Member Denominations TESTIMONY OF DR. MAX E. GLENN, EXECUTIVE DIRECTOR Senator Nickles, I appreciate the opportunity to appear at your Oversight (Farm hearing to discuss my concerns about the Farm Credit Services Credit System) programs and operations. As you know from your own participation several months ago, the Oklahoma Conference of Churches has operated a farm crisis hotline, which we call "AG-LINK", since October 21, 1985. In the months since then we have seen certain trends begin to emerge. Unfortunately, certain incidents seem to reflect individual action on the part of a particular employee or officer of FCS. More importantly, though, the incident pattern, especially from the northern and western parts of Oklahoma, reflect official attitudes on the part of FCS which trouble me. They lack common sense, and in many areas are devoid of common decency, justice or the due process of law guaranteed us by our Constitution. I know that FCS, by law, is not a Federal agency. In policy implementation of Public Law 99-205, the Farm Credit Amendments Act of 1985, and in response to its position as financier of one-third of the agriculture debt in the United States, the role responsibility and performanceof FCS must remain very visible to public scrutiny and very accountable to the Congress of the United States, of which you are a key part. Your hearing today is a welcome opportunity to accomplish both goals. My concerns center on three major trends I see Oklahoma Conference of Churches 2901 Classen Boulevard P.O. Box 60288 Oklahoma City, Oklahoma 73146 Dr. Max E. Glenn Dr. Eugene N. Frazier From our cases, I first and foremost see a blind rush on the part of FCS to purge current farmers from their loan portfolio, regardless of events or debtor's action which may offer an alternative solution. I offer three specific cases to highlight my concern. CASE I. A family farm with an arrearage of $1,400 CASE II. The total land debt of one farm couple was CASE III. Public Law 99-198, the Food Security Act A second trend I see developing within FCS offices is an unreasonable discrimination against current owners, in comparison with new buyers. In illustration of this trend is a case which was one of the first to use our AG-LINK facilities. The farmer had just been foreclosed by his Production Credit Association. Within a week, his farm was resold. The new buyer was given: As the former farmer said, "I could have cash-flowed and saved my farm if I'd been given the same terms. " as A companion piece of this trend is my third concern: a personal attitude on the part of growing numbers of FCS personnel involving disdain and disrespect of the owner though he or she was personally responsible for low prices or the decline in land values. This attitude has consistently resulted in intimidation of or hostility in the farmer and a complete breakdown in communication between the parties. Communication is further ruptured and distrust enhanced when some "official policy" prevents release of payment records and the way payments have been applied to the farmer's loan. And, finally, trust vanishes completely when agreements developed verbally are so often suddenly repudiated and denied when it's too late to try to develop other financing. As promised, I want also to advance at least three legislative chaNges which I would ask you to consider: (1) Endorse and require strict adherence to the forebearance policy laid out in the March 12, 1986, letter to Attorney General Mike Turpen, a copy of which is attached to my testimony. In addition, require that existing operators be given current market breaks through a combination of factors like those in the "Fair Credit Plan". (2) Write into the law a guarantee that lenders and Thank you for this opportunity to share with you this summary of the high level of frustration which we hear daily from farm men and women. To date we have received in excess of 2,000 phone calls. Words cannot convey the injustices and trauma now being experienced in Oklahoma and across the heartland. -3 Thank you for your telephone call regarding our forbearance policy. The correspondence you have with Attorney General Bob Stephan's office is correct. The following is some additional information in response to your inquiry concerning our forbearance policy. As you are aware, the deteriorating farm economy has resulted in increased numbers of farmers leaving their occupation either voluntarily or involuntarily. Unfortunately, this trend has led to increasing numbers of foreclosures by the Farm Credit System. The Farm Credit System views foreclosures as a last resort and is only initiated after all other reasonable efforts to assist the borrower have been exhausted. The Farm Credit Banks of Wichita adheres to the forbearance policy of the Federal Farm Credit Board. A copy of this policy is enclosed for your information. This policy enables us to stay with farmers longer and allows the borrower time to work out of his situation. However, when it is determined that the borrower no longer has a reasonable chance to recover, we are left no choice but to initiate foreclosure and minimize our loss. Organized as a cooperative, we must pass on any losses incurred to other members. For a cooperative lender, this means higher interest rates to our members. If we did not initiate foreclosure and minimize our losses on these loans that have no reasonable chance for recovery, interest rates would have to increase even further. This places a very heavy burden on the vast majority of our borrowers who are paying their loans on time. In fact, many of our borrowers are refinancing elsewhere because they believe they have no obligation to subsidize through higher interest rates a minority of borrowers who are unable to repay their loans. If losses are not minimized by initiating foreclosure when appropriate by cooperative lending institutions, the cost of such losses is reflected in the form of higher interest rates to the remaining farmer/rancher/cooperative borrowers. Mr. Mike Turpen I believe the Farm Credit System will work with borrowers to the maximum extent that we have resources. Unfortunately, our resources are severely limited, to the point that we have sought and received assistance from Congress. The Farm Credit Amendments Act of 1985 has helped stabilize the system. The legislation has also helped protect borrower stock in the system. However, it is not a panacea for all of the system's or agriculture's problems. Farm credit institutions must continue to operate as prudent lenders in an effort to protect the vast majority of our borrowers who are in sound financial condition. To do otherwise could only jeopardize the viability of all our borrowers. Please feel free to contact Ron Wilson, Vice President-Legislative Services and Member Relations at any time to clarify any of the information enclosed or if you have additional questions. |