Farmers Home Administration (FmHA)

The Farmers Home Administration (FmHA) is a former agency of the U.S. Department of Agriculture created to assist farmers and families living in rural areas by financing and insuring loans for housing and other farming-related needs. The Farmers Home Administration provided credit and technical assistance to rural families and communities through four major programs: a housing program, utilities program, business program, and community development program. The agency had about 1,900 county and district loans offices nationwide.

The Farmers Home Administration was created to provide families with financing tools such as loans and grants to help them re-establish self-sufficient farming efforts in the aftermath of the Great Depression. It was originally named the Resettlement Administration and subsequently changed its name to Farm Security Administration, Farmers Home Administration and currently USDA Rural Development.

The FmHA was authorized by Congress in 1946 to provide financing for housing, business and community facilities in rural areas. According to the U.S. Federal Home Loan Center, what was the housing program of FmHA, now the USDA Rural Development Guaranteed Housing Loan program, has a loan portfolio of $86 billion, administering almost $16 billion in loan guarantees, program loans, and grants.

By the 1990s some members of Congress were becoming concerned with the large number of defaults on FmHA loans and the large losses the agency was accruing as a result of weak lending practices. So Congress directed the U.S. Government Accountability Office (GAO) to conduct a study. In 1992 the GAO published their report, which found several problems with FmHA. For example, the GAO identified that almost $14 billion, or about 70 percent of the FmHA direct loan portfolio at the time, was at risk of default since the loans were held by delinquent borrowers or by borrowers whose debts had been rescheduled because of repayment difficulties. In that year, FmHA estimated potential losses of $1.2 billion, or about 28 percent of its guaranteed loan program.

Other problems identified by the GAO included a direct loan program where field lending officials did not comply with FmHA loan-making and loan-servicing standards established to safeguard federal financial interests. The GAO said that FmHA estimated that, as of September 30, 1991, it had acquired about 3,100 farms from borrowers who had not repaid their loans. Overall the GAO said management weaknesses at FmHA contributed to the longstanding loan management problems, including poor management information systems and weak financial controls.