What Is the Farmers Home Administration?

The Farmers Home Administration (FmHA) is a former U.S. Department of Agriculture 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. During the height of its activity, the agency operated at least 1,900 county and district loan offices nationwide.

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. 
  • Currently known as the USDA Office of Rural Development, this agency's housing loan program has an $86 billion loan portfolio and has doled out approximately $16 billion in grants, guarantees, and program loans.
  • According to a U.S. Government Accountability Office report, the FmHA faltered by the 1990s, due to the failure of loan recipients to pay back a collective $14 billion in direct loans.
  • By September 30, 1991, the FmHA seized an estimated 3,100 farms from delinquent borrowers.

Understanding the Farmers Home Administration (FmHA)

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. It has since been renamed multiple times and is presently known as the USDA Office of Rural Development.

According to the U.S. Federal Home Loan Center, this agency's housing loan program boasts a loan portfolio of $86 billion. It has administered nearly $16 billion in loan guarantees, program loans, and grants.

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

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.