S. 3126 — Fair Credit for Farmers Act of 2025

This section directs the Secretary of Agriculture to defer principal and interest payments for two years from enactment on direct farm ownership, operating, or emergency loans (under the Consolidated Farm and Rural Development Act) to eligible borrowers (delinquent or financially distressed farmers or ranchers), excluding loans with terms of 12 months or less, and to extend those loans' maturity dates and repayment periods by two years (authorizing exceedance of statutory maximum repayment periods—such as 40 years under 7 U.S.C. 1927 for farm ownership loans—by up to two years). It further directs the Secretary to reduce the interest rate on the remaining principal of such outstanding direct farm loans to 0.125% during the two-year deferral period. Separately, this section requires lenders of guaranteed farm loans to covered producers (limited resource, socially disadvantaged, beginning, or veteran farmers or ranchers) to waive guarantee fees for at least two years from enactment (extendable by the Secretary by an additional 180 days).

This section inserts new section 375 into subtitle D of the Consolidated Farm and Rural Development Act (7 U.S.C. 1922 et seq.) to reform farmer program loans (i.e., direct and guaranteed farm ownership, operating, and microloans administered by the Farm Service Agency), including (1) requiring determination letters for adverse decisions on such loans, Farm Service Agency benefits, or noninsured crop disaster assistance to specify all known reasons, relevant regulations and handbooks, and online access instructions—and prohibiting subsequent adverse decisions based on unstated reasons unless applicant circumstances substantially change; (2) limiting collateralization of direct loans by authorizing a lien on a principal residence (i.e., borrower's residence plus not more than 10 adjoining acres) only if other assets are inadequate, mandating automatic partial release of such lien when other assets equal 100% of remaining loan balance, requiring liens in servicing to achieve not more than 100% collateralization with residence as last resort, and prohibiting security exceeding loan amount; and (3) eliminating any limitation on years allowed to close a loan. It also applies these adverse decision requirements to noninsured crop disaster assistance applications. This section further revises eligibility for direct farm ownership loans under section 302(b) (7 U.S.C. 1922(b)) by requiring applicants to have at least 1 year of experience substantially participating in farm or ranch management and business operations (replacing prior eligibility criteria) and authorizing the Secretary to waive this requirement for qualified beginning farmers or ranchers with approved mentoring relationships or other acceptable education or experience.

This section revises burden-of-proof standards and implementation requirements for the National Appeals Division (NAD) of the U.S. Department of Agriculture, which conducts hearings on appeals of adverse agency decisions in farm and other USDA programs. (1) It shifts the burden of proof from the appellant to the agency—which must prove by substantial evidence that its decision was not erroneous—for appellants with adjusted gross income (AGI) of not more than $300,000 in the previous year or as an average over the previous five years (previously, the appellant bore the burden in all cases). (2) It requires agency heads, in implementing NAD final determinations, to use only the information relied on by the Division and prohibits conditioning implementation on additional information except as specified in the decision letter.