Wednesday, the Federal Deposit Insurance Corporation began the process of conducting what may be the largest sale of farm notes since the 1980s savings-and-loan crisis. Being offered at auction on the Internet are 418 farm loans stranded on the books of failed Greeley, Colorado-based New Frontier Bank. Many of the farmers involved fear they will lose their property as a result. Investors or banks were expected to snap up their notes at fire-sale prices and then liquidate their collateral to score a quick profit.
Bob Winter, a board member of the Colorado Farm Bureau said it could be devastating. The loans were originally valued at $455 million and most of the notes were in poor shape, held by dairymen and other farmers hammered by turbulent commodities prices. About 70% of the loans are classified as nonperforming, meaning more than 60 days past due at the time of the bank's closing.
The Internet bids are scheduled to be closed out, or given final approval, by the FDIC on September 3. Within days, the winning bidders typically notify borrowers. The FDIC will not publicly post the outcome of all bids for two to three months. In the meantime, all the farmers can do is wait and hope that their note buyers agree to refinance.