Summary

In response to a congressional request, GAO provided information on the current financial condition of Farmers Home Administration (FmHA) borrowers and the farm loan portfolio, as shown by the Farmer Program Management Information System.

GAO found that: (1) the average borrower had a debt-to-asset ratio of 83 percent; (2) 20 percent of the borrowers were technically insolvent and an additional 31 percent of the borrowers were having extreme financial problems; (3) in the first half of 1985, FmHA made new loans to 7,213 technically insolvent borrowers and 12,047 borrowers having extreme financial problems; (4) while the average borrower had a yearly negative cash flow, 15 percent had a positive cash flow; (5) because FmHA revised its servicing policy in 1982 to allow borrowers to obtain additional farm loans without considering the borrowers' ability to repay prior debts, it made loans to many farmers who had limited repayment ability; (6) as of June 30, 1985, borrowers owed a total of $8.1 billion, of which borrowers in extreme financial difficulty or technical insolvency owed $5.1 billion; and (7) in November 1985, FmHA revised its servicing policy to provide additional credit only to borrowers who were current on their loan payments.