Title 12, Banks and BankingRelease 119-110
§2279aa–6 Guarantee of Qualified Loans
Title 12 › CHAPTER 23 — FARM CREDIT SYSTEM › SUBCHAPTER VIII — AGRICULTURAL MORTGAGE SECONDARY MARKET › Part A — Establishment and Activities of Federal Agricultural Mortgage Corporation › § 2279aa–6
Summary
The Corporation will guarantee that holders get paid on time the principal and interest for securities issued by certified facilities when those securities are backed only by pools of qualified loans that meet the program’s loan rules. The Corporation can also issue guaranteed securities backed by qualified loans it buys. If a facility cannot make a payment, the Corporation must pay in cash when due and then steps into the facility’s rights to collect on the loans. The Corporation may, by contract, remove a facility’s ownership rights in the mortgages on default so the mortgages become the Corporation’s property, except for any unpaid claims of the security holders. To get these guarantees, a facility must agree to handle loan defaults like a careful lender; apply any recovered money first to reduce any Treasury-purchased obligations used to support guarantees and then to repay the Corporation for guarantee payments; allow original loan makers to keep servicing the loans; give minority-owned or controlled firms a real chance to take part in public offerings; and not refuse loans from States with borrower-rights laws (though reasonable fees or discounts tied to extra costs are allowed). The Board will set rules for what loan pools look like and how transfers work. The Corporation and its affiliates may buy, hold, and sell guaranteed securities and may issue debt only to raise money to buy those securities, buy qualified loans, and run related operations. Those debt issues must clearly say they are not obligations of the United States or other federal agencies. The Corporation cannot issue that debt while earlier similar obligations remain unpaid.
Full Legal Text
Title 12, §2279aa–6
Banks and Banking, Source: USLM XML via OLRC
(a)Guarantee authorized for certified facilities
(1)In general
Subject to the requirements of this section and on such other terms and conditions as the Corporation shall consider appropriate, the Corporation—
(A)shall guarantee the timely payment of principal and interest on the securities issued by a certified facility that represents interests solely in, or obligations fully backed by, any pool consisting solely of qualified loans which meet the applicable standards established under section 2279aa–8 of this title and which are held by such facility; and
(B)may issue a security, guaranteed as to the timely payment of principal and interest, that represents an interest solely in, or an obligation fully backed by, a pool consisting of qualified loans that—
(i)meet the applicable standards established under section 2279aa–8 of this title; and
(ii)have been purchased and held by the Corporation.
(2)Inability of facility to pay
If the facility is unable to make any payment of principal or interest on any security for which a guarantee has been provided by the Corporation under paragraph (1), the Corporation shall make such payment as and when due in cash, and on such payment shall be subrogated fully to the rights satisfied by such payment.
(3)Power of Corporation
Notwithstanding any other provision of law, the Corporation is empowered, in connection with any guarantee under this subsection, whether before or after any default, to provide by contract with the facility for the extinguishment, on default by the facility, of any redemption, equitable, legal, or other right, title, or interest of the facility in any mortgage or mortgages constituting the pool against which the guaranteed securities are issued. With respect to any issue of guaranteed securities, in the event of default and pursuant otherwise to the terms of the contract, the mortgages that constitute such pool shall become the absolute property of the Corporation subject only to the unsatisfied rights of the holders of the securities based on and backed by such pool.
(b)Other responsibilities of and limitations on certified facilities
As a condition for providing any guarantees under this section for securities issued by a certified facility that represent interests in, or obligations backed by, any pool of qualified loans, the Corporation shall require such facility to agree to comply with the following requirements:
(1)Loan default resolution
The facility shall act in accordance with the standards of a prudent institutional lender to resolve loan defaults.
(2)Subrogation of United States and Corporation to interests of facility
The proceeds of any collateral, judgments, settlements, or guarantees received by the facility with respect to any loan in such pool, shall be applied, after payment of costs of collection—
(A)first, to reduce the amount of any principal outstanding on any obligation of the Corporation that was purchased by the Secretary of the Treasury under section 2279aa–13 of this title to the extent the proceeds of such obligation were used to make guarantees in connection with such securities; and
(B)second, to reimburse the Corporation for any such guarantee payments.
(3)Loan servicing
The originator of any loan in such pool shall be permitted to retain the right to service the loan.
(4)Minority participation in public offerings
The facility shall take such steps as may be necessary to ensure that minority owned or controlled investment banking firms, underwriters, and bond counsels throughout the United States have an opportunity to participate to a significant degree in any public offering of securities.
(5)No discrimination against States with borrowers rights
The facility may not refuse to purchase qualified loans originating in States that have established borrowers rights laws either by statute or under the constitution of such States, except that the facility may require discounts or charge fees reasonably related to costs and expenses arising from such statutes or constitutional provisions.
(c)Additional authority of Board
To ensure the liquidity of securities for which guarantees have been provided under this section, the Board shall adopt appropriate standards regarding—
(1)the characteristics of any pool of qualified loans serving as collateral for such securities; and
(2)transfer requirements.
(d)Purchase of guaranteed securities
(1)Purchase authority
The Corporation (and affiliates) may purchase, hold, and sell any securities guaranteed under this section by the Corporation that represent interests in, or obligations backed by, pools of qualified loans. Securities issued under this section shall have maturities and bear rates of interest as determined by the Corporation.
(2)Issuance of debt obligations
The Corporation (and affiliates) may issue debt obligations solely for the purpose of obtaining amounts for the purchase of any securities under paragraph (1), for the purchase of qualified loans (as defined in section 2279aa of this title), and for maintaining reasonable amounts for business operations (including adequate liquidity) relating to activities under this subsection.
(3)Terms and limitations
(A)Terms
The obligations issued under this subsection shall have maturities and bear rates of interest as determined by the Corporation, and may be redeemable at the option of the Corporation before maturity in the manner stipulated in the obligations.
(B)Requirement
Each obligation shall clearly indicate that the obligation is not an obligation of, and is not guaranteed as to principal and interest by, the Farm Credit Administration, the United States, or any other agency or instrumentality of the United States (other than the Corporation).
(C)Authority
The Corporation may not issue obligations pursuant to paragraph (2) under this subsection while any obligation issued by the Corporation under section 2279aa–13(a) of this title remains outstanding.
Legislative History
Notes & Related Subsidiaries
Editorial Notes
Codification Pub. L. 110–234 and Pub. L. 110–246 made identical
Amendments
to this section. The
Amendments
by Pub. L. 110–234 were repealed by section 4(a) of Pub. L. 110–246.
Amendments
2018—Subsec. (d). Pub. L. 115–334, § 5411(45)(A), (B), redesignated subsec. (e) as (d) and struck out former subsec. (d) which related to aggregate principal amounts of qualified loans and limits on provision of guarantees during certain years. Subsec. (d)(2). Pub. L. 115–334, § 5411(45)(C), substituted “2279aa of this title)” for “2279aa(9) of this title)”. Subsec. (e). Pub. L. 115–334, § 5411(45)(B), redesignated subsec. (e) as (d). 2008—Subsec. (a)(1)(A), (B)(i). Pub. L. 110–246, § 5406(b), inserted “applicable” before “standards”. 1996—Subsec. (a)(1). Pub. L. 104–105, § 107(1), designated part of existing text as subpar. (A) and added subpar. (B). Subsec. (a)(2). Pub. L. 104–105, § 108(c)(2), struck out “subject to the provisions of subsection (b) of this section” after “paragraph (1),”. Subsec. (b). Pub. L. 104–105, §§ 108(a), 109(a)(2), redesignated subsec. (d) as (b) and struck out heading and text of former subsec.(b). Text read as follows: “In the case of any pool referred to in subsection (a) of this section, the Corporation shall— “(1) provide a guarantee only with respect to an individual pool of qualified loans on application of a certified facility; “(2) provide a guarantee only if a reserve, or retained subordinated participating interests, in an amount equal to at least 10 percent of the outstanding principal amount of the loans constituting the pool has been established in accordance with this subchapter; “(3) require that full recourse be taken against reserves and retained subordinated participating interests before any demand be made by the certified facility with respect to the guarantee of the Corporation; and “(4) ensure the timely receipt of principal and interest due to security or obligation holders only after full recourse has been taken against such reserves and retained subordinated participating interests.” Subsec. (b)(4) to (6). Pub. L. 104–105, § 109(b)(4), redesignated pars. (5) and (6) as (4) and (5), respectively, and struck out heading and text of former par. (4). Text read as follows: “The facility shall comply with the standards adopted by the Board under subsection (c) of this section in establishing and maintaining the pool.” Subsec. (c). Pub. L. 104–105, § 109(a), redesignated subsec. (e) as (c) and struck out heading and text of former subsec. (c) which related to standards requiring diversified pools, including establishment of minimum criteria for pools of qualified loans, provisions to encourage loans to small farms and family farmers, and requirements for congressional review of standards. Subsec. (d). Pub. L. 104–105, § 109(a)(2), redesignated subsec. (f) as (d). Former subsec. (d) redesignated (b). Subsec. (d)(4) to (7). Pub. L. 104–105, § 107(2), redesignated pars. (5) to (7) as (4) to (6), respectively, and struck out heading and text of former par. (4). Text read as follows: “Each loan in the pool shall have been sold to the certified facility without recourse to the originator of such loan (other than recourse to any interest of such originator in a reserve established in connection with such loan or any subordinated participation interest of such originator in such loan).” Subsecs. (e), (f). Pub. L. 104–105, § 109(a)(2), redesignated subsecs. (f) and (g) as (d) and (e), respectively. Former subsec. (e) redesignated (c). Subsec. (g). Pub. L. 104–105, § 109(a)(2), redesignated subsec. (g) as (e). Subsec. (g)(2). Pub. L. 104–105, § 107(3), substituted “2279aa(9) of this title” for “2279aa(9)(B) of this title”. 1991—Subsec. (g). Pub. L. 102–237 added subsec. (g). 1988—Subsec. (a)(1). Pub. L. 100–399, § 601(f), substituted “represents interests solely in, or obligations fully backed by, any pool consisting solely of qualified loans which meet the standards established under section 2279aa–8 of this title and which are” for “represents interests in, or obligations backed by, any pool of qualified loans”. Subsec. (e). Pub. L. 100–399, § 601(g), redesignated par. (3) as (2) and struck out former par. (2) which read as follows: “registration requirements (if any) with respect to such securities; and”. Subsec. (f)(1). Pub. L. 100–399, § 601(h), substituted “date of the enactment” for “
Effective Date
”, both of which for purposes of codification were translated as “January 6, 1988,”.
Statutory Notes and Related Subsidiaries
Effective Date
of 2008 AmendmentAmendment of this section and repeal of Pub. L. 110–234 by Pub. L. 110–246 effective May 22, 2008, the date of enactment of Pub. L. 110–234, see section 4 of Pub. L. 110–246, set out as an
Effective Date
note under section 8701 of Title 7, Agriculture.
Effective Date
of 1988 AmendmentAmendment by Pub. L. 100–399 effective as if enacted immediately after enactment of Pub. L. 100–233, which was approved Jan. 6, 1988, see section 1001(a) of Pub. L. 100–399, set out as a note under section 2002 of this title.
Reference
Citations & Metadata
Citation
12 U.S.C. § 2279aa–6
Title 12, Banks and Banking
Last Updated
Sep 22, 2026
Release point: 119-110