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those proposals. The Secretary and I had some discussions in the past that that's probably a problem for many of you in the Department in that the Secretary sat on this committee with Charlie and I for 10 years and we all think we know him very well. And we do. But we've had discussions, and we recognize there were some proposals coming from the administration and from the Department.

There are a number of concerns you expressed relative to some of the credit provisions that came from the 1996 farm bill that concerned us a great deal as well. These did not occur in the House. They occurred in conference and we never had an opportunity to fully view or review those. We never had an opportunity to quite review the farm bill as we'd wished, but that's water under the bridge, I guess. But it is important, I think, to look at that.

I share some of the real concerns that you do, particularly in the area of the strict implementation. We've had numerous conversations over the past months with the legal counsel at USDA as far as their regulations and, you know, how far they could go, and what they needed to do to comply with the intent and the spirit of the law. For example, a write-down or a forgiveness—that was done back several years ago at last resort. The committee went through a process at that time to establish a write-down or forgiveness provision that would not occur on a normal basis, but only after everything else was considered. One of the considerations was that the loss incurred would have had to have been less than foreclosure.

So, in reality, you were able to keep not only a farmer operating—and they had to then be able to cash flow that—but you also incurred actual less loss. You didn't then vacate the land and all of those problems that come with that. The effect of land values, the effect of equipment values being plummeted. A lot of these, we had heard concerns from banks who, in fact, had a lot of farm equipment as assets on their financial statements. If you have a tremendous reduction in the value of those then, of course, you have greatly skewed those. So, there were huge implications by not doing a write-down provision.

That was done at a time and it followed the rules. A farmer who followed the rules at the time should not now be penalized for following the rules at the time. That was a real concern that I had. Now, I must say also, we think we have to be stewards of the taxpayers' dollars as well as you do, and I know you take that very seriously. We don't want to throw good money after bad, and recognize that there are going to be some problems that have to be dealt with. That occurs not only in farming. It occurs if you own a pharmacy in the middle of downtown Lubbock or wherever that might be. The fact that at a time a person followed the rules that were applicable to them, there should not be a penalty. And so, I assure you, we want to work very closely with you on your credit proposed legislative changes to try to do that as quickly as possible, and to see if we can't come to some accommodation in that area.

Congressman Stenholm and I were both on the committee. In fact, I had originally introduced the Guaranteed Loan Program at the same time the USDA—this was back in the early nineties—was planning on making some changes themselves toward a guaranteed lender program. We didn't get the legislative changes that I had wanted due to, basically, some problems with the other body. I was very glad to see in your statement, the good record of your certified lenders in loss ratios. Because one of the concerns of a number of folks in the other body was that "Well, we're just going to create a loophole here by which bankers are going to be able to make bad loans.” That has not turned out to be the case. So, I do think there are some real benefits of that program. While the Preferred Lender Program was started, I think 442 years ago, we will be also anxious to see your proposals of how we might implement that program as I think we are certainly moving toward more of a participation with an outside lender and less direct lending from the credit side of FSA.

One of the very first meetings I had in 1985 after being sworn in was with a group of bankers and farmers about farmers' home lending programs and problems. We could re-read that meeting today and a lot of those would still exist. I recognize there has been a number of transitionary things that have created the fact that they may be continuing. But one, it's so hard to get a handle on them. One of those is the concern that we continued to hear, both from borrowers and from participating financial institutions with guaranteed loan programs. That is that there is a concern in among a group of lenders who you get together—I've had a number of lenders tell me that they're not certified lenders because the county offices they deal with work very well and actually, may approve those guarantee loans—these are in some very large counties as well, I might mention—before they could do it as certified lender or even before some of the certified lender loans would be. And so, they see no reason to be. Other counties feel that is the only option they have, and yet they're both working within the State of Texas under the guidance of Mr. Bennett and those in the State Office. Yet, there's day and night differences.

Some of it is certainly due to personnel. Some of it seems to do with the fact that in the areas where the co-location or the formation of a Farm Service Agency has conceptually, the idea is to train a lot of people in that office to do a lot of different jobs. That hasn't handed off in many cases and there still remains to be only one person who can actually process that, both in direct loans as well as in guaranteed loans. I think it's very important to look at those areas and those counties, and you can probably do that just by looking at the timeliness by which they're processing those loans. That there still is a major problem in those counties that really needs to be dealt with.

Another is this: This is a regular commercial bank loan for a farmer operation. Same bank, this is the Farmers Home Guaranty Program loan application. You can see that the USDA application is much, much thicker than the application for the commercial bank loan. This has been one of the things that has been discussed every year that I have been in a position to listen to people. That is, how much it takes to fill out the paperwork.

Now, that sort of leads me into another area of concern and consideration here. When you look at the amount of time that it takes on an average to process a loan from date of receipt to either date of denial or date of approval, I don't think in that—that is from the

time the application is in its final form and actually presented. I understand that in many cases, this application may have been presented weeks before that. And yet, in an application of this size, it would be quite easy to make some inadvertent, minor mistakes. But if that i is not dotted or that t is not crossed, or there's something in there that would really not have a great deal to do with the validity of the loan, that there is a fairly lengthy process of letter writing and recontacting, “you didn't do this,” “you didn't do that,” and “you have to do that." There may be weeks sometimes that transpire between when this application was first received and by the time that the farmer has received all of their correspondence about the things that weren't done. Then that letter will come back explaining that. It will sit there for another week or two, be looked at again at some other problem.

Now we're not suggesting that a loan not be completed and we're not suggesting that there be false information. I do think that there's a judgment call many times in these that could be a little more accommodating to try to get to the point that this was considered a final application presented to the local FSA office. Many times farmers will read the statistics in both of your testimonies and say well the average period of time. And they say, “Gee, mine's been there for three times that." So, I don't think it considers from the time it was actually filed, officially filed. To be officially filed, I think all those t's have to be crossed and all those i's have to be dotted.

If there's some kind of way we can just work through that and make that a little more customer friendly. Your suggestions from the positions you're in would certainly be helpful, I think, out there to the county offices. Because much of the time, that really takes a great deal of time. And I need to add for the record, the individual—these are real people who these applications represent, realizes we were going to use them and approved the facts. So, we're not looking at any information in here that would be confidential that they're not aware of.

But it makes the point, I think. When we requested this, it was don't bring us the exception of the case. Just bring us the average file and let's take a look at that. But the paperwork that is created and is necessary in filling out one of these has been one of the main concerns that we've had throughout. It's also one of the reasons that, once again, as we have had in this room before in past meetings, the SBA here. Because banks are making comparisons with the way that they deal with not in the application process, but I would have to say in the loss claims area. That there are a number of bankers who have told me that they're well over a year in having loss claims dealt with.

I also have to state in their behalf—and I hope I'm not stealing their thunder. Maybe they will either reemphasize this or they may not want to mention it at all. There's a concern expressed to us by banks that even some guaranteed lenders are sometimes concerned about exercising that for fear that due to all of the complications and all of the intricacies of an application that FSA will take a technical problem and basically deny, then, their ability to recapture that loan if there is a loss. There's a fear out there among both direct borrowers and guaranteed lenders, or lenders you're

working with through the Guaranteed Program, that sometimes there's an effort to do just whatever can be done to either slow the process down of complying with a loss claim, or of denying it.

We, again, do not want you to do something in regards to a loan that is improper. We are not suggesting that a person or a financial institution be sloppy in their application process. But we also intend for the guarantee program to work. For it to work and for us to be able to continue that, we have to be good stewards of the taxpayers' dollars, but we also, I think, have to make sure these programs work. These are just things we hear, or I hear—I'm only speaking for myself. These are the things that I hear that do concern us.

Certainly, if you could point to an intent of doing this, we'd be having a different kind of hearing. I don't think it's intentional, but I do think it's a problem that, certainly, we need to try to work with.

I would hope, Mr. Bennett, that in the continual training process—and some of us had real reservations about the formation of Farm Service Agencies when it was done. I realize that anytime you've got a transition period and this is somewhat indicated as another problem, area, sometimes a turf battle there. The concept was, again, that we have a number of people in a Farm Service Agency, and that's what it should be. It should be a service agency. We'd like to get Government into the service business. The emphasis should really be placed on, No. 1, timeliness in training. Getting those trainees in place, getting the work done so that, in fact, there can be a number of people in that office. If you happen to have only one person and that person is out on annual leave or whatever the case may be, everything just doesn't come to a screeching halt. I know that's not the case in every instance, but I would just encourage you to stress that as much as possible in those offices because we are all in the service business.

I had a question for you, Ms. Cooksie. In the second page of your testimony where you're talking about fiscal year 1996, 17,000 direct loans, $832,014,575 guarantees totaling $1.85 billion. Is that $1.85 billion the amount that the Federal Government is liable for, or is that the total amount of the loan including the amount that the banks are participating in? Or the other lenders guaranteed lenders?

Ms. COOKSIE. It's the total amount of the loan.

Mr. COMBEST. So, it would be the total amount. Because as we looked through here, if there was that additional 20 percent or whatever above that we're looking at a whole lot more money even in farm loans.

Ms. COOKSIE. Yes. Mr. COMBEST. I had a couple very quick questions here and then I'll recognize Mr. Stenholm. I apologize that I've gone a little beyond my time.

When you're looking at the condition today as compared to a year ago in the number of delinquent loans, that figure would also include loans that receive either forgiveness or write-down, or were no longer on the books that foreclosure had taken place? It's just not that that same number had all of a sudden got current, would it be?

Ms. COOKSIE. That's true. That's right.

Mr. COMBEST. So that would include
Ms. COOKSIE. Yes, it would.
Mr. COMBEST. OK.
I would recognize Mr. Stenholm.
Mr. STENHOLM. Thank you, Mr. Chairman.

Those were some excellent statements and you did a great job of summarizing the additional problems that we have to try to solve. I think I will just associate myself with all of your remarks.

I've got a few questions I would like to ask. You state the comparison and the success rate on the reduction of the delinquency in the direct lending comparing December 1995 with 1996. You did not state the comparison of the guaranteed loan portfolio comparison with December 1995. Did we also see a reduction in the numbers of delinquencies in guaranteed loans from 1995 to 1996?

Mr. Hall. It's a slight increase on the delinquency rate on the guaranteed loans. It's today at 1.79 and it was just a little above 1.25 at that same time, year before.

Mr. STENHOLM. On what total guaranteed volume?

Mr. HALL. The total volume is about $6 billion and there was a slight increase in the guaranteed volume from this time last year.

Mr. STENHOLM. So, we went from $6 billion in outstanding FSA guarantees in 1995 with a 1.25 delinquency, to $6.4 billion with a 1.79?

Mr. HALL. Yes, sir.

Mr. STENHOLM. One area that Mr. Combest did not mention is the area of training for the borrower. We've talked about training for employees. But if there is one area of great frustration that I have heard, it is the training that was required in the 1990 farm bill for borrowers. The additional cost, $1,000, $1,500, $2,000, sometimes more that was required of borrowers that were already in financial difficulty, but yet had to find that money in order to pay someone to package that loan. That packaging, I suspect, might contribute to this stack of applications.

Where are we on that in light of now, we have a concern that many have not gone through the training, or perhaps will not meet the standards that someone may be setting for that training and might be declared ineligible for a loan because they did not do what somebody-and I would add, this did not originate in the House of Representatives. This was one of those wonderful Senate additions to the 1990 farm bill.

Ms. COOKSIE. Jim, would you address that, please?
Mr. RADINTZ. Certainly.

Yes, Congressman Stenholm, we recognize that the borrower training program has not always worked. I think one of the other statements that was given us this morning said that it really sounds like a good idea and it looks great on paper, but it loses something in the implementation. I know

Mr. STENHOLM. Whoever said that is a very wise person.

Mr. RADINTZ. We've been working with Harold Bob and his staff in Texas. Quite frankly, I think some of the problems that you're hearing about are particular to the State, partly because of the size; partly because of the nature of agriculture.

As Ms. Cooksie mentioned, especially in the guarantee program, there have been some concerns and we do have a legislative pro

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