New approach aims to get USDA ahead of farm debt problems

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Agriculture Secretary Tom Vilsack wants to see if County Agriculture Department employees can intervene before a grower is at risk of seizure. And he got funding from the Inflation Reduction Act to help him give it a shot.

“Instead of waiting for foreclosure action and creating an adversarial and strained relationship between (the Farm Service Agency) and the borrower because the borrower is having a bit of a hard time, we are now able to work with that borrower and to give him time and assistance and help to get them to a better place to keep them on the farm,” Vilsack told reporters on Tuesday.

Funding for his plan will come from the $3.1 billion earmarked in the IRA for debt relief for farmers in financial difficulty. Vilsack detailed the plan and announced Tuesday that the department is providing $800 million in short-term IRA debt relief.

Vilsack said FSA County Loan Officers – staff members he hailed as “really good at what they do” – can identify the warning signs and deal with a producer’s situation. before the words “foreclosure” or “bankruptcy” enter the conversation.

Tuesday’s announcement totaled about $1.3 billion: about $600 million for electronic payments to keep 11,000 farmers current on their loans; a $200 million fund to help farmers who have already faced bankruptcy but could still face Treasury Department holdbacks; $66 million to discount loans for 7,000 producers who used some COVID aid; and the remaining approximately $434 million to give the FSA the flexibility to mitigate foreclosure actions.

This latest pot of cash could take on particular significance if the Biden administration’s moratorium on foreclosures is not extended. For many producers facing the prospect of the moratorium being lifted and loan repayments coming due, help may be needed.

For this help to be provided, Vilsack envisions a scenario in which local FSA officials work on a case-by-case basis with growers.

“I don’t anticipate or expect at this point that we’re dealing with any type of application process,” he said. “We’re dealing with people sitting across the table saying, ‘OK, let’s figure it out, let’s see how we can put you in a better place.'”

Of the roughly 115,000 growers who have loans through the USDA — funding, according to Vilsack, is often extended after other options have been exhausted — about 15,600 borrowers have been identified as needing USDA’s new proactive regime. The vast majority of this total, approximately 14,000 producers, will be able to request rapid intervention to resolve loan servicing issues; the other 1,600 are more complex cases that could include more imminent bankruptcy or foreclosure.

The program comes as the Biden administration and congressional Democrats have worked to settle the debt of producers, especially those of color. Last year, Congress passed the US bailout and its debt forgiveness plan for minority-owned farmers. The language eventually enacted into law created a program to repay debt owed by socially disadvantaged producers and an additional 20% to each beneficiary to meet the tax implications of the relief.

But under the IRA, that plan was abrogated following a pushback in the courts. Instead, there was language for a $3.1 billion program for “distressed” borrowers and a separate $2.2 billion effort for producers who have been discriminated against through USDA loan programs. Vilsack said the latter program is being implemented, and federal officials are sorting through several thorny issues as they determine how to allocate funding.

“This isn’t the first time the federal government has offered compensation” to address past discrimination, Vilsack said. Specifically, he referred to the Pigford case which compensated black farmers, the Keepseagle case for Native American producers, the Love case for female producers and Garcia case for Hispanic producers.

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During those settlements, Vilsack said about 25,000 people received payments, with some receiving up to $250,000. “The question is, are these people coming back and are they able to get a new opportunity?”

“So there’s an opportunity here, I think, for us to address the issue of discrimination separately and distinctly from what we’re talking about here,” he added.

Under the IRA, there is no prohibition on a producer receiving help through the Distressed Borrower Relief detailed on Tuesday as well as the pending Discrimination Scheme which has yet to be announced, a- he declared. However, the new relief does not take into account tax implications, which Vilsack said individual producers should settle with their accountants.

The success of Vilsack’s FSA plan — and the ability of a slimming USDA workforce to carry it out — remains to be determined. The midterm elections could also put Republicans in charge of House or Senate House committees — or both — and offer conservatives the chance to constrain the new strategy and the money needed to fund it. The two top Republicans on the panels — Rep. Glenn Thompson, R-Pa., and Sen. John Boozman, R-Ark. — did not respond to requests for comment.

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