Statute: 1971 ACT AS AMENDED
Title: Title VIII Agricultural Mortgage Secondary Market
Subtitle: Subtitle A - Establishment and Activities of Federal Agricultural Mortgage Corporation
U.S. Code Citation: 12 U.S.C. 2279aa-6
12 U.S.C. 2279aa-6 SEC. 8.6. GUARANTEE OF QUALIFIED LOANS.
(a) GUARANTEE AUTHORIZED FOR CERTIFIED FACILITIES.
(1) IN GENERAL. Subject to the requirements of this section and on such other terms and conditions as the Corporation shall consider appropriate, the Corporation—
(A) shall guarantee the timely payment of principal and interest on the securities issued by a certified facility that represents interests solely in, or obligations fully backed by, any pool consisting solely of qualified loans which meet the applicable standards established under section 8.8 and which are held by such facility; and
(B) may issue a security, guaranteed as to the timely payment of principal and interest, that represents an interest solely in, or an obligation fully backed by, a pool consisting of qualified loans that--
(i) meet the applicable standards established under section 8.8; and
(ii) have been purchased and held by the Corporation.
(2) INABILITY OF FACILITY TO PAY. If the facility is unable to make any payment of principal or interest on any security for which a guarantee has been provided by the Corporation under paragraph (1) of this section the Corporation shall make such payment as and when due in cash and on such payment shall be subrogated fully to the rights satisfied by such payment.
(3) POWER OF CORPORATION. Notwithstanding any other provision of law, the Corporation is empowered, in connection with any guarantee under this subsection, whether before or after any default, to provide by contract with the facility for the extinguishment, on default by the facility, of any redemption, equitable, legal, or other right, title, or interest of the facility in any mortgage or mortgages constituting the pool against which the guaranteed securities are issued. With respect to any issue of guaranteed securities, in the event of default and pursuant otherwise to the terms of the contract, the mortgages that constitute such pool shall become the absolute property of the Corporation subject only to the unsatisfied rights of the holders of the securities based on and backed by such pool.
(b) OTHER RESPONSIBILITIES OF AND LIMITATIONS ON CERTIFIED FACILITIES. As a condition for providing any guarantees under this section for securities issued by a certified facility that represent interests in, or obligations backed by, any pool of qualified loans, the Corporation shall require such facility to agree to comply with the following requirements:
(1) LOAN DEFAULT RESOLUTION. The facility shall act in accordance with the standards of a prudent institutional lender to resolve loan defaults.
(2) SUBROGATION OF UNITED STATES AND CORPORATION TO INTERESTS OF FACILITY. The proceeds of any collateral, judgments, settlements, or guarantees received by the facility with respect to any loan in such pool, shall be applied, after payment of costs of collection—
(A) first, to reduce the amount of any principal outstanding on any obligation of the Corporation that was purchased by the Secretary of the Treasury under section 8.13 to the extent the proceeds of such obligation were used to make guarantees in connection with such securities; and
(B) second, to reimburse the Corporation for any such guarantee payments.
(3) LOAN SERVICING. The originator of any loan in such pool shall be permitted to retain the right to service the loan.
(4) MINORITY PARTICIPATION IN PUBLIC OFFERINGS. The facility shall take such steps as may be necessary to ensure that minority owned or controlled investment banking firms, underwriters, and bond counsels throughout the United States have an opportunity to participate to a significant degree in any public offering of securities.
(5) NO DISCRIMINATION AGAINST STATES WITH BORROWERS RIGHTS. The facility may not refuse to purchase qualified loans originating in States that have established borrowers rights laws either by statute or under the constitution of such States, except that the facility may require discounts or charge fees reasonably related to costs and expenses arising from such statutes or constitutional provisions.
(c) ADDITIONAL AUTHORITY OF THE BOARD. To ensure the liquidity of securities for which guarantees have been provided under this section, the Board shall adopt appropriate standards regarding—
(1) the characteristics of any pool of qualified loans serving as collateral for such securities; and
(2) transfer requirements.
(d) AGGREGATE PRINCIPAL AMOUNTS OF QUALIFIED LOANS.
(1) INITIAL YEAR. During the first year after the date of the enactment of this title, the Corporation may not provide guarantees for securities representing interests in, or obligations backed by, qualified loans (other than loans which back securities issued by Farm Credit System institutions for which the Corporation provides a guarantee) in an aggregate principal amount in excess of 2 percent of the total agricultural real estate debt outstanding at the close of the prior calendar year (as published by the Board of Governors of the Federal Reserve System), less all Farmers Home Administration agricultural real estate debt.
(2) SECOND YEAR. During the year following the year referred to in paragraph (1), the Corporation may not provide guarantees for securities representing interests in, or obligations backed by, qualified loans (other than loans which back securities issued by Farm Credit System institutions for which the Corporation provides a guarantee) in an additional principal amount in excess of 4 percent of the total agricultural real estate debt outstanding at the close of the prior calendar year, less all Farmers Home Administration agricultural real estate debt.
(3) THIRD YEAR. During the year following the year referred to in paragraph (2), the Corporation may not provide guarantees for securities representing interests in, or obligations backed by, qualified loans (other than loans which back securities issued by Farm Credit System institutions for which the Corporation provides a guarantee) in an additional principal amount in excess of 8 percent of the total agricultural real estate debt outstanding at the close of the prior calendar year, less all Farmers Home Administration agricultural real estate debt.
(4) SUBSEQUENT YEARS. In years subsequent to the year referred to in paragraph (3), the Corporation may provide guarantees without regard to the principal amount of the qualified loans guaranteed.
(e) PURCHASE OF GUARANTEED SECURITIES.
(1) PURCHASE AUTHORITY. The Corporation (and affiliates) may purchase, hold, and sell any securities guaranteed under this section by the Corporation that represent interests in, or obligations backed by, pools of qualified loans. Securities issued under this section shall have maturities and bear rates of interest as determined by the Corporation.
(2) ISSUANCE OF DEBT OBLIGATIONS. The Corporation (and affiliates) may issue debt obligations solely for the purpose of obtaining amounts for the purchase of any securities under paragraph (1), for the purchase of qualified loans (as defined in section 8.0(9)), and for maintaining reasonable amounts for business operations (including adequate liquidity) relating to activities under this subsection.
(3) TERMS AND LIMITATIONS.
(A) TERMS. The obligations issued under this subsection shall have maturities and bear rates of interest as determined by the Corporation, and may be redeemable at the option of the Corporation before maturity in the manner stipulated in the obligations.
(B) REQUIREMENT. Each obligation shall clearly indicate that the obligation is not an obligation of, and is not guaranteed as to principal and interest by, the Farm Credit Administration, the United States, or any other agency or instrumentality of the United States (other than the Corporation).
(C) AUTHORITY. The Corporation may not issue obligations pursuant to paragraph (2) under this subsection while any obligation issued by the Corporation under section 8.13(a) remains outstanding.
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