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We are working presently on a training program that we're going to have each State institute hopefully by April, so that we can train probably 150 new agriculture credit loan officers per year. That's going to be based on our training dollars. We think we have enough to do that over the next 2 years. We'll hopefully get 300 new agriculture credit officers trained within the ranks and give them loan approval authority. There will be county executive directors who will be trained. There will be PAs out in the county offices who will be trained. We're going to try to use our employee base that we have on board now to try to train them into agricultural credit lending.

There was also a question that was not in the original letter on borrower training. We know that is onerous in a lot of places. Jim may want to talk about this a little bit later. But one of the provisions that we have put forth in the legislative package from the USDA is asking for leniency on guaranteed borrowers that they don't have to go through the training program. They're working with the lender and we think they're a little bit different situation than the direct loan borrowers. And so, that is in the legislative package. I just wanted to add that. This is not in my testimony.

You may have heard of our recent troubles on some civil rights issues in the Department of Agriculture last December, the Secretary temporarily halted foreclosure sales on delinquent farm loans until a determination can be made on whether there's evidence of discrimination or inconsistency in program delivery. This was not as the papers said, a moratorium, it was only a second review process. Before a loan even starts in a foreclosure process, we've instituted a process now where the SED and the agriculture credit director in the State has to do a second review of the entire file to make sure there's no inconsistency or any discrimination apparent before it can go forward. Then once that happens, once the review happens, if there is no problem, it goes forward. The foreclosure sales will be delayed until after the file has been reviewed for compliance the ECO and USDA civil rights procedures. And then the foreclosure and sales will resume if there is no problem. So, there is not really a moratorium, per se, in effect. It was just another review process instituted by the Secretary to make sure that we were doing the right thing.

In conclusion, Mr. Chairman, I want to reemphasize the progress made in FSA since October 1, 1995. That needs to be changed. It's 1995 because that's when reorganization happened. This has been an extremely difficult time for FSA employees. They have all had all their regular duties plus reorganization, the 1996 farm bill implementation, Production Flexibility Contract sign-up to contend with. As I mentioned earlier, FSA processed a higher volume of loans and helped many, many farmers this past year. I know that the members of the next panel have some concerns with our programs, as well they should. We want to hear those concerns and try to address as many of them as we can. Our goal is constant improvement. I just don't want all the tremendous accomplishments and hard work of FSA employees over the past year to be forgotten. The dedicated employees have worked hard for rural American farms and ranchers.

We look forward to working with you to achieve the objectives of the loan programs and provide the assistance and service that farm families so richly deserve.

I do appreciate the opportunity to come to Lubbock today to testify and will be happy to respond to any questions that we can. Thank you. Mr. COMBEST. Thank you very much, Ms. Cooksie.

[The prepared statement of Ms. Cooksie appears at the conclusion of the hearing.] Mr. COMBEST. Mr. Bennett. STATEMENT OF HAROLD BOB BENNETT, TEXAS STATE

EXECUTIVE DIRECTOR, FARM SERVICE AGENCY Mr. BENNETT. I want to thank you, Chairman Combest, for bringing the committee to Lubbock also. I thank you for your introduction a while ago, but I must say at this time, probably the title I'm most proud of is that of being a farmer from Kester County.

I feel a little bit out of place testifying as to agriculture lending and everything. I can assure you, being in the farming industry in this area, my brothers and I probably have Ph.D.s on the borrowing side rather than on the lending side. So, my oral comments should probably be construed as only my own. I have written testimony to give here.

I certainly am here that you're here in Lubbock. As you know, it's a very rich area. It's a very diverse agriculture here, and a very intense agriculture that requires a lot of capital and a lot of credit that comes from both the public and private sector. Hopefully, from today's comments, we can come from today's hearing, maybe we can do some things that will make us more efficient and more effective down the road.

I think it would only be fitting at this time to also thank and issue a big thank you to our bankers, our customers, our producers and our borrowers for the patience and understanding that they've shown us in the last year. As Carolyn just mentioned, FSA was actually born in October 1995. I guess just as a young child, you crawl before you walk. Certainly the last year we've been crawling instead of walking, but we feel like we have made some progress. We'll get into that a little farther in our testimony. But you can not imagine how patient and how much support our customers have given to us as we have struggled with the new Agency

We certainly want to say unequivocally and straight-up that we're not necessarily happy with our record. We feel like we've made some changes and are in the process of making some changes where we can expedite these loans, the loan making and the loan servicing. We feel like some changes are long overdue. We hope that we are addressing those and we hope that we will continue to do that.

I must say that we made a very conscious decision early-on last spring that we had to do some very serious and very intense training for some employees, our employees, for legacy FmHA and for the legacy ASCS, if you will—those employees to be involved in the agriculture credit. Because we felt like the only way that we were going to be able to make it more efficient, more timely, and give better service was with a highly trained work force.

At this time before I get into where we're going or where we are, I think we need to review some of where we were and some of the places that we have been. Certainly, change is hard. After the birth of this FSA, then we had to go through the training and whathave-you. But I think one of the biggest things and one of the biggest obstacles we had last year was the disastrous year that we had in 1995 in agriculture in Texas. As you all are well aware, we had a severe drought that spread from west to east and covered nearly three-fourths of the State. We had early freezes in parts of the State and we had late freezes in parts of the State. I appreciate Congressman Thornberry mentioning the insect infestation. I mean, we lost crops everywhere because of that.

So, our farmers, regardless of how tough we thought we had it as Government employees or as bankers, I think our farmers were the ones that were suffering the disastrous hit. That caused an explosion in the need and the demand for agriculture credit. I'm not going to say—well, I guess I will say that we probably weren't prepared for the amount and the demand that was there, but we were hopefully, you know, going to get there.

And I will say this, while we thought we did a poor job at times, while we thought we struggled, by June of last year, in reality, we had made more loans to more producers for more dollars than we had the year before. So, I think there are some successes and I think we need to look to those and maybe gain momentum.

In my testimony, I have some exhibits that should give facts and figures on the size and scope of agriculture lending program and agriculture credit in Texas. I would point your attention to exhibit 1, page 1, where we have 8,144 direct borrowers. These folks owe $851,237,556 in principal, $252,806,402 in interest for a total of $1,104,043,958. Of the 8,144 direct borrowers, 40 percent are delinquent. At least 3,258 owe $711,512,862. These 8,144 borrowers have 23,793 loans. I think by looking at these numbers, you can see the sheer size of the loan program in Texas.

We also have 362 direct loans to socially disadvantaged borrowers, and we have 312 loans to our beginning farmer borrowers. I guess the one that we direct a lot of attention to in exhibit 2–1 is the Guaranteed Loan Program. I personally think the Guaranteed Loan Program is one of the best Government programs that there is. If operated and administered properly, and all parties that are involved doing it properly and what-have-you, I really think that it's a good Government program. I know a lot of people may not think there is such a thing but personally, I do. I think it's a program where the individual, the industry and Government can, and is, benefitting.

Certainly, we have improvements to make in these. Again, I would point our attention to the cooperation and the support that we've gotten from our bankers as we've implemented this program. But in Texas today, we have 2,791 guaranteed loan borrowers owing $491,288,647. Of these loans, 441 are delinquent in the amount of $22,758,045. We have 9.23 percent of our guaranteed loans delinquent with 4.63 percent of dollar owed delinquent. Of these 2,791 borrowers had 4,779 loans. We have a chart on in our testimony that will show that, I think, of the $2 billion nationally, Texas has $500 million in the Guaranteed Loan Program.

I thought Carolyn did a good job of going over the Certified Lender Program and I would defer to hers. If we have questions on the Preferred Lender Program or how the bill affected the Nation or what-have-you, we will address that. But I personally think that the Certified Lender Program is going reasonably well in Texas. We have 69 lenders participating in the CLP in Texas. We believe this would represent approximately 70 percent of the lenders that have loan volume and loss ratio to be considered eligible to participate.

As far as just Texas and our borrowers and how the farm bill has affected those, we believe 696 of the borrowers receiving debt forgiveness in the past currently have either direct or guaranteed loans. Of these 696 borrowers, we believe 129 would be unable to receive any additional assistance. The balance of these borrowers would be able to receive direct or guaranteed loans for annual farm operating and family living expenses only.

We've attached a chart showing the dollar amounts of guaranteed loans closed since the inception of the program and the dollar amounts lost. It will reflect that we 12,817 guaranteed loans for a total dollar amount of $1,433,262,965. We've paid 990 loss claims for a total of $59,321,280. I think some of the discussion we get on the Guaranteed Loan Program and how the farm bill affected our producers and what-have-you, it seems like there was an arbitrary cold rule there made that's going to disallow some folks from borrowing money with no reflection on are they in a current situation? Have they made it? Are they currently paying us back? Maybe in some of the discussion we have with our counties and our producers at different grower meetings and what-have-you, it seems that it might be judicious for us to look and see if they have a performing loan. Especially when we as a government, or we as an agency, encouraged or advised or helped or okayed this buy-down or writedown or buy-back several years ago. That may be something to consider.

We've attached a copy—as I said, last year we made more loans to more producers for more dollars than we did the year before. We have a chart showing that, the number of loans and dollar amounts that have happened over the last 2 years. This increase was done with a shortage of personnel. And at the same time, as Carolyn said, we were implementing the farm bill, implementing disaster programs in more than 200 counties in Texas, and also training the legacy ASCS employees.

As I said earlier, we're certainly not happy with all of our time lines and our timeliness of our loans. We'll have some reports showing that 70.4 percent of the guaranteed loans from eligible lenders are processed within the required time frame, with an average processing time of 21 days from date of receipt of a complete application. These reports indicate that only 35 percent of the applications from certified and approved lenders are approved, a process which would require a 15 day time frame. We're not satisfied with this and we're working to improve on it, but they are approved within 24 days.

We wanted to discuss some of the reasons that many of the guaranteed loans are not processed timely. Certainly, last year as we were going through the Guaranteed Loan Program to make a producer eligible, there was the Emergency Loan Program which I think that we funded $17 million through. We certainly felt like with our credit folks in the field, it was certainly better to work with the producer, get the emergency loan so he could qualify for the guaranteed loan rather than to deny the loan. That caused more time and more effort from our credit managers and our district directors and what-have-you, and it exceeded the time limit. We also need to do more training with our folks, with our employees, with our producers, and also, probably, with our lenders to be sure that we're all on the same page in processing of forms accurately and timely. I think as you'll see in the Comparison of Obligations table and the Loss Claims Paid table.

One I would like to point to in Texas is exhibit 6–1, our Delinquency Reduction. It shows the number of borrowers that are one payment, two payments, or three payments delinquent. I think you can tell the reductions we made from 1,641 that are one delinquent payment past down to 649 in the past year, which we feel like is a good indication. Also, the total dollar amount—and I can tell you that we're shooting for in Texas to reduce our delinquency amounts by $100 million in 1997. We certainly had too many.

Exhibit 8-1 will tell about the processing time, and also 9–1 and 10-1. I think those are pretty self-explanatory.

In closing, I'd like to say at first, there are four of us from the Texas State office that have spent the last 2 days visiting county offices in each one of your Congressional districts. We're trying to get in all over Texas. We're trying to get a grip on are we improving our time lines and our timeliness of loan making. I'm happy to say that in several of the county offices in the Lubbock area, we've seen quite an improvement and a vast improvement in delivery. We still have a ways to go, but several offices are having a 10 day turnaround time on loans for the producers. Certainly, we're going to have to continue to work on this.

But we would hope also that our producers would try to get in as early as possible. The need for credit is out there. We all know that as producers, we have to have credit to farm. So, I would encourage our producers to get in as early as possible. We have a couple of offices near Lubbock that are probably going to complete their loans by March 1 and March 7. We're only hoping that more producers will get in there.

In closing, I'd say we have some pretty specific and ambitious goals for the next year. Our first goal is to complete all loans in the mandated time period by April 1. We've challenged our employees to accomplish this. We're going to continue to work with them and train them. And we're going to continue to try to cooperate and encourage cooperation between all of our customers.

Our second goal is to settle all guaranteed loan loss claims in a timely and current manner. I know that we probably have some of our bankers and some of our customers that might think that would be unbelievable if we ever do that, but we honestly feel that we're about a month away from being current. We've had jump teams come in from other States, from Washington. We brought our District Directors in to-stations to focus on settling these loss claims. I think it's very important that we do that. But we feel like

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