New Rules on Farm Loans Announced

March 29, 2002

Agriculture Secretary Ann M. Veneman Thursday announced new rules designed to make it easier and faster for farmers who have suffered losses due to natural disasters to get federal loans. Local Farm Service Agency offices will process all new Emergency Loan Program applications from farmers under these rules which are effective immediately.

"FSA farm loan employees initiated these changes to make the program more responsive to all farmers, from those who raise livestock to those who grow traditional crops like corn, wheat and soybeans," said Veneman. "Farmers can now borrow 100% of production losses rather than the previous 80%, and they will have to go through fewer steps to apply for a loan. These are the most significant changes to the program in more than 15 years."

Farmers now can borrow the full amount of their losses, up to the maximum $500,000 outstanding balance. This reduces the need for farmers to apply for additional assistance through other USDA loan programs. The change will benefit borrowers by decreasing the number of loan applications they must complete.

In addition, USDA will use established production information when available, rather than requiring borrowers to submit additional records to calculate qualifying production losses. USDA also has simplified steps local FSA staff must follow to determine applicant eligibility and loan amounts. These changes will reduce paperwork for borrowers and shorten loan processing time.

Livestock producers also should find the program more accessible. USDA says in the past, these producers, unlike farmers who grow crops like corn, soybeans and wheat, had a difficult time qualifying for emergency loans. USDA has updated loss determination methods, originally developed with crop production in mind, to accommodate the different production levels and margins of livestock production.

The Emergency Loan Program provides about $150 million annually to more than 2,500 farmers who cannot obtain commercial credit. The program helps farmers who have suffered physical or production losses in counties declared disaster areas by the President or Secretary of Agriculture.

Loans may be used to restore property, pay production costs associated with the disaster year, pay living expenses, reorganize the farming operation and refinance debts. USDA has not changed eligibility guidelines, which are set by law. To qualify, a farmer must have farmed in a declared disaster area or contiguous county; have suffered a 30% loss in crop production or a physical loss to livestock, livestock products, real estate or chattel property; be a citizen or hold permanent residency status; have an acceptable credit history; be unable to receive credit from commercial sources; and meet all other regulatory criteria. Producers must also be able to show they can repay the loan and have collateral to secure the loan.

Further information on the emergency loan program is available from local USDA service centers or on the FSA web site at: http://www.fsa.usda.gov.