USDA announces additional aid for distressed borrowers

The U.S. Department of Agriculture announced Oct. 7 an additional $250 million in automatic payments for distressed direct and guaranteed farm loan borrowers under Section 22006 of the Inflation Reduction Act. This significant step continues USDA’s commitment to keeping farmers and ranchers financially viable and support for agricultural communities.  

Over the past two years, USDA acted swiftly to assist borrowers in retaining their land and continuing their agricultural operations. Since President Joe Biden signed the Inflation Reduction Act into law in August 2022, the USDA has provided approximately $2.4 billion in assistance to more than 43,900 distressed borrowers.

The additional $250 million will aid approximately 4,650 distressed direct and guaranteed farm loan borrowers. This includes approximately $235 million in assistance for an estimated 4,485 delinquent direct and guaranteed borrowers who have not received prior IRA 22006 assistance, and approximately $15 million in assistance for an estimated 165 direct and guaranteed borrowers with Shared Appreciation Agreements.  

Distressed FSA borrowers with loans secured by real estate must sign a Shared Appreciation Agreement when they accept loan servicing actions that write down a portion of their direct or guaranteed debt. FSA is required to recapture a portion of that write-down if the property value of the real estate security increases when the agreement matures.

Borrowers are required to either repay this amount or have it converted into an interest-accruing repayment agreement. As loan servicing actions that were paused due to the COVID-19 pandemic resume, such as Shared Appreciation Agreement recaptures, this added debt burden could severely impact borrowers who are already struggling.

How payments will be made

For direct borrower delinquency assistance, FSA will make an automatic payment in the amount of any outstanding delinquencies, as of Sept. 30, 2024, on qualifying direct borrower loans that are one or more days delinquent, as of that date, provided those borrowers have not received prior Section 22006  assistance that was applied to reduce a direct FSA loan balance (excluding assistance for Disaster Set-Asides and Emergency Loans).  

For guaranteed borrower delinquency payments, FSA will mail via check an automatic payment in the amount of any outstanding delinquencies, as of Sept. 30, 2024, on qualifying guaranteed loans that are 30 or more days delinquent, as of that date, provided those borrowers have not received prior Section 22006 guaranteed loan assistance. Guaranteed loan borrowers are not considered to be in monetary default until 30 days past due. This assistance will be in the form of a Department of the Treasury check that is jointly payable to the borrower and the lender.

For borrowers receiving assistance on their Shared Appreciation Agreements, a payment will be made to resolve outstanding amortized repayment agreements and recapture amounts owed to FSA which have matured as of Sept. 30, 2024. Borrowers whose Shared Appreciation Agreements have not matured as of Sept. 30, 2024, will be contacted by FSA and provided an opportunity to request that FSA calculate a partial recapture and Shared Appreciation Agreement assistance offer.

USDA encourages producers to reach out to their local FSA farm loan staff to ensure they fully understand the wide range of loan and servicing options available to assist with starting, expanding, or maintaining their agricultural operation. To conduct business with FSA, producers should contact their local USDA Service Center.