ATTACHMENT B 2-13-87 FOR YOUR INFORMATION TO ALL FIELD OFFICES IN NORTH DAKOTA SUBJECT: Leasing and Sale of Furm Inventory Property 10: All State Directors, State Directors-at-Large You are to IMMEDIATELY carry out the policy found in the regulations limiting the leasing of certain farm inventory property. FHA instruction 1955-6, Section 1955.66, states that leasing may be used when it is CLEARLY in the best interest of the lovernment. This means that a lease will be signed only if it is determined that it is the Government's best financial interest to lease the farm. This decision will be made by the State Director on a case by case basis. YOU MUST CONTINUE TO OFFER TO LEASE FARMS 10 PREVIOUS OWNERS OR UPERATORS of the property. Such Teases will be offered for a period of one year, renewable annually for up to 3 years, provided a feasible plan can be developed and the other requirements in Section 1955.56 of FHA Instruction 1955-u can be met. You must also continue to offer to lease under FmHA Instruction 1955-8, Section 1955.73, Farmer Program Dwelling Retention. You may continue to lease mon-farm property and dwellings. In all other instances involving leasing, please take the following actions: 1. 2. 3. Immediately suspend leasing efforts where a pending offer has not been accepted in writing and where it cannot be shown that it is in the Government's best financial interest to lease the particular farm. This determination will be made by the State Director on a case by case basis. On any existing leases, continue with the lease until the expiration date of the lease. This means that the lease renewal is not automatic as it must be determined to be in the Government's best financial interest to continue with the lease. A farmer who is currently leasing FmHA inventory property may have the lease renewed only on the explicit approval of the State Director if the County Supervisor determines that the renewal is essential to maintain a feasible operation for the ensuing crop year. On any FHA Inventory farm that will not be luased, the property will be managed as follows: (a) When the property will not be leased as set forth in (1) or (2) management agreement accordance with Section 1955.65 of FmHA Senator CONRAD. I was amazed by the testimony of Mr. Clark on the question of the cost of this bill. It was irresponsible of him to testify the way he did, and it was irresponsible of him to testify that it is a $7.6 billion giveaway because one, it gave no credit to the collateral value. We would be writing down only to market value. Obviously there is collateral value. Two, it gave no recognition of what has already been lost. We have a USDA estimate of some $2.7 billion. We know from his own testimony 75 percent of the $7.6 billion that is delinquent has been delinquent for more than 3 years. And three, he provided no recognition of the cost of liquidation or foreclosure. You provided some estimates based on a theoretical farm size of the cost of liquidation and foreclosure. If he was going to come in here and be serious about giving an estimate of the cost of this bill, I would have given him some credibility. If he would have said we believe there are some costs, albeit probably not very high if one wants to compare apples to apples and admit the loss that has already been realized, simply not recognized, and also to take account of the collateral value which would remain and to the cost of liquidation and foreclosure, I would have given him some credibility. That would be an honest, serious-minded attempt to cost out this bill. Obviously he made no such attempt, and that is troubling. We deserve more than that. Ms. VOGEL. He is evenhanded, however. That is exactly what he told the House a month ago on their bill. Senator CONRAD. Oh, did he? Ms. VOGEL. Yes. Senator CONRAD. The same thing? Ms. VOGEL. The same thing. If you adopt this bill, we will lose everything. Senator CONRAD. Yes. Well, obviously that is disappointing. That is serious. And that testimony cannot be taken seriously. Next we will hear from Ralph Paige, the Federation of Southern Cooperatives/Land Assistance Fund. Senator Fowler told us he cannot be here soon, so we will proceed. He sends his regrets. He says he is happy that you are here, and we will proceed, and then when we are finished, I have a couple of questions I want to address to all of you before our next panel. STATEMENT OF RALPH PAIGE, EXECUTIVE DIRECTOR, FEDERATION OF SOUTHERN COOPERATIVES/LAND ASSISTANCE FUND, ATLANTA, GA Mr. PAIGE. Thank you. Inform the Senator I will give him a private account of my presentation at his convenience. I am Ralph Paige, executive director of the Federation of Southern Cooperatives/Land Assistance Fund. I have served as executive director for the past 3 years. For 15 years prior to my appointment as executive director, I worked in various other field staff and programmatic positions for the organization. I am based at the Federation/ LAF's Administrative and Fundraising Office in Atlanta from which I work throughout the Southeast region. The Federation of Southern Cooperatives and Land Assistance Fund works with over 15,000 black family farmers whose average land holding is 100 acres or less. These farmers are organized into self-help cooperatives and community based associations to collectively pursue purchasing, marketing, and technical services. The Federation provides the central information, training, resource and technical backup support for this network of cooperatives, credit unions, land associations and other groups. The Federation/LAF also serves as an advocate for black farmers with Federal and State agencies, land-grant colleges, corporations, and other groups. I am here to speak wholeheartedly in favor of reform of the Farmers Home Administration's credit policies and programs. We support Senator Conrad's initiative, S. 1179, however, we feel it would be strengthened to embody all 10 recommendations in the National Save the Family Farm Coalition's platform on FmHA credit reform. Government policies and programs in agriculture, for the past half century, have been enacted in the name of family farmers, but have been utilized to strengthen and enrich the larger farmers and the corporate sector in agriculture. Under the FmHA and most other USDA programs, the top one-fifth of the largest farmers receive a disproportionate three-fifths or more of the benefits. The current economic crisis in agriculture and rural America is accentuated for black, other minority and limited resource farmers who have for years been struggling to make a subsistence income on the edge of poverty. For black farmers in the rural south, there has been a "continuing crisis" for the past 75 years. Black farmers have faced not only the general decline in the farm economy, but also neglect, racial discrimination, and economic exploitation from the system. Black farm ownership and population has declined steadily and at a more rapid rate than that for white farmers for the most of this century. In 1910, there were over 1 million black farmers owning 15 million acres of land, while by 1980 there were less than 100,000 black farmers owning less than 6 million acres of land. Black farmers are still losing land at an astounding rate of 1,000 acres per day or a third of a million acres per year. The U.S. Civil Rights Commission, in a report entitled, "The Decline of Black Farming in America," published in 1982 found there were only 57,000 black commercial farmers, with sales above $2,500 annually, owning 4.7 million acres of land, left in America. This report warns that unless the policies of the U.S. Department of Agriculture are changed, then "there will be no more black farmers by the year 2000." We understand that the Congress is debating and legislating on credit reform in an effort to stabilize the Farm Credit System. Black farmers have by and large not benefited from the Farm Credit System, that is, Production Credit Associations, Federal land banks, and the Bank for Cooperatives. Black farmers, because our operations are smaller and less well capitalized and because of the historic patterns of neglect and discrimination by the Farm Credit System, have not received a fair share of the benefits from the Farm Credit System. Based on a survey of our members and other black farmers, we can report that: Less than 2 percent of the borrowers of the Farm Credit System are black or other minority farmers; to our knowledge, there are no local or regional black board members on any of the banks in the Farm Credit System; efforts are being made by the Farm Credit System to foreclose on the few black farmers who have received loans, rather than to assist them with other options. Because of the miserable record of the Farm Credit System, credit reform legislation, which does not deal with the problems of Farmers Home Administration, will not materially assist black farmers. The FmHA, although far from perfect, does have a more extensive record of service to black, minority, and limited resource farmers. The Farmers Home Administration reform legislation before your committee, S. 1179, and other suggested legislation, needs to be strengthened in the following manner: One, adding specific language to the legislation requiring affirmative action in the distribution of FmHA and other USDA program benefits, and the selection of State and county committees to administer the FmHA loan programs in a nondiscriminatory manner. Two, allowing State and county organizations of black and other minority farmers to nominate a list of minority persons for which the minority representatives will be chosen to serve on these committees. Three, giving black and other minority farmers priority and preference in distribution of program benefits, for example, FmHA limited resource loans at lower interest rates, sale of property in inventory after giving the original owner the right of first refusal, deferrals, and writing down of interest rates and costs on loans. Four, developing a set-aside program, ensuring that in counties with 5 percent or more minority farmers, that the proportion of Federal funds provided by USDA programs, for example, FmHA loans, ASCS conservation programs, extension service research and resources, Forestry Service assistance, be at least equal to the proportion of minority farmers in the county. Five, supporting changes in particular regulations of the FmHA loan programs which are harmful to minority and limited resource farmers, for example, the $40,000 income requirement on the homesteading provisions for farmers facing foreclosure; arbitrary delays in loan processing; utilizing administrative law judges to make FmHA appeals process more equitable. Some of these changes have been incorporated in S. 1179, and we support that. Six, supporting programs which would assist and support young people, particularly minority youth, to get involved in agriculture and farming. In conclusion, let me suggest that the farm credit reform by itself would not be enough. We must also have action by the Congress to raise farm commodity prices or farmers will never be able to repay the funds they have borrowed regardless of the terms and the credit reforms. For this reason, the Federation of Southern Cooperatives and Land Assistance Fund has joined with other grassroots farm organizations in the National Save the Family Farm Coalition to urge passage of the Harkin/Gephardt "Family Farm 3) The state would have greater ability to legislate with an even-handed effect on all lenders. We also approve of the repurchase preference policy of subsection (b) of § 6. Prior owners deserve the first chance to repurchase as do their immediate families. However, we would urge that the bill be amended to require FmHA to make contract-for-deed financing available to these prior owners and their families. If FmHA has a wealthy buyer who can put down cash or a large down payment and a former owner who needs FmHA financing, we believe the tendency will be to ignore the former owner preference. FmHA's performance in applying the former owner preference in the past year and a half when it approved only 22 repurchases nationwide is illustrative of this tendency. FmHA should therefore be required in the law to self-finance such sales, when the former owner or family cannot. This is not a new financing tool because FmHA now has a regulation which authorizes acquired property to be sold in this manner See Homesteads, 7 C.F.R. § 1955.73(£). We also approve of the provision of subsection (b)(3) that would extend a special preference to tribal members or tribes where the property is acquired from a tribal member. Native American farmers and ranchers on a reservation as a practical matter are restricted to FmHA financing and their economic situation is generally more stressed than white farmers and ranchers. Thus, pending FmHA collection actions on the reservations are a major problem to preservation of tribal land and economies. For example, on the Fort Berthold Reservation, in North Dakota (Mandan, Hidatsa and Arikara) one-tenth of remaining reservation trust land is at risk of loss to FmHA. 50-60 Native American farmerranchers (virtually every rancher on the reservation) is in financial difficulty with FmHA. With an unemployment rate already hovering at 60%, it would not be an exaggeration to say that the reservation's economy would be crippled, perhaps irrevocably, by loss of this additional land and business. Debt settlement for those tribal borrowers who are still ranching and the special preference for lease back and repurchase by former owners, tribal members and tribes can possibly be the salvation of this and other tribes. We also support a special preference for other minority farmers. Black land loss is a serious problem. FmHA is a major lender to blacks, many of whom face FmHA foreclosure. Again, it is crucial that the tribal member preference and minority farmer preference include a self-financing feature by FmHA. SECTION 7. Farm Leaseback Program. In 1985, Congress sought to have FmHA give a special preference to prior owners to lease back their homesteads and farms and to allow such leases to be negotiated before FmHA acquires title. |