12 USC 2279aa-8 – Standards for qualified loans
(a) Standards
(1) In general
The Corporation shall establish underwriting, security appraisal, and repayment standards for qualified loans taking into account the nature, risk profile, and other differences between different categories of qualified loans.
(2) Supervision, examination, and report of condition
The standards shall be subject to the authorities of the Farm Credit Administration under section 2279aa-11 of this title.
(3) Mortgage loans
In establishing standards for qualified loans, the Corporation shall confine corporate operations, so far as practicable, to mortgage loans that are deemed by the Board to be of such quality so as to meet, substantially and generally, the purchase standards imposed by private institutional mortgage investors.
(b) Minimum criteria
To further the purpose of this subchapter to provide a new source of long-term fixed rate financing to assist farmers and ranchers to purchase agricultural real estate, the standards established by the Board pursuant to subsection (a) with respect to loans secured by agricultural real estate shall, at a minimum—
(1) provide that no agricultural mortgage loan with a loan-to-value ratio in excess of 80 percent may be treated as a qualified loan;
(2) require each borrower to demonstrate sufficient cash-flow to adequately service the agricultural mortgage loan;
(3) contain sufficient documentation standards;
(4) contain adequate standards to protect the integrity of the appraisal process with respect to any agricultural mortgage loans;
(5) contain adequate standards to ensure that the farmer or rancher is or will be actively engaged in agricultural production, and require the borrower to certify to the originator that the borrower intends to continue agricultural production on the farm or ranch involved;
(6) minimize speculation in agricultural real estate for nonagricultural purposes; and
(7) in establishing the value of agricultural real estate, consider the purpose for which the real estate is taxed.
(c) Loan amount limitation
(1) In general
A loan secured by agricultural real estate may not be treated as a qualified loan if the principal amount of such loan exceeds $2,500,000, adjusted for inflation, except as provided in paragraph (2).
(2) Acreage exception
Paragraph (1) shall not apply with respect to any agricultural mortgage loan described in such paragraph if such loan is secured by agricultural real estate that, in the aggregate, comprises not more than 2,000 acres.
(d) Nondiscrimination requirement
Terms Used In 12 USC 2279aa-8
- Appraisal: A determination of property value.
- Corporation: A legal entity owned by the holders of shares of stock that have been issued, and that can own, receive, and transfer property, and carry on business in its own name.
- Fixed Rate: Having a "fixed" rate means that the APR doesn't change based on fluctuations of some external rate (such as the "Prime Rate"). In other words, a fixed rate is a rate that is not a variable rate. A fixed APR can change over time, in several circumstances:
- You are late making a payment or commit some other default, triggering an increase to a penalty rate
- The bank changes the terms of your account and you do not reject the change.
- The rate expires (if the rate was fixed for only a certain period of time).
- Mortgage: The written agreement pledging property to a creditor as collateral for a loan.
- Mortgage loan: A loan made by a lender to a borrower for the financing of real property. Source: OCC
The standards established under subsection (a) shall not discriminate against small originators or small agricultural mortgage loans that are at least $50,000. The Board shall promote and encourage the inclusion of qualified loans for small farms and family farmers in the agricultural mortgage secondary market.