Selling Your USDA Loans To Coastal. First Quarter 2015

Transcription

1 Selling Your USDA Loans To Coastal First Quarter 2015

2 United States Department of Agriculture I. Rural Development A. Rural Development - Cooperative Services (RBS) B & I Loans (Business and Industry) B. Rural Housing Service - (RHS) CP (Community Programs) II. Farm and Foreign Agricultural Services A. Farm Service Agency s (FSA) 1. FO (Farm Ownership) 2. OL (Operating Loans) 2

3 Why Sell to the Secondary Market? Immediate liquidity Improved regulatory ratios Exceed statutory loan limits Increased earnings Servicing Income Premium income Income on cash flow float 3

4 Servicing Income Collected during the life of the loan Collected on guaranteed portion sold Smaller servicing fee greater premium Larger servicing fee smaller premium 4

5 Premium Income One time source of income Collected at time of loan sale Can be anywhere from 1% to over 15%, depending on loan characteristics Longer maturities and higher coupons command higher premiums 5

6 Yield Summary for a Variable Rate USDA Loan 6

7 Yield Summary for a Variable Rate USDA Loan 7

8 Secondary Market Requirements Loan Parameters (1 of 2) 1. Present Balance x Guaranteed Percentage i.e. (2,000m x 90% = 1,800m) 2. Note Rate (interest rate paid by the borrower) 3. Rate adjustment period(s) i.e. monthly, quarterly, semi-annually, annually, or fixed rate 4. Payment frequency and structure (Reamoritizing) 5. Dated date 6. Maturity date 7. Construction period if applicable 8

9 Secondary Market Requirements 8. Commitment fees if applicable Loan Parameters (2 of 2) 9. Prepayment Penalties - i.e. (5,4,3,2,1) Partial Payments Allowed -subject to Penalty Partial Payments Allowed -not subject to Penalty No Partial Payments Allowed 10. USDA Case Number 11. Nature of business 12. Location of business 13. How long in business 9

10 The USDA Secondary Market - The Role of the Broker/Dealer BORROWER PURCHASING INSTITUTION LENDING BANK COASTAL SECURITIES 10

11 The USDA Secondary Market Items on a Bid Sheet: Case Loan Number Loan Guaranteed Balance Gross & Net Coupons Fixed/Variable Coupon Adjust Frequency Payment Frequency Prepayment Penalties Dated Date Maturity Caps Bid 11

12 The USDA Secondary Market Required Information For Good Delivery (Business & Industry Loans Single Note Option) **NOTE: Loan must be properly closed and fully disbursed prior to settlement date in the secondary market. Documents to be included in all Transaction Packages: A. Assignment Guarantee Agreement (Form ) This form can be obtained at your Farm Agency office. This form must be the original published document. Copies will not be accepted. All signatures on Page 3 must be original signatures. This form must have no whiteouts, cross throughs or any other methods of correction. Please type the USDA Loan Identification Number exactly as it appears on the Loan Note Guarantee (4279-5). An authorized officer must attest the signatures of the Lender and Holder and the Corporate Seal affixed over the respective signature. 12

13 The USDA Secondary Market Required Information For Good Delivery (Business & Industry Loans Single Note Option) B. The Note (Standard Bank Note) This form must be a copy. C. Loan Note Guarantee (Form ) Your Farm Agency office provides this form after the loan is guaranteed. This form must be a copy. D. Prepayment Pass-Through Letter If a prepayment penalty clause is incorporated in the loan agreement or note, a Prepayment Pass-Through letter from the originating lender must be prepared. The letter should state the lender s agreement to pass through to the holder a pro-rata share of any prepayment collected from the borrower. 13

14 The USDA Secondary Market Required Information For Good Delivery (Business & Industry Loans Single Note Option) E. If seller is not the originating lender, three (3) Assignment Agreements must be properly executed, transferring the loan from the seller to the purchaser. If loan is already in the Secondary Market, include all assignments representing the chain of ownership from original holder to the current purchaser. The Assignment Agreement must have no whiteouts, mark-outs, cross-throughs or any other methods of correction. All signatures must be original. Please submit the executed documents to the following address: Coastal Securities. Inc. 920 Memorial City Way 11 th Floor Houston, Texas Should you have any questions regarding the above information, please do not hesitate to contact any Coastal cashier at

15 The USDA Secondary Market Required Information For Good Delivery (Farm Service Agency, Rural Housing Service & Rural Utilities Service) **NOTE: Loan must be properly closed and fully disbursed prior to settlement date in the secondary market. Documents to be included in all Transaction Packages: A. Assignment of Guarantee (FSA Form ) This form can be obtained at your Farm Agency office. All signatures on Page 3 must be original signatures. This form must have no whiteouts, cross throughs or any other methods of correction. Please type the Loan Identification Number exactly as it appears on the Loan Guarantee ( ). B. The Note (Standard Bank Note) This form must be a copy.. 15

16 The USDA Secondary Market Required Information For Good Delivery (Farm Service Agency, Rural Housing Service & Rural Utilities Service) C. Loan Guarantee (FSA Form ) Your Farm Agency office provides this form after the loan is guaranteed. This form must be a copy D. Prepayment Pass-Through Letter If a prepayment penalty clause is incorporated in the loan agreement or note, a Prepayment Pass-Through letter from the originating lender must be prepared. The letter should state the lender s agreement to pass through to the holder a pro-rata share of any prepayment collected from the borrower. E. If seller is not the original lender, three (3) Assignment Agreements must be properly executed, transferring the loan from seller to purchaser. If loan is already in the Secondary Market, include all assignments representing the chain of ownership from original holder to the current purchaser. 16

17 The USDA Secondary Market Required Information For Good Delivery (Farm Service Agency, Rural Housing Service & Rural Utilities Service) The Assignment Agreement must have no whiteouts, mark-outs, cross throughs or any other methods of correction. All signatures must be original. Please submit the executed documents to the following address: Coastal Securities, Inc. 920 Memorial City Way 11 th Floor Houston, TX Should you have any questions regarding the above information, please do not hesitate to contact any cashier at

18 Disclaimer Nothing contained herein is an offer to sell or the solicitation of an offer to buy any financial instrument. The opinions and recommendations presented do not take into account individual client circumstances, objectives, or needs and are not intended as recommendations of particular securities, financial instruments or strategies to particular clients. Investors must make their own independent decisions regarding any securities or financial instruments mentioned herein and seek professional advice, including tax and accounting advice. Any indications of market valuation contained herein are based on current information that we consider reliable, but we do not guarantee it is accurate or complete and users should make whatever additional determinations of market value they deem appropriate. All assumptions, opinions and estimates constitute Coastal Securities, Inc. s (CSI) judgment as of this date and, along with prices and yields, are subject to change without notice. Past performance is not indicative of future results. The yield and/or average life shown on loans, SBA pools, CMOs or mortgage backed securities consider prepayment assumptions that may or may not be met. Changes in prepayments may significantly affect yield and/or average life. CSI does not accept orders or instructions transmitted via or left on any phone voice or text mail system. Please be aware that communications received by or sent from our system are not confidential and subject to review by supervisory personnel. 18