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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 State usury laws superseded.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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