NSAC's Blog

Farm Service Agency Increasing Action on Program for New Farmers and Ranchers

December 19, 2012

USDA’s Farm Service Agency (FSA) is taking steps to increase participation in the Land Contract Guarantee Program.  The program facilitates the transfer of a farm or ranch to a beginning or socially disadvantaged farmer or rancher who may have a relatively short credit history or limited farming experience.

In order to be eligible for this particular program, the seller must self-finance the sale of a farm or ranch sold to either a beginning or socially disadvantaged farmer.  The buyer of the farm or ranch must be establishing a family farm operation in which most of the management and labor is provided by family members and must own or operate the farm when the sales contract is complete.  The buyer needs to have an acceptable credit history but may have had difficulty obtaining sufficient credit elsewhere.

Under the program, FSA offers two types of payment guarantees to the seller, both of which run for period of up to 10 years, including:

• Prompt Payment Guarantee: a guarantee up to the amount of three amortized installments payments plus the cost of any related real estate taxes and insurance; or

• Standard Guarantee: a guarantee of 90 percent of the outstanding principal balance under the land contract.

The program went nationwide in January 2012.  Now, FSA wants to generate more interest in the program by reaching out to escrow and servicing agents.  Escrow agents who are needed to close and service the land contract guarantees.  Therefore, FSA issued a notice on December 14 to its State and County Offices, with a list of escrow and servicing agents who operate nationwide and the following instructions:

• FSA County Offices should make the list of nationwide escrow and servicing agents available to farm sellers and buyers interested in the Land Contract Guarantee Program;

• FSA State and County Offices should ensure that financial institutions, tax professionals, attorneys and escrow agents in their state and region are made aware of the program.  These professionals are likely to be involved with farm and ranch transfers and have clients who would be interested in the program’s land contract guarantees.  Hopefully, with more outreach and publicity, more will step to the plate.

• FSA offices are being encouraged to provide information on a one-on-one basis, as well as taking part in estate planning information meetings.

• FSA State and County Outreach Coordinators are directed to document all marketing efforts related to the Program.

NSAC developed the policy proposal for the Land Contract Guarantee Program and fought for its inclusion in the 2002 and 2008 Farm Bills, with the leadership of Senator Tom Harkin and Representative Tim Walz.  We are pleased to see FSA taking steps to publicize the Program and reach out to connect farmers and ranchers with escrow and servicing professionals.

More information from FSA on the Land Contract Guarantee Program is available in a Fact Sheet and in the USDA Guide to Farm Loan Programs.  To learn about  Farm Bill programs that assist BFR and SDA farmers see the Farming Opportunities section of the NSAC Grassroots Guide to the Farm Bill.  And to take action on key BFR-SDA programs at risk in the action to renew the Farm Bill,  see the Beginning Farmers article in our “What’s at Stake? series on the Farm Bill.

Categories: Beginning and Minority Farmers, Commodity, Crop Insurance & Credit Programs

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