Mr. MACKENZIE. No, sir. Senator SPARKMAN. Mr. Scott, Mr. McLeaish and Mr. Smith, we are glad to have all three of you with us. You may proceed in your own way. Farm housing STATEMENT OF KENNETH L. SCOTT, DIRECTOR, AGRICULTURAL CREDIT SERVICES, DEPARTMENT OF AGRICULTURE, ACCOMPANIED BY R. B. McLEAISH, ADMINISTRATOR; AND HENRY C. SMITH, DEPUTY ADMINISTRATOR, FARMERS HOME ADMINISTRATION Mr. Scorr. Thank you, Mr. Chairman. Although the Department has already reported on S. 789 and S. 1022, we appreciate this opportunity to discuss the Department's views on these two bills and the farm housing loan situation generally. Undoubtedly, there is a great need for improvement in the dwellings and other buildings on many farms. One has only to drive through the countryside to recognize this need. The Department's position, however, has been that on family-type farms legislative authority already exists to meet this need so far as it should be met by Government direct or insured loans. During the last Congress, amendments were enacted to title I of the Bankhead-Jones Farm Tenant Act which strengthened the authorities for direct and insured farm ownership loans to a point where adequate authority and very substantial funds are available to meet the credit needs of persons who own and operate family-type farms and who wish to construct, repair, or remodel their farm buildings. Title I of the Bankhead-Jones Farm Tenant Act authorizes the insuring of loans of up to $100 million each fiscal year. In addition, about $19 million has been available each fiscal year for direct loans for the same purpose. The difference in the direct and insured programs is that to be eligible for an insured loan, the applicant must have the equivalent of a 10 percent down payment either in cash or as an equity in the farm he owns. Most applicants for this type of assistance do have at least a 10-percent equity in their farm, although some, of course, already have their farm mortgaged heavily and are unable to qualify for insured loans because of the 10-percent requirement. There are farmers and ranchers in need of housing loans who cannot qualify for farm ownership loans. For example, in the West, applications have been received from ranchers who reside on small tracts of land and depend upon leasing arrangements to secure the rangeland needed to carry on their ranching operations. Because the farm on which one of these applicants may reside is not in itself of sufficient size to constitute a family-type farm, we are not able to assist this applicant with a farm-ownership loan. Also, there are farmers and ranchers operating units larger than family-type farms who for one reason or another are unable to secure the necessary credit to improve their farm buildings to an acceptable standard. In our report on S. 789 and S. 1022, we stated that if the Congress desires to make credit available to construct, repair, or remodel build ings on farms that are larger or smaller than family-type farms, then we favored the enactment of S. 1022 rather than S. 789. We believe that if these individuals are to be assisted, then it would be more practicable to enact the essential features of S. 1022 than to extend title V of the Housing Act of 1949 as proposed by S. 789. There are three important differences between the two bills which seem to us to make S. 1022 preferable to S. 789: 1. Under S. 1022, a farm is 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 farming. This compares to the eligibility requirement contained in title V of the Housing Act of 1949, as amended, wherein a farm is described 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 annual 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-farm work. The enactment of S. 789 would not change this definition of a farm. We believe the definition of a farm should be changed as provided in S. 1022 to assure that loans would be made to bona fide farmers. 2. Authority is provided in S. 1022 to insure loans made by private lenders in the same manner as other Farmers Home Administration insured loans. This insured loan authority is working well in connection with farm ownership and soil and water conservation loan programs of the Farmers Home Administration. We are giving further consideration to the portion of the interest which might properly be paid to the lender under the insured loan program. 3. S. 1022 would establish the interest rate on loans at not to exceed 5 percent compared to a fixed 4 percent rate contained in the existing provisions of title V of the Housing Act of 1949 which would not be changed by S. 789. Title I of the Bankhead-Jones Farm Tenant Act also provides for an interest rate of not to exceed 5 percent on direct loans and not to exceed 4 percent plus a 1-percent insurance charge on insured loans. Both direct and insured farm ownership loans under title I of the Bankhead-Jones Farm Tenant Act are presently being made at 412 percent interest charge to the borrower. We believe that the interest rate charges on farm housing loans either under S. 789 or S. 1022 should be the same as for direct and insured farm ownership loans. The interest rate, of course, is an important factor for insured loans because of the necessity for securing the participation of private lenders. Our experience has been that the insured loan program becomes practically inoperative unless some flexibility is permitted to adjust the interest rates reasonably to the current investment picture. There is one technical provision which should be included in S. 1022 if it is to be enacted. This change was not detected previously so was not included in our report on this bill. A new section 3 should be added at the end of the bill as follows: SEC. 3. The first paragraph of section 24, chapter 6, of the Federal Reserve Act, as amended (12 U. S. C., 1952 edition, 371) is hereby amended by inserting after the phrase "or the act of August 28, 1937, as amended" the following, "or title V of the Housing Act of 1949, as amended." This provision is included in the insured loan authority of title I of the Bankhead-Jones Farm Tenant Act, as amended, and the Act of August 28, 1937, as amended, which authorizes insured soil and water conservation loans. The provision would operate to remove some of the restrictions on national banks which otherwise might make it impossible for them to advance funds for the insured loans. For example, it would lift the restriction under which they can make a realestate loan only up to 60 percent of the value of the property. Senator SPARKMAN. Mr. McLeaish, do you have a statement also? Mr. McLEAISH. No, sir. Senator SPARKMAN. Mr. Smith, do you have one? Mr. SMITH. No, sir. Senator SPARKMAN. Senator Capehart? Senator CAPEHART. No questions. Senator SPARKMAN. Senator Bush? Senator BUSH. No questions. Senator CAPEHART. The statement speaks for itself. Senator PAYNE. No questions. Senator SPARKMAN. Mr. Scott, I wonder if you could supply for the record a table showing what has been done in the farm housing program under this law since its adoption and, if it is not difficult to do, if there could be a comparative table showing what has been done under the Bankhead-Jones Act during the same time. Mr. SCOTT. We would be very glad to do it. Senator SPARKMAN. That will not be difficult, will it? Mr. McLEAISH. Not too difficult, Senator. We will furnish it for the record. (The information requested follows:) |