Farmers Home Administration

Changes Needed in Loan Servicing Under the Agricultural Credit Act Gao ID: RCED-90-169 August 2, 1990

Pursuant to a congressional request, GAO reviewed the Farmers Home Administration's (FmHA) implementation of the debt servicing requirements under the Agricultural Credit Act of 1987.

GAO found that: (1) in January 1988, FmHA estimated that delinquent borrowers were past due on about $9.6 billion in principal and interest payments; (2) FmHA borrowers who acted in bad faith were not eligible for the primary loan servicing options, but were eligible for net-recovery-value buy-out; (3) FmHA used the same servicing process for borrowers who acted in bad faith that it used for other borrowers in determining eligibility for restructuring and net-recovery-value buy-out; (4) borrowers could obtain additional loans at the same time their delinquent debt was being restructured; (5) FmHA did not include assets that were not pledged as security for FmHA debts when computing the type and amount of debt relief for delinquent borrowers; (6) the debt reduction provisions apply only to borrowers who default on their loan payments, causing an incentive for nondelinquent borrowers to intentionally become delinquent; and (7) FmHA may be unable to deny servicing to borrowers who intentionally become delinquent.

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.

Director: Team: Phone:


The Justia Government Accountability Office site republishes public reports retrieved from the U.S. GAO These reports should not be considered official, and do not necessarily reflect the views of Justia.