A Stronger Farmer Mac
Improving the secondary market for ag loans ensures a strong rural America.
By: Curt Covington
Curt Covington joined Farmer Mac in 2015 as senior vice president, agricultural finance. He leads business development efforts in the farm and ranch and USDA-guaranteed business segments, and oversees the company’s credit administration, underwriting and servicing functions. He can be reached at firstname.lastname@example.org.
Life, as they say, is full of surprises — and the past few years have certainly given me my share. For four decades, I had built a career as a regional agricultural lender based on the West Coast. Little did I know that in early 2015, I would be driving the family truckster from Fresno, Calif., to our new home in Washington, D.C., where I’d take a new position as the head of the agricultural finance division of the Federal Agricultural Mortgage Corp., otherwise known as Farmer Mac. I’ve never looked back!
Like all career ag bankers, I’d known Farmer Mac by reputation and had admired the solutions and the benefits it brings to both banks and their borrowers — America’s farmers and ranchers. I must confess, however, that I underestimated the breadth and depth of Farmer Mac’s reach — loans in all 50 states and a near $18 billion book of business. I was intimidated, I was overwhelmed, but I also knew that I believed in the company’s mission of delivering affordable credit to rural America. I also knew many of the faces at Farmer Mac — some of whom have devoted their entire careers thus far to working at the almost 30-year old company, their dedication reflecting an unwavering commitment to serving our mission.
I was excited to get to work. I wanted to build on the company’s solid core and most important job: to intently and intensely serve our customers, which consist of financial institutions that originate or hold first mortgages secured by farmland. Because Farmer Mac provides a secondary market and does not itself originate loans, this vast national network of farm mortgage loan originators, including community banks, insurance companies and Farm Credit institutions, is the foundation of our business. I knew that as the new head of agricultural finance, my focus must first be on these vital players.
Transparency and Communication Are NOT Four-Letter Words
When I worked as a banker, I sold many loans to Farmer Mac, so I had first-hand knowledge of the advantages of doing so. Lenders can structure long-term fixed-rate loans with favorable terms that benefit their farm and ranch customers, while also shedding interest and credit risk. In exchange, lenders also receive a steady stream of servicing fee income from every loan sold to Farmer Mac.
What I didn’t always understand was the loan decision process at Farmer Mac, which given the complexity of the farm mortgage business, could be confusing. Over the last few years here, I have spent a lot of time with our incredibly talented and highly experienced underwriters looking at loans as they come in and thinking about ways we could improve the process. I wondered, “Could we inject some humanity — and clarity —into this relationship to strengthen our bond with the lenders?”
Approximately 80 percent of the loans submitted to Farmer Mac are approved, which is remarkable by any standard. However, on those occasions when a loan application doesn’t meet our underwriting criteria, I firmly believe that a “no” should be accompanied by constructive feedback to help create stronger applications in the future. To that end, we have implemented small changes to the approval process with a focus on both transparency and communication with our customers. Our conversations with many of our lenders start well before they submit their first loan. We have also committed ourselves to more lender training to avoid any surprises. And, if and when we can’t accept a loan, we make it a point to have an honest discussion with the lender, so that the next transaction with us can be a successful one.
We Don’t Live on an Island
Working on K Street in Washington, is both a privilege and a disadvantage when you are trying to recruit financial institutions from all over the country to sell you farm mortgage loans. Visiting our customers almost always involves a plane ride. It’s been important to me that the physical distance never translates into a mental distance from our customers; I have impressed on our staff that we are all in the farm finance business together. The interrelationship between the farming community, the financial institutions that serve that community’s daily needs and Farmer Mac is crucial and worth strengthening. If Farmer Mac is not seen as a part of the fabric of the U.S. agricultural industry, then we could be perceived as just some anonymous group of people working in a glass tower in Washington. In order to weave us into that fabric more effectively, I have undertaken several strategic, customer-focused initiatives over the last few years that will drive the company going forward. These efforts are based on the realization that we do not live on an island and on the conviction that we have a unique position and responsibility to agricultural finance in the United States.
The customer comes first. Last year, we created a client services department to focus on delivering a positive customer experience for all of our approved lenders. From onboarding to training, this relatively new team is responsible for guiding the lender through a seamless submission, approval and closing process. We had been conducting training on how to access Farmer Mac’s services for years, but we now include training that covers a bigger slice of agricultural lending.
Boots on the Ground
We have stepped up our participation at lender events around the country, as well as other events with relevance to agricultural lending. Farmer Mac attended more than 150 ag-focused events and conferences across the country last year alone. We also produce and deliver more than 25 annual road show events throughout rural America to introduce, and in some cases remind, lenders of our solutions and the advantages to be gained by working with us.
Share Our Knowledge
Our diverse commodity portfolio and ag lender network span the entire United States, giving us a unique perspective on the farm real estate finance business and the current agricultural climate nationwide. Our 30,000-foot view of the farm real estate mortgage market offers invaluable information, and we believe that one aspect of our mission is to share that knowledge to support our customers and the agricultural community at large. But how to get it out to those who could use it? In addition to attending the many agricultural and finance-focused events, a year ago we launched The Feed, a quarterly report focused on the U.S. farm economy that includes relevant research and insightful commentary and analysis from our team of experts on all aspects of the current economic landscape of rural America. We provide this information free, to anyone who wants it — you don’t have to sell us any loans (or even be in the farm mortgage origination business) to be able to access this report. In fact, it serves not only our lenders but also the broader agricultural community including producers, agribusinesses and ag media. To subscribe, go to www.farmermac.com/thefeed.
Take It to the Source
We have also recently employed a push/pull strategy to become better known to the farm community as a whole, not just to those working in agricultural finance. We believe that it is important that the farmers and ranchers understand who we are, what we do and, ultimately, how we can help. To that end, our team of economic and ag banking experts, myself included, travel the country to speak, exhibit and sponsor at producer-focused meetings and conferences. Though it is still in its infancy, this strategy is already beginning to bear fruit (sorry for the pun). I had a farmer ask me at a recent event, “How do I know if my bank works with Farmer Mac?” I responded, “Just ask them!” If they have a bewildered look on their face, there’s a pretty good chance the bank is not an approved lender. In that case, my team will gladly visit the bank to help it become one. Ultimately, we are here to provide a competitive edge to lenders and a financial advantage to their farm and ranch borrowers, and this affects everyone in the agricultural world, from the ground up (to use another pun!).
Finding Friends in All the Right Places
In addition to the strategic initiatives that we have instituted, we have also recognized that we can exert a leadership role in other areas of farm finance. For example, we are the largest holder of U.S. Department of Agriculture Farm Service Agency guarantees in the country. Most lenders know that we have been buying FSA-guarantees for many years, but few know that we now hold more than $2 billion in total USDA guarantees. By selling their USDA guaranteed loans to us, lenders can off er their customers lower fixed rates and longer terms. It seemed to me that anything we could do to help banks and others originate FSA-guaranteed loans would benefit everyone involved.
As an example, we observed that there was no national organization that brought together lenders who use the program and USDA officials to discuss issues of mutual concern. We identified the need and decided to step in to help. For the last three years, we have produced and hosted an annual “stakeholders” meeting that has enabled lenders of all types to get together with USDA officials for an open dialogue. All of the participants understand the importance of working together to improve the program to better serve the ultimate beneficiaries — farmers and ranchers. The feedback USDA officials have received from the attendees at these meetings has been very productive, and program changes have been made as a result. We will continue to host these meetings for as long as lenders find them useful.
Going forward, we will participate in other forums where there are connections to the farm and ranch finance community. We recognize that as a nationally focused entity in farm and ranch finance we have a responsibility to help when we can.
When It Is All Said and Done, People Matter the Most
Ultimately, agricultural lending is still very much a people-to-people business. While we will continue to innovate with all of the technology we can get our hands on to help speed up processes and make working with us easy and efficient, nothing will ever take the place of a firm handshake on the steps of a bank or standing on the rich soil found in American agricultural and rural communities.
The last few years have been a voyage of discovery for me, and I am keeping my eyes on the horizon. I’m honored to work for a company that has fundamentally changed farm real estate mortgage lending. Yet even as Farmer Mac has become better known to more and more lenders and producers, there is still a lot more ground to cover. Our mission is to build a strong and vital rural America by increasing the availability and affordability of credit for the benefit of American agriculture and rural communities, and we will continue to look for new ways to bring our services to more lenders and, by extension, to more farmers and ranchers.
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