Summary: Pursuant to a congressional request, GAO provided information on the Farmers Home Administration's (FmHA) interest rate reduction (IRR) program for its guaranteed farm loans.
GAO found that: (1) by the end of fiscal year (FY) 1988, FmHA had obligated about $49 million of its $490-million IRR authorization on 7,306 loans totalling about $841 million and involving 5,287 different borrowers; (2) total IRR obligations more than doubled between FY 1986 and 1987, but declined in FY 1988; (3) FmHA and private lenders cited the high risk of financial failure and the volume of loan processing paperwork as reasons for limited IRR participation; (4) simplified paperwork and new provisions reducing interest rates on farm acquisition loans and requiring lenders to consider IRR before foreclosing on a delinquent loan could increase participation; (5) the potential budgetary impact of the guaranteed loans under the IRR program versus direct loans depended on such factors as the timing of government disbursements, loan interest charges, and loan repayments; (6) FmHA approved guaranteed loans under the IRR program to borrowers who did not meet program requirements; and (7) FmHA believed that most of the private lenders who were willing to participate in the program were already doing so.
