The Farmers Home Administration was a federal agency within the US Department of Agriculture. Founded in 1946 as a result of Congress reorganizing, it was formed Farm Security Administration under the Farmers Home Administration Act.
Congress’s intention to create the agency was to encourage and nurture the family farm system of agriculture in the US.
To do so, the agency provided FmHA loans to farmers and rural families that lived on ranches for buying and enhancing real estate, agricultural equipment, and livestock, as well as for annual operating reasons.
At some point, 40% of all the agricultural FmHA mortgages in the country were given to the farmers and ranchers by the Farmers Home Administration and the Farm Credit System.
However, issues started to arise with the agency over the years. In the 1980s, 40% of FmHA loans went into serious delinquencies.
At the same time, in some regions, the value of many assets, such as farmland and agricultural equipment, fell by 20-30%.
Congress later ordered the US Government Accountability Office (GAO) to investigate the agency. In an April 1992 report, the Central Government Accountability Office determined that up to 70% of the agency’s loan portfolio was at risk of default.
This happened even after the agency pardoned $4.5 billion of debt between 1989 and 1990.
By September 1991, the agency had acquired more than 3,100 farmlands due to default.
The Government Accountability Office came to the conclusion that the deficient execution of the agency’s loan guidelines was the primary reason for these issues arising.
The agency was abolished in October 1995 with the Agricultural Reorganization Act of 1994.
Its functions were transferred to the USDA’s Farm Service Agency. After making a few more amendments over the years, these functions were transferred to USDA which currently is overseeing these loans.