Farm Service Agency

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Farm Service Agency

• Kansas Farm Loan Programs
• Guaranteed Lender Informational Meeting

www.fsa.usda.gov/ks
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FSA Loan Funds for FY 2012
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
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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
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• 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.

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Interest Assistance Program for Fiscal Year 2012
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. 
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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.
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• 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

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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 applicants credit needs. Determine Cap
ital 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. Lenders Promisorry Note must
match Conditional Commitment and Loan Guarantee
to be issued.
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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.
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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-OLs on the
books prior to 4/4/1996. Guaranteed OLs (G-OL)
do not count against the borrowers D-OL
eligibility but D-OLs 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.
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Shared Lien Positions Between FSA Guaranteed Loan
and Lenders 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.
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• 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 Agencys lien position
  to maintain its lien position when
  servicing/restructuring
• when the guaranteed loan made will be to
  refinance debt of another lender FSAs position
  on the real estate security will not be adversely
  affected

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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.
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Increasing SDA Participation in the Guaranteed
Loan Program

• Guaranteed Lender Training

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USDA Secretarial Initiative

• 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.

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USDA Secretarial Initiative

• 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_Assessm
  ent-Final_Report.pdf
• Note Report Exhibits are not accessible at the
  current time.

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Cultural Transformation, Inclusion and
Accessibility Report

• 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

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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.
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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 SDAs 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.

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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.

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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 FSAs 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.

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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.

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Increasing SDA Participation in the Guaranteed
Loan Program

• FSAs 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

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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. The
Women and Hispanic class action lawsuit can be
found at www.farmerclaims.gov. The African
American / Black farmer lawsuit known as Pigford
II can be found at www.blackfarmercase.com.
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Stop Go back Remember this Dont forget
that.
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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)
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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)
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Loan Servicing Requirements Semi-Annual Status
Reports
Status Reporting All Lenders will provide semi
annual status reports for the period
ending March 31st reports due by April
30th September 30th reports due by October
31st 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.
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Loan Servicing Requirements Default Status
Reporting
When moving into liquidation, be sure to check
boxes.
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USDA Lender Interface Network Connection (LINC)
FSAs 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.
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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.
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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.
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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.
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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 gtNewsroom gtSubscriptions gtEnte
r email address
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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
arlyn.stiebe_at_ks.usda.gov 785.564.4759 And/or
Shelly Wolf, Guaranteed Farm Loan Specialist
shelly.wolf_at_ks.usda.gov 785.564.4765 Happy
Holidays to you and yours!
Farm Service Agency
www.fsa.usda.gov/ks