Agricultural Credit Act of 1987

(Conference report filed in House, H. Rept. 100-490)

Agricultural Credit Act of 1987 - Title I: Assistance to Farm Credit System Borrowers - Amends the Farm Credit Act of 1971 to provide a five-year guarantee (par value redemption) for the value of Farm Credit System (FCS) borrower held stock. Applies such guarantee to: (1) certain frozen stock; (2) stock outstanding on the date of enactment of this Act; and (3) certain stock required to be purchased in order to obtain an FCS institution (institution) loan.

Requires an FCS lender to restructure a financially-stressed loan if the loan's restructured value would exceed its liquidated value.

Requires the lender to: (1) notify a borrower of a distressed loan that such loan may be suitable for restructuring, not later than 45 days before beginning any foreclosure action; (2) take no foreclosure action before determining a loan's suitability for restructuring; and (3) choose the least-cost restructuring alternative.

Requires each farm credit district (district) board of directors, within 60 days of enactment of this Act, to develop a written policy governing the treatment of distressed loans, including denied borrowers' appeal rights. States that such policy shall constitute the restructuring policy of each FCS lender within the district.

Requires each lender to submit semiannual Farm Credit Administration (FCA) reports regarding loan review results and the financial effect of restructurings and foreclosures.

Authorizes Federal intermediate credit banks, on request of any production credit association, to assist in loan restructuring.

Provides that if a Federal land bank or production credit association writes off restructured loan principal, the borrower's land bank or production credit association shall cancel the equivalent dollar value of the borrower's stock. Entitles the borrower to retain at least one share of stock in order to maintain association membership and voting power.

Requires each district to establish a special asset group to review, and reverse if appropriate, loan restructuring denials.

Establishes a National Special Asset Council to: (1) monitor lender compliance; and (2) review sample special asset group determinations.

Expresses the sense of the Congress that institutions should administer restructuring and other loan guarantee programs on a case-by-case-basis with the objective of using such programs as alternatives to foreclosure.

Requires lenders to provide borrowers with access to documents and loan information concerning interest rates, charges, loan options, and any action taken on such loan.

Gives distressed loan borrowers the right to request a review of a restructuring denial. Prohibits a lender from accelerating loan payments.

Establishes a foreclosed borrower's right of first refusal to FCS-acquired agricultural real estate. Limits such right to the property's previous owner. Sets forth implementing provisions.

Requires lenders offering more than one interest rate, upon borrower request, to: (1) review the loan to determine if the proper interest rate has been charged; and (2) explain the basis for such different rates.

Applies certain uninsured borrower funds held in a bankrupt institution against such person's loan indebtedness.

Title II: Assistance to Farm Credit System - Establishes a federally-chartered Farm Credit System Assistance Board (Board) to: (1) replace the Farm Credit System Capital Corporation; and (2) provide financial (including stock guarantees) and technical assistance to distressed institutions. Terminates the Board on December 31, 1992. Empowers the FCA to exercise Board powers until the Board's charter is issued. Exempts the Board from FCA regulation and Federal, State, and local taxation.

Provides for a three-member board of directors composed of the Secretary of the Treasury, the Secretary of Agriculture, and an agricultural producer experienced in finance.

Directs the Board to monitor distressed institutions. Authorizes an institution to apply for assistance when the book value of its stock falls below par value. Requires such action when book values fall below 75 percent of par value.

Authorizes the Board to determine whether a distressed institution may issue preferred stock sufficient to: (1) maintain the value of its stock; and (2) maintain its economic viability.

Enumerates the Board's special powers with regard to seriously distressed institutions, including: (1) appointment of a receiver or a conservator; (2) approval of, and power to mandate, institution consolidations; and (3) authority over operating and loan activities.

Requires the Board, in coordination with the Financial Assistance Corporation (created by this Act), to report annually to the appropriate congressional committees.

Directs the FCA to establish the Farm Credit System Financial Assistance Corporation (Corporation) as a federally-chartered FCS institution. States that the Corporation shall carry out a program to provide capital to distressed institutions.

Provides that the Corporation's board of directors shall consist of the board of directors of the Federal Farm Credit Banks Funding Corporation.

Directs the Corporation to establish: (1) the Farm Credit Assistance Fund; and (2) the Financial Assistance Corporation Trust Fund.

Authorizes the Corporation to issue 15-year debt obligations. Sets forth the following interest payment schedule: (1) the Corporation shall pay full interest for the first five years; (2) the Corporation and the institutions shall split the interest for the second five years; and (3) the institutions shall pay full interest after the first ten years. Makes the Corporation liable for institution interest defaults.

States that institutions shall repay the Government for interest costs incurred in their behalf. Requires that such repayments be made: (1) when the institutions possess the necessary financial viability; and (2) in a manner that shall not impair stock or capital requirements.

Directs the Corporation to: (1) evaluate institutions as their obligations come due; (2) furnish the Secretary of the Treasury and the appropriate congressional committees with such evaluations; and (3) if an institution is unable to redeem preferred stock, use Trust Fund amounts for such purpose.

States that: (1) Treasury funds shall be used if the Corporation is unable to meet interest or principal obligations; and (2) the first $2,000,000,000 of Treasury payments to the Assistance Fund shall not be subject to institution repayment.

Authorizes appropriations for restructuring purposes.

Provides Trust Fund financing through institution purchases of Corporation stock. Permits district boards, with affected institution approval, to reallocate such required stock purchase assessments.

Terminates the Corporation upon debt expiration.

Makes the current revolving fund available to assist institutions during the transition period.

Establishes the Federal Farm Credit Banks Funding Corporation as an FCS institution which shall: (1) issue and market FCS obligations; and (2) determine consolidated issues maturities, interest rates, and conditions of participation.

Directs the FCA, during the period beginning September 30, 2001, and ending December 31, 2001, to evaluate the financial condition of the FCS and report to the Secretary of the Treasury and the appropriate congressional committees.

Title III: Capitalization of System Institutions - Directs the FCA, within 120 days of enactment of this Act, to establish minimum capitalization standards for FCS institutions. Requires such standards to include fixed capital to asset ratios.

Prohibits any institution enforcement actions based solely on capitalization adequacy during the five-year transition period.

Establishes the Farm Credit System Insurance Corporation (Insurance Corporation) which shall insure the timely payment of FCS institution obligations.

States that as of the later of January 1, 1989, or 12 months after enactment of this Act, every FCS bank will be an insured bank. Requires annual premium filings with the Insurance Corporation. Subjects an institution to forfeiture of FCS rights and privileges for failure to file or pay the premiums, and makes a director who participated in such failure personally liable for consequential damages.

Authorizes the Insurance Corporation to: (1) make loans to purchase the assets or securities of, assume the liabilities of, or make contributions to a financially troubled insured institution; and (2) take specified steps to facilitate institution mergers or consolidations.

Prohibits assistance to an institution if such amounts would exceed liquidation costs, unless the continued operation of the institution is essential to provide local agricultural credit services.

Establishes the Farm Credit Insurance Fund to insure the timely payment of principal and interest on insured obligations. Transfers current revolving fund assets to such Fund.

Exempts the Insurance Corporation from taxation. Requires annual reports to the Congress.

Title IV: Restructuring the Farm Credit System - Subtitle A: Creation of Farm Credit Banks - Provides for the mandatory mergers within each district of Federal land banks and Federal intermediate credit banks within six months of enactment of this Act. (States that such merged banks shall be known as Farm Credit Banks.) Sets forth such banks' powers, including real estate and intermediate credit lending authority and the provision of technical assistance.

States that loans may be made for: (1) agricultural or aquatic purposes; (2) rural housing financing; and (3) farm-related services.

Requires loans to be made through Federal land bank associations. Stipulates that if no such active association exists in an area, loans may be made directly or through other financial institutions.

Exempts Farm Credit Banks from taxation.

Sets forth organizational and operating provisions regarding production credit associations and Federal land bank associations.

Subtitle B: Merger of System Institutions - Provides for the mandatory merger within each district of production credit associations and Federal land bank associations within six months of the merger of the district Federal land bank and the Federal intermediate credit bank.

Requires the selection, within six months of enactment of this Act, of a special committee to develop a proposal for the consolidation of FCS districts into not less than six farm credit banks. Requires quarterly proposal reports to the appropriate congressional committees. Requires FCA review and a stockholder vote as prerequisites to consolidation.

Requires the selection, within 15 days of enactment of this Act, of a special committee to develop a proposal for the voluntary merger of the banks for cooperatives. Requires FCA review and a stockholder vote as prerequisites to consolidation.

States that if eight or more district banks approve the merger, such banks and the Central Bank for Cooperatives shall be merged into a single National Bank for Cooperatives which shall serve any FCS territory.

States that if at least one but fewer than eight such banks approve a merger, such banks and the Central Bank for Cooperatives shall be merged into a United Bank for Cooperatives which shall serve the constituent banks' territories.

States that nonconsenting banks may continue to offer services in their territory.

Sets forth organizational and operating provisions of such United and National Banks for Cooperatives.

Authorizes mergers of FCS institutions in the same district if approved by the FCA, the boards of directors of the institutions, and a majority of the stockholders.

States that a merged bank shall have all the powers of and be subject to all the obligations imposed on the constituent banks.

Requires merged banks for cooperatives to file annual reports (for five years) with the FCA that: (1) analyze the merger's effect; (2) provide loan breakdowns; and (3) describe the adequacy of credit and other services provided to smaller cooperatives.

Authorizes a Federal land bank or merged bank having a Federal land bank as one of its constituents to transfer lending authority to a Federal land bank association if approved by the FCA, the institution' boards of directors, and stockholders.

Authorizes two or more unlike associations within the same district to merge into a single entity if approved by the FCA, the association's boards of directors, the stockholders, and the Farm Credit Bank.

Sets forth conditions under which an institution may terminate FCS status.

Provides for stockholder disclosure of information regarding mergers, dissolutions, terminations, and transfers.

Authorizes banks to merge with similar banks in other districts if approved by the FCA, the banks' boards of directors, and stockholders. Authorizes similar mergers for associations.

Directs the FCA to ensure that nonmerging associations shall not be charged higher assessments and receive financial assistance on the same basis as other district associations.

Subtitle C: Other Restructuring Provisions - Makes the following entities eligible to borrow from a bank for cooperatives: (1) qualifying entities with loans or loan guarantees from the Rural Electrification Administration or the Rural Telephone Bank; (2) subsidiary entities which when combined with the parent entity meet the eligibility criteria; and (3) eligible parent entities who borrow for subsidiaries.

Requires institutions, when making insurance available through private insurers, to approve programs of two or more insurers for each type of insurance offered in the district.

Provides civil money penalties of up to $500 per day for each violation under such Act.

Limits FCA disclosure authority concerning loans made to directors or their families.

States that loans originated by a Federal land bank, or in which such bank participates with a non-FCA bank, shall not exceed 85 percent of the real estate security's appraisal. Sets forth exceptions for 75 percent loans.

Requires institutions with more than 20 employees to establish affirmative action programs.

Encourages FCS borrowers to use soil conservation practices.

Directs institutions to comply with FCA uniform financial reporting standards.

Prohibits FCS district board members from receiving more than $15,000 in annual compensation.

Requires the Farm Credit Administration Board to adopt rules for the transaction of business and keep permanent records of proceedings. Sets forth duties of the Chairman of the Board. Vests the Board with authority to appoint all institution receivers or conservators.

Directs the FCA to: (1) determine fiscal year costs; (2) assess and collect fees for such costs from institutions; and (3) deposit such amounts in the Farm Credit Administration Administrative Expense Account in the Treasury.

Provides for the examination of Federal land bank associations.

Provides for outside directors on association boards of directors.

Sets forth transitional authority provisions.

Title V: State Mediation Programs - Subtitle A: Matching Grants for State Mediation Programs - Establishes guidelines for State farm loan mediation programs. Enumerates criteria to be met by a State in order to qualify for the matching grant program instituted in this title. Lists the requirements to be met by the farm loan mediation program of a State, including provisions with respect to mediator training and duties and applications for mediation.

Provides matching grants to a qualifying State for the operation and administration of its farm loan mediation program. Limits the amount of such a grant to: (1) no more than 50 percent of the costs of the operation and administration of the State's program; and (2) $500,000 per year per State.

Directs the Secretary of Agriculture to prescribe rules requiring each guarantee or insurance program under the Secretary's jurisdiction to: (1) cooperate in good faith with requests for information or for analysis; and (2) present and explore debt restructuring proposals advanced during the course of any farm loan mediation program. Mandates corresponding rulemaking by the FCA with respect to FCS institutions. Requires the Secretary to report to the Congress by January 1, 1990.

Authorizes FY 1988 through 1991 appropriations.

Subtitle B: Waiver of Mediation Rights - Prohibits an institution from conditioning a loan upon the borrower's waiver of mediation rights.

Amends the Consolidated Farm and Rural Development Act to prohibit the Secretary from conditioning a Farmers Home Administration (FmHA) loan upon the borrower's waiver of mediation rights.

Title VI: Farmers Home Administration Loans - Amends the Consolidated Farm and Rural Development Act to permit a borrower to use the same collateral to secure two or more FmHA loans (except that such loans' value may not exceed the total value of such collateral). Prohibits the Secretary from: (1) requiring a FmHA borrower to provide additional collateral if loan payments are current; or (2) foreclosing as a result of the failure to provide additional collateral.

Directs the Secretary to notify delinquent FmHA borrowers of the available loan service programs and how to apply for such assistance.

Requires that appropriate procedures be used to calculate future yields for loan application purposes in cases where past fields have been affected by natural disasters.

Provides minimum notice periods for county committee nominations (45 days) and elections (30 days). Makes any farmer eligible for a director insured loan also eligible to serve as a county committee member (but only one such farmer may serve at one time).

Directs the Secretary to establish within the FmHA a national appeals division to hear borrower loan appeals.

Gives borrowers, upon request, a right to all loan documents, including appraisals.

Requires a county committee to classify or reclassify farmland as suitable for meaningful farming operations unless it cannot be used to meet certain purposes. Requires the Secretary to sell suitable farmland administered under specified programs to operators of not larger than family-sized farms.

Directs the Secretary, during the longer of the 180-day period after acquisition or the applicable State-permitted period, to permit a borrower to repurchase or lease his or her property. Establishes the following order of repurchase priority: (1) the immediate previous owner; (2) if actively engaged in farming, the spouse or child of the previous owner, or stockholder of a family-held corporation; and (3) operators of not larger than family-size farms.

Authorizes the government of any Indian tribe to revise FmHA purchase or lease priorities.

Includes wildlife habitats in the conservation reserve program.

Amends the Food Security Act of 1985 to extend the interest rate reduction program until 1993. Extends the eligibility income period with respect to such program from 12 to 24 months. Requires FmHA county supervisors to make available to farmers upon request a list of approved lenders participating in the FmHA guaranteed loan program.

Amends the Consolidated Farm and Rural Development Act to establish a three-year demonstration project to reduce loan interest for persons seeking to purchase FCS-held property. Limits: (1) interest reductions to not more than four percent; and (2) the length of time of such reductions to the lesser of five years or the outstanding term of such loan. Authorizes the Secretary to guarantee 95 percent of such loan. Permits subdivision of the land into more affordable tracts.

Revises homestead protection provisions to include certain farm outbuildings and up to ten acres of adjoining land. Permits occupancy for up to five years. Requires the Secretary to notify the foreclosed borrower of such homestead rights. Makes persons eligible for such protection who: (1) apply within 90 days of foreclosure; and (2) have farmed and resided on the land (with permitted absences of up to 12 months) for a specified time and meet certain income percentage requirements. Provides that during such occupancy period the borrower shall have the right of first refusal.

Provides that applicable State law shall prevail in any conflict with this Act regarding homestead provisions.

Directs the Secretary to modify delinquent FmHA loans to: (1) avoid losses to the Secretary with priority consideration placed on principal and interest write-downs and debt set-asides or otherwise through primary loan service; and (2) ensure that borrowers are able to continue farming and ranching operations.

Sets forth eligibility criteria, including: (1) the delinquency must be due to circumstances beyond the borrower's control; (2) good faith activity by the borrower, including a reasonable recovery plan; and (3) a net recovery by the Government that will equal or exceed similar foreclosure recovery. Sets forth restructuring determination provisions.

Directs the Secretary to: (1) make the required loan calculations and notify the borrower within 60 days of receiving the restructuring request; and (2) if the application is appropriate, offer to restructure the loan within an additional 45 days; and (3) if deemed inappropriate, notify the borrower within 15 days of such determination.

Authorizes up to ten-year shared appreciation arrangements (recapture of written-off amounts) as a precondition to loan restructuring.

Prohibits foreclosure of a loan that has been determined ineligible for restructuring until the borrower has been given an opportunity to appeal or until such appeal has been exhausted.

Authorizes the Secretary, without reimbursement, to transfer to any Federal or State agency, for conservation purposes, FmHA-acquired land that is determined to be: (1) surplus; (2) of marginal agricultural value; and (3) environmentally sensitive or of special importance.

Directs the Secretary to: (1) establish county-wide target participation rates for minority farmers to receive loans to purchase or lease FmHA-held land; and (2) report annually to the appropriate congressional committees.

Authorizes FmHA to use local attorneys to clear title in foreclosure proceedings on a case-by-case basis.

Directs the Secretary to pay lenders the losses on guaranteed loans within three months of a borrower's court-confirmed bankruptcy. Sets forth loss determination provisions.

Authorizes the Secretary to lease to public or private nonprofit organizations certain acquired facilities.

Directs the Secretary, not later than 60 days before issuing final regulations concerning the FmHA loan risk determinations, to report to the Congress on the effects of such regulations.

Directs the Secretary to: (1) continue at current levels the limited resource farmers' initiative; and (2) develop a farm outreach program for socially disadvantaged persons.

Expresses the sense of the Congress that: (1) the Secretary should use the FmHA guaranteed loan program to the maximum extent practicable to assist eligible borrowers whose loans are restructured; and (2) efforts by various governmental agencies and private organizations to focus attention on and respond to rural problems deserve the recognition and support of the Congress and the American people.

Title VII: Agricultural Mortgage Secondary Markets - Subtitle A: The Federal Agricultural Mortgage Corporation - Amends the Farm Credit Act of 1971 to establish a federally-chartered Federal Agricultural Mortgage Corporation to: (1) 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 guarantee of specific mortgage pools; and (3) provide guarantees for the repayment of qualified loan pool principal and interest.

Requires the Corporation to issue standards for certification of agricultural mortgage marketing facilities.

Authorizes the Corporation to charge fees to cover administrative costs.

Authorizes the Corporation to issue obligations to cover its guarantee losses. Limits outstanding obligations to $1,500,000,000.

Authorizes $1,500,000,000 to be appropriated by the Treasury for the purposes of this title.

Subjects the Corporation to Federal jurisdiction.

Directs the Comptroller General to: (1) audit the Corporation; and (2) conduct specified studies concerning the Corporation and the secondary agricultural mortgage market, and report to the Congress within two years of enactment of this Act.

Subtitle B: Farmers Home Administration Loans - Amends the Consolidated Farm and Rural Development Act to provide for a secondary market in the guaranteed portion of FmHA loans. Requires that, before any such sale, all fees be paid in full and the loan be fully disbursed to the borrower.

States that after such a sale the lender shall remain obligated under the guarantee agreement and shall continue to service the loan.

Permits loan pooling.

Directs the Secretary to submit an annual report to the appropriate congressional committees.

Title VIII: Miscellaneous - Amends the Food Security Act of 1985 to revise ownership requirements under the conservation reserve program with respect to ownership changes due to foreclosure where the owner immediately before foreclosure exercises a right of redemption from the mortgage holder.

Amends the Farm Credit Act of 1971 to repeal FCA authority to approve FCS institution bylaws or amendments. Establishes a transition period for such repeal.

Amends the Omnibus Budget Reconciliation Act of 1986 to require the Secretary, before the sale of a portfolio of notes or other obligations, to: (1) determine whether the issuer of any unsold note desires to purchase it; and (2) if so, hold open for 30 days an offer to sell the note to the issuer at a price determined by the Secretary according to a certain procedure. Prohibits the Secretary, as a condition of such sale, to require the issuer to purchase any other unsold notes or obligations.

Title IX: Regulations - Provides for the issuance of new regulations and the temporary retention of certain existing regulations.