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The federal government guarantees loans in the Federal Family Education Loan program (FFELP) so that private lenders that participate in the program will be reimbursed if a borrower defaults, and about $4.6 billion was spent in fiscal year 2006 to repay lenders for defaulted loans. To retain the guarantee on their loans, all FFELP lenders must comply with minimum due diligence requirements for servicing loans, including establishing a borrower's first repayment due date and making a certain number of attempts to contact delinquent borrowers. Lenders that adhere to these requirements are eligible to receive at least a standard reimbursement rate of 97 percent of the outstanding principal and accrued interest for defaults. However, pursuant to a provision of the Higher Education Amendments of 1992, the Secretary of Education has the authority to designate lenders and loan servicers as "exceptional performers" in servicing FFELP loans, and loans serviced by those with the exceptional performer designation qualify for a 99 percent reimbursement rate. The amendments also provided authority to the Secretary of Education to terminate the exceptional performer program following a GAO study, if such termination is in the fiscal interest of the United States. To obtain the exceptional performer designation, loan servicers have to obtain an initial audit, by independent auditors, demonstrating at least 97 percent compliance with due diligence requirements for a random sample of loans they service, and they must continue to demonstrate compliance through quarterly and annual audits to maintain the designation. The first exceptional performer designation that Education granted took effect in January 2004, and 18 organizations that service about 90 percent of all FFELP loans currently have the exceptional performer designation. Congress asked us to conduct a review of the exceptional performer program to answer the following questions: (1) To what extent is the exceptional performer program meeting its objectives of improving loan servicing and decreasing defaults? (2) What are the costs and benefits of the exceptional performer program? In summary, we reported the following findings. The exceptional performer program has not materially affected loan servicing, and default claims have not declined in the years following the first exceptional performer designation. Specifically, representatives from each of the exceptional performers we interviewed told us they did not make substantive changes to their loan servicing to obtain the designation, and technological advances made prior to the first exceptional performer designation automated much of loan servicing, which simplified compliance with due diligence requirements. Additionally, both the number and dollar amount of default claims relative to all out-of-school FFELP loans increased from fiscal years 2004 to 2006. The federal government incurs substantial costs, while lenders receive most of... [ABSTRACT FROM AUTHOR]

Alternative mortgage products (AMPs) can make homes more affordable by allowing borrowers to defer repayment of principal or part of the interest for the first few years of the mortgage. Recent growth in AMP lending has heightened the importance of borrowers' understanding and lenders' management of AMP risks. This report discusses the (1) recent trends in the AMP market, (2) potential AMP risks for borrowers and lenders, (3) extent to which mortgage disclosures discuss AMP risks, and (4) federal and selected state regulatory response to AMP risks. To address these objectives, GAO used regulatory and industry data to analyze changes in AMP monthly payments; reviewed available studies; and interviewed relevant federal and state regulators and mortgage industry groups, and consumer groups. From 2003 through 2005, AMP originations, comprising mostly interest-only and payment-option adjustable-rate mortgages, grew from less than 10 percent of residential mortgage originations to about 30 percent. They were highly concentrated on the East and West Coasts, especially in California. Federally and state-regulated banks and independent mortgage lenders and brokers market AMPs, which have been used for years as a financial management tool by wealthy and financially sophisticated borrowers. In recent years, however, AMPs have been marketed as an "affordability" product to allow borrowers to purchase homes they otherwise might not be able to afford with a conventional fixed-rate mortgage. Because AMP borrowers can defer repayment of principal, and sometimes part of the interest, for several years, they may eventually face payment increases large enough to be described as "payment shock." Mortgage statistics show that lenders offered AMPs to less creditworthy and less wealthy borrowers than in the past. Some of these recent borrowers may have more difficulty refinancing or selling their homes to avoid higher monthly payments, particularly if interest rates have risen or if the equity in their homes fell because they were making only minimum monthly payments or home values did not increase. As a result, delinquencies and defaults could rise. Officials from the federal banking regulators stated that most banks appeared to be managing their credit risk by diversifying their portfolios or through loan sales or securitizations. However, because the monthly payments for most AMPs originated between 2003 and 2005 have not reset to cover both interest and principal, it is too soon to tell to what extent payment shocks would result in increased delinquencies or foreclosures for borrowers and in losses for banks and other lenders. Regulators and others are concerned that borrowers may not be well-informed about the risks of AMPs, due to their complexity and because promotional materials by some lenders and brokers do not provide balanced information on AMPs benefits and risks. Although lenders and certain brokers are required to provide borrowers with... [ABSTRACT FROM AUTHOR]

The Export-Import Bank (Ex-Im Bank) facilitates U.S. exports by extending credit to foreign governments and corporations, mostly in developing countries. The Federal Credit Reform Act requires Ex-Im Bank to estimate its net future losses, called "subsidy costs," for budget purposes. Beginning with fiscal year 2003, the Office of Management and Budget (OMB) significantly changed its methodology for estimating a key subsidy cost component: the expected loss rates across a range of risk ratings of U.S.-provided international credits. In response to a congressional mandate, GAO agreed to (1) describe OMB's current and former methodologies and the rationale for the recent revisions, (2) determine the current methodology's impact on Ex-Im Bank, and (3) assess the methodology and how it was developed. OMB changed its method for determining expected loss rates for U.S. international credits, with one basis being that emerging finance literature indicated the former approach might overstate losses to the government. While it formerly used only interest rate differences across bonds to derive expected loss rates, it now uses corporate bond default data, adjusted for trends in interest rates, to predict defaults and makes assumptions regarding recoveries to estimate expected loss rates. As the figure shows, expected loss rates fell under the new approach: they were higher across risk rating categories in fiscal year 2002 (the last year that the former method was used) than in fiscal year 2005. This drop has contributed to lower Ex-Im Bank projections of subsidy costs and budget needs. OMB's current method for estimating expected loss rates involves challenges and lacks transparency. Estimating such losses on developing country financing is inherently difficult, and OMB's shift to using corporate default data has some basis, given the practices of some other financial institutions and limitations in other data sources. However, the corporate default data's coverage of developing countries has historically been limited, and their predictive value for Ex-Im Bank losses is not yet established. OMB's method generally predicts lower defaults than the corporate default data it used, whereas more recent corporate data show higher default rates. At the same time, OMB has assumed increasingly lower recovery rates, which serve to somewhat offset the lower default expectations, but the basis for the recovery rates and the changes over time has not been transparent. In addition, despite the method's complexity, OMB developed it independently and provided affected agencies with limited information about its basis or structure. [ABSTRACT FROM AUTHOR]

The number of borrowers consolidating their federal student loans has increased substantially in recent years, with the total amount of loans being consolidated rising from $13 billion in fiscal year 1999 to over $41 billion in fiscal year 2003. This increase in consolidation loan volume and recent interest rate trends have increased the overall estimated long-term cost to the federal government of providing consolidation loans under the Department of Education's (Education) two major student loan programs--the Federal Family Education Loan Program (FFELP) and the William D. Ford Federal Direct Loan Program (FDLP). GAO is providing information on (1) the differences that exist between FFELP and FDLP consolidation loans and borrowers, (2) the extent to which borrowers with student loans under one program obtain consolidation loans under the other, and (3) how FFELP and FDLP borrower and loan characteristics and the movement of loans between the two programs are incorporated into Education's budgetary cost estimates for consolidation loans. On average, during the 1995-to-2003 period, FFELP consolidation loan borrowers had higher levels of consolidation loan debt than FDLP consolidation loan borrowers. FFELP borrowers were also more likely than FDLP consolidation borrowers to have attended a 4-year school versus a 2-year or proprietary school. As a group, FFELP borrowers were less likely to default on a student loan prior to consolidation than FDLP borrowers. However, both FFELP and FDLP borrowers who had defaulted prior to consolidation were more likely to default on their consolidation loan than those who did not default prior to consolidation. Over the 1998-to-2002 period, an increasing share of both FFELP and FDLP underlying loan volume was consolidated into FFELP, while a decreasing share of underlying loan volume was consolidated into FDLP. Defaulted loans, however, whether from FFELP or FDLP, were much more likely to be consolidated into FDLP. In general, Education incorporates borrower and loan characteristics and movement of loans between programs into its budgetary cost estimates by (1) grouping loans with similar characteristics in risk categories, (2) forecasting loan volume for each risk category, and (3) applying various assumptions to each risk category based on historical and other economic data. Education incorporates the default history of borrowers into its cost estimates by grouping consolidation loans with underlying defaulted loans in a risk category and applying higher default rate assumptions to loans in this category. However, Education has not analyzed whether borrowers with an underlying defaulted loan will default on their consolidation loans at different rates based on the type of school attended. Education does incorporate assumptions based on variations in default rates by school type, but only for nonconsolidation loans. Our analysis demonstrates that the extent to which borrowers with an underlying defaulted loan default on their consolidation loan varies according to the type of school they attended. [ABSTRACT FROM AUTHOR]

Title XI of the Merchant Marine Act of 1936, as amended, is intended to help promote growth and modernization of the U.S. merchant marine and U.S. shipyards by enabling owners of eligible vessels and shipyards to obtain financing at attractive terms. The program has guaranteed more than $5.6 billion in ship construction and shipyard modernization costs since 1993, but has experienced several large-scale defaults over the past few years. One borrower, American Classic Voyages, defaulted on five loan guarantees in amounts totaling $330 million, the largest of which was for the construction of Project America cruise ships. Because of concerns about the scale of recent defaults, GAO was asked to (1) determine whether MARAD complied with key program requirements, (2) describe how MARAD's practices for managing financial risk compare to those of selected private-sector maritime lenders, and (3) assess MARAD's implementation of credit reform. We are currently considering a number of recommendations to reform the Title XI program. Because of the fundamental flaws we have identified, we question whether MARAD should approve new loan guarantees without first addressing these program weaknesses. The Maritime Administration (MARAD) has not fully complied with some key Title XI program requirements. While MARAD generally complied with requirements to assess an applicant's economic soundness before issuing loan guarantees, MARAD did not ensure that shipowners and shipyard owners provided required financial statements and disbursed funds without sufficient documentation of project progress. Overall, MARAD does not employ procedures that would help it adequately manage the financial risk of the program. MARAD could benefit from following the practices of selected private-sector maritime lenders. These lenders separate key lending functions, offer less flexibility on key lending standards, use a more systematic approach to loan monitoring and rely on experts to estimate the value of defaulted assets. With regard to credit reform implementation, MARAD uses a simplistic cash flow model to calculate cost estimates, which have not reflected recent experience. If this pattern of recent experience were to continue, MARAD will have significantly underestimated the cost of the program. MARAD does not operate the program in a businesslike fashion. Consequently, MARAD cannot maximize the use of its limited resources to achieve its mission and the program is vulnerable to fraud, waste, abuse, and mismanagement. Also, because MARAD's subsidy estimates are questionable, Congress cannot know the true costs of the program. [ABSTRACT FROM AUTHOR]

During fiscal year 2002, an estimated 5.8 million people borrowed about $38 billion in federal student loans. Despite a dramatic reduction in annual default rates on those loans since fiscal year 1990 (from 22.4 to 5.9 percent), the total volume of dollars in default doubled to nearly $22 billion by fiscal year 2001 from about $11 billion in fiscal year 1990. During that same period, the total student loans outstanding grew from $54.1 billion to $233.2 billion. The Department of Education's Office of Federal Student Aid (FSA) manages the nation's student financial assistance programs authorized under title IV of the Higher Education Act (HEA). In 1998, Congress amended the HEA and established FSA as a performance-based organization. Among other requirements, the HEA called for FSA to annually develop 5-year plans, issue annual reports, and consult with stakeholders regarding their delivery system. GAO initiated a review to assess FSA's default management efforts and results. FSA's default management goals were mostly to prevent defaults, increase collections, and verify student eligibility, but the agency lacked a plan to guide its efforts. FSA had 39 default management goals for fiscal years 2000 through 2002. However, the goals changed significantly during this period and FSA did not annually prepare 5-year performance plans as required by the HEA. FSA met or exceeded most goals, but did not prepare timely performance reports. According to our analysis, FSA met or exceeded performance targets for 36 of its 39 default management goals during fiscal years 2000 through 2002. However, FSA did not issue performance reports for fiscal years 2000 and 2001, as required by the HEA. Instead, in December 2002, FSA issued one report for both fiscal years that lists accomplishments, but does not clearly indicate the extent to which goals were or were not met. Suggestions from survey respondents did not indicate the need for additional goals. While about one-third of the 23 school officials who responded to our survey made suggestions about ways that FSA could better assist them, none of the suggestions indicated the need for additional default management goals. FSA assisted all schools by sharing default management information through symposiums and other media, and provided individual assistance to some schools through visits and telephone calls. Most of the responding officials were generally pleased with FSA's assistance. The suggestions that officials made did not indicate a need for additional goals because they either related to existing goals or addressed operational issues. [ABSTRACT FROM AUTHOR]

The relationship between the Department of Education and state-designated guaranty agencies that run the largest federal student loan program is changing in order to achieve program and cost efficiencies and improve delivery of student financial aid. These state or private not-for-profit agencies guarantee payment if students fail to repay loans obtained through the Federal Family Education Loan programs. The 1998 Amendments to the Higher Education Act authorize the Secretary of Education to enter into "voluntary flexible agreements" (VFA) with individual guaranty agencies. These agreements allow a guaranty agency to waive or modify some of the federal requirements that apply to other guaranty agencies. GAO found that the process for developing the agreements did not fully meet the needs of the guaranty agencies and other program participants. The process frustrated guaranty agency officials GAO talked to, especially those who ultimately chose not to apply for a VFA and those who were not granted a VFA. Agency officials said that Education's communication about the VFA development process was poor and that Education was unable to meet its own timetable. The VFAs generally complied with most of the legislative requirements. However, one of the four agreements does not conform to the requirement that projected federal program costs not increase due to the agreements. The key changes implemented under the VFAs include incentive pay structures for guaranty agencies and waivers of certain statutory and regulatory requirements. Each VFA contains provisions for paying the guaranty agency incentive amounts on the basis of specific performance measures, such as default rates. Education is not prepared to assess the effects of VFAs because it lacks a way to adequately measure changes in guaranty agency performance. The lack of uniform measures makes it difficult to distinguish the results of the VFAs from the effects of other factors, such as the general condition of the economy. Although the Department is required to report on the status of the VFA by September 2001, no reports have been issued so far. [ABSTRACT FROM AUTHOR]

The process and types of data the Small Business Administration (SBA) uses to estimate the subsidy cost of the 7(a)General Business Loan Program are generally reasonable and comply with existing Office of Management and Budget guidance. GAO's review of actual and originally estimated defaults and recoveries showed that, on a cumulative basis since 1992, defaults were overestimated by approximately $2 billion and recoveries were overestimated by approximately $450 million. During this same period, SBA overestimated the cost of the 7(a) program by $958 million as evidenced from a trend of downward reestimates. The majority of these downward reestimates can be attributed to the overestimate of defaults. For those loan guarantees approved from fiscal years 1992 through 1997, GAO was unable to determine the specific reason for the overestimate of defaults primarily because the basis SBA used for the estimated default rate for these years was not documented. During this period reestimates account for approximately 84 percent of the total $958 million reestimate. SBA began using its current methodology in 1998. Under this method, high default rates associated with loan guarantees approved in fiscal years 1986 through 1990 contributed to the difference between estimated and actual defaults for loan guarantees approved from 1998 through 2000. SBA has proposed to the Office of Management and Budget another methodology that uses the five most recent years of actual loan performance prior to each activity year being estimated--referred to as the lookback period--rather than the current approach. The proposed method would be more sensitive to fluctuations in economic conditions or changes in program delivery or design because it uses a shorter lookback period. The benefit of this approach is that, in a continuing stable economy, the original subsidy cost estimate would be expected to more closely match actual loan performance and reestimates would therefore be smaller. However, the risk of this approach is that a sudden downturn in the economy would be more likely to result in actual loan performance being different than estimated and thus would likely result in larger upward reestimates than under the current approach. [ABSTRACT FROM AUTHOR]

This testimony discusses the Department of Agriculture's (USDA) farm loan programs, which are run by the Farm Service Agency (FSA). GAO (1) provides an overview of the financial condition of FSA's farm loan portfolio as of September 30, 2000 and (2) explains its decision to remove the farm programs from its high-risk list. GAO found that FSA had more than $16.6 billion in outstanding farm loans as of September 30, 2000; direct loans accounted for slightly more than half of this amount and guaranteed loans for slightly less than half. Of the $16.6 billion, about $2.1 billion was owed by borrowers who were delinquent on repaying their FSA loans. Most (87 percent) of the $2.1 billion was owed on direct farm loans. Although the total amount due on the problem loans remains high, this financial position reflects improvement in FSA's direct loan portfolio in recent years as well as a continuation of a relatively healthy guaranteed loan portfolio. In January 2001, GAO removed FSA's farm loan programs from its high-risk list. Several actions taken by Congress and USDA, many of which GAO recommended, have significantly improved the operation and condition of USDA's farm loan programs. [ABSTRACT FROM AUTHOR]

The Department of Veterans' Affairs (VA) Loan Guaranty Program, which guarantees mortgage loans for qualified lenders, provides additional assistance to those who face financial hardship and possible foreclosure. This report discusses VA's supplemental loan servicing program. GAO (1) assesses VA's implementation of its policies and procedures for servicing troubled loans and (2) analyzes VA's measures for assessing the effectiveness of its supplemental servicing program and ability to generate meaningful data for overseeing and improving loan servicing. GAO found that the three regional loan centers it visited generally conformed with VA policies and procedures and had procedures in place to ensure that VA's loan servicing representatives complied with VA policies and procedures. Two issues affect VA's ability to effectively manage its supplemental servicing program. First, VA lacks meaningful performance measures that would allow it to accurately assess the effectiveness of its program. Second, VA's computer system has been unable to generate useful and timely management reports that regional loan center managers and headquarters staff could use to manage their supplemental loan servicing program. [ABSTRACT FROM AUTHOR]

The Farm Service Agency (FSA) within the Department of Agriculture provides financial assistance to farmers and ranchers who are unable to obtain commercial credit at reasonable rates and terms. FSA provides direct government-funded loans and repayment guarantees on farm loans made by commercial lenders. During the 1990s, GAO issued a series of reports highlighting the substantial financial risk associated with FSA's farm loan programs and multibillion-dollar portfolio. GAO recently reviewed FSA's farm loan programs to determine the outstanding principal owed on direct and guaranteed farm loans at the end of fiscal year 2000 and the losses incurred by FSA on direct and guaranteed farm loans in the same year. GAO found that FSA had more than $16.6 billion in outstanding farm loans as of September 2000. Farm loan losses incurred by FSA during fiscal year 2000 totalled about $486 million. Both figures represent a significant decrease when compared to figures for earlier years. [ABSTRACT FROM AUTHOR]

This report focuses on the default rate for student loans. Two major federal student loan programs, the Federal Direct Loan Program (FDLP) and the Federal Family Education Loan Program (FFELP), together provided student borrowers with about 9 million loans totaling about $42.9 billion in fiscal year 1999. The most recent student loan default rate statistics for schools showed that, overall, the direct and guaranteed student loan programs had similar default rates: at 6.6 percent for FDLP and 6.7 percent for FFELP. The two programs had similar default rates when the comparisons focused on the type of school. FDLP has two types of loans, consolidated and nonconsolidated. Generally, borrowers with consolidated loans who used the standard payment plan had a lower default rate than did borrowers with nonconsolidated loans. However, when income contingent repayment plans were used, borrowers with consolidated loans had a higher default rate than did those with nonconsolidated loans. The Department of Education uses various procedures to ensure that loans are properly serviced and collected, including independent monitoring and external assessments of monitoring results. [ABSTRACT FROM AUTHOR]

The Rural Utilities Services (RUS) has exercised broad authority in restructuring the loans of two generation and transmission (G&T) borrowers, including acquisition of third-party non-RUS guaranteed debt, and providing significant concessions to the borrows, such as noninterest bearing notes, contingent payments, and forgiveness of federal government's losses. Although RUS generally followed its policies and procedures for restructuring loans of two financially troubled borrowers, GAO found one instance in which RUS' policies were not fully used and other instances in which procedures could be improved. RUS' procedures lack detailed written criteria for determining when a borrower should be added or removed from RUS' list of financially troubled borrowers. RUS estimated that it could lose approximately $185 million on loans restructured for the first borrower and between $110 and $120 million for the second borrower. The Rural Development Service (RD) did not include in the fiscal year 1999 financial reports the estimated loss of $185 million it anticipates will occur as a result of restructuring loans for one borrower, and included only $30 million of the estimated $110 to $120 million anticipated loss on the restructured loan for the other borrower. These errors occurred because the accounting department lacked documented procedures to ensure that debt forgiveness and losses resulting from restructuring loans were properly reported in the financial statements. [ABSTRACT FROM AUTHOR]

Every year, the Department of Housing and Urban Development (HUD), through the Federal Housing Administration (FHA), insures billions of dollars in home mortgage loans made by private lenders. During fiscal year 1999, FHA insured 1.3 million mortgages valued at about $124 billion. Recent cases of mortgage fraud across the country have raised concerns about HUD's oversight of these lenders. This report provides information on HUD's oversight of lenders participating in FHA's mortgage insurance programs for single-family homes. Among other things, GAO found that 12 of 36 lenders had received 4 or more "poor" ratings from HUD's homeownership centers for their last 15 preclosing reviews. In addition, the homeownership centers' monitoring of lenders does not adequately focus on the lenders and loans that pose the greatest insurance risks to HUD. This testimony summarizes the April 2000 report, GAO/RCED-00-112. [ABSTRACT FROM AUTHOR]

Every year, the Department of Housing and Urban Development (HUD), through the Federal Housing Administration (FHA), insures billions of dollars in home mortgage loans made by private lenders. During fiscal year 1999, FHA insured 1.3 million mortgages valued at about $124 billion. Recent cases of mortgage fraud across the country have raised concerns about HUD's oversight of these lenders. This report provides information on HUD's oversight of lenders participating in FHA's mortgage insurance programs for single-family homes. Among other things, GAO found that 12 of 36 lenders had received 4 or more "poor" ratings from HUD's homeownership centers for their last 15 preclosing reviews. In addition, the homeownership centers' monitoring of lenders does not adequately focus on the lenders and loans that pose the greatest insurance risks to HUD. GAO summarized this report in testimony before Congress; see: Single-Family Housing: Stronger Oversight of FHA Lenders Could Reduce HUD's Insurance Risk, by Stanley J. Czerwinski, Associate Director for Housing and Community Development Issues, before the Permanent Subcommittee on Investigations, Senate Committee on Governmental Affairs. GAO/T-RCED-00-213, June 29 (nine pages). [ABSTRACT FROM AUTHOR]

Pursuant to a legislative requirement, GAO reviewed the Homeowners Protection Act of 1998, focusing on the: (1) act's cancellation and termination provisions for private mortgage insurance; (2) act's high-risk provisions; (3) effect high-risk provisions would have on mortgage lenders; and (4) number and characteristics of residential mortgage loans that are considered high risk and are therefore excluded from the routine cancellation and termination provisions. GAO noted that: (1) homeowners are generally required to obtain mortgage insurance when they make a low down payment on a mortgage loan; (2) under the act, if the borrower has a good payment history, the borrower may cancel his or her private mortgage insurance when the principal balance of the mortgage reaches 80 percent of the original value of the property securing the loan; (3) if the borrower does not cancel the insurance, the lender must do so when the mortgage balance reaches 78 percent of the original value of the property securing the loan provided the borrower is current on the mortgage payments; (4) however, these cancellation and termination provisions do not apply if the mortgage has high risks associated with it; (5) the act does not define this term but stipulates that conforming loans (limited to $240,000) may be designated as high risk in accordance with guidelines established by the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac); (6) for mortgage loans of more than $240,000 (nonconforming loans), the lender can define what constitutes high risk; (7) Fannie Mae and Freddie Mac have not defined high risk; (8) instead, they have decided to treat all conforming mortgages the same way and not apply the act's high-risk provisions for cancelling or terminating private mortgage insurance to specific mortgages; (9) therefore, the act's exception for high-risk loans has had no effect; (10) GAO believes that a mortgage lender would gain little by invoking the high-risks provisions for a mortgage of more than $240,000 because these provisions do not explicitly stipulate that the borrower have a good payment history or be current on a loan; (11) as a result, GAO believes there is a disincentive for lenders to invoke the high-risk exception; and (12) GAO believes that attempting to determine the number and characteristics of high-risk mortgages would not produce information helpful to decisionmakers for two reasons: (a) Fannie Mae and Freddie Mac have decided to treat all mortgages the same way and not apply the act's high-risk provisions for cancellation; and (b) there is a disincentive in the act for lenders to define mortgage loans of more than $240,000 as high risk. [ABSTRACT FROM AUTHOR]

The marketing assistance loan program provides farmers who grow certain crops with financial assistance at harvest time, when prices are usually lower than at other times of the year. As of September 1999, $3.4 billion of the $3.7 billion in cash payments went to producers of the following four crops: corn, soybeans, wheat, and upland cotton. The top 10 states where producers received the assistance were Illinois, Indiana, Iowa, Kansas, Minnesota, Nebraska, North Dakota, Ohio, South Dakota, and Texas. This report discusses (1) which producers received cash payments through the program, (2) why some producers did not participate in the program, and (3) the concerns that have been raised about the program's effects on cash payments and potential forfeitures. [ABSTRACT FROM AUTHOR]

The Guaranteed Business and Industry Loan Program guarantees the repayment of bank loans for almost any business project that creates or retains jobs in a rural area. As of June 1999, the program had more than 1,980 borrowers and $2.6 billion in outstanding loan principal and 130 delinquent borrowers who owed $167 million. GAO examined the Service's experience with business and industry guaranteed loans made during fiscal years 1994 through 1998 on which the Service paid losses. GAO found that the level of losses associated with the loan program has been relatively low in recent years, compared with the size of the entire loan portfolio. [ABSTRACT FROM AUTHOR]

Two major federal student loan programs--the Federal Family Education Loan Program and the William D. Ford Federal Direct Loan Program--help students meet their expenses for postsecondary education. These programs have made nearly 8.4 loans, providing students with more than $30 billion. When borrowers default on their student loans, however, it is the government that ultimately pays. An accurate measure of student loan defaults at colleges, universities, and vocational schools is an important way to monitor the financial risk facing the Department of Education. The Department now excludes schools from the program if their default rate reaches 25 percent or more for three consecutive years. This report examines the way in which the Department calculates these default rates. GAO focuses on borrowers who have temporary approval through their lenders or loan services through "deferment" or "forbearance" not to make payments on their loans. In the Department's calculation of a school's default rate, these borrowers are not counted as defaulters, but they do count as part of the total number of borrowers. This report answers the following three questions: During the last several years, has there been any increase in the number of borrowers who entered repayment but later received deferments or forebearances? What would have been the effect of the most recent default rates if borrowers whose loans were in deferment or forbearance had been excluded from the default rate calculation? Under this alternative method of calculating the default rate, would any additional schools have exceeded the 25-percent default rate threshold? [ABSTRACT FROM AUTHOR]

Defaults on mortgages insured by the Department of Housing and Urban Development's (HUD) Federal Housing Administration (FHA) increased during the 1980s, primarily because of weak real estate markets. By the early 1990s, HUD owned nearly 110,000 single-family and 2,400 multifamily loans that it had insured. In a series of six sales held between 1994 and 1997, HUD sold 98,640 single-family loans and 1,093 multifamily loans. The sales generated more than $2.2 billion in budgetary savings. This report discusses the reasonableness of (1) HUD's estimates of budgetary savings from the sale of its single-family loans and (2) the model HUD used to estimate savings from the sale of multifamily loans. GAO concludes that HUD's estimates of budgetary savings from the sale of the single-family loans it reviewed were reasonable. [ABSTRACT FROM AUTHOR]