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FARM CREDIT SYSTEM REFORM ACT OF 1996
[[Page 110 STAT. 162]]
Public Law 104-105
104th Congress
An Act
To amend the Farm Credit Act of 1971 to provide regulatory relief, and
for other purposes. <<NOTE: Feb. 10, 1996 - [H.R. 2029]>>
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled, <<NOTE: Farm Credit
System Reform Act of 1996. Loans.>>
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) <<NOTE: 12 USC 2001 note.>> Short Title.--This Act may be cited
as the ``Farm Credit System Reform Act of 1996''.
(b) Table of Contents.--The table of contents for this Act is as
follows:
Sec. 1. Short title; table of contents.
TITLE I--AGRICULTURAL MORTGAGE SECONDARY MARKET
Sec. 101. Definition of real estate.
Sec. 102. Definition of certified facility.
Sec. 103. Duties of Federal Agricultural Mortgage Corporation.
Sec. 104. Powers of the Corporation.
Sec. 105. Federal reserve banks as depositaries and fiscal agents.
Sec. 106. Certification of agricultural mortgage marketing facilities.
Sec. 107. Guarantee of qualified loans.
Sec. 108. Mandatory reserves and subordinated participation interests
eliminated.
Sec. 109. Standards requiring diversified pools.
Sec. 110. Small farms.
Sec. 111. Definition of an affiliate.
Sec. 112. State usury laws superseded.
Sec. 113. Extension of capital transition period.
Sec. 114. Minimum capital level.
Sec. 115. Critical capital level.
Sec. 116. Enforcement levels.
Sec. 117. Recapitalization of the Corporation.
Sec. 118. Liquidation of the Federal Agricultural Mortgage Corporation.
TITLE II--REGULATORY RELIEF
Sec. 201. Compensation of association personnel.
Sec. 202. Use of private mortgage insurance.
Sec. 203. Removal of certain borrower reporting requirement.
Sec. 204. Reform of regulatory limitations on dividend, member business,
and voting practices of eligible farmer-owned cooperatives.
Sec. 205. Removal of Federal Government certification requirement for
certain private sector financings.
Sec. 206. Borrower stock.
Sec. 207. Disclosure relating to adjustable rate loans.
Sec. 208. Borrowers' rights.
Sec. 209. Formation of administrative service entities.
Sec. 210. Joint management agreements.
Sec. 211. Dissemination of quarterly reports.
Sec. 212. Regulatory review.
Sec. 213. Examination of farm credit system institutions.
Sec. 214. Conservatorships and receiverships.
Sec. 215. Farm Credit Insurance Fund operations.
Sec. 216. Examinations by the Farm Credit System Insurance Corporation.
Sec. 217. Powers with respect to troubled insured System banks.
[[Page 110 STAT. 163]]
Sec. 218. Oversight and regulatory actions by the Farm Credit System
Insurance Corporation.
Sec. 219. Farm Credit System Insurance Corporation board of directors.
Sec. 220. Interest rate reduction program.
Sec. 221. Liability for making criminal referrals.
TITLE III--IMPLEMENTATION AND EFFECTIVE DATE
Sec. 301. Implementation.
Sec. 302. Effective date.
TITLE I--AGRICULTURAL MORTGAGE SECONDARY MARKET
SEC. 101. DEFINITION OF REAL ESTATE.
Section 8.0(1)(B)(ii) of the Farm Credit Act of 1971 (12 U.S.C.
2279aa(1)(B)(ii)) is amended by striking ``with a purchase price'' and
inserting ``, excluding the land to which the dwelling is affixed, with
a value''.
SEC. 102. DEFINITION OF CERTIFIED FACILITY.
Section 8.0(3) of the Farm Credit Act of 1971 (12 U.S.C. 2279aa(3))
is amended--
(1) in subparagraph (A), by striking ``a secondary marketing
agricultural loan'' and inserting ``an agricultural mortgage
marketing''; and
(2) in subparagraph (B), by striking ``, but only'' and all
that follows through ``(9)(B)''.
SEC. 103. DUTIES OF FEDERAL AGRICULTURAL MORTGAGE CORPORATION.
Section 8.1(b) of the Farm Credit Act of 1971 (12 U.S.C. 2279aa-
1(b)) is amended--
(1) in paragraph (2), by striking ``and'' at the end;
(2) in paragraph (3), by striking the period at the end and
inserting ``; and''; and
(3) by adding at the end the following:
``(4) purchase qualified loans and issue securities
representing interests in, or obligations backed by, the
qualified loans, guaranteed for the timely repayment of
principal and interest.''.
SEC. 104. POWERS OF THE CORPORATION.
Section 8.3(c) of the Farm Credit Act of 1971 (12 U.S.C. 2279aa-
3(c)) is amended--
(1) by redesignating paragraphs (13) and (14) as paragraphs
(14) and (15), respectively; and
(2) by inserting after paragraph (12) the following:
``(13) To purchase, hold, sell, or assign a qualified loan,
to issue a guaranteed security, representing an interest in, or
an obligation backed by, the qualified loan, and to perform all
the functions and responsibilities of an agricultural mortgage
marketing facility operating as a certified facility under this
title.''.
SEC. 105. FEDERAL RESERVE BANKS AS DEPOSITARIES AND FISCAL AGENTS.
Section 8.3 of the Farm Credit Act of 1971 (12 U.S.C. 2279aa-3) is
amended--
(1) in subsection (d), by striking ``may act as depositories
for, or'' and inserting ``shall act as depositories for, and'';
and
[[Page 110 STAT. 164]]
(2) in subsection (e), by striking ``Secretary of the
Treasury may authorize the Corporation to use'' and inserting
``Corporation shall have access to''.
SEC. 106. CERTIFICATION OF AGRICULTURAL MORTGAGE MARKETING FACILITIES.
Section 8.5 of the Farm Credit Act of 1971 (12 U.S.C. 2279aa-5) is
amended--
(1) in subsection (a)--
(A) in paragraph (1), by inserting ``(other than the
Corporation)'' after ``agricultural mortgage marketing
facilities''; and
(B) in paragraph (2), by inserting ``(other than the
Corporation)'' after ``agricultural mortgage marketing
facility''; and
(2) in subsection (e)(1), by striking ``(other than the
Corporation)''.
SEC. 107. GUARANTEE OF QUALIFIED LOANS.
Section 8.6 of the Farm Credit Act of 1971 (12 U.S.C. 2279aa-6) is
amended--
(1) in subsection (a)(1)--
(A) by striking ``Corporation shall guarantee'' and
inserting the following: ``Corporation--
``(A) shall guarantee'';
(B) by striking the period at the end and inserting
``; and''; and
(C) by adding at the end the following:
``(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 standards established under
section 8.8; and
``(ii) have been purchased and held by the
Corporation.'';
(2) in subsection (d)--
(A) by striking paragraph (4); and
(B) by redesignating paragraphs (5), (6), and (7) as
paragraphs (4), (5), and (6), respectively; and
(3) in subsection (g)(2), by striking ``section 8.0(9)(B))''
and inserting ``section 8.0(9))''.
SEC. 108. MANDATORY RESERVES AND SUBORDINATED PARTICIPATION INTERESTS
ELIMINATED.
(a) Guarantee of Qualified Loans.--Section 8.6 of the Farm Credit
Act of 1971 (12 U.S.C. 2279aa-6) is amended by striking subsection (b).
(b) Reserves and Subordinated Participation Interests.--Section 8.7
of the Farm Credit Act of 1971 (12 U.S.C. 2279aa-7) is repealed.
(c) Conforming Amendments.--
(1) Section 8.0(9)(B)(i) of the Farm Credit Act of 1971 (12
U.S.C. 2279aa(9)(B)(i)) is amended by striking ``8.7, 8.8,'' and
inserting ``8.8''.
(2) Section 8.6(a)(2) of the Farm Credit Act of 1971 (12
U.S.C. 2279aa-6(a)(2)) is amended by striking ``subject to the
provisions of subsection (b)''.
[[Page 110 STAT. 165]]
SEC. 109. STANDARDS REQUIRING DIVERSIFIED POOLS.
(a) In General.--Section 8.6 of the Farm Credit Act of 1971 (12
U.S.C. 2279aa-6) (as amended by section 108) is amended--
(1) by striking subsection (c); and
(2) by redesignating subsections (d) through (g) as
subsections (b) through (e), respectively.
(b) Conforming Amendments.--
(1) Section 8.0(9)(B)(i) of the Farm Credit Act of 1971 (12
U.S.C. 2279aa(9)(B)(i)) is amended by striking ``(f)'' and
inserting ``(d)''.
(2) Section 8.13(a) of the Farm Credit Act of 1971 (12
U.S.C. 2279aa-13(a)) is amended by striking ``sections 8.6(b)
and'' in each place it appears and inserting ``section''.
(3) Section 8.32(b)(1)(C) of the Farm Credit Act of 1971 (12
U.S.C. 2279bb-1(b)(1)(C)) is amended--
(A) by striking ``shall'' and inserting ``may''; and
(B) by inserting ``(as in effect before the date of
the enactment of the Farm Credit System Reform Act of
1996)'' before the semicolon.
(4) Section 8.6(b) of the Farm Credit Act of 1971 (12 U.S.C.
2279aa-6(b)) (as redesignated by subsection (a)(2)) is
amended--
(A) by striking paragraph (4) (as redesignated by
section 107(2)(B)); and
(B) by redesignating paragraphs (5) and (6) (as
redesignated by section 107(2)(B)) as paragraphs (4) and
(5), respectively.
SEC. 110. SMALL FARMS.
Section 8.8(e) of the Farm Credit Act of 1971 (12 U.S.C. 2279aa-
8(e)) is amended by adding at the end the following: ``The Board shall
promote and encourage the inclusion of qualified loans for small farms
and family farmers in the agricultural mortgage secondary market.''.
SEC. 111. DEFINITION OF AN AFFILIATE.
Section 8.11(e) of the Farm Credit Act of 1971 (12 U.S.C. 2279aa-
11(e)) is amended--
(1) by striking ``a certified facility or''; and
(2) by striking ``paragraphs (3) and (7), respectively, of
section 8.0'' and inserting ``section 8.0(7)''.
SEC. 112. STATE USURY LAWS SUPERSEDED.
Section 8.12 of the Farm Credit Act of 1971 (12 U.S.C. 2279aa-12) is
amended by striking subsection (d) and inserting the following:
``(d) State Usury Laws Superseded.--A provision of the Constitution
or law of any State shall not apply to an agricultural loan made by an
originator or a certified facility in accordance with this title for
sale to the Corporation or to a certified facility for inclusion in a
pool for which the Corporation has provided, or has committed to
provide, a guarantee, if the loan, not later than 180 days after the
date the loan was made, is sold to the Corporation or included in a pool
for which the Corporation has provided a guarantee, if the provision--
``(1) limits the rate or amount of interest, discount
points, finance charges, or other charges that may be charged,
taken,
[[Page 110 STAT. 166]]
received, or reserved by an agricultural lender or a certified
facility; or
``(2) limits or prohibits a prepayment penalty (either fixed
or declining), yield maintenance, or make-whole payment that may
be charged, taken, or received by an agricultural lender or a
certified facility in connection with the full or partial
payment of the principal amount due on a loan by a borrower in
advance of the scheduled date for the payment under the terms of
the loan, otherwise known as a prepayment of the loan
principal.''.
SEC. 113. EXTENSION OF CAPITAL TRANSITION PERIOD.
Section 8.32 of the Farm Credit Act of 1971 (12 U.S.C. 2279bb-1) is
amended--
(1) in the first sentence of subsection (a), by striking
``Not later than the expiration of the 2-year period beginning
on December 13, 1991,'' and inserting ``Not sooner than the
expiration of the 3-year period beginning on the date of
enactment of the Farm Credit System Reform Act of 1996,'';
(2) in the first sentence of subsection (b)(2), by striking
``5-year'' and inserting ``8-year''; and
(3) in subsection (d)--
(A) in the first sentence--
(i) by striking ``The regulations
establishing'' and inserting the following:
``(1) In general.--The regulations establishing''; and
(ii) by striking ``shall contain'' and
inserting the following: ``shall--
``(A) be issued by the Director for public comment
in the form of a notice of proposed rulemaking, to be
first published after the expiration of the period
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