Farm Service Agency:

Information on Farm Loans and Losses

RCED-99-18: Published: Nov 27, 1998. Publicly Released: Dec 30, 1998.

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Pursuant to a congressional request, GAO provided information on selected Farm Service Agency (FSA) farm loans, focusing on: (1) the financial condition of FSA's active direct farm loan portfolio at the end of fiscal years (FY) 1995 through 1997; (2) the amount and number of losses incurred by FSA on direct farm loans from FY 1989 through FY 1997; and (3) new farm operating loans that FSA has made on an exception basis, since the 1996 Farm Bill, to borrowers who had debts forgiven when their loans were restructured.

GAO noted that: (1) the unpaid principal on FSA's active direct farm loan portfolio totalled about $9.7 billion at the end of FY 1997; (2) delinquent borrowers held about $2.7 billion, or 28.2 percent, of this amount; (3) the size of the agency's portfolio, as well as the percentage of the portfolio held by delinquent borrowers, has decreased since 1995, when the portfolio totalled $11.4 billion, of which 40.7 percent was held by delinquent borrowers; (4) in fiscal years 1996 and 1997, about $1.9 billion of principal and interest owed on farm loans was written off by the agency; (5) for the 9-year period fiscal years 1989 through 1997, FSA wrote off $15.2 billion of direct farm loans for almost 80,000 borrowers through its various processes for resolving delinquencies, which provide for: (a) restructuring loans; (b) allowing a borrower who does not qualify for restructuring to make a payment based on the value of loan-security property; or (c) reaching a final resolution of the debt that may or may not include a payment by the borrower; (6) about $1.7 billion of the agency's losses resulted from reducing the debts of borrowers whose loans were restructured, and about $2.4 billion resulted from forgiving the debts of those who made buyout payments; (7) most of the write-off--about $11.1 billion--occurred through debt settlement; (8) since the enactment date of the 1996 Farm Bill through June 30, 1998, FSA made or guaranteed $54.2 million in new farm operating loans to 690 borrowers whose debts had been reduced when their prior farm loans were restructured; and (9) most of the 690 borrowers who received loans--about 77 percent--obtained direct farm operating loans, and about 23 percent obtained guaranteed farm operating loans.

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