Farmers Home Administration Programs

Expanded Programs. The volume of FHA direct and insured loans and grants increased from $1,639,748,570 in fiscal 1970 to $2,414,315,915 in fiscal 1971 and from 149, 388 loans and grants in 1970 to 191,912 loans and grants in 1971. The greater volume resulted from increased programs which were authorized by the Consolidated Farmers Home Administration Act of 1961 and Title V of the Housing Act of 1949, with particular emphasis on loans and grants for rural water and waste disposal systems and rural housing loans and grants for single and multi-unit dwellings. In addition to the quantitative increase in legal work necessitated by increased FHA program appropriations, recent legislation has created a substantial increase in the amount of legal work in fiscal 1971. Such nonroutine type of legal work, which is necessary to implement new and expanded program authorizations involving statutory interpretation and assistance with drafting and legal approval of FHA regulations, is particularly time-consuming. Examples of recent legislation to which considerable time was devoted during fiscal 1971 are: The Disaster Relief Act of 1970, which substantially changed the program authorizations of the FHA emergency loan and rural housing disaster loan programs; the Indian land acquisition act (Public Law 91-229), which authorized FHA to make insured loans to Indian tribes or tribal corporations to purchase real estate within Indian reservations; and portions of the National Flood Insurance Act of 1968 which relate to the prohibition against duplication of Federal disaster financial assistance.

For the second year since the beginning of the insured loan program in 1946, FHA marketed blocks of FHA insured obligations through a group of underwriters. During fiscal 1971, 3 block sales were held involving a total of $800 million of insured obligations. This compares with the initial block sale of $350 million in fiscal 1970. Each block sale requires legal counsel on such matters as preparing and revising the insurance contract, prospectus, purchase agreement, bailment agreement, and fiscal agency agreement between FHA and the Federal Reserve Bank of New York, obtaining opinions of the U.S. Attorney General, U.S. Comptroller of the Currency, and the Securities and Exchange Commission, and preparing legal opinions, memoranda, and certifications necessary for the closing.

Workload. The FHA legal work has continued to increase in volume and complexity during the past fiscal year. The increased emphasis in recent years on community facilities and multi-unit dwellings for which projects the applicant is a corporation or public body has greatly added to the complexity and time involved in making a single loan or grant as opposed to the situation that exists for loans to individuals for farm ownership, operating, or housing loans.

The figures below, while not reflecting the nature of the loan or grant applicant, do evidence the units of FHA legal work performed by the 17 field offices in fiscal 1971 as compared with fiscal 1970:

In addition to the FHA legal work performed by the field offices, the Farmers Home Division in the Washington Office handled 1,823 work items during fiscal 1971 as compared with 1,545 work items during fiscal 1970.

Servicing. As the FHA appropriations have increased and the FHA loans have aged, the servicing problems have vastly increased. This is partially evidenced by the second grouping of comparative figures above. The aggregate outstanding FHA loans being serviced by FHA at the close of fiscal 1971 was $7,869,429,356. This compares with $1,276,794,587 of outstanding loans at the close of fiscal 1961. Additionally, as in loan making, the servicing problems involving community facilities and multipleunit dwellings are far more complex and time-consuming than servicing problems involving an individual-type loan. Many of these more complex cases which arose during fiscal 1971 and which it is anticipated will further increase during the coming fiscal years involve unique factual situations that must be resolved on a case-by-case basis. These pertain to such matters as the transfer of the assets to and the assumption of the liabilities by a larger entity which may or may not be eligible for FHA financial assistance; the merger or consolidation of two or more FHA borrowers into a single, more efficient entity; and the readjustment of the debt terms of an FHA borrower which is having temporary financial problems. Substantial time was also spent in fiscal 1971 in assisting in the formulating of FHA regulations to cope with the more routine type of servicing problems for corporate and public-body type borrowers. Other legal work in connection with loan servicing and collection consist of such matters as: (1) referring cases to United States Attorneys or to the Department of Justice for litigation, including in many cases the preparation of the necessary court documents, and pleadings, (2) handling power of sale foreclosures under deeds of trust, (3) preparing or approving claims to be filed in deceased and bankruptcy cases, (4) advising FHA with respect to compromise, cancellation, and charge off of claims, (5) drafting or approving instruments necessary for exchanges or sales of security property, and (6) assisting with the preparation and revisions of FHA regulations and forms to handle uniform types of servicing problems. Also, legal advice must be provided FHA in connection with its servicing of discontinued Federal programs such as those formerly administered by the Resettlement Administration, the Farm Security Administration, and the Emergency Crop and Feed Loan Offices of the Farm Credit Administration.

INVESTIGATIONS OF FOOD STAMP VIOLATIONS

Mr. MICHEL. How many investigations of food stamp violations have been referred to you by the OIG so far this fiscal year? Would you compare this to fiscal 1970 and fiscal 1971? How many of these have you referred to U.S. attorneys? How many have been resolved? Mr. SHULMAN. The most recent data available shows that during the first half of this fiscal year, OIG referred about 650 investigations of food stamp violations to the Office of the General Counsel for review. As of December 31, 1971, 333 of these reports had been referred to U.S. attorneys. In fiscal year 1971 about 870 such cases were sent to this Office of which 648 were referred to U.S. attorneys, while in fiscal year 1970 our Office received about 600 such reports from OIG of which 346 were sent on to U.S. attorneys for consideration. A large number of these cases have been resolved by U.S. attorneys. During fiscal year 1970, for example, U.S. attorneys closed 281 cases. In fiscal year 1971, 483 cases were closed. While in the first half of fiscal year 1972 U.S. attorneys have closed 248 of the cases forwarded to them for consideration.

Mr. MICHEL. Do you have a backlog of food stamp cases? Has it increased during the past year? What kinds of problems result from cases not receiving prompt attention?

Mr. SHULMAN. At the present time the Office of the General Counsel has only a small backlog of pending cases. At the end of December 1971, there were 43 such cases under review in the Washington and OGC field offices. This backlog of cases has not increased significantly in OGC although the number of cases pending in court or the U.S. attorneys' offices has been growing. For example, at the end of fiscal year 1970, 173 cases were pending in court or in the hands of U.S. attorneys. At the end of fiscal year 1971 that number had grown to 362. At the end of the first half of fiscal year 1972, 317 cases were yet to be resolved by the courts or U.S. attorneys. We try to give prompt attention to food stamp program cases in order to maintain a high level of program integrity. It is important that potential violators realize that they will be caught and will be disqualified for appropriate periods from the program. They may also be prosecuted for criminal violations. Delays in the disposition of these cases tends to lessen the deterrent effect of criminal and administrative action.

Mr. WHITTEN. Thank you for your appearance, Mr. Shulman.

77-540 O 72 pt. 3 - 42

OFFICE OF INFORMATION

WITNESSES

FRANK B. ELLIOTT, ASSISTANT SECRETARY FOR ADMINISTRATION

CLAUDE W. GIFFORD, DIRECTOR, OFFICE OF INFORMATION

HAL R. TAYLOR, DEPUTY DIRECTOR, OFFICE OF INFORMATION DAVID M. GRANAHAN, ASSISTANT DIRECTOR, OFFICE OF INFORMATION

FRANCIS A. SHEA, EXECUTIVE ASSISTANT TO THE DIRECTOR, OFFICE OF INFORMATION

RICHARD E. BALLARD, CHIEF, DIVISION OF BUDGET AND FINANCE, OFFICE OF MANAGEMENT SERVICES

JEROME A. MILES, DIRECTOR OF FINANCE, DEPARTMENT OF AGRICULTURE

Note: Obligations incurred under allotments from other accounts are included in the schedule of the parent appropriation, as follows:

Soil Conservation Service:

"Great Plains conservation program."

"Working capital fund."

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