Federal Agricultural Mortgage Corporation (FAMC)
What Is the Federal Agricultural Mortgage Corporation (FAMC)?
The Federal Agricultural Mortgage Corporation (FAMC) — otherwise called Farmer Mac — was established by an act of Congress in 1987 in response to the farm crisis in the United States. The crisis made a large number of farmers default on their loans and furthermore brought about the disappointment of numerous agricultural banks.
Congress laid out the Federal Agricultural Mortgage Corporation (FAMC) to make a secondary market for agricultural mortgage-backed securities (AMBS) and to ease conditions for agricultural and rural borrowing. The FAMC is a stockholder-claimed, federally chartered corporation, trading under the ticker symbol "AGM."
Figuring out the Federal Agricultural Mortgage Corporation (FAMC)
The creation of the Federal Agricultural Mortgage Corporation (FAMC) was a consequence of a combination of diminished farm income and increased interest rates. These two tensions prompted a crisis among agricultural borrowers.
In 1987, Congress answered the emergency by supporting the Agricultural Credit Act, which made Farmer Mac. In the years that followed, Congress expanded Farmer Mac's authority to incorporate U.S. Department of Agriculture (USDA) guaranteed securities, whole loans, and rural utility loans.
Farmer Mac's charter incorporates the ability to issue debt securities. The cash flow from these sales is reinvested into agricultural mortgages and rural loan purchases. Farmer Mac issues an assortment of debt securities, including discount notes, fixed and floating-rate medium-term notes, and callable notes. These securities are not guaranteed by the federal government and are not associated with the Farm Credit System (FCS).
97%
The percentage of Farmer Mac's Farm and Ranch and USDA guaranteed loans that are made to small or family-possessed farms.
Federal Agricultural Mortgage Corporation (FAMC) Functionality
Farmer Mac operates its secondary market activities through four lines of business: Farm and Ranch, USDA Guarantees, Rural Utilities, and Institutional Credit. Farmer Mac's function inside the marketplace is like that of other government-sponsored enterprises (GSEs), like Fannie Mae and Freddie Mac. It purchases retail loans and afterward repackages them into pools of marketable securities. As a secondary market, the Federal Agricultural Mortgage Corporation (FAMC) gives a market to those securities.
FAMC works with rural lenders, businesses, and institutions to offer low-cost rural financing that incorporates flexible terms and competitive interest rates.
Farmer Mac guarantees agricultural mortgage-backed securities. Its more extensive goal is to foster a secondary market for agricultural real estate and rural housing loans. FAMC additionally upholds the availability of long-term credit for American farmers, farmers, and rural homeowners.
These actions carry global capital to widen the pool of qualified purchasers for rural real estate or different assets. The loan insurance given by these GSEs additionally serves this end. These efforts lead to the availability of lower interest rates for retail borrowers and cost savings over the life of a loan.
Special Considerations
Like other GSEs, Farmer Mac works with the borrowing system and costs for agricultural borrowers. This loan activity makes critical risk for the agency, especially in times of financial crisis. Inescapable mortgage defaults put stress on Farmer Mac's ability to guarantee loans.
Higher interest rates may likewise lead to higher repayment risk and strain Farmer Mac's ability to cover loans. During the 2008 financial crisis, Farmer Mac's investment in Fannie Mae shares and Lehman Brothers prompted huge losses.
These losses forced the Farm Credit System and different investors to bail out Farmer Mac.
Features
- The combination of increased interest rates and a decline in the demand for agricultural products made numerous American farmers default on their loans and declare bankruptcy.
- Farmer Mac functions in the marketplace in a way like other government-sponsored undertakings (GSEs), like Fannie Mae and Freddie Mac.
- Farmer Mac is a stockholder-possessed, federally chartered corporation and trades on the New York Stock Exchange (NYSE) under the ticker symbol "AGM."
- Farmer Mac's mission is to make a secondary market for agricultural mortgage-backed securities and to furnish agricultural lenders with a source of low-cost financing that incorporates flexible terms and competitive interest rates.
- The Federal Agricultural Mortgage Corporation (FAMC) — otherwise called Farmer Mac — was established by an act of Congress in response to the U.S. farm crisis of the 1980s.
FAQ
What Does the Federal Agricultural Mortgage Corporation (FAMC) Do?
The Federal Agricultural Mortgage Corporation (FAMC) gives "a secondary market for agricultural real estate mortgage loans, rural housing loans, and rural cooperative loans." as a rule, it gives better long-term credit to rural networks and allows lenders to offer competitive rates.
What Are Farmer Mac's Business Segments?
Farmer Mac has four business portions, which are Farm and Ranch, USDA Guarantees, Rural Utilities, and Institutional Credit.
Is Farmer Mac a Federal Agency?
Farmer Mac is an independent agency in the executive branch of the U.S. government and is regulated by the Farm Credit Administration (FCA).
