AGRICULTURAL MORTGAGE SECONDARY MARKET.

SEC. 702. AGRICULTURAL MORTGAGE SECONDARY MARKET. The Farm Credit Act of 1971 (12 U.S.C. 2001 et seq.) is amended by adding after title VII (as added by section 401 of this Act) the following new title: “TITLE VIII— AGRICULTURAL MORTGAGE SECONDARY MARKET “SEC. 8.0. DEFINITIONS. “For purposes of this title: “(1) Agricultural real estate.— The term ‘agricultural real estate’ means— “(A) a parcel or parcels of land, or a building or structure affixed to the parcel or parcels, that— “(i) is used for the production of one or more agricultural commodities or products; and “(ii) consists of a minimum acreage or is used in producing minimum annual receipts, as determined by the Corporation; or “(B) a principal residence that is a single family, moderate-priced residential dwelling located in a rural area, excluding— “(i) any community having a population in excess of 2,500 inhabitants; and “(ii) any dwelling with a purchase price exceeding $100,000 (as adjusted for inflation). “(2) Board.— The term ‘Board’ means— 101 STAT. 1687 “(A) the interim board of directors established in section 8.2(a); and “(B) the permanent board of directors established in section 8.2(b); as the case may be. “(3) Certified facility.— The term ‘certified facility’ means a secondary marketing agricultural loan facility that is certified under section 8.5. “(4) Corporation.— The term ‘Corporation’ means the Federal Agricultural Mortgage Corporation established in section 8.1. “(5) Guarantee.— The term ‘guarantee’ means the guarantee of timely payment of the principal and interest on securities representing interests in, or obligations backed by, pools of qualified loans, in accordance with this title. “(6) Interim board.— The term ‘interim board’ means the interim board of directors established in section 8.2(a). “(7) Originator.— The term ‘originator’ means any Farm Credit System institution, bank, insurance company, business and industrial development company, savings and loan association, association of agricultural producers, agricultural cooperative, commercial finance company, trust company, credit union, or other entity that originates and services agricultural mortgage loans. “(8) Permanent board.— The term ‘permanent board’ means the permanent board of directors established in section 8.2(b). “(9) Qualified loan.— The term ‘qualified loan’ means an obligation that— “(A) is secured by a fee-simple or leasehold mortgage with status as a first lien on agricultural real estate located in the United States that is not subject to any legal or equitable claims deriving from a preceding fee-simple or lease-hold mortgage; “(B) is an obligation of— “(i) a citizen or national of the United States or an alien lawfully admitted for permanent residence in the United States; or “(ii) a private corporation or partnership whose members, stockholders, or partners hold a majority interest in the corporation or partnership and are individuals described in clause (i); and “(C) is an obligation of a person, corporation, or partnership that has training or farming experience that, under criteria established by the Corporation, is sufficient to ensure a reasonable likelihood that the loan will be repaid according to its terms. “(10) State.— The term ‘State’ has the meaning given such term in section 5.51. “SEC. 8.1. FEDERAL AGRICULTURAL MORTGAGE CORPORATION. “(a) Establishment.— “(1) In general.— There is hereby established a corporation to be known as the Federal Agricultural Mortgage Corporation, which shall be a federally chartered instrumentality of the United States. “(2) Institution within farm credit system.— The Corporation shall be an institution of the Farm Credit System. 101 STAT. 1688 “(3) Liability.— “(A) Corporation.— The Corporation shall not be liable for any debt or obligation of any other institution of the Farm Credit System. “(B) System institutions.— The Farm Credit System and System institutions (other than the Corporation) shall not be liable for any debt or obligation of the Corporation. “(b) Duties.— The Corporation shall— “(1) in consultation with originators, develop uniform underwriting, security appraisal, and repayment standards for qualified loans; “(2) determine the eligibility of agricultural mortgage marketing facilities to contract with the Corporation for the provision of guarantees for specific mortgage pools; and “(3) provide guarantees for the timely repayment of principal and interest on securities representing interests in, or obligations backed by, pools of qualified loans. “SEC. 8.2. BOARD OF DIRECTORS. “(a) Interim Board.— “(1) Number and appointment.— Until the permanent board of directors established in subsection (b) first meets with a quorum of its members present, the Corporation shall be under the management of an interim board of directors composed of 9 members appointed by the President within 90 days after the effective date of this title as follows: “(A) 3 members appointed from among persons who are representatives of banks, other financial institutions or entities, and insurance companies. “(B) 3 members appointed from among persons who are representatives of the Farm Credit System institutions. “(C) 2 members appointed from among persons who are farmers or ranchers who are not serving, and have not served, as directors or officers of any financial institution or entity, of which not more than 1 may be a stockholder of any Farm Credit System institution. “(D) 1 member appointed from among persons who represent the interests of the general public and are not serving, and have not served, as directors or officers of any financial institution or entity. “(2) Political affiliation.— Not more than 5 members of the interim board shall be of the same political party. “(3) Vacancy.— A vacancy in the interim board shall be filled in the manner in which the original appointment was made. “(4) Continuation of membership.— If— “(A) any member of the interim board who was appointed to such board from among persons who are representatives of banks, other financial institutions or entities, insurance companies, or Farm Credit System institutions ceases to be such a representative; or “(B) any member who was appointed from among persons who are not or have not been directors or officers of any financial institution or entity becomes a director or an officer of any financial institution or entity; such member may continue as a member for not longer than the 45-day period beginning on the date such member ceases to be 101 STAT. 1689such a representative or becomes such a director or officer, as the case may be. “(5) Terms.— The members of the interim board shall be appointed for the life of such board. “(6) Quorum.— 5 members of the interim board shall constitute a quorum. “(7) Chairperson.— The President shall designate 1 of the members of the interim board as the chairperson of the interim board. “(8) Meetings.— The interim board shall meet at the call of the chairperson or a majority of its members. “(9) Voting common stock.— “(A) Initial offering.— Upon the appointment of sufficient members of the interim board to convene a meeting with a quorum present, the interim board shall arrange for an initial offering of common stock and shall take whatever other actions are necessary to proceed with the operations of the Corporation. “(B) Purchasers.— Subject to subparagraph (C), the voting common stock shall be offered to banks, other financial entities, insurance companies, and System institutions under such terms and conditions as the interim board may adopt. “(C) Distribution.— The voting stock shall be fairly and broadly offered to ensure that no institution or institutions acquire a disproportionate amount of the total amount of voting common stock outstanding of a class and that capital contributions and issuances of voting common stock for the contributions are fairly distributed between entities eligible to hold class A and class B stock, as provided under section 8.4. “(10) Termination.— The interim board shall terminate when the permanent board of directors established in subsection (b) first meets with a quorum present. “(b) Permanent Board.— “(1) Establishment.— Immediately after the date that banks, other financial institutions or entities, insurance companies, and System institutions have subscribed and fully paid for at least $20,000,000 of common stock of the Corporation, the Corporation shall arrange for the election and appointment of a permanent board of directors. After the termination of the interim board, the Corporation shall be under the management of the permanent board. “(2) Composition.— The permanent board shall consist of 15 members, of which— “(A) 5 members shall be elected by holders of common stock that are insurance companies, banks, or other financial institutions or entities; “(B) 5 members shall be elected by holders of common stock that are Farm Credit System institutions; and “(C) 5 members shall be appointed by the President, by and with the advice and consent of the Senate— “(i) which members shall not be, or have been, officers or directors of any financial institutions or entities; “(ii) which members shall be representatives of the general public; 101 STAT. 1690 “(iii) of which members not more than 3 shall be members of the same political party; and “(iv) of which members at least 2 shall be experienced in farming or ranching. “(3) Presidential appointees.— The President shall appoint the members of the permanent board referred to in paragraph (2)(C) not later than the later of— “(A) the date referred to in paragraph (1); or “(B) the expiration of the 270-day period beginning on the effective date of this title. “(4) Vacancy.— “(A) Elected members.— Subject to paragraph (6), a vacancy among the members elected to the permanent board in the manner described in subparagraph (A) or (B) of paragraph (2) shall be filled by the permanent board from among persons eligible for election to the position for which the vacancy exists. “(B) Appointed members.— A vacancy among the members appointed to the permanent board under paragraph (2)(C) shall be filled in the manner in which the original appointment was made. “(5) Continuation of membership.— If— “(A) any member of the permanent board who was appointed or elected to the permanent board from among persons who are representatives of banks, other financial institutions or entities, insurance companies, or Farm Credit System institutions ceases to be such a representative; or “(B) any member who was appointed from persons who are not or have not been directors or officers of any financial institution or entity becomes a director or an officer of any financial institution or entity; such member may continue as a member for not longer than the 45-day period beginning on the date such member ceases to be such a representative, officer, or employee or becomes such a director or officer, as the case may be. “(6) Terms.— “(A) Appointed members.— The members appointed by the President shall serve at the pleasure of the President. “(B) Elected members.— The members elected under subparagraphs (A) and (B) of subsection (b)(2) shall each be elected annually for a term ending on the date of the next annual meeting of the common stockholders of the Corporation and shall serve until their successors are elected and qualified. Any seat on the permanent board that becomes vacant after the annual election of the directors shall be filled by the members of the permanent board from the same category of directors, but only for the unexpired portion of the term. “(C) Vacancy appointment.— Any member appointed to fill a vacancy occurring before the expiration of the term for which the predecessor of the member was appointed shall be appointed only for the remainder of such term. “(D) Service after expiration of term.— A member may serve after the expiration of the term of the member until the successor of the member has taken office. 101 STAT. 1691 “(7) Quorum.— 8 members of the permanent board shall constitute a quorum. “(8) No additional pay for federal officers or employees.— Members of the permanent board who are fulltime officers or employees of the United States shall receive no additional pay by reason of service on the permanent board. “(9) Chairperson.— The President shall designate 1 of the members of the permanent board who are appointed by the President as the chairperson of the permanent board. “(10) Meetings.— The permanent board shall meet at the call of the chairperson or a majority of its members. “(c) Officers and Staff.— The Board may appoint, employ, fix the pay of, and provide other allowances and benefits for such officers and employees of the Corporation as the Board determines to be appropriate. “SEC. 8.3. POWERS AND DUTIES OF CORPORATION AND BOARD. “(a) Guarantees.— After the Board has been duly constituted, subject to the other provisions of this title and other commitments and requirements established pursuant to law, the Corporation may provide guarantees on terms and conditions determined by the Corporation of securities issued on the security of, or in participation in, pooled interests in qualified loans. “(b) Duties of the Board.— “(1) In general.— The Board shall— “(A) determine the general policies that shall govern the operations of the Corporation; “(B) select, appoint, and determine the compensation of qualified persons to fill such offices as may be provided for in the bylaws of the Corporation; and “(C) assign to such persons such executive functions, powers, and duties as may be prescribed by the bylaws of the Corporation or by the Board. “(2) Executive officers and functions.— The persons elected or appointed under paragraph (1)(B) shall be the executive officers of the Corporation and shall discharge the executive functions, powers, and duties of the Corporation. “(c) Powers of the Corporation.— The Corporation shall be a body corporate and shall have the following powers: “(1) To operate under the direction of its Board. “(2) To issue stock in the manner provided in section 8.4. “(3) To adopt, alter, and use a corporate seal, which shall be judicially noted. “(4) To provide for a president, 1 or more vice presidents, secretary, treasurer, and such other officers, employees, and agents, as may be necessary, define their duties and compensation levels, all without regard to title 5, United States Code, and require surety bonds or make other provisions against losses occasioned by acts of the persons. “(5) To provide guarantees in the manner provided under section 8.6. “(6) To have succession until dissolved by a law enacted by the Congress. “(7) To prescribe bylaws, through the Board, not inconsistent with law, that shall provide for— “(A) the classes of the stock of the Corporation; and “(B) the manner in which— 101 STAT. 1692 “(i) the stock shall be issued, transferred, and retired; “(ii) the officers, employees, and agents of the Corporation are selected; “(iii) the property of the Corporation is acquired, held, and transferred; “(iv) the commitments and other financial assistance of the Corporation are made; “(v) the general business of the Corporation is conducted; and “(vi) the privileges granted by law to the Corporation are exercised and enjoyed; “(8) To prescribe such standards as may be necessary to carry out this title. “(9) To enter into contracts and make payments with respect to the contracts. “(10) To sue and be sued in its corporate capacity and to complain and defend in any action brought by or against the Corporation in any State or Federal court of competent jurisdiction. “(11) To make and perform contracts, agreements, and commitments with persons and entities both inside and outside of the Farm Credit System. “(12) To acquire, hold, lease, mortgage or dispose of, at public or private sale, real and personal property, purchase or sell any securities or obligations, and otherwise exercise all the usual incidents of ownership of property necessary and convenient to the business of the Corporation. “(13) To exercise such other incidental powers as are necessary to carry out the powers, duties, and functions of the Corporation in accordance with this title. “(d) Federal Reserve Banks as Depositaries and Fiscal Agents.— The Federal Reserve banks may act as depositaries for, or as fiscal agents or custodians of, the Corporation. “(e) Access to Book-Entry System.— The Secretary of the Treasury may authorize the Corporation to use the book-entry system of the Federal Reserve System. “SEC. 8.4. STOCK ISSUANCE. “(a) Voting Common Stock.— “(1) Issue.— The Corporation shall issue voting common stock having such par value as may be fixed by the Board from time to time. Each share of voting common stock shall be entitled to one vote with rights of cumulative voting at all elections of directors. Voting shall be by classes as described in section 8.2(a)(9). The stock shall be divided into two classes with the same par value per share. Class A stock may be held only by entities that are not Farm Credit System institutions that are entitled to vote for directors specified in section 8.2(b)(2)(A). Class B stock may be held only by Farm Credit System institutions that are entitled to vote for directors specified in section 8.2(b)(2)(B). “(2) Limitation on issue.— After the date the permanent board first meets with a quorum of its members present, voting common stock of the Corporation may be issued only to originators and certified facilities. “(3) Authority of board to establish terms and procedures.— The Board shall adopt such terms, conditions, and 101 STAT. 1693procedures with regard to the issue of stock under this section as may be necessary, including the establishment of a maximum amount limitation on the number of shares of voting common stock that may be outstanding at any time. “(4) Transferability.— Subject to such limitations as the Board may impose, any share of any class of voting common stock issued under this section shall be transferable among the institutions or entities to which shares of such class of common stock may be offered under paragraph (1), except that, as to the Corporation, such shares shall be transferable only on the books of the Corporation. “(5) Maximum number of shares.— No stockholder, other than a holder of class B stock, may own, directly or indirectly, more than 33 percent of the outstanding shares of such class of the voting common stock of the Corporation. “(b) Required Capital Contributions.— “(1) In general.— The Corporation may require each originator and each certified facility to make, or commit to make, such nonrefundable capital contributions to the Corporation as are reasonable and necessary to meet the administrative expenses of the Corporation. “(2) Stock issued as consideration for contribution.— The Corporation, from time to time, shall issue to each originator or certified facility voting common stock evidencing any capital contributions made pursuant to this subsection. “(c) Dividends.— “(1) In general.— Such dividends as may be declared by the Board, in the discretion of the Board, shall be paid by the Corporation to the holders of the voting common stock of the Corporation pro rata based on the total number of shares of both classes of stock outstanding. “(2) Reserves requirement.— No dividend may be declared or paid by the Board under this section unless the Board determines that adequate provision has been made for the reserve required under section 8.10(c)(1). “(3) Dividends prohibited while obligations are outstanding.— No dividend may be declared or paid by the Board under this section while any obligation issued by the Corporation to the Secretary of the Treasury under section 8.13 remains outstanding. “(d) Nonvoting Common Stock.— The Corporation is authorized to issue nonvoting common stock having such par value as may be fixed by the Board from time to time. Such nonvoting common stock shall be freely transferable, except that, as to the Corporation, such stock shall be transferable only on the books of the Corporation. Such dividends as may be declared by the Board, in the discretion of the Board, may be paid by the Corporation to the holders of the nonvoting common stock of the Corporation, subject to paragraphs (2) and (3) of subsection (c). “(e) Preferred Stock.— “(1) Authority of board.— The Corporation is authorized to issue nonvoting preferred stock having such par value as may be fixed by the Board from time to time. Such preferred stock issued shall be freely transferable, except that, as to the Corporation, such stock shall be transferred only on the books of the Association. 101 STAT. 1694 “(2) Rights of preferred stock.— Subject to paragraphs (2) and (3) of subsection (c), the holders of the preferred stock shall be entitled to such rate of cumulative dividends, and such holders shall be subject to such redemption or other conversion provisions, as may be provided for at the time of issuance. No dividends shall be payable on any share of common stock at any time when any dividend is due on any share of preferred stock and has not been paid. “(3) Preference on termination of business.— In the event of any liquidation, dissolution, or winding up of the business of the Corporation, the holders of the preferred shares of stock shall be paid in full at the par value thereof, plus all accrued dividends, before the holders of the common shares receive any payment. “SEC. 8.5. CERTIFICATION OF AGRICULTURAL MORTGAGE MARKETING FACILITIES. “(a) Eligibility Standards.— “(1) Establishment required.— Within 120 days after the date on which the permanent board first meets with a quorum present, the Corporation shall issue standards for the certification of agricultural mortgage marketing facilities, including eligibility standards in accordance with paragraph (2). “(2) Minimum requirements.— To be eligible to be certified under the standards referred to in paragraph (1), an agricultural mortgage marketing facility shall— “(A) be an institution of the Farm Credit System or a corporation, association, or trust organized under the laws of the United States or of any State; “(B) meet or exceed capital standards established by the Board; “(C) have as one of the purposes of the facility, the sale or resale of securities representing interests in, or obligations backed by, pools of qualified loans that have been provided guarantees by the Corporation; “(D) demonstrate managerial ability with respect to agricultural mortgage loan underwriting, servicing, and marketing that is acceptable to the Corporation; “(E) adopt appropriate agricultural mortgage loan underwriting, appraisal, and servicing standards and procedures that meet or exceed the standards established by the Board; “(F) for purposes of enabling the Corporation to examine the facility, agree to allow officers or employees of the Corporation to have access to all books, accounts, financial records, reports, files, and all other papers, things, or property, of any type whatsoever, belonging to or used by the Corporation that are necessary to facilitate an examination of the operations of the facility in connection with securities, and the pools of qualified loans that back securities, for which the Corporation has provided guarantees; and “(G) adopt appropriate minimum standards and procedures relating to loan administration and disclosure to borrowers concerning the terms and rights applicable to loans for which guarantee is provided, in conformity with uniform standards established by the Corporation. “(3) Nondiscrimination requirement.— The standards established under this subsection shall not discriminate between or 101 STAT. 1695against Farm Credit System and non-Farm Credit System applicants. “(b) Certification by Corporation.— Within 60 days after receiving an application for certification under this section, the Corporation shall certify the facility if the facility meets the standards established by the Corporation under subsection (a)(1). “(c) Maximum Time Period for Certification.— Any certification by the Corporation of an agricultural mortgage marketing facility shall be effective for a period determined by the Corporation of not to exceed 5 years. “(d) Revocation.— “(1) In general.— After notice and an opportunity for a hearing, the Corporation may revoke the certification of an agricultural mortgage marketing facility if the Corporation determines that the facility no longer meets the standards referred to in subsection (a). “(2) Effect of revocation.— Revocation of a certification shall not affect any pool guarantee that has been issued by the Corporation. “(e) Affiliation of FCS Institutions With Facility.— “(1) Establishment of affiliate authorized.— Notwithstanding any other provision of this Act, any Farm Credit System institution (other than the Corporation), acting for such institution alone or in conjunction with one or more other such institutions, may establish and operate, as an affiliate, an agricultural mortgage marketing facility if, within a reasonable time after such establishment, such facility obtains and thereafter retains certification under subsection (b) as a certified facility. “(2) Exclusive agency agreement authorized.— Any number of Farm Credit System institutions (other than the Corporation) may enter into an agreement with any certified facility (including an affiliate established under paragraph (1)) to sell the qualified loans of such institutions exclusively to or through the facility. “SEC. 8.6. GUARANTEE OF QUALIFIED LOANS. “(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 shall guarantee the timely payment of principal and interest on the securities issued by a certified facility that represents interests in, or obligations backed by, any pool of qualified loans held by such facility. “(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), subject to the provisions of subsection (b) 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, 101 STAT. 1696equitable, 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) Reserve or Subordinated Participation Requirements.— In the case of any pool referred to in subsection (a), 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 title; “(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. “(c) Standards Requiring Diversified Pools.— “(1) In general.— To reduce the risks incurred by the Corporation in providing guarantees under this section and to further the purposes of this title, the Board shall establish standards governing the composition of each pool of qualified loans (in connection with which such guarantees are provided) over the period during which the commitment to provide guarantees is effective. “(2) Minimum criteria.— The standards established by the Board pursuant to paragraph (1) for pools of qualified loans shall, at a minimum— “(A) require that each pool consist of loans that— “(i) are secured by agricultural real estate that is widely distributed geographically; “(ii) vary widely in terms of amounts of principal; and “(iii) in the case of land used in the production of agricultural commodities, are secured by agricultural real estate that, in the aggregate, is used to produce a wide range of agricultural commodities; “(B) prohibit the inclusion in any such pool of— “(i) any loan the principal amount of which exceeds 3.5 percent of the aggregate amount of principal of all loans in such pool; and “(ii) 2 or more loans to related borrowers; and “(C) require that each pool consist of not less than 50 loans. “(3) Small farms and family farmers.— In establishing the standards described in paragraph (2)(A)(ii), the Board shall include provisions that promote and encourage the inclusion of 101 STAT. 1697loans for small farms and family farmers in pools of qualified loans. “(4) Congressional review.— No standard prescribed under this subsection shall take effect before the later of— “(A) the end of a period consisting of 30 legislative days and beginning on the date such standards are submitted to Congress; or “(B) the end of a period consisting of 90 calendar days and beginning on such date. “(d) 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 8.13 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) Loans with recourse to originator prohibited.— 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). “(5) Compliance with diversified pool standards.— The facility shall comply with the standards adopted by the Board under subsection (c) in establishing and maintaining the pool. “(6) 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. “(7) 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. “(e) Additional Authority of the Board.— To ensure the liquidity of securities for which guarantees have been provided under this section, the Board shall adopt appropriate standards regarding— 101 STAT. 1698 “(1) the characteristics of any pool of qualified loans serving as collateral for such securities; “(2) registration requirements (if any) with respect to such securities; and “(3) transfer requirements. “(f) Aggregate Principal Amounts of Qualified Loans.— “(1) Initial year.— During the first year after the effective date of this title, the Corporation may not provide guarantees for securities representing interests in, or obligations backed by, qualified loans (other than loans which back securities issued by Farm Credit System institutions for which the Corporation provides a guarantee) in an aggregate principal amount in excess of 2 percent of the total agricultural real estate debt outstanding at the close of the prior calendar year (as published by the Board of Governors of the Federal Reserve System), less all Farmers Home Administration agricultural real estate debt. “(2) Second year.— During the year following the year referred to in paragraph (1), the Corporation may not provide guarantees for securities representing interests in, or obligations backed by, qualified loans (other than loans which back securities issued by Farm Credit System institutions for which the Corporation provides a guarantee) in an additional principal amount in excess of 4 percent of the total agricultural real estate debt outstanding at the close of the prior calendar year, less all Farmers Home Administration agricultural real estate debt. “(3) Third year.— During the year following the year referred to in paragraph (2), the Corporation may not provide guarantees for securities representing interests in, or obligations backed by, qualified loans (other than loans which back securities issued by Farm Credit System institutions for which the Corporation provides a guarantee) in an additional principal amount in excess of 8 percent of the total agricultural real estate debt outstanding at the close of the prior calendar year, less all Farmers Home Administration agricultural real estate debt. “(4) Subsequent years.— In years subsequent to the year referred to in paragraph (3), the Corporation may provide guarantees without regard to the principal amount of the qualified loans guaranteed. “SEC. 8.7. RESERVES AND SUBORDINATED PARTICIPATION INTERESTS OF CERTIFIED FACILITIES. “(a) Cash Contributions.— “(1) Contributions by originators.— For each pool of loans, a certified facility and the participating originators may each contribute a share of the minimum reserve required under section 8.6(b)(2). “(2) Composition of reserves.— The reserves required under this section, other than retained subordinated participation interests, shall be held in the form of United States Treasury securities or other securities issued, guaranteed, or insured by an agency or instrumentality of the United States Government. “(3) Use and disposition of assets in reserve.— Subject to the requirements of subsection (c), any certified facility that establishes a reserve pursuant to this subsection shall be required by the Corporation to maintain such reserve as a segregated account consisting of the amounts contributed (but not 101 STAT. 1699the earnings accruing on such amounts) to ensure the repayment of principal of, and the payment of interest on, the securities representing an interest in, or obligations backed by, the pool of qualified loans with respect to which such reserve is established. “(b) Retention of Subordinated Participation Interests.— “(1) In general.— A certified facility may meet the requirements of section 8.6(b)(2) with respect to any pool of qualified loans by retaining a subordinated participation interest in each loan included in each such pool in an amount not less than the amount that is equal to 10 percent of the principal amount of such loan. “(2) Retention of such interests by loan originators.— Under the terms of the sale of any qualified loan by the originator of such loan to a certified facility, the originator of such loan may agree to retain a subordinated participation interest in such loan and the amount of the subordinated interest so retained by such loan originator shall be attributed to the facility for purposes of determining whether the requirements of paragraph (1) have been met. “(3) Distribution rights of holders of subordinated interests.— The rights of the holders of the subordinated participation interests to receive distributions with respect to the loans constituting the pool shall be subordinated as prescribed by the Corporation to enhance the likelihood of regular receipt by the other holders of interests in such pool of the full amount of scheduled payments of principal and interest on loans constituting the pool. “(c) Additional Requirements Relating to Section 8.6(b)(2) Reserves.— “(1) Distribution of earnings accruing in section 8.6(b)(2) reserves.— In the case of each applicable loan pool, a certified facility shall distribute to originators, at least semiannually, any earnings on the contributions of the originators to the reserve. “(2) Exception for withdrawals that would decrease reserve levels below reserve requirement.— No withdrawal and distribution authorized under paragraph (1) may be made to the extent such withdrawal would cause the reserve to fall below the amount required to be held in such reserve under section 8.6(b)(2). “(3) Separate loan loss accounting.— Any certified facility that maintains a reserve (pursuant to section 8.6(b)(2)) to which any originator has contributed shall maintain separate loan loss accounting for each loan for which a contribution was made by such originator to such reserve. “(4) Loan loss attribution rule.— Except for that portion of losses absorbed by a contribution of a certified facility to the reserve as provided in subsection (a)(1), each originator participating in the pool shall absorb any losses on loans originated up to the total amount the originator has contributed to the reserve before the losses are absorbed by the contributions of other originators who are participating in the pool. “(d) Authority of Board to Establish other Policies and Procedures.— The Board may establish such other policies and procedures with respect to— 101 STAT. 1700 “(1) the establishment of reserves and the retention of subordinated participation interests under this section; and “(2) the manner in which such reserves or interests shall be available to make payments of interest on, and repayments of principal of, securities for which the Corporation has provided guarantees, as the Board determines to be necessary or appropriate to carry out the purposes of this title. “SEC. 8.8. STANDARDS FOR QUALIFIED LOANS. “(a) Standards.— Not later than 120 days after the appointment and election of the Board, the Corporation, in consultation with originators, shall establish uniform underwriting, security appraisal, and repayment standards for qualified loans. In establishing standards for qualified loans, the Corporation shall confine corporate operations, so far as practicable, to mortgage loans that are deemed by the Board to be of such quality so as to meet, substantially and generally, the purchase standards imposed by private institutional mortgage investors. “(b) Minimum Criteria.— To further the purpose of this title to provide a new source of long-term fixed rate financing to assist farmers and ranchers to purchase agricultural real estate, the standards established by the Board pursuant to subsection (a) shall, at a minimum— “(1) provide that no agricultural mortgage loan with a loan-to-value ratio in excess of 80 percent may be treated as a qualified loan;. “(2) require each borrower to demonstrate sufficient cash-flow to adequately service the agricultural mortgage loan; “(3) contain sufficient documentation standards; “(4) contain adequate standards to protect the integrity of the appraisal process with respect to any agricultural mortgage loans; “(5) contain adequate standards to ensure that the borrower is or will be actively engaged in agricultural production, and require the borrower to certify to the originator that the borrower intends to continue agricultural production on the site involved; “(6) minimize speculation in agricultural real estate for nonagricultural purposes; and “(7) in establishing the value of agricultural real estate, consider the purpose for which the real estate is taxed. “(c) Loan Amount Limitation.— “(1) In general.— A loan may not be treated as a qualified loan if the principal amount of such loan exceeds $2,500,000, adjusted for inflation, except as provided in paragraph (2). “(2) Acreage exception.— Paragraph (1) shall not apply with respect to any agricultural mortgage loan described in such paragraph if such loan is secured by agricultural real estate that, in the aggregate, comprises not more than 1,000 acres. “(d) Congressional Review.— No standard prescribed under subsection (a) shall take effect before the later of— “(1) the end of a period consisting of 30 legislative days and beginning on the date such standards are submitted to the Congress; or “(2) the end of a period consisting of 90 calendar days and beginning on such date. 101 STAT. 1701 “(e) Nondiscrimination Requirement.— The standards established under subsection (a) shall not discriminate against small originators or small agricultural mortgage loans that are at least $50,000. “SEC. 8.9. EXEMPTION FROM RESTRUCTURING AND BORROWERS RIGHTS PROVISIONS FOR POOLED LOANS. “(a) Restructuring.— Notwithstanding any other provision of law, sections 4.14, 4.14A, 4.14B, 4.14C, and 4.37 shall not apply to any loan included in a pool of qualified loans backing securities or obligations for which the Corporation provides guarantee. The loan servicing standards established by the Corporation shall be patterned after similar standards adopted by other federally sponsored secondary market facilities. “(b) Borrowers Rights.— At the time of application for a loan, originators that are Farm Credit System institutions shall give written notice to each applicant of the terms and conditions of the loan, setting forth separately terms and conditions for pooled loans and loans that are not pooled. This notice shall include a statement, if applicable, that the loan may be pooled and that, if pooled, sections 4.14, 4.14A, 4.14B, 4.14C, and 4.37 shall not apply. This notice also shall inform the applicant that he or she has the right not to have the loan pooled. Within 3 days from the time of commitment, an applicant has the right to refuse to allow the loan to be pooled, thereby retaining rights under sections 4.14, 4.14A, 4.14B, 4.14C, and 4.37, if applicable. “SEC. 8.10. FUNDING FOR GUARANTEE: RESERVES OF CORPORATION. “(a) Guarantee.— The Corporation shall provide guarantees for securities representing interests in, or obligations backed by, pools of qualified loans through commitments issued by the Corporation providing for guarantees. “(b) Guarantee Fees.— “(1) Initial fee.— At the time a guarantee is issued by the Corporation, the Corporation shall assess the certified facility a fee of not more than ½ of 1 percent of the initial principal amount of each pool of qualified loans. “(2) Annual fees.— Beginning in the second year after the date the guarantee is issued under paragraph (1), the Corporation may, at the end of each year, assess the certified facility an annual fee of not more than ½ of 1 percent of the principal amount of the loans then constituting the pool. “(3) Determination of amount.— The Corporation shall establish such fees on the amount of risk incurred by the Corporation in providing the guarantees with respect to which such fee is assessed, as determined by the Corporation. Fees assessed under paragraphs (1) and (2) shall be established on an actuarially sound basis. “(4) Annual review by gao.— The Comptroller General of the United States shall annually review, and submit to the Congress a report regarding, the actuarial soundness and reasonableness of the fees established by the Corporation under this subsection. “(c) Corporation Reserve Against Guarantees Losses Required.— “(1) In general.— So much of the fees assessed under this section as the Board determines to be necessary shall be set 101 STAT. 1702aside by the Corporation in a segregated account as a reserve against losses arising out of the guarantee activities of the Corporation. “(2) Exhaustion of reserve required.— The Corporation may not issue obligations to the Secretary of the Treasury under section 8.13 in order to meet the obligations of the Corporation with respect to any guarantees provided under this title until the reserve established under paragraph (1) has been exhausted. “(d) Fees to Cover Administrative Costs Authorized.— The Corporation may impose charges or fees in reasonable amounts in connection with the administration of its activities under this title to recover its costs for performing such administration. “SEC. 8.11. SUPERVISION, EXAMINATION, AND REPORT OF CONDITION. “(a) Regulation.— “(1) Authority.— Notwithstanding any other provision of this Act, the regulatory authority of the Farm Credit Administration with respect to the Corporation shall be confined to— “(A) providing for the examination of the condition of the Corporation; and “(B) providing for the general supervision of the safe and sound performance of the powers, functions, and duties vested in the Corporation by this title, including through the use of the enforcement powers of the Farm Credit Administration under part C of title V. “(2) Considerations.— In exercising its authority pursuant to this section, the Farm Credit Administration shall consider— “(A) the purposes for which the Corporation was created; “(B) the practices appropriate to the conduct of secondary markets in agricultural loans; and “(C) the reduced levels of risk associated with appropriately structured secondary market transactions. “(b) Examinations and Audits.— “(1) In general.— The financial transactions of the Corporation shall be examined by examiners of the Farm Credit Administration in accordance with the principles and procedures applicable to commercial corporate transactions under such rules and regulations as may be prescribed by the Administration. “(2) Frequency.— The examinations shall occur at such times as the Farm Credit Administration Board may determine, but in no event less than once each year. “(3) Access.— The examiners shall— “(A) have access to all books, accounts, financial records, reports, files, and all other papers, things, or property belonging to or in use by the Corporation and necessary to facilitate the audit; and “(B) be afforded full access for verifying transactions with certified facilities and other entities with whom the Corporation conducts transactions. “(c) Annual Report of Condition.— The Corporation shall make and publish an annual report of condition as prescribed by the Farm Credit Administration. Each report shall contain financial statements prepared in accordance with generally accepted accounting principles and contain such additional information as the Farm Credit Administration may by regulation prescribe. The financial 101 STAT. 1703statements of the Corporation shall be audited by an independent public accountant. “(d) FCA Assessments to Cover Costs.— The Farm Credit Administration shall assess the Corporation for the cost to the Administration of any regulatory activities conducted under this section, including the cost of any examination. “SEC. 8.12. SECURITIES IN CREDIT ENHANCED POOLS. “(a) Federal Laws.— “(1) Applicability of certain federal securities laws.— For purposes of section 3(a)(2) of the Securities Act of 1933, no security representing an interest in a pool of qualified loans for which guarantees have been provided by the Corporation shall be deemed to be a security issued or guaranteed by a person controlled or supervised by, or acting as an instrumentality of, the Government of the United States. No such security shall be deemed to be a ‘government security’ for purposes of the Securities Exchange Act of 1934 or for purposes of the Investment Company Act of 1940. “(2) No full faith and credit of the united states.— Each security for which credit enhancement has been provided by the Corporation shall clearly indicate that the security is not an obligation of, and is not guaranteed as to principal or interest by, the Farm Credit Administration, the United States, or any other agency or instrumentality of the United States (other than the Corporation). “(b) State Securities Laws.— “(1) General exemption.— Any security or obligation that has been provided a guarantee by the Corporation shall be exempt from any law of any State with respect to or requiring registration or qualification of securities or real estate to the same extent as any obligation issued by, or guaranteed as to principal and interest by, the United States or any agency or instrumentality of the United States. “(2) State override.— The provisions of paragraph (1) shall not be applicable to any State that, during the 8-year period beginning on the effective date of this title, enacts a law that— “(A) specifically refers to this subsection; and “(B) expressly provides that paragraph (1) shall not apply to the State. “(c) Authorized Investments.— “(1) In general.— Securities representing an interest in, or obligations backed by, pools of qualified loans with respect to which the Corporation has provided a guarantee shall be authorized investments of any person, trust, corporation, partnership, association, business trust, or business entity created pursuant to or existing under the laws of the United States or any State to the same extent that the person, trust, corporation, partnership, association, business trust, or business entity is authorized under any applicable law to purchase, hold, or invest in obligations issued by or guaranteed as to principal and interest by the United States or any agency or instrumentality of the United States. Such securities or obligations may be accepted as security for all fiduciary, trust, and public funds, the investment or deposits of which shall be under the authority and control of the United States or any State or any officers of either. 101 STAT. 1704 “(2) State limitations on purchase, holding, or investment.— If State law limits the purchase, holding, or investment in obligations issued by the United States by the person, trust, corporation, partnership, association, business trust, or business entity, securities or obligations of a certified facility issued on which the Corporation has provided a guarantee shall be considered to be obligations issued by the United States for purposes of the limitation. “(3) Nonapplicability of provisions.— “(A) Subsequent state law.— Paragraphs (1) and (2) shall not apply with respect to a particular person, trust, corporation, partnership, association, business trust, or business entity, or class thereof, in any State that, prior to the expiration of the 8-year period beginning on the date of the enactment of this title, enacts a law that specifically refers to this section and either prohibits or provides for a more limited authority to purchase, hold, or invest in the securities by any person, trust, corporation, partnership, association, business trust, or business entity, or class thereof, than is provided in paragraphs (1) and (2). “(B) Effect of subsequent state law.— The enactment by any State of a law of the type described in subparagraph (A) shall not affect the validity of any contractual commitment to purchase, hold, or invest that was made prior to the effective date of the law and shall not require the sale or other disposition of any securities acquired prior to the effective date of the law. “(d) State Usury Laws Superseded.— Any provision of the constitution or law of any State which expressly limits the rate or amount of interest, discount points, finance charges, or other charges that may be charged, taken, received, or reserved by agricultural lenders or certified facilities shall not apply to any agricultural loan made by an originator or a certified facility in accordance with this title that is included in a pool for which the Corporation has provided a guarantee. “SEC. 8.13. AUTHORITY TO ISSUE OBLIGATIONS TO COVER GUARANTEE LOSSES OF CORPORATION. “(a) Sale of Obligations to Treasury.— “(1) In general.— Subject to the limitations contained in sections 8.6(b) and 8.10(c) and the requirement of paragraph (2), the Corporation may issue obligations to the Secretary of the Treasury the proceeds of which may be used by the Corporation solely for the purpose of fulfilling the obligations of the Corporation under any guarantee provided by the Corporation under this title. “(2) Certification.— The Secretary of the Treasury may purchase obligations of the Corporation under paragraph (1) only if the Corporation certifies to the Secretary that— “(A) the requirements of sections 8.6(b) and 8.10(c) have been fulfilled; and “(B) the proceeds of the sale of such obligations are needed to fulfill the obligations of the Corporation under any guarantee provided by the Corporation under this title. “(b) Expeditious Transaction Required.— Not later than 10 business days after receipt by the Secretary of the Treasury of any certification by the Corporation under subsection (a)(2), the Sec-101 STAT. 1705retary of the Treasury shall purchase obligations issued by the Corporation in an amount determined by the Corporation to be sufficient to meet the guarantee liabilities of the Corporation. “(c) Limitation on Amount of Outstanding Obligations.— The aggregate amount of obligations issued by the Corporation under subsection (a)(1) which may be held by the Secretary of the Treasury at any time (as determined by the Secretary) shall not exceed $1,500,000,000. “(d) Terms of Obligation.— “(1) Interest.— Each obligation purchased by the Secretary of the Treasury shall bear interest at a rate determined by the Secretary, taking into consideration the average rate on outstanding marketable obligations of the United States as of the last day of the last calendar month ending before the date of the purchase of such obligation. “(2) Redemption.— The Secretary of the Treasury shall require that such obligations be repurchased by the Corporation within a reasonable time. “(e) Coordination With Title 31, United States Code.— “(1) Authority to use proceeds from sale of treasury securities.— For the purpose of purchasing obligations of the Corporation, the Secretary of the Treasury may use as a public debt transaction the proceeds from the sale by the Secretary of any securities issued under chapter 31 of title 31, United States Code, and the purposes for which securities may be issued under such chapter are extended to include such purchases. “(2) Treatment of transactions.— All purchases and sales by the Secretary of the Treasury of obligations issued by the Corporation under this section shall be treated as public debt transactions of the United States. “(f) Authorization of Appropriations.— There is authorized to be appropriated to the Secretary of the Treasury $1,500,000,000, without fiscal year limitation, to carry out the purposes of this title. “SEC. 8.14. FEDERAL JURISDICTION. “Notwithstanding section 1349 of title 28, United States Code, or any other provision of law: “(1) The Corporation shall be considered an agency under sections 1345 and 1442 of such title. “(2) All civil actions to which the Corporation is a party shall be deemed to arise under the laws of the United States and, to the extent applicable, shall be deemed to be governed by Federal common law. The district courts of the United States shall have original jurisdiction of all such actions, without regard to amount of value. “(3) Any civil or other action, case, or controversy in a court of a State or any court, other than a district court of the United States, to which the Corporation is a party may at any time before trial be removed by the Corporation, without the giving of any bond or security— “(A) to the District Court of the United States for the district and division embracing the place where the same is pending; or “(B) if there is no such district court, to the District Court of the United States for the district in which the principal office of the Corporation is located; 101 STAT. 1706by following any procedure for removal for causes in effect at the time of such removal. “(4) No attachment or execution shall be issued against the Corporation or any of the property of the Corporation before final judgment in any Federal, State, or other court.”.