quarter variations in 1957-58 were generally in opposite directions from what they had been in 1953-54. However, the magnitudes of such varia tions were too small for warranting further attention to this fact. Mortgage Loans Made in the United States Dollar volume of loans made.--So similar were the 223 quarter-to-quarter variations In volume during both 1953-5* and 1957-58 that a description of trends of 1953- 5* is In effect a description also of the trends during 1957-58. Pro* a low level during the first quarter of 1953, there was a Moderate rise In the volume of loans wade during the second quarter. Thereafter, there was a very slow but steady decrease In voIumo each quarter through the first quarter of 195*. However, coMMenclng with the second quarter of 195*, there were substantial and per sistent Increases each quarter during each of the three reualnlng quarters of 195** The only difference between the pattern here described for 1953-5* and that of 1957-58 resulted from the fact that the rises in 1958 were slightly greater in magnitude than those of 195*. Share of three institutions1 mortgage loans made.— Basically, commercial banks' share of the Institutional loans made during the two years of 1953-5* was the same as these banks' share had been during 1957-58, at the national level. Evidence of this fact was furnished above, when it was pointed out that aggregate loans made during the earlier period amounted to 28.5 per cent of the lending by the three institutions, and this percentage had only changed to 28.* per cent by 1957-58. And, concerning quarter-to-quarter variations In 224 percentage shares, it may be said that 1957-58 presented a somewhat similar pattern to that of 1953-54 inasmuch a3 there was very little quarter-to-quarter variation present during either period. However, even though the range was small, it is at least of passing interest to note that during 1953-54 there was a slow but steady decrease from 30.2 per cent of the market during early 1953 to 28.1 per cent during late 195^* Then, the opposite occurred during 1957-58, when a 27.3 per cent share during early 1957 progressed slowly to a 30.0 per cent share in late 1958. III. SEMI-ANNUAL INCREASES IN DOLLAR VOLUME HOLDINGS Tables III and VII and Figures 11, 15, 16, 20, 23, and 24 contain detailed Information concerning the dollar volume of Increases in commercial bank mortgage loan hold ings for each of the semi-annual periods covered in the present study. It Is now the purpose In this section to discuss some of the patterns and relationships which emerge from this statistical data. L03 Angeles Metropolitan Area In Chapter VI, it was noted that at the end of 1952 the commercial banks' share of the three institutions' total Los Angeles area mortgage loans outstanding amounted 225 to 26.7 per cent, and that by December 31, 1956 this share had fallen to 21.3 per cent. It was also indicated in Table III that commercial banks' holdings of Los Angeles area mortgage loans increased during 1953-54 hy 11.6 per cent over December 31* 1952, and by 11.8 per cent over the new base of December 31, 1956 during 1957-58. It is now the purpose to examine the pattern in which variations occurred semi-annually In the levels of increases and decreases In the holdings of various types of mortgage loans. Increases in total holdings of mortgage loans.--The general pattern of changing levels of increases in commer cial bank holdings of Los Angeles Metropolitan Area mort gage loans during 1957-58 was very similar to the corres ponding pattern of 1953-54, Insofar as directions of changes were concerned. And, in respect to both directions and magnitudes, the pattern of changes in 1957 was almost identical to that of 1953. Thus, only 1954 and 1958 need further explanation; and here the only difference of pat terns occurred In the magnitude of the levels of increases. During both 1954 and 1958, there was a rise from a low level of Increases (actually a small decrease in the first half of 1958) during the first part of the year to a level of higher Increases during the latter half of the year. However, the change in 1954 was one from an increase of 226 $23 Millions during the first half of the year to an increase of only $27 Millions during the second half of the year. On the other hand> the changing level of 1958 was one froM a decrease in Mortgage holdings of $10 Mil lions during the first half of the year to a phenoaenal Increase of $126 Millions during the last half of the year. » . Hence, 1953 presented a pattern of changes In levels of Increases which was Most extraordinary. Such a change froM a small decrease to this size of an increase during the course of a year was most unusual for commer- cial banks during any years other than 1956, a year not covered in the present study. It is of some Interest to note that 195^ was char acterized by a pattern of changes In levels of Increases which was very similar to both 1953 and 1957. The similar ities between these three years, without additional data, would almost indicate a seasonal change fron a low level of Increases during the first half of each year to a slightly higher level during the last half of the same year. However, sufficient Information was obtained in the present research project to determine that this seasonal pattern did not prevail consistently for years other than 1953# 195^ and 1957. Increases in holdings of FHA mortgage loans.— 227 Primarily aa a result of differing magnitudes, and second arily as a result of differing directions of changes, the changing levels of commercial bank holdings of Los Angeles Metropolitan Area FHA loans during 1957-58 were completely different from the corresponding changes during 1953-5*. Fro* a relatively high level during the first half of 1953# there was a slight rise to an even higher level of increases during the second half of 1953. Thereafter, there was an abrupt decline in the level of Increases which did not cease with the first half of 195* but con tinued consistently on to a low point during the last half of that year. On the other hand, the period of 1957-58 commenced at a very low level of Increase in FHA holdings. And even though this rose slightly during the second half of 1957# it quickly fell back to a very low level of increase during the first half of 1958. It was from this point, though, that the extraordinarily abrupt rise to a very high level of Increase during the last half of 1958 took place. Thus, the 1957-58 closed at a very high level of Increases in FHA holdings, whereas the 1953-5* period had closed at a very low level. Increases in holdings of VA mortgage loans.--This section heading uses the term "increases" only for consis tency purposes, since there were actually no Increases in 228 commercial banks' holdings of Los Angeles area VA mortgage loans during either 1953-5** or 1957-58* These periods could be termed semi-annual periods of "negative increases,*' but here will be referred to more exactly as "decreases." As to the changing levels of decreases In such holdings, the first three semi-annual periods of 1957-58 demonstrated a pattern which was completely the opposite of that which had occurred during 1953-5** • As to the fourth semi-annual periods, the second half of 1958 and the second half of 195** were both periods in which the decreases In VA holdings were not so substantial as they had been during the immediately preceding periods, In each instance. However, even then there was so little similar ity between the magnitude of the decrease in 1958 and that of 195* 1# that it can be stated that there was complete dissimilarity between the period 1953-5** and the period 1957-58. Prom a substantial volume of decreases in holdings of VA loans during the first half of 1953# the size of the semi-annual decreases diminished with each succeeding period right through the second half of 195**. In fact, by the time of this last period of the two years, there was virtually stability of holdings since the decrease amounted to less than .1 per cent of VA loans outstanding 229 at that tine. However, the trend of decreases In holdings of VA loans was exactly the opposite during the first three of the four semi-annual periods of 1957-58. From a rela tively snail decrease during the first half of 1957, the decrease during the second half of that year becane sub stantially larger, and then even greater during the first half of 1958 to reach the level of a $30 millions decrease. This trend was reversed slightly, however, with the last half of 1958, a period in which the decrease in holdings amounted only to a volume of $10 millions. Increases in holdings of PHA and VA mortgage loans combined.— As to changes in commercial bank holdings of Los Angeles Metropolitan Area combined FHA-VA mortgage loans, there was little similarity between the pattern of changes In 1957-58 and the pattern of such changes which had taken place during 1953-5^• In essence, the pattern of Increases in commercial bank holdings of these guaranteed-insured mortgage loans during 1953-5^ was dominated by the changing levels of increases in holdings of FHA loans. This was true for the reason that the decreases In holdings of VA loans were not substantial for periods other than the first half of 1953* To the contrary, during the first three of the four semi annual periods of 1957-58, the pattern of decreases in 230 holdings of guaranteed-insured mortgage loans followed closely the pattern of decreases In holdings of VA loans. This was true for the reason that FHA Increases were rela tively minor during these three periods. During the last half of 1958, however, the very substantial increases in holdings of FHA loans more than offset relatively small decreases in VA holdings. Thus, in regard to changing levels of increases and decreases in holdings of combined FHA-VA loans, the first six months of 1953-5^ were characterized by a moderate level of Increase during the first half of 1953. From this point, there was a rise to a substantially higher level of increase during late 1953* Thereafter, there were steadily declining levels of increases during 195^ which reached a very low level of increase during the last six-months period of that year. On the other hand, during the first three periods of the four semi-annual periods making up 1957-58, there were decreases rather than increases in the holdings of combined FHA-VA loans. From only a negligible decrease during the first half of 1957, the decreases became steadily larger during the next two semi-annual periods. However, so substantial was the Increase in holdings of FHA loans during late 1958 that the consequent increase in combined FHA-VA loans was far greater than such increase had been during the last half 231 of 195*. Increases In holdings of conventional mortgage loans.— Other than for a considerable Increase In holdings of Los Angeles Metropolitan Area conventional loans during both the last half of 195* and the last half of 1958, there was very little similarity between the pattern of such increases in 1957-58 and the corresponding pattern of increases during 1953-5** So minor were the increases in holdings of conven tional loans during the first three of the four semi-annual periods of 1953-5* that these increases may be ignored, and this one and one-half year period merely termed a stable period of no change in conventional holdings. However, during the last half of 195** there was a substan tial increase in commercial banks' conventional loan hold ings to a level of $15 millions for the six-months period. For the 1957-58 period, though, the first half year commenced with an $18 millions increase in conven tional loan holdings, and this rose to $39 millions during the second half of that year. Then, after a fall during the first half of 1958, there came about a very substantial rise to a new high level of increases during the last half of 1958 which even approximated the extraordinarily high level of increase in holdings of FHA mortgage loans during that period. 232 Summary.— The most significant dissimilarity between the 1953-5^ period and the 1957-58 period occurred as a result of the extraordinary Increase in volume of total loan holdings during the last half of 1958. This high level Increase had no parallel increase during the counterpart second half of 195^. Other than for this one dissimilarity, however, there was considerable similarity between the pattern of changing levels of semi-annual Increases during 1957-58 and the pattern which had devel oped during 1953-5^j insofar as total loans were concerned. The general pattern which emerged during both periods consisted of low level Increases during the first half year, and relatively higher increases during the last half year, with these higher Increases including the extra ordinarily high increases of late 1958. The various patterns of changing semi-annual Increases in specific types of loans, however, were vastly more complex than the patterns related to total mortgage loan holdings. In fact, dissimilarities of 1953-5^ pat terns and 1957-58 patterns were to some degree evident when each specific type of mortgage loan holdings was considered separately. It Is difficult, particularly when examining the 1953-5^ period, to determine the specific type or types of mortgage loans which had the most Influ ence In bringing about the resultant patterns of Increases 233 In total mortgage loan holdings. The greatest Influence In 1953 would sees to have been In the FHA segment of the portfolio for reasons of the existence of substantial Increases In this type of loan holdings, and also the fact that there was a representative rise in the level of such Increases during the latter half of the year. This rise was also supported, however, by the fact that the decrease in holdings of VA nortgage loans was less during the latter half of the year than during the first half. During 1954, there was evidence of the increasing influence of changes in holdings of conventional loans, particularly as to the level of the increase during the last half of the year. However, the diminishing dollar volume decreases in hold ings of VA loans during 1954 also supported the pattern which emerged. During 1957-58, the overall pattern of changing levels of increases in total mortgage loan holdings was influenced by both FHA lending and conventional lending, in about the same proportions. However, even here there was some support of the pattern during 1958 from the pat tern of VA changes, since the decrease in VA holdings was less during the latter half of the year than it was during the first half. Hence, the variations in levels of increases of the specific types of loans in commercial banks' portfolios were following patterns somewhat similar 234 to each other during 1957-58# with the exception that VA loan holdings were decreasing rather than Increasing. As a result, there was little difference in patterns between those for specific types of mortgages and that for total mortgage loans. This was somewhat different from 1953-54, during which period there were great variations between the trends of the three specific types of mortgages. In any event, It Is Interesting to note that out of the complexities and dissimilarities of the changes in portfolio holdings of the various specific types of loans, there emerged a pattern of changing levels of increases In total mortgage loan holdings In 1957-58 which was similar to that which had emerged during 1953-54. United States In Chapter VI, it was stated that as of December 31, 1952, insofar as mortgage loans outstanding were con cerned, commercial bank holdings made up 28.1 per cent of the total of the three institutions' holdings in the United States. And as was the case with the Los Angeles Metropolitan Area market, commercial banks' share of this national market had decreased somewhat in Importance by December 31, 1956, at which time these banks held only 24.4 per cent of the loans outstanding. It may be noted from Table VII that for commercial banks in the United 235 States the two-year increase in loan holdings during 1953-5^ constituted a 17.6 per cent Increase over Decem- ber 31, 1952. However, it may also be noted that by the 1957-58 period the two-year Increase in holdings amounted only to 12.5 per cent, as computed on a new base of December 31, 1956. Additional information is now fur nished of the period-to-period variations within each of these two-year periods. Increases in total holdings of mortgage loans. - - With the exception of the fact that the first half of 1957 was accompanied by only a negligible increase in commercial banks' mortgage loan holdings, while there was at least a determinable Increase in such holdings during early 1953, there was close similarity between 1953-5^ and 1957-58, as to patterns of changing levels of increases in mortgage loan holdings. There was an increase of Just under one-half bil lion dollars during each semi-annual period of 1953, and this stability of the level of Increases continued through the first half of 195^* However, there was an abrupt rise in the level of Increases to well over $1 billions during the second half of 195^* Even though there was practically no Increase during the first half year of the 1957-58 period, by the second half of 1957 the level of semi-annual increase had 236 gone slightly above one-half billion dollars, and the increase in holdings remained at this amount during the first half of 1958, in a similar manner to that of 1953- 5^. Then, like the second half of 195^# tbe second half of 1958 saw an extraordinary rise, which in 1958 amounted to an increase of one and one-half billion dollars In total mortgage loan holdings. Increases in holdlngB of FHA mortgage loans.— The pattern of varying levels of increases In FHA loan hold ings by commercial banks changed very substantially between the 1953-5^ period and the 1957-58 period. Whereas there had been minor rises and minor falls in the level of Increases during both 1953 and 195^, there was a slow, but consistent rise In the levels of increases in holdings of FHA loans during 1957 and 1958. The fluctuation around a low level of Increases during 1953-5^ la evidenced by the fact that even though the largest semi-annual Increase during the four periods was only some $150 millions, the level did not fall below $50 millions during any of the periods. Hence, it may be stated that during the two-year period, the semi-annual increases were practically constant, with just little more tendency to fall during early 195^ and to rise slightly during late 195^. With the 1957-58 period, however, such minor 237 fluctatlons around a nora did not prevail. From a alight decrease in holdings of FHA loans during the first half of 1957, there was a small rise to an Increase of about $100 Millions during the last half of 1957, and then to almost $150 Millions during the first half of 1958. Then, during the last half of 1958 there was a very substantial increase in FHA loan holdings which reached the anount of one-half billion dollars during this terMinal period for 1957-58. Increases in holdings of VA mortgage loans.--As was the case with FHA loan holdings, the variations in the levels of Increases in VA holdings followed a pattern in 1957-58 which was somewhat different from that of 1953-5^• The most obvious difference, however, was in the overall dollar volume of such increases rather than in the pattern of variations between individual semi-annual periods. In 1953-5^ there were increases in such holdings, but by 1957-58 there were actually decreases during each semi annual period. From only a negligible increase in holdings during the first half of 1953, there was a slight Increase during the second half of that year, and the increase remained only slight during the first half of 195^. However, there was a substantial rise in the level of increase in holdings of VA loans during the last half of 195^• 238 During the first three semi-annual periods of 1957-58, the semi-annual decreases In holdings of VA loans remained relatively stable at approximately $150 millions each period. During the last half of 1958, however, the decrease in such holdings was less substantial in that VA loans held were only $70 millions less at the end of the period than they had been at the beginning of the period. Increases in holdings of FHA and VA mortgage loans combined.— Since the changes in holdings of FHA and VA mortgage loans were to some degree equated to each other during the periods being examined In this study, the pat tern of changes in holdings of combined FHA and VA loans was a clear reflection of the influences of both types of loans. At first glance, it would seem that the fact there were decreases in 1957 and early 1958 and increases during all of 1953-5^ would prove that a dissimilarity between the periods existed, with regard to the patterns of chang ing levels of combined FHA-VA loan holdings. In spite of disparity between overall dollar volumes, there was at least a moderate amount of similarity of patterns, however, between three semi-annual periods of 1953-5^ and the three corresponding semi-annual periods of 1957-58. The period of 1953-5^ commenced with a moderate amount of increase in holdings of combined FHA-VA loans 239 during the first period which regained constant for the next two periods. The period of 1957-58 comenced with a very substantial amount of decrease in holdings during the first period, but this became only a relatively small amount of decrease in holdings by the second period, and then stability prevailed at this same level through the third period. The fourth period of 1958, as was true also of 195*** was characterized by very substantial Increases in holdings of FHA and VA loans combined. Hence, some similarity of patterns can be shown to have existed, since there was relative stability during the second and third periods, and a very substantial Increase in holdings during the fourth periods, for both 1953-5^ and 1957-58. However, the second and third periods of 1953-5** were characterized by a stable level of small increases in holdings, and 1957-58 with a stable level of small decreases in holdings. Summary.— The most striking dissimilarity between the 1953-5*1 period and the 1957-58 period, in regard to changes in total mortgage loan holdings, occurred primarily as a result of the very low level of such increase during the first half of 1957. This almost negligible Increase had no counterpart increase in 1953-5*** since there had been at least a moderate increase during the first half of 1953. For the remaining three semi-annual periods of 240 1957-58, however, there was almost a duplication of the pattern of changing levels of increases as that which had occurred during 1953-54. The Important influence of conventional type loans on the pattern of changes in increases of total mortgage loan holdings is indicated not only from the greater rela tive volume of such conventional loan Increases, but also from the fact that the patterns of conventional loan Increases and total mortgage loan Increases were nearly identical throughout the two periods. At the same time, however, the patterns of changes in holdings of FHA and VA mortgage loans were not by any means inconsequential. As to directions of rises and falls in the levels of both Increases and decreases, neither FHA nor VA loan holdings patterns were to any great extent oriented in directions opposite to those of total mortgage loan holdings. However, the changes in guaranteed and insured mortgage loan holdings were either considerably less in dollar volume importance, as in 1953-5^* or were such as to offset each other partially, as in 1957-58. Thus, it was the changes in holdings of conventional loans which dominated the semi-annual changes in total mortgage loan holdings, generally speaking, during the two periods covered in this study. IV. SALIENT POINTS 24l In accordance with the procedures used in the two previous chapters, certain information may be accumulated at this point for purposes of aiding in the interpretation of the forthcoming conclusions regarding the basic hypoth esis . Pattern of Loans Made--Dollar Volume It Is now necessary to note the degree to which the data for commercial banks conforms with the original assumption that the 1957-58 pattern of loans made would be similar to the corresponding pattern for 1953-5^. Los Angeles Metropolitan Area.--Even though the pattern which occurred during 1957 was not a duplicate of the pattern of 1953* mainly as a consequence of slightly higher volumes of loans made during the first and fourth quarters of 1957, the general pattern of 1957-58 was similar to the general pattern of 1953-5^. Thus, the data for the Los Angeles Metropolitan Area 1b fundamentally In support of the assumption of similarity of patterns. United States.— At the national level, the pattern of variations in loans made during 1957-58 was almost identical to the corresponding pattern for 1953-5^• Hence, the Information for the United States market would indicate significant validity to the above-mentioned assumption 242 regarding consistency of mortgage lending decisions. Pattern of Loans Made— Percentage of the Total Evidence in support of the validity of the under lying assumption would come from a finding of quarter-to- quarter variations in the percentage influence of commer cial banks, and at the same time a quasi-repetition during 1957-58 of the two-year pattern of the percentage varia- tlons which had existed during 1953-5^• Los Angeles Metropolitan Area.--The statistics for commercial banks might at first appear to furnish some support to the assumptions concerning quarter-to-quarter variations in shares of the market. However, the varia tions were slight, and the percentages remained almost constant during the latter part of 1954. Moreover, the two-year pattern of quarter-to-quarter variations during 1957-58, even though such variations were slight, did not resemble the pattern which had obtained during 1953-54. Thus, the assumptions regarding percentages of the local market do not gain support from an analysis of commercial bank lending. United States.— There is also no conclusive evidence in support of the share-of-the-market assumptions, when all commercial banks in the United States are considered. There were almost no variations from quarter-to-quarter in 243 the share of the market which could be attributed to com mercial banks. And, moreover, the pattern of slight variations during 1953-54 indicated a constantly decreas ing importance of these banks, whereas the pattern of 1957-58 indicated an opposite trend. Thus, the conclu sions with regard to the validity of this implied assump tion must come from an analysis of the lending patterns of the other two groupings of institutions. Pattern of Net Additions to Loan Holdings--Total Loans Support of the underlying assumptions would be indicated by a similarity between the 1957-58 pattern of period-to-period net additions and the corresponding pattern which had existed during 1953-54. Los Angeles Metropolitan Area.--There was general support of the assumption of similarity of net additions to holdings of Los Angeles Metropolitan Area mortgage loans, since the directions of the rises and falls in the levels of Increases were identical. However, for purposes of adding detail to a later examination of composite lend ing trends, it is necessary to take cognizance of the more abrupt fall in the dollar volume of increases during the first half of 1958, and the extraordinary rise to a very high level of Increases during the last half of that year. United States.--There was clear support of the 2hk assumption of similarity between patterns, at the national level, with the exception of the extraordinarily low level of increases in holdings during the first half of 1957. As was true for the local market, the conclusion Is that there was general validity to the original assumption, but that the exception to consistency of mortgage lending pol icies in the national market must also be noted. Pattern of Net Additions to Guaranteed-Insured Loans Validity of the original assumption would be Indicated by a similarity between the pattern of changes during 1957-5B and the corresponding pattern which had occurred during 1953-5^. Los Angeles Metropolitan Area.--For this local mort gage market, there Is virtually no evidence In support of the assumption of a repetition of the 1953-5^ pattern of changes in holdings of guaranteed-insured mortgage loans. Of particular note are the decreases which occurred in commercial banks' holdings of these loans during the second half of 1957 and the first half of 1958# and the abrupt Increase In such holdings during the last six months of 1958. None of these were similar to changes which had taken place during 1953-5^. United States.— It is difficult to generalize con cerning the degree of support given to the assumption by 245 the data accumulated for the national market. The two- year dollar volumes of changes in portfolio holdings of guaranteed-insured loans during 1953-54 was quite differ ent from the two-year level for 1957-58. During 1957 and early 1958, there were actually decreases in the holdings of these two types of loans combined. In spite of the differences in general levels, however, the period-to- period trends within each of the two-year periods showed some degree of resemblance between them. Therefore, it is concluded that there was a small amount of support given to the underlying assumption, insofar as consistency of mortgage lending policies at the national level was concerned. Conclusions In general, it may be stated that the underlying assumptions regarding commercial bank lending are supported to a slight degree by the information available, for both the Los Angeles Metropolitan Area market and the national market. However, the support comes primarily from simi larity between patterns of mortgage loans made. The information regarding changes in the shares of total institutional loans made was inconclusive, principally for the reason that quarter-to-quarter variations in the dis tribution of loans among Institutional lenders apparently 246 were confined to the savings and loan associations and life Insurance companies. As to the patterns of additions to loan holdings, the Information is inconclusive for the reason that, in spite of several similarities between the patterns of 1953-5^ and 1957-58, there were a few notable exceptions to such similarities, in each of the markets. As for similarity between patterns of additions to guaranteed-lnsured loan holdings, there is no support of the assumption of consistency of mortgage lending policies, insofar as the Los Angeles Metropolitan Area market was concerned. Moreover, there was only limited support of this assumption, at the national level. CHAPTER X COMPOSITE MORTGAGE LENDING TRENDS It Is possible now to examine the patterns of Institutional mortgage lending which emerged from the combined activities of savings and loan associations, life Insurance companies and commercial banks. The three preceding chapters have had as their pur pose a determination of the degree of validity of the assumptions underlying the basic hypothesis. The present chapter analyzes the composite data for purposes of pro viding a background for conclusions regarding the basic hypothesis Itself. I. OVERVIEW OP THE TWO PERIODS The present study is primarily concerned with quar terly and semi-annual variations In mortgage lending activities. However, It Is important to note that the two-year level of total activities of the three institu tions combined during 1957-58 was higher than the two-year level had been during 1953-5^. This rise In activity occurred during a period in which population was increas ing at an annual rate of approximately 5 per cent in the 2^7 248 Los Angeles area,1 and at the average rate of just less than 2 per cent each year, for the United States.2 This Is not to imply that population Increases accounted for all increases In Mortgage lending activities, since there are great munbers of other demand and supply factors, as well as changes In general price levels, which affect the dollar volume levels of mortgage lending activities. Mortgage Loans Made As would be anticipated In light of the more rapid rate of general growth in the Los Angeles Metropolitan Area, the level of mortgage lending activity In this local mortgage market rose more rapidly than did the level of such activity for the United States as a whole. Los Angeles Metropolitan Area.— In the Los Angeles Metropolitan Area, the $3*9 billions of combined mortgage loans made by the three types of institutional lenders during 1957-58 represented a 31.2 per cent Increase over the $3-0 billions of such loans made during 1953-5^. ^Computed from an average of three estimates as made by the Security-First National Bank (Los Angeles), California State Department of Finance, and California Taxpayers’ Association. 2u. S. Bureau of the Census, Current Population Reports, Population Estimates (percentage compu£e~d from annual Issues). ~ 249 The proportion of the total increase attributable to each type of institution nay be determined from Table IX. Whereas commercial banks increased their loans made by a percentage which was less than one-half the average growth for all three groupings combined, savings and loan association lending Increased at double this average rate. Life Insurance company lending during 1957-58 was only slightly higher than it was during 1953-5^- United States.--For the United States, the $45.3 billions of mortgage loans made by the three types of Institutional lenders represented a 24.5 per cent Increase over the $36.4 billions of such loans made during 1953-54. From Table X, It may be determined that this average rate of increase for the three types of institu tions was also representative of the specific Increase in lending by commercial banks alone. Savings and loan asso ciations did not Increase their loans by twice the average rate for Insltutions, as such associations had done in the Los Angeles Metropolitan Area, but savings and loan associ ations in the United States did make 35*9 per cent more loans during 1957-58 than they had made during 1953-54. As had been true in the Los Angeles Metropolitan Area mar ket, there was only a slight increase in the dollar volume of loans made by life insurance companies. 250 Met Additions to Loan Holdings As was true of loans made, there was also a greater percentage growth in additions to loan holdings, in the Los Angeles Metropolitan Area. During the period of 1953-5** the total Increase in mortgage loan holdings of the three types of institutions in the national market was approximately twelve times the increase in these institu tions' holdings of Los Angeles Metropolitan Area loans. By 1957-58, however, the net additions for the United States were only eleven times those of the Los Angeles Metropolitan Area market. Los Angeles Metropolitan Area.--The net additions of Los Angeles Metropolitan Area mortgage loan holdings for the three types of institutions amounted to $1.5 billions during 1957-58. This amount represented an increase of 23.* per cent over the corresponding $1.2 billions increase during 1953-5*. As may be noted in Table I, most of the $.3 billions difference, between the 1953-5* increase and the 1957-58 increase, can be attributed to the activities of savings and loan associations. From Table II, it may be noted that life Insurance companies added less dollar volume of Los Angeles Metropolitan Area mort gage loans to their portfolios in 1957-58 than they had during 1953-5*. United States.— For the nation as a whole, the 251 two-year Increase in the combined mortgage loan holdings of the three institutions amounted to $16.5 billions dur ing 1957-58. This amount represented an 11.6 per cent Increase over the corresponding $14.7 billions during 1953-54. Commercial banks during 1957-58 added about the same dollar volume of mortgage loans that they had added during 1953-54. Life Insurance companies added less dollar volume of mortgage loans during 1957-58 than they had during 1953-54. Thus, the far greater growth rate of lending activities of savings and loan associations is evident. Implications Before proceeding with the more detailed analyses of quarterly and semi-annual variations in mortgage lend ing, it is necessary to refer briefly to two types of comparisons. Loans made and net additions to holdings.--For the Los Angeles Metropolitan Area, total loans made during 1957-58 exceeded total loans made during 1953-54 by 31.2 per cent. However, the corresponding increase in net additions to loan holdings was 23.4 per cent. At the national level, these two percentages were 24.5 per cent and 11.6 per cent, respectively. This data is consistent with the more detailed 252 information Included in the overview sections of the three previous chapters, and is further evidence of a need for describing mortgage lending patterns in terms of two separate types of mortgage lending activity indicators. Comparisons between local and national statistics.-- Whereas the growth in lending activities was at a substan tially higher rate in the Los Angeles Metropolitan Area, the differences between local and national rates of growth were not alone of such magnitudes as to occasion complications in the present study. The fact that the entire two-year level of activ ities rose slightly more at the national level has little significance with regard to detailed inter-market compari sons to be made for quarterly and semi-annual activities within each of the two-year periods. II. MORTGAGE LOANS MADE Since the major purpose of the present study Is to determine the degree of repetition In 1957-58 of the 1953-5^ patterns of mortgage lending, It is necessary now to examine the composite patterns of changes in the volumes of mortgage loans made, during these two-year periods. The statistical data for the Los Angeles Metropolitan Area appears In Table IX and Figure 10. Similar information for the national market appears In Table X and Figure 10. 253 Mortgage Loans Made in the Los Angelea Metropolitan Area Even though some similarity existed between the 1953-5% and the 1957-58 patterns of variations in volumes of loans made in the Los Angeles Metropolitan Area, the one significant exception to such similarity requires detailed discussion. It is also necessary to take note of the fact that the relative proportions of total loans made by each grouping of institutions were not consistent from quarter-to-quarter; and, moreover, the proportional distribution of loans among groupings of Institutions which occurred during 1953-5% was not repeated during 1957-58. Dollar volume of mortgage loans made.— During a decline in the volume of Los Angeles Metropolitan Area mortgage loans made, this decline commencing with the third quarter of 1953* a low point was reached in the fourth quarter of that year. This was followed by a moderate increase in volume during the first quarter of 195%, and rapid increases thereafter. Pour years later, however, during a similar type decline commencing with the third quarter of 1957, the decline continued into the first quarter of 1958. However, this low point was followed by a very abrupt increase dur ing the succeeding quarters of 1958, Just as had happened in 195%. 254 Therefore, other than for the one-quarter extension of the declining volumes of loans made, this extension running Into the first quarter of 1958, the pattern of rises and falls In dollar volume of loans made during 1957-58 was similar to the corresponding pattern for 1953- 54. Percentage of loans made by specific types of Institutions.--The pattern of variations In shares of total institutional mortgage loans made by each of the three types of Institutions during 1957-58 was signifi cantly different from the pattern of such variation for 1953-54. During 1953 a steady rise In the percentages of the total which were made by savings and loan associations was offset in a different manner each quarter. For example the offset during the first three quarters of the year came from a substantial fall in the relative impor tance of life insurance companies, since the commercial banks' share of the lending market had risen slightly during these quarters. However, during the fourth quarter of 1953, there was a drop In the percentage of the total made by commercial banks and a very small rise in the share made by life insurance companies. Thus, the result was that the continued Increasing Importance of savings and loan associations in late 1953 was offset by decreasing importance of commercial banks. The decreasing portions 255 made by savings and loan associations during the first two quarters of 195* were shared almost equally between life Insurance companies and commercial banks. Generally speak ing, stability of percentages existed during late 195*. During 1957-58 the changes which occurred in the distribution of institutional loans among groupings of institutions followed an entirely different pattern. An extraordinarily high percentage share of the described lending market was attributable to savings and loan associ ations during the second quarter of 1957, partially as a result of a deep decline in the share of loans made by life insurance companies. Then, whereas during the second half of 1953 there had occurred a rise in the relative impor tance of savings and loan associations, such an Increase in the importance of these associations did not appear during the second half of 1957- In fact, there occurred an abrupt decline in the percentage of the three institutions' loans which were made by savings and loan associations during this second six months of 1957. The decline was offset by increasing importance of life insurance company lending activities during the third quarter of 1957, but life Insurance companies and commercial banks both Increased their proportionate shares of the market during the fourth quarter of that year. During the first two quarters of 1958, there were 256 rises in the savings and loan associations' share of the total loans made, as contrasted with decreases In these associations' share during the first two quarters of 1954. The gain during the first quarter of 1958 was offset by a reduction in the share of total lending activities attrib utable to life insurance companies, but the second quarter rise was offset by a decrease in the influence of commer cial banks in the institutional lending market. As opposed to stability in the share of the market controlled by savings and loan associations in the latter half of 1954, there were two successive quarters of decreasing importance of these associations during the last half of 1958. This loss of the savings and loan associations' share of the market in latter 1958 was offset by gains in the importance of commercial banks. Therefore, it can be stated that even though in 1957-58 the savings and loan associations made a higher percentage of the total loans made by the three institu tions than they did during 1953-54, many minor fluctuations occurred from semi-annual period to semi-annual period as to the percentages of total institutional loans which were made by these associations. And, moreover, these fluctu ations in percentage shares of the market during 1957-58 were inconsistent with those which had occurred during 1953-54. 257 Mortgage Loana Made In the United States The national market patterns of variations In dollar volume of mortgage loans made by the combined three Insti tutions were so similar for 1953-54 and for 1957-58 that they may be termed almost identical. Likewise, the period-to-period variations in the percentages of total lending which could be attributed to specific types of institutions followed a pattern in 1957-58 which was very similar to the corresponding pattern of 1953-54. Dollar volume of loans made.— So identical were the patterns of changes in institutional mortgage loans made during 1953-54 to those made in 1957-58 that description of either two-year period can suffice for both periods. Prom a low level of activity during the first quar ter of the first year, loan activity rose rapidly during the second quarter, and then rose less rapidly during the third quarter. Thereafter, there was a rather abrupt downturn in volume of loans made which lasted through the fourth quarter of the first year and the first quarter of the second year. Then, during the remainder of the second year, there was an abrupt and steady increase in loans made during the second, third and fourth quarters, with the level of activity during the fourth quarter being much higher than the peak reached during the third quarter of the previous year. 258 Specific institutions' shares of total Mortgage loans aade.— As was true for dollar volumes of loans made by all three Institutions combined, changes In the shares of the total which were made by each of the three Institu tions during 1957-58 resembled very closely the corres ponding changes In proportionate shares during 1953-5*. The share of the total loans which were made by commercial banks remained so steady throughout both periods that their range of 28 per cent to 30 per cent of the total can be termed stable. Thus, concentration may be placed on the activities of the other two groupings of Institutions. For savings and loan associations and life Insurance companies, each type of Institution showed a considerable amount of quarter-to-quarter fluctuation in its respective share of the institutional lending market, but the general pattern of such fluctuations was almost identical in 1957-58 to what it had been during 1953-5*- From a low point during the first quarter of 1957, the share of the total made by savings and loan associations rose to a high point during the second quarter of 1957 and stabilized itself at this high point during the following quarter as well. Then, the share of the loans made by these associations decreased to a low point during the fourth quarter of 1957 and remained at this low point throughout the first quarter of 1958. Thereafter, this 259 share increased to another high point which lasted through the second and third quarters of 1958. And, during the fourth quarter of 1958* this share once again decreased to a low point. This pattern for 1957-58 was alnost a repe tition of the corresponding pattern for 1953-5^. Since the commercial banks' share of the narket remained constant during these periods, it is self-evident that from the present definition of the Institutional mar- ket that the life Insurance companies' share of loans made had to change in accordance with a pattern which was opposite to that of savings and loan associations. Thus, during both 1953-5^ and 1957-58, the share of the loans nade by life Insurance companies was generally at low points during the second and third quarters and at high points during the first and fourth quarters of each year. III. SEMI-ANNUAL INCREASES IN DOLLAR VOLUME HOLDINGS Tables IV and IX and Figures 12, 17, 21 and 22 con tain much of the background information for the present section. Emphasis now will be placed on the details of the patterns of changes in the levels of Increases during the periods 1953-5^ and 1957-58. Los Angeles Metropolitan Area In comparing 1953-5^ composite patterns of 260 Increases In the three Institutions' Los Angeles Metro politan Area mortgage loan holdings with the corresponding patterns for 1957-58# a number of dissimilarities become apparent. It Is now necessary to examine In detail both the similarities and dissimilarities between the patterns of these two periods. Increases in total holdings of mortgage loans.— As to the changing levels of Increases In the three Institu tions' holdings of all mortgage loans, the inconsistencies of composite patterns appear primarily between the first three semi-annual periods of the two-year periods under examination. Whereas in 1953 the level of Increase was already at a low level and remained almost stable at a low level throughout that year and the first half of 195^# this was not true of 1957-58. During the first half of 1957# the level of Increase in total holdings was first at a very high level, then took an abrupt downturn through the second half of the year, and this downturn continued unabated to a very low level during the first half of 1958. This level of the first half of 1958 was consider ably lower In dollar volume than the otherwise similar low level reached during the first half of 195^- The very abrupt rise to a high level of Increase during latter 1958, did resemble very closely the rise to a high level during latter 195^* 261 Increase in holdings of FHA Mortgage loans.— Total dollar volume Increases in Los Angeles Metropolitan Area FHA Mortgage loan holdings of the three institutions were extremely low during 1953-5* and Most of 1957-58. However, during the second half of 1958 the increase aluost reached $100 Millions, a seemingly significant sum for a local market. It was this extraordinary Increase which made up the major differentiation between the composite pattern of changing levels of Increases of FHA holdings in 1957-58 and that pattern which had existed during 1953-5*. From a very low level during the first half year of 1953 and again in 1957, a slight rise in the levels occurred during the latter parts of both years. These rises then were followed by at least slight drops during the first six months of 195* and again in 1958. However, during the last half of 195*, there was even a lower level of increase than during the first half of that year. This was far from true for 1958, since it was during late 1958 that the extraordinary Increase in holdings of this type of loan occurred. Increases in holdings of VA mortgage loans.--There was almost no resemblance between the composite institu tional pattern of increases in Los Angeles Metropolitan Area VA holdings during 1957-58 and that which took place during 1953-5*. From a low point in the first quarter of 262 1953t there was a substantial rise In the level of the Increase during the second half of that year. Moreover, 195^ was characterized by substantially higher levelB of Increases In holdings which lasted throughout both seal- annual periods. In contrast, however, 1957 commenced with a moderate Increase in holdings during the first half of the year, but there was a considerable drop In the level of the increase during the last half of the year. This falling level of Increases continued to such a degree during the first half of 1958 that there was actually a substantial decrease In the holdings of VA loans during that half year. During the last half of 1958, even though this trend of substantial decreases In holdings did not con tinue, a negligible decrease in the volume of such hold ings did occur. Increases in holdings of FHA and VA mortgage loans combined.— About the only similarity between the pattern of increases In holdings of Los Angeles Metropolitan Area combined guaranteed-Insured loans during 1957-58 and the corresponding pattern of such Increases during 1953-5^ was a resemblance between the last half of 195^ and the last half of 1958. During both 195^ and 1958, the three institutions combined had higher levels of Increases dur ing the first half of the same year. Even here, though, 263 three Inconsistencies between the two counterpart years should be Mentioned. First, the rise In late 195**» even though Intro ducing such larger rises to coMe the next year (not covered In the present study), was not a very rapid rise during this second half of 195**. In contrast, the rise in late 1958 was extrenely rapid and was Introducing only a very slight rise to cowe during the early part of the suc ceeding year (not covered In this study). Secondly, whereas the rising level of Increases in late 195** was alwost entirely the result of Increased holdings of VA loans, this had changed In such a manner by late 1958 that the Increases of this latter period were alnost entirely a result of Increases In holdings of FHA mortgage loans. And, third, the abrupt rise to a high level of Increase in late 1958 followed a decrease in these holdings during the first half of that year. This was different from the conditions of 195*1, when the moderate rise to a high level of Increase followed a period of already moderate Increases during the first six months of that year. As to the first three semi-annual periods of 1953-5*1 and 1957-58, both 1953 and 1957 commenced at rela tively low points in levels of Increases during the first period, but then commenced their dissimilar patterns. For the period consisting of late 1953 and early 195**, there 264 was first a substantial rise In the level of Increases which was followed by a slight fall. However, during late 1957 and early 1958, there was a slight fall first, and then a fall which was so substantial that the first period of 1958 was characterized by a decrease rather than an Increase In the holdings of guaranteed-Insured loans. Thus, In general there was almost no similarity between 1953-54 and 1957-58 In regard to the patterns of Increases In holdings of Los Angeles Metropolitan Area combined FHA and VA mortgage loans. Increases In holdings of conventional mortgage loans.— Even though several dissimilarities existed between 1953-54 and 1957-58 patterns of Increases in com bined institutional holdings of conventional loans, these dissimilarities were not so apparent as were those which existed between the two periods' patterns of Increases In total mortgage loan holdings. As was the case with total loan holdings, the very high level of conventional loan increases during the first half of 1957 and the subsequent fall to a very low level of such Increases during the first half of 1958 differed considerably from the 1953-54 pat tern of varying levels of Increases In holdings of conven tional loans. The greater degree of dissimilarities between patterns of Increases In total holdings resulted primarily from the added effects of the low level of 265 increases in holdings of guaranteed-lnsured loans during early 1953* and the decrease in such holdings during the first half of 1958. United States The following discussion of the national market patterns of Increases in the three Institutions' mortgage loan holdings is based primarily on Tables V through VIII and Figures 17 and 22* Since this information is avail able for reference, the present discussion can consist of discussions of the changes from high levels to low levels, and vice versa, rather than with discussions of actual dollar volumes. Increases in total holdings of mortgage loans.— At the national level, there was only one minor dissimilarity between the pattern of changing levels of Increases in 1957-58 and that which took place during 1953-5^. That exception is related to the lending activities during the second semi-annual period of the first year of each of the two-year periods. From a low level of increase during the first half of 1953* there was a gradual rise in the level of Increase during the second half of the year, and this gradual rise continued through the first half of 195^. Thereafter, there occurred a very rapid rise in the level of Increase during latter 195^. 266 On the other hand, from a low level during the first period of 1957* there occurred during the second period of that year a much wore substantial rise than that which occurred during the second half of 1953. This was primarily a result of relatively substantial Increases in mortgage holdings of commercial banks during the second half of 1957. With the exception of conditions existing during this one six-months period, though, the pattern of changes during 1957-58 resembled very closely the corres ponding pattern of 1953-5^* as has been described above. Increases in holdings of FHA mortgage loans.— Extreme differences appeared at the national level between the 1953-5^ and the 1957-58 patterns of changing levels of Increases in FHA loan holdings. During 1953-5^* the level of Increases in the three institutions 1 holdings of FHA loans was very low throughout the period, particularly as compared with the levels for VA and conventional loans. And, moreover, the semi-annual variations In levels were so slight that it may be stated that FHA loan increases remained relatively stable throughout the two years, with only a slight fall in the levels of increases during 1953 and the first half of 195^* and then a slight rise during the latter half of 195^. By contrast, 1957-58 presented an entirely differ ent pattern. From a slight decrease in FHA holdings during 267 the first half of 1957* there was a very substantial rise in the level of Increases during the second half of that year. This was followed by a very slight fall In this level of increases during the first half of 1958, and then a very abrupt rise to new heights of Increases during the latter half of 1958. Increases in holdings of VA Mortgage loans.— The national trend as to changing levels of increases in the three institutions1 combined holdings of VA loans was also entirely different in 1957-58 from what it had been during 1953-5^. The two periods in 1958 actually were character ized by decreases rather than Increases in the holdings of VA loans. Prom a very low point of Increases in VA holdings during the first half of 1953* there occurred a substantial rise In the level of Increases during latter 1953- This was followed by a slight Increase during the first half of 195^* and an abrupt and very considerable rise In the level during latter 195^. By contrast, tbe first quarter of 1957 was accom panied by a moderate Increase in VA holdings, but that proved to be the last of the Increases, for 1957-58 at least. During the second half of 1957* there was substan tially no change in the holdings of VA loans; and this stability was followed in early 1958 by moderate decreases 268 which continued at the save level of decreases throughout the remainder of 1958 as well. Increases in holdings of FHA and VA Mortgage loans combined.--The national pattern of changing levels of Increases in the three Institutions1 holdings of combined guaranteed-lnsured loans during 1957-58 resembled fairly closely the corresponding pattern of the changes which took place during 1953-5^* The one notable exception can be noted from a comparison of the first half of 195^ with the first half of 1958. From a relatively low point in such Increases during the first half of 1953 and also during the first half of 1957> there were moderate rises in the levels of such Increases during the latter part of each of these years. However, during the first half of 195^ the level of the increase in holdings of guaranteed- insured loans remained constant at the same level as that of the immediately preceding period. During the counter part period, that is the first half of 1958, conditions were different in that there was a marked decline in the level of Increases in guaranteed-lnsured loan holdings. This terminated the dissimilarities, though, since the last half of 1958, like the last half of 195^* was narked by a very substantial rise in the level of Increases. Increases in holdings of conventional mortgage loans.--Other than for a slight decline in the level of 269 the three Institutions' Increases In conventional loan holdings during the second half of 1953, which was not duplicated In the second half of 1957, there was some similarity between the pattern of Increases In 1957-58 and the corresponding pattern of 1953-5%. The years 1957 and 1958 can quite slsiply be described as years of substantial and consistent rises in the levels of Increases in hold ings of conventional loans throughout the two years. And, with the exception of the above-mentioned second half of 1953, the years of 1953 and 195% alBo were characterized by at least moderate Increases In holdings of conventional loans. Thus, there was a considerable degree of similarity between the 1953-5% and the 1957-58 patterns of changing levels of Increases in conventional holdings. IV. SALIENT POINTS It Is now possible to relate the discussions of the present chapter to the basic hypothesis of the study. However, even at this point, it Is not possible to arrive at meaningful conclusions without also referring to the findings presented In the three preceding chapters. A resume of such findings, as they relate to the Implied assumptions underlying the hypothesis, will be included after summary statements are made concerning composite 270 Mortgage lending trends. Lob Angeles Metropolitan Area As would be anticipated, if the basic hypothesis were to be proven valid, the composite Institutional Mort gage lending patterns of 1957-58 did vary to some degree froM the corresponding patterns for 1953-5^. It is now necessary, however, to determine whether or not such variances can be attributed to changes In the structure of the market. Variations.— The 1957-58 composite pattern of lend ing varied from the 1953-5^ pattern in at least three respects: (1) The net additions to mortgage loan holdings during the first half of 1957 were far in excess of the corresponding additions during early 1953. (2) The deep decline in the level of additions to loan holdings during the second half of 1957 was in con trast with the stable level of additions to holdings in late 1953. (3) The decline in the volume of loans made during the first quarter of 1958 and the very low level of addi tions of holdings during the first six months of 1958 differed from the slight rises in both types of lending activities during early 195^. Structural changes and variations in lending.--The 271 principal change in the structure of the market, between December 31* 1952 and December 31* 1956, consisted of an Increase in the proportion of the institutional market held by savings and loan associations from a 36 per cent share to a 46 per cent share. It is now necessary to dis cuss the possibilities of the existence of a relationship between the increasing Influence of savings and loan asso ciations and the variations between the 1953-54 and 1957- 58 composite patterns of lending. (1) The extraordinarily high level of total addi tions to institutional holdings during the first six months of 1957 can to a great extent be attributed to the activities of savings and loan associations, since the other two institutional lenders' additions to holdings were at very low levels during that period. (2) The deep decline in the level of combined additions to holdings during the last half of 1957 can also to a great extent be attributed to savings and loan associations, since there were actually rising levels of additions to holdings during that period in the portfolios of the other two groupings of institutions. (3) As for the decline in the volume of loans made during the first three months of 1958 and the very low level of additions to holdings during the first six months of that year, the data indicates that savings and loan 272 association activities were only one of several factors contributing to the development of such lending condi tions. The volume of loans made during the first quarter of 195& by'savings and loan associations did drop to a very low level. However, the loans made by these associ ations rose rapidly during the second quarter; and, as a result, there was a slight rise In the level of additions to holdings for the first six months of that year. At the same time, however, both of the other types of institutions also had decreases In their volumes of loans made during the first quarter of 1958. Furthermore, these life Insurance companies and commercial banks both had substantial falls in the levels of their additions to holdings during the first six months of 1958. Therefore, savings and loan association activities were only one of several causes of this one deep decline in composite institutional lending activity during early 1958. Supplementary mortgage classification Information.-- Since the rising importance of conventional lending in the Los Angeles Metropolitan Area was closely related to the greater domination of the market by savings and loan asso ciations, the effects of the declining influences of guaranteed-lnsured lending during 1957-58 are at least partially attributable to the change in the institutional 273 structure of the market. This is for the reason that these associations have strong preferences for conven tional loans. Therefore, several points of information may be added which relate specifically to the mortgage classification composition of the market: (l) As mentioned above, one of the variations between the 1953-5^ and the 1957-58 patterns of lending occurred as a result of the abrupt fall in the level of additions to holdings of loans during 1957, whereas stability had occurred during 1953* During both 1953 and 1957, there was a falling level of Increases in holdings of conventional loans. However, during 1953 there had been increases in holdings of guaranteed-lnsured loans which had served to offset the falling levels of conven tional loans. During 1957, however, this was not true; and the abrupt declines in conventional lending thus became abrupt declines in total lending. This declining importance of FHA-VA lending could not be attributed alone to the Increasing influence of savings and loan associations, since commercial banks were permitting their holdings of guaranteed-lnsured loans (par ticularly VA loans) to decrease. However, because of the greater Influence of savings and loan associations in the market, their lack of interest in PHA-VA lending was becoming a more dominating factor In the market. 274 (2) The extremely low level of additions to hold ings of loans during the first half of 1958 can be attrib uted to a great extent to decreases in holdings of VA loans, particularly as a result of the lending decisions of savings and loan associations and commercial banks. However, savings and loan associations' additions to con ventional holdings were substantial enough to offset their falling level of increases in VA loans. This was not true of the commercial banks. As for life insurance companies' activities, such companies' additions to FHA loan holdings offset their decreases in VA holdings, but the level of their Increases in holdings of conventional loans had also fallen. Thus, the data indicate that in terms of total mortgage lending the low level of activity during 1958 was as much attributable to the activities of life insurance companies and commercial banks as it was to the activities of savings and loan associations. Summary.--The composite lending pattern for all of 1957 and the first half of 1958, particularly as described in terms of variations in level3 of additions to loan holdings, varied considerably from the lending pattern which prevailed during 1953 and early 1954. Moreover, during 1957, and to a limited extent during the first quarter of 1958, the non-repetition of 275 the earlier years' pattern of lending could he attributed primarily to the lending policies of savings and loan associations. Since the change in structure of the Mort gage market had been dominated the growing importance of these associations, it would at this point appear that the Los Angeles Metropolitan Area data indicates some measure of validity to the basic hypothesis. However, additional no£e must be taken of the examination of the underlying assumptions, as discussed in the three preceding chapters, before arriving at a final conclusion regarding the basic hypothesis. United States The pattern of mortgage lending during 1957-58, at the national level, was almost Identical to the corres ponding pattern which had prevailed during 1953-5*1. The one minor exception to similarity is included in the dis cussions below, but only for the purpose of pointing out that such exception did not appear to be related to the increasing importance of savings and loan associations in the structure of the market. Structural changes and variation In lending.--The only variation between the pattern of 1957-58 and that of 1953-5^ occurred as a result of the existence of a higher level of increase in holdings during the second half of 2.76 1957 than had occurred during the second half of 1953. The only significance of this variation to the present study lies In the fact that the slightly abnormal Increase In activity during the second half of 1957 was brought about by Increased commercial bank lending activ ity, rather than by Increased lending of savings and loan associations. Thus, the one divergence from the pattern of 1953-5* could not be explained by the fact that savings and loan associations had become more Influential In the structure of the market. Structural changes and similarity In lending.--It Is only Important at this point to refer to the three remaining semi-annual periods of 1957-58* during which time the lending patterns which emerged were very similar to those which existed during the corresponding periods of 1953-5** In the discussion Immediately below, the term "normal" refers to the conditions of 1953-5*: (1) The level of activity during the first half of 1957 (which corresponded to a similar level during early 1953) was maintained during a period of higher than normal Increase In life Insurance company holdings and a lower than normal Increase In commercial bank holdings. (2) The level of activity during the first half of 1958 (which corresponded to a similar level In 195*) was maintained during a period In which savings and loan 277 association lending, which was primarily conventional mortgage lending, was maintained at a level which was high enough to offset less than normal Increases In holdings of guaranteed-lnsured loans In the portfolios of life insur ance companies. (3) The very high level of activity during the last half of 1958 (corresponding to a similar high level during late 195*0 was maintained during a period in which greater than normal lending by savings and loan associa tions served as an offset to less than normal Increases In life Insurance company holdings of all types of mortgage loans. Supplementary mortgage classification Information.— It Is of supplementary value to note that the other than normal (as defined above) lending activities of life Insurance companies and commercial banks were not confined to the FHA-VA segments of their lending activities. With the exception of the first half of 1958, all periods during which commercial bank and life Insurance company activities were other than normal were character ized by variations in conventional lending, as well as guaranteed-lnsured lending. Summary.— For all practical purposes, It may be stated that the 1957-58 composite pattern of lending at the national level was identical to the corresponding 278 pattern which existed during 1953-5*• Thus, a preliminary analysis would appear to Indi cate some measure of validity to the basic hypothesis, since the greater similarity between the 1953-5* and 1957-58 patterns at the national level would appear on the surface to be Indicative of the smaller degree of change which had taken place In the structure of the national market. However, It Is necessary first to re-examine the assumptions underlying the hypothesis before arriving at a final conclusion with regard to the degree of validity of the hypothesis. Such a need for re-examining the find ings presented In the three previous chapters Is suggested by Indications that the similarity of national composite patterns was maintained In the face of the fact that life Insurance companies and commercial banks did not vary their perlod-to-perlod mortgage lending activities during 1957-58 in accordance with the exact patterns of such vari ations during 1953-5*• V. RE-EXAMINATION OP THE UNDERLYING ASSUMPTIONS Prom the above discussions of the composite mort gage lending trends, preliminary statements have been made regarding the validity of the basic hypothesis. Thus far, the data would Indicate some measure of validity to the 279 basic hypothesis. However, a determination of the degree of such validity, as well as the significance of such a finding, must depend upon the extent to which the data also support the underlying assumptions. The following discussion Is chiefly a summary of the Information presented in the three preceding chapters. Los Angeles Metropolitan Area As may be noted below, there Is little in the Los Angeles Metropolitan Area data to support an acceptance of the underlying assumptions which were implied in the present study. Differences between individual groupings.--There is Indication that each grouping of institutions did react to economic changes In a manner which was distinguishable from the manner in which each of the other two groupings of Institutions reacted. Such an Indication comes from the existence of variations from quarter to quarter In the percentages of the total institutional loans made which were made by each of the separate types of Institutions. As will be noted below, however, this apparent confirmation of the validity of the underlying assumptions of the study was to a great extent limited to these period-to-period variances In the distribution of loans among Institutional lenders. Non-repetition of lending activities by Individual 280 groupings.--There Is little In the data to support the assumption that each of the three Individual groupings of Institutions would react to economic conditions which existed during 1957-58 in the same manner In which it had reacted to the similar conditions which had occurred dur ing 1953-5*. The greatest dissimilarity between 1953-5* and 1957-58 patterns of lending activities occurred in the case of the savings and loan associations. The greatest similarity of actions occurred in the case of the commer cial banks; however, even the banks reacted somewhat dif ferently during 1957-58, particularly with regard to PHA-VA lending. The non-repetition of patterns for each of the groupings was more nearly apparent in the data for net additions to loan holdings than in the statistics of loans made. Generally speaking, however, non-repetition of reactions prevailed. This is indicated by the finding that at least minor dissimilarities occurred in regard to gross volumes of loans made, and also the finding that very substantial dissimilarities occurred in regard to patterns of semi-annual net additions to mortgage loan holdings. United States Prom the data for the national market, there is a greater amount of support of the assumptions underlying 281 the hypothesis. Even st this national level, however, several exceptions to the assumed conditions may be shown to have existed. Differences between Individual groupings.--Even though the percentage of total loans made by commercial banks remained nearly constant, the percentages attribu table to each of the other two groupings of Institutions did vary from quarter to quarter. Hence, there would seem to be a basis for assuming that there will generally be a variation among Individual groupings of Institutions as to the manner in which each grouping will react to given changes in economic conditions. Repetition of lending activities by Individual groupings.--There was a considerably greater amount of stability displayed at the national level than at the local level with regard to the repetition in 1957-58 of the 1953-5^ lending activities of each separate grouping of Institutions. However, a few exceptions to repetitions of patterns occurred. The net additions to mortgage hold ings of commercial banks were a little lower during the first half of 1957 and a little higher during the second half of that year than would have been anticipated in light of the lending activities of these banks during 1953* As for life Insurance companies, the conditions were reversed. For these latter companies, there occurred 282 a slightly higher level during the first half of 1957 and a slightly lower level during the second half of that year, as compared with conditions of 1953. Again, as was true for the Los Angeles Metropolitan Area market, the exceptions to repeating patterns of activities occurred primarily in these net additions to holdings, as computed on a semi-annual basis. However, the exceptions at the national level were minor. Thus, considering the overall findings with regard to both types of indicators of activities, the data indi cates a significant measure of support to the assumption that individual groupings of institutions, in the national market, will react in a consistent and predictable manner to changes in general economic conditions. Summary For both the Los Angeles Metropolitan Area market and the national market, there is indication that varia tion exists among the three groupings of institutions as to their individual responses to a given set of general economic conditions. As for each individual grouping repeating its own mortgage lending patterns in response to repetitions of changes in general economic conditions, however, the results of this study are not so clear. Fundamentally, 283 however, the data indicate that such repetitions of actions did not exist for any of the three institutional lenders in the Los Angeles Metropolitan Area market. On the other hand, such repetitions did occur, at least to a limited extent, in the national market. It is now possible to proceed with the formal con clusions to the study. CHAPTER XI SUMMARY AND CONCLUSIONS Since a considerable amount of empirical research was necessary for the present study, much of the back ground information, as well as the results of testing the hypothesis, could be tensed ' ’findings1' of the study. However, it is the purpose now only to summarize the data which has been the most essential to the testing of the hypothesis, and to present the final conclusions regarding the indicated degree of validity of the basic hypothesis and its underlying assumptions. As discussed in Chapter VI, the distribution among groupings of institutional lenders of mortgage loans out standing had changed considerably In the Los Angeles Metro politan Area market between December 31, 1952 and Decem ber 31t 1956. To a lesser degree, there had also been a change between these dates in the distribution of mortgage loans among the same groupings of institutional lenders in the national mortgage market. It was the primary purpose of this study to deter mine whether or not the change in the structure of a local mortgage market affects the period-to-period composite 284 285 patterns of Institutional Mortgage lending In that market, during periods characterized by recurring cyclical changes in general economic conditions. As discussed In Chapter XV, the two-year period of 1957-58 was to a great degree characterized by a repetition of the changing cyclical economic conditions which had prevailed during 1953-5^. The research for the study was oriented primarily toward a determination of the degree of repetition or non-repetition during 1957-58 of the institutional mort gage lending patterns which had prevailed in the Los Angeles Metropolitan Area during 1953-5^. Secondarily, there was included in the research an examination of the degree of repetition or non-repetition of institutional mortgage lending patterns in the national mortgage market, during these same two-year periods. I. COMPOSITE MORTGAGE LENDIMG TRENDS When statistics for the three major groupings of institutions are combined, a comparison of the resultant composite pattern of mortgage lending during 1957-58 with the corresponding pattern for 1953-5^ indicates some measure of validity to the basic hypothesis. However, upon separate and detailed examination of the lending activities of each individual grouping of institutions, in 286 light of the basic assumptions made in this study concern ing anticipated actions of individual groupings, the tentative finding of validity of the basic hypothesis loses a considerable amount of Its significance. The present section summarizes data which indicate this apparent validity of the basic hypothesis. The suc ceeding section summarizes the data which indicate doubt as to the acceptability of some of the implied assumptions which underlie the hypothesis. Los Angeles Metropolitan Area Some measure of validity to the basic hypothesis is indicated by the fact that the composite pattern of lending during 1957-58 was riot a repetition of the pattern which had prevailed during 1953-51 *, in the Los Angele3 Metropolitan Area mortgage market. Moreover, some support to this contention of validity of the hypothesis is indi cated from a growth by 1957-58 in the degree of influence of savings and loan associations on the composite pattern of institutional lending. Non-repetition of the 1953-5** pattern during 1957- ^8^.--The evidence of the non-repetition in 1957-58 of the 1953-5** pattern of lending comes from the existence of extraordinarily large volumes of net additions to loan holdings during the first half of 1957; a subsequent rapid 287 fall In the level of net additions to holdings during the second half of 1957; a continued lag In the volume of loans wade during the first quarter of 1958; and a very low level of net additions to holdings during the first half of 1958. None of these conditions had to any great extent existed during 1953-5^. Influence of savings and loan associations.— A detailed examination of lending patterns gives evidence of the greater influence by 1957-58 of savings and loan asso ciations on the composite pattern of Institutional lending in the Los Angeles Metropolitan Area market. This greater influence becomes readily apparent from a comparison of the conditions of 1957 with the conditions which prevailed during 1953. Whereas the savings and loan associations' pattern of lending during 1953 was not clearly reflected in the composite pattern, these associations' pattern of lending dominated to a great degree the composite pattern of institutional lending during 1957. And, since most of the differences between the 1953-5^ and the 1957-58 com posite patterns of lending resulted from a non-repetition of 1953 lending activities in 1957, there is indication of some measure of validity to the basic hypothesis. Implications.— In order for the results of the present study to appear to be useful for such purposes as predicting future lending trends, It would also be 288 necessary for there to be Indications that the nature and characteristics of an Individual grouping of Institutions are stable, and such as to bring about a repetition of its previous pattern of mortgage Investment decisions in response to a repetition of cyclical economic conditions. It is with regard to this latter point that the above- mentioned tentative finding of validity of the hypothesis loses some of its significance. This is for the reason that the 1953-5^ lending patterns for each of the individ ual groupings of institutions, and savings and loan asso ciations In particular, were not repeated to any great degree during 1957-58. This topic is pursued further, after a discussion below of the composite mortgage lending trends in the national market. United States In view of the lesser degree of structural change at the national level, some degree of validity of the basic hypothesis might be suggested by indications of greater similarities between 1953-5^ lending patterns and 1957-58 lending patterns in the national market. To a considerable extent, the statistical information indicates that greater similarities between these patterns did exist in the national market. Even with regard to this finding, however, certain details are necessary if proper 289 Interpretations of the finding are to be forthcoming. Repetition of the 1953-5^- pattern during 1957-38.— So closely did the pattern of 1953-5^ prevail once again during 1957-58 that for all practical purposes it nay be stated that there was repetition of composite institu tional lending patterns in the national market. Such sim ilarity of patterns had not occurred in the Los Angeles Metropolitan Area mortgage market. Implications.— The implications of the repetition of patterns would at first appear to be that the change In structure of the national market was not only less than the change in structure of the local market, but also that the change at the national level was not even of such a magnitude as to bring about any variations during 1957-58 from the pattern of lending which was established during 1953-5^. However, the significance of these findings also depends to some extent upon the validity of the under lying assumptions regarding the predictability of individ ual groupings' reactions to general economic changes. Even though such predictability seemed possible for savings and loan associations, some doubt arises as to the degree of success which might be attained in predicting the level of activities of commercial banks, and even more particu larly, of life Insurance companies. 290 Cautionary note.— It must be added that the closer repetition of the 1953-5* pattern during 1957-58 at the national level la not without shortcomings aa an Indicator of validity of the hypothesis. This Is for the reason that there are a vastly greater number of Individual firms operating In the national Market, and this fact might have a bearing on the consistency of mortgage lending patterns from one period to another. At the sane tine, however, the very close duplication In 1957-58 of the 1953-5* national pattern Is significant in light of the substan tial variations which had occurred In the local market. II. LENDING PATTERNS OP INDIVIDUAL GROUPINGS OP INSTITUTIONS A determination of the degree of significance of the above-nentloned findings depends upon additional find ings related to certain assumptions underlying the hypoth esis. It was implied in the basic hypothesis, as formu lated for the present study, that the lending patterns of any one grouping of Institutions would be repetitive, and thus predictable, in the event of recurring cyclical economic conditions. It was also implied that each group ing of institutions would react in a different manner from that of each of the other groupings of institutions, in regard to its variations in mortgage lending during periods 291 of given cyclical economic changes. There was indication in the data for both the national and local markets that there was validity to this latter assumption. This indication came from the determination of period-to-period variations in the pro portions of the lending market which could be attributed specifically to individual groupings of institutions. Concerning the assumed repetition of the lending pattern of each specific grouping, however, there was indication of a lack of acceptability of the underlying assumptions, and particularly with regard to the condi tions found to exist in the Los Angeles Metropolitan Area market. 1x38 Angeles Metropolitan Area There were several dissimilarities between the 1953-5^ and the 1957-58 patterns of lending of savings and loan associations and also life Insurance companies, in the Los Angeles Metropolitan Area market. Moreover, the 1957-58 pattern of lending by commercial banks in at least one significant respect differed from the corres ponding pattern of lending by these banks during 1953-5^. Savings and loan associations.--Since it was the phenomenal growth of the savings and loan associations which primarily brought about the significant change in 292 the structure of the Los Angeles Metropolitan Area mort- gage market, It Is Important to review certain Information regarding these associations' lending patterns. The data has Indicated that the non-repetition in 1957 of the changes in composite institutional holdings which occurred during 1953 could be attributed primarily to the lending activities of savings and loan associations. However, It has also been pointed out that these associa tions did not vary their own lending activities in 1957-58 in such a manner as to indicate that there was a consis tency of policy making which could have made their 1957-58 lending pattern predictable in light of their 1953-5^ lending pattern. The fact that this would seem to detract from the significance of the above-mentioned findings of a measure of validity to the hypothesis is included among the general implications discussed below. Life insurance companies and commercial banks.-- Even though the influence of savings and loan associations on the Los Angeles Metropolitan Area lending market was considerably greater than the influence of either of the two other types of institutions, it is important to note that life insurance companies and commercial banks also did not duplicate their 1953-5^ patterns of lending during 1957-58. For life insurance companies, the only resem blance between the two periods1 patterns occurred during 292 the structure of the Los Angeles Metropolitan Area mort gage market, it is important to review certain information regarding these associations1 lending patterns. The data has indicated that the non-repetition in 1957 of the changes in composite institutional holdings which occurred during 1953 could be attributed primarily to the lending activities of savings and loan associations. However, it has also been pointed out that these associa tions did not vary their own lending activities in 1957-58 in such a manner as to indicate that there was a consis tency of policy making which could have made their 1957-58 lending pattern predictable in light of their 1953-5^ lending pattern. The fact that this would seem to detract from the significance of the above-mentioned findings of a measure of validity to the hypothesis is included among the general implications discussed below. Life Insurance companies and commercial banks.-- Even though the influence of savings and loan associations on the Los Angeles Metropolitan Area lending market was considerably greater than the Influence of either of the two other types of institutions, it is important to note that life insurance companies and commercial banks also did not duplicate their 1953-5^ patterns of lending during 1957-58. For life insurance companies, the only resem blance between the two periods1 patterns occurred during 293 the last six months of the periods. In regard to commer cial bank lending, the decline in such banks1 mortgage lending activities during early 1958 did not parallel their lending activities during early 1954. Implications.--As was mentioned in the introductory chapter, it was not essential in the present study to sub stantiate completely and precisely all of the several assumptions underlying the basic hypothesis. However, the available data indicates clearly that the assumption of stable and predictable reactions of specific individual groupings to repeating economic changes was not an accept able assumption for the Los Angeles Metropolitan Area market. Thus, it would appear that the tentative support of the basic hypothesis, as indicated by the finding of dissimilarities of composite institutional mortgage lend ing trends, does not prove conclusively that there is a significant degree of validity to the basic hypothesis. United States There was very close similarity between the 1957-58 and the 1953-54 patterns of lending by savings and loan associations in the national market. Moreover, with the exception of the low level of activities during early 1957* the mortgage lending pattern of commercial banka during 1957-58 was very similar to the corresponding 2 9 4 lending pattern for these bank3 during 1953-54. However, there were some indications of non-repetition of a 1953- 54 pattern of lending which arose with regard to the activities of life insurance companies. Comparison between markets.--For the Los Angeles Metropolitan Area mortgage market, only the commercial banks varied their mortgage lending activities on a semi annual basis during 1957-58 in a manner which was similar to that of 1953-54. In the national market, however, savings and loan associations duplicated their 1953-54 pattern in 1957-58, and commercial banks closely approxi mated their 1953-54 pattern again during 1957-58. Implications.--The implications of these findings would seem to be that the assumptions underlying the basic hypothesis are fundamentally valid for the national mar ket. However, as has been mentioned above, the data indicate that at least one of such assumptions Is not valid for the local market. III. CONCLUSIONS OP THE STUDY In light of the details included in the above pre sentations of the findings with regard to composite lend ing trends and patterns of lending by individual groupings of institutions, the general conclusions of the study may be stated quite simply. The data Indicate that there is 295 a measure of validity to the ba3ic hypothesis, a3 this hypothesis was formulated for the present study. However, there is a detraction from the significance of this deter mination, for the reason that there is no indication that such a finding will lead to greater accuracy in the pre dicting of future trends in mortgage lending. At this point, a few of the details leading to this conclusion may be summarized. Specific Conclusion As stated above, the conclusion of the study relates not only to the Indications of some validity to the basic hypothesis but also the problems still remaining with regard to making actual predictions of future insti tutional mortgage lending patterns. Variatlons in patterns.--The data indicate that the composite institutional mortgage lending pattern of 1957-58 varied from the corresponding pattern which pre vailed during 1953-5^* in the Los Angeles Metropolitan Area mortgage market. Further, this change in patterns of lending could be related to the increasing influence of savings and loan associations in the structure of the local market. In addition, in the national mortgage mar ket, where there had occurred less of a change in market structures, there also occurred less of a variation between the 1957-58 pattern of institutional lending and 296 the corresponding pattern for 1953-54. Problems in predicting local patterns of lending.— The data also indicates, however, that the variation between the two periods 1 patterns in the local market was caused by a combination of two factors. First, as was assumed, there was a variation between Individual group ings of institutions as to their patterns of reactions to a series of changes in economic conditions. Second, how ever, in contradiction to one of the assumptions of the study, the nature and characteristics of each individual grouping of institutions were not such as to bring about, for each grouping considered separately, a repetition in 1957-58 of its 1953-54 pattern of mortgage lending. Summary.--The study indicates that the existence of a non-repetition of composite institutional mortgage lending patterns, during periods characterized by repeat ing cyclical economic conditions, is related to changes in the structure of the local institutional mortgage market. At the same time, however, there is also indication that the problems of predicting needed details of non recurring local mortgage lending patterns are complicated by the fact that the nature and characteristics of individ ual groupings of institutional lenders are not such that each Individual grouping will react in an easily predict able manner, to given economic conditions, insofar as its 297 own mortgage lending activities in a local area are con cerned. Therefore, it is concluded that the effects of general economic conditions on local mortgage lending will vary with changes in the structure of the market; but it is also concluded that knowledge of a change in market structure does not in itself necessarily lead to greater predictability of the details of local mortgage market lending patterns which will occur during assumed cyclical changes in the economy. Suggestions for Further Analyses It would seem that attempts to find practical answers to complex local mortgage market problems, in light of the limited statistical information available, might frequently lead to over-simplification and the attainment of only partial solutions to basic problems. Such would appear to be the case in the present study, particularly with regard to the questionable assumption that savings and loan associations and life insurance companies would each, in the Los Angeles Metropolitan Area mortgage market, repeat in 1957-58 its own 1953-5* pattern of mort gage lending. On the other hand, attemps to take into considera tion, at once, all of the many factors which influence a 298 local mortgage market might have led to highly theoretical conclusions, not only as a result of the paucity of empir ical local market statistics, but also as a result of an Inability to consider simultaneously all of the many vari ables which are Involved. It would seem clear, though, that some knowledge In addition to knowledge of the structure of the institu tional market must be known if accurate predictions of mortgage lending patterns are to be made. Prom a study related to FHA-VA lending in a non-metropolitan local mortgage market, Professor James C. T. Mao has suggested certain factors other than the market structure which may have significant effects on the kinds of lending done in any given local market.1 Among those he has suggested are the income and wealth position of home buyers and the level of construction costs.2 In the background chapters of the present study, certain additional factors have been men tioned which may be closely related to total volume of mortgage lending. Among these latter factors are charac teristics of the population, degree of Importance of Imported mortgage capital, and variations In the rate of ^James C. T. Mao, "The Impact of Federal Mortgage Insurance Programs on Ann Arbor's Home Mortgage Market, 1956," Journal of Finance, September, 1958. 2Ibid., p. 416. 299 Inflow of savings capital Into those Institutions which participate In the Mortgage lending market. It Is possible that some of the Information pre sented In the present study nay suggest several types of analyses which night conceivably be undertaken for pur poses of developing capabilities In the forecasting of future nortgage lending trends. A study of the rate of Inflow of Institutional savings would appear to be worthy of particular attention, with reference to the Los Angeles Metropolitan Area mortgage narket. In the present research the over-simplified assumption was made that the rate of Inflow of institutional savings would be one of many fac tors affecting individual Institutional lending policies, and that all of these factors combined would lead to a repetition in 1957-58 of the 1953-5^ pattern of mortgage lending, for each specific grouping of institutions. However, the very high rate of Inflow of savings into Los Angeles Metropolitan Area savings and loan associa tions during the latter half of both 1956 and 1958 and the extremely low rate of inflow of savings into these associ ations during the second half of 1957 could not have been anticipated even though the general characteristics of such associations were well known and the nature of their operations during 1953 and 195^ could be determined with accuracy. In the case of life insurance companies, 300 however, the non-repetition of their 1953-5^ patterns of lending could not be shown to be closely related to vari ations in the rate of inflow of their total savings cap ital. In any event it is here suggested that in addition to an investigation of market structures, local mortgage market studies should include separate analyses of abnor malities which may occur in the inflow of savings into the institutions participating in a local mortgage market. It is also possible that a separate analysis of the topic of importation of capital from other geographical areas, with particular emphasis on the location of the investment decision-making process, would lead to a better under standing of mortgage lending trends in a market such as that of the Los Angeles Metropolitan Area. BIBLIOGRAPHY KbAbh NOTE: Figure pages are not original copy. They tend to "curl". Filmed in the best way possible. University Microfilms, Inc. BIBLIOGRAPHY A. BOOKS Behrer.s, Carl P. Commercial Bank Activities in Urban Mortgage Financing. Hew York! NationsI-Bureau of Economic ResearchJ 1952. 125 pp. Clawson, C. J., P. W. Barsalou, e_t al. The Savings and Loan Industry in California. South Pasadena7 Call- 7ornla7 Stanford Research Institute, i960. 384 pp. Pisher, Ernest M. Urban Real Estate Markets: Character istics and Financing" New York: National Bureau of Economic Research, 1951. 208 pp. Gillies, James, and Clayton Curtis. Institutional Residen tial Mortgage Lending in Los Angeles County 1946^51. LosAngeles: University ofCalifornia^ 1956. 202pp. Gillies, James, and F. Mittelbach. Mergers of Savings and Loan Associations in California" Research Report Number 1, Real Estate ResearchProgram, Graduate School of Business Administration, University of California, Los Angeles. Los Angeles: University of California, i960. 39 pp. Grebler, Leo. Housing Issues in Economic Stabilization Policy. New Vork: National Bureau of Economic Research, i960. 120 pp. Klaman, Saul B. The Volume of Mortgage Debt in the Postwar Decade. New YorJF: National “ Bureau of Economic Research, 1958. 14-3 pp. Morton, Joseph E. Urban Mortgage Lending. New York: National Bureau of Economic hesearch, 1956. 187 pp. Ratcliff, Richard U., D. B. Rathbun, and J. Honnold. Residential Finance, 1950* New York: John Wiley & Sons, Inc., T§!5TT 180 pp. Saulnier, Raymond J. Urban Mortgage Lending by Life Insurance Companies. New York: NationalBureau of EconomicResearch,1950. 180 pp. 302 303 B. PUBLICATIONS OF THE GOVERNMENT, LEARNED SOCIETIES, AND OTHER ORGANIZATIONS American Bankers Association, Savings and Mortgage Divi- slon. Savings and Mortgage Statistics (annual). New Yorfc: American Bankers Association, 1958. California Insurance Commissioner. Annual Report of the Insurance Commissioner of the Stale of California. Sacramento": California-State Printing Office. 1950-59. California Savings and Loan Commissioner. Annual Report of* the Savings and Loan Commissioner of the State of California. Sacramento: California JTtate Printing Cfflce. 1950-59. California Savings and Loan League. California Sayings and Housing Data Book (annual). fasadena, Califor nia : California Savings and Loan League. 1956-59. California Savings and Loan League. Roster of Savings and Loan Associations, California-Arizona- We vada-Utah- 6uam-Hawaii (annual~H Pasadena, California: Cali fornia Savings and Loan League. 1950-59. California Savings and Loan League. Sayings and Loan Journal (monthly). Pasadena, California: California Savings and Loan League. 1950-59- California State Banking Department. Annua1 Report. Sacramento: California State Printing "Office. 1950-59. Federal Home Loan Bank of San Francisco. Roster of Mem bers, With Statements of Condition (annual). San Francisco: Federal Home Loan Bank of San Francisco. 1950-59. Federal Deposit Insurance Corporation. Assets, Liabili ties, and Capital Accounts, Commercial and Mutual Savings Banks (semi-annuallyT^ Washington: Federa1 Deposit Insurance Corporation. 1950-59- Federal Deposit Insurance Corporation. Annual Report of the Federal Deposit Insurance Corporation. Washing- ton: Federal Deposit Insurance Corporation. 1950-59- 304 Institute of Life Insurance. Life Insurance Fact Book (annual). New York: Institute of Life Insurance. 1949-59. Mortgage Bankers of America and New York University. Pro ceedings of Annual Conference for Senior Executives In Mortgage BankingT annual). New YorkUniversity Business Series. New York: New York University. 1955-59. National Association of Mutual Savings Banks. Annual Report, Mutual Savings Banking. New York: National Association of Mutual Savings' Banks. 1958-59. Realty Tax and Service Company. Realty Financing (monthly). Los Angeles: Realty Tax and Service Com pany. 1950-59. Residential Research Committee of Southern California. Residential Research Report (quarterly). Los Angeles: Residential Research Committee of Southern California. 1957-59. Security First National Bank (Los Angeles) Research Depart ment. Monthly Summary of Business Conditions in Southern dallfornla. Los Angeles: Security FTrst National Bank. 19*50-59. Security Title Insurance Company. Bulletin of Loan Record ings (monthly). Los Angeles: Security TitTe”Insur ance Company. 1955-59* The Spectator Company. County Patterns of Insurance Sales. 1958-59 edition. Philadelphia: The Spectator Com- pany. United States, Board of Governors, Federal Reserve System. Distribution of Bank Deposits by Counties (biennial). Washington: Board of Governors, Federal Reserve System. 1951-60. United States, Board of Governors, Federal Reserve System. Federal Reserve Bulletin (monthly). Washington: Board of Governors, Federal Reserve System. 1950-59- United States Bureau of the Census. Seventeenth Census of the United States: 1950. Population. Washington: Government Printing bffice, 195^* 305 United States Bureau of the Census. U. S^. Census of Housing, 1950* Vol. IV, Residential Financing'] Part 2 , "Large Standard Metropolitan AreasY" United States Bureau of the Census. U. S. Census of Popu- lation: i960. Number of InhabllanTs. tJnlte<T~States Summary. Final Report W(l)-lA. Washington: Govern ment^ Printing Office. United States Bureau of the Census. U. S. Census of Popu lation: i960. General Population Characterlsllcs. tfaited States Summary. Final Report PC(1)-IB. Washington: Government Printing Office. United States Congress, Senate, Committee on Banking and Currency, Subcommittee on Housing. Study of Mortgage Credit. A report of the committee, B5th Congress 2nd Session, 1958. Washington: Government Printing Office, 1958. United States, Federal Home Loan Bank Board. Savings and Home Financing Source Book (annual). Washington: Federal Home Loan bank Board. 1953-59. United States, Housing and Home Finance Agency. Housing Statistics (monthly). Washington: Housing and Rome Finance Agency. 1950-59* United States Savings and Loan League. Savings and Loan Fact Book (annual). Chicago: United States Savings and Loan League. 19*9-59* United States Savings and Loan League. The Proceedings of Annual Conference on Savings and Residential Finan cing (annual). Chicago: United States Savings and Loan League. 1958-59* C. PERIODICALS Gillies, James, and Clayton Curtis. "The Structure of Local Mortgage Markets and Government Housing Finance Programs," Journal of Finance, September, 1955, PP. 363-75* Maisel, Sherman J. "Changes in the Rate and Components of Household Formation, Journal of the American Statis tical Association, JuneT I960, pp“ £68-d3. 306 Mao, James C. T., "The Impact of Federal Mortgage Insur ance Programs on Ann Arbor's Home Mortgage Market, 1956," Journal of Finance. September, 1958, pp. 412-416. "National and Local Housing Mortgage Market Structures," Housing Research, October, 1952, pp. 9-22. APPENDIX A 308 TABLE I SAVINGS AND LOAN ASSOCIATIONS: INCMSES IN MORTGAGE LOAN HOLDINGS* LOS ANGELES METROPOLITAN AREA - 1953-54 AND 1957-58 (In Thousands of Dollars) FH A V_A CONVENTIONAL TOTAL Outstanding Increase Over Outstanding Increase Over Outstanding Increase Over Outstanding Increase Over Period End of Period Previous Period End of Period Previous Period End of Period Previous Period End of Period Previous Period 1952-2 $47,018 » $180,263 $ $1,111,206 $ $1,338,487 $ 1953-1 42,318 (4,700) 213,085 32,822 1,261,900 150,694 1,517,303 178,816 1953-2 41,555 ( 763) 266,451 53,366 1,375,554 113,654 1,683,560 166,257 1954-1 40,009 (1,546) 292,021 25,570 1,525,932 150,378 1,857,962 174,402 1954-2 39,079 ( 930) 322,768 30,747 1,731,586 205,654 2,093,433 235,471 2-year Increase Dollar Volume $(7,939) $142,505 $620,380 $ 754,946 Percentage (16.9*) 79.1* 55.8* 56.4* 1956-2 $38,281 $ $590,215 $ $2,480,121 $ $3,108,617 t 1957-1 38,815 534 652,106 61,891 2,772,854 292,733 3,463,775 355,158 1957-2 40,879 2,064 691,152 39,046 2,953,246 180,392 3,685,277 221,502 1958-1 43,612 2,733 707,057 15,905 3,152,882 199,636 3,903,551 218,274 1958-2 47,586 3,974 723,470 16,413 3,472,420 319,538 4,243,476 339,925 2-year Increase Dollar Volume $9,305 $133,255 $992,299 $1,134,859 Percentage 24.3* 22.6* 40.0* 36.5* •Non-farm mortgage loans only. SOURCE: Computed from data made available by the Los Angeles Branch of Federal Home Loan Bank of San Francisco. 309 TABIEII LIfE INSURANCE COMPANIES: INCREASES IN MORTGAGE LOAN HOLDINGS* LOS ANGELES METROPOLITAN AREA - 1953-54 AND 1957-58 (In Thousands of Dollars) FH A VA CONVENTIONAL TOTAL Outstanding Increase Over Outstanding Increase Over Outstanding Increase Over Outstanding Increase Over Period End of Period Previous Period End of Period Previous Period End of Period Previous Period End of Period Previous Period 1952-2 1276,573 $ $370,860 $ I 736,670 t $1,384,103 $ 1953-1 275,606 ( 967) 379,391 8,531 818,610 81,940 1,473,607 89,504 1953-2 274,389 (1,217) 386,176 6,785 883,780 65,170 1,544,345 70,738 1954-1 274,183 ( 206) 415,840 29,664 938,058 54,278 1,628,081 83,736 1954-2 274,041 ( 142) 458,548 42,708 1,016,490 78,432 1,749,079 120,998 2-year Increase Dollar Volume 3(2,532) $87,688 $279,820 $364,976 Percentage . (0.9.0 23.6$ 38.0$ 26.4$ 1956-2 $250,183 $ $676,698 $ $1,252,498 $ $2,179,379 $ 1957-1 248,554 (1,629) 678,384 1,686 1,302,857 50,359 2,229,795 50,416 1957-2 247,279 (1,275) 680,538 2,154 1,367,210 64,353 2,295,027 65,232 1956-1 259,549 12,270 664,669 (15,869) 1,410,398 43,188 2,334,616 39,589 1958-2 276,563 17,014 652,925 (11,744) 1,470,286 59,888 2,399,774 65,158 2-year Increase Dollar Volume $26,380 $(23,773) $217,788 $220,395 Percentage 10.5$ (3.5$) 17.4$ 10.1$ ♦ N o n -fa rm m o rtg a g e lo an s o n ly . S O U R C E : C o m p u te d fro m confidential in fo rm a tio n fu rn ish ed b y life in su ran ce c o m p a n ie s w h ic h h eld d u rin g these y ears a n a v e ra g e of 86,5 p e r cen t o f total L o s A n g e le s M e tro p o litan A re a m o rtg a g e lo an s h eld b y all life in su ra n c e -c o m p a n ie s. 3 1 0 TABLE III C O M M E R C I A L B A N K S : I N C R E A S E S I N M O R T G A G E L O A N H O L D I N G S * L O S A N G E L E S M E T R O P O L I T A N A R E A - 1953-54 A N D 1957-58 ( I n T h o u s a n d s o f D o l l a r s ) F H A V _ A C O N V E N T I O N A L T O T A L Outstanding Increase Over Outstanding Increase Over Outstanding Increase Over Outstanding Increase Over Period End of Period Previous Period End of Period Previous Period End of Period Previous Period End of Period Previous Period 1952-2 $391,444 $ $294,773 $ $306,068 $ $ 992,305 $ 1953-1 426,022 34,558 278,677 (16,096) 311,946 5,878 1,016,645 24,340 1953-2 468,994 42,972 270,999 ( 7,678) 317,865 5,919 1,057,858 41,213 1954-1 498,848 29,854 266,026 ( 4,973) 315,674 (2,191) 1,080,548 22,690 1954-2 511,072 12,224 265,788 ( 238) 331,045 15,371 1,107,905 27,357 2-year Increase Dollar Volume $119,608 $(28,985) $24,977 $115,600 Percentage 30.6* (9.8*) 8,2* 11.6* 1956-2 $663,526 $ $309,451 t $453,995 $ $1,426,972 $ 1957-1 669,08? 5,561 299,671 ( 9,780) 471,923 17,928 1,440,681 13,709 1957-2 686,877 17,790 282,850 (16,821) 510,723 38,800 1,480,450 39,769 1958-1 688,309 1,432 251,978 (30,872) 529,615 18,892 1,469,902 (10,548) 1958-2 761,403 73,094 242,217 ( 9,761) 592,368 62,753 1,595,988 126,085 2-year Increase Dollar Volume $97,877 $(67,234) $138,373 $169,016 Percentage 14.8* (21.7*) 30.5* 11.8* *Non-fann mortgage loana only, SOURCE: Computed from confidential information furnished by commercial banks which held during these years an average of 88,5 per cent of total Los Angeles Metropolitan Area mortgage loans held by all commercial banks, 311 TABLE IV MAJOR INSTITUTIONAL LENDERS: INCREASES IN COMBINED MORTGAGE LOAN HOLDINGS* LOS ANGELES METROPOLITAN AREA - 1953-54 AND 1957-58 (In Thousands of Dollars) FH A Vi CONVENTIONAL T O M * Outstanding Increase Over Outstanding Increase Over Outstanding Increase Over Outstanding Increase Over Period End of Period Previous Period End of Period Previous Period End of Period Previous Period End of Period Previous Period 1952-2 * 715,055 J * 845,896 * *2,153,944 * *3,714,895 * 1953-1 743,946 28,891 871,153 25,257 2,392,456 238,512 4,007,555 292,660 1953-2 784,938 40,992 923,626 52,473 2,577,199 184,743 4,285,763 278,208 1954-1 813,040 28,102 973,887 50,261 2,779,664 202,465 4,566,591 280,828 1954-2 824,192 11,152 1,047,104 73,217 3,079,121 299,457 4,950,417 383,826 2-year Increase Dollar Volume *109,137 1201,208 *925,177 *1,235,522 Percentage 15.3* 23. 8* 43.0* 33.3* 1956-2 * 951,990 * *1,576,364 * *4,186,614 t *6,714,968 t 1957-1 956,456 4,466 1,630,161 53,797 4,547,634 361,020 7,134,251 419,283 1957-2 975,035 18,579 1,654,540 24,379 4,831,179 283,545 7,460,754 326,503 1958-1 991,470 16,435 1,623,704 (30,836) 5,092,895 261,716 7,708,069 247,315 1958-2 1,085,552 94,082 1,618,612 ( 5,092) 5,535,074 442,179 8,239,238 531,169 2-year Increase Dollar Volume *133,562 * 42,248 *1,348,460 *1,524,270 Percentage 14.0* 2.7* 32.2* 22.7* * N o n - f a n m o r t g a g e l o a n s o n l y , * * S a v i n g s a n d l o a n a s s o c i a t i o n s , l i f e i n s u r a n c e c o m p a n i e s , a n d c o m m e r c i a l b a n k s , S O U R C E : T a b l e s I , I I a n d I I I , 312 TABLE V SAVINGS AND LOAN ASSOCIATIONS: INCREASES IN' MORTGAGE LOAN HOLDINGS* UNITED STATES - 1953-54 AND 1957-58 (In Millions of Dollars) F H A U CONVENTIONAL TOTAL Outstanding Increase Over Outstanding Increase Over Outstanding Increase Over Outstanding Increase Over Period End of Period 1 devious Period End of Period Previous Period End of Period Previous Period End of Period Previous Period 1952-2 I 904 5 13,385 5 514,047 5 518,336 5 1953-1 962 58 3,593 208 15,578 1,531 20,133 1,797 1953-2 1,044 82 3,961 368 16,877 1,299 21,882 1,749 1954-1 1,102 58 4,277 316 18,468 1,591 23,847 1,965 1954-2 1,171 69 4,714 437 20,257 1,789 26,142 2,295 2-year Increase Dollar Volume Percentage 5267 29.515 $1,329 39.3# $6,210 44.2# $7,806 42,6# 1956-2 $1,486 5 56,643 5 $27,600 29,467 5 $35,729 5 1957-1 1,530 44 6,889 246 1,867 37,886 2,157 1957-2 1,643 113 7,011 122 31,353 1,886 40,007 2,121 1958-1 1,833 190 6,995 (16) 33,505 2,152 42,333 2,326 1958-2 2,206 373 7,077 82 36,344 2,839 45,627 3,294 2-year Increase Dollar Volume Percentage 5720 48.5* 5 434 6.5* $8,744 31.7# 59,898 27.7# ♦Non-farm mortgage loans only, SOURCE: Hie Board of Governors, Federal Reserve System, 313 TABLE VI L I F E I N S U R A N C E COMES: I N C R E A S E S I N »»m L O A N MGS* U N I T E D S T A T E S - 1953-54 A N D 1957-58 (In Millions of Dollars) F H A V A C Q N V E i l T l O N A l T O T A L Outstanding Increase Over Outstanding Increase Over Outstanding Increase Over Outstanding Increase Over Period End of Period Previous Period End of Period Previous Period End of Period Previous Period End of Period Previous Period 1952-2 $5,881 $ $3,347 » $10,518 t $19,546 $ 1953-1 5,884 203 3,396 49 11,145 627 20,425 879 1953-2 8,012 128 3,560 164 11,864 719 21,436 1,011 1954-1 6,091 79 3,886 326 12,426 562 22,403 967 1954-2 6,122 31 4,636 750 13,123 697 23,881 1,478 2-year Increase Dollar Volume $441 $1,289 $2,605 $4,335 Percentage 7.8$ 38.5$ 24.8$ 22.2$ 1956-2 $6,813 $ $7,304 $ $16,391 $ $30,508 $ 1957-1 6,670 (143) 7,677 373 17,273 882 31,620 1,112 1957-2 6,964 294 7,721 44 17,967 694 32,652 1,032 1958-1 7,038 74 7,677 (44) 18,694 727 33,409 757 1958-2 7,671 633 7,433 (244) 19,291 597 34,395 986 2-year Increase Dollar Volume $858 $129 $2,900 $3,887 Percentage 12.6$ 1.8^ 17.7$ 12.7$ *Non-farm mortgage loans only. SOURCE: Board of Oovernors, Federal Reserve System, 3 1 4 TABLE VII C O M M E R C I A L B A M S : I N C R E A S E S I N M O R T G A G E L O A N H O L D I N G S * U N I T E D S T A T E S - 1953-54 A N D 1957-58 ( I n M i l l i o n s o f D o l l a r s ) FH A U C O N V E N T I O N A L T O T A L O u t s t a n d i n g I n c r e a s e O v e r O u t s t a n d i n g I n c r e a s e O v e r O u t s t a n d i n g I n c r e a s e O v e r O u t s t a n d i n g I n c r e a s e O v e r P e r i o d E n d o f P e r i o d 1 P r e v i o u s P e r i o d E n d o f P e r i o d P r e v i o u s P e r i o d E n d o f P e r i o d P r e v i o u s P e r i o d E n d o f P e r i o d P r e v i o u s P e r i o d 1952-2 $3,675 $ $3,012 $ $8,122 $ $14,809 $ 1953-1 3,798 123 3,013 1 8,472 350 15,283 474 1953-2 3,912 114 3,061 48 8,794 322 15,768 485 1954-1 3,962 50 3,117 56 9,163 369 16,242 474 1954-2 4,106 144 3,350 233 9,958 795 17,414 1,172 2-year Increase Dollar Volume Percentage $431 11.7* $338 11.2* $1,836 22.6* $2,605 17.6* 1956-2 $4,803 $ $3,902 $ $12,679 $ $21,384 $ 1957-1 4,730 (73) 3,720 (182) 12,940 261 21,390 6 1957-2 4,823 93 3,589 (131) 13,558 618 21,970 580 1958-1 4,970 147 3,405 (184) 14,145 587 22,520 550 1958-2 5,476 506 3,335 (70) 15,241 1,096 24,052 1,532 2-year Increase Dollar Volume $673 $(567) $2,562 $2,668 Percentage 14.0* (14.5*) 20.2* 12.5* * N o n - f a r r a m o r t g a g e l o a n s o n l y . SOURCE: The Board of Governors, Federal Reserve System, 315 TABLE VIII KAJCR INSTITUTIONAL LENDERS: INCREASES IN COMBINED MORTGAGE LOAN HOLDINGS* UNITED STATES - 1953-54 AND 1957-58 (In Millions of Dollars) FH A U CONVENTIONAL TOTAL** Outstanding Increase Over Outstanding Increase Over Outstanding Increase Over Outstanding Increase Over Period End of Period iPrevious Period End of Period Previous Period End of Period Previous Period End of Period Previous Period 1952-2 $10,260 $ $9,744 $ $32,687 $ $52,691 $ 1953-1 10,644 384 10,002 258 35,195 2,508 55,841 3,150 1953-2 10,968 324 10,582 580 37,535 2,340 59,086 3,245 1954-1 11,155 187 11,280 698 40,057 2,522 62,492 3,406 1954-2 11,399 244 12,700 1,420 43,338 3,281 67,437 4,945 2-year Increase Dollar Volume Percentage $1,139 11.1* $2,956 30.3* $10,651 32.6* $14,746 28,0* 1956-2 $13,102 $ $17,849 $ $56,670 $ $ 87,621 t 1957-1 12,930 (172) 18,286 437 59,680 3,010 90,896 3,275 1957-2 13,430 500 18,321 35 62,878 3,198 94,629 3,733 1958-1 13,841 4U 18,077 (244) 66,344 3,466 98,262 3,633 1958-2 15,353 1,512 17,845 (232) 70,876 4,532 104,074 5,812 2-year Increase Dollar Volume Percentage $2,251 17.2* $ (4) (0*) $14,206 25.1* $16,453 18.8* ♦ N o n - f a r m m o r t g a g e l o a n s o n l y , ♦ • S a v i n g s a n d l o a n a s s o c i a t i o n s , l i f e i n s u r a n c e c o m p a n i e s , a n d c o m e r c i a l b a n k s , S O U R C E : T a b l e s V , V I , a n d V I I . 316 T A B L E I X MAJOR INSTITUTIONAL LENDERS: VOLUME OF MORTGAGE LOANS MADE LOS ANGELES METROPOLITAN AREA - 1953-54 AND 1957-58 (In Thousands of Dollars) Savinas and Loan Associations Life Insurance Comnanies CoDoercial Banks Total Period Dollar Volume Per Cent of Total Dollar Volume Per Cent of Total Dollar Volume Per Cent of Total Dollar Volume Per Cent of Total 1953-1 > 175,945 55.3 » 67,918 21.3 > 74,627 23.4 > 318,490 100.0 2 208,360 55.3 75,492 20.1 92,795 24.6 376,647 100.0 3 185,334 57.2 56,456 17.4 82,377 25.4 324,167 100.0 4 178,644 58.2 57,702 18,8 70,390 23.0 306,736 100.0 1954-1 187,496 57.8 58,676 18.1 78,201 24.1 324,373 100.0 2 205,684 51.6 89,505 22.4 103,975 26.0 399,164 100.0 3 221,335 51.2 101,018 23.4 109,802 25.4 432,155 100,0 4 256,959 51.8 113,300 22.8 125,738 25.4 495,997 100.0 Total >1,619,757 54.4 >620,067 20.8 >737,905 24.8 >2,977,729 100,0 1957-1 $ 303,113 64.2 > 72,578 15.4 > 96,254 20.4 > 471,945 100.0 2 331,881 68.1 59,307 12.2 96,057 19.7 487,245 100,0 3 279,520 63.0 82,084 18.5 82,105 18.5 443,709 100.0 4 263,904 59.7 86,500 19.6 91,614 20.7 442,038 100.0 1958-1 235,480 62.1 62,677 16.5 81,346 21.4 379,503 100.0 2 293,851 63.0 83,282 17.9 89,350 19.2 466,483 100.0 3 342,659 59.9 90,740 15.9 138,090 24.2 571,489 100.0 4 370,360 57.5 111,516 17.3 162,572 25.2 644,448 100.0 Total >2,420,768 62,0 >648,704 16.6 >837,388 21.4 >3,906,860 100.0 SOURCES: Savings and loan associations— atatistiCB of loans closed by Los Angeles Metropolitan Area associations, furnished by Los Angeles Branch of Federal Horn Loan Bank of San Francisco. Life insurance companias— estimated from loan recordings by companies whose increases in holdings of Los Angeles Metropolitan Area mortgage loans averaged 60 per cent of total increases in such holdings by all life insurance companies. Commercial banks— estimated from loan recordings by banks holding an average of 88.5 p«r cent of the total Los Angeles Metropolitan Area mortgage loans held by all commercial banks. 317 TABLE I MAJOR INSTITUTIONAL LENDERS: VOLUME OF MORTGAGE LOANS MADE* UNITED STATES - 1953-54 AND 1957-58 (In Millions of Dollars) Savings and Loan Associations Life Insurance Companies Comnerclal Banks** Total Period Dollar Volume Per Cent of Total Dollar Volume Per Cent of Total Dollar Volume Per Cent of Total Dollar Volume Per Cent of Total 1953-1 $ 1,659 44.4 * 951 25.4 $1,128 30.2 $3,738 100.0 2 2,101 48.7 950 22.0 1,264 29.3 4,315 100.0 3 2,149 48.7 1,023 23.2. 1,239 28.1 4,411 100.0 4 1,858 44.1 1,172 27.9 1,178 28.0 4,208 100.0 1954-1 1,744 44.3 1,056 26.8 1,140 28.9 3,940 100.0 2 2,270 16.8 1,236 25.5 1,348 27.7 4,854 100.0 3 2,471 46.9 1,332 25.3 1,468 27.8 5,271 100.0 4 2,484 44.0 1,570 27.9 1,584 28.1 5,638 100.0 Total *16,736 46.0 $9,290 25.5 $10,349 28.5 $36,375 100.0 1957-1 1 2,265 46.9 *1,244 25.8 $ 1,318 27.3 $ 4,82? 100.0 2 2,792 51.8 1,148 21.3 1,449 26.9 5,389 100.0 3 2,861 51.2 1,199 21.5 1,527 27.3 5,587 100.0 4 2,482 48.1 1,247 24.2 1,432 27.7 5,161 100.0 1958-1 2,246 48.5 1,065 23.0 1,321 28.5 4,632 100.0 2 3,046 52.8 1,049 18.2 1,676 29.0 5,771 100.0 3 3,575 52.4 1,225 18.0 2,014 29.6 6,814 100.0 4 3,479 48.9 1,500 21.1 2,124 30.0 7,103 100.0 Total $22,746 50.2 $9,677 21.4 $12,861 28.4 S? CM w\ 100.0 ♦Non-farm mortgage loans only, **Estimated from recordings of $20,000 or less. SOURCE: The Board of Governors, Federal Reserve System. 318 TABLE H INSTITUTIONAL MORTGAGE MARKET STRUCTURES, DECEMBER 31, 1952 AND DECEMBER 31, 1956 LOS ANGELES METROPOLITAN AREA AND THE UNITED STATES (Three Major Institutions) December 31, 1952 December 31. 1956 Per Gent of Per Cent in Per Cent of Per Cent in Mortgage Market Conventional Loans Mortgage Market Conventional Loans L ob Angeles Metropolitan Area Savings and Loan Associations 36.0 83.0 46.3 79.7 Life Insurance Companies 37.3 53.2 32.4 57.4 Commercial Banks 26,7 30.9 21.3 31.8 Totals 100.0 58.0 100.0 62.5 United States Savings and Loan Associations 34.8 76.6 40.8 77.2 Life Insurance Companies 37.1 53.8 34.8 53.7 Commrical Banks 28.1 54.8 24.4 59.3 Totals 100,0 62.0 100.0 64.7 Ratio: Los Angeles to United States (£) Savings and Loan Associations 103.4 108.4 113.5 103.2 Life Insurance Companies 100.5 98.9 93.1 106.9 Commercial Banks 95.0 56.4 87.3 53.6 SOURCE: Tables I through VIII, 319 TABLE XII COMPARISON OF STRUCTURES ADD DEGREE OF IMPORTANCE OF CONVENTIONAL LOAN HOLDINGS MORTGAGE MARKETS OF LOS ANGELES METROPOLITAN AREA AND THE UNITED STATES DECEMBER 31, 1952 AND DECEMBER 31, 1956 Institutional Lenders December 31, 1952 - Actual Ratio Relationships: Los Angeles Metropolitan Area as a Percentage of United States December 31, 1956 * United States: Actual Market Structures and Degree of Importance of Conventional Loans December 31, 1956 - Los Angeles Metropolitan Area: Estimated Market Structure and Degree of Importance of Conventional Loans, If a Continuation of 1952 Ratio Relationships is Assumed Degree of Importance Per Cent of Total Conventional Loans Per Cent of Total Conventional Loans as Column (5) T^pe of Lender Market of Conventional Institutional as a Percentage of Institutional a Percentage of toltiplied Structure Loans Market Total Loans Market^ Total Loans* by Column (6) (1) (2) (3) U) " ' i r ' " 1 ' (4) (77 Savings and Loan Associations , 103.4 108.4 40.8 77.2 42.1 83.7 35.2 Life Insurance Companies , . . 100.5 98.9 34.8 53.7 34.9 53.1 18.5 Commercial Banks . . . . . . 95.0 56.4 24.4 59.3 23.0 33.5 11 6L4* ♦Estimated only. For actml percentages, see Table XI. Column 5 estimated fra columns 1 and 3. Column 6 estimated from columns 2 and 4. ♦♦Estimated percentage of total institutional holdings (three institutions combined) of Los Angeles Metropolitan Area mortgage loans which were conventional loans, assuming a continuation of 1952 ratio relationships (from Table XI it may be noted that the actual percentage was 62.356)* SOURCE: Table XI. APPENDIX B ... i " i 111 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 i . i . i i.m HDD IBDS1K1S8 IC T Ifll 0 9KHBM CiLirCDa A ID KURIL REEK BIO 7 K M . P K D O C T IO i V lR R R L I iT M 1 0 ,M SonroMt Saenritj Flrat Rational B ank (Lot ingalaa) and Board of Oornmon, Fadaral Raaam Sjatan D adax of Boalnaaa ictiritj in Southarn California Fadaral Raaam Indai of M a trial Prodootioo liiiiniifil a * 3 S i \ ► • ftr * !..«]!i ! i ! ) ilHi *214’*1! 12222 2 2 195L 1955- I I I I I I rj i 'T I'l I 1 I I 1 II I I I I I I I I ! ! 1 I I H I I 1 M I h m M ~ ~ 1 L ’TT npiouHT is i FEGvrioi of m ubcb ra cs a u s los i n m s h u m m i m m RDEtiL u s s t n m h v k m & io ilt u il w m w r (o,s,j Smrotit Security Flrat U tio u l B ank (L m in jtlii) eni Board of Oorernore, M e n l Reeero Sjitm, bploywot u i PerceaU|o of the labor force in the Loe ingalia Metropolitan A rea Federal leeerre IMei of Bon-azricultural hplojunt 110,0 ft S 1 0 ? , 5 i "rrtt'TiT uwmi iiiiimiiii j i i . ' i i i . ' u i j{* 5''i ’}{! I 195L Mill 1 1 1 1 1 ' l 1 1 1 ] 1 1 1 1 1 1 1 m I 1 1 1 ' l I ' l T LLLLLIlLLUm ud d or u s d iss iCTirin a so o h w g ilito d ii m K1ROT1 1 0 3 IF U.S. OO VBDOT W B M gUHBII ITffiiOB, M Sobtomi Socoritj F ln t I ttio u l Buk (Im lu p in ) ud B oord of OoTiraon, M in i Snoro S jita ladu of Bolivia ic tM tj Id SoqUwib Cuifonui Xirbt liild i of U «Si Qonroont 3-)tonth Billi ihuiliml i S l i i l i l S i Minim iWi ! k l < I . ^: i :M ; muli HPLOUBT iS i PBCH tll d IB UBS l ® 8 B IB L O S MILES (BffiO POLH ll M D ID KIBRIBUE d U.S. (OTDOI3-MTTE BUIS Q tU R T E E L I I M S , M $ I I . 0 0 SooroMt Security l i n t latlonal Bak (Loi lu p in ) ud Boord of Oownon, M o n l Boeoro S jita .25 ftf l ojmrt u i Taronti|i of the labor foroo In thi W . Botwp. i n t Hirket Tlildi of U.S. Oonrnwt 3-M onth Bills .00 I I . 5 0 .25 .00 .75 I .25 .00 .75 .25 •00 i i i 0 I mn 19JL 19SL 19SL 1951- 1951- 321 iiiii'niiimiinnmumiiimuiu.mi m ) K I o r NWBS O F H S L P U U 1 T 8 D A D 6 , L O S i R Q E U S N E IC P 1 F Z R S , I H D H A B I S T T H L D S o r 0 , 3 , oovrm? b i l l s QQ IRTM I m m , M Soutcm: Sacoritjr First Hitionil B ank (Los iifa lu ) ud Board of Oownon, M oral B aum Sjatai. Indax of Llnai of Hslp laatad A di Ilaldi of 0,5. Oowrnsnt 3-sonth Bills, • -J 3 o, a I i ? S' I o H liMilUtOza ■ a1 * nS>2F>0& «<F I »* t • i z » a 5 « SWiJiJfeiMm* U75 m 1 * 25 boo 37$ 350 325 300 275 250 225 20 0 175 150 125 1 0 0 75 50 25 0 J«B- DOLLAR VOLUME OF MORTGAGE LOAMS MADE IM THE LOS AMQELES METRO POLITAX AREA, BT TTFES OF IMSTITUTIOKAL I2NDEBS, QUARTERLT TOTALS, 1953-5b AMD 1957-58 (In Billions of dollars) Source: Table H Seringa and loan aaaodationa Ufa insurance ccnpaniea Coaarclal banka Jl- •_ L Zl<X 95 90 85 80 75 70 65 6 0 55 50 1 * 5 1( 0 35 30 25 20 15 10 5 0 327 FfficBJTAOE or dbtitotioiui mortqagk loans midi in the ids amgeles METROP0LIT1N AREA BT EiCH Of THUS MAJOR TIPS OF INSTITUTIONAL LENDERS, QUARTERLY, 1953-5U AND 1957-58 Source: Table I X , Strings and loan associations Life insurance companies Comercial banks 1 9 5?_ FIGURE 8 DOLLAR VOLUME OF MORTGAGE LOIRS MADE H THE UNITED STATES, BT TYPES OF IRSTITUTIOHAL LENDEBS, QUARTERLY TOTALS, 1953-5U AMD 1957-58 (In Millions of dollars) Soares: Table I. Strings and loan associations Life insurance coqaanlea Gonerclal banks jiSifJijjsSs »-»: if jiSjtiS i5■!:».«J f ?f % on ^ ^ < < S o * 5 329 FIGURE 9 PERCENTAGE OF INSTITUTIONAL MORTGAGE LOANS MADE IN THE UNITED STATES BT EACH OF THREE MAJOR TYPES OF INSTITUTIONAL LENDERS, AS COMPUTED QUARTER!!, 1953-514 AND 1957-58 BO Source: Table X« Sayings and loan associations Life insurance companies Comasrcial banks t rr it > . K * h 9 ( l • » o s i i «* I . 2 < a 0 z Q i? j j j 5 i Zi&oza ■ * • a 0 • “ < i O Z O i * A < 1 1 - 9 ? I 0 I * 3 t « S £ < t lOxc Loo Angeles M e t a r o poll-ten Area 330 tit t-K i FIGURE 10 DOLLAR VOLHd OF TOTAL MORTGAGE LOANS MADE BT THREE MAJOR TYPES OF INSTITUnORAL LBTDStS IN THE LOS ANGELES METROPOLITAN AREA AND IN THE UNITED STATES, QUARTERLY TOTALS, W53-5U AND 1957-58 (In Millions of dollars) Sourcet Tables H and I. Los Angelas Metropolitan Area — - < -- United States ! K 0 a ♦ ! ► o “- 3 ,0 0 * . ^ K w O * A i ■ ? 3 4 I Si % , •i*<x ’, 2 <A i i ? i « 5 S <X^2<«OZQ «? s £ t«M f t s n !h><J X ’<Jo*Q Dnl'ted State* 331 FIGURE 11 METROPOLITAN ARM, BT TYPES OF INSTITUTIONAL LENDERS, AS COMPUTED SJMI-ANNUALLY, 1953-5U AND 1957*58 (In allllons of dollars) Source: Tables I, II, and III Savings and loan associations Life insurance companies Comsrcial banks 1 ■ ■ ■ * ■ • ■ * • i i , . i i <— »--j— i — i — i i a i 5 M } E S i 5 i i S . S S a ? j ; 5 1953- 1954 _ • t ► & a * u j y d o e - J ^ 0 Z Q • a • o * 1 I u o » <vtOZQ 1957— 1956— 332 FIGURE 12 DOLLAR VOLEKB INCREASES IN COMBINED MORTGAGE LOANS HELD IN THE LOS ANGELES METROPOLITAN AREA BY THREE MAJOR TYPES OF ! j INSTITUTIONAL LENDERS, ACCORDING TO CLASSIFICATIONS OF MORTGAGE LOANS, SEMI-ANNUALLY, 1^53-5U and 1957-59 (In Billions of dollars) iTnTTrnrrnrri Source: Table Iv, FtH.A. — V.A. • • • • • * Conventional ! 1 ( 2 5 1(0 0 375 350 325 30 0 275 250 225 20 0 175 150 125 1 00 75 50 25 0 -25 -50 333 FIGURE 13 DOLLAR 70L®B INCREASES IN MORTGAGE LOANS HELD IN THE LOS ANGELES METROPOLITAN AREA BT SAVINGS AND LOAN ASSOCIATIONS, ACOCRDING TO CLASSIFICATIONS OF MORTGAGE LOANS, Satt-ANNOAILI, 1953-51* AND 1957-58 (In millions of dollars) Source: Table A # F.H.A. 7.A. ......... Conventional F ■All A l l k K 2 • « f t < 3 435«S.??f t ! h X < J I i < A 0 * o ► > 9 0 , * ► "i a « i 0 ’<»oz w a *« r ti j n o 1 ! < < n 0 z a 334 DOLUS VOMiE INCREASES IK MORTGAGE LOANS HELD IN THE LOS ANQKUSS ME1ROFOUTAN AREA BT UR INSURANCE COMPANIES, ACCORDING TO CLASSIFICATIONS OF MORTGAGE LOANS, SHG-ANNUAILI, 1953-54 and 1957-58 (In Billions of dollara) S o u r c f l : Tkble II F.H.A Conrentional 200 2 00 1 0 0 100 * P z n 1953— 1952_ FIGURE 15 DOLLAR VOLDMB INCREASES IN HORTGiGi LOANS HELD IN THE LOS ANGELES METROPOLITAN AREA BT COMMERCIAL BANKS, ACCORDING 10 CLASSIFICATIONS OF MORTGAGE LOANS, SEMI-ANNUAL!!, 1953-51 AND 1957-56 (In millions of dollars) Source: Table III. F.H.A. 7,A. Conventional s -iij 5 - 3 m 5 * . 1 ! M>|if > O . a s o ! i J h 11 i * I :il<l ’i<i02Q 336 1 * , 0 0 0 3.750 3.500 3.250 3,000 2.750 2.500 2.250 2 , 0 0 0 1.750 1,500 1.250 1,000 750 500 250 0 -250 -5oo FIQRE 16 dollar volume increases in mortgage loan holdinos in the united states. BT TTPE3 OF INSTITUTIONAL LKNDEHS, AS COMPUTED SM-AHNUALLT, 1 5 5 3 - 5 1 * AND 1957-58 (In nilliona of dollara) Sources Tablaa V, VI# and VII. Sartnga and loan aaaociationa Life lnaurance conpanlea Conarclal banka 'imZ’t&Oza • i lit 5 i •Zl<lZZ<&Ozq • g- 5 s f t s i DOLLAB VOLUME INCREASES II COMBIIED MORTGAGE LOANS HELD IN THE UNITED STATES BY THREE MAJOR TYPES OF INSTITUTIONAL LENDERS, ACCORDING TO CLASSIFICATIONS OF MORTGAGE LOANS, COMPUTED SEMI-ANNUALLY, 1955-54 AND 1957-58 ( I n i l l l i o n a o f d o l l a r i ) S o u r o e t T a b le V I I I V.A. • • • • i i Conventional iilKl ”<bOIQ • i s »• H • Si • * £ i z < l XI < * o z o B a ; 5 ? i ^ 5 a * ► v -i.yoi £li<*£’<&6xa 4.250 1 1 , 0 0 0 3.750 3.500 3.250 3,000 2.750 2.500 2.250 2,000 1.750 1 , 5 0 0 1,250 1,000 750 500 2$0 0 -250 - 5 0 0 I' i . .__ _ f- 1 — — — - - - - 1 FTGnull1 8 ----- -- = DOLLAR VOLUME INCREASES IN MORTGAGE LCAHS HDD H THE UNITED STATE BY SAVINGS AND LOAN ASSOCIATIONS, ACCORDING TO “ CLASSIFICATIONS OF MORTGAGE LOANS, COMPUTED SK-ANNUAIU, - 1 9 5 3 - 5 1 * and 1957-58 (In silliona of dolltn) : Sourco: Tablo V, P.H.i. - - - __________ i - ' ■ ■ . ._ T- . . . . . — - - - - — - - - • - _ __ -4 h h .. . . .--— - - - f I -- V.A. • • • • t • • — . . . u cm nniontL __ - r— - j ~ r — _ - ... . . . . f : 4 _ 4 1 i h j. . . . ■ - — . . . . . I 4 V- - . . . • - _ . . . — - - - . . . . — — - - . . _ - _ _ . _ z: u _ . . . . / t- . . . . --- - - ■ ■ • t _ . . - — __ - . . . . ._ ■ — f - - .. .I- 4-- f - - - - — - — - . . . . . - - ■ - . - *_ — --- — -- — . - T . . . - - - 4 - .... -- - - — — . . . - - - . . . . . _ . ----- ...... - . . . _ . . — -- - -- — . . . . . . . - - . . . . — ----- -- - -- ■ • ■ - . . . . ----— . . . -• . . . . . . . . — . - . . . .— . . + -- t-- . . . . — __ — -- . . . . - — . .. — — — -- — - - - ___ i - • 4 ■ 4-- 4: , _ * r --- - . . . . — . . . . . . . . — J — I 1 . . . . . . . - - ■ | * J ! . . . . . -- . . . . L| r - it -- Bi . . . . — . . . . k __ . . . . --- - J —- 4" 4- - * . 44 -- j-f . . . . . ---- -1 » - - . , - “ - -- I: — 4 - • • 4- ^ 4- 4“- - -- : e: - I . . . . . — — -- " _ . „ — — a < 3 - K tt. s > fit !i 5: it H * 4 2 <t.a * & 9 • < M ( i i 3 Z C U; J « a « ill\ii I < • S 3 : t L • < 3. | ► h-t i i > 5 5zc ' 3 i I i * tx to ► * 1 <3 9 * . t i < e 5 5 z •; i * - » Vi to ► s i li i 2 u <« ho 1953— 1954— 1953— 1958— 338 4.250 U,000 3.750 3.500 3.250 3,000 2.750 2.500 2.250 2,000 1.750 1 , 5 0 0 1,250 1,000 750 5oo 250 0 -250 -5oo FIQuBI 15 D0I1AS VOUHE IMCREASE II MORTGAGE LOAMS HELD IM THE UNITED STATES BI LUK IKSHLAH& COKPAHUS, ACCOBDHO TO CUSSIFICATIOMS OF MORTGAGE LOAMS, COMPOTB) SBG-AXMLLI, 1953-5H HD 1957-58 (In > 1 1 1 1 0 1 1 8 of dollars) Source: Table 71. F.H.A. 7.A. . . . . . . . Conventional a i i i S ' 5 * ? f j 5 i f « - 2 < i t • a J j i S j FIGURE 20 DOLLAR VOLUME INCREASES IN MORTGAGE LOAMS HOD IM THE UNITED STATES BT COMMERCIAL BANKS, ACCORDING 10 CLASSIFICATIONS OF MORTGAGE LOANS, COMPUTE) S9G-ANNUALLT, 1953-5U AND 1957-58 (In illliona of dollars) Sourcs: Tabls VH. F.H.A. V.A. Convsntlonal 1 ■ “ ; t t i ' 8 * • a • n ► » a ► v ■ q 3 i t > o * i < M 0 Z Q ■jj*i ii » ' A ' ! *3 ^ M o I • i X < 111 < A o * a Loa Angeles M e t r o p o l i t a n A r e a U: FIGtRE 21 DOLLAR VOLtHE INCREASES IN COMBINED MORTOAQE LOANS HEU) BT THREE MAJOR TTPES OF INSTITUTIONAL LENDERS IN THE LOS ANQELES METROPOLITAN AREA AND IN THE UNITED STATES. COMPUTED SM-ANNUALU, 1953-51 AND 1957-58 ( I n i l l l i o n f l of dollars) Source: Tables 17 and Till, Los Angeles Metropolitan Area United States >i i St jijss 5 i ii • « -5 s jt 5 * 1953— 1954— j fca<a».3.<d0zQ 'ij<j33<Ao*a «i ! 11 ? i e t i 1957- 1958— + 1,1 ^4-4 + FIQEBE22 DOLLAR vOLDS IMGREA3B5 IN COMBINED QUARANTEB)-INSORH) MORTGAGE LOANS ~ HEU) BT T f f i E E MAJOR TTPBS OF INSTITUTIONAL LENDERS IN THE LOS ANGELES METROPOLITAN AREA AND IN THE UNITED STATES, COMPUTED SSG-ANNUALLT, 1 5 > 5 3 - 5 1 i AND 1957-58 (In nllllons of dollars) Sonrcsa: Infomtlon derlred fro* Tables 17 and Till. Los Angeles Metropolitan Area United States ; n • ► » a - k X C E ^ ^ O X □ “ , • n • : J p U i k K X i i < « O z c l - l a * « o e * hi 2 < 2 I 1 < w 0 Z Q * & - - „ : a « T u O • I < C O 0 Z U ) / ' ) Z 0 9+%*%S P^T'af) 3*3 FIQURE 23 DOLLAR VOLUME INCREASES IN (HMRANTEED-INSURED MORTGAGE LOAN HOIDINQS IN THE LOS ANQELSS METROPOLITAN AREA, 6T TTPES OF INSTITUTIONAL LRDIBS, COMPUTED S9U-ANNUALLF, i 1953-5U AND 1957-58 (In Millions of dollars) Sources! Inforaatlon derived frca Tables I, II, and III. Un strings and loan associations Ilfs Insurance companies CoMerclal banks I .i a ii Si ? jj s s i i X < 3 ’ l « & 0 2 0 JB2 E t S K'’ a»; . s * r 5 ’ ♦'»5 i o*6 sim FIOUBE 2k DOLIiR VOLKS BCREAS3S IK QUARANTEIB-IHSUBH) MORTGAGE ID IN H OLDIKOS IK THE DKITED STATES, BT TTFES OF DBTITOnOKAL L E NDBBS, COMPUTED SM-ANKUAIiT, 1953-51 AND 1957-58 (In Billions of dollars) Sources: Infomtion derived fro* Tables V, VI, VII. Seringa and loan associations Life insurance companies Coeaercial banks I 5 4* ?! x«x£.J<A fci<: ”<m02a J1 ; > * " • • <x4 ’CcSoiQ ikio

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Asset Metadata

Creator Cox, John Robert (author)

Core Title Institutional Mortgage Lending In The Los Angeles Metropolitan Area, 1953-1954 And 1957-1958

Degree Doctor of Philosophy

Degree Program Economics

Publisher University of Southern California (original), University of Southern California. Libraries (digital)

Tag Economics, Finance,OAI-PMH Harvest

Format dissertations (aat)

Language English

Contributor Digitized by ProQuest (provenance)

Advisor Grey, Arthur Leslie, Jr (committee chair), Garis, Roy L. (committee member), Martin, Preston (committee member)

Permanent Link (DOI) https://doi.org/10.25549/usctheses-c18-274572

Unique identifier UC11358731

Identifier 6302145.pdf (filename),usctheses-c18-274572 (legacy record id)

Legacy Identifier 6302145.pdf

Dmrecord 274572

Document Type Dissertation

Format dissertations (aat)

Rights Cox, John Robert

Type texts

Source University of Southern California (contributing entity), University of Southern California Dissertations and Theses (collection)

Access Conditions The author retains rights to his/her dissertation, thesis or other graduate work according to U.S. copyright law. Electronic access is being provided by the USC Libraries in agreement with the au...

Repository Name University of Southern California Digital Library

Repository Location USC Digital Library, University of Southern California, University Park Campus, Los Angeles, California 90089, USA