Sec. 3. Farm loan reform

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Subtitle D of the Consolidated Farm and Rural Development Act is amended by inserting after section 374 ( 7 U.S.C. 2008i ) the following: In this section: The term adverse decision has the meaning given the term in section 271 of the Department of Agriculture Reorganization Act of 1994 ( 7 U.S.C. 6991 ). The term principal residence means the principal residence (as determined by the Secretary) of a borrower of a farmer program loan, including a residence and not more than 10 acres of adjoining land possessed and occupied by the borrower.

In the case of any adverse decision relating to a farmer program loan, a Farm Service Agency program benefit, or the noninsured crop disaster assistance program established by section 196 of the Federal Agriculture Improvement and Reform Act of 1996 ( 7 U.S.C. 7333 ), the Secretary shall include in a determination letter provided to the applicant, to the maximum extent practicable— a description of each reason known, or that reasonably should have been known, to the Secretary for that adverse decision; a reference to each regulation and each relevant instruction in the Farm Loan Programs handbook, the Noninsured Crop Disaster Assistance Program handbook, or any other appropriate handbook published by the Farm Service Agency; and instructions for accessing the Electronic Code of Federal Regulations and the handbooks described in subparagraph

(B)online. If the Secretary issues any adverse decision relating to an application for a farmer program loan, a Farm Service Agency program benefit, or the noninsured crop disaster assistance program established by section 196 of the Federal Agriculture Improvement and Reform Act of 1996 ( 7 U.S.C. 7333 ) and does not include in a determination letter provided to the applicant a reason known or which should have reasonably been known to the Secretary for that adverse decision, the Secretary may not subsequently issue an adverse decision to that applicant on the basis of the same reason, known or which should have reasonably been known to the Secretary, unless the circumstances of the applicant have substantially changed since the issuance of the prior adverse decision. The Secretary may secure a direct farmer program loan with a principal residence only if the total value of other assets available to secure the farmer program loan does not provide adequate security (as defined in section 761.2(b) of title 7, Code of Federal Regulations (as in effect on the date of enactment of the Fair Credit for Farmers Act of 2025 )) for the loan. In the case of a farmer program loan secured in part by a principal residence, the Secretary shall initiate a partial release of the principal residence as security in accordance with subpart H of part 765 of title 7, Code of Federal Regulations (as in effect on the date of enactment of the Fair Credit for Farmers Act of 2025 ), without any action required by the borrower, when the total value of other assets securing the farmer program loan is equal to 100 percent of the remaining loan amount. In the case of a farmer program loan borrower who is delinquent prior to restructuring the farmer program loan, the borrower shall execute and provide to the Secretary a lien on assets necessary to achieve not more than 100 percent collateralization of the loan value. Except as provided in section 764.106 of title 7, Code of Federal Regulations (as in effect on the date of enactment of the Fair Credit for Farmers Act of 2025 ), the Secretary shall take the best lien obtainable on assets described in subparagraph (A), subject to the condition that a primary residence shall be the last option available to the Secretary to achieve 100 percent collateralization of the loan value. The Secretary may not secure a direct farmer program loan with any property that provides security in excess of the amount of security value equal to the loan amount. The Secretary shall not impose any limitation relating to the number of years in which a farmer program loan may be closed by a borrower. . Section 196(b) of the Federal Agriculture Improvement and Reform Act of 1996 ( 7 U.S.C. 7333(b) ) is amended by adding at the end the following: In the case of an adverse decision relating to an application under this subsection, section 375(b) of the Consolidated Farm and Rural Development Act shall apply. . Section 302(b) of the Consolidated Farm and Rural Development Act ( 7 U.S.C. 1922(b) ) is amended— by striking paragraph

(1)and inserting the following: The Secretary may make a direct loan under this subtitle only to a farmer or rancher who has at least 1 year of experience substantially participating in the management and business operations of a farm or ranch, as determined by the Secretary. ; and by striking paragraphs

(3)and

(4)and inserting the following: In the case of a qualified beginning farmer or rancher, the Secretary may waive the 1-year requirement described in paragraph

(1)if the qualified beginning farmer or rancher— has an established relationship with an individual who has experience in farming or ranching, or with a local farm or ranch operator or organization, approved by the Secretary, that is committed to mentoring the qualified beginning farmer or rancher; or has other acceptable education or experience for an appropriate period of time, as determined by the Secretary. . Section 311 of the Consolidated Farm and Rural Development Act ( 7 U.S.C. 1941 ) is amended by striking subsection (c). Section 303(a)(1) of the Consolidated Farm and Rural Development Act ( 7 U.S.C. 1923(a)(1) ) is amended by striking subparagraph

(E)and inserting the following: refinancing the indebtedness of the farmer or rancher, if the farmer or rancher— has used a direct loan under this subtitle to refinance indebtedness not more than 4 times previously; and is refinancing a debt obtained from a creditor other than the Secretary, including a guaranteed loan. . Section 312(a) of the Consolidated Farm and Rural Development Act ( 7 U.S.C. 1942(a) ) is amended by striking paragraph

(9)and inserting the following: refinancing the indebtedness of a borrower; or . Section 339(d)(4)(B) of the Consolidated Farm and Rural Development Act ( 7 U.S.C. 1989(d)(4)(B) ) is amended— by striking institutions to and inserting the following: institutions— to ; and in clause

(i)(as so designated)— by striking subsection relating and inserting subsection, relating ; by striking worthiness, the and inserting worthiness or the ; and by striking collection and liquidation of loans, and to and inserting the following: or collection of loans; and to . Section 346(b)(2) of the Consolidated Farm and Rural Development Act ( 7 U.S.C. 1994(b)(2) ) is amended— in subparagraph (A)— in clause (i)(II), by inserting , to the extent practicable after April 1 of the fiscal year ; and in clause (iii), by inserting , to the extent practicable after September 1 of the fiscal year ; and in subparagraph (B)(iii), by inserting , to the extent practicable after April 1 of the fiscal year . Section 373 of the Consolidated Farm and Rural Development Act ( 7 U.S.C. 2008h ) is amended— in subsection (b)(2)(A)— by striking clause (i); in clause (ii), by striking chapters 11, 12, or 13 of Title 11 of the and inserting chapter 11, 12, or 13 of title 11, ; and by redesignating clauses

(ii)and

(iii)as clauses

(i)and (ii), respectively; and by striking subsection

(c)and inserting the following: The Secretary shall not restrict the eligibility of a borrower for a farm ownership or operating loan under subtitle A or B based on a previous debt write-down or other loss to the Secretary. . Section 366 of the Consolidated Farm and Rural Development Act ( 7 U.S.C. 2008a ) is amended— in subsection (a)— in paragraph (1), by striking

(1)received and inserting (1)(A) received ; in paragraph (2)— by striking the period at the end and inserting ; or ; and by striking

(2)the Secretary and inserting

(B)the Secretary ; and by adding at the end the following: received a benefit under any other program administered by an agency (as defined in section 271 of the Department of Agriculture Reorganization Act of 1994 ( 7 U.S.C. 6991 )); and the Secretary determines is not in compliance with the requirements of the provisions of law that authorize that program. ; in subsection (b)(2), by inserting , including having made management or financial decisions for the farming or ranching operation of the farmer or rancher that were detrimental due to the erroneous nature of an official communication from the Department of Agriculture, regardless of whether a financial benefit was received or only promised before the period at the end; in subsection (c)(1), by striking (a)(2) and inserting (a)(1)(B) ; in subsection (e), by striking section in the matter preceding paragraph

(1)and all that follows through shall not be in paragraph

(2)and inserting section shall be ; and by adding at the end the following: A hearing officer (as defined in section 271 of the Department of Agriculture Reorganization Act of 1994 ( 7 U.S.C. 6991 )) may provide equitable relief under this section. The Secretary may review a decision of a hearing officer (as so defined) to grant equitable relief pursuant to paragraph (1). In this subsection: The term adverse decision has the meaning given the term in section 271 of the Department of Agriculture Reorganization Act of 1994 ( 7 U.S.C. 6991 ). The term applicant means a person who submitted to, or attempted to submit to, the Farm Service Agency an application for— a direct farm ownership, operating, or emergency loan under this title; or a Farm Service Agency program benefit. A loan applicant shall be eligible for equitable relief under this section if— the National Appeals Division determines that the Farm Service Agency was in error in denying the loan, benefit, or payment based on feasibility; the National Appeals Division has confirmed the accuracy of the projected income and projected expenses described in the original application submitted by the applicant; and the original application submitted by the applicant is no longer feasible due to the delay caused by the erroneous denial by the Farm Service Agency and the length of the appeals process. The amount of equitable relief under subparagraph

(A)shall be the amount equal to the difference between— the projected income described in the application; and the projected expenses described in the application. A loan applicant shall be eligible for equitable relief under this section if— feasibility was not listed as a reason for an adverse decision in the determination letter provided to the applicant; eligibility was listed as a reason for an adverse decision in the determination letter provided to the applicant; the National Appeals Division determines that the Farm Service Agency was in error in denying the loan based on eligibility; and the original application submitted by the applicant is no longer feasible due to the delay caused by the erroneous denial by the Farm Service Agency and the length of the appeals process. An applicant shall be eligible for equitable relief under this section if— the Farm Service Agency issued an adverse decision on an application that the Farm Service Agency subsequently withdrew; and the original application submitted by the applicant is no longer feasible due to the delay caused by the adverse decision. An applicant shall be eligible for equitable relief under this section if— the Farm Service Agency indicated in an official communication made after the date of enactment of this subsection that the applicant could expect the loan, benefit, or payment, and then reversed its decision; and the applicant acted in good faith. . Subsection

(g)of section 366 of the Consolidated Farm and Rural Development Act ( 7 U.S.C. 2008a )— applies only with respect to applications submitted or attempted to be submitted, and decisions or communications made, after the date of enactment of this Act; and does not apply retroactively with respect to— any application submitted or attempted to be submitted, or decision or communication made, before that date of enactment; or any action, inaction, or consequence resulting from a decision or communication made before that date of enactment.

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