and their questioning and their understanding of the problem, and willingness to deal with it. The one thought I would like to leave with you is this quote from agriculture expert Franz Schurmann that "history issues a stern warning. Countries that have abandoned their farmers have suffered disasters. Soviet agriculture still has not recovered from the 1930's decimation of an entire class of productive peasants. * * * The argument for some new farm policy is simple but elusive: somehow any country's well-being and security are bound up with a viable population of farmers. As much as the rest of the world is learning this lesson of history, we are rapidly forgetting it." It is ironic to me that the Reagan administration uses such high level of rhetoric against communism, where in my opinion, when I scrape away all the technical issues here and look at this it is really a land control issue, who is going to control the land. And when we look at countries in the Soviet Union and in Central America where the seeds of communism were sown long ago, and it resulted in a loss of the land by many into the hands of a few. Those are the seeds of communism that I fear are being sowed by the administration while on one hand they condemn it; on the other hand, their policies are sowing the seeds of it, in my opinion. Senator CONRAD. Thank you very much for your testimony. [The prepared statement of Mr. Huff follows:] Mr. Chairman, members of the Committee, my name is Cecil Huff and I am a dairy farmer and a FmHA borrower from Missouri. I am cochair of the Credit Committee of the National Save the Family Farm Coalition. I speak for thirty eight grassroots farm and rural organizations from twenty eight states. I want to thank the Committee for this opportunity to speak to you on reform of the Farmer's Home Administration. I want to commend you for your interest in resolving the continuing problems with FmHA. However, I must start out by stating that the Coalition strongly urges the members of this Committee to pass nothing less than a comprehensive package that provides the needed debt relief and rights to borrower's of all lenders--FmHA, FCS and commercial banks. severe In the 1985 farm bill, Congress made its position clear by passing a strong reform package that provided FmHA officials with broad authority to use all means available to work with its borrowers facing financial difficulties due to the past five years of a farm economic crisis. As you have undoubtedly been hearing from your constituents and from the witnesses today, the Farmers Home Administriation has failed miserably in its implementation of the policies passed in 1985. Among other things, the statutory changes you passed in 1985 allow FmHA to resturcture debt instead of foreclose, provide greater access to loan servicing options, provide for redemption of homestead after foreclosure, and strengthen the appeals system. Congress also tried to further democratize FmHA by having 2 of 3 county committee members elected and moved to assure that FmHA's large and growing land inventory be returned to the previous owner and other family farmers. In these policy areas and others, it is clear that FmHA has ignored or aggresively circumvented your intentions laid out in the 1985 law. FmHA's disregard of Congress' wishes has meant unnecessary hardship for thousands of farm families. This is a serious problem that must be addressed quickly. Now, more than ever before, we need an FHA that is truly working to help its borrowers keep their farms during the continuing economic crisis. We desperately need an agency that is committed, in the same way Congress is, to maintaining and rebuilding an efficient family farm agriculture. That is why the groups of the National Save the Family Farm Coalition strongly support the legislative proposal, S. 1179, brought together by Senator Conrad. This legislation is a golden opportunity for Congress to aggresively counter the attempts by FmHA officials to get around its responsibility to maintain and build a family farm system of agriculture. This bill builds on what was passed in 1985. It tightens the language so that FmHA officials have no choice but to fully comply with the wishes of Congress. I will not take your time reviewing this very good piece of legislation. Instead, I would like to talk about additional areas that need to be addressed as you move to reform FmHA. The first is debt restructuring. The stronger language on debt settlement in S. 1179 is sorely needed. In 1985, Congress gave FmHA the authority to restructure debts to avoid foreclosure. The proposed bill would mandate that they use their authority whenever restructuring is less or equal to the cost of foreclosure. An important point that is missed in this bill, though, is a clear definition of the cost of foreclosure to reflect the true recovery cost to the lender. Cost of foreclosure should include legal and administrative costs of foreclosing, costs of maintaining collateral as a nonperforming asset, adverse impact of the sale of acquired property on other borrowers and the estimate of the change in value of the collateral while it is held by FmHA. With The second issue that needs to be addressed is the proper disposition of FmHA's land inventory. FmHA has 1.6 million acres, or 5,000 farms, worth just under a billion dollars in inventory. FmHA trying to resume their adverse action against delinquent borrowers, this number could easily double. The fact that FmHA is holding so much land is testimony to the great loss of our family farmers in these past few years. However, this land should also be viewed as a national resource providing a unique opportunity for rebuilding an efficient family farm agriculture, and halting centralization of land ownership. In the 1985 FmHA reforms, Congress recognized the importance of making sure this land in inventory was returned to the hands of previous owners and other family farmers. The reforms included a farm leaseback and option to purchase program and placed restrictions on the sale of inventory property by the Secretary. After two years of a self-imposed moratorium to keep from adversely affecting land values, FmHA is now beginning to sell-off its farmland holdings. It is alarming, but also not too suprising, to discover that once again, FmHA is clearly disregarding Congressional intent by selling much of its land to persons who are ineligible for FmHA financing. In a study done by the Center for Rural Affairs, it was found that "71% of current farmland sales have gone to buyers who are ineligible for FHA loans and therefore outside the scope of the agency's mission." According to the Center for Rural Affairs, FmHA gets around the law by classifying most of their land holdings as surplus, which allows them to sell the land to ineligible buyers. It is clear FmHA does not share Congress' committment to assuring that our farmland stay in the hands of family farmers. You must take further action to give FmHA no choice but to sell their farmable land to family farmers. To do this you must take away FmHA's discretion in classifying land as surplus. All land should automatically be considered suitable unless the Secretary can prove that an eligible person would not be able to conduct a farming operation on it. Also, the law states that FHA must offer suitable land for sale for three years before classifying it as surplus. In some cases FmHA began counting from the time the land was acquired, even though a moratorium on sales has kept FmHA land off the market for two years. The three year time period must start when the land becomes available for purchase. The first right of refusal language must also be expanded. After the previous owner is offered the chance to lease and buy back his farm, the same right should then be given to a member of the previous owner's family, the third priority should be given to a new farmer, and the fourth to a local family farmer. Black farmers have been the most severely hit of all types of farmers in the farm crisis. It is important then that minority farmers should be given an equal chance to purchase FHA land inventories. Congress should stipulate that FHA lands are sold to minority farmers at least in the same proportion as the farm population of a county. A third issue is the availability of operating capital to farmers who have reached agreements through Chapter 12 bankruptcy. Many times, borrowers are not able to get further financing after successfully completing a bankruptcy plan. FmHA, as the lender of last resort, should be required to provide that capital to assure that the Chapter 12 process works. A fourth issue involves FmHA's ability to attach government payments in their debt collection efforts. There ability has at times allowed FmHA to "starve out" a farm family be attaching needed government payments. We feel FmHA should be prohibited from attaching government payments that are needed for a family's farm operating and family living expenses. In conclusion, I would like to say that the issues being discussed here are fundamental. Congress clearly expressed its intent in the 1985 credit package to recommit FmHA to the task of maintaining the semblance of family farm agriculture and working to rebuild the system. The real debate is whether our Government will work to save family farmers or work for their demise. I would like to end with this quote from agriculture expert Franz Schurmann: "History issues a stern warning. Countries that have National Save the Family Farm Coalition 80 F STREET, N.W., SUITE 714 (202) 737-2215 BOX 414 CIRCLE, MONTANA 59215 (406) 485-3324 1. POSITION ON FmIA REFORM LEGISLATION FmHA should be required to restructure troubled loans whenever it would be less costly than foreclosure. FmHA should not be allowed to demand liquidation of secured property as a condition of debt settlement until all loan servicing options have been made available to the borrower. 2. The nomination period for county committee elections should be expanded to at least 45 days, and at least 30 days public notice should be given to farmers before the actual election. FmHA borrowers should be allowed to run for and serve on county committees. 3. Borrower appeals of FmllA decisions should be decided by administrative law judges (ALJ's), not FmHA employees. 4. Regulations should be strengthened to assure FmHA is returning its land 5. FmHA should be required to provide living and operating expenses to farm families throughout debt settlement negotiations. The Secretary should be required to publish substantive standards which outline specific expenses to be included for living and farm operating. 6. FmHA should be required to negotiate homestead retention prior to the farmer conveying the land back. Farmers should be allowed to keep outbuildings, eligibility for homestead retention should not be based on a $40,000 gross sale minimum, and any inventory property should be available for dwelling retention. 7. FmHA must provide specific protections for minority farmers such as assuring proper minority representation in proportion to farm population in a region on county committees and other public FmHA bodies. FmHA must report annually to Congress on the number of minority farmers who receive loans, forebearance and debt restructuring. 8. The burden should be placed on FmHA to inform the borrower of all loan servicing options available. 9. FmHA should be required to comply with all state credit laws such as right to mediation and farmstead redemption. FmHA should be prohibited from securing deficiency judgements against farmers who have been totally liquidated, either through foreclosure or voluntary conveyence. 10. FmHA should be prohibited from attaching government payments in its Note: Two bills have been introduced (S. 1179 and II.R. 2340), that closely follow this position on FmHA reform. |