Federal Agricultural Mortgage Corporation:

Issues Facing the Secondary Market for FmHA Guaranteed Loans

RCED-91-138: Published: Jun 13, 1991. Publicly Released: Jun 13, 1991.

Additional Materials:

Contact:

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

Pursuant to a congressional request, GAO reviewed the: (1) issues the Federal Agricultural Mortgage Corporation (Farmer Mac) faced in facilitating the creation of a secondary market for Farmers Home Administration (FmHA) guaranteed loans; and (2) impact of such a market on the government's exposure to risk.

GAO found that: (1) Farmer Mac created the Farmer Mac II program to establish a continuing, predictable, and competitively priced secondary market in which lenders could sell the guaranteed portions of their FmHA guaranteed loans; (2) FmHA-guaranteed loans would be difficult to combine into marketable pools, since they lacked such common characteristics as loan interest rates, maturity dates, and payment dates; (3) agricultural banks are currently well positioned to extend credit and may not need additional liquidity offered by Farmer Mac II; (4) due to pooling and liquidity problems, the number of FmHA-guaranteed loans may not be large enough to support a secondary market; (5) the Farmer Mac plan to purchase loans and offer lenders a management premium may place Farmer Mac II at a competitive disadvantage with the existing ad hoc secondary market, since sellers in the ad hoc market earn a return over the life of the loan; (6) the success of Farmer Mac II will likely depend on such advantages as providing a uniform infrastructure for selling loans and securities, and a guarantee of timely payment of principal and interest to investors; and (7) such actions as lenders refinancing loans to existing customers who are financially stressed and improper FmHA management of guaranteed-loans could increase the government's risk exposure.

Jun 9, 2016

May 26, 2016

May 19, 2016

Apr 14, 2016

Jan 14, 2016

Jan 8, 2016

Jul 9, 2015

Jun 18, 2015

May 26, 2015

May 20, 2015

Looking for more? Browse all our products here