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What is The FSA Ability to Repay Rule?

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fsa-repay-ruleThe Farm Service Agency (FSA) is a part of the U.S. Department of Agriculture (USDA) and the institution responsible for guarantees for government backed rural lending specifically for small farm holdings and those in need of help. Updates have made it easier for a wider range of farmers to qualify under the new terms of the program.

Help Buying The Farm

Farmers that have acceptable credit in the eyes of lenders and the ability to pay for a loan but are unable to otherwise qualify to get a loan for a farm property, this program might make the difference between getting the loan and not. In recent year farmers have been having a particularly tough time due to the recession.

The recession has hit young and small holding farmers particularly. However these are the future of agriculture and so the FSA has a mission to make sure that any farm owners that could reasonably be expected to succeed in the business are given a fair chance to find the funding to purchase the farmland required to make an enterprise out of a season’s crops. The terms that lenders can give are more flexible than they would otherwise be due to the revisions and extension to the Ability to Repay Rule.

Ability To Repay Is Different For Farmers

Unlike residential real estate where the ability to repay is predicated on the income and debt of the individual borrower farming is considered a business and the producer of vital resources, requiring expertise to succeed. To that end the FSA gives lenders some flexibility in the calculation of a farmer’s ability to repay a loan. As well as income lenders consider the experience or education of the farm owner. Any combination of these factors is considered acceptable.

As a national resource farming is one of the most important activities that keeps the nation on its feet. The USDA and the FSA have a broad remit to ensure that there is a healthy environment for farmers and for the future of the farming community. Providing loan guarantees is just one way in which they look out for the rural economy.

Putting The Life Into Country

The guarantees have been expanded and will cover the purchase of land, repair and construction of buildings, institute water conservation and among other things enable farmers to refinance existing debts on favorable terms. The rules do stipulate that any lending must be adequately secured so that there is a realistic chance of repayment. The guaranteed portion of any of these loans can be sold to investors so that the lender can recover their funds to initial new lending.

Agricultural and farm mortgages like these are considered a safe investment because of the government backing that comes with them. This sort of subsidized lending helps everyone involved. Farmers get funding on better terms or where none was available before, lenders create new business and investors receive a secure income.

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Trace Richardson has written 638 articles on BankChirp.com

I'm Trace Richardson and am the founder of LeadPress. I’m a licensed California Real Estate broker and a former equities trader previously holding the Series 7, 63, 55 and 24 securities licenses.

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