Farm Finance:

Provisions for Secondary Markets for Farm Real Estate Loans in H.R. 3030

RCED-88-55FS: Published: Nov 5, 1987. Publicly Released: Nov 5, 1987.

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Pursuant to a congressional request, GAO provided information on the proposed Agricultural Credit Act of 1987, focusing on its: (1) creation of a secondary market for agricultural mortgage loans; (2) improvement of existing secondary market operations for Farmers Home Administration (FmHA)-guaranteed loans; and (3) creation of a secondary market program exclusively for Farm Credit System (FCS) loans.

GAO found that the proposed legislation would establish the Federal Agricultural Mortgage Corporation to: (1) certify agricultural mortgage marketing facilities; (2) provide secondary marketing arrangements for farm real estate mortgages to increase the availability of long-term agricultural credit at a stable interest rate; (3) provide greater liquidity and lending capacity to lenders for agricultural real estate; and (4) provide for new lending to facilitate capital market investments in long-term agricultural funding. GAO also found that the proposed legislation would: (1) allow the Secretary of Agriculture to guarantee pool certificates backed by FmHA-guaranteed loans; (2) attract a larger universe of potential buyers through the addition of a formal mechanism to aggregate loans and sell government-guaranteed loan pools; and (3) authorize FCS banks to issue securities backed by pooled loans, excluding long-term agricultural loans.

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