of the country. This isn't just my opinion; it is a fact that has been verified for me by farm brokers all over America. Let's break the problem down to one farmer. He lives on, let us say, a 200-acre farm near a small town. He may be in Minnesota, where it gets 40 degrees below in the winter; he may in Texas where he has dust storms to contend with The CHAIRMAN. Texas doesn't admit that. They will be offended. Mr. GRANTHAM. They will work it out. Or, he may be in Mississippi, Alabama, or any other predominately agricultural State. But wherever he is, his problem is the same way if he tries to build a modern home or make permanent improvements to his farm. In the area where he lives, the insurance companies are probably not making loans, and if they are, it is only on large and well-improved farms. He goes to the local bank and asks for a loan to build himself a new home. The bank only has available around $300,000 for loans. to farmers. The bank can't spare the money; it has to go for crop loans. The farmer goes to the Federal land bank. They will only make loans based on antiquated valuations, not enough for him to build a home or really improve his farm. He goes to the Farmers Home Administration-it has run out of money. He finds that this agency was not set up to serve him. It was intended to help people who have nothing at all. It will set up in business a farmer with nothing to his name, but it cannot make a loan to a man with a 200-acre farm. Our farmer then goes to the Production Credit Association, and finds that they only make crop loans. This agency cannot finance a new house or permanent improvements. When our farmer has made the rounds, he winds up back at the local bank where he started. All he can get there is a "frost to frost" loan to make the next crop on. This is borrowing the money at the last frost in the spring and paying it back at the first frost in the fall. In short, he can only plan a few months ahead. Almost any other type businessman in the Nation can arrange for long-term credit, can make plans for years ahead, but the farmer who feeds us all cannot plan to improve his place; he cannot plan to build a new home for his family. He can only plan a few months ahead because he cannot get the credit that is essential for him to plan further. That is what I hope you, as a member of the National Congress, will do something about. Take steps to provide him with that essential credit that he may improve his farm for the benefit of us all and build a home for the benefit of his family. Let's suppose our farmer gets disgusted and quits farming and moves to town. If he is a veteran, he can move into an FHA-financed house for only 10 percent, or around a thousand dollars. Now he has an indoor toilet, electric lights, running water, and low monthly payments on the house. He gets a job at a living wage and he begins to make some plans. If he had stayed in the country and had been able to obtain a veteran's loan to build a home, he could only have secured a maximum GI guaranty of $4,000 for housing construction. This, even though he owned a 200-acre farm as collateral. But, when he moved to town and bought himself a 50 foot by 150 foot lot, he was able to obtain a Government guaranty up to $7,500. I wonder which is really worth more, which will grow the most turnips, peas, and potatoes to fill stomachs-a 50 foot lot or a 200-acre farm. Isn't real value determined by the productive capacity of anything, whether it be a man, mule, or a plot of land? But where does that leave the other people who need the food and fiber he would have produced if he had stayed there on the farm! And worst of all, where does it leave the farmer and others like him if a recession comes and he finds himself out of work? There he sits, high and dry, as far as finances are concerned, a sitting duck for Communist agitators and others who prey upon misfortune, bad luck, and discontent. Perhaps at this point he tries to return to the farm. He is right back where he started and he still can see little further into the future than the next homegrown meal. That is, if he is lucky enough to get back on a farm by this time. For, in the meantime a large syndicate is likely to have grabbed up the available land and devoted it to a mechanical operation. How much better it would have been if that farmer had been enabled to remain on the farm in the first place-as he most likely would have done if he had been able to enjoy all the advantages there that he could have in town. The main advantage to which I refer is that of having a decent home in which to live and to be able to plan ahead. To do these things, he must have long-term credit. It all comes back to that in the final analysis. If most of us here didn't have money to buy equipment, rent office space, pay our help, and pay living expenses, or if we didn't have sources of credit to enable us to take care of these items of overhead, we couldn't stay in business 30 days. How can a farmer be expected to stay in business when that credit is denied him? At the same time, millions of city homes are being subsidized by the Government, and I think partly at the expense of the farmers because the farmers are taxpayers, too. This policy of the Government guaranteeing extra liberal loans in towns and cities, while denying the farmers even half a loaf, is having the effect of depleting our rural population. In fact, in cities the Federal Housing Authority has extended the program of that agency to financing the construction of apartment projects, many of which are now being repossessed. This proves they were subsidized, so don't let the word "subsidy scare you away from this first suggestion I have to make on improving rural housing. I think the FHA can expedite the making of rural loans by subsidizing part of the interest rate. The main reason insurance companies and other agencies don't make loans to farmers now under the provisions of the FHA law is simply that they cannot make as much return from such loans as from those made in town. If the Government will subsidize loans for rural housing to the extent of 1 or 2 percent, then lending agencies will find it as profitable to lend money for a rural home as for one in town. My second suggestion for achieving the same result is to exempt from taxes part of the income realized from rural loans. If an insurance company or other lending agency knew that part of the interest realized on a rural loan would be exempt from income taxes while all the interest from loans made in towns would be taxable, then this business of loaning all the money out on main street would be reversed. I have another suggestion for expediting construction on rural housing. That is to have the Federal Housing Administration adopt a policy of encouraging lending agencies to provide clear title to home sites on farms on which mortgage loans are outstanding. Let's take a specific example: Suppose our farmer with 200 acres of land has a mortgage outstanding on the entire farm. It is small and he can meet it readily, but it prohibits him from qualifying for a housing loan. If from 1 to 10 acres could be set aside under a clear title, then the farmer would be eligible for a housing loan, with the house, of course, to be erected on that small plot. The remainder of the farm would still stand good for the original mortgage. Apparently it was the intention of Congress, in mapping the original Federal Housing Administration law, to make available to farmers the same liberal loans that were being made available to city dwellers, but it didn't work that way. Somewhere in the shuffle the farmer was cast aside. Most FHA offices don't even have application blanks for rural housing loans, even though the law permits such loans. Therefore, Mr. Chairman, you and Congress can prolong the life of this great Nation for many hundreds of years, and keep alive the great agriculture traditions we have built by keeping the farmers down on the farm, and through sound policies you can further distribute our population into the lesser populated sections by simply seeing to it that farmers and rural dwellers receive equal treatment from their Government. The CHAIRMAN. Well, the Housing Administrator is recommending we do away with it because they have had so few applications. Mr. GRANTHAM. That is not the fact, Senator. The CHAIRMAN. He testified to that. Mr. GRANTHAM. But I have had thousands in the last 5 years. I have probably had a thousand applications, and I have told them there is no need of trying. The CHAIRMAN. Why? Mr. GRANTHAM. Because they just don't have them. They can't make them. It comes back to the matter of money, and neither the banks nor the insurance companies will make these loans, the same as they do in town, because they can control them in the same town and the same city, and they don't like to go out into different counties and have the loans distributed there-especially the banks and the insurance companies. Now, the GI loan, back in our country, and in the Southwest I haven't heard of a straight GI loan being made to a farmer in so long that it is nearly impossible to remember. There is no doubt about it, the farmer is getting it right in the neck in this lending proposition. There is no money available for long-term loans. It is a "Frost to Frost" proposition, meaning borrowing the money at the last frost in the spring and repaying it at the first frost of fall. The CHAIRMAN. Under existing law, he can get a loan. Mr. GRANTHAM. But there is no financing. That is, if you go to a bank or other lending institution. The CHAIRMAN. You mean the bankers won't handle the mortgages? Mr. GRANTHAM. They can't make any money on it, Senator. The CHAIRMAN. The law permits FHA to guarantee the farm mortgages. Mr. GRANTHAM. That is true. But I don't suppose there is an appli cation in one-hundredth of the FHA offices in this country for a farm loan. They just never have encouraged it and, in fact, they have discouraged it. The CHAIRMAN. How long has this been going on? Mr. GRANTHAM. It has been going on all the time. I came into Senator Eastland's office last year, and he said, "You can borrow money through FHA"; and I said, "No such thing." And we called the Commodity Credit Corporation and they said, "No; we have the authority. but just don't make them under FHA." The CHAIRMAN. Why? Mr. GRANTHAM. Back to money, I suppose. Or maybe they just don't care to. Frankly, just putting it on the line, the big city builders are well organized and are able to lobby their interests through Congress, and the interests have been shown there, and the farmers have been forgotten because they haven't been represented. I don't particularly blame these big city builders for going out and trying to build more houses and make more money, but I think we ought to be cut in on the gravy, in other words, our fair share. The CHAIRMAN. Well, section 108 of this bill has Farm housing mortgage insurance authorization terminated. This section would terminate the authority of the Federal Housing Commissioner under section 203 (d) to insure mortgages on farm housing after the effective date of the Housing Act of 1954, except pursuant to a commitment to insure issued on or before that date. Mr. GRANTHAM. They didn't have to put it in there, Senator. They already quit. The CHAIRMAN. Here is the law, 203 (d): The Commissioner is authorized to insure, pursuant to the provisions of this section, any mortgage which (A) covers a farm upon which a farm house or other farm buildings are to be constructed or repaired, and (B) otherwise would be eligible for insurance under the provisions of paragraph (b) of this section: Provided, that the construction and repairs to be undertaken on sneh farm involve the expenditure for materials and labor of an amount not less than 15 percentum of the total principal obligation of said mortgage. Mr. GRANTHAM. I'll bet you can inquire of FHA now and they haven't made a dozen in the past 5 years. The CHAIRMAN. I know they haven't. That is why they are recommending it be eliminated. They say there are no applications. Mr. GRANTHAM. I can get them 10,000 applications in 30 days, if they will loan the money. I won't get them myself. They will come from all over the country, from the National Institute of Farm Brokers. The CHAIRMAN. Didn't they 2 or 3 or 5 years ago make these loans? Mr. GRANTHAM. They never have. The CHAIRMAN. They never have? Mr. GRANTHAM. No, sir. That is a lot of poppycock that they didn't have applications, because I could have handled a hundred every month. The CHAIRMAN. Somebody is wrong, then. I don't know who it is. It is either you or the FHA. Mr. GRANTHAM. The FHA is wrong. You can take it from me, because I have been doing it. I have contacts with farm brokers in every State of the Union, and I meet with them 4 or 5 times every year, and we discuss those things. I don't know of 1 location in this country The CHAIRMAN. All right; we're going to send your testimony this afternoon by special messenger over to FHA, with instructions to give us the answer, and tell us why they haven't made these loans, and why they are recommending it be discontinued. Mr' GRANTHAM. Thank you, sir. I hope you will get something out of it. The CHAIRMAN. Will you send that over this afternoon, Mr. Clerk, and tell them we want more information as to why they are discontinuing it and why the loans haven't been made. What the trouble is? I agree we ought not to discriminate against the farmers. (The information requested follows:) Mr. IRA DIXON, FEDERAL HOUSING ADMINISTRATION, Clerk, Committee on Banking and Currency, DEAR MR. DIXON: Thank you very much for sending me the statement presented to the Senate Banking and Currency Committee by Mr. B. E. Grantham. In connection with this statement, I am sending the attached material with regard to section 203 (d) FHA insurance of mortgages on farm properties. I believe this may be helpful to Mr. McMurray, and if there is any additional information you would like to have, please let me know. Sincerely yours, GUY T. O. HOLLYDAY, Commissioner. SECTION 203 (D) INSURANCE OF MORTGAGES ON FARM PROPERTIES The FHA program for the insurance of mortgages on farm properties has been available for 16 years and practically no business has been presented since the first year of operation. The apparent reason for this is that better facilities are offered by other Government agencies that have a record of long operation in this field, such as the Farm Credit Administration and Federal land banks. There is a great difference between residential mortgages and farm mortgages as the operation of a farm is a business and to establish the valuation of a farm property gross earning, operating expenses, the value of crops and other matters of this nature must be taken into consideration. If an appreciable volume of applications for mortgage insurance on farm properties were presented to the FHA, it would be necessary to hire farm valuators and farm production analysts, which would duplicate the services being rendered by other agencies. Mr. B. E. Grantham, of Jackson, Miss., who testified before the United States Senate Banking and Currency Committee on March 24, suggested that a small portion, perhaps 10 acres or less, be delineated and released from obligation of the farm mortgage in order that a first mortgage could be insured on the farm residence alone. Such a mortgage would not be eligible for insurance under FHA criteria as there would be no marketability for the property in the event of foreclosure. Mr. Grantham implies in his testimony that a subsidy was inherent in the FHA section 608 program of financing for apartment buildings. This, of Course, is not the case and, to date FHA has suffered no loss whatsoever under this program. Mr. GRANTHAM. May I make one observation there: If you like, we will get you a qualified farm broker from at least 25 States to come in here and make the same statement I make, and they know; they are lealing with the farmers. Or we will get you a farm broker from every State in the Union to make that same statement. The CHAIRMAN. Why don't you get them to send in their statements? It is a little late to get them in here. Mr. GRANTHAM. We'll be glad to. |