November 15, 2019
Mr. Barry F. Mardock
Office of Regulatory Policy
Farm Credit Administration
1501 Farm Credit Drive
McLean, VA 22102-5090
RE: Comment to RIN 3052-AD35 – Buying and Selling USDA Loan Guarantees of non-FCS Lenders Investment Eligibility Federal Register, Vol. 84, No. 181, Wednesday, September 18, 2019
Dear Mr. Mardock:
Royal Bank is a $450 million community bank located in central and southwest Wisconsin. Almost all of our 19 locations are located in very rural areas of Wisconsin, and a significant portion
of our loan portfolio is made to all sectors of agriculture and associated agricultural businesses.
I am writing to express my views on the Farm Credit Administration’s intent to allow Farm Credit System (FCS) institutions to buy and hold the guaranteed portion of USDA loans that are originated
by non-FCS lenders.
These non-FCS lenders would largely be community banks, like Royal Bank.
I oppose FCA’s proposal.
We utilize Farmer Mac for a significant amount of secondary market fixed rate sales of farm real estate and USDA loan guarantees, including FSA and RD loans.
FCA’s proposal allows the FCS to duplicate the activities of Farmer Mac, established by Congress, would harm and impair Farmer Mac and would impair their stability.
Allowing the FCS, who has a much larger financial network, to mirror key aspects of Farmer Mac’s activities, would allow FCS to undermine Farmer Mac’s secondary market activities. This will financially
harm hundreds of community banks and to thousands of rural borrowers.
Simply put: we do not need 2 entities, that were established by Congress, to compete and cannibalize each other to the detriment of farmers in rural areas and community banks and further bring
instability to the rural capital markets.
The FCS would easily be able to offer discounts to Farmer Mac’s rate sheets in an effort to lowball Farmer Mac pricing or cherry pick desired loans. The secondary market is and will be quite
robust without the FCS seeking to compete as an alternative secondary market provider. There already exist an adequate number of loan purchasers in the market without needing FCS’s presence. I fail to see in FCA’s proposed rule any efforts FCA would undertake
to protect Farmer Mac from the cutthroat and below market pricing activities of FCS institutions or even an effort to closely monitor such FCS activities on an ongoing basis.
In order to prevent the problems this proposal would cause if adopted, I suggest FCA withdraw the proposed rule or at least require FCS institutions to buy the guaranteed portion of such loans
only from Farmer Mac or sell the guaranteed portion of USDA loans that FCS originates to Farmer Mac. This approach would actually enhance the secondary market while preventing FCS from taking control of the secondary market and would minimize disruptive behavior
by FCS lenders seeking to manipulate the secondary market. FCA is also supposed to protect the interests of Farmer Mac, which it also regulates.
Senior Vice President
142 Hwy 61 N
Lancaster, WI 53813