Yet another competitor to the Farm Credit System, Farmer Mac has shown steady growth in the farm lending business, and currently houses over $1.62 billion in unsecuritized loans.

As the agricultural equivalent to shops like Fannie Mae and Freddie Mac, Farmer Mac is looking to securitize following a year on the sidelines.

"Last fall, with the turmoil that took place with the financial markets, we modified our securitization strategy and started holding the securities," said a source at Farmer Mac.

Before the company pulled out last August, Farmer Mac was securitizing agricultural mortgage-backed loans every 30 days, with typical deal volumes ranging from $15 million to $40 million.

"If we were to sell the securities we're currently holding, of course it could be any amount of what's currently in the portfolio," the source said, acknowledging the likelihood of an unusually large return-to-market issuance.

Though deal timing will depend mostly upon market conditions, the company hopes to issue very soon. "We certainly don't want to be forgotten in the market place," the source said. "So we try to weigh the need to take some kind of transaction into the market place just to remind investors that we're still an issuer."

Unlike the Farm Credit System, which finances agricultural borrowers by issuing debt into the bond market, Farmer Mac issues agricultural mortgage-backed securities based on first-lien mortgages.

"It provides agricultural lenders with access to funding through the capital markets, which has not been readily available to them," the source said.

Additionally, Farmer Mac allows the small rural banks to compete with the Farm Credit System, by providing funds for equipment, supplies and development.

"They could use the money for any purpose, so long as the loan is collateralized against the first lien on the real estate," the source said.

The source added that Farmer Mac has contributed to longer fixed-rate loans to farm borrowers. "If you go back a few years most farm lending was variable," the source said. "It also permits lenders who use the program to diversify their risk concentration, to shed credit risk and interest rate risk, depending on whether they sell or swap loans for securities.

"So the program is effective in what it does: bridging the rural lenders into the Wall Street markets, to the benefit of lenders and borrowers both."

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