November 17, 2019
Mr. Barry F. Mardock
Office of Regulatory Policy
Farm Credit Administration
1501 Farm Credit Drive
McLean, VA 22102-5090
RE: RIN 3052-AD35, FCA proposed rule – 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:
I am writing to express my views as a community banker on the Farm Credit Administration’s (FCA) proposal to allow Farm Credit System (FCS) institutions to purchase and hold the guaranteed portion of USDA loans
that are originated by non-FCS lenders. These non-FCS lenders would largely be community banks.
I oppose FCA’s proposal. FCA’s proposal allows the FCS to duplicate the activities of Farmer Mac, established by Congress as the secondary market for farm real estate and USDA loan guarantees. Allowing the FCS,
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.
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 exists 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.
I believe this proposal continues to expand the business model of FCS far beyond that which is was created, to serve small farms of limited means that do not have access to other financial resources. Nothing
in this proposal represents any services not already available.
Thank you for considering my recommendations.
Scott Tewksbury, President
Heartland State Bank