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So with all the problems that you have--and that you face now-I do want to say that our feeling is that you have done a splendid job with a hard problem; and I hope we may get over to the OMB the fact that you are doing the basic thing, the first priority thing compared to some of the programs that they do release funds for ahead

of you.

I do not know that I have told you anything new, but I think this record should show that your agency has grown in stature, in responsibility, in volume, and in the great work that the Government does to enable people to help themselves.

I repeat again, to borrow from your agency is to show you cannot get the funds elsewhere, but still have a reasonable chance of paying back. You deal with some big matters, but you are still dealing with those who are unable to finance their operations from other sources.

We would be glad to have your statements, or have you address yourself to whatever you would like at this time in the way of a general statement.

STATEMENT OF JAMES V. SMITH, ADMINISTRATOR, FARMERS HOME

ADMINISTRATION, DEPARTMENT OF AGRICULTURE Mr. SMITH. First of all, Mr. Chairman, and members of the committee, I would like to thank the chairman for that statement and for his complimentary remarks on the Farmers Home Administration.

Certainly, the national office and the field, Mr. Chairman, are aware of the concern and assistance that has been given by the chairman and this committee, and the House of Representatives down through the years.

We are grateful for it, and we appreciate the guidance that you have given us, and the support you have given us over this long period of time.

I would prefer to read my statement, Mr. Chairman.
Mr. WITTEX. Certainly.

Mr. Swtii. Mr. Chairman, at this point I suggest that pages 216 through 273 of the explanatory notes be inserted in the record.

(The information follows:)

FARMERS HOME ADMINISTRATION

Purpose Statement

The Farners Home Administration, established November 1, 1946, by the Farmers Home Administration Act of 1946, conducts the following activities:

1. Fara ownership loans. Loans are made to farmers and ranchers for acquiring,

enlarging, or improving farms, including dwellings and farm buildings; land and water development, use and conservation; forestry leve-opment; recreational facilities; the development of nonfarm enterprises on farms; refinancing indebtedness, and for loan closing costs, Loans are limited to farms which are not larger than family farms and cannot exceed the normal value of the farm or $100,000, whichever is the lesser The loan limitation includes the unpaid indebtedness against the farm or other security. Loans are repayable in not more than 40 years and bear interest not in excess o? = percent. Loans may be made simultaneously with loans made for authorized farm ownership purposes by private long-term lenders. Insured loans are made Prom the Agricultural Credit Insurance Fund for sale to private lenders. Payments of principal and interest to the lenders are fully guaranteed. The Administratior. services these i isured loans, makes collections, and pays the lenders.

2. Recreation loans. Loans are made to farmers and ranchers for converting all or

a portion of the farms or ranches they own or operate -- outdoor income - producing recreation enterprises which wili supplement or suppiant farm income and permit carrying on sound and successful operations. Recreation :oans to individuals are insured on the same basis as insured farm wnership loans.

3. Soil and water loans to individuals, Loans are made to farmers, ranchers, and

nonoperator owners for land and water development, ise and conservation. Direct land conservation and development loans are made in the Appalachian region to establish and carry out land stabilization, conservation and erosion control practices. Loans may be made on farms of any size A loan cannot exceed the normal value of the Carm or $100,000, whichever is the lesser. The loan limitation includes the unpaid indebtedness against the farm or other security. Loans are repayable in not more than 40 years and bear interest not in excess of 5 percent. Soil and water loans to indiv! luals are insured on the

same basis as insured farm ownership loans. 4. Loans to associations. Loans are made to public and nonprofit associations for

the effective development and utilization of water supply and waste disposal systems and for the improvement o. land by soil and water conserving facilities and practices. Loans to associations also may be made for shifts in land use, including grazing, the development of recreationai facilities and for irrigation development, Loans to associations are authorized in designated areas to repair or replace certain public facilities damage, or iestroyed by a ma'or disaster. Association loans may be made to serve residents of open country and rural towns and villages of not more than 5,500 popula ion, which are not part of an urban area. The unpaid principal indebedness of a loan, together with the amount of any grant assistance, is imited to $4,.700,000, Loans are repayable in not more than 40 years and bear interest no: ir excess of 5 percent. Association loans are insured or the same basis as ir:sured farm ownership loans.

5. Indian tribe land acquisition loans. Loans are made to qualified Indian tribes

or tribal corporations to acquire land or interests in and within the tribes! reservation or Alaskan Indian community, as determined by the Secretary of the Interior. These loans are insured on the same basis as insured farm ownership loans.

6. Grants for the preparation of comprehensive plans which coordinate the develop

ment of water and waste disposal systems in rural areas. Planning grants are made to public bodies such as counties, townships, planning commissions, and similar units of government, and such other agencies as may have authority to prepare such official comprehensive plans. The amount of each grant will be limited to the actual expense for the preparation of the plan which is outside

the normal budget of the recipient organization. 7. Grants for water and waste disposal development. Development grants are made

to associations, including corporations operating on a nonprofit basis, municipalities, and similar organizations, generally designated as public or quasipublic agencies, that propose projects for the development, storage, treatment, purification, and distribution of domestic water or the collections, treatment, or disposal of waste in rural areas Development grants to associations also are authorized in designated areas, under limited conditions, to repair or replace certain public facilities damaged or destroyed by a major disaster. Grants may not exceed 50 percent of the development cose of the projects and supplement other funds borrowed or furnished by applicants to pay development costs. No grant may be made which, together with any unpaid principal loan indebtedness of any association owed to the farmers Home Administration, would exceed $4,000,000 at any one time.

8. Operating loans. Loans are made to farmers and ranchers for costs incident to

reorganizing & farming system for more profitable operations; for a variety of essential farm expenses such as purchase of livestock, l'arm equipment, feed, seed, fertilizer, farm supplies, and other essential operating expenses, including cash rent, and costs incident to the production and harvesting of forestry products; for financing land and water development, use and conservation; for recreational uses and facilities; for costs incident to nonfarm enterprises on farms; for refinancing indebtedness; for other farm and home needs; and for loan closing costs. Loans are confined to operators of not larger than family farms. The outstanding principal loar. balance for operating loans is limited to $35,000. Loans bear interest at a rate based on the average rate paid by the U.S. Treasury on obligations with a similar maturity period. The rate for the 1972 fiscal year is 6-3/8 percent. Loans may be scheduled for payment over periods from 1 to 7 years depending on loan purposes. In some situations, they may be renewed for not more than 5 additional years. Loans are secured by crop and chattel llens and, when necessary, by real estate mortgages. Other reliable agricultural credit sources are encouraged to arnish as much as possible of the essential needs of loan applicants with the balance being supplied with

operating loan funds from the Farmers Home Administration 9. Emergency loans. Loans are made in designated areas where a natural disaster

has caused a general need for agricultural credit. The Former statutory emergency loan requirement of inability to obtain credit elsewhere was suspended by Public Law 91-606, approved December 31, 1970, for loans made before the end of the first full operating year following the disaster Thereafter, however, applicants must be unable to obtain credit elsewhere ir order to qualify for additional emergency loans based on the same disaster. Emergency loans are made to eligible established farmers, ranchers or oyster planters, and to private domestic corporations or partnerships engaged primarily in farming, ranching or oyster planting. Emergency loans are made primarily for financing farm operating needs, family living expenses, and a number of closely related purposes. Loans bear interest at a rate determined monthly not in excess of 6 percent and are repayable over periods not longer than regular loans made by the Farmers Home Administration for similar purposes. Lans may be made outside of designated emergency areas under certain conditions to persons or corporations who have suffered severe production losses not general to the area as a result of a natural disaster, or to persons who are indebted for emergency loans made under prior authorities. Public Law 91-606 authorized loans in areas where the President has declared a major disaster, with special provisions for refinancing real estate debts under restricted conditions, for

cancellation of a portion of principal up to $2,500, and for deferment of interest and principal payments up to three years on loans for other than operating expenses. Under Public Law 92-173, approved November 24, 1971, emergency loans may be insured on the same basis as insured farm ownership loans.

10. Rural housing loans. Insured building loans to individuals are made to enable

eligible applicants in rural areas to construct, improve, alter, repair or replace dwellings and essential farm service buildings. Loans may include funds to buy a house, building site and farm service buildings. If the borrowers are persons of low or moderate incomes, and if their need for necessary housing cannot be met with Pinancial assistance from other sources, including assistance available under section 235 of the National Housing Act, the insured loans made by the farmers Home Administration in fiscal year 1972 will bear interest at 7-1/4 percent with provision for interest credits up to 6-1/4 percent under certain circumstances. Such loans may not exceed amounts necessary to provide adequate housing, modest in size, design and cost. Building loans are made to farm owners, owners of other real estate in rural areas, others who are or will become rural residents, and long-term leaseholders. These loans are repayable in not more than 33 years. Loans are limited to rural areas which include towns, villages or other rural places with a population up to 10,000 inhabitants. Insured rural housing loans are made from the Rural Housing Insurance Fund for sale to private lenders. Payments of principal and interest to the lenders are fully guaranteed. The Administration services these insured loans, makes collections and pays the lenders.

Insured natural disaster loans are made at a rate determined monthly not in excess of 6 percent for not more than 33 years to provide for repair or replacement of farm or rural dwellings, farm service buildings and related facilities damaged by a natural disaster. Direct repair and improvement loans of $2,500 or less are made at one percent interest for not more than 10 years only to very low-income families who are owners of farms or nonfarm rural property to repair or improve their dwellings and essential farm buildings in order to make them safe and sanitary or to remove health hazards to the families or the community. Such loans which 1nvolve water supply, septic tanks, or bathroom and kitchen plumbing facilities may be made in amounts not in excess of $3,500.

11. Insured rural rental and cooperative housing loans. Insured loans are made to

Individuals, corporations, associations, trusts, or partnerships to provide moderate cost rental or cooperative housing and related facilities for elderly persons and other persons of low or moderate income in rural areas. These loans are repayable in not more than 50 years and bear interest in fiscal year 1972 at 7-1/4 percent with provision for interest credits up to 6-1/4 percent under certain circumstances. These loans are made only if the need for necessary housing cannot be met with financial assistance from other sources, including assistance available under section 236 of the National Housing Act. No loan may exceed $750,000. Loans are limited to rural areas which include towns, villages or other rural places with a population up to 10,000 inhabitants. Rural rental and cooperative housing loans are insured on the same basis as insured housing loans to individuals.

12. Farm labor housing loans. Insured loans are made to a farm owner, to a public

or private nonprofit organization or to a nonprofit organization of farmworkers incorporated within a state to provide modest 11ving quarters, basic household furnishings, and related facilities, including land necessary for an adequate site, for domestic farm labor. These loans are repayable in not more than 33 years and bear interest not in excess of 1 percent. Farm labor housing loans are insured on the same basis as other insured rural housing loans.

13. Financial assistance to a public or broad-based private nonprofit organiza

tion or to a nonprofit organization of farmworkers incorporated within a State
for low-rent housing and related facilities for domestic farm labor. Grant
assistance, not to exceed 90 percent of the total development costs, is pro-
vided for new structures or rehabilitation of existing buildings suitable for
dwelling use by domestic farm labor. Funds also may be used for essential
related facilities such as dining halls, community rooms or buildings, infirm-
aries or other essential services, including basic household furnishings.
These grants may be made simultaneously with farm labor housing loans.

14. Financial assistance to local organizations to promote mutual or self-help

housing. These grants are especially designed to aid the development of mutual or self-help housing programs under which groups of families build their own homes by mutually exchanging labor. Grants are used to provide technical and supervisory assistance to families who build their homes by the sel:-help method.

15.

Loans for purchase and development of land to be subdivided into building
sites and sold on a nonprofit basis to low-income families or to organizations
for rental or cooperative housing. Site loans are insured on the same basis
as insured rural rental and cooperative housing loans. Direct site loans are
made at 3 percent interest for a two-year period to develop building sites for
sale in connection with self-help projects. Insured loans are made at 7-1/4
percent interest in fiscal year 1972 for a two-year period.

16.

Watershed works of improvement and flood prevention loans to sponsors of pro-
jects approved for operation by the Soil Conservation Service. Direct loans
are made to local organizations for installing, repairing or improving works
of improvement and water storage facilities, purchasing sites or rights-of-way
and for related costs. Watershed works of improvement and flood prevention
loans are repayable in not more than 50 years at an interest rate based on the
average rate paid by the U.S. Treasury on obligations of similar maturity.
The rate for the 1972 fiscal year is 3.502 percent. Total loans outstanding
on any one project may not exceed $5,000,000.

1

17.

Resource conservation and development loans to sponsors of projects approved
for operation by the Soil Conservation Service. Direct loans are made to
local organizations and individuals for planned conservation measures and
works of improvement as specified in approved work plans. Resource conserva-
tion and development loans are repayable in not more than 30 years, with
repayment of principal and interest deferred up to 5 years, if necessary.
Loans bear interest at a rate based on the average rate paid by the U.S. Trea-
sury on obligations of similar maturity. The rate for the 1972 fiscal year is
3.502 percent.

18.

Grants may be made from funds from the Appalachian Regional Commission, the
Department of Commerce, or the Department of the Army to supplement the water
and waste disposal loans and grants made for development costs by the farmers
Home Administration.

19.

Technical assistance for comprehensive planning is provided, in cooperation with the Department of Housing and Urban Development, regarding establishment of nonmetropolitan districts and the carrying out of comprehensive planning in such districts.

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