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Agency Seeks to Allay Farm Foreclosure Fear

January 25, 1986|PAUL HOUSTON | Times Staff Writer

WASHINGTON — Agriculture Department officials seemed to satisfy a group of perturbed senators Friday that the Farmers Home Administration is not beginning massive foreclosures against farmers who are behind in their loan payments.

Panic hit the farm community earlier this month when word got out that the FmHA had drafted harshly worded foreclosure warnings to about 70,000 borrowers, some of whom were only $100 delinquent.

Calling the notices "alarming," Sen. Thad Cochran (R-Miss.), chairman of the Senate Agriculture appropriations subcommittee, called a hearing attended by nine equally alarmed colleagues, including five farm-state Republicans who face tough reelection campaigns this year.

At the hearing, Agriculture Under Secretary Frank W. Naylor Jr. said that the notices have been toned down and that the government "will continue to show compassion" in helping strapped farmers restructure their debts to avoid losing their property.

Lender of Last Resort

The assurances were echoed by Vance L. Clark, administrator of the FmHA, traditionally the lender of last resort for farmers who cannot obtain credit from other sources. Clark said that his agency is interested mainly in cracking down on borrowers who are more than three years in arrears or who are suspected of fraudulently handling property that had been put up as collateral for loans.

He said such borrowers would be sent a notice of "intent to take adverse action," giving them 30 days to meet with an FmHA agent to determine if their loan qualified for restructuring. If not, foreclosure would begin, he said.

Borrowers who are fewer than three years delinquent also will be asked to come in to "work out their loan problems" but will not receive an "adverse action" notice, Clark said.

"The idea is to have the farmer and the FmHA county supervisor sit down together and develop a work-out plan that yields a payment schedule that can be handled within the farmer's cash flow," he told the senators.

'More Sensitive'

"As a farmer myself, I say hallelujah," Sen. Mark Andrews (R-N.D.) said of the revised notices.

But, he added sternly, "just remember, we're looking over your shoulder."

Cochran said he also was pleased that the newly drafted notices "are more sensitive, without a doubt."

However, he expressed concern that spending cuts forced by the new Gramm-Rudman balanced-budget law would reduce the number of local FmHA agents and make it "impossible" to process the expected flood of requests for deferral of loan payments.

On a related matter, Andrews and Sen. David L. Boren (D-Okla.) protested that an FmHA regulation issued last month had called for denying a loan to any farmer who planted a crop that was in surplus nationally.

"That means any commodity except for vegetables would be disqualified for a loan," Boren said incredulously. "How unfair is that?"

Naylor, conceding that the regulation had been poorly worded, said it had been redrafted to deny loans only to farmers who increased their production levels.

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