Abstract

As a result of financial difficulties confronting American agriculture, public debate is focusing on longterm options for restoring economic stability and growth to the agricultural economy. Many believe that just as homeowners in small communities throughout the nation have been served by the development of a secondary market for residential mortgages sponsored by the federal government, farmers throughout the country would similarly benefit from the development of a secondary market for farm real estate mortgages. This paper discusses issues relating to the development of a secondary market for agricultural real estate loans. The concept of a secondary market for agriculture is of considerable interest to Congress, as evidenced by recent enactment of the Agricultural Credit Act of 1987 which established the Federal Agricultural Mortgage Corporation (“Farmer Mac”) to create a secondary market for farm real estate loans. The first section discusses the general nature of secondary markets and their purposes, with particular attention given to the secondary market for home mortgages because it served as a model for a secondary market for farm loans. Section two discusses basic differences between agriculture and housing, and section three provides a brief discussion of federal credit subsidies designed to help meet social and economic goals by influencing the allocation of credit to particular sectors of the economy such as housing and agriculture. Potential benefits and costs associated with the development of a secondary market for agriculture are discussed in section four