total projected level of insured rural housing loans for the 1966 fiscal year is $350 million. In addition to the $350 million of insured loans to individuals, the rural housing insurance fund will be used for insured farm labor housing loans totaling about $10 million and insured. rental housing loans for senior citizens totaling $15 million. These multiunit housing programs are currently insured through the agricultural credit insurance fund. Even if operated at this level, the rural housing program is small when compared to the extensive need that exists in rural areas for housing credit. But it represents a significant step in the direction of offering equality of housing opportunity to rural families. Immediate implementation of the insured rural housing program is urgently needed to start making more rapid progress toward helping rural families have a decent home of their own and eliminating the large amount of substandard housing that now exists in rural areas. There are several compelling reasons why the Farmers Home Administration needs $100 million to capitalize the rural housing insurance fund. They are: 1. For the past 3 years, the backlog of rural housing loan applications has been at least $100 million. On June 30, 1965, we had on hand 16,153 applications. We anticipate that under the new legislation with our expanded authorizations the flow of applications will increase sharply. A substantial amount of capital will be required to accommodate the expected flow of loans. 2. The fund will need to have adequate capital to permit the accumulation and blocking of loans by terms and types of loans. Rural housing loans will have varying repayment periods. To sell them without loss for the maximum terms consistent with good administration, it will be advantageous to group them in blocks. To illustrate, those maturing under 20 years might be one group, and those repayable in more than 20 years, another. Also, certain investors have indicated interest in certain types of loans. For example, labor unions have indicated an interest in labor housing loans. Some large banks have several branch banks and frequently want to purchase through the branch banks loans from the State in which the branch banks operate. This is also true of State employee retirement funds and other such investors. This will require blocking of loans by location. 3. The demand for loan capital will fluctuate due to seasonal variations in building operations, particuarly in Northern States. The available capital should be adequate to meet the maximum seasonal demand. 4. Adequate capital should be available to provide sufficient latitude to continue operations and not have to sell in a disadvantageous money market. Since the money market fluctuates from time to time, we will need to continually test the market. We may find that at a particular time no ready market exists for rural housing loans at acceptable terms. In such a case, we may need to temporarily hold loans in the fund until they can be sold on acceptable terms. The amount of capital required for the fund will, in our opinion, fluctuate from $40 to $100 million, depending on actual cash needs and the ability to move the loans into private financing at rates and terms which are advantageous to the Government. 5. By selling rural housing loans for longer terms than we have been selling farm ownership loans, we anticipate fewer lenders will be interested. It will be necessary, therefore, to make most of the loans out of the fund for later sales. 6. There is a lapse of time between the date the insurance fund issues the loan check and the date the note is ready for sale. 7. A final point: The insured housing loans will be a new commodity on the money market. Consequently, they may not be at the outset as readily salable as better known loan paper. For these reasons, the Farmers Home Administration needs $100 million to capitalize the rural housing insurance fund. To administer the substantially expanded housing program, the Farmers Home Administration will need $4 million for salaries and expenses. These funds are needed primarily to strengthen the county staffs working directly with applicants for loans, to meet the added cost of county committee expense involved in reviewing applications, and to meet other administrative costs. It will, however, be necessary to add to some State office staffs a minimum number of additional technical and clerical employees. The pyramiding workload increases each year have more than absorbed manpower and management savings, creating a tremendous burden on all Farmers Home Administration personnel. The agency is without capacity to absorb the additional workload that will result from the broadened rural housing authorities. A delay of action on this request until our regular 1967 budget submission would mean essentially a year's delay in implementing the provisions of the Housing and Urban Development Act of 1965 and, since only minimal direct funds were provided for 1966, it would mean a virtual suspension for the balance of this fiscal year of all rural housing loan activity. The funds we are requesting were, in fact, anticipated by appropriate footnotes in the regular 1966 budget request. LOAN PROGRAMS BY LOAN LEVEL AND FINANCING Mr. WHITTEN. Mr. Bertsch, you might proceed now with the information that I earlier requested and supply that for the record. (The information requested follows:) Type of assistance FARMERS HOME ADMINISTRATION Loan programs by loan level and financing for 1965 and 1966 estimated $45,000 511. 2 350,000 7,636 Borrowing authorization in sec. 20,000 Rural housing direct loan account.1 27 Direct appropriation. 1,000 Rural housing direct loan account.1 To build or improve homes in rural $123, 313 Borrowing authorization in sec. To build, improve, repair, or purchase To build, improve, repair, or purchase 1,922 do. 9,000 Direct appropriation. To acquire, enlarge, or develop family farms. Loan funds also may be used to develop recreational enterprises and to refinance debts. To provide facilities forland and water To provide facilities for land and water To provide for the application or To assist family farmers in reorganiz- Type of assistance FARMERS HOME ADMINISTRATION-Continued Loan programs by loan level and financing for 1965 and 1966 estimated-Continued To provide standby source of agricul- Resource conservation and develop- To plan and carry out plans for re ment, direct. source conservation and develop- $78, 447 Emergency credit revolving fund. $64,000 Emergency credit revolving fund. |