Emergency Disaster Farm Loans: Government's Financial Risk Could Be Reduced
RCED-96-80
Published: Mar 29, 1996. Publicly Released: Mar 29, 1996.
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Highlights
GAO analyzed the financial condition of the Department of Agriculture's multi-billion dollar farm loan portfolio, focusing on: (1) the factors that contribute to the financial risk associated with these loans; and (2) the extent to which farmers attempted to minimize the need for farm loans by purchasing insurance to protect their farming operations.
Recommendations
Matter for Congressional Consideration
| Matter | Status | Comments |
|---|---|---|
| If Congress waives the requirement for crop insurance, it should consider options that would more selectively target the applicants who would be eligible for the waiver and limit the amount of the loan that they could receive. These options could include prohibiting borrowers who have previously been granted insurance waivers from receiving additional waivers and reducing the amount of an emergency loan to exclude the value of the proceeds that would have been available if the borrower had chosen to purchase the required insurance. |
Closed – Implemented
|
The Federal Agriculture Improvement and Reform Act of 1996 requires borrowers to have had insurance on property damaged or destroyed as a condition for receiving emergency loans. |
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of Agriculture | The Secretary of Agriculture should direct the Farm Service Agency Administrator to develop regulations that improve the cash flow analyses used in loanmaking decisions by incorporating an allowance to cover contingencies and the cost of replacing equipment. |
Closed – Not Implemented
USDA and the Farm Service Agency do not plan to develop regulations unless required by Congress.
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Topics
Agricultural programsDebt collectionNatural disastersDelinquent loansEmergency loansFarm creditFarm income stabilization programsFarm subsidiesInsuranceLoan defaultsLoan repayments