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GAO-06-912R 1 (2006-06-28)

handle is hein.gao/gaocrptattj0001 and id is 1 raw text is: Sai Accountability * Integrity * Reliability United States Government Accountability Office Washington, DC 20548 June 28, 2006 The Honorable Saxby Chambliss Chairman Committee on Agriculture, Nutrition and Forestry United States Senate Subject: Farm Loan Programs: GAO Reports on USDA Lending Practices Dear Mr. Chairman: This report responds to your request for information relating to the committee's June 13, 2006, hearing on the U.S. Department of Agriculture's (USDA) farm loan programs. In particular, your May 16, 2006 letter requested that we summarize our findings from the 1990s through 2002 on USDA's farm loan programs. You also requested that we provide any GAO opinions on the current management and status of the loan programs and identify any matters that the committee should consider. The USDA Farm Service Agency's (FSA) farm loan programs are intended to provide temporary financial assistance for the nation's farmers and ranchers who are unable to obtain commercial credit at reasonable rates and terms. FSA provides various types of both direct and guaranteed farm loans. Direct farm ownership loans can be used to buy farm real estate and make capital improvements. Guaranteed farm ownership loans are made for the same purposes and for refinancing existing debts. Also, direct farm operating loans can be used to buy feed, seed, fertilizer, livestock, and farm equipment; pay family living expenses; and, subject to certain restrictions, refinance existing debts. Guaranteed farm operating loans are made for the same purposes, but without restriction on refinancing existing debts. Additionally, direct loans include emergency disaster loans, which are made to farmers and ranchers whose operations have been substantially damaged by adverse weather or other natural disasters. In operating the farm loan programs, USDA faces the conflicting tasks of providing temporary credit to high-risk borrowers so that they can stay in farming until they are able to secure commercial credit and ensuring that the taxpayers' investment is protected. Our reports from the mid-1980s through 2001 highlighted significant financial and policy shortcomings in USDA's farm loan programs. In particular, we reported that billions of dollars of losses had occurred on USDA's farm loan programs because of weaknesses in USDA's lending practices and management of the program. In 1990, we placed USDA's farm loan programs on our high-risk list because delinquent farm loan borrowers held $11.1 billion of the agency's outstanding loans. In 1992, we reported that because of defaults in recent preceding years the Farmers Home Administration (FmHA) had reduced or forgiven delinquent debt of $7.6 billion. However, starting in the mid-1990s, the Congress passed key legislation, such as the 1996 Farm Bill, that addressed many of GAO-06-912R Farm Loans Programs

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