Tumbling interest rate keeps loan agents busy

8/13/2010

For nearly a decade, Ag Credit Services has offered a program whereby the agricultural lending cooperative calls borrowers who could benefit most from repricing the fixed interest rates on their loans.

And, with farm rates at historic lows, the Fostoria-based cooperative with more than 6,000 members in 18 northwest Ohio counties is making lots of calls these days to the region's farmers, offering to quickly modify their loans at lower interest rates.

With agricultural rates as low as about 6 percent for 20-year loans, for example, Ag Credit has been modifying nearly 60 loans a day.

Since April, 2009, Ag Credit has completed more than 5,500 loan modifications to $1.2 billion in loans, said Dan Ebert, Ag Credit chief financial officer.

In Ag Credit's Van Wert office, employees make four to five calls a day to borrowers who could benefit most by modifying agricultural loans, and the processing fee typically is about $200, branch manager Aaron Stoller said.

"It really creates a very heavy workload for us, but it's worth it because it helps our members," Mr. Stoller said.

Terry Profit, a farmer near Van Wert, said Ag Credit's service notifying borrowers when rates have dropped is welcome.

"You don't have to be watching it yourself," Mr. Profit said. "They're doing it for you."

Another agricultural lending cooperative, Farm Credit Services of Mid-America, based in Louisville, Ky., also has been notifying northwest Ohio customers about lowering rates and modifying loans.

Farm Credit typically charges $350 to modify a loan, but that is less than if borrowers refinanced and had to get appraisals and title work, said Carl Hess, Farm Credit regional vice president, who manages offices in Archbold, Delphos, and Celina.

Agricultural loans are a type of commercial loan, so their rates are a bit higher than home mortgage rates, Mr. Hess explained. Many Farm Credit borrowers want loans ranging from five to seven years, with seven-year rates running about 4.6 percent, he said.

"These rates for farms are at historic lows," Mr. Hess said.

Farm Credit customers also can get notices online that tell them when loan rates have dropped, Mr. Hess said. This year, 20 percent to 30 percent of Farm Credit customers in northwest Ohio have modified their agricultural loans, he said.

Some Ag Credit customers are surprised when they get calls asking if they'd like to have their rates lowered, which in some cases can be more than 7 percent, said Mr. Ebert, the chief financial officer. Some, however, were borrowers when rates declined in 2002 and 2003, so they remember the service, he said.

If it made financial sense, some borrowers have modified their loans more than once in the most recent period of rate declines, Mr. Ebert said. Since April, 2009, loan modifications have saved borrowers about $3.8 million in the first 12 months after their loans were modified, he said.

"Nobody expected rates to go down as far or stay down as long as what they have," Mr. Ebert said.

Contact Julie M. McKinnon at:

jmckinnon@theblade.com

or 419-724-6087.