Farm Loan Programs:

GAO Reports on USDA Lending Practices

GAO-06-912R: Published: Jun 28, 2006. Publicly Released: Jun 28, 2006.

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This report responds to a Congressional request for information relating to a June 13, 2006 Congressional hearing on the U.S. Department of Agriculture's (USDA) farm loan programs. In particular, the May 16, 2006 letter requested that we summarize our findings from the 1990s through 2002 on USDA's farm loan programs. Congress also requested that we provide any GAO opinions on the current management and status of the loan programs and identify any matters that Congress should consider.

Our reports from the mid-1980s through 2001 highlighted significant financial and policy shortcomings in USDA's farm loan programs. In particular, we reported that billions of dollars of losses had occurred on USDA's farm loan programs because of weaknesses in USDA's lending practices and management of the program. In 1990, we placed USDA's farm loan programs on our "high-risk" list because delinquent farm loan borrowers held $11.1 billion of the agency's outstanding loans. In 1992, we reported that because of defaults in recent preceding years the Farmers Home Administration (FmHA) had reduced or forgiven delinquent debt of $7.6 billion. However, starting in the mid-1990s, the Congress passed key legislation, such as the 1996 Farm Bill, that addressed many of the weaknesses in USDA's farm loan programs. USDA also initiated program management improvements in response to our recommendations. In January 2001, we removed these programs from our high-risk list because actions taken by the Congress and USDA had a significant positive impact on the operations and financial condition of USDA's farm loan programs. In our January 2001 report, we noted that borrowers who were delinquent on their farm loans owed $1.8 billion on direct loans (about 21 percent of the outstanding principle on direct loans)--a significant decrease in delinquent debt. Moreover, we reported that USDA's direct loan losses of $427 million in fiscal year 2000 were the lowest in over 10 years.

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