FmHA will normally grant only a one-year lease under this program; however, leases may be made for up to three years. Farmers/ranchers who have no real prospect of purchasing the property at the end of a one-year lease should request a threeyear lease with option to buy. То be eligible for this program, a farmer/rancher must have sufficient experience, management skills, and financial resources to make the farming/ranching operation work. The FmHA county supervisor must look at past financial and production records to determine if the previous operation failed due to circumstances beyond the borrower's control. These circumstances could include such things as natural disasters, livestock disease, high interest rates, and farm commodity prices that were below cost of production. The lease price must reflect the average annual income that can be made from farming/ranching the property. This is called the "capitalization value". If FMHA denies the lease application, the farmer/rancher has a right to appeal. If an appeal is requested, FmHA cannot sell or lease the property to anyone else until the entire appeal procedure is concluded. Debt Settlement A third provision in the 1985 Farm Bill expanded FmHA's authority 5 to compromise, adjust, or reduce debt. For years, FmHA has had the authority to compromise, adjust, charge-off, and cancel debt. 6 However, it has been the agency's policy to use this 5 6 Food Security Act of 1985, Pub. L. No. 99-198, § 1309, 99 Stat. 1354, 1523 (1985). Proposed new regulations were published July 3, 1986. They had not been finalized when this publication went to press. 7 C.F.R. Part 1864. authority only after all of the borrower's property has been liquidated. settlement The legislative history regarding the new debt provisions suggests that Congress intended FmHA to enter into "workout" agreements before liquidation and foreclosure. The proposed regulations of July 3, 1986 do not substantially change or expand the debt settlement authorities and still seem to require prior liquidation. Whether FmHA's policies on debt settlement will change with the final regulations remains to be seen. FmHA Hinders Programs The dwelling retention, farmland retention, and debt settlement programs could easily be very beneficial to borrowers who are threatened with the loss of their land, equipment, livestock, and crops. However, Fm HA regulatory procedures and policies prevent borrowers from obtaining "workout" agreements that reflect this authority. FmHA will not make any commitments on the terms of dwelling retention, farmland retention, or debt settlement until after the chattels have been liquidated and real property is in Fm HA inventory. These procedures prevent borrowers from negotiating "workout" agreements with FmHA "up front". This forces borrowers to fight FmHA adverse actions all the way through the administrative appeal process and possibly into the judicial arena. Many borrowers who attend loan servicing conferences with their county supervisors are advised that loan servicing will not work. Then they are advised that if they voluntarily convey the property to FmHA, they can get dwelling retention, farmland retention, and debt settlement. No borrower should convey property to FHA voluntarily in hopes of obtaining such relief. Borrowers should continue with the appeals of loan servicing denials. Failure to do so may make them ineligible for dwelling retention and debt settlement. If borrowers wish to voluntarily convey property, they should insist on getting agreements, including lease terms and option prices for dwelling retention and family farmland retention, in writing prior to any conveyance. Any debt settlement agreements should also be in writing prior to conveyance. The writing must be signed by the FmHA official who has the authority to make that agreement. In most cases, this will not be the county supervisor. Usually, either state director or national administrator approval must be obtained on any agreements. debt settlement FARMERS' LEGAL ACTION GROUP, INC. 1301 Minnesota Building 46 East Fourth Street St. Paul, Minnesota 55101 (612) 223-5400 ८ James T. Massey EXECUTIVE DIRECTOR TO: SPECIAL TELEPHONE #: 612/223-5403 MEMORANDUM ADVOCATES, FARM GROUPS, HOTLINES, AND OTHERS Lynn A. Hayes Randi Ilyse Roth Juliet M. Tomkins ATTORNEYS Enclosed is a packet of informational materials that should help you in advising FmHA farmer program borrowers. The packet includes: A memorandum in question and answer form that explains the Coleman decisions; 1. 2. A press release; 3. A copy of the important parts of the May 7, 1987 4. Coleman decision; and A copy of the June 2, 1987 Coleman decision. For your information, we have set up a telephone number (612/2235403) in our office to handle calls from advocates, farmers, and attorneys who need additional information about the Coleman decisions. We would appreciate it if you would simply provide copies of the question and answer form to all farmers who did not receive the "Notice of Acceleration" before May 7, 1987. Farmers who were accelerated prior to May 7, 1987 should call the telephone number above, or have you call on their behalf, so that we can keep track of the 13,000 to 14,000 who received those acceleration notices. We will have a law clerk answering that line. answer questions about the Coleman decisions. She is trained to Anything that goes beyond the decisions themselves she probably will not be able to answer. If you need additional information that the law clerk cannot provide, please ask her to give one of our attorneys a message. We are now discussing legal strategy to deal with the 14,000 people who were accelerated prior to May 7, 1987. We may be asking the court to extend further protections to those 14,000 people, or to at least require FmHA to send them a notice of the court's decisions. We also hope to eventually put together a packet of sample pleadings that attorneys can use when filing individual lawsuits or defending against foreclosure on behalf of these 14,000 borrowers. We will do the best we can to keep you informed of our strategies and what materials will be available. We would appreciate anything you can do to assist in getting the question and answer form to as many FmHA borrowers as possible. /acp Enclosures |