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Honored Advisor

Re: Do guys go broke anymore

Farmers your age and mine may know better, but I think the original post to the thread shows that some have a bad memory, or disbelieve that trends can break the wrong way.  They are the ones who will get hurt. 

Farm Credit wanted into the overall mortgage market BAD!  They were just as greedy and wanted the right to be as reckless as any other bank.  Thank goodness Congress didn't let them, for whatever reason. 

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Senior Advisor

Re: Do guys go broke anymore

I think highly of farm credit and find them most pleasant to deal with. They do what they say they will and I do what I am supposed to do.

 

I think farmers for the most part have a strong balance sheet. Of course there are exceptions, but I think ag bankers are reasonably prudent for the most part.

 

But then I do not have much recent history with bankers so I don't know how much bad paper they have in the vault.

Honored Advisor

Re: Do guys go broke anymore

We've always preferred to work with Farm Credit, and have never had a moment's problem with them.  We keep a line of credit open there, mostly so we can move fast if we want to without taking a beating on time deposits and other investments.  That way, if we want to make a big purchase, it can be done without upsetting the store of "rusty money." 

I do think they were saved from their own lust for easy money in the refusal to broaden their charter to the general mortgage market.  Who's to say if they would have remained as interested in ag, if not basically forced to do so??? 

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Contributor

Re: Do guys go broke anymore

Look at the request for expansion of authorities as a protective attack back at banks.  There are continual attacks on the Farm credit system by the large banking lobby.

 

The rules have been bent already as far as farm credit/ housing loans.  Basically they looked at the actual wording of the rules and determined they could do a little more.  Maybe the farm credit conservative lending could be applied to that market!   Supposedly there is a gap in financing.  The secondary market finances people in town on 1 acre parcels, but does not want the farmettes/homes with acreage.  The banks were over charging for those type loans, thus creating a niche market.

 

 

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Honored Advisor

Re: Do guys go broke anymore

As i understand it, those towns have to be under a certain size, so still classify largely as "rural."  When we moved from VA to NC 16 years ago, we encountered the sight of a lot of farm families living in small towns, not on their land.  It was odd to us, as almost everyone lives on their homestead back where we come from.  I can see where it makes sense for Farm Credet to finance is such circumstances. 

Also, getting comps to suit Fannie Mae and Freddie Mac standards for mortgage bundling ( if you actually follow the rules, which apparently is being done in the aftermath of the debacle of unverified income and such) can be exceedingly difficult in the radius standard and time window of so few miles and months and in traditonally-settled communities, such as farm areas.  I could nto find three comps in our whole conthy for the brick 1970s ranch house in front of our place.  It is coming up in an estate sale auction at some point in time, if the heirs cannot successfully challenge their mother's will.  Its value is inflated at present by the housing bubble's influence on the tax bill. 

Of course commercial banks want ag when they need us, and don't when they don't.  We've always stuck with Farm Credit, since they have to stick with us, and we did not have to spend so much time educating the lender. 

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Contributor

Re: Do guys go broke anymore

that educating the lender!  it is very tough to get to know every farm.  There are so many different ways on a farm to do the same thing.

 

i dont think the housing will become a problem for the FC system.  more likely loss is the large ag-related business loans (i.e. hog processing, dairy plants, ethanol, wind energy, etc.)  since these industries are outside the normal producer credit FC is used to.  Plus politics could change any industry at this point... scary for all lenders!  example now is BP.  i guess they are done with auto/health.  now they need energy Smiley Happy

 

back to the subject,,,  guys go broke.  Hopefully not mine.  interest rates would be MUCH cheaper if they didnt go broke and there was no fear of it happening.

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Honored Advisor

Re: Do guys go broke anymore

Let's be honest:  Everyone wants to lend to the good risk, and let everyone else have the bad ones.  Some commercial banks have in spells not given a **bleep** if there was a single farm loan funded. 

When home mortgages looked like such a sure thing, with no downside, they all flocked there in droves.  Mainstream ag was sucking wind for a lot of those years...and without government programs, still would be some circles. 

We've made it a point in all our years of business to "dance with the one that brung us," so to speak.  One brief detour to a commercial bank was a disastrous discovery of loan fraud for me...that loan officer ended up giving the bank her hoime to avoid jail time, and another employee got fired just for letting her back in the door.  It all started to unravel for her when I told her direct boss's secretary, when I was told he "did not talk to customers" when I called to inform him about her,  that the next number I would be dialing was the Attorney General, if he truly did not have time for me.  It took less than fifteen minutes for me to outline probably five felonies right under his nose.  She was the one who famously told me that if you wanted to write a loan on a house, and it was not worth it, turn around and photograph the one across the street.  If you get caught, claim you got confused.  I heard him sucking in air hard on that one alone.  The rest was worse.  This is how cheating on mortgage loans is/was done at the street level. 

Someone else mentions weather as a serious risk factor of ag profitability.  You bring up a lot of the further-processing and more speculative uses of farm poruducts and farmland as potentially risky business.  Our associationm claims it only takes minor shares in such stuff, but a lot of small exposures can add up to a big one eventually. 

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Senior Advisor

Re: Do guys go broke anymore

Really, they can get a home mortgage based on a photo of some else's house? Any real estate loan I have gotten was apraised by a appraiser hired by the lender. In fact I have never met one of the appraisers. The lender informs me of their evaluation and we go from there.

 

Hmmm?

Honored Advisor

Re: Do guys go broke anymore

Appraising has gotten a lot more institutionalized since this conversation, which was fifteen years ago this summer.  I think the fraud in appraising has gotten a lot more sophisticated, too. 

I have a friend who is nationally certified to appraise residential and commerical property.  He agreed with a point on a news show a couple of years ago...that appraisers that would not fudge on property values for lenders to be able to write the loan they wanted, simply did not get work.  Once you have enough comps, however falsly inflated, the monster is a self-perpetuating problem. 

BTW, the loan officer I basically got fired had also gotten a false appraisal on this farm, too.  She never showed it to us in the process, but I learned what was in it when I talked with her boss that day. 

we were just told it was "fine," and I was too naive to question further at that time.  We live and learn.  He and I put two and two together on several accounts of her actions that day. 

The next thing I heard, her butt was gone, and another girl in that branch had been fired for letting her back in, supposedly to use the fax machine.  I suspect it was the shredder instead.   

I would know better now, but as you said, do not need to borrow anymore. 

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Highlighted
Contributor

Re: Do guys go broke anymore

the best rule change in the last year regarding appraisals is that mortgage brokers cannot choose which appraiser does it.  This will hopefully cut down on the fraud, and also keep the honest appraisers employed! Smiley Happy

 

what ever happened to ethics?                                money i suppose.

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