The U.S. Department of Agriculture is updating its farm loan programs to better support current borrowers, including historically underserved producers. These improvements are part of what the USDA calls its commitment to increase equity in all programs, including farm loans that provide important access to capital for covering operating expenses and purchasing land and equipment.
“USDA remains committed to examining barriers faced by all borrowers, especially those in economic distress, new and beginning, socially disadvantaged or otherwise underserved producers,” said Zach Ducheneaux, Administrator of USDA’s Farm Service Agency. “We recognize loan making and servicing activities are critical for producers, especially in tough times. This improvement to our farm loan programs recognizes the needs of producers and more importantly enacts equitable relief provisions to ensure they get a fair shake.”
The 2018 Farm Bill authorized the FSA to provide equitable relief to certain direct loan borrowers, who are non-compliant with program requirements due to good faith reliance on a material action of, advice of, or non-action from an FSA official. Previously, borrowers may have been required to immediately repay the loan or convert it to a non-program loan with higher interest rates, less favorable terms, and limited loan servicing.
Now, the FSA has additional flexibilities to assist borrowers in such situations. If the agency provided incorrect guidance to an existing direct loan borrower, the agency may provide equitable relief to that borrower. The FSA may assist the borrower by allowing the borrower to keep their loans at current rates or other terms received in association with the loan which was determined to be noncompliant or the borrower may receive other equitable relief for the loan as the agency determines to be appropriate.
The USDA encourages producers to reach out to their local loan officials to ensure they fully understand the wide range of loan and servicing options available that can assist them in starting, expanding, or maintaining their operation.
Equitable relief is one of several changes authorized by the 2018 Farm Bill that the USDA has made to the direct and guaranteed loan programs. Other changes that were previously implemented include:
- Modifying the existing three-year farming experience requirement for Direct Farm Ownership loans to include additional items as acceptable experience.
- Allowing socially disadvantaged and beginning farmer applicants to receive a guarantee equal to 95%, rather than the otherwise applicable 90% guarantee.
- Expanding the definition of and providing additional benefits to veteran farmers.
- Allowing borrowers who received restructuring with a write down to maintain eligibility for an Emergency loan.
- Expanding the scope of eligible issues and persons covered under the agricultural Certified Mediation Program.
Additional information on these changes is available in the March 8, 2022 rule on the Federal Register.
Last summer, the USDA announced it was providing $67 million in competitive loans through its new Heirs’ Property Relending Program to help agricultural producers and landowners resolve heirs’ land ownership and succession issues. FSA also invested $4.7 million to establish partnerships with organizations to provide outreach and technical assistance to historically underserved farmers and ranchers, which contributed to a fourfold increase in participation by historically underserved producers in the Coronavirus Food Assistance Program 2 (CFAP 2), a key pandemic assistance program, since April 2021.
Additionally, in January 2021, Vilsack announced a temporary suspension of past-due debt collection and foreclosures for distressed direct loan borrowers due to the economic hardship imposed by the COVID-19 pandemic.