Farm & Ranch Loan Purchase
Farmer Mac can help provide rural lenders a competitive edge through attractive rates and a broad portfolio of loan products that complement traditional offerings.
Farmer Mac’s Farm & Ranch Loan Purchase solution helps rural lenders be more competitive in serving their customers and communities. Farmer Mac enables lenders to offer more favorable terms, a full suite of products including long-term fixed rate loans that many banks don’t offer. This solution also helps rural lenders preserve capital, manage interest rate risk and minimize credit risk, all while still maintaining the customer relationship.
How it Works:- The lender applies to be an Approved Lender under the Farmer Mac program and is provided access to our daily rates as well as Farmer Mac’s proprietary and easy to use loan underwriting platform, “AgPower”.
- We purchase loans and loan participations that are secured by first lien mortgages on eligible agricultural or rural utility assets, which include production agriculture and many agribusinesses.
- Farmer Mac generally purchases the loan at origination at par, while the lender maintains its field servicing relationship with the borrower.
- Access to Farmer Mac’s unique, low-cost source of funds with competitive rates and favorable terms to better serve your farm, ranch or agribusiness customers
- A full suite of loan products, ranging from revolving lines of credit all the way up to long term fixed rate loans with terms up to 30 years
- Maintain the customer relationship and earn field servicing fees
- Enhance return on equity, gain liquidity, and eliminate credit risk to your institution
Farm & Ranch Credit Protection
Farmer Mac’s credit protection solutions are risk management tools that help lenders free up capital and reduce credit risk.
Farmer Mac’s Farm & Ranch Credit Protection solutions are flexible tools that allow lenders to seek full or partial credit risk relief, as these solutions can be customized to fit each lender’s unique needs. There are two core products to choose from, but each will help lenders improve their equity capital and manage general credit risk, borrower hold limits or portfolio concentrations. Lenders can choose from a guaranteed security product or a purchase commitment product, each designed to meet different needs. Additionally, Farmer Mac can tailor the products for flow loans, a single loan or a portfolio of loans.
Products:
Farm & Ranch Purchase Commitment
With a Farm & Ranch Purchase Commitment, lenders can obtain credit protection from Farmer Mac for specified eligible loans. For a modest annual fee, Farmer Mac will commit to purchase any of the scheduled loans that default. This loss protection can be structured with the lender retaining a portion of the risk, if desired, for a reduced fee charge by Farmer Mac.
How it Works:
- Lender identifies the loans for which it is seeking credit protection and specifies what degree of protection it is seeking (full, partial, etc.)
- Farmer Mac reviews the loans and approves them according to its standard credit requirements
- Once approved, the lender pays an annual commitment fee for the protection, retains the loans on its own balance sheet and continues to earn the interest
- If the loan defaults, Farmer Mac purchases the loan at par
Key Features:
- Lender eliminates all, or part, of the credit risk on the identified loans
- If full credit protection is elected, the risk weighting on the loans can drop from 100% to as little as 20%, thereby improving the lender’s equity position
- Lender retains the loans on its balance sheet, earns the interest on these loans, and maintains the customer relationship
- Very flexible way to manage credit risk, while not having to “say no” to a customer – you can continue to grow with that customer
Agricultural Mortgage-Backed Securities
The Agricultural Mortgage-Backed Securities (AMBS) product is a Farmer Mac Guaranteed Security that provides lenders both credit protection and liquidity for a desired population of eligible loans, which can include agricultural mortgages, guaranteed portions of eligible USDA or rural utility loans. Farmer Mac will securitize the desired population of eligible loans and provide a credit guarantee that ensures timely payment of principal and interest to the holder of the AMBS securities issued from the trust.
How It Works:
- Lender identifies the population of loans for which it is seeking credit protection
- Farmer Mac reviews the loans and approves them according to its standard credit requirements
- Once approved, Farmer Mac securitizes the loans and issues the Farmer Mac guaranteed AMBS (guaranteed as to timely payment of principal and interest)
- The lender may purchase the AMBS if it desires to earn the interest on the securities, or Farmer Mac may purchase the AMBS if the lender would like liquidity from the transaction
Key Features:
- Lender eliminates all of the credit risk on the identified loans
- If the Lender holds the AMBS on its balance sheet, the risk weighting can drop from 100% on the loans to as little as 20% on the AMBS, thereby improving the Lender’s equity position, while continuing to earn the interest on the AMBS securities
- If the Lender elects to have Farmer Mac purchase the AMBS, it also generates liquidity that can be used to make new loans
- Offers a way to manage credit risk, while not having to “say no” to a customer – you can continue to grow with that customer
Custom Solutions
Farmer Mac prides itself on innovation and custom-designed solutions to fit our customers’ needs. We have built a talented team of knowledgeable agriculture and financial specialists who all share a passion for rural America and who are committed to solving our customers’ problems and exceeding their expectations. Let us craft an innovative solution for your unique business need.