What Is the Federal Agricultural Mortgage Corporate (FAMC)?
The Federal Agricultural Mortgage Corporate (FAMC)—also known as Farmer Mac—was once primarily based by way of an act of Congress in 1987 in keeping with the farm crisis in the United States. The crisis resulted in loads of farmers to default on their loans and in addition resulted inside the failure of many agricultural banks.
Congress established the Federal Agricultural Mortgage Corporate (FAMC) to create a secondary market for agricultural mortgage-backed securities (AMBS) and to ease must haves for agricultural and rural borrowing. The FAMC is a stockholder-owned, federally chartered corporate, purchasing and promoting underneath the ticker symbol “AGM.”
Key Takeaways
- The Federal Agricultural Mortgage Corporate (FAMC)—also known as Farmer Mac—was once primarily based by way of an act of Congress in keeping with the U.S. farm crisis of the 1980s.
- The mix of bigger interest rates and a decline inside the name for for agricultural products resulted in many American farmers to default on their loans and declare bankruptcy.
- Farmer Mac’s problem is to create a secondary market for agricultural mortgage-backed securities and to supply agricultural lenders with a provide of inexpensive financing that includes flexible words and competitive interest rates.
- Farmer Mac functions to be had available on the market in a way similar to other government-sponsored enterprises (GSEs), similar to Fannie Mae and Freddie Mac.
- Farmer Mac is a stockholder-owned, federally chartered corporate and trades on the New York Stock Exchange (NYSE) underneath the ticker symbol “AGM.”
Understanding the Federal Agricultural Mortgage Corporate (FAMC)
The creation of the Federal Agricultural Mortgage Corporate (FAMC) was once a result of a mix of decreased farm income and bigger interest rates. The ones two pressures led to a crisis among agricultural borrowers.
In 1987, Congress spoke again to the emergency by way of approving the Agricultural Credit score ranking Act, which created Farmer Mac. Inside the years that followed, Congress expanded Farmer Mac’s authority to include U.S. Department of Agriculture (USDA) confident securities, complete loans, and rural instrument loans.
Farmer Mac’s charter incorporates the ability to issue debt securities. The cash glide from the ones product sales is reinvested into agricultural mortgages and rural loan purchases. Farmer Mac issues plenty of debt securities, in conjunction with discount notes, fixed and floating-rate medium-term notes, and callable notes. The ones securities don’t seem to be confident by way of the federal government and don’t seem to be associated with the Farm Credit score ranking Gadget (FCS).
97%
The percentage of Farmer Mac’s Farm & Ranch and USDA confident loans which may well be made to small or family-owned farms.
Federal Agricultural Mortgage Corporate (FAMC) Capacity
Farmer Mac operates its secondary market movements via 4 strains of business: Farm & Ranch, USDA Guarantees, Rural Utilities, and Institutional Credit score ranking. Farmer Mac’s function throughout the marketplace is similar to that of various government-sponsored enterprises (GSEs), similar to Fannie Mae and Freddie Mac. It purchases retail loans and then repackages them into swimming swimming pools of marketable securities. As a secondary market, the Federal Agricultural Mortgage Corporate (FAMC) provides a market for those securities.
FAMC works with rural lenders, firms, and institutions to offer affordable rural financing that includes flexible words and competitive interest rates.
Farmer Mac guarantees agricultural mortgage-backed securities. Its broader purpose is to foster a secondary market for agricultural exact assets and rural housing loans. FAMC moreover is helping the provision of long-term credit score ranking for American farmers, ranchers, and rural house owners.
The ones actions elevate world capital to make bigger the pool of qualified consumers for rural exact assets or other assets. The loan insurance plans equipped by way of the ones GSEs moreover serves this end. The ones efforts end result within the provide of lower interest rates for retail borrowers and value monetary financial savings over the life of a loan.
Specific Considerations
Like other GSEs, Farmer Mac facilitates the borrowing process and costs for agricultural borrowers. This loan procedure creates important likelihood for the corporate, in particular in circumstances of monetary crisis. In taste mortgage defaults put tension on Farmer Mac’s ability to verify loans.
Higher interest rates may additionally lead to higher compensation likelihood and power Farmer Mac’s ability to cover loans. All over the 2008 financial crisis, Farmer Mac’s investment in Fannie Mae shares and Lehman Brothers led to important losses.
The ones losses pressured the Farm Credit score ranking Gadget and other patrons to bail out Farmer Mac.
What Does the Federal Agricultural Mortgage Corporate (FAMC) Do?
The Federal Agricultural Mortgage Corporate (FAMC) provides “a secondary market for agricultural exact assets mortgage loans, rural housing loans, and rural cooperative loans.” Usually, it provides upper long-term credit score ranking to rural communities and allows lenders to offer competitive fees.
Is Farmer Mac a Federal Corporate?
Farmer Mac is an independent corporate inside the government division of the U.S. government and is regulated by way of the Farm Credit score ranking Control (FCA).
What Are Farmer Mac’s Trade Segments?
Farmer Mac has 4 business segments, which may also be Farm & Ranch, USDA Guarantees, Rural Utilities, and Institutional Credit score ranking.
