Pursuant to a congressional request, GAO provided information on the Farmers Home Administration's (FmHA) single-family housing loan servicing operations, focusing on: (1) the status of the FmHA single-family home loan portfolio; (2) FmHA efforts to centralize servicing operations for direct housing loans; (3) the benefits and disadvantages of centralized servicing; and (4) options for implementing centralized servicing operations.

GAO found that: (1) as of 1993, approximately 1,700 FmHA offices held single-family direct housing loans totalling $18.8 billion; (2) funding for homeowners loans has remained constant at $1.2 billion annually; (3) in 1987, about 95,000 FmHA single-family housing loans were sold to a private company for servicing; (4) although FmHA has allocated about $1.6 million and significant staff resources to improve program management and streamline field office operations, it has not formally adopted a centralized approach to servicing single-family housing loans; (5) the benefits of centralized loan servicing include annual operational cost savings totalling $106 million, consolidation and closure of many duplicative county offices, a lower loan delinquency rate, and reduced loan losses; (6) the private loan-servicing company credits its increased efficiency to centralized servicing, computer systems that identify delinquent borrowers and track missed payments, an escrow accounting system that assists borrowers' financial management, and a highly specialized staff who service loans; (7) the potential disadvantages of centralized servicing include the loss of personalized contact between the borrower and loan servicer and the costs of redeveloping existing automated systems; (8) options for implementing centralized servicing operations include establishing an in-house loan servicing center, contracting with the private sector or allowing public and private sectors to compete for loan servicing; and (9) although all options support efforts to reduce hierarchies and improve efficiency, increased loan-servicing competition would improve morale, increase efficiency, and focus on customers' needs.