The following suggested language is intended to offer guidance in the wording of promissory notes in order to make them acceptable for purchase in the Farmer Mac 2 program. It is important to note however, that lenders are responsible for the legal sufficiency and enforceability of loan documents, which may be affected by laws of the state or jurisdictions governing the loan transaction. Therefore, lenders should consult their own counsel on matters of state or local law and may make modifications to the following suggested language as they deem appropriate to comply with such laws.

Farmer Mac 3-Month Cost of Funds Index (COFI) Net Yield

“The initial interest rate on the loan is [initial rate %]. The interest rate will reset to [state index margin %] over the Base Rate in effect on [state 1st day of next calendar quarter] and on the first day of each calendar quarter thereafter. The Base Rate is the Farmer Mac 3-Month Cost of Funds Index (COFI) Net Yield.”

Farmer Mac 5-Year Reset Cost of Funds Index (COFI) Net Yield

“The initial interest rate on the loan is [initial rate %]. The interest rate will reset to [state index margin %] over the Base Rate in effect on [state first reset date-see Rate Line] and every 5-years thereafter. The Base Rate is the Farmer Mac 5-Year Reset Cost of Funds Index (COFI) Net Yield.”

Farmer Mac 10-Year Cost of Funds Index (COFI) Net Yield

“The initial interest rate on the loan is [initial rate %]. The interest rate will reset to [state index margin %] over the Base Rate in effect on [state first reset date-see Rate Line] and every 10-years thereafter. The Base Rate is the Farmer Mac 10-Year Reset Cost of Funds Index (COFI) Net Yield.”

Farmer Mac 15-Year Cost of Funds Index (COFI) Net Yield

“The initial interest rate on the loan is [initial rate %]. The interest rate will reset to [state index margin %] over the Base Rate in effect on [state first reset date-see Rate Line] and every 15-years thereafter. The Base Rate is the Farmer Mac 15-Year Reset Cost of Funds Index (COFI) Net Yield.”

Wall Street Journal Prime Rate

“The initial interest rate on the loan is [initial rate %]. The interest rate will reset to [state index margin %] over the Base Rate in effect as the base rate adjusts from time to time. The Base Rate is the maximum Wall Street Journal Prime Rate.”

Fixed Rate

“The interest rate is fixed at [initial rate %] until the maturity of [state maturity date]. Payments in the amount of [state payment dollar amount] will be due on the first day of each [state month], beginning [state first payment due date].”

Changes to Existing Notes

A change in the interest rate, payment period, or any of the other terms of an existing note may be completeted by means of a Note Modification or a change in terms agreement that is signed by the Borrower. Since the note is guaranteed by the USDA, any changes must be acknowledged in writing by USDA either on the allonge itself, or in a separate letter or document that identifies the loan and specifies the change.

Forms