USDA Rolls Out Debt Relief Program As More Socially Disadvantaged Producers Come Seeking Relief | 2021-05-25

USDA Rolls Out Debt Relief Program for Socially Disadvantaged Farmers, Sending Letters of Offer to Producers Eligible for Direct Loan Relief, Even as it Debates How to Repay Guaranteed Loans faced with the concerns of banks worried about the loss of income.

The US bailout has allocated $ 4 billion for the debt relief plan, but the USDA can exceed that amount. The law says the ministry can spend “as much as it needs” on the program, which offers 120% debt relief.

The extra 20% goes to pay taxes on the payments, and Farm Service Agency administrator Zach Ducheneaux said USDA plans to partner with local community groups to provide free tax advice to growers. .

According to the USDA, there are approximately 14,400 SDA borrowers with approximately $ 2.7 billion in debt, along with another overdue amount of over $ 400 million. Over 80% of borrowers hold direct loans and account for about 65% of debt, or about $ 2 billion. The rest, the secured lenders, have about $ 1 billion.

Meanwhile, the FSA finds that more producers than those on the books as socially disadvantaged are coming forward to collect the payments.

The department doesn’t have exact figures on how many producers have done so, but Ducheneaux and others involved in the process said they weren’t surprised, given the history of discrimination at which farmers of color face.

Ducheneaux said they won’t be blamed for producers not checking the appropriate box on their AD-2047s in the past. Instead, they will be able to check this box now to show that they are eligible for payments.

Administrator of the FSA Zach Ducheneaux

“If they make this designation, they will receive a letter of offer,” said Ducheneaux. “They will have to put their signature attesting to this in this letter of offer.”

“The department as a whole and the Farm Service Agency have a policy of trusting the farmer,” he said.

A USDA spokesperson elaborated on the matter. “As all loan recipients know, when you sign a document for a loan of any kind, it is a legal document that carries an obligation under the law. In addition to due diligence. standard of the FSA on all loan programs, section 1006 of the [American Rescue Plan] provides $ 5 million to the USDA Inspector General’s office to monitor how funds have been disbursed according to law. We are waiting and anticipating the OIG to carry out its functions. “

Ducheneaux cited a VICE News article earlier this month on the debt relief program that included comments from a Louisiana FSA county commissioner opposed to the debt relief program that said borrowers minority are in debt “because they spend their money on other things. Their priorities might not be right.

“Imagine you could pass for white and this is the environment you work in,” said Ducheneaux. “You bet your last dollar that you’re not going to tick the African American or American Indian box.”

“This is the reality that we are trying to overcome,” he said. “And that’s why we were very welcoming from the start. Come in, update your AD-2047. We put it on our website.

Banks, however, fear losing anticipated income from interest payments on USDA-guaranteed loans when they are suddenly repaid. In a letter sent last month to Agriculture Secretary Tom Vilsack, they demanded reimbursement of lost future income.

“If the USDA does not compensate lenders for such disruptions or avoid sudden loan repayments, the likely outcome will be less access to credit for those seeking USDA guaranteed loans in the future,” including SDA farmers / ranchers, ”the American Bankers Association, Independent Community Bankers of America and the National Rural Lenders Association said in the letter. They also expressed concern about the damage to secondary markets – the brokers and loan aggregators who buy and trade loans from banks.

“We’re just saying, look at the consequences, recognize that there are going to be costs… and provide compensation to the lenders so that we don’t get hurt because some of them are committed to serving minority borrowers and young people. , starting small farmers through the guaranteed loan program, ”said Mark Scanlan, senior vice president of agriculture and rural policy at ICBA. Agri-Pulse.

“The USDA has the flexibility to make sure that lenders are not harmed by the way this program is implemented,” he said, noting that bankers “are simply making suggestions to the USDA. on implementation “, not threatening to interrupt lending to socially disadvantaged farmers.

Marc Scanlan

Mark Scanlan, ICBA

“Lenders are going to look at how this program is run and see how much they want to participate in these programs – not [just] socially disadvantaged farmers, but the program as a whole guaranteed, ”he said.

Interested in more news on agricultural programs, trade and rural issues? Sign up for a four week free trial of Agri-Pulse. You will receive our content – absolutely free – during the trial period.

He cited the example – also mentioned in documents sent to the USDA – of a bank in Georgia with a portfolio of over $ 200 million in loans to socially disadvantaged farmers. The loss of this loan amount would force the bank to adopt “a completely different business plan”.

Ducheneaux asserts that banks are “an essential partner” in providing loans to farmers “because we do not have the budgetary authority, as we currently operate, to meet all the credit needs that exist in agriculture and breeding “. The FSA educated itself “to better understand what the relationship between secured lenders and borrowers looks like,” as well as bankers’ concerns about secondary markets.

“When liquidity tightens, lenders tend to sell a large chunk of these loans on the secondary market,” says Scanlan, replenishing banks’ cash flow.

“We need to have a relationship with the banks and we are convinced that we will not undermine the confidence of the collateral in the secondary market with our efforts,” said Ducheneaux.

Additionally, when it comes to concerns about “sudden” payments, he says, “It’s not like you don’t get the money. You get the money. You just get it sooner than you would like, which I guess is a scheduling issue. “

Bankers will benefit, he says. “Each of these banks will have a customer who has been virtually cured, who will have assets free to commit to new loans,” he said. “The bank can turn around and give them an operating loan for the next year, which usually has a higher rate of return than these term loans anyway.”

Scanlan, however, says that “it is the sudden and dramatic impact” of the payment that is of concern. “Suddenly you took $ 200 million out of your business plan from new money making assets.” A possible impact, he says: “You don’t need the staff you had to handle this anymore. And, especially for bankers in rural areas, it will be difficult to offset that volume.

“If you were a farmer and you had a few thousand acres and all of a sudden you lost 30% of your farm, that would be pretty big,” Scanlan says.

Bankers want the USDA to “look at these implications and do some math. The lenders have said they are ready to meet with the USDA.

He also points out that the banks believe the USDA has the statutory power to make lenders unharmed. “The USDA said they can establish a carbon bank through the CCC,” he says. “They definitely have the power to do something like this, which should be pretty straightforward and easy to do. And in this case, we are talking about banks that have large amounts of these loans.

Ducheneaux says USDA has obtained information from lenders on SDA loans “so we can prepare to launch this second [Notice of Funding Availability] and also dealing with our secured loan clients. The notice of availability of funds on direct loan debt repayments indicated that the NOFA for the guaranteed loan portion of the program would be released within 120 days.

He also said the department was not deviating from its plan to make lump sum payments instead of sending the payments over time, as suggested by bankers.

“We’re the Farm Service Agency, and we’re going to put the farmer first,” Ducheneaux said.

He also noted that the USDA has agreed to pay all prepayment penalties, but Scanlan says that’s “not much of a problem” as they “only apply to a small percentage of loans made by. the banks”.

Todd Van Hoose, president and CEO of the Farm Credit Council, the trade association for the farm credit system, said he had not been involved in the bankers’ efforts.

“We hear where they’re coming from, but we’re a little different,” he said. “We belong to our customers and we will act in their best interests. “

Van Hoose said: “We’re saying to Administrator Ducheneaux and his team, in essence, just ask us for a winning statement.”

But he also notes that repaying secured loans can be a complex exercise.

“Some are annual paying agricultural mortgages, which are quite easy to calculate”, but others are lines of credit, which can be difficult to calculate with the planting season and the purchase of seeds and inputs ” , he said.

Todd Van Hoose

Todd Van Hoose, Farm Credit Council

Producers are “pulling on their lines of credit like they’re supposed to,” he says. “And so the numbers on how much someone has to change all the time”, which makes the guaranteed part of the program “quite complex”.

The bankers’ arguments do not suit John Boyd, head of the National Black Famers Association.

“It’s not a priority for the National Black Farmers Association, I’ll be honest with you,” Boyd said when asked if banks should get some type of rebate.

“I think that was the wrong time” for the bankers to say, “Hey, we have to make more money with this,” he said. “This is my personal opinion.”

He also stressed, however, that he had no problem with white farmers receiving benefits from farm programs. “I mean that because it’s not part of the stories,” he said. “I have no problem with white farmers getting the money. They deserve any kind of loan or benefit that the country has to offer. The problem, he said, is accessibility.

“We have the best farm programs available in the world, but they don’t reach black farmers. That’s the problem, ”said Boyd, who urged the USDA to step up its debt relief efforts.

Ducheneaux says he agrees with Boyd that “we have to do this as soon as possible”.

For more information, visit www.Agri-Pulse.com.

About Jermaine Chase

Check Also

Using the cloud for income and employment verification

In a recent Equifax survey, nearly 40% of dealerships said they were still not investing …

Leave a Reply

Your email address will not be published.