    [Analytical Perspectives]
    [Special Analyses and Presentations]
    [8. Underwriting Federal Credit and Insurance]
    [From the U.S. Government Printing Office, www.gpo.gov]

      In a period of tight budgetary constraints, the Administration has
    been reexamining the role and design of Federal credit and insurance
    programs. In many lines of credit and insurance, the private market can
    meet societal demands and Federal intervention is unnecessary. However,
    in some situations Federal intervention can improve the market outcome.
    Last year, the ``Underwriting Federal Credit and Insurance'' chapter of
    Analytical Perspectives focused on these rationales and their
    application to particular credit and insurance programs.
      This year, the chapter focuses on the next step in the analysis. Even
    when Federal intervention can improve on market outcomes in principle,
    it is necessary to judge whether the program is achieving these goals in
    practice. Thus, the Administration is highlighting measurement of
    program performance. What do these programs produce? What outcomes and
    net impacts do they have on society?
      Cost is also a performance measure. For credit and insurance programs,
    it is a continuing challenge to understand and control the risks that
    the Government assumes and to measure the inherent cost. This is
    especially true in view of the rapid changes in financial markets and
    increasingly complex financial instruments. Ultimately, performance is
    measured by benefits (net impact) in relation to cost.
      Budgetary constraints are also impinging on administrative resources
    and program structure, pressing program managers to find more efficient
    ways to originate, service, and collect on loans and monitor the
    financial risks of guarantees and insurance. In some cases, staff is
    diminishing despite rapidly growing portfolios. To address this problem,
    improved financial systems are being implemented, and various forms of
    private involvement are being explored.
           I. Estimated Costs of Federal Credit and Insurance Programs
      The Federal Government continues to be the largest creditor
    institution in the United States, with $5.5 trillion outstanding at the
    end of 1995. Of this, $163 billion is direct loans, $727 billion is loan
    guarantees, and $4,613 billion is insurance. Including the Government-
    sponsored enterprises (GSEs) pushes the total Federal and federally
    assisted credit and insurance outstanding to $7.0 trillion.
      Table 8-l presents the face value and estimated future costs of the
    largest Federal credit and insurance programs and the Government-
    sponsored enterprises. The face value of these programs is the total
    amount of credit outstanding or the insurance in force. The future costs
    of these programs is the amount by which payments from the Federal
    Government to borrowers, guaranteed lenders, or insured parties exceeds
    the repayments, fees, premiums, and other cash inflows to the
    Government--whether by intent or in practice.\1\ The costs shown in this
    table assume that program activity will continue following recent
    trends.
      \1\Under the Federal Credit Reform Act of 1990, the budget records as
    an outlay the cost of a direct loan or loan guarantee when the loan is
    disbursed. The cost is defined as the net present value of the estimated
    cash outflows from the Government due to the loan or guarantee over its
    life minus the present value of estimated cash inflows. Chapter 23 of
    Analytical Perspectives, ``Budget System and Concepts and Glossary,''
    explains concepts and terms used in credit budgeting.
    ---------------------------------------------------------------------------
      The amounts shown are not only costs or potential costs to taxpayers.
    They are also the means by which these programs reallocate credit in the
    economy toward purposes and entities or individuals favored under the
    laws authorizing these programs and away from alternative uses. When the
    Federal Government guarantees loans, for example to students or small
    businesses, those borrowers move ahead of other borrowers in the credit
    queue, because the Federal Government bears the risk of defaults on
    their loans.
      In volume, the fastest growth in Federal assistance is via Government-
    sponsored enterprises. These privately owned, federally chartered
    financial institutions are transforming mortgage markets; tapping
    capital markets to assist agriculture, education, and housing; making
    advances to depository institutions; lending for farming and rural
    development; and insuring borrowing for educational institutions. Also
    growing are loan guarantees and direct loans for home mortgages and
    student assistance, and disaster insurance coverage.
      Federal costs for credit and insurance programs generally declined
    last year. Behind this improvement is the declining trend in long-term
    interest rates in recent years as the Federal deficit was reduced, the
    expectation that interest rates will continue to decline as the budget
    moves closer to balance, and the economic growth and prosperity
    documented in Chapter 2 of the Budget--Supplement, ``Three Years of
    Progress.'' For credit programs, there has also been a widespread effort
    to reduce subsidies, now that the Federal Credit Reform Act of 1990 has
    raised awareness of them.
    [[Page 120]]
                   Table 8-1.  FACE VALUE AND ESTIMATED COST OF FEDERAL CREDIT AND INSURANCE PROGRAMS
                                                (In billions of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                                                             1995 Budget                   Current
                                                                               Estim.                     Estimates
                                                               Face Value      Present     Face Value      Present
                             Program                              1994        Value of        1995        Value of
                                                                               Future                      Future
                                                                              Costs\1\                    Costs\1\
    ----------------------------------------------------------------------------------------------------------------
    Direct Loans:\2\
      Farm Service Agency (excluding CCC)...................         49         15-21            43         13-19
      Rural Electrification Admin. and Rural Telephone Bank.         38           2-4            43           2-4
      Agency for International Development..................         14           0-1            14           2-3
      Public Law 480........................................         12           2-3            12           2-4
      Disaster Assistance (SBA & FEMA)......................        N/A           N/A             9           3-5
      Foreign Military Financing............................          8           0-1             8           0-1
      Export-Import Bank....................................          8           3-5             8           1-3
      Federal Direct Student Loan Program...................          *         11-15             3           6-9
      Small Business Loans (SBA)............................          9           2-3             2           0-1
      Other Direct..........................................         17           2-4            19           1-2
                                                             -------------------------------------------------------
      Total Direct Loans....................................        155         37-57        \2\161         30-51

    Guaranteed Loans\2\:
      FHA Single-Family.....................................        303        (13)-0           318        (12)-0
      VA Mortgage...........................................        155           4-6           154           3-5
      FHA Multi-Family......................................         79           5-6            83         11-14
      Federal Family Education Loan Program.................         75         13-23            86          5-10
      Small Business Administration.........................         25           4-5            26           2-3
      Export-Import Bank....................................         17           6-8            18           3-5
      Farm Service Agency...................................          9           1-2             8           1-2
      CCC Export Credits....................................         12           4-5             5           2-3
      Other Guaranteed......................................         23           2-3            27           3-4
                                                             -------------------------------------------------------
      Total Guaranteed Loans................................        699         26-58           727         18-46

    Federal Insurance:
      Banks.................................................      1,885        (5)-15         1,919       (6)-(4)
      Thrifts...............................................        691         15-25           709         (2)-1
      Credit Unions.........................................        253     ............        266     ............
                                                             -------------------------------------------------------
       Subtotal, Deposit Insurance..........................      2,829         10-40         2,894       (8)-(3)
                                                             -------------------------------------------------------
      PBGC..................................................        950         20-40           853         30-60
      Disaster Insurance....................................        238         14-15           354         13-14
      Other Insurance.......................................        484         13-14           512         11-12
                                                             -------------------------------------------------------
      Total Federal Insurance...............................      4,445        57-109         4,613         46-83
                                                             -------------------------------------------------------
      Total Federal Credit and Insurance....................      5,299       120-224         5,501        94-180
                                                             -------------------------------------------------------
    GSEs:\3\
      Fannie Mae............................................        744     ............        787     ............
      Freddie Mac...........................................        567     ............        552     ............
      Federal Home Loan Banks...............................        140     ............        122     ............
      Sallie Mae\4\.........................................  ............  ............  ............  ............
      Farm Credit System....................................         51           0-1            53           0-1
                                                             -------------------------------------------------------
      Total GSEs............................................      1,502           0-1         1,514           0-1

          Total Federal and Federally Assisted Credit and
           Insurance........................................      6,801       120-225         7,015        94-181
    ----------------------------------------------------------------------------------------------------------------
    *Less than $500,00.
    \1\Direct loan future costs are program account outlays projected into the future plus the embedded loss from
      outstanding loans. Loan guarantee costs are program account outlays plus liquidating account outlays (and
      outlays from defaulted guarantees that result in loans receivable) projected into the future. Future insurance
      costs are the equivalent of program plus liquidating costs through 2001, plus the accrued liability remaining
      at the end of 2001.
    \2\Excludes loans and guarantees by deposit insurance agencies and programs not included under credit reform,
      such as CCC farm supports. Defaulted guarantees which become loans receivable are accounted for in guaranteed
      loans.
    \3\Net of borrowing from Federal sources, other GSEs, and federally guaranteed loans.
    \4\The face value and Federal costs of Federal Family Education Loans in Sallie Mae's portfolio are included in
      that account above.

      Deposit insurance costs declined sharply, following the closure of so
    many insolvent banks and thrifts in the 1980s. Depository institutions,
    which tend to borrow short and lend longer-term, benefited substantially
    from the decline in interest rates and the steepening yield curve of the
    early 1990s, as well as from the low unemployment, strong incomes and
    profits, and continued low interest rates of the past year. Banks
    especially had record earnings in 1993-95, built strong capital
    positions, and restored the reserves of the Bank Insurance Fund (BIF).
    The banks' strong capital cushion will help to buffer BIF against the
    effects of interest rate risk, increasingly complex financial
    instruments, and
    [[Page 121]]
    more intense competition as regulatory, geographic, and
    functional barriers fall.
      Student loan costs, both direct and guaranteed, are also reduced by
    declining interest rates, in particular the expectation that rates will
    continue down as the Federal budget moves toward balance. The direct
    loan program gains from lower borrowing costs; the guaranteed loan
    program gains from lower interest supplements while students are in
    school or when interest rates are high. Default rates have also been
    reduced, primarily by excluding formerly high-default schools and
    ineligible students from the program.
      Farm Service Agency direct loans, some of which have very low interest
    rates by statute, also have lower interest costs when interest rates
    come down. These portfolios also benefited from the recovery in farm
    income and land values and in rural economies.
      The Small Business Administration, in an effort to ensure the
    continued availability of credit to small businesses, has adopted a
    policy of reducing, even eliminating, subsidies for its primary loan
    programs. Larger fee income, increased risk-sharing with guaranteed
    lenders, and a proposed shift of the Section 504 Community Development
    Company program to a direct loan program, all reduce the subsidies paid
    by SBA.
      Eximbank, too, has adopted a policy of reducing or eliminating
    subsidies. Higher fees, collateralization, escrow accounts, and asset-
    based financing are some of the methods used.
      For one program, FHA multi-family loan guarantees, the current
    estimate of future costs is higher than previous estimates. Before now,
    the cost of this program did not include the effect of the Federal
    rental subsidies, which many of these properties receive, on their
    financial condition. Current law does not allow for indefinite
    continuation of these subsidies at their current levels. Reductions in
    rental subsidies would create some mortgage defaults, resulting in
    payments from the FHA insurance fund. These costs, along with proposals
    to minimize them, have been reflected for the first time in the estimate
    of future costs.
      Pension guarantee cost estimates amount to $30-60 billion this year,
    as a result of refinements in the model, and the effect of lower
    interest rates on the value of future pension benefits. However, good
    economic conditions with high profits reduced sponsor bankruptcies last
    year. Rising stock markets and increased funding under the Retirement
    Protection Act of 1994 bolstered pension plans. And the Pension Benefit
    Guaranty Corporation negotiated 30 major settlements under their Early
    Warning Program that provided $13 billion in new contributions from
    companies.
      In sum, the present value of future costs of Federal credit and
    insurance programs is now estimated to total $94 billion to $181
    billion--a substantial improvement from the $120 billion to $225 billion
    estimated last year.
               II. Developing A Performance Measurement Framework
      It is not enough to have a good rationale for a Federal program and to
    know its cost; it is also necessary to assess whether it is achieving
    its intended results. The Government Performance and Results Act (GPRA)
    is encouraging such assessments by requiring agencies to define their
    missions and long-term objectives using strategic plans, to set annual
    performance goals, and to measure actual performance against those
    goals.
      Credit program managers, who have long worked together on credit
    reform and other matters, established a Performance Measures Task Force
    under the Federal Credit Policy Working Group to develop a common
    framework of such measures. These are to be used in their agencies'
    annual performance plans under GPRA and their budget requests to explain
    what they intend to accomplish. The same measures are to be shown in
    their annual performance reports and Chief Financial Officer's
    Accountability Reports to explain actual results.
      The Task Force believes that a common core of indicators would be
    useful to program managers, the Executive Branch, the Congress, and the
    public--helping them to understand and compare credit programs. The
    group sought to identify the most appropriate measures, whether or not
    data was currently collected on them by some or all agencies. They
    expect that agencies will supplement the core measures with program-
    specific measures whenever they are useful to assess their programs.
      The common framework has four main categories of indicators: inputs
    (the resources used), outputs (the goods or services produced), outcomes
    and net impacts (the gross and net effects on society). The specific
    measures below reflect discussion so far, but are still subject to
    modification.

      Inputs. The group chose three common inputs: program objectives and
    performance goals (planning inputs), subsidy costs, and administrative
    costs (both resource inputs).
      Borrowers have been making lower downpayments, which mean that the ratios between loan principal and
     collateral value(LTV ratios) are higher, posing greater credit risk for lenders. The proportion of conventional
     mortgages with LTV ratios over 90 percent rose from 7 percent in 1989 to 27 percent in 1994. The average LTV
     ratio of conventional mortgages rose from 75 percent in 1989 to over 80 percent in 1995. Data from Freddie Mac
     indicate that the default rates of conventional mortgages with LTV ratios over 90 percent are six times higher
     than the default rates on conventional loans with 80 percent LTV ratios.

      Depository institutions, Fannie Mae, and Freddie Mac have increased their commitment to affordable
     lending programs that allow borrowers to make downpayments of 5 percent or less while loosening other
     underwriting guidelines. Compensating factors lessen, but may not wholly offset, the resulting increase in
     risk.

      When the volume of single-family originations declined by 24 percent in 1994 and further in 1995, many
     originators entered the markets for home equity loans and lines of credit and for first mortgage loans to
     borrowers with checkered credit histories (so-called B- to D-quality loans), causing the volume of such loans
     to increase.

      The use of credit scoring in the single-family mortgage market will increase at an accelerating rate in the
    next few years. Credit scores are numerical assessments that rank borrowers by their relative default risk.
    Scores are calculated by statistical models that use information proven to be predictive of loan performance
    drawing on data from borrower credit reports to predict a borrower's future performance on consumer debt (auto,
    credit card, or installment debt) or on a mortgage loan.

      Credit scores have been used to evaluate applications for nonmortgage debt for nearly 40 years, but have been
    used in single-family mortgage lending only in the last five years. Industry research has found a strong
    relationship between low consumer credit scores at origination and the likelihood of future default on mortgage
    loans. Fannie Mae has found that, although borrowers with scores below 620 represent only a small percentage of
    all borrowers, as a group they account for about 50 percent of the defaults that eventually occur.

      In 1995, first Freddie Mac and then Fannie Mae urged lenders to use generic credit scores in the underwriting
    process, provided guidance about how lenders should do so, and indicated that they would use consumer credit
    scores as part of the post-purchase review process. The potential benefits of scoring and the commitment of
    Fannie Mae and Freddie Mac to using credit scores are likely to accelerate the industry's development and use of
    scores.

    ------------------------------------------------------------------------
      The Federal Home Loan Bank System's financial performance and
    condition continued to be strong in 1995. Outstanding advances to
    members reached $122.1 billion at year-end 1995, up from $116.2 billion
    at the
    [[Page 134]]
    end of 1994. Total System capital at the end of 1995 was $14.7
    billion, compared to $12.9 billion at the end of 1994. For calendar year
    1995, the System's reported net income rose to $1.2 billion, up from
    $0.9 billion in 1994. Return on equity in 1995, after adjustment for
    payment of interest to REFCorp and other expenses, was approximately 6.5
    percent.
      The Federal Home Loan Banks are required to pay the greater of $300
    million or 20 percent of their annual net income to help pay the cost of
    interest on bonds issued by the Resolution Funding Corporation, REFCorp.
    REFCorp was created by FIRREA to provide initial capital for the
    Resolution Trust Corporation. The need to generate income to meet this
    obligation to REFCorp and provide a return on members' investment is a
    driving force behind the large increase in the System's investment
    activity in recent years. Investments other than advances were $146.8
    billion as of December 31, 1995, an increase of 28 percent over just one
    year earlier. Thus, the need to generate the funds to pay REFCorp has
    encouraged the System to expose itself to new kinds of risk and resulted
    in a departure from the System's focus--making advances to members.
      Historically, the System's exposure to credit risk has been virtually
    nonexistent. All advances to member institutions are collateralized, and
    the FHLBanks have the ability to call for additional or substitute
    collateral during the life of an advance. In the over sixty years of the
    System's existence, no FHLBank has ever experienced a loss on an
    advance. The System's increasing investment activities, however, have
    added new sources of credit risk, for example, to the extent that there
    is a risk of default by the FHLBanks' counterparties to off-balance
    sheet interest rate exchange agreements.
    [[Page 135]]
      The System is also exposed to interest rate risk. The Financial
    Management Policy issued by the FHLBanks' regulator, the Federal Housing
    Finance Board, requires the FHLBanks to take a number of specific steps
    to manage their interest rate risk. The FHLBanks manage their interest
    rate risk by analyzing the sensitivity of the market value of their
    equity to changes in interest rates, charging prepayment fees on
    advances to members, restricting the types of mortgage-backed securities
    that they can invest in, and using interest rate exchange agreements.
    The System's exposure to risk will continue to be monitored carefully to
    ensure that it remains safe and sound.
      Despite the System's current profitability and apparent strength,
    there is a need to strengthen the capital structure of the System in
    order to protect against future downturns. The Housing and Community
    Development Act of 1992 required that studies of the FHLBS be performed
    by the Congressional Budget Office, the General Accounting Office, the
    Department of Housing and Urban Development, the Federal Housing Finance
    Board, and System shareholders. All of these studies agreed that risk-
    based capital standards should be adopted for the System.
      In response to these studies of the FHLBS which were completed in 1993
    and 1994, last year the Administration and Congress proposed legislation
    to reform and modernize the Federal Home Loan Bank System. Both
    legislative proposals addressed the System's mission, capital structure,
    and capacity to pay interest obligations on the REFCorp bonds. The House
    of Representatives conducted hearings on the two proposals in 1995, and
    it is anticipated that the issue will be taken up again in 1996.
      The Administration's proposal attempts to keep the System safe, sound,
    and focused on its public purpose. It would maintain the System's
    important role in housing finance, particularly its role in supporting
    portfolio lending. It would make System membership fully voluntary, with
    equal rights and responsibilities for all members. Perhaps most
    importantly, the Administration's proposal would enhance the safety and
    soundness of the System by creating minimum capital standards, including
    risk-based capital requirements, for each Federal Home Loan Bank and for
    the System as a whole, and by instituting a set of procedures for
    correcting capital deficiencies.
      The role and risks of the FHLBS must continue to be examined and
    monitored in the face of rapidly changing financial markets. The
    increased use of credit scoring systems by mortgage lenders may
    eventually lead to less of a role for portfolio lenders in housing
    finance markets. In addition, it is important to continue to evaluate
    the System's role in housing finance in light of potential changes in
    the structure of the industry it serves.
                      Federal Housing Administration (FHA)

      Trends in Program Size. As the national surge in single-family
    refinancing business ebbed in 1995, commitments in the FHA Mutual
    Mortgage Insurance (MMI) single-family program fell to $50 billion in
    1995, after a volume of $89 billion in 1994. FHA service to low-income
    and minority home buyers, however, remained strong. The proportion of
    FHA-insured home purchase loans to African-American and Hispanic home
    buyers continued at more than twice the proportion of conventional home
    purchase loans to these groups, and increased from 1994 to 1995.
      National Homeownership Strategy. In June of 1995, the President
    announced a National Homeownership Strategy to add up to 8 million new
    families to America's homeownership rolls by the end of the year 2000,
    lifting the country's homeownership rate to an all-time high. This
    Strategy will strive to eliminate barriers that prevent lower-income
    working families, minorities, and immigrants from becoming homeowners.
    For example, it will actively promote wider use of flexible underwriting
    criteria, which would allow more buyers to qualify for mortgages, and it
    will increase homeownership counseling programs, which help first-time
    buyers find homes, qualify for mortgages, and budget their incomes to
    meet their mortgage payments.
      FHA will be a full partner in this Strategy. In 1995, FHA took action
    to increase the availability of affordable homeownership, particularly
    in the central cities, by simplifying its rehabilitation mortgage
    insurance program, and establishing the Single Family Property
    Disposition program to sell FHA-foreclosed homes at a discount to
    nonprofit groups for rehabilitation and resale to lower-income buyers.

      FHA as a Performance-Based Organization. In 1997, the Administration
    will seek to transform FHA into a ``Performance-Based Organization''
    with flexibility in human resources management, procurement, and other
    administrative functions. FHA will continue to operate within HUD; it
    will be led by executives operating under term, performance-based
    contracts negotiated by the Secretary.
      FHA Assignment Alternative. FHA is now preparing to implement
    legislation, expected to be passed soon by the Congress, establishing an
    alternative to FHA's current assignment program for delinquent
    borrowers. Currently, if an otherwise qualified FHA homeowner
    experiences temporary financial trouble and becomes 90 days delinquent,
    FHA can pay a full claim on their behalf and take over servicing of the
    mortgage. The borrower is then allowed up to 3 years to bring the loan
    to current status. The proposed alternative would provide FHA with tools
    to encourage private lenders to forebear instead of assigning the
    mortgage to HUD. This alternative would improve the targeting and
    efficiency of forbearance, while allowing FHA homeowners experiencing
    temporary economic distress to stay in their homes.
      Potential Effects of Credit Scoring. As the use of credit scoring in
    the underwriting of conventional
    [[Page 136]]
    mortgages increases, some borrowers who
    have little cash but excellent credit histories and would have
    traditionally been served by FHA's single-family mortgage insurance
    program will find that they are eligible for conventional financing on
    attractive terms. More importantly, applicants who have checkered credit
    histories will face tighter conventional underwriting constraints and
    may often be unable to obtain a conventional loan unless they can make
    downpayments of 20 percent or more. Those who can not and whose
    mortgages are small enough to qualify for FHA insurance will be shifted
    to FHA. Although the magnitude of this potential shifting of credit risk
    to FHA is uncertain, research on the relationship between consumer
    credit scores and likelihood of mortgage default suggests that it could
    significantly increase FHA default rates.
      Sale of Single- and Multi-Family Assets. In March, 1994, the FHA
    launched an aggressive program to sell HUD-held mortgages. The goals of
    the program are to maximize value of HUD-held assets and assist in
    redeployment of its staff and resources to manage the insured portfolio,
    particularly in light of downsizing of the organization. The initiative
    was a key element in the Administration's larger effort to reinvent HUD.
    To date, FHA has sold 769 multi-family mortgages, 28,243 single family
    mortgages, and 2,700 Title I notes. These mortgage sales have not only
    succeeded in streamlining the agency's operation and management, they
    have generated proceeds which exceed the expected value to HUD (if the
    loans were held) of more than $500 million in 1995. In 1996 and 1997 FHA
    plans to sell an additional 600 multi-family and 65,000 single family
    mortgages with a total outstanding principal balance of approximately $6
    billion.
      Multi-family Portfolio Reengineering. Last year, the Administration
    proposed ``Mark-to-Market,'' legislation intended to address long-
    standing problems in the portfolio of properties which have mortgages
    insured by FHA and also receive rental subsidies for low-income tenants.
    This Budget includes a proposal, ``Portfolio Reengineering,'' which
    retains many of the features of last year's proposal. The core
    principles of this initiative are the use of market incentives to
    improve the efficiency and quality of assisted housing and expanded
    housing choices for residents and communities. This initiative would
    recognize economic losses that have occurred in FHA's multi-family
    portfolio, eliminate over-subsidization of some properties, and provide
    an orderly way of managing its restructuring. This portfolio provides
    housing to nearly 850,000 lower-income households in 8,500 privately
    owned but HUD-subsidized projects, who would be protected if eligible by
    receiving housing subsidies.
      This initiative will generate savings in rental subsidies since many
    properties receive subsidies in excess of market rents. Allowing the
    rents of projects to adjust to market levels will in some cases reduce
    project income and necessitate writing down the mortgages of these
    properties to reflect their true economic value. This will result in
    claims being paid out of the FHA fund. HUD will use third-party partners
    to produce efficient and proactive mortgage restructuring. In 1997, HUD
    intends to focus restructuring on projects where contracts expire and
    the current rents are above market. The Administration is willing to
    discuss with Congress mechanisms to take account of consequences
    (including tax effects) for owners who enter into restructuring
    agreements with HUD. The effect of the proposal would be a savings of
    $1.4 billion in claims costs.
                         Department of Veterans Affairs

      Trends in Program Size. As interest rates declined in the 1990s,
    lending in DVA's loan guaranty program increased dramatically, from
    $15.7 billion in 1990 to $55 billion in 1994. It has since fallen, to
    $22 billion in 1995. In the long term, loan volume in this program is
    driven by the size and composition of the veterans population. As this
    population continues to diminish over the next several years, loan
    volume is expected to fall gradually, from $22 billion in 1995 to about
    $20 billion in 2001.
      Performance Measures. DVA uses a cross-section of several performance
    measures to track the status of its guaranteed loan portfolio and the
    quality of its management of this portfolio. For example, the early
    foreclosure rate, which is the percent of loans in foreclosure within
    three years of origination, measures the quality of underwriting. The
    foreclosure avoidance through servicing ratio, which is the percentage
    of seriously delinquent loans that do not go into foreclosure, measures
    the success of VA's supplemental servicing program at helping veterans
    keep their homes. The six-month pipeline of property in inventory
    measures the quality of property disposition.
                          Rural Housing Insurance Fund
      The primary Rural Housing Service (RHS) programs are the Section-502
    single-family direct and guaranteed loan programs and the Section-515
    multi-family direct loan program. The 502 direct loan program provides
    qualified borrowers with loans for the purchase, rehabilitation, or
    repair of rural single-family homes. Participants qualify if their
    income is less than 80 percent of State median income, they live in a
    legislatively defined ``rural'' area, and they are unable to obtain
    credit at affordable terms from a private institution. The 502
    guaranteed loan program guarantees up to 90 percent of a loan on an
    unsubsidized basis for the purchase of new or existing housing. The 515
    program, which generally lends to private developers, finances both the
    construction of new rural rental housing and the purchase and
    rehabilitation of existing substandard rental housing. Units are
    occupied by low- and moderate-income households, elderly households, or
    handicapped individuals. Currently, re-authorization of the 515 program
    is needed in order for any new construction to be financed from 1996
    appropriated funds.
    [[Page 137]]
      Cost and Risk. The primary costs in the 502 guaranteed program come
    from loan defaults. The default rate is 7.5 percent, and an average of
    21 percent of the principal amount of the defaulted loan is not
    recovered. Both direct loan programs subsidize loans by setting interest
    rates below the Treasury rate. The primary cost in the direct programs
    is due to the interest rate subsidy. The rate charged 502 borrowers
    depends on their income; currently, the average effective interest rate
    for the outstanding subsidized portfolio is 3.4 percent. A 515
    borrower's effective interest rate is generally fixed at 1 percent.
      The riskiness in the RHS portfolio is most notable in the 502 direct
    loan program, whose risk is significantly greater than for conventional
    private sector loans for two reasons. First, RHS lends to very low- and
    moderate-income households who, as an eligibility requirement, are
    unable to obtain private credit. Second, because RHS' interest rate is
    periodically adjusted for changes in the borrower's income, the
    underlying costs of the outstanding portfolio change as borrowers'
    ability to pay changes. During economic slowdowns, incomes go down, more
    defaults and delinquencies are likely, and the effective interest rate
    paid by borrowers drops. At the same time, the 502 interest subsidy
    costs increase.

      Progress in Reducing Costs. RHS implemented a new rule in 1996 that
    would save costs in the 502 direct loan program. Two major changes
    include how RHS determines repayment ability and the amount of payment
    assistance that a borrower receives. Instead of using a family budget to
    determine repayment ability, RHS now uses two expenditure-to-income
    ratios. The loan principal, interest, taxes and insurance (PITI) cannot
    exceed 29 percent of adjusted family income for very low income
    borrowers and 33 percent for low income borrowers. The total debt ratio
    (TD) is capped at 38 percent of income for all borrowers. This reduces
    the complexity of making loans, is more objective, and imposes a smaller
    administrative burden. RHS also implemented an escalating interest rate
    structure which insures that lower payment assistance is provided as
    borrower income increases.
      RHS has also begun implementing the Dedicated Loan Origination Service
    (DLOS), consolidating the servicing of the 502 direct single family
    housing loan portfolio in one location, rather than in county offices.
    DLOS objectives include establishing an escrowing system; reducing the
    foreclosure rate; lowering delinquency rates, loan losses and operating
    costs; and bringing the accounting more in line with the commercial
    sector. The new efficiencies will improve servicing of the portfolio
    with 1,500 fewer employees. The current implementation plan would save
    approximately $250 million from 1996-2000. The 1997 subsidy rate
    reflects the .83 percentage point reduction in the subsidy rate that is
    a direct result of the DLOS-related changes.
      For 1997, RHS will propose a ``balloon payment'' for the 515
    Multifamily housing loan program. The proposal would require that all
    new 515 loans be for 30 years while amortized over 50 years. This would
    create a lump sum payment in the 30th year for the balance of the loan.
    This legislative proposal would lower the 515 loan subsidy rate by 8
    percentage points because of the accelerated repayment to the Treasury
    that occurs in the 30th year.
                         VII. Federal Insurance Programs
                                Deposit Insurance
      Federal deposit insurance was instituted in the 1930s to protect
    individual depositors from losses caused by failures of insured
    institutions. Deposit insurance also protects against widespread
    disruption in financial markets by reducing the probability that the
    failure of one financial institution will lead to a cascade of other
    failures. The Federal Deposit Insurance Corporation (FDIC) insures the
    deposits of banks and thrifts through two separate insurance funds, the
    Bank Insurance Fund (BIF) and the Savings Association Insurance Fund
    (SAIF). Deposits of credit unions are insured through the National
    Credit Union Administration (NCUA). Currently, deposits are insured up
    to a limit of $100,000 per account.
      The 1980s and early 1990s were a turbulent period for the bank and
    thrift industries, with over 1400 bank failures and 1100 thrift
    failures. The Federal Government responded with the Financial
    Institutions Reform, Recovery and Enforcement Act (FIRREA) of 1989 and
    the Federal Deposit Insurance Corporation Improvement Act (FDICIA) of
    1991. These legislative reforms, combined with more favorable economic
    conditions, helped to restore the health of depository institutions and
    to enhance public confidence in the deposit insurance system.
      Prior to the enactment of FIRREA, thrift deposits were insured by the
    Federal Savings and Loan Insurance Corporation (FSLIC). FIRREA abolished
    FSLIC and established the Resolution Trust Corporation (RTC) as a
    temporary agency to handle the unprecedented number of failures created
    by the thrift crisis. In July 1995, responsibility for handling new
    thrift failures was transferred from RTC to SAIF, and the remaining
    assets and liabilities of RTC were transferred to FDIC's FSLIC
    Resolution Fund on December 31, 1995. During its life, the RTC handled
    over 747 failed thrifts with over $400 billion in assets, at a cost to
    taxpayers of about $90 billion.

      Current Industry and Insurance Fund Conditions. The National Credit
    Union Share Insurance Fund continues to remain strong with assets of
    $3.4 billion. In fiscal year 1995, the income generated from the 1
    percent deposit eliminated the need to assess the annual premium. In
    fact, earlier this year the Fund
    [[Page 138]]
    paid a $106 million dividend to
    federally insured credit unions due to an excess over the 1.30 percent
    reserve requirement. The level of reserves had reached 1.33 percent at
    the end of fiscal year 1995. In addition, the Fund did not report any
    insurance losses from failed credit unions during fiscal year 1995. For
    insurance year 1996, the required annual insurance premium of one-
    twelfth of 1 percent of total member share accounts has been waived.
      The health of the banking industry has improved dramatically over the
    last few years. Banks achieved record levels of earnings in 1993 and
    1994. This strong performance enabled banks to recapitalize the BIF,
    which reached its statutorily-designated reserve ratio of 1.25 percent
    in mid-1995. As a result of BIF's recapitalization, the FDIC has lowered
    deposit insurance premiums for banks. The rate for the healthiest banks
    is currently only the statutory minimum of $2,000 per year.
      The earnings of the thrift industry also have showed strong
    improvement in the last few years. The thrift industry reported net
    income of $1.2 billion in 1991, $5.1 billion in 1992, $4.9 billion in
    1993, and $4.3 billion in 1994. For the first nine months of 1995, the
    industry reported net income of $3.2 billion. Despite the continued
    profitability of the industry, the long-term outlook for thrifts is
    uncertain. Deposit insurance premiums for thrifts remain high, at 23
    cents per $100 of deposits for the healthiest thrifts. Thus, a healthy
    thrift with $100 million in deposits would pay $230,000 for deposit
    insurance this year, while a healthy bank of the same size would pay
    only $2,000. This large disparity between the deposit insurance premiums
    paid by banks and thrifts threatens to destabilize the thrift industry
    and its deposit insurance fund, SAIF. In addition, the thrift industry
    remains vulnerable to geographic asset concentration, swings in interest
    rates, and increasing competition from banks and other financial
    institutions.
      In contrast to BIF's recapitalization, SAIF's reserve ratio stood at
    about 0.46 percent at the end of fiscal year 1995, only about one-third
    of the required 1.25 percent. One reason that SAIF's reserves have grown
    so slowly compared to BIF's is that SAIF-insured institutions are
    obligated under current law to pay the interest on Financing Corporation
    (FICO) bonds that were used to finance part of the cost of the recent
    thrift crisis. The SAIF is required by law to maintain its premium rates
    at about 23 cents per $100 of deposits until the fund is recapitalized.
    The FICO obligation currently consumes about 45 percent of premium
    income that would otherwise be available to build up the reserves of
    SAIF.

      The Administration's Proposal to Address the Problems of SAIF. The
    Administration projects that the current 23-basis point differential
    between SAIF and BIF insurance premiums will have a detrimental effect
    on SAIF's assessment base. Because of the differential, thrifts have an
    incentive to find ways of reducing their reliance on SAIF-insured
    deposits. Thrifts might do this by shifting deposits to BIF-insured
    affiliates, shrinking their balance sheets, or relying more heavily on
    non-deposit liabilities such as advances from the Federal Home Loan Bank
    System. Preliminary evidence indicates that thrifts are indeed moving to
    reduce their reliance on SAIF-insured deposits. As the available SAIF
    assessment base shrinks, the proportion of SAIF's premium income that
    must go to pay FICO obligations will increase. Within only a few years,
    the portion of SAIF premiums available to pay FICO interest could be
    insufficient to cover the $793 million annual cost.
      Without legislative action, the current BIF-SAIF premium disparity
    will persist for many years. The Administration does not currently
    project that SAIF will recapitalize on its own within the 10-year budget
    horizon. Even more optimistic forecasts do not project that SAIF will
    recapitalize within the next 5 years. Even if SAIF recapitalizes on its
    own without legislation, a significant premium disparity would continue
    to exist until 2019 because of SAIF-insured institutions' obligation to
    pay FICO bond interest.
      Last year, the Administration proposed legislation to remedy the
    problems of SAIF. The main elements of the proposal are a one-time
    special assessment on SAIF-insured deposits to immediately bring SAIF's
    reserve ratio up to the required 1.25 percent, a requirement that the
    FICO interest payments be shared across banks and thrifts on a pro rata
    basis, and a merger of BIF and SAIF. Congress adopted a very similar
    proposal in its seven-year balanced budget plan. As the prospect of a
    significant BIF-SAIF premium disparity has become reality, and
    preliminary evidence that the deposit insurance premium disparity is
    having a harmful impact on SAIF's assessment base has emerged, the
    Administration believes it is increasingly urgent that action be taken
    to address this problem through legislation like that proposed by the
    Administration last year.

      Projecting Deposit Insurance Losses in a Changing Environment.
    Predicting failures of depository institutions and the associated impact
    on the deposit insurance funds is a significant challenge. In recent
    years, rapidly changing conditions in depository institutions' operating
    environment have made predicting insured institution failures more
    difficult. First, depository institutions face increasing competition
    from non-bank financial institutions. Depository institutions are
    responding to this challenge by changing their products, investments,
    and their role in the economy. Second, it is extremely difficult to
    assess the potential impact that increasing off-balance sheet activity,
    such as investment in derivatives, has had on the risk exposure of the
    deposit insurance funds. Finally, it is too soon to tell with certainty
    how much the legislative changes of the past few years will affect
    deposit insurance losses. For example, stricter regulatory and capital
    requirements imposed by FDICIA should have the long-term effect of
    reducing losses borne by the deposit insurance funds.
    [[Page 139]]
      The Administration is continuing to examine and monitor the
    effectiveness and efficiency of the current regulatory system. In
    addition, the Administration will continue to study the need for policy
    changes to protect the health of the deposit insurance funds, to improve
    the long run profitability of the bank and thrift industry, and to
    support the growth of the financial services sector.
                                Pension Insurance
      The Pension Benefit Guaranty Corporation (PBGC) insures defined
    benefit pension plans of private employers. PBGC steps in when a company
    becomes insolvent and its pension plan cannot pay the full value of
    benefits guaranteed by law. At any given time, PBGC's exposure to claims
    relates to the underfunding of pension plans, that is, to any amount by
    which expected future benefits exceed plan assets.
      The Retirement Protection Act (RPA), signed into law December 1994,
    strengthens pension safeguards and improves program operations. The RPA:

    [[Page 147]]
             Table 8-3. ESTIMATED 1997 SUBSIDY RATES, BUDGET AUTHORITY, AND LOAN LEVELS FOR DIRECT LOANS\1\
                                                (In millions of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                                                         1997 Weighted
                                                                            average      1997 Subsidy       1997
                             Agency and Program                           subsidy as a      budget       Estimated
                                                                           percent of     authority     loan levels
                                                                         disbursements
    ----------------------------------------------------------------------------------------------------------------
    Funds Appropriated to the President:
      Micro and small enterprise development...........................       12.20          --*               1
      Foreign Military Financing.......................................       10.81           40             370
      Overseas Private Investment Corporation..........................        5.00            4              80

    Agriculture:
      Agricultural credit insurance fund...............................       12.85           70             546
      Rural housing insurance fund.....................................        5.81          225           1,668
      Rural economic development loans.................................       22.11            3              14
      Rural electrification and telephone..............................        2.52           41           1,620
      Public Law 480 direct loans......................................       81.79          179             219
      Distance learning and medical link loan program..................        1.62            2             125
      Rural community facility loan program............................        7.44           15             200
      Rural business and industry loans................................       -1.56           -1              50
      Rural telephone bank.............................................        1.33            2             175
      Rural development loan fund......................................       46.16           37              80
      Rural water and waste disposal loan program......................        8.57           69             800

    Education:
      Federal direct student loan program..............................        0.35           53          15,101

    Interior:
      Bureau of Reclamation loans......................................       40.00           13              36

    State Department: Repatriation loans...............................       80.00            1               1

    Transportation:
      Minority business resource center program........................       10.00          --*              15
      Alameda Corridor project loan program............................       14.67           59             400

    Treasury:
      Community development financial institutions fund................       35.83           20              56

    Veterans Affairs:
      Direct loan......................................................       46.77          --*             --*
      Loan guarantee fund..............................................        1.56           14             894
      Guaranty and indemnity fund......................................        0.95           13           1,417
      Vocational rehabilitation........................................        1.75          --*               2
      Native american veteran housing loan program.....................        7.72            1              18

    Other Independent Agencies:
      Export-Import Bank\2\............................................        4.00          136           3,396

    Federal Emergency Management Agency:
        Disaster assistance............................................        5.54            2              25

    Small Business Administration:
        Disaster loans.................................................        7.90           66             667
                                                                        --------------------------------------------
    Total..............................................................        3.80        1,064          27,976
    ----------------------------------------------------------------------------------------------------------------
    *Less than $500,000.
    \1\Additional information on credit reform subsidy rates is contained in the Federal Credit and Insurance
      Supplement to the budget for 1996.
    \2\Includes 1996 carryover budget authority.

    [[Page 148]]
            Table 8-4. ESTIMATED 1997 SUBSIDY RATES, BUDGET AUTHORITY, AND LOAN LEVELS FOR LOAN GUARANTEES\1\
                                                (In millions of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                                                         1997 Weighted-
                                                                            average      1997 Subsidy       1997
                             Agency and Program                           subsidy as a      budget       Estimated
                                                                           percent of     authority     loan levels
                                                                         disbursements
    ----------------------------------------------------------------------------------------------------------------
    Funds Appropriated to the President:
        Micro and small enterprise development.........................        3.73            1              38
        AID housing and other credit guarantees........................       11.83            5              41
        Overseas Private Investment Corporation........................        2.50           65           2,250

    Agriculture:
      Agricultural credit insurance fund...............................        2.60           69           2,650
      Commodity Credit Corporation: Export credits.....................        8.00          390           5,500
      Rural housing insurance fund.....................................        0.27            6           2,400
      Rural business and industry loan program.........................        0.94            7             750
      Rural community facility loan program............................        0.41           -*             100

    Commerce:
      Fishing vessel obligations.......................................        1.00           -*              25

    Defense:
      Family Housing Improvement Fund..................................    \2\10.00     .............  .............

    Education:
      Federal family education loan program............................       10.04        1,918          19,114

    Health and Human Services:
      Health professions graduate student loan program.................        0.34           -*             140

    Housing and Urban Development:
      Community development (Sec. 108).................................        2.30           46           2,000
      Federal Housing Administration general and special risk..........        1.06        \3\41       \4\12,933
      Federal Housing Administration mutual mortgage...................       -2.88       -1,255          70,721
      GNMA secondary mortgage guarantees...............................  .............  .............    110,000
      Indian housing guarantee.........................................        8.13            3              37

    Interior:
      Indian loan guaranty and insurance fund..........................       13.00            5              35

    Transportation:
      Title XI maritime guaranteed loans...............................        7              40             800

    Veterans Affairs:
      Guaranty and indemnity fund......................................        1.47          361          24,547
      Loan guaranty fund...............................................       15.04           -*               1

    Other Independent Agencies:
      Export-Import Bank\5\............................................        4.45          636          14,294

      Small Business Administration:
        Business Loans.................................................        2.68          203          11,653
                                                                        --------------------------------------------
        Total\4\.......................................................        9.50        2,660         280,030
    ----------------------------------------------------------------------------------------------------------------
    *Less than $500,00.
    \1\Additional information on credit reform subsidy rates is contained in the Federal Credit and Insurance
      Supplement to the budget for Fiscal Year 1996.
    \2\The subsidy rate is an estimated weighted average subsidy rate. Actual rates will be calculated on a
      transaction by transaction basis at the time of loan obligation.
    \3\Subsidy BA represents the net amount resulting from new loans in both positive and negative subsidy programs.
      Since appropriations requested are for the gross amount of subsidy BA for positive subsidy programs (to be
      offset by the negative subsidy), the BA amount in this table does not represent the total gross appropriations
      request.
    \4\Loan levels do not include standby commitment authority and therefore do not match levels requested in
      appropriations.
    \5\Includes 1996 carryover budget authority.

    [[Page 149]]
                             Table 8-5. SUMMARY OF FEDERAL DIRECT LOANS AND LOAN GUARANTEES
                                                (In billions of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                                                                      Actual             Estimate
                                                                             ---------------------------------------
                                                                               1993    1994    1995    1996    1997
    ----------------------------------------------------------------------------------------------------------------
    Direct Loans:
        Obligations.........................................................    22.1    22.7    30.9    34.4    45.4
        Disbursements.......................................................    27.1    19.3      22    27.7    34.7
        Subsidy budget authority............................................     2.1     2.8     2.6     1.6     1.0

    Loan Guarantees:
        Commitments.........................................................   169.9   204.1   138.5   179.0   172.0
        Lender Disbursements................................................   144.3   194.2   117.9   139.2     152
        Subsidy budget authority............................................     4.1     2.6     5.1     4.4     3.7
    ----------------------------------------------------------------------------------------------------------------

                   Table 8-6. NEW DIRECT LOAN OBLIGATIONS AND GUARANTEED LOAN COMMITMENTS BY FUNCTION
                                                (In millions of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                                             Direct loan obligations     Guaranteed loan commitments
                                                         -----------------------------------------------------------
                          Function                          1995      1996      1997      1995      1996      1997
                                                           actual   estimate  estimate   actual   estimate  estimate
    ----------------------------------------------------------------------------------------------------------------
    050  National Defense...............................  ........  ........  ........       300       342       229
    150  International affairs..........................     2,476     3,992     4,067    14,354    17,906    18,624
    270  Energy.........................................     1,320     1,426     1,620  ........  ........  ........
    300  Natural resources and environment..............        16        33        36  ........  ........  ........
    350  Agriculture....................................     9,794     6,463     7,605     7,638     8,150     8,150
    370  Commerce and housing credit\1\.................     2,496     2,537     5,536    71,057   105,263    97,707
    400  Transportation.................................        98        15       415       118       229       571
    450  Community and regional development.............     1,427     1,052     1,952     2,366     2,360     2,885
    500  Education, training, employment, and social
     services...........................................    11,547    16,317    21,770    19,960    20,433    19,114
    550  Health.........................................  ........  ........  ........       275       210       140
    600  Income security................................  ........  ........  ........        22        37        37
    700  Veterans benefits and services.................     1,535     2,104     2,344    22,162    24,033    24,548
    800  General government.............................       147       379  ........  ........  ........  ........
    990  Multiple functions.............................        45        55       106  ........  ........
                                                         -----------------------------------------------------------
        Total...........................................    30,901    34,373    45,451   138,272   178,963   172,005
                                                         -----------------------------------------------------------
                          ADDENDUM
    Secondary guaranteed loans..........................  ........  ........  ........   142,000   110,000   110,000
    ----------------------------------------------------------------------------------------------------------------
    \1\Commitments by GNMA to guarantee securities that are backed by loans previously insured or guaranteed by the
      Federal Housing Administration, Department of Veterans Affairs, or Farmers Home Administration (secondary
      guarantees) are excluded from the totals and shown in the addendum.

    [[Page 150]]
                     Table 8-7. DIRECT LOAN WRITE-OFFS AND GUARANTEED LOAN TERMINATIONS FOR DEFAULTS
    ----------------------------------------------------------------------------------------------------------------
                                                             In millions of dollars     As percentage of outstanding
                                                         ------------------------------           loans\1\
                      Agency or Program                                                -----------------------------
                                                            1995      1996      1997      1995      1996      1997
                                                           actual   estimate  estimate   actual   estimate  estimate
    ----------------------------------------------------------------------------------------------------------------
                        DIRECT LOANS

    Funds Appropriated to the President:
      Economic assistance loans.........................        32  ........  ........      0.24  ........  ........
      International debt reduction......................  ........         3         4  ........      0.67      0.92
      Foreign military loans............................        94        39        39      1.11      0.47      0.48

    Department of Agriculture:
      Rural electrification and telephone revolving fund        50  ........  ........      0.15  ........  ........
      Agricultural credit insurance fund................       579       515       520      4.79      4.58      5.04
      Rural housing insurance fund......................        99       101       100      0.32      0.33      0.33
      Public Law 480 Food Aid...........................       168  ........        63      1.43  ........      0.54

    Department of Education:
      Federal direct student loan program...............        14        12        52      0.49      0.15      0.27

    Department of Commerce:
      Economic development revolving fund (EDA).........         2  ........  ........      2.94  ........  ........

    Department of Interior:
      Bureau of Indian Affairs direct loans.............        11         4         4     17.74     14.81      7.41

    Department of Veterans Affairs:
      Veterans housing programs.........................        23        12        19      1.81      0.79      0.96

    Independent Agencies:
      Small Business Administration.....................       346       296       260      3.07       2.6      2.11
      Export-Import Bank................................        45  ........  ........       .60  ........  ........

                                                         -----------------------------------------------------------
        Total, direct loan writeoffs....................     1,463       982     1,061  ........  ........  ........
                                                         -----------------------------------------------------------
                      GUARANTEED LOANS

    Funds Appropriated to the President
      Housing and other credit guaranty programs........        10        25        25      0.49      1.25      1.28
      Overseas Private Investment Corporation...........        19        14        15      1.54      0.51      0.36
      Microenterprise and other development guaranteed..  ........         1         1  ........      2.22      1.25
      Assistance for the New Independent States of the
       Soviet Union.....................................  ........  ........         8  ........  ........     14.55
      CCC export credit guarantees......................     1,167       579       693     22.96      7.19      6.91
      Foreign military loans............................         9         7         2      0.14      0.11      0.03

    Department of Agriculture:
      Agricultural credit insurance fund................        18        17        12      0.29      0.25      0.15
      Rural development insurance fund..................        21        27        23      3.48      4.86      4.98
      Rural housing insurance fund......................         1        11        14     22.00     46.00     54.00
      Rural water and waste water disposal fund.........         1  ........  ........      0.20    100.00  ........
      Rural community facility loans fund...............  ........        54  ........  ........     59.34  ........
      Rural business and industry loans.................  ........         1         1  ........      0.05      0.06

    Department of Education:
      Federal family education loans....................     1,286     1,767     2,384      3.10      2.62      2.78

    Department of Interior:
      Indian loan guaranty and insurance fund...........         4         7         9      1.89      3.20      3.85

    Department of Housing and Urban Development:
      FHA-General and special risk guaranteed loans.....     1,033     1,956     1,875      1.24      2.34      2.16
      FHA-mutual mortgage and cooperative housing loans.     3,969     3,658     4,124      1.25      1.10      1.17

    Department of Transportation:
      MARAD ship financing fund.........................         8        49        49      0.46      2.40      1.92

    Department of Veterans Affairs:
      Veterans housing programs.........................     1,664     2,500     2,360      1.07      1.55      1.34

    Independent Agencies:
      Small business administration.....................       635       629       816      2.40      2.16      2.36
      Export-Import Bank................................       353        16        78      2.56      0.11      0.54

                                                         -----------------------------------------------------------
        Total, guaranteed loan terminations for default.    10,198    11,318    12,489  ........  ........  ........
                                                         -----------------------------------------------------------
       DEFAULTED GUARANTEED LOANS THAT RESULT IN LOANS
                         RECEIVABLE

    Funds Appropriated to the President:
      Housing and other credit guaranty programs........         1        35        39      0.23      8.20      8.86
      Foreign military loans............................        31        10        23      4.61      1.49      3.42

    Department of Education:
      Federal family education loans....................        30         5        10      2.38      4.21      4.60

    [[Page 151]]
    Department of Housing and Urban Development:
      FHA-mutual mortgage and cooperative housing loans.       139       851       510      3.23     32.21     53.80
      FHA-general and special risk guaranteed loans.....       321     2,376     1,752      6.07     66.31     92.50

    Department of Health and Human Services:
      Health professions guaranteed student loans.......         8        13        13      2.06      3.20      2.95

      Department of Veterans Affairs:
        Veterans housing programs.......................       584       693       711     37.58     45.56      49.4

    Independent Agencies:
      Small Business Administration.....................        40        84       184      2.45      4.50      7.76

                                                         -----------------------------------------------------------
        Total, writeoffs of loans receivable............     1,447     4,067     3,903  ........  ........  ........
                                                         ===========================================================

                                                         -----------------------------------------------------------
        Grand Total.....................................    13,108    16,637    17,453  ........  ........  ........
    ----------------------------------------------------------------------------------------------------------------
    \1\Average of loans outstanding over year.

    [[Page 152]]

                            Table 8-8. APPROPRIATIONS ACTS LIMITATIONS ON CREDIT LOAN LEVELS
                                                (In millions of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                                                                                     Estimate
                                  Agency or Program                                  1995    -----------------------
                                                                                    Actual       1996        1997
    ----------------------------------------------------------------------------------------------------------------
                       LIMITATIONS ON DIRECT LOAN OBLIGATIONS

    Funds Appropriated to the President:
      Foreign military financing................................................         558         544         370

    Agriculture:\1\
      Farm Service Agency:
        Agricultural credit insurance fund......................................         564         763         546

      Rural Utilities Service:
        Rural electric and telephone............................................       1,320       1,426       1,620
        Rural telephone bank....................................................         175         175         175
        Distance learning and medical link loans................................  ..........  ..........         125
        Rural development insurance fund\1\.....................................       1,131  ..........  ..........
        Rural water and waste disposal loans....................................  ..........         547         800

      Rural Housing Service:
        Rural housing insurance fund............................................       1,472       1,223       1,668
        Rural community facility loans..........................................  ..........         208         200

      Rural Business--Cooperative Service:
        Rural development loan fund.............................................          85          38          80
        Rural economic development loans........................................          13          14          14
        Rural business and industry loans.......................................  ..........  ..........          50

      Foreign Assistance Programs:
        Public Law 480 direct credit............................................         303         291         219

    Housing and Urban Development:
      FHA-General and special risk..............................................         220         120         120
      FHA-Mutual mortgage insurance.............................................         180         200         200

    Interior:
      Bureau of Reclamation direct loans........................................          23          37          36
      Indian direct loan........................................................          11  ..........  ..........

    State Department:
      Repatriation Loans........................................................           1           1           1

    Transportation:
      Alameda Corridor project improvement......................................  ..........  ..........         400
      High priority corridors...................................................          40  ..........  ..........
      Orange County (CA) toll road..............................................         100          20  ..........
      Minority business resource center.........................................          15          15          15

    Veterans Affairs:
      Direct loans..............................................................           1  ..........  ..........
      Vocational rehabilitation.................................................           2           2           2
    FEMA--Disaster assistance...................................................         175          36          25
                                                                                 -----------------------------------
          Total, limitations on direct loan obligations.........................       6,389       5,660       6,666
                                                                                 -----------------------------------
                     LIMITATIONS ON GUARANTEED LOAN COMMITMENTS

    Funds Appropriated to the President:
      Loan guarantees to Israel.................................................       2,000       2,000       2,000
      Assistance for the New Independent States of the Former Soviet Union......  ..........         106  ..........

    Agriculture:
      Agricultural credit insurance fund........................................       1,938       2,450       2,650
      Rural development insurance fund..........................................         575          50  ..........
      Rural business and industry loan fund.....................................  ..........         700         750
      Rural housing insurance fund..............................................       1,049       1,700       2,400
      Rural community facility loan fund........................................  ..........          75         100

    Education:
      Historically black colleges/universities..................................         357  ..........  ..........

    Health and Human Services:
      Health professions graduate student loan insurance........................         275         210         140

    Housing and Urban Development:
      FHA--General and special risk.............................................      20,885      17,400      17,400
      FHA--Mutual mortgage insurance............................................     100,000     110,000     110,000
      Community development loan guarantees.....................................       2,054       1,500       2,000
      Indian housing loan guarantee.............................................          22          37          37
    [[Page 153]]

    Interior:
      Indian loan guaranty and insurance........................................          47          35          35
                                                                                 -----------------------------------
        Total, limitations on guaranteed loan commitments.......................     129,202     136,263     137,512
                                                                                 ===================================
                                      ADDENDUM

    Secondary guaranteed loan commitment limitations:
      GNMA, mortgage-backed securities..........................................     142,000     110,000    110,000
    ----------------------------------------------------------------------------------------------------------------
    \1\In 1995, this included water and waste, community facility, and business and industry funds.
    [[Page 154]]
    Table 8-9.  DIRECT LOAN TRANSACTIONS OF THE FEDERAL GOVERNMENT----------

    (in millions of dollars)

    ------------------------------------------------------------------------
                                                               Estimate
                Agency or Program                1995    -------------------
                                               actual       1996      1997
    ------------------------------------------------------------------------
       Funds Appropriated to the President

        International Security Assistance

    Foreign military loan liquidating
     account:
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................        461         30         9
       Change in outstandings...............       -716       -943      -886
       Outstandings.........................      7,911      6,968     6,082

    Foreign military financing direct loan
     financing account:
       Obligations..........................        558        544       370
       Loan disbursements...................        266        743       829
       Change in outstandings...............        266        733       807
       Outstandings.........................        539      1,272     2,079

    Military debt reduction financing
     account:
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................  ..........        15         4
       Change in outstandings...............  ..........        15         4
       Outstandings.........................  ..........        15        19

             Multilateral Assistance

    International organizations and
     programs:
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................  ..........  ........  ........
       Change in outstandings...............         -2         -2        -2
       Outstandings.........................         36         34        32

      Agency for International Development

    Economic assistance loans--liquidating
     account:
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................         11         13  ........
       Change in outstandings...............       -486       -599      -616
       Outstandings.........................     13,279     12,680    12,064

    Debt reduction, financing account:
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................  ..........        51        47
       Change in outstandings...............        -47         -6       -10
       Outstandings.........................        453        447       437

    Private sector revolving fund
     liquidating account:
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................  ..........  ........  ........
       Change in outstandings...............         -1         -4  ........
       Outstandings.........................          7          3         3

    Microenterprise and other development
     credit direct loan financing account:
       Obligations..........................          1          1         1
       Loan disbursements...................  ..........         3         1
       Change in outstandings...............  ..........         3  ........
       Outstandings.........................          1          4         4

     Overseas Private Investment Corporation

    Overseas Private Investment Corporation
     liquidating account:
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................  ..........  ........  ........
       Change in outstandings...............        -11         -5        -6
       Outstandings.........................         28         23        17

    Overseas private investment corporation
     direct loan financing account:
       Obligations..........................         15        200        85
       Loan disbursements...................         46         62        75
       Change in outstandings...............         45         61        74
       Outstandings.........................         53        114       188

            Department of Agriculture

               Farm Service Agency

    Agricultural credit insurance fund
     liquidating account:
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................          4          3         3
       Change in outstandings...............     -1,082     -1,174    -1,174
       Outstandings.........................     10,426      9,252     8,078

    Agricultural credit insurance fund
     direct loan financing account:
       Obligations..........................        564        763       546
       Loan disbursements...................        583        813       777
       Change in outstandings...............        143        328       247
       Outstandings.........................      1,655      1,983     2,230

    Commodity credit corporation fund:\1\
       Obligations..........................      9,230      5,700     7,059
       Loan disbursements...................      9,230      5,700     7,059
       Change in outstandings...............       -343       -665       186
       Outstandings.........................      2,786      2,121     2,307

             Rural Utilities Service

    Rural communication development fund
     liquidating account:
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................  ..........  ........  ........
       Change in outstandings...............         -1         -1        -1
       Outstandings.........................         10          9         8

    Distance learning and medical link
     direct loan financing account:
       Obligations..........................  ..........  ........       125
       Loan disbursements...................  ..........  ........        38
       Change in outstandings...............  ..........  ........        38
       Outstandings.........................  ..........  ........        38

    Rural development insurance fund
     liquidating account:
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................         65         29        24
       Change in outstandings...............       -127       -159      -158
       Outstandings.........................      4,471      4,312     4,154

    Rural electrification and telephone
     direct loan financing account:
       Obligations..........................      1,320      1,426     1,620
       Loan disbursements...................        830      1,192     1,275
       Change in outstandings...............        787      1,155     1,208
       Outstandings.........................      2,740      3,895     5,103

    Rural telephone bank direct loan
     financing account:
       Obligations..........................        175        175       175
       Loan disbursements...................         37        223       179
       Change in outstandings...............         33        220       176
       Outstandings.........................        118        338       514

    Rural development insurance fund direct
     loan financing account:
       Obligations..........................      1,004   ........  ........
       Loan disbursements...................        608   ........  ........
       Change in outstandings...............        593     -1,218  ........
       Outstandings.........................      1,218   ........  ........

    Rural water and waste disposal loans
     direct financing account:
       Obligations..........................  ..........       547       800
       Loan disbursements...................  ..........       600       677
       Change in outstandings...............  ..........     1,567       655
       Outstandings.........................  ..........     1,567     2,222
    [[Page 155]]

    Rural electrification and telephone
     revolving fund liquidating account:
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................        432        227       178
       Change in outstandings...............       -998     -1,326    -1,153
       Outstandings.........................     33,101     31,775    30,622

    Rural telephone bank liquidating
     account:
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................         36         33        33
       Change in outstandings...............        -45        -60       -61
       Outstandings.........................      1,414      1,354     1,293

                  Rural Housing

    Rural housing insurance fund liquidating
     account:
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................          9          5         1
       Change in outstandings...............     -1,163     -1,233    -1,214
       Outstandings.........................     23,675     22,442    21,228

    Rural housing insurance fund direct loan
     financing account:
       Obligations..........................      1,162      1,223     1,668
       Loan disbursements...................      1,584      1,252     1,567
       Change in outstandings...............      1,491      1,145     1,404
       Outstandings.........................      6,797      7,942     9,346

    Rural community facility loans direct
     financing account:
       Obligations..........................  ..........       208       200
       Loan disbursements...................  ..........       134       161
       Change in outstandings...............  ..........       366       149
       Outstandings.........................  ..........       366       515

       Rural Business-Cooperative Service

    Rural economic development liquidating
     account:
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................  ..........         1  ........
       Change in outstandings...............         -1   ........        -2
       Outstandings.........................          8          8         6

    Rural economic development loan direct
     financing account:
       Obligations..........................         12         14        14
       Loan disbursements...................         12         11        12
       Change in outstandings...............         10          7         7
       Outstandings.........................         30         37        44

    Rural development loan fund direct loan
     financing account:
       Obligations..........................         85         38        80
       Loan disbursements...................         47         63        57
       Change in outstandings...............         47         63        56
       Outstandings.........................         74        137       193

    Rural business and industry direct loans
     financing account:
       Obligations..........................  ..........  ........        50
       Loan disbursements...................  ..........  ........        12
       Change in outstandings...............  ..........  ........        12
       Outstandings.........................  ..........  ........        12

    Rural development loan fund liquidating
     account:
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................          5          3         2
       Change in outstandings...............  ..........        -1        -2
       Outstandings.........................         85         84        82

          Foreign Agricultural Service

    Expenses, Public Law 480, foreign
     assistance programs, Agriculture
     liquidating account:
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................  ..........  ........  ........
       Change in outstandings...............       -118       -272      -255
       Outstandings.........................     10,697     10,425    10,170

    P.L. 480 Direct credit financing
     account:
       Obligations..........................        303        291       219
       Loan disbursements...................        186        270       191
       Change in outstandings...............        175        270       145
       Outstandings.........................      1,024      1,294     1,439

    P.L. 480 Title I Food for Progress
     Credits, financing account:
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................         52   ........  ........
       Change in outstandings...............         52   ........  ........
       Outstandings.........................        508        508       508

    Debt reduction--financing account:
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................  ..........  ........  ........
       Change in outstandings...............         -1         -1        -2
       Outstandings.........................         66         65        63

             Department of Commerce

       Economic Development Administration

    Economic development revolving fund
     liquidating account :
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................  ..........  ........  ........
       Change in outstandings...............         -7         -7        -6
       Outstandings.........................         68         61        55

         Department of Defense--Military

         Revolving and Management Funds

    Defense business operations fund:
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................  ..........  ........  ........
       Change in outstandings...............        -47        -49       -75
       Outstandings.........................      1,433      1,384     1,309

             Department of Education

        Office of Postsecondary Education

    Student financial assistance:
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................  ..........  ........  ........
       Change in outstandings...............       -136          2         3
       Outstandings.........................        187        189       192

    Higher education facilities loans:
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................  ..........  ........  ........
       Change in outstandings...............         -7         -6        -6
       Outstandings.........................         55         49        43

    College housing and academic facilities
     loans liquidating account:
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................          4          4         4
       Change in outstandings...............          2          2         1
       Outstandings.........................        138        140       141

    College housing loans:
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................  ..........  ........  ........
       Change in outstandings...............        -35        -35       -32
       Outstandings.........................        484        449       417
    [[Page 156]]

    College housing and academic facilities
     direct loan financing account:
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................          6         13         9
       Change in outstandings...............          6         13         9
       Outstandings.........................          7         20        29

    Federal direct student loan program,
     financing account:
       Obligations..........................     11,547     16,317    21,770
       Loan disbursements...................      2,332      9,600    13,763
       Change in outstandings...............      2,324      9,417    13,213
       Outstandings.........................      2,801     12,218    25,431

              Department of Energy

         Power Marketing Administration

    Bonneville Power Administration fund:
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................  ..........  ........  ........
       Change in outstandings...............  ..........  ........  ........
       Outstandings.........................          3          3         3

     Department of Health and Human Services

          Health Resources and Services
                 Administration

    Health Resources and Services:
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................         17         17        18
       Change in outstandings...............        266          3         4
       Outstandings.........................        797        800       804

    Health loan funds:
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................          2          1         1
       Change in outstandings...............        -19        -11       -10
       Outstandings.........................         45         34        24

         Department of Housing and Urban
                   Development

       Public and Indian Housing Programs

    Low-rent public housing--loans and other
     expenses :
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................  ..........  ........  ........
       Change in outstandings...............        -58        -62       -65
       Outstandings.........................      1,689      1,627     1,562

       Community Planning and Development

    Revolving fund (liquidating programs):
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................  ..........  ........  ........
       Change in outstandings...............        -58        -52       -46
       Outstandings.........................        388        336       290

    Community development loan guarantees
     liquidating account:
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................  ..........  ........  ........
       Change in outstandings...............        -21        -20       -15
       Outstandings.........................         89         69        54

                Housing Programs

    Nonprofit sponsor assistance liquidating
     account:
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................  ..........  ........  ........
       Change in outstandings...............  ..........  ........  ........
       Outstandings.........................          1          1         1

    Flexible Subsidy Fund:
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................        126        159        56
       Change in outstandings...............        125        157        54
       Outstandings.........................        584        741       795

    FHA mutual mortgage and cooperative
     housing insurance funds liquidating
     account:
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................  ..........  ........  ........
       Change in outstandings...............         -2         -2        -2
       Outstandings.........................         15         13        11

    FHA general and special risk insurance
     funds liquidating account:
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................  ..........  ........  ........
       Change in outstandings...............         -5         -6        -6
       Outstandings.........................        107        101        95

    FHA-General and special risk direct loan
     financing account:
       Obligations..........................  ..........       120       120
       Loan disbursements...................  ..........       120       120
       Change in outstandings...............  ..........       120       120
       Outstandings.........................  ..........       120       240

    Housing for the elderly or handicapped
     fund liquidating account:
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................          7        192  ........
       Change in outstandings...............       -131        131       -63
       Outstandings.........................      8,331      8,462     8,399

    FHA-Mutual mortgage insurance direct
     loan financing account:
       Obligations..........................  ..........       200       200
       Loan disbursements...................  ..........       200       200
       Change in outstandings...............  ..........       200       199
       Outstandings.........................  ..........       200       399

    Government National Mortgage Association

    Guarantees of mortgage-backed securities
     liquidating account:
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................        149        314       378
       Change in outstandings...............        -16         27        49
       Outstandings.........................        333        360       409

           Department of the Interior

              Bureau of Reclamation

    Bureau of reclamation loan liquidating
     account:
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................  ..........  ........  ........
       Change in outstandings...............  ..........        -3        -3
       Outstandings.........................         83         80        77

    Bureau of Reclamation direct loan
     financing account:
       Obligations..........................         16         33        36
       Loan disbursements...................         12         28        34
       Change in outstandings...............         12         28        34
       Outstandings.........................         31         59        93

    Emergency fund:
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................  ..........  ........  ........
       Change in outstandings...............         -1         -1        -1
       Outstandings.........................          6          5         4
    [[Page 157]]

              National Park Service

    Construction:
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................  ..........  ........  ........
       Change in outstandings...............         -1   ........        -1
       Outstandings.........................          7          7         6

            Bureau of Indian Affairs

    Revolving fund for loans liquidating
     account:
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................  ..........  ........  ........
       Change in outstandings...............         -9         -7        -8
       Outstandings.........................         67         60        52

    Indian loan guaranty and insurance fund
     liquidating account:
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................          3          4         4
       Change in outstandings...............          3   ........  ........
       Outstandings.........................         40         40        40

    Indian direct loan financing account:
       Obligations..........................         11   ........  ........
       Loan disbursements...................        -14   ........  ........
       Change in outstandings...............         -5         -5        -3
       Outstandings.........................         22         17        14

                 Insular Affairs

    Assistance to territories:
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................  ..........  ........  ........
       Change in outstandings...............         -1         -1        -1
       Outstandings.........................         21         20        19

               Department of State

        Administration of Foreign Affairs

    Repatriation loans financing account:
       Obligations..........................          1          1         1
       Loan disbursements...................  ..........         1         1
       Change in outstandings...............  ..........         1         1
       Outstandings.........................          1          2         3

          Department of Transportation

         Federal Highway Administration

    Alameda corridor project direct loan
     financing account:
       Obligations..........................  ..........  ........       400
       Loan disbursements...................  ..........  ........  ........
       Change in outstandings...............  ..........  ........  ........
       Outstandings.........................  ..........  ........  ........

    Orange County (CA) toll road
     demonstration project direct loan
     financing account:
       Obligations..........................  ..........  ........        24
       Loan disbursements...................  ..........  ........        24
       Change in outstandings...............  ..........  ........        25
       Outstandings.........................  ..........  ........        25

    High priority corridors loan financing
     account:
       Obligations..........................         40   ........  ........
       Loan disbursements...................         37   ........  ........
       Change in outstandings...............         37   ........       -37
       Outstandings.........................         37         37  ........

    Right-of-way revolving fund liquidating
     account:
       Obligations..........................         43   ........  ........
       Loan disbursements...................         26         24        25
       Change in outstandings...............          2         -6        -5
       Outstandings.........................        153        147       142

         Federal Railroad Administration

    Amtrak corridor improvement loans
     liquidating account:
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................  ..........  ........  ........
       Change in outstandings...............  ..........        -1        -1
       Outstandings.........................          7          6         5

    Amtrak corridor improvement direct loan
     financing account:
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................  ..........         2  ........
       Change in outstandings...............  ..........         2  ........
       Outstandings.........................          3          5         5

    Railroad rehabilitation and improvement
     liquidating account:
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................  ..........  ........  ........
       Change in outstandings...............         -3         -3        -3
       Outstandings.........................         67         64        61

    Railroad rehabilitation and improvement
     direct loan financing account:
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................          6   ........  ........
       Change in outstandings...............          4   ........  ........
       Outstandings.........................          4          4         4

             Maritime Administration

    Federal ship financing fund liquidating
     account:
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................          8         50        50
       Change in outstandings...............       -185         42        43
       Outstandings.........................         33         75       118

             Office of the Secretary

    Minority business resource center direct
     loan financing account:
       Obligations..........................         15         15        15
       Loan disbursements...................          9         21        15
       Change in outstandings...............          2   ........  ........
       Outstandings.........................          9          9         9

           Department of the Treasury

              Departmental Offices

    Community development financial
     institutions fund direct loan financing
     account:
       Obligations..........................  ..........        34        56
       Loan disbursements...................  ..........         7        25
       Change in outstandings...............  ..........         7        25
       Outstandings.........................  ..........         7        32

         Department of Veterans Affairs

        Veterans Benefits Administration

    Guaranty and indemnity fund liquidating
     account:
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................          4   ........  ........
       Change in outstandings...............         -9         -1  ........
       Outstandings.........................         13         12        12

    Direct loan revolving fund liquidating
     account:
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................  ..........  ........  ........
       Change in outstandings...............         -3         -3        -3
       Outstandings.........................         14         11         8
    [[Page 158]]
    Loan guaranty revolving fund liquidating
     account:
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................         24   ........  ........
       Change in outstandings...............       -100        -44       -44
       Outstandings.........................        528        484       440

    Vocational rehabilitation direct loan
     financing account:
       Obligations..........................          2          2         2
       Loan disbursements...................          2          2         2
       Change in outstandings...............  ..........  ........  ........
       Outstandings.........................          1          1         1

    Education loan fund liquidating account:
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................  ..........  ........  ........
       Change in outstandings...............  ..........  ........        -1
       Outstandings.........................          3          3         2

    Loan guaranty direct loan financing
     account:
       Obligations..........................        923        885       894
       Loan disbursements...................        933        885       894
       Change in outstandings...............         45        196       191
       Outstandings.........................        473        669       860

    Guaranty and indemnity direct loan
     financing account:
       Obligations..........................        604      1,197     1,417
       Loan disbursements...................        604      1,197     1,417
       Change in outstandings...............         77        319       256
       Outstandings.........................        227        546       802

    Direct loan financing account:
       Obligations..........................          6         20        31
       Loan disbursements...................          6         20        31
       Change in outstandings...............          5         21        31
       Outstandings.........................          6         27        58

         Environmental Protection Agency

         Environmental Protection Agency

    Abatement, control, and compliance
     direct loan liquidating account:
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................          2          1  ........
       Change in outstandings...............         -7         -8        -9
       Outstandings.........................         96         88        79

    Abatement, control, and compliance
     direct loan financing account:
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................         21         10         6
       Change in outstandings...............         17          5         1
       Outstandings.........................         60         65        66

          Small Business Administration

          Small Business Administration

    Business direct loan financing account:
       Obligations..........................         23         60     2,684
       Loan disbursements...................         33         41     1,367
       Change in outstandings...............         10         11     1,267
       Outstandings.........................        126        137     1,404

    Disaster direct loan financing account:
       Obligations..........................      1,311        932     1,260
       Loan disbursements...................      1,811        923     1,057
       Change in outstandings...............      1,748        734       797
       Outstandings.........................      7,157      7,891     8,688

    Disaster loan fund liquidating account:
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................          5   ........  ........
       Change in outstandings...............       -277       -298      -252
       Outstandings.........................      1,918      1,620     1,368

    Business loan fund liquidating account:
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................        199        226       159
       Change in outstandings...............       -530       -208      -229
       Outstandings.........................      2,037      1,829     1,600

           Other Independent Agencies

              District of Columbia

    Loans to the District of Columbia for
     capital projects:
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................  ..........  ........  ........
       Change in outstandings...............        -12        -13       -12
       Outstandings.........................         75         62        50

    Repayable advances to the District of
     Columbia direct loan financing account:
       Obligations..........................        147        379  ........
       Loan disbursements...................        147        379  ........
       Change in outstandings...............        147        232      -379
       Outstandings.........................        147        379  ........

     Export-Import Bank of the United States

    Export-Import Bank of the United States
     liquidating account:
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................        193        140       102
       Change in outstandings...............       -520     -1,538      -829
       Outstandings.........................      6,138      4,600     3,771

    Debt reduction financing account:
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................  ..........        64        30
       Change in outstandings...............  ..........        64        30
       Outstandings.........................  ..........        64        94

    Export-Import Bank direct loan financing
     account:
       Obligations..........................      1,598      2,955     3,396
       Loan disbursements...................        673      1,388     1,573
       Change in outstandings...............        580      1,056     1,222
       Outstandings.........................      1,407      2,463     3,685

     Farm Credit System Financial Assistance
                   Corporation

    Financial assistance corporation
     assistance fund, liquidating account:
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................  ..........  ........  ........
       Change in outstandings...............        -48        -41       -42
       Outstandings.........................      1,010        969       927

                 Bank Insurance

    Bank insurance fund:
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................  ..........  ........  ........
       Change in outstandings...............         -5        -19  ........
       Outstandings.........................        132        113       113

                FSLIC Resolution

    FSLIC resolution fund:
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................  ..........  ........  ........
       Change in outstandings...............        -31        -32       -31
       Outstandings.........................         95         63        32

       Federal Emergency Management Agency

    Disaster assistance direct loan
     liquidating account:
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................  ..........  ........  ........
       Change in outstandings...............  ..........       -44  ........
       Outstandings.........................         59         15        15
    [[Page 159]]
    Disaster assistance direct loan
     financing account:
       Obligations..........................        140         36        25
       Loan disbursements...................         44        112        25
       Change in outstandings...............         14         89       -48
       Outstandings.........................         90        179       131

      National Credit Union Administration

    Credit union share insurance fund:
       Obligations..........................  ..........         2         2
       Loan disbursements...................  ..........         5         1
       Change in outstandings...............         -3          2  ........
       Outstandings.........................  ..........         2         2

    Central liquidity facility:
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................  ..........  ........  ........
       Change in outstandings...............  ..........  ........  ........
       Outstandings.........................  ..........  ........  ........

    Community development credit union
     revolving loan fund:
       Obligations..........................  ..........  ........  ........
       Loan disbursements...................          2          2         2
       Change in outstandings...............  ..........  ........  ........
       Outstandings.........................          5          5         5

           Tennessee Valley Authority

    Tennessee Valley Authority fund:
       Obligations..........................         45         55       106
       Loan disbursements...................         45         55       106
       Change in outstandings...............         -6          2        31
       Outstandings.........................        150        152       183

    Total, Direct loan transactions:
       Obligations..........................     30,901     34,373    45,451
       Loan disbursements...................     21,982     27,683    34,710
       Change in outstandings...............      1,628      8,621    14,964
       Outstandings.........................    163,323    171,944   186,908
    ------------------------------------------------------------------------
    \1\CCC direct loans for crop price support, by law, are not subject to
      credit reform treatment.
    [[Page 160]]
    Table 8-10.  GUARANTEED LOAN TRANSACTIONS OF THE FEDERAL GOVERNMENT-----

    (in millions of dollars)

    ------------------------------------------------------------------------
                                                             Estimate
              Agency or Program              1995    -----------------------
                                           actual        1996        1997
    ------------------------------------------------------------------------
     Funds Appropriated to the President

      International Security Assistance

    Foreign military loan liquidating
     account:
       Commitments......................  ..........  ..........  ..........
       New guaranteed loans.............  ..........  ..........  ..........
       Change in outstandings...........        -536        -442        -395
       Outstandings.....................       6,610       6,168       5,773

    Agency for International Development

    Loan guarantees to Israel financing
     account:
       Commitments......................       1,783       1,940       2,000
       New guaranteed loans.............       1,783       1,940       2,000
       Change in outstandings...........       1,783       1,940       2,000
       Outstandings.....................       5,346       7,286       9,286

    Housing and other credit guaranty
     programs liquidating account:
       Commitments......................  ..........  ..........  ..........
       New guaranteed loans.............          34          27          50
       Change in outstandings...........         -28         -45         -24
       Outstandings.....................       2,009       1,964       1,940

    Private sector revolving fund
     liquidating account:
       Commitments......................  ..........  ..........  ..........
       New guaranteed loans.............  ..........  ..........  ..........
       Change in outstandings...........  ..........  ..........         -17
       Outstandings.....................          19          19           2

    Microenterprise and other
     development guaranteed loan
     financing account:
       Commitments......................          48          38          38
       New guaranteed loans.............           4          20          36
       Change in outstandings...........           4          19          35
       Outstandings.....................          26          45          80

    Housing and other credit guaranty
     programs guaranteed loan financing
     account:
       Commitments......................         148          41          42
       New guaranteed loans.............         120         131         112
       Change in outstandings...........         120         131         112
       Outstandings.....................         179         310         422

    Assistance for the New Independent
     States of the Former Soviet Union:
     Ukraine export credit insurance
     financing account:
       Commitments......................  ..........         106  ..........
       New guaranteed loans.............  ..........          90          16
       Change in outstandings...........  ..........          90         -35
       Outstandings.....................  ..........          90          55

         Overseas Private Investment
                 Corporation

    Overseas Private Investment
     Corporation liquidating account:
       Commitments......................  ..........  ..........  ..........
       New guaranteed loans.............  ..........  ..........  ..........
       Change in outstandings...........         -69         -69         -61
       Outstandings.....................         287         218         157

    Overseas private investment
     corporation guaranteed loan
     financing account:
       Commitments......................       1,891       2,000       2,250
       New guaranteed loans.............         575       1,627       1,765
       Change in outstandings...........         561       1,602       1,465
       Outstandings.....................         948       2,550       4,015

          Department of Agriculture

             Farm Service Agency

    Agricultural credit insurance fund
     liquidating account:
       Commitments......................  ..........  ..........  ..........
       New guaranteed loans.............           3  ..........  ..........
       Change in outstandings...........        -674        -317        -212
       Outstandings.....................       1,316         999         787

    Agricultural credit insurance fund
     guaranteed loan financing account:
       Commitments......................       1,938       2,450       2,650
       New guaranteed loans.............       1,878       1,922       2,573
       Change in outstandings...........       1,029         827       1,296
       Outstandings.....................       4,979       5,806       7,102

    Commodity credit corporation export
     guarantee financing account:
       Commitments......................       5,700       5,700       5,500
       New guaranteed loans.............       2,518       5,700       5,500
       Change in outstandings...........      -5,888       3,091       2,048
       Outstandings.....................       4,874       7,965      10,013

    Commodity credit corporation
     guaranteed loans liquidating
     account:
       Commitments......................  ..........  ..........  ..........
       New guaranteed loans.............  ..........  ..........  ..........
       Change in outstandings...........      -1,723        -114         -75
       Outstandings.....................         206          92          17

       Natural Resources Conservation
                   Service

    Agricultural resource conservation
     demonstration guaranteed loan
     financing account:
       Commitments......................  ..........  ..........  ..........
       New guaranteed loans.............  ..........  ..........  ..........
       Change in outstandings...........  ..........  ..........  ..........
       Outstandings.....................          17          17          17

           Rural Utilities Service

    Rural communication development fund
     liquidating account:
       Commitments......................  ..........  ..........  ..........
       New guaranteed loans.............  ..........  ..........  ..........
       Change in outstandings...........  ..........  ..........  ..........
       Outstandings.....................           5           5           5

    Rural development insurance fund
     liquidating account:
       Commitments......................  ..........  ..........  ..........
       New guaranteed loans.............           7          19  ..........
       Change in outstandings...........        -102         -94         -94
       Outstandings.....................         602         508         414

    Rural water and waste water disposal
     guaranteed loan financing account:
       Commitments......................         475          50  ..........
       New guaranteed loans.............         217           3          12
       Change in outstandings...........         183        -484          12
       Outstandings.....................         494          10          22

    Rural electrification and telephone
     revolving fund liquidating account:
       Commitments......................  ..........  ..........  ..........
       New guaranteed loans.............  ..........  ..........  ..........
       Change in outstandings...........         -17         -20         -22
       Outstandings.....................         687         667         645
    [[Page 161]]
            Rural Housing Service

    Rural housing insurance fund
     liquidating account:
       Commitments......................  ..........  ..........  ..........
       New guaranteed loans.............  ..........  ..........  ..........
       Change in outstandings...........          -5          -4          -3
       Outstandings.....................          36          32          29

    Rural housing insurance fund
     guaranteed loan financing account:
       Commitments......................       1,049       1,700       2,400
       New guaranteed loans.............         859       1,466       2,161
       Change in outstandings...........         809       1,373       2,009
       Outstandings.....................       2,085       3,458       5,467

    Rural community facility loans
     guaranteed financing account:
       Commitments......................  ..........          75         100
       New guaranteed loans.............  ..........          40          45
       Change in outstandings...........  ..........          91          40
       Outstandings.....................  ..........          91         131

     Rural Business-Cooperative Service

    Rural business and industry loans
     guaranteed financing account:
       Commitments......................  ..........         700         750
       New guaranteed loans.............  ..........         515         638
       Change in outstandings...........  ..........       1,183         507
       Outstandings.....................  ..........       1,183       1,690

           Department of Commerce

     Economic Development Administration

    Economic development revolving fund
     liquidating account:
       Commitments......................  ..........  ..........  ..........
       New guaranteed loans.............  ..........  ..........  ..........
       Change in outstandings...........         -11          -2          -1
       Outstandings.....................          19          17          16

      National Oceanic and Atmospheric
               Administration

    Fishing vessel obligations
     guarantees financing account:
       Commitments......................          75          25  ..........
       New guaranteed loans.............          32          25  ..........
       Change in outstandings...........           5          19          -6
       Outstandings.....................          54          73          67

    Federal ship financing fund, fishing
     vessels liquidating account:
       Commitments......................  ..........  ..........  ..........
       New guaranteed loans.............  ..........  ..........  ..........
       Change in outstandings...........         -21  ..........  ..........
       Outstandings.....................         142         142         142

           Department of Education

      Office of Postsecondary Education

    Federal family education loan
     liquidating account:
       Commitments......................  ..........  ..........  ..........
       New guaranteed loans.............          19          19           5
       Change in outstandings...........      -6,801      -6,801      -5,188
       Outstandings.....................      29,573      22,772      17,584

    Federal family education loan
     program, financing account:
       Commitments......................      19,603      20,433      19,114
       New guaranteed loans.............      20,321      18,369      18,587
       Change in outstandings...........      16,289      18,620      13,447
       Outstandings.....................      56,557      75,177      88,624

    Historically Black College and
     University Capital financing--
     Financing account:
       Commitments......................         357  ..........  ..........
       New guaranteed loans.............  ..........          65          75
       Change in outstandings...........  ..........          64          74
       Outstandings.....................  ..........          64         138

       Department of Health and Human
                  Services

        Health Resources and Services
               Administration

    Health Resources and Services:
       Commitments......................  ..........  ..........  ..........
       New guaranteed loans.............  ..........  ..........  ..........
       Change in outstandings...........          -2          -1          -1
       Outstandings.....................          11          10           9

    Health professions graduate student
     loan guaranteed loan financing
     account:
       Commitments......................         275         210         140
       New guaranteed loans.............         275         210         140
       Change in outstandings...........         274         207         132
       Outstandings.....................       1,163       1,370       1,502

    Health professions graduate student
     loan insurance fund liquidating
     account:
       Commitments......................  ..........  ..........  ..........
       New guaranteed loans.............  ..........  ..........  ..........
       Change in outstandings...........         -64         -68         -73
       Outstandings.....................       1,657       1,589       1,516

    Health loan funds:
       Commitments......................  ..........  ..........  ..........
       New guaranteed loans.............  ..........  ..........  ..........
       Change in outstandings...........         -48         -39         -31
       Outstandings.....................         261         222         191

       Department of Housing and Urban
                 Development

     Public and Indian Housing Programs

    Low-rent public housing--loans and
     other expenses:
       Commitments......................  ..........  ..........  ..........
       New guaranteed loans.............  ..........  ..........  ..........
       Change in outstandings...........        -281        -300        -325
       Outstandings.....................       4,132       3,832       3,507

    Indian housing loan guarantee--
     financing account:
       Commitments......................          22          37          37
       New guaranteed loans.............  ..........          28          33
       Change in outstandings...........  ..........          28          33
       Outstandings.....................  ..........          28          61

     Community Planning and Development

    Revolving fund (liquidating
     programs) :
       Commitments......................  ..........  ..........  ..........
       New guaranteed loans.............  ..........  ..........  ..........
       Change in outstandings...........          -4          -1          -1
       Outstandings.....................           4           3           2

    Community development loan
     guarantees financing account:
       Commitments......................       1,844       1,500       2,000
       New guaranteed loans.............         243       1,672       1,750
       Change in outstandings...........         202       1,632       1,685
       Outstandings.....................         317       1,949       3,634

    Community development loan
     guarantees liquidating account:
       Commitments......................  ..........  ..........  ..........
       New guaranteed loans.............          27          20          15
       Change in outstandings...........         -51         -50         -45
       Outstandings.....................         246         196         151
    [[Page 162]]
              Housing Programs

    FHA mutual mortgage and cooperative
     housing insurance funds liquidating
     account:
       Commitments......................  ..........  ..........  ..........
       New guaranteed loans.............  ..........  ..........  ..........
       Change in outstandings...........     -22,543     -14,610     -10,526
       Outstandings.....................      96,145      81,535      71,009

    FHA general and special risk
     insurance funds liquidating
     account:
       Commitments......................  ..........  ..........  ..........
       New guaranteed loans.............  ..........  ..........  ..........
       Change in outstandings...........      -5,025      -2,971      -2,210
       Outstandings.....................      47,729      44,758      42,548

    FHA-General and special risk
     guaranteed loan financing account:
       Commitments......................      10,138      11,824      12,933
       New guaranteed loans.............       9,622       9,971      10,741
       Change in outstandings...........       9,229       3,515       5,417
       Outstandings.....................      35,457      38,972      44,389

    Mutual mortgage insurance guaranteed
     loan financing account :
       Commitments......................      50,323      77,793      70,721
       New guaranteed loans.............      40,142      51,543      58,592
       Change in outstandings...........      37,831      30,358      28,530
       Outstandings.....................     222,021     252,379     280,909

        Government National Mortgage
                 Association

    Guarantees of mortgage-backed
     securities liquidating account:
       Commitments......................  ..........  ..........  ..........
       New guaranteed loans.............      63,727      94,440      81,575
       Change in outstandings...........      18,858      25,749       9,354
       Outstandings.....................     463,848     489,597     498,951

    Guarantees of mortgage-backed
     securities financing account:
       Commitments......................     142,000     110,000     110,000
       New guaranteed loans.............  ..........  ..........  ..........
       Change in outstandings...........  ..........  ..........  ..........
       Outstandings.....................  ..........  ..........  ..........

         Department of the Interior

          Bureau of Indian Affairs

    Indian loan guaranty and insurance
     fund liquidating account:
       Commitments......................  ..........  ..........  ..........
       New guaranteed loans.............  ..........  ..........  ..........
       Change in outstandings...........         -43         -25         -19
       Outstandings.....................         103          78          59

    Indian guaranteed loan financing
     account:
       Commitments......................          47          35          35
       New guaranteed loans.............          67          43          50
       Change in outstandings...........          55          32          34
       Outstandings.....................         109         141         175

        Department of Transportation

       Federal Aviation Administration

    Aircraft purchase loan guarantee
     program:
       Commitments......................  ..........  ..........  ..........
       New guaranteed loans.............  ..........  ..........  ..........
       Change in outstandings...........          -3          -2  ..........
       Outstandings.....................           2  ..........  ..........

           Maritime Administration

    Federal ship financing fund
     liquidating account:
       Commitments......................  ..........  ..........  ..........
       New guaranteed loans.............  ..........  ..........  ..........
       Change in outstandings...........        -166        -199        -179
       Outstandings.....................         981         782         603

    Maritime guaranteed loan (Title XI)
     financing account:
       Commitments......................         418         571         800
       New guaranteed loans.............         418         571         800
       Change in outstandings...........         428         515         694
       Outstandings.....................         742       1,257       1,951

       Department of Veterans Affairs

      Veterans Benefits Administration

    Guaranty and indemnity fund
     liquidating account:
       Commitments......................  ..........  ..........  ..........
       New guaranteed loans.............  ..........  ..........  ..........
       Change in outstandings...........      -1,099      -1,102      -1,022
       Outstandings.....................      16,569      15,467      14,445

    Loan guaranty revolving fund
     liquidating account:
       Commitments......................  ..........  ..........  ..........
       New guaranteed loans.............  ..........  ..........  ..........
       Change in outstandings...........     -22,891      -8,466      -3,319
       Outstandings.....................      15,774       7,308       3,989

    Loan guaranty guaranteed loan
     financing account:
       Commitments......................           1           1           1
       New guaranteed loans.............           1           1           1
       Change in outstandings...........         834         674         685
       Outstandings.....................         836       1,510       2,195

    Guaranty and indemnity guaranteed
     loan financing account:
       Commitments......................      22,161      24,032      24,547
       New guaranteed loans.............      22,161      24,032      24,547
       Change in outstandings...........      20,213      21,462      21,716
       Outstandings.....................     121,307     142,769     164,485

        Small Business Administration

        Small Business Administration

    Pollution control equipment fund
     liquidating account:
       Commitments......................  ..........  ..........  ..........
       New guaranteed loans.............  ..........  ..........  ..........
       Change in outstandings...........         -11          -9          -8
       Outstandings.....................          95          86          78

    Business guaranteed loan financing
     account:
       Commitments......................       9,709      13,921      11,653
       New guaranteed loans.............       8,402      10,413      11,864
       Change in outstandings...........       5,611       6,607       6,789
       Outstandings.....................      18,618      25,225      32,014

    Business loan fund liquidating
     account:
       Commitments......................  ..........  ..........  ..........
       New guaranteed loans.............           4  ..........  ..........
       Change in outstandings...........      -1,804      -1,302      -1,030
       Outstandings.....................       7,675       6,373       5,343
    [[Page 163]]

         Other Independent Agencies

      Export-Import Bank of the United
                   States

    Export-Import Bank of the United
     States liquidating account:
       Commitments......................  ..........  ..........  ..........
       New guaranteed loans.............         288         300         275
       Change in outstandings...........      -1,010      -1,193        -913
       Outstandings.....................       4,010       2,817       1,904

    Export-Import Bank guaranteed loan
     financing account:
       Commitments......................      10,267      13,781      14,294
       New guaranteed loans.............       7,854       8,455       9,618
       Change in outstandings...........       1,990         423         323
       Outstandings.....................      13,736      14,159      14,482

              FSLIC Resolution

    FSLIC resolution fund:
       Commitments......................  ..........  ..........  ..........
       New guaranteed loans.............  ..........  ..........  ..........
       Change in outstandings...........        -360  ..........  ..........
       Outstandings.....................  ..........  ..........  ..........

         Tennessee Valley Authority

    Tennessee Valley Authority fund:
       Commitments......................  ..........  ..........  ..........
       New guaranteed loans.............           1  ..........           1
       Change in outstandings...........  ..........  ..........  ..........
       Outstandings.....................  ..........  ..........  ..........

    Subtotal, Guaranteed loans (gross):
       Commitments......................     280,272     288,963     282,005
       New guaranteed loans.............     181,602     233,677     233,577
       Change in outstandings...........      45,028      81,522      72,602
       Outstandings.....................   1,190,618   1,272,140   1,344,742

    Less, secondary guaranteed loans:\1\

    GNMA guarantees of FmHA/VA/FHA
     pools:
       Commitments......................    -142,000    -110,000    -110,000
       New guaranteed loans.............     -63,727     -94,440     -81,575
       Change in outstandings...........     -18,858     -25,749      -9,354
       Outstandings.....................    -463,848    -489,597    -498,951

    Total, primary guaranteed loans:\2\
       Commitments......................     138,272     178,963     172,005
       New guaranteed loans.............     117,875     139,237     152,002
       Change in outstandings...........      26,170      55,773      63,248
       Outstandings.....................     726,770     782,543     845,791
    ------------------------------------------------------------------------
    \1\Loans guaranteed by FHA, VA, or FmHA are included above. GNMA places
      a secondary guarantee on these loans, so they are deducted here to
      avoid double counting.
    \2\When guaranteed loans result in loans receivable, they are shown in
      the direct loan table.

    [[Page 164]]
                      Table 8-11. LENDING AND BORROWING BY GOVERNMENT-SPONSORED ENTERPRISES (GSEs)
                                                (In millions of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                                                                                    Estimate
                   Enterprise                                                      1995    -------------------------
                                                                                  actual        1996         1997
    ----------------------------------------------------------------------------------------------------------------
                     LENDING

    Student Loan Marketing Association......  Obligations.....................      11,021       10,553       10,441
                                              New transactions................      11,021       10,553       10,441
                                              Net change......................       3,565       -3,434       -1,866
                                              Outstandings....................      41,636       38,202       36,336
    Federal National Mortgage Association:
      Corporation Accounts..................  Obligations.....................      44,501       64,526       69,773
                                              New transactions................      44,574       63,686       67,815
                                              Net change......................      28,608       31,691       33,202
                                              Outstandings....................     250,374      282,065      315,267
      Mortgage-backed securities............  Obligations.....................     -51,497      129,045      129,247
                                              New transactions................      89,130      129,045      129,247
                                              Net change......................      36,073       58,802       54,204
                                              Outstandings....................     559,585      618,387      672,591
    Farm Credit System:
      Banks for cooperatives................  Obligations.....................       8,690        9,976       10,076
                                              New transactions................       8,690        9,976       10,076
                                              Net change......................         619          205          208
                                              Outstandings....................       2,273        2,478        2,686
      Farm Credit Banks.....................  Obligations.....................      22,036       22,103       22,436
                                              New transactions................      22,036       22,492       22,880
                                              Net change......................         345          568          542
                                              Outstandings....................      14,231       14,800       15,600
      Agricultural credit banks.............  Obligations.....................      42,644       44,000       45,000
                                              New transactions................      42,638       44,000       45,000
                                              Net change......................       1,357          569          800
                                              Outstandings....................      14,231       14,800       15,600
    Federal Home Loan Bank system:
      Federal home loan banks...............  Obligations.....................     724,349      725,000      725,000
                                              New transactions................     724,349      725,000      725,000
                                              Net change......................       5,561       -1,628  ...........
                                              Outstandings....................     122,128      120,500      120,500
    Federal Home Loan Mortgage Corporation:
      Corporation accounts..................  Obligations.....................      37,389       48,876       41,615
                                              New transactions................      37,389       48,876       41,615
                                              Net change......................      28,373       32,502       24,854
                                              Outstandings....................      95,052      127,554      152,408
      Participation certificate pools.......  Obligations.....................      70,071      110,877      108,540
                                              New transactions................      70,071      110,877      108,540
                                              Net change......................      -6,626       21,017       30,493
                                              Outstandings....................     457,046      478,063      508,556
        Subtotal, lending (gross)...........  Obligations.....................     909,204    1,164,956    1,162,128
                                              New transactions................   1,049,898    1,164,505    1,160,614
                                              Net change......................      97,875      140,292      142,437
                                              Outstandings....................   1,578,860    1,719,152    1,861,589
    Less guaranteed loans held as direct
     loans by:
      Federal National Mortgage Association.  Net change......................       2,247         -346         -122
                                              Outstandings....................      23,027       22,681       22,559
      Student Loan Marketing Association\1\.  Net change......................       3,565       -3,434       -1,866
                                              Outstandings....................      41,636       38,202       36,336
      Other.................................  Net change......................       3,405  ...........  ...........
                                              Outstandings....................       7,860        7,860        7,860
                                             -----------------------------------------------------------------------
        Total GSE lending (net).............  Obligations.....................     909,204    1,164,956    1,162,128
                                              New transactions................   1,049,898    1,164,505    1,160,614
                                              Net change......................      88,658      144,072      144,425
                                              Outstandings....................   1,506,337    1,650,409    1,794,834
                    BORROWING

    Student Loan Marketing Association\1\...  Net change......................       1,980       -5,915       -1,558
                                              Outstandings....................      51,672       45,757       44,199
    Federal National Mortgage Association...  Net change......................      73,945       91,506       90,068
                                              Outstandings....................     836,777      928,283    1,018,351
    Farm Credit System:
      Banks for cooperatives................  Net change......................         759           -7          -32
                                              Outstandings....................       2,458        2,451        2,419
      Farm credit banks.....................  Net change......................         922          734        1,083
                                              Outstandings....................      39,041       39,775       40,858
      Agricultural credit banks.............  Net change......................       1,583          465          884
                                              Outstanding.....................      15,319       15,784       16,668
    Federal Housing Finance Board:
      Federal home loan banks...............  Net change......................      63,027       -9,406  ...........
                                              Outstandings....................     226,406      217,000      217,000
      The Financing Corporation.............  Net change......................           1            1            2
                                              Outstandings....................       8,141        8,142        8,144
      Resolution Funding Corporation........  Net change......................          -3           -2           -2
    [[Page 165]]
                                              Outstandings....................      30,076       30,074       30,072
    Federal Home Loan Mortgage Corporation..  Net change......................      21,038       50,536       62,449
                                              Outstandings....................     568,656      619,192      681,641
        Subtotal, borrowing (gross).........  Net change......................     163,252      127,912      152,894
                                              Outstandings....................   1,778,546    1,906,458    2,059,352
    Less borrowing from other GSEs..........  Net change......................      -3,421  ...........  ...........
                                              Outstandings....................      36,387       36,387       36,387
    Less investment in Federal Securities...  Net change......................      -1,375        1,712          491
                                              Outstandings....................       8,674       10,386       10,877
    Less borrowing for guaranteed loans held
     as direct loans by:
      Federal National Mortgage Association.  Net change......................       2,247         -346         -122
                                              Outstandings....................      23,027       22,681       22,559
      Student Loan Marketing Association\1\.  Net change......................       3,565       -3,434       -1,866
                                              Outstandings....................      41,636       38,202       36,336
      Other.................................  Net change......................       3,935  ...........  ...........
                                              Outstandings....................       7,860        7,860        7,860
                                             -----------------------------------------------------------------------
        Total GSE borrowing (net)...........  Net change......................     158,301      129,980      154,391
                                              Outstandings....................   1,660,962    1,790,942    1,945,333

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    \1\All SLMA loans shown in the table above are guaranteed by the Federal Government and therefore also counted
      as guaranteed loans.