Presentation on theme: "Kansas Farm Loan Programs Guaranteed Lender Informational Meeting www.fsa.usda.gov/ks Please place your phones on mute. If you do not have a mute option."— Presentation transcript:
Kansas Farm Loan Programs Guaranteed Lender Informational Meeting www.fsa.usda.gov/ks Please place your phones on mute. If you do not have a mute option on your phone: Press *6 on any phone (including cellular phones) to Mute.
At one time or another you have experienced a red, yellow or green funding day with Farm Service Agency. Red is only temporary as loans are approved subject to funds being made available or we are given the green light “go” for the type of assistance. Yellow is the waiting list. If funds are not readily available, they are placed on an appropriate list according to the type of credit requested. When a loan request is approved by the appropriate loan approval official it is submitted to the FSA State Office to have funds obligated. Requests are funded by *** ***direct loans = date received application in office ***guaranteed loans = date complete in office
Forecasting the Funding for Fiscal Year 2012 “The USDA Farm Service Agency delivered over $720.3 million in federal program payments and loans to Kansas farmers and ranchers during FY 2011.* Kansas agriculture benefits greatly from the tireless efforts of our dedicated employees and locally elected County Committees.” Adrian J. Polansky State Executive Director *Farm Loans $131,300,415 …… FY 2011 ending 9/30/11 Farm Loans $162,556,987 …… FY 2010 ending 9/30/10 Farm Loans $147,683,765 …… FY 2009 ending 9/30/09 Farm Loans $ 91,497,008 …… FY 2008 ending 9/30/08 Farm Loans $101,451,850 …… FY 2007 ending 9/30/07 Farm Loans $ 89,002,542 …… FY 2006 ending 9/30/06
Guaranteed Loan Limits – Fiscal Year 2011 The dollar limit of guaranteed loans is adjusted annually, each September, based on the percentage change in the Prices Paid by Farmers Index, as compiled by USDA. Effective 10/1/2011 ~ $1,214,000 Total combined outstanding direct and guaranteed FO, OL & SW balances cannot exceed $1,514,000 and if there is an EM involved, combined balances cannot exceed $2,014,000.
Effective November 22, 2011 Federal Register Notice has announced that FSA will no longer accept applications, until further notice, for guaranteed loans with interest assistance (IA) because of a lack of program funding. There is no impact on guaranteed applications without interest assistance or on existing interest assistance agreements. Interest Assistance Program for Fiscal Year 2012
Guaranteed Loan Fee: 1.5% Effective October 1, 2011 any loan approved will have a 1.5% fee charged on the guaranteed portion. This increase in the guaranteed fee is the first since the inception of the guaranteed loan program in 1974 when we provided guarantees on economic emergency and livestock emergency loans. 1980 was when FSA loan programs included guaranteed Operating, Line of Credit and Farm Ownership loans. The emergency type loans were subsequently removed.
Guaranteed Loan Fee: 1.5% Guaranteed fees are collected from the lender but may be passed on to the applicant. Certain loan situations are exempt from collecting a fee and are found in 2-FLP Handbook at Paragraph 247 A. Guaranteed loan transactions that are not charged a fee are: Loans with Interest Assistance Loans where the majority of the funds are used to refinance FSA direct loan debt Loans to farmers involved in the direct downpayment program
Guaranteed Loan Fee: 1.5% Keep in mind when requesting a loan that the lender needs to request an amount as closely to the amount needed for the applicant’s credit needs. Determine: *Capital purchases *Amounts to refinance *Loan fees that will be included A loan request does not need to be in whole dollars and may be down to the nearest $1.00. Ex: Purchase Drill - $25,011; Refinance Bank debt - $132,568; Loan Fees - $2,500 = $160,079 x 90% x 1.5% = $2,161.07 guarantee fee. Lender’s Promisorry Note must match Conditional Commitment and Loan Guarantee to be issued.
15-Year Operating (OL) Term Limits The suspension of the OL Term Limits was not continued at the end of calendar year 2010. Thus many FSA borrowers have been affected. For Kansas, a total of 213 borrowers have used their 15-year term OL eligibility. Another 149 were in the 1-2 year category. Term Limit eligibility can be found in the 2-FLP Handbook at paragraphs 108 L and M. In October, past and present borrowers along with lenders were notified of potential eligibility issues with the term limitations nearing 1 or 2 years left for customers. A loan guarantee cannot be issued after 12/31/11 if a loan was approved and is not closed unless all lender actions and FSA conditions of the loan have been completed. The lender will be advised that the Conditional Commitment issued will be “null and void”.
15-Year Operating (OL) Term Limits Lender should work with the local FSA County Office to assist in direct OL (D-OL) eligibility. A key date is whether or not the borrower had D-OL’s on the books prior to 4/4/1996. Guaranteed OL’s (G-OL) do not count against the borrower’s D-OL eligibility but D-OL’s do count towards the 15-year term limit in receiving OL assistance, including LOC advances. Note: There is no term limit for guaranteed farm ownership (FO) loans. A borrower that has used up years of eligibility with the direct FO program may qualify for a guaranteed FO loan [after meeting other eligibility requirements] at any time. A direct FO borrower has a term limit to receive FO loans in a total of 10 years after the closing of his first FO loan.
Shared Lien Positions Between FSA Guaranteed Loan and Lender’s Non-Guaranteed Loan All guaranteed loans will be secured by the best lien obtainable provided that any chattel secured guaranteed loan must have a higher lien priority (including PMSI) than an unguaranteed loan secured by the same chattels and held by the same lender. What does this mean to the lender? If the lender holds an unguaranteed loan with a first lien on the same collateral proposed as primary security for a guaranteed loan, they must subordinate its lien position to the FSA guaranteed loan. Junior lien positions are acceptable only if the total amount of debt with liens on the security, including the debt in junior lien position, is less than or equal to 85% of the value of security. Note: Subsequent guaranteed loans made by the same lender with the same security will not be considered junior in this limitation and will be treated as having an equal lien position with existing outstanding loans.
Subordinations of Direct Loan Security when a Guaranteed Loan is made FSA may subordinate its security on a direct loan when a guaranteed loan is being made only in the following circumstances: When the lender will advance funds and perfect a security interest in crops, feeder livestock, livestock offspring or livestock products (can be for a 5-year LOC) when the lender requesting the guarantee needs the subordination of the Agency’s lien position to maintain its lien position when servicing/restructuring when the guaranteed loan made will be to refinance debt of another lender FSA’s position on the real estate security will not be adversely affected
Proposed Changes Being Reviewed by the National Office Allow the State Executive Director “exception authority” to release significant income generating property if certain conditions are met. -Currently regulations read that if loans are secured with “all assets” – security, other than significant income generating property will not be released outright with no consideration. Allow the State Executive Director “exception authority” to approve a subordination on additional security if certain conditions are met. -Currently regulations require the lender to request a subordination of basic/additional security for any purpose that is not allowing another lender to refinance existing prior liens.
Guaranteed Lender Training
On April 21, 2009, Secretary of Agriculture, Thomas J. Vilsack issued a memorandum entitled “A New Civil Rights Era for USDA.” The memorandum outlined 14 actions “to ensure fair treatment of all employees and applicants and improve our program delivery to every person entitled to our varied services.”
The first action was the completion of an external analysis of the delivery of FSA, NRCS, RD, and RMA programs, including FLP. The results of this analysis, referred to as the Cultural Transformation, Inclusion and Accessibility Report, are available at: http://www.usda.gov/documents/Civil_Rights_ Assessment-Final_Report.pdf Note: Report Exhibits are not accessible at the current time.
For Farm Loan Programs, the Report indicates: in general, the SDA participation rate in the direct loan program was at or above the percent of SDA “principal operators” reported in the 2007 NASS Census of Agriculture. With the exception of Asians, and Native Hawaiians and Pacific Islanders, the guaranteed loan program has a substantially lower SDA participation rate
Increasing SDA Participation in the Guaranteed Loan Program What is SDA? -- Socially Disadvantaged Applicant (or Farmer) An individual or entity who is a member of a socially disadvantaged group. For entity applicant, the majority interest must be held by SDA individuals. For married couples, the SDA individual must have at least 50% ownership in the farm business and make most of the management decision, contribute a significant amount of labor, and generally be recognized as the operator of the farm. A group whose members have been subject to racial, ethnic or gender prejudice because of their identity as members of a group without regard to their individual qualities. These groups consist of: American or Alaskan Natives, Asians, Blacks or African Americans, Native Hawaiians or other Pacific Islanders, Hispanics and women.
Increasing SDA Participation in the Guaranteed Loan Program Information you need to know: -According to NASS data, SDA principal operator numbers have substantially increased since 2002. - Currently FSA loan funds are targeted for SDA participants. -As emphasis on SDA’s increases, the more important accurate recording of demographics becomes. -Perception from SDA farmers ~ they are reluctant to attempt to obtain loans from commercial lenders. -It has been found that Leaders of African American and Native American farmer groups, in particular, have stated lenders are not interested in financing SDA farmers and therefore; the guaranteed loan program does not meet their needs.
Increasing SDA Participation in the Guaranteed Loan Program Information you need to know: -Many SDA farmers find it difficult to meet the financial standards set by commercial lenders. -Guaranteed loans are made on commercial rates and terms. The higher interest rates and shorter loan terms make it more difficult to develop a feasible plan for repayment. -External commercial banks make 70% of FSA guaranteed loans; however, in the southern and mid-Atlantic states where the majority of African American farmers are located, there is minimal bank participation in the program. -Commercial lenders may be reluctant to make loans to Native Americans when enforcement of lien instruments is under the jurisdiction of tribal courts.
Increasing SDA Participation in the Guaranteed Loan Program As a lender, what can you do? -Encourage applicants to complete demographic information to be counted and to take advantage of targeted loan funds. Albeit the information to complete is voluntary but important data required for proper funding placement. -FSA collects demographic information of customers from that voluntary information section of the guaranteed application. -You may also participate in FSA’s Market Placement Program so you know when SDA applicants are to be potential customers. The FSA County Office staff is willing to assist in expanding your loan portfolio to assist in extending credit to SDA Farmers and Ranchers.
Increasing SDA Participation in the Guaranteed Loan Program Market Placement Program: -Besides determining the participation rate, demographic information enables some applicants to take advantage of special targeted funds. -Market Placement is designed to assist qualified direct loan borrowers and new direct loan applicants to obtain guaranteed loan assistance from commercial lenders. -Helps lenders increase their customer base and expand their portfolio. -Can help SDA applicants overcome the perceived inaccessibility of commercial lenders.
Increasing SDA Participation in the Guaranteed Loan Program FSA’s Role in the Market Placement Program: -Evaluate current direct borrowers and all new direct applicants -Determine if borrower or applicant meets lender qualifications based on underwriting standards of participating lenders -Provide lenders with: -Completed guaranteed application -Farm business Plan -Narrative -Suggested servicing plan -Appraisal
For Your Information The United States Government has established a claims process to make available a monetary settlement to farmers who alleged discrimination by the USDA based on being African American, Black, Native American, Female or Hispanic. The Native American class action lawsuit known as Keepseagle v. Vilsack, can be found at www.indianfarmclass.com. www.indianfarmclass.com The Women and Hispanic class action lawsuit can be found at www.farmerclaims.gov.www.farmerclaims.gov The African American / Black farmer lawsuit known as Pigford II can be found at www.blackfarmercase.com.www.blackfarmercase.com
Stop – Go back – Remember this – Don’t forget that….
Loan Servicing Requirements Line of Credit (LOC) Renewals SEL will submit: - Request to advance for next operating year - Balance Sheet - Income/Expense statement for previous year (Tax Return) * - Projected Cash Flow - Narrative summarizing previous operating year progress -Discuss disposition of collateral (recent farm visit) CLP will submit: -Determine need for annual analysis based on the financial strength of borrower and document the file -Loans secured by chattels, CLP will have the same documentation in their file as an SEL -CLP will provide written summary/analysis of the operation to FSA -Provide annual certification stating that a cash flow has been developed and is feasible and all security has been accounted for (recent farm visit)
Loan Servicing Requirements Interest Assistance Renewals All lenders (pre-6/8/07) IA dated agreement will submit: - Balance Sheet - Income/Expense statement for previous year (Tax Return) * - Projected Cash Flow (with and without IA) – without IA supports the need for continued 4% subsidy - A copy of the IA needs analysis portion of the application form - Narrative summarizing previous operating year progress -Discuss disposition of collateral (recent farm visit) - FSA-2222 “Request for IA Payment” - Supporting documentation regarding disbursements/payments to the loan for the previous period (loan history bank ledgers) All lenders (post-6/8/07) IA dated agreement will submit: - FSA-2222 “Request for IA Payment” - Supporting documentation regarding disbursements/payments to the loan for the previous period (loan history bank ledgers)
Loan Servicing Requirements – Semi-Annual Status Reports Status Reporting All Lenders will provide semi annual status reports for the period ending: *March 31 st ~ reports due by April 30 th *September 30 th ~ reports due by October 31 st For LOC loans, the amount of advances will only be reported for the previous 6 months through the report ending date. These forms (FSA-2241) are mailed from the Finance Office. Unless you are participating in online “LINC” reporting, then LINC administrators are notified via email when the reports are available. Note: when a loan is reported behind schedule on the semi- annual status report – the lender will follow-up with FSA-2248 “Default Status Report” and complete an updated report every 60 days until the loan is paid current or other remedy to the delinquency.
Loan Servicing Requirements – Default Status Reporting When moving into liquidation, be sure to check boxes.
FSA’s online system automatically creates status reports for the semi-annual reporting period and those loans are displayed on the status reports mailed to the lenders. Lenders are required to update loan information for loans on those reports and mail them back to the FSA County Office. If lenders choose to participate in LINC, the information will be updated electronically. Using LINC will allow lenders to have the capability of updating borrowers’ accounts with regard to status and default status reports, instantly which saves mailing time and eliminates the possibility of lost documents and reduces paper. If you would like to begin reporting online, please contact your local County Office – Farm Loan Programs for additional information or Shelly Wolf in the Kansas FSA State Office at 785.564.4765. USDA Lender Interface Network Connection (LINC)
Loss Claim Deficiencies 1. Lenders are not submitting an estimated loss claim within 150 days of the missed payment due date. $0.00 claims should be submitted. 2. Lenders do not submit proper documentation for prompt loss claim payments. Lenders should submit detailed documentation justifying charges and expenses involved in liquidation of security and the accounting of chattel security with regard to items sold, proceeds received, fees involved, etc. 3. Lenders not submitting loan ledgers and/or accounting of use or loan funds and payments. 4. If the same lender has several guaranteed and non-guaranteed loans secured by the same chattels, lender and FSA needs to ensure that liquidation/sales proceeds are applied as extra payments and in order of lien priority. 5. Late payment fees and default interest charges are being shown on ledgers. These are not covered under the guaranteed and should be tracked on separate ledgers. 6. Appraisals are not within 12 months for highest and best use and are being used to determine market value and to calculate loss claims.
Preferred Lender File Review Findings 1. No documentation of farm visit before loan closing. 2. Files do not contain evidence of environmental compliance. 3. Evidence of hazard insurance could not be located. 4. Debts in excess of $1,000 were not verified. 5. Appraisals not always being completed on subsequent guaranteed loans secured by real estate. 6. Loans secured by the same real estate are cross collateralized but mortgages securing the individual guarantee not always filed. 7. Cash flow indicating need for Interest Assistance was questionable. 8. Loans being made to ineligible individuals or entities. 9. Lack of ledgers showing disbursements and repayment on lines of credit. 10. Annual Farm inspections are not being completed or not being documented. 11. Files did not contain annual/current financial statements. 12. Estimated loss claims are not being filed.
Farm Visits and Environmental Due Diligence A farm visit is required for all applicants/borrowers prior to the application being submitted to FSA from all lender types. The farm visit should be discussed in the loan narrative. If the request is not taking real estate as primary security, some questions may by N/A. Real Estate taken as security must have an FSA-851 “Environmental Risk Survey” completed.
GovDelivery – “FSA Electronic News Service” Farming and ranching is a 24/7 industry. Farmers and Ranchers in Kansas will have a more efficient timely option for receiving important FSA program eligibility requirements, deadlines and related information. FSA is offering free online communication through our GovDelivery electronic news service. News will be sent via e-mail right to your home or office and later enhancement will be to a smartphone. We are encouraging lenders to sign up for GovDelivery, as well. Farm Loan Program news; ie: interest rate changes, cash planning prices, loan program changes, guaranteed lender news will be delivered this way. To sign up go to: www.fsa.usda.gov and click on:www.fsa.usda.gov >Newsroom >Subscriptions >Enter email address
Thank you for your attendance! Please direct any questions regarding this informational meeting or an item that was not addressed that you have a concern about to: Arlyn Stiebe, Farm Loan Chief – firstname.lastname@example.org 785.564.4759 And/or: Shelly Wolf, Guaranteed Farm Loan Specialist – email@example.com firstname.lastname@example.org 785.564.4765 Happy Holidays to you and yours! Farm Service Agency www.fsa.usda.gov/ks