A federal judge in North Dakota yesterday ordered the Farmers Home Administration (FmHA) to halt foreclosure actions against about 78,000 farmers because of the agency's failure to inform them of their legal rights.
The order by U.S. District Judge Bruce M. Van Sickle will stop immediately foreclosures involving 13,000 financially troubled farmers and require renotification of an additional 65,000 farmers who are in the early stages of FmHA foreclosure procedures.
The remedies, which include revising FmHA notification forms and advising borrowers of their rights, could take months and give many farmers important time to work out their financial difficulties.
Van Sickle's order was another in a series of major defeats for the Reagan administration in a running battle among the FmHA, farmer advocacy groups and farm-state lawmakers over the agency's lending policies.
Last month, Van Sickle held that the FmHA had denied Fifth Amendment due-process protections to 79,000 farmers who had been notified in late 1985 of the farm lender's intentions to take "adverse action" on their loans -- that is, to force settlements or foreclose on them.
Of those 79,000 farmers, the loans of 13,000 had been "accelerated" or put into foreclosure channels. Under agency rules, accelerations also mean that those farmers are denied continued living expenses and farm operating money to which they ordinarily would be entitled.
Van Sickle ordered no remedies in his ruling last month other than to tell the FmHA to cure its administrative flaws quickly. Yesterday, he said the May ruling was erroneous and retroactive relief is required even though it will be costly to FmHA. "Renotification of these borrowers will burden FmHA's operation and budget, but this burden is outweighed by the benefit of providing . . . sound notice to this large pool of borrowers," he said.
The new order affects about 29 percent of the FmHA's 267,000 farmer borrowers, although it also could slow proceedings against 19,000 delinquent borrowers who were notified earlier this year that the FmHA would move against them if they did not take steps to reduce or pay off their debts.
An agency spokesman said the FmHA would have no comment until Agriculture Department lawyers have reviewed Van Sickle's order. "We don't even know what to tell our state directors," spokesman Joseph O'Neill said.
In St. Paul, Minn., attorney Lynn Hayes of the Farmers Legal Action Group, which had sought the order, said Van Sickle had provided "a major victory" for at least 65,000 farmers and had given the 13,000 maneuvering room to stave off final foreclosure action.
But for another 1,000 farmers involved in the case who already have lost their land, Van Sickle declined to provide remedies even though the FmHA may have acted unconstitutionally in their cases. "This court will not reopen the wounds of those individuals for whom the legal process has been completed," he said yesterday.
Van Sickle's ruling was one of several he has made against the FmHA since 1983 when farm-advocacy groups went to court contending that the federal farm lender of last resort had violated farmers' rights in its efforts to crack down on delinquent borrowers.
The judge's 1984 ruling in the original case, which involved nine North Dakota farmers, resulted in a nationwide moratorium on loan foreclosures for nearly two years.