OCTOBER 21, 2022:
Distressed borrowers with qualifying US Department of Agriculture farm loans have received $800 million in assistance to keep them on their farms.
USDA Secretary Tom Vilsack says USDA and its Farm Service Agency are changing the way they deal with distressed borrowers to make sure producers can keep farming.
“In the past, that approach has been to monitor performance and, in the event that people were unable to make payments, the USDA would then go through the legal processes of collecting the debt. We’re going to focus on a more proactive approach to avoid those circumstances and situations and try to address and assist folks before they get to a point of no return.”
Vilsack says the money has provided immediate help for more than 13,000 distressed USDA farm loan borrowers, but there are a lot of other farmers in similar predicaments.
“One group is roughly 1600 borrowers who are 60 days or more delinquent, but who are now engaged in a bit more complicated circumstances. Either they’re in bankruptcy or they were already in foreclosure at the time that moratorium went into place, and we will be working with them on a case-by-case basis to figure out ways in which we can handle and deal with the delinquency that they find themselves and the circumstances that they find themselves in. We also know that there are about 14,000 borrowers in our loan portfolio who we suspect, in looking at and understanding their current circumstances, may be confronted with a cash flow challenge for a variety of reasons. So, we’ll be working on a case-by-case basis with those roughly 14,000 borrowers to assist them and to provide resources from the $500 million we’ve set aside so that they too have peace of mind.”
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“At-risk farmers across the country have needed a lifeline for far too long. As a former FSA State Executive Director, I know firsthand what happens to farmers who receive too little, too late, and that has implications that go well beyond just the loss of a farm operation, which is devastating enough. But the impact on that producer, his or her family and that personal intergenerational loss, the loss of multiple generations of a family commitment to stay on that land and to keep farming is why we make this commitment.”
The funds are a part of the $3.1 billion in assistance provided through the Inflation Reduction Act.
More details on each of the assistance categories, including a downloadable fact sheet, are available on the Inflation Reduction Act webpage on farmers.gov.
OCTOBER 20, 2022:
The U.S. Department of Agriculture revealed this week (Oct. 18, 2022) that distressed borrowers with qualifying USDA farm loans have already received nearly $800 million in assistance, as part of the $3.1 billion in assistance for distressed farm loan borrowers provided through Section 22006 of the Inflation Reduction Act (IRA). The IRA directed USDA to expedite assistance to distressed borrowers of direct or guaranteed loans administered by USDA’s Farm Service Agency (FSA) whose operations face financial risk.
The announcement kicks off a process to provide assistance to distressed farm loan borrowers using several complementary approaches, with the goal of keeping them farming, removing obstacles that currently prevent many of these borrowers from returning to farming, and improving the way that USDA approaches borrowing and servicing. Through this assistance, USDA is focused on generating long-term stability and success for distressed borrowers.
“Through no fault of their own, our nation’s farmers and ranchers have faced incredibly tough circumstances over the last few years,” said Agriculture Secretary Tom Vilsack. “The funding included in today’s announcement helps keep our farmers farming and provides a fresh start for producers in challenging positions.”
Work has already started to bring some relief to distressed farmers. As of today, over 13,000 borrowers have already benefited from the resources provided under the Inflation Reduction Act as follows:
- Approximately 11,000 delinquent direct and guaranteed borrowers had their accounts brought current. USDA also paid the next scheduled annual installment for these direct loan borrowers giving them peace of mind in the near term.
- Approximately 2,100 borrowers who had their farms foreclosed on and still had remaining debt have had this debt resolved in order to cease debt collections and garnishment relieving that burden that has made getting a fresh start more difficult.
In addition to the automatic assistance already provided, USDA has also outlined steps to administer up to an additional $500 million in payments to benefit the following distressed borrowers:
- USDA will administer $66 million in separate automatic payments, using COVID-19 pandemic relief funds, to support up to 7,000 direct loan borrowers who used FSA’s disaster-set-aside option during the pandemic to move their scheduled payments to the end of their loans.
- USDA is also initiating two case-by-case processes to provide additional assistance to farm loan borrowers. Under the first new process, FSA will review and assist with delinquencies from 1,600 complex cases, including cases in which borrowers are facing bankruptcy or foreclosure. The second new process will add a new option using existing direct loan servicing criteria to intervene more quickly and help an estimated 14,000 financially distressed borrowers who request assistance to avoid even becoming delinquent.
More details on each of the categories of assistance, including a downloadable fact sheet, are available on the Inflation Reduction Act webpage on farmers.gov.
Similar to other USDA assistance, all of these payments will be reported as income and borrowers are encouraged to consult their tax advisors. USDA also has resources and partnerships with cooperators who can provide additional assistance and help borrowers navigate the process.
The announcement today is only the first step in USDA’s efforts to provide assistance to distressed farm loan borrowers and respond to farmers and to improve the loan servicing efforts at USDA by adding more tools and relaxing unnecessary restrictions. Additional announcements and investments in assistance will be made as USDA institutes these additional changes and improvements.
This effort will ultimately also include adding more tools and relaxing unnecessary restrictions through assistance made possible by Congress through the IRA. Further assistance and changes to the approach will be made in subsequent phases.
Background
USDA provides access to credit to approximately 115,000 producers who cannot obtain sufficient commercial credit through direct and guaranteed farm loans, which do not include farm storage facility loans or marketing assistance loans. With the funds and direction Congress provided in Section 22006 of IRA, USDA is taking action to immediately provide relief to qualifying distressed borrowers whose operations are at financial risk while working on making transformational changes to how USDA goes about loan servicing in the long run so that borrowers are provided the flexibility and opportunities needed to address the inherent risks and unpredictability associated with agricultural operations and remain in good financial standing.
In January 2021, USDA suspended foreclosures and other adverse actions on direct farm loans due to the pandemic and encouraged guaranteed lenders to follow suit. Last week, USDA reiterated this request to guaranteed lenders to provide time for the full set of IRA distressed borrower assistance to be made available before lenders take irreparable actions.
Producers can explore available loan options using the Farm Loan Discovery Tool on farmers.gov (also available in Spanish) or by contacting their local USDA Service Center. Producers can also call the FSA call center at 877-508-8364 between 8 a.m. and 7 p.m. Eastern. USDA has tax-related resources available at farmers.gov/taxes.
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