Equitable Interest Rates Are Needed for Farmers Home Administration Loans
RCED-83-157
Published: Aug 12, 1983. Publicly Released: Aug 12, 1983.
Skip to Highlights
Highlights
GAO reviewed the Farmers Home Administration's (FmHA) policies, procedures, and practices for setting and revising interest rates on farm, home, and community facility loans.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of Agriculture | The Secretary of Agriculture, to provide for changes in farm and home loan program interest rates in a timely, economical, and equitable manner, should direct the Administrator, FmHA, to revise interest rates monthly, setting new rates at the Treasury monthly cost-of-money rate with appropriate adjustments for limited-resource farm loans. |
Closed – Implemented
FmHA agreed to adjust interest rates monthly, generally following Treasury and statutory rates. Savings are not determinable without extensive, new audit work which is not planned.
|
| Department of Agriculture | The Secretary of Agriculture, to facilitate this change without adversely affecting the FmHA work load, should direct the Administrator, FmHA, to implement rate changes by the fifth work day of each month and require FmHA county supervisors to determine the maximum rate applicants can pay. |
Closed – Implemented
Changes in interest rates will be effective on the first of the following month.
|
| Department of Agriculture | The Secretary of Agriculture should require the Administrator, FmHA, before extending FmHA authority, to develop specific, quantitative criteria to identify and weigh other factors in setting loan program interest rates. |
Closed – Implemented
Other than reviewing and adjusting interest rates on a monthly basis, FmHA will not develop further criteria to set rates because of volatility of farm economy.
|
| Department of Agriculture | The Secretary of Agriculture, to better comply with the requirements of FmHA authorizing legislation, should direct the Administrator, FmHA, to use a 30-year maturity period to set interest rates on farm ownership, including limited-resource farm ownership, and single family housing loans. |
Closed – Not Implemented
FmHA will continue to use a 25-year maturity period because it believes that this period better reflects actual maturity. A new management information system will provide better data on maturity periods.
|
| Department of Agriculture | The Secretary of Agriculture, to ensure continued validity of the maturity period being used to set interest rates, should direct the Administrator, FmHA, to periodically determine the actual maturity period of FmHA loans. |
Closed – Not Implemented
FmHA will continue to use a 25-year maturity period because it believes that this period better reflects actual maturity. A new management information system will provide better data on maturity periods.
|
| Department of Agriculture | The Secretary of Agriculture should direct the Administrator, FmHA, to use a revenue bond index to determine bond market rates for the purpose of setting interest rates on community facility loans. |
Closed – Not Implemented
FmHA policy is legal and consistent with program objectives to provide financing at reasonable rates and terms.
|
Full Report
Office of Public Affairs
Topics
Agricultural programsEvaluation criteriaGovernment guaranteed loansLoan interest ratesMortgage interest ratesRural economic developmentInterest ratesBond marketMortgage marketFarm subsidies