Looking for Land Lending … Farm Credit is Your Partner …
Jeremy Bertier and John Campagna teamed up to draft this piece on land lending and the Farm Credit system… Both John and Jeremy had direct meetings with Farm Credit leadership in putting this piece together and collaborated in drafting this update.
Farm Credit and Funding Land Purchases
One of the main lenders of choice when purchasing working lands (farms, ranches, forest tracts, hunting preserves, etc.) has been Farm Credit. Farm Credit has been around for over 100 years and they have been the main source of funding for the rural economy for much of that time. This includes mortgages, but also rural business loans, insurance products, etc. Though Farm Credit came into existence through acts of the Federal government, today Farm Credit is member based and owned co-op that spans the nation. In the Chesapeake area Mid-Atlantic Farm Credit is one of the co-op’s in the Farm Credit universe that provides funding and services for our rural communities and business.
As an independent entity Farm Credit does utilize a range of financial markets to support its mission. For example, many of its loans are “conforming” loans (mortgages on rural properties with primary residences on them) that are originated by Farm Credit and then sold to investors through institutions such as Farmer Mac. This in turn allows Farm Credit to “recycle” the cash and put out more loans and mortgages. A key point here is Farm Credit can keep capital and credit flowing to the rural communities with the support of large investors. In the 2020 stimulus plan, this type of process will be the mechanism that allows the Federal Reserve to buy investments originated by Farm Credit (conforming and other types of loans) if necessary to ensure that our rural economies continue to receive the financial support needed to grow and prosper. This allows Farm Credit to have the confidence to lend money at its current rates and volume with credit requirements and down payment levels remaining the same. Borrows can be confident that Farm Credit will be there.
In addition to providing loans and mortgages Farm Credit also coordinates other funding sources at time of purchase to help buyers invest in working lands. In Maryland, these programs include MARBIDCO, MALPF and other local ag preservation and conservation programs. By teaming up with Farm Credit, these programs can do things like help new farmers get “on the ground”, ensure that ag land stays ag land, incorporate conservation practices to enhance the land’s productivity, etc. And since many of these State and local programs are funded annually, they are currently funded and ready to be used today.
So if you are looking to 1) buy a farm, forest holding or hunting preserve,2) expand your existing land holdings, or 3) invest in an real asset class for diversification purposes the funding tools to help you are still available and strong. We at The Land Group are happy to help you understand the land market and how to leverage funding to secure the land that fits your needs.