old Federal Works Agency, GSA, and the Housing Agency, until such time as the function was transferred to the Civil Defense Administration. In our experience in that period of years in these disaster operations, we developed, I think, quite a number of people with the knowhow who we have loaned, of course, to the Civil Defense Administration for use in these areas.

And that, Senator Lehman, about constitutes the activities of the Community Facilities Administration in this particular field.

Senator LEHMAN. Are you constantly in touch with the State and local authorities?

STATEMENT OF ORVIL R. OLMSTEAD, ASSISTANT COMMISSIONER FOR PROGRAMS, PUBLIC HOUSING ADMINISTRATION

Mr. OLMSTED. Senator, my name is Orvil R. Olmsted. I am Assistant Commissioner of the Public Housing Administration in charge of programs, and I am representing Commissioner Slusser today who is recovering from an operation, and he asked me to convey his regrets that he could not be here.

I have a brief statement which I will be glad to give you. It follows Mr. Meistrell's summary of the Public Housing Administration's participation in the disaster relief program.

Senator LEHMAN. Do you have anything to add?

Mr. OLMSTED. I have nothing to add, but I will be very glad to answer questions.

Senator LEHMAN. I do not think there are any questions at the moment. There may be at some later time. We have gone over the housing situation very well.

(The statement referred to follows:)

STATEMENT OF PARTICIPATION BY PUBLIC HOUSING ADMINISTRATION IN THE

DISASTER-RELIEF PROGRAM

On August 20, 1955, President Eisenhower invoked Public Law 875 for disaster-affected localities. The Federal Civil Defense Administration issued Disaster Order No. 1 on August 20, 1955, assigning disaster relief responsibilties to the various governmental agencies. The Administrator of the Housing and Home Finance Agency was given the responsibility for providing temporary housing and other emergency shelter. Disaster Relief Order No. 1 also provided for "an orderly and continuing means of assistance by the Federal Government to States and local governments in carrying out their responsibilities to alleviate suffering and damage resulting from the major disasters in Massachusetts, Rhode Island, Connecticut, New York, New Jersey, and Pennsylvania."

In the New England area, emergency assistance was handled through a special HHFA Disaster Office established in Waterbury, Conn. A member of the PHA New York field office was assigned to this task force. Since the time factor was of prime importance, authority and responsibility for PHA operations was given to the New York field office.

The PHA made available some 1,400 units of federally owned war housing and federally aided public housing in the Connecticut area as temporary housing for homeless flood victims. Also, the PHA authorized local authorities to open all public housing vacancies for this purpose in addition to vacancies in Lanham Act projects. It was established that a potential of 600 federally owned trailers at Portsmouth, Ohio, could be moved into the disaster area if other housing resources were insufficient.

The FCDA was advised that action by PHA to bring in housing would be taken upon an authorization from FCDA.

In negotiations with representatives of FCDA, they were advised that our fund situation was limited to such an extent that we could not prepare and transport trailers to the disaster areas except on a reimbursable basis; title to trailers transported and temporary family housing moved to the disaster-affected areas was to be transferred to FCDA and responsibility for management and future handling would rest with FCDA.

Housing was transported or existing units in the area were made available for Occupancy as follows:

Trailers were moved from Piketon, Ohio (Public Law 139 program) to the various locations outlined above.

The housing at Groton, Conn., was transferred to FCDA to be removed from its present location to other localities as required by the emergency. The two Lanham projects at Waterbury and West Hartford which were in process of disposition were reactivated for use under the disaster-relief program. The number of units shown represents the number of vacant units at these projects.

By mid-September the PHA had housed disaster families in existing low-rent and Lanham projects as follows:

Subsequently, another hurricane caused serious damage in the New Bern, N. C., area. The PHA authorized the local housing authority at New Bern to house disaster families in existing low-rent projects on an emergency basis. No requests were received from FCDA for utilization of trailers or other temporary housing.

When new floods occurred in the New England area earlier this month, the task force for housing disaster victims was reassembled. Eligibility requirements for admission to existing projects were relaxed, and 21 trailer units were moved into the Danbury, Conn., area for emergency housing use. Of these units 19 were moved from Piketon, Ohio, and 2 were moved from Southbridge, Mass.

Senator LEHMAN. Before we proceed with the next witness, I want to say that I understand that Mr. Reid of FNMA is present in the hearing room. I know he was not asked to testify, but I would like to ask him to file a statement for the record, setting forth the views of his agency concerning their ability to help in the distressed areas and how practical advance commitments of aid are to a man with a heavy mortgage debt. Mr. Reid, will you do that?

STATEMENT OF ROBERT NEWTON REID, VICE PRESIDENT AND GENERAL COUNSEL, FEDERAL NATIONAL MORTGAGE ASSOCIATION

Mr. REID. Yes, sir.

Senator LEHMAN. If you wish to testify or someone else from your agency, we will be very glad to hear you.

Mr. REID. Thank you, sir. If you have any questions, I will try to answer them. Otherwise, I will be pleased to file a statement. Senator LEHMAN. We will hold the record open-and we may ask you to come back.

(The following statement was submitted subsequently by Mr. Reid to supplement his preceding testimony :)

STATEMENT OF ROBERT NEWTON REID, VICE PRESIDENT AND GENERAL COUNSEL, FEDERAL NATIONAL MORTGAGE ASSOCIATION

In response to the committee's request to me, made in open hearing on October 31, 1955, I am submitting this statement concerning the facilities of the Federal National Mortgage Association in relation to the two recent tragic floods in the Northeastern States and other such major disasters. For the record, my name is Robert Newton Reid and I am the Vice President and General Counsel of the Association.

The Federal National Mortgage Association is in a position to purchase, or to commit to purchase, mortgages insured by the Federal Housing Commissioner or guaranteed by the Administrator of Veterans' Affairs if such mortgages cover replacement housing, in instances in which the mortgagor's former home was destroyed or damaged to such an extent that construction, reconstruction, or purchase of a dwelling is required to replace the home lost in a catastrophe which the President of the United States has determined to be a major disaster and the housing to be covered by the mortgage will be occupied by the mortgagor or members of his immediate family.

These purchases, and commitments to purchase, of FHA-insured and VA-guaranteed mortgages are authorized under the special assistance functions of the Association (sec. 305 of the FNMA Charter Act). At the present time, the full unpaid principal amount of the mortgages affected by such purchases of and commitments to purchase mortgages (including special participations in mortgages) may not exceed $10 million outstanding at any one time, but that amount may be increased within statutory limits by action of the President of the United States.

Adverting to earlier testimony, it is my opinion that if a house were destroyed by flood there would nevertheless be a continuing personal obligation of the mortgagor to effect payment of the unpaid portion of his mortgage debt.

It is my understanding, further, that destruction of the house by flood would prevent recovery by the mortgagee under the FHA mortgage-insurance contract with respect to an FHA-insured mortgage, i. e., the mortgagee's recovery would be restricted to the amount that could be realized from disposition (other than to FHA) of the unimproved land, plus any amount that were recoverable on account of the personal liability of the mortgagor.

If, in like circumstances, the mortgagee held a VA-guaranteed mortgage, it is my understanding that the mortgagee could collect the guaranty (for example, 60 percent of the unpaid portion of the mortgage debt) from the Veterans' Administration. (The Veterans' Administration would thereupon be subrogated

to the mortgagee's rights, and would have a claim against the mortgagor for the amount paid under the guaranty.) It is likely, in such circumstances, that the Veterans' Administration would elect not to accept conveyance of the unimproved land for the balance of the mortgage debt. The mortgagee's additional recovery would be limited, therefore, to the amount that could be realized from other disposition of the unimproved land, plus any amount that were recoverable on account of the personal liability of the mortgagor for the remaining unpaid mortgage debt.

In the circumstances outlined above, I think it is unlikely that a mortgagor could obtain a new mortgage loan until some satisfactory settlement had been made with respect to the unpaid portion of the mortgage loan covering the property on which had been located the house that was destroyed. That is a credit matter, and presumably would apply without regard to whether the new home were placed on the old site or on a new site. Assuming that some satisfactory settlement had been effected, I think the fact that FNMA commitments are available to lenders would in many instances be of material help to the mortgagor in obtaining a new loan.

There can be no question but that the interests of both mortgagors and mortgagees would be enhanced if broad disaster insurance could be made available on reasonable terms.

It has been testified earlier by the Federal Housing Commissioner, Mr. Mason, that only a few FHA insurance commitments have as yet been issued for disaster housing mortgages following the recent New England floods. That is accounted for because there has not been a sufficient lapse of time. Until an FHA insurance commitment has been obtained, a lending institution (mortgagee) is not in a position to ask the Federal National Mortgage Association to commit to purchase the mortgage. I believe that fact explains why there have been thus far no applications for FNMA commitments in connection with these two recent floods.

Disaster housing mortgages which are eligible for FNMA's commitments are those insured by FHA under section 203 (b), 203 (h), 203 (i), or 222 of the National Housing Act, as amended, and those guaranteed by VA under section 501 of the Servicemen's Readjustment Act of 1944, as amended.

As authorized by the President of the United States, pursuant to the provisions of the Federal National Mortgage Association Charter Act, the Federal National Mortgage Association (FNMA) announces that it will enter into contracts to purchase mortgages, or 20 percent immediate participations in mortgages (including a related deferred participation agreement to purchase the remaining outstanding interest in such mortgages conditional upon the occurrence of such a default as gives rise to the right to foreclose), that are insured by the Federal Housing Commissioner (FHA-insured mortgages) or guaranteed by the Administrator of Veterans' Affairs (VA-guaranteed mortgages) covering housing intended to be made available primarily for families who are victims of a catastrophe that the President of the United States has determined to be a major disaster. A separate announcement will be made in connection with the assistance to be rendered by FNMA to victims of each catastrophe so determined to be a major disaster. In addition to other conditions and requirements set forth in this Sellers Guide, commitments and purchases under this program will be subject to the following supplemental conditions:

Types of mortgages to be purchased

Unless otherwise specifically provided to meet the requirements of a particular situation or circumstance, purchases will be limited to mortgages and 20 percent immediate participations in mortgages to be insured by FHA under section 203 (b), 203 (h), 203 (i), and 222 of the National Housing Act, as amended, or guaranteed by VA under section 501 of the Servicemen's Readjustment Act of 1944, as amended.

Method of purchase

Seller may offer mortgages to FNMA for purchase either under an immediate purchase contract, FNMA form 304, or under a commitment contract, FNMA form 307.

Twenty percent immediate participations in mortgages may be offered to FNMA for purchase under a commitment and participation contract, FNMA form 309.

Program limitation

The full unpaid principal amounts of the mortgages affected by FNMA's purchases of and commitments to purchase mortgages and 20 percent immediate participations in mortgages under this program may not exceed $10 million outstanding at any one time.

Duration of program

When it has been determined that FNMA will make its facilities under this program available in connection with a particular major disaster, the duration of the program as it relates to that major disaster will be specified in the announcement relating thereto.

Area covered

The announcement by FNMA of any major disaster to be included in this program will include a description of the area affected thereby.

Mortgage interest rate

The mortgage must bear interest at the highest rate permitted by FHA or VA rules and regulations for that type of mortgage at the time of issuance of the FHA insurance commitment or the VA certificate of reasonable value.

Purchase prices

In connection with the announcement of a particular major disaster included under this program, the purchase prices that FNMA will pay for mortgages, or for 20 percent immediate participations, will be specified in the announcement.

Commitment fee

Seller will be required to pay at the time of application (offer of a commitment contract or commitment and participation contract) a commitment fee equal to 1 percent of the original amount of the mortgage, which is nonrefundable if the application is accepted.

Purchase and marketing fee

Seller will be required to pay with respect to each mortgage submitted for purchase a purchase and marketing fee equal to one-half of 1 percent of the unpaid principal balance of the mortgage. With respect to each 20 percent immediate participation in a mortgage, seller will be required to pay a purchase and marketing fee equal to one-half of 1 percent of the unpaid principal balance of the 20 percent immediate participation. The purchase and marketing fee will be deducted from the purchase price. Seller will not be required or permitted to make a common-stock subscription in the case of mortgages purchased by FNMA under special-assistance programs.

Special requirements

1. With each application (offer of a contract) covering a mortgage or a 20-percent immediate participation therein for purchase by FNMA, seller shall submit an original statement by the mortgagor addressed to FNMA containing substantially the following language:

"For the purpose of inducing Federal National Mortgage Association to issue its contract to for the purchase of the mortgage or a par

(Name of mortgagee)

the

ticipation therein, covering the property situated at undersigned states that his home, which he occupied as an owner or a tenant, was destroyed or damaged to such an extent that construction, reconstruction, or purchase of a dwelling is required to replace the home lost in a catastrophe which the President of the United States has determined to be a major disaster and the housing to be covered by the mortgage will be occupied by the undersigned or members of his immediate family."

2. With each application (offer of a contract) covering a mortgage seller must submit letters from at least two mortgage-lending institutions normally engaged in the purchase of mortgages of the same type to evidence that seller (a) is