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the authority that exists in the Bankhead-Jones Farm Tenant Act to either insure or make direct loans.

Now, it is

Mr. MULTER. Where you make the direct loan, you have been making it at 3 percent?

Mr. SMITH. Four percent.

Mr. MULTER. Which is the 3-percent loan?

Mr. SMITH. Now, our position is-the Department's position is— that by making these minor revisions in the Bankhead-Jones Farm Tenant Act that the Department would thereby be in position to serve better and more family size farm owners under the Bankhead-Jones Farm Tenant Act, and by that method would not need the authority contained in title V of the Housing Act.

Mr. MULTER. There is a direct-loan policy where you charge the farmer 4 percent?

Mr. SMITH. That is right.

Mr. MULTER. That is Government money going to him at 4 percent? Mr. SMITH. That is right.

Mr. MULTER. In addition to that you have these guaranteed loans where the interest rate is 4 percent, but you charge the lender 1 percent for our Government guaranty?

Mr. SMITH. That is right.

Mr. MULTER. You are suggesting that be increased from 4 to 5 percent so the lender can get his net of 4 percent and the Government still get its 1 percent for the guaranty?

Mr. SMITH. That is right.

Mr. McLEAISH. We have been told it would.

Mr. MULTER. Of course at more expense to the farmer. ·

Mr. McLEAISH. That is right.

Mr. MULTER. And that expense he is going to pass on to the consumer because he is not going to pay it?

Mr. McLEAISH. Well, the same applies when labor gets a raise. The consumer pays it.

Mr. MULTER. That is right. That is what I have been saying. A lot of people have been laughing at me. Every time you increase the interest rate it is an increase in living costs right across the board. Your suits cost more, your food costs more, and your rent costs more. Mr. SMITH. At the present rate of our insured loans the farmer is not being given the privilege of the loan because the private lender won't make the loans at the low interest rate. It seems right to give the farmer the choice, if the lender will make the loans at the increased rate. The farmer can then take the loan if he desires to pay the additional interest rate.

Mr. MULTER. Let me go back again a moment to what is the present policy. I would like to know what is the present policy of your Administration with reference to the loans as between the part-time farmer and the full-time farmer. What is your policy on that?

Mr. SMITH. At the present time the Farmers' Home Administration has discontinued making the 504 loan, and also the 503 loan.

The loans under the Housing Act are made under section 502 and under the present policies those applicants are declared eligible who are bona fide farmers, who are making a substantial production of agricultural commodities on their farms.

Mr. MULTER. They are the ones who are now getting the loans? Mr. SMITH. Yes.

Mr. MULTER. And you need more money for that?

Mr. SMITH. That is right.

Mr. D'EWART. Would the gentleman yield?

Mr. MULTER. Yes.

Mr. D'EWART. I would like to say that I have had an opportunity to work with Mr. McLeaish as he has served the farmers of my State, and his agency steps in where other loaning institutions cannot go, and picks up the balance there, and he has been most cooperative in working out difficult problems for the farmers of my State, and I think I can say that his agency has done, in fact, a very good job, not only on straight FHA loans, but also on the distress loans that they have been handling for the last year. They have been handling them in as businesslike a way as possible considering they only step in where other agencies will not go. I think that should be recognized. Their repayments have been good, and they have tried to provide a real service to those farmers who cannot get credit anywhere else.

Mr. MULTER. I am glad you made that comment because I meant nothing personal in my questions. It doesn't matter to me whether it was a Democratic administration or Republican administration, if anything wrong had been done. It appeared that something had been done wrong, and I wanted to be sure it is corrected, because I think the first man who should be helped on the farms is the man devoting his full time to farming. If there is a choice I think they should get the preferential treatment, if there is any.

Mr. McLEAISH. That is our feeling, Congressman.

Mr. TALLE. My experience with the Farmers Home Administration has been similar to that of the gentleman from Montana. I am well pleased with what the Farmers Home Administration has done in my district located in northeastern Iowa.

Mr. McLEAISH. Thank you, Mr. Talle.

Mr. TALLE. Now, if I may turn to something else for just a second, since we are looking around for definitions of farmers here, when I was a youngster on the farm there was a publication known as Farm, Stock, and Home. I was learning to read at the time, and I found an interesting definition. It said, "A farmer makes his money on the farm and spends it in town. The agriculturalist makes his money in town and spends it on the farm."

Now, this fellow who builds this little country home is giving you a little trouble?

Mr. McLEAISH. Yes, sir.

Mr. TALLE. But he really isn't a farmer.

Mr. McLEAISH. He is not a farmer by any sense of the word.

Mr. TALLE. A small-scale agriculturalist.

Mr. McLEAISH. Well, to be frank with you, they tell us they are going to go into the chicken-raising business, or they are going to raise strawberries, but they have never raised anything in their life before. But they want a loan.

Mr. TALLE. I think your agency is doing a good job.

Mr. McLEAISH. Thank you.

Mr. MULTER. Mr. Chairman, may I continue briefly?

The CHAIRMAN. Mr. Multer.

Mr. MULTER. Now, you probably know that in the housing bill, for a long time, in the Housing Act, there is a provision for loans for so-called modernization and rehabilitation. The present limitation is $3,000 and a 3-year term, and we are seeking to increase it to $5,000 and a 5-year term. Those are unsecured loans, but guaranteed.

Now, from what you say, apparently you don't have a similar program for the farmer.

Mr. McLEAISH. No, we don't, and, incidentally, I have had 2 of those type loans, Mr. Congressman, and the rate has been 5 percent to me on those.

Mr. MULTER. I am not concerned with what the rate would be.
Mr. McLEAISH. Yes, but I know the type of loan.

Mr. MULTER. That rate necessarily must be a little higher than the others, because you do not have any real-estate security. Mr. McLEAISH. That is right.

Mr. MULTER. You are suggesting here that apparently, to do that same job for the farmer as is being done on those loans, that you take a second mortgage.

Mr. McLEAISH. Not exactly. The second mortgage is just a little bit better than an open note.

Mr. MULTER. But why isn't the same principle applicable to the farmer? Why shouldn't he get the same benefit if he needs modernization? Why shouldn't we get the same kind of loan under the same guaranty?

Mr. SMITH. Congressman, aren't those home-improvement loans that you refer to under the Housing Act, aren't they also available to farm people?

Mr. MULTER. I thought that you gentlemen were suggesting they weren't. If they are, then why do you need this second mortgage authority?

I think that is much better than the second-mortgage authority. Mr. SMITH. The point about the second-mortgage authority that we are asking for-I think it is entirely a different type of loan that we are proposing to make to a farm owner than is referred to in that particular section of the Housing Act.

You see, our loan on the farm may include the erection of a new dwelling on the farm: it may include only a repair job on the dwelling; it might very well include funds for other farm buildings and, in addition, may include funds for development of pasture and for the fencing of the farm, and that type of improvement, in addition to the improvements to the dwellings and farm buildings. So the average size, Congressman, of our farm-housing loans have run $5,500, so we are actually talking about a little different type of loan to the farm owner than is referred to in that section of the Housing Act for urban dwellers.

Mr. MULTER. I don't see the real distinction. I can understand where the city man will improve his house by building another bedroom onto it, and the farmer, instead of building a bedroom onto his house, may build another barn. Theoretically, however, it is the same thing; the farmer is improving his land and his means of income and his home, while the city man just has the home to improve.

But I can't see why the same principles should not apply. Every mortgage that you place, I am sure, has a provision in it that covers the land, the improvements thereon, and any improvements thereafter affixed or erected thereon.

Mr. SMITH. Yes, sir.

Mr. MULTER. It is the same for a city house as for a farmhouse. If the farmer is going to add something to that, why don't you do it the same way as under the modernization program for the city man? Mr. SMITH. The unsecured insured loan that you have reference to under the Housing Act is a short-term loan. I believe at the present time it is limited to 3 years.

Mr. MULTER. That is right.

Mr. SMITH. The loans under title V of the Housing Act are 33-year loans, and those under the Bankhead-Jones Act are 40-year loans. And it is necessary, in making that loan, to tie the indebtedness to the farm on which the improvements are made.

Mr. DEANE. Mr. Chairman.

The CHAIRMAN. Mr. Deane.

Mr. DEANE. Mr. McLeaish, I want to thank you for your courtesies in furnishing me considerable information on the rural housing program, as carried on by your agency, under title V, which the agency would drop and attempt to use the Bankhead-Jones Act. I am not against the Bankhead-Jones Act, but what we are interested in is being sure that we have the facilities that will continue to make available to the rural man suitable housing, which he hasn't had.

You have referred here to Senate bill 1276. The hearings on that were before the Agricultural Committee of the Senate; isn't that so? Mr. McLEAISH. Well, the bill has passed the Senate.

Mr. DEANE. Well, I mean the hearings were before the Senate committee; is that right?

Mr. McLEAISH. Yes, sir.

Mr. DEANE. Now, the original Bankhead-Jones Tenant Act cleared the House through the Committee on Agriculture. Have you appeared before the Committee on Agriculture of the House advancing the amendments here proposed?

Mr. McLEAISH. No. 1, I haven't appeared before the House committee. I don't know whether it had any hearings yet.

Mr. DEANE. No hearings have been held.

Mr. McLEAISH. On that bill.

Mr. DEANE. Mr. Chairman, the question of committee jurisdiction is involved. Senate bill 1276, which would amend the BankheadJones Farm Tenant Act, comes from the Senate Agriculture Committee. It seems to me, the House Committee on Agriculture, which committee has not seen fit to take up a companion bill to S. 1276, should first determine the facts.

Mr. McLEAISH. If I am not mistaken, that happened about the time I came to Washington, there was a companion bill introduced in the House, as well as the Senate. I don't recall the number of that. But S. 1276 has been passed by the Senate.

Mr. DEANE. There have been no hearings held in the House on that particular bill?

Mr. McLEAISH. Not that I know of.

Mr. DEANE. Getting right down to the meat of it, I wonder why you are not asking for title V to be extended? Is it because of the basic philosophy, so far as the tenant, and the individual who is now receiving aid, or who has received aid under title V?

Mr. SMITH. Only farm owners were eligible for assistance under title V. Title V was not designed to convert tenants into owners, sir. Mr. DEANE. That is what I am driving at. Those individuals who have received-you mentioned a mail clerk awhile ago-loans-haven't the great majority of the loans made under title V largely been to individuals engaged in agriculture? A few of the applicants may have a part-time job in a mill, but they are engaged in basic agricultural pursuits?

Mr. SMITH. That is true with respect to the loans that have been made during the past 2 fiscal years.

Mr. DEANE. Are you advancing the theory that your problem is, and the reason you are leaving title V is, that you haven't had enough money to carry out the program? Is that right?

Mr. SMITH. We have had adequate funds to make some loans to bona fide farmers. We haven't had adequate funds to serve both the city worker who lives in the country and also to serve the farmer.

Mr. DEANE. Then it comes right down, as Mr. Multer said a few minutes ago, to the fact that the basic problem is a matter of administration.

Mr. SMITH. It is very difficult, Congressman, when the agency has funds, to make loans under title V of the Housing Act, it is very difficult as an administrative matter to declare ineligible a city worker who by the act is eligible.

Mr. DEANE. I know in my community there are a great many textile mills, and one of the great problems these days, as Mr. Multer said, is this: The Secretary of Agriculture said here some days ago that farming represented only 5 percent of the national income, and the Secretary stated that that was too low. Frankly the farmer has been forced to go to work in the mills at night, and on their farms in the daytime, to make ends meet.

Isn't it true that under the Bankhead-Jones Act you can make direct as well as insured loans?

Mr. SMITH. That is true.

Mr. DEANE. Isn't it also true that the greater majority of your loans have been direct rather than insured loans?

Mr. SMITH. That is right.

Mr. DEANE. Due to the fact that the mortgage market hasn't been interested in the insured loan. Has it been due to the 40-year period, or what?

Mr. McLEAISH. It has been due to the interest rate. In other words, in those mortgages made in the last few years there has been an agreement that Farmers Home would pick them up in 5 years if the mortgagors wanted to turn them over. That is an administration decision.

But the 3 percent has been the point, and that applies to some State school retirement funds which did come in for a while at 3 percent, and only last year notified our agency that unless the rate was moved up to at least 32 percent they weren't interested any further.

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