What Is the Farmers Home Administration?

The Farmers Home Administration (FmHA) is a former U.S. Department of Agriculture (USDA) agency, created to finance and insure loans for rural families and farmers. The FmHA provided credit and technical assistance through housing, utility, business, and community development programs.

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. In 1961, Congress authorized the FmHA to broaden its bandwidth and finance general water projects and housing for non-farmers in rural municipalities.

FmHA has since been renamed multiple times and is currently known as USDA Rural Development.

$234.4 billion

The amount of USDA Rural Development's portfolio for its loan programs in 2021.

Historical Problems With FmHA

By the 1990s, some members of Congress were becoming increasingly concerned with the large number of defaults on FmHA loans and the substantial losses the agency was accruing as a result of weak lending practices. In 1992, Congress directed the U.S. Government Accountability Office (GAO) to conduct a study, which unearthed numerous problems with the FmHA.

Most notably, the report found that nearly $14 billion (70%) of the FmHA direct loan portfolio was at risk of default because the loans were held by delinquent borrowers, or by individuals whose debts were rescheduled in the wake of repayment difficulties. In that year, FmHA estimated potential losses of $1.2 billion, or about 28% of its guaranteed loan program.

The GAO also discovered that many field lending officials failed to comply with the loan-making and loan-servicing standards that the FmHA established to safeguard federal financial interests.

Furthermore, the GAO found that by September 30, 1991, the FmHA acquired an estimated 3,100 farms from borrowers who had not repaid their loans. Overall, the GAO concluded that FmHA management weaknesses contributed to the longstanding loan management problems, including inferior information systems and weak financial controls.

Termination of the Farmers Home Administration

Under the Agriculture Reorganization Act of 1994, in October 1995 the FmHA was abolished. Its functions were transferred to the Farm Service Agency at the USDA. In later years, following other reorganizations, these functions were ultimately transferred to USDA Rural Development, as it is known today.

What Did the Farmers Home Administration (FmHA) Do?

The Farmers Home Administration (FmHA) was created in 1946 to provide and guarantee loans for rural families and farmers. It managed housing, utility, business, and community development programs that provided credit and technical assistance. These functions are currently performed by USDA Rural Development.

Why Was the Farmers Home Administration (FmHA) Terminated?

Members of Congress became concerned when a significant number of FmHA loans defaulted and, in 1992, directed the U.S. Government Accountability Office (GAO) to conduct a study.  It found a multitude of problems related to weak lending practices. In 1994, the FmHA was terminated and its functions transferred to the Farm Service Agency at the USDA, and in the years that followed to USDA Rural Development.