USDA Tells of Rules to Relieve Some Indebted Farmers

August 9, 2000

USDA has announced rules changes that could bring relief to some farmers who are facing repayment of a part of their debt that was forgiven by the government a decade ago. As a condition of the debt write-down made available since the late 1980s, federal farm borrowers have been required to sign a share appreciation agreement under which the government could recapture part of the debt forgiven if the farm appreciated in value during the 10 years of the agreement.

The department says the program has made it possible for "thousands of borrowers" unable to pay their debts to avoid foreclosure and continue farming. The agreement commits the borrower to repay 70% during the first four years and 50% of any positive appreciation in the farm’s value, up to the amount written off, from the fifth year to the 10^th year of the agreement if certain actions occurred.

Under the revision in the regulations, which become effective when published in the Federal Register later this month, three changes are made in the shared appreciation agreement: it provides a deduction for certain capital improvements to the farm in determining appreciation, possibly reducing the amount of recapture due; it allows recapture to be paid off over a 25-year period in most instances at a special low interest rate, and it reduces the terms of new agreements from 10 years to five.

Regulatory changes made last year allowed borrowers with agreements maturing in 1999 and 2000 to suspend payment of recapture for up to three years if they could not pay. The benefits of the latest changes will be available to all borrowers whose agreement accounts currently are in suspension as well as agreements that mature in this and succeeding years.