FSA loans come from lenders, not the FSA as you might assume. Participating lenders must be approved by the FSA in order to write these loans. Despite their approval, though, different lenders can have different statuses from the FSA. Learn how the status can affect your FSA loan.
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The Standard Eligible Lender
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FSA loans start off as a Standard Eligible Lender. In order to get this status, though, lenders must have experience in farm loans. This includes both writing and servicing them. The lender must also be able to prove to the FSA that they have the funds and capability to manage the funds.
In order for a lender to come standard eligible, they must pass the credit evaluation and standard evaluation by the state. The bank must also have an office that is near the farm that they are lending the funds for so that they can service the loan with ease.
All FSA lenders remain a standard lender until they reach the Certified Lender, which is the next step. In order to become a Certified Lender, the lender must write and service a specific number of loans and minimize their losses.
The Certified Lender
In order to become a Certified Lender, the bank must be a Standard Eligible Lender first. They must also service at least 10 FSA guaranteed loans as a standard lender. Of those loans, the lender must have closed at least 5 in the last 24 months.
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Of the guaranteed loans the lender wrote, the lender must have a loss that is no higher than 7% of the total. In addition, anyone that will be working with the FSA servicing must prove that they have undergone FSA training within the last year.
Certified lenders have the ability to tweak some of the processes, by using their own forms and even their own process as long as they meet FSA guidelines. This lender still has the FSA overseeing their procedures, but they are less involved than they are with the standard lender.
The Preferred Lender
The top status any FSA lender can have is the Preferred Lender. The Preferred Lender is one that already reached the Certified Lender status and does not have a loss that exceeds 3% of their portfolio. In addition, the Preferred Lender must have closed at least 20 FSA loans already.
Preferred Lenders have even more flexibility with the guidelines and procedures they use. Preferred lenders have priority when it comes to getting in line for FSA approval for individual loans. Lenders with this status have the fastest turnaround time, giving you the money you need much quicker.
lender’s status controls how long your loan process may take and how much say the FSA has in the loan. You have a better chance of approval when you deal with a Preferred Lender as they have more leeway with the guidelines and procedures than the lenders in their other categories. You will get your money faster and possibly even pay lower closing costs because of the decreased administrative costs required.
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