Farm Loan Losses Top $1 Billion Lawmaker Advocates Using Private Collectors To Cut Loss
A federal agency wrote off $1.1 billion in government loans to farmers last year, prompting calls from at least one senator to turn the program over to private collectors.
But losses in Washington and Idaho declined, meaning officials in those states are doing a better job issuing farm loans and collecting from deadbeat borrowers.
In a report to Congress Monday, the General Accounting Office said losses nationwide were 6.5 percent of the $16.9 billion loan portfolio the department had with farmers for the 12-month period ended Sept. 30, 1996.
Most of the losses stemmed from the direct loan program, which assists the riskiest borrowers. These farmers must be turned down by commercial lenders before they can apply for a loan from the USDA, known as the “lender of last resort.”
Government losses came as the USDA either stretched out repayment terms or forgave debts under the direct and guaranteed loans programs covering 3,939 farm borrowers, the GAO said.
“It’s wrong to tell the American people the USDA is going to write off bad loans without making an aggressive collection attempt,” said Sen. Richard Lugar, R-Ind., a critic of USDA lending programs.
Lugar has urged Agriculture Secretary Dan Glickman to consider turning the loan portfolio over to private collection agencies, who would share in a percentage of the recovery.
USDA officials hailed the report as evidence that collections are improving. The report said 34 percent, or $3.6 billion of the $10.5 billion in outstanding direct loans, were delinquent, meaning payments were past due. That was down from 40 percent in 1995.
In the direct loan program, officials in Idaho wrote off $29 million in uncollected direct and guaranteed loans to 81 borrowers. Outstanding loans totaled $192.4 million to 2,012 borrowers.
In Washington, officials wrote off $6.7 million to 25 delinquent borrowers. Outstanding loans in the state totaled $132.4 million to 1,009 borrowers.
The number of delinquent direct loans during the year decreased by 12 percent in Idaho, the GAO said, and 10 percent in Washington.
However, there are still hundreds of delinquent borrowers struggling to repay loans.
In Washington, 185 borrowers were delinquent on Sept. 30, owing $44.4 million, or 31 percent of the total direct loans outstanding. In Idaho, 371 borrowers owed $55.7 million, or 29 percent of the total loans.
GAO said about half the nation’s write off came from farmborrowers in four states: California, Louisiana, Mississippi and Texas.