Thomas USAF
The USDA B&I Update as of March 23, 2009
On February
17, 2009 President Obama signed the American
Recovery and Reinvestment Bill which
adds approximately $2.9 billion to
the USDA B&I Budgets for 2009 and 2010. Later the President signed the
Agriculture Appropriation Bill for 2009. When these two bills are added together
there is approximately $3.9
billion for B&I loans or almost 300% of what B&I funded in the 2008 budget.
Good
news! There is more than ample
funds in the B&I loan program in 2009 and 2010.
Good
news! There also appears to be
ample funding in USDA's Energy loan programs - roughly $60 million in subsidies.
Good
news! USDA new regulations will
be effective June 1, 2009 and the new regulation will have a fast track 10 day
approval process in its Preferred Lender Program (PLP) and the Agency is
incorporating many of the recommendations made by those in the Industry and
Government.
Not so
good news! Even with $3.9 billion
in funding the funds have not
reached the states which are
still approving loans subject to funding. This keeps Lenders from closing loans
and keeps the economy from benefiting from the stimulus package.
Not so
good news! No one at USDA can
tell us when the funds will reach the field office so Lenders can close their
approved loans.
Not so
good news! No one at USDA can
tell us if the Agency plans to follow SBA's lead and increase
guarantees up to 90% and/or allow
stimulus funds to be used for
Borrower fees to the agency.
Finally,
USDA personnel need to understand that the financial crisis brought on by the
Government's takeover of Fannie Mae and Freddie Mac has raised
the investors' yields on Government Guaranteed Paper by 1 to 2%.Just
reference, Farmer's Mac's current par price of P-0.75% for 100% guaranteed
paper. This rate was P-2% to 2.25% in normal times. Therefore, Lenders must pass
this increased cost on to Borrowers by charging Borrowers higher interest rate
on loans. SBA is hopeful that TALF will solve this problem for their loans, but
so far I have not seen any USDA participation in TALF. If TALF solves the
secondary market problem for the purchase of Government Guaranteed loans, we
will again publish our weekly pricing matrix for USDA loans.
Mike Thomas. mike@usaf2.com vasu@usaf2.com
