The US government will try to shift more of its farmer borrowers into the hands of private lenders by offering to ``buy down'' interest rates to levels the farmers can afford, a top official said Wednesday. The interest-rate subsidy would be the latest tool in a longstanding attempt to reduce the cost of the loan programs. The Farmers Home Administration (FmHA) has put increasing emphasis on loan guarantees in recent years and cut back on directly lending money itself.
Loan guarantees accounted for 61 percent of FmHA lending in fiscal 1990 but loan levels have fallen well short of the amount Congress authorized.
Farm activists say they fear that some farmers will be squeezed out of FmHA programs because they cannot obtain guaranteed loans and there is too little money to go around for direct loans.
``We certainly hope a large number of farmers are eligible [for the guaranteed loans], but there is no guarantee that will be the case,'' said Kathy Ozer of the National Family Farm Coalition. ``One of our real concerns is there are a lot of banks that are not participating in the guarantee program and won't with the interest-rate buydown.''
Under the interest rate program, FmHA would reduce interest rates by as much as four percentage points so that a farmer would be able to repay a private loan.
The administration's fiscal 1992 budget calls for offering subsidies on up to $600 million of the $2.8 billion that would be offered in loan guarantees. Funding for direct loans would drop by $100 million, to $447 million.
FmHA Administrator LaVerne Ausman said he will focus on operating loans and greatly reduce loan programs for buying farmland.