The Farmers Home Administration, ending a court-ordered two-year moratorium, will begin notifying farmers next week that if they are delinquent on federal loans they must immediately take steps to repay or restructure those loans or face foreclosure of their farms.
Letters, titled "notice of intent to take adverse action," will be mailed out to any farmers who were at least $100 behind in loan payments at the end of December. About 90,000 farmers, a third of all those who took out FHA loans, are estimated to be behind in their payments.
The FHA, a division of the Agriculture Department, has oftentimes been the lender of last resort to America's cash-strapped farmers, and now holds about 12 percent of the nation's total farm debt.
The letters will tell the farmers that they are delinquent in their payments, and spell out seven steps the farmers can seek to take, including having the loan restructured, deferring some payments, combining loans and applying for new short-term, low-interest loans to help with quick cash-flow problems. The farmers will have 30 days to respond to the notices.
Vance L. Clark, the FHA administrator, said yesterday that the notices should not be interpreted as a decision to begin foreclosing on farms. Rather, he said, the letters will tell farmers that they are behind in their payments and will outline the available options.
"Foreclosure, that's the last thing that happens," Clark said. "There are a lot of options open to borrowers to preclude these foreclosures." He said that along with each notification he is sending a letter from himself telling each farmer that the FHA understands the farmers' plight and wants to help.
Still, Clark said, there eventually may have to be some farm foreclosures, bearing out the worst predictions of farmers and farm-state lobbyists. "Not everybody's going to make it this year. There's going to be some who have to leave the farm," Clark said.
The Farmers Home Administration was essentially barred from sending out notifications of foreclosures to farmers in November 1983, when a federal judge in North Dakota said the lending agency must first notify farmers of all other options open to them before moving forward with foreclosure proceedings.
That ruling, in a class-action case brought by farmers whose land was threatened, forced the FHA to hold up new foreclosure notices while it drafted regulations giving farmers various options for handling their debts.
Those regulations were published in the Federal Register in November.
"The judge said 'wait a minute, you have to tell them the farmers of other avenues,' so we cleaned up our act," Clark said. Before the judge's moratorium, which effectively ended yesterday, the FHA had foreclosed on hundreds of farms.
Rising production costs, a grain glut and falling farm prices -- expected to go even lower because of new legislation signed by President Reagan to drive commodity prices down -- all have taken a toll on thousands of American farmers, forcing many into massive debts and driving some out of business.