Pursuant to a congressional request, GAO provided information on the: (1) Federal Agricultural Mortgage Corporation's (Farmer Mac) actions to establish a secondary market for rural housing loans, including the development of standards to govern the quality of those loans; (2) Farmer Mac's potential role in facilitating the delivery of credit for rural housing; and (3) barriers Farmer Mac may face in facilitating the delivery of credit for rural housing.

GAO found that: (1) Farmer Mac has taken the necessary steps to sponsor a secondary market for rural housing loans, including developing credit underwriting, repayment, and security appraisal standards to qualify loans for the rural housing portion of Farmer Mac I, but it has not yet guaranteed any securities backed by pools of loans; (2) Farmer Mac's potential role in facilitating delivery of rural housing credit depends upon its ability to compete with existing credit alternatives; (3) Farmer Mac's legislative restriction to rural areas could allow rural lenders and the Farm Credit System institutions better access to the home mortgage secondary market than is now available; and (4) Farmer Mac has misinterpreted its property value limit to be $200,000, which is not consistent with its authorizing legislation. GAO also found that problematic issues that could affect Farmer Mac's ability to sponsor a secondary market to rural lenders include: (1) an unknown loan volume, which could make it difficult for poolers to justify a continued commitment to the program; (2) uncertainty about the pricing of both the original mortgage and the securities sold in the secondary market; (3) the administrative burden for originators participating in a secondary market; (4) the potential inability of poolers to form networks of lenders to meet a legislative requirement for geographically diverse loan pools; and (5) regulatory requirements lenders will have to meet if they choose to retain a subordinated participation interest in the loan or in the related pool of loans.