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We oppose the enactment of S. 789 and S. 1022 because the Farmers' Home Administration has adequate authority and funds to meet the credit needs of persons who own and operate family-type farms to construct, repair, or remodel farm buildings on their farms. Title I of the Bankhead-Jones Farm Tenant Act, as amended, provides authority to make or insure loans to owners of undersized and underdeveloped farms to enlarge and develop such units to adequate familytype farms. Such loans may also be made to tenants, share-croppers, or farm laborers to purchase adequate family-type farms. Funds may be included in such loans to construct, repair, and remodel essential farm buildings on their farms.
While we do not favor the enactment of either S. 789 or S. 1022, if the Congress desires to make credit available to construct, repair, or remodel buildings on farms that are larger or smaller than family-type farms or to owners of familytype farms who do not operate them, we favor the enactment of S. 1022 rather than S. 789. S. 1022 provides for several improvements in title V. The two principal improvements are (1) loans would be available only to improve dwellings and other farm buildings of persons who devote the preponderance of their time to farming and who receive the preponderance of their income from farming; and (2) authority is provided for insuring loans on the same basis as other Farmers' Home Administration insured loans.
Both bills, S. 789 and S. 1022, propose to continue the authority to make funds available for extending financial assistance to farm owners as provided in title V. This title authorizes the Secretary of Agriculture to extend financial assistance to owners of farms to enable them to construct, improve, alter, repair, or replace dwellings and other farm buildings on their farms and to provide them, their tenants, lessees, sharecroppers, and laborers with decent, safe, and sanitary living conditions and adequate farm buildings. The present authorization expires June 30, 1955.
There appear to be adequate loan funds available from private lenders at reasonable terms on an insured basis; therefore, it does not seem necessary to use Federal funds for these loans, as provided by S. 789. S. 1022 provides that these loans would be made on an insured basis.
Title V defines a "farm" as "a parcel or parcels of land operated as a single unit * * * which customarily produces or is capable of producing *** commodities for sale or home use of a gross anual value of not less than the equivalent of a gross value of $400 in 1949. * * *" This definition permits small tracts of only a few acres to qualify as farms, with the result that many of these loans would be made to rural residents or persons who reside in suburban areas and devote practically all of their time to off-farmwork. The enactment of S. 789 would not change this definition of a farm. In our opinion, the definition of a farm should be changed as provided in S. 1022 tò assure that these loans will be made to bona fide farmers.
Section 503 of title V was intended to assist individuals whose farms are inadequate to make such farms adequate units. This authority is similar to the authority contained in title I of the Bankhead-Jones Farm Tenant Act and most of the applicants for loans needing this assistance can be taken care of under that act. Loans under section 504 of title V were only for minor repairs in order to make the buildings on inadequate farms safe and sanitary. The Farmers' Home Administration received very few applications for this type of assistance. We, therefore, think sections 503 and 504 should be eliminated. S. 1022 provides for the elimination of these two sections.
S. 1022 would authorize a maximum interest rate of 5 percent instead of 4 percent. This change would permit adjustments in the rate of interest for these loans consistent with other real-estate loans made by the Farmers' Home Administration.
The Bureau of the Budget advises that, from the standpoint of the program of the President, there is no objection to submitting this report. Sincerely yours,
TRUE D. MORSE, Acting Secretary.
HOUSING AND HOME FINANCE AGENCY,
OFFICE OF THE ADMINISTRATOR,
Washington D. C., April 4, 1955. Re S. 789, 84th Congress Hon. J. W. FULBRIGHT, Chairman, Committee on Banking and Currency,
United States Senate, Washington 25, D. C. DEAR SENATOR FULBRIGHT: This is in further reply to your letter of February 4 requesting an opinion as to the merits of S. 789, a bill to continue authority to make funds available for loans and grants under title V of the Housing Act of 1949, as amended.
The bill would amend title V of the Housing Act of 1949, as amended, to pro vide authority to the Secretary of Agriculture to borrow an additional $100 million on and after July 1, 1955, from the Secretary of the Treasury for the making of farm housing loans and also to make additional commitments on and after July 1, 1955 for $2 million of annual contributions to farm housing on potentially adequate farms. Additional appropriations of $10 million would also be authorized for loans or grants or combined loans and grants by the Secretary of Agriculture to make farm dwellings safe and sanitary and to encourage adequate family-size farms in order to provide income sufficient to support safe and sanitary housing and other farm buildings.
This Agency is aware that there is need for improving or replacing many of the Nation's farm homes which are not now adequate for the health, safety, and economic well-being of their occupants. However, the program which would be continued by this bill has been administered by the Department of Agriculture since its inception in 1949 as a part of its overall program dealing with farm housing and with the farm economy generally. That Department is therefore in a better position than this Agency to advise you as to the merits of this legislation and whether the program which would be continued by the bill should be continued in that form in view of other related programs of the Department.
I have been advised by the Bureau of the Budget that there would be no objection to the submission of this report. Sincerely yours,
ALBERT M. COLE, Administrator.
UNITED STATES SENATE,
Washington, D. C., May 10, 1955. Hon. JOHN SPARKMAN, Chairman, Subcommittee on Housing, Committee on Banking and Currency,
United States Senate, Washington, D. C. DEAB MR. CHAIRMAN: Other duties prevent me from appearing before you this morning on behalf of S. 1022, which I have introduced and which is pending before your subcommittee. I would therefore appreciate your including this letter in the official record of your committee.
I feel very sincerely that your subcommittee is performing a valuable function in giving serious thought to the housing situation on our Nation's farms. We have seen in this country a vast effort to improve urban housing but little attention has been devoted to the important factor of farm housing.
The farm housing program of the Farmers' Home Administration authorized by title V of the Housing Act of 1949 (Public Law 171, 81st Cong., 1st sess.) began in November 1949 (fiscal year 1950). The original legislation authorized the program for 4 years and provided for authorizations to borrow from the Treasury for loans and appropriations for loans and grants. The authorizations were in progressively larger amounts from a total of $27 million in the first year to $110 million in the fourth year. The amount of $27 million was actually made available in the first year, but only about $19 million was available in each of the subsequent 3 years. The act was subsequenty extended to cover the fiscal year 1954 and $19 million was made available for loans that year. The act was again extended in the 83d Congress, 2d session, for 1 additional year, but no funds were requested to carry out its provisions.
The extension contemplated by S. 1022 would eliminate the loans heretofore made under section 503 which was intended to assist individuals whose farms were inadequate to make such farms adequate units. This section is almost exactly what is intended by title I of the Bankhead-Jones Farm Tenant Act, and any applicants for loans needing this assistance could be taken care of under that act. It also eliminates loans under section 504 which were loans only for minor repairs in order to make buildings on inadequate units safe and sanitary. At no time was there much activity under this section and its elimination is not important.
Loans under section 502 would be limited to farm owners on farms which would be described as “a parcel or parcels of land operated as a single unit by a person the preponderance of whose time is devoted to operating the farm and who receives the preponderance of his income from its operation." Under this provision, it would still be possible to make loans to absentee owners as long as the operator of the farm was preponderantly devoting his time to the operation of the farm and if the preponderance of his income was derived from such operation. The proposed amendment would also permit the insuring of loans made by private lenders in an amount which I leave to the discretion of your committee.
The present act provides for an interest rate of not to exceed 4 percent. This rate would be changed to not to exceed 5 percent.
In addition to the insuring of loans, there would be authorized appropriations for administrative expenses and borrowings from the Treasury for direct Government loans as the Congress may from time to time determine.
The principal difference between this amendment and the authorities contained in title I of the Bankhead-Jones Farm Tenant Act is that loans could be made on farms of larger or smaller size than economic farm units as long as the operator of the farm received a preponderance of his income from its operation and devoted a preponderance of his time to the operation of the farm. With best wishes, I am Cordially yours,
KARL E. MUNDT, United States Senator. Senator SPARKMAN. I would like for the record to include three recommendations of the Hoover Commission on the program of the Farmers' Home Administration. The clerk will ask the Department of Agriculture for its comments on these recommendations.
(The recommendations referred to follow :)
HOOVER COMMISSION RECOMMENDATIONS
Recommendation No. 30 That the Farmers' Home Administration instruct the county committees advising the agency to screen more carefully applicants for loans to insure compliance with the criteria for loan applicants contained in the law.
Recommendation No. 31 That the Farmers' Home Administration require adequate equities under all its loan programs except disaster and emergency crop and feed loans.
Recommendation No. 32 That the Congress require the Farmers' Home Administration to charge interest, premiums, or other fees on loans made by the agency sufficient to cover the administrative expense of the lending program and the cost of money to the Treasury. (The following was received for the record :)
DEPARTMENT OF AGRICULTURE,
OFFICE OF THE SECRETARY,
Washington, May 19, 1955. Hon. J. WILLIAM FULBRIGHT, Chairman, Committee on Banking and Currency,
United States Senate. (Attention : Mr. J. H. Yingling.) DEAR SENATOR I'ULBRIGHT: This is in response to Mr. Yingling's letter of May 13, 1955, in which he stated that Senator Sparkman requested the comments of this Department on recommendations Nos. 30, 31, and 32 of the Commission on Organization of the Executive Branch of the Government as they relate to the loan program under title V of the Housing Act of 1949.
The Commission recommendations and the comments of this Department will be discussed separately below:
Commission recommendation No. 30 : "That the Farmers Home Administration instruct the county committees advising the agency to screen more carefully applicants for loans to insure compliance with the criteria for loan applicants contained in the law."
This Department is in full agreement that all applications for loans, including those made under title V of the Housing Act of 1949 should be screened closely to make sure that the services are being made available only to those farmers who are clearly eligible to receive the service. County committees appointed under the Bankhead-Jones Farm Tenant Act are responsible for determining the eligibility of applicants for loans including housing loans referred to. The Farmers Home Administration conducts a continuous training program for the county committees to assure that the members of the committees are completely aware of all of the criteria and eligibility requirements for the various types of loans made. The Department has been assured by the Administrator of the Farmers Home Administration that committee training activity will be continued and improved upon wherever needed.
Commission recommendation No. 31 : “That the Farmers Home Administration require adequate equities under all its loan programs except disaster and emergency crop and feed loans.”
The Department agrees that security requirements contained in the several statutes should be fully complied with but the Department does not agree with this recommendation. In making loans under title V of the Housing Act of 1949, the Department followed the policy that each loan should be secured by a lien on the farm on which the buildings would be constructed, improved, or repaired and that the applicant must own sufficient equity on the property so that such lien should constitute reasonable security for the Government's protection. The Department has interpreted the phrase "adequate equities” in the Commission's recommendation as meaning equities more nearly in line with those required by commercial lenders. Usually if such equities did in fact exist the applicant for a loan probably could secure credit elsewhere and would not be eligible for a loan under title V of the Housing Act of 1949. The security which the Department felt was necessary for a farm housing loan did not constitute the adequate equity which a commercial lender would require. In determining the adequacy and reasonableness of the security for the loan, the income producing possibilities of the farm constituted a major factor to be considered. The repayment record on these loans has been very good. The establishment of prescribed equities under this type of loan would not appear to be warranted by the experience of this Department.
Recommendation No. 32: “That the Congress require the Farmers Home Administration to charge interest, premiums, or other fees on loans made by the agency sufficient to cover the administrative expense of the lending program and the cost of money to the Treasury."
The Department does not agree with this recommendation at least to the extent of increasing interest rates and other charges to borrowers to the full amount necessary to completely offset the cost of the Government of the services. If interest rates and other charges to borrowers were established at such levels that would enable the Government to recover its entire cost, such cost to the borrower would be exorbitant. The Department believes that adequate interest rates should be charged borrowers but that these rates should be reasonable and generally not above those charged by private and cooperative lenders in the community. A 4-percent rate of interest is established by statute for loans under title V of the Housing Act of 1949. This Department is now charging 412 percent for somewhat comparable loans under title I of the Bankhead-Jones Farm Tenant Act. The 4-percent rate of interest for the housing loans did not cover the administrative expenses and the money to the Treasury. A much higher interest rate would have been required under these loans in order to have accomplished this objective.
If additional information is needed concerning the request contained in your letter of May 15, we shall be glad for you to inform us. Sincerely yours,
K. L. SCOTT, Director, Agricultural Credit Services.
Senator SPARKMAN. Mr. Owen Kane, of the General Accounting Office.
We are glad to have you with us. We have your statement before us. You can proceed with it, or you can place it in the record and talk about it. You may proceed in any way you wish. Military Housing
STATEMENT OF OWEN A. KANE, LEGISLATIVE ATTORNEY, ACCOM
PANIED BY WILLIAM A. NEWMAN, JR., ASSOCIATE DIRECTOR OF AUDITS, OFFICE OF THE COMPTROLLER GENERAL
Mr. KANE. Mr. Chairman and members of the committee, we are pleased to be here at your request to discuss the various housing bills which your committee is considering in these hearings. Our comments primarily concern the housing amendments of 1955 proposed in S. 1800 and the Armed Services Housing Insurance Act of 1955 as provided in S. 1501.
The bill S. 1800 provides for extensions and increased authorizations in the FHA insurance, the low-rent public housing, and the slum clearance and urban renewal programs, plus changes in the law governing the operations of the Home Loan Bank Board and the Federal Savings and Loan Insurance Corporation.
Each of these programs is audited by the General Accounting Office and we are pleased that some of the changes would put into effect the legislative recommendations set forth in audit reports submitted by the Comptroller General to the Congress. We furnished the Director of the Bureau of the Budget a report on the draft of the bill during its consideration by the Bureau. While a few of the suggestions we made are reflected in the bill, we believe that some of the others still warrant further consideration.
For example, section 2 of the bill would continue the FHA title I home repair and modernization program for 5 years from July 1, 1955. We recognized that the last extension of this program was for 5 years, but suggested at this time that the Bureau consider a shorter period of extension in view of the special nature of the program and in the light of the abuses in the past. There remain some weaknesses in this program which the administrative officials are trying hard to iron out. After this is accomplished, consideration could then be given to extending the program for longer periods. Actually, this program has contracted sharply since the coinsurance requirement and limitation on types of home improvements were put into effect. Requests for insurance are about 50 percent of those received a year ago.
Section 4 of the bill would authorize the FHA to make final settlement of certificates of claims held by mortgagees, and refunds to mortgagors, at any time after the sale or transfer of title by the FHA of the foreclosed property instead of waiting until final liquidation of the Government's interest in the property. We recommended that FHA have this authority as a means of saving personnel expenditures and other administrative expenses that are necessary in maintaining records for periods up to 20 years before final settlement of the certificate of claims and refunds can be accomplished under the present law.
In this connection, we have also recommended that the FHA have discretion to make settlement of insurance claims in cash in addition