The Farmers Home Administration's Economic Emergency Loan Program Could Be More Effective

The economic emergency loan program was authorized by the Emergency Agricultural Credit Act. A review of the loan files in 10 States indicated that the main purpose of the loans was to increase the borrowers' current cash flow and assist with current operations. Loan proceeds did accomplish these purposes but it was too soon to tell if the temporary loan program should be continued.

Indications were that the delinquency rate on this program may be a problem and that only a small percentage of the loans were guaranteed. Discussions with Farmers Home Administration (FmHA) officials and bankers in a wide range of communities indicated that banks are referring borrowers for insured loans, since the banks generally prefer to handle short-term farm operating loans or consumer type loans at higher rates and shorter terms than those used in the guaranteed loan program. Information obtained in the review indicated that economic emergency loans were made because regular farm ownership or operating loans were limited or not available, or the loan amount exceeded the maximum limits for individual loans under regular loan programs. In some cases, economic emergency loans refinanced very recent land purchases because of limited farm ownership monies. Much of the economic emergency loan proceeds were used to refinance existing indebtedness on other loans, such as bank loans and Federal Government loans.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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