will have approximately $8 billion in credit outstanding. The current year's program is the largest in the history of the agency-we have some $2.3 billion in loans and grants available for family farms, for homes, and for the water and sewer facilities that are such a vital part of environmental control and so necessary for family health and comfort.

The programs of Farmers Home Administration have directly touched the lives of about 7 million Americans during this year. A million families now have pure, running water in their homes or are benefiting from environment-protecting sewer facilities. Another 120,000 families are being helped to realize the American dream of home ownership, joining the 434,405 previous home loan borrowers. And roundly 200,000 farm families are improving their income and their standard of living on the farm.

This past year has seen more than a year of growth in dollar volume, however. It has been a year of reorientation; and broadening of our mission and an opening up of new relationships with the private sector.

In our housing program, for example, the role of the county supervisor is no longer primarily to locate the would-be borrower, and help him complete the application. The supervisor is working with the private sector-banks, savings and loans, various other mortgage lenders, realtors, and builders to interest them in participating in the rural housing program. Their talents and energies help to promote the program, to reach out to identify and help qualify applicants, and to help in the processing of loan applications for the final consideration of the county supervisor.

The time-consuming process of making monthly collections is transferred, in the case of the housing program, from the county office clerk to the modern computer in our national finance office. Additional use will be made of this procedure, as test programs prove such changes to be feasible.

We recognize that we are a secondary source of credit in rural areas rather than a primary source of loan money. Farmers Home Administration is taking on a more active role as a lead agency in stimulating an increasing flow of private credit to rural areas. The newly authorized $100,000 farm ownership level, combined with participation in farm ownership loans, for example, gives us strong leverage to help more farmers in a more meaningful way. A partial loan from FHA may make it possible for private capital to pick up the greater share of such a loan-this means our limited loan dollars will go further. Our cooperation encourages other lenders to bring their capital to credit hungry rural areas.

To keep pace with our growth, and with these changing concepts, we have introduced innovative management programs. We authorized the hiring of assistant county supervisors with college degrees in fields other than agriculture where the housing caseload has become the dominate program. The changing use of personnel will be implemented by a changed and strengthened educational arm within our personnel division. Program review officers are examining our complete program, with the goal of streamlining and improving the system wherever possible.

Additional salary and expense funds provided last year, coupled with increased personnel ceilings, have permitted us to experiment

with placement of technical experts at district levels to augment county capabilities, and to establish a few assistant supervisor-at-large positions. We are adding engineers and architects to State office staffs to provide professional, technical guidance. Decisionmaking in the lending process remains a highly decentralized operation, with authority residing in 1,726 county offices.

All of our authorities support development of rural areas, including providing jobs through housing and our water and sewer programs. Through our unique system for delivering credit and supervision to rural areas, we support a national growth policy to better utilize our land and other natural resources and encourage better population distribution.

Truly, Farmers Home Administration is an agency in transition, growing in size and diversity of its services. We remain a people-oriented agency, sensitive and responsive to the credit needs of rural America. We are also cognizant that credit alone will not solve the problem-concern for and supervision of borrowers remain as essential elements in our personnel and in our program.

FARMER PROGRAMS

Our farmer programs, composed mainly of farm ownership, operating and emergency loans, are the foundation of the FHA supervised credit program. When contrasted to the total credit supplied to farmers and ranchers, our program levels are comparatively low. However, the FHA credit and technical assistance are critical to the needs of family farmers who cannot meet the requirements of commercial lenders.

These credit needs increase each year, as more resources are needed to be successful. Long-term real estate credit and additional operating capital to generate income become more essential as the margin of income over expenses decreases.

Nearly a million farm people including men, women, and children have benefited directly from farm ownership loans and nearly 3 million have been beneficiaries of capital furnished by operating loans. In addition local businessmen as well as rural towns and cities have profited from the increased stability and buying power of these family farmers. Local banks and other farm lenders have told us they like to have customers who have used supervised FHA credit.

The following is a summary of the number of new farmers to whom we made loans in calendar year 1970. It shows initial loans for ownership and operating purposes, and the percentage and actual number of borrowers that had not farmed the year previous to the loan.

NUMBER OF FARMING STARTS FOR CALENDAR 1970, FARMOWNERSHIP AND OPERATING BORROWERS

Forty-three percent of the ownership borrowers and 33 percent of operating loan borrowers are less than 34 years of age. Our experienced loan officers tell me that by far the majority of our new farmers fall into this age group.

Over the past 2 fiscal years, we have graduated a total of 9,601 of our farm program borrowers to commercial credit. These are farmers whose equity increased to the point of acceptability by private credit, and the change was accomplished without effecting hardship upon client.

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Each year we analyze a sample of our active borrowers to measure progress and the impact of loans and supervision. The 1970 study covered over 2,000 operating and nearly 2,100 farm ownership borrowers. This study shows that for the 1964-69 period. FO and OL borrowers had the following increases in gross income and net worth:

The average size operating loan has more than doubled during the past 10 years. In addition to an increase in the size of farming operation in general, each item of cost such as labor, equipment, taxes, fertilizer, seed, pesticides, fungicides, fuel, insurance and maintenance has increased greatly.

Legislation is pending in the Congress to place the operating loan program under the insured loan account. This would be the last of our major programs to be converted from direct funding to insured funding. This step would shift the funding of operating loans to the private sector and reduce direct budget outlays. We believe approval of the legislation already introduced by Congressman Bob Price and 45 cosponsors would suggest an approach to increasing the funding of the operating loan program to more nearly meet the demand and need.

Farm operating loans

Operating loans are authorized annually from funds available in the FHA direct loan account. Our request for fiscal 1972 is the same as for the 1970 and 1971 fiscal years:

Farmownership loans

Ownership loans have been funded almost completely through the insured account. We believe the program can be completely financed in this manner; therefore, no direct funds are requested for fiscal 1972. The insured level for 1972 is $210 million. Legislation will be proposed to change the interest rate to the borrower. If the legislation is enacted, the program for 1972 will be increased by $70 million.

As shown in the 1972 budget, the insured loan level for fiscal 1971 was $210 million. This amount was subsequently raised to $213 million, with the increase offset by a decrease of $3 million in insured recreation loans to individuals.

Insured nonfarm enterprise loans, included in the above figures, are for nonagricultural enterprises located on the farm to help supplement the farm income. Enterprises include such purposes as auto repair and body shops, beauty or barber shops, and other businesses that the family is capable of managing. The 3-year comparison is as follows:

These loans have been made on direct and insured bases to individuals, family farming corporations, and farming partnerships to improve, conserve, and make proper use of water and farmland. We believe the program can be completely funded on an insured basis and are not requesting any direct funds for fiscal 1972. This is a small, but essential, program and the three-year comparison is as follows:

Recreation loans are made on an insured basis to individual farmers and ranchers for converting all or a portion of the farms or ranches they own or operate to outdoor income-producing recreation enterprises which will supplement or supplant farm income and permit carrying on sound and successful operations. A three-year comparison f these loans is as follows:

The water and sewer programs are of special importance at this time. Our water program delivers pure water to homes, helping to maintain good health and make life more enjoyable. The waste disposal efforts protect and enhance the environment, a consideration vital to our citizens. Such facilities are basic to other urgent national goals as well, such as the upgrading of housing and improving the distribution of population.

Farmers Home Administration has become a primary force for bringing such facilities to rural areas under the Consolidated Act and the Poage-Aiken bill, Loans and grants have helped nearly 5,000 communities to serve about a million families through water and sewer systems.

As shown by a survey completed this year, there are nearly 32,000 rural communities that need new or improved water systems, and over 30,000 that require new or improved sewer systems, with a total dollar cost exceeding $12 billion. Against this background, our accomplishments to date seem small, indeed.

As of January 31, 1971, we had on hand 2,680 applications for loans for water and waste disposal systems, approximating $500 million. The grant requests number 1,309 and total about $104 million. Over the past 3 years 7,267 loan and grant applications representing more than a billion dollars have been returned due to lack of funds.

Faced with this cogent need and urgent demand, we were pleased when the 91st Congress enacted Public Law 91-617, clearing the way for financing municipal systems with insured loans, rather than with money from direct appropriation. For this reason, the composition of our request to the committee this year is different than in the past.

In the 1972 budget we have proposed an insured loan level of $189 million and we have requested no authorization for direct loans. This will be the highest level of loan activity for community water and waste disposal facilities since the program began.

For fiscal year 1971, we have decreased direct loans and increased insured loans by $44 million from the levels shown in the budget because of enactment of legislation that I referred to a moment ago. Our request for grant funds, which we believe we are using judiciously, is approximately at the same level as was used last the same as we expect to use this year.

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