Date: 1990-03-06
Speaker: DE LA GARZA (democrat)
Chamber: H

Mr. Speaker. I yield myself such time as I may consume. Mr. Speaker and my colleagues. this bill. as the title directs. will amend the Consolidated Farm and Rural Development Act to modify procedures and to insist that borrowers act in good faith and to improve the management of delinquent loans. The problem. as with most legislation. Mr. Speaker. is that someone has gone and found loopholes. There are some perhaps inconsistencies in the application of the intent of Congress in relation to the law. So basically that is what this legislation would do. allow the Farmers Home Administration to effectively administer these programs. In order to do so. we must close the loopholes that were inadvertently created. I would hope the Members would join us in supporting this legislation. Mr. Speaker. this bill will amend the Consolidated Farm and Rural Development Act to modify the procedures for the sale of inventory land. require Farmers Home Administration borrowers to act in good faith. and improve the management of delinquent loans. The Farmers Home Administration [FmHA] provides a unique service by operating as the Federal lender of last resort to farmers who are unable to obtain financing through the private sector. Direct loans are made to family farmers and ranchers to assist them in maintaining their operations at the least cost to the Federal Government. FmHA also provides guarantees for some loans by commercial lenders. In its role as lender of last resort. FmHA provided an increasing amount of support for farmers and ranchers during the agriculture recession of the early seventies through the eighties. As indicated in a GAO report--January 1990FmHA Financial Statements for 1988 and 1987FmHAs farm loan portfolio increased fitom $5.1 billion in 1976 to $25.5 billion in 1988. With the continuing deterioration of the financial condition of agriculture. FmHA found Itself dealing with increasing levels of loan losses and interest costs. In an effort to alleviate the situation. Congress passed the Agriculture Credit Act of 1987 which was signed into law on January 6. 1988. Through such restructuring options as loan consolidation. rescheduling or reamortization. interest rate reduction. and writedowns of outstanding principal and accumulated interest. the act was a sincere effort to keep borrowers on the farm and shore up the agricultural economy. The 1987 Agriculture Credit Act has been successful in alleviating some of the financial stress on the agricultural community. However. some problems have arisen which were not anticipated and the committee is concerned that the act is not being administered as originally intended. H.R. 4077 focuses on addressing those problems and clarifying congressional intent. One area that has caused considerable concern is the "bad faith" borrower. There have been cases where borrowers sell or dispose of property secured by loans without FmHA approval or repay other lenders more than required. This bill requires borrowers to act in good faith to qualify for net recovery buyout and preference with regard to the repurchase of property acquired through foreclosure or otherwise. A second provision of the bill requires the Secretary to sell inventory property at the appraised market value to purchasers with rights of first refusal under the act and at the fair market value. as determined by bids after advertising or by negotiated sale. to all others. A third provision allows the Secretary to consider all assets of the borrower In determining the value of restructured loans and to consider all assets listed on the security agreements in determining the recovery value of the collateral. The bill limits each borrower to one writedown and one not recovery buyout. Writedowns would also be limited to $250.000 per borrower. Other changes include extending the time period to 90 days for exercise by the borrower of the net recovery buyout option and extending the recapture period with regard to net recovery buyout to 10 years. The deadlines for application by the borrower for loan servicing and for processing of such applications would be extended to 60 days and 90 days respectively. To allow FmHA to effectively administer these progas. we must close the loopholes that were inadvertently created. Please join me in supporting this bill as we attempt to clarify the intent of Congress when it passed the 1987 Agriculture Credit Act Mr. Speaker. I yield such time as he may consume to the distinguished chairman of the subcommittee. the gentleman from Oklahoma . who might give us a little bit more detail in several areas relative to this legislation.