What is a federal land bank?


Quick Answer

A federal land bank specializes in providing financing for rural property. These properties can include farms, parks, recreational services, or forestry and timber. All federal land banks merged with the federal intermediate credit banks and formed farm credit banks in July 1988.

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Full Answer

The Federal Farm Loan Act of 1916 originally established 12 federal land banks that were designed to offer long-term loans to farmers and ranchers. The banks later expanded to offer mortgages to rural home buyers. These federal land banks then partnered with the national farm loan associations that served as agents for the federal land banks. When a loan was given to a borrower, a portion of the loan proceeds were used to also purchase stock within the farm loan association. This made the borrower a partial owner of the farm loan association.

The Agricultural Credits Act of 1923 was used to establish the federal intermediate credit banks, which were established in the same 12 districts as the federal land banks. These banks were designed to offer short-term credit solutions for agricultural and rural borrowers.

The merger that lead to the formation of the farm credit banks was a direct result of the Agricultural Credit Act of 1987.

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