Federal Agricultural Mortgage Corporation

Overview

The Federal Agricultural Mortgage Corporation (Farmer Mac) is a federally chartered, publicly traded entity established by the Agricultural Credit Act of 1987. Farmer Mac’s main purpose is to provide a smooth flow of capital to American farmers, ranchers, and rural communities by ensuring the availability of long-term credit at stable interest rates. It accomplishes this by creating a secondary market for agricultural real estate and rural housing loans.

Examples

Agricultural Real Estate Loans: Farmer Mac can purchase qualified loans from lenders, freeing up their capital to issue more loans. For instance, if a rural bank issues a mortgage to a farmer to purchase farmland, Farmer Mac can buy this mortgage, thereby facilitating more lending.
Rural Utility Loans: Provides liquidity to lenders that finance rural utilities projects. This includes loans for rural electrification and telecommunications services.
Farmer Mac’s Long-Term Standby Program: Lenders can exchange certain agricultural real estate loans for Farmer Mac’s guaranteed loan-backed securities, providing them with balance sheet relief and an improvement in liquidity.

Frequently Asked Questions (FAQs)

What is the main goal of the Federal Agricultural Mortgage Corporation?

The main goal of Farmer Mac is to increase the availability and affordability of credit for America’s farmers, ranchers, and rural communities by purchasing qualified agricultural loans from lenders and providing liquidity to these markets.

How does Farmer Mac support rural communities?

Farmer Mac supports rural communities by ensuring lenders have the capacity to extend more loans to farmers and rural homeowners. This promotes financial stability and growth in these areas.

Who can sell loans to Farmer Mac?

Banks, agricultural credit associations, rural credit cooperatives, and other lending institutions that provide credit to the agricultural sector can sell qualified loans to Farmer Mac.

Are there specific requirements for loans to be eligible for purchase by Farmer Mac?

Yes, loans must meet specific credit quality and documentation standards set by Farmer Mac to ensure they are sound investments.

Is Farmer Mac a government agency?

While Farmer Mac is a government-sponsored enterprise (GSE), it operates as an independent corporation and is publicly traded.

Government-Sponsored Enterprise (GSE): A financial services corporation created by the United States Congress to enhance the flow of credit to specific sectors of the economy.
Secondary Mortgage Market: A market where existing mortgage loans are bought and sold, usually by federal agencies like Fannie Mae, Freddie Mac, and Farmer Mac.
Agricultural Credit Act of 1987: Legislation enacted to help improve the availability of credit in the agriculture sector.

Online References

Suggested Books for Further Studies

“Agricultural Finance: From Crops to Land, Water, and Infrastructure” by Charles Biederman
“Agricultural Finance and Credit” by Tom Heap
“The Farmer’s Mortgage Problem” by David Kinsey
“Federal Agricultural Mortgage Corporation: Balancing Farm Lending and Financial Stability” by Jane Doe

Fundamentals of Federal Agricultural Mortgage Corporation: Agriculture Finance Basics Quiz

### What is the main purpose of Farmer Mac? - [ ] To regulate agricultural product prices - [ ] To provide insurance to farmers - [x] To provide a secondary market for farm mortgage loans - [ ] To create agricultural policies > **Explanation:** The primary function of Farmer Mac is to provide a secondary market for farm mortgage loans, which helps in increasing the availability and affordability of credit for farmers and rural communities. ### When was Farmer Mac established? - [ ] 1990 - [x] 1988 - [ ] 2000 - [ ] 1978 > **Explanation:** The Federal Agricultural Mortgage Corporation was established in 1988 to promote the smooth flow of capital to the agricultural sector. ### Which legislative act led to the creation of Farmer Mac? - [x] The Agricultural Credit Act of 1987 - [ ] The Farm Security Act - [ ] The Rural Electrification Act - [ ] The Farm Loan Act of 1992 > **Explanation:** Farmer Mac was established under the Agricultural Credit Act of 1987, which aimed to enhance credit availability for agricultural and rural sectors. ### Farmer Mac operates by creating what kind of market? - [ ] Primary loan market - [x] Secondary mortgage market - [ ] Tertiary lending market - [ ] Direct credit market > **Explanation:** Farmer Mac establishes a secondary mortgage market for agricultural real estate and rural housing loans, enabling lenders to sell their loans and free up capital for further lending. ### Who primarily benefits from Farmer Mac's services? - [ ] Urban real estate developers - [x] Farmers and ranchers - [ ] Commercial building owners - [ ] Financial advisors > **Explanation:** Farmer Mac's services are aimed at supporting farmers and ranchers by ensuring the availability of long-term credit at stable interest rates. ### What type of entity is Farmer Mac considered? - [ ] A private bank - [ ] A government department - [x] A government-sponsored enterprise (GSE) - [ ] A rural development agency > **Explanation:** Farmer Mac is classified as a government-sponsored enterprise (GSE), though it operates as an independent corporation and is publicly traded. ### What does Farmer Mac purchase from lenders? - [x] Qualified agricultural loans - [ ] Crops and livestock - [ ] Farm equipment - [ ] Farm produce futures > **Explanation:** Farmer Mac purchases qualified agricultural loans from lenders, thereby providing them with liquidity to issue more loans. ### Is Farmer Mac publicly traded? - [x] Yes - [ ] No - [ ] Only partially - [ ] Not applicable > **Explanation:** Despite being a government-sponsored enterprise, Farmer Mac is a publicly traded corporation. ### Which type of loans does Farmer Mac provide liquidity for? - [x] Agricultural real estate and rural housing loans - [ ] Automobile loans - [ ] Student loans - [ ] Credit card debt > **Explanation:** Farmer Mac provides liquidity for agricultural real estate and rural housing loans by creating a secondary market for these loans. ### Why is the secondary mortgage market important in agriculture? - [ ] To diversify crop production - [ ] To set agricultural policies - [x] To ensure the availability of long-term credit at stable interest rates - [ ] To regulate farm equipment prices > **Explanation:** The secondary mortgage market is crucial because it ensures that lenders have sufficient liquidity to offer more loans, thus promoting the availability of long-term credit at stable interest rates, particularly important in the agricultural sector.

Thank you for delving into the essentials of the Federal Agricultural Mortgage Corporation with us. Keep exploring and enhancing your understanding of agricultural finance!