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Feb 21, 1997
To whom it may Concern:
Subject: Guaranteed Loans
My name is Lee Everitt. I tarm approximately 1000 acres in Lubbock County, Texas. I am adding this statement to the letter that several of us in this community have signed concerning our feeling on the FSA's Guaranteed Loan Frogram.
I have had experience with both the SBA's Guaranteed Loan Program and the FSA's Guaranteed Loan Program and would like to offer this perspective, not with any malice, but simply a statement of facts. I feel like both programs similar in their objectives to help a certain sector tu obtain commercial financing for different business ventures, but therein the programs start to diverge. The biggest differences that I have noticed are as fullows:
1) The amount of paperwork that is required for
we are in the Ag Chemical and Fertilizer business serving the farners of Levelland and the surrounding community of Hockley County. Our trade in the area encompasses a wide range of growers of varying financial strengths and abilities to repay debt.
I tell my
Our problem lies therein; when we start a year, for instance, with PCA or Bank Financed growers we have the assurance, fairly prompt, or before a month's worth of purchases they will be refinanced. On the other hand with our FMHA customers we don't know what their status is till April, May or even later. customers that borrowing from FmHA in Hockley County is a death sentence because if he starts farming when his loan is processed and complete he has missed a crop and has no hope to repay. On the other hand, it he starts farming in a timely fashion with good sound management practices in January to fertilize and deep plowing they have to ride their suppliers. These suppliers include fuel, parts and fertilizer.
My theory is that Liberal government wants people to be dependant on them for everything and the loaning practices of this office sure reflect that thought. 16 the government were here to really help try to work theses growers into the main stream and off their dependance they should, at least, be as prompt as their counter parts in the lending industry. But then private industry has to earn a profit and pay its way and the bureaucracy of the federal government does not. Please Mr. Combest we need an officer in this obbice who can at least get a yes or no answer to the grower quicker than 3 to 4 months, I do not mean the money but at least let the growers know so we can know in a more timely fashion.
WILBUR ELLS COMPANY/SOUTHERN DIVISION
1 1/2 MILES WEST FM 300
P.O. BOX 1309
Agriculture lending represents very large part of
loan portfolio. A majority of these loans are made with the help of the Farm Service Agency in the form of guaranteed loans or through the FSA subordination program.
It is extremely important to this bank, our farm customers and small business owners that we maintain a strong and healthy farm economy. Without the strong farm economy, our county and countless other West Texas counties
survive. Therefore, it is imperative that farm credit through the Farm Service Agency remain available. Not only must farm credit remain available, it must be made available in a more timely fashion. As you are aware, 1996 was a very difficult year in regards to the timely processing of FSA loans in Hockley County.
With another production year upon us, it is imperative that the
the demise of many of our farm borrowers and business owners.
The point of the matter is that the agriculture economy,
as well our economy in general will be severely impacted if credit worthy borrowers can not receive funding in a timely fashion. Sincerely,
MAX JOINER EXECUTIVE VICE PRESIDENT
DI TORENZO LORENZO, TEXAS ma
Sub Committee on Forestry, Resource Conservation and
Lorenzo State Bank at lorenzo is a 30 millions dollar bank located at Lorenzo, Texas. The bank is primarily a farm bank. We loan approximately 8.5 million dollars annually to tarmers in Crosby and surrounding counties. For years a portion of our farm loans were to FSA borrowers through the FSA Subordination Program. The dollar amount loaned through subs is in the range of 3 million annually. Recently the FSA has had a great push to convert all FSA loans to guaranteed loans. Lorenzo State Bank has a problem with this. The Board of Directors at Lorenzo State Bank has passed a resolution limiting the FSA guaranteed loans to i million dollars. Currently we have approximately 1 million in guaranteed loans so there is no room to take additional loans.
The reasons for this action are as follows:
1. Many of our fellow bankers tell horror stories about trying to collect on a FSA Guaranteed Loan. I have listened to Rick Hatter in a training meeting and certainly am not comforted by him.
2. No bank can carry a non performing note for 6 months or more waiting to be paid by the Guaranty.
3. We feel that under the FSA Guaranteed Program we are being asked to take over and shut down borrowers who should have been closed out by FSA years ago.
We also believe that a payment on a guaranty might be reduced or denied by the bank making a simple error which we have watched FSA make for years. S.
It is very hard to tell which of the rules made by FSA must be followed and which ones are to be ignored. Sincerely,
LORENZO STATE BANK AT LORENZO
A Marrienn Ave
PO Box 490
LORENZO, TEXAS 79343
FAX (806) 634-5721
39-584 97 -6
Loan Pro, Inc.
Voice: (505) 276-8401
Fax: (505) 276-8486 Mobile: (806) 946-8407
Voice Mail 1-888-201-4471 E-Mail firstname.lastname@example.org
February 19, 1997
U.S. House of Representatives
Subcommittee Chairman, Mr. Larry Combest,
RE: USDA, Farm Service Agency Guaranteed Lending
I share a great concem over the future of the FSA Guarantee program. If this vital program is to continue to serve the needs of the agriculture community of America, the excessive losses in the program must stop. It is to this issue that we address this letter.
I think three areas need to be addressed to resolve the problems that exist today. First, some regulatory changes need to be made. Credit quality should be the key ingredient in those changes. Second, some changes on how the program is managed on the local level. Last, lender participation needs to be reexamined.
I offer the following suggestions for your review and consideration;
Suggested regulatory changes: [A] Require some nominal equity ( 5% - 10% ) or reduce the Guarantee percentage. This is only the most basic prudent credit practice, and will go a long way in reducing losses. [B] Abolish the 300 (F/O) and 400 (O/L) split in the program. Make the entire amount available then allow the borrower and the lender to decide what best suits that individual operation. The life of the collateral taken should determine the maximum maturity. [C] Scale the amount of the guarantee fee charged based on the maturity of the loan. As a suggestion; 12 point for three (3) years, and 2% for 20 years. [D] Remove 1980-B 1980.175 (b)(1)(vi) and similar regulations that require that the borrower be "unable to obtain credit without the guarantee." This is an open invitation for future loan losses. [E] Expand eligibility requirements to be able to include larger more profitable operations. This can go a long way in assisting to make the program more self-sufficient. [ [F] On Line of Credit notes, require hard collateral and/or crop insurance. For advances above the amount of the hard collateral and insurance - reduce the guarantee percentage significantly. [G] Increase the $700,000 overall limitation. Modern farming has changed over the last 10 - 12 years. It is my understanding that this limitation has been in place for more than 12 years. We need for the program to keep some type of pace with the cost of farming.