Dr. Val Farmer
Rural Mental Health & Family Relationships

A Loan Officer Replies

May 3, 1999

Here is a lender's response to a column about a farmer's perspective on bankruptcy and foreclosure fights.

As a 23 year Ag Loan Officer I found the article on the Successful Farmer to be vindictive and demeaning to all Ag Loan people in banks. Please allow me to give you a perspective from an Ag Loan Officer.

Our bank has never had a forced sale. We have always worked with the farmer to achieve the best result for the farmer. I am not aware of any successful farmer ever being forced to sell. Yes, we have had numerous farm sales over the years by farmers no longer able to be profitable enough to support their family and meet their financial obligations.

Our bank officers meet with their financially troubled farmer as often as necessary to work out a mutual plan. This plan does not involve an attorney, however we may request assistance of a credit counselor. Keep in mind; this plan does not happen in a day. Our discussions/counseling usually begins years before any final liquidation of the farm. The process usually goes as follows: as your April 9 author would say, "The Slow Train Wreck."

1. Farmer and banker review a poor year; the banker makes suggestions/reviews options (maybe refinance with FSA Guarantee?) or other ideas. Then the banker states the consequences of another poor year.

2. Farmer and banker plan next year with cautious optimism. Farmer reviews options (off farm employment?, shared farming?, letting less productive land go?, etc.). The banker emphasizes the risk and present equity position that could be jeopardized.

3. Banker/farmer visit regularly during the year about progress and always reviews options.

4. Above procedure may continue for several years. However, when the banker feels the farmer is losing too much equity, he will make his recommendation. He is no longer comfortable with the progress and may recommend to sell or refinance with another lender.

5. Banker/farmer agree to refinance elsewhere or discontinue farming at present scale.

In this process it is most likely not, "What you say," (the lender) but, "How you say it." The lender must be honest, upfront and compassionate. These relationships are often times much more than business for us. They are personal. These are friends, not only borrowers and we have their families and best interest at heart.

We do not want to lose another family or farmer from our area, as it hurts our local community, school, businesses and, yes, the bank loses another customer. We try to make every reasonable loan possible. Loans are a major reason for a bank's existence, to serve the community and make the bank a fair profit. Banks are closely regulated by examiners to insure the loans are not of excessive risk., which would jeopardize the deposits of all of the bank’s customers.

. . . Those endless and complicated loan documents the farmers are asked to sign must have all the fine print because many prior borrowers in some parts of the country have tried to avoid paying their obligations. Some have sold mortgaged property, hid property, etc. I am not aware of loan officers asking farmers to borrow more money than is necessary for the essential farm operation.

"It's the borrower making the request and using the funds; therefore their responsibility to repay the loan." I am not saying farming is easy, however, management is a most important part. A major problem I see in farming (like anything else) is keeping up with the neighbor, new pickup, tractor, machinery, land, etc.

I was working with a young farm family for the past ten years. They had just gone through bankruptcy and were willing to start out small and work off the farm. After 10 years, I was pleased to inform the young farmer I was happy with his effort and progress. He finally had his finances under control and could weather an unforseen setback.

Guess what! Three weeks later he happily informs me he has purchased a new car, late model pickup, and tractor and has now been able to finance all the purchases elsewhere with his improved credit. Needless to say, my 10 years of counseling did not work and I do not expect this successful farmer will remain successful for long.

Some farm customers think the loan officer is some kind of robot or "AX GUY," the bank is rich and it owes them favors. The bank is a business like farming and the loan officers are human and many grew up on farms. These loan officers have stress and much responsibility that farmers do not notice. They are also compassionate and have feelings. Like any profession, there will be a few "bad apples," but this is a free country and if the farmer does not have trust in his bank or credit institution or the loan officer, he should find another bank. I would.

Many young farmers are wanting the best of everything upfront. It's management and ambition, not the weather, that will make them successful. Of all the farmers that have left the farm in our area and have secured employment elsewhere; everyone has expressed to me that they are satisfied with their decision to leave farming. They have less stress, are happier, and see a brighter future for themselves and their family. Most say they should have left farming sooner. Who is most happy for them? I am. They are my hardworking friends.

Is there life after farming? You bet! - Proud loan officer