due agreements to provide loan guarantees when a farmer is unable to immediatly make payments on his indebtedness to circumstances beyond his control. If he is facing foreclosure due to an inability to obtain credit or credit refinancing, the guaranteed loan authority specified in the consolidated Farm and Rural Development Act (USC 1942 (a)) would be made available as a means of keeping the farmer in business. The bill also provides that there will be a deferral of payments of principal and interest until September 30, 1984. At that time, it would be the intent of this legislation to provide refinancing and repayment terms consistent with the financial situation of the farmer. The unique aspect of this legislation is that the Farmers Home Administration could call upon the assistance of the Farm Credit System to make these guarantees available in those areas where the FmHA offices have reached their maximum effective workload. The costs of doing so could be built into the loan guarantee and no more than 90 percent of the principal and interest would be guaranteed by this procedure, as in the existing law. Finally, I urge the subcommittee to act quickly on the reauthorization of Farmers Home Administration legislation. The provision in last years FmHA reauthorizatin bill which prohibits foreclosure of FmHA loans is found in title II of H.R. 1311. I urge that the House act with dispatch on this proposal to prevent the termination and foreclosure of large numbers of farmers across the country. It is my view and that of most farmers in my Congressional District that emergency farm credit legislation must be put on a "fast track" if we are to prevent the liquidation of thousands of farm operations, particularly in the Southern States. Those farmers are the victims of a farm depression made in large part in Washington, D. C. and they are looking to us for relief. The National Grange is pleased to have this opportunity to comment on farm credit legislation pending before the House of Representatives. We urge quick action on farm credit legislation that will provide financially distressed producers with sufficient funds to carry them through one of the worst economic periods in the history of American agriculture. However, we do not believe that the solution to today's agricultural depression can be solved simply by providing easier and cheaper credit to the nation's farmers. In fact, part of our problems have been caused by easy access to credit without due consideration given to the borrower's ability to repay. In general, the National Grange has been pleased with the improvement in the operation of the FmHA farm loan programs. We have made repeated calls for more emphasis to be placed on loan programs that serve production agriculture and less on nonfarm loan programs. Therefore, we support the elimination of, or reduction in, FmHA nonfarm loan programs. The Grange, along with many members of Congress and other farm organizations, has been critical of Farmers Home for the long delay in obtaining loan approval and the lack of supervision from FmHA state and local offices of farm ownership and operating loans. The work load caused by the supervisors of nonfarm loan programs is partially responsible for the breakdown of farm loan supervision. We have seen considerable improvement in the time lag between application and decisions on farm loans and in management assistance to FmHA agricultural borrowers, but more work in this area is needed. We urge this committee to continue its oversight authority over the general operation of the Farmers Home Administration to assure progress in adding family farmer. Only in this way can FmHA borrowers be graduated to other nongovernment lending institutions. The National Grange has requested from this Administration and the previous Administration that a Farmer Home Task Force be appointed to conduct detailed study of the Farmers Home Administration. Such a task force should concentrate it study on loan programs administered by FmHA, loan policies that guide loan decisions and better utilization of local FmHA committees. The task force should be composed of representatives from FmHA state and local offices, local FmHA committees, borrowers and other financial institutions. The goal of the task force should be to make FmHA more responsive to the credit needs of family farmers and beginning farmers. We are in general agreement with the actions taken by the FmHA in meeting the credit crunch that exists among certain segments of agriculture. However, we do not believe that the financial situation in agriculture calls for a mass infusion of cheap credit. We have criticized the Farmers Home administrators that not enough emphasis has been placed on informing the borrower of the alternatives available to him when his/her loan becomes delinquent or his application is denied. The directives may go forth from Washington but there has been little follow-through to see that the directives are carried out at the state and local level. We believe that more authority placed in the local FmHA committees could improve upon this area of administration of FmHA farmer loan programs. Operating Loans: The National Grange will support increasing the total amount of funds available for operating loans in fiscal 1983 and 1984. However, we do not agree that the individual loan limits need to be increased to the levels in H.R. 1190 or those proposed by the Administration in the FY'84 agriculture budget. The proposed increases would benefit a small number of larger farms but could reduce the total number of farmers able to borrow from FmHA. Loan Defferal: The National Grange is opposed to legislation which would grant a blanket moratorium on the repayment of FmHA farm loans. H.R. 1190 would put into law some of the criteria which FmHA uses in considering whether to grant or not to grant a deferral and therefore it is claimed that it does not constitute a moratorium. The burden of proof would remain with the farmer. However, the acceptance by FmHA of the farmer's proof is a judgment placed on FmHA. It can be subject to a court's interpretation which could lead to a moratorium on all loan repayments, we therefore must oppose any further restrictions on the discretion of the Secretary of Agriculture. Economic Emergency Loans: The National Grange believes that there is a need for an EE loan program to meet the present emergency that has been created by the economic stress agriculture is experiencing. A very large group of farmers find themselves in a position of not being able to secure financing from their usual commerical sources and are too large, either in the size of the loan required or do not qualify under FmHA definition of a family farm. The problem is being addressed by FmHA by proposing to increase the regular FmHA loan limits and changing their definition of a family farm so as to include larger farm operations. As we have stated, we are opposed to increasing the loan limit and are opposed to changing the size definition. The FmHA historically has been the lender of last resort for family farmers unable to acquire needed capital from conventional lending sources. But caution must be exercised to avoid granting undue advantage to large operations at the expense of family-sized family units. We do not want to see the FmHA move from this traditional role and become the lending agency for large commercial farming units. Increasing loan limits and changing the size definition could be the start of such an agency. We would therefore support a mandatory, short-term EE loan program to meet the above referred to credit gap. We do not believe the funds need to be increased beyond the present $600 million authorization. We also would recommend that the individual loan limit be set at $200,000. Disaster Emergency Loans: The National Grange supports an Emergency Disaster Loan program as a part of the FmHA loan programs available to farmers. But again, caution must be used in setting up or continuing ED loan programs. The credibility of such programs must be preserved if they are to be available in the future to meet disasters inflicted on agricultural producers. We would recommend that a limit be placed on the size of the loan that would be eligible for less than commerical interest rates and that to be eligible, a borrower must meet the historic FmHA credit elsewhere test. We appreciate this opportunity to present the views of the National Grange. EA :khv CC. House of Representatives Sincerely, Edward Andersen Edward Andersen, Master Enclosed please find a statement prepared by a farmer in my district, Douglas Dailey, wherein he outlines his views as to the problems associated with farm credit. You may recall the front page story in the Washington Post several weeks ago regarding the sale of Mr. Dailey's farm. The Production Credit Association foreclosed because my constituent was unable to meet his financial obligations. Mr. Dailey contacted me regarding his desire to testify before the Subcommittee but arrangements were not able to be made. This is to ask that his testimony be made a part of the official transcript of your hearings on the farm credit problem. If anyone would have any suggestions which would be helpful to my constituent or if comment would be made on his recommendations, it would be appreciated. Thank you for your attention. CPW: f enclosure Very trulyours, CHALMERS P.WYLIE Representative to Congress Douglas Dailey February 14, 1983 Chalmers P. Wylie House of Representatives Dear Mr. Wylie: I am a fourth generation Ohio farmer who worked time years at International Harvester to get my 2000 acre farm operation started. I had no outside help like inheritance, etc. From 1966 to 1980, I worked closely with PCA in building my farm operation, always meeting my commitments. I build my own home and my wife has assisted with her off the farm employment. During the past four years, my wife, Pam, and I have tried to improve agriculture in the State of Ohio with active participation in Farm Bureau. We have traveled to both Chicago and Washington, D.C., promoting Farm Bureau activities. I was honored by a local Jaycee Club as "Farmer of the Year" several years ago. Grain embargos, two years of disasterous weather, high interest rates and the unexplained change in credit policy of the PCA have got me, as well as my family, and neighbors in severe financial trouble. For the past two years, my family, neighbors and other PCA stockholders have been trying to bring attention to these problems and search for solutions. The PCA system has retaliated with severe treatment. The enclosed is my story in more detail. |