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We are moving into this further expansion of our activities with essentially the same staff that we had in 1960 and with an annual volume of business that is more than 160 percent above the 1960 level.

In fiscal 1960 the Farmers Home Administration advanced $309 million. In 1963, we will loan approximately $800 million.

Similar increases have taken place in the volume of our collections and the volume of our loans outstanding. Collections rose from $306 million in fiscal 1960 to an estimated $415 million for fiscal 1963.

Loans outstanding rose from $1.1 billion on June 30, 1960, to an estimated $2 billion on June 30, 1963.

These substantial increases in our activities stem from increased loan authorities and funds which we requested and which the Congress provided during the past 2 years. We have not received the staff increase so badly needed to carry forward the added workload burden of these new and larger responsibilities entrusted to the Farmers Home Administration.

The present staff is carrying an extremely heavy workload and is doing so to a large extent by personal sacrifice. The extent of personal sacrifice is illustrated by the fact that in 1962 employees put in over 260 man-years of voluntary noncompensated overtime. Forty-five percent of the employees lost annual leave.

We welcome the opportunity that has been given to us to be of greater service to farm families. We have in the past established some remarkable collection records. We are particularly proud of these records since they are indicative of the economic progress that has been made by our borrowers. With low-income farm borrowers, it is particularly important to furnish good supervision with the credit if the borrower is to become successfully established in the community. Our servicing volume has nearly doubled in the last 3 years. Our present staff is beyond the capacity to absorb the additional responsibilities and continue to do a quality job of making and servicing loans and to carry an essential leadership role in rural areas. We are face to face with a very real danger of taking sizable losses in family progress and loan payments unless additional staff is provided to work with the borrowers. Additional administrative funds are urgently needed to bolster and strengthen our county and State staffs, especially in the most critical workload areas.

Also, approval is requested to provide for increased Pay Act costs of $1.182.000 which cannot be absorbed, as reflected in the 1964 printed budget. This amount is proposed to be provided by transfer from other funds available to the Department.

The total increase for salaries and expenses, therefore, is $1,452.000.
We will be glad to respond to any questions you may wish to ask.

RURAL ELDERLY HOUSING LOANS

Mr. WHITTEN. For the program for rural elderly housing what are the provisions in the act? Describe it for us, please.

Mr. BERTSCH. The Senior Citizens Housing Act of 1962 which was signed on September 28, 1962, subsequent to the time the 1963 appropriation bill was enacted, permitted three phases of housing credit to apply to senior citizens. First it provided for loans to individuals beyond 62 years of age to construct or acquire owned individual housing.

This program has been in effect since the signing of the act in September.

Mr. WHITTEN. What experience have you had in that first phase? Have you made loans?

Mr. BERTSCH. At this time we have made loans in excess of a million dollars-nearly 200 loans scattered throughout the United States.

Mr. WHITTEN. That is to individual elderly people who have borrowed money from you. You are running it through your regular organization?

Mr. BERTSCI. That is correct.

Mr. WHITTEN. What is the second phase?

Mr. BERTSCH. The second authorization in this act is an authorization to insure the loans of private investors for rental housing, loans to profitmaking corporations or associations; again, run through our regular organization, housing for a profit-that is, housing construction.

Mr. WHITTEN. What has been your experience in that category? Mr. BERTSCH. We have just initiated that program. We have about 19 applications in process.

Mr. WHITTEN. You are handling that with your regular people? Mr. BERTSCH. Yes.

Mr. WHITTEN. What is the third one?

RURAL HOUSING FOR THE ELDERLY REVOLVING FUND

Mr. BERTSCH. The third authorization in the act was an authorization to establish a revolving fund of not to exceed $50 million, out of which direct loans would be made to nonprofit associations and consumer cooperatives to provide rental housing to senior citizens in rural areas.

Mr. WHITTEN. That would be a church in some community?
Mr. BERTSCH. These are principally rural churches.

Mr. WHITTEN. Under the act was there any restriction on implementing that program as you did the other two?

Mr. BERTSCH. The restriction was that the revolving fund required appropriations to fund it and in this proposal we are requesting that the first $5 million of funding for that revolving fund be provided. Until it is, we obviously have no resources.

ADMINISTRATIVE FUNDS

Mr. WHITTEN. The other two are handled by your regular employees. Here you want special employees. Is it not a fact you want some new people to go out and promote this program, Mr. Bertsch?

Mr. BERTSCH. No, Mr. Chairman. We are asking for administrative funds to compensate for the additional workload involved in all three of those programs.

Mr. WHITTEN. How many people are you asking for?

Mr. BERTSCH. Forty-one man-years of employment.

Mr. WHITTEN. There are just 3 months left in this year. As you know, we just finished hearings for the regular bill on this item. Is it not a fact that if these funds were made available it would take you from now until the 1st of July to recruit people to handle these matters?

Mr. BERTSCH. We think not. We think we would be able to recruit within a very short time sufficient people to absorb this or to effectively

utilize this.

INQUIRIES ON RENTAL HOUSING

Mr. WHITTEN. How many applications have you had by church groups or others?

Mr. BERTSCH. We have presently, even though we have not made this program operative, obviously, because of the lack of funds, we

have 97 inquiries from associations desiring to construct rental housing.

Mr. WHITTEN. Is this in rural areas?

Mr. BERTSCH. This is in rural areas. We have accepted the census definition of a rural area. This means a community with fewer than 2,500 population.

Mr. WHITTEN. Could we have for the record the distribution of those applications? Could you provide that for the record?

Mr. BERTSCH. Yes. I am satisfied we can. I do not have it well in mind. I would say they are widely distributed throughout the country.

Mr. WHITTEN. Provide it for the record.

Mr. BERTSCH. We shall do that.

(The information supplied follows:)

States from which inquiries have been received in the national office on loans to finance rental housing for senior citizens as of Mar. 19, 1963

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NATURE OF RENTAL HOUSING PROGRAM

Mr. WHITTEN. In connection with this type of loan, is it expected that the users of these residences will pay a rate that will liquidate the loan? In other words, is this a good investment, or is it a help program to those that happen to be in that category of needing attention?

Mr. BERTSCH. This program is aimed at low and moderate income elderly people in rural areas, which comprises about 50 percent of the elderly people in rural areas. About 50 percent of them have incomes of $2,000 or less.

We believe that there are three safeguards that assure the construction of the kind of housing they can afford to pay for.

Mr. WHITTEN. Let me get the details. Is there anything in the law or regulations that requires the tenants to pay a rate such as to liquidate the amount you advance or not?

Mr. BERTSCH. There is nothing in the law that would require this except that there is no provision in the law for subsidizing the builder, subsidizing the borrower or owner. There are three elements in this operation which we believe will enable these borrowers to provide low-cost housing within the means of the people borrowing.

Mr. WHITTEN. I am trying to draw a distinction. We have a program in operation now wherein a community may have an application with you. But we have a program also where the local people, judging it to be a sound venture, can go into it commercially. That is in addition to what you are asking here. This is to let the church in community X borrow money. Would you take a mortgage on the church?

Mr. BERTSCH. We would take a mortgage on the housing constructed by the borrowing association.

Mr. WHITTEN. Is there any requirement that the church, or whatever benevolent nonprofit group, charge rates that would in turn liquidate the loan or not?

Mr. BERTSCH. There is, yes. The loan would be liquidated. I mean the management, the income from the rental housing would have to be sufficient to liquidate the loan.

Mr. THOMAS. This is the third program we have for the elderly, exclusive of public housing. If you include that it would be four. Mr. Whitten is asking you if there is any subsidy involved in this, if so, detail it, what is the period of the loan, what is the interest rate, et cetera. The act refers to low-cost rental housing. What is the interest rate and what is the term of the loan? It is to a nonprofifit cooperative mainly.

Mr. BERTSCH. There is no subsidy in the program.

Mr. THOMAS. What is your interest rate?

Mr. BERTSCH. Three and a half percent.

Mr. THOMAS. Does the statute set up the formula?

Mr. BERTSCH. The statute sets up a formula.

Mr. THOMAS. We are familiar with the formula. The only subsidy is the difference between the interest rate on the long-term loan made by the Government and the private rates.

Mr. BERTSCH. That is right.

Mr. THOMAS. What is the period of the loan?
Mr. BERTSCH. Fifty years is the maximum.

Mr. THOMAS. Exactly the same as the Office of the Administrator of the HHFA. It is the same proposition.

Mr. BERTSCH. This provides essentially low-cost housing for elderly in rural areas comparable to that that is now provided for elderly elsewhere.

Mr. THOMAS. What do your rules and regulations indicate is your square foot cost per unit and what will your rental be per unit?

Mr. BERTSCH. We anticipate that the rental for these apartments or these houses would be approximately $50 a month. The square footage cost would probably run about $6 per square foot. We have not perfected regulations to control this but the soundness of each proposal will be judged individually.

Mr. WHITTEN. The question I was trying to develop is along that line. Now, you have a program of that type where commercially someone can go in and help get together a sufficient group to justify such a project?

Mr. BERTSCH. That is right.

Mr. WHITTEN. If you set up a program where nobody does that and nobody has any interest other than the folks who want to join.

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together for a place to live, wouldn't that require promotion and all that type of thing? Wouldn't you be in competition with the other program which has the same interest rates and which has some individual interested to promote it?

Would you not be in competition with that section of the act? Mr. BERTSCH. First of all, the insured program for commercial profitmaking ventures is substantially higher than the interest rate for this kind of project.

Mr. WHITTEN. Describe it.

Mr. BERTSCH. By statute we track the interest rate charged on conventional loans of this sort to be about 534 percent at the present time compared with about 311⁄2 percent for the nonprofit low cost housing.

Mr. WHITTEN. Since this is dealing with elderly people and housing, and your present personnel is handling the other two, and it is just a matter of probably 3 months until the end of the fiscal year, why do you think you have to have a special group for this?

Mr. BERTSCH. We are faced with the problem of our present personnel handling these other loans pretty much on the basis of personal sacrifice.

TOTAL FUNDS AND PERSONNEL IN THE FARMERS HOME ADMINISTRATION

Mr. WHITTEN. Mr. Bertsch, we had this developed in our committee the other day. I will ask you for the record to show not only your regular program, but the transfer of funds from all the different activities that you have so we can see just how much funds you have for your operating personnel.

I would like that for the record. It would probably be of help to the committee in reviewing this situation.

Mr. BERTSCH. We will be glad to do that. (The information requested follows:)

Total administrative funds available to Farmers Home Administration from all sources for fiscal year 1963

Administrative funds available to Farmers Home Administration:
Salaries and expenses: Net appropriation.....
All other funds 2.

Grand total for fiscal year 1963.

Average number of all employees (man-years) for fiscal year 1963:
Salaries and expenses, Farmers Home Administration:

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Amount (in thousands)

1 $34,536 4.500

139.036

4.421 395

4. 816

659

Grand total (man-years) for fiscal year 1963.

5.475

1 Does not include $1,182.000 Pay Act cost apportioned on a deficiency basis. 2 Includes emergency credit revolving fund, trust funds, and allocations from Soil Conservation Service, consolidated working fund, and Agency for International Development. 3 Full-time permanent and temporary and part-time employees except committeemen.

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