Under proposed legislation, 1966.-Proposed legislation would amend title V of the Housing Act of 1949 to provide for a program of insured rural housing loans. The insured loan program would be supported by the special assistance and secondary market facilities of the Federal National Mortgage Association. A $350 million level of insured housing loans is anticipated if the insured loan program becomes operative early in 1966. Families in the lower income levels would require an estimated $300 million annually, and an estimated $50 million annually would be needed for other applicants. In addition to the $200 million in loans made from the proposed new fund for later sale, it is expected that approximately $150 million in loans from private sources will be insured annually. The Rural housing insurance fund would be used for the farm labor housing and rental housing for the elderly loans presently insured through the Agricultural credit insurance fund. Authority to insure rental housing for the elderly loans through the Agricultural credit insurance fund will expire on September 30, 1965, but extension of this program is being proposed. All of these loans would be made and serviced by the Farmers Home Administration. DIRECT LOAN ACCOUNT Direct loans and advances under subtitles A and B, and advances under section 335(a) for which funds are not otherwise available, of the Consolidated Farmers Home Administration Act of 1961 (7 U.S.C. 1921), as amended, may be made from funds available in the Farmers Home Administration direct loan account as follows: real estate loans, [$60,000,000] $40,000,000; and operating loans, $300,000,000, of which $50,000,000 shall be placed in reserve to be used only to the extent required during current fiscal year under the then existing conditions for the expeditious and orderly conduct of the loan program. (Department of Agriculture and Related Agencies Appropriation Act, 1965.) Program and Financing (in thousands of dollars) 1964 actual 1965 1966 estimate estimate 13,000 16,000 Direct loan account.-This account was established on October 16, 1961, pursuant to section 338 (c) of the Consolidated Farmers Home Administration Act of 1961. Real estate and operating loans are made under the authorities of subtitle A and B of the act to farmers and ranchers and to associations unable to obtain credit from other sources at reasonable rates. Loans made under these and similar prior authorities are reported and accounted for in this account. In 1965, the total available for loans, including a $50 million reserve for operating loans, is $360 million. In 1966, it is proposed to carry out the estimated loan program of $340 million through utilization of receipts to the Direct loan account representing collections on loans outstanding. No new borrowing authorization is estimated for 1966. In addition to the direct loans, farm ownership and soil and water loans advanced by private lenders will be insured within the annual statutory insurance authority of $200 million for these purposes. Legislation is being 35,900 55,000 19,000 proposed to increase this insured loan authority to $300 12,173 15,000 30,000 million. Contingent liabilities for these insured loans are reflected in the Agricultural credit insurance fund schedules. 12,019 Costs incident to security for loans... 25 Provision for losses on current receiv ables.... 2,598 Total operating costs, funded......... 14,642 2,497 15,497 2,305 18,305 48,073 Operating loans.... 297,944 Judgments and collateral acquired... 197 61 -9,000 Real estate loans-a. Farm ownership loans.-Direct and insured loans are made to farmers and ranchers for acquiring, enlarging, or improving farms, including farm buildings; for financing land and water development, use and conservation including recreational uses and facili375,556 358,366 ties; for forestry development; for refinancing existing indebtedness; and for loan closing costs. Loans are confined to farms which are not larger than family farms. A loan cannot exceed $60 thousand in any case. In addition, the indebtedness against a farm or other security, including the amount of the loan, cannot exceed $60 thousand or the normal value of the farm and any additional security. -261,965-292,717-301,690 -150 -200 -10 -200 -215 -44,834-47,485 -50,444 -12 b. Soil and water loans.-Direct and insured loans are made to farmers and ranchers and to associations for the effective development and utilization of water supplies and for the improvement of farmland by soil and water conserving facilities and practices. Loans to associations also are made for shifts in land use including the development of recreational facilities. There is no limitation on the size of farms that may be improved with loans to individual farmers. For loans to individuals, a loan cannot exceed $60 thousand in any case; in addition the indebtedness against a farm or other security, including the amount of the loan, cannot exceed $60 thousand or the normal value of the farm and any additional security. For loans to associations, the unpaid principal indebtedness is limited to $500 thousand in the case of a direct loan and $1 million in the case of an insured loan. SOIL AND WATER LOANS [Dollars in thousands] 511 3,349 650 4,000 650 229 30,221 320 41,000 320 70 4,000 41,000 Loans receivable, net.... 5,000 Land and improvements. Farm ownership and soil and water loans are repayable in not more than 40 years and bear interest not in excess of 5%. Insured loans are made through the Agricultural credit insurance fund with funds advanced by private lenders. Annual payments of principal and interest to lenders are fully guaranteed. The law provides that lenders can receive up to 4%% interest of the 5% paid by the borrower. The maximum return to lenders is currently established at 4%. The Government retains at least one-half of 1% of the interest as an insurance premium. The Administration services these insured loans, makes collections, and pays the lender. Operating loans.-Direct loans are made to farmers and ranchers for paying costs incident to reorganizing a farming system for more profitable operations; for a variety of essential farm operating expenses such as the purchase of livestock, farm equipment, feed, seed, fertilizer and farm supplies; for financing land and water development, use and conservation including recreational uses and facilities; 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 loan balance for operating loans is limited to $35 thousand. Loans bear interest at 5% and may be made for periods up to 7 years, but may be re Property acquired through fore closure... Judgments, net. Total assets. Liabilities: Current.. Government equity: Interest-bearing capital: Start of year. End of year.. Non-interest-bearing capital. Retained earnings... .... 1963 actual 1964 1965 actual estimate estimate 1966 25,648 43,439 62,516 82,033 Total Government equity... 1,079,686 1,097,477 1,116,554 1,136,071 Object Classification (in thousands of dollars) 1965 1966 estimate estimate 356,498 362,556 342,366 EMERGENCY CREDIT REVOLVING FUND 1965 1966 estimate estimate 4,320 Program and Financing (in thousands of dollars) 4,320 413 4,733 4,716 64,000 64,000 64,013 64,023 Loans may be made outside of such areas to eligible applicants who have suffered severe production losses not general to the area. Loans also may be made to previously indebted borrowers to permit orderly repayment of such indebtedness. Loans (a) Emergency loans.-Emergency loans are made at 3% interest to eligible farmers, ranchers, or oyster planters and to domestic corporations or partnerships engaged primarily in farming, ranching, or oyster planting. Loans are made for any authorized purposes for which operating, farm ownership, or soil and water loans may be made by the Farmers Home Administration. (b) Other loans.-Where necessary to protect the Government's investment, obligations are incurred in connection with outstanding loans to provide for payment of such costs as taxes and insurance. Such advances are charged to the borrowers' accounts. Administrative expenses. The principal administrative expenses are related to the loan programs of the Farmers Home Administration. These expenses are estimated at $4.3 million in 1965 and 1966. Administrative expenses for the Office of the General Counsel are estimated at $22 thousand in 1965 and 1966. Financing the program.-No new budgetary authorization is required for 1966. A net loss of $4.4 million is estimated on an accrual basis. Expenditures are estimated to exceed receipts by $5.9 million on a cash basis 68,746 68,739 due primarily to excess loans made over receipts during the year. During 1966, the program will be wholly financed by receipts from operations of the revolving fund. Operating results and financial condition.-Revenue for 1966, consisting principally of interest on loans, is estimated at $2.4 million, compared to expenses of $6.8 million, resulting in an estimated loss of $4.4 million. A net loss of $4.8 million is estimated for 1965, and a net loss of $3.9 million resulted in 1964. 68,746 68,739 -62,115-49, 139 -60,569 -19 -49 -50 -2,357 -50 Loans receivable, after allowance for losses, are expected to amount to $75.6 million on June 30, 1966, as compared to $74.3 million on June 30, 1965, and $61.6 million on June 30, 1964. The Government investment at June 30, 1966, is expected to be $102.8 million consisting of $205.8 million appropriated and donated, less a deficit of $103 million. Revenue, Expense, and Retained Earnings (in thousands of dollars) 54,688 -64,428 68,746 68,739 -51,181-62,976 71 Receipts and other offsets (items 11-17)..... Obligations affecting expenditures. 72.98 Receivables in excess of obligations, start of year.... 74.98 Receivable in excess of obligations, end of year.. Expenditures.. Balances of selected resources are identified on the statement of financial condition. This fund is authorized by subtitle C of the Consolidated Farmers Home Administration Act of 1961, to finance emergency loans in areas where agricultural credit is not readily available because of natural disasters. Loans are generally confined to areas designated as emergency areas. Net nonoperating income.. Deficit, end of year.. -4,813 -4,430 -89,920-93,816-98,629 -93,816-98,629 -103.059 1 Balances of selected resources are identified on the statement of financial condition. This fund is used to insure farm ownership loans, soil and water loans, farm labor housing loans and loans for rental housing for the elderly, as authorized by subtitle A of the Consolidated Farmers Home Administration Act of 1961, and sections 514 and 515(b) of title V of the Housing Act of 1949. The insurance endorsement on each insured loan includes an agreement by the Government to purchase the loan after a specified initial period of not less than 3 years, at the holder's option. The initial fund of $1 million is supplemented by loan insurance charges collected from insured loan borrowers and by borrowing from the Secretary of the Treasury. A portion of such loan insurance charges equal to at least onehalf of 1% of the outstanding principal obligations must be deposited to the fund to cover losses. The remainder of such charges may be used for administrative expenses. Loans other than farm labor housing loans may be made directly from the fund from available receipts or borrowings from the Treasury for the purpose of acquiring blocks of loans if there is reasonable assurance that the loans can be sold to investors without undue delay. With respect to loans made from this fund, not more than $25 million for farm ownership and soil and water loans and not more than $10 million for loans for rental housing for the elderly may be held in the fund at any one time. Interest paid the Secretary of the Treasury on borrowings is based on the current average market yield of outstanding marketable obligations of the United States having maturities comparable to the notes issued for borrowings from the Treasury for operation of the fund. Budget program. Capital outlay is estimated at $308.7 million in 1966, an increase of $39 million over 1965 and an increase of $92.7 million over 1964. Included in capital outlay is $147.7 million in 1965 and $153.2 million in 1966 for making loans from the fund which will later be sold on an insured basis. The increase in 1965 and 1966 in sale of loans from the fund is expected to result from the relatively favorable market for insured loans. Insured loans outstanding which are contingent liabilities against the insurance fund are expected to increase from $578.3 million on June 30, 1964, to approximately $788 million at June 30, 1965, and to $968 million by June 30, 1966. Financing.-Net repayments to the Treasury in 1966 are estimated at $11.8 million and in 1965 at $16 million. Operating results and retained earnings.-Total revenue, consisting principally of loan insurance charges is estimated at $8.8 million in 1966, an increase of about $1.2 million from 1965. Outstanding loans receivable of $72.4 million are estimated at June 30, 1966. Retained earnings, available to cover future losses, are estimated to be $20.7 million at the end of 1966. These earnings, when added to the $1 million appropriation and estimated borrowings of $52.8 million from the Treasury, represent a $74.5 million Government investment. Legislation will be proposed for establishing a Rural housing insurance fund which will be used to insure the farm labor housing and rental housing for the elderly loans presently insured through this fund. POSITION WITH RESPECT TO INSURANCE AUTHORITIES Farm ownership and soil and water loans: Annual insurance authority...... Charges against insurance authority during the year: Loans insured.. |