Midwest Business Solutions is excited to add another tool that can help make your credit union money—Farmer Mac loans. MWBS is now a direct seller to Farmer Mac. FM offers a variety of fixed and variable rate financing on farmland, ranch land and farm facilities. Leased farm ground may also be eligible. Variable rates can fluctuate monthly, or on a one, three, five, ten, 7/1, or 10/1 year basis. Fixed rates can be locked up to 25 years. Amortizations on these loans can run up to 30 years. The property must be involved in production of an eligible commodity as those listed by the USDA and must have at least $5,000 of annual gross agricultural sales.
FM also offers an AgEquity Line of Credit that gives the farmer a 5 or 10 year draw period followed by a repayment period of up to another 25 years. The payments during the revolving draw period are interest only and will fluctuate monthly.
Mortgage amounts are typically up to $11 million, and the maximum loan request for any one borrower is up to $30 million. Payments can be set up monthly, semi-annually or annually for your borrower’s convenience. The interest rates will be directly competitive with those at FSA or with an insurance company who finances farm ground.
These loans also represent no risk to you, as they are all sold into the secondary market. You can think of it as a FannieMae or FreddieMac loan for farmers. Since this is the case, your institution does not need to have an experienced ag or business lender on staff. Any institution could participate in this loan. Those CUs who have ag loans on their books, may find this product valuable to manage your balance sheet exposure. You can move the term debt on the land to a FM product while you keep the equipment and operating line debt. This can also help manage duration risk of placing a large fixed interest rate loan on your books while giving your farmer a product he wants.
The best thing is that even though this product is sold into the secondary market, you still have an opportunity to make money. You can make money at origination and also can make servicing income throughout the life of the loan, even though it is not on your books. If you had a FM loan with an average balance of $1 million and were making 50 basis points on the servicing side, this would translate into another $5,000 of non-interest income for your credit union.
You can find out more about our FM loans at www.mwb-s.com/farmer-mac. Our site also has information on the different FM loan types, an underwriting grid for various FM loans and a series of questions to help you talk about this product to your customer.
We will be sending out rate sheets on a weekly basis for the Farmer Mac products. If you want to get on our rate sheet email list, email me at phil.love@mwb-s.com.