Farm Refinance or farm foreclosure.
Farm refinance can entrap the farmer into farm foreclosure.
In Chapter 17 of the Code of banking practice the banks undertake to:
“If we are considering providing you with a new loan, or an increase in a loan limit, we will exercise the care and skill of a diligent and prudent banker.”
“If you are a small business, when assessing whether you can repay the loan we will do so by considering the appropriate circumstances reasonably known to us.”
These clauses are widely believed to mean that the bank will use that care and skill to avoid lending the farmers into unaffordable debt. Farm refinance can entrap the farmer into farm foreclosure.
The banker and the farmer
That however is not said or suggested in the code. The most profitable loan for a banker is one that the borrower cannot afford repay or service but is secured by real property of far greater value than the loan it secures. Farmers, affected by weather, commodity prices and government policy are ideal targets, whose skill is related to livestock, crops and the land. Comparatively, financial statements, loan projections and budgets may be lower on skills or priorities.
Farm foreclosure.
When the farmer cannot make a repayment instalment the interest rate often increases. The debt builds up and the farmer pays what they can which is first allocated to interest. The bank earns an increasing share of the farm income each year. After many years the farm debt may have risen by millions and is approaching the value of the security, The bank will sell the farm up. The farmer will lose all the money they have poured into the loan over the years. Thereby causing them to lose the farm with which the loan was secured.
Farm refinance or Smoke and mirrors.
The bank did use its care and skill as a prudent banker. It protected itself all the time, making sure it had good mortgage security and could recover the debt in full by selling up the farm. For the bank and its shareholders it was very prudent. It just made the bank part of a small fortune. AI probably probably approved the farm loan. But it took the farmer for a very expensive ride.
The Big Bad Billionaire Banks
It is to protect farmers that
GBAC has worked hard over the last 40 years. It helps the farm borrowers to see the traps in the bank offers of farm refinance. Thereby assisting farmers to protect themselves from predatory banks and receivers that prey on farm foreclosures.
HI – Human Intelligence wins the day
It is possible for borrowers to obtain good, suitable and reasonably safe farm loans. But it requires a good bit of work. The bank will exercise the care and skills of a diligent banker to earn itself the maximum amount from the loan. It is important to understand that what the bank earns the farmer loses.
GBAC offers a HI (Human Intelligence) service. This includes negotiating the best loan first up, managing and clearing the farm debt. Finally recovering the title deeds at the end. That is the way for farmers to make money out of borrowing.
