Tom Harkin: “Today I introduced along with several colleagues legislation that will extend the current waiver of the 15-year term…”

“Today I introduced along with several colleagues legislation that will extend the current waiver of the 15-year term limit on USDA guaranteed loans which will expire on December 31, 2006. Starting January 1, 2007, many producers nationwide will become ineligible for Farm Service Agency, FSA, guaranteed loans. These loan guarantees enable producers to obtain credit to purchase farmland, livestock, feed, seed, farm equipment, and fuel essential to their farming operations. Without the Government guarantee many farmers will be unable to secure operating credit and will be forced out of their livelihood. The FSA guarantee loan allows lenders to make agricultural credit available to farmers who may not meet the lenders' normal underwriting criteria. Borrowers apply for a guaranteed loan through an agricultural lender who then secures a guarantee from FSA. The guarantee covers up to 95 percent of the loss to the lender of principal and interest on a loan in case of default. Admirably, default rates on these loans are very low at 1.4 percent. While the 15-year limit on eligibility is intended to graduate producers to commercial credit, we have found that in many cases producers simply are unable to meet lenders' standards without the guarantee. Term limits on guaranteed loans do not adequately take into consideration economic and weather conditions. In recent years, many of America's producers have suffered through high energy costs, droughts and hurricanes.”