Term
Farm Service Agency Guaranteed Loans |
|
Definition
- provide lenders with a guarantee of up to 95% of the loss of principal and interest on a loan
- makes ag credit available to farmers who do not meet the lenders normal underwriting criteria
- both Farm Ownership and Operating Loans |
|
|
Term
|
Definition
- be a citizen of the United States( or legal resident alien)
- have an acceptable credit history as determined by the lender
- have the legal capacity to incur the obligations of the loan
- be unable to obtain a loan without a guarantee
- not have caused FSA a loss by receiving debt forgiveness more than 3 times
- be the operator of the farm after the loan is closed
- not be delinquent on any Federal debt |
|
|
Term
|
Definition
- must be adequately secrued
- a lein |
|
|
Term
Advantages of Using the Secondary Market |
|
Definition
- Reduced interest rate risk
- increased liquidity
- increased lending or investing capabilities
- increased return on investment
- rates and terms |
|
|
Term
Reduced Interest Rate Risk |
|
Definition
- Lenders can transger risk of interest rate increases on the guaranteed portion of a fixed rate loan. |
|
|
Term
|
Definition
- Selling the loan on the secondary market frees the funds for additional lending or investing activity |
|
|
Term
Increased Lending or Investing Capabilities |
|
Definition
- Since the guaranteed portion of the loan is generally not applied against a bank's lending limit, it can be used to expand lending capabilities |
|
|
Term
Increased Return on Investment |
|
Definition
- the sale of the guaranteed portion of the loan in the secondary market increases the lender's overall return on investment. Each time a bank sells a guaranteed portion, it generally retains a servicing fee |
|
|
Term
|
Definition
- Lenders may be able to offer the producer more flexible repayment terms, as well as fixed and/or reduced interest rates to improve cash flow |
|
|