Rules Finalized for Land Contract Guarantee Program

The Farm Service Agency recently finalized rules for the Land Contract Guarantee Program, making the program available nationwide.

The program provides federal loan guarantees to retiring farmers and landowners who self-finance the sale of their land to beginning or socially disadvantaged farmers and ranchers.

With land values escalating, beginning farmers and ranchers face ever greater challenges in gaining access to land. The Land Contract Guarantee Program is designed to encourage private land contract sales by providing a degree of protection to the retiring farmer, whose retirement savings is likely the land and farm. This protection may be the incentive needed to self-finance sale of their land to a beginning farmer and rancher.

To be eligible, the seller needs to:

  • Self-finance the sale of the land, and
  • Sell to a beginning or socially disadvantaged farmer.

The buyer of the farm or ranch must:

  • Be a beginning or socially disadvantaged farmer or rancher;
  • Be no larger than a family farm (in which most of the management and labor is provided by family members);
  • Have an acceptable credit history demonstrated by satisfactory debt repayment;
  • Own or operate the farm or ranch when the contract is complete; and
  • Be unable to obtain sufficient credit elsewhere without a guarantee to finance actual needs at reasonable rates or terms.

Under this program, the seller of the farmland has two guarantee options:

  • A “prompt payment” guarantee covers three amortized annual installments or an amount equaling three amortized annual installments; or
  • A standard asset guarantee that covers an amount equal to 90 percent of the outstanding principal of the loan, provided the seller obtains a servicing agent.

For either option, the loan guarantee stays in effect for 10 years. The purchase price or appraisal value of the farm or ranch in the contract sale cannot be greater than $500,000. The buyer of the farm and ranch must contribute at least 5 percent as the down payment for the land.

Farmers and ranchers interested in this program should contact their local Farm Service Agency office. To learn more, contact our Farm Bill Helpline. Call Traci at 402.687.2100 or email tracib@cfra.org.