Farmer Mac Total Loan Purchases, Guarantees Cross $1 Billion

November 30, 1999

The Federal Agricultural Mortgage Corporation (Farmer Mac) has completed two transactions that push total agricultural mortgage loan purchases and guarantees for 1999 beyond the $1 billion mark. The transactions are a swap and a long-term stand-by commitment to purchase qualified agricultural mortgage loans involving a combined principal of more than $250 million.

A swap transaction, completed in early October, involved about $103 million of qualified loans exchanged for Farmer Mac-guaranteed agricultural mortgage-backed securities by the Central Coast Federal Land Bank Association, Arroyo Grande, CA. The loan pool consisted of 130 qualified loans with an average loan size of $794,000 and a weighted average maturity of 235 months.

The stand-by commitment, completed in mid-November, involved about $155 million of qualified loans owned by the AgStar Agricultural Credit Association, Mankato, MN. The loan pool consisted of 2,103 qualified loans with an average loan size of $74,000 and a weighted average maturing of 177 months.

Henry D. Edelman, Farmer Mac's president and CEO, says the transactions enable the corporation to complete its first year with more than $1 billion in guaranteed volume. "In addition, we are pleased to note the growing acceptance of Farmer Mac's programs by Farm Credit System associations," he adds.

A long-term stand-by commitment is a swap-like transaction involving the identification of a specific pool of qualified agricultural mortgage loans that Farmer Mac commits to purchase under specified circumstances over the life of the loans. The seller enters into a mandatory sale-purchase contract with Farmer Mac and agrees to pay an annual commitment fee over the life of the mortgages, about equal to Farmer Mac's guarantee fee in other transactions.

The seller retains ownership of and acts as the servicer for the pooled mortgages. The seller benefits from the transaction because Farmer Mac's unconditional commitment to purchase the loans eliminates the seller's credit risk and qualifies the mortgages for more favorable regulatory capital treatment, even though they remain in the seller's loan portfolio.