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on property acquired with farm loans and the level of insurance that borrowers needed to have had as a condition for obtaining an emergency loan.
Establishes a maximum indebtedness level of $500,000 for disaster emergency
Allows FSA to (1) contract with commercial lenders to service the farm loan portfolio (2) use private collection agencies to assist in collecting delinquent
Requires borrowers to pay at least a portion of the interest on their loans as a
The FAIR Act also clarifies FSA's basic lending mission by, among other things, emphasizing that its assistance is to be temporary. Additionally, the act builds upon other legislation enacted earlier in the 1990s that emphasized helping beginning farmers and ranchers get started and progress in farming or ranching. The act also reinforces past congressional emphasis on shifting farm lending from direct loans to guaranteed loans. More specifically, the act, among other things, does the following:
Sets term limits for the receipt of direct farm ownership and operating loans. A person must have operated a farm or ranch for at least 3 years to be eligible to obtain a direct farm ownership loan. A borrower can obtain direct farm ownership loans during a 10-year period that starts when the person first obtains a farm ownership loan. A borrower can obtain direct farm operating
loans during 7 years; these may be consecutive, nonconsecutive, or a
Encourages the graduation of direct loan borrowers to conventional credit by allowing a 95-percent guarantee on loans made by commercial lenders to refinance the existing direct loans that borrowers have.
Increases the guarantee percentage allowed on loans made by commercial lenders to beginning farmers and ranchers who participate in a farm ownership loan program that is targeted to them.
Targets farm properties that are in FSA's inventory for sale to beginning
The changes in the FAIR Act address many of the problems that we have reported on in the past. While it is too early to gauge their impact on the financial condition of the portfolio, we believe that, if properly implemented, they will reduce the financial risk associated with the farm lending programs. We plan to continue to monitor and report on the USDA's progress in implementing the FAIR Act's credit provisions.
This concludes our prepared statement.
I understand that there will be testimony in Lubbock on February 21, 1997, before the subcommittee on agriculture. If I understand correctly, part of that testimony will be in reference to the various FmHA programs, including the guaranteed loan program. First State Bank, has been using FTHA guaranteed loans for farm operating. equipment, and livestock loans for about 20 years. During that time we have had only a minimal number of claims against the guaranties. Thoge claims were paid with no problems whatsoever. The paperwork associated with the guarantee process is considerable and time consuming, but not impossible to someone familiar with ag lending. I believe the application process could be streamlined. Cooperation from our past county supervisors and present county supervisor, Mike Beck, has been very good. All have been knowledgeable and good to work with. The only problem we have ever experienced was on a loan that was in excess of our county supervisor's approval limit. This loan, which went to the district supervisor, was in process for over four months. This long delay cost First State Bank a good potential customer and caused the customer to put his plans on hold.
I believe the FmA guarantee program is worthwhile and important for our many marginal ag producers. FmHA has been good to us and we hope the program continues. If we can be of further assistance, please contact us.
P.O. BOX 247
Spearman, 1X 79081
806 / 659-5565
You have asked me to provide a letter of our experiences with FmHA guaranty loans.
Currently FirstBank Southwest has three FmHA guaranty loans, two of which just
The loan in loss claim status was a Loan Note Guarantee (through the Parmer County
I realize that we may have made some mistakes, but we have serviced farm production