LTSPC Operations
The LTSPC permits the Seller to retain the loan pool in its portfolio until such time, if ever, that the Seller delivers some or all of the loans to Farmer Mac for purchase.
Farmer Mac will purchase upon request the loans at any time in the future so long as the loans remain in the commitment pool and have not been substantively modified. (STOP) The loans will be purchased at par if and when they become a minimum of 90 days delinquent. Otherwise, the price will be marked to market.
Loans may be added to the initial pool, on either a flow or batch basis and may be submitted electronically. These additions become part of the pool on the first day of the month following the month of acceptance by Farmer Mac.
In addition to being an approved Farmer Mac Seller and paying the periodic commitment fee, the lender must make customary loan representations and warranties and service the loans according to typical industry servicing practices. Loans may not be removed from the pool, nor may the agreement be cancelled. Farmer Mac’s approval is needed for changes in principal amortization, collateral support or co-makers, guarantors or obligors. Servicing actions not fitting these general categories do not need Farmer Mac approval (e.g., re-pricing).
Appraisals for LTSPC loans must have been completed in compliance with the institution’s policies and criteria at the time the loan was originated. Farmer Mac may require the institution to provide an update of the property and market trend information.
Loan servicing after purchase by Farmer Mac
In the event of default of a loan in the LTSPC pool and subsequent purchase by Farmer Mac, the institution executing the LTSPC agreement will continue to act as the Servicer and does so through a Central Servicing Agreement executed at the same time as the LTSPC agreement. Once servicing actions are approved by Farmer Mac after having been submitted through the special “online platform”, the Servicer administers all routine servicing actions (partial releases, etc.), handles the loan through restructuring or partial or full liquidation, and must repurchase the restructured loan if brought current on its original terms. The Servicer is paid for servicing the loan, collected from installments as made or from loan liquidation. The Servicer’s collection expenses are recovered before principal in liquidation.
What is the order of the application of proceeds from loan liquidation?
Unless otherwise agreed between Farmer Mac and the LTSPC participant, loan liquidation proceeds are applied as follows:
- To the Seller, accrued interest through six months following the first delinquency
- To the Seller, protective advances and collection expenses
- To Farmer Mac, interest from the purchase date
- To Farmer Mac, the outstanding principal
- To the Seller, other accrued interest
- To the Servicer, unpaid servicing fees accrued during the period Farmer Mac owned the qualified loan
- To the Seller, default interest, for the period during which the institution owned the loan
- To the Seller, prepayment penalties required to be paid by the Seller institution with respect to the loan, but only to the extent such prepayment penalties exceed default interest paid to the Seller institution under 7 above, if any
- To Farmer Mac, the remainder, if any
