What Is the Farmers Home Administration?
Let me explain what the Farmers Home Administration, or FmHA, was. It was a former agency under the U.S. Department of Agriculture, or USDA, set up to finance and insure loans for rural families and farmers. The FmHA offered credit and technical help through programs for housing, utilities, business, and community development.
Key Takeaways
- The Farmers Home Administration (FmHA) was a government agency created to help dispense loans to farmers and rural communities following the Great Depression.
- It is known today as USDA Rural Development.
- According to a U.S. Government Accountability Office report, the FmHA faltered by the 1990s due to weak lending practices.
- The FmHA was abolished in October 1994 and its functions transferred to another agency at the USDA.
FmHA Loans
In 1946, Congress authorized the Farmers Home Administration to provide families with financing tools such as loans and grants aimed at helping them re-establish self-sufficient farming efforts, following the Great Depression. By 1961, Congress allowed the FmHA to expand and finance general water projects and housing for non-farmers in rural areas.
The FmHA has been renamed several times since then and is now called USDA Rural Development. As of 2021, USDA Rural Development's loan programs portfolio amounted to $234.4 billion.
Historical Problems With FmHA
By the 1990s, some members of Congress grew concerned about the high number of defaults on FmHA loans and the big losses from weak lending practices. In 1992, they directed the U.S. Government Accountability Office, or GAO, to study it, and the report found many issues.
The most notable finding was that nearly $14 billion, or 70%, of the FmHA's direct loan portfolio was at risk of default, held by delinquent borrowers or those with rescheduled debts due to repayment problems. That year, FmHA estimated potential losses of $1.2 billion, about 28% of its guaranteed loan program.
The GAO also found that many field lending officials didn't follow the FmHA's standards for making and servicing loans to protect federal interests. Additionally, by September 30, 1991, the FmHA had acquired around 3,100 farms from borrowers who hadn't repaid their loans.
Overall, the GAO concluded that FmHA's management weaknesses, including poor information systems and weak financial controls, contributed to these ongoing loan management problems.
Termination of the Farmers Home Administration
Under the Agriculture Reorganization Act of 1994, the FmHA was abolished in October 1994. Its functions were transferred to the Farm Service Agency at the USDA. In later years, through other reorganizations, these functions ended up with USDA Rural Development, as it's known today.
What Did the Farmers Home Administration (FmHA) Do?
The Farmers Home Administration was created in 1946 to provide and guarantee loans for rural families and farmers. It handled programs for housing, utilities, business, and community development, offering credit and technical assistance. These roles are now carried out by USDA Rural Development.
Why Was the Farmers Home Administration (FmHA) Terminated?
Congress became concerned about the significant number of FmHA loan defaults, so in 1992, they had the GAO conduct a study. It revealed many problems tied to weak lending practices. In 1994, the FmHA was terminated, and its functions were transferred to the Farm Service Agency at the USDA, and later to USDA Rural Development.
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