1. The 2008 Farm Bill Credit Provisions
Bill Burton
Area Agricultural Economics Specialist
Cooperative Extension Service
Oklahoma State University

2. Abbreviations and definitions
BF/R = Beginning Farmer/Rancher
FO = farm ownership
OL = Operating loan
SD = Socially disadvantaged
Must have been subject to racial, ethnic, or gender prejudice.
Women, American Indians, African Americans, Alaskan Natives, Hispanics, Asian Americans and Pacific Islanders

3. Beginning Farmer/Rancher FO Loans
Previous legislation
Have not operated a farm/ranch for more than 10 years
Meets the loan eligibility requirements of the program
Substantially participates in the operation
Does not own a farm greater than 30 percent of the median size farm in the county
Must have participated in the business operation of a farm for at least 3 years out of the last 10 years
2008 Farm Bill
Farm experience no matter when it occurred
Section 5001

4. Conservation Loan and Loan Guarantee Programs
Qualified Conservation Loans for USDA approved projects
Installing structures, water conservation measures, waste management systems
Establishing forest cover
Establishment or improvement of permanent pasture
Other
No regulations yet (2009 funding)
Section 5002

5. Conservation Loan and Loan Guarantee Programs (continued)
Eligible borrowers include farmers, ranchers and other entities controlled by them engaged in production ag
Priority to
Beginning farmers/ranchers
SDA farmers/ranchers
Owners/tenants converting to sustainable or organic ag production systems
Producers building structures or practices to comply with section 1212 of FSA 1985
Section 5002

6. Conservation Loan and Loan Guarantee Programs (continued)
Guarantee limited to 75% of the principal
Loans made or guaranteed should be geographically dispersed
Priority to SDA BF but may be opened to others at a higher interest rate
Section 5002

7. Limitations on FO Loans
Previous legislation
Borrowing limit = $200,000
Guarantee limit = $982,000
2008 Farm Bill
Borrowing limit = $300,000
Guarantee limit = $1,094,000
Section 5003

8. Down Payment Loan Program
Previous legislation
Financing for beginning farmers/ranchers at 4% fixed rates for up to 15 years at 40% of sale price appraised value
2008 Farm Bill
Adds SD farmers/ranchers
45% of purchase price, appraised value or $500,000 whichever is lowest
Interest rate 4% below regular direct FO loan rate, minimum of 1.5%
Section 5004

9. Down Payment Loan Program (continued)
2008 Farm Bill
Increases loan duration from 15 to 20 years
Reduces borrower down payment from 10% to 5%
Requires Secretary to establish annual performance goals to promote use
Section 5004

10. BF/R and SDA Contract Land Sales Program
Previous legislation
Established pilot program to guarantee up to 5 loans per state made by a private seller to qualified BF/R if underwriting criteria met and commercial lending institution agreed to serve as escrow agent
15 states and we won’t know for a couple of months who gets it
Section 5005

11. BF/R and SDA Contract Land Sales Program (continued)
2008 Farm Bill
Expands to include SDA
Permanent and nationwide
Minimum down payment of 5%
Maximum purchase price of $500,000
Maximum loan period of 10 years
Acceptable credit history
Unable to obtain credit without guarantee
Section 5005

12. BF/R and SDA Contract Land Sales Program (continued)
2008 Farm Bill
Offers sellers choice of guarantee options
Prompt payment guarantee plan
3 amortized annual installments
An amount equal to 3 annual installments
Standard guarantee plan coving an amount equal to 90 percent of the outstanding principal
Seller must secure a commercial entity to serve as an escrow agent or
Use an appropriate, approved alternate arrangement
Section 5005

13. Operating Loans Previous legislation 2008 Farm Bill
Must have participated in the business operation of a farm for at least 3 years
Borrowing limit of $200,000
Waived eligibility time limits on guaranteed OL through May 2008 on a case by case basis, one-time, up to 2 years
2008 Farm Bill
Farm experience no matter when it occurred
Borrowing limit of $300,000
Extends waiver eligibility through Dec. 31, 2010 for guaranteed loans only
Section 5101, 5102, 5103

14. Emergency Loans 2008 Farm Bill
Makes equine farmers/ranchers eligible for emergency loans
Section 5201

15. Administrative Provisions
New Farmer Individual Development Account (IDA) Pilot Program
Matching-funds savings accounts for BF/R
At least 15 states
Will require monthly deposit into personal savings
Agreement on eligible expenditures for which savings will be used at end of contract
Agreement on level of matching of at least 100% but not more than 200% of savings, up to $6,000
Eligible expenditures: farmland, breeding stock , trees and other similar expenditures
No regs but hope to know in the next couple of months
FSA won’t regulate
Section 5301

16. Administrative Provisions
New Farmer Individual Development Account (IDA) Pilot Program
Savings account entities must provide 50% non-Federal match with up to 10% of Federal match for admin expenses
New farmer must
lack significant assets
have an income that is either below 80% of State’s median or below 200% of State’s poverty income guidelines
Complete financial training
Section 5301

17. Inventory Sales Preferences
Previous legislation
Beginning farmers have preference to buy FSA inventory farm property for 135 days
Property divided or combined to make more suitable for these borrowers
2008 Farm Bill
Extends preference for 135 days to include SD
If more than 1 offer, buyer chosen randomly
Section 5302

18. Loan fund set asides Previous legislation reserved for BF/R
70% of available funds of FO loans of which 60% were reserved for down payment loans.
25% of available funds for guaranteed ownership loans
35% of funds for direct OL
2008 Farm Bill reserves for BF/R
75% of available funds of FO loans of which 2/3 are reserved for down payment loans and joint financing
40% of available funds for guaranteed ownership loans
50% of funds for direct OL
Section 5302

19. Transition to Private Commercial or Other Sources of Credit
Must encourage transition of borrowers in shortest practicable time
Section 5304

20. Extension of Right of First Refusal to Reacquire Homestead Property to Immediate Family Members of Borrower-Owner
Previous legislation
Established the right
2008 Farm Bill
Extends right to SD groups.
Eliminates right of first refusal to borrowers who are not members of SD groups.
Section 5305

21. Loans to Purchasers of Highly Fractioned Land
2008 Farm Bill
Secretary may make and insure loans to Indian tribal members of highly fractioned land
Excludes trust land, restricted tribal land, or tribal corporation land
Section 5501

22. Questions ?