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

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 loans to guaranteed loans. GAO believes that Congress may wish to reevaluate the FmHA role by examining such key issues as the: (1) effectiveness of FmHA continuation and debt restructuring policies for heavily indebted farmers; (2) balance between the costs of providing continuous credit and the benefits to the government and farmers; (3) development of specific criteria for determining when borrowers should graduate to non-FmHA credit sources; and (4) the provision of other types of assistance to borrowers unable to repay loans.