The Farmers Home Administration: What Is It?
In order to fund and insure loans for rural families and farmers, the previous U.S. Department of Agriculture (USDA) established the Farmers Home Administration (FmHA). Through its programs for housing, utilities, businesses, and community development, the FmHA offered loans and technical support.
Following the Great Depression, the Farmers Home Administration was given permission by Congress in 1946 to offer families financial assistance in the form of loans and grants in order to help them restart self-sufficient farming operations. The FmHA was given permission by Congress in 1961 to increase its funding for housing for non-farmers in rural towns as well as general water projects.
Since then, FmHA has gone by several different names; it is now known as USDA Rural Development.
Issues in the Past with FmHA
By the 1990s, several Congressmen were growing increasingly worried about the high rate of FmHA loan defaults and the significant losses the agency was suffering as a result of subpar lending procedures. The 1992 assessment by the U.S. Government Accountability Office (GAO) was ordered by Congress and revealed many issues with the FmHA.
The audit’s most significant finding was that more than $14 billion (70%) of the FmHA direct loan portfolio was at risk of default since the loans were held by indebted borrowers or by people whose debts were rescheduled after experiencing payment difficulties. FmHA calculated possible losses for that year at $1.2 billion, or around 28% of its guaranteed credit program.
The FmHA developed loan-making and loan-servicing requirements to protect federal financial interests, but the GAO found that many field lending officers disregarded them.
In addition, the GAO discovered that by September 30, 1991, the FmHA had purchased 3,100 farms from borrowers who had defaulted on their loans. Overall, the GAO came to the conclusion that FmHA management flaws, such as subpar information systems and lax financial controls, contributed to the ongoing loan management issues.
Farmers Home Administration’s closure
In accordance with the Agriculture Reorganization Act of 1994, the FmHA was revoked in October 1995. Its responsibilities were shifted to the USDA’s Farm Service Agency. These duties were subsequently given to USDA Rural Development, as it is currently known, in later years after more reorganizations.
What actions was taken by the Farmers Home Administration (FmHA)?
In order to provide loans and give loan guarantees for farmers and rural families, the Farmers Home Administration (FmHA) was established in 1946. It oversaw credit and technical assistance-giving housing, utility, commercial, and community development projects. USDA Rural Development is currently responsible for carrying out these duties.
The Farmers Home Administration (FmHA) was terminated for what reasons?
Concerned about the high number of defaulted FmHA loans, members of Congress asked the U.S. Government Accountability Office (GAO) to perform a study in 1992. It discovered numerous issues connected to bad lending practices. The Farm Service Agency of the USDA, and later USDA Rural Development, took up the FmHA’s duties after it was abolished in 1994.