Shared Flashcard Set

Details

FSA Guaranteed Loans
N/A
9
Finance
Undergraduate 4
04/20/2015

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Cards

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
Borrower Eligibility
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
Security
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
Increased Liquidity
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
Rates and Terms
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
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