Farmers Home Administration - FmHA

What is 'Farmers Home Administration - FmHA'

The Farmers Home Administration - FmHA is an agency of the U.S. Department of Agriculture created to assist farmers and families living in rural areas by financing and insuring loans for housing and other farming-related needs. The Farmers Home Administration (FmHA) provides credit and technical assistance to rural families and communities through four major programs: a housing program, utilities program, business program and community development program. The agency has about 1,900 county and district loans offices nationwide.

BREAKING DOWN 'Farmers Home Administration - FmHA'

The Farmers Home Administration - FmHA was created to provide families with financing tools - such as loans and grants - to help them re-establish self-sufficient farming efforts in 1935 in the aftermath of the Great Depression. It was originally named the Resettlement Administration and subsequently changed names to Farm Security Administration, Farmers Home Administration and most-recently the Rural Economic and Community Development Service.

The FmHA was authorized by Congress in 1946 to provide financing for housing, business, and community facilities in rural areas. According to the U.S. Federal Home Loan Center, today the housing program of FmHA has a loan portfolio of $86 billion, administering almost $16 billion in loan guarantees, program loans and grants. The program’s full name is the USDA Rural Development Guaranteed Housing Loan program.

Historical Problems with FmHA

By the 1990s some members of Congress were becoming concerned with the large number of defaults on FmHA loans and the large losses the agency was accruing as a result of weak lending practices. So Congress directed the U.S. Government Accountability Office (GAO) to conduct a study. In 1992 the GAO published their report about FmHA. The report found several problems with FmHA. For example GAO identified that almost $14 billion, or about 70 percent of the FmHA direct loan portfolio at the time, was at risk of default, since the loans were held by delinquent borrowers or by borrowers whose debts had been rescheduled because of repayment difficulties. In that year, FmHA estimated potential losses of $1.2 billion, or about 28 percent of its guaranteed loan program.

Other problems identified by GAO included a direct loan program where field lending officials did not comply with FmHA loan-making and loan-servicing standards established to safeguard federal financial interests. The GAO said that FmHA estimated that, as of September 30, 1991, it had acquired about 3,100 farms from borrowers who had not repaid their loans. Overall GAO said management weaknesses at FmHA contributed to the longstanding loan management problems, including poor management information systems and weak financial controls.