USDA today announced an interim rule that sets thresholds on the interest rates charged by lenders on guaranteed farm ownership and operating loans. The changes will amend guidelines for interest rates and establish new policies that clearly set the maximum interest rate lenders may charge to borrowers.
USDA's Farm Service Agency (FSA) guaranteed loans reduce the risk of loss to lenders (banks, farm credit institutions and credit unions) by guaranteeing up to 95% of the loss of principal and interest on a loan. By reducing a lender's risk, borrowers benefit from a lower rate.
The interim rule on maximum interest rates for FSA-guaranteed loans will benefit lenders and producers alike. Lenders have expressed a desire to see greater clarity in FSA's interest rate policy. At the same time, FSA seeks greater consistency with industry standards and other government agencies that administer similar programs. The improvements in the new rule will make credit pricing procedures easier to follow and improve compliance for lenders.
At this time, FSA is also requesting additional comments on the interim policies in the rule, aiming to assure that the benchmark rates required of lenders do not prevent farmers and ranchers from obtaining guaranteed loans. USDA is seeking comments through June 3, 2013.