USDA Details Loan Debt Relief Plans

DES MOINES (DTN) -- USDA on Tuesday announced it has provided $800 million in debt relief so far to distressed borrowers of Farm Service Agency (FSA) loans as part of $3.1 billion in promised aid.

The list of programs and support will help as many as 34,000 borrowers with USDA direct or guaranteed loans.

The department on Tuesday kicked off a process to provide aid to distressed farm loan borrowers "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," USDA stated.

The $3.1 billion comes from the Inflation Reduction Act (IRA) signed into law in early August. The funds replace a separate loan debt relief program for socially disadvantaged farmers that had been blocked by federal lawsuits. Still, leaders of the National Black Farmers Association and others sued the federal government earlier this month over those provisions being rescinded from law.

See, "Litigation Over Farm Debt Relief," https://www.dtnpf.com/…

Agriculture Secretary Tom Vilsack addressed the difference in the new debt payments, which will pay off debt for distressed farmers regardless of race or gender.

"The key here for the activity and work that we're doing under this program is to focus on distressed borrowers," Vilsack said. "Those distressed borrowers might be Black farmers, they might be Hispanic farmers, they might be beginning farmers, they might be veteran farmers, they might be women farmers, they might be organic farmers, they might be conventional crop producers, they could be livestock producers."

The only similar characteristic for these distressed farmers is that they received FSA loans when they had no other place to turn, Vilsack said.

"They couldn't get credit anywhere else. We were the last resort for all of these borrowers. And two, they didn't make their payment. They were in a distressed circumstance."

As of Tuesday, USDA stated more than 13,000 distressed borrowers have already benefited from the IRA debt relief. USDA stated roughly 11,000 farmers who were delinquent on direct or guaranteed loans "had their accounts brought current. USDA also paid off the next scheduled annual installment on those direct loans, the department stated.

"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."

Out of about $800 million paid out, USDA officials stated the average debt-relief payment on a direct loan is about $52,000. For loans that have gone into foreclosure or court action, the average payment is about $101,000. On guaranteed loans, which have a higher loan limit, the average payoff is about $172,000.

Jewel Bronaugh, USDA's deputy secretary, said, "Today's announcement is long overdue, and honestly, that's an understatement. You know, at-risk farmers across the country have been in need of a lifeline for far too long."

Bronaugh, a former state FSA director in Virginia, said she had seen the hardships farmers face once farmers receive too little support 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 and generational loss the loss of multiple generations of a family commitment to stay on that land and to keep farming," Bronaugh said.

Another 2,100 or so borrowers who had their farms foreclosed on but remained in debt to USDA "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," USDA stated. Vilsack said $200 million will be set aside to help these producers to end garnishments.

USDA 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. Their loans will be made current as well.

-- FSA also will review and assist with delinquencies from 1,600 complex cases, including cases in which borrowers are facing bankruptcy or foreclosure before the debt freeze went into place. Vilsack said these debt cases will be more complicated to resolve because the loans are already in bankruptcy or some other court action.

-- A second 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.

USDA noted all debt-relief payments will be reported as income and borrowers are encouraged to consult their tax advisers on the impact of that income.

Last week -- in a move to address past discrimination against minority farmers -- USDA announced a 30-day comment period on another $2.2 billion in aid under Section 22007 of the IRA to request information on "how USDA should design and administer the program." USDA wants to know how to use those funds to support former borrowers and identify those who experienced discrimination. USDA also wants to know how it should set up the criteria to select the outside group or groups that would administer that program.

Annually, USDA provides credit to approximately 115,000 producers who cannot obtain sufficient commercial credit through direct and guaranteed farm loans.

USDA suspended foreclosures and other adverse actions against direct farm loans in January 2021 due to the pandemic. USDA also encouraged its guaranteed lenders to do the same. Last week, the department reiterated the 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."

USDA also will hold three listening sessions, the first of which is planned for Oct. 20 at 11 a.m. Central. USDA listening sessions on aid to farmers who have experienced discrimination: https://www.usda.gov/…

More details on the debt-relief plans can be found at www.farmers.gov

Chris Clayton can be reached at Chris.Clayton@dtn.com

Follow him on Twitter @ChrisClaytonDTN

(c) Copyright 2022 DTN, LLC. All rights reserved.