Farm Bill Changes to Farm Loan Programs Go Final
December 31, 2014
USDA’s Farm Service Agency (FSA) has posted a final rule codifying a variety of changes to the farm loan programs as directed by the 2014 Farm Bill. Several of the rule changes were championed by the National Sustainable Agriculture Coalition (NSAC) and Senator Tom Harkin (D-IA) and Representative Tim Walz (D-MN), the lead congressional sponsors of the Beginning Farmer and Rancher Opportunity Act (BFROA). The final rule appears in the Federal Register of December 31, 2014.
FSA provides both direct government loans and government guarantees of private sector loans. Among the loan types are farm ownership (real estate) loans, down payment loans, farm operating loans, conservation loans, microloans, and land contract guarantees. NSAC played a prominent role in the creation of the down payment, micro, conservation, and land contract loan programs, as well as the targeting of loan funds to beginning and minority farmers.
All of the rule changes become effective December 31, 2014, though they were implemented on a temporary basis administratively soon after the 2014 Farm Bill became law in February.
As part of the new final rule and consistent with the 2014 Farm Bill, FSA is:
- Reducing the interest rate for joint financed farm ownership loans (50 percent FSA and 50 percent private financing) from a flat five percent to a more flexible two percent less than the regular farm ownership interest rate, with a floor of 2.5 percent. This change, part of the BFROA, will make joint financing far more attractive in times of low interest rates, and thus encourage public-private partnerships in helping to finance new farming opportunities.
- Increasing the maximum FSA portion of public-private down payment loans for new farmers from $225,000 to $300,000. Also part of the BFROA, this change will bring the down payment loan cap in line with 100 percent government financed loans, making it a more attractive option for first time farmers seeking to purchase farmland.
- Increasing the federal guarantee on private sector conservation loans from 75 percent to 80 percent, and to 90 percent for beginning and minority farmers. Another item included in the BFROA, this change will make conservation loans useful. They have been little used since the guarantee was lower than for regular guaranteed farm loans.
- Excluding microloans made to beginning or veteran farmers from term limits on farm operating loans. Another provision of the BFROA, this change will help ensure that small, start-up farms do not have tiny early loans count against them once they become more established and need more substantial credit.
- Increasing the acreage a beginning farmer can already own and still obtain FSA ownership loans from 30 percent of median farm acreage to 30 percent of average farm acreage in their vicinity. Nationally, median farm size is 80 acres while the average is 434 acres, though of course there is great variation by region and type of farming. This BFROA-proposed change will increase eligibility for beginning farmers and allow them to pursue closer to commercial size farms.
- Eliminating term limits for guaranteed operating loans, allowing farmers to obtain such loans longer than the previous 15 year cutoff. The BFROA included a different and more comprehensive approach to term limits, but that superior option was not included in the Farm Bill.
FSA is to be congratulated for bringing all this to final rule fruition within the same calendar year of passage of the new farm bill. With the new, substantially higher congressional appropriation for direct farm ownership loans for 2015, this could be a big new year for new farming opportunities supported by USDA!
Beginning and Minority Farmers, Commodity, Crop Insurance & Credit Programs, Farm Bill