Becoming an FSA Guaranteed Lender An Overview of the USDA Farm Service Agency Farm Loan Programs

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Farm Service Agency Farm Loan Programs http://fsa.usda.gov/FSA/ 1400 Independence Ave, SW Washington, DC 202-720-3889

Farm Service Agency Farm Loan Programs Chris Beyerhelm Deputy Administrator for Farm Loan Programs

Guaranteed Loan Making Farm Loan Programs Guaranteed Loan Making Randi Sheffer Branch Chief Trent Rogers Senior Loan Officer

Guaranteed Loan Servicing Farm Loan Programs Guaranteed Loan Servicing Jeff King Branch Chief Theresa Null Senior Loan Officer

California FarmLink Certified CDFI Reggie Knox Executive Director Santa Cruz, CA CA FarmLink provides small loans to farmers for annual operating costs, equipment and infrastructure.

Farm Service Agency FSA provides assistance to farmers through many programs:   Farm Programs: Production, Emergencies & Compliance Price Support Conservation & Environmental Programs Disaster Programs Farm Loan Programs: Direct Loans Guaranteed Loans

Types of Loans Direct Loans Applicant applies directly to one of the USDA-FSA Service Centers located across the country Loan limits may be made up to $300,000 Guaranteed Loans Applicant applies to an agricultural lender, who then applies to FSA for the guarantee Guaranteed Loan limits may be made up to $1,355,000 (adjusted annually)

Benefits of a Guaranteed Loan Provides an “Insurance Policy” for production agricultural loans FSA reimburses the lender up to 95% of the principal and interest lost when a borrower can not pay back the loan Mitigates risk when lending to borrowers who do not meet commercial lender underwriting standards Less risk means lower interests for your borrowers

Benefits Turns a loan into a marketable security Guaranteed portion of loan can be sold on the secondary market Provides capital that can build portfolio Provides source of capital through servicing fees

Benefits Using guaranteed & direct farm ownership programs together Downpayment Program (SDA/BF) 5% down payment provided by borrower Up to $300,000 financed by FSA directly Balance financed by lender Participation If FSA provides ≤ 50%, special interest rates apply

Benefits Gain experience underwriting agricultural loans FSA will help you through the underwriting process FSA provides annual lender training

Purposes Farm Ownership (FO) Direct & Guaranteed Use of Proceeds Purchase farm Construct buildings or other capital improvements Soil and water conservation Pay closing cost Refinance debt incurred for FO purposes (Guaranteed only) Interest Rates-Fees Direct: varies, based on Government’s borrowing cost (currently 4%) Guaranteed: determined by lender 1.5% Guaranteed Fee Terms up to 40 year

Purposes Farm Operating (OL)(LOC) Direct & Guaranteed Use of Proceeds Purchase livestock, machinery and equipment Pay annual operating and/or family living expenses Refinance operating debt Pay closing cost Payment of non-delinquent payments on term debts (OL/FO) Interest Rates-Fees Direct: varies, based on Government’s borrowing cost (currently 2.25%) Guaranteed: determined by lender 1.5% Guaranteed Fee Terms up to 7 year

Eligibility Requirements Standard Eligible Lender (SEL) SEL is basic level of participation in the FSA Guaranteed Loan Program Lender must have experience in making and servicing agricultural loans (or work with an experienced packager) Lender must maintain an office near enough to the collateral’s location for proper servicing

Becoming a SEL CDFI’s requesting SEL approval will need to provide: Cover letter requesting SEL status Copy of year-end financial statement and agriculture performance history for past 2 years Schedule of current sources of funding and funds available for agriculture lending Current loan loss reserve Requests are submitted to the National Office through the State Executive Director for the State where the CDFI is located.

Application Process SELs submit the following to FSA: Application form Loan narrative Balance sheet Cash flow budget Description of farmed land Credit report Environmental information (if needed) Verification of income/debts Financial/production history FSA will: Make determination, approve and obligate loan request

Questions

Guaranteed Loan Servicing Guaranteed against loss as long as: Serviced according to standard Ag Lending practices and standards, and The requirements of the lenders agreement and the guarantee are met.

General Servicing Lender Responsibilities: Apply standard agricultural loan servicing principals to guaranteed loans: Accounting for loan proceeds Monitoring collateral and tracking the sale of collateral Maintain regular contact with the borrower Servicing a guaranteed loan is no different than servicing a non-guaranteed loan.

Reporting Guaranteed Loan Status reports as of March 31 and September 30 of each year.

Servicing Tools FSA works with lenders to help assure that every borrower has the opportunity to be a successful farmer or rancher. The guarantee provides servicing flexibility that results in favorable terms for: Rescheduling Deferral Debt Writedown

Other Servicing Tools Servicing tools that are also available to assist borrowers with options to improve cash flow or help to ensure the success of the farming or ranching operation include: Subordinations Partial Releases Interest Rate Adjustments Debt Consolidation

Default Servicing Loans are in default when 30 days past due on a payment or in violation of provisions of the loan documents. Default status reports are required for delinquent loans every 60 days until the default is resolved or loss claim submitted.

Loss Claims Must be supported by documentation that lender has serviced the loan as required. Example: Accounting for use of proceeds Accounting for all security

FSA Website: http://fsa.usda.gov/FSA/ Sign-up for FSA electronic notifications Download Fact Sheets for FSA Programs Locate FSA State and County Service Center Office (FSA staff and phone number) CDFI’s can also contact: FSA State Office Local USDA-FSA Service Center

Questions