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FSA Loan Eligibility
Last updated: September 20, 2011
FSA Loan Eligibility — Statutory term limits restrict borrower eligibility for Farm Service Agency (FSA) direct or guaranteed loans regardless of borrowers' ability to obtain other credit. Limitations also restrict borrowers receiving debt write-down to direct or guaranteed annual operating loans. NASDA believes FSA borrowers should be assisted and encouraged to graduate to commercial credit as quickly as possible. However, eligibility should not be determined by arbitrary term limits. NASDA also believes that FSA borrowers who previously filed for bankruptcy should remain eligible for direct and guaranteed operating loans, provided they are current on their loans under their original or revised plan of operation.
FSA may offset government payments to any borrower who is 30 or more days delinquent on loan payments. FSA may offset regardless of payment assignments to other lenders, or whether the borrower has applied for FSA loan servicing. NASDA believes FSA should recognize prior assignments of government payments, and release the proceeds as agreed to in the plan of operation. Further, FSA should not have offset authority until FSA loan servicing actions have been concluded.
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FSA Emergency Loans
Last updated: September 20, 2011
FSA Emergency Loans — Emergency loans are provided to help cover production and physical losses in counties declared as disaster areas by the President or the Secretary of Agriculture. Generally, producer eligibility is triggered by a qualifying physical loss, or a production loss of at least 30 percent in any essential farm or ranch enterprise. Producers are only eligible for an emergency loan if they cannot obtain commercial credit. The loan limit is 100 percent of actual loss with a maximum loan amount of $500,000. Unfortunately, the emergency loan program has been an effective tool for only a few farmers because substantial assistance is needed to truly recover losses.
NASDA urges the creation of a new emergency loan program, similar to assistance provided to small businesses, that provides measurable assistance to agricultural producers in disaster situations. The program should contain appropriate loan amount caps with broadened eligibility to assist producers not currently eligible under current emergency loan requirements. Further, NASDA recommends the program's review process for loan approval determinations be simplified.
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FSA Direct and Guaranteed Loan Programs
Last updated: September 20, 2011
FSA Direct and Guaranteed Loan Programs — The FSA guaranteed loan program has proven to be cost effective in reducing federal budget outlays. However, some rural areas have a shortage of commercial lending institutions that are interested in production agricultural lending. In such areas, the FSA Loan Guarantee program is of little value and leaves many producers dependent on FSA direct loans to finance their operations. NASDA urges continuation of and adequate funding for FSA direct loan programs. In keeping with the mission of FSA lending, NASDA also urges that FSA guaranteed loan limits remain capped at reasonable levels.
Under FSA Instruction 1951-S, required loan servicing actions are offered to producers who become delinquent on FSA direct loans. FSA guaranteed loans provide a substantial safety net for commercial lenders and even though 1951-S loan servicing is available to guaranteed lenders, they are not required to utilize the servicing options before loan liquidation. NASDA recommends an incentive, such as a higher percentage guarantee, be offered to commercial lenders who agree to service delinquent guaranteed loans according to 1951-S.
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FSA Interest Assistance Program
Last updated: September 20, 2011
FSA Interest Assistance Program — Interest assistance is provided on guaranteed loans if cash flow projections indicate the necessity for a feasible repayment schedule. The program is a valuable tool. However, program funding is often inadequate. NASDA recommends that following the year end analysis of the farm/ranch operation, only the actual amount of assistance required for repayment be provided. Any interest assistance obligated but not distributed should be retained by the program and added to the next fiscal year's appropriation. NASDA also recommends a higher level of interest assistance be provided to beginning farmers demonstrating the need for additional assistance.Interest assistance is provided on guaranteed loans if cash flow projections indicate the necessity for a feasible repayment schedule. For producers needing interest assistance, the program is a valuable tool. However, funding for interest assistance is often limited. NASDA urges that guaranteed loan interest assistance be reeâevaluated following the year end analysis of the farm/ranch operation and that only the actual amount of needed assistance be provided.
Any interest assistance obligated but not distributed should be added to the next fiscal year's appropriation. It is also urged that a higher level of interest assistance be provided to beginning farmers demonstrating the need for assistance.