it; the Veterans' Administration inspected and approved it; the veterans bought those homes; and then the houses sank as the dump decayed. In that case a release was obtained. Mr. DERVAN. Yes, sir, because we were reasonably able to conclude that to some degree, at least, the Government was at fault. Senator YARBOROUGH. But if the Veterans' Administration had not done that, even though the houses had sunk into the sand, there would have been no relief without this legislation? Mr. DERVAN. Correct, sir. Senator YARBOROUGH. The Veterans' Administration has requested this legislation to help them out administratively in a few hard cases? Mr. DERVAN. Yes, sir. Senator YARBOROUGH. I have no further questions. I have here a statement by Administrator J. S. Gleason, Jr., of the Veterans' Administration to Senator Lister Hill, chairman of the full committee, dated February 15, 1963, recommending favorable action by the committee on this legislation. Senator JORDAN. May I ask for my own information, are there any statutes applying to other loans besides veterans' loans, such as the Federal Housing Administration loans are there any "compelling reasons" or statutes applicable there to this question here? Mr. DERVAN. Not that I am aware of, sir, but I cannot speak as an expert in that partciular area, as to loans other than those of the Veterans' Administration. Mr. BLAND. I believe at least the Farmers Home Administration may have some latitude. Senator JORDAN. I wondered if there were such discretionary power with reference to other types of Government loans. Mr. DERVAN. That I do not know. Senator YARBOROUGH. The Veterans' Administration now has the discretion in this type of case to reduce the amount of the payment? Mr. DERVAN. Yes, sir. We have authority to accept Senator YARBOROUGH. To accept a token payment? Mr. DERVAN. To accept a compromise payment in full settlement of his indebtedness. Senator YARBOROUGH. And in this, instead of accepting a token payment, you would go ahead and waive it? Mr. DERVAN. That is right. Senator YARBOROUGH. You have practically this authority now, except that you have to have a token payment. Mr. DERVAN. In effect, Mr. Chairman, that is correct. If S. 412 were enacted it would give VA specific authority to waive a veteran's indebtedness in the type of cases where we now are required to obtain at least a token payment by way of compromise. Senator JORDAN. Mr. Chairman, could we request the staff to inquire what are the practice and policies of other lending agencies of the Government? Senator YARBOROUGH. The staff will make that inquiry and furnish that information for the record. (The information follows:) U.S. DEPARTMENT OF AGRICULTURE, Hon. RALPH W. YARBOROUGH, Labor and Public Welfare Committee, DEAR SENATOR YARBOROUGH: A member of the subcommittee's staff orally requested the following information concerning the Farmers Home Administration, in conjunction with the consideration by your subcommittee of a legislative proposal to amend the authority of the Veterans' Administration in dealing with personal liability on loans made or guaranteed by that agency in the event of damage to or destruction of security property. Under the provisions of 7 U.S.C. 1981 (d), the Secretary of Agriculture, and through him the Farmers Home Administration, is authorized to compromise, adjust, and reduce claims administered by that agency as the circumstances require. More specifically, the subsection provides as follows: "(d) compromise, adjust, or reduce claims, and adjust and modify the terms of mortgages, leases, contracts, and agreements entered into or administered by the Farmers Home Administration under any of its programs, as circumstances may require, but compromises, adjustments, or reductions of claims of $15,000 or more shall not be made without the approval of the Administrator: Provided, however, That "(1) compromise, adjustment, or reduction of claims shall be based on the value of the security and a determination by the Secretary of the debtor's reasonable ability to pay considering his other assets and income at the time of the action and with or without the payment of any consideration at the time of such adjustment or reduction; "(2) releases from personal liability may also be made with or without payment of any consideration at the time of adjustment of claims against"(A) borrowers who have transferred the security property to approved applicants under agreements assuming the outstanding secured indebtedness; "(B) borrowers who have transferred the security property to approved applicants under agreements assuming that portion of the secured indebtedness equal to the current market value of the security property or transferred the security property to the Secretary: "(C) borrowers who have transferred the security property to other than approved applicants under agreements assuming the full amount of, or that portion of the secured indebtedness equal to, the current market value of the security property on terms not to exceed five annual installments with interest on the unpaid balance at a rate determined by the Secretary; and "(D) borrowers who transfer security property under subparagraphs (B) and (C) above for amounts less than the indebtedness secured thereby may be released from personal liability only on a determination by the Secretary that each such borrower has no reasonable debt-paying ability considering his assets and income at the time of the transfer and the county committee certifies that the borrower has cooperated in good faith, used due diligence to maintain the security property against loss, and has otherwise fulfilled the covenants incident to his loan to the best of his ability; "(3) no compromise, adjustment, or reduction of claims shall be made upon terms more favorable than recommended by the appropriate county committee utilized pursuant to section 332 of this title; and "(4) any claim which has been due and payable for five years or more, and where the debtor has no assets or no apparent future debt-paying ability from which the claim could be collected, or is deceased and has left no estate, or has been absent from his last known address for a period of at least five years, has no known assets, and his whereabouts cannot be ascertained without undue expense, may be charged off or released by the Secretary upon a report and favorable recommendation of the county committee and of the employee having charge of the claim, and any claim involving a principal balance of $150 or less may be charged off or released whenever it appears to the Secretary that further collection efforts would be ineffectual or likely to prove uneconomical; and "(5) partial releases and subordination of mortgages may be granted either where the secured indebtedness remaining after the transaction will be adequately secured or the security interest of the Secretary will not be adversely affected, and the transaction and use of proceeds will further the purposes for which the loan was made, improve the borrower's debt-paying ability, permit payments on indebtedness owed to or insured by the Secretary, or permit payment of reasonable costs and expenses incident to the transaction, including taxes incident to or resulting from the transaction which the borrower is unable to pay from other sources: Provided further, That no such compromise, adjustment, or reduction shall be made hereunder after the claim has been referred to the Attorney General unless agreed to by the Attorney General. "(e) collect all claims and obligations arising or administered under this title, or under any mortgage, lease, contract, or agreement entered into or administered pursuant to this title and, if in his judgment necessary and inadvisable, pursue the same to final collection in any court having jurisdiction." Under this statutory authority, we have found it possible to reduce claims against real estate loan borrowers whose property has been destroyed by natural catastrophe if the borrower has no other reasonable repayment ability or property out of which the loan could be collected without depriving him of his dwelling or means of making a living. For example, in one case a flood caused a change in the river channel which destroyed some 20 acres of the most productive part of the borrower's farm. The claim was reduced on the basic earning capacity of the remaining part of the farm. The mortgage contracts used by the Farmers Home Administration impose on borrowers the responsibility of protection of the security property and require them to obtain and pay for insurance against normal hazards. Upon default of the borrower in providing such insurance, the Farmers Home Administration protects its mortgage interest by separate insurance and charges the cost to the borrower's account. Nevertheless, there are many occasions in which the amount of insurance obtainable will not provide adequate funds for restoration of the buildings. In those cases, consideration may be given to a supplemental loan, if necessary, to complete the restoration of essential buildings. In such a case, it would be unusual, however, if consideration were given to adjustment of the personal liability before the loan fails and the remaining security is liquidated. If you have any further questions pertaining to your present inquiry please let us know. Sincerely yours, JOHN C. BAGWELL, General Counsel. (For additional information see p. 58.) Senator YARBOROUGH. Are there any further questions from any member of the subcommittee? If not, thank you. I believe. Mr. Bland, that you have another statement on another measure. Mr. BLAND. We have one other statement, Mr. Chairman, and I will ask Mr. Knapp to come forward on that. I shall read the statement. Mr. Knapp is quite familiar with these bills and will undertake to answer any questions that you may have. This is Mr. Donald C. Knapp, who is Assistant General Counsel in the Veterans' Administration. Senator YARBOROUGH. You may proceed. S. 449 AND S. 384 STATEMENT OF THE VETERANS' ADMINISTRATION, PRESENTED BY R. P. BLAND, ASSISTANT GENERAL COUNSEL, ACCOMPANIED BY D. C. KNAPP, ASSISTANT GENERAL COUNSEL Mr. BLAND. Mr. Chairman and members of the subcommittee, we are pleased to present this statement to the subcommittee on two bills, S. 449 and S. 384. As these bills involve different subject matter, we shall treat them separately in our discussion. S. 449-TO EXTEND ASSISTANCE IN THE PURCHASE OF AUTOMOBILES TO CERTAIN DISABLED VETERANS Chapter 39 of title 38, United States Code, currently authorizes a payment of not to exceed $1,600 toward the purchase of an automobile by World War II and Korean conflict veterans who have suffered the loss or permanent loss of use of one or both hands or feet, or permanent visual impairment to a prescribed degree as a result of such war service. S. 449, if enacted, would extend this benefit to veterans who suffer the loss or permanent loss of use of one or both feet due to disability incurred or aggravated in line of duty (1) as a direct result of armed conflict or (2) while engaged in extrahazardous service (including such service under conditions simulating war) during the period between January 31, 1955, and the date when individuals are no longer liable for induction into the Armed Forces under the Universal Military Training and Service Act. This automobile assistance program, which has been in existence for about 17 years, has become an established and recognized special benefit for wartime veterans, and is directly conditioned on the presence of a service-connected disability. Although the induction period to which the bill applies is not a wartime period, the bill is limited to veterans disabled as a result of armed conflict or while engaged in extrahazardous service (including such service under conditions simulating war). This renders the bill consistent with a longstanding provision of existing law under which the Veterans' Administration pays wartime rates of disability compensation for disabilities received during peacetime service when they are incurred under the noted conditions. Under the circumstances, the Veterans' Administration believes that the extension of assistance in the purchase of an automobile to this group of veterans is justified, and we recommend that the bill receive favorable consideration by your subcommittee. Alternative time limitations for filing of an application for this benefit is prescribed by 38 U.S.C. 1905. Section 2 of S. 449 proposes to extend to the date of enactment the start of any applicable time limitation which otherwise would have begun to run prior to that date. It is possible that some "inducion period" veterans who would meet the basic criteria of the bill would already be barred by the time limitation in section 1905. Hence, this extension of those limitations is appropriate. Since under existing law, the induction period will expire on June 30 of this year, the bill if enacted will render some 75 veterans eligible for assistance in acquiring an automobile during the first fiscal year, at an estimated cost for that year of $120,000. Assuming that the Universal Military Training Act is extended and that applicable data on which our estimate is based are maintained at current levels, the bill will affect some 85 veterans the first year and cost about $136,000 additional for that year. S. 384 TO INCREASE THE PROTECTION AGAINST EVICTION OF SERVICEMEN'S DEPENDENTS FROM RENTED DWELLINGS Since 1940 the Soldiers' and Sailors' Civil Relief Act of 1940, as amended, has provided generally that in the absence of judicial consent it shall be a misdemeanor to evict the wife, children, or other dependents of a person in military service from any premises occupied chiefly as a dwelling, for which the agreed rent does not extend $80 per month. S. 384 proposes to increase this amount to $135 per month. The Soldiers' and Sailors' Civil Relief Act was designed to afford broad protection to persons while in the military service. With one exception which is not involved in this bill, the provisions of the act are not administered by the Veterans' Administration, although our loan assistance activities are sometimes affected if the veteran has reentered service. Most of the provisions of the act, including the section here involved, are construed and enforced by the courts in individual cases. It is apparent that the Department of Defense and the Department of Justice would have a considerable interest in this type of legislation, and under the circumstances the Veterans' Administration would defer to the views of those departments as to the merits of S. 384. This concludes our formal statement on these measures, Mr. Chairman. I would be pleased to answer any questions that members of the subcommittee may care to ask. Senator YARBOROUGH. Thank you for the statement. Are there any questions, Senator Burdick? Senator BURDICK. No questions. Senator YARBOROUGH. Any questions, Senator Jordan? Senator JORDAN. No questions. Senator YARBOROUGH. Thank you. If there are no further questions of the Veterans' Administration, you may be excused. Our next witness on the list is Mr. Francis W. Stover, director, national legislative service, Veterans of Foreign Wars of the United States. We shall be glad to hear from you now. STATEMENT OF FRANCIS W. STOVER, DIRECTOR, NATIONAL LEGISLATIVE SERVICE, VETERANS OF FOREIGN WARS OF THE UNITED STATES Mr. STOVER. Mr. Chairman and members of the subcommittee, may I first extend the deep appreciation and thanks of the Veterans of Foreign Wars for the privilege of appearing here today to present our views concerning this most important legislation. My name is |