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Author Topic: Frustration in Homestead Financing  (Read 230 times)

Hiddenone

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Frustration in Homestead Financing
« on: January 21, 2018, 10:24:13 AM »

  Ok I just want to let everyone know this is a rant   
  From time to time I give advice to local people that want to begin a homestead. There are times this has been so damn frustrating it isn't funny. The major problem is that banks don't have a clue and are not interested or friendly in what one is attempting to do. This has for the most part driven a number of potential homesteaders away from their goal. I don't think it is right and I think it is discriminatory in their lending practices to homesteaders. Banks don't have a clue of the history of this nation and it's homesteaders.
   When the homesteading act was passed back in the 1800s the sole purpose was to get people who didn't have a lot to move west and homestead to build the economy and to populate the vast open areas of our nation that were for the most part vacant and nonproductive. Yes many homesteaders failed due to being unprepared, or ready to work so hard to succeed. Many also homesteaded in areas that were not suited for farming. many did however succeed and this grew the national economy in huge ways. It built towns and created income for them as well as railroads and a vast infrastructure of our nation. The income these homesteaders created was spent on products from companies back east that supplied the things they needed as well as shipping for those products to and from those areas. Without homesteading this nation would have been much slower to grow and thrive as it did. The government also wanted to increase and develop it's vast resources as well as populate these areas as free states in the union due to the civil war that was taking place. It created a intercontinental railroad and telegraph system in the process and created huge numbers of jobs as well to a depressed country. This idea created hope for the poor as well as the rich also the soldiers from both sides of the conflict looking for a fresh start.
   What has set me off is that there is a small resurgence of people out there that would like to homestead for the independence it creates as well as piece of mind in a troubled world that we live. Banks will not lend any funds to people that honestly tell them what they want to do or hope to accomplish. This is in the most part due to the fact they and big agriculture don't like small freeholders getting in their way. A small homesteader will try and buy a acreage to either build or live in a small home and raise food and try to become as self sufficient as possible. These families would help small communities by enrolling their kids in the local schools, and trading with the local merchants. They will pay taxes on building not bare land increasing the tax rolls of the area. yes their are a few people out there that want to homestead that have some different ideas on how things should be done but what's wrong with that? Unless they are totally off the wall and cause a community problems who the hell cares. Would a bank rather have productive members in the rural areas of just bare land that the big farmers farm to death and pour thousands of gallons of toxic chemicals on that contaminate the ground, water, and air. A small homestead will pay 5 times the taxes on their improved property than a bare piece of cropland and reap more benefits from that ground. Less pollution better maintained soil and a healthy and sane lifestyle which seems a big plus in my opinion.
   Large farmers are bulldozing every area that they can to make room for more crops to be planted destroying trees and wetlands and demolishing standing farmsteads where people could live and thrive if allowed. The price they get for these crops is low and they have to compete with markets from other countries who can produce it for less. Big farmers don't raise food crops they raise food for livestock and biofuel plants (these came into being due to lack of a market for the crops they produced). The government pays out billions of dollars to subsidize these big farmers every year is crop support programs. They big farmers plant from road ditch to road ditch in order to get even more. In this area you don't see many fences due to the fact very few  farmers raise livestock and those that do raise it in a factory type setting. The wet spots are crossed with tile lines that drain the ground water out at a faster rate than intended and pollute the local streams at an alarming rate. Farm chemicals in the form of fertilizer, pesticides and herbicides enter these waters as well as valuable topsoil creating a problem for water life and those down stream who use it for drinking water. I can guarantee a small homestead will not do that due to the fact it isn't needed for and acreage. I would let you be the judge of what is a more practical use of the land.
   Banks are in financial trouble due to those low crop prices and are way over extended in the loans they service. This travels up the ladder to the larger banks. $12,000 and acre land can't produce enough with modern agriculture to be self sustainable and that's what banks fail to see. Yes there are years where farm commodity prices shoot up due to crop failures in other countries but those are few and far between. When a big farmer can't pay his notes a bank will help him restructure his loan payments because they can't afford for them to fail and take down the bank. This is a big shell game as nothing changes just more worthless paper with signatures that are also worthless. During the farm crises in the 70s and early 80s this broke the Federal Land Bank the largest farm lender in the country. Guess banking didn't learn from their mistakes due to the greed of making more and more money. The problem was they really weren't making money they just had paper saying  they were. That's why big banks are traded on the stock exchange just the same as farm commodities. They are using money someone else lends them buy selling stock and paying interest in the form of dividens. That is just insane.
  I had a couple who lived and worked in the city that knew me and came to me for advice. They both had good jobs and appeared to be making good money. WRONG!!!!! They lived in a $300,000 home and drove very nice cars both of which they owed a huge amount on. They had decided that they were getting nowhere just paying it all to the lenders as well as a credit card balance that my family could live very well on. They were never late on payments and for all intent had a high credit score sure looked good on paper. WRONG!!!!! They approached a bank and wanted to borrow money on buy 15 acres with an old house that needed work and some good buildings on it. The bank was receptive to the idea until they told them that they wanted to move from the city sell  their home and become homesteaders in the next 5 years. She would have been able to work from home and he had planned to find work in the area they intended to move to. Sounded like a very good plan to most people but it wasn't. The bank said they wouldn't be able to lend them money on something like that. Why that was just crazy on their part to even think of doing something like that. There would be no way that that was practical for the bank to do something like that. Well that just blew them out of the water to think their bank would refuse them a lone. They then decided to get ahold of me to ask my advice.
   I told them I wanted to see some kind of a plan and look at the property they found. We got together and checked the property out and I looked over their plan. It was very conservative and practical. They had planned on downsizing and uncluttering their lives and it was very practical and financially feasible. They had done their homework and they weren't jumping into homesteading blindly. I told them to try a local bank to see if they could get a loan there. The next week or two they did just that. The bank ran a credit check on them and told them that they would be a great addition to the community and they would let them know if their loan was approved in the next week or so. They left feeling very confident that they dream was at hand. WRONG!!!!!! The local banker called their bank and had a chat and guess what? Yep LOAN DENIED!!!!!!! The folks were devastated when the bank told them the news. I had told them not to tell the local bank what they were going to do and they didn't. Guess what when they told the first bank blew the whole deal and that's sucks. They were only looking to borrow $50,000 after they had sold their house and got rid of the nice cars for a more practical used car and pickup.
    Guess the bank wasn't done bleeding them dry on the nice house and cars. Yep money was the key these folks were a huge cash cow for the bank. Banks are a bunch of blood sucking whores in my book and this just goes to prove the fact. They are just raping the poor average Joe to death and smiling all the way to the board meetings. About 3 months later the dream home they wanted was purchased by the big across the fence from them and the house trees and buildings were pushed in a pile and burnt and the land was plowed up and prepared for next years corn crop. A little foot note to the story people like us tend to have sources in these small communities and we keep our ears open. The big farmer in this case was sitting in the coffee shop telling a couple of his buddies that the banker had called him and loaned him the money against ground he already had loans against and told him to get it bought so no more of these city crazies would get a chance to buy it. Now if that is fair I will gladly kiss you ass. That is just down right crooked and underhanded in my book.
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Canuck In Denver

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Re: Frustration in Homestead Financing
« Reply #1 on: January 21, 2018, 10:14:50 PM »

That sucks for the family. Unfortunately they broke the cardinal rule of OpSec and told someone who didn't need to know their plans, or in their case the full plan. The bank would have been happy to lend them the money to buy the homestead as long as they called it a vacation home or an investment or maybe even part of their retirement plan.

I won't comment much on my real feelings for bankers, but there ain't no love lost that's for sure. Hit your favorite search engine and look up the "Credit River Decision" or "First National Bank of Montgomery vs. Jerome Daly" for an interesting read.

This whole thing brings to mind a quote I read once and think is rather appropriate - Johann von Goethe: “The best slave is the one who thinks he is free.” - because in the end are we not just slaves to "the system" or "the man"?
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