The Federal Agricultural Mortgage Corporation (Farmer Mac) is a Government-sponsored enterprise with the mission of providing a secondary market for agricultural real estate mortgage loans, rural housing mortgage loans, and rural utility cooperative loans.
Congress established Farmer Mac in the Agricultural Credit Act of 1987. Creation of Farmer Mac was one response to the farm crisis of the 1980s when large surpluses, falling farm prices and land values, and rapidly rising inflation caused many farmers to default on loans they had taken out during the prosperous years of the 1970s. The crisis was severe enough to threaten the viability of the Farm Credit System from which many farmers had received their loans.
By creating Farmer Mac to provide a secondary mortgage market for agricultural loans, Congress sought to safeguard the economy from such a credit crisis in the future. Its goal was to increase the availability of competitively priced mortgage financing to farmers, ranchers, and rural homeowners and to provide greater liquidity and lending capacity to agricultural lenders.
Farmer Mac Programs
Farmer Mac conducts its business primarily through two programs:
- Farmer Mac I, in which Farmer Mac purchases, or commits to purchase, qualified agricultural or rural housing mortgage loans, or obligations backed by qualified loans
- Farmer Mac II, in which Farmer Mac purchases the portions of qualified loans that are guaranteed by the U.S. Department of Agriculture
Farmer Mac guarantees the timely payment of principal and interest on securities backed by qualified loans or guaranteed portions, and either retains those securities in its portfolio or sells them in the secondary capital markets.
FCA Oversight of Farmer Mac
Farmer Mac is regulated, examined, and supervised by FCA through its Office of Secondary Market Oversight (OSMO). Each year, OSMO conducts an examination of Farmer Mac to evaluate its safety and soundness, compliance with applicable laws and regulations, and mission achievement. The examination includes a review of Farmer Mac’s
- capital adequacy,
- asset quality,
- management performance,
- liquidity, and
- sensitivity to interest rate risk.
OSMO also reviews Farmer Mac’s annual and quarterly reports—for example, reports required by the Securities and Exchange Commission, as well as the Uniform Call Reports required by FCA. The director of OSMO meets regularly with Farmer Mac management and its board of directors.