Definition
The Federal Land Bank is a government-sponsored agency in the United States that provides mortgage loans specifically targeted at rural properties, primarily to farmers and individuals who support agricultural activities, i.e., services to farmers and ranchers. To secure a loan, the borrower is typically required to buy stock in their local Federal Land Bank Association, which then serves as additional collateral for the loan.
Examples
- Farmer’s Loan: A farmer looking to expand their farm by purchasing an adjacent piece of agricultural land can obtain a loan from the Federal Land Bank. They must purchase stock in the local land bank association that will act as additional loan security.
- Ranch Upgrades: A rancher aiming to improve their property infrastructure could secure funding through the Federal Land Bank, provided they invest in stock in the regional land bank association.
- Service Providers: An individual providing essential services such as veterinary care to farmers can also apply for loans to either purchase property or upgrade their facilities, conditioned on obtaining the stock as additional collateral.
Frequently Asked Questions
Who qualifies for a loan from the Federal Land Bank? Individuals who are farmers, ranchers, or provide services to these professionals are eligible for loans.
Why is the purchase of stock in the local land bank association necessary? This stock serves as additional security for the loan, ensuring the borrower has vested trust and interest in the association.
What types of properties can be financed through the Federal Land Bank? Loans are typically provided for rural properties, including farms, ranches, and other facilities that serve the agricultural sector.
Is the interest rate on these loans competitive? Yes, the Federal Land Bank usually offers competitive, often lower-than-market interest rates, tailored to the agricultural economy’s needs.
Can loans be used for purposes other than purchasing land? Yes, loans can also be used for property improvements, equipment purchases, and other agricultural needs.
Related Terms
- Mortgage Loan: A loan secured by the collateral of a specified real estate property, which the borrower is obliged to pay back with a predetermined set of payments.
- Rural Development: Policies and procedures aimed at improving the quality of life and economic well-being of people living in relatively isolated and sparsely populated areas.
- Agricultural Credit: Financial services that provide capital to the agricultural sector.
- Land Bank Association: Local or regional entities that administer loans and manage the purchase of stock as additional loan security.
Online References
- Farm Credit Administration – Official Website
- USDA Rural Development
- Farm Credit - An Agricultural Lending Cooperative
Suggested Books for Further Studies
- “Agricultural Finance: From Crops to Land, Water, and Infrastructure” by Charles B. Moss - A comprehensive guide on agricultural finance.
- “Farm Credit and the Farm Credit System” by Lee J. Alston, Edwyna Harris, and Bernardo Mueller - Explores the history and functions of farm credit.
- “Financial Management in Agriculture” by Peter Barry, Paul Ellinger, John Hopkin, and C. B. Baker - An in-depth look at financial management practices in the agricultural sector.
Fundamentals of Federal Land Bank: Agricultural Finance Basics Quiz
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