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104TH CONGRESS

1ST SESSION H. R. 2130

To amend the Farm Credit Act of 1971 to improve the efficiency and

operation of the Federal Agricultural Mortgage Corporation in order

better to ensure that farmers, ranchers and rural home owners will

have access to a stable and competitive supply of mortgage credit now

and in the future.

IN THE HOUSE OF REPRESENTATIVES

JULY 27, 1995

Mr. EMERSON (for himself, Mr. BARRETT of Nebraska, and Mr. BEREUTER)

introduced the following bill; which was referred to the Committee on Agriculture

A BILL

To amend the Farm Credit Act of 1971 to improve the

efficiency and operation of the Federal Agricultural

Mortgage Corporation in order better to ensure that

farmers, ranchers and rural home owners will have access

to a stable and competitive supply of mortgage credit

now and in the future.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Farmer Mac Reform

5 Act of 1995’’.
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1 SEC. 2. REFERENCES TO THE FARM CREDIT ACT OF 1971.

2 Except as otherwise expressly provided, whenever in

3 this Act an amendment or repeal is expressed in terms

4 of an amendment to, or repeal of, a section or other provi5 sion, the reference shall be considered to be made to a

6 section or other provision of the Farm Credit Act of 1971

7 (12 U.S.C. 2001 et seq.).

8 SEC. 3. DEFINITION OF REAL ESTATE.

9 Section 8.0(1)(B)(ii) (12 U.S.C. 2279aa—(1)(B)(ii)

10 is amended by striking ‘‘with a purchase price’’ and insert11 ing ‘‘, excluding the land to which the dwelling is affixed,

12 with a value’’.

13 SEC. 4. DEFINITION OF CERTIFIED FACILITY.

14 Section 8.0(3) (12 U.S.C. 2279aa—(3)) is amend15 ed—

16 (1) in subparagraph (A), by striking ‘‘a second17 ary marketing agricultural loan’’ and inserting ‘‘an

18 agricultural mortgage marketing’’; and

19 (2) in subparagraph (B), by striking ‘‘, but

20 only’’ and all that follows through ‘‘(9)(B)’’.

21 SEC. 5. DUTIES OF FEDERAL AGRICULTURAL MORTGAGE

22 CORPORATION.

23 Section 8.1(b) (12 U.S.C. 2279aa—1(b)) is amend24 ed—

25 (1) in paragraph (2), by striking ‘‘and’’ at the

26 end;
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1 (2) in paragraph (3), by striking the period at

2 the end and inserting ‘‘; and’’; and

3 (3) by adding at the end the following;

4 ‘‘(4) purchase qualified loans and issue securi5 ties representing interests in, or obligations backed

6 by, the qualified loans, guaranteed for the timely re7 payment of principal and interest.’’.

8 SEC. 6. POWERS OF THE CORPORATION.

9 Section 8.3(c) (12 U.S.C. 2279aa—3(c)) is amend10 ed—

11 (1) by redesignating paragraphs (13) and (14)

12 as paragraphs (14) and (15), respectively; and

13 (2) by inserting after paragraph (12) the fol14 lowing:

15 ‘‘(13) To purchase, hold, sell, or assign a quali16 fied loan, to issue a guaranteed security, represent17 ing an interest in, or an obligation backed by, the

18 qualified loan, and otherwise to perform all the func19 tions and responsibilities of an agricultural mortgage

20 marketing facility operating as a certified facility

21 under this title.’’.

22 SEC. 7. FEDERAL RESERVE BANKS AS DEPOSITARIES AND

23 FISCAL AGENTS.

24 Section 8.3 (12 U.S.C. 2279aa—3) is amended—
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1 (1) in subsection (d), by striking ‘‘may act as

2 depositories for, or’’ and inserting ‘‘shall act as de3 positories for, and’’; and

4 (2) in subsection (e), by striking ‘‘Secretary of

5 the Treasury may authorize the Corporation to use’’

6 and inserting ‘‘Corporation shall have access to’’.

7 SEC. 8. CERTIFICATION OF AGRICULTURAL MORTGAGE

8 MARKETING FACILITIES.

9 Section 8.5 (12 U.S.C. 2279aa—5) is amended—

10 (1) in subsection (a)—

11 (A) in paragraph (1), by inserting ‘‘(other

12 than the Corporation)’’ after ‘‘agricultural

13 mortgage marketing facilities’’; and

14 (B) in paragraph (2), by inserting ‘‘(other

15 than the Corporation)’’ after ‘‘agricultural

16 mortgage marketing facility’’; and

17 (2) in subsection (e)(1), by striking ‘‘(other

18 than the Corporation)’’.

19 SEC. 9. GUARANTEE OF QUALIFIED LOANS.

20 Section 8.6 (12 U.S.C. 2279aa—6) is amended—

21 (1) in subsection (a)(1)—

22 (A) by striking ‘‘Corporation shall guaran23 tee’’ and inserting the following: ‘‘Corpora24 tion—

25 ‘‘(A) shall guarantee’’;
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1 (B) by striking the period at the end and

2 inserting ‘‘; and’’; and

3 (C) by adding at the end the following:

4 ‘‘(B) may issue a security, guaranteed as

5 to the timely payment of principal and interest,

6 that represents an interest solely in, or an obli7 gation fully backed by, a pool consisting of

8 qualified loans that—

9 ‘‘(i) meet the standards established

10 under section 8.8; and

11 ‘‘(ii) have been purchased and held by

12 the Corporation.’’;

13 (2) in subsection (d)—

14 (A) by striking paragraph (4); and

15 (B) by redesignating paragraphs (5), (6),

16 and (7) as paragraphs (4), (5), and (6), respec17 tively; and

18 (3) in subsection (g)(2), by striking ‘‘section

19 8.0(9)(B))’’ and inserting ‘‘section 8.0(9))’’.

20 SEC. 10. MANDATORY RESERVES AND SUBORDINATED PAR21 TICIPATION INTERESTS ELIMINATED.

22 (a) GUARANTEE OF QUALIFIED LOANS.—Section 8.6

23 (12 U.S.C. 2279aa—6) is amended by striking subsection

24 (b).
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1 (b) RESERVES AND SUBORDINATED PARTICIPATION

2 INTERESTS.—Section 8.7 (12 U.S.C. 2279aa—7) is re3 pealed.

4 SEC. 11. STANDARDS REQUIRING DIVERSIFIED POOLS.

5 Section 8.6 (12 U.S.C. 2279aa—6) (as amended by

6 section 218) is further amended—

7 (1) by striking subsection (c); and

8 (2) by redesignating subsections (d) through (g)

9 as subsections (b) through (e), respectively.

10 SEC. 12. SMALL FARMS.

11 Section 8.8(e) (12 U.S.C. 2279aa—8(e)) is amended

12 by adding at the end the following: ‘‘The Board shall pro13 mote and encourage the inclusion of qualified loans for

14 small farms and family farmers in the agricultural mort15 gage secondary market.’’.

16 SEC. 13. DEFINITION OF AN AFFILIATE.

17 Section 8.11(e) (21 U.S.C. 2279aa—11(e)) is amend18 ed—

19 (1) by striking ‘‘a certified facility or’’; and

20 (2) by striking ‘‘paragraphs (3) and (7), respec21 tively, of section 8.0’’ and inserting ‘‘section 8.0(7)’’.

22 SEC. 14. STATE USURY LAWS SUPERSEDED.

23 Section 8.12 (12 U.S.C. 2279aa–12) is amended by

24 striking subsection (d) and inserting the following:
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1 ‘‘(d) STATE USURY LAWS SUPERSEDED.—A provi2 sion of the Constitution or law of any State shall not apply

3 to an agricultural loan made by an originator or a certified

4 facility in accordance with this title for sale to the Cor5 poration or to a certified facility for inclusion in a pool

6 for which the Corporation has provided, or has committed

7 to provide, a guarantee, if the loan, not later than 180

8 days after the date the loan was made, is sold to the Cor9 poration or included in a pool for which the Corporation

10 has provided a guarantee, if the provision—

11 ‘‘(1) limits the rate or amount of interest, dis12 count points, finance charges, or other charges that

13 may be charged, taken, received, or reserved by an

14 agricultural lender or a certified facility; or

15 ‘‘(2) limits or prohibits a prepayment penalty

16 (either fixed or declining), yield maintenance, or

17 make-whole payment that may be charged, taken, or

18 received by an agricultural lender or a certified facil19 ity in connection with the full or partial payment of

20 the principal amount due on a loan by a borrower

21 in advance of the scheduled date for the payment

22 under the terms of the loan, otherwise known as a

23 prepayment of the loan principal.’’.

24 SEC. 15. EXTENSION OF CAPITAL TRANSITION PERIOD.

25 Section 8.32 (12 U.S.C. 2279bb–1) is amended—
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1 (1) in the first sentence of subsection (a), by

2 striking ‘‘Not later than the expiration of the 2-year

3 period beginning on December 13, 1991,’’ and in4 serting ‘‘Not sooner than the expiration of the 3-

5 year period beginning on the date of enactment of

6 the Farm Credit Improvements Act of 1995,’’;

7 (2) in the first sentence of subsection (b)(2), by

8 striking ‘‘5-year’’ and inserting ‘‘8-year’’; and

9 (3) in subsection (d)—

10 (A) in the first sentence—

11 (i) by striking ‘‘The regulations estab12 lishing’’ and inserting the following:

13 ‘‘(1) IN GENERAL.—The regulations establish14 ing’’; and

15 (ii) by striking ‘‘shall contain’’ and in16 serting the following: ‘‘shall—

17 ‘‘(A) be issued by the Director for public

18 comment in the form of a notice of proposed

19 rulemaking, to be first published after the expi20 ration of the period referred to in subsection

21 (a); and

22 ‘‘(B) contain’’; and

23 (B) in the second sentence, by striking

24 ‘‘The regulations shall’’ and inserting the fol25 lowing:
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1 ‘‘(2) SPECIFICITY.—The regulations referred to

2 in paragraph (1) shall’’.

3 SEC. 16. MINIMUM CAPITALIZATION LEVEL.

4 Section 8.33 (12 U.S.C. 2279bb–2) is amended—

5 (1) in subsection (a), by striking paragraph (3)

6 and inserting the following:

7 ‘‘(3) the percentage, determined under sub8 section (c), of the aggregate assets of the Corpora9 tion acquired under the linked portfolio option under

10 section 8.6(e), plus the aggregate amount of quali11 fied loans purchased and held by the Corporation

12 under the pooling option under section 8.3(c)(13).’’;

13 and

14 (2) in subsection (c)—

15 (A) by striking ‘‘Linked Portfolio Assets’’

16 and inserting ‘‘Designated Assets’’;

17 (B) by striking ‘‘section 8.6(g)’’ and all

18 that follows through ‘‘8.34(3)(A))’’ and insert19 ing ‘‘section 8.6(e), plus the aggregate amount

20 of qualified loans purchased and held by the

21 Corporation under the pooling option under sec22 tion 8.3(c)(13)’’; and

23 (C) by striking ‘‘5-year’’ each place it ap24 pears and inserting ‘‘8-year’’.
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1 SEC. 17. CRITICAL CAPITAL LEVEL.

2 Section 8.34(3) (12 U.S.C. 2279bb–3(3)) is amend3 ed—

4 (1) by striking ‘‘section 8.6(g),’’ and inserting

5 ‘‘section 8.6(e),’’; and

6 (2) by striking ‘‘5-year’’ each place it appears

7 and inserting ‘‘8-year’’.

8 SEC. 18. ENFORCEMENT LEVELS.

9 Section 8.35(e) (12 U.S.C. 2279bb–4(e)) is amended

10 by striking ‘‘during the 30-month period beginning on the

11 date of enactment of this section,’’ and inserting ‘‘during

12 the period beginning on December 13, 1991, and ending

13 on the effective date of the risk-based capital regulation

14 issued by the Director under section 8.32,’’.

15 SEC. 19. RECAPITALIZATION OF THE CORPORATION.

16 Title VIII (12 U.S.C. 2279aa et seq.) is amended by

17 adding at the end the following:

18 ‘‘SEC. 8.38. RECAPITALIZATION OF THE CORPORATION.

19 ‘‘(a) MANDATORY RECAPITALIZATION.—The Cor20 poration shall increase the core capital of the Corporation

21 to an amount equal to or greater than $25,000,000, not

22 later than the earlier of—

23 ‘‘(1) the date that is 3 years after the date of

24 enactment of this section; or

25 ‘‘(2) the date that is 180 days after the end of

26 the first calendar quarter that the aggregate on-bal-
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1 ance sheet assets of the Corporation, plus the out2 standing principal of the off-balance sheet obliga3 tions of the Corporation, equal or exceed

4 $2,000,000,000.

5 ‘‘(b) RAISING CORE CAPITAL.—In carrying out this

6 section, the Corporation may issue stock under section 8.4

7 and otherwise employ any recognized and legitimate

8 means of raising core capital in the power of the Corpora9 tion under section 8.3.

10 ‘‘(c) LIMITATION ON GROWTH OF TOTAL ASSETS.—

11 During the 3-year period beginning on the date of enact12 ment of this section, the aggregate on-balance sheet assets

13 of the Corporation plus the outstanding principal of the

14 off-balance sheet obligations of the Corporation may not

15 exceed $3,000,000,000 if the core capital of the Corpora16 tion is less than $25,000,000.

17 ‘‘(d) ENFORCEMENT.—If the Corporation fails to

18 carry out subsection (a) by the date required under para19 graph (1) or (2) of subsection (a), the Corporation may

20 not purchase a new qualified loan, or issue or guarantee

21 a new loan-backed security, until the core capital of the

22 Corporation is increased to an amount equal to or greater

23 than $25,000,000.’’.

24 SEC. 20. BORROWER STOCK.

25 Section 4.3A (12 U.S.C. 2154A) is amended—
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1 (1) by redesignating subsections (f) and (g) as

2 subsections (g) and (h), respectively; and

3 (2) by inserting after subsection (e) the follow4 ing:

5 ‘‘(f) LOANS DESIGNATED FOR SALE OR SOLD INTO

6 THE SECONDARY MARKET.—

7 ‘‘(1) IN GENERAL.—Subject to paragraph (2)

8 and notwithstanding any other provision of this sec9 tion, the bylaws adopted by a bank or association

10 under subsection (b) may provide—

11 ‘‘(A) in the case of a loan made on or after

12 the date of enactment of this paragraph that is

13 designated, at the time the loan is made, for

14 sale into a secondary market, that no voting

15 stock or participation certificate purchase re16 quirement shall apply to the borrower for the

17 loan; and

18 ‘‘(B) in the case of a loan made before the

19 date of enactment of this paragraph that is sold

20 into a secondary market, that all outstanding

21 voting stock or participation certificates held by

22 the borrower with respect to the loan shall, sub23 ject to subsection (d)(1), be retired.

24 ‘‘(2) APPLICABILITY.—Notwithstandng any

25 other provision of this section, in the case of a loan
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1 sold to a secondary market under title VIII, para2 graph (1) shall apply regardless of whether the bank

3 or association retains a subordinated participation

4 interest in a loan or pool of loans or contributes to

5 a cash reserve.

6 ‘‘(3) EXCEPTION.—

7 ‘‘(A) IN GENERAL.—Subject to subpara8 graph (B) and notwithstanding any other provi9 sion of this section, if a loan designated for sale

10 under paragraph (1)(A) is not sold into a sec11 ondary market during the 180-day period that

12 begins on the date of the designation, the vot13 ing stock or participation certificate purchase

14 requirement that would otherwise apply to the

15 loan in the absence of a bylaw provision de16 scribed in paragraph (1)(A) shall be effective.

17 ‘‘(B) RETIREMENT.—The bylaws adopted

18 by a bank or association under subsection (b)

19 may provide that if a loan described in subpara20 graph (A) is sold into a secondary market after

21 the end of the 180-day period described in the

22 subparagraph, all outstanding voting stock or

23 participation certificates held by the borrower
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1 with respect to the loan shall, subject to sub2 section (d)(1), be retired.’’.

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