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April 6, 1976

WILLARD LA VERN PEALO et al., Plaintiffs,

The opinion of the court was delivered by: RICHEY


 On July 3, 1973, this Court entered an order to compel defendants to implement the Farmers Home Administration's interest credit loan program, pursuant to Section 521 of Title V of the Housing Act of 1949, 42 U.S.C. § 1490a. In its accompanying Memorandum Opinion, reported at 361 F. Supp. 1320, this Court held that for the defendants to certify various qualified members of plaintiff class as being eligible to receive direct housing loans under Sections 502 and 515 of the Act, and then to deny such individuals Section 521 interest credit loans by virtue of defendants' unilateral suspension of the program, would operate to frustrate the intent of Congress in enacting the Section 502 and 515 direct loan programs. It would have meant, in effect, that persons whom the Secretary of Agriculture, at his discretion, had determined would be unable to meet their necessary housing needs "with financial assistance from other sources" *fn1" would, nonetheless, have to be charged the maximum amount of interest allowable on such housing loans. The defendants' action was therefore found to be in derogation of the 1959 Housing Act.

 Defendants appealed the Court's order to the United States Court of Appeals for the District of Columbia Circuit. A stay was granted but was subsequently dissolved. Just prior to the date scheduled for oral argument in the Court of Appeals, defendants represented to the court that they would continue to implement the programs in question as mandated by Congress, at least until the expiration of the current congressional authorization in 1977. The court of appeals thereupon granted plaintiffs' motion to dismiss the appeal on grounds that the appeal was moot.

 The matter is now before this Court on plaintiffs' motion for reasonable attorneys' fees and related expenses for the work of counsel in pursuing this matter to a successful conclusion. Counsel for the plaintiffs aver by detailed affidavit that they have spent a total of 411.5 hours in connection with this matter, both in this court and at the appellate level, and have also incurred a total of $482.68 in expenses for which they seek to be reimbursed.

 The defendants have interposed the following objections to the payment of fees in this case: (1) the Rural Housing Insurance Fund (RHIF) is comprised of public money and any judgment of attorneys' fees against the RHIF would be a judgment of attorneys' fees against the United States which is prohibited by 28 U.S.C. § 2412; (2) there is no "common fund" in existence from which fees can be awarded; and (3) the "legal fees" provision of the Act cannot be read to permit the award of attorneys' fees of the kind sought by plaintiffs. The Court finds that defendants' objections do not prevent an award of attorneys' fees in this case.


 The defendants' objection to the award of attorneys' fees in this case is based upon the nature of the RHIF. The Associate Administrator of the Farmers Home Administration, Frank W. Naylor, Jr., has submitted several affidavits concerning the nature and operation of the RHIF. They reveal the following pertinent information:

"The RHIF is a revolving fund and as such does not receive an annual loan appropriation from Congress. It does receive annually an appropriation sufficient in amount to cover the losses incurred two years previously. Congress recommends annual loan authorization levels for the current fiscal year. Thus, there are no funds to carry forward. The most that can be said to exist is a recommended loan level that has not been reached. There are no monies to transfer or to revert.
As a revolving fund, cash needs are met by the sale of certificates of beneficial ownership CBO's to the Federal Financing Bank, collections on outstanding borrowers' accounts, and borrowings from the Department of the Treasury.
The Federal Financing Bank (Bank) was established to provide a source of funds for Federal agencies so as to lessen competition among the agencies in the private money market and to provide lower interest cost to the United States. In operation, the Bank purchases CBO's from FmHA thereby financing FmHA's loan programs. Bank officials have informed FmHA that the Bank finances its purchases by borrowing from the Treasury.
It is anticipated the Federal Financing Bank will be the sole purchaser of CBO's for the foreseeable future. The Bank is used to finance FmHA loan programs as it results in the lowest cost for financing to the United States.
The sale by the FmHA of CBO's to the Federal Financing Bank (Bank) is made at an interest rate set by the Bank. This rate is based on the cost of money to the Department of the Treasury with an add-on for the Bank's administrative expenses. Because the rate paid to the Bank may from time to time be lower than the interest rates for unsubsidized loans made by the FmHA out of, for example, the RHIF, at these times the RHIF may actually make money on the unsubsidized loans. It has been true, however, that in the past the FmHA has had to annually request Congressional appropriations to cover the actual losses sustained by the Fund in prior years. Nevertheless, it cannot be said that the Fund will always lose money. For one thing, Congress constantly reviews loan programs and might in the future take action which would prevent the making of subsidized loans. Then too, those borrowers who do receive interest credits currently have their situation reviewed every two years, and their financial posture may have improved to the point where they could be taken off of interest credits. Conceivably, if no more subsidized loans were being made and if a substantial number of borrowers with interest credits were taken off the program, then the RHIF might not continue to lose money and subsequent Congressional appropriations would not then have to be sought."

 The defendants have sought to impress upon this Court that if additional monies were collected by the sale of CBO's for payment of attorneys' fees, Congress would have to make up any deficit, which would be a direct violation of 28 U.S.C. § 2412. On the other hand, the defendants maintain that if the RHIF happens to create an "overage," that could likewise not be used to pay ...

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