Processing Time for Farmers Home Administration's Operating Loans in Minnesota During Fiscal Year 1984

In response to a congressional request, GAO reviewed the processing time for the Farmer's Home Administration's (FmHA) fiscal year 1984 operating loans in Minnesota to determine: (1) the criteria for timely loan processing; (2) the actual processing time and the reasons for the length of time between the various processing steps; (3) the effects of any delays on the farmers; and (4) alternatives available for improving the process.

GAO reviewed: (1) the organizational structure responsible for the FmHA farm program loans; (2) the two types of operating loans available; (3) the eligibility requirements for operating loan applicants; and (4) the five steps in the operating loan process. GAO found that: (1) FmHA had no formal criteria for timely loan processing; (2) the average operating loan processing time in Minnesota was 72 days; (3) incomplete farmer documentation, heavy work loads during the peak loan season, financial viability assessments of marginally creditworthy applicants, and special processing problems contributed to the time needed for processing loans; (4) about 3 percent of the loans were not closed or approved before planting time due to FmHA funding delays; and (5) FmHA files contained no record of letters, visits, or telephone calls complaining of adverse effects on borrowers due to the FmHA loan processing time requirements. During the GAO review, Congress introduced legislation requiring FmHA to hire additional personnel and urging it to use other means to expedite the loan application process. FmHA also implemented additional loan funding and staff increases and encouraged state governments and Farm Credit System lenders to help in the processing of 1985 loan applications. GAO, therefore, terminated any further study on operating loan processes because of these actions affecting the relevance of its 1984 program study and because of the lack of both FmHA loan processing time criteria and evidence of adverse effect on borrowers in 1984.