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091623 1 (1970-08-28)

handle is hein.gao/gaobacwdc0001 and id is 1 raw text is: UNITED STATES GENERAL ACCOUNTING OFFICE WASHINGTON, D.C. 20548 CIVIL DIVISION AUG 28 1970' Dear Mr. Smith: The General Accounting Office is making a review of the manner in which State and county offices of the Farmers Home Administration (FHA) are carrying out their financial management policies and procedures for administering the various loan programs of FHA. As part of this review, we have examined the practices followed by your field personnel for appraising real property pledged as security for a loan. The Senate Committee on Appropriations, Department of Agriculture and Related Agencies, previously has expressed an interest in the prac- tices followed by FHA in appraising real property. In this connection, Senate Report 1370, dated July 12, 1966, which accompanied the Department of Agriculture and Related Agencies Appropriation Bill, 1967, contained comments regarding FHA appraisal activities. The report pointed out that: --the Committee was concerned about action taken by FHA to disperse the important appraisal responsibility for re2al estate loans to over 1,632 county office supervisors. --in the Committee's view, appraisal functions of all spe- cialized loan programs should not be delegated to county offices except in special cases, but retained at a level within the State organization wherein qualified appraisal capability is located. Also, Conference Report 1867, dated August 23, 1966, which also accom- panied the Department of Agriculture and Related Agencies Appropriation Bill, 1967, contained the suggestion that FHA carefully review the results of the dispersal of appraisal activities to county offices to be sure that the interests of both the borrower and the Government are adequately pro- tected. During our current review of the practices followed by FHA in apprais- ing real property, we noted that, prior to January 1970, FHA instructions prohibited county supervisors from approving real estate loans made in connection with property the supervisors had appraised. However, in January 1970, FHA revised its instructions to authorize county supervisors to approve real estate loans for nonfarm tracts up to $25,000 in connection with property they have appraised. We were advised by FHA officials that the procedural change would speed up the loan approval processing time which had been adversely

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