Issues Surrounding the Role and Mission of the Farmers Home Administration's Farm Loan Programs

T-RCED-90-22: Published: Jan 25, 1990. Publicly Released: Jan 25, 1990.

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GAO discussed its examination of the Farmers Home Administration's (FmHA) farm loan programs. GAO noted that: (1) delinquent borrowers held about half of the $23 billion in outstanding direct loan principal in the FmHA farm loan portfolio; (2) the FmHA farm loan programs had several material internal accounting control weaknesses involving inaccurate and incomplete property tracking information and an incomplete system for recording acquired property, and lacked a methodology for estimating loan losses; (3) FmHA lending policies resulted in the provision of loans to borrowers who were unable to repay them and who subsequently required extensive loan servicing; (4) FmHA has become a continuous source of subsidized credit, rather than a source of temporary credit, for many borrowers; and (5) FmHA generally made guaranteed loans to existing commercial lenders and shifted few direct farm loan borrowers to guaranteed loans.

Matters for Congressional Consideration

  1. Status: Closed - Not Implemented

    Comments: GAO has a more recent, comprehensive report (RCED-92-86) with a similar recommendation.

    Matter: Congress may wish to reevaluate the current and future role of FmHA by examining whether the continuation and debt restructuring policies are the best means of assisting already heavily indebted farmers.

  2. Status: Closed - Not Implemented

    Comments: GAO has a more recent, comprehensive report (RCED-92-86) with a similar recommendation.

    Matter: Congress may wish to reevaluate the current and future role of FmHA by examining at what point the cost of providing continuous credit assistance to financially marginal farmers, including the cost of loan losses, interest rate subsidies, and administrative expenses, will outweigh the benefits to the government, rural communities, and the farmer.

  3. Status: Closed - Not Implemented

    Comments: GAO has a more recent, comprehensive report with a similar recommendation.

    Matter: Congress may wish to reevaluate the current and future role of FmHA by examining whether FmHA is to serve as a temporary source of credit, and if so, whether specific criteria should be developed, such as time limits or measurable financial improvement, to decide when a borrower has had sufficient opportunity to become financially sound and be in a position to graduate to non-FmHA sources of credit.

  4. Status: Closed - Not Implemented

    Comments: GAO has a more recent, comprehensive report with a similar recommendation.

    Matter: Congress may wish to reevaluate the current and future role of FmHA by examining whether it would be more appropriate to provide other forms of assistance, such as job training, to aid in possible transition to other employment opportunities, for those borrowers who, after a period of time, show little or no prospect for succeeding.

 

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