Agricultural loan guarantee programs administered by the Wisconsin Housing and Economic Development Authority

Under the agricultural production loan guarantee program, WHEDA is prohibited from guaranteeing a loan if the total outstanding principal of all loans to a borrower under the program is more than a maximum amount set annually by WHEDA that is not more than $150,000. Under the bill, WHEDA is prohibited from guaranteeing a loan if the total guarantee, rather than the total outstanding principal, of all loans to the borrower is more than $250,000. This limitation also applies to a guaranteed loan that is used to refinance a loan guaranteed under the agricultural production loan guarantee program. The bill also allows WHEDA to extend an agricultural production loan guarantee beyond the original term of the guaranteed loan if the loan is part of a loan workout agreement.

Under current law, a farmer is eligible for a loan guarantee under the agricultural production loan guarantee program if the farmer's debts total at least 40 percent of the farmer's assets. This bill restricts the farmer's debts and assets that are compared to only those that are related to the agricultural production that is the subject of the loan. Current law also requires that to be eligible for a guaranteed loan, it must be reasonably likely that, if the farmer receives a guaranteed loan, the farmer will not be subject to voluntary or involuntary liquidation before April 1 of the following calendar year. This bill changes the April 1 date to the end of the loan term.

Under current law, WHEDA is required under the agricultural production loan guarantee program to guarantee repayment of 80 or 90 percent of the principal of an eligible loan, depending on the total principal of the loan. Additionally, under current law, when commercial interest rates exceed a certain amount, WHEDA must make interest reduction payments equal to 2 percent of the principal amount of a guaranteed loan to participating lenders. This bill makes both of these requirements permissive rather than mandatory. Additionally, the bill changes the amount of a guarantee under the program to no more than 90 percent, regardless of the principal amount of a loan, and changes the amount of the interest reduction payments to an amount not to exceed 2 percent of the principal amount of the guaranteed loan.

Farm assets reinvestment management loan guarantee program WHEDA operates the farm assets reinvestment management loan guarantee program (FARM program) under which WHEDA guarantees loans to farmers for the acquisition of agricultural assets or the cost of improvements to facilities or land.

Under current law, a farmer is eligible for a loan under the FARM program if, among other things, the person is currently operating farm premises or if the person intends to operate farm premises and has at least three years of farming experience, including managing the day-to-day operations of a farm. The bill expands eligibility for loan guarantees under the program to include a person who intends to operate farm premises and maintain the family farmstead on the farm premises and who has experience farming the specific farm.

Current law requires WHEDA to charge an origination fee on every loan guaranteed under the FARM program in an amount that is 1 percent of the loan.

Current law also requires that all collected origination fees must be deposited in the Wisconsin development reserve fund and must be used for the FARM program. This bill allows WHEDA to charge origination fees but does not require it to do so and, if collected, origination fees must be deposited in the Wisconsin development reserve fund but do not have to be used for the FARM program.

Additionally, similar to the changes made to the agricultural production loan guarantee program, this bill changes the current limitation on the amount extended to the borrower under the FARM program from the total outstanding principal amount of all loans to the borrower to the total guarantee amount of all the loans made to the borrower under the program. The bill also limits the debt to asset comparison for purposes of farmer eligibility to refer to the debts and assets related to the agricultural assets that are the subject of the eligible loan.

Agricultural production drought assistance loan guarantee program Current law provides that, prior to July 1, 1989, WHEDA was authorized to guarantee collection of 90 percent of eligible loans made to farmers for certain extraordinary drought-related costs (agricultural production drought assistance loan guarantees). This bill reinstates WHEDA's authority to guarantee agricultural production drought assistance loan guarantees and expands the program to include loans for certain extraordinary costs related to any act of nature for which the governor issues a declaration of disaster. Under the bill, agricultural production drought assistance loan guarantees are renamed agricultural production disaster assistance loan guarantees.

Under current law, if WHEDA guarantees an agricultural production drought assistance loan, WHEDA is also required to pay an amount equal to 3.5 percent of the loan to the participating lender to reduce the interest rate charged to the farmer receiving the loan. Under the bill, WHEDA is authorized, but not required, to make an interest reduction payment in an amount up to 3.5 percent of the loan. The bill also increases the maximum amount of guarantee that WHEDA may extend to a borrower from the amount guaranteed on $15,000 of total principal to $25,000 of total guarantee and eliminates the existing limitation on the term of a loan that is eligible to be guaranteed under the program. However, the bill restricts the period of time that WHEDA may guarantee a loan under the program to no more than three years.

Under current law, WHEDA is required to guarantee 90 percent of the principal of a loan under the agricultural production drought assistance loan guarantee program. Under the bill, WHEDA is authorized, but not required, to guarantee a loan under the program in an amount that is up to 90 percent of an eligible loan. The bill also makes similar changes that are made to the agricultural production loan guarantee program and the FARM program, related to an eligible farmer's debt to asset ratio.

Agricultural development loan guarantee program WHEDA operates a program under which it provides guarantees for loans for working capital or to finance certain items, if the working capital or item is necessary to, or used to, process or market a product from a raw agricultural commodity produced in this state or to commercially harvest whitefish from Lake Superior (agricultural development loan guarantee program). Under the agricultural development loan guarantee program, WHEDA is prohibited from guaranteeing a loan if the total principal of all loans to the borrower under the program is more than $750,000 or the total principal amount of loans to the borrower under the program for commercially harvesting whitefish in Lake Superior is more than $100,000. This bill changes these maximum amounts from the total principal amount of the loans to the borrower to the total amount guaranteed under the program to the borrower.

The bill also creates an exception for loans that are included in a loan workout agreement from the current limitation on the term of a loan that may be guaranteed under the agricultural development loan guarantee program. Current law requires WHEDA to guarantee an eligible loan under the agricultural development loan guarantee program. This bill makes WHEDA's authority to make guarantees under the program permissive instead of mandatory.