Features of Farmer Mac Debt
Farmer Mac either purchases loans in the secondary market from various financial institutions and retains the loans in its portfolio or securitizes them and sells the resulting guaranteed securities in the capital markets. The company earns a spread on the loans it retains, which is a primary component of Farmer Mac's quarterly and annual earnings.
The loans that Farmer Mac purchases provide liquidity to lenders who extend credit to:
- Agricultural borrowers;
- Rural borrowers, and
- Rural utility cooperatives.
Farmer Mac obtains the funds to finance its loan purchases and other business activities by selling senior, unsecured debt securities through its approved dealers to investors.
Farmer Mac obtains most of its funding through two types of funding vehicles: discount notes and medium-term notes.
In addition, Farmer Mac will from time to time package mortgage loans into Agricultural Mortgage-Backed Securities (AMBS), which it guarantees for full and timely payment of principal and interest, and which are sold to investors.
