1. Source of funds

Direct loans are made from appropriated funds in amounts up to 100 percent of the value of the farm and necessary repairs and improvements. Loans made by private lenders up to 90 percent of the value of the farm and necessary repairs and improvements may be fully insured by the Government.

2. Distribution of funds

Direct loan funds and authorizations to insure mortgages are distributed among the states and territories on the basis of farm population and the prevalence of tenancy. Adjustments among states may be made to meet the applications of

veterans.

3. Supervision and technical services

Borrowers are given assistance as needed by local county supervisors and by engineers in making the improvements and adjustments necessary to the efficient operation of their farms and homes.

4. Eligibility

Farm tenants, farm laborers, sharecroppers and owners who are unable to obtain needed credit from private and cooperative credit sources are eligible. Preference is given to applications from veterans with special provisions for loans to disabled veterans.

5. Types of loans

There are three types of Farm Ownership loans: (a) Tenant Purchase loans to buy and develop family-type farms; (b) Farm Enlargement loans to buy additional land and develop undersized units into efficient family-type farms; (c) Farm Development loans to develop underimproved units into efficient family-type farms. Farm-enlargement and farm development-loans are receiving increasing attention. Loans also are made to disabled veterans to purchase, enlarge, or develop units which may be less than efficient family-type farms.

6. Terms of loans

Loans are amortized over a 40-year period. Borrowers are encouraged under a variable payment plan to pay more than an annual installment in years of good income in order to build a reserve which can be used in years of low income. On loans made since June 19, 1948, direct loan borrowers pay 4 percent interest and insured loan borrowers pay 3 percent interest plus a 1 percent annual mortgageinsurance charge. Borrowers are required to refinance their loans with responsible private or cooperative credit sources whenever they are able to obtain such refinancing at reasonable rates and terms.

7. Limitations on loans

Loans may not be made for the purchase, enlargement, or improvement of farms which have a value, as acquired, enlarged, or improved, in excess of the average value of efficient family-type farm-management units in the county where the loan is made. In addition, there is an administrative limit of $12,000 which applies to the total investment in any farm. (Investments in excess of this ceiling may be made only by prior approval by the Administrator.) In making each loan, a normal earning capacity appraisal based upon long time yields, prices, and production costs is made by a competent appraiser. As a further safeguard, the fair and reasonable value of each farm, based upon its normal earning capacity, after contemplated improvements are made, is determined by a local county committee composed of three men, at least two of whom are farmers. No loan may be made in excess of the amount certified by the county committee to be the fair and reasonable value of the farm.

8. Progress of program

A. Applications. Of the 90,485 active applications on hand in the 1948 fiscal year, 50,023 were from veterans and 40,462 from nonveterans. All applicants are considered first for insured loans before they are considered for direct loans. Historically, applications for loans have far exceeded the number of loans that could be made in any fiscal year. See tables I and II for distribution by States. B. Loans.-Cumulative activities for direct and insured loans are outlined below:

(1) Direct loans: Since inception of the program in 1938 more than 57,000 loans for about $323,000,000 have been made. In the 1947 fiscal year, with a $50,000,000 loan appropriation, over 5,600 loans were made. In 1948, with $15,000,000 appropriated, over 1,900 families received loans. Consistent with

the veteran preference provision in the Farmers Home Administration Act of 1946, 1,518 of these loans in the amount of $11,106,731 were made to veterans. Approximately 2,000 loans will be made with the $15,000,000 appropriated for the 1949 fiscal year with approximately the same high proportion going to veterans. (2) Insured loans: The insured loan phase of the program was started in October 1947. Activity was limited during the 1948 fiscal year, partly because private lenders in many areas were reluctant to advance loans, the relatively long period of the loan, the lack of a secondary market, and the 21⁄2 percent interest rate. Public Law 720, approved June 19, 1948, increased the interest rate to 3 percent. It also gave lenders an assured market by authorizing the sale of nondelinquent mortgages to the Government for cash after the expiration of a period not less than 5 years from the date the loan was made. Administratively this period has been set at 7 years. With increased experience and the benefit of these amendments, there will be substantially more insured loans made in 1949. Experience indicates, however, that many applicants, both veteran and nonveteran, are unable to meet the 10-percent down-payment requirement; hence, there is a continuing need for direct loan funds.

Direct and insured loan activity is shown in the following tables:

C. Value of farms. High prices of farm real estate still limit the number of farms that can be purchased or enlarged at earning capacity values in many areas, although it has been, and is, possible to find a sufficient number to exhaust available funds. In addition, adherence to normal earning capacity values and the rejection of overpriced farms have brought about substantial reductions in the asking price of many farms. Average size of initial loan, average acres per farm, and average loan per acre for the years 1940 and 1945 through 1948 are as follows:

D. Repayment progress.-Of the $322,557,674 advanced to 57,682 families for the purchase, enlargement, and development of their farms since 1938, $135,908,772 in principal had been collected by March 31, 1948. In addition

$33,971,791 had been paid in interest. Scheduled installments due from 41,537 borrowers owing balances as of March 31, 1948, amounted to $41,802,986. Actual principal and interest payments made on such installments were $63,067,782 which was $21,264,796, or 51 percent, more than required on a scheduled amortization basis. In addition, the accounts of these borrowers have been credited with $11,205,848 in refunds and extra payments, which were not applied to scheduled installments. As of March 31, 1948, a total of 26,673 borrowers were ahead of schedule $23,378,450, and 7,543 borrowers were behind schedule $2,113,654. The remaining 7,321 borrowers were on schedule. See table IV for distribution by States. By June 30, 1948, about 19 percent of the total families receiving loans had paid their accounts in full from agricultural income or by refinancing through private or cooperative credit sources. In addition, 4,655 families had paid their loans in full either by foreclosure or from nonagricultural income. The number of borrowers paying in full from agricultural income or by refinancing in the years 1945-48 is shown below:

E. Improved financial position of borrowers.-An indication of the increase in income and the improvement of net worth of borrowers receiving farm ownership loans is shown by the following figures reported for active borrowers: