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Mr. MEISTRELL. I am sure it has been from time to time considered. Is FHA to be the same as VA or VA the same as FHA-I do not know. Those are problems that I assume have had very careful consideration by the Congress at the time they enacted the act.

Mr. WALLACE. Thank you very much.

Senator LEHMAN. Commissioner Mason, are you prepared to testify at this time?

Mr. MASON. Yes, sir.

Senator LEHMAN. We would be very glad to hear from you.


Mr. MASON. Senator Lehman, my name is Norman Mason, and I am Commissioner of the Federal Housing Administration. I have a prepared statement. I feel that much of it has been covered by Mr. Meistrell in his testimony. If you would like, I will omit the details of what we have done, or I will give them to you.

Senator LEHMAN. Whichever you wish to do.

Mr. MASON. If I may take just a moment, I will go through it, if I may.

Last August as the accounts of the ravages of the unprecedented flood that struck the eastern part of the United States showed the tragic loss of life and devastating damage to homes and industry, we in the Federal Housing Administration immediately took steps to provide what financial relief we could to the unfortunate flood victims. I felt it would be helpful to have firsthand, eyewitness knowledge of conditions, so I went to the Pennsylvania, New Jersey, and New England areas. I was flown to Hartford as soon as weather conditions permitted and conferred there with our local office chief and the heads of other constituents of the Housing and Home Finance Agency. The officials of the Civil Defense Administration also were present. Senator Bush was most helpful and attended these meetings. I also met on the following day other Senators and Congressmen who had come to the area. After these conferences, I was given an opportunity, through a helicopter flight, to have an impression of the great damage wrought by the flood. That afternoon I went by air to eastern Pennsylvania for a similar firsthand impression of the measure of damage and the holding of conferences with the officials concerned with providing relief.

My conclusions of this survey were that the Federal Housing Administration could best serve the unfortunate flood victims by easing their financial burden in the rebuilding and repair of their homes on a long-range basis. I felt that the immediate problems of disaster relief were being solved by the relief agencies. After the declaration of the disaster areas by the President, FHA arranged to provide under our disaster-loan program that distress-area victims who lost their homes would be enabled to purchase or build homes for $7,000 with no downpayment and a 30-year FHA insured loan. We arranged for priority and the most rapid method of processing of such applications. I have already told you we have had very little use taken of that function. Since that provision would benefit victims desiring only houses in the lower-price range, we also changed our rules to

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lower downpayments and increased the maturities of mortgages for distress-area victims under our regular single-family home programs. By letter all lenders were urged to extend the full facilities of the title I FHA home improvement and modernization program to disaster victims for the repair of flood damage. Recognizing that flood victims would be finding it difficult to meet their current obligations, we liberalized our rules to provide that lending institutions would have 15 months-from 9 months-in which to file claims against the FHA after default in meeting title I monthly payments by the borrower, and mortgages were allowed 2 years, instead of 1 year, from the date of default before filing claims with us. These steps made it easier for lending institutions to work out relaxed repayment plans for victims whose incomes were curtailed or cut off by the flood.

A survey was made immediately in Commissioner-owned housing projects of vacancies which could be used for temporary disaster housing.

Most important, however, was our procedure of sending teams of fully informed FHA personnel from our Washington headquarters to go with representatives from our local offices to the disaster areas to inform mayors, relief committees, and all parties interested, of the FHA facilities available for rebuilding. These teams worked long hours and traveled long distances and visited every city and town damaged by the flood in the New England, New York, and Middle Atlantic areas to explain to worried town officials and homeowners the steps under which we intended to ease the financial burdens of homeowners afflicted by the flood.

We made arrangements to provide the Small Business Administration with the services of local FHA personnel for appraisal and architectural inspection duties in connection with their progress.

One could not visit the actual disaster areas and talk with the people of these communities without being impressed with the really serious situation that faced homeowners, good Americans who had lost their homes and were left with a debt to pay.

Quite properly I believe our Government, recognizing that homeownership is one of the cornerstones of good citizenship, has encouraged its citizens to purchase homes. Through FHA financing we have made it possible for these folks to acquire a home with a low downpayment and to retire their debt over a long period of years. There are fire insurance and other forms of casualty insurance to protect his investment from the more normal hazards-we even have earthquake insurance-but the homeowner has no way to protect his investment in a home from a flood. I believe that since we encourage our young folks to go into debt to buy a home, we should find a way to help provide protection for them.

I have talked with insurance people and they tell me that it is not economically feasible for them to provide flood insurance so I am happy to see this committee exploring this matter. I am sure that I do not myself have the answer, but a committee such as this, with the wealth of information it can call upon will, I am sure, find the solution to the problem.

If there are ways that FHA can help the committee, we will be most happy to do so.

Senator, I agree with what you said to Mr. Meistrell, and I particularly am impressed with it, because we do encourage people to incur this debt, and then we leave them right out on a limb.

Senator LEHMAN. We certainly do that. I am very grateful to you for your comments, and I can assure you this committee is going to use its best efforts, continuing efforts, to find a solution for this thing, because I think it is highly important.

Mr. MASON. I am sure it is.

Senator LEHMAN. I want to ask you one question. As the reason so little use was made of the FHA insurance program for disaster loans that the $7,000 limit is too low to be practical in these higher cost construction areas? Should the statutory limit be raised?

Mr. MASON. Yes, sir; I am sure this has a bearing. The folks who live in Connecticut as a rule do like better houses than $7,000 houses. The three applications that we have are all prefabricated houses which are small and not too desirable additions to the housing inventory.

Senator LEHMAN. Let me ask you this. I read some figures and Mr. Meistrell gave us figures of the number of houses destroyed. He said there were some that had been damaged. The figures that I read from the Civil Defense Administration were very, very much larger, half again as large, of houses destroyed, and 3 or 4 times as large than Mr. Meistrell had in mind, I gather, of houses seriously damaged or with minor damages. Have you got any information on that?

Mr. MASON. No, we do not collect statistics for such purposes. We depend upon Commerce and other departments of the Government for those figures. I would say that when I flew over that area, Senator, I was really shocked, though.

Senator LEHMAN. We had a similar disaster in New York in 1936. It was not as serious as this one, but it affected the entire southern tier. I was down there for a number of days, and although it was much less serious than the one we have just gone through, the damage was enormous. And, as in this disaster, the load fell on the little fellow, the little homeowner, almost exclusively.

Mr. MASON. You see, I am sure you know this, but it is not just the very poor man. I think the very poor man sometimes gets taken care of by the Red Cross. But our average American citizen who has a little business of his own may lose that also in paying off his mortgage which a bank, after all, cannot pay off. And this is not just a Government loan program, either, because, as I am sure you know, something less than 25 percent of the loans that are made are Insured by FHA, and another percentage, which would bring it up to less than 50 percent, are VA loans. The VA's program is a little larger than FHA. And then beyond that are conventional loans. And these people are left out on a limb, too, just as those with Government-insured loans. They may not have such a large mortgage, but it is just as serious.

Senator LEHMAN. Of course the man with a very large income is very little hurt, although he may lose a valuable house, because he is in a position to write off his loss against his income tax, and therefore suffers very little loss.

Has the Agency had many complaints from disaster victims concerning the speed in rendering aid, the adequacy of aid, or other complaints?

Mr. MASON. We have not gotten them in Washington yet, sir. I would say in general we have had a pretty good reputation. You see, we do have in FHA local offices in the States to which people can get and this may be a help. I am sure it does. It is an office with which the lenders at least are familiar. I realize this is a problem, because people do not know where Government agencies are, and so we did send these teams out-our local director and two men from Washington, in each of the areas to travel around and tell, not just the city officials, but interested groups in towns, where we were and what we could do for them.

Senator LEHMAN. Do you think that any legislation that is enacted should cover only flood insurance or insurance against all natural disasters?

Mr. MASON. Well, the flood insurance is one which has been particularly impressed upon me, because of this disaster. In my thinking, I have thought about other possible disaster areas that might be covered, and the number of them is relatively small. Therefore, I believe that if it covered everything, it would be an added advantage. One of the problems that the insurance people always bring up when you talk to them is that nobody buys flood insurance excepting the man who is a bad risk, and if we had something that would spread this so that other people bought this kind of insurance, it might be an advantage.

Senator LEHMAN. I think that might very well be the case. Have you given any thought to manmade disasters, such as enemy attack! Mr. MASON. No, sir; in FHA we have not explored that yet.

Mr. WALLACE. Mr. Mason, do you have figures on how many FHA homes were affected by the flood and how many homes with FHAinsured mortgages were affected in this six-State area?

Mr. MASON. No, we do not.

Mr. WALLACE. Mr. Meistrell mentioned that in the case of an FHA home which was washed away by flood you would get a moratorium on the loan, and then could get an advance commitment for a mortgage to build a new house; is that correct?

Mr. MASON. If the man applied for it; yes. I mean we extended the term on the loan from 1 year to 2 years, which permitted the bank-it isn't a moratorium exactly, and yet I suppose it is-it gives the bank the privilege of extending relaxed terms to this borrower who is in this terrible situation.

Mr. WALLACE. Well, assuming that a man had a $5,000 FHA-insured mortgage on a home which was washed away, and he got what in effect was a moratorium and an advance commitment for another mortgage of $5,000, he would have to repay a mortgage of $10,000; would he not? Mr. MASON. Yes, he would. Now, the figures that you have used are possible, but if you get into larger figures you have trouble-as you know, you cannot get an FHA-insured loan unless you have an adequate income to carry the loan. So you could easily price yourself out of this.

Mr. WALLACE. His credit rating would hardly be sufficient to cover what in effect is almost a double mortgage.

Mr. MASON. It isn't a question of the credit rating. It is a question of earning enough to retire the mortgage.

Mr. WALLACE. Have you gotten many requests to use this moratorium and advance commitment?

Mr. MASON. Not yet; no, sir.

Mr. WALLACE. I would think it would be pretty difficult for a person to pay, in effect, a double mortgage.

Mr. MASON. You see, we won't have them yet, sir, because they come from the banks.

Mr. WALLACE. I understand, though, that the Red Cross has been stepping into this gap to some extent. I have been told of one instance of a woman who purchased a $15,000 home right before the floods and it was washed out, and the Red Cross stepped in and helped to take care of that old mortgage so she could get a new mortgage. Do you know the extent to which the Red Cross will step in and fill that gap? Mr. MASON. No, I do not. But I didn't think it applied to a $15,000 mortgage. I have been through a flood myself and suffered from it, and know that the Red Cross assisted principally, in our case, up in Massachusetts, along the Merrimack River, welfare cases, so to speak. I mean the man who was really right up against it. And the man who has a $15,000 house generally is not up against it. Mr. WALLACE. Thank you very much.

Senator LEHMAN. I want to hold you here for a few minutes more, because it is perfectly obvious you have given a lot of thought to this subject. I would like to get your judgment on 1 or 2 other points. Do you think the program should be one of direct insurance or also through reinsurance?

Mr. MASON. I didn't get the alternative.

Senator LEHMAN. Should the Government be the insurer or assist through reinsurance, or a combination of both?

Mr. MASON. I am not sufficiently an expert on this, Senator, to be sure. I am a believer in private enterprise doing the bulk of this work. I believe if you are going to have an insurance program, that the insurance companies can more efficiently run the handling of the individual policies, as they did in the war risk in other wars. So I think that perhaps I would say that if you were going to have an insurance program, it should provide for reinsurance.

Senator LEHMAN. Have you any idea of what Government agency should administer the program, if the program is adopted?

Mr. MASON. This is maybe a self-serving statement, sir, but I believe that the Housing and Home Finance Agency, which has in FHA an insuring agency, has personnel who are equipped to handle such a program. We are certainly equipped to know about financing, about insuring homes, and if we carried this further, the principles of insuring other things are the same. Primarily, of course, my interest has been in homes, and my studies have been along that line.

Senator LEHMAN. The suggestion has been made by a number of people with whom I have spoken that the Civil Defense Administration should handle it. But we are going to give very careful consideration to all the agencies that might be qualified to handle this.

Mr. MASON. Yes, sir.

Senator LEHMAN. Do you think that this insurance should be confined merely to real property or to personal property as well?

Mr. MASON. Well, as I said a minute ago, I am primarily interested in homes. And my own philosophy is that in general I buy protection

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