Also a A Primer on the Farmer Mac Program
Our hard money mortgage company, Blackburne & Sons, is actively making hard money loans on farm land and cropland nationwide. Our sweet spot is loans between $100,000 and $1.5 million.
Our farm land loans and cropland loans are typically priced between 9.9% and 12.9%, depending on the risk, with 11.9% being the most common rate. Our typical fee is 2.5 points + $950 to 3 points + $950.
Because we are so bullish on farm land, Blackburne & Sons will lend up to 65% loan-to-value, even if the farmer/operator is losing money or has poor credit. Our hard money farm loans have no prepayment penalty.
The farm land cannot usually have a house on it because the loan could then be classified as a home loan, a type of loan we are not licensed to make. However, if the purpose of the loan is clearly commercial in nature - as opposed to intended for personal, family or household purposes - and the tillable acreage exceeds 30 acres, it may still be possible for the loan to considered commercial in nature. The value of the tillable acreage must clearly exceed the value of the home.
In order to promote Blackburne & Sons' new farm land loan program, I started calling on mortgage brokers who specialize in farm loans. One of them was kind enough to give me a primer on the Farmer Mac program:
Farmer Mac is an acronym for the Federal Agricultural Mortgage Corporation, a government-sponsored enterprise (GSE), similar to Fannie Mae or Freddie Mac. Farmer Mac buys farm loans and ranch loans from banks and correspondents and then sells the loans off as mortgage-backed securities. Farmer Mac never got crazy with their underwriting standards, so they are not suffering from waves of defaults, like Fannie Mae and Freddie Mac.
The underwriting standards of Farmer Mac are very conservative:
Minimum credit score of 680.
The loan cannot exceed 50% of the farmer's total assets.
The farmer's net income must exceed 130% of the proposed payment.
The farmer must have no late payments on prior Farmer Mac or other bank mortgage loans.
Blackburne & Sons' new farm loan program is designed for "near-miss" Farmer Mac borrowers - farmers who fall slightly outside of Farmer Mac's underwriting standards.
Got a farm land deal? Please call Mike Thurman at 916-338-3232 or email him at [email protected].