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It seems to me that it is a business that belongs right in this field, because certainly it is a type of agriculture, and it ordinarily is carried on by the family farm operation.

Mr. SMITH. The predominant policy is that the farm should be of sufficient size and quality to fully employ the labor in the family the year around, and that must relate, of course, to the type of operations that the farm family

Senator SPARKMAN. Of course, the poultry business would do that on just a couple of acres.

Mr. SMITH. Much smaller than row-crop farming.

Senator SPARKMAN. Yes. I note with interest your comment on section 504. That was the one to provide minor repairs to make the place sanitary, and so on and so forth.

Mr. SMITH. Yes.

Senator SPARKMAN. It is my understanding that is adequately provided for now in section 1 of

Mr. SMITH. It is our understanding it is under section 1 of the National Housing Act.

Senator SPARKMAN. No, I mean of the Bankhead-Jones Farm Tenant Act. Do you have a provision for that?

Mr. SMITH. Yes, sir. We can advance funds for the repair and improvement of farm buildings under title I of the Bankhead-Jones. Senator SPARKMAN. I said section 1. I meant title I.

Mr. SMITH. Title I.

Senator SPARKMAN. Is it being done?

Mr. SMITH. Yes, sir. We actually make four different types of loans under title I, Senator.

Senator SPARKMAN. What are they?

Mr. SMITH. We make loans to purchase family-type farms. In other words, we can make a loan to a tenant to purchase a family-type farm.

We can make loans to owners to finance development on those farms, such as improvements in the buildings, fencing, pasture improvement, soil-conservation measures, and things of that character.

And we can make loans to owners to enlarge the unit into an adequate unit. If he can buy land nearby and add it to the farm to round out the farm, we can make the loan for that purpose.

Senator SPARKMAN. In order to make it an economic unit?

Mr. SMITH. That is right, sir.

Then we have a special type of loan under title I called a buildingimprovement loan. In other words, if all the owner needs is just funds to either add buildings or improve the buildings that are already there, we call that a building-improvement loan.

Senator CAPEHART. To buy a new farm what percentage of the appraised value do you loan?

Mr. SMITH. If it is a direct loan, we can advance the funds up to 100 percent of the long-time agricultural value of the farm, together with the improvements that are needed to make it an efficient unit. Under the insured loan authority, we can only insure 90 percent of the cost of purchasing and developing the unit.

Senator SPARKMAN. Are these four types that you described available for either type, either the direct loan or the insured loan? Mr. SMITH. Yes, sir, they are.

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Senator SPARKMAN. I presume that the test ordinarily as to whether you would make a direct loan or an insured loan would depend upon two things-the ability of the person to make the 10 percent and the willingness of the lender to loan the money under the insured plan?

Mr. SMITH. That is right. And at the present time it is actually only the question of whether the applicant can qualify under the 10percent requirement, because we have adequate insured commitments to handle all applicants that can qualify under farm insured loans.

Senator SPARKMAN. Any further questions, Senator Capehart? Senator CAPEHART. Is there a limit to what you can loan any one borrower?

Mr. SMITH. There is no dollar limit, Senator, in the statute. The limit is what is established by determining what is the value of the average family-type farms in the county. So it varies by counties. And that is set by

Senator CAPEHART. Could you loan a man $100,000?

Mr. SMITH. No, sir. We have an administrative limit that we do not advance more than $20,000.

Senator CAPEHART. That is what I asked you. There is a limit then of $20,000.

Mr. SMITH. That has been set by administration regulations.
Senator CAPEHART. Not by law?

Mr. SMITH. That is right.

Senator CAPEHART. How long has the $20,000 limit been in effect? Mr. SMITH. For several years.

Senator CAPEHART. That is $20,000 both for the purchase of land

Mr. SMITH. Purchase and development.

Senator CAPEHART. And repairs? That is $20,000.

Mr. SMITH. That is right.

Senator CAPEHART. That is a limit set by

Mr. SMITH. Administration regulations.

Senator CAPEHART. Not by law?

Mr. SMITH. That is right.

Senator CAPEHART. Is the law silent on the subject?

Mr. SMITH. No, sir. The law provides that these loans can be made for the purchase and development of farms that do not have a value greater than the average family-type farm in the county, and thatSenator CAPEHART. So it is limited by that then?

Mr. SMITH. That is right, sir.

Senator CAPEHART. So there is a limit in the law then?

Mr. SMITH. That is right.

Senator CAPEHART. But it is rather-what shall I say?

Mr. SMITH. It varies by counties.

Senator SPARKMAN. It is variable according to communities and types of farming.

Mr. SMITH. That is right.

Senator CAPEHART. That is all I have, sir.

Senator SPARKMAN. Senator Payne!

Senator PAYNE. I was just wondering, Mr. Chairman, whether or not we have had anybody testify from the Agriculture Department in connection with the bill of Senator Daniel and Senator Johnson. It is not under the housing bill, but you remember the other day with reference to emergency loans in areas hit by

Senator SPARKMAN. That is disaster loans, and Senator Morse's subcommittee has held hearings on that.

Let me get this straight: Suppose a person owns a farm that is, we will say, in rundown condition, with a house that needs replacing. It is what you might call a marginal farm. It could be built up, could be made an adequate farming unit and an adequate place to live, but it would require a loan for the purpose of building up the farm and replacing the house. Can that be taken care of under the BankheadJones Act?

Mr. SMITH. Yes, sir. If we could reach a decision that after the development that was apparent that should be made on the farm that it would be then an efficient family-type farm from which the operator would realize enough income to pay his expenses, his living costs, and retire the debts that would be required in connection with the operation.

Senator SPARKMAN. That same test has been in the direct lending program, has it not?

Mr. SMITH. That is right, sir.

Senator SPARKMAN. You have had the same test?

Mr. SMITH. The same test. The direct loan and the insured loan, Senator, are exactly the same loan except for the 10

Senator SPARKMAN. Except for the 90 percent and the 100 percent? Mr. SMITH. That is right.

Senator SPARKMAN. When was the Bankhead-Jones Act amended to extend this home loan authority? It was amended, was it not, within recent years?

Mr. SMITH. It was amended in 1946 to extend the insured authority. There were some amendments passed last year by the 83d Congress. Senator SPARK MAN. Did that extend or liberalize the lending authority of the Bankhead-Jones Act?

Mr. SMITH. There were two important provisions in the amendments that were enacted last year. One provided authority in connection with direct loans that the Government could secure the loan by a second mortgage rather than a first mortgage, which means that the direct loan funds that we have available can extend to more customers now than they could previously. In addition, the amendment provided that the interest rate on these loans may not exceed 5 percent. That gave the agency some flexibility in establishing an interest rate that would encourage more investors to become interested in the insured phase of the program.

Senator SPARK MAN. Let me be certain of this: Is there any class of the family-size farmer that at the present time is reachable under the direct loan program-and when I refer to that I am talking about title V-that is not reachable under the Bankhead-Jones Act?

Mr. SMITH. I do not quite get the question that you are raising. Senator SPARKMAN. Your basic recommendation is that we let title V die. If we do that, will any group or type of farmers be left out of the possibility of getting help?

Mr. SMITH. The principal ones that would be left out, Senator, would be the type that Mr. McLeaish explained a few minutes ago— which would be the city dweller or the city worker, I mean, who lives out at the edge of town and is not obtaining his livelihood from the farm.

Senator SPARK MAN. Well, would he be left out if he actually lived on a farm big enough and it was being carried on by other members of his family?

Mr. McLEAISH. If it were a family-size farm he would not be left out.

Senator SPARK MAN. You meant on small acreage?

Mr. SMITH. That is right, sir.

Senator SPARK MAN. Of course, he would be entitled to get one under our regular FHA program, would he not?

Mr. McLEAISH. I think in certain areas he would. Or regular Federal Housing.

Senator SPARKMAN. If he were a veteran and in the territory where credit was not available, he would be able to get it under the direct veterans' loan program?

Mr. McLEAISH. That is right.

Senator SPARKMAN. I know when this law was passed originally we felt a very definite need for it, and the extent to which it has been used indicates that there must have been a need for it. The thing I want to be certain about before we drop it is that that need has been met or will be met, can be met, or is being met by other law.

Mr. SMITH. Senator, right along that line, 90 or 95 percent of the loans that were made under title V housing authority were made under section 502 that requires a finding that there is an adequate unit. Senator SPARKMAN. That is right.

Mr. SMITH. So the lending authority there and the loans that were made were somewhat in the same area as title I of the BankheadJones farm tenant loans anyway.

Senator SPARK MAN. Could that 95 percent have been covered by title I ?

Mr. SMITH. I would not like to say all of it.

Senator SPARK MAN. Would you be willing to say that all of them could have been covered by Title I?

Mr. SMITH. I would not like to say, Senator, that all could have been covered, but a substantial number might.

Senator SPARKMAN. Under what test might some of them have been excluded?

Mr. SMITH. Well, some of the loans may have been made to owners who did not actually operate the unit. See, under the BankheadJones Farm Tenant Act there is a requirement that the loan be limited to owner-operators.

Senator SPARKMAN. But when you speak of owner-operators, would that include the family of the operators?

Mr. SMITH. Yes, sir.

Senator SPARK MAN. In other words, he or his family?

Mr. SMITH. Yes, sir. I do not know how many might have been excluded by that type of difference in the two.

Senator SPARKMAN. Is that the only test you can think of now that would have excluded any of that 95 percent?

Mr. SMITH. Yes, sir. And then, in addition, some of these loans may have been made to operators who owned less than an adequate unit but who leased an adjoining tract of land under long-term leases that rounded out their units. And we could serve that type of customer or that type of farmer under the title V which could not have been served under

Senator SPARKMAN. Can you still not serve that type underMr. SMITH. Under the Bankhead-Jones we cannot.

Senator SPARK MAN. You cannot?

Mr. SMITH. We cannot. That was pointed out in Mr. Scott's

statement.

Senator SPARKMAN. Do you not feel that that type of a farm operator is entitled to help if he needs it?

Mr. SMITH. I believe that point was brought out in Mr. Scott's statement; yes, sir. But they could be served under 1022.

Senator SPARK MAN. I understand that; but I am talking now about your basic recommendation that title V be dropped.

Mr. SMITH. Yes.

Senator SPARKMAN. What I am trying to find out is, if we drop title V, just whom are we dropping.

Mr. SCOTT. Mr. Chairman, may I say that we feel quite strongly that it is preferable for the Farmers' Home Administration to stay in the field which the Congress has pointed out for it many times the family-size farms. While we are not resisting the idea if the Congress feels that we should take care of a few of these isolated instances that have been pointed out by Mr. Smith. Certainly we feel that Farmers' Home Administration is the best agency to take care of them. We prefer and think that we have our hands full taking care of this family-type operation and are really not seeking any authority to get into these larger operations or to get into these which are really residences in the suburban areas, people who have an acre or two of ground but who are really employed in the town. If someone is to finance those larger operations we think the Farmers' Home Administration would be the agency.

The Federal Housing Administration it would seem to us might better take care of these real small tracts that amount to no more than residences out on the edge of town. We would feel that that group perhaps might become a part of the Federal Housing responsibility. Senator SPARKMAN. That has always been an area that has been hard for us to reach in any kind of a housing program. There is a certain twilight zone in that there is difficulty to reach them because your lending agencies ordinarily do not care to handle that kind of a mortgage.

Any further questions?

Thank you very much, gentlemen.

I have here a letter from the Department of Agriculture, one from the Housing Agency, and also a statement by Senator Karl Mundt, the author of S. 1022, who could not be here this morning. He asked that his statement be placed in the record.

Without objection, all of these will be placed in the record at this time.

(The letters and the statement referred to follow :)

Hon. J. W. FULBRIGHT,

DEPARTMENT OF AGRICULTURE, Washington 25, D. C., March 30, 1955.

Chairman, Committee on Banking and Currency,

United States Senate.

DEAR SENATOR FULBRIGHT: This is in reply to your request of February 4 for a report on 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, and your request of February 11 for a report on S. 1022, a bill to amend title V of the Housing Act of 1949, as amended, and to provide for insurance of loans thereunder.

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