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Direct and insured farm ownership loans made under authority of title I of the Bankhead-Jones Farm Tenant Act, as amended, during the same period farm housing loans were made under Title V of the Housing Act of 1949, as amended, and during fiscal year 1955 through Apr. 30

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Senator SPARKMAN. My understanding is that this program did work very well while it was being used. Is that not true?

Mr. McLEAISH. I will let Mr. Smith answer that. I was only with

it one year.

Mr. SMITH. There were 18,919 loans made during the period 1950 through 1953 for approximately $97 million. There is still outstanding on those loans, Senator, approximately $77 million.

Senator SPARKMAN. $77 million?

Mr. SMITH. Yes, sir.

Senator SPARKMAN. That is practically 19,000, just in round numbers, of loans for $97 million, with $77 million outstanding.

Mr. SMITH. That is right.

Senator SPARKMAN. What is the delinquency rate?

Mr. SMITH. As of December 31, 1954 the regular payments as a percent of the scheduled installments on these loans was 105.6 percent. Senator SPARKMAN. 105.6 percent paid up?

Mr. SMITH. Yes, sir.

Senator SPARKMAN. How about foreclosures?

Mr. SMITH. Very few number of foreclosures.

Senator SPARKMAN. You would say it has been a good program? Mr. SMITH. From a repayment record, yes, sir.

Senator SPARKMAN. That is what I mean.

Mr. SMITH. Yes, sir.

Senator PAYNE. What is the average length of time of the loan, Mr. Chairman?

Mr. SMITH. The average length is approximately 20 years.
Senator PAYNE. Approximately 20 years?

Mr. SMITH. Under the statute the loan could be scheduled up to 33 years.

Senator PAYNE. Based upon the total that you had outstanding and and the amount that is outstanding as of the present time, if you compute that on loans issued from 1950 to 1953, with approximately a $20 million repayment that has been made, it figures out so it is practically in line?

Mr. SMITH. Yes, sir.

Senator SPARKMAN. During 1954 the program was not used. I mean this particular law was not used. Instead, the Bankhead-Jones Act was used. That is correct, is it not?

Mr. SMITH. That is right, sir.

Senator SPARKMAN. Did you have any appreciable increase in Bankhead-Jones loans during that time?

Mr. SMITH. This year, sir, beginning July 1, 1954, through April 30, 1955, we have advanced Bankhead-Jones loans of about $40 million, both direct and insured, to approximately 3,600 farms over the Nation. That is some substantial increase in the Bankhead-Jones business this year.

Senator SPARKMAN. About how much?

Mr. SMITH. The increase is in the insured mortgage field. We had $19 million of direct farm ownership funds.

Senator SPARKMAN. Nineteen?

Mr. SMITH. $19 million this year.

Senator SPARKMAN. Well, is that what would have been under this Act? Not necessarily, is it?

Mr. SMITH. This is approximately double the Bankhead-Jones volume of business that is normal.

Senator SPARKMAN. Your Bankhead-Jones Act can make both types of loans and has been making both types all along, both the insured and the direct?

Mr. SMITH. That is right, sir.

Senator SPARKMAN. In fact, the insured loan just came into being after the war?

Mr. SMITH. Yes. 1946.

Senator SPARKMAN. But prior to that time it had been only direct loans?

Mr. SMITH. That is right.

Senator SPARKMAN. Now you make both?

Mr. SMITH. Yes.

Mr. McLEAISH. Senator, if I may interpose here, the reason we have been restricted to direct loans in farm ownership except for a small percentage was the negotiation with private lenders. Now we have negotiated with private lenders, and we have commitments of $76 million this year for insured loans, both farm ownership and soil and water, compared with $8.5 million last year.

Senator SPARKMAN. In other words, your insurance program is growing?

Mr. McLEAISH. It is growing, yes, sir.

Senator SPARKMAN. Very much like the FHA program originally? They had to take hold gradually.

Mr. McLEAISH. We have had to go out and sell the lending institutions.

Mr. SCOTT. Mr. Chairman, we are very encouraged about the experience to date with this insured loan program. We think it has many advantages.

Senator SPARKMAN. You know, if I am not mistaken, I was present at the closing of the first insured loan. It was down in southeast Alabama. The first insured loan when the program was first put into effect. I think it was the first in the nation. Certainly it was the first in Alabama.

I am delighted to know that the insured program is growing, because I think it is always a healthier situation where we can bring private funds into the market. There will always be some places though where you cannot get those private funds, will there not?

Mr. McLEAISH. Well, what we are doing now, Senator-and this is a different approach than has been existing before is that we are securing roughly three classes of lenders. One would be national insurance companies who can lend countrywise. Then we are going to retirement funds who may want to restrict their loans to a State. And then to small country banks or city banks. In other words, we are trying to get these funds so that they will be spread across the country rather than restricted to a local county or something like that. Senator SPARKMAN. Under the Bankhead-Jones Act, can you make a direct loan for the purpose of enabling the owner of a piece of land to build a new home?

Mr. McLEAISH. Yes, if it is a family-size farm. If it is a familysize farm we can.

Senator SPARKMAN. What is a family-size farm? Is the definition in S. 1022 the same definition as in the Bankhead-Jones Act?

Mr. McLEAISH. No, it is not. Under S. 1022 you would take care of people who would not qualify under Bankhead-Jones. It would be people, as Mr. Scott pointed out, who have a small plot of ground and a lot of leased land. Then you would have a farm. And I have seen around the country some of maybe one or two thousand acres, rented out to several tenants. He may want to put some tenant houses on that farm. He would not qualify under the family-size farm definition. So those are the two classes that would fit S. 1022.

Senator SPARKMAN. In other words, the Bankhead-Jones Act would not reach the second group?

Mr. McLEAISH. Would not reach the second group.

Senator SPARKMAN. If we want to reach that group we must have a supplementary law?

Mr. McLEAISH. Now, the reason for the language and the reason why we approve this language in defining farmers is that it has been our experience in Farm Home Administration that many people applied, quite a large number, some of whom resided in the city of Washington, for a loan to put a house on three acres out in the country. Admittedly they are not farmers. And we have had quite a few Government employees who work on the railroad-the railway mail clerks who had a plot of land out in the country and thought the Government ought to finance that. We do not believe those are farmers.

So when you put in that definition of his income and his time, we believe that that will enable us to have a much better program.

Senator SPARKMAN. Let me ask you about this kind of a case: Down in a part of my State-and, of course, I know this prevails in many parts of the country-there is a very good chicken industry. It does not require many acres to have a satisfactory and profitable poultry business. You could have just a very few acres of land.

I recall one case, for instance, in which a person I think had eight acres, and he tried to get a loan through the Farmers Home Administration. At first, it was suggested to him that that was not a large enough farm to justify a loan. Later on I believe they did say they could make that type of loan, but that they did not have sufficient funds with which to do it.

Can that kind of business be taken care of under the BankheadJones Act?

Mr. SMITH. The size of the farm, Senator, of course, relates directly to the type of operation that is being conducted on it by the owner or operator. We have no acreage limitations. There are no acreage limitations.

Senator SPARKMAN. I thought that was right, and when it was first put up to me that was the point I raised. There was no acreage limitation.

Mr. SMITH. That is right.

Senator SPARKMAN. When we went back to the Farmers' Home Administration, as I say, they seemed to reverse that ruling, but then they said, "But we just do not have the funds to go to that type of business."

I may say that then I took it up with the Small Business Administration, and after a considerable amount of wrestling we got a loan, not on that particular one but on a similar case, from the Small Business Administration.

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