The Federal Agricultural Mortgage Corporation, also known as Farmer Mac, is a stockholder-owned, publicly traded company that was chartered by the United States federal government in 1988 to serve as a secondary market in agricultural loans such as mortgages for agricultural real estate and rural housing, as well as rural utilities cooperative lending. The company purchases qualified loans from agricultural and rural cooperative lenders, and either holds them as investment or sells instruments backed by those loans. The company also works with the United States Department of Agriculture. It is based in Washington, D.C.
History
The Agricultural Credit act of 1987 established the corporation to “increase the availability of long-term credit to farmers and ranchers at stable interest rates; to provide greater liquidity and lending capacity in extending credit to farmers and ranchers; to provide an arrangement for new lending to facilitate capital market investments in providing long-term agricultural funding, including funds at fixed rates of interest; and to enhance the ability of individuals in small rural communities to obtain financing for moderate-priced homes”. The company was created in response to the 1980s farm crisis, which had caused many farmers to default on their loans. The company was chartered by Congress in the midst of a $4 billion bailout of the Farm Credit System, hoping to provide an alternative source of credit to farmers following the models of Fannie Mae and Ginnie Mae. This model was selected because it would allow Farmer Mac to offer banks the ability to make long-term, fixed rate loans while still keeping funds available to lend. The company was able to follow the model of the GSEs that preceded it to quickly start providing its services as a secondary market. The Food, Agriculture, Conservation, and Trade Act Amendments of 1991 established the USDA guaranteed loan program, and gave Farmer Mac authority to purchase, hold, and sell any securities guaranteed under that program. The Farm Credit System Reform Act of 1996 gave Farmer Mac the authority to purchase, hold, sell, or assign a qualified loan, to issue a guaranteed security, and to perform all the functions and responsibilities of an agricultural mortgage marketing facility. In 1999, Farmer Mac was listed on the New York Stock Exchange. Total assets increased from $512 million in 1995 to $4.3 billion by 2003. In June 2008, Farmer Mac had $47.2 million invested in Fannie Mae shares. Over the next few months, in the wake of the Federal takeover of Fannie Mae and Freddie Mac, these investments lost about $44 million in value. The company also had significant investments in the newly-bankrupt Lehman Brothers Holdings. The five Farm Credit System Banks and Zions Bancorporation kept Farmer Mac’s capital above the minimum level required by regulators by providing a $65 million investment in stock. Farmer Mac raised an additional $50 million in sales of preferred stock in December 2008. The company recovered, celebrating its 25th anniversary in 2013, and expanding to $20 billion in assets by 2019. In the years since its creation, Farmer Mac’s authorities expanded to include the ability to purchase certain USDA-guaranteed loans, to purchase unguaranteed agricultural and rural housing mortgage loans, and to purchase rural utility loans.
The Feed
The Feed was created in 2015, and is a Farmer Mac publication that compiles relevant research from trusted agricultural sources and commentary from Farmer Mac’s team. The report is free and is released on a quarterly basis, with each edition focusing on the current season. The inaugural fall 2015 edition included information on farm income and asset levels; outlooks for cattle, hogs, dairy, corn, soybeans, almonds, and citrus crops; and weather trends; while the spring 2019 edition examined the implications of removing the 1937 prohibition on widespread industrial hemp cultivation.
Business
Farmer Mac’s main activities are to purchase eligible loans directly from lenders; provide financing for lenders and farmland investors by purchasing obligations; secure assets and guarantee on the timely payment of principal and interest on resulting securities; and, issue long-term standby purchase commitments for eligible loans. It partners with around 700 community bank lenders who are involved in agriculture, farm credit associations, and non-bank lenders. Customer bases include institutional owners of farm and ranch loans, rural utilities, and USDA lenders.
Lines of Business
The company offers four lines of business: Farm & Ranch, United StatesDepartment of Agriculture guarantees, rural utilities, and institutional credit. The Farm & Ranch program includes loan purchases and credit protection through its purchase commitment products. Loan Purchases are also made through its USDA Guarantees and Rural Utilities products. Farmer Mac launched AgXpress in 2019 to offer one-day credit turnaround, a simplified application process, reduced documentation requirements, and other time-sensitive functionality.
Debt Securities
Farmer Mac issues discount notes, floating-rate medium-term notes, and callable notes. It also regularly issues agricultural mortgage-backed securities, which have backing by either Farm and Ranch program loans, or USDA-guaranteed portions of loans.
