USDA is trying to ease the ongoing credit crunch in farm country that Ag bankers fear could worsen without a new farm bill this year. The American Bankers Association recently warned Congress the lack of a new farm bill this year could force more producers to refinance debt, a risky practice given low crop prices.
But FSA Administrator Zach Ducheneaux says his agency is launching a new program to help financially distressed borrowers. He says, “Oftentimes, what producers need is just a little breathing room, just that payment moved to the back of the note. We can do that for producers that are on our portfolio as of September 25th.”
Setting a payment aside lowers the loan rate as Ducheneaux says, “Instead of accruing interest at the already established rate, it’s going to accrue interest at one-eighth of a percent.” That would avert a “ballooning” of payments as the loan matures.
Separately, Ducheneaux concedes FSA loan terms may have already been too stringent, something USDA’s trying to fix in a new rule. He says, “Before the effective date of this rule, FSA would take more security than was needed to preserve the taxpayer interest in the loan.” Sometimes that was up to 150 percent. Now, he says “So with this rule, we’re announcing that not more than 125 percent security will be taken in any loans that we make.”
Plus, a chance to reduce security to that amount on outstanding loans. All of which could help producers get better terms from Ag lenders, with more assets free of FSA encumbrances.
Story by Matt Kaye/Berns Bureau; courtesy of NAFB News Service