WASHINGTON, Jan. 20, 2012–USDA’s Farm Service Agency (FSA) announced a new rule today that expands loan opportunities for beginning and socially disadvantaged farmers and ranchers, while also establishing the new Land Contract Guarantee Program.

“As I travel around the country, I here deep concern on the part of many in rural communities about who the next generation of farmers will be and how they’ll be able to access the credit necessary to be able to farm,” said Secretary of Agriculture Tom Vilsack in an interview with Agri-Pulse today.  

He said that while speaking with young, potential farmers and ranchers, like those in the Future Farmers of America (FFA), he heard that one of the biggest problems is the level of experience required to qualify for a loan.

“So, the rule that we’re implementing this month basically broadens the qualifications for farm operating and ownership loans,” he said. 

The rule provides additional flexibility allowing FSA loan officers to consider all prior farming experience, including on-the-job training and formal education, when determining eligibility for FSA farm operating and ownership loans.

“It’s going to allow our loan officers and our FSA offices to look at a broader spectrum of experience in terms of farming,” Vilsack said.  “As a result, I think we’ll see more young people be able to qualify for our loan programs.”

It also expands a previous pilot program, the Land Contract Guarantee Program, from six states to all 50 states. The original six states included were Iowa, Minnesota, Oregon, Pennsylvania, Wisconsin, and North Dakota. The program then added California, Indiana and Nebraska before today’s expansion to all states. 

This program is designed to encourage farmers and ranchers to sell their property to beginning and socially disadvantaged (SDA) farmers and ranchers through the use of seller financing.

The new rule enables landowners to sell their farmland to the next generation on a contract for deed with a 90-percent guarantee against losses to the seller.  Previously, the rule only included the prompt payment guarantee, not the 90 percent guarantee.

Alternatively, the agency can provide a guarantee of three years’ amortized loan installments, plus payment of real estate taxes and hazard insurance premiums for the same three-year period.

“If I’m a farmer and I’m retiring and I have a young person I want to sell the farm to, if I sell the farm on contract to that young person, as opposed to a more mature operator, I’m taking a risk that that person will be able to operate the farm and make the payments,” Vilsack said. “The risk is that if he or she does not, the farm comes back to me and I have to sell it again.”

“USDA will work with those contract sales to guarantee up to 90 percent of the contract,” he added. “It reduces the concern and the fear of doing business with these young folks.”

More information on the new Land Contract Guarantee Program and the other changes are available at local FSA offices nationwide. Information about Farm Loan Programs and FSA loan qualifications can be found at www.fsa.usda.gov.


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