Company: AGM-PH
Filing Date: 2025-02-21
Form Type: 10-K
Source: 0000845877-25-000033
Chunk: 114

Company: FEDERAL AGRICULTURAL MORTGAGE CORP
Filing Date: 2025-02-21
Form: 10-K
Item: Item 1
Chunk 114
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 agricultural loan servicing and collateral valuation contractors, to perform the necessary underwriting, servicing, and collateral valuation functions on Farm & Ranch loans.

USDA Securities are exempted from the credit underwriting, collateral valuation, documentation, and other standards that other loans must meet to be eligible for the secondary market provided by Farmer Mac and are exempted from any diversification and internal credit enhancement that may be required of pools of other eligible loans. Prior to 2024, Farmer Mac purchased nearly all of its USDA Securities through Farmer Mac II LLC, a subsidiary of Farmer Mac that had operated substantially all of the business related to Farmer Mac's USDA Securities since 2010. Beginning in January 2024, Farmer Mac resumed its direct purchase of USDA Securities, leaving the Farmer Mac II LLC subsidiary's portfolio in a "run-off" mode with no new USDA Securities being purchased in the subsidiary's name. 

11

Underwriting and Collateral Standards - Corporate AgFinance

Farmer Mac accepts direct credit exposure to borrowers on Agricultural Finance mortgage loans in Farmer Mac’s Corporate AgFinance reportable operating segment (referred to as “Corporate AgFinance loans”) through its loan purchases and unfunded commitments. Farmer Mac applies credit underwriting standards and methodologies to help assess exposures to Corporate AgFinance loans, which may include cash flow, leverage, and liquidity assessment, financial metrics analysis, collateral valuation, and other appropriate borrower financial and credit information.

Corporate AgFinance loan borrowers tend to be larger and more complex operations than Farm & Ranch loan borrowers (generally loan sizes more than $10 million) and typically are agribusinesses focused on agriculture production, food and fiber processing, and other supply chain production. The underwriting for loans to agribusinesses typically relies upon enterprise value, meaning the debt is generally secured by all business assets and common stock (in addition to first lien mortgages) of the borrower and the value of the borrowing entity depends on its ability to generate recurring positive cash flow. Enterprise value is the estimated value of the borrower as a going concern, which is estimated using one or more valuation techniques such as: discounted cash flow, cash flow multiples, asset liquidation, or other valuation techniques. Thus, Corporate AgFinance loans often have a different credit risk profile than Farm & Ranch loans. Farmer Mac has implemented methodologies and parameters to help assess credit risk and has established specific underwriting criteria for Corporate AgFinance loans based on the sector, borrower construct, and transaction complexity. Due to the larger loan sizes and different credit risk profiles, Farmer Mac thoroughly analyzes each prospective