In Pennsylvania we have had one and another area coming in with about 100, but the one is the only definite one to date. We have an indication that a group of people are putting up and will need 100, but they have not finally

Senator LEHMAN. You have actually had only four applications, as I understand it, for the $7,000 loan?

Mr. MASON. Three applications, sir, under the disaster insurance provisions 100 percent

Senator LEHMAN. I was liberal.

Mr. MASON. You're very kind.

Senator LEHMAN. How many have you granted? How many have actually been granted?

Mr. MASON. These are in the application stage.

Senator LEHMAN. I see. All right. Thank you very much.

Mr. MEISTRELL. We are also authorized, Senator Lehman, under our advance planning program to make interest-free advances to communities for the planning of needed public works. These funds can be used to aid in financing the cost of engineering and architectural surveys, designs, plans, specifications, and other action preliminary to construction of public works.

We have already advanced approximately $30,000 to aid the floodstricken town of East Stroudsburg, Pa., in the planning of streets and water and sewer facilities. It is estimated that these advances will make it possible for the community to initiate a $3 million program of reconstruction.

Another assistance program of our agency available to flood areas is the public works loan program recently authorized by the Housing Amendments of 1955. This would be of assistance to communities which need to replace or improve flood-damaged public facilities and cannot otherwise obtain financing on reasonable terms.

Because of our deep concern for the plight of the homeowners whose homes were either destroyed or seriously damaged in the recent floods, we immediately undertook a study to determine whether an insurance program could be developed to protect people against the possibility of losses from floods.

Perhaps I should mention that the first hearing that we had was on the 8th of September, a little over 2 weeks after the flood. We held another one on the 21st of September and the last one on the 11th of October, which is about 3 weeks ago.

In connection with our studies we had representatives from the casualty insurance companies, various groups from the financial community, and representatives of the Bureau of the Budget. In addition, we carried on discussions with representatives of the Bureau concerning some of the major problems involved in any Government insurance program.

I was impressed this morning with your observation, Senator Lehman, that it is a very complex and a very difficult problem, as we soon recognized that. We hope to continue to stress not only the insurance aspects of it but any other phases that may affect the problem.

Mr. Jones, Assistant Director of the Budget. I think stated to you this morning the views of the Administration with respect to flood insurance, including some of the problems involved, and also indicated alternatives, and I concur in the general views expressed by him. I, of course, would be pleased to answer any questions.

We felt in the Housing Agency

Senator LEHMAN. Could I interrupt you?

Mr. MEISTRELL. Yes.

Senator LEHMAN. Were you here when Mr. Jones testified?
Mr. MEISTRELL. Yes; I was.

Senator LEHMAN. You say in the statement:

Mr. Roger Jones, Assistant Director of the Bureau, has already given this committee the views of the Administration with reference to flood insurance.

I find it not quite appropriate to ask one witness to testify for another witness, but so long as you were here when he testified, I wondered whether you could sketch any testimony that Mr. Jones gave covering the views of the Administration with reference to flood insurance. I certainly do not recall that he did that.

Mr. MEISTRELL. Well, perhaps, Senator Lehman, he mentioned 2 general assumptions and 6 various points that I think he urged upon this committee to consider in evaluating an insurance program. That is what I had reference to.

Senator LEHMAN. He did give certain criteria.

Mr. MEISTRELL. Certain criteria.

Senator LEHMAN. Suggestions which should be taken into account in formulating legislation. I think those were very interesting suggestions. But I certainly did not complete the questioning of Mr. Jones with any idea what the recommendations or suggestions of the Administration are with regard to flood insurance. I pressed upon that. I hope we will get it within the next day or two.

Mr. MEISTRELL. My recollection of his testimony was that he was giving some critiques and explaining some of the problems involved. Representatives of our constituent agencies may wish to amplify my remarks with reference to our operations in the flood-stricken area. They are here, and I am sure they, as well as I, would be glad to answer questions.

Senator LEHMAN. My attention was just drawn to a certain matter which I probably overlooked, because I was away at the time. But the fact as stated to me was that shortly after this committee, through its staff, started to work on disaster insurance, after Senator Bush and the others and I had indicated our interest in this matter, FHA, as I reall it and I hope I am not incorrectly quoting the facts-put out a news release saying that the Federal Housing Administration would take the lead in working out such an insurance program. I am told that you were General Counsel of the Federal Housing Administration at the time. Can you tell us now whether those statements were cleared with the budget.

Mr. MEISTRELL. No; I do not believe they were, Senator Lehman. Senator LEHMAN. You must have had something in mind at the time, when these releases were issued. I wonder whether you could refresh your recollection.

Mr. MEISTRELL. Yes, we did. When these floods occurred, the Commissioner of the FHA and I had discussions concerning some method of approach to the problem. One method of approach, of course, would be an insurance program, if it could be developed on some sound basis. We also discussed some of the other possibilities that were adverted to this morning. And, as a result of those discussions, we

undertook to get the views of various interested segments of our economy. And that brought forth these meetings to which I have referred. Senator LEHMAN. Čould you tell us how many houses were destroyed or seriously damaged in the disaster area of the Northeastern States? Mr. MEISTRELL. We do not have statistics of our own, Senator Lehman. The Department of Commerce issued a release today, in which it indicated that figures gathered by the Civil Defense Agency in various State and local agencies indicate approximately 813 homes were destroyed by flood.

Senator LEHMAN. That is exclusive of the seriously damaged? Mr. MEISTRELL. Yes. We do not have that information readily available, Senator Lehman.

Senator LEHMAN. Let me get back, for a moment, to something that has been very much in my mind and I think in the minds of my colleagues on the committee and, I may say, of many millions of other persons.

The loss that resulted from these disastrous floods fell primarily on the little fellow. The big corporations which suffered large losses, in all probability, in most cases, will have no difficuty whatsoever in writing that off out of their earnings or surplus. They can get loans from the Government to permit them to rehabilitate themselves. But it is the little fellow, who has a $7,000 or $10,000 or $12,000 home, on which certain payments have been made, in many cases, but which is still plastered with a mortgage in most instances. What that fellow is going to do when his home is destroyed or seriously damaged, I just do not know. I do not know that there is anything that can be done retroactively. But I certainly feel very strongly that we must take every possible step to see that in future developments, and I hope in present developments, the loss will not fall on these people, who are without any fault whatsoever. They thought they were protected from this great disaster. Yet they are left without anything in the world, except the mortgage.

Mr. MEISTRELL. That is correct. Senator Lehman, I subscribe very strongly to what you have just said. We in the Housing Agency feel a very deep responsibility to these people. And, as you have indicated, it is the fellow who has a $7,000 or $10,000 mortgage on his home which is either totally or substantially destroyed and face, a deficiency judgment from some of the lending institutions that hold those mortgages. And it is something we are aware of. It is a very human and a very difficult problem. I can assure you that we will assist you and your staff in any way possible to try to work out some solution to meet these unusually difficult and, indeed, hardship cases. Whether it will be done, as has been suggested today, through some form of joint venture by the State and Federal Government in some indemnity way, I frankly do not know. It is a venture into a new theory of government, to undertake to indemnify people for their personal losses. I do not believe that has ever been done, even in wars. Perhaps it should be. I do not know. But I think we have got to evaluate that problem with the utmost care, as to how far the Government will undertake to reimburse an individual for the loss of his own property.

Senator LEHMAN. Well, I want to correct one statement that you made. The Government does reimburse for personal losses in warvery frequently it has.

Mr. MEISTRELL. Perhaps I am in error on that. I was informed that was not the case.

Senator LEHMAN. I want you to know I am very grateful to you for your expression of sympathy. I am sure the statement is really sincere and represents the point of view of the Administration of which you are a representative here today.

I would be less than frank, however, if I did not again express my very deep disappointment that the Bureau of the Budget had no specific legislative proposals for a disaster insurance program. The six criteria offered appear to contain no substantial additions to the bill which I have suggested for study. I am sorry, very sorry, that the Bureau looks upon such an insurance program as merely an experiment, and that the Bureau would exclude coverage of personal property. Otherwise, these criteria are pretty well expressed in my bill. I had hoped that the Bureau would have made some positive contributions.

I realize the difficulty of this situation. The members of the committee want your help. We have given a great deal of thought to this. But we want the guidance of the Administration and the expression of their opinion. And that, according to the statement made by the President, must come from the Bureau of the Budget.

Mr. MEISTRELL. Well, I can assure you, Senator, that we want to be as helpful as we can, and I think your staff will agree that we have attempted to be, in every way possible. We have asked you to attend our meetings. We have offered to make available to the staff all the data and information that we have. And I look upon this as a venture that we should all participate in and all attempt to come up with a good, sound answer.

I do think-and I feel strongly that I should say this that one thing we want to particularly guard against is any hasty or ill-conceived ideas which might very well affect the concept that you are attempting to develop and which we are interested in. It is not an easy problem. It is a difficult problem. And I think after you have had occasion to get the views of the insurance industry, who I hope will point out to this committee some of the problems they have raised with us, which caused us at least to be cautious in making recommendations that are not well thought through.

Senator LEHMAN. As I said this morning, the insurance companies will be given every opportunity to testify before this committee.

There is just one more question I want to ask you. I am asking this really for the record-because there is a great discrepancy between the figures that you have given regarding the destruction and damage to homes, and those given by the Civil Defense Administration. You stated that there were approximately 900 homes destroyed.

Mr. MEISTRELL. Senator, I am quoting from a release of the Department of Commerce, which is dated Monday, October 31, and I assume this is available, but I would be happy to give it to you at this time.

Senator LEHMAN. We have it. But you testified that there were 813 homes destroyed, and that a certain number were damaged. These figures were supplied by the Civil Defense Administration to this

committee. It is a preliminary estimate of damage. But they give houses destroyed, 1,229; homes, major damages, 4,900; and homes which sustained minor damage, 15,529. That is the total for the area that was affected in the Northeastern States by the flood. Those are

pretty great variations.

Mr. WALLACE. Mr. Chairman, may I clear up the record for one part of the conception on these guaranteed loans. If you have an FHA loan and your house is washed away by flood, what happens? The loan is a guaranteed loan. Can you tell us what happens in that case?

Mr. MEISTRELL. Well, I am not qualified to speak on the VA-guaranteed loan.

Mr. WALLACE. No; I mentioned FHA loans.

Mr. MEISTRELL. The FHA does not gurantee loans; it insures the loan. The dealings between a borrower and lender are generally consummated subject to an FHA insurance, which runs to the bank, the lending institution. We agree in our insuring programs to indemnify the bank against loss on condition that the property is in substantially the condition it was at the time the loan was made. So that if a house is totally destroyed, the FHA has no liability.

Mr. WALLACE. On an insured loan, an FHA-insured loan, if the person who has the house has it washed away, he loses everything except the mortgage.

Mr. MEISTRELL. That is correct.

Mr. WALLACE. But in the case of a guaranteed loan, such as the VA, the loan itself is guaranteed, so that he loses his house, but he also loses the mortgage.

Mr. MEISTRELL. I believe under the VA guaranty, the Veterans' Administration liability is fixed to some percentage of the total loan, without regard to the security behind it. In other words, if the house is washed away, it probably washes away part of the debt, too. Whereas in the Federal Housing Administration, if the house is washed away, the mortgage has not been.

Mr. WALLACE. In your own studies, have you considered the possibility of working out an amendment to FHA legislation which would protect in case of flood in a similar way that the VA protects against flood?

Mr. MEISTRELL. When you say the VA protects against flood, I assume you are referring to this liability under the mortgage.

Mr. WALLACE. No; I mean that they guarantee instead of insure. don't know whether it could be done legislatively. I merely wondered if you had looked into the question of providing something legislatively which would protect an FHA borrower, the same as a VA borrower is currently protected.

Mr. MEISTRELL. Well, I think they are two entirely different concepts; whether or not the Federal Housing Administration, in their insurance liability should assume a fixed liability irrespective of the risk element, as against the VA assuming the fixed liability in a lower amounts is a matter of legislative determination, and I am sure that matter has been under study. But I would rather Commissioner

Mason comment upon that.

Mr. WALLACE. In other words, it is under study and you have considered that angle.