| WASHINGTON (AP) Despite slumping crop prices in recent
years, delinquency rates on government farm loans have fallen
sharply because farmers now risk being cut off from credit if
they do not keep up their payments.
The Agriculture Department lends directly to farmers and
also guarantees loans through private banks.
About 21 percent of the $8.7 billion in outstanding direct
loans was delinquent as of September, compared with 41 percent
in 1995, the General Accounting Office reported Wednesday.
The delinquency rate on the departments $8 billion in
guaranteed loans has held relatively steady at 3.5 percent.
Rules imposed by Congress in 1996 prohibited farmers from
getting new loans if they are delinquent on an existing loan
or have debt forgiven.
Prior to these changes, there was no disincentive for
borrowers to have ... debts written off rather than to repay
them, Carolyn Cooksie, deputy administrator of the loan
programs, told the Senate Agriculture Committee.
The new rules prompted borrowers to more carefully
consider the consequences of failure to repay, she said.
The department was losing about $3 billion a year on bad
loans in the early 1990s. That has now been cut to about $500
million a year.
Thats still a lot of money but a significant
improvement since our credit reform legislation, said Sen.
Richard Lugar, R-Ind., chairman of the Senate committee. Given
low farm commodity prices this is a remarkable achievement.
The loan programs still bear watching, however, because of
exemptions to the rules that lawmakers have enacted since
1996, according to the GAO, the auditing arm of Congress.
One major farm group, the National Farmers Union, says the
restrictions may have gone too far. The organization has asked
lawmakers to consider easing them further.
The Agriculture Department is the lender of last resort for
farmers unable to get private credit. |