OFFICE OF THE ADMINISTRATOR

UNITED STATES DEPARTMENT OF AGRICULTURE

FARMERS HOME ADMINISTRATION
WASHINGTON, D.C. 20250

Mr. Richard Jones

Room 5009 A

Government Division

Congressional Research Service

Library of Congress
Washington, D. C. 20540

Dear Mr. Jones:

In response to your telephone call, we are enclosing the best copies we could find for the reports on loans made by the Farmers Home Administration (FMHA) to American Indians during fiscal years 1970 through May 1974. Although we could not find the originals of the reports, we are sure that duplicates made from these copies will be legible.

The reports on loans to American Indians on reservations have been prepared only for fiscal year 1973 and the first 5 months of fiscal year 1974.

Please call if you need additional information on this subject.
Sincerely,

LAshwell

L. D. ELWELL

Assistant Administrator
Rural Housing

Enclosures

Farmers Home Administration is an Equal Opportunity Lender.
Complaints of racial or ethnic discrimination should be sent to:
Secretary of Agriculture, Washington, D. C. 20250

U. S. Department of Agriculture

Farmers Home Administration

FHA Instruction 444.16

Section 502 and 504 Rural Housing Loans

on Leasehold Interests in Nonfarm Tracts

Ι

II

GENERAL: This Instruction authorizes Section 502 and 504 Rural
Housing (RH) loans to applicants who hold or will hold leases on
nonfarm tracts under conditions specified in this Instruction.
Section 502 loans will be made on nonfarm tracts in accordance
with FHA Instruction 444.1, as modified by this Instruction.
Section 504 loans may be made to the holder of a lease on a nonfarm
tract in accordance with FHA Instruction 444.3, as modified by this
Instruction.

DEFINITIONS:
will apply:

A

B

As used in this Instruction the following definitions

Applicant. A person who applies for a Section 502 or Section 504 RH loan on a nonfarm tract on which he holds or will hold a lease.

Leasehold. The rights and interests a person has in the nonfarm building site on which he has a lease.

III

C

Lessor. The owner of the building site.

D

Acquisition Cost. The cost of acquiring the leasehold interest exclusive of any monthly or annual rental charges.

E

OGC.

The Regional Attorney or Attorney in Charge whose service area includes the particular State.

The following policies will apply to loans under this

POLICY:
Instruction:

A

B

Loans may be made on leaseholds on land owned by a State, political subdivision, public body, or public agency, on Indian Tribal lands which are not available for purchase, or on land where the State Director determines that longterm leasing of homesites by nonpublic bodies is a wellestablished practice and such leaseholds are freely marketable in the area.

A loan may be made on a
is unable to obtain fee

DISTRIBUTION: W, S, C

leasehold only when the applicant title to the property.

Program Operations
Loan and Grant Making

FHA Instruction 444.16
III (cont.)

IV

C

The applicant should have the right to any extent
feasible to acquire the fee title to the property
sometime during the life of the loan.

D The lease must have an unexpired term, from the date
of loan approval, of at least 50 years for Section 502
loans and at least 15 years for Section 504 loans
except in cases where a lease is granted for the purpose
of permitting a family to obtain an RH loan and the time
required to process and approve the loan results in the
unexpired term of the lease being a few months less than
the period of time indicated above.

E

The lease must meet the requirements of paragraph VII J 1 of FHA Instruction 444.1.

A recorded mortgage constituting a valid and enforceable lien on the applicant's leasehold will be required unless the loan is secured by other than real estate in accordance with FHA Instruction 444.1 and 444.3.

USE OF LOAN FUNDS:

A

Section 502 RH loans may include funds for:

1 Reasonable acquisition cost of the leasehold interest at the time of making the initial RH loan in areas where acquisition charges are customary

2 The purchase of the fee title on which a leasehold exists, by means of a subsequent loan provided that all other requirements are met.

3 Purposes authorized in paragraph VI of FHA Instruction 444.1 for nonfarm tracts except for the payment of real estate

taxes.

B

Section 504 RH loan funds will not be used to pay the lease acquisition cost of the leasehold interest in the property or for purposes other than those authorized in paragraph V of FHA Instruction 444.3. The limitations described in paragraph VII of FHA Instruction 444.3 are applicable.

FHA Instruction 444.16

V

V

VI

VII

VIII

LEASE FORM: The lease forms used by the Federal Housing Adminis-
tration and the Veterans Administration in the area, the Bureau of
Indian Affairs lease form, No. 5-184, "Lease," and the lease forms
used in cases of RH loans on farm leaseholds, should be used by the
State Director as guides in developing a lease form or forms for his
State. The services of OGC are available for this purpose.
In any
case in which the lessor wants the option of paying the RH debt in
case the borrower defaults, the lease may include such a provision.

MAXIMUM RH LOAN AND RENTAL CHARGES:

A

B

When it appears that an RH loan can be made on a leasehold interest, an appraisal of the leasehold will be made in accordance with the procedure applicable to the type of loan being made. The amount of the RH loan plus any prior liens against the property will not exceed the maximum security value.

The rental must not exceed the rate being paid for
similar sites in the area under similar leases.

TITLE CLEARANCE AND LOAN CLOSING: Title clearance and loan closings will be handled in accordance with applicable instructions in the 427 series.

INTEREST CREDITS: Interest credits to Section 502 RH borrowers who
hold leaseholds may be granted in accordance with applicable FHA
Instructions. If interest credits are granted, the amount will be
determined on the same basis as though the borrower owned the
property except that the annual rental charges will be included in
the interest credit determination block which contains loan pay-
ment, taxes, and insurance costs on Form FHA 444-6, "Interest Credit
Agreement (Section 502 RH loans)." Insert the following in the blank
space below the entry indicating Annual Real Estate Taxes:

"Annual rental charges $

"

President Nixon sent the 1975 budget to Congress this week, with Farmers Home Administration program levels estimated as follows:

TOTAL, Farmers Home Administration $3,748,907 $ 3,963,732 $ 4,016,900

* The $350 million for operating loans was increased by $175 million subsequent to printing of the budget.

EXPIRATION DATE: March 29, 1974