Farm Credit System (FCS) lenders have a knack for expanding the scope of the FCS’s mission, extending some questionable loans and striking some strange partnerships. One need only look at Farm Credit’s ties to global packaging firm Greif, Inc., to PacifiCorp powering a Facebook data center, and to any number of telecommunications firms like Frontier or Verizon.
What’s just one more on the heap?
On May 12, Georgia’s Albany Herald reported that Southwest Georgia Farm Credit is now partnering with Quicken Loans. Beyond providing a platform for customers to access financial products, Quicken Loans is the nation’s largest mortgage lender.
It’s not exactly clear what led to this partnership. But according to Southwest Georgia Farm Credit, it “just made home financing even easier for borrowers… Now, new home buyers and homeowners who want to refinance, can experience local service delivered on a national lending platform.”
It’s an excellent idea – and not at all strange or unorthodox – to make it easier for farmers to access home financing. That’s something almost everyone can agree on. But what about if Southwest Georgia Farm Credit advertises in its announcement that “interested persons don’t have to be a farmer to get a home loan with Farm Credit”?
Farm Credit institutions are authorized to provide rural housing loans to non-farmers provided that at least one of the criteria below is met:
· The property must be at least 5 acres;
· The town where the property is located must have a population of 2,500 or less;
· The potential owner must have the intent to farm;
· The property must yield at least $500 in gross farm income.
With this information in mind, let’s look at what this announcement is really saying: a government- and taxpayer-backed institution is going to lend to non-farmers under ludicrously lax criteria, and it’s going to do so by partnering with the nation’s largest mortgage lender.
At this point, is Farm Credit just trying to be a bank but with generous tax benefits? In 2019, the System as a whole had an effective tax rate of 1.86 percent. If it’s starting to act more and more like a normal commercial lender, then at what point do policymakers just begin to treat it like one and stop granting it special status?
Unfortunately this is part of a longer pattern of letting the “farm” drop out of Farm Credit. While this has been the case for some time now, Farm Credit has only become more brazen, shifting so much in recent years to other sectors – such as health care – that its regulator suggested to Congress that it is “bumping against [its] authority.” Congress needs to revisit the Farm Credit Act so that it can provide clarity of intent for the Farm Credit System. Farmers, ranchers and producers across the country will be better off for it.