As filed with the Securities and Exchange Commission On April 29, 1997
Registration No. 333-______
===================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------
FARMER MAC MORTGAGE
SECURITIES CORPORATION
(Exact name of registrant as specified in its charter)
--------------------
Delaware 52-1779791
(State or other (I.R.S. Employer
jurisdiction of Identification No.)
incorporation or
organization)
919 18th Street, N.W.
Washington, D.C. 20006
(202) 872-7700
(Address including zip code, and telephone number, including area code, of
registrant's principal executive offices)
--------------------
Henry D. Edelman
Farmer Mac Mortgage Securities Corporation
919 18th Street, N.W.
Washington, D.C. 20006
(202) 872-7700
(Name, address including zip code, and telephone number,
including area code, of agent for service)
--------------------
Copies to:
F. William Reindel Michael T. Bennett
Fried, Frank, Harris, Shriver & Federal Agricultural Mortgage
Jacobson Corporation
One New York Plaza 919 18th Street, N.W.
New York, New York 10004-1980 Washington, D.C. 20006
(212) 859-8189 (202) 872-7700
--------------------
Approximate date of commencement of proposed sale to the public: From time to
time after the effective date of this Registration Statement.
If any securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415
under the Securities Act of 1933, as amended, check the following
box: [X]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
================================================================================
Amount Proposed Proposed Amount of
Title of Class of to be Maximum Maximum Registration
Securities to be Registered Aggregate Aggregate Fee (2)
Registered Price Offering
Per Unit (1) Price (1)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Guaranteed
Agricultural $500,000,000 100% $500,000,000 $151,515.15
Mortgage-Backed
Securities (Issuable
in Series)
- --------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of computing the registration fee in
accordance with Rule 457(o) under the Securities Act of 1933.
(2) Pursuant to Rule 429 under the Securities Act of 1933, $12,792,610 of
securities registered under Registration Statement No. 333-6325 are being
carried forward. A filing fee of $4,411.25, which is associated with the
$12,792,610 of securities being carried forward, was previously paid with
Registration Statement No. 333-6325. In addition, a filing fee of $303.03
was previously paid on April 29, 1997 when this Registration Statement was
originally filed.
(3) Pursuant to Rule 429 under the Securities Act of 1933, this Registration
Statement contains a combined prospectus that also relates to Registration
Statement No. 333-6325 on Form S-3 previously filed by the Registrant on
June 19, 1996 and declared effective on June 20, 1996.
--------------------
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
<PAGE>
[GRAPHIC OMITTED]
SUBJECT TO COMPLETION, DATED May --, 1997
PROSPECTUS SUPPLEMENT
(To Prospectus dated May --, 1997) $____________
(Approximate)
FEDERAL AGRICULTURAL MORTGAGE CORPORATION
FARMER MAC
GUARANTEED AGRICULTURAL MORTGAGE-BACKED SECURITIES
The Guaranteed Agricultural Mortgage-Backed Securities offered hereby (the
"Certificates") evidence beneficial ownership interests in a trust fund (the
"Trust Fund") consisting primarily of one or more pools (each, a "Pool") of [(i)
agricultural real estate mortgage loans (collectively, the "Qualified Loans"),]
[(ii) portions of loans guaranteed by the United States Secretary of Agriculture
pursuant to the Consolidated Farm and Rural Development Act (7 U.S.C. ss. 1921
et seq.) ("Guaranteed Portions"),] [(iii) Farmer Mac Guaranteed Agricultural
Mortgage-Backed Securities ("Trust Fund AMBS"), mortgage pass-through
certificates or other mortgage-backed securities evidencing interests in or
secured by Qualified Loans or Guaranteed Portions (collectively, the "QMBS")] or
[(iv) a combination of the foregoing.]. As described herein, timely payment of
interest on and principal of the Certificates is guaranteed by the Federal
Agricultural Mortgage Corporation, a federally chartered instrumentality of the
United States ("Farmer Mac"), pursuant to Title VIII of the Farm Credit Act of
1971, as amended. See "FARMER MAC GUARANTEE" herein. (Continued on next page)
THE OBLIGATIONS OF FARMER MAC UNDER ITS GUARANTEE ARE OBLIGATIONS SOLELY OF
FARMER MAC AND ARE NOT OBLIGATIONS OF, AND ARE NOT GUARANTEED BY, THE FARM
CREDIT ADMINISTRATION, THE UNITED STATES OR ANY AGENCY OR INSTRUMENTALITY OF THE
UNITED STATES (OTHER THAN FARMER MAC), AND ARE NOT BACKED BY THE FULL FAITH AND
CREDIT OF THE UNITED STATES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Prospective investors in the Certificates should consider the factors discussed
under "Risk Factors" in this Prospectus Supplement on Page S-__ and in the
Prospectus on Page ___.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------
Class Original CUSIP Pass- Payment Initial Final
DesignationPrincipal Number Through Frequency Distribution Distribution
(1) Amount(2) Rate Date Date (4)
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------
</TABLE>
(1) Each Class of Certificates will separately evidence the Pool of Qualified
Loans [QMBS] having the corresponding alpha-numerical designation. As described
herein, each Class of Certificates will be entitled to all payments of interest
and principal on the underlying [Qualified Loans] [Guaranteed Portions] [QMBS]
included in the related Pool. (2) Approximate, subject to a permitted variance
of plus or minus 5% with respect to each Pool. (3) On each applicable
Distribution Date, the Pass-Through Rate for each Class of Certificates will be
a rate per annum equal to the weighted average of the Net Mortgage Rates (as
defined herein) for the underlying [Qualified Loans] [Guaranteed Portions]
[QMBS] in the related Pool. It is expected that the Pass-Through Rates for the
initial Interest Accrual Period for each Class of Certificates will be
approximately as follows: __________________, per annum. See "DESCRIPTION OF THE
CERTIFICATES--Distributions--Interest" herein. (4) The Final Distribution Date
for each Class of Certificates has been set to coincide with the latest maturing
underlying [Qualified Loans] [Guaranteed Portions] [QMBS] in the related Pool.
The Certificates will be purchased from Farmer Mac Mortgage Securities
Corporation (the "Depositor") by (the "Underwriter") and are being offered by
the Underwriter from time to time in negotiated transactions, at varying prices
to be determined at the time of sale. Proceeds to the Depositor from the sale of
the Certificates will be approximately ______% of the aggregate initial
Certificate Balances (subject to increase if proceeds to the Underwriter exceed
certain levels), plus accrued interest thereon from _________, 199 (the "Cut-off
Date"), before deducting expenses payable by the Depositor. See "METHOD OF
DISTRIBUTION" herein.
The Certificates are offered subject to receipt and acceptance by the
Underwriter, to prior sale and to the Underwriter's right to reject any order in
whole or in part and to withdraw, cancel or modify the offer without notice. [It
is expected that the Certificates will be issued in book-entry form, and
beneficial interests therein will be held through the book-entry system of the
Federal Reserve Banks, on or about __________, 199_ (the "Closing Date"). ]
[Underwriter]
The date of this Prospectus Supplement is _______, 199_.
<PAGE>
Each Class of Certificates will be issued in an original Class Certificate
Balance equal to the original principal amount of the related Pool. The initial
Class Certificate Balance of each Class of Certificates is subject to the
permitted variance set forth on the cover hereof with respect to the related
Pool.
Each Class of Certificates will relate to a separate Pool. Interest will
accrue on each Class of Certificates at the respective rate per annum (each, a
"Pass-Through Rate") set forth on the cover page hereof and will be
distributable on each Distribution Date for such Class, commencing on the date
specified on the cover hereof. On each applicable Distribution Date, the amount
of interest distributable on each Certificate will equal interest accrued for
the related Interest Accrual Period at the applicable Pass-Through Rate on the
Certificate Balance thereof immediately prior to such Distribution Date.
Principal in respect of each Pool will be distributable to the related
Class of Certificates on each Distribution Date for such Class to the extent and
in the manner described herein.
The yield to maturity on the Certificates of each Class will be affected
by the rate and timing of principal payments (including voluntary prepayments
and prepayments resulting from Liquidated Qualified Loans (as defined herein))
on the underlying Qualified Loans in the related Pool, which may be prepaid
under the circumstances described herein. Investors in the Certificates offered
hereby should consider, in the case of any Certificates purchased at a discount,
the risk that a slower than anticipated rate of principal payments on the
related Qualified Loans could result in actual yields that are lower than
anticipated yields and, in the case of any Certificates purchased at a premium,
the risk that a faster than anticipated rate of principal payments on the
related Qualified Loans could result in actual yields that are lower than
anticipated yields. See "YIELD, PREPAYMENT AND MATURITY CONSIDERATIONS" herein.
[On any Distribution Date when the aggregate principal balance of the
Qualified Loans in the Trust Fund is less than one percent thereof as of the
Cut-off Date (the "Termination Percentage"), the Master Servicer may purchase
from the Trust Fund all remaining Qualified Loans and thereby effect an early
retirement of the Certificates outstanding at such time. See "DESCRIPTION OF THE
AGREEMENTS--Optional Termination" herein and "DESCRIPTION OF THE
CERTIFICATES--TERMINATION" in the Prospectus.]
The Qualified Loans will be directly serviced by _______________ (each, a
"Central Servicer") which will act on behalf of Farmer Mac as described herein.
See "DESCRIPTION OF THE AGREEMENTS" herein.
The terms "Holder" and "Holders" used herein refer to both holders of
Book-Entry Certificates (as defined herein) and holders of Non-Book-Entry
Certificates (as defined herein), unless specific reference is made only to
either holders of Book-Entry Certificates or holders of Non-Book-Entry
Certificates.
The Certificates offered hereby constitute Guaranteed Agricultural
Mortgage-Backed Securities offered from time to time pursuant to a
Prospectus dated _________, 1997 of which this Prospectus Supplement is a
part. This Prospectus Supplement does not contain complete information
about the offering of the Certificates. Additional information is
contained in the Prospectus and purchasers are urged to read both this
Prospectus Supplement and the Prospectus in full. Sales of the
Certificates may not be consummated unless the purchaser has received both this
Prospectus Supplement and the Prospectus.
---------------------------
There is currently no secondary market for the Certificates of any Class.
The Underwriter intends to make a market in the Certificates but is not
obligated to do so. There can be no assurance that any such market for the
Certificates will develop or, if developed, will continue or will provide
investors with sufficient liquidity of investment.
---------------------------
Certain persons participating in this offering may engage in transactions
that stabilize, maintain, or otherwise affect the price of the Certificates.
Specifically, the Underwriter may overallot in connection with the offering, and
may bid for, and purchase, the Certificates in the open market. For a
description of these activities, see "METHOD OF DISTRIBUTION."
---------------------------
<PAGE>
[The Trust Fund will be treated as a grantor trust for federal income tax
purposes; no election will be made to treat the Trust Fund as a real estate
mortgage investment conduit. See "CERTAIN FEDERAL INCOME TAX CONSEQUENCES"
herein and in the Prospectus.] [An election will be made to treat the Trust Fund
as a real estate mortgage investment conduit (a "REMIC") for federal income tax
purposes. Each Class of Certificates other than the Class R Certificates (as
defined in the Prospectus) will be designated as regular interests in the REMIC
and will generally be treated as debt instruments for federal income tax
purposes. The Class R Certificates will be designated as the residual interests
in the REMIC. Prospective investors are cautioned that the REMIC taxable income
and tax liability on Class R Certificates may exceed cash distributions to such
Holders during certain periods, in which event such Holders must have sufficient
alternative sources of funds to pay such tax liability. See "CERTAIN FEDERAL
INCOME TAX CONSEQUENCES" herein and in the Prospectus.]
---------------------------
[As described further herein, the Class R Certificates may not be
purchased by or transferred by ERISA Plans to (i) a Disqualified
Organization or Book-Entry Nominee (as defined in accompanying
Prospectus), (ii) except under limited circumstances, a person who is not
a U.S. Person (as defined in the accompanying Prospectus), (iii) an ERISA
Plan or (iv) any person or entity who the transferor has reason to believe
intends to impede the assessment or collection of any federal, state or
local taxes legally required to be paid with respect thereto. See "ERISA
CONSIDERATIONS" herein]
---------------------------
Until 90 days after the date of this Prospectus Supplement, all
dealers effecting transactions in the Certificates, whether or not
participating in this distribution, may be required to deliver a
Prospectus Supplement and the Prospectus to which it relates. This is in
addition to the obligation of dealers to deliver a Prospectus and
Prospectus Supplement when acting as underwriters and with respect to their
unsold allotments or subscriptions.
---------------------------
All documents and reports filed or caused to be filed by the Depositor
subsequent to the date of this Prospectus Supplement with respect to the Trust
Fund pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, prior
to the termination of an offering of Certificates evidencing interests therein
shall be deemed to be incorporated by reference in this Prospectus Supplement
and to be a part hereof. In addition, Farmer Mac's Annual Report on Form 10-K
for the year ended ________________, and any subsequent reports filed with the
Commission pursuant to Sections 13(a) or 15(d) of the Exchange Act shall also be
deemed to be incorporated by reference in this Prospectus Supplement and to be a
part hereof. All documents and reports filed by Farmer Mac pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus Supplement and prior to the termination of any offering made by this
Prospectus Supplement will likewise be deemed to be incorporated by reference
herein and to be a part hereof.
Any periodic reports filed by the Depositor or Farmer Mac under the
Exchange Act as described in the Prospectus can be inspected at the public
reference facilities maintained by the Commission at its Public Reference
Section, 450 Fifth Street, N.W., Washington, DC 20549, and its Regional Offices
located as follows: Chicago Regional Office, Citicorp Center, 500 Madison
Street, Chicago, Illinois 60661; and New York Regional Office, Seven World Trade
Center, New York, New York 10048. The Commission maintains a World Wide Web site
on the Internet at http://www.sec.gov. that contains reports, proxy and other
information regarding registrants that file electronically with the Commission.
The consolidated balance sheets of Farmer Mac as of ____________ and _____
and related consolidated statements of operations and cash flows for each of the
years in the three-year period ended ___________, have been incorporated by
reference herein and in the Registration Statement in reliance upon the report
of KPMG Peat Marwick LLP, independent certified public accountants, incorporated
by reference herein, and upon the authority of said firm as experts in
accounting and auditing.
<PAGE>
- -----------------------------------------------------------------------------
SUMMARY OF TERMS
The following summary is qualified in its entirety by the detailed
information appearing elsewhere in this Prospectus Supplement and the
Prospectus. Capitalized terms used herein and not otherwise defined have the
meanings assigned in the Prospectus.
Securities Offered Guaranteed Agricultural Mortgage-Backed
Securities (the "Certificates").
The Certificates will be issued in one or more
Classes, as set forth on the cover page hereof.
Each Class of Certificates will separately
evidence the right to receive distributions in
respect of the Pool of [Qualified Loans]
[Guaranteed Portions] [QMBS] having the
corresponding alpha-numerical designation and
will be issued in an original Class Certificate
Balance equal to the original principal amount
of such Pool. The initial Class Certificate
Balance of each Class of Certificates is subject
to a permitted variance as provided on the cover
hereof. See "ANNEX I: DESCRIPTION OF THE
QUALIFIED LOAN POOLS" for detailed information
on the underlying Qualified Loans in each Pool.
The Guarantor The Federal Agricultural Mortgage
Corporation ("Farmer Mac") is a federally
chartered instrumentality of the United
States established by Title VIII of the
Farm Credit Act of 1971, as amended (the
"Farmer Mac Charter"). See "FEDERAL
AGRICULTURAL MORTGAGE CORPORATION" in the
Prospectus.
The Depositor Farmer Mac Mortgage Securities
Corporation, a Delaware corporation and wholly
owned subsidiary of Farmer Mac, will act as
depositor (the "Depositor") under the Trust
Agreement. See "THE DEPOSITOR" herein.
The Guarantee As described herein, the timely
payment to Holders of interest on and principal
(including any balloon payments) of the
Certificates is guaranteed by Farmer Mac. See
"FARMER MAC GUARANTEE" herein.
Not an Obligation of the Farmer Mac's obligations under the Farmer
United States Mac Guarantee are not backed by the full
faith and credit of the United States.
The Master Servicer Farmer Mac will act as Master Servicer (the
"Master Servicer") of the Qualified Loans.
The Qualified Loans will be directly
serviced by _______________ (each, a
"Central Servicer"), which will act on
behalf of Farmer Mac pursuant to a
Servicing Contract (as supplemented)
between such parties. See "DESCRIPTION OF
THE AGREEMENTS" herein.
The Trustee _______________, a ___________, will act as
trustee (the "Trustee") pursuant to a Trust
Agreement as supplemented by an Issue
Supplement (collectively, the "Trust
Agreement"), each among Farmer Mac, the
Depositor and the Trustee.
Cut-off Date As set forth on the cover page hereof.
Closing Date As set forth on the cover page hereof.
Distribution Dates Distributions to Holders of the
Certificates of each Class will be made on
an [annual, semi-annual or quarterly] basis
as specified on the cover page hereof.
Such [annual, semi-annual, or quarterly]
Distribution Dates will occur on
______________ (unless such ____ day is not
a Business Day, whereupon such distribution
will be made on the next following Business
Day), commencing on the initial
Distribution Date for such Class set forth
on the cover page hereof.
Distributions on the Interest. Interest will accrue on the
Certificates Certificates of each Class at the
respective Pass-Through Rate described herein
during each related Interest Accrual Period. On
each applicable Distribution Date, interest will
be distributable on each Class of Certificates
in an aggregate amount equal to the interest
accrued at the applicable Pass-Through Rate
during the related Interest Accrual Period on
the Class Certificate Balance of such Class
immediately prior to such Distribution Date (as
to each Class, the "Accrued Certificate
Interest"). As to each Class and related
Distribution Date, the "Interest Accrual Period"
will be the period from the first day of the
month of the preceding Distribution Date (or, in
the case of the first Distribution Date for each
Class, from the Cut-off Date) through and
including the last day of the month preceding
the month of such current Distribution Date. See
"DESCRIPTION OF THE CERTIFICATES--
Distributions-- Interest" herein.
Principal. Principal in respect of each Pool
will be distributed to the related Class of
Certificates on each applicable Distribution
Date in an aggregate amount equal to the
Principal Distribution Amount for such
Distribution Date and Pool. The "Principal
Distribution Amount" for each Pool as of each
applicable Distribution Date will equal the sum
of (i) the principal portion of all scheduled
payments (including any balloon payments) on the
Qualified Loans in such Pool due during the
preceding Due Period (as defined herein), (ii)
the scheduled principal balance of each
Qualified Loan included in such Pool which was
repurchased or became a Liquidated Qualified
Loan during the preceding Due Period, and (iii)
all full or partial principal prepayments
received during the preceding Due Period. See
"DESCRIPTION OF THE
CERTIFICATES--Distributions-- Principal" herein.
[Yield Maintenance Charges. Each Qualified Loan
provides for the payment by the Borrower of a
Yield Maintenance Charge (as defined herein) in
connection with any prepayments, in whole or in
part. The amount of any Yield Maintenance Charge
in respect of the related Qualified Loan, to the
extent collected by the Central Servicer, will
be distributed to the Holders of the related
Class of Certificates on each Distribution Date
in the manner and to the extent described
herein.] Farmer Mac will not guarantee to
Holders of the related Class of Certificates the
collection of any Yield Maintenance Charge
payable in connection with a principal
prepayment on a Qualified Loan. [See
"DESCRIPTION OF THE
CERTIFICATES--Distributions--Yield Maintenance
Charges" herein.]
Record Date The Record Date for each Distribution Date
and Class of Certificates will be the close of
business on the _____ Business Day of the month
immediately preceding the month in which such
Distribution Date occurs.
The Trust Fund The Trust Fund corpus consists of:
(a) [(i) agricultural real estate mortgage
loans (collectively, the "Qualified
Loans"),] [(ii) portions of loans
guaranteed by the United States Secretary
of Agriculture pursuant to the Consolidated
Farm and Rural Development Act (7 U.S.C.
ss. 1921 et seq.) ("Guaranteed Portions"),]
[(iii) Farmer Mac Guaranteed Agricultural
Mortgage-Backed Securities ("Trust Fund
AMBS"), mortgage pass-through certificates
or other mortgage-backed securities
evidencing interests in or secured by
Qualified Loans or Guaranteed Portions
(collectively, the "QMBS")] or [(iv) a
combination of the foregoing] and (b)(i)
the Farmer Mac Guarantee and (ii) the
Collection Account, the Certificate Account
(each as defined in the Prospectus) and all
cash and investments held therein.
Optional Termination On any Distribution Date for any Class of
Certificates, when the aggregate principal
balance of the Qualified Loans in all of
the Pools in the Trust Fund is less than
the Termination Percentage as of the
Cut-off Date, the Master Servicer may
repurchase from the Trust Fund all
remaining Qualified Loans and thereby
effect an early retirement of the
Certificates outstanding at such time. See
"DESCRIPTION OF THE AGREEMENTS--Optional
Termination" herein and in "DESCRIPTION OF
THE CERTIFICATES--TERMINATION" in the
Prospectus.
Certain Federal Income Tax
Consequences [The Trust Fund will be treated as a
grantor trust for federal income tax
purposes; no election will be made to treat
the Trust Fund as a real estate mortgage
investment conduit.] [An election will be
made to treat the Trust Fund as a real
estate mortgage investment conduit (the
"REMIC") for federal income tax purposes.
The Certificates other than the Class R
Certificates will be designated as the
regular interests in the REMIC and
generally will be treated as newly
originated debt instruments for federal
income tax purposes. The Class R
Certificates will be designated as the
residual interests in the REMIC. Beneficial
owners of the Certificates will be required
to
report income on such Certificates in
accordance with the accrual method of
accounting. Prospective investors are
cautioned that the REMIC taxable income and
tax liability on Class R Certificates may
exceed cash distributions to such Holders
during certain periods, in which event such
Holders must have sufficient alternative
sources of funds to pay such tax
liability. The Class R Certificates are
subject to significant transfer
ERISA Considerations restrictions.] [Insert any
relevant disclosure regarding original issue
discount on the Certificates.] See "CERTAIN
FEDERAL INCOME TAX CONSEQUENCES" herein and in
the Prospectus.
The acquisition of a Certificate by a plan
subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or
any individual retirement account ("IRA") or any
other plan subject to Code Section 4975 could,
in some instances, result in a prohibited
transaction or other violations of the fiduciary
responsibility provisions of ERISA and Code
Section 4975. Prospective plan investors should
consult with their legal advisors concerning the
impact of ERISA and the Code, and the
availability of any exemptions thereunder, prior
to making an investment in the Certificates. See
"ERISA CONSIDERATIONS" herein and in the
Prospectus.
Legal Investment The Certificates will constitute securities
guaranteed by Farmer Mac for purposes of
the Farmer Mac Charter and, as such, will,
by statute, be legal investments for
certain types of institutional investors to
the extent that those investors are
authorized under any applicable law to
purchase, hold, or invest in obligations
issued by or guaranteed as to principal and
interest by the United States or any agency
or instrumentality of the United States.
Investors whose investment authority is
subject to legal restrictions should
consult their own legal advisors to
determine whether and the extent to which
Certificates constitute legal investments
for them. See "LEGAL INVESTMENT" herein and
in the Prospectus.
<PAGE>
RISK FACTORS
Prospective investors in the Certificates should consider the following
factors (together with the factors set forth in "RISK FACTORS" in the
Prospectus) in connection with the purchase of such Certificates.
[Collection of Yield Maintenance Charges. Farmer Mac will not guarantee to
Holders of the related Class of Certificates the collection of any yield
maintenance charge ("Yield Maintenance Charge") payable in connection with a
principal prepayment on a Qualified Loan. The amount of any Yield Maintenance
Charge in respect of the related Qualified Loan, to the extent collected by the
appropriate Central Servicer, will be distributed to Holders of the related
Class of Certificates on the related Distribution Date in the manner and to the
extent described herein. ]
[Under each Servicing Contract, the Central Servicer may not waive the
collection of any Yield Maintenance Charge without the prior written consent of
Farmer Mac, as Master Servicer. It is Farmer Mac's policy generally not to
consent to the waiver of the collection of a Yield Maintenance Charge unless the
amount of such charge is unduly large relative to the unpaid principal balance
of the related Qualified Loan. In such cases, and other circumstances that raise
similar equitable concerns, Farmer Mac's policy is to require Central Servicers
to attempt to collect a portion of such Yield Maintenance Charge in connection
with any prepayment of principal; however, there may be situations in which
Farmer Mac may consider it appropriate to waive any collection of a Yield
Maintenance Charge. Generally, a principal prepayment resulting from the
condemnation of, or casualty on, the related Mortgaged Property (as defined
herein) will not be accompanied by a Yield Maintenance Charge. Because Farmer
Mac does not guarantee the collection of such charges, the expected yield to
investors in the Certificates may be sensitive in various degrees to the extent
such amounts are not collected. See "FARMER MAC GUARANTEE" herein.]
[The required payment of any Yield Maintenance Charge may not be a
sufficient disincentive to prevent the voluntary prepayment of the related
Qualified Loan and, even if collected, may be insufficient to offset fully the
adverse effects on the anticipated yield thereon arising out of the
corresponding principal payment.]
[Relative Loan Sizes. Discussion of risk factors.]
[Limited Number of Loans. Discussion of risk factors.]
[Other]
<PAGE>
DESCRIPTION OF THE QUALIFIED LOANS
General
The Trust Fund will consist of [(i) agricultural real estate mortgage
loans (collectively, the "Qualified Loans"),] [(ii) portions of loans guaranteed
by the United States Secretary of Agriculture pursuant to the Consolidated Farm
and Rural Development Act (7 U.S.C. ss. 1921 et seq.) ("Guaranteed Portions"),]
[(iii) Farmer Mac Guaranteed Agricultural Mortgage-Backed Securities ("Trust
Fund AMBS"), mortgage pass-through certificates or other mortgage-backed
securities evidencing interests in or secured by Qualified Loans or Guaranteed
Portions (collectively, the "QMBS")] or [(iv) a combination of the foregoing.]
[Description of QMBS
The Trust Fund will include Trust Fund QMBS that have the characteristics
as defined herein.]
Description of Qualified Loans
The Trust Fund will consist primarily of one or more Pools of Qualified
Loans [which underlie the QMBS] which will be assigned to the Trust Fund by the
Depositor. For a detailed description of certain characteristics of the
[underlying] Qualified Loans in each Pool, see "ANNEX I: DESCRIPTION OF THE
QUALIFIED LOAN POOLS" at the end of this Prospectus Supplement. The aggregate
outstanding principal balance of the Qualified Loans [underlying the QMBS] in
each Pool is subject to the permitted variance described on the cover page
hereof. Each Qualified Loan is secured by a first-lien on Agricultural Real
Estate (the "Mortgaged Properties"). The principal amount of any Qualified Loan
cannot exceed $3,420,400, as adjusted for inflation. "Agricultural Real Estate"
is a parcel or parcels of land, which may be improved by buildings and
machinery, fixtures and equipment or other structures permanently affixed to the
parcel or parcels, that (a) are used for the production of one or more
agricultural commodities and (b) consist of a minimum of five acres or are used
in producing minimum annual receipts of $5,000.
The Qualified Loans [underlying the QMBS] have current loan-to-value
ratios of not more than 70%. All of the Qualified Loans meet Farmer Mac's
Underwriting and Appraisal Standards (the "Underwriting Standards") with respect
to newly originated loans. As used herein, a "current" loan-to-value ratio is
based on an appraisal performed within one year prior to the acquisition of the
related Qualified Loan by the Depositor. See "DESCRIPTION OF THE TRUST
FUNDS--Qualified Loans--General" in the Prospectus.
The description of the Qualified Loans [underlying the QMBS] and the
related Mortgaged Properties is based upon each Pool as constituted at the close
of business on the Cut-off Date, as adjusted for any scheduled principal
payments due on or before such date. Prior to the issuance of the Certificates,
Qualified Loans [QMBS] may be removed from a Pool as a result of incomplete
documentation or otherwise, if the Depositor deems such removal necessary or
appropriate, or as a result of prepayments in full. A limited number of other
Qualified Loans [QMBS] may be added to any Pool prior to the issuance of the
Certificates unless including such Qualified Loans [QMBS] would materially alter
the characteristics of such Pool as described herein. The Depositor believes
that the information set forth in "ANNEX I: DESCRIPTION OF THE QUALIFIED LOAN
POOLS" will be representative of the characteristics of each Pool as it will be
constituted at the time the Certificates are issued although the range of
Mortgage Interest Rates and maturities and certain other characteristics of the
[underlying] Qualified Loans in such Pool may vary. Pursuant to the Sale
Agreement, the related Seller (as defined herein) has made certain
representations and warranties with respect to the Qualified Loans and their
origination in accordance with the Underwriting Standards. See "DESCRIPTION OF
THE AGREEMENTS--Representations and Warranties; Repurchases" in the Prospectus.
The information in ANNEX I with respect to the [underlying] Qualified
Loans will be revised to reflect any adjustments in the composition of the Trust
Fund and will be included in a Form 8-K to be filed with the Commission within
15 days after the Closing Date. Such information will be available to Holders
promptly thereafter through the facilities of the Commission as described on
page S-__ herein and under "AVAILABLE INFORMATION" in the Prospectus.
DESCRIPTION OF THE CERTIFICATES
General
The Certificates will be issued pursuant to a Trust Agreement, dated as of
__________, as supplemented by an Issue Supplement dated as of the Cut-off Date
(collectively, the "Trust Agreement"), each among Farmer Mac, the Depositor and
the Trustee. Reference is made to the Prospectus for important additional
information regarding the terms and conditions of the Trust Agreement and the
Certificates. See "DESCRIPTION OF THE CERTIFICATES" and "DESCRIPTION OF THE
AGREEMENTS" in the Prospectus. The Certificates are issued as a separate series
under the Trust Agreement with a series designation corresponding to the Closing
Date. Each Class of Certificates will be issued in an initial Class Certificate
Balance equal to ______________.
The Certificates will evidence beneficial ownership interests in a trust
fund (the "Trust Fund") consisting primarily of [(i) agricultural real estate
mortgage loans (collectively, the "Qualified Loans"),] [(ii) portions of loans
guaranteed by the United States Secretary of Agriculture pursuant to the
Consolidated Farm and Rural Development Act (7 U.S.C. ss. 1921 et seq.)
("Guaranteed Portions"),] [(iii) Farmer Mac Guaranteed Agricultural
Mortgage-Backed Securities ("Trust Fund AMBS"), mortgage pass-through
certificates or other mortgage-backed securities evidencing interests in or
secured by Qualified Loans or Guaranteed Portions (collectively, the "QMBS")] or
[(iv) a combination of the foregoing.] Each Pool of Qualified Loans [QMBS] is
evidenced by a single Class of Certificates bearing the same alpha-numerical
designation as the underlying Pool. Distributions of interest and principal on
each Class of Certificates will be calculated with reference to the [underlying]
Qualified Loans in the related Pool.
Farmer Mac has established a six-digit alpha-numerical pool numbering
system to identify certain characteristics of the Qualified Loans [underlying
QMBS] in each Pool and to facilitate Holders' access to the factor and other
loan information to be published periodically by Farmer Mac with respect
thereto. The first three digits are "loan identifiers." The first digit denotes
the maximum original term to maturity of the Qualified Loans [underlying the
QMBS] in the Pool; the second digit denotes the scheduled payment frequency with
respect to the Qualified Loans [underlying the ABMS] in the Pool; the third
digit denotes the first month in a calendar year in which a Distribution Date
for such Pool occurs. The last three digits sequentially designate Pools with
the same three loan identifiers. The table below summarizes Farmer Mac's pool
numbering system:
<TABLE>
<CAPTION>
<S> <C> <C>
1st Digit 2nd Digit 3rd Digit
A=15 year A=Annual 1=January
B=7 year S=Semi-annual 2=April
C=5 year Q=Quarterly 3=July
4=October
</TABLE>
[Book-Entry Certificates
The Certificates will be issued in book-entry form, and beneficial
interests therein will be held by investors through the book-entry system of the
Federal Reserve Banks (the "Fed book-entry system"), in minimum denominations in
Certificate Balances of $1,000 and integral multiples of $1 in excess thereof.
The Certificates will be maintained on the Fed book-entry system in a
manner that permits separate trading and ownership. Each Class of Certificates
has been assigned a CUSIP number and will be tradable separately under such
CUSIP number. The CUSIP number for each Class is specified on the cover hereof.
In accordance with the procedures established for the Fed book-entry
system, the Federal Reserve Banks will maintain book-entry accounts with respect
to the Certificates and make distributions on the Certificates on behalf of the
Master Servicer on the applicable Distribution Dates by crediting Holders'
accounts at the Federal Reserve Banks.
Such entities whose names appear on the book-entry records of a Federal
Reserve Bank as the entities for whose accounts such Certificates have been
deposited are herein referred to as "Holders of Book-Entry Certificates." A
Holder of Book-Entry Certificates is not necessarily the beneficial owner of a
Certificate. Beneficial owners will ordinarily hold Certificates through one or
more financial intermediaries, such as banks, brokerage firms and securities
clearing organizations. See "DESCRIPTION OF THE CERTIFICATES--The Fed System" in
the Prospectus.
Issuance of the Certificates in book-entry form may reduce the liquidity
of such Certificates in the secondary market since certain investors may be
unwilling to purchase Certificates for which they cannot obtain physical
certificates. See "RISK FACTORS--Limited Liquidity" in the Prospectus.]
[Non-Book-Entry Certificates
The Residual Certificates (the "Non-Book-Entry Certificates") will be
issued in a fully-registered, certificated form. The Non-Book-Entry Certificates
will be transferable and exchangeable on a Certificate Register to be maintained
at the corporate trust office in the city in which the Trustee is located or
such other office or agency maintained for such purposes by the Trustee in New
York City. Under the Trust Agreement, the Trustee will initially be appointed as
the Certificate Registrar. No service charge will be made for any registration
of transfer or exchange of the Non-Book-Entry Certificates, but payment of a sum
sufficient to cover any tax or other governmental charge may be required by the
Trustee. The Residual Certificates will be subject to certain restrictions on
transfer. See "Restrictions on Transfer of the Residual Certificates" below.
Distributions of principal and interest, if any, on each Distribution Date
on the Non-Book-Entry Certificates will be made to the persons in whose names
such Certificates are registered at the close of business on the last business
day of the month immediately preceding the month of such Distribution Date.
Distributions will be made by check or money order mailed to the person entitled
thereto at the address appearing in the Certificate Register, or, upon written
request by the Holder of Non-Book-Entry Certificates to the Trustee, by wire
transfer to a United States depository institution designated by such Holder of
Non-Book-Entry Certificates and acceptable to the Trustee or by such other means
of payment as such Holder of Non-Book Entry Certificates and the Trustee may
agree; provided, however, that the final distribution in retirement of the
Non-Book-Entry Certificates will be made only upon presentation and surrender of
such Certificates at the office or agency of the Trustee specified in the notice
to the Holders of Non-Book-Entry Certificates of such final distribution.]
Distributions
General. Distributions of principal and interest on the Certificates will
be made on an [annual, semi-annual or quarterly] basis as specified for each
Class on the cover page hereof. Such [annual, semi-annual or quarterly]
Distribution Dates will occur on the 25th day of ____________, as applicable,
commencing on the date for each Class set forth on the cover page hereof (each,
a "Distribution Date"). If any such day is not a Business Day (that is, a day
other than Saturday, Sunday or a day on which the Federal Reserve Bank of New
York authorizes banking institutions in the Second Federal Reserve District to
be closed, or banking institutions in New York are authorized or obligated by
law to be closed or Farmer Mac is closed), distributions will be made on the
next succeeding Business Day to persons in whose names the Certificates are
registered on the applicable Record Date. The "Record Date" for any Class and
related Distribution Date will be the close of business on the _____ Business
Day of the month preceding the month in which such Distribution Date occurs.
Interest. Interest on the Certificates of each Class will be distributed
on each Distribution Date for such Class in an aggregate amount equal to the
Accrued Certificate Interest for such Distribution Date and Class. "Accrued
Certificate Interest" for each Distribution Date and Class will equal the amount
of interest accrued during the related Interest Accrual Period at the applicable
Pass-Through Rate on the Class Certificate Balance of such Class immediately
prior to such Distribution Date. Interest on the Certificates will be calculated
on the basis of a 360-day year consisting of twelve 30-day months. As of any
date of determination, the "Class Certificate Balance" of any Class of
Certificates will equal the sum of the Certificate Balances of all Certificates
of the same Class and the "Certificate Balance" of any Certificate as of any
date of determination will equal the original Certificate Balance thereof less
all amounts distributed thereon in respect of principal on preceding
Distribution Dates.
The Interest Accrual Periods for each Class will depend on the payment
frequency of such Class. As to any Class and related Distribution Date, the
"Interest Accrual Period" will be the period from the first day of the month of
the month of the preceding Distribution Date (or, in the case of the first
Distribution Date for each Class, from the Cut-off Date) through and including
the last day of the month preceding the month of such current Distribution Date.
Interest will accrue on the Certificates of each Class at a variable rate
per annum (the "Pass-Through Rate") equal to the weighted average of the Net
Mortgage Rates of the [underlying] Qualified Loans included in the related Pool.
For purposes hereof, the "Net Mortgage Rate" for each Qualified Loan will equal
the interest rate thereon (the "Mortgage Interest Rate") less a rate
representing the combined fees of the applicable Central Servicer, Master
Servicer, Field Servicer and Farmer Mac as guarantor (such amount, the
"Administrative Fee Rate"). The weighted average Administrative Fee Rate as of
the Cut-off Date for each Pool is set forth in ANNEX I hereto. The Pass-Through
Rate for each Pool and Distribution Date is calculated by (1) multiplying the
outstanding balance of each Qualified Loan in such Pool by its Net Mortgage Rate
to derive such Qualified Loan's weighted interest amount ("Weighted Interest
Amount"); (2) dividing the sum of all such Pool's Weighted Interest Amounts by
the Class Certificate Balance of the related Class of Certificates, before
giving effect to the distribution of principal on the related Distribution Date;
and (3) truncating such interest rate to three decimal places.
Principal. Principal in respect of each Class will be distributed on each
applicable Distribution Date in an aggregate amount equal to the Principal
Distribution Amount for the related Pool on such Distribution Date. On each
Distribution Date, the "Principal Distribution Amount" for each Pool as of each
applicable Distribution Date will equal the sum of (i) the principal portion of
all scheduled payments (including any balloon payments) on the [underlying]
Qualified Loans in such Pool due during the preceding Due Period, (ii) the
scheduled principal balance of each [underlying] Qualified Loan included in such
Pool which was repurchased or became a Liquidated Qualified Loan during the
preceding Due Period, and (iii) all full or partial principal prepayments
received during the preceding Due Period. The "Due Period" for each Pool and
Distribution Date will commence on the second day of the month of the preceding
Distribution Date (or, in the case of the first Distribution Date for each
Class, on the day following the Cut-off Date) and will end on the first day of
the month of such current Distribution Date. A "Liquidated Qualified Loan" is
generally any defaulted Qualified Loan as to which it has been determined that
all amounts to be received thereon have been recovered.
Certificate Pool Factors. As soon as practicable following the fifth
Business Day of each month of a Distribution Date, Farmer Mac will make
available to financial publications and electronic services for each applicable
Pool of Qualified Loans [underlying the QMBS], among other things, the factor
(carried to eight decimal places) which, when multiplied by the original
Certificate Balance of a Certificate evidencing an interest in such Pool, will
equal the remaining principal balance of such Certificate after giving effect to
the distribution of principal to be made on the Distribution Date in such month.
[Yield Maintenance Charges. In the event a Borrower is required to pay a
Yield Maintenance Charge, to the extent such payment is collected by the Central
Servicer, the Master Servicer will distribute such amount, adjusted to the
related Net Mortgage Rate as described below, to Holders of the related Class of
Certificates. Each Yield Maintenance Charge has been designed to mitigate
reinvestment losses to the noteholder on the prepaid amount of any Qualified
Loan. Generally, such charge represents the excess of reinvestment earnings at
the related Mortgage Interest Rate (net of the related servicing fee rates) on
such prepaid amount (i.e., the amount that would have been received by the
related noteholder in the absence of the prepayment) over earnings calculated at
a prevailing interest rate (a specified Treasury yield) on such prepaid amount.
Amounts, if any, passed through to Holders in respect of Yield Maintenance
Charges will be calculated on the basis of the related Net Mortgage Rate rather
than the Mortgage Interest Rate. The distribution of any Yield Maintenance
Charge to Holders will not reduce the Certificate Balance of the related
Certificates. Farmer Mac will not guarantee to Holders of the related Class of
Certificates the collection of any Yield Maintenance Charge payable in
connection with a principal payment on a Qualified Loan. See "FARMER MAC
GUARANTEE" herein.]
Advances
[Under the terms of its Servicing Agreement, ____________, as Central
Servicer, will be required to advance its own funds with respect to delinquent
Qualified Loans.] [Under the terms of its Servicing Agreement, ____________, as
Central Servicer, will not be required to advance its own funds with respect to
delinquent Qualified Loans.] Because Farmer Mac guarantees timely distributions
to Holders of interest on the Certificates and the full Principal Distribution
Amount (including any balloon payments), the failure of the Central Servicer to
make any such advance will not affect distributions of interest and principal to
such Holders.
[Additional Rights of Holders of Residual Certificates
In addition to distribution of principal and interest, the Holder of the
Residual Certificate will be entitled to receive (i) any amounts remaining in
the Certificate Account on any Distribution Date after distribution of principal
and interest are made on Certificates on such date and (ii) the proceeds, if
any, of the assets of the Trust Fund after the Certificate Balance of all the
Classes of Certificates have been reduced to zero. It is not anticipated that
any material assets will be remaining for such distribution at any such time.]
[Transfer Restrictions of the Residual Certificate]
<PAGE>
FARMER MAC GUARANTEE
Pursuant to the Trust Agreement, Farmer Mac will guarantee (the "Farmer
Mac Guarantee") the timely distribution of interest accrued on the Certificates
and the distribution of the full Principal Distribution Amount (including any
balloon payments) for the related Pool and Distribution Date. In addition,
Farmer Mac is obligated to distribute on a timely basis the outstanding Class
Certificate Balance of each Class of Certificates in full no later than the
related Final Distribution Date (as set forth on the cover hereof), whether or
not sufficient funds are available in the Certificate Account. The Farmer Mac
Guarantee will not cover the distribution to Holders of the related Class of
Certificates of any uncollected Yield Maintenance Charge. See "RISK FACTORS"
herein.
Farmer Mac's obligations under the Farmer Mac Guarantee are obligations
solely of Farmer Mac and are not backed by the full faith and credit of the
United States. Furthermore, Farmer Mac anticipates that its future contingent
liabilities in respect of guarantees of outstanding securities backed by
agricultural mortgage loans will greatly exceed its resources, including its
limited ability to borrow from the United States Treasury. See "OUTSTANDING
GUARANTEES" herein and "FEDERAL AGRICULTURAL MORTGAGE CORPORATION" in the
Prospectus.
OUTSTANDING GUARANTEES
As of the Cut-off Date, Farmer Mac had outstanding guarantees on
approximately $____ million aggregate principal amount of securities (including
approximately $_____ million of securities evidencing assets which are
guaranteed by the Secretary of the United States Department of Agriculture).
Farmer Mac is authorized to borrow up to $1,500,000,000 from the Secretary of
the Treasury, subject to certain conditions, to enable Farmer Mac to fulfill its
guarantee obligations. See "FEDERAL AGRICULTURAL MORTGAGE CORPORATION" in the
Prospectus. As of the Cut-off Date, Farmer Mac had not borrowed any amounts from
the Secretary of the Treasury to fund guarantee payments.
YIELD, PREPAYMENT AND MATURITY CONSIDERATIONS
The rate of payment of principal on each Class of Certificates and the
yield to maturity thereof will correspond directly to the rate of payments of
principal on the [underlying] Qualified Loans in the related Pool. The rate of
payments of principal of the [underlying] Qualified Loans will in turn be
affected by the rate of principal prepayments thereon by Borrowers, by
liquidations of defaulted Qualified Loans, by repurchases as a result of
defective documentation and breaches of representations and warranties or for
certain other reasons. There is little or no historical data available to
provide assistance in estimating the rate of prepayments and defaults on loans
secured by Agricultural Real Estate generally or the Qualified Loans
particularly.
In the case of Qualified Loans, social, economic, political, trade,
geographic, climatic, demographic, legal and other factors may influence
prepayments and defaults, including the age of the Qualified Loans, the
geographic distribution of the related Mortgaged Properties, the payment terms
of the Qualified Loans, the characteristics of the borrowers, weather, economic
conditions generally and in the geographic area in which the Mortgaged
Properties are located, enforceability of due-on-sale clauses, servicing
decisions, the availability of mortgage funds, the extent of the borrowers' net
equity in the Mortgaged Properties, mortgage market interest rates in relation
to the effective interest rates on the Qualified Loans and other unforeseeable
variables, both domestic and international, affecting particular commodity
groups and the farming industry in general. Generally, if prevailing interest
rates fall significantly below the interest rates on the Qualified Loans, the
Qualified Loans are likely to be subject to higher prepayments than if
prevailing rates remain at or above the interest rates on such Qualified Loans.
Conversely, if prevailing interest rates rise above the interest rates on the
Qualified Loans, the rate of prepayment would be expected to decrease. There can
be no certainty as to the rate or prepayments on the Qualified Loans during any
period or over the lives of the Certificates. The rate of default on the
Qualified Loans will also affect the rate of payment of principal on the
Qualified Loans. Prepayments, liquidations and repurchases of the Qualified
Loans will result in distributions to Holders of the related Class of
Certificates of amounts which would otherwise be distributed over the remaining
terms of the Qualified Loans.
[________] of the Qualified Loans impose Yield Maintenance Charges that,
if enforced by the Central Servicer, could be a deterrent to prepayments. Under
the Servicing Contract (as defined herein), the Central Servicer may not waive
the collection of any Yield Maintenance Charge without the prior written consent
of Farmer Mac, as Master Servicer. It is Farmer Mac's policy generally not to
consent to the waiver of the collection of a Yield Maintenance Charge unless the
amount of such charge is unduly large relative to the unpaid principal balance
of the related Qualified Loan. In such cases, and other circumstances that raise
similar equitable concerns, Farmer Mac's policy is to require Central Servicers
to attempt to collect a portion of such Yield Maintenance Charge in connection
with any prepayment of principal; however, there may be situations in which
Farmer Mac may consider it appropriate to waive any collection of a Yield
Maintenance Charge. Generally, a principal prepayment resulting from the
condemnation of, or casualty on, the related Mortgaged Property (as defined
herein) will not be accompanied by a Yield Maintenance Charge. With respect to
each Qualified Loan, any Yield Maintenance Charge payable in connection with a
prepayment thereon, whether in whole or in part, will be calculated with
reference to United States Treasury securities in a manner designed to mitigate
reinvestment losses, if any, that would otherwise be incurred by the noteholder
in connection with such prepayment.
Because Farmer Mac does not guarantee the collection of any Yield
Maintenance Charge, the expected yield to investors in the Certificates may be
sensitive in varying degrees to the extent such amounts are not collected.
The required payment of any Yield Maintenance Charge, if any, may not be a
sufficient disincentive to prevent the voluntary prepayment of the related
Qualified Loan and, even if collected, may be insufficient to offset fully the
adverse effects on the anticipated yield thereon arising out of the
corresponding principal payment.
In addition, all of the Qualified Loans include "due-on-sale" clauses;
however, it is generally the policy of the Central Servicers not to enforce such
clauses unless the transferor of the related Mortgaged Property does not meet
the Underwriting Standards of Farmer Mac and the Servicing Contracts do not
require any such enforcement. In addition, at the request of the Borrower, the
applicable Central Servicer may allow the partial release of a Mortgaged
Property provided the collateral property is reappraised and a partial
prepayment is made such that the resulting loan-to-value ratio is no greater
than 70% and the cash flows from the remaining property are sufficient to
service the remaining debt. Such partial release may result in a prepayment in
part (together with any required Yield Maintenance Charge, calculated as
described herein) on the related Qualified Loan and a corresponding
reamortization of the unpaid principal balance of such Qualified Loan to the
maturity date (or the original amortization date if the Qualified Loan provides
for a balloon payment) for such loan. Any Qualified Loan as to which a partial
release occurs will remain in the Trust Fund.
The yield to maturity to investors in the Certificates of a Class will be
sensitive to the rate and timing of principal payments (including prepayments)
of the Qualified Loans in the related Pool, which generally can be prepaid at
any time, subject to the restrictions and prepayment penalties described above.
In addition, the yield to maturity on a Certificate may vary depending on the
extent to which such Certificate is purchased at a discount or premium.
Investors should consider, in the case of any Certificates purchased at a
discount, the risk that a slower than anticipated rate of principal payments on
the related Qualified Loans could result in an actual yield that is lower than
the anticipated yield and, in the case of any Certificates purchased at a
premium, the risk that a faster than anticipated rate of principal payments on
the related Qualified Loans could result in an actual yield that is lower than
the anticipated yield, particularly if any Yield Maintenance Charge is not
distributed to such Holders.
The timing of changes in the rate of prepayments on the Qualified Loans
may significantly affect an investor's actual yield to maturity, even if the
average rate of principal payments is consistent with an investor's expectation.
In general, the earlier a prepayment of principal of the related Qualified
Loans, the greater the effect on an investor's yield to maturity. The effect on
an investor's yield of principal payments occurring at a rate higher (or lower)
than the rate anticipated by the investor during the period immediately
following the issuance of the Certificates may not be offset by a subsequent
like decrease (or increase) in the rate of principal payments. An investor must
make an independent decision as to the appropriate prepayment scenario to be
used in deciding whether to purchase the Certificates.
Investors should consider the risk that rapid rates of prepayments on the
Qualified Loans, and therefore of principal payments on the related Class of
Certificates, may coincide with periods of low prevailing interest rates. During
such periods, the effective interest rates on securities in which an investor
may choose to reinvest amounts received as principal payments on such investor's
Certificate may be lower than the applicable Pass-Through Rate. Conversely, slow
rates of prepayments on the Qualified Loans, and therefore of principal payments
on the related Class of Certificates, may coincide with periods of high
prevailing interest rates. During such periods, the amount of principal payments
available to an investor for reinvestment at such high prevailing interest rates
may be relatively low.
The Pass-Through Rate for each Class of Certificates will equal the
weighted average of the Net Mortgage Rates of the Qualified Loans in the related
Pool. Prepayments of Qualified Loans with relatively higher Mortgage Interest
Rates, particularly if such Qualified Loans have larger unpaid principal
balances, will reduce the Pass-Through Rate for the related Class of
Certificates from that which would have existed in the absence of such
prepayments. In addition, the Qualified Loans in a Pool will not prepay at the
same rate or at the same time. Qualified Loans with relatively higher Mortgage
Interest Rates may prepay at faster rates than Qualified Loans with relatively
lower Mortgage Interest Rates in response to a given change in market interest
rates. If such differential prepayments were to occur, the yield on the related
Class of Certificates would be adversely affected.
The effective yield to the Holders will be lower than the yield otherwise
produced by the applicable purchase price and Pass-Through Rate because the
distributions of principal, if any, and interest will not be payable to such
Holders until at least the 25th day of the month following the period in which
interest accrues (without any additional distribution of interest or earnings
thereon in respect of such delay).
DESCRIPTION OF THE AGREEMENTS
The Certificates will be issued pursuant to the Trust Agreement. Farmer
Mac will act as Master Servicer of the Qualified Loans. The Qualified Loans will
be directly serviced by _______ [and _____, each,] the Central Servicer acting
on behalf of Farmer Mac pursuant to a Master Central Servicing Contract (as
supplemented) between it and Farmer Mac (the "Servicing Contract"). See
"DESCRIPTION OF THE AGREEMENTS" in the Prospectus. [For a statement of the
numbers of Qualified Loans (and related principal balances) in each Pool
serviced by the Central Servicer, see the narrative description for each Pool
set forth in ANNEX A hereto.] The Central Servicer may subcontract the
performance of certain of its servicing duties to a subservicer who may be the
seller or originator of the respective Qualified Loans (the "Sellers"). In
addition, each of the Sellers of the Qualified Loans has transferred and
assigned its respective Qualified Loans to the Depositor pursuant to a separate
Selling and Servicing Agreement (a "Sale Agreement"). The Sale Agreement
includes certain representations and warranties of the related Seller respecting
the related Qualified Loans which representations and warranties and the
remedies for their breach will be assigned by Farmer Mac to the Trustee for the
benefit of Holders pursuant to the Trust Agreement. See "DESCRIPTION OF THE
AGREEMENTS--Representations and Warranties; Repurchases" in the Prospectus.
Trustee
The Trustee for the Certificates will be _____________ [a national banking
association organized and existing under the federal laws of the United States]
with an office at ____________.
Servicing and Other Compensation And Payment of Expenses
The Central Servicer will be paid a servicing fee calculated on a
loan-by-loan basis. Additional servicing compensation in the form of assumption
fees or similar fees (other than late payment charges in certain cases) may be
retained by the Central Servicer. The Depositor, the Master Servicer and the
Central Servicer are obligated to pay all expenses incurred in connection with
their respective responsibilities under the Trust Agreement and the Servicing
Contract (subject to reimbursement for liquidation expenses), including the fees
of the Trustee, and also including, without limitation, the various other items
of expense enumerated in the Prospectus. See "DESCRIPTION OF THE CERTIFICATES"
in the Prospectus.
Optional Termination
The Master Servicer may effect an early termination of the Trust Fund on a
Distribution Date for any Class when the aggregate principal balance of
Qualified Loans in all of the Pools in the Trust Fund is reduced to less than
the Termination Percentage thereof as of the Cut-off Date by repurchasing all
the Qualified Loans and REO Property (as defined herein) at a price equal to
100% of the unpaid principal balance of the Qualified Loans, including any
Qualified Loans as to which the related property is held as part of the Trust,
plus accrued and unpaid interest thereon at the applicable Mortgage Interest
Rate, determined as provided in the Trust Agreement. The Master Servicer will
distribute the proceeds thereof to Holders of the then outstanding Classes of
Certificates on such Distribution Date whether or not such Distribution Date is
a Distribution Date for all such Classes of Certificates. See "DESCRIPTION OF
CERTIFICATES--Termination" in the Prospectus.
Repurchases of Qualified Loans
Under the Trust Agreement, Farmer Mac, as Master Servicer, will have the
right (without obligation and in its discretion) to repurchase from the Trust
Fund, upon payment of the purchase price provided in the Trust Agreement, any
Qualified Loan at any time after such loan becomes and remains delinquent as to
any scheduled payment for a period of ninety days. Farmer Mac will also have a
similar right to purchase from the Trust Fund any property acquired by the Trust
Fund upon foreclosure or comparable conversion of any Qualified Loan ("REO
Property"). See also "DESCRIPTION OF THE AGREEMENTS--Representations and
Warranties; Repurchases" in the Prospectus.
THE DEPOSITOR
Farmer Mac Mortgage Securities Corporation, the Depositor, is a wholly
owned subsidiary of Farmer Mac and was incorporated in the State of Delaware in
December 1991. The principal executive offices of the Depositor are located at
919 18th Street, N.W., Washington, D.C. 20006 (telephone (202)-872-7700).
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following general discussion of certain material anticipated federal
income tax consequences of an investment in Certificates is to be considered
only in connection with the discussion in the Prospectus under the caption
"CERTAIN FEDERAL INCOME TAX CONSEQUENCES."
[No election will be made to treat the Trust Fund as a real estate
mortgage investment conduit ("REMIC") for federal income tax purposes. In the
opinion of Fried, Frank, Harris, Shriver & Jacobson, counsel for the Depositor,
(i) the Trust Fund will be treated as a grantor trust for federal income tax
purposes; (ii) a Certificate owned by a real estate investment trust
representing an interest in Qualified Loans will be considered to represent
"real estate assets" within the meaning of Code Section 856(c)(5)(A), and
interest income on the Qualified Loans will be considered "interest on
obligations secured by mortgages on real property" within the meaning of Code
Section 856(c)(3)(B), to the extent that the Qualified Loans represented by that
Certificate are of a type described in such Code section; and (iii) a
Certificate owned by a REMIC will represent "obligation[s] . . . which [are]
principally secured by an interest in real property" within the meaning of Code
Section 860G(a)(3) to the extent that the Qualified Loans represented by that
Certificate are of a type described in such Code section. If the value of the
real property securing a Qualified Loan is lower than the amount of such
Qualified Loan, any such Qualified Loan may not qualify in its entirety under
the foregoing Code sections. The Holders will be treated as owners of their pro
rata interests in the assets of the Trust Fund with respect to the related Pool.
The Trust Fund intends to account for all servicing fees as reasonable servicing
fees. However, if any servicing fees, determined on a Qualified Loan by
Qualified Loan basis, were determined to exceed reasonable servicing fees, the
Certificates would be treated as representing an interest in one or more
"stripped bonds."]
[An election will be made to treat the Trust Fund as a real estate
mortgage investment conduit ("REMIC") for federal income tax purposes. The
Certificates other than the Class R Certificates will be designated as the
regular interests in the REMIC, and the Class R Certificates will be designated
as the residual interests in the REMIC. The Certificates other than the Class R
Certificates generally will be treated as newly originated debt instruments for
federal income tax purposes, and not as ownership interests in the REMIC or its
assets. [Insert any relevant disclosure regarding any original issue discount on
the Certificates, including the appropriate prepayment assumption to be used in
making original issue discount and other related calculations with respect to
the Certificates (other than the Class R Certificates).]]
[In general, subject to certain qualifications described in the
Prospectus, (i) Certificates owned by a real estate investment trust will
constitute "real estate assets" within the meaning of Code Section 856(c)(5)(A),
(ii) interest on Certificates (other than the Class R Certificates) owned by a
real estate investment trust and any amounts includible in income with respect
to Class R Certificates owned by a real estate investment trust will be
considered "interest on obligations secured by mortgages on real property"
within the meaning of Code Section 856(c)(3)(B), and (iii) Certificates other
than Class R Certificates owned by a REMIC will be considered "obligation[s] . .
. which [are] principally secured by an interest in real property" within the
meaning of Code Section 860G(a)(3).]
Potential investors should consult their tax advisors before acquiring
Certificates.
ERISA CONSIDERATIONS
The acquisition of Certificates by a plan subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or any individual
retirement account ("IRA") or any other plan subject to Code Section 4975 could,
in some instances, result in a prohibited transaction or other violations of the
fiduciary responsibility provisions of ERISA and Code Section 4975. Certain
exemptions from the prohibited transaction rules could, however, be applicable.
Prospective Plan investors should consult with their legal advisors
concerning the impact of ERISA and the Code, and the potential consequences in
their specific circumstances, prior to making an investment in the Certificates.
Moreover, each Plan fiduciary should determine whether under the general
fiduciary standards of investment prudence and diversification, an investment in
the Certificates is appropriate for the Plan, taking into account the overall
investment policy of the Plan and the composition of the Plan's investment
portfolio. See "ERISA CONSIDERATIONS" in the Prospectus.
LEGAL INVESTMENT
The Certificates will constitute securities guaranteed by Farmer Mac for
purposes of the Farmer Mac Charter and, as such, will, by statute, be legal
investments for certain types of institutional investors to the extent that
those investors are authorized under any applicable law to purchase, hold, or
invest in obligations issued by or guaranteed as to principal and interest by
the United States or any agency or instrumentality of the United States.
Investors whose investment authority is subject to legal restrictions should
consult their own legal advisors to determine whether and the extent to which
specific Classes of the Certificates constitute legal investments for them.
METHOD OF DISTRIBUTION
[Subject to the terms and conditions set forth in the Underwriting
Agreement among Farmer Mac, the Depositor and each Underwriter identified on the
cover page hereof, the Certificates offered hereby are being purchased from the
Depositor by each such Underwriter upon issuance. Distribution of the
Certificates will be made by each such Underwriter from time to time in
negotiated transactions or otherwise at varying prices to be determined at the
time of sale. Proceeds to the Depositor from the sale of the Certificates is set
forth on the cover page hereof. To the extent provided in the Underwriting
Agreement, if proceeds to the Underwriter or Underwriters from the offering of
the Certificates exceed certain levels, the purchase price for the Certificates
payable to the Depositor by each such Underwriter will be increased. Any such
increase to the proceeds to the Depositor will be included on a Form 8-K to be
filed with the Commission within 15 days after the Closing Date and be available
to Holders promptly thereafter through the facilities of the Commission as
described on page S-herein and under "AVAILABLE INFORMATION" in the Prospectus.
In connection with the purchase and sale of the Certificates offered hereby,
each Underwriter may be deemed to have received compensation from the Depositor
in the form of underwriting discounts.
In addition to purchasing the Certificates pursuant to the Underwriting
Agreement, each Underwriter named on the cover page hereof and their affiliates
may be engaged in several ongoing business relationships with Farmer Mac.
The Underwriting Agreement provides that Farmer Mac and the Depositor will
indemnify each Underwriter named on the cover page hereof against certain civil
liabilities under the Securities Act of 1933 or contribute to payments each such
Underwriter may be required to make in respect thereof.]
LEGAL MATTERS
Certain legal matters relating to the Certificates will be passed upon for
the Depositor by the General Counsel of Farmer Mac and by Fried, Frank, Harris,
Shriver & Jacobson and for the [Underwriter] by
. Fried, Frank, Harris, Shriver & Jacobson
has also acted as special tax counsel to the Trust Fund.
<PAGE>
INDEX OF PRINCIPAL TERMS
Unless the context indicates otherwise, the following terms shall have the
meanings set forth on the pages indicated below:
<TABLE>
<CAPTION>
<S> <C>
Accrued Certificate Interest S-5, S-12
Administrative Fee Rate S-12
Agricultural Real Estate S-9
Balloon Payment S-21
Book-Entry Certificates S-11
Central Servicer S-2, S-4
Certificate Balance S-12
Certificates S-1, S-4
Class Certificate Balance S-12
Closing Date S-5
Cut-off Date S-1
Depositor S-1, S-4
Distribution Dates S-12
Due Period S-13
ERISA S-7, S-17
Farmer Mac S-1, S-4
Farmer Mac Charter S-4
Farmer Mac Guarantee S-14
Fed book-entry system S-11
Guaranteed Portions S-1, S- 6, S-9, S-10
Holders S-2
Interest Accrual Period S-5
IRA S-7, S-18
Liquidated Qualified Loan S-13
loan identifiers S-10
Master Servicer S-4
Mortgage Interest Rate S-12
Mortgaged Properties S-9
Net Mortgage Rate S-12
Non-Book-Entry Certificates S-11
Pass-Through Rate S-2, S-12
Principal Distribution Amount S-5, S-12
Pool S-1
QMBS S-1, S-6, S-9, S-10
Qualified Balloon Loan S-21
Qualified Loan . S-6, S- 9
Record Date S-12
REMIC S-3, S-6, S-18
REO Property S-17
Sale Agreement S-16
Sellers S-16
Servicing Contract S-16
Termination Percentage S-2
Trust Agreement S-5, S-10
Trust Fund S-1, S-10
Trust Fund AMBS S-1, S-6, S-9, S-10
Trustee S-5
Underwriter S-1
Underwriting Standards S-9
Weighted Interest Amount S-12
Yield Maintenance Charge S-8
</TABLE>
<PAGE>
- -------------------------------------------------------------------
ANNEX I: DESCRIPTION OF THE QUALIFIED LOAN POOLS
- -------------------------------------------------------------------
The description of the Qualified Loans [underlying the QMBS] and the
related Mortgaged Properties set forth below is based upon each Pool as
constituted at the close of business on the Cut-off Date, as adjusted for the
scheduled principal payments due before such date. Prior to the issuance of the
Certificates, Qualified Loans [QMBS] may be removed from each Pool as a result
of incomplete documentation or otherwise, if the Depositor deems such removal
necessary or appropriate, or as a result of prepayments in full. A limited
number of other Qualified Loans [QMBS] may be added to each Pool prior to the
issuance of the Certificates unless including such Qualified Loans would
materially alter the characteristics of such Pool as described herein. The
Depositor believes that the information set forth herein will be representative
of the characteristics of the related Pool as it will be constituted at the time
the Certificates are issued although the range of Mortgage Interest Rates and
maturities and certain other characteristics of the [underlying] Qualified Loans
in such Pool may vary.
The composition of each [Qualified Loan] Pool is subject to adjustment,
with the amount of such variance restricted to no more than 5% of the aggregate
principal balance of the [underlying] Qualified Loans in such Pool, as stated
herein. The information set forth as to the Qualified Loans [underlying the
QMBS] will be revised to reflect such adjustments and included on a Form 8-K to
be filed with the Commission within 15 days after the Closing Date. Such
information will be available to Holders of Certificates promptly thereafter
through the facilities of the Commission as described on page S- herein and
under "AVAILABLE INFORMATION" in the Prospectus.
Percentages in the following tables have been rounded and, therefore, the
total of the percentages in any given column may not add to 100%.
DESCRIPTION OF POOL
The [underlying] Qualified Loans in Pool will have had individual
principal balances as of the Cut-off Date of not less than $ and not more than $
. of the [underlying] Qualified Loans in Pool will have been originated prior to
and have a scheduled maturity of . The [underlying] Qualified Loans in Pool will
have a weighted average Administrative Fee Rate as of the Cut-off Date of
approximately %.
of the [underlying] Qualified Loans in Pool require the payment of
a Yield Maintenance Charge in connection with any principal prepayment, in whole
or in part, made prior to the maturity date of each such Qualified Loan.
of the [underlying] Qualified Loans in Pool
(approximately % by aggregate outstanding principal
balance as of the Cut-off Date) provide for the annual payment of principal and
interest on a level basis to amortize fully each such Qualified Loan over its
stated term. of the remaining [underlying] Qualified Loans in Pool are balloon
loans which provide for regular annual payments of principal and interest
computed on the basis of an amortization term that is longer than the related
term to stated maturity, with a "balloon" payment (each, a "Balloon Payment")
due at stated maturity that will be significantly larger than the annual
payments (each, a "Qualified Balloon Loan").
will be the Central Servicer with
respect to of the [underlying] Qualified Loans in Pool
having an aggregate principal balance as of the Cut-off
Date of $ .
<PAGE>
One [underlying] Qualified Loan included in Pool constitutes % (by
principal balance as of the Cut-off Date) of the aggregate principal amount of
such Pool. Such Qualified Loan has the following additional characteristics (in
each case, as of the Cut-off Date):
Principal Balance
Mortgage Interest Rate
Net Mortgage Rate
Year of Maturity
Loan-to-Value Ratio
Original term to Maturity
The Mortgaged Property securing such Qualified Loan is located in the
State of ; the primary commodities produced on such property are . The loan is a
Qualified Balloon Loan, with an amortization schedule of years. The total debt
service coverage ratio (which ratio gives effect to all sources of income) for
such loan is . See "RISK FACTORS--"Relative Loan Sizes" herein.
The following table[s] set forth additional information with respect to
the Qualified Loans [underlying the QMBS] included in Pool , in each case as of
the Cut-off Date. Percentages are based on the aggregate principal balance of
Qualified Loans in Pool .
[Qualified Loan Schedule]
<TABLE>
<CAPTION>
[Pool -
Distribution by Cut-off Date Principal Balance
- -------------------------------------------------------------------------
Aggregate Percentage of
Number Principal Aggregate
Cut-off Date Principal Balance of Balance As of Principal
Loans Cut-off Date Balance As of
Cut-off Date
- -------------------------------------------------------------------------
<S> <C> <C> <C>
- -------------------------------------------------------------------------
</TABLE>
Total
- -------------------------------------------------------------------------
Average Loan Amount $
Minimum Amount $
Maximum Amount $
<PAGE>
<TABLE>
<CAPTION>
Pool -
Distribution by Mortgage Interest Rate
- --------------------------------------------------------------------------
Aggregate Percentage of
Number Principal Aggregate
Mortgage Interest Rate of Loans Balance As Principal
of Cut-off Balance As of
Date Cut-off Date
- --------------------------------------------------------------------------
<S> <C> <C> <C>
- --------------------------------------------------------------------------
Total
- --------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Weighted Average Mortgage %
Interest Rate
Minimum Mortgage Interest %
Rate
Maximum Mortgage Interest %
Rate
</TABLE>
<TABLE>
<CAPTION>
Pool -
Distribution by Net Mortgage Rate
- -------------------------------------------------------------------------
Aggregate Percentage of
Number Principal Aggregate
Net Mortgage Rate of Balance As Principal Balance
Loans of Cut-off As of Cut-off Date
Date
- -------------------------------------------------------------------------
<S> <C> <C> <C>
- -------------------------------------------------------------------------
Total
- -------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Weighted Average Net Mortgage Rate %
Minimum Net Mortgage Rate %
Maximum Net Mortgage Rate %
</TABLE>
<TABLE>
<CAPTION>
Pool -
Distribution by Remaining Amortization Term
- -------------------------------------------------------------------------
Aggregate Percentage of
Principal Aggregate
Remaining Amortization Term Number Balance As Principal Balance
(months) of of Cut-off As of Cut-off Date
Loans Date
- -------------------------------------------------------------------------
<S> <C> <C> <C>
- -------------------------------------------------------------------------
Total
- -------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Weighted Average Remaining Amortization Term months
Minimum Remaining Amortization Term months
Maximum Remaining Amortization Term months
</TABLE>
<TABLE>
<CAPTION>
Pool -
Distribution by Amortization Type
- -------------------------------------------------------------------------
Aggregate PercentagWeighted Weighted
Principal of Average Average
Year NumberBalance Aggregate Cut-off Balloon-to
of of As of Principal Date Value
Maturity Loans Cut-off Balance Loan-to-ValueRatio (1)
Date As of Ratio
Cut-off
Date
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Fully Amortizing
Balloon Loans
- -------------------------------------------------------------------------
Total
- -------------------------------------------------------------------------
</TABLE>
(1)The Weighted Average Balloon-to-Value Ratio is the percentage of the Balloon
Payment of each Qualified Balloon Loan in the Pool to the appraised value of
the related Mortgaged Property weighted by the percentage of the Principal
Balance of such Qualified Loan to the aggregate Principal Balance of all of
the Qualified Balloon Loans in the Pool, each as of the Cut-off Date.
<PAGE>
<TABLE>
<CAPTION>
Pool -
Distribution by Cut-off Date Loan-to-Value Ratio
- --------------------------------------------------------------------------
Aggregate Percentage Cumulative
Principal of Percentage
Loan-to-Value Ratio Number Balance Aggregate
of As of Principal
Loans Cut-off Balance As
Date of Cut-off
Date
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------
Total
- --------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Weighted Average Loan-to-Value Ratio %
Minimum Loan-to-Value Ratio %
Maximum Loan-to-Value Ratio %
</TABLE>
<TABLE>
<CAPTION>
Pool -
Distribution by Total Debt Coverage Ratio (1)
- --------------------------------------------------------------------------
Aggregate Percentage of Cumulative
Number Principal Aggregate Percentage
Debt Coverage Ratio of Balance Principal
Loans As of Balance As of
Cut-off Cut-off Date
Date
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------
Total
- --------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Weighted Average Total Debt Coverage Ratio %
Minimum Total Debt Coverage Ratio %
Maximum Total Debt Coverage Ratio %
</TABLE>
(1) Total Debt Coverage Ratio is the ratio determined by dividing the
borrower's total annual net income (net of living expenses and taxes) from
all sources by the borrower's total annual debt service obligations
(including capital lease payments).
<PAGE>
<TABLE>
<CAPTION>
Pool -
Distribution by Commodity Group (1)
- --------------------------------------------------------------------------
Aggregate Percentage of
Number Principal Aggregate
Commodity Group of Balance As of Principal Balance
Loans Cut-off Date As of Cut-off Date
- --------------------------------------------------------------------------
<S> <C> <C> <C>
- --------------------------------------------------------------------------
Total
- --------------------------------------------------------------------------
</TABLE>
(1) The number of loans in each commodity group will not
equal the total number of loans because a Mortgaged Property may be used to
produce multiple commodities and thus the related Qualified Loan may be
allocated to more than one commodity group. As to any Qualified Loan
allocated to more than one commodity group, the principal balance thereof is
allocated among commodity groups based on the proportion of the Mortgaged
Property used for the production of each commodity.
<TABLE>
<CAPTION>
Pool -
Distribution by State]
- --------------------------------------------------------------------------
Aggregate Percentage of
Number Principal Aggregate
State of Balance As of Principal Balance
Loans Cut-off Date As of Cut-off Date
- --------------------------------------------------------------------------
<S> <C> <C> <C>
- --------------------------------------------------------------------------
Total
- --------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
PROSPECTUS SUBJECT TO COMPLETION, DATED MAY --, 1997
- --------------------------------------------------------------------------------
GUARANTEED AGRICULTURAL MORTGAGE-BACKED SECURITIES ("AMBS")
(Issuable in Series)
[GRAPHIC OMITTED]
FEDERAL AGRICULTURAL MORTGAGE CORPORATION
Guarantor
FARMER MAC MORTGAGE SECURITIES CORPORATION
Depositor
The securities offered hereby and by Supplements to this
Prospectus (the "AMBS" or "Certificates") will be offered from
time to time in one or more series (each, a "Series"). Each
Series of Certificates will represent in the
aggregate the entire beneficial ownership interest in a trust fund (with respect
to any Series, the "Trust Fund") consisting of one or more segregated pools
(each, a "Pool") of various types of agricultural real estate mortgage loans
("Qualified Loans"), the portions of loans guaranteed by the United States
Secretary of Agriculture ("Guaranteed Portions"), Trust Fund AMBS (as defined
herein), mortgage pass-through certificates or other mortgage-backed securities
evidencing interests in or secured by Qualified Loans or Guaranteed Portions or
any combination thereof (with respect to any Series, collectively, the
"Qualified Assets").
Each Certificate will be covered by a guarantee (the "Farmer Mac Guarantee") of
the timely payment of required distributions of interest and principal of the
Federal Agricultural Mortgage Corporation ("Farmer Mac"), a federally chartered
instrumentality of the United States, as described herein and in the related
Prospectus Supplement. See "FEDERAL AGRICULTURAL MORTGAGE CORPORATION" herein.
THE OBLIGATIONS OF FARMER MAC UNDER ITS GUARANTEE ARE OBLIGATIONS SOLELY OF
FARMER MAC AND ARE NOT OBLIGATIONS OF, AND ARE NOT GUARANTEED BY, THE FARM
CREDIT ADMINISTRATION, THE UNITED STATES OR ANY AGENCY OR INSTRUMENTALITY OF THE
UNITED STATES (OTHER THAN FARMER MAC), AND ARE NOT BACKED BY THE FULL FAITH AND
CREDIT OF THE UNITED STATES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS OR THE RELATED PROSPECTUS SUPPLEMENT.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Prospective investors should review the information appearing on page 16 herein
under the caption "RISK FACTORS" and such information as may be set forth under
the caption "RISK FACTORS" in the related Prospectus Supplement before
purchasing any Certificate.
Prior to issuance there will have been no market for the Certificates of any
Series and there can be no assurance that a secondary market for any
Certificates will develop or that, if it does develop, it will continue. This
Prospectus may not be used to consummate sales of the Certificates of any Series
unless accompanied by the Prospectus Supplement for such Series.
Farmer Mac will make available information regarding the Pools and related
Qualified Loans. See "AVAILABLE INFORMATION" herein.
Offers of the Certificates may be made through one or more different methods,
including offerings through underwriters, as more fully described under "METHOD
OF DISTRIBUTION" herein and in the related Prospectus Supplement.
May --, 1997
<PAGE>
Each Series of Certificates will consist of one or more classes of
Certificates (each, a "Class") that may (i) provide for the accrual of interest
thereon based on fixed, variable or floating rates; (ii) be entitled to
principal distributions, with disproportionately low, nominal or no interest
distributions; (iii) be entitled to interest distributions, with
disproportionately low, nominal or no principal distributions; (iv) provide for
distributions of accrued interest thereon commencing only following the
occurrence of certain events, such as the retirement of one or more other
Classes of Certificates of such Series; (v) provide for distributions of
principal sequentially, based on specified payment schedules or other
methodologies; (vi) provide for distributions based on a combination of two or
more components thereof with one or more of the characteristics described in
this paragraph, to the extent of available funds; and/or (vii) be entitled to
distributions of any Prepayment Premium and Yield Maintenance Charge (each as
defined herein), to the extent collected, in each case as described in the
related Prospectus Supplement. See "DESCRIPTION OF THE CERTIFICATES" herein and
in the related Prospectus Supplement.
Principal and interest with respect to the Certificates will be
distributable quarterly, semi-annually or annually or at such other intervals
and on the dates specified in the related Prospectus Supplement. Distributions
on the Certificates of any Series will be made only from the assets of the
related Trust Fund, including, without limitation, the related Farmer Mac
Guarantee.
The Certificates of each Series will not represent an obligation of or
interest in the Depositor, any Originator (as defined herein), any Seller (as
defined herein), any Central Servicer (as defined herein) or any of their
respective affiliates, except to the limited extent described herein and in the
related Prospectus Supplement. Other than the Farmer Mac Guarantee, neither the
Certificates nor any assets in the related Trust Fund (other than Guaranteed
Portions) will be guaranteed or insured by any governmental agency or
instrumentality or by any other person. The Qualified Assets in each Trust Fund
will be held in trust for the benefit of the Holders of the related Series of
Certificates pursuant to a Trust Agreement, as more fully described herein. See
"DESCRIPTION OF THE AGREEMENTS" herein. The terms "Holder" and "Holders" used
herein refer to both holders of Book-Entry Certificates (as defined herein) and
holders of Definitive Certificates (as defined herein), unless specific
reference is made only to either holders of Book-Entry Certificates or holders
of Definitive Certificates.
The yield on each Class of Certificates of a Series will be affected by,
among other things, the rate of payment of principal (including prepayments,
repurchases and defaults) on the Qualified Assets in the related Trust Fund and
the timing of receipt of such payments as described under the caption "YIELD
CONSIDERATIONS" herein and "YIELD, PREPAYMENT AND MATURITY CONSIDERATIONS" in
the related Prospectus Supplement. A Trust Fund may be subject to early
termination under the circumstances described herein and in the related
Prospectus Supplement.
If so provided in the related Prospectus Supplement, one or more elections
may be made to treat the related Trust Fund or a designated portion thereof as a
real estate mortgage investment conduit or "REMIC" for federal income tax
purposes. See "CERTAIN FEDERAL INCOME TAX CONSEQUENCES" herein and in the
related Prospectus Supplement.
Until 90 days after the date of each Prospectus Supplement, all dealers
effecting transactions in the Certificates covered by such Prospectus
Supplement, whether or not participating in the distribution thereof, may be
required to deliver such Prospectus Supplement and this Prospectus. This is in
addition to the obligation of dealers to deliver a Prospectus and Prospectus
Supplement when acting as underwriters and with respect to their unsold
allotments or subscriptions.
<PAGE>
PROSPECTUS SUPPLEMENT
As more particularly described herein, the Prospectus Supplement relating
to the Certificates of each Series will, among other things, set forth with
respect to such Certificates, as appropriate: (i) a description of the Class or
Classes of Certificates, the payment provisions with respect to each such Class
and the Pass-Through Rate (as defined herein) or method of determining the
Pass-Through Rate with respect to each such Class; (ii) the aggregate principal
amount and distribution dates relating to such Series and, if applicable, the
initial and final scheduled distribution dates for each Class; (iii) information
as to the Qualified Assets comprising the Trust Fund, including the general
characteristics of such assets (with respect to the Certificates of any Series,
the "Trust Assets"); (iv) the circumstances, if any, under which the Trust Fund
may be subject to early termination; (v) additional information with respect to
the method of distribution of such Certificates; (vi) whether one or more REMIC
(as defined herein) elections will be made and designation of the regular
interests and residual interests; (vii) information as to the terms of the
Farmer Mac Guarantee of the Certificates; (viii) whether such Certificates will
be initially issued in definitive or book-entry form; and (ix) to what extent,
if any, the Farmer Mac Guarantee will cover the timely payment of the related
Balloon Payment (as defined herein) on any Qualified Balloon Loan (as defined
herein).
AVAILABLE INFORMATION
Farmer Mac is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports and other information with the Securities and Exchange
Commission (the "Commission").
The Depositor has filed with the Commission a Registration Statement (of
which this Prospectus forms a part) under the Securities Act of 1933, as
amended, with respect to the Certificates. The Depositor intends to establish a
trust and cause it to issue a Series of Certificates as soon as practicable
after the Registration Statement is declared effective. This Prospectus and the
Prospectus Supplement relating to each Series of Certificates contain summaries
of the material terms of the documents referred to herein and therein, but do
not contain all of the information set forth in the Registration Statement
pursuant to the rules and regulations of the Commission. For further
information, reference is made to such Registration Statement and the exhibits
thereto. Such Registration Statement and exhibits can be inspected and copied at
prescribed rates at the public reference facilities maintained by the Commission
at its Public Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at its Regional Offices located as follows: Chicago Regional Office,
Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661; and New York
Regional Office, Seven World Trade Center, New York, New York 10048. The
Commission maintains a World Wide Web site on the Internet at
http://www.sec.gov. that contains reports, proxy and other information regarding
registrants (including Farmer Mac and the Depositor) that file electronically
with the Commission.
Unless and until Definitive Certificates are issued or unless otherwise
provided in the related Prospectus Supplement, the Depositor will forward to the
Federal Reserve Bank of New York or the nominee for any private depository, as
applicable, periodic unaudited reports (as discussed below) concerning the
related Trust Fund. When and if Definitive Certificates are issued, the
Depositor will deliver such reports to Holders of Definitive Certificates. Such
reports may be available to Beneficial Owners (as defined herein) of the
Certificates upon request to their respective Direct Participants or Indirect
Participants (as defined herein), through the facilities of the Commission, or
through information vendors, as discussed below. See "DESCRIPTION OF THE
CERTIFICATES - Reports to Holders; Publication of Certificate Factors" and
"DESCRIPTION OF THE AGREEMENTS" herein.
The Depositor intends to make a written request to the staff of the
Commission that the staff issue an order pursuant to Section 12(h) of the
Exchange Act exempting the Depositor from certain reporting requirements under
the Exchange Act with respect to each Trust Fund. If such request is granted,
the Depositor will file or cause to be filed with the Commission such reports
with respect to each Trust Fund as are required by the Commission pursuant to
the Exchange Act and the rules and regulations of the Commission thereunder, and
will provide such reports to Holders of Definitive Certificates, if any. Because
of the limited number of record holders expected for each Series, the Depositor
anticipates that a significant portion of such reporting requirements will be
permanently suspended following the first fiscal year for the related Trust
Fund.
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus and any Prospectus
Supplement with respect hereto and, if given or made, such information or
representations must not be relied upon as having been authorized by the
Depositor or any of the Underwriters. This Prospectus and any Prospectus
Supplement with respect hereto do not constitute an offer to sell or a
solicitation of an offer to buy any securities other than the Certificates to
any person by any person in any state or other jurisdiction in which such offer
or solicitation is not authorized or in which the person making such offer or
solicitation is not qualified to do so or to any person to whom it is unlawful
to make such solicitation. The delivery of this Prospectus at any time does not
imply that information contained herein is correct as of any time subsequent to
its date; however, if any material change occurs while this Prospectus is
required by law to be delivered, this Prospectus will be amended or supplemented
accordingly.
Farmer Mac will make available for the benefit of AMBS investors
information about the Certificates and Pools underlying such Certificates ("AMBS
Information"). Generally, Farmer Mac will provide AMBS Information on a periodic
scheduled basis after the date on which the related Pool is formed. The
information will be available from various sources, including several
information vendors that provide securities information. Investors can obtain
the names of those vendors disseminating AMBS Information by writing Farmer Mac
at 919 18th Street, N.W., Washington, D.C. 20006 or calling Farmer Mac's
Investor Inquiry Department at 1-800-TRY-FARM (879-3276).
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
All documents and reports filed or caused to be filed by the Depositor
with respect to a Trust Fund pursuant to Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act, prior to the termination of an offering of Certificates
evidencing interests therein, shall be deemed to be incorporated by reference in
this Prospectus and to be a part hereof. In addition, Farmer Mac's Annual Report
on Form 10-K for the year ended December 31, 1996, and any subsequent reports
filed with the Commission pursuant to Sections 13(a) or 15(d) of the Exchange
Act shall also be deemed to be incorporated by reference in this Prospectus and
to be a part hereof. All documents and reports filed by Farmer Mac pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of
this Prospectus and prior to the termination of any offering made by this
Prospectus will likewise be deemed to be incorporated by reference herein and to
be a part hereof. Such documents and reports can be inspected at the public
reference facilities maintained by the Commission as described under the caption
"AVAILABLE INFORMATION" of this Prospectus.
The consolidated balance sheets of Farmer Mac as of December 31, 1996 and
1995 and related consolidated statements of operations and cash flows for each
of the years in the three-year period ended December 31, 1996 have been
incorporated by reference herein and in the Registration Statement in reliance
upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing.
Upon request, the Depositor will provide or cause to be provided without
charge to each person to whom this Prospectus is delivered in connection with
the offering of one or more Classes of Certificates, a copy of any or all
documents or reports incorporated herein by reference, in each case to the
extent such documents or reports relate to one or more of such Classes of such
Certificates, other than the exhibits to such documents (unless such exhibits
are specifically incorporated by reference in such documents). Requests to the
Depositor should be directed in writing to Farmer Mac Mortgage Securities
Corporation, 919 18th Street, N.W., Suite 200, Washington, D.C. 20006,
Attention: Corporate Secretary (telephone (202) 872-7700). The Depositor has
determined that its financial statements are not material to the offering of any
Certificates.
<PAGE>
SUMMARY
The following summary of certain pertinent information is qualified in its
entirety by reference to the more detailed information appearing elsewhere in
this Prospectus and by reference to the information with respect to each Series
of Certificates contained in the Prospectus Supplement to be prepared and
delivered in connection with the offering of such Series. An Index of Principal
Terms is included at the end of this Prospectus.
Title of Certificates Guaranteed Agricultural Mortgage-Backed
Securities ("AMBS") issuable in Series (the
"Certificates").
Guarantor Federal Agricultural Mortgage Corporation ("Farmer Mac"),
a federally chartered instrumentality of the United
States, established by Title VIII of the Farm Credit Act
of 1971, as amended (the "Farmer Mac Charter").
The 1996 Amendment The Farm Credit System Reform Act of
1996, Pub. L. 104-105 (the "1996
Amendment"), signed into law by the
President of the United States on
February 10, 1996, modified the Farmer
Mac Charter as it theretofore existed
in several major respects, by, among
other things (i) authorizing Farmer Mac
to purchase Qualified Loans and to
deposit such purchased Qualified Loans
in Trust Funds serving as the basis for
securities guaranteed by Farmer Mac,
(ii) extending from December 1996 to
December 1999 the statutory deadline
for the full imposition of certain
regulatory capital requirements
applicable to Farmer Mac, and (iii)
eliminating statutory requirements for
credit support features aggregating not
less than ten percent of the initial
principal balances of Qualified Loans
in a Trust Fund. The 1996 Amendment
also made various statutory changes
intended to further streamline program
operations and clarify certain
ambiguous statutory provisions. See
"FEDERAL AGRICULTURAL MORTGAGE
CORPORATION" and "RISK FACTORS - Recent
Developments Affecting Farmer Mac"
herein.
Depositor Farmer Mac Mortgage Securities
Corporation, a Delaware corporation and
a wholly-owned subsidiary of Farmer
Mac. See "THE DEPOSITOR" herein.
The Master Servicer Farmer Mac will act as the Master
Servicer of the Qualified Loans
included in or underlying each Trust
Fund (in such capacity, the "Master
Servicer"). Although Farmer Mac will be
legally and contractually responsible
for all servicing, it will conduct its
servicing responsibilities for each
Trust Fund through one or more Central
Servicers (each, a "Central Servicer")
which will be identified in the related
Prospectus Supplement.
Trustee The trustee (the "Trustee") for each Series of
Certificates will be named in the related Prospectus
Supplement. See "DESCRIPTION OF THE AGREEMENTS - The
Trustee."
Each Series of Certificates will
The Trust Assets represent in the aggregate the entire
beneficial ownership interest in a Trust Fund consisting
primarily of:
(a) Qualified Assets The Qualified Assets with respect to
each Series of Certificates will
consist of (i) agricultural real estate
mortgage loans (collectively, the
"Qualified Loans"), (ii) portions of
loans guaranteed by the United States
Secretary of Agriculture pursuant to
the Consolidated Farm and Rural
Development Act (7 U.S.C. ss.1921 et
seq.) ("Guaranteed Portions"), (iii)
Farmer Mac Guaranteed Agricultural
Mortgage-Backed Securities ("Trust Fund
AMBS"), mortgage pass-through
certificates or other mortgage-backed
securities evidencing interests in or
secured by Qualified Loans or
Guaranteed Portions (collectively, the
"QMBS") or (iv) a combination of the
foregoing. AMBS and Trust Fund AMBS
refer to Certificates issued and
offered pursuant to this Registration
Statement or registration statements
previously or subsequently filed by the
Depositor. The Qualified Loans will
not be guaranteed or insured by Farmer
Mac or any of its affiliates or by any
governmental agency or instrumentality
or other person. As more specifically
described herein, the Qualified Loans
will be secured by a fee simple
mortgage or a minimum 50-year leasehold
mortgage, with status as a first lien
on Agricultural Real Estate (as defined
below) that is located within the
United States (the "Mortgaged
Properties"). A Qualified Loan must be
an obligation of (i) a citizen or
national of the United States or an
alien lawfully admitted for permanent
residence in the United States; or (ii)
a private corporation or partnership
whose members, stockholders or partners
holding a majority interest in the
corporation or partnership are
individuals described in clause (i). A
Qualified Loan must also be an
obligation of a person, corporation or
partnership having training or farming
experience sufficient to ensure a
reasonable likelihood of repayment of
the loan according to its terms. A
Qualified Loan may be an existing or
newly originated mortgage loan that
conforms to the requirements set forth
in the Farmer Mac program documents
(the "Guides"). Qualified Loans are
secured by Agricultural Real Estate.
"Agricultural Real Estate" is defined
as a parcel or parcels of land, which
may be improved by buildings or other
structures permanently affixed to the
parcel or parcels, that (a) are
used for the production of
one or more
agricultural commodities and (b) consist of a minimum of
five acres or are used in producing minimum receipts of
at least $5,000. The principal amount of a Qualified Loan
secured by Agricultural Real Estate of at least one
thousand acres may not exceed $3,420,400, as adjusted for
inflation as of December 31, 1996.
Each Qualified Loan may provide for accrual of interest
thereon at an interest rate (a " Mortgage Interest Rate")
that is fixed over its term or that adjusts from time to
time, or is partially fixed and partially floating or
that may be converted from a floating to a fixed Mortgage
Interest Rate, or from a fixed to a floating Mortgage
Interest Rate, from time to time at the Mortgagor's
election, in each case as described in the related
Prospectus Supplement. The floating Mortgage Interest
Rates on the Qualified Loans in a Trust Fund may be based
on one or more indices. Each Qualified Loan may provide
for scheduled payments to maturity, payments that adjust
from time to time to accommodate changes in the Mortgage
Interest Rate or to reflect the occurrence of certain
events, and may provide for accelerated amortization, in
each case as described in the related Prospectus
Supplement. Each Qualified Loan may be fully amortizing
or require a balloon payment (each such payment, a
"Balloon Payment") due on its stated maturity date, in
each case as described in the related Prospectus
Supplement. Each Qualified Loan may contain prohibitions
on prepayment or require payment of a Prepayment Premium
or a Yield Maintenance Charge (each term as defined
herein) in connection with a prepayment, in each case, as
described in the related Prospectus Supplement. The
Qualified Loans may provide for payments of principal,
interest or both, on due dates that occur quarterly,
semi-annually, annually or at such other interval as is
specified in the related Prospectus Supplement. See
"DESCRIPTION OF THE TRUST FUNDS - Qualified Loans."
(b) Farmer Mac The Certificates of each Series will be
Guarantee covered by a Farmer Mac Guarantee.
Because the Farmer Mac Guarantee runs directly to
Holders, it does not directly cover payments on the
related Qualified Loans included in or underlying the
related Trust Fund. Each Farmer Mac Guarantee will
provide for the payment by Farmer Mac to Holders of any
and all amounts necessary to assure the timely payment of
all required distributions of interest and principal on
the Certificates to the extent set forth in the related
Prospectus Supplement. The related Prospectus Supplement
will specify the extent of Farmer Mac's guarantee
obligation, if any, with respect to any Qualified Loan in
default as to its Balloon Payment and will discuss any
resulting impact on the expected yield of the related
Certificates. See "YIELD, PREPAYMENT AND MATURITY
CONSIDERATIONS" in the related Prospectus Supplement. In
addition, Farmer Mac guarantees the distribution to
Holders of the principal balance of each Class of
Certificates in full no later than the related Final
Distribution Date, whether or not sufficient funds are
available in the Certificate Account. Farmer Mac's
obligations under each Farmer Mac Guarantee are
obligations solely of Farmer Mac and are not backed by
the full faith and credit of the United States. Farmer
Mac will not guarantee the collection from any borrower
of any yield maintenance charge ("Yield Maintenance
Charge") or any other premium ("Prepayment Premium")
payable in connection with a principal prepayment on a
Qualified Loan, and in the event the related Trust
Agreement entitles the related Holders to receive
distributions of such Yield Maintenance Charges or
Prepayment Premiums, such Holders will receive such
amounts only to the extent actually collected. Under the
Farmer Mac Charter, Farmer Mac is required to establish a
segregated account into which it will deposit a portion
of the guarantee fees it receives for its guarantee
obligations. Farmer Mac expects that its future
contingent liabilities in respect of guarantees of
outstanding securities backed by agricultural mortgage
loans will substantially exceed any amounts on deposit in
such reserve account. The amount on deposit in such
reserve account as of the end of any calendar quarter is
set forth (as an allowance for losses) in Farmer Mac's
consolidated balance sheets filed with the Commission and
incorporated by reference herein. See "INCORPORATION OF
CERTAIN INFORMATION BY REFERENCE" herein. If the reserve
account so established, together with any remaining
general Farmer Mac assets, is insufficient to enable
Farmer Mac to make a required payment under any Farmer
Mac Guarantee, Farmer Mac will issue obligations to the
Secretary of the Treasury in an amount at any time
outstanding not to exceed $1,500,000,000. The Secretary
of the Treasury is required to purchase obligations
issued by Farmer Mac not later than ten business days
after receipt by the Secretary of the Treasury of a
certification by Farmer Mac in accordance with the
requirements of the Farmer Mac Charter. The Trust
Agreement will contain various timing mechanisms designed
to assure that Farmer Mac will have sufficient advance
notice of any obligation under a Farmer Mac Guarantee in
order, to the extent required, to make timely demand upon
the Secretary of the Treasury. If for
any reason beyond the control of any
Holder, such Holder fails to receive
on any Distribution Date such Holder's portion of any
payment required pursuant to the Farmer Mac Guarantee,
such Holder may, through the related Trustee, enforce
such obligation against Farmer Mac to the extent of such
Holder's portion. Farmer Mac anticipates that its future
contingent liabilities in respect of guarantees of
outstanding securities backed by agricultural mortgage
loans will greatly exceed its resources, including its
limited ability to borrow from the United States
Treasury. See "FEDERAL AGRICULTURAL MORTGAGE
CORPORATION" herein.
(c) Collection Each Trust Fund will include one or
Account; more accounts (each, a "Collection
Certificate Account Account") established and maintained on behalf
of the Holders into which the Central Servicer
designated in the related Prospectus Supplement will, to
the extent described herein and in such Prospectus
Supplement, deposit all payments and collections
received or advanced with respect to the Qualified
Assets in the Trust Fund. Such an account may be
maintained as an interest bearing or a non-interest
bearing account, and funds held therein may be held as
cash or invested in certain short-term obligations.
Prior to each Distribution Date, the Central Servicer
will remit to Farmer Mac, as Master Servicer, for
deposit into the Certificate Account maintained by it
funds then held in the Collection Account that are
applicable to the distribution on such following
Distribution Date. See "DESCRIPTION OF THE AGREEMENTS -
Accounts" herein.
Description of
Certificates Each Series of Certificates evidencing
an interest in a Trust Fund will be
issued pursuant to a Trust Agreement.
If Qualified Loans are included in a
Trust Fund, they will be master
serviced by Farmer Mac pursuant to the
related Trust Agreement. Farmer Mac's
servicing responsibilities under the
Trust Agreement will be performed on
its behalf by one or more Central
Servicers pursuant to Servicing
Contracts with Farmer Mac. Qualified
Assets deposited into a Trust Fund by
the Depositor will have been sold to
it by Originators or other holders of
Qualified Loans (collectively,
"Sellers") pursuant to a Master Loan
Sale Agreement (each a "Sale
Agreement"). The Trust Agreements,
Servicing Contracts and Sale
Agreements for a particular Trust Fund
are referred to herein as the
"Agreements." See "DESCRIPTION OF THE
TRUST FUNDS" herein "DESCRIPTION OF THE
AGREEMENTS" and
"DESCRIPTION OF THE QUALIFIED LOANS" in
the Prospectus Supplement. Each Series
of Certificates will include one or more Classes. Each
Series of Certificates will represent in the aggregate
the entire beneficial ownership interest in the related
Trust Fund. Each Class of Certificates (other than
certain Stripped Interest Certificates, as defined below)
will have a stated principal amount (a "Certificate
Balance") and (other than certain Stripped Principal
Certificates, as defined below), will accrue interest
thereon based on a fixed, variable or floating interest
rate (a "Pass-Through Rate"). The related Prospectus
Supplement will specify the Certificate Balance, if any,
and the Pass-Through Rate, if any, for each Class of
Certificates or, in the case of a variable or floating
Pass-Through Rate, the method for determining the
Pass-Through Rate. See "DESCRIPTION OF THE CERTIFICATES"
herein and in the related Prospectus Supplement.
Distributions on
Certificates Each Series of Certificates will
consist of one or more Classes of
Certificates that may (i) provide for
the accrual of interest thereon based
on fixed, variable or floating rates;
(ii) be entitled to principal
distributions with disproportionately
low, nominal or no interest
distributions (collectively, "Stripped
Principal Certificates"); (iii) be
entitled to interest distributions with
disproportionately low, nominal or no
principal distributions (collectively,
"Stripped Interest Certificates"); (iv)
provide for distributions of accrued
interest thereon commencing only
following the occurrence of certain
events, such as the retirement of one
or more other classes of Certificates
of such Series (collectively, "Accrual
Certificates"); (v) provide for
distributions of principal
sequentially, based on specified
payment schedules or other
methodologies; (vi) provide for
distributions based on a combination of
two or more components thereof with one
or more of the characteristics
described in this paragraph, including
a Stripped Principal Certificate
component and a Stripped Interest
Certificate component, to the extent of
available funds; and/or (vii) to the
extent the Trust Agreement so provides,
be entitled to distributions of any
Prepayment Premiums and Yield
Maintenance Charges to the extent
collected, in each case as described in
the related Prospectus Supplement. With
respect to Certificates with two or
more components, references
herein to Certificate
Balance, notional amount and
Pass-Through Rate refer to the
principal balance, if any, notional
amount, if any, and the Pass-Through
Rate, if any, for any such component.
(a) Interest Interest on each Class of Certificates
(other than Stripped Principal
Certificates and certain Classes of
Stripped Interest Certificates) of each
Series will accrue at the applicable
Pass-Through Rate on the outstanding
Certificate Balance thereof and will be
distributed to Holders as provided in
the related Prospectus Supplement (each
of the specified dates on which
distributions are to be made, a
"Distribution Date"). Distributions
with respect to interest on Stripped
Interest Certificates may be made on
each Distribution Date on the basis of
a notional amount as described in the
related Prospectus Supplement.
Stripped Principal Certificates with no
stated Pass-Through Rate will not
accrue interest. See "YIELD
CONSIDERATIONS" and "DESCRIPTION OF THE
CERTIFICATES - Distributions of
Interest on the Certificates" herein.
(b) Principal The Certificates of each Series will
have an aggregate Certificate Balance
no greater than the outstanding
principal balance of the Qualified
Assets as of the close of business on
the first day of formation of the
related Trust Fund (the "Cut-off
Date"), after application of scheduled
payments due on or before such date,
whether or not received. The
Certificate Balance of a Certificate
outstanding from time to time
represents the maximum amount that the
Holder thereof is then entitled to
receive in respect of principal from
future cash flows on the assets in the
related Trust Fund. Distributions of
principal will be made on each
Distribution Date to the Class or
Classes of Certificates entitled
thereto until the Certificate Balances
of such Certificates have been reduced
to zero. Distributions of principal of
any Class of Certificates will be made
on a pro rata basis among all of the
Certificates of such Class or by random
selection, as described in the related
Prospectus Supplement. Stripped
Interest Certificates with no
Certificate Balance will not receive
distributions in respect of principal.
See "DESCRIPTION OF THE CERTIFICATES -
Distributions of Principal of the
Certificates" herein.
Qualified Loan The Qualified Loans in a Trust Fund
Groups may be divided, to the extent set
forth in the related Prospectus Supplement, into two or
more Qualified Loan Groups comprised of Qualified Loans
having, in some cases, similar Due Dates for scheduled
payments and/or in other cases generally similar
Mortgage Interest Rates or methods of calculating such
rates and scheduled final maturities. The related
Prospectus Supplement will specify whether a Qualified
Loan Group will, for Farmer Mac designation and
reporting purposes, constitute a Pool and will specify
the numerical designation for each Pool comprising the
related Series. Payments of interest and principal on
the Qualified Loans in a Qualified Loan Group, will be
applied first to required distributions on the related
Class or Classes of Certificates. Thus, each Qualified
Loan Group and each related Class or Classes of
Certificates will be separate and distinct from every
other Qualified Loan Group and its related Class or
Classes of Certificates, except with respect to
Certificates evidencing an ownership interest only in
interest payments or residual payments from Qualified
Loans in two or more Qualified Loan Groups. Information
with respect to any Qualified Loan Group will be set
forth in the related Prospectus Supplement. If the
Qualified Loans included in a Trust Fund are divided
into Qualified Loan Groups, references herein to the
Qualified Loans in such Trust Fund will refer, to the
extent required by the context, to such Qualified Loan
Groups.
Advances Each Central Servicer will, to the
extent set forth in the Prospectus
Supplement, be obligated as part of
its sub-servicing responsibilities to
make certain advances with respect to
delinquent scheduled payments on the
Qualified Loans in such Trust Fund
which are deemed to be recoverable
("Advances"). Neither the Depositor
nor any of its affiliates will have
any responsibility to make such
Advances, although the failure to
advance may trigger Farmer Mac's
obligations under the Farmer Mac
Guarantee. Because Farmer Mac
guarantees timely distribution
of interest and principal on the
Certificates (including any Balloon
Payments), the presence or absence of
an advancing obligation will not affect
distributions of interest and
principal to such Holders. In
addition, Farmer Mac may determine to
make an Advance on behalf of a Central
Servicer rather than make a payment
under the related Farmer Mac
Guarantee. Advances are reimbursable
generally from subsequent recoveries
in respect of such Qualified Loans and
otherwise to the extent described
herein and in the related Prospectus
Supplement. The Prospectus Supplement
for any Series of Certificates
evidencing an interest in a Trust Fund
that includes QMBS will describe any
corresponding advancing obligation of
any person in connection with such
QMBS. See "DESCRIPTION OF THE
CERTIFICATES - Advances in Respect of
Delinquencies" herein.
If so specified in the related
Termination Prospectus Supplement, a Series of
Certificates may be subject to
optional early termination through the
repurchase of the Qualified Assets in
the related Trust Fund by the party
specified therein, under the
circumstances and in the manner set
forth therein. If so provided in the
related Prospectus Supplement, upon
the reduction of the Certificate
Balance of a specified Class or
Classes of Certificates by a specified
percentage or amount or on and after a
date specified in such Prospectus
Supplement, the party specified
therein will solicit bids for the
purchase of all of the Qualified
Assets of the Trust Fund, or of a
sufficient portion of such Qualified
Assets to retire such Class or
Classes, or purchase such Qualified
Assets at a price set forth in the
related Prospectus Supplement. In
addition, if so provided in the
related Prospectus Supplement, certain
Classes of Certificates may be
purchased subject to similar
conditions. See "DESCRIPTION OF THE
CERTIFICATES - Termination" herein.
Tax Status of the
Certificates The Certificates of each Series will
constitute either (i) interests in a
Trust Fund treated as a grantor trust
under subpart E, Part I of subchapter
J of the Code, if no election is made
to treat the Trust Fund as a real
estate mortgage investment conduit (a
"REMIC"), or (ii) "regular interests"
("REMIC Regular Certificates") or
"residual interests" ("REMIC Residual
Certificates" or "Class R
Certificates") in a Trust Fund as to
which a REMIC election is made.
(a) Grantor Trust If no election is made to treat the
Trust Fund relating to a Series of
Certificates as a REMIC, the Trust
Fund will be classified as a grantor
trust and not as an association
taxable as a corporation for federal
income tax purposes, and therefore
Holders will be treated as the owners
of undivided pro rata interests in the
related Trust Assets. Investors are
advised to consult their tax advisors
and to review "CERTAIN FEDERAL INCOME
TAX CONSEQUENCES" herein and in the
related Prospectus Supplement.
REMIC Regular Certificates generally
(b) REMIC will be treated as debt obligations
for federal income tax purposes.
Certain REMIC Regular Certificates may
be issued with original issue discount
for federal income tax purposes. See
"CERTAIN FEDERAL INCOME TAX CONSE-
QUENCES" herein and in the related
Prospectus Supplement. In general,
(i) Certificates held by a real estate
investment trust will be treated as
"real estate assets" within the
meaning of Section 856(c)(5)(A) of the
Code and interest on REMIC Regular
Certificates, and any amounts
includible in income with respect to
REMIC Residual Certificates, held by a
real estate investment trust will be
considered "interest on obligations
secured by mortgages on real property"
within the meaning of Section
856(c)(3)(B), and (ii) REMIC Regular
Certificates held by a REMIC will be
considered "obligation[s] . . . which
[are] principally secured by an
interest in real property" within the
meaning of Section 860G(a)(3) of the
Code, in each case to the extent
described herein and in the related
Prospectus Supplement. See "CERTAIN
FEDERAL INCOME TAX CONSE-QUENCES"
herein and in the related Prospectus
Supplement.
ERISA The acquisition of a Certificate by a
plan subject to the Employee
Retirement Income Security Act of
1974, as amended ("ERISA") or any
other plan subject to Code Section
4975 could, in some instances, result
in a prohibited transaction or other
violations of the fiduciary
responsibility provisions of ERISA and
Code Section 4975. Certain exemptions
from the prohibited transaction rules
could, however, be applicable. See
"ERISA CONSIDERATIONS" herein and in
the related Prospectus Supplement.
Legal Investment The Certificates will constitute
securities guaranteed by Farmer Mac
for purposes of the Farmer Mac Charter
and, as such, will, by statute, be
legal investments for certain types of
institutional investors to the extent
that those investors are authorized
under any applicable law to purchase,
hold, or invest in obligations issued
by or guaranteed as to principal and
interest by the United States or any
agency or instrumentality of the
United States. Investors whose
investment authority is subject to
legal restrictions should consult
their own legal advisors to determine
whether and to what extent specific
Classes of the Certificates
(particularly Classes of Stripped
Interest or Stripped Principal
Certificates) constitute legal
investments for them. See "LEGAL
INVESTMENT" herein and in the related
Prospectus Supplement.
<PAGE>
RISK FACTORS
Investors should consider, in connection with the purchase of Certificates,
among other things, the following factors and certain other factors as may be
set forth in "RISK FACTORS" in the related Prospectus Supplement.
Recent Developments Affecting Farmer Mac
The Farm Credit System Reform Act of 1996 (the "1996 Amendment") modified
the Farmer Mac Charter (as defined herein) by, among other things, requiring
Farmer Mac to increase its capital to at least $25 million by February 1998 (or
sooner if business volume increases substantially). As of December 31, 1996,
Farmer Mac's capital as reported on its Annual Report on Form 10-K for the year
ended December 31, 1996 was $47.2 million. See Farmer Mac's Annual Report on
Form 10-K for the year ended December 31, 1996 filed with the Commission
pursuant to the Exchange Act and incorporated by reference in this Prospectus,
"INCORPORATION OF CERTAIN INFORMATION BY REFERENCE" and "FEDERAL AGRICULTURAL
MORTGAGE CORPORATION" herein.
Limited Liquidity
There can be no assurance that a secondary market for the Certificates of any
Series will develop or, if it does develop, that it will provide Holders with
liquidity of investment or will continue while Certificates of such Series
remain outstanding. Any such secondary market may provide less liquidity to
investors than any comparable market for securities evidencing interests in
single family mortgage loans. The market value of Certificates will fluctuate
with changes in prevailing rates of interest. Consequently, sale of Certificates
by a Holder in any secondary market that may develop may be at a discount from
100% of their original Certificate Balance or from their purchase price. Except
to the extent described herein and in the related Prospectus Supplement, Holders
will have no redemption rights and the Certificates are subject to early
retirement only under certain specified circumstances described herein and in
the related Prospectus Supplement. See "DESCRIPTION OF THE CERTIFICATES
Termination" herein.
Farmer Mac Guarantee
Farmer Mac's obligations under each Farmer Mac Guarantee are obligations
solely of Farmer Mac and are not backed by the full faith and credit of the
United States. Sources of funding for the payment of claims, if any, under any
Farmer Mac Guarantees will be (i) the fees Farmer Mac charges for providing its
guarantee and (ii) Farmer Mac's general assets, which are insignificant in
relation to its potential exposure to any meaningful level of possible claims
under Farmer Mac Guarantees. A portion of the guarantee fees received is
required to be set aside by Farmer Mac in a segregated account as a reserve
against losses from its guarantee activities. Farmer Mac expects that its future
contingent liabilities in respect of guarantees of outstanding securities backed
by agricultural mortgage loans will substantially exceed any amounts on deposit
in such reserve account. This reserve account must be exhausted before Farmer
Mac issues obligations to the Secretary of the Treasury against the
$1,500,000,000 Farmer Mac is authorized to borrow from the Secretary of the
Treasury pursuant to the Farmer Mac Charter. The Secretary of the Treasury is
required under the Farmer Mac Charter to purchase obligations issued by Farmer
Mac not later than ten business days after receipt by the Secretary of the
Treasury of a certification by Farmer Mac in the form prescribed by the Farmer
Mac Charter. The Trust Agreement will contain various timing mechanisms designed
to assure that Farmer Mac will have sufficient advance notice of any obligation
under a Farmer Mac Guarantee in order, to the extent required, to make timely
demand upon the Secretary of the Treasury. If for any reason beyond the control
of any Holder, such Holder fails to receive on any Distribution Date such
Holder's portion of any payment required pursuant to the Farmer Mac Guarantee,
such Holder may, through the related Trustee, enforce such obligation against
Farmer Mac to the extent of such Holder's portion. Farmer Mac anticipates that
its future contingent liabilities in respect of guarantees of outstanding
securities will greatly exceed its resources, including its limited ability to
borrow from the United States Treasury referred to above. See "FEDERAL
AGRICULTURAL MORTGAGE CORPORATION" herein.
Farmer Mac will not guarantee the collection from any borrower of any yield
maintenance charge ("Yield Maintenance Charge") or any other premium
(collectively, "Prepayment Premiums") payable in connection with a principal
prepayment on a Qualified Loan, and in the event the related Trust Agreement
entitles the related Holders to receive distributions of such Yield Maintenance
Charges or Prepayment Premiums, such Holder will receive such amounts only to
the extent actually collected.
Yield, Prepayment and Maturity Considerations
Agricultural lending is generally viewed as exposing lenders to a greater
risk of loss than single-family residential lending. Agricultural lending
typically involves larger loans to single borrowers than does lending on
single-family residences. Repayment of agricultural loans is typically dependent
upon the success of the related farming operation, which is, in turn, dependent
upon many variables and factors over which farmers may have little or no
control, such as weather conditions, economic conditions (both domestically and
internationally) and even political conditions. If the cash flow from a farming
operation is diminished (for example, adverse weather conditions destroy a crop
or prevent the planting or harvesting of a crop), the borrower's ability to
repay the loan may be impaired. Agricultural lending is perhaps more affected by
circumstances beyond the control of the borrower than any other area of real
estate lending. However, under the Farmer Mac Guarantee, Holders will continue
to receive required interest and principal distributions on each Distribution
Date regardless of whether sufficient funds have been collected from borrowers.
In addition, principal prepayments resulting from liquidations of Qualified
Loans due to defaults or other calamities affecting Qualified Loans, or
repurchases of Qualified Loans due to breaches of representations and warranties
may significantly affect the yield to investors. The rates of prepayment and
default on the Qualified Loans in a particular Trust Fund will affect the
anticipated maturities and yields to maturity of the related Certificates.
Little or no historical data is available to provide meaningful assistance in
estimating the rate of prepayments and defaults on loans secured by Agricultural
Real Estate.
The yield to investors in each Class of a Series of Certificates will be
sensitive in varying degrees to the rate and timing of principal payments
(including prepayments) of the underlying Qualified Assets, which, in the case
of each Trust Fund, will be prepayable to the extent described in the related
Prospectus Supplement. In addition, the yield to maturity on a Class of
Certificates may vary depending on the extent to which such Class is purchased
at a discount or premium. Investors should consider, in the case of any
Certificates purchased at a discount, the risk that a slower than anticipated
rate of principal payments could result in an actual yield that is lower than
the anticipated yield and, in the case of any Certificates purchased at a
premium, the risk that a faster than anticipated rate of principal payments
could result in an actual yield that is lower than the anticipated yield.
The yield to maturity on each Class of Certificates will be extremely
sensitive to the rate and timing of principal payments (including prepayments)
of the underlying Qualifying Loans, which may fluctuate significantly from time
to time. Investors should fully consider the associated risks, including the
risk that an extremely rapid rate of principal payments on the Qualified Loans
could result in the failure of investors in any Class of Stripped Interest
Certificates to recoup their initial investments. See "YIELD CONSIDERATIONS -
Payments of Principal; Prepayments" herein.
Most loans secured by Agricultural Real Estate contain lock-out periods in
which prepayments are completely prohibited or set forth maximum amounts that
may be prepaid in any year, contain restrictions on the source of prepayments,
limit the dates on which the payments may be made to regular interest payment
dates, or impose prepayment penalties or charges and/or other restrictions on
prepayments including Yield Maintenance Charges. Because Farmer Mac does not
guarantee the collection of any Yield Maintenance Charges or Prepayment Premiums
on the underlying Qualified Loans, the expected yield to investors in the
Certificates may be sensitive in various degrees to the extent such amounts are
not collected. In addition, the required payment of Prepayment Premiums or Yield
Maintenance Charges may not be a sufficient disincentive to prevent the
voluntary prepayment of the Qualified Loans and, even if collected, allocation
thereof to any Class may be insufficient to offset fully the adverse effects on
the anticipated yield thereon arising out of the corresponding principal
payment. Each Prospectus Supplement will describe the extent to which any
restrictions on prepayments are applicable to the underlying Qualified Loans and
the standard or standards, if any, applicable to the enforcement by the related
Central Servicer of any such restrictions.
Each Prospectus Supplement will also set forth the extent to which the
underlying Qualified Loans include "due on sale" clauses which permit the
mortgagee to demand payment of the entire Qualified Loan in connection with the
sale or certain transfers of the related mortgaged property. Standards
applicable to the enforcement or waiver by the related Central Servicer of any
such "due on sale" clauses will also be described in the related Prospectus
Supplement.
Book-Entry Registration
If so provided in the Prospectus Supplement, one or more Classes of the
Certificates will be issued and maintained and may be transferred only on the
book-entry system of the Federal Reserve Banks and/or will be initially
represented by one or more certificates registered in the name of the nominee
for the central depository identified therein, and will not be registered in the
names of the Beneficial Owners or their nominees. Because of this, unless and
until Definitive Certificates are issued, Beneficial Owners will not be
recognized by the Trustee as Holders. Hence, until such time, Beneficial Owners
will be able to exercise the rights of Holders only indirectly through the
Federal Reserve Banks and their participating financial institutions or through
such central depository and its participating organizations. See "DESCRIPTION OF
THE CERTIFICATES - Book-Entry Registration" herein.
<PAGE>
DESCRIPTION OF THE TRUST FUNDS
Assets
The primary assets of each Trust Fund are set forth above under "SUMMARY -
The Trust Assets." The Certificates of any Series will be entitled to payment
only from the assets of the related Trust Fund and will not be entitled to
payments in respect of the assets of any other trust fund established by the
Depositor. If specified in the related Prospectus Supplement, the assets of a
Trust Fund will consist of certificates representing beneficial ownership
interests in another trust fund that contains Qualified Assets.
Qualified Loans
General
The general characteristics of, and eligibility standards for, Qualified
Loans are set forth above under "SUMMARY - The Trust Assets - (a) Qualified
Assets." In addition to these general statutory standards, Farmer Mac has
established supplemental standards described below in an effort to reduce the
risk of loss from defaults by borrowers and to provide guidance to a participant
in its guarantee program concerning management, administration and conduct of
appraisals.
Farmer Mac's Underwriting and Appraisal Standards (the "Underwriting
Standards" and the "Appraisal Standards") are based on industry norms for
mortgage loans qualified to be sold in the secondary market, and are designed to
assess the creditworthiness of the borrower as well as the value of the
Mortgaged Properties relative to the amount of the Qualified Loan. Farmer Mac
generally relies on representations and warranties made by the Seller to ensure
that the Qualified Loans contained in the Trust Fund conform to such
Underwriting Standards and other requirements of the Guides.
The Underwriting Standards require, among other things, that the
loan-to-value ratio for any Qualified Loan cannot exceed 70%. In the case of
newly originated Qualified Loans secured by Agricultural Real Estate, borrowers
must also meet certain credit ratios, including: (i) a pro forma (after closing
the new loan) debt-to-asset ratio of 50% or less; (ii) a pro forma cash flow
debt service coverage ratio of not less than 1:1 on the subject property; (iii)
a total debt service coverage ratio, computed on a pro forma basis, of not less
than 1.25:1, including farm and off-farm income; and (iv) a ratio of current
assets to current liabilities, computed on a pro forma basis, of not less than
1:1.
In the case of existing loans, sustained loan performance is considered by
Farmer Mac to be a reliable alternative indicator of a borrower's ability to pay
the loan according to its terms. An existing loan generally will be eligible for
pooling and inclusion in a Trust Fund if it is at least three years old, has a
loan-to-value ratio (based on an updated appraisal) of 60% or less if the loan
is at least five years old (70% or less if the loan is less than five years
old), and there have been no payments more than 60 days past due during the
three years prior to pooling and no material restructurings or modifications
during the five years prior to pooling.
The Mortgaged Property securing a Qualified Loan must be covered by a hazard
insurance policy. The coverage of such policy is required to be in an amount not
less than the maximum insurable value of the Mortgaged Property securing the
related Qualified Loan from time to time or the principal balance outstanding on
the related Qualified Loan, whichever is less. Each such hazard insurance policy
covers physical damage to or destruction of the improvements of the property by
fire, lightning, explosion, smoke, windstorm and hail, riot, strike and civil
commotion, subject to the conditions and exclusions specified in each policy. To
the extent the Mortgaged Property is located in an area designated as a flood
plain by the Federal government, a flood insurance policy must be maintained for
such Mortgaged Property.
The Underwriting Standards provide that Farmer Mac may purchase or guarantee
securities backed by loans that do not conform to one or more of the
Underwriting Standards when: (a) those loans exceed one or more of the
Underwriting Standards to which they do conform to a degree that compensates for
noncompliance with one or more other Underwriting Standards and (b) those loans
are made to producers of particular agricultural commodities in a segment of
agriculture in which such non-conformance and compensating strengths are typical
of the financial condition of sound borrowers. The acceptance by Farmer Mac of
loans that do not conform to one or more of the Underwriting Standards is not
intended to provide a basis for waiving or lessening in any way the requirement
that loans be of high quality in order to be included in a Trust Fund. The
entity that requests the acceptance by Farmer Mac of such loans bears the burden
of convincing Farmer Mac that the loans meet both tests as set forth in clauses
(a) and (b) above, and that the inclusion of such loans in a Trust Fund, will
strengthen, not weaken, the overall performance of the Trust Fund. For those
reasons, Farmer Mac does not believe that the inclusion of such loans in a
particular Trust Fund creates any additional risk.
The Appraisal Standards for newly originated loans require, among other
things, that the appraisal function be performed independently of the credit
decision making process. The Appraisal Standards require the appraisal function
to be conducted or administered by an individual meeting certain qualification
criteria who (a) is not associated, except by the engagement for the appraisal,
with the credit underwriters who make the loan decision, though both the
appraiser and the credit underwriter may be directly or indirectly employed by a
common employer; (b) receives no financial or professional benefit of any kind
relative to the report content, valuation or credit decision made or based on
the appraisal product; and (c) has no present or contemplated future direct or
indirect interest in the appraised property. The Appraisal Standards also
require uniform reporting of reliable and accurate estimates of the market
value, market rent and net property income characteristics of the Mortgaged
Property and the market forces relative thereto.
Qualified Loan Information in Prospectus Supplements
Each Prospectus Supplement will contain information, as of the date of such
Prospectus Supplement, with respect to the Qualified Loans, generally including
either (A) (i) the aggregate outstanding principal balance and the largest,
smallest and average outstanding principal balance of the Qualified Loans as of
the applicable Cut-off Date, (ii) the percentage (by principal balance) of
Qualified Loans secured by Mortgaged Properties upon which specified commodity
groups are produced (i.e. (a) food grains, (b) feed crops, (c) cotton/tobacco,
(d) oilseeds, (e) potatoes, tomatoes and other vegetables, (f) permanent
plantings, (g) sugarbeets, cane and other crops, (h) timber, (i) dairy, (j)
cattle and calves and (k) sheep, lamb and other livestock), (iii) the weighted
average (by principal balance) of the original and remaining terms to maturity
of the Qualified Loans, (iv) the earliest and latest origination date and
maturity date of the Qualified Loans, (v) the loan-to-value ratios and the
weighted average (by principal balance) of the current loan-to-value ratios of
the Qualified Loans, (vi) the Mortgage Interest Rates or range of Mortgage
Interest Rates and the weighted average Mortgage Interest Rate borne by the
Qualified Loans, (vii) the geographic distribution of Qualified Loans secured by
Mortgaged Properties, (viii) information with respect to the amortization
provisions and provisions relating to prepayment, including any Prepayment
Premiums, Yield Maintenance Charges or lock-outs, if any, of the Qualified
Loans, (ix) with respect to Qualified Loans with floating Mortgage Interest
Rates ("ARM Loans"), the index, the frequency of the adjustment dates, the
highest, lowest and weighted average note margin and pass-through margin, and
the maximum Mortgage Interest Rate or monthly payment variation at the time of
any adjustment thereof and over the life of the ARM Loan and the frequency of
such monthly payment adjustments, (x) information regarding the payment
characteristics of the Qualified Loans, including without limitation, Balloon
Payments, or (B) similar information with respect to each of the Qualified
Loans. If specific information respecting the Qualified Loans is not known at
the time Certificates are initially offered, more general information of the
nature described above will be provided in the Prospectus Supplement, and
specific information will be set forth in a report which will be available to
purchasers of the related Certificates at or before the initial issuance thereof
and will be filed as part of a Current Report on Form 8-K with the Commission
within fifteen days after such initial issuance.
QMBS
Any QMBS will have been issued pursuant to a participation and servicing
agreement, a pooling and servicing agreement, a trust agreement, an indenture or
similar agreement (a "QMBS Agreement"). A seller (the "QMBS Issuer") and/or
servicer (the "QMBS Servicer") of the underlying Qualified Loans (or Underlying
QMBS) will have entered into the QMBS Agreement with a trustee or a custodian
under the QMBS Agreement (the "QMBS Trustee"), if any, or with the original
purchaser of the interest in the underlying Qualified Loans or QMBS evidenced by
the QMBS.
Distributions of any principal or interest, as applicable, will be made on
QMBS on the dates specified in the related Prospectus Supplement. The QMBS may
be issued in one or more Classes with characteristics similar to the Classes of
Certificates described in this Prospectus. Any principal or interest
distributions will be made on the QMBS by the QMBS Trustee or the QMBS Servicer.
The QMBS Issuer or the QMBS Servicer or another person specified in the related
Prospectus Supplement may have the right or obligation to repurchase or
substitute assets underlying the QMBS for the breach of certain representations
and warranties contained in the QMBS Agreement or under other circumstances
specified in the related Prospectus Supplement.
The Prospectus Supplement for a Series of Certificates evidencing interests
in Qualified Assets that include QMBS generally will specify (i) the aggregate
approximate initial and outstanding principal amount or notional amount, as
applicable, and type of the QMBS to be included in the related Trust Fund, (ii)
the original and remaining term to stated maturity of the QMBS, if applicable,
(iii) whether such QMBS is entitled only to interest payments, only to principal
payments or to both, (iv) the pass-through or bond rate of the QMBS or formula
for determining such rates, if any, (v) the applicable payment provisions for
the QMBS, including, but not limited to, any priorities, payment schedules and
subordination features, (vi) the QMBS Issuer, QMBS Servicer and QMBS Trustee, as
applicable, (vii) certain characteristics of the credit support, if any, such as
guarantees, subordination, reserve funds, insurance policies or letters of
credit or relating to the related underlying Qualified Loans, the underlying
QMBS or directly to such QMBS, (viii) the terms on which the related underlying
Qualified Loans or underlying QMBS for such QMBS or the QMBS may, or are
required to, be purchased prior to their maturity, (ix) the terms on which
Qualified Loans or underlying QMBS may be substituted for those originally
underlying the QMBS, (x) the servicing fees payable under the QMBS Agreement,
(xi) the type of information in respect of the underlying Qualified Loans
described under "- Qualified Loans - Qualified Loan Information in Prospectus
Supplements" above, and the type of information in respect of the underlying
QMBS described in this paragraph, (xii) the characteristics of any cash flow
agreements that are included as part of the trust fund evidenced or secured by
the QMBS and (xiii) whether the QMBS is in certificated form, book-entry form or
held through a depository such as The Depository Trust Company or the
Participants Trust Company.
Guaranteed Portions
The participation in a loan guaranteed (each such participation in the
related whole loan (the "Guaranteed Loan") being referred to herein as a
"Guaranteed Portion" and the related guarantee being referred to herein as a
"Secretary's Guarantee") by the Secretary of Agriculture pursuant to the
Consolidated Farm and Rural Development Act (7 U.S.C. ss. 1921 et seq.) is
statutorily included in the definition of loans eligible as "Qualified Loans"
for Farmer Mac secondary market programs. Guaranteed Portions are exempt from
all underwriting, appraisal and repayment standards otherwise applicable to
Qualified Loans.
The maximum loss covered by a Secretary's Guarantee can never exceed the
lesser of (1) 90% of principal and interest indebtedness on the Guaranteed Loan,
any loan subsidy due, and 90% of principal and interest indebtedness on secured
authorized protective advances for protection and preservation of the related
mortgaged property; and (2) 90% of the principal advanced to or assured by the
borrower under the Guaranteed Loan and any interest due (including a loan
subsidy).
The Secretary's Guarantee is a full faith and credit obligation of the United
States. Any Guaranteed Portion is the portion of the loan that is fully
guaranteed as to principal and interest due on such loan as described below. The
Secretary's Guarantee is activated if a Lender fails to repurchase the
Guaranteed Portion from the owner thereof (the "Owner") within thirty (30) days
of written demand from the Owner when (a) the borrower under the Guaranteed Loan
(the "Borrower") is in default not less than sixty (60) days in the payment of
any principal or interest due on the Guaranteed Portion, or (b) the Lender has
failed to remit to the Owner the payment made by the Borrower on the Guaranteed
Portion or any related loan subsidy within thirty (30) days of the Lender's
receipt thereof.
If the Lender does not repurchase the Guaranteed Portion as provided above,
the Secretary is required to purchase the unpaid principal balance of the
Guaranteed Portion together with accrued interest (including any loan subsidy)
to the date of purchase, less the servicing fee, within thirty (30) days of
written demand from the Owner. While the Secretary's Guarantee will not cover
the note interest on Guaranteed Portions accruing after ninety (90) days from
the date of the original demand letter to the Lender requesting repurchase,
procedures will be set forth in the related Trust Agreement to require tendering
of Guaranteed Portions in a timely manner so as not to exceed the 90-day period.
If, in the opinion of the Lender (with the concurrence of the Secretary) or
in the opinion of the Secretary, repurchase of the Guaranteed Portion is
necessary to service adequately the related Guaranteed Loan, the Owner will sell
the Guaranteed Portion to the Lender or the Secretary for an amount equal to the
unpaid principal balance and accrued interest (including any loan subsidy) on
such Guaranteed Portion less the Lender's servicing fee. Regulations prohibit
the Lender from repurchasing Guaranteed Portions for arbitrage purposes.
All Guaranteed Loans must be originated and serviced by eligible Lenders.
Under regulations, all eligible Lenders must be subject to credit examination
and supervision by either an agency of the United States or a state, must be in
good standing with their licensing authorities and have met any licensing, loan
making, loan servicing and other applicable requirements of the state in which
the collateral for a Guaranteed Loan will be located. The Lender on each
Guaranteed Loan is required to retain the unguaranteed portion of the Guaranteed
Loan (the "Unguaranteed Portion"), to service the entire underlying Guaranteed
Loan, including the Guaranteed Portion and to remain mortgagee and/or secured
party of record. The Guaranteed Portion and the Unguaranteed Portion of the
underlying Guaranteed Loan are to be secured by the same security with equal
lien priority. The Guaranteed Portion cannot be paid later than or in any way be
subordinated to the related Unguaranteed Portion.
The Farmer Mac Guarantee of Certificates evidencing interests in a Trust Fund
containing Guaranteed Portions will cover the timely payment of interest on and
principal of such Certificates (regardless of whether payment has been made
under the Secretary's Guarantee).
USE OF PROCEEDS
The net proceeds to be received from the sale of a Series of Certificates by
the Depositor will be applied by the Depositor to the purchase of Trust Assets
from Sellers and to pay for certain expenses incurred in connection with such
purchase of Trust Assets and sale of Certificates. The Depositor expects to sell
Certificates from time to time, but the timing and amount of offerings of
Certificates will depend on a number of factors, including the volume of
Qualified Assets acquired by the Depositor, prevailing interest rates,
availability of funds and general market conditions.
Rather than sell Certificates directly itself, the Depositor expects that
Certificates comprising a substantial number of Series will be exchanged by the
Depositor for Qualified Assets being swapped to it by Sellers.
YIELD CONSIDERATIONS
General
The yield on any Certificate will depend on the price paid for the
Certificate, the Pass-Through Rate of the Certificate, the receipt and timing of
receipt of distributions on the Certificate and the weighted average lives of
the Qualified Assets in the related Trust Fund, all of which may be affected by
prepayments, defaults, liquidations or repurchases. See "RISK FACTORS -- Yield,
Prepayment and Maturity Considerations" herein and in the related Prospectus
Supplement.
Pass-Through Rate
Certificates of any Class within a Series may have fixed, variable or
floating Pass-Through Rates, which may or may not be based upon the interest
rates borne by the Qualified Assets in the related Trust Fund. The Prospectus
Supplement with respect to any Series of Certificates will specify the
Pass-Through Rate for each Class of such Certificates or, in the case of a
variable or floating Pass-Through Rate, the method of determining the
Pass-Through Rate, and the effect, if any, of the prepayment of any Qualified
Asset on the Pass-Through Rate of one or more Classes of Certificates.
If the Interest Accrual Period for a Class ends prior to a Distribution Date
for the related Series of Certificates, the effective yield to maturity to each
Holder entitled to payments of interest will be below that otherwise produced by
the applicable Pass-Through Rate and purchase price of such Certificate because,
while interest will accrue on each such Certificate during such Interest Accrual
Period, the distribution of such interest will be made on a day which may be
several days, weeks or months following the period of accrual.
Timing of Payment of Interest
Each payment of interest on the Certificates (or addition to the Certificate
Balance of a Class of Accrual Certificates) on a Distribution Date will include
interest accrued during the Interest Accrual Period for such Distribution Date.
As indicated above under "- Pass-Through Rate," if the Interest Accrual Period
ends on a date other than a Distribution Date for the related Series, the yield
realized by Holders may be lower than the yield that would result if the
Interest Accrual Period ended on such Distribution Date. The Interest Accrual
Period for any Class of Certificates will be described in the related Prospectus
Supplement.
Payments of Principal; Prepayments
The yield to maturity on the Certificates will be affected by the rate of
principal payments on the Qualified Assets (including principal prepayments on
Qualified Loans resulting from voluntary prepayments by the borrowers, insurance
proceeds, condemnations and involuntary liquidations). A number of social,
economic, geographic, climatic, demographic, tax, legal and other factors may
influence the rate at which principal prepayments and defaults occur on the
Qualified Loans including, without limitation, the age of the Qualified Loans,
the payment terms of the Qualified Loans, the availability of mortgage credit,
enforceability of due-on-sale clauses, servicing decisions, the extent of the
borrower's net equity in the related Mortgaged Property, the characteristics of
the borrowers, mortgage market interest rates in relation to the effective
interest rates on the Qualified Loans and other unforeseeable variables, both
domestic and international, affecting particular commodity groups and the
farming industry in general. Generally, however, if prevailing interest rates
fall significantly below the Mortgage Interest Rates on the Qualified Loans
comprising or underlying the Qualified Assets in a particular Trust Fund, such
Qualified Loans are likely to be the subject of higher principal prepayments
than if prevailing rates remain at or above the rates borne by such Qualified
Loans. In this regard, it should be noted that certain Qualified Assets may
consist of Qualified Loans with different Mortgage Interest Rates and the stated
pass-through or pay-through interest rate of certain QMBS may be a number of
percentage points higher or lower than certain of the underlying Qualified
Loans. The rate of principal payments on some or all of the Classes of
Certificates of a Series will correspond to the rate of principal payments on
the Qualified Assets in the related Trust Fund and is likely to be affected by
the existence of lock-out periods and prepayment premium or yield maintenance
provisions of the Qualified Loans underlying or comprising such Qualified
Assets, and by the extent to which the servicer of any such Qualified Loan is
able to enforce such provisions. Qualified Loans with a lock-out period or a
prepayment premium or yield maintenance provision, to the extent enforceable,
generally would be expected to experience a lower rate of principal prepayments
than otherwise identical Qualified Loans without such provisions, with shorter
lock-out periods or with lower prepayment premiums or yield maintenance.
If the purchaser of a Certificate offered at a discount calculates its
anticipated yield to maturity based on an assumed rate of distributions of
principal that is faster than that actually experienced on the Certificate, the
actual yield to maturity will be lower than that so calculated. Conversely, if
the purchaser of a Certificate offered at a premium calculates its anticipated
yield to maturity based on an assumed rate of distributions of principal that is
slower than that actually experienced on the Certificate, the actual yield to
maturity will be lower than that so calculated. In either case, if so provided
in the Prospectus Supplement for a Series of Certificates, the effect on yield
on one or more Classes of the Certificates of such Series of prepayments of the
Qualified Assets in the related Trust Fund may be mitigated or exacerbated by
any provisions for sequential or selective distribution of principal to such
Classes.
A prepayment of principal, whether full or partial, is applied so as to
reduce the outstanding principal balance of the related Qualified Loan as of the
Due Date following the date on which such prepayment is received. As a result, a
prepayment on a Qualified Loan will not reduce the amount of interest passed
through to Holders for each related Interest Accrual Period.
The timing of changes in the rate of principal payments on the Qualified
Assets may significantly affect an investor's actual yield to maturity, even if
the average rate of distributions of principal is consistent with an investor's
expectation. In general, the earlier a principal payment is received on the
Qualified Assets and distributed on a Certificate, the greater the effect on
such investor's yield to maturity. The effect on an investor's yield of
principal payments occurring at a rate higher (or lower) than the rate
anticipated by the investor during a given period may not be offset by a
subsequent like decrease (or increase) in the rate of principal payments.
Prepayments, Maturity and Weighted Average Lives
The rates at which principal payments are received on the Qualified Assets
included in or comprising a Trust Fund for the related Series of Certificates
may affect the ultimate maturity and the weighted average life of each Class of
such Series. Prepayments on the Qualified Loans comprising or underlying the
Qualified Assets in a particular Trust Fund will generally accelerate the rate
at which principal is paid on some or all of the Classes of the Certificates of
the related Series.
As described in the related Prospectus Supplement for a Series of
Certificates, each Class of Certificates will have a final scheduled
Distribution Date, which is the date on or prior to which the Certificate
Balance thereof is required to be reduced to zero, calculated on the basis of
the assumptions applicable to such Series set forth therein. Payment of the
entire Certificate Balance of each such Class no later than such final
Distribution Date will be covered by the related Farmer Mac Guarantee.
Weighted average life refers to the average amount of time that will elapse
from the date of issue of a security until each dollar of principal of such
security will be repaid to the investor. The weighted average life of a Class of
Certificates of a Series will be influenced by the rate at which principal on
the Qualified Loans comprising or underlying the Qualified Assets is paid to
such Class, which may be in the form of scheduled amortization or prepayments
(for this purpose, the term "prepayment" includes prepayments, in whole or in
part, and liquidations due to default).
......In addition, the weighted average lives of the Certificates may be
affected by the varying maturities of the Qualified Loans comprising or
underlying the Qualified Assets. If any Qualified Loans comprising or underlying
the Qualified Assets in a particular Trust Fund have actual terms to maturity of
less than those assumed in calculating final scheduled Distribution Dates for
the Classes of Certificates of the related Series, one or more Classes of such
Certificates may be fully paid prior to their respective final scheduled
Distribution Dates, even in the absence of prepayments. Accordingly, the
prepayment experience of the Qualified Assets will, to some extent, be a
function of the mix of Mortgage Interest Rates and maturities of the Qualified
Loans comprising or underlying such Qualified Assets. See "DESCRIPTION OF THE
TRUST FUNDS" herein.
Prepayments on loans are also commonly measured relative to a prepayment
standard or model, such as the Constant Prepayment Rate ("CPR") prepayment
model. CPR represents a constant assumed rate of prepayment each month relative
to the then outstanding principal balance of a pool of loans for the life of
such loans. Neither CPR nor any other prepayment model or assumption purports to
be an historical description of prepayment experience or a prediction of the
anticipated rate of prepayment of any pool of loans, including the Qualified
Loans underlying or comprising the Qualified Assets. Moreover, CPR was developed
based upon historical prepayment experience for single family residential
mortgage loans. Thus, it is likely that prepayment of any Qualified Loans
comprising or underlying the Qualified Assets for any Series will not conform to
any particular level of CPR.
The Depositor is not aware of any meaningful prepayment statistics for
Qualified Loans secured by Agricultural Real Estate.
The Prospectus Supplement with respect to each Series of Certificates may
contain tables, if applicable, setting forth the projected weighted average life
of each Class of Certificates of such Series and the percentage of the initial
Certificate Balance of each such Class that would be outstanding on specified
Distribution Dates based on the assumptions stated in such Prospectus
Supplement, including assumptions that prepayments on the Qualified Loans
comprising or underlying the related Qualified Assets are made at rates
corresponding to various percentages of CPR or at such other rates specified in
such Prospectus Supplement. Such tables and assumptions are intended to
illustrate the sensitivity of weighted average lives of the Certificates to
various prepayment rates and will not be intended to predict or to provide
information that will enable investors to predict the actual weighted average
lives of the Certificates. It is unlikely that prepayment of any Qualified Loans
comprising or underlying the Qualified Assets for any Series will conform to any
particular level of CPR or any other rate specified in the related Prospectus
Supplement.
THE DEPOSITOR
Farmer Mac Mortgage Securities Corporation, the Depositor, is a wholly-owned
subsidiary of Farmer Mac and was incorporated in the State of Delaware in
December 1991. The principal executive offices of the Depositor are located at
919 18th Street, N.W., Washington, D.C. 20006 (telephone (202) 872-7700).
FEDERAL AGRICULTURAL MORTGAGE CORPORATION
The Federal Agricultural Mortgage Corporation ("Farmer Mac") is a federally
chartered instrumentality of the United States established by Title VIII of the
Farm Credit Act of 1971, as amended (12 U.S.C. ss. 2279aa et seq.) (the "Farmer
Mac Charter"). Farmer Mac was established primarily to attract new capital for
the financing of agricultural real estate and rural housing loans and to provide
liquidity to agricultural real estate and rural housing lenders. Farmer Mac is
intended to aid the development of a secondary market for agricultural real
estate and rural housing loans made by participating originators (each, an
"Originator"), secured by first liens on agricultural real estate, including
rural housing, by guaranteeing the timely payment of interest and principal on
obligations backed by such loans and securities representing interests in such
loans or in Guaranteed Portions.
Section 503 of the Food, Agriculture, Conservation, and Trade Act Amendments
of 1991 (the "1991 Act") provided for the creation of an Office of Secondary
Market Oversight within the Farm Credit Administration ("FCA") that is managed
by a full-time director selected by and reporting to the FCA Board. Through this
office, the FCA has general regulatory and enforcement authority over Farmer
Mac, including the authority to promulgate rules and regulations governing the
activities of Farmer Mac and to apply its general enforcement powers to Farmer
Mac and its activities. The 1991 Act also established certain minimum and
critical capital levels for Farmer Mac.
The 1996 Amendment signed into law by the President of the United States on
February 10, 1996, modified the Farmer Mac Charter as it theretofore existed in
several major respects, by, among other things (i) authorizing Farmer Mac to
purchase Qualified Loans and to include such purchased Qualified Loans in Trust
Funds serving as the basis for securities guaranteed by Farmer Mac, (ii)
extending from December 1996 to December 1999 the statutory deadline for the
full imposition of certain regulatory capital requirements applicable to Farmer
Mac, and (iii) eliminating statutory requirements for credit support features
aggregating not less than ten percent of the initial principal balances of
Qualified Loans in a Trust Fund. The 1996 Amendment also made various statutory
changes intended to further streamline program operations and clarify certain
ambiguous statutory provisions.
The 1996 Amendment also imposed certain additional capital requirements upon
Farmer Mac and timing limitations therefor, including a requirement that Farmer
Mac increase its capital to at least $25 million. The 1996 Amendment limits
Farmer Mac's authority to conduct new business if the $25 million capital level
is not reached by February 1998. As of December 31, 1996, Farmer Mac's capital
as reported on its Annual Report on Form 10-K for the year ended December 31,
1996 was $47.2 million.
The Farmer Mac Charter authorizes Farmer Mac to borrow up to $1,500,000,000
from the Secretary of the Treasury, subject to certain conditions, to enable
Farmer Mac to fulfill its guarantee obligations. The debt created by such
borrowing will bear interest at a rate determined by the Secretary of the
Treasury taking into consideration the average rate on outstanding marketable
obligations of the United States as of the last day of the calendar month ending
before the date of the purchase of such obligations. Farmer Mac is required to
repurchase its debt obligations from the Treasury within a reasonable time.
Public offerings of securities guaranteed by Farmer Mac must be registered
with the Commission pursuant to the Securities Act of 1933, as amended (the
"1933 Act"). Farmer Mac is also subject to the periodic reporting requirements
of the Exchange Act and, accordingly, files reports with the Commission pursuant
thereto. Pursuant to existing FCA regulations, Farmer Mac is required to file
quarterly reports of condition with the FCA, as well as copies of all documents
filed with the Commission under the 1933 Act and the Exchange Act.
The Farmer Mac Charter requires the Comptroller General to review annually,
and submit to the Congress a report regarding the actuarial soundness and
reasonableness of the fees Farmer Mac charges for providing its guarantee.
Although Farmer Mac is an institution of the Farm Credit System, it is not
liable for any debt or obligation of any other institution of the Farm Credit
System (a "System Institution"). Neither the Farm Credit System nor any other
individual System Institution is liable for any debt or obligation of Farmer
Mac. For more information about Farmer Mac, see the documents incorporated by
reference herein and referred to in "INCORPORATION OF CERTAIN INFORMATION BY
REFERENCE" herein.
Farmer Mac maintains its principal executive offices at 919
18th Street, N.W., Washington, D.C. 20006. Its telephone number
is (202) 872-7700.
DESCRIPTION OF THE CERTIFICATES
General
The Certificates of each Series (including any Class of Certificates not
offered hereby) will represent the entire beneficial ownership interest in the
Trust Fund created pursuant to the related Trust Agreement and Issue Supplement.
Each Series of Certificates will consist of one or more Classes of Certificates
that may (i) provide for the accrual of interest thereon based on fixed,
variable or floating rates; (ii) be entitled to principal distributions, with
disproportionately low, nominal or no interest distributions (collectively,
"Stripped Principal Certificates"); (iii) be entitled to interest distributions,
with disproportionately low, nominal or no principal distributions
(collectively, "Stripped Interest Certificates"); (iv) provide for distributions
of accrued interest thereon commencing only following the occurrence of certain
events, such as the retirement of one or more other Classes of Certificates of
such Series (collectively, "Accrual Certificates"); (v) provide for payments of
principal sequentially, based on specified payment schedules, from only a
portion of the Trust Assets in such Trust Fund or based on specified
calculations, to the extent of available funds, in each case as described in the
related Prospectus Supplement; (vi) provide for distributions based on a
combination of two or more components thereof with one or more of the
characteristics described in this paragraph including a Stripped Principal
Certificate component and a Stripped Interest Certificate component; and/or
(vii) be entitled to distributions of any Prepayment Premium and Yield
Maintenance Charge (each term as defined herein), to the extent collected, in
each case as described in the related Prospectus Supplement.
Each Class of Certificates of a Series will be issued in minimum
denominations corresponding to the Certificate Balances or, in the case of
Stripped Interest Certificates, notional amounts or percentage interests
specified in the related Prospectus Supplement. The transfer of any Certificates
may be registered and such Certificates may be exchanged without the payment of
any service charge payable in connection with such registration of transfer or
exchange, but the Depositor or the Trustee or any agent thereof may require
payment of a sum sufficient to cover any tax or other governmental charge. One
or more Classes of Certificates of a Series may be issued in definitive form
("Definitive Certificates") or in book-entry form ("Book-Entry Certificates"),
as provided in the related Prospectus Supplement. See "- Book-Entry
Registration" and "RISK FACTORS - Book-Entry Registration" herein. Definitive
Certificates will be exchangeable for other Certificates of the same Class and
Series of a like aggregate Certificate Balance, notional amount or percentage
interest but of different authorized denominations.
Distributions
Distributions on the Certificates of each Series will be made by or on behalf
of Farmer Mac on each Distribution Date as specified in the related Prospectus
Supplement. Distributions (other than the final distribution) will be made to
the persons in whose names the Certificates are registered at the close of
business on the last business day of the month preceding the month in which the
Distribution Date occurs (the "Record Date"), and the amount of each
distribution will be determined on or before the fifth business day during the
month of such Distribution Date or such other date as may be specified in the
Trust Agreement and described in the related Prospectus Supplement (the
"Determination Date"). All distributions with respect to each Class of
Certificates on each Distribution Date will be allocated pro rata among the
outstanding Certificates in such Class or by random selection, as described in
the related Prospectus Supplement or otherwise established by Farmer Mac.
Payments will be made either by wire transfer in immediately available funds to
the account of a Holder at a bank or other entity having appropriate facilities
therefor, if such Holder has so notified the Trustee or other person required to
make such payments no later than the date specified in the related Prospectus
Supplement (and, if so provided in the related Prospectus Supplement, holds
Certificates in the requisite amount specified therein), or by check mailed to
the address of the person entitled thereto as it appears on the Certificate
Register; provided, however, that the final distribution in retirement of
Definitive Certificates will be made only upon presentation and surrender of the
Certificates at the location specified in the notice to Holders of Definitive
Certificates of such final distribution.
All distributions on the Certificates of each Series on each Distribution
Date will be made from the amount on deposit in the related Certificate Account
on such Distribution Date as supplemented, to the extent necessary, by any
amount paid by Farmer Mac under its guarantee. As described below, the entire
amount on deposit in the Certificate Account will be distributed among the
related Certificates or otherwise released from the Trust Fund on each
Distribution Date, and accordingly will not be available for any future
distributions.
Distribution of Interest on the Certificates
Each Class of Certificates (other than classes of Stripped Principal
Certificates that have no Pass-Through Rate) may have a different Pass-Through
Rate, which will be a fixed, variable or floating rate at which interest will
accrue on such Class or a component thereof (the "Pass-Through Rate"). The
related Prospectus Supplement will specify the Pass-Through Rate for each Class
or component or, in the case of a variable or floating Pass-Through Rate, the
method for determining the Pass-Through Rate.
Distributions of interest in respect of the Certificates of any Class will be
made on each Distribution Date (other than any Class of Accrual Certificates,
which will be entitled to distributions of accrued interest commencing only on
the Distribution Date, or under the circumstances, specified in the related
Prospectus Supplement, and any Class of Stripped Principal Certificates that are
not entitled to any distributions of interest) based on the Accrued Certificate
Interest (as defined herein) for such Class and such Distribution Date. Prior to
the time interest is distributable on any Class of Accrual Certificates, the
amount of Accrued Certificate Interest otherwise distributable on such Class
will be added to the Certificate Balance thereof on each Distribution Date. With
respect to each Class of Certificates and each Distribution Date (other than
certain Classes of Stripped Interest Certificates), "Accrued Certificate
Interest" will be equal to interest accrued for a specified period on the
outstanding Certificate Balance thereof immediately prior to the Distribution
Date, at the applicable Pass-Through Rate. Accrued Certificate Interest on
Stripped Interest Certificates will be equal to interest accrued for a specified
period on the outstanding notional amount thereof immediately prior to each
Distribution Date, at the applicable Pass-Through Rate. The method of
determining the notional amount for any Class of Stripped Interest Certificates
will be described in the related Prospectus Supplement. Reference to a notional
amount is solely for convenience in certain calculations and does not represent
the right to receive any distributions of principal.
Distributions of Principal of the Certificates
The Certificates of each Series, other than certain Classes of Stripped
Interest Certificates, will have a "Certificate Balance" which, at any time,
will equal the then maximum amount that the Holder will be entitled to receive
in respect of principal out of the future cash flow on the Qualified Assets and
other assets included in the related Trust Fund. The outstanding Certificate
Balance of a Certificate will be reduced to the extent of distributions of
principal thereon from time to time and, in the case of Accrual Certificates
prior to the Distribution Date on which distributions of interest are required
to commence, will be increased by any related Accrued Certificate Interest. The
initial aggregate Certificate Balance of all Classes of Certificates of a Series
will not be greater than the outstanding aggregate principal balance of the
related Qualified Assets as of the applicable Cut-off Date. The initial
aggregate Certificate Balance of a Series and each Class thereof will be
specified in the related Prospectus Supplement. Distributions of principal will
be made on each Distribution Date to the Class or Classes of Certificates
entitled thereto in accordance with the provisions described in such Prospectus
Supplement until the Certificate Balance of such Class has been reduced to zero.
Stripped Interest Certificates with no Certificate Balance are not entitled to
any distributions of principal.
Distributions on the Certificates of Prepayment Premiums and
Yield Maintenance Charges
If so provided in the related Prospectus Supplement, Prepayment Premiums or
Yield Maintenance Charges that are collected on the Qualified Assets in the
related Trust Fund may be distributed on each Distribution Date to the Class or
Classes of Certificates entitled thereto in accordance with the provisions
described in such Prospectus Supplement.
Advances in Respect of Delinquencies
With respect to any Series of Certificates, the Central Servicer or another
entity described in the related Prospectus Supplement will, to the extent set
forth in the Prospectus Supplement, be required as part of its sub-servicing
responsibilities to advance on or before each Certificate Account Deposit Date
(generally a date ten days prior to the related Distribution Date) its own funds
in an amount equal to the aggregate of payments of principal and interest (net
of the related Central Servicer fee) that were due on the Qualified Loans in
such Trust Fund and were delinquent on such Certificate Account Deposit Date,
subject to such Central Servicer's (or another entity's) good faith
determination that such advances (each, an "Advance") will be reimbursable from
recoveries on the Qualified Loans respecting which such Advances were made (as
to any Qualified Loan, "Related Proceeds").
Because Farmer Mac guarantees timely distribution of interest and principal
on the Certificates (including any Balloon Payments), the presence or absence
of an advancing obligation will not affect distributions of interest and
principal to such Holders. In addition, Farmer Mac may determine to make an
Advance on behalf of a Central Servicer rather than make a payment under the
related Farmer Mac Guarantee.
The Prospectus Supplement for any Series of Certificates evidencing an
interest in a Trust Fund that includes QMBS will describe any corresponding
advancing obligation of any person in connection with such QMBS.
Reports to Holders; Publication of Certificate Principal Factors
With each distribution to Holders of any Class of Certificates of a Series,
the Master Servicer will forward or cause to be forwarded to the Trustee, the
Depositor, the Federal Reserve Bank of New York or the nominee for any private
depository, if applicable, the Holders of Definitive Certificates, if any, and
to such other parties as may be specified in the related Agreement, and will
generally make available to financial publications and electronic services, a
statement setting forth, in each case to the extent applicable and available:
(i)...information sufficient to enable Holders of each Class to calculate
the amount of such distribution allocable to principal, separately identifying
the aggregate amount of any principal prepayments and, if so specified in the
related Prospectus Supplement, any Prepayment Premiums or Yield Maintenance
Charges included therein;
(ii)..information sufficient to enable Holders of each Class to calculate
the amount of such distribution allocable to Accrued Certificate Interest;
(iii).the Certificate Principal Factor for each Class of Certificates (i.e., the
percentage carried to eight places which, when multiplied by the denomination of
a Certificate of such Class, will produce the Certificate Balance of such
Certificate or, in the case of an Interest Only Certificate, the notional amount
of such Certificate immediately following such Distribution Date);
(iv)..in the case of Certificates with a variable Pass-Through Rate, the
Pass-Through Rate applicable to such Distribution Date, and, if available, the
immediately succeeding Distribution Date, as calculated in accordance with the
method specified in the related Prospectus Supplement; and
(v)...any other information required to be distributed to such parties as
specified in the related Prospectus Supplement or Agreement.
On or before the Determination Date for a Class of Certificates, Farmer Mac
will calculate the certificate distribution amount for such Distribution Date
and, as soon as possible thereafter, will make available for such Class of
Certificates comprising such Series the Certificate Principal Factor therefor
described in clause (iii) above.
In the case of information furnished pursuant to subclauses (i) and (ii)
above, the amounts shall be expressed as a dollar amount per minimum
denomination of Certificates or for such other specified portion thereof. The
Master Servicer or the Trustee, as specified in the related Prospectus
Supplement, will make available any information received by the Master Servicer
or the Trustee, as applicable, with respect to any QMBS.
Within a reasonable period of time after the end of each calendar year, the
Master Servicer, shall make available the information set forth in subclauses
(i) and (ii) above, aggregated for such calendar year. Such obligation of the
Master Servicer shall be deemed to have been satisfied to the extent that
substantially comparable information shall be provided by the Master Servicer
pursuant to any requirements of the Code as are from time to time in force.
Unless and until Definitive Certificates are issued, or unless otherwise
provided in the related Prospectus Supplement, the foregoing statement will be
forwarded by the Master Servicer to the Federal Reserve Bank of New York or the
nominee for the private depository, as applicable. Such statements are available
through the facilities of the Commission and information vendors, and may be
obtained by the Beneficial Owner by requesting a copy and certifying to the
Trustee or the Master Servicer, as applicable, that it is the Beneficial Owner
of a Certificate. See "DESCRIPTION OF THE CERTIFICATES -Book-Entry Registration"
herein and "Available Information" herein. Communication among Beneficial Owners
may be conducted through the facilities of the related depository or financial
intermediary.
Termination
Farmer Mac's responsibilities and obligations created by the Trust Agreement
for each Series of Certificates will terminate upon the distribution to Holders
of that Series of all amounts required to be distributed to them pursuant to
such Trust Agreement following (i) the final payment of the last Qualified Asset
subject thereto, (ii) the purchase of all of the assets of the Trust Fund by the
party entitled to effect such termination, under the circumstances and in the
manner set forth in the related Prospectus Supplement or (iii) distribution by
Farmer Mac pursuant to the Farmer Mac Guarantee on the Final Distribution Date
for the latest maturing Class of such Series of an amount sufficient to reduce
the Certificate Balance thereof to zero. In no event, however, will any trust
created by the Trust Agreement continue beyond a date which is 21 years
subsequent to the death of the survivor of the descendants of Joseph P. Kennedy,
the late ambassador of the United States to the Court of St. James's, living on
the Cut-off Date for the related Series. Farmer Mac shall make available to
financial publications and electronic services notice for the benefit of Holders
that the final distribution will be made on the specified Distribution Date. The
final distribution will be made only upon, in the case of any Definitive
Certificate, presentation and surrender of such Definitive Certificate at the
location to be specified in the notice of termination.
If so specified in the related Prospectus Supplement, a Series of
Certificates may be subject to optional early termination through the repurchase
of the assets in the related Trust Fund by the party specified therein, under
the circumstances and in the manner set forth therein. If so provided in the
related Prospectus Supplement, upon the reduction of the Certificate Balance of
a specified Class or Classes of Certificates by a specified percentage or
amount, the party specified therein will solicit bids for the purchase of all
assets of the Trust Fund, or of a sufficient portion of such assets to retire
such Class or Classes or purchase such Class or Classes at a price set forth in
the related Prospectus Supplement, in each case, under the circumstances and in
the manner set forth therein.
Book-Entry Registration
If so provided in the related Prospectus Supplement, one or more Classes of
the Certificates of any Series will be issued as Book-Entry Certificates, and
each such Class will either (i) be issued and maintained only on the book-entry
system of the Federal Reserve Banks (the "Fed System") or (ii) be represented by
one or more single Certificates registered in the name of a nominee for the
depository identified in the Prospectus Supplement (the "Depository").
The Fed System
Book-Entry Certificates issued and maintained under the Fed System may be
held of record only by entities eligible to maintain book-entry accounts with
the Federal Reserve Banks. Such entities whose names appear on the book-entry
records of the Federal Reserve Banks as the entities for whose accounts the
Certificates have been deposited are herein referred to as "Holders of
Book-Entry Certificates." A Holder of Book-Entry Certificates is not necessarily
the Beneficial Owner of a Book-Entry Certificate. Beneficial Owners (as defined
below) will ordinarily hold beneficial interests in Book-Entry Certificates
through one or more financial intermediaries, such as banks, brokerage firms and
securities clearing organizations. A Holder of Book-Entry Certificates that is
not the Beneficial Owner of a Certificate, and each other financial intermediary
in the chain to the Beneficial Owner, will have the responsibility of
establishing and maintaining accounts for their respective customers. The rights
of the Beneficial Owner of a Book-Entry Certificate with respect to the
applicable Trust Fund and the Federal Reserve Banks may be exercised only
through the Holder of Book-Entry Certificates. The Trustee, the Master Servicer
and the Federal Reserve Banks will have no direct obligations to a Beneficial
Owner of a Book-Entry Certificate that is not also the Holder of Book-Entry
Certificates. The Federal Reserve Banks will act only upon the instructions of
the Holders of Book-Entry Certificates in recording transfers of Book-Entry
Certificates.
A Fiscal Agency Agreement between Farmer Mac and the Federal Reserve Bank of
New York makes generally applicable to the Book-Entry Certificates (i)
regulations governing Farmer Mac's use of the book-entry system and (ii) such
procedures, insofar as applicable, as may from time to time be established by
regulations of the United States Department of the Treasury governing United
States securities, as now set forth in Treasury Department Circular Number 300,
31 C.F.R. Part 306 (other than Subpart O). The Book-Entry Certificates are also
governed by applicable operating circulars and letters of the Federal Reserve
Banks.
A Depository System
Any Depository will be a limited-purpose trust company organized under the
laws of the State of New York, a member of the Federal Reserve System, a
"clearing corporation" within the meaning of the New York Uniform Commercial
Code ("UCC") and a "clearing agency" registered pursuant to the provisions of
Section 17A of the Exchange Act. The Depository will have been created to hold
securities for its participating organizations ("Participants") and facilitate
the clearance and settlement of securities transactions between Participants
through electronic book-entry changes in their accounts, thereby eliminating the
need for physical movement of certificates. Participants, which maintain
accounts with the Depository, will include securities brokers and dealers,
banks, trust companies and clearing corporations and may include certain other
organizations. Indirect access to a Depository system will also be available to
others such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a Participant, either directly or
indirectly ("Indirect Participants").
Generally, investors that are not Participants or Indirect Participants but
desire to purchase, sell or otherwise transfer ownership of, or other interests
in, Book-Entry Certificates may do so only through Participants and Indirect
Participants. In addition, such investors ("Beneficial Owners") will receive all
distributions on the Book-Entry Certificates through the Depository and its
Participants. Under a book-entry format, Beneficial Owners will receive payments
after the related Distribution Date because, while payments are required to be
forwarded to the nominee, as nominee for the Depository, on each such date, the
Depository will forward such payments to its Participants which thereafter will
be required to forward them to Indirect Participants or Beneficial Owners. So
long as a Certificate is in book-entry form, the only Holder of Book-Entry
Certificates will be the nominee for the Depository, and the Beneficial Owners
will not be recognized by the Trustee as the Holders of Book-Entry Certificates
under the Agreements. Beneficial Owners will be permitted to exercise the rights
of Holders of Book-Entry Certificates under the related Agreements only
indirectly through the Participants who in turn will exercise their rights
through the Depository.
Under the rules, regulations and procedures creating and affecting the
Depository and its operations, the Depository will be required to make
book-entry transfers among Participants on whose behalf it acts with respect to
the Book-Entry Certificates and will be required to receive and transmit
distributions of principal of, and interest on, the Book-Entry Certificates.
Participants and Indirect Participants, with which Beneficial Owners have
accounts with respect to the Book-Entry Certificates, similarly will be required
to make book-entry transfers and receive and transmit such payments on behalf of
their respective Beneficial Owners.
Because the Depository will be able to act only on behalf of Participants,
who in turn will act on behalf of Indirect Participants and certain banks, the
ability of a Beneficial Owner to pledge its interest in the Book-Entry
Certificates to persons or entities that do not participate in the Depository
system, or otherwise take actions in respect of its interest in the Book-Entry
Certificates, may be limited due to the lack of a physical certificate
evidencing such interest.
Under the Depository's procedures, the Depository will take any action
permitted to be taken by a Holder of Book-Entry Certificates under an Agreement
only at the direction of one or more Participants to whose account with the
Depository interests in the Book-Entry Certificates are credited and whose
aggregate holdings represent no less than any minimum amount of Voting Rights,
if any, required therefor. Therefore, Beneficial Owners will only be able to
exercise their Voting Rights, if any, to the extent permitted, and subject to
the procedures established, by their Participant and/or Indirect Participant, as
applicable. The Depository may take conflicting actions to the extent that
Participants authorize such actions. Neither the Master Servicer, the Depositor,
the Trustee nor any of their respective affiliates will have any liability for
any aspect of the records relating to or payments made on account of beneficial
ownership interests in the Book-Entry Certificates, or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
Certificates initially issued in book-entry form will be issued in fully
registered, certificated form to Beneficial Owners or their nominees
("Definitive Certificates"), rather than to the Depository or its nominee only
if (i) the Depositor advises the Trustee in writing that the Depository is no
longer willing or able to properly discharge its responsibilities as depository
with respect to the Certificates and the Depositor is unable to locate a
qualified successor or (ii) the Depositor, at its option, elects to terminate
the book-entry system through the Depository.
Upon the occurrence of either of the events described in the immediately
preceding paragraph, the Depository will be required to notify all Participants
of the availability through the Depository of Definitive Certificates for the
Beneficial Owners. Upon surrender by the Depository of the certificate or
certificates representing the Book-Entry Certificates, together with
instructions for re-registration, the Trustee will issue (or cause to be issued)
to the Beneficial Owners identified in such instructions the Definitive
Certificates to which they are entitled, and thereafter the Trustee will
recognize the Beneficial Owners as the Holders of Definitive Certificates.
DESCRIPTION OF THE AGREEMENTS
The Certificates of each Series evidencing interests in a Trust Fund will be
issued pursuant to a Trust Agreement among the Depositor, Farmer Mac and the
Trustee. If Qualified Loans are included in a Trust Fund, Farmer Mac will be
responsible for the servicing of such Qualified Loans through one or more
Central Servicers acting pursuant to a Servicing Contract (as supplemented)
between the Central Servicer and Farmer Mac. A Central Servicer may subcontract
the performance of certain of its servicing duties to a subservicer who may be
the seller or originator of the Qualified Loans (the "Sellers"). In addition,
each Seller of Qualified Assets to the Depositor will transfer and assign such
Qualified Assets to the Depositor pursuant to a separate Sale Agreement between
the Depositor, Farmer Mac and such Seller. Each such Sale Agreement will include
certain representations and warranties of the Seller respecting the related
Qualified Assets which representations and warranties and the remedies for their
breach will be assigned to the Trustee for the benefit of the Holders pursuant
to the Trust Agreement for the related Series of Certificates. The Trust
Agreement, each Servicing Contract and each Sale Agreement relating to a
particular Series of Certificate are herein collectively referred to as the
"Agreements." The provisions of each Agreement will vary depending upon the
nature of the Certificates to be issued thereunder and the nature of the related
Trust Fund. Forms of a Trust Agreement, a Servicing Contract and a Sale
Agreement have been filed as exhibits to the Registration Statement of which
this Prospectus is a part. The following summaries describe certain provisions
that may appear in each Agreement. The Prospectus Supplement for a Series of
Certificates will describe any provision of the Agreements relating to such
Series that materially differs from the description thereof contained in this
Prospectus. The summaries do not purport to be complete and are subject and are
qualified in their entirety by reference to all of the provisions of the
Agreements for each Trust Fund and the description of such provisions in the
related Prospectus Supplement. As used herein with respect to any Series, the
term "Certificate" refers to all of the Certificates of that Series, whether or
not offered hereby and by the related Prospectus Supplement, unless the context
otherwise requires. The Depositor will provide a copy of the Agreements (without
exhibits) relating to any Series of Certificates without charge upon the written
request by a Holder of a Certificate of such Series addressed to the Trustee
identified in the related Prospectus Supplement.
Assignment of Assets; Repurchases
At the time of issuance of any Series of Certificates, the Depositor will
assign (or cause to be assigned) to the designated Trustee, on behalf of
Holders, the Trust Assets to be included in the related Trust Fund, together
with all principal and interest to be received on or with respect to such Trust
Assets after the Cut-off Date, other than principal and interest due on or
before the Cut-off Date. The Trustee will, concurrently with such assignment,
deliver the Certificates to the Depositor in exchange for the Trust Assets and
the other assets comprising the Trust Fund for such Series. Each Qualified Asset
will be identified in a schedule appearing as an exhibit to the related
Agreement. Such schedule will include detailed information (i) in respect of
each Qualified Loan included in the related Trust Fund, including without
limitation, the address of the related Mortgaged Property and type of such
property, the Mortgage Interest Rate and, if applicable, the applicable index,
margin, adjustment date and any rate cap information, the original and remaining
term to maturity and the original and outstanding principal balance, and (ii) in
respect of each QMBS included in the related Trust Fund, including without
limitation, the QMBS Issuer, QMBS Servicer and QMBS Trustee, the pass-through or
bond rate or formula for determining such rate, the issue date and original and
remaining term to maturity, if applicable, the original and outstanding
principal amount and payment provisions, if applicable.
With respect to each Qualified Loan, the Depositor will deliver or cause to
be delivered to the Trustee (or to the custodian hereinafter referred to)
certain loan documents, which will (unless the Qualified Loan is evidenced by a
participation certificate) include the original Mortgage Note endorsed, without
recourse, in blank or to the order of the Trustee, the original Mortgage (or a
certified copy thereof) with evidence of recording indicated thereon and an
assignment of the Mortgage to the Trustee in recordable form. The related
Agreements will require that the Depositor or another party specified therein
promptly cause each such assignment of Mortgage to be recorded in the
appropriate public office for real property records.
The Trustee (or a custodian) will review such Qualified Loan documents within
a specified period of days after receipt thereof, and the Trustee (or a
custodian) will hold such documents in trust for the benefit of the Holders. If
any such document is found to be missing or defective in any material respect,
the Trustee (or such custodian) shall immediately notify the Seller in writing.
If the Seller cannot cure the omission or defect within a specified number of
days after receipt of such notice, then the Seller will be obligated, within a
specified number of days of receipt of such notice, to repurchase the related
Qualified Loan from the Trustee at the Purchase Price (as defined below) or
replace the Qualified Loan with an eligible substitute Qualified Loan.
With respect to each QMBS in certificated form, the Depositor will deliver or
cause to be delivered to the Trustee (or the custodian) the original certificate
or other definitive evidence of such QMBS together with bond power or other
instruments, certifications or documents required to transfer fully such QMBS to
the Trustee for the benefit of the Holders. With respect to each QMBS in
uncertificated or book-entry form or held through a "clearing corporation"
within the meaning of the UCC, the Depositor and the Trustee will cause such
QMBS to be registered directly or on the books of such clearing corporation or
of a financial intermediary in the name of the Trustee for the benefit of the
Holders. The related Agreement will require that either the Depositor or the
Trustee promptly cause any QMBS in certificated form not registered in the name
of the Trustee to be re-registered, with the applicable persons, in the name of
the Trustee.
Representations and Warranties; Repurchases
There will be assigned to the Trustee pursuant to each Trust Agreement the
representations and warranties of the Seller in the related Sale Agreement, as
of a specified date covering, by way of example, the following types of matters:
(i) the accuracy of the information set forth for each Qualified Loan on the
schedule of Qualified Assets appearing as an exhibit to such Trust Agreement;
(ii) the existence of title insurance insuring (or a title opinion assuring) the
lien priority of the Qualified Loan; (iii) the authority of the Seller to sell
the Qualified Loan; (iv) the payment status of the Qualified Loan and the status
of payments of taxes, assessments and other charges affecting the related
Mortgaged Property; (v) the status of such Qualified Loan as a "Qualified Loan"
under the Farmer Mac Charter and its conformity in all material respects with
the Guides and (vi) the existence of customary provisions in the related
Mortgage Note and Mortgage that permits the holder of the mortgage to obtain
marketable title to the Mortgaged Property upon the borrower's default.
Unless otherwise specified in the related Sale Agreement, in the event of a
material breach of any such representation or warranty, the related Seller will
be obligated either to cure such breach in all material respects or repurchase
or replace the affected Qualified Loan as described below. Since the
representations and warranties will not usually address events that may occur
following the date as of which they were made, the Seller will have a cure,
repurchase or substitution obligation in connection with a breach of such a
representation and warranty only if the relevant event that causes such breach
occurs prior to such date. Such party would have no such obligation if the
relevant event that causes such breach occurs after such date.
The Agreements will provide that the Master Servicer and/or Trustee will be
required to notify promptly the relevant Seller of any breach of any
representation or warranty made by it in respect of a Qualified Loan that
materially and adversely affects the value of such Qualified Loan or the
interests therein of the Holders. If such Seller cannot cure such breach within
a specified period following the date on which it was notified of such breach,
then such Seller will be obligated to repurchase such Qualified Loan from the
Trustee within a specified period from the date on which the Seller was notified
of such breach, at the Purchase Price therefor. As to any Qualified Loan, the
"Purchase Price" is equal to the sum of the unpaid principal balance thereof,
plus unpaid accrued interest thereon at the Mortgage Interest Rate from the date
as to which interest was last paid to the due date in the Due Period in which
the relevant purchase is to occur, plus certain servicing expenses that are
reimbursable to the Master Servicer and Central Servicer. A Seller's repurchase
of a Qualified Loan may also include payment of a Prepayment Premium or Yield
Maintenance Charge to the extent described in the related Prospectus Supplement.
A Seller, rather than repurchase a Qualified Loan as to which a breach has
occurred, will have the option if so specified in the related Prospectus
Supplement, within two years after initial issuance of the related Series of
Certificates, to cause the removal of such Qualified Loan from the Trust Fund
and substitute in its place one or more other Qualified Loans, in accordance
with standards established by Farmer Mac to assure that any such substitution
will not materially alter the characteristics of the related Trust Fund.
Neither the Depositor nor Farmer Mac will be obligated to purchase or
substitute for a Qualified Loan if a Seller defaults on its obligation to do so,
and no assurance can be given that Sellers will carry out such obligations with
respect to Qualified Loans. Any resultant loss to a Trust Fund which would
result in a deficiency in any required distribution to Holders will be covered
by the Farmer Mac Guarantee. Therefore, Holders will suffer no loss by reason of
any such Seller default.
The Seller will, with respect to a Trust Fund that includes QMBS, make
certain representations or warranties, as of a specified date, with respect to
such QMBS, covering (i) the accuracy of the information set forth therefor on
the schedule of Qualified Assets appearing as an exhibit to the related
Agreement and (ii) the authority of the Seller to sell such Qualified Assets.
Accounts
General
To the extent described in the related Prospectus Supplement, each Trust
Fund will include one or more separate accounts established and maintained on
behalf of the Holders into which the Central Servicer will deposit all payments
and collections on the related Qualified Assets (collectively, the "Collection
Account"). The Collection Account must be an account or accounts with any
Federal Reserve Bank, the Trustee or any other depository institution or trust
company approved in writing by Farmer Mac incorporated under the laws of the
United States or any state thereof and subject to supervision and examination by
federal or state banking authorities (an "Eligible Depository"). Each Collection
Account may be maintained as an interest bearing or a non-interest bearing
account and the funds held therein may be invested pending each succeeding
Certificate Account Deposit Date in certain short-term direct obligations of,
and obligations fully guaranteed by, the United States, Farmer Mac or any other
agency or instrumentality of the United States or any other obligation or
security approved by Farmer Mac ("Eligible Investments"). Any interest or other
income earned on funds in a Collection Account will be paid to Farmer Mac or the
related Central Servicer or its designee as additional servicing compensation,
as specified in the related Servicing Contract, and the risk of loss of funds in
a Collection Account resulting from such investments will be borne by Farmer Mac
or such Central Servicer, as the case may be. The amount of such loss will be
required to be deposited by Farmer Mac or such Central Servicer in the related
Collection Account immediately as realized.
Deposits
The Central Servicer will deposit or cause to be deposited in a Collection
Account the following payments and collections received, or Advances made, by
it:
......(i).. all payments on account of principal, including
principal prepayments, on the Qualified Assets;
......(ii). all payments on account of interest on the Qualified
Assets, including any default interest collected, in each case
net of any portion thereof permitted to be retained by a
Central Servicer as servicing compensation;
......(iii) all proceeds of any insurance policies ("Insurance Proceeds") to be
maintained in respect of each Mortgaged Property securing a Qualified Loan in
the Trust Fund (to the extent such proceeds are not applied to the restoration
or repair of the related Mortgaged Property or released to the borrower in
accordance with the normal servicing procedures of a Central Servicer, subject
to the terms and conditions of the related Mortgage and Mortgage Note) and all
other amounts received and retained in connection with the liquidation of
defaulted Qualified Loans in the Trust Fund, by foreclosure, condemnation or
otherwise ("Liquidation Proceeds");
......(iv). any Advances made by the Central Servicer as
described under "DESCRIPTION OF THE CERTIFICATES - Advances in
Respect of Delinquencies";
......(v).. to the extent required to be distributed to Holders,
any amounts representing Prepayment Premiums and Yield
Maintenance Charges paid by borrowers; and
(vi).. proceeds from the operation of foreclosed Mortgaged
Properties held in the Trust Fund ("REO Proceeds").
Withdrawals
All such deposits in a Collection Account will, unless otherwise specified in
the Prospectus Supplement, be net of the following amounts to be retained by the
Central Servicer:
......(i).. amounts to reimburse the Central Servicer for unreimbursed amounts
advanced as described under "DESCRIPTION OF THE CERTIFICATES - Advances in
Respect of Delinquencies" such reimbursement to be made out of amounts received
which were identified and applied by such Central Servicer as late collections
of interest on, and principal of, the particular Qualified Loans with respect to
which the Advances were made;
......(ii). amounts to reimburse the Central Servicer for unpaid servicing fees
earned and certain unreimbursed servicing expenses incurred with respect to
Qualified Loans and properties acquired in respect thereof, such reimbursement
to be made out of amounts that represent Liquidation Proceeds and Insurance
Proceeds collected on the particular Qualified Loans and properties, and REO
Proceeds collected on the particular properties, with respect to which such fees
were earned or such expenses were incurred;
......(iii) amounts to reimburse the Central Servicer for any Advances described
in clause (i) above and any servicing expenses described in clause (ii) above
which, in the Central Servicer's good faith judgment, will not be recoverable
from the amounts described in clauses (i) and (ii), respectively, such
reimbursement to be made from amounts collected on other Trust Assets; and
......(iv). to make any other withdrawals permitted by the
related Agreement and described in the related Prospectus
Supplement.
On or before the issuance of a Series of Certificates, Farmer Mac is required
to either (i) open with an Eligible Depository one or more trust accounts in the
name of the Trustee applicable to the related Trust Fund (collectively, the
"Certificate Account") or (ii) in lieu of maintaining any such account or
accounts, maintain the Certificate Account for the related Trust Fund by means
of appropriate entries on Farmer Mac's books and records designating all amounts
credited thereto in respect of the related Qualified Assets as being held by it
for the related Holders evidencing beneficial ownership of such Trust Fund. To
the extent that the Certificate Account for any Trust Fund is maintained by
Farmer Mac in the manner provided in (ii) above, all references herein to
deposits and withdrawals from the Certificate Account shall be deemed to refer
to credits and debits to the related books of Farmer Mac.
On or before a date (the "Certificate Account Deposit Date") which, for
each Trust Fund, will be approximately ten days before each Distribution Date,
the related Central Servicer will be required to withdraw from the applicable
Collection Account and remit to Farmer Mac for deposit in the Certificate
Account all funds held therein (other than amounts relating to future
Distribution Dates). In the event that the amount so remitted on or before a
Certificate Account Deposit Date is less than the amount to be distributed for
the related Distribution Date as previously calculated by Farmer Mac, Farmer Mac
is required by the Trust Agreement to provide to the Trustee an Officer's
Certificate stating (i) the amount of such insufficiency, (ii) whether Farmer
Mac is certain that funds will be available to it on such Distribution Date in
an amount sufficient to cure such insufficiency pursuant to its guarantee of the
related Certificates without the necessity of borrowing from the United States
Treasury and (iii) in the event the response to (ii) above is in the negative,
attaching to such Officer's Certificate a copy of the certification furnished to
the Secretary of the Treasury requesting that funds in the necessary amount be
made available to Farmer Mac on or before such Distribution Date for purposes of
satisfying its guarantee obligations.
Amounts on deposit in the Certificate Account on a Distribution Date for a
Series will be withdrawn by Farmer Mac in the amount required, to the extent
funds are available therefor, for application as follows:
......(i).. towards the distribution to Holders in federal funds
of the amount to be distributed on such Distribution Date;
......(ii). to the reimbursement to Farmer Mac of any amount
previously paid by it in respect of such Series pursuant to its
guarantee of the related Certificates;
......(iii) to the payment of any portion of the Guarantee Fee for such
Distribution Date or any prior Distribution Date which has not otherwise been
paid; and
......(iv). to the payment to Farmer Mac of any amounts remaining in the
Certificate Account after the withdrawals referred to in clauses (i) through
(iii) above, any such amounts being deemed to be payable to Farmer Mac as
compensation for its master servicing activities and to the reimbursement of
expenses incurred by it in connection therewith.
Collection and Other Servicing Procedures
Collection Procedures
Each Servicing Contract will provide that the Central Servicer will,
consistent with the Guides and in accordance with customary industry standards
for agricultural mortgage loan servicing, make reasonable efforts to collect all
payments called for under the terms and provisions of the Qualified Loans.
Consistent with the above, the Central Servicer may in its discretion waive,
postpone, reschedule, modify or otherwise compromise the terms of payment of any
Qualified Loan so long as any such waiver, postponement, rescheduling,
modification or compromise is not inconsistent with the Servicing Contract or is
consented to in writing in advance by Farmer Mac. Any required adjustment to the
payment schedule of any Qualified Loan as a result of the foregoing will not
affect the computation of the amount due on the Certificates under the formula
applicable thereto, subject to any exceptions set forth in the related
Prospectus Supplement.
As part of its servicing activities, the Central Servicer may, but is not
required to, enforce any due-on-sale or due-on-encumbrance clause contained in
any Mortgage Note or Mortgage, in accordance with the provisions of such
Mortgage Note or Mortgage and in the best interests of Farmer Mac. In cases in
which the Mortgaged Property is to be conveyed to a person by a borrower and
such person enters into an assumption agreement or a substitution agreement,
pursuant to which a new borrower is substituted for the existing borrower, the
Central Servicer is obligated to certify that (i) the Qualified Loan will
continue to be secured by a first mortgage lien pursuant to the terms of the
Mortgage, (ii) no material term of the Qualified Loan, including, but not
limited to, the Mortgage Interest Rate and any term affecting the amount or
timing of payment, will be altered, nor will the term of the Qualified Loan be
increased, and (iii) if the seller/transferor of the Mortgaged Property is to be
released from liability on the Qualified Loan, such release will not adversely
affect the collectability of the Qualified Loan.
Realization Upon Defaulted Qualified Loans
Subject to the conditions set forth in the Servicing Contract, the Central
Servicer is required to foreclose upon or otherwise comparably convert the
ownership of Mortgaged Properties securing such of the Qualified Loans as come
into and continue in default and as to which no arrangements consistent with the
Guides have been made for collection of delinquent payments.
Borrowers who do not wish to proceed through foreclosure may assign the deed
of their Mortgaged Property to the Trust Fund with the consent of the Central
Servicer. The Central Servicer will then take the appropriate steps to liquidate
the property and pay off the Qualified Loan.
In the event that title to any Mortgaged Property is acquired in
foreclosure or by delivery of a deed in lieu of foreclosure, the deed or
certificate of sale will be issued to the Trustee or to its nominee on behalf of
Holders. Notwithstanding any such acquisition of title and cancellation of the
related Qualified Loan, such Qualified Loan will be considered for purposes of
calculation of amounts due on the Certificates under any formula applicable
thereto to be an outstanding Qualified Loan held in the Trust Fund until such
time as the Mortgaged Property is sold and such Qualified Loan becomes a
liquidated Qualified Loan. The Central Servicer, on behalf of Farmer Mac, is
required to use its best efforts to dispose of any Mortgaged Property acquired
by foreclosure, deed in lieu of foreclosure or otherwise in a reasonably
expeditious manner, in accordance with applicable local and environmental laws
to the extent applicable and consistent, if applicable, with the status of the
Trust as a REMIC.
Compensation and Payment of Expenses
The Central Servicer will receive a fee (the "Central Servicing Fee") payable
out of the interest payments received on each Qualified Loan. Farmer Mac will
pay the Trustee a fee for services rendered in its capacity as Trustee. The
amount of such compensation with respect to the Certificates may decrease as the
Qualified Loans amortize, and will be affected by principal prepayments on the
Qualified Loans. In addition, Farmer Mac, as Master Servicer, may be entitled to
compensation for its master servicing duties.
The Central Servicer will, to the extent provided in the Prospectus
Supplement, be entitled to retain, as additional compensation, all assumption
fees, late payment charges and other charges (other than Prepayment Premiums or
Yield Maintenance Charges), to the extent collected from borrowers and as
described in the Servicing Contract, and may be entitled to retain any earnings
on the investment of funds held by it pending remittance to Farmer Mac for
deposit in the Certificate Account to the extent provided in the related
Servicing Contract. The Central Servicer will also be entitled to reimbursement
for certain expenses incurred by it in connection with the liquidation of
defaulted Qualified Loans including, under certain circumstances, reimbursement
of expenditures incurred in connection with the preservation of the related
Mortgaged Properties.
Certain Matters Regarding Farmer Mac
The Trust Agreement provides that Farmer Mac may not resign from its
obligations and duties thereunder.
The Trust Agreement also provides that neither Farmer Mac nor the Depositor
nor any of their respective directors, officers, employees or agents will be
under any liability for any action taken or for refraining from the taking of
any action in good faith pursuant to the Trust Agreement, or for errors in
judgment; provided, however, that neither Farmer Mac nor the Depositor will be
protected against any liability which would otherwise be imposed by reason of
willful misfeasance, bad faith or negligence in the performance of duties or by
reason of willful disregard of obligations and duties thereunder. In addition,
the Trust Agreement will provide that neither Farmer Mac nor the Depositor will
be under any obligation to appear in, prosecute or defend any legal action which
is not incidental to their responsibilities under the Trust Agreement and which
in their opinion may involve them in any expense or liability. Farmer Mac and
the Depositor may, however, in their discretion undertake any such legal action
which they may deem necessary or desirable with respect to the Trust Agreement
and the rights and duties of the parties thereto and the interests of the
Holders thereunder.
Events of Default
Events of Default by Farmer Mac under the Trust Agreement will consist of (i)
any failure by Farmer Mac to distribute to Holders of Certificates of any Class
in the related Trust Fund any distribution required to be made under the terms
of the related Trust Agreement (including, for this purpose, pursuant to the
Farmer Mac Guarantee) which continues unremedied for a period of five days after
the date upon which written notice of such failure, requiring the same to be
remedied, shall have been given to Farmer Mac by the Trustee or to Farmer Mac
and the Trustee by the Holders of Certificates of such Class having Certificate
Balances or Notional Balances aggregating not less than 5% of the aggregate of
the Certificate Balances or Notional Balances of all of the Certificates of such
Class, (ii) failure on the part of Farmer Mac duly to observe or perform in any
material respect any other of the covenants or agreements on the part of Farmer
Mac in the Trust Agreement which continues unremedied for a period of 60 days
after the date on which written notice of such failure, requiring the same to be
remedied, shall have been given to Farmer Mac and the Trustee by the Holders of
Certificates of any Class in the related Trust Fund having Certificate Balances
or Notional Balances aggregating not less than 25% of the aggregate of the
Certificate Balances or Notional Balances of all of the Certificates of such
Class, and (iii) certain events of insolvency, readjustment of debt, marshalling
of assets and liabilities or similar proceedings regarding Farmer Mac indicating
its insolvency or inability to pay its obligations.
Rights Upon Event of Default
So long as an Event of Default remains unremedied, the Trustee or the Holders
of Certificates of any Class in the related Trust Fund having Certificate
Balances or Notional Balances aggregating not less than 25% of the aggregate of
the Certificate Balances or Notional Balances of such Class may (a) terminate
all obligations and duties imposed upon Farmer Mac (other than its obligations
under the Farmer Mac Guarantee) under the Trust Agreement, and (b) name and
appoint a successor or successors to succeed to and assume all of such
obligations and duties. Such actions shall be effected by notice in writing to
Farmer Mac and shall become effective upon receipt of such notice by Farmer Mac
and the acceptance of such appointment by such successor or successors. Because
the Trustee is required to give notice to Farmer Mac of any failure to make a
required distribution, the Holders' failure to give such notice will not result
in a waiver of the remedies available upon default.
Supplemental Agreements
The parties to the Trust Agreement may, without the consent of any of the
Holders, enter into an agreement or other instrument supplemental to the Trust
Agreement, which shall thereafter form a part of the Trust Agreement, in order
(i) to add to the covenants of Farmer Mac; (ii) to evidence the succession of
another Person or Persons to Farmer Mac pursuant to Article VII of the Trust
Agreement; (iii) to eliminate any right reserved to or conferred upon Farmer
Mac; (iv) to take such action to cure any ambiguity or correct or supplement any
provision of the Trust Agreement; or (v) to modify, eliminate or add to the
provision of the Trust Agreement to the extent necessary to maintain the Trust
Fund's tax exempt status under federal and state law.
With the consent of the Holders of Certificates of each Class in the related
Trust Fund having Certificate Balances and Notional Balances aggregating not
less than 66% of the aggregate of the Certificate Balances or Notional Balances,
as applicable, of all of the Certificates of such Class (i) compliance by Farmer
Mac with any of the terms of the related Trust Agreement may be waived or (ii)
Farmer Mac may enter into any supplemental agreement for the purpose of adding
any provisions to or changing in any manner or eliminating any of the provisions
of such Trust Agreement or of modifying in any manner the rights of the Holders
issued under such Trust Agreement; provided that no such waiver or supplemental
agreement shall:
......(a).. without the consent of all Holders affected thereby
reduce in any manner the amount of, or delay the timing of,
distributions which are required to be made on any Certificate;
or
......(b).. without the consent of all Holders (i) terminate or modify the
Farmer Mac Guarantee with respect to the Certificates of such Series, or (ii)
reduce the aforesaid percentages of Certificates, the Holders of which are
required to consent to any waiver or any supplemental agreement.
Notwithstanding the foregoing, the Trustee will not be entitled to consent to
any such amendment without having first received an Opinion of Counsel, to the
extent applicable, to the effect that such amendment will not cause the Trust
Fund to fail to qualify as a REMIC.
The Trustee
The Trustee under each Trust Agreement will be named in the related
Prospectus Supplement. The commercial bank, national banking association,
banking corporation or trust company serving as Trustee may have a banking
relationship with Farmer Mac and its affiliates and with any Central Servicer
and its affiliates.
Duties of the Trustee
The Trustee will make no representations as to the validity or sufficiency of
any Agreement, the Certificates or any Trust Asset or related document and is
not accountable for the use or application by or on behalf of any Central
Servicer or Farmer Mac of any funds paid to such Central Servicer or Farmer Mac
in respect of the Qualified Loans, or deposited into or withdrawn from any
Account or any other account by or on behalf of any Central Servicer or Farmer
Mac. If no Event of Default has occurred and is continuing, the Trustee is
required to perform only those duties specifically required under the related
Agreement. However, upon receipt of the various certificates, reports or other
instruments required to be furnished to it, the Trustee is required to examine
such documents and to determine whether they conform to the requirements of the
Agreement.
Indemnification of the Trustee
Farmer Mac shall indemnify the Trustee and any director, officer, employee or
agent of the Trustee for, and hold them harmless against, any loss or liability
incurred by any of them without negligence or bad faith in connection with the
Trustee's acceptance or administration of the trusts created by the related
Trust Agreement.
Resignation and Removal of the Trustee
The Trustee may at any time resign and be discharged from the Trust created
by the Trust Agreement by giving written notice thereof to Farmer Mac. Upon
receiving such notice of resignation, Farmer Mac is required promptly to appoint
a successor trustee. If no successor trustee shall have been so appointed and
have accepted appointment within 90 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor trustee.
If at any time the Trustee shall cease to be eligible to continue as such
under the related Agreement, or if at any time the Trustee shall become
incapable of acting, or shall be adjudged bankrupt or insolvent, or a receiver
of the Trustee or of its property shall be appointed, or any public officer
shall take charge or control of the Trustee or of its property or affairs for
the purpose of rehabilitation, conservation or liquidation, then Farmer Mac may
remove the Trustee and appoint a successor trustee.
Any resignation or removal of the Trustee and appointment of a successor
trustee shall not become effective until acceptance of appointment by the
successor trustee.
CERTAIN LEGAL ASPECTS OF QUALIFIED LOANS AND OTHER MATTERS
The following discussion contains summaries of certain legal aspects of
mortgage loans, including the Qualified Loans, that are general in nature.
Because such legal aspects are governed in part by applicable state law (which
laws may differ substantially), the summaries do not purport to be complete nor
to reflect the laws of any particular state nor to encompass the laws of all
states in which the Mortgaged Properties may be situated. The summaries are
qualified in their entirety by reference to the applicable federal and state
laws governing the Qualified Loans. Because Farmer Mac guarantees the timely
payment of principal and interest on the Certificates to Holders, and because
Farmer Mac is authorized to borrow up to $1,500,000,000 from the Secretary of
the Treasury the impact of any adverse effects described in the summaries of
certain legal aspects of the Qualified Loans below is not likely to affect the
Farmer Mac Guarantee or distributions to Holders. However, because Farmer Mac
anticipates that its future contingent liabilities in respect of guarantees of
outstanding securities will greatly exceed its resources, including its limited
ability to borrow from the United States Treasury, it is possible that the
adverse effects described below could affect distributions to Holders. See "RISK
FACTORS -- Farmer Mac Guarantee" herein.
General
The Qualified Loans will be evidenced by promissory notes, collectively
referred to as "Mortgage Notes," and secured by either deeds of trust or
mortgages, depending upon the prevailing practice in the state in which the
property subject to a Qualified Loan is located. A mortgage creates a lien upon
the real property encumbered by the mortgage. Foreclosure of a mortgage is
generally accomplished by judicial action. Foreclosure of a deed of trust is
generally accomplished by a non-judicial trustee's sale under a specific
provision in the deed of trust which authorizes the trustee to sell the property
to a third party upon any default by the borrower under the terms of the note or
deed of trust. In some states, after sale pursuant to a deed of trust or
foreclosure of a mortgage, the borrower and foreclosed junior lienors are given
a statutory period in which to redeem the property from the foreclosure sale.
The effect of a statutory right of redemption is to diminish the ability of the
lender to sell the foreclosed property in a timely manner. Certain states have
imposed statutory prohibitions which limit the remedies of a beneficiary under a
deed of trust or a mortgagee under a mortgage. In some states, statutes limit
the right of the beneficiary or mortgagee to obtain a deficiency judgment
against the borrower following foreclosure or sale under a deed of trust.
In addition to laws limiting or prohibiting deficiency judgments, numerous
other statutory provisions, including the federal bankruptcy laws and state laws
affording relief to debtors, may interfere with or affect the ability of the
secured mortgage lender to realize upon collateral or enforce a deficiency
judgment. In addition, the terms of a mortgage loan secured by property of the
debtor may be modified in a federal bankruptcy case. Such modifications may
include reducing the amount of each monthly payment, changing the rate of
interest, extending or otherwise altering the repayment schedule, and reducing
the lender's security interest to the value of the collateral, thus leaving the
lender a general unsecured creditor for the difference between the value of the
collateral and the outstanding balance of the loan. The federal Bankruptcy Code
also includes provisions under which a "family farmer with regular annual
income" is permitted to file and obtain confirmation of a plan on an expedited
basis, and protections for such debtors that are not available to other types of
debtors. Federal bankruptcy laws and applicable state laws may also limit the
ability to enforce any assignment by a borrower of rents and leases related to a
Mortgaged Property.
The Internal Revenue Code of 1986, as amended, provides priority to certain
tax liens over the lien of a mortgage. In addition, substantive requirements are
imposed upon mortgage lenders in connection with the origination and servicing
of mortgage loans by numerous federal and some state consumer protection laws.
These laws include the federal Truth-in-Lending Act, Real Estate Settlement
Procedures Act, Equal Credit Opportunity Act, Fair Credit Billing Act, Fair
Credit Reporting Act and related statutes. These federal laws impose specific
statutory liabilities upon lenders who originate mortgage loans and who fail to
comply with the provisions of the law. In some cases, this liability may affect
assignees of the mortgage loans.
Borrower's Rights Laws Applicable to Agricultural Mortgage
Loans
Farm Credit Act
In general, borrowers with loans, including mortgage loans, from lenders
which are institutions of the Farm Credit System, are entitled to certain rights
under Sections 4.14, 4.14A, 4.14B, 4.14C, 4.14D and 4.36 of the Farm Credit Act
of 1971, as amended (12 U.S.C. ss. 2001 et seq.) (the "Farm Credit Act"). These
rights include restructuring and favorable treatment of certain borrower money
held by the lender in case of the liquidation of the lender. Section 8.9 of the
Farm Credit Act provides that the rights as conferred under such Sections 4.14,
4.14A, 4.14B, 4.14C, 4.14D and 4.36 are not applicable to any Qualified Loan.
Certain State Laws
Certain states have enacted legislation granting certain rights to borrowers
under agricultural mortgage loans. These rights may include, among others,
restructuring of loans, mediation prior to foreclosure, moratoria on
foreclosures or payments, access by a dispossessed borrower to previously
planted crops, redemption provisions that are more favorable to farm borrowers
than to other commercial borrowers and restrictions on disposition of
agricultural property acquired through foreclosure. Section 8.6(b)(5) of the
Farmer Mac Charter specifically provides that such rights apply to Qualified
Loans. Section 8.6(b)(5) allows a Seller or Farmer Mac to require discounts or
charge fees reasonably related to costs and expenses arising from such
borrowers' rights provisions but prohibits a Seller or Farmer Mac from refusing
to purchase such Qualified Loans.
Sellers will represent and warrant in the Sale Agreements that each Qualified
Loan was originated in compliance with applicable state laws in all material
respects and that no homestead exemption is available to the borrower unless the
value of the portion of the Mortgaged Property not subject to a homestead
exemption would result in a current loan-to-value ratio of not more than 70%.
Environmental Regulation
Real property pledged as a security to a lender may be subject to known or
unforeseen environmental risks. Of particular concern may be those mortgaged
properties which have been the site of manufacturing, industrial or disposal
activity. Such environmental risks may give rise to (a) a diminution in value of
the Mortgaged Property or the inability to foreclose against such property or
(b) in certain circumstances as more fully described below, liability for
clean-up costs or other remedial actions, which liability could exceed the value
of such property or the Qualified Loan related to such property.
Under the Comprehensive Environmental Response, Compensation, and Liability
Act ("CERCLA"), as amended by the Asset Conservation, Lender Liability, and
Deposit Insurance Protection Act of 1996, a lender may be liable as an "owner or
operator" for costs of addressing releases or threatened releases of hazardous
substances on a mortgaged property if such lender or its agents or employees
have "participated in the management" of the operations of the borrower, even
though the environmental damage or threat was caused by a prior owner or other
third party. Excluded from CERCLA's definition of "owner or operator," however,
is a person "who is a lender that, without participating in the management of a
vessel or facility, holds indicia of ownership primarily to protect the security
interest of the person in the vessel or facility" (the "secured-creditor
exemption"). This exemption for holders of a security interest such as a secured
lender applies only when the lender acts in a manner that is consistent with the
protection of its security interest in the contaminated facility or property.
Thus, if a lender's activities begin to encroach on the interest in the
contaminated facility or property, the lender faces potential liability as an
"owner or operator" under CERCLA. Similarly, when a lender forecloses and takes
title to a contaminated facility or property (unless the foreclosure and any
subsequent disposition of the facility or property are primarily for the
protection of the security interest), the lender may incur CERCLA liability.
A decision in May 1990 of the United States Court of Appeals for the Eleventh
Circuit in United States v. Fleet Factors Corp. construed CERCLA's original
exemption for secured creditors. The court held that a lender need not have
involved itself in the day-to-day operations of the facility or participated in
decisions relating to the use, handling, or disposal of hazardous waste to be
liable under CERCLA; rather, liability could attach to a lender if its
involvement with the management of the facility was broad enough to support the
inference that the lender had the capacity to influence the borrower's treatment
of hazardous waste. The court added that a lender's capacity to influence such
decisions could be inferred from the extent of its involvement in the facility's
financial management.
The United States Environmental Protection Agency sought to clarify and limit
the effects of Fleet Factors by issuing a Final Rule delineating the range of
permissible actions that may be undertaken by a holder of a contaminated
facility without exceeding the bounds of the secured-creditor exemption.
However, that rule was vacated by the United States Court of Appeals for the
District of Columbia on February 4, 1994 on the grounds that the EPA did not
have the authority to issue rules interpreting any terms contained in CERCLA.
In September 1996 Congress amended CERCLA, as noted above, in order to
clarify whether and under what circumstances clean-up costs or the obligation to
take remedial actions could be imposed on a secured lender such as the Trust
Fund. However, the amendment, which is intended to relieve lenders from
liability under CERCLA if they did not "participate in management," has not yet
been tested by the courts. Moreover, the EPA has announced its intention to
challenge certain aspects of the amendment on the grounds that Congress did not
fully or accurately codify the EPA's lender liability rule. It is thus still not
clear the extent to which management participation may be undertaken by a lender
without exposing it to the risk of environmental liability.
If the lender is or becomes liable for clean-up costs, it may bring an action
for contribution against the current owners or operators, the owners or
operators at the time of on-site disposal activity or any other party who
contributed to the environmental hazard, but such persons or entities may be
bankrupt or otherwise judgment proof. Furthermore, such action against the
borrower may be adversely affected by any limitations on recourse in the
underlying mortgage loans. Similarly, in some states anti-deficiency legislation
and other statutes requiring the lender to exhaust its security before bringing
an action against the borrower-trustor may curtail the lender's ability to
recover from its borrower the environmental clean-up and other related costs and
liabilities incurred by the lender.
Certain states by statute impose a lien for any cleanup costs incurred by
such state on the property that is the subject of such cleanup costs (a "State
Environmental Lien"). All subsequent liens on such property are subordinated to
such State Environmental Lien and, in some states, even prior recorded liens are
subordinated to such State Environmental Liens. In the latter states, the
security interest of the Trustee in a property that is subject to such a State
Environmental Lien could be adversely affected. The Servicing Contract provides
that title to a Mortgaged Property securing a defaulted Qualified Loan shall not
be taken by the Trust Fund if the Central Servicer determines that cleanup costs
would exceed the potential recovery upon liquidation of such Qualified Loan.
Enforceability of Certain Provisions
General
Upon foreclosure, courts have imposed general equitable principles. These
equitable principles are generally designed to relieve the borrower from the
legal effect of his defaults under the loan documents. Examples of judicial
remedies that have been fashioned include judicial requirements that the lender
undertake affirmative and expensive actions to determine the causes for the
borrower's default and the likelihood that the borrower will be able to
reinstate the loan. In some cases, courts have substituted their judgment for
the lender's judgment and have required that lenders reinstate loans or recast
payment schedules in order to accommodate borrowers who are suffering from
temporary financial disability. In other cases, courts have limited the right of
the lender to foreclose if the default under the mortgage instrument is not
monetary, such as the borrower failing to adequately maintain the property or
the borrower executing a second mortgage or deed of trust affecting the
property. Finally, some courts have been faced with the issue of whether or not
federal or state constitutional provisions reflecting due process concerns for
adequate notice require that borrowers under deeds of trust or mortgages receive
notices in addition to the statutorily prescribed minimum. For the most part,
these cases have upheld the notice provisions as being reasonable or have found
that the sale by a trustee under a deed of trust, or under a mortgage having a
power of sale, does not involve sufficient state action to afford constitutional
protection to the borrower.
Due-on-Sale Clauses
Some or all of the Qualified Loans in a Trust Fund, as set forth in the
related Prospectus Supplement, may contain due-on-sale clauses. These clauses
permit the lender to accelerate the maturity of the loan if the borrower sells,
transfers or conveys the property. The enforceability of these clauses has been
the subject of legislation or litigation in many states, and in some cases the
enforceability of these clauses was limited or denied. Federal legislation that
overrides state laws restricting the enforceability of due-on-sale clauses
applies only to mortgage loans secured by a residence occupied by the borrower.
Similar state laws may restrict the enforceability of any due-on-encumbrance
provisions contained in the Qualified Loans.
Any inability to enforce a due-on-sale clause may result in a Qualified Loan
bearing an interest rate below the current market rate being assumed by a new
purchaser of the Mortgaged Property rather than being paid off, which may have
an impact upon the average life of the Qualified Loans and the number of
Qualified Loans which may be outstanding until maturity.
Applicability of Usury Laws
Section 8.12(d) of the Farmer Mac Charter expressly excludes any Qualified
Loan purchased by the Depositor within 180 days of such Qualified Loan's date of
origination from any provision of the constitution or law of any state which
expressly limits the rate or amount of interest, discount points, financial
charges, or other charges, including Yield Maintenance Charges and Prepayment
Premiums, that may be charged, taken, received, or reserved.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary of the anticipated material federal income tax
consequences of the purchase, ownership and disposition of Certificates is based
on the advice of Fried, Frank, Harris, Shriver & Jacobson ("Fried, Frank"),
counsel to the Depositor. This summary is based on laws, regulations, including
the REMIC regulations promulgated by the Treasury Department, rulings and
decisions now in effect or (with respect to regulations) proposed, all of which
are subject to change either prospectively or retroactively. Fried, Frank will
deliver an opinion to the Depositor that the information set forth under this
caption, "CERTAIN FEDERAL INCOME TAX CONSEQUENCES," to the extent that it
constitutes matters of law or legal conclusions, is correct in all material
respects. This summary does not address the federal income tax consequences of
an investment in Certificates applicable to all categories of investors, some of
which (for example, banks and insurance companies) may be subject to special
rules. Prospective investors should consult their tax advisors regarding the
federal, state, local and any other tax consequences to them of the purchase,
ownership and disposition of Certificates.
General
The federal income tax consequences to Holders will vary depending on whether
an election is made to treat the Trust Fund relating to a particular Series of
Certificates as a REMIC under the Code. The Prospectus Supplement for each
Series of Certificates will specify whether a REMIC election will be made.
Grantor Trust Funds
If a REMIC election is not made, Fried, Frank will deliver its opinion that
the Trust Fund will be classified as a grantor trust under subpart E, Part I of
subchapter J of the Internal Revenue Code of 1986, as amended (the "Code"), and
not as an association taxable as a corporation. Accordingly, owners of
Certificates generally will be treated for federal income tax purposes as owners
of a portion of the Trust Fund's assets, as described below. In this portion of
this summary (under the caption "CERTAIN FEDERAL INCOME TAX CONSEQUENCES
- --Grantor Trust Funds"), the Certificates offered by this Prospectus will be
referred to as "Grantor Trust Certificates," and the term "Qualified Loan" will
be used to refer to the Qualified Loans (including for this purpose Guaranteed
Portions) held by a Trust Fund as well as the mortgage loans underlying any
Qualified Assets (other than Qualified Loans) held by a Trust Fund.
a.....Single Class of Grantor Trust Certificates
Characterization and General Rules. The Trust Fund may be created with a
single class of Grantor Trust Certificates relating to each Pool of Qualified
Assets comprising the Trust Fund. In this case, each Holder of a Grantor Trust
Certificate will be treated as the owner of a pro rata undivided interest in
each of the Qualified Assets in the related Pool.
Each Holder of a Grantor Trust Certificate will be required to report on its
federal income tax return, in accordance with such holder's method of
accounting, its pro rata share of the entire income from the Qualified Assets in
the Trust Fund represented by Grantor Trust Certificates, including interest,
original issue discount ("OID"), if any, prepayment fees, assumption fees and
any late payment charges received by the Master Servicer. Any amounts received
by a Holder in lieu of amounts due with respect to any Qualified Asset because
of a default or delinquency in payment should be treated for federal income tax
purposes as having the same character as the payments they replace. Under Code
Sections 162 or 212, each Holder of a Grantor Trust Certificate will be entitled
to deduct its pro rata share of servicing fees, prepayment fees, assumption
fees, any loss recognized upon an assumption and any late payment charges
retained by the Master Servicer, the Central Servicers or any subservicer
(collectively, "Servicers"), provided that such amounts are reasonable
compensation for services rendered by the Servicers to the Trust Fund. Holders
of Grantor Trust Certificates that are individuals, estates or trusts will be
entitled to deduct their share of the expenses of the Trust Fund as itemized
deductions only to the extent such expenses plus all other Code Section 212
expenses incurred by such Holders exceed 2% of their adjusted gross income. In
addition, the amount of itemized deductions otherwise allowable to an individual
whose adjusted gross income for a taxable year exceeds an amount specified in
the Code (which amount is adjusted each year for inflation) will be reduced by
the lesser of (i) 3% of the excess of adjusted gross income over the specified
amount or (ii) 80% of the amount of itemized deductions otherwise allowable for
such taxable year. A Holder using the cash method of accounting generally must
take into account its pro rata share of income and deductions of the Trust Fund
as and when such income is collected by the Trust Fund or the expenses giving
rise to such deductions are paid by the Trust Fund. A Holder using an accrual
method of accounting must take into account its pro rata share of income and
deductions of the Trust Fund as they become due to, or are paid by, the Trust
Fund, whichever is earlier.
Note that if the servicing fees paid to the Servicers are treated by the
Internal Revenue Service ("IRS") as exceeding a reasonable compensation for the
services provided by the Servicers, the amount of such excess would be
considered as an ownership interest retained by the Servicers (or any person to
whom a Servicer assigned for value all or a portion of the servicing fees) in a
portion of the interest payments on the Qualified Loans. In that event, the
Trust Fund would be treated as having issued more than one class of interests in
each Pool, the rules described in the preceding paragraph would not apply to
Holders of Grantor Trust Certificates, and instead, the rules described below
under "-- b. Multiple Classes of Grantor Trust Certificates" would apply.
Original Issue Discount. The IRS has stated in published rulings that the
rules of the Code relating to OID and the Treasury regulations implementing such
rules (the "OID Regulations") are applicable to a Holder of Grantor Trust
Certificates' interest in those Qualified Loans issued with OID. These rules are
applicable to mortgages of corporations originated after May 27, 1969, mortgages
of non-corporate mortgagors (other than individuals) originated after July 1,
1982, and mortgages of individuals originated after March 2, 1984. As discussed
in more detail below, under the OID rules, OID generally must be reported as
ordinary gross income as it accrues under a constant yield method; thus in the
event that a Pool contains one or more Qualified Loans that were issued with
OID, Holders of Grantor Trust Certificates relating to that Pool may recognize
income in advance of the receipt of the cash associated with such income. In the
case of the Qualified Loans, OID could arise by financing of points or other
charges by the originator of such Loans in an amount greater than a statutory de
minimis amount, to the extent that the points are not for services provided by
the lender. OID could also arise if the interest rate structure of a Qualified
Loan includes a "teaser" rate. In addition, a Pool could contain Qualified
Assets that constitute "stripped bonds" or "stripped coupons," within the
meaning of Section 1286 of the Code, and each of those kinds of instruments
could be treated under that Section of the Code as bearing OID.
Each Qualified Loan underlying the Grantor Trust Certificates will be treated
as having been issued on the date it was originated with an amount of OID equal
to the excess of such Qualified Loan's "stated redemption price at maturity"
over its "issue price." The "stated redemption price at maturity" of a Qualified
Loan is the sum of all payments to be made on such Qualified Loan other than
payments that are treated as "qualified stated interest" payments (generally,
payments of interest at a single fixed or variable rate payable unconditionally
at least annually). The "issue price" of a Qualified Loan is generally the
amount lent to the mortgagor, which may be adjusted to take into account certain
loan origination fees. If the excess of a Qualified Loan's stated redemption
price at maturity over its issue price is less than 0.25% of the stated
redemption price at maturity multiplied by the number of complete years to
maturity of the Qualified Loan (in the case of a Qualified Loan the principal of
which is payable in more than one installment, the weighted average maturity of
the Qualified Loan is substituted for the number of complete years to maturity)
(the "de minimis amount"), the Qualified Loan is treated as not bearing OID.
Generally, the Holder of a Grantor Trust Certificate must include in gross
income the sum of the "daily portions" of the OID on the Qualified Loans
underlying such Certificate for each day on which such Holder owns the
Certificate. "Daily portions" are generally computed by determining the amount
of OID accruing during each "accrual period" and then dividing such amount by
the number of days in such accrual period. An "accrual period" is generally the
period of time between payment dates. The amount of OID that accrues during any
accrual period is generally the product of the "yield to maturity" of the
Qualified Loan and its "adjusted issue price" at the beginning of such accrual
period less any qualified stated interest allocable to the accrual period. The
"yield to maturity" of a Qualified Loan is generally the interest rate that,
when used to compute the present values of all the payments due under the
Qualified Loan as of its issue date, causes the sum of such present values to
equal the issue price of such Qualified Loan. The "adjusted issue price" of a
Qualified Loan as of the beginning of any accrual period generally equals the
issue price of such Qualified Loan, plus all the OID previously accrued on such
Qualified Loan, minus all payments previously made on such Qualified Loan, other
than payments of qualified stated interest. In the event that a Qualified Loan
has an initial accrual period longer or shorter than the regular accrual period
for such Qualified Loan, appropriate adjustments are made to take into account
such longer or shorter period.
Market Discount. The price paid for a Grantor Trust Certificate by a Holder
will be allocated to such Holder's undivided interest in each Qualified Loan in
the related Pool based on each Qualified Loan's relative fair market value, so
that such Holder's undivided interest in each Qualified Loan will have its own
tax basis. To the extent that a holder's tax basis in an undivided interest in a
Qualified Loan is less than such Holder's share of the principal amount of such
Qualified Loan (or, if such Qualified Loan was issued with OID, the adjusted
issue price of such Qualified Loan), such Qualified Loan may be considered to
have been purchased at a "market discount," subject to the market discount rules
of Code Sections 1276-1278. The market discount rules provide that if the amount
of market discount with respect to a Holder's interest in a Qualified Loan
exceeds a statutorily-defined de minimis amount (described below), gain on
disposition of the Qualified Loan and the receipt of any principal payment on
such Qualified Loan (whether scheduled or not) is taxable as ordinary income to
the extent of the amount of market discount that has accrued (but has not been
included in income) as of the time such gain is recognized or such principal
payment is received. Holders of Grantor Trust Certificates will be entitled to
elect to include market discount currently as it accrues, rather than upon
disposition or receipt of a principal payment, in which case such election
generally would apply to all debt instruments (i.e., not only to interests in
Qualified Loans) acquired by such Holders during the year in which such election
is made and in all subsequent years.
The method of accruing market discount in the case of Grantor Trust
Certificates, which represent interests in Qualified Loans, is not entirely
clear. The Code grants the Treasury Department authority to issue regulations
providing for the method of accruing market discount on debt instruments, such
as the Qualified Loans, the principal of which is payable in more than one
installment. Since the Treasury Department has not yet issued those regulations,
rules described in the relevant legislative history should apply. Under those
rules, the Holder of a market discount bond may elect to accrue market discount
either on the basis of a constant yield method or according to one of the
following methods: (a) in the case of a Qualified Loan issued with OID, the
amount of market discount that accrues during any accrual period would be equal
to the product of (i) the total remaining market discount and (ii) a fraction,
the numerator of which is the OID accruing during the period and the denominator
of which is the total remaining OID at the beginning of the accrual period; or
(b) in the case of a Qualified Loan not issued with OID, the amount of market
discount that accrues during a period is equal to the product of (i) the total
remaining market discount and (ii) a fraction, the numerator of which is the
amount of stated interest paid during the accrual period and the denominator of
which is the total amount of stated interest remaining to be paid at the
beginning of the accrual period. Because the regulations implementing these
rules have not been issued, it is impossible to predict what effect those
regulations might have on the tax treatment of a Grantor Trust Certificate (or
the underlying Qualified Loans) purchased at a discount in the secondary market.
A Holder who acquires a Grantor Trust Certificate (i.e., an interest in a
Qualified Loan) at a market discount also may be required to defer a portion of
its interest deductions for the taxable year attributable to any indebtedness
incurred or continued to purchase or carry such Grantor Trust Certificate,
unless the Holder makes the election described above to include market discount
currently as it accrues. Holders that incur or continue indebtedness to purchase
or carry their Grantor Trust Certificates should consult their tax advisors as
to the proper application of this rule.
If the amount of market discount on a Holder's interest in a Qualified Loan
is less than an amount equal to 0.25% of such Holder's portion of the Qualified
Loan's stated redemption price at maturity multiplied by the number of complete
years to maturity remaining after the date of purchase (i.e., the de minimis
amount), the market discount on that interest will be not be subject to the
rules described above. In the case of a Qualified Loan the principal of which is
payable in more than one installment, while it is not certain due to the absence
of applicable authority, by analogy to the OID rules, that computation should be
made by substituting the weighted average maturity of the Qualified Loan for the
number of complete years to maturity of the Qualified Loan.
Treasury regulations implementing the market discount rules have not yet been
issued; therefore, Holders of Grantor Trust Certificates are urged to consult
their own tax advisors regarding the application of these rules and the
advisability of making any of the elections allowed under these rules.
Premium. In the event a Holder of a Grantor Trust Certificate acquires an
interest in a Qualified Loan at an "acquisition premium," i.e., for an amount
greater than the Qualified Loan's then adjusted issue price but less than the
sum of the remaining payments due on the Qualified Loan (other than payments of
qualified stated interest), the Holder will be entitled to offset a portion of
the OID that accrues in each subsequent accrual period by a portion of that
excess.
In the event a Holder of a Grantor Trust Certificate acquires an interest in
a Qualified Loan at a premium (i.e., for an amount greater than the sum of the
remaining payments due on the Qualified Loan, other than payments of qualified
stated interest), the Holder may elect to amortize such premium under a constant
yield method, provided that such Qualified Loan was originated after September
27, 1985. Amortized premium under these rules will be treated as an offset to
interest income on such Qualified Loan, and the tax basis of an interest in a
Qualified Loan will be reduced to the extent that amortizable premium is applied
to offset interest payments. A Holder that elects to amortize premium under
these rules will be deemed to have made an election to amortize premium with
respect to all debt instruments (i.e., not only with respect to interests in
Qualified Loans) having amortizable bond premium that such Holder holds during
the year of the election or acquires thereafter. Premium allocable to Qualified
Loans originated on or before September 27, 1985, should be allocated among the
principal payments on such Qualified Loans and allowed as an ordinary deduction
as principal payments are made.
Election to Treat All Interest as OID. The OID Regulations permit the Holder
of a Grantor Trust Certificate to elect to accrue all interest, discount
(including de minimis market or original issue discount) and premium in income
as interest, based on a constant yield method. If such an election were to be
made with respect to a Grantor Trust Certificate representing an interest in
Qualified Loans with market discount, the Holder of such Certificate would be
deemed to have made an election to include market discount in income currently
with respect to all other debt instruments having market discount that such
Holder acquires during the year of the election or thereafter. Similarly, a
Holder that makes this election for a Certificate that represents an interest in
Qualified Loans acquired at a premium will be deemed to have made an election to
amortize bond premium on a constant yield method with respect to all debt
instruments having amortizable bond premium that such Holder owns in the year of
the election or thereafter acquires. The election to accrue all interest,
discount and premium on a constant yield method with respect to a Certificate is
irrevocable.
Prepayment Premiums and Yield Maintenance Charges. Because of the absence of
clear authority, it is uncertain whether the portion of any Prepayment Premium
or Yield Maintenance Charge received by any Holder of a Grantor Trust
Certificate should be treated as capital gain (assuming a Certificate is held as
a capital asset) or as ordinary income. Holders that receive distributions from
a Trust Fund of Prepayment Premiums or Yield Maintenance Charges should consult
their tax advisors regarding the taxable status of such amounts.
Characterization of Certificates with respect to Certain Holders. As to each
Series of Certificates issued in a single class with respect to a Pool, Fried,
Frank will advise the Depositor that:
(i) a Grantor Trust Certificate owned by a real estate investment trust
representing an interest in Qualified Loans will be considered to represent
"real estate assets" within the meaning of Code Section 856(c)(5)(A), and
interest income on the Qualified Loans will be considered "interest on
obligations secured by mortgages on real property" within the meaning of Code
Section 856(c)(3)(B), in each case to the extent that the Qualified Loans
represented by the Grantor Trust Certificate are of a type described in such
Code section; and
(ii) a Grantor Trust Certificate owned by a REMIC will represent an
interest in "obligation[s] ... which [are] principally secured by an interest
in real property" within the meaning Code Section 860G(a)(3) to the extent
that the Qualified Loans represented by the Grantor Trust Certificate are of
a type described in such Code section.
If the value of the real property securing a Qualified Loan is lower than the
amount of such Qualified Loan, such Qualified Loan may not qualify in its
entirety under the foregoing Code sections.
b. Multiple Classes of Grantor Trust Certificates
If a Trust Fund is created with two classes of Grantor Trust Certificates
relating to a Pool, one class of Grantor Trust Certificates may represent the
right to principal and some interest, or principal only, on all or a portion of
the Qualified Assets in the Pool (the "Stripped Bond Certificates"), while the
other class of Grantor Trust Certificates may represent the right to some or all
of the interest on such portion (the "Stripped Coupon Certificates"). Under Code
Section 1286, the separation of ownership of the right to receive some or all of
the interest payments on an obligation from ownership of the right to receive
some or all of the principal payments on the obligation results in the creation
of "stripped bonds" with respect to principal payments and "stripped coupons"
with respect to interest payments. For purposes of the OID, market discount and
related rules, Code Section 1286 treats a stripped bond or a stripped coupon as
an obligation issued on the date that such stripped interest is purchased and
provides that the OID rules are applied to that obligation, rather than to the
underlying debt instrument that has been "stripped." As noted above under "-- a.
Single Class of Grantor Trust Certificates -- Characterization and General
Rules," servicing fees that are treated by the IRS as exceeding a reasonable fee
("excess servicing fee") will be treated as creating stripped coupons (the right
to receive the excess servicing fee) and stripped bonds (the right to receive
all the principal of, and all the interest, other than the amount of the excess
servicing fee, on, the Qualified Loans).
Although not entirely clear due to the absence of applicable authority, a
Stripped Bond Certificate generally should be treated as an interest in
Qualified Assets issued on the date such Certificate is purchased for purposes
of calculating any OID, and the issue price of such Certificate should be the
amount paid for such Certificate. Discount on a Stripped Bond Certificate will
be treated as market discount, subject to the rules described above under "-- a.
Single Class of Grantor Trust Certificates -- Market Discount," rather than as
OID, if either (i) the amount of OID on such Certificate is less than the de
minimis amount (generally calculated as described above as 0.25% of the stated
redemption price at maturity of the Certificate multiplied by the weighted
average maturity of the Certificate) or (ii) the annual stated interest rate
payable on the Certificate (including any amounts treated as a reasonable
servicing fee) is more than 100 basis points less than the annual stated
interest rate payable on the Qualified Loans (including all amounts paid as
servicing fees) before the creation of the Stripped Coupon Certificates. The
treatment of discount as market discount rather than as OID under this rule
constitutes a method of accounting for tax purposes; thus any Holder of a
Grantor Trust Certificate that adopted a method of accounting for stripped bonds
prior to its acquisition of any Certificates subject to the rule described in
this paragraph should consult its tax advisor to determine whether it is
required to change its previously-adopted method of accounting, and if so, how
to make that change.
The tax treatment of Stripped Coupon Certificates is uncertain. The Code
could be read literally to require that OID computations be made separately for
each payment from each Qualified Loan. The better treatment, however, appears to
be to treat all payments to be received on a Stripped Coupon Certificate as a
single installment obligation subject to the OID rules, in which case, all
payments on such Certificate would be included in the Certificate's stated
redemption price at maturity.
The computation of OID with respect to Stripped Bond Certificates and
Stripped Coupon Certificates is uncertain due to the absence of applicable
authority. Code Section 1272(a)(6) provides that in the case of an instrument,
the payments on which may be accelerated by reason of prepayments on other
obligations securing such instrument, OID computations must take into account a
"prepayment assumption" (the "Prepayment Assumption Rule"). The Prepayment
Assumption Rule does not by its terms apply to Stripped Bond Certificates or
Stripped Coupon Certificates, because these Certificates are not secured by the
underlying Qualified Assets. However, payments on these Certificates may, in
fact, be accelerated by reason of prepayments on the Qualified Assets. There are
no regulations implementing the Prepayment Assumption Rule, and there is no
other authority as to whether that Rule is to be applied in the computation of
OID with respect to instruments such as the Certificates. In the absence of any
authoritative guidance, the Master Servicer intends to compute OID on Stripped
Bond Certificates and Stripped Coupon Certificates in accordance with the
Prepayment Assumption Rule.
Under the Prepayment Assumption Rule, OID for any accrual period is generally
determined by (a) adding (i) the present value as of the end of the accrual
period of all remaining payments to be received on the Certificate (determined
by using as a discount factor the original yield to maturity of the Certificate
and taking into account a prepayment assumption) and (ii) any payments received
during such accrual period that were included in the state redemption price at
maturity, and (b) subtracting from that sum the adjusted issue price of the
Certificate at the beginning of such accrual period. The Code provides that the
prepayment assumption is to be determined in the manner prescribed by
regulations. These regulations have not yet been issued. However, the
legislative history to the Prepayment Assumption Rule indicates that the
regulations are to require that the same prepayment assumption used to determine
the offering price of a Certificate (the "Prepayment Assumption") be used to
make OID computations. It is unclear whether that rule would apply in the case
of Stripped Bond Certificates and Stripped Coupon Certificates, or whether,
assuming any prepayment assumption is to be used with respect to such
Certificates, such prepayment assumption would be determined based on conditions
existing at the time such stripped interests are created (e.g., in the case of a
subsequent Holder, at the time such Holder acquires such Certificate). Neither
the Depositor, the Guarantor nor the Master Servicer will make any
representation that any Certificate will prepay at a rate consistent with the
Prepayment Assumption or at any other rate.
It is unclear under what circumstances, if any, the prepayment of a Qualified
Loan will give rise to a loss to the Holder of a Stripped Bond Certificate
purchased at a premium or a Stripped Coupon Certificate. If a Stripped Bond
Certificate is treated as a single instrument (rather than as an interest in
discrete Qualified Loans) and the Prepayment Assumption Rule applies in the
computation of OID with respect to such Certificate, it appears that no loss
will be allowable as a result of any particular prepayment, and instead, a
prepayment should be treated as a partial payment of the stated redemption price
of the Stripped Bond Certificate and accounted for under the Prepayment
Assumption Rule. However, if a Stripped Bond Certificate is treated as an
interest in discrete Qualified Loans, then when a Qualified Loan is prepaid, the
Holder of such Certificate should recognize a loss equal to the excess of the
portion of the Holder's adjusted basis for such Certificate allocable to such
Qualified Loan over the amount of principal prepaid. If a Stripped Coupon
Certificate is treated as a single instrument and the Prepayment Assumption Rule
applies, it appears that no loss will be available as a result of any particular
prepayment, unless prepayments on the Qualified Loans generally occur at a rate
faster than the assumed prepayment rate. However, if a Stripped Coupon
Certificate is treated as an interest in discrete Qualified Loans, then when a
Qualified Loan is prepaid, the Holder of such Certificate should recognize a
loss equal to the portion of the Holder's adjusted basis for such Certificate
allocable to such Qualified Loan. If a Stripped Bond Certificate or Stripped
Coupon Certificate is treated as a single instrument but the Prepayment
Assumption Rule does not apply, it appears that no loss will be allowable as a
result of any particular prepayment, and a Holder would be entitled to a loss
only upon receiving a final payment with respect to such Certificate that is
less than such Holder's remaining adjusted basis for such Certificate.
As noted, the tax treatment of Stripped Bond Certificates and Stripped Coupon
Certificates is subject to significant uncertainties. Holders of Stripped Bond
Certificates and Stripped Coupon Certificates are urged to consult with their
own tax advisors regarding the proper treatment of these Certificates for
federal income tax purposes.
Characterization of Stripped Bond Certificates and Stripped Coupon
Certificates with respect to Certain Holders. As noted above under "--a. Single
Class of Grantor Trust Certificates --Characterization of Stripped Bond
Certificates and Stripped Coupon Certificates with respect to Certain Holders,"
Certificates issued in a single class with respect to a Pool will represent
permissible investments for real estate investment trusts, provided the
underlying Qualified Assets constitute permissible investments. There is no
specific authority regarding whether Certificates that constitute Stripped Bond
Certificates or Stripped Coupon Certificates will also represent permissible
investments for such Holders. However, the Code provisions governing stripped
obligations by their terms apply only for purposes of determining OID, market
discount and similar matters. Therefore, while not free from doubt, Stripped
Bond Certificates and Stripped Coupon Certificates should represent "real estate
assets" within the meaning of Code Section 856(c)(5)(A), and interest income
attributable to such Certificates should represent "interest on obligations
secured by mortgages on real property" within the meaning of Code Section
856(c)(3)(B), provided that in each case the underlying Qualified Assets and
interest on such Qualified Assets qualify for such treatment. Prospective
purchasers to which such characterization of an investment in Certificates is
material should consult their own tax advisors regarding the characterization of
the Grantor Trust Certificates and the income therefrom. Stripped Bond
Certificates and Stripped Coupon Certificates held by a REMIC will constitute
"obligation[s] ... which [are] principally secured, directly or indirectly, by
an interest in real property" within the meaning of Code Section 860G(a)(3) to
the extent that the Qualified Loans underlying such Certificates are of a type
described in such Code section .
c. Sale or Exchange of a Grantor Trust Certificate
Sale or exchange of a Grantor Trust Certificate prior to its maturity will
result in gain or loss equal to the difference, if any, between the amount
received and the Holder's adjusted basis in the Grantor Trust Certificate. Such
adjusted basis generally will equal the Holder's purchase price for the Grantor
Trust Certificate, increased by the OID included in the Holder's gross income
with respect to the Grantor Trust Certificate, and reduced by principal payments
on the Grantor Trust Certificate previously received by the Holder. Such gain or
loss will be capital gain or loss to a Holder for which a Grantor Trust
Certificate is a "capital asset" and will be long-term or short-term depending
on whether the Grantor Trust Certificate has been owned for the long-term
holding period (currently more than one year). Grantor Trust Certificates will
be "evidences of indebtedness" within the meaning of Code Section 582(c)(1), so
that gain or loss recognized from the sale of a Grantor Trust Certificate by a
bank or a thrift institution to which such section applies will be treated as
ordinary income or loss.
d. Non-U.S. Persons
Generally, a Holder of a Grantor Trust Certificate that is not a U.S. Person
(as defined below) and for which income derived from a Certificate would not be
effectively connected with the conduct of a U.S. trade or business will not be
subject to U.S. federal income or withholding tax in respect of distributions on
a Certificate, provided that such Holder complies with certain identification
requirements (including delivery of a statement, signed by the Holder under
penalties of perjury, certifying that such Holder is not a U.S. Person and
providing the holder's name and address). This rule may not apply to a Holder in
the event (i) such Holder owns 10% or more of the interests in the obligor under
a Qualified Loan, (ii) such Holder is a "controlled foreign corporation" for
U.S. federal income tax purposes, or (iii) one or more Qualified Loans in the
related Pool were originated on or before July 18, 1984. If any of these
circumstances exist with respect to a Holder that is not a U.S. Person,
distributions made to such Holder could be subject to withholding, and such
Holder should consult its own tax advisor regarding the federal income tax
consequences of holding a Certificate.
A Grantor Trust Certificate held by a Holder who is a nonresident alien
individual and for whom distributions would be exempt from tax as described in
the preceding paragraph will not be included in the U.S. estate of such Holder.
As used herein, a "U.S. Person" means a citizen or resident of the United
States, a corporation or a partnership organized in or under the laws of the
United States or any political subdivision thereof or an estate or trust, the
income of which is includible in gross income for federal income tax purposes
regardless of its source.
e. Information Reporting and Backup Withholding
The Master Servicer will furnish or make available, within a reasonable time
after the end of each calendar year, to each person or entity who held a Grantor
Trust Certificate at any time during such year, such information as may be
required by applicable rules to assist such Holders in preparing their federal
income tax returns, or to enable Holders to make such information available to
beneficial owners or financial intermediaries that hold such Certificates as
nominees on behalf of beneficial owners. If a Holder, beneficial owner,
financial intermediary or other recipient of a payment on behalf of a beneficial
owner fails to supply a certified taxpayer identification number or if the
Secretary of the Treasury owner fails to supply a certified taxpayer
identification number or if the Secretary of the Treasury determines that such
person has not reported all interest and dividend income required to be shown on
its federal income tax return, 31% backup withholding may be required with
respect to any payments. Any amounts deducted and withheld from a distribution
to a recipient would be allowed as a credit against such recipient's federal
income tax liability.
REMICs
The Trust Fund relating to a Series of Certificates may elect to be treated
as a REMIC. Qualification as a REMIC requires ongoing compliance with certain
conditions. Although a REMIC is not generally subject to federal income tax
(see, however "--b. Taxation of Owners of REMIC Residual Certificates" and "--e.
Prohibited Transactions" below), if a Trust Fund with respect to which a REMIC
election is made fails to comply with one or more of the ongoing requirements of
the Code for REMIC status during any taxable year, including the implementation
of restrictions on the purchase and transfer of the residual interests in the
REMIC as described below under "--a. Taxation of Owners of REMIC Residual
Certificates," the Code provides that the Trust Fund will not be treated as a
REMIC for such year and thereafter. In that event, such entity may be taxable as
a separate corporation, and the related Certificates (the "REMIC Certificates")
may not be accorded the status or given the tax treatment described below. While
the Code authorizes the Treasury Department to issue regulations providing
relief in the event of an inadvertent termination of the status of a Trust Fund
as a REMIC, no such regulations have been issued. Any such relief, moreover, may
be accompanied by sanctions, such as the imposition of a corporate tax on all or
a portion of the REMIC's income for the period during which the requirements for
such status were not satisfied. With respect to each Trust Fund that elects
REMIC status, Fried Frank will deliver its opinion generally to the effect that,
under then existing law and assuming compliance with all provisions of the
related Trust Agreement and any related agreements, such Trust Fund will qualify
as a REMIC, and the related Certificates will be considered to be regular
interests ("REMIC Regular Certificates") or residual interests ("REMIC Residual
Certificates") in the REMIC. The related Prospectus Supplement for each Series
of Certificates will indicate whether the Trust Fund will make a REMIC election,
and if so, whether the Certificates of a particular class will be treated as
regular or residual interests in the REMIC.
In general, with respect to each Series of Certificates for which a REMIC
election is made, (i) Certificates held by a real estate investment trust will
constitute "real estate assets" within the meaning of Code Section 856(c)(5)(A);
and (ii) interest on REMIC Regular Certificates held by a real estate investment
trust and any income includible with respect to a REMIC Residual Certificate
held by a real estate investment trust will be considered "interest on
obligations secured by mortgages on real property" within the meaning of Code
Section 856(c)(3)(B). However, if less than 95% of the REMIC's assets qualify as
real estate assets, the Certificates will be qualifying assets only to the
extent that the REMIC's assets are qualifying assets. It is unclear whether
property acquired by foreclosure held pending sale and amounts in reserve
accounts (to the extent not invested in real estate assets) would be considered
to be real estate assets, or whether such assets otherwise would receive the
same treatment as the Qualified Assets for purposes of all of the foregoing
sections. Also, payments on Qualified Assets held pending distribution on the
REMIC Certificates will be considered to be part of the Qualified Assets for
purposes of Code Section 856(c) and thus will be treated as real estate assets
as described above. In addition, REMIC Regular Certificates held by a REMIC will
be considered "obligation[s] O which [are] principally secured by an interest in
real property" within the meaning of Section 860G(a)(3) of the Code.
Tiered REMIC Structures. For certain Series of Certificates, two separate
elections may be made to treat separately designated portions of the related
Trust Fund as REMICs (respectively, the "Master REMIC" and the "Subsidiary
REMIC") for federal income tax purposes. Upon the issuance of any such Series of
Certificates, Fried Frank will deliver its opinion generally to the effect that,
assuming compliance with all provisions of the related Trust Agreement, each of
the Master REMIC and the Subsidiary REMIC will qualify as a REMIC, and the REMIC
Certificates issued by both the Master REMIC and the Subsidiary REMIC will
constitute REMIC Regular Certificates or REMIC Residual Certificates, as the
case may be, in the related REMIC.
The Master REMIC and the Subsidiary REMIC will be treated as one REMIC solely
for purposes of determining (i) whether the REMIC Certificates will be
considered "real estate assets" within the meaning of Section 856(c)(5)(A) of
the Code and (ii) whether the income on such Certificates is interest described
in Section 856(c)(3)(B) of the Code.
a. Taxation of Owners of REMIC Regular Certificates
General. Except as otherwise stated in this discussion, REMIC Regular
Certificates will be treated for federal income tax purposes as debt instruments
issued by the REMIC and not as ownership interests in the REMIC or its assets.
Moreover, Holders of REMIC Regular Certificates that otherwise report income
under a cash method of accounting will be required to report income with respect
to REMIC Regular Certificates under an accrual method.
Original Issue Discount. The REMIC Regular Certificates may be issued with
OID. Holders of any class of REMIC Regular Certificates issued with OID will be
required to include such OID in gross income for federal income tax purposes as
it accrues, in accordance with a constant yield method based on the compounding
of interest as it accrues, rather than in accordance with the receipt of
distributions on the REMIC Regular Certificates. The amount and rate of accrual
of OID will be determined by taking into account the expected rate of
prepayments on the Qualified Assets held by the REMIC and will be adjusted to
reflect the rate of prepayments as they actually occur. As described in more
detail below, under this method, if the actual prepayments during a particular
period exceed the expected prepayments, the amount of OID accrued in that period
will be greater than the amount of OID that would accrue if prepayments during
that period equaled the amount expected. Similarly, if the actual prepayments
during a particular period are less than the expected prepayments, the amount of
OID accrued in that period will be less than the amount of OID that would accrue
if prepayments during that period equaled the amount expected (but in no case
less than zero). The OID rules provide that the expected rate of prepayments to
be used for these computations be determined as prescribed by regulations which
have not yet been issued. The legislative history to these rules provides,
however, that the regulations should require that the rate used be the
prepayment assumption that is used in determining the initial offering price of
the REMIC Regular Certificates the ("Prepayment Assumption"). The Prepayment
Assumption with respect to a Series of REMIC Regular Certificates will be set
forth in the related Prospectus Supplement. However, neither the Depositor, the
Trustee nor the Master or Central Servicer will make any representation that the
REMIC Regular Certificates will in fact prepay at the Prepayment Assumption or
at any other rate. The OID rules applicable to REMIC Regular Certificates are
very complex and are subject to uncertainties due to the absence of applicable
authority; thus, Holders are urged to consult their own tax advisors regarding
the tax consequences of purchasing, owning and disposing of the REMIC Regular
Certificates.
In general, each REMIC Regular Certificate will be treated as a single
installment obligation issued with an amount of OID equal to the excess of its
"stated redemption price at maturity" over its "issue price." The "stated
redemption price at maturity" of a REMIC Regular Certificate includes the
original principal amount of the Certificate and all other payments on the
Certificate other than payments that constitute "qualified stated interest."
"Qualified stated interest" generally means interest at a single fixed rate or
qualified variable rate (as described below) that is unconditionally payable at
intervals of one year or less during the entire term of the REMIC Regular
Certificate. Interest is treated as payable at a single fixed rate only if the
rate appropriately takes into account the length of the interval between
payments. Where the interval between the issue date and the first Distribution
Date on a REMIC Regular Certificate is shorter than the interval between
subsequent Distribution Dates, interest due on the first Distribution Date in
excess of the amount that accrued during the first period may be added to the
Certificate's stated redemption price at maturity. The "issue price" of a REMIC
Regular Certificate of a particular class is generally the first price at which
a substantial amount of REMIC Regular Certificates of that class are first sold
to the public (excluding bond houses, brokers, underwriters or wholesalers).
Under a "de minimis" rule, OID on a REMIC Regular Certificate will generally
be considered to be zero if the OID calculated as described above is less than
0.25% of the stated redemption price at maturity of the Certificate multiplied
by the weighted average maturity of the REMIC Regular Certificate. For this
purpose, the weighted average maturity of the Certificate is computed as the sum
of the amounts determined by multiplying the number of full years (i.e.,
rounding down partial years) from the issue date until each distribution in
reduction of stated redemption price at maturity is scheduled to be made by a
fraction, the numerator of which is the amount of such distribution and the
denominator of which is the stated redemption price at maturity of the
Certificate). Although not entirely clear, it appears that the schedule of such
distributions should be determined taking into account the Prepayment
Assumption. Holders generally must report de minimis OID pro rata as principal
payments are received, and such income will be capital gain if the REMIC Regular
Certificate is held as a capital asset.
Generally, a Holder of a REMIC Regular Certificate must include in gross
income the "daily portions," as determined below, of the OID that accrues on
such Certificate for each day such Holder holds the Certificate. "Daily
portions" are generally computed by determining the amount of OID accruing
during each "accrual period" and then dividing such amount by the number of days
in such accrual period. An "accrual period" is generally the period of time
between payment dates on the REMIC Regular Certificate. The amount of OID that
accrues in any accrual period is generally determined by (a) adding (i) the
present value at the end of the accrual period of all remaining payments to be
received on the Certificate (determined by using as a discount factor the
original yield to maturity of the REMIC Regular Certificate and taking into
account the Prepayment Assumption) and (ii) any payments received during such
accrual period that were included in the stated redemption price at maturity,
and (b) subtracting from that sum the "adjusted issue price" of the Certificate
at the beginning of such accrual period. The "yield to maturity" of a REMIC
Regular Certificate is generally the interest rate that, when used to compute
the present values of all the payments due under the Certificate as of its issue
date (taking the Prepayment Assumption into account), causes the sum of such
present values to equal the issue price of such Certificate. The "adjusted issue
price" of a REMIC Regular Certificate at the beginning of the first accrual
period is its issue price; the "adjusted issue price" of a REMIC Regular
Certificate at the beginning of a subsequent accrual period is the adjusted
issue price at the beginning of the immediately preceding accrual period, plus
the amount of OID accrued during such accrual period, and minus the amount of
any payments made on the Certificate during such accrual period, other than any
payment of qualified stated interest. As noted above, the calculation of OID
under this method will cause the accrual of OID with respect to a particular
accrual period either to increase or decrease (but never below zero) relative to
the Certificate's original yield to maturity to reflect prepayments during such
accrual period that exceeded or were less than the Prepayment Assumption.
Certain REMIC Regular Certificates may be issued at prices significantly
exceeding their principal amounts or based on notional principal balances (e.g.,
so-called "interest-only" or "I/O" strips). The income tax treatment of such
Certificates is not entirely certain. For information reporting purposes, the
Trust Fund intends to take the position that the stated redemption price at
maturity of such Certificates is the sum of all payments to be made on such
Certificates determined taking the Prepayment Assumption into account, with the
result that such Certificates would be treated as issued with OID. The
calculation of income in this manner could result in negative OID when
prepayments on the Qualified Assets occur faster than the Prepayment Assumption;
however negative OID is not deductible in the period accrued, but should be
allowed as an offset to future accruals of positive OID. Alternatively, it is
possible that the stated redemption price at maturity of these Certificates
should be limited to their stated principal amount, so that such REMIC Regular
Certificates would be considered to be issued at a premium. In such case, the
rules described below under "--Premium" would apply. It is unclear when a loss
may be claimed for any unrecovered basis in a REMIC Regular Certificate
described in this paragraph; it is possible that a loss may only be claimed when
the remaining basis in the Certificate exceeds the maximum amount of future
payments to be received on the Certificate, assuming no further prepayments, or
perhaps only when the final payment is received with respect to such
Certificate.
Certain REMIC Regular Certificates may provide for interest based on a
variable rate. The OID Regulations provide that interest based on certain kinds
of variable rates will constitute qualified stated interest; thus Certificates
that bear interest at one of these kinds of variable rates would not have OID
(unless the Certificates were issued at a discount from their principal amount).
However, a Certificate that bears interest based on a variable rate that does
not constitute qualified stated interest would have OID, because all such
interest would be included in the Certificate's stated redemption price at
maturity. The Prospectus Supplement with respect to an issuance of REMIC Regular
Certificates that bear interest at a variable rate will indicate whether such
interest will be treated as qualified stated interest.
Market Discount. A Holder that purchases a REMIC Regular Certificate at a
market discount, that is, in the case of a REMIC Regular Certificate issued
without OID, at a purchase price less than its remaining stated principal
amount, or in the case of a REMIC Regular Certificate issued with OID, at a
purchase price less than its adjusted issue price, will be required to include
as ordinary income a portion of such market discount upon the receipt of any
distribution of an amount included in such Certificate's stated redemption price
at maturity. Under the market discount rules, each such distribution is treated
as ordinary income up to the amount of market discount accrued (and not
previously included) as of the date of such distribution. Upon disposition of a
REMIC Regular Certificate, Holders are required to treat any gain recognized as
ordinary income to the extent of the market discount accrued as of the date of
disposition. Holders may elect to include market discount in income currently as
it accrues rather than including it on the deferred basis described above. If
made, such election will apply to all market discount bonds (i.e., not only to
REMIC interests) acquired by such Holder during the year in which such election
is made and in all subsequent years.
The method of accruing market discount in the case of REMIC Regular
Certificates is not entirely clear. The Code grants the Treasury Department
authority to issue regulations providing for the method of accruing market
discount on debt instruments, such as the REMIC Regular Certificates, the
principal of which is payable in more than one installment. Since the Treasury
Department has not yet issued those regulations, rules described in the relevant
legislative history should apply. Under those rules, the Holder of a market
discount bond may elect to accrue market discount either on the basis of a
constant yield method or according to one of the following methods: (a) in the
case of a REMIC Regular Certificate issued with OID, the amount of market
discount that accrues during any accrual period would be equal to the product of
(i) the total remaining market discount and (ii) a fraction, the numerator of
which is the OID accruing during the period and the denominator of which is the
total remaining OID at the beginning of the accrual period; or (b) in the case
of a REMIC Regular Certificate not issued with OID, the amount of market
discount that accrues during a period is equal to the product of (i) the total
remaining market discount and (ii) a fraction, the numerator of which is the
amount of stated interest paid during the accrual period and the denominator of
which is the total amount of stated interest remaining to be paid at the
beginning of the accrual period. The calculation of accrued market discount
under any of the above methods will be made taking into account the same
Prepayment Assumption applicable to the calculation of the accrual of OID, as
described above. Because the regulations implementing these rules have not been
issued, it is impossible to predict what effect those regulations might have on
the tax treatment of a REMIC Regular Certificate purchased at a discount in the
secondary market.
A Holder who acquires a REMIC Regular Certificate at a market discount also
may be required to defer a portion of its interest deductions for the taxable
year attributable to any indebtedness incurred or continued to purchase or carry
such Certificate, unless the Holder makes the election described above to
include market discount currently as it accrues. Holders that incur or continue
indebtedness to purchase or carry their REMIC Regular Certificates should
consult their tax advisors as to the proper application of this rule.
If the amount of market discount on a REMIC Regular Certificate is less than
a de minimis amount equal to 0.25% of the Certificate's remaining stated
redemption price at maturity multiplied by the weighted average remaining
maturity of the Certificate, the market discount on that Certificate will not be
subject to the rules described above. Although not entirely clear, it appears
that the computation of the de minimis amount should be made taking the
Prepayment Assumption into account. De minimis market discount should be
allocated among the distributions representing stated redemption price at
maturity of the Certificate, and the allocable portion of the market discount
should be included in income at the time each such distribution is made or is
due.
Treasury regulations implementing the market discount rules have not yet been
issued; therefore, Holders are urged to consult their own tax advisors regarding
the application of these rules and the advisability of making any of the
elections allowed under these rules.
Premium. In the event a Holder acquires an interest in a REMIC Regular
Certificate at an "acquisition premium," i.e., for an amount greater than the
Certificate's then adjusted issue price but less than its then remaining stated
redemption price at maturity, the Holder will be entitled to offset a portion of
the OID that accrues in each subsequent accrual period by a portion of that
excess.
In the event a Holder acquires a REMIC Regular Certificate at a premium
(i.e., for an amount greater than its then remaining stated redemption price at
maturity), the Holder may elect to amortize such premium under a constant yield
method. Amortized premium under these rules will be treated as an offset to
interest income on such Certificate, and the tax basis of the Certificate will
be reduced to the extent that amortizable premium is applied to offset interest
payments. A Holder that elects to amortize premium under these rules will be
deemed to have made an election to amortize premium with respect to all debt
instruments (i.e., not only with respect to REMIC interests) having amortizable
bond premium that such Holder holds during the year of the election or acquires
thereafter.
Because of the absence of applicable regulations, it is not clear whether,
and if so, how, the Prepayment Assumption should be taken into account in
computing the amortization of premium under these rules. However, the applicable
legislative history generally states that the same rules that apply to the
accrual of market discount (which rules require use of a prepayment assumption
in accruing market discount with respect to REMIC Regular Certificates, without
regard to whether such Certificates have OID) will also apply in amortizing bond
premium under these rules.
Election to Treat All Interest as OID. The OID Regulations permit a Holder of
a REMIC Regular Certificate to elect to accrue all interest, discount (including
de minimis market or original issue discount) and premium in income as interest,
based on a constant yield method. If such an election were to be made with
respect to a REMIC Regular Certificate with market discount, the Holder would be
deemed to have made an election to include market discount in income currently
with respect to all other debt instruments having market discount that such
Holder acquires during the year of the election or thereafter. Similarly, a
Holder that makes this election for a Certificate that is acquired at a premium
will be deemed to have made an election to amortize bond premium on a constant
yield method with respect to all debt instruments having amortizable bond
premium that such Holder owns in the year of the election or thereafter
acquires. The election to accrue interest, discount and premium on a constant
yield method with respect to a Certificate is irrevocable.
Sale or Other Disposition of a REMIC Regular Certificate. If a REMIC Regular
Certificate is sold, exchanged, redeemed or otherwise disposed of, the seller
will recognize gain or loss equal to the difference between the amount received
on the sale or other disposition and the seller's adjusted tax basis in the
Certificate. Such adjusted basis generally will equal the initial cost of the
Certificate to the seller, increased by any OID and market discount previously
included in the seller's gross income with respect to the Certificate, and
reduced (but not below zero) by payments previously received by the seller of
amounts included in the Certificate's stated redemption price at maturity and by
any amortized premium previously recognized by the seller. A Holder who receives
a final payment on a REMIC Regular Certificate that is less than the Holder's
adjusted tax basis in the Certificate will generally be entitled to recognize a
loss. Except as provided in the following paragraphs and as provided under
"--Market Discount" above, any such gain or loss will be capital gain or loss,
provided that the REMIC Regular Certificate is held as a capital asset.
Gain from the sale or other disposition of a REMIC Regular Certificate that
would otherwise be treated as capital gain will instead be treated as ordinary
income to the extent that such gain does not exceed the excess, if any, of (i)
the amount that would have been includible in such Holder's income with respect
to the REMIC Regular Certificate had income accrued thereon at a rate equal to
110% of the "applicable federal rate" as defined in Code Section 1274(d)
(generally, an average of current yields on Treasury securities of comparable
maturity), determined as of the date of purchase of such REMIC Regular
Certificate, over (ii) the amount actually includible in such Holder's income.
The Certificates will be "evidences of indebtedness" within the meaning of
Code Section 582(c)(1), so that gain or loss recognized from the sale of a REMIC
Regular Certificate by a bank or a thrift institution to which such section
applies will be ordinary income or loss.
Non-Interest Expenses of the REMIC. As discussed in more detail below under
"--b. Taxation of Holders of REMIC Residual Certificates - Pass-Through of
Non-Interest Expenses of the REMIC," if the REMIC is considered to be a
"single-class REMIC," a portion of the REMIC's servicing, administrative and
other non-interest expenses will be allocated as a separate item to those
Holders of REMIC Regular Certificates that are individuals or "pass-through
interest holders." Holders that are individuals or pass-through interest holders
should consult their tax advisors about the impact of these rules on an
investment in the REMIC Regular Certificates.
Prepayment Premiums and Yield Maintenance Charges. Because of the absence of
clear authority, it is uncertain whether the portion of any Prepayment Premium
or Yield Maintenance Charge received by any Holder should be treated as capital
gain (assuming a Certificate is held as a capital asset) or as ordinary income.
Holders should consult their tax advisors regarding the taxable status of such
amounts.
Non-U.S. Persons. Generally, a Holder that is not a U.S. Person (as defined
above under "--Grantor Trust Funds - d. Non-U.S. Persons") and for which income
derived from a REMIC Regular Certificate would not be effectively connected with
the conduct of a U.S. trade or business will not be subject to U.S. federal
income or withholding tax in respect of distributions on a REMIC Regular
Certificate, provided that such Holder complies with certain identification
requirements (including delivery of a statement, signed by the Holder under
penalties of perjury, certifying that such Holder is not a U.S. Person and
providing the name and address of such Holder). This rule may not apply to a
Holder that owns, directly or indirectly, a 10% or greater interest in the REMIC
Residual Certificates. If a Holder of a REMIC Regular Certificate is not exempt
from U.S. tax as described above, distributions of interest to such Holder,
including distributions in respect of accrued OID, may be subject to a 30%
withholding tax, subject to reduction under any applicable tax treaty. Holders
of REMIC Regular Certificates that also own REMIC Residual Certificates and are
not U.S. Persons should consult their tax advisors as to whether distributions
to them from the REMIC are exempt from U.S. federal income tax.
A REMIC Regular Certificate held by a nonresident alien individual for whom
distributions on such Certificate would be exempt from tax as described in the
preceding paragraph will not be included in the U.S. estate of such Holder.
Information Reporting and Backup Withholding. The Master Servicer will
furnish or make available, within a reasonable time after the end of each
calendar year, to each person or entity who held a REMIC Regular Certificate at
any time during such year, such information as may be required by applicable
rules to assist such Holders in preparing their federal income tax returns, or
to enable Holders to make such information available to beneficial owners or
financial intermediaries that hold such Certificates on behalf of beneficial
owners. In particular, such information will include a statement of the adjusted
issue price of the REMIC Regular Certificate at the beginning of each accrual
period. In addition, the reports will include information necessary to compute
the accrual of any market discount that may arise upon secondary trading of
REMIC Regular Certificates. If a Holder, beneficial owner, financial
intermediary or other recipient of a payment on behalf of a beneficial owner
fails to supply a certified taxpayer identification number or if the Secretary
of the Treasury determines that such person has not reported all interest and
dividend income required to be shown on its federal income tax return, 31%
backup withholding may be required with respect to any payments. Any amounts
deducted and withheld from a distribution to a recipient would be allowed as a
credit against such recipient's federal income tax liability.
b. Taxation of Holders of REMIC Residual Certificates
Holders of REMIC Residual Certificates will be subject to rules, described
below, that differ from those that would apply if such Holders were treated as
owning undivided interests in the Qualified Assets held by the REMIC or as
owning debt instruments issued by the REMIC. The rules applicable to Holders of
REMIC Residual Certificates are very complex; such Holders are urged to consult
their tax advisors before making an investment in REMIC Residual Certificates.
Allocation of the Income of the REMIC to the REMIC Residual Certificates. The
REMIC itself will not be subject to federal income tax, except as described
below with respect to "prohibited transactions" and certain other transactions.
See "--e. Prohibited Transactions and Other Taxes" below. Instead, each original
Holder of a REMIC Residual Certificate is required to report its share of the
taxable income, or subject to the limitations described below, the net loss, of
the REMIC for each day during the taxable year on which such Holder owns any
REMIC Residual Certificates. Such income or loss is treated as ordinary income
or loss. The taxable income or loss of the REMIC for each day will be determined
by allocating the taxable income or loss of the REMIC for each calendar quarter
ratably to each day in the quarter. Such Holder's share of the taxable income or
loss of the REMIC for each day will be based on the proportion of the
outstanding REMIC Residual Certificates that such Holder owns on that day. The
taxable income or loss of the REMIC will be determined under an accrual method
and will be includible by the Holder of a REMIC Residual Certificate without
regard to the timing or amounts of cash distributions made to such Holder by the
REMIC. Ordinary income derived from REMIC Residual Certificates will be
characterized as "portfolio income" for purposes of determining limitations on
the deductibility by certain taxpayers of "passive losses."
A Holder of a REMIC Residual Certificate may be required to include taxable
income from the Certificate in excess of the cash distributed. For example, a
structure where principal distributions are made serially on REMIC Regular
Certificates (that is, a so-called "fast-pay, slow-pay" structure) may generate
a mismatching of income and cash distributions (that is, "phantom income") to a
Holder of a REMIC Residual Certificate. Depending upon the structure of a
particular transaction, phantom income may significantly reduce the after-tax
yield of an investment in a REMIC Residual Certificate. Potential investors
should consult their own tax advisors concerning the federal income tax
treatment to them of a REMIC Residual Certificate and the impact of such tax
treatment on the after-tax yield of the Certificate.
The legislative history to the REMIC rules indicates that certain adjustments
may be appropriate to reduce (or increase) the income of a subsequent Holder of
a REMIC Residual Certificate that purchased such Certificate at a price greater
than (or less than) the adjusted tax basis of such Certificate in the hands of
the previous Holder of such Certificate. No regulations have been issued
providing for such adjustments. As a result, it is not clear whether such
adjustments will in fact be permitted or required and, if so, how they would be
made.
The requirement that Holders of REMIC Residual Certificates report their pro
rata shares of the REMIC's taxable income or net loss will continue until there
are no Certificates of any class of the related Series outstanding.
Taxable Income of the REMIC. The taxable income of the REMIC will reflect a
netting of the income from the Qualified Assets and the REMIC's other assets and
the deductions allowed to the REMIC for interest and OID on the REMIC Regular
Certificates and, except as described below under "--Pass-Through of
Non-Interest Expenses of the REMIC," other expenses. REMIC taxable income is
generally determined in the same manner as the taxable income of an individual
using the accrual method of accounting, with certain exceptions. The REMIC's
gross income generally includes interest, original issue discount income and
market discount income, if any, on the Qualified Loans, reduced by amortization
of any premium on the Qualified Loans, plus income on reinvestment of cash flows
and reserve assets, but does not include any income in respect of a prohibited
transaction, as described below. The REMIC's deductions generally include
interest and original issue discount expense on the REMIC Regular Certificates,
servicing fees on the Qualified Loans, other administrative expenses of the
REMIC and realized losses on the Qualified Loans. The REMIC will not be subject
to the Code Section 67 limitation on deduction of servicing, administrative and
other non-interest expenses (so-called "miscellaneous itemized deductions"), but
Holders who are individuals and who are allocated a share of such expenses will
be subject to that limitation.
For purposes of determining its taxable income, the REMIC will have an
initial aggregate tax basis in its assets equal to the sum of the issue prices
of the REMIC Regular Certificates and the REMIC Residual Certificates. The issue
price of the REMIC Residual Certificates will be determined under the general
OID rules (or, if such Certificates are not offered initially, will be the fair
market value of such Certificates). Such aggregate tax basis will be allocated
among the Qualified Assets and other assets of the REMIC in proportion to their
respective fair market values. A Qualified Asset will be deemed to have been
acquired with discount or premium to the extent that the REMIC's initial tax
basis therein is less than or greater than its adjusted issue price,
respectively. Any such discount (whether market discount or OID) will be
includible in the REMIC's taxable income as it accrues under a method similar to
the method described above for accruing OID on the REMIC Regular Certificates.
The REMIC expects to elect to amortize any premium on the Qualified Assets on a
constant yield method. It is not clear whether the yield of a Qualified Asset
would be calculated for this purpose based only on scheduled payments or by
taking into account the Prepayment Assumption.
The REMIC will be allowed a deduction for stated interest and OID on the
REMIC Regular Certificates. OID deductions (including deductions for any de
minimis OID that would not be includible as OID by the Holders of REMIC Regular
Certificates) will generally accrue in the same manner as described above with
respect to REMIC Regular Certificates, except that no adjustments to OID
deductions will be made to reflect the purchase of a REMIC Regular Certificate
at an acquisition premium. If a class of REMIC Regular Certificates is issued at
a price in excess of the stated redemption price at maturity of such class, the
net amount of interest deductions that will be allowed to the REMIC in each
taxable year with respect to the REMIC Regular Certificates of such class will
be reduced by an amount equal to the portion of such excess that is considered
to be amortized or repaid in such year.
A Holder of a REMIC Residual Certificate will not be permitted to amortize
the cost of the Certificate as an offset to such holder's share of the REMIC's
taxable income. However, REMIC taxable income will not include cash received by
the REMIC that represents a recovery of the REMIC's basis in its assets, and, as
described above, the issue price of the REMIC Residual Certificates will be
added to the issue price of the REMIC Regular Certificates in determining the
REMIC's initial basis in its assets.
Net Losses of the REMIC. The REMIC will have a net loss for any calendar
quarter in which its deductions exceed its gross income. Such net loss will be
allocated among the Holders of REMIC Residual Certificates in the same manner as
the REMIC's taxable income. The net loss allocable to any REMIC Residual
Certificate will not be deductible by the Holder to the extent that such net
loss exceeds such Holder's adjusted tax basis in such Certificate. Any net loss
that is not currently deductible by reason of this limitation may only be used
by such Holder to offset its share of the REMIC's taxable income in future
periods, but not otherwise. The ability of Holders of REMIC Residual
Certificates to deduct net losses may be subject to additional limitations under
the Code, as to which Holders should consult their own tax advisors.
Excess Inclusions. A portion of the income on a REMIC Residual Certificate
(referred to in the Code as an "excess inclusion") for any calendar quarter may
be subject to federal income tax in all events. Thus, for example, an excess
inclusion (i) may not be offset by any unrelated losses, deductions or loss
carryovers of the Holder of the REMIC Residual Certificate, (ii) will be treated
as "unrelated business taxable income" within the meaning of Code Section 512 if
the Holder of the REMIC Residual Certificate is a pension fund or any other
organization that is subject to tax only on its unrelated business taxable
income, and (iii) is not eligible for any reduction in the rate of withholding
tax in the case of a Holder of a REMIC Residual Certificate that is not a U.S.
Person.
Except as discussed in the following paragraph, with respect to any Holder of
a REMIC Residual Certificate, the excess inclusion for any calendar quarter will
be the excess, if any, of (i) the income allocable to such Holder for that
calendar quarter with respect to its REMIC Residual Certificate over (ii) the
sum of the "daily accruals" for each day during the calendar quarter on which
such Holder holds such Certificate. For this purpose, the "daily accruals" with
respect to a REMIC Residual Certificate are determined by allocating to each day
in the calendar quarter its ratable portion of the product of the "adjusted
issue price" of the Certificate at the beginning of the calendar quarter and 120
percent of the "federal long-term rate" in effect at the time the Certificate is
issued. For this purpose, the "adjusted issue price" of a REMIC Residual
Certificate at the beginning of any calendar quarter equals the issue price of
the Certificate, increased by the amount of daily accruals for all prior
quarters, and decreased (but not below zero) by the aggregate amount of
distributions made on the Certificate before the beginning of such quarter. The
"federal long-term rate" is an average of current yields on Treasury securities
with a remaining term of greater than nine years, computed and published monthly
by the IRS.
As an exception to the general rule described above, the Treasury Department
has authority to issue regulations, which regulations have not yet been issued,
that would treat the entire amount of income accruing on a REMIC Residual
Certificate as an excess inclusion if the REMIC Residual Certificates in the
aggregate are considered not to have "significant value." Applicable legislative
history provides that for this purpose, REMIC Residual Certificates should be
treated as having "significant value" if the Certificates have an aggregate
issue price that is at least equal to 2% of the aggregate issue price of all
REMIC Residual Certificates and REMIC Regular Certificates with respect to the
REMIC. It is impossible to predict whether any such regulations will be issued,
and if so, how they will define "significant value" for purposes of this rule.
In the case of any REMIC Residual Certificates held by a real estate
investment trust, the aggregate excess inclusions with respect to such REMIC
Residual Certificates, reduced (but not below zero) by the real estate
investment trust taxable income (within the meaning of Code Section 857(b)(2),
excluding any net capital gain), will be allocated among the shareholders of
such trust in proportion to the dividends received by such shareholders from
such trust, and any amount so allocated will be treated as an excess inclusion
with respect to a REMIC Residual Certificate as if held directly by such
shareholder. Regulated investment companies, common trust funds and certain
cooperatives are subject to similar rules.
Pass-through of Non-Interest Expenses of the REMIC. As a general rule, all of
the fees and expenses of a REMIC will be taken into account by Holders of the
REMIC Residual Certificates. In the case of a "single-class" REMIC, however, the
expenses and a matching amount of additional income will be allocated among the
Holders of the REMIC Regular Certificates and the REMIC Residual Certificates on
a daily basis in proportion to the relative amounts of income accruing to each
Holder with respect to that day. In general terms, a "single-class" REMIC is a
REMIC that either (i) would qualify, under existing regulations, as a grantor
trust if it were not a REMIC (treating all interests in the REMIC as ownership
interests, even if they are in fact classified as debt for federal income tax
purposes) or (ii) is similar to a grantor trust and is structured with the
principal purpose of avoiding the "single-class" REMIC rules.
In the case of individuals (or trusts, estates or other persons that compute
their income in the same manner as individuals) who own an interest in a REMIC
Regular Certificate or a REMIC Residual Certificate directly or through a
"pass-through interest holder" (as defined below) that is required to pass
miscellaneous itemized deductions through to its owners or beneficiaries (e.g.,
a partnership, an S corporation or a grantor trust), such expenses will be
deductible, under Code Section 67, only to the extent that such expenses, plus
other "miscellaneous itemized deductions" of the individual, exceed 2% of such
individual's adjusted gross income. In addition, Code Section 68 provides that
the amount of itemized deductions otherwise allowable to an individual whose
adjusted gross income exceeds a specified amount (the "Applicable Amount") will
be reduced by the lesser of (i) 3% of the excess of the individual's adjusted
gross income over the Applicable Amount or (ii) 80% of the amount of itemized
deductions otherwise allowable for the taxable year. The amount of additional
taxable income recognized by Holders of REMIC Residual Certificates who are
subject to the limitations of either Code Section 67 or Code Section 68 may be
substantial. Further, a Holder (other than a corporation) subject to the
alternative minimum tax may not deduct any miscellaneous itemized deductions in
determining such holder's alternative minimum taxable income, even though an
amount equal to the amount of such deductions will be included in such holder's
gross income. The REMIC is required to report to each pass-through interest
Holder and to the IRS such Holder's allocable share, if any, of the REMIC's
non-interest expenses. The term "pass-through interest holder" generally
includes entities taxed as individuals and certain pass-through entities, but
does not include real estate investment trusts. Prospective investors that are
individuals or other pass-through interest holders should consider the impact of
these rules on them prior to making an investment in REMIC Regular Certificates
or REMIC Residual Certificates.
Mark-to-Market Rules. Prospective purchasers of a REMIC Residual Certificate
should be aware that the IRS recently adopted regulations which provide that
REMIC Residual Certificates are not subject to the mark-to-market rules. These
regulations reverse the position taken in the previous regulations which allowed
a REMIC residual interest to be marked-to-market provided that it was not a
"negative value" residual interest and did not have the same economic effect as
a "negative value" residual interest.
Distributions. In general, any distribution made with respect to a REMIC
Residual Certificate will be treated as a non-taxable return of capital to the
extent it does not exceed the Holder's adjusted tax basis in such REMIC Residual
Certificate. To the extent a distribution exceeds such adjusted tax basis, it
will be treated as gain from the sale of the REMIC Residual Certificate.
Amounts paid to Holders of REMIC Residual Certificates that are not U.S.
Persons are treated as interest for purposes of the 30% (or lower treaty rate)
United States withholding tax. Amounts distributed to Holders of REMIC Residual
Certificates should qualify as "portfolio interest," subject to the conditions
described above under "--a. Taxation of Owners of REMIC Regular Certificates,"
but only to the extent that the underlying mortgage loans were originated after
July 18,1984. If the portfolio interest exemption is unavailable, distributions
will be subject to United States withholding tax when made (or when the REMIC
Residual Certificate is disposed of) under rules similar to those for
withholding upon disposition of debt instruments that have OID. The Code,
however, grants the Treasury Department authority to issue regulations, which
regulations have not been issued, imposing withholding tax without regard to
whether distributions are made, where necessary to prevent avoidance of tax. If
the amounts distributed to Holders of REMIC Residual Certificates that are not
U.S. Persons are effectively connected with their conduct of a trade or business
in the United States, the 30% (or lower treaty rate) withholding will not apply.
Instead, the amounts distributed will be subject to U.S. federal taxation at
regular graduated rates. For special restrictions on the transfer of REMIC
Residual Certificates to non-U.S. Persons, see "--c. Tax-Related Restrictions on
Transfers of REMIC Residual Certificates" below.
Sale or Exchange of REMIC Residual Certificates. If a REMIC Residual
Certificate is sold or exchanged, the seller will generally recognize gain or
loss equal to the difference between the amount realized on the sale or exchange
and its adjusted tax basis in the REMIC Residual Certificate (except that the
recognition of loss may be limited under the "wash sale" rules described below).
A Holder's adjusted tax basis in a REMIC Residual Certificate generally equals
the cost of such REMIC Residual Certificate to such Holder, increased by the
taxable income of the REMIC that was included in the income of such Holder with
respect to such REMIC Residual Certificate, and decreased (but not below zero)
by the net losses that have been allowed as deductions to such Holder with
respect to such REMIC Residual Certificate and by the distributions received
with respect thereto by such Holder. In general any such gain or loss will be
capital gain or loss provided the REMIC Residual Certificate is held as a
capital asset. However, REMIC Residual Certificates will be "evidences of
indebtedness" within the meaning of Code Section 582(c)(1), so that gain or loss
recognized from sale of a REMIC Residual Certificate by a bank or thrift
institution to which such section applies would be ordinary income or loss.
Except as provided in Treasury regulations yet to be issued, if the seller of
a REMIC Residual Certificate reacquires such REMIC Residual Certificate, or
acquires any other REMIC Residual Certificate, any residual interest in another
REMIC or similar interest in a "taxable mortgage pool" (as defined in Code
Section 7701(i)) during the period beginning six months before, and ending six
months after, the date of such sale, such sale will be subject to the "wash
sale" rules of Code Section 1091. In that event, any loss realized by the Holder
on the sale will not be deductible, but, instead, will increase such Holder's
adjusted tax basis in the newly acquired asset.
Administrative Matters Applicable to Holders of REMIC Residual Certificates.
Solely for the purpose of the administrative provisions of the Code, the REMIC
generally will be treated as a partnership and the Holders of REMIC Residual
Certificates will be treated as the partners. Certain information will be
furnished quarterly to each Holder of a REMIC Residual Certificate who held a
REMIC Residual Certificate on any day in the previous calendar quarter.
Each Holder of a REMIC Residual Certificate is required to treat items on its
return consistently with their treatment on the REMIC's return, unless the
Holder either files a statement identifying the inconsistency or establishes
that the inconsistency resulted from incorrect information received from the
REMIC. The IRS may assert a deficiency resulting from a failure to comply with
the consistency requirement without instituting an administrative proceeding at
the REMIC level. The REMIC does not intend to register as a tax shelter pursuant
to Code Section 6111 because it is not anticipated that the REMIC will have a
net loss for any of the first five taxable years of its existence. Any person
that holds a REMIC Residual Certificate as a nominee for another person may be
required to furnish the REMIC, in a manner to be provided in Treasury
regulations, with the name and address of such person and other information.
c. Tax-Related Restrictions on Transfers of REMIC Residual
Certificates
Disqualified Organizations. An entity may not qualify as a REMIC unless there
are reasonable arrangements designed to ensure that residual interests in such
entity are not held by "disqualified organizations" (as defined below) and
information necessary for the application of the tax described in this paragraph
is made available by the REMIC. A tax is imposed on the transfer of a residual
interest in a REMIC to a "disqualified organization." The amount of the tax
equals the product of (i) an amount (as determined under regulations) equal to
the present value of the total anticipated "excess inclusions" with respect to
such interest for periods after the transfer and (ii) the highest marginal
federal income tax rate applicable to corporations. The tax is imposed on the
transferor unless the transfer is through an agent (including a broker or other
middleman) for a disqualified organization, in which event the tax is imposed on
the agent. The person otherwise liable for the tax is relieved of liability for
the tax if the transferee furnishes to such person an affidavit that the
transferee is not a disqualified organization and, at the time of the transfer,
such person does not have actual knowledge that the affidavit is false. For this
purpose, a "disqualified organization" means (A) the United States, any State,
possession or political subdivision thereof, any foreign government, any
international organization or any agency or instrumentality of any of the
foregoing (provided that such term does not include an instrumentality if all
its activities are subject to tax and, except for FHLMC, a majority of its board
of directors is not selected by any such governmental agency), (B) any
organization (other than certain farmers' cooperatives) generally exempt from
federal income tax, unless such organization is subject to the tax on "unrelated
business taxable income" and (C) a rural electric or telephone cooperative.
A tax is imposed on a "pass-through entity" (as defined below) holding a
residual interest in a REMIC if at any time during the taxable year of the
pass-through entity a disqualified organization is the record Holder of an
interest in such entity. The amount of the tax is equal to the product of (i)
the amount of excess inclusions for the taxable year applicable to the interest
held by the disqualified organization and (ii) the highest marginal federal
income tax rate applicable to corporations. The pass-through entity otherwise
liable for the tax, for any period during which the disqualified organization is
the record Holder of an interest in such entity, will be relieved of liability
for the tax if such record Holder furnishes to such entity an affidavit that
such record Holder is not a disqualified organization and, for such period, the
pass-through entity does not have actual knowledge that the affidavit is false.
For this purpose, a "pass-through entity" means (A) a regulated investment
company, real estate investment trust or common trust fund, (B) a partnership,
trust or estate and (C) certain cooperatives. Except as may be provided in
Treasury regulations not yet issued, any person holding an interest in a
pass-through entity as a nominee for another will, with respect to such
interest, be treated as a pass-through entity.
In order to comply with these rules, the Agreement will provide that no
record or beneficial ownership interest in a REMIC Residual Certificate may be
purchased, transferred or sold, directly or indirectly, without the express
written consent of the Trustee and/or the Master Servicer. The Trustee and/or
Master Servicer will grant such consent to a proposed transfer only if it
receives the following: (i) an affidavit from the proposed transferee to the
effect that it is not a disqualified organization and is not acquiring the REMIC
Residual Certificate as a nominee or agent for a disqualified organization and
(ii) a covenant by the proposed transferee to the effect that the proposed
transferee agrees to be bound by and to abide by the transfer restrictions
applicable to the REMIC Residual Certificate.
Noneconomic REMIC Residual Certificates. The REMIC rules disregard, for
federal income tax purposes, any transfer of a "noneconomic REMIC Residual
Certificate" to a U.S. Person (or generally to a non-U.S. Person that holds the
REMIC Residual Certificate in connection with a U.S. trade or business) unless
no significant purpose of the transfer is to enable the transferor to impede the
assessment or collection of tax. A "noneconomic REMIC Residual Certificate" is
any REMIC Residual Certificate (including a REMIC Residual Certificate with a
positive value at issuance), unless, at the time of transfer, taking into
account the Prepayment Assumption and any required or permitted clean up calls
or required liquidation provided for in the REMIC's organizational documents,
(i) the present value of the expected future distributions on the REMIC Residual
Certificate at least equals the product of the present value of the anticipated
excess inclusions and the highest corporate income tax rate in effect for the
year in which the transfer occurs and (ii) the transferor reasonably expects
that the transferee will receive distributions from the REMIC at or after the
time at which taxes accrue on the anticipated excess inclusions in an amount
sufficient to satisfy the accrued taxes. A significant purpose to impede the
assessment or collection of tax is treated as existing if the transferor, at the
time of the transfer, either knew or should have known that the transferee would
be unwilling or unable to pay taxes due on its share of the taxable income of
the REMIC. A transferor is presumed not to have such knowledge if (A) the
transferor conducted a reasonable investigation of the transferee and (B) the
transferee acknowledges to the transferor that the REMIC Residual Certificate
may generate tax liabilities in excess of the cash flow and the transferee
represents that it intends to pay such taxes as they become due. If a transfer
of a noneconomic REMIC Residual Certificate is disregarded, the transferor would
continue to be treated as the owner of the Certificate and would continue to be
subject to tax on its allocable portion of the net income of the REMIC.
Non-U.S. Persons. The REMIC rules provide that the transfer of a REMIC
Residual Certificate that has a "tax avoidance potential" to a non-U.S. Person
will be disregarded for federal income tax purposes. This rule appears to apply
to a transferee who is not a U.S. Person, unless such transferee's income in
respect of the REMIC Residual Certificate is effectively connected with the
conduct of a United States trade or business. A REMIC Residual Certificate is
deemed to have a tax avoidance potential unless, at the time of transfer, the
transferor reasonably expect that the REMIC will distribute to the transferee
amounts that will equal at least 30 percent of each excess inclusion, and that
such amounts will be distributed at or after the time the excess inclusion
accrues and not later than the end of the calendar year following the year of
accrual. If the non-U.S. Person transfers the REMIC Residual Certificate to a
U.S. Person, the transfer will be disregarded, and the foreign transferor will
continue to be treated as the owner, if the transfer has the effect of allowing
the transferor to avoid tax on accrued excess inclusions. The Agreement will
provide that no record or beneficial ownership interest in a REMIC Residual
Certificate may be transferred, directly or indirectly, to a non-U.S. Person
unless such person provides the Trustee and/or the Master Servicer with a duly
completed IRS Form 4224 and the Trustee and/or Master Servicer consents to such
transfer in writing.
Any attempted transfer or pledge in violation of the transfer restrictions
will be absolutely null and void and shall vest no rights in any purported
transferee. Investors in REMIC Residual Certificates are advised to consult
their own tax advisors with respect to transfers of the REMIC Residual
Certificates and, in addition, pass-through entities are advised to consult
their own tax advisors with respect to any taxes which may be imposed on a
pass-through entity.
d. Tax-Exempt Holders of REMIC Residual Certificates
As noted above under "--b. Taxation of Holders of REMIC Residual Certificates
- - Excess Inclusions," any Holder of a REMIC Residual Certificate that is a
pension fund or other entity that is subject to federal income taxation only on
its "unrelated business taxable income" within the meaning of Code Section 512
will be subject to such tax on that portion of the distributions received on a
REMIC Residual Certificate that is considered an excess inclusion.
e. Prohibited Transactions and Other Taxes
The Code imposes a tax on a REMIC equal to 100% of the net income derived
from "prohibited transactions" (the "Prohibited Transactions Tax"). In general,
subject to certain specified exceptions, a "prohibited transaction" includes the
disposition of a Qualified Asset, the receipt of income from a source other than
a Qualified Asset or certain other permitted investments, the receipt of
compensation for services, or gain from the disposition of an asset purchased
with the payments received on the Qualified Assets for temporary investment
pending distribution on the Certificates. It is not anticipated that the Trust
Fund for any Series of Certificates will engage in any prohibited transactions
in which it would recognize a material amount of net income.
In addition, certain contributions to a REMIC made after the day on which the
REMIC issues all of its interests could result in the imposition of a tax on the
REMIC equal to 100% of the value of the contributed property (the "Contributions
Tax"). No Trust Fund that makes an election to be treated as a REMIC will accept
contributions that would subject it to such tax.
In addition, a REMIC may also be subject to federal income tax at the highest
corporate rate on "net income from foreclosure property," determined by
reference to the rules applicable to real estate investment trusts. "Net income
from foreclosure property" generally means income from foreclosure property
other than qualifying income for a real estate investment trust.
Where any Prohibited Transactions Tax, Contributions Tax, tax on net income
from foreclosure property or state or local income or franchise tax that may be
imposed on a REMIC relating to any Series of Certificates arises out of or
results from (i) a breach of the related Master Servicer's, Central Servicer's,
Trustee's or Seller's obligations, as the case may be, under the related
Agreement for such Series, such tax will be borne by such Master Servicer,
Central Servicer, Trustee or Seller, as the case may be, out of its own funds or
(ii) the Seller's obligation to repurchase a Qualified Loan, such tax will be
borne by the Seller. In the event that the Master Servicer, Central Servicer,
Trustee or Seller, as the case may be, fails to pay or is not required to pay
any such tax as provided above, such tax will be payable out of the Trust Fund
for such Series and will be covered under the Farmer Mac Guarantee.
f. Liquidation and Termination
If the REMIC adopts a plan of complete liquidation, within the meaning of
Code Section 860F(a)(4)(A)(i), which may be accomplished by designating in the
REMIC's final tax return a date on which such adoption is deemed to occur, and
sells all of its assets (other than cash) within a 90-day period beginning on
such date, the REMIC will not be subject to any Prohibited Transaction Tax,
provided that the REMIC credits or distributes in liquidation all of the sale
proceeds plus its cash (other than the amounts retained to meet claims) to
Holders of REMIC Regular Certificates and REMIC Residual Certificates within the
90-day period.
The REMIC will terminate shortly following the retirement of the REMIC
Regular Certificates. If the adjusted tax basis in a REMIC Residual Certificate
of a Holder of a REMIC Residual Certificate exceeds the amount of cash
distributed to such Holder of a REMIC Residual Certificate in final liquidation
of its interest, then it would appear that the Holder of a REMIC Residual
Certificate would be entitled to a loss equal to the amount of such excess. It
is unclear whether such a loss, if allowed, will be a capital loss or an
ordinary loss.
STATE TAX CONSIDERATIONS
In addition to the federal income tax consequences described under "CERTAIN
FEDERAL INCOME TAX CONSEQUENCES," potential investors should consider the state
local and foreign tax consequences of the acquisition, ownership, and
disposition of the Certificates. State, local and foreign income and other tax
laws may differ substantially from federal law, and this discussion does not
purport to describe any aspect of the income tax laws of any state, locality or
foreign country.
ERISA CONSIDERATIONS
General
The Employee Retirement Income Security Act of 1974, as amended ("ERISA")
imposes certain restrictions on employee benefit plans and certain other
retirement arrangements subject to ERISA ("Plans") and on persons who are
parties in interest or disqualified persons ("parties in interest") with respect
to such Plans. Certain employee benefit plans, such as governmental plans and
church plans (if no election has been made under Code Section 410(d)), are not
subject to the requirements of ERISA, and assets of such plans may be invested
in Certificates without regard to the ERISA considerations described below,
subject to the provisions of other applicable federal and state law. If the
assets of a Trust Fund were deemed to be plan assets, (i) the prudence standards
and other provisions of Title I of ERISA applicable to investments by Plans and
their fiduciaries would extend (as to all fiduciaries) to all assets of the
Trust Fund and (ii) transactions involving the assets of the Trust Fund and
parties in interest or disqualified persons with respect to such plans might be
prohibited under ERISA Section 406 and Code Section 4975 unless an exemption is
applicable. Under ERISA, parties in interest include, among others, fiduciaries,
service providers and employers whose employees are covered by a Plan.
A fiduciary with respect to a Plan is a person who (i) exercises any
discretionary authority or discretionary control respecting management of a Plan
or exercises any authority or control respecting management or disposition of
its assets, (ii) renders investment advice for a fee or other compensation,
direct or indirect, with respect to any monies or other property of such Plan,
or has any authority or responsibility to do so, or (iii) has any discretionary
authority or discretionary responsibility in the administration of such Plan.
In considering an investment in the Certificates, a fiduciary should consider
(i) whether the investment is prudent and in accordance with the documents and
instruments governing the Plan and is appropriate for the Plan in light of the
Plan's investment portfolio taken as a whole, (ii) whether the investment
satisfies the diversification requirements of Section 404(a)(1)(C) of Title I of
ERISA, and (iii) in the case of a Plan described in Code Section 401(a)
("Qualified Plan") or an individual retirement account ("IRA") whether the
investment will result in unrelated business taxable income to the Qualified
Plan or IRA.
Plan Assets
ERISA standards of conduct are imposed on parties, such as fiduciaries, who
have authority to deal with "plan assets." Final regulations defining plan
assets in the context of plan investments in other entities have been issued by
the Department of Labor ("Final Regulations"). The Final Regulations set forth
the general rule that, when a Plan (which term shall include for purposes of
this discussion Qualified Plans, IRAs and any other plan described in Code
Section 4975 (a "Code Section 4975 Plan") invests in another entity, the Plan's
assets include its investment, but do not, solely by reason of such investment,
include any of the underlying assets of the entity. The general rule does not
apply, however, if a Plan acquires an equity interest in an entity that is
neither a publicly-offered security nor a security issued by an investment
company registered under the Investment Company Act of 1940. If the general rule
does not apply, a Plan's assets include both the equity interest and an
undivided interest in each of the underlying assets of the entity, unless it is
established that (i) the entity is an operating company or (ii) equity
participation in the entity by benefit plan investors is not significant. Equity
participation in the Trust would be considered significant if immediately after
the most recent acquisition of any equity interest, 25% or more of the value of
any class of equity interests in the Trust is held by Plan investors.
In addition, the Final Regulations provide a plan asset exception for a
Plan's purchase and holding of "guaranteed governmental mortgage pool
certificates." The Final Regulations provide that where a Plan acquires a
guaranteed governmental mortgage pool certificate, the Plan's assets include the
certificate and all of its rights with respect to such certificate under
applicable law, but do not, solely by reason of the Plan's holding of such
certificate, include any of the mortgages underlying such certificate. The term
"guaranteed governmental mortgage pool certificate" is defined as a certificate
backed by, or evidencing an interest in, specified mortgages or participation
interests therein, and with respect to which interest and principal payable
pursuant to the certificate is guaranteed by the United States or an agency or
instrumentality thereof. Fried, Frank, Harris, Shriver & Jacobson, counsel to
Farmer Mac, has advised Farmer Mac that the Certificates satisfy the conditions
set forth in the Final Regulations and thus qualify as "guaranteed governmental
mortgage pool certificates;" no assurance can be given, however, that the
Department of Labor or any other authority would concur with such analysis.
A "publicly-offered security" is one that is freely transferable, part of a
class of securities that is widely held and is either (i) part of a class of
securities registered under section 12(b) or 12(g) of the Exchange Act or (ii)
sold as part of an offering of securities to the public pursuant to an effective
registration statement under the 1933 Act and the class of securities of which
such security is a part is registered under the Exchange Act within 120 days (or
a later time as permitted by the Securities and Exchange Commission) after the
end of the fiscal year of the issuer during which the offering of such
securities to the public occurred. A class of securities is widely held only if
it is a class of securities that is owned by 100 or more investors independent
of the issuer and one another. It is unlikely that the Certificates offered
hereby will be considered to be publicly-offered securities.
Prohibited Transactions
A broad range of transactions between parties-in-interest and Plans are
prohibited by ERISA. The acquisition of a Certificate by a Plan subject to ERISA
or any IRA or any other Plan subject to Code Section 4975 could, in some
instances, result in prohibited transactions or other violations of the
fiduciary responsibility provisions of ERISA and Code Section 4975. Certain
exemptions from the prohibited transaction rules could be applicable, depending
in part upon the type and circumstances of the Plan fiduciary making the
decision to acquire a Certificate.
For a particular Plan desiring to invest in the Certificates, a prohibited
transaction class exemption issued by the Department of Labor might apply as
follows: PTCE 84-14 (Class Exemption for Plan Asset Transactions Determined by
Independent Qualified Professional Asset Managers), PTCE 96-23 (Class Exemption
for Plan Asset Transactions Determined by In-House Asset Managers), PTCE 91-38
(Class Exemption for Certain Transactions Involving Bank Collective Investment
Funds), PTCE 90-1 (Class Exemption for Certain Transactions Involving Insurance
Company Pooled Separate Accounts) or PTCE 95-60 (Class Exemption for Certain
Transactions Involving Insurance Company General Accounts). There can be no
assurance that any of these class exemptions will apply with respect to any
particular Plan desiring to invest in the Certificates or, even if it were to
apply, that the exemption would apply to all transactions involving the Trust
Fund.
Before purchasing any Certificates in reliance on either the guaranteed
governmental mortgage pool certificate exception or any of the above referenced
class exemptions, a fiduciary of a Plan should itself confirm that the
requirements set forth in such exception and/or class exemptions would be
satisfied.
Special caution should be exercised before the assets of a Plan are used to
purchase a Certificate in circumstances where an affiliate of the Seller, the
Originator, the Central Servicer, the Trustee or the Borrower either: (a) has
investment discretion with respect to the investment of such assets of such Plan
or (b) has authority or responsibility to give, or regularly gives investment
advice with respect to such assets for a fee and pursuant to an agreement or
understanding that such advice will serve as a primary basis for investment
decisions with respect to such assets and that such advice will be based on the
particular investment needs of the Plan.
Any Plan fiduciary considering whether to purchase any Certificates on behalf
of a Plan should consult with its counsel regarding the applicability of the
fiduciary responsibility and prohibited transaction provisions of ERISA and the
Code to such investment, and the potential consequences on their specific
circumstances, prior to making an investment in the Certificates. Each Plan
fiduciary also should determine whether, under the general fiduciary standards
of investment prudence and diversification, an investment in the Certificates is
appropriate for the Plan taking into consideration the overall investment policy
of the Plan and the composition of the Plan's investment portfolio.
LEGAL INVESTMENT
The Certificates will constitute securities guaranteed by Farmer Mac for
purposes of the Farmer Mac Charter and, as such, will, by statute, be legal
investments for any persons, trusts, corporations, partnerships, associations,
business trusts and business entities (including depository institutions, life
insurance companies and pension funds) created pursuant to or existing under the
laws of the United States or (except as indicated below) of any State (including
the District of Columbia and Puerto Rico) to the same extent that, under
applicable law, obligations issued by or guaranteed as to principal and interest
by the United States or any agency or instrumentality thereof constitute legal
investments for such entities. Under the Farmer Mac Charter, if a State enacted
legislation prior to January 6, 1996 specifically limiting the legal investment
authority of any state-chartered entities with respect to Farmer Mac guaranteed
securities, such securities will constitute legal investments for entities
subject to such legislation only to the extent provided therein. Farmer Mac is
unaware of any state that has enacted such legislation prior to the deadline
therefor in the Farmer Mac Charter.
The Farmer Mac Charter thus allows federal savings and loan associations and
federal savings banks to invest in Farmer Mac guaranteed securities without
limitation as to the percentage of their assets represented thereby; federal
credit unions to invest in Farmer Mac guaranteed securities without limitation
as to percentage of capital and surplus; and allows national banks to purchase
Farmer Mac guaranteed securities for their own account without regard to the
limitation generally applicable to investment securities set forth in 12 U.S.C.
Section 24 (Seventh), subject in each case to such regulations as the applicable
federal regulatory authority may prescribe. In addition, on July 9, 1990, the
Comptroller of the Currency issued an interpretation that Farmer Mac guaranteed
securities of the type offered hereby are eligible for dealing in and
underwriting by national banks.
Relevant regulatory authorities may impose administrative restrictions on
investment in Certificates with special characteristics, such as interest only
and principal only certificates.
Investors should consult their own legal advisors in determining whether and
to what extent the Certificates constitute legal investments for them.
METHOD OF DISTRIBUTION
The Certificates offered by the related Prospectus Supplements may be (i)
issued to Sellers or Originators in exchange for Qualified Loans or (ii) sold
either directly or to underwriters for immediate resale in a public offering.
The Prospectus Supplement for each Series of Certificates will set forth the
method of distribution, and, in the case of any sale to underwriters, will
additionally set forth the terms of the offering of the Certificates of such
Series offered thereby, including the name or names of the underwriters, the
purchase price of such Certificates, the proceeds from such sale, and, in the
case of an underwritten fixed price offering, the initial public offering price,
the discounts and commissions to the underwriters and any discounts or
concessions allowed or reallowed to certain dealers.
The Certificates of a Series may be acquired by underwriters for their own
account and may be resold from time to time in one or more transactions,
including negotiated transactions, at a fixed public offering price or at
varying prices determined at the time of sale. The obligations of any
underwriters will be subject to certain conditions precedent and such
underwriters will be severally obligated to purchase all of the Certificates of
a Series offered by the Prospectus Supplement for such Series if any are
purchased. If the Certificates of a Series are offered other than through
underwriters, the Prospectus Supplement for such Series will contain information
regarding the nature of such offering and any agreements to be entered into with
respect to the purchase of such Certificates.
The place and time of delivery for the Certificates of a Series in respect of
which this Prospectus is delivered will be set forth in the Prospectus
Supplement for such Series.
In addition to purchasing the Certificates pursuant to the Underwriting
Agreement, each Underwriter named on the cover page of a Prospectus Supplement
and their affiliates may be engaged in several ongoing business relationships
with Farmer Mac.
The Underwriting Agreement provides that Farmer Mac and the Depositor will
indemnify each Underwriter named on the cover page of any Prospectus Supplement
against certain civil liabilities under the Securities Act of 1933, as amended,
or contribute to payments each such Underwriter may be required to make in
respect thereof.
<PAGE>
INDEX OF PRINCIPAL TERMS
Unless the context indicates otherwise, the following capitalized terms shall
have the meanings set forth on the pages indicated below:
<TABLE>
<CAPTION>
Page
<S> <C>
1933 Act 27
1991 Act 26
1996 Amendment 16
Accrual Certificates 11, 23, 27
Accrual Period 48, 56
Accrued Certificate Interest 5, 28
Adjusted Issue Price 48, 56
Advance 13, 29
Agreements 11, 33
Agricultural Real Estate 7
AMBS 1, 6
AMBS Information 4
Applicable Amount 62
Appraisal Standards 19
ARM Loans 20
Balloon Payments 8
Beneficial Owners 32
Book-Entry Certificates 28
Central Servicer 6
Central Servicing Fee 39
Certificate Account 37
Certificate Account Deposit Date 37
Certificate Balance 11
Certificates 1, 6
Class 2
Class R Certificates 14
Closing Date 1
Code 46
Code Section 4975 Plan 68
Collection Account 10, 36
Commission 3
Contributions Tax 66
CPR 25
Cut-off Date 12
Definitive Certificates 28, 33
Depository 31
<PAGE>
Page
Determination Date 28
Disqualified Organizations 64
Distribution Date 12
Eligible Depository 36
Eligible Investment 36
ERISA 15, 67
Excess inclusion 61
Excess servicing fee 50
Exchange Act 3
Farmer Mac 1, 6, 26
Farmer Mac Charter 6, 26
Farmer Mac Guarantee 1
FCA 26
Fed System 31
Final Regulation 68
Grantor Trust Certificates 46
Guaranteed Governmental Mortgage Pool Certificate 68
Guaranteed Portion 7, 21
Guides 7
Holders 2
Indirect Participants 32
Insurance Proceeds 36
IRA 68
IRS 47
Liquidation Proceeds 36
Master REMIC 54
Master Servicer 6
Mortgage Interest Rate 8
Mortgage Notes 42
Mortgage Pool 64
Mortgaged Properties 7
OID 46
OID Regulations 47
Originator 26
Owner 22
Participants 32
Parties in interest 67
pass-through interest holder 59
Pass-Through entity 65
Pass-Through Rate 11, 28
phantom income 60
Plans 67
Pool 1
Prepayment 25
Prepayment Assumption 51, 55
Prohibited Transactions Tax 66
<PAGE>
Page
Publicly-Offered Security 68
Purchase Price 35
QMBS 7
QMBS Agreement 21
QMBS Issuer 21
QMBS Servicer 21
QMBS Trustee 21
Qualified Assets 1
Qualified Loan Group 13
Qualified Loans 7
Qualified Plan 68
Record Date 28
Related Proceeds 29
REMIC 2, 14
REMIC Certificates 53
REMIC Regular Certificates 14, 54
REMIC Regulations 46
REMIC Residual Certificates 14, 54
REO Proceeds 36
Sale Agreement 10
Secretary's Guarantee 21
Sellers 10
Series 1
State Environmental Lien 44
Stripped Bond Certificates 50
Stripped Coupon Certificates 50
Stripped Interest Certificates 27
Stripped Principal Certificates 11, 27
Subsidiary REMIC 54
System Institution 27
Trust Assets 3
Trust Fund 1
Trust Fund AMBS 79, 10
Trustee 5
U.C.C. 32
Underwriting Standards 19
Unguaranteed Portion 22
U.S. Person 53
Yield Maintenance Charge 9, 17
</TABLE>
<PAGE>
=========================================================================
No person has been
authorized to give any
information or to make any $ ____________
representations other than those
contained in this Prospectus
Supplement or the Prospectus
and, if given or made, such
information or representations Farmer Mac
must not be relied upon as
having been authorized by the
Depositor or by any
Underwriter. This Prospectus Guaranteed Agricultural
Supplement and the Prospectus do Mortgage-Backed
not constitute an offer to sell, Securities
or a solicitation of an offer to
buy, the securities offered
hereby by anyone in any
jurisdiction in which such an
offer or solicitation is not Federal Agricultural
authorized or in which the Mortgage Corporation
person making such offer or
solicitation is not qualified to
do so or to anyone to whom it is
unlawful to make any such offer
or solicitation. Neither the
delivery of this Prospectus ______________________
Supplement and the Prospectus
nor any sale made hereunder PROSPECTUS SUPPLEMENT
shall, under any circumstances, _______________________
create an implication that
information herein or therein is
correct as of any time since the [Underwriter]
date of this Prospectus
Supplement or the Prospectus.
______________ ______________, 199__
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
Page
Summary of Terms................S
Risk Factors....................S
Description of the Qualified
Loans...........................S
Description of the CertificatesS
Farmer Mac Guarantee............S
Outstanding Guarantees..........S
Yield, Prepayment and Maturity
Considerations..................S
Description of the Agreements..S
The Depositor...................S
Certain Federal Income Tax
Consequences....................S
ERISA Considerations............S
Legal Investment................S
Method of Distribution..........S
Legal Matters...................S
Index of Principal Terms........S
Annex I: Description of the
Qualified Loan Pools............S
PROSPECTUS
Prospectus Supplement...........S
Available Information...........S
Incorporation of Certain
Information by Reference........S
Summary of Prospectus...........S
Risk Factors....................S
Description of the Trust Funds..S
Use of Proceeds.................S
Yield Considerations............S
The Depositor...................S
Federal Agricultural Mortgage
Corporation.....................S
Description of the CertificatesS
Description of the Agreements...S
Certain Legal Aspects of
Qualified Loans and Other Matters
S
Certain Federal Income Tax
Consequences....................S
State Tax Considerations........S
ERISA Considerations............S
Method of Distribution..........S
Legal Investment................S
Index of Principal Terms........S
--------------
Until 90 days after the date of this Prospectus Supplement, all dealers
effecting transactions in the Certificates offered hereby, whether or not
participating in this distribution, may be required to deliver a Prospectus
Supplement and Prospectus to which it relates. This is in addition to the
obligation of dealers to deliver a Prospectus Supplement and Prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
=========================================================================
<PAGE>
PART II INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses expected to be incurred by the Registrant in
connection with the issuance and distribution of the securities being
registered, other than underwriting discounts and commissions, are as follows:
<TABLE>
<CAPTION>
<S> <C>
SEC Registration Fee $ 151,515.15
Trustee's Fees and Expenses
(including counsel fees) 15,000.00
Printing and Engraving Costs 30,000.00
Legal Fees and Expenses 60,000.00
Accounting Fees and Expenses 60,000.00
Miscellaneous 3,484.85
Total $320,000.00
</TABLE>
<PAGE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The registrant's certificate of incorporation provides that directors
and officers of the registrant will be indemnified to the fullest extent
authorized or permitted by Delaware law. Section 145 of the Delaware General
Corporation Law provides, in substance, that Delaware corporations have the
power, under specified circumstances, to indemnify their directors, officers,
employees or agents in connection with actions, suits or proceedings involving
any of them by reason of the fact that they were or are such directors,
officers, employees or agents, against expenses incurred in any such action,
suit or proceeding.
The form of Underwriting Agreement to be filed as Exhibit 1.1 to this
registration statement provides, under certain circumstances, for the
indemnification of the Registrant, each Underwriter and other persons.
<PAGE>
ITEM 16. EXHIBITS
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
<S> <C>
*1.1 Proposed Form of Underwriting Agreement
*4.1 Proposed Form of Master Central Servicing
Agreement
*4.2 Proposed Form of Loan Sale Agreement
*4.3 Proposed Form of Trust Agreement - Grantor
Trusts
*4.4 Proposed Form of Trust Agreement - REMIC
Trusts
*5.1 Opinion of General Counsel of the Registrant
*8.1 Opinion of Fried, Frank, Harris, Shriver &
Jacobson
as to tax matters
*23.1 The consent of the General Counsel of the
Registrant
is contained in the opinion filed as Exhibit
5.1 hereto.
*23.2 The consent of Fried, Frank, Harris, Shriver & Jacobson is contained
in the opinion filed as Exhibit 8.1 hereto.
*23.3 Consent of KPMG Peat Marwick LLP
24.1 Power of Attorney (included in II-5 of this
registration statement).
</TABLE>
- -------------------
* Filed herewith.
ITEM 17. UNDERTAKINGS
A. Undertaking in respect of Rule 415 offering.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933.
(ii) To reflect in the Prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the Registration Statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
<PAGE>
B. Undertaking in respect of indemnification.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
C. Undertakings for registration statement permitted by
Rule 430A.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof. <PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Washington, D.C., on the 20th day of May, 1997.
FARMER MAC MORTGAGE SECURITIES
CORPORATION
By:
/s/ Henry D. Edelman
Henry D. Edelman
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on the 20th day of May, 1997.
/s/ Henry D. Edelman
Henry D. Edelman President and Director
(Principal Executive Officer)
*Christopher A. Dunn Vice President and Director
*Nancy E. Corsiglia Vice President, Treasurer and
Director
(Principal Financial and
Accounting Officer)
*By: /s/ Henry D. Edelman Attorney-in-Fact
Henry D. Edelman
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS INDEX
Sequential
Page
Exhibit Description Number
No.
<S> <C> <C>
1.1 Proposed Form of Underwriting Agreement E-1
4.1 Proposed Form of Master Central Servicing E-21
Agreement
4.2 Proposed Form of Loan Sale Agreement E-54
4.3 Proposed Form of Trust Agreement - Grantor E-89
Trusts
4.4 Proposed Form of Trust Agreement - REMIC E-123
Trusts
5.1 Opinion of General Counsel of the Registrant
8.1 Opinion of Fried, Frank, Harris, Shriver &
Jacobson as to tax matters
23.1 The consent of the General Counsel of the Registrant is contained in
the opinion filed as Exhibit 5.1 hereto.
23.2 The consent of Fried, Frank, Harris, Shriver & Jacobson is contained
in the opinion filed as Exhibit 8.1 hereto.
23.3 Consent of KPMG Peat Marwick LLP.
24.1 Power of Attorney (included in II-5 of this
registration statement).
</TABLE>
FARMER MAC MORTGAGE SECURITIES CORPORATION
GUARANTEED AGRICULTURAL MORTGAGE-BACKED SECURITIES
(Issuable in Series)
GUARANTEED BY
FEDERAL AGRICULTURAL MORTGAGE CORPORATION
FORM OF UNDERWRITING AGREEMENT
[UNDERWRITER] [DATE]
Ladies and Gentlemen:
Farmer Mac Mortgage Securities Corporation, a corporation organized and
existing under the laws of the State of Delaware (the "Company"), may offer for
sale to you (the "Underwriter") from time to time its Guaranteed Agricultural
Mortgage-Backed Securities ("AMBS") evidencing interests in pools of
agricultural real estate mortgage loans (the "Qualified Loans") and previously
issued AMBS (the "Certificates"). The Certificates may be issued in various
series, and within each series, in one or more classes, in one or more offerings
on terms determined at the time of sale (each such series, a "Series" and each
such class, a "Class"). Each Series of the Certificates will be issued pursuant
to a Trust Agreement dated June 1, 1996 (the "Trust Agreement") as supplemented
by an Issue Supplement (each, an "Issue Supplement" and together with the Trust
Agreement, the "Agreement") to be dated as of the respective cutoff date (each,
a "Cut-off Date") between the Company, as depositor, the Federal Agricultural
Mortgage Corporation ("Farmer Mac"), as guarantor, and First Trust National
Association, as trustee (the "Trustee"). Capitalized terms used but not defined
herein shall have the meanings given to them in the Agreement.
The Certificates issued under the Agreement will represent the entire
beneficial ownership interest in a trust fund (the "Trust Fund") established by
such Agreement. If so specified in the related Terms Agreement, one or more
elections may be made to treat the assets of each Trust Fund as a real estate
mortgage investment conduit (each, a "REMIC") for federal income tax purposes.
The Certificates will have the benefit of the guarantee of
Farmer Mac (the "Farmer Mac Guarantee"). The Farmer Mac
Guarantee will guarantee the timely payment of required distributions of
interest and principal on the Certificates as described in the related Issue
Supplement.
Whenever the Company determines to make an offering of Certificates (each,
a "Certificate Offering") pursuant to this Agreement through you, it will enter
into an agreement with you (the "Terms Agreement") providing for the sale of
specified Classes of Offered Certificates (as defined below) to, and the
purchase and public offering thereof by, you. Each such Certificate Offering
which the Company elects to make pursuant to this Agreement shall be governed by
this Underwriting Agreement, as supplemented by the related Terms Agreement.
Each Terms Agreement, which shall be substantially in the form of Exhibit A
hereto, shall specify, among other things, the Classes of Certificates to be
purchased by the Underwriter (the "Offered Certificates"), the principal balance
or balances of the Offered Certificates, each subject to any stated variance,
and the price or prices at which such Offered Certificates are to be purchased
by the Underwriter from the Company.
1. Representations and Warranties. (a) The Company
represents and warrants to and agrees with the Underwriter, as of
the date of the related Terms Agreement, that:
(i) The registration statement specified in the related Terms
Agreement, on Form S-3, including a prospectus, has been filed with the
Securities and Exchange Commission (the "Commission") for the registration
under the Securities Act of 1933, as amended (the "Act"), of guaranteed
agricultural mortgage-backed securities issuable in series, which
registration statement has been declared effective by the Commission. Such
registration statement, as amended to the date of the related Terms
Agreement, including any documents incorporated by reference therein
pursuant to Item 12 of Form S-3 under the Act which were filed under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), on or
before the effective date of the Registration Statement, is hereinafter
called the "Registration Statement", and such prospectus, as such
prospectus is supplemented by a prospectus supplement relating to the
Offered Certificates of the related Series, each in the form first filed
after the date of the related Terms Agreement pursuant to Rule 424(b)
under the Act, including any documents incorporated by reference therein
pursuant to Item 12 of Form S-3 under the Act which were filed under the
Exchange Act on or before the date of such prospectus supplement (other
than any such incorporated documents that relate to Collateral Term Sheets
(as defined herein))(such prospectus supplement, including such
incorporated documents (other than those that relate to Collateral Term
Sheets), in the form first filed after the date of the related Terms
Agreement pursuant to Rule 424(b) is hereinafter called the "Prospectus
Supplement"), is hereinafter called the "Prospectus". Any reference herein
to the terms "amend", "amendment" or "supplement" with respect to the
Registration Statement, the Prospectus or the Prospectus Supplement shall
be deemed to refer to and include the filing of any document under the
Exchange Act after the effective date of the Registration Statement or the
issue date of the Prospectus or Prospectus Supplement, as the case may be,
deemed to be incorporated therein by reference pursuant to Item 12 of Form
S-3 under the Act.
(ii) The related Registration Statement, at the time it became
effective, and the Prospectus contained therein, and any amendments
thereof and supplements thereto filed prior to the date of the related
Terms Agreement, conformed in all material respects to the requirements of
the Act and the rules and regulations of the Commission thereunder; on the
date of the related Terms Agreement and on each Closing Date (as defined
in Section 3 below), the related Registration Statement and the related
Prospectus, and any amendments thereof and supplements thereto, will
conform in all material respects to the requirements of the Act and the
rules and regulations of the Commission thereunder; such Registration
Statement, at the time it became effective, did not contain any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading; such Prospectus, on the date of any filing pursuant to Rule
424(b) and on each Closing Date, will not include any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they are
made, not misleading; and any Form 8-K referred to in such Prospectus, on
each Closing Date and the date of any filing thereof under cover of Form
8-K, will not include any untrue statement of a material fact or omit to
state any information which such Prospectus states will be included
therein; provided, however, that the Company makes no representations or
warranties as to the information contained in or omitted from (A) such
Registration Statement or such Prospectus (or any supplement thereto) in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of the Underwriter specifically for use in the
preparation thereof or (B) any Current Report (as defined in Section 5(b)
below), or in any amendment thereof or supplement thereto, incorporated by
reference in such Registration Statement or such Prospectus (or any
amendment thereof or supplement thereto).
(iii)On the Closing Date, the Certificates of the related Series will
have been duly and validly authorized, and when executed and authenticated
in accordance with the terms of the Agreement and sold to the Underwriter
as provided herein, will be validly issued and entitled to the benefits of
the Agreement.
(iv) On the Closing Date, the Farmer Mac Guarantee will be in full
force and effect and constitute a valid and binding agreement of Farmer
Mac enforceable in accordance with its terms.
2. Purchase and Sale. Subject to the execution of the Terms Agreement for
a particular Certificate Offering and subject to the terms and conditions and in
reliance upon the representations and warranties set forth in this Underwriting
Agreement and such Terms Agreement, the Company agrees to sell to the
Underwriter, and the Underwriter agrees to purchase from the Company, all, but
not less than all, of the related Offered Certificates at the purchase price
therefor set forth in such Terms Agreement (the "Purchase Price").
The parties hereto agree that settlement for all securities sold pursuant
to this Underwriting Agreement and the applicable Terms Agreement shall take
place on the settlement date agreed upon at the time of the related transaction
and set forth as the "Closing Date" in such Terms Agreement and not as set forth
in Rule 15c6-1(a) of the Exchange Act.
3. Delivery and Payment. Delivery of and payment for the Offered
Certificates of a Series shall be made at the offices of the Company,
Washington, D.C., at 10:00 A.M., New York City time, on the Closing Date
specified in the related Terms Agreement, which date and time may be postponed
by agreement between the Underwriter and the Company (such date and time being
herein called the "Closing Date"). Delivery of such Offered Certificates shall
be made to the Underwriter against payment by the Underwriter of the Purchase
Price thereof to or upon the order of the Company by wire transfer in federal or
other immediately available funds or by check payable in federal funds, as the
Company shall specify no later than five full business days prior to such
Closing Date. Unless delivery is made through the facilities of the U.S. Federal
Reserve Banks, the Offered Certificates shall be in certificated form and
registered in such names and in such authorized denominations as the Underwriter
may request not less than two full business days in advance of each Closing
Date.
4. Offering by the Underwriter. It is understood that the Underwriter
proposes to offer the Offered Certificates of the related Series for sale to the
public as set forth in the related Prospectus.
5. Agreements. The Company and Farmer Mac jointly and
severally agree with the Underwriter that:
(a) The Company will cause the Prospectus as supplemented by a
Prospectus Supplement relating to the Offered Certificates to be filed
pursuant to Rule 424 under the Act and will promptly advise the
Underwriter when such Prospectus as so supplemented has been so filed, and
prior to the termination of the Certificate Offering to which such
Prospectus relates also will promptly advise the Underwriter (i) when any
amendment to the related Registration Statement specifically relating to
such Offered Certificates shall have become effective or any further
supplement to such Prospectus has been filed, (ii) of any request by the
Commission for any amendment of such Registration Statement or Prospectus
or for any additional information, (iii) of the issuance by the Commission
of any stop order suspending the effectiveness of such Registration
Statement or the institution or threatening of any proceeding for that
purpose and (iv) of the receipt by the Company of any written notification
with respect to the suspension of the qualification of such Offered
Certificates for sale in any jurisdiction or the initiation or threatening
of any proceeding for such purpose. The Company will not file any
amendment of the related Registration Statement or supplement to the
related Prospectus (other than any amendment or supplement specifically
relating to one or more Series of guaranteed agricultural mortgage-backed
securities other than the Series that includes the related Offered
Certificates) unless the Company has furnished the Underwriter with a copy
for its review prior to filing. The Company will use its best efforts to
prevent the issuance of any such stop order and, if issued, to obtain as
soon as possible the withdrawal thereof.
(b) The Company will cause any Computational Materials and any
Structural Term Sheets (each as defined in Section 8 below) with respect
to the Offered Certificates of a Series that are delivered by the
Underwriter to the Company pursuant to Section 8 to be filed with the
Commission on a Current Report on Form 8-K (each such filing of such
materials, a "Current Report") pursuant to Rule 13a-11 under the Exchange
Act on the business day immediately following the later of (i) the day on
which such Computational Materials and Structural Term Sheets are
delivered to counsel for the Company by the Underwriter prior to 10:30
a.m. and (ii) the date on which this Agreement is executed and delivered.
The Company will cause one Collateral Term Sheet (as defined in Section 9
below) with respect to the Offered Certificates of a Series that is
delivered by the Underwriter to the Company in accordance with the
provisions of Section 9 to be filed with the Commission on a Current
Report pursuant to Rule 13a-11 under the Exchange Act on the business day
immediately following the day on which such Collateral Term Sheet is
delivered to counsel for the Company by the Underwriter prior to 10:30
a.m. In addition, if at any time prior to the availability of the related
Prospectus Supplement the Underwriter has delivered to any prospective
investor a Collateral Term Sheet that reflects, in the reasonable judgment
of the Underwriter and the Company, a material change in the
characteristics of the Qualified Loans for the related Series from those
on which a Collateral Term Sheet with respect to the related Series
previously filed with the Commission was based, the Company will cause any
such Collateral Term Sheet that is delivered by the Underwriter to the
Company in accordance with the provisions of Section 9 to be filed with
the Commission on a Current Report on the business day immediately
following the day on which such Collateral Term Sheet is delivered to
counsel for the Company by the Underwriter prior to 10:30 a.m. In each
case, the Company will promptly advise the Underwriter when such Current
Report has been so filed. Each such Current Report shall be incorporated
by reference in the related Prospectus and the related Registration
Statement. Notwithstanding the five preceding sentences, the Company shall
have no obligation to file any materials provided by the Underwriter
pursuant to Sections 8 and 9 which, in the reasonable determination of the
Company after making reasonable efforts to consult with the Underwriter,
are not required to be filed pursuant to the Kidder Letters or the PSA
Letter (each as defined in Section 8 below), or which contain erroneous
information or contain any untrue statement of a material fact or, when
read in conjunction with the Prospectus and Prospectus Supplement, omit to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading; it being understood, however, that
the Company shall have no obligation to review or pass upon the accuracy
or adequacy of, or to correct, any Computational Materials, Structural
Term Sheets or Collateral Term Sheets provided by the Underwriter to the
Company pursuant to Section 8 or Section 9 hereof.
(c) If, at any time when a prospectus relating to the Offered
Certificates of a Series is required to be delivered under the Act, any
event occurs as a result of which the related Prospectus as then amended
or supplemented would include any untrue statement of a material fact or
omit to state any material fact necessary to make the statements therein
in light of the circumstances under which they were made not misleading,
or if it shall be necessary at any time to amend or supplement the related
Prospectus to comply with the Act or the rules thereunder, the Company
promptly will prepare and file with the Commission, subject to paragraph
(a) of this Section 5, an amendment or supplement which will correct such
statement or omission or an amendment which will effect such compliance;
provided, however, that the Company will not be required to file any such
amendment or supplement with respect to any Computational Materials,
Structural Term Sheets or Collateral Term Sheets incorporated by reference
in the Prospectus other than any amendments or supplements of such
Computational Materials or Structural Term Sheets that are furnished to
the Company by the Underwriter pursuant to Section 8(e) hereof or any
amendments or supplements of such Collateral Term Sheets that are
furnished to the Company by the Underwriter pursuant to Section 9(d)
hereof which the Company determines to file in accordance therewith.
(d) Whether or not the transactions contemplated hereby and by the
related Terms Agreement shall be consummated, the Company shall be
responsible for the payment of any costs and expenses for which details
are submitted, in connection with the performance of its obligations under
this Underwriting Agreement and the related Terms Agreement. The
Underwriter will pay all its own costs and expenses, including the fees of
Stroock & Stroock & Lavan, counsel for the Underwriter, transfer taxes on
resale of any Offered Certificates by it, advertising expenses connected
with any offers that it may make, the fees of KPMG Peat Marwick LLP with
respect to any letter furnished pursuant to Section 6(c) of this Agreement
to the extent such letter or letters do not relate to collateral
information on the related Qualified Loans for the related Certificate
Offering and all expenses (e.g., shipping, postage and courier costs)
associated with the delivery of the related Prospectus to prospective
investors and investors, other than the costs of delivery to the
Underwriter's facilities.
6. Conditions to the Obligations of the Underwriter. The obligation of the
Underwriter to purchase the Offered Certificates of any Series shall be subject
to the accuracy in all material respects of the representations and warranties
on the part of the Company or Farmer Mac contained in this Agreement, as
supplemented by the related Terms Agreement, as of the respective dates thereof
and the related Closing Date, to the accuracy of the statements of the Company
or Farmer Mac made in any applicable officers' certificates pursuant to the
provisions hereof, to the performance by the Company or Farmer Mac of each of
its obligations under this Agreement and such Terms Agreement and to the
following additional conditions applicable to the related Certificate Offering:
(a) No stop order suspending the effectiveness of the related
Registration Statement shall have been issued and no proceedings for that
purpose shall have been instituted or threatened.
(b) Michael T. Bennett, General Counsel of the Company and Farmer
Mac, shall have furnished to the Underwriter an opinion, dated the related
Closing Date, to the effect as set forth in Exhibit B hereto.
(c) KPMG Peat Marwick LLP shall have furnished to the Underwriter one
or more letters, in form and substance satisfactory to the Underwriter.
If any of the conditions specified in this Section 6 shall not have been
fulfilled in all material respects with respect to the particular Offered
Certificates of a Series when and as provided in this Underwriting Agreement and
the related Terms Agreement, this Agreement (with respect to such Offered
Certificates) and such Terms Agreement and all obligations of the Underwriter
hereunder (with respect to such Offered Certificates) and thereunder may be
canceled at, or at any time prior to, the related Closing Date by the
Underwriter. Notice of such cancellation shall be given to the Company in
writing, or by telephone or telecopy confirmed in writing.,
7. Indemnification and Contribution.
(a) The Company and Farmer Mac agree, jointly and severally, to
indemnify and hold harmless the Underwriter and each person who controls the
Underwriter within the meaning of the Act or the Exchange Act against any and
all losses, claims, damages or liabilities, joint or several, to which they or
any of them may become subject under the Act, the Exchange Act, or other Federal
or state statutory law or regulation, at common law or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement relating to the
Offered Certificates of the applicable Series as it became effective or in any
amendment or supplement thereof, or in such Registration Statement or the
related Prospectus, or in any amendment thereof, or in the Form 8-K referred to
in such Prospectus or arise out of or are based upon the omission or alleged
omission (in the case of any Computational Materials or ABS Term Sheets (in each
case, as defined herein) in respect of which the Company and Farmer Mac agree to
indemnify the Underwriter, as set forth below, when such are read in conjunction
with the related Prospectus and Prospectus Supplement) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and agrees to reimburse each such indemnified party for
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that (i) the Company and Farmer Mac will not be liable in any
such case to the extent that any such loss, claim, damage or liability arises
out of or is based upon any such untrue statement or alleged untrue statement or
omission or alleged omission made therein (A) in reliance upon and in conformity
with written information furnished to the Company as herein stated by or on
behalf of the Underwriter specifically for use in connection with the
preparation thereof or (B) in any Current Report or any amendment or supplement
thereof, except to the extent that any untrue statement or alleged untrue
statement therein or omission therefrom results (or is alleged to have resulted)
directly from an error (a "Mortgage Pool Error") in the information concerning
the characteristics of the Mortgage Loans furnished by the Company to the
Underwriter in writing or by electronic transmission that was used in the
preparation of either (x) any Computational Materials or ABS Term Sheets (or
amendments or supplements thereof) included in such Current Report (or amendment
or supplement thereof) or (y) any written or electronic materials furnished to
prospective investors on which the Computational Materials (or amendments or
supplements) were based, (ii) such indemnity with respect to any Corrected
Statement (as defined below) in such Prospectus (or supplement thereto) shall
not inure to the benefit of the Underwriter (or any person controlling the
Underwriter) from whom the person asserting any loss, claim, damage or liability
purchased the Certificates of the related Series that are the subject thereof if
such person did not receive a copy of a supplement to such Prospectus at or
prior to the confirmation of the sale of such Certificates and the untrue
statement or omission of a material fact contained in such Prospectus (or
supplement thereto) was corrected (a "Corrected Statement") in such other
supplement and such supplement was furnished by the Company to the Underwriter
prior to the delivery of such confirmation, and (iii) such indemnity with
respect to any Mortgage Pool Error shall not inure to the benefit of the
Underwriter (or any person controlling the Underwriter) from whom the person
asserting any loss, claim, damage or liability received any Computational
Materials (or any written or electronic materials on which the Computational
Materials are based) or ABS Term Sheets that were prepared on the basis of such
Mortgage Pool Error, if, prior to the time of confirmation of the sale of the
applicable Certificates to such person, the Company notified the Underwriter in
writing of the Mortgage Pool Error or provided in written or electronic form
information superseding or correcting such Mortgage Pool Error (in any such
case, a "Corrected Mortgage Pool Error"), and the Underwriter failed to notify
such person thereof or to deliver to such person corrected Computational
Materials (or underlying written or electronic materials) or ABS Term Sheets.
This indemnity agreement will be in addition to any liability which the Company
or Farmer Mac may otherwise have.
(b) The Underwriter agrees to indemnify and hold harmless the Company
and Farmer Mac, each of its directors, each of its officers who signs the
Registration Statement relating to the Offered Certificates of the applicable
Series, and each person who controls the Company or Farmer Mac within the
meaning of the Act or the Exchange Act to the same extent as the foregoing
indemnities from the Company and Farmer Mac to the Underwriter, but only with
reference to (A) written information furnished to the Company by or on behalf of
the Underwriter specifically for use in the preparation of the documents
referred to in the foregoing indemnity with respect to the related Series, or
(B) any Computational Materials or ABS Term Sheets (or amendments or supplements
thereof) furnished to the Company by the Underwriter pursuant to Section 8 or
Section 9 and incorporated by reference in such Registration Statement or the
related Prospectus or any amendment or supplement thereof (except that no such
indemnity shall be available for any losses, claims, damages or liabilities, or
actions in respect thereof, resulting from any Mortgage Pool Error, other than a
Corrected Mortgage Pool Error). This indemnity agreement will be in addition to
any liability which the Underwriter may otherwise have. The Company acknowledges
that the statements set forth [TO COME] constitute the only information
furnished in writing by or on behalf of the Underwriter for inclusion in the
related Prospectus (other than any Computational Materials or ABS Term Sheets
(or amendments or supplements thereof) furnished to the Company by the
Underwriter), and the Underwriter confirms that such statements are correct.
(c) Promptly after receipt by an indemnified party under Section 7 of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 7, notify the indemnifying party in writing of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party otherwise than under
this Section 7. In case any such action is brought against any indemnified
party, and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein, and to the extent
that it may elect by written notice delivered to the indemnified party promptly
after receiving the aforesaid notice from such indemnified party, to assume the
defense thereof, with counsel satisfactory to such indemnified party; provided,
however, that if the defendants in any such action include both the indemnified
party and the indemnifying party and the indemnified party shall have reasonably
concluded that there may be legal defenses available to it and/or other
indemnified parties which are different from or additional to those available to
the indemnifying party, the indemnified party or parties shall have the right to
select separate counsel to assert such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified party or
parties. Upon receipt of notice from the indemnifying party to such indemnified
party of its election so to assume the defense of such action and approval by
the indemnified party of counsel, the indemnifying party will not be liable to
such indemnified party under this Section 7 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof unless (i) the indemnified party shall have employed separate counsel in
connection with the assertion of legal defenses in accordance with the proviso
to the next preceding sentence (it being understood, however, that the
indemnifying party shall not be liable for the expenses of more than one
separate counsel approved by the indemnified party in the case of subparagraph
(a) or (b), representing the indemnified parties under subparagraph (a) or (b),
who are parties to such action), (ii) the indemnifying party shall not have
employed counsel satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of commencement of the
action or (iii) the indemnifying party has authorized the employment of counsel
for the indemnified party at the expense of the indemnifying party; and except
that, if clause (i) or (iii) is applicable, such liability shall be only in
respect of the counsel referred to in such clause (i) or (iii).
(d) If the indemnification provided for in paragraph (a) or (b) of
this Section 7 is due in accordance with its terms but is for any reason held by
a court to be unavailable from the Company, Farmer Mac or the Underwriter, on
grounds of policy or otherwise, or if the indemnified party failed to give
notice under paragraph (c) of this Section 7 in respect of a claim otherwise
subject to indemnification in accordance with paragraph (a) or (b) of this
Section 7, the Company, Farmer Mac and the Underwriter shall contribute to the
aggregate losses, claims, damages and liabilities (including legal and other
expenses reasonably incurred in connection with investigating or defending same)
to which the Company, Farmer Mac and the Underwriter may be subject, as follows:
(i) in the case of any losses, claims, damages and liabilities (or
actions in respect thereof) which do not arise out of or are not based
upon any untrue statement or omission of a material fact in any
Computational Materials or ABS Term Sheets (or any amendments or
supplements thereof), in such proportion so that the Underwriter is
responsible for that portion represented by the difference between the
proceeds to the Company and Farmer Mac in respect of the Offered
Certificates appearing on the cover page of the Prospectus Supplement for
the related Series and the total proceeds received by the Underwriter from
the sale of such Offered Certificates (the "Underwriting Discount"), and
the Company is responsible for the balance; and
(ii) in the case of any losses, claims, damages and liabilities (or
actions in respect thereof) which arise out of or are based upon any
untrue statement or omission of a material fact in any Computational
Materials or ABS Term Sheets (or any amendments or supplements thereof) or
in any written or electronic materials distributed to prospective
investors on which the Computational Materials are based, in such
proportion as is appropriate to reflect the relative fault of the Company
and Farmer Mac on the one hand and the Underwriter on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities (or actions in respect thereof) as well as
any other relevant equitable considerations. The relative fault shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact in such Computational Materials or ABS
Term Sheets (or any amendments or supplements thereof or such written or
electronic materials) results from information prepared by the Company on
the one hand or the Underwriter on the other and the parties, relative
intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
Notwithstanding anything to the contrary in this Section 7(d), no person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 7, each person who
controls the Underwriter within the meaning of either the Act or the Exchange
Act shall have the same rights to contribution as the Underwriter, and each
person who controls the Company within the meaning of either the Act or the
Exchange Act, each officer of the Company who shall have signed the Registration
Statement and each director of the Company or Farmer Mac shall have the same
rights to contribution as the Company and Farmer Mac, subject in each case to
the immediately preceding sentence of this paragraph (d).
8. Computational Materials and Structural Term Sheets. (a) Not later than
10:30 a.m., New York time, on the business day before the date on which the
Current Report relating to the Offered Certificates of a Series is required to
be filed by the Company with the Commission pursuant to Section 5(b) hereof, the
Underwriter shall deliver to the Company one complete copy of all materials
provided by the Underwriter to prospective investors in such Offered
Certificates that constitute (i) "Computational Materials" within the meaning of
the no-action letter dated May 20, 1994 issued by the Division of Corporation
Finance of the Commission to Kidder, Peabody Acceptance Corporation I, Kidder,
Peabody & Co. Incorporated, and Kidder Structured Asset Corporation and the
no-action letter dated May 27, 1994 issued by the Division of Corporation
Finance of the Commission to the Public Securities Association (together, the
"Kidder Letters"), the filing of which material is a condition of the relief
granted in such letter (such materials being the "Computational Materials"), and
(ii) "Structural Term Sheets" within the meaning of the no-action letter dated
February 17, 1995 issued by the Division of Corporation Finance of the
Commission to the Public Securities Association (the "PSA Letter"), the filing
of which material is a condition of the relief granted in such letter (such
materials being the "Structural Term Sheets").
(b) The Underwriter represents and warrants to and agrees with the
Company, as of the date of the related Terms Agreement and as of the Closing
Date, that:
(i) the Computational Materials furnished to the Company pursuant to
Section 8(a) constitute (either in original, aggregated or consolidated
form) all of the materials furnished to prospective investors by the
Underwriter prior to the time of delivery thereof to the Company that are
required to be filed with the Commission with respect to the related
Offered Certificates in accordance with the Kidder Letters, and such
Computational Materials comply with the requirements of the Kidder
Letters;
(ii) the Structural Term Sheets furnished to the Company pursuant to
Section 8(a) constitute all of the materials furnished to prospective
investors by the Underwriter prior to the time of delivery thereof to the
Company that are required to be filed with the Commission as "Structural
Term Sheets" with respect to the related Offered Certificates in
accordance with the PSA Letter, and such Structural Term Sheets comply
with the requirements of the PSA Letter; and
(iii)on the date any such Computational Materials or Structural Term
Sheets with respect to such offered Certificates (or any written or
electronic materials furnished to prospective investors on which the
Computational Materials are based) were last furnished to each prospective
investor and on the date of delivery thereof to the Company pursuant to
Section 8(a) and on the related Closing Date, such Computational Materials
(or such other materials) or Structural Term Sheets did not and will not
include any untrue statement of a material fact or, when read in
conjunction with the related Prospectus and Prospectus Supplement, omit to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading.
Notwithstanding the foregoing, the Underwriter makes no representation or
warranty as to whether any Computational Materials or Structural Term Sheets (or
any written or electronic materials on which the Computational Materials are
based) included or will include any untrue statement resulting directly from any
Mortgage Pool Error (except any Corrected Mortgage Pool Error, with respect to
materials prepared after the receipt by the Underwriter from the Company of
notice of such Corrected Mortgage Pool Error or materials superseding or
correcting such Corrected Mortgage Pool Error).
(c) The Underwriter acknowledges and agrees that any Computational
Materials or Structural Term Sheets with respect to any Series of Certificates
have been prepared and disseminated by the Underwriter and not by or on behalf
of the Company, and that such materials included and shall include a disclaimer
in form satisfactory to the Company to the effect that such materials have been
prepared and disseminated by the Underwriter, and that the content and accuracy
of such materials have not been reviewed by the Company.
(d) If, at any time when a prospectus relating to the Offered
Certificates of a Series is required to be delivered under the Act, it shall be
necessary to amend or supplement the related Prospectus as a result of an untrue
statement of a material fact contained in any Computational Materials or
Structural Term Sheets provided by the Underwriter pursuant to this Section 8 or
the omission to state therein a material fact required, when considered in
conjunction with the related Prospectus and Prospectus Supplement, to be stated
therein or necessary to make the statements therein, when read in conjunction
with the related Prospectus and Prospectus Supplement, not misleading, or if it
shall be necessary to amend or supplement any Current Report relating to any
Computational Materials or Structural Term Sheets to comply with the Act or the
rules thereunder, the Underwriter promptly will prepare and furnish to the
Company for filing with the Commission an amendment or supplement which will
correct such statement or omission or an amendment which will effect such
compliance. The Underwriter represents and warrants to the Company, as of the
date of delivery of such amendment or supplement to the Company, that such
amendment or supplement will not include any untrue statement of a material fact
or, when read in conjunction with the related Prospectus and Prospectus
Supplement, omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided, however, that
the Underwriter makes no representation or warranty as to whether any such
amendment or supplement will include any untrue statement resulting directly
from any Mortgage Pool Error (except any Corrected Mortgage Pool Error, with
respect to any such amendment or supplement prepared after the receipt by the
Underwriter from the Company of notice of such Corrected Mortgage Pool Error or
materials superseding or correcting such Corrected Mortgage Pool Error). The
Company shall have no obligation to file such amendment or supplement if the
Company determines that (i) such amendment or supplement contains any untrue
statement of a material fact or, when read in conjunction with the related
Prospectus and Prospectus Supplement, omits to state a material fact required to
be stated therein or necessary to make the statements therein not misleading; it
being understood, however, that the Company shall have no obligation to review
or pass upon the accuracy or adequacy of, or to correct, any such amendment or
supplement provided by the Underwriter to the Company pursuant to this paragraph
(e) or (ii) such filing is not required under the Act.
9. Collateral Term Sheets. (a) Prior to the delivery of any "Collateral
Term Sheet" within the meaning of the PSA Letter, the filing of which material
is a condition of the relief granted in such letter (such material being the
"Collateral Term Sheets"), to a prospective investor in any Offered
Certificates, the Underwriter shall, in order to facilitate the timely filing of
such material with the Commission, notify the Company and its counsel by
telephone of its intention to deliver such materials and the approximate date on
which the first such delivery of such materials is expected to occur. Not later
than 10:30 a.m., New York time, on the business day immediately following the
date on which any Collateral Term Sheet was first delivered to a prospective
investor in such Offered Certificates, the Underwriter shall deliver to the
Company five complete copies of all materials provided by the Underwriter to
prospective investors in the Offered Certificates that constitute "Collateral
Term Sheets." Each delivery of a Collateral Term Sheet to the Company pursuant
to this paragraph (a) shall be effected by delivering one copy of such materials
to the Company. (Collateral Term Sheets and Structural Term Sheets are,
together, referred to herein as "ABS Term Sheets.") At the time of each such
delivery, the Underwriter shall indicate in writing that the materials being
delivered constitute Collateral Term Sheets, and, if there has been any prior
such delivery with -respect to the related Series, shall indicate whether such
materials differ in any material respect from any Collateral Term Sheets
previously delivered to the Company with respect to such Series pursuant to this
Section 9(a) as a result of the occurrence of a material change in the
characteristics of the related Mortgage Loans.
(b) The Underwriter represents and warrants to and agrees with the
Company as of the date of the related Terms Agreement and as of the Closing
Date, that:
(i) The Collateral Term Sheets furnished to the Company pursuant to
Section 9(a) constitute all of the materials furnished to prospective
investors by the Underwriter prior to time of delivery thereof to the
Company that are required to be filed with the Commission as "Collateral
Term Sheets" with respect to the related Offered Certificates in
accordance with the PSA Letter, and such Collateral Term Sheets comply
with the requirements of the PSA Letter; and
(ii) On the date any such Collateral Term Sheets with respect to such
Offered Certificates were last furnished to each prospective investor and
on the date of delivery thereof to the Company pursuant to Section 9(a)
and on the related Closing Date, such Collateral Term Sheets did not and
will not include any untrue statement of a material fact or, when read in
conjunction with the Prospectus and Prospectus Supplement, omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading.
Notwithstanding the foregoing, the Underwriter makes no representation or
warranty as to whether any Collateral Term Sheet included or will include any
untrue statement or material omission resulting directly from any Mortgage Pool
Error (except any Corrected Mortgage Pool Error, with respect to materials
prepared after the receipt by the Underwriter from the Company of notice of such
Corrected Mortgage Pool Error or materials superseding or correcting such
Corrected Mortgage Pool Error).
(c) The Underwriter acknowledges and agrees that any Collateral Term
Sheets with respect to any Series of Certificates furnished to prospective
investors from and after the date hereof will have been prepared and
disseminated by the Underwriter and not by or on behalf of the Company, and that
such materials shall include a disclaimer in form satisfactory to the Company to
the effect set forth in Section 8(d) hereof, and to the effect that the
information contained in such materials supersedes the information contained in
any prior Collateral Term Sheet with respect to such Series of Offered
Certificates and will be superseded by the description of the related Mortgage
Loans in the related Prospectus Supplement and in the Form 8-K relating to such
Prospectus Supplement to be filed. The Underwriter agrees that it will not
represent to prospective investors that any Collateral Term Sheets were prepared
or disseminated on behalf of the Company or Farmer Mac.
(d) If, at any time when a prospectus relating to the Offered
Certificates of a Series is required to be delivered under the Act, it shall be
necessary to amend or supplement the related Prospectus as a result of an untrue
statement of a material fact contained in any Collateral Term Sheets provided by
the Underwriter pursuant to this Section 9 or the omission to state therein a
material fact required, when considered in conjunction with the related
Prospectus and Prospectus Supplement, to be stated therein or necessary to make
the statements therein, when read in conjunction with the related Prospectus and
Prospectus Supplement, not misleading, or if it shall be necessary to amend or
supplement any Current Report relating to any Collateral Term Sheets to comply
with the Act or the rules thereunder, the Underwriter promptly will prepare and
furnish to the Company for filing with the Commission an amendment or supplement
which will correct such statement or omission or an amendment which will effect
such compliance. The Underwriter represents and warrants to the Company, as of
the date of delivery of such amendment or supplement to the Company, that such
amendment or supplement will not include any untrue statement of a material fact
or, when read in conjunction with the related Prospectus and Prospectus
Supplement, omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided, however, the
Underwriter makes no representation or warranty as to whether any such amendment
or supplement will include any untrue statement resulting directly from any
Mortgage Pool Error (except any Corrected Mortgage Pool Error, with respect to
any such amendment or supplement prepared after the receipt by the Underwriter
from the Company of notice of such Corrected Mortgage Pool Error or materials
superseding or correcting such Corrected Mortgage Pool Error). The Company shall
have no obligation to file such amendment or supplement if the Company
determines that (i) such amendment or supplement contains any untrue statement
of a material fact or, when read in conjunction with the related Prospectus and
Prospectus Supplement, omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading; it being
understood, however, that the Company shall have no obligation to review or pass
upon the accuracy or adequacy of, or to correct, any such amendment or
supplement provided by the Underwriter to the Company pursuant to this paragraph
(d) or (ii) such filing is not required under the Act.
10. Termination. This Agreement (with respect to a particular Certificate
Offering) and the related Terms Agreement shall be subject to termination in the
absolute discretion of the Underwriter, by notice given to the Company prior to
delivery of and payment for the related Offered Certificates, if prior to the
related Closing Date (i) trading in securities generally on the New York Stock
Exchange shall have been suspended or materially limited, (ii) a general
moratorium on commercial banking activities in New York shall have been declared
by either federal or New York State authorities, or (iii) there shall have
occurred any outbreak or material escalation of hostilities or other calamity or
crisis the effect of which on the financial markets of the United States is such
as to make it, in the reasonable judgment of the Underwriter, impracticable to
market such Offered Certificates.
11. Representations and Indemnities to Survive Delivery. The agreements,
representations, warranties, indemnities and other statements of the Company and
Farmer Mac or its respective officers and of the Underwriter set forth in or
made pursuant to this Agreement and the related Terms Agreement will remain in
full force and effect, regardless of any investigation made by or on behalf of
the Underwriter, the Company or Farmer Mac or any of the officers, directors or
controlling persons referred to in Section 7 hereof, and will survive delivery
of and payment for the related Offered Certificates. The provisions of Section 7
hereof shall survive the termination or cancellation of this Agreement and the
related Terms Agreement.
12. Successors. This Agreement and the related Terms Agreement will inure
to the benefit of and be binding upon the parties hereto and thereto and their
respective successors and the officers, directors and controlling persons
referred to in Section 7 hereof, and their successors and assigns, and no other
person will have any right or obligation hereunder or thereunder. No purchaser
of any Offered Certificate from the Underwriter shall be deemed a successor or
assign by reason of such purchase.
13. APPLICABLE LAW. THIS AGREEMENT AND THE RELATED TERMS
AGREEMENT WILL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE
AND TO BE PERFORMED THEREIN.
14. Miscellaneous. This Agreement, as supplemented by the related Terms
Agreement, supersedes all prior and contemporaneous agreements and
understandings relating to the subject matter hereof. This Agreement and the
related Terms Agreement or any term of each may not be changed, waived,
discharged or terminated except by an affirmative written agreement made by the
party against whom enforcement of the change, waiver, discharge or termination
is sought. The headings in this Agreement and the related Terms Agreement are
for purposes of reference only and shall not limit or otherwise affect the
meaning hereof or thereof.
15. Notices. All communications hereunder will be in
writing and effective only on receipt, and, if sent to the
Underwriter, will be delivered to it at the address first above
written; or if sent to the Company or Farmer Mac, will be
delivered to 919 18th Street, N.W. Washington, D.C. 20006,
Attention: General Counsel.
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the undersigned a counterpart hereof,
whereupon this letter and your acceptance shall represent a binding agreement
among the Company, Farmer Mac and the Underwriter.
Very truly yours,
FARMER MAC MORTGAGE SECURITIES
CORPORATION
By:
--------------------------------
Name:
Title:
FEDERAL AGRICULTURAL MORTGAGE
CORPORATION
By:
---------------------------------
Name:
Title:
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written.
[UNDERWRITER]
By: _________________________
Name:
Title:
<PAGE>
EXHIBIT A
FARMER MAC MORTGAGE SECURITIES CORPORATION
Guaranteed Agricultural Mortgage-Backed Securities
Series 1996-
Guaranteed by the Federal Agricultural Mortgage Corporation
TERMS AGREEMENT
(to Underwriting Agreement,
dated June [__], 1996,
among the Company, Farmer Mac and the Underwriter)
Farmer Mac Mortgage Securities Corporation
[DATE]
919 18th Street, N.W.
Washington D.C. 20006
Federal Agricultural Mortgage Corporation
919 18th Street, N.W.
Washington D.C. 20006
_________________________ (the "Underwriter") agrees, subject to the terms
and provisions herein and of the captioned Underwriting Agreement (the
"Underwriting Agreement"), to purchase the Classes of Series 1996-______
Certificates specified in Section 1(a) hereof (the "Offered Certificates"). This
Terms Agreement supplements and modifies the Underwriting Agreement solely as it
relates to the purchase and sale of the Offered Certificates described below.
The Series 1996-_________ Certificates are registered with the Securities and
Exchange Commission by means of an effective Registration Statement (No.
33-___________). Capitalized terms used and not defined herein have the meanings
given them in the Underwriting Agreement.
Section 1.The Certificates: The Offered Certificates shall
be issued as follows:
(a) Classes: The Offered Certificates shall be issued with the
following Class designations, interest rates and principal balances,
subject in the aggregate to the variance referred to in Section i(a):
Principal Interest Class Purchase
Class Balance Rate Price Percentage
<PAGE>
(b) The Offered Certificates shall have such other characteristics as
described in the related Prospectus.
Section 2.Purchase Price: The Purchase Price for each Class of the Offered
Certificates shall be the Class Purchase Price Percentage therefor (determined
as set forth in Section 1(a) above) of the initial Class Certificate Principal
Balance thereof plus accrued interest at the initial interest rate per annum
from and including the Cut-off Date up to, but not including, __________,
_______ ("the Closing Date").
Section 3.Tax Treatment: [One or more elections will be
made to treat the assets of the Trust Fund as a REMIC.]
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the undersigned a counterpart hereof,
whereupon this letter and your acceptance shall represent a binding agreement
among the Underwriter, the Company and Farmer Mac.
Very truly yours,
[UNDERWRITER]
By:
-------------------------------
Name:
Title:
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written.
FARMER MAC MORTGAGE SECURITIES CORPORATION
By: ______________________________
Name:
Title:
FEDERAL AGRICULTURAL MORTGAGE CORPORATION
By: ______________________________
Name:
Title:
<PAGE>
EXHIBIT B
[Farmer Mac Letterhead]
[Date]
Bear, Stearns & Co. Inc.
245 Park Avenue
New York, New York 10167
Re: Farmer Mac Guaranteed Agricultural Mortgage-Backed
Securities Series 1996-
Ladies and Gentlemen:
I am the Vice President and General Counsel of the Federal Agricultural
Mortgage Corporation, a federally chartered instrumentality of the United States
("Farmer Mac"), and in such capacity have acted as counsel to Farmer Mac and
Farmer Mac Mortgage Securities Corporation (the "Company") in connection with
the issuance and sale of $[ ] aggregate principal amount of Guaranteed
Agricultural Mortgage-Backed Securities, Series 1996-[ ], (the Certificates"),
to you (the "Underwriter") pursuant to the Underwriting Agreement dated June [
], 1996 (the "Underwriting Agreement"), as supplemented by the Terms Agreement
dated June [ ], 1996 (the "Terms Agreement"), each by and among the Company,
Farmer Mac and the Underwriter.
The Certificates have been issued pursuant to a Trust Agreement dated as
of June 1, 1996 (the "Trust Agreement"), as supplemented by an Issue Supplement
dated June [ ], 1996 (the "Issue Supplement" and together with the Trust
Agreement, the "Agreement"), by and among the Company, as depositor, Farmer Mac,
as guarantor, and First Trust National Association, as trustee (the "Trustee").
Capitalized terms used but not otherwise defined herein shall have the meanings
assigned to such terms in the Agreement.
In arriving at the opinions expressed below, I have made such legal and
factual examinations and inquiries, and have examined and relied upon originals
or copies, certified or otherwise identified to my satisfaction, of such other
certificate, corporate records, agreements and other instruments and documents,
as I have deemed advisable or necessary for the purpose of rendering this
opinion.
Based upon the foregoing and my consideration of such other matters of
fact and questions of law as I have deemed relevant in the circumstances, I am
of the opinion that:
(i) Farmer Mac has been duly incorporated and is validly existing as
a federally chartered instrumentality of the United States, pursuant to
Title VIII of the Farmer Credit Act of 1971, as amended (the "Act"), and
has statutory authority under the Act to enter into and perform its
obligations under the Agreement, the Underwriting Agreement and Terms
Agreement and to consummate the transactions contemplated thereby.
(ii) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of Delaware
and has corporate power and authority to enter into and perform its
obligations under the Agreement, the Underwriting Agreement and Terms
Agreement and to consummate the transactions contemplated thereby.
(iii)When duly issued and outstanding, the Certificates will be
entitled to the benefits of the Agreement and the Farmer Mac Guarantee to
the extent described in the Issue Supplement.
In rendering the opinions set forth above, I do not express any
independent opinion concerning law other than the Delaware General Corporation
Law, the laws of the District of Columbia and the federal law of the United
States of America.
This opinion is delivered to you pursuant to the Underwriting Agreement
and in connection with the transactions contemplated thereby and may not be
relied upon by you or any other person in any other context without my prior
written consent. This opinion is given as of the date hereof and I assume no
obligation to advise you of changes that may thereafter be brought to my
attention.
Very truly yours,
===================================================================
MASTER CENTRAL SERVICING AGREEMENT
===================================================================
between
===================================================================
FEDERAL AGRICULTURAL MORTGAGE CORPORATION,
===================================================================
as Owner/Master Servicer
and
[NAME OF CENTRAL SERVICER],
as Central Servicer
dated as of
[ ] 1, 199__
===================================================================
<PAGE>
MASTER CENTRAL SERVICING AGREEMENT
THIS MASTER CENTRAL SERVICING AGREEMENT (this "Agreement") entered into
as of [ ] 1, 199_, between the Federal Agricultural Mortgage Corporation, a
federally chartered instrumentality of the United States and an institution of
the Farm Credit System ("Farmer Mac") and [Name of Central Servicer], a [ ] (the
"Central Servicer").
WITNESSETH
WHEREAS, Farmer Mac is the beneficial owner of certain agricultural real
estate mortgage loans and Master Servicer with respect to certain other
agricultural real estate mortgage loans; and
WHEREAS, Farmer Mac and the Central Servicer have agreed that the Central
Servicer is to service on behalf of Farmer Mac certain of such agricultural real
estate mortgage loans (the "Qualified Loans") to be identified on the Schedule
of Qualified Loans (as hereinafter defined) attached to each Central Servicing
Supplement.
NOW, THEREFORE, in consideration of these premises, the parties agree as
follows:
ARTICLE I
DEFINED TERMS
Section 1.01 Defined Terms. All capitalized terms used but not defined
herein have the meanings assigned to them in the Securities Guide and the
following terms shall have the following meanings:
"Amount Held for Future Distribution": As to any Remittance Date,
the total of all amounts held in the Collection Account at the close of business
on such Remittance Date on account of (i) Installment Payments due after the
preceding Due Date and (ii) prepayments received after the preceding Due Date.
"Appraisal Standards": The appraisal standards
established by Farmer Mac and set forth in the Securities Guide.
"Appraised Value": The appraised value of a Mortgaged Property as
indicated on the Schedule of Qualified Loans, which is the appraised value based
upon the appraisal conducted in accordance with the Appraisal Standards less
than one year prior to Farmer Mac's acquisition of the Qualified Loan.
"Borrower": The obligor under a Qualified Loan.
"Business Day": Any other day than (i) a Saturday or a Sunday, (ii) a day
on which banking institutions in the States of Minnesota, New York or [Central
Servicer's jurisdiction] are required or authorized by law to be closed or (iii)
a day on
which Farmer Mac is closed.
"Central Servicer": [ ], and
in its permitted successors and assigns.
"Central Servicer Advance": As to any Remittance Date, the amounts
advanced by the Central Servicer as specified in the definition of Central
Servicer Advance Requirement.
"Central Servicer Advance Requirement": The amount, if any, required to be
advanced by the Central Servicer on any Remittance Date, such amount being equal
to the total of all Installment Payments (with each interest component thereof
being adjusted to interest at the applicable Net Mortgage Rate) on the Qualified
Loans (including, for this purpose, REO Qualified Loans) that were due on or
prior to the preceding Due Date, and such Installments Payments were not the
subject of any previous unreimbursed Central Servicer Advance and were known by
the Central Servicer to be past due (irrespective of any moratorium, waiver or
other postponement) as of the close of business on such related Remittance Date;
provided, however, that no such advance in respect of a particular Qualified
Loan shall be required on any Remittance Date to the extent the Central Servicer
determines that any such advance if made would be a Nonrecoverable Advance.
"Central Servicer's Report": A report (which shall be in
electronic machine readable form) of the Central Servicer to Farmer Mac and
Farmer Mac's designee, if any, conforming to Section 4.01.
"Central Servicing Supplement": An instrument substantially in the
form of Exhibit B hereto executed by Farmer Mac and the Central Servicer
pursuant to Section 2.01 hereof which supplements this Master Central Servicing
Agreement and identifies the Qualified Loans the Central Servicing of which is
being delegated to the Central Servicer by Farmer Mac on the Closing Date
identified therein and sets forth the terms of the servicing of such Qualified
Loans.
"Closing Date": As identified in the Central Servicing
Supplement.
"Collection Account": The Eligible Account or Accounts created and
maintained pursuant to Section 3.02. Funds required to be deposited in the
Collection Account shall be held in trust for Farmer Mac.
"Collection Period": As defined in the Central Servicing
Supplement.
"Cut-Off Date": As defined in the Central Servicing
Supplement.
"Due Date": As to any Qualified Loan, any date upon which a
scheduled installment of principal and interest on such Qualified Loan is due in
accordance with the terms of the related Mortgage Note.
"Eligible Account": An account that is either (i) maintained with a
depository institution the obligations of which would qualify as Permitted
Investments pursuant to clause (iii) of the definition thereof, (ii) an account
or accounts the deposits in which are fully insured by the Federal Deposit
Insurance Corporation or (iii) an account or accounts in a depository
institution acting in its fiduciary capacity in which the deposits in such
accounts are held in trust and are invested in an account as described in (i) or
(ii) above or in Permitted Investments. Funds deposited in each Eligible Account
shall be held in trust pending application in accordance with the provisions of
this Agreement.
"Eligible Substitute Mortgaged Property": A Mortgaged Property that is
substituted for an Existing Mortgaged Property pursuant to Section 3.02(a)
which, as evidenced by an Servicing Officer's certificate delivered to Farmer
Mac, shall:
(i) secure the same Qualified Loan that such
Existing Mortgaged Property secures; and
(ii) on the date of substitution, have a current appraised value
at least equal to the Appraised Value of such Existing Mortgaged Property.
"Environmental Review Report": The report required to be prepared pursuant
to the Securities Guide prior to the foreclosure or other conversion of any
defaulted Qualified Loan.
"Environmental Statute": Any Federal, state or local law, ordinance, rule
or regulation including, but not limited to, the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended; the Hazardous
Materials Transportation Act, as amended; the Resource Conservation and Recovery
Act, as amended; and any regulations adopted and publications promulgated
pursuant to each of the foregoing.
"Existing Mortgaged Property": A Mortgaged Property that is replaced by an
Eligible Substitute Mortgaged Property pursuant to Section 3.02(a).
"Farmer Mac": The Federal Agricultural Mortgage Corporation, a federally
chartered institution of the Farm Credit System and instrumentality of the
United States, or any successor corporation or entity or Farmer Mac's designee.
The term Farmer Mac, when used to refer to the entity owning the Qualified
Loans, shall also include any entity designated by Farmer Mac to be the holder
of the Qualified Loans.
"Field Servicer": Any Person with whom the Central Servicer has entered
into a Servicing Agreement or any Person who otherwise is acting as a Field
Servicer.
"Field Servicing Fee Rate": As to any Qualified Loan, the per annum rate
identified as the Field Servicing Fee Rate in the Schedule of Qualified Loans.
"Hazardous Materials": Any flammable explosives, radioactive materials or
any other materials, wastes or substances defined as hazardous materials,
hazardous wastes or hazardous or toxic substances by any Environmental Statute
or by any Federal, state or local governmental authority having or claiming
jurisdiction over the Mortgaged Property.
"Independent": When used with respect to any specified Person, such a
Person who (i) is in fact independent of the Seller and the Central Servicer,
(ii) does not have any direct financial interest or any material indirect
financial interest in the Seller or the Central Servicer or in an affiliate
thereof, and (iii) is not connected with the Seller or the Central Servicer as
an officer, employee, promoter, underwriter, partner, director or person
performing similar functions.
"Installment Payment": As to any Qualified Loan and any Due Date, any
payment of principal and/or interest thereon in accordance with the amortization
schedule of such Qualified Loan (after adjustment for any curtailments occurring
prior to the Due Date but before any adjustment to such amortization schedule by
reason of any bankruptcy or similar proceeding or any moratorium or similar
waiver or grace period).
"Insurance Proceeds": Proceeds paid to Farmer Mac or the Central Servicer
(including any Field Servicer) by any insurer pursuant to any insurance policy
covering a Qualified Loan or Mortgaged Property, reduced by any expenses
incurred by Farmer Mac or the Central Servicer (including any Field Servicer) in
connection with the collection of such Insurance Proceeds and not otherwise
reimbursed to Farmer Mac or the Central Servicer, such expenses including,
without limitation, legal fees and expenses.
"Insured Expenses": Expenses covered by any insurance policy covering a
Qualified Loan or Mortgaged Property that are paid by or on behalf of Farmer Mac
or the Central Servicer.
"Liquidated Qualified Loan": Any defaulted Qualified Loan (including any
REO Qualified Loan) as to which the Central Servicer has determined that all
amounts it expects to recover from or on account of such Qualified Loan have
been recovered and have been deposited into the Collection Account.
"Liquidation Expenses": Expenses incurred by or on behalf of Farmer Mac or
the Central Servicer in connection with the liquidation of any defaulted
Qualified Loan, including, without limitation, legal fees and expenses,
brokerage commissions paid to third parties, any unreimbursed amounts expended
by Farmer Mac or the Central Servicer pursuant to Sections 3.05(a), 3.07(a) and
3.07(e) (to the extent such amounts are reimbursable under the terms of such
Sections) respecting the related Qualified Loan and any related and unreimbursed
expenditures for real estate and conveyance taxes or for property restoration or
preservation. Liquidation Expenses shall not include any previously incurred
expenses in respect of a defaulted Qualified Loan that have been netted against
related REO Proceeds, and shall not include Insured Expenses.
"Liquidation Proceeds": Cash (including Insurance Proceeds) received in
connection with the liquidation of defaulted Qualified Loans and REO Qualified
Loans, whether through trustee's sale, foreclosure sale or otherwise.
"Loan-to-Value Ratio": As of any date, the fraction, expressed as a
percentage, the numerator of which is the principal balance of the related
Qualified Loan at the date of determination and the denominator of which is the
Appraised Value of the related Mortgaged Property as of the date of the
appraisal performed in accordance with the Appraisal Standards.
"Mortgage": A mortgage, deed of trust or other instrument that constitutes
a first lien on an interest in real property securing a Mortgage Note.
"Mortgage File": The legal documents (including the Mortgage Note,
Mortgage, assignment of the Mortgage, evidence of title to the Mortgaged
Property and any additional security documents) relating to a Qualified Loan.
"Mortgage Note": The originally executed note or other evidence of
indebtedness evidencing the indebtedness of a Borrower under a Qualified Loan.
"Mortgage Rate": As to any Qualified Loan, the rate of
interest borne by the related Mortgage Note.
"Mortgage Servicing Documents": The custodial documents, servicing
documents, escrow documents, if any, the original appraisal, including any
updates thereto, which was the basis for the Appraised Value, and all other
documents, records, and tapes necessary for prudent servicing in accordance with
the Central Servicer's standards for mortgage loan servicing, and such other
papers and documents, tax receipts, insurance policies, insurance premium
receipts, water stock certificates, ledger sheets, payment records, insurance
claim files and correspondence, foreclosure files and correspondence, current
and historical computerized data files and other papers and records of whatever
kind or description.
"Mortgaged Property": The property securing a Qualified
Loan.
"Net Liquidation Proceeds": As to any Liquidated Qualified
Loan, Liquidation Proceeds net of Liquidation Expenses not
theretofore reimbursed to the Central Servicer.
"Net Mortgage Rate": As to each Qualified Loan, the
Mortgage Rate less the sum of (a) the Servicing Fee Rate and (b)
the Field Servicing Fee Rate.
"Net REO Proceeds": As to any REO Qualified Loan, REO Proceeds net of any
related and otherwise unreimbursed expenses of the Central Servicer.
"Nonrecoverable Advance": Any portion of a Central Servicer Advance
previously made or proposed to be made in respect of a Qualified Loan which has
not been previously reimbursed to the Central Servicer and which, in the good
faith judgment of the Central Servicer, will not or, in the case of a proposed
Central Servicer Advance, would not be ultimately recoverable from future
Borrower payments or from Net Liquidation Proceeds, REO Proceeds or other
recoveries in respect of the related Qualified Loan. The determination by the
Central Servicer that it has made a Nonrecoverable Advance or that any proposed
advance, if made, would constitute a Nonrecoverable Advance shall be evidenced
by a written certification of a Servicing Officer delivered to Farmer Mac,
stating (i) the amount of such Nonrecoverable Advance and (ii) that the Central
Servicer has determined in good faith that such advance is or would be a
Nonrecoverable Advance in accordance with the terms hereof and setting forth the
reasons therefor.
"Permitted Investments": One or more of the following, but
only to the extent permitted by applicable regulations:
(i) obligations of, or guaranteed as to
principal and interest by, Farmer Mac or the United
States or any agency or instrumentality thereof;
(ii) repurchase agreements on obligations specified in clause (i),
which repurchase agreements will mature not later than the day preceding
the immediately following Remittance Date, provided that (a) the unsecured
short-term obligations of the party agreeing to repurchase such
obligations are at the time rated not less than A-1 by Standard & Poor's
and not less than Prime-1 by Moody's, (b) such repurchase agreements are
effected with a primary dealer recognized by a Federal Reserve Bank or (c)
such repurchase agreements are secured by obligations specified in clause
(i) above at not less than 102% of market value determined on a daily
basis;
(iii) demand and time deposits in, certificates of deposit of, or
bankers' acceptances maturing in not more than 60 days and issued by, any
depository institution or trust company incorporated under the laws of the
United States of America or any state thereof and subject to supervision
and examination by federal and/or state banking authorities, so long as at
the time of such investment or contractual commitment providing for such
investment the commercial paper or other short-term debt obligations of
such depository institution or trust company (or, in the case of a
depository institution that is the principal subsidiary of a holding
company, the commercial paper or other short-term obligations of such
holding company) have a rating of not less than A-1 from Standard & Poor's
and a rating of not less than Prime-1 from Moody's;
(iv) commercial paper (having remaining maturities of not more than
60 days) of any corporation incorporated under the laws of the United
States or any state thereof, which on the date of acquisition has been
rated not less than A-1 from Standard & Poor's and not less than Prime-1
by Moody's; and
(v) securities bearing interest or sold at a discount issued by any
corporation incorporated under the laws of the United States of America or
any state thereof if such securities are rated in the highest long-term
unsecured rating categories at the time of investment or the contractual
commitment providing for such investment by Standard & Poor's and Moody's;
provided, however, that securities issued by any particular corporation
will not be Permitted Investments to the extent that investment therein
will cause the then outstanding principal amount of securities issued by
such corporation and held as part of the Collection Account to exceed 10%
of the outstanding principal balance of the Qualified Loans being serviced
under this Agreement (it being understood that the entity directing the
investment shall be responsible for compliance with the foregoing
restriction on investments);
(vi) units of a taxable money-market portfolio rated "P-1" by
Moody's and "AAAm" by Standard & Poor's and restricted to investments in
obligations issued or guaranteed by the United States of America or
entities whose obligations are backed by the full faith and credit of the
United States of America and repurchase agreements collateralized by such
obligations;
(vii) units of a taxable money-market portfolio restricted to
investments which would be `Permitted Investments' under paragraphs (i)
through (vi) of this definition of `Permitted Investments'; and
(viii) other obligations or securities that are acceptable to (and
specified in writing by) Farmer Mac.
The foregoing is qualified to the extent that no instrument described
above shall be a Permitted Investment if such instrument evidences either (x) a
right to receive only interest payments with respect to the obligations
underlying such instrument or (y) both principal and interest payments derived
from obligations underlying such instrument and the interest and principal
payments with respect to such instrument provide a yield to maturity of greater
than 120% of the yield to maturity at par of such underlying obligations.
"Person": Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Principal Prepayment": Any payment (other than an Installment Payment) or
other recovery of principal on a Qualified Loan that is received in advance of
its scheduled Due Date.
"Principal Prepayment in Full": Any payment received on a Qualified Loan
that is in excess of the installment of principal and interest due thereon in an
amount sufficient to pay the entire principal balance of such Qualified Loan.
"Purchase Price": With respect to any Qualified Loan to be purchased
on any date pursuant to Section 3.07(g), an amount equal to the sum of (i) 100%
of the unpaid principal balance thereof as shown on the Schedule of Qualified
Loans less any principal payments made in respect of such Qualified Loan; (ii)
the unpaid accrued interest at the Net Mortgage Rate on the unpaid principal
balance thereof from the Due Date to which interest was last paid by the
Borrower to the next Due Date for such Qualified Loan; and (iii) if the date of
purchase by the Central Servicer occurs after the Qualified Loan has been
securitized, any Yield Maintenance Amount that would be payable under the terms
of the related Mortgage Note as if a Principal Prepayment in Full were made on
the date of purchase by the Central Servicer and such Yield Maintenance Amount
were calculated based on interest accruing at the Net Mortgage Rate less the sum
of (x) the Guarantee Fee Rate and (y) the Trustee Fee Rate (each of the
Guarantee Fee Rate and the Trustee Fee Rate having the meaning given such term
in the applicable securitization documents).
"Qualified Loan Receipts": With respect to any Collection Period, an
amount equal to (a) the sum of (i) the amount attributable to the Qualified
Loans that is on deposit in the Collection Account as of the close of business
on the following Remittance Date, including Borrower payments, including any
related Central Servicer Advance Requirement, Net REO Proceeds and Net
Liquidation Proceeds and any amount deposited in the Collection Account after
the preceding Remittance Date in respect of defaulted Qualified Loans purchased
by the Central Servicer or the Seller pursuant to Section 3.07(g) and (ii) any
amount on deposit in the Collection Account on the Due Date(s) in such
Collection Period in respect of the repurchase of any Qualified Loan repurchased
by the seller thereof, reduced by (b) the sum of (i) any Amount Held for Future
Distribution and (ii) all amounts permitted to be retained by the Central
Servicer pursuant to Section 3.02 or withdrawn by the Central Servicer from the
Collection Account in respect of the Qualified Loans pursuant to clauses (ii)
through (iv), inclusive, of Section 3.04(a).
"Qualified Loans": As defined in the recitals.
"Recourse Obligation": A Mortgage Note that permits the mortgagee
thereunder to seek a deficiency judgment that is enforceable under applicable
state law.
"Remittance Account": The account or accounts established by Farmer Mac
into which the Central Servicer will make deposits on each Remittance Date.
"Remittance Date": As to any Collection Period, the 15th day (or if such
15th day is not a Business Day, the next succeeding Business Day) of the month
in which such Collection Period ends.
"REO Account": The account established by the Central Servicer in which it
shall segregate all funds collected and received in connection with the
operation of any REO Qualified Loans separate and apart from its own funds and
general assets and held in trust for the benefit of Farmer Mac, which shall be
an Eligible Account and may be located in the same account as the Collection
Account, but as to which separate records (or entries) shall be maintained.
"REO Principal Amortization Amount": With respect to any REO Qualified
Loan for any Remittance Date (other than an REO Qualified Loan which has a
Scheduled Principal Balance of zero), any amount transferred during the
preceding Collection Period to the REO Account and not allocated pursuant to
clauses first and second of Section 3.07(c).
"REO Proceeds": Proceeds, other than Liquidation Proceeds, received in
respect of any REO Qualified Loan (including, without limitation, proceeds from
the rental of the related Mortgaged Property).
"REO Property": Any Mortgaged Property that has been acquired by Farmer
Mac (or an assignee of Farmer Mac and as to which Farmer Mac is the master
servicer) by foreclosure, deed-in-lieu of foreclosure or otherwise.
"REO Qualified Loan": Any Qualified Loan that is not a Liquidated
Qualified Loan and as to which the related Mortgaged Property is held by Farmer
Mac (or an assignee of Farmer Mac and as to which Farmer Mac is the master
servicer).
"Schedule of Qualified Loans": The list of Qualified Loans the
servicing of which has been assigned by Farmer Mac to the Central Servicer on
the applicable Closing Date and attached to and made part of the Central
Servicing Supplement in the form and containing the information set forth in
Attachment I thereto, which list may be amended from time to time by Farmer Mac
and the Central Servicer. Such schedule, which shall be in hard copy and in
machine readable format to Farmer Mac and the Central Servicer shall be prepared
by Farmer Mac (based on information provided to Farmer Mac by the seller of the
Qualified Loans) and may consist of multiple reports that collectively set forth
all of the information requested.
"Securities Guide": The publication entitled "Federal Agricultural
Mortgage Corporation Securities Guide," release dated April 10, 1992, as
modified by any guide update or bulletin or as replaced by any other publication
of Farmer Mac identified by Farmer Mac as a "Servicing Guide."
"Servicing Agreement": An agreement between the Central Servicer and
a Field Servicer providing for the servicing and administration of some or all
of the Qualified Loans by such Field Servicer. A Servicing Agreement does not
relieve the Central Servicer of any of its duties or obligations under this
Agreement.
"Servicing Fee Rate": As to any Qualified Loan, the per annum rate
identified as the Central Servicing Fee Rate in the Schedule of Qualified Loans.
"Servicing Officer": Any officer of the Central Servicer involved in, or
responsible for, the administration and servicing of the Qualified Loans whose
name and specimen signature appears on a list of servicing officers furnished to
Farmer Mac by the Central Servicer on the Closing Date, as such list may from
time to time be amended by delivery of written notice by an existing Servicing
Officer.
"Standard Hazard Insurance Policy": A standard fire insurance policy with
extended coverage, which shall provide standard coverage against loss by fire,
lightning, windstorm, hail, explosion, riot not attending a strike, civil
commotion, aircraft, vehicles, smoke, vandalism or malicious mischief.
"Yield Maintenance Amount": As to any Qualified Loan, the amount payable
by the Borrower thereunder in connection with a Principal Prepayment thereof
(whether voluntary or involuntary) or other acceleration by the legal holder
thereof upon a default by such Borrower thereunder, as specified in the Mortgage
Note.
ARTICLE II
MORTGAGE SERVICING DOCUMENTS
Section 2.01 Mortgage Servicing Documents. Not later than each Closing
Date, the Central Servicer shall be in possession of the Mortgage Servicing
Documents with respect to each Qualified Loan. To the extent such Mortgage
Servicing Documents are not in the possession of the Central Servicer, the
Central Servicer will immediately notify Farmer Mac in writing of the missing
documents.
ARTICLE III
CENTRAL SERVICING OF QUALIFIED LOANS
Section 3.01. Central Servicer to Act as Servicer.
(a) Commencing with each Closing Date, the Central Servicer shall service
the Qualified Loans (including REO Qualified Loans) identified in the related
Schedule of Qualified Loans in conformity with this Agreement and the Securities
Guide as it applies to the Qualified Loans and shall have full power and
authority, acting alone and/or through field servicers as provided in Section
3.15, to do any and all things which it may deem necessary or desirable in
connection with such servicing.
(b) Without limiting the generality of the foregoing, the Central Servicer
is hereby authorized and empowered by Farmer Mac when the Central Servicer
believes it appropriate, in its best judgment, but consistent with and subject
to the terms of this Agreement, to execute and deliver, on behalf of Farmer Mac,
any and all instruments of satisfaction or cancellation, or of partial or full
release or discharge and all other comparable instruments, with respect to the
Qualified Loans and with respect to the Mortgaged Properties. Farmer Mac shall
cause the Central Servicer to be furnished from time to time with such Powers of
Attorney and other documents necessary or appropriate to enable the Central
Servicer to service and administer the Qualified Loans upon the request of the
Central Servicer. The Central Servicer shall provide Farmer Mac with the form of
any such Power(s) of Attorney or other document(s) (reasonably acceptable to
Farmer Mac) and Farmer Mac agrees to cause such Power(s) of Attorney or other
documents to be executed and returned promptly after hard copy receipt thereof
by Farmer Mac. Farmer Mac acknowledges and understands that the Central Servicer
may submit Power(s) of Attorney to Farmer Mac on an annual basis for recording
each year in accordance with local law requirements, and Farmer Mac agrees to
cause such Power(s) of Attorney to be executed and returned as provided in the
preceding sentence.
Section 3.02. Collection of Certain
Qualified Loan Payments; Collection Account.
(a) The Central Servicer shall, consistent with this Agreement and, to the
extent not inconsistent with the Securities Guide, in accordance with customary
industry standards for agricultural mortgage loan servicing, make reasonable
efforts to collect all payments called for under the terms and provisions of the
Qualified Loans. The Central Servicer may in its discretion waive, postpone,
reschedule, modify or otherwise compromise the terms of payment of any Qualified
Loan so long as any such waiver, postponement, rescheduling, modification or
compromise shall not be inconsistent with this Agreement, or be consented to in
advance in writing by Farmer Mac. No such arrangement shall alter or modify the
amortization schedule of such Qualified Loan for purposes of calculating any
Central Servicer Advance Requirement in respect thereof without the prior
written consent of Farmer Mac. In addition, the Central Servicer may in its
discretion permit the substitution of an Eligible Substitute Mortgaged Property
for an Existing Mortgaged Property so long as the Mortgage Note relating to the
Qualified Loan that the Existing Mortgaged Property secures is a Recourse
Obligation. The Central Servicer may waive, in whole or in part, the obligation
of a Borrower to pay a Yield Maintenance Amount only with the prior written
consent of Farmer Mac.
(b) The Central Servicer shall establish and maintain a Collection Account
in its name for the benefit of Farmer Mac (and for which Farmer Mac shall bear
any costs and expenses incurred with respect to withdrawals with respect to
Remittance Date) in which the Central Servicer shall deposit as promptly as
practicable following receipt (but in no event later than one (1) Business Day
following receipt) except as otherwise specifically provided herein or in a
Central Servicing Supplement, the following payments and collections received by
it subsequent to the Cut-Off Date (other than in respect of principal and
interest on the Qualified Loans due on or before the Cut-Off Date):
(i) All payments on account of principal on
the Qualified Loans;
(ii) All payments on account of interest on the Qualified Loans
adjusted, in each case, to interest at the applicable Net Mortgage Rate,
except that the portion of any such payment on account of interest
accruing on any delinquent Installment Payment with respect to which a
Central Servicer Advance is outstanding need not be deposited in the
Collection Account;
(iii) Net Liquidation Proceeds, Net REO Proceeds and Insurance Proceeds
(other than Insurance Proceeds to be applied to the restoration or repair
of the related Mortgaged Property or released to the Borrower in
accordance with the Central Servicer's normal servicing procedures) net of
any amounts permitted to be withheld by the Central Servicer as servicing
compensation pursuant to Section 3.09 or permitted to be paid to the
Central Servicer pursuant to the last sentence of Section 3.07(e) and not
paid directly by Farmer Mac;
(iv) All proceeds of any Qualified Loans
purchased by the Central Servicer or repurchased by the
seller of such Qualified Loan;
(v) All Yield Maintenance Amounts paid by
Borrowers;
(vi) Any deposit required by the second
paragraph of Section 3.05(a); and
(vii) Any late charge or interest on the Qualified Loans accruing at a
default rate related to delinquent Installment Payments with respect to
which no Central Servicer Advance was made.
Notwithstanding the foregoing, the Central Servicer shall not be required
to deposit and may retain late collections, including Liquidation Proceeds,
Insurance Proceeds and REO Proceeds to the extent of unpaid Central Servicer
Advances and servicing advances with respect to the related Qualified Loans. The
foregoing requirements for deposit in the Collection Account shall be exclusive,
it being understood and agreed that, without limiting the generality of the
foregoing, payments or collections in the nature of late payment charges,
assumption fees or other service charges imposed upon Borrowers in connection
with servicing the Qualified Loans may but need not be deposited by the Central
Servicer in the Collection Account. In the event the Central Servicer shall
deposit in the Collection Account any amount not required to be deposited
therein, it may at any time withdraw such amount from the Collection Account,
any provision herein to the contrary notwithstanding.
(c) The Central Servicer shall cause the institution with which the
Collection Account is maintained to invest the funds in the Collection Account
attributable to the Qualified Loans in those Permitted Investments specified in
writing by Farmer Mac which shall mature in immediately available funds not
later than the day preceding the next Remittance Date and shall not be sold or
disposed of prior to maturity. All earnings and gains realized from any such
investments in the Collection Account shall be for the benefit of Farmer Mac.
The amount of any losses or expenses incurred in connection with the investment
of amounts in the Collection Account shall be deducted from the amount to be
distributed to Farmer Mac.
(d) The Central Servicer shall give notice to Farmer Mac of the location
of the Collection Account, and of any change in the location thereof, prior to
the use thereof.
Section 3.03. Payment of Taxes, Assessments and Other
Items; Advances by Central Servicer.
(a) The Central Servicer shall use its best efforts to cause the Borrowers
to pay any taxes, assessments, Standard Hazard Insurance Policy premiums, or
other charges with respect to which the failure to pay would result in a lien on
the related Mortgaged Property by operation of law or comparable items relating
to the Mortgaged Properties.
(b) The Central Servicer shall advance the payments referred to in
subsection (a) that are not timely paid by the Borrowers on the date when the
tax, premium or other cost for which such payment is intended is due, but the
Central Servicer shall be required so to advance only (x) to the extent
necessary, in the good faith judgment of the Central Servicer, to protect Farmer
Mac against any loss and (y) so long as in the good faith judgment of the
Central Servicer, such advances ultimately would be recoverable from payments
(other than Installment Payments) made by the Borrower or from Liquidation
Proceeds.
Section 3.04. Permitted Withdrawals from the
Collection Account; Maintenance of Accounting Records.
(a) The Central Servicer may, from time to time as provided herein, make
withdrawals from the Collection Account for the following purposes:
(i) to make distributions to Farmer Mac on each
Remittance Date;
(ii) at any time to withdraw any amount deposited in the
Collection Account that was not required to be deposited therein pursuant
to Section 3.02(b);
(iii) to reimburse itself for previously unreimbursed Central
Servicer Advances and servicing advances, the Central Servicer's right to
withdraw amounts pursuant to this clause (iii) being limited to amounts
received on particular Qualified Loans (including, for this purpose,
Borrower payments, Insurance Proceeds, Liquidation Proceeds, REO Proceeds
and proceeds from the repurchase of the related Qualified Loan) which
represent late recoveries of Installment Payments respecting which any
such Central Servicer Advance was made; and
(iv) to reimburse itself for any Nonrecoverable Advance and to
pay to an Independent contractor any fee to be paid or reimbursed by
Farmer Mac pursuant to the last sentence of Section 3.07(e).
(b) The Central Servicer shall keep and maintain or cause to be kept and
maintained separate accounting, on a Qualified Loan-by-Qualified Loan basis, for
the purpose of providing Farmer Mac or its designee with the information
necessary for the preparation of such reports as may be requested by Farmer Mac.
Section 3.05. Maintenance of Hazard Insurance and
Errors and Omissions and Fidelity Coverage.
(a) The Central Servicer shall cause to be maintained for each Qualified
Loan a Standard Hazard Insurance Policy insuring against loss or damage to the
insurable improvements included in the Appraised Value in an amount not less
than the value assigned to such improvements in the related appraisal. The
Central Servicer shall also cause to be maintained on property acquired upon
foreclosure, or deed in lieu of foreclosure, of any Qualified Loan, a Standard
Hazard Insurance Policy in an amount at least equal to the amount necessary to
avoid the application of any co-insurance clause contained in the related hazard
insurance policy. Pursuant to Section 3.02, any amounts collected by the Central
Servicer under any such policies (other than amounts to be applied to the
restoration or repair of the related Mortgaged Property or property thus
acquired or amounts released to the Borrower in accordance with the Central
Servicer's normal servicing procedures) shall be deposited in the Collection
Account, subject to withdrawal pursuant to Section 3.04. Any cost incurred by
the Central Servicer in maintaining any such insurance shall not, for the
purpose of calculating amounts required to be deposited in the Collection
Account, be added to the amount owing under the Qualified Loan, notwithstanding
that the terms of the Qualified Loan so permit. Such costs shall be reimbursable
to the Central Servicer in accordance with Section 3.04(a)(iii) as if such costs
were contained in a Central Servicer Advance. It is understood and agreed that
no earthquake or other additional insurance is to be required of any Borrower or
maintained on property acquired in respect of a Qualified Loan other than
pursuant to such laws and regulations applicable to such Borrower as shall at
any time be in force and as shall require such additional insurance.
If the Central Servicer shall maintain a blanket policy issued by an
insurer having a Moody's financial strength rating of A3 or higher and insuring
against hazard losses on all of the Qualified Loans, it shall conclusively be
deemed to have satisfied its obligation as set forth in this Section 3.05(a).
Such policy may contain a deductible clause, in which case, if there shall not
have been maintained on the related Mortgaged Property or acquired property an
insurance policy complying with the first sentence of the first paragraph of
this Section 3.05(a), and there shall have been a loss that would have been
covered by such a policy had it been maintained, the Central Servicer shall be
required to deposit from its own funds into the Collection Account the amount
not otherwise payable under the blanket policy because of such deductible
clause.
(b) The Central Servicer shall obtain and maintain at its own
(non-reimbursable) expense and keep in full force and effect throughout the term
of this Agreement a blanket fidelity bond and an errors and omissions insurance
policy (which errors and omissions insurance policy shall provide coverage in
accordance with the Securities Guide) covering the Central Servicer's officers
and employees and other persons acting on behalf of the Central Servicer in
connection with its activities under this Agreement, except that such policies
need not specifically insure against the acts of Field Servicers, except to the
extent the Field Servicer is receiving payments on Qualified Loans, or executing
documents under a power of attorney granted by the Central Servicer. In the
event that any such required bond or policy ceases to be in effect, the Central
Servicer shall obtain a comparable replacement bond or policy from an issuer or
insurer, as the case may be, providing such coverage as shall satisfy the
requirements set forth in the Securities Guide. Coverage of the Central Servicer
under a policy or bond obtained by an Affiliate of the Central Servicer and
providing the coverage required by this Section 3.05(b) shall satisfy the
requirements of this Section 3.05(b).
Section 3.06. Enforcement of Due-on-Sale Clauses;
Assumption Agreements.
(a) When any Mortgaged Property is conveyed by the Borrower, the Central
Servicer may, but shall not be required to, enforce any due-on-sale or
due-on-encumbrance clause contained in any Mortgage Note or Mortgage, in
accordance with the provisions of such Mortgage Note or Mortgage and in the best
interests of Farmer Mac, and may approve the assumption of the Mortgage Note by
the transferee of the Mortgaged Property; provided, however, that after giving
due effect to any such additional encumbrance, the loan-to-value ratio of the
related Qualified Loan is not in excess of the Loan-to-Value Ratio thereof as of
the Cut-Off Date.
(b) In any case in which a Mortgaged Property is to be conveyed to a
Person by a Borrower, and such Person is to enter into an assumption agreement
or substitution agreement or supplement to the Mortgage Note or Mortgage which
requires the signature of Farmer Mac, or if an instrument of release to be
signed by Farmer Mac is required releasing the Borrower from liability on the
Qualified Loan, the Central Servicer shall deliver or cause to be delivered to
Farmer Mac (or its designee) for signature the assumption agreement with the
Person to whom the Mortgaged Property is to be conveyed and such substitution
agreement or supplement to the Mortgage Note or Mortgage or other instruments as
are reasonable or necessary to carry out the terms of the Mortgage Note or
Mortgage or otherwise to comply with any applicable laws regarding assumptions
or the transfer of the Mortgaged Property to such Person. The Central Servicer
shall also deliver or cause to be delivered to Farmer Mac with the foregoing
documents a letter explaining the nature of such documents and the reason or
reasons why Farmer Mac's signature is required. With such letter, the Central
Servicer shall deliver to Farmer Mac a certificate of a Servicing Officer in
form reasonably satisfactory to Farmer Mac certifying that: (i) a Servicing
Officer has examined and approved such documents as to form and substance, (ii)
Farmer Mac's execution and delivery thereof will not conflict with or violate
any terms of this Agreement; (iii) subsequent to the closing of the transaction
involving the assumption or transfer (A) the Qualified Loan will continue to be
secured by a first mortgage lien pursuant to the terms of the Mortgage and (B)
no material term (including, but not limited to, the Mortgage Rate, the amount
of any Installment Payment and any term affecting the amount or timing of
payment) of the Qualified Loan will be altered and the term of the Qualified
Loan will not be increased and (iv) if the seller/transferor of the Mortgaged
Property is to be released from liability on the Qualified Loan, the Central
Servicer has evaluated the creditworthiness of the buyer/transferee and has
determined that if the buyer/transferee were applying for the Qualified Loan
being assumed, such loan would be a Qualified Loan, and such release will not
adversely affect the collectibility of the Qualified Loan (based on the Central
Servicer's good faith determination). Upon receipt of and in reliance upon such
certificate, Farmer Mac (or its designee) shall execute any necessary
instruments for such assumption or substitution of liability. Upon the closing
of the transactions contemplated by such documents, the Central Servicer shall
cause the originals of the assumption agreement, the release (if any), or the
modification or supplement to the Mortgage Note or Mortgage to be delivered to
Farmer Mac.
(c) The Central Servicer shall be entitled to approve a request from a
Borrower for the granting of an easement on the related Mortgaged Property in
favor of another Person, any alteration or demolition of the related Mortgaged
Property or other similar matters if (A) it has determined, exercising its good
faith business judgment in the same manner as it would if it were the owner of
the related Qualified Loan, that (i) the security for such Qualified Loan would
not be materially adversely affected thereby; (ii) the timely and full
collectibility of such Qualified Loan would not be adversely affected thereby;
and (iii) as a result of such easement, alteration, demolition orother similar
matter, the loan-to-value ratio would not be in excess of the Loan-to-Value
Ratio with respect to such Qualified Loan as of the Cut-Off Date; and (B) it
follows the requirements and procedures therefor as set forth in the Securities
Guide, if applicable.
Section 3.07. Realization Upon Defaulted Qualified
Loans.
(a) (i) Notwithstanding anything to the contrary in this Agreement, the
Central Servicer shall not, on behalf of Farmer Mac, obtain title to a
Mortgaged Property as a result of foreclosure or otherwise, and shall not
otherwise acquire possession of, or take any other action with respect to,
any Mortgaged Property, if, as a result of any such action, Farmer Mac
would be considered to hold title to, to be a "mortgagee-in-possession"
of, or to be an "owner" or "operator" of, such Mortgaged Property within
the meaning of any Environmental Statute or a "discharger" or "responsible
party" thereunder, unless the Central Servicer has prepared or caused to
be prepared an Environmental Review Report and obtained any consents in
connection therewith as shall be required by the Securities Guide. The
Central Servicer shall foreclose upon or otherwise comparably convert the
ownership of Mortgaged Properties securing such of the Qualified Loans as
come into and continue in default and as to which no arrangements
consistent with this Agreement and the Securities Guide have been made for
collection of delinquent payments pursuant to Section 3.02. In connection
with such foreclosure or other conversion, and in connection with any
restoration of any Mortgaged Property after foreclosure or conversion and
before disposal thereof, the Central Servicer shall follow such practices
and procedures as it shall deem, in its best judgment, necessary or
advisable in accordance with applicable law and as shall be required or
permitted by this Agreement and the Securities Guide. The foregoing is
subject to the proviso that the Central Servicer shall not be authorized
to incur expenses in connection with any foreclosure or conversion, or
towards the restoration of any property, unless it shall determine in good
faith that such conversion, foreclosure and/or restoration will increase
the proceeds of liquidation of the Qualified Loan to Farmer Mac after
reimbursement for the expenses therefor. In the event that the Central
Servicer makes such a determination, it shall advance any Liquidation
Expenses from its own funds. Any Liquidation Expenses incurred by the
Central Servicer in accordance with the foregoing shall be reimbursable to
the Central Servicer, out of REO Proceeds or Liquidation Proceeds relating
to such Qualified Loan in accordance with Section 3.04(a)(iii) as if such
costs were contained in a Central Servicer Advance. The Central Servicer
shall be entitled to receive interest on such Liquidation Expenses to the
extent such interest is collected under the terms of the related Mortgage
Note; provided, however, that, the Central Servicer shall only be entitled
to such interest after an aggregate amount equal to the sum of (i) the
outstanding principal balance of the related Qualified Loan; (ii) interest
accrued and unpaid on such Qualified Loan at the applicable Net Mortgage
Rate; and (iii) any applicable Yield Maintenance Amount has been deposited
in the Remittance Account with respect to such Qualified Loan.
(ii) If the Environmental Review Report discloses any adverse
information with respect to any Mortgaged Property or if any questions
required to be answered in the Environmental Review Report cannot be
answered, the Central Servicer shall either (x) recommend to Farmer Mac in
writing that foreclosure, trustee's sale or a deed-in-lieu of foreclosure
should be delayed or abandoned, stating the reasons for the Central
Servicer's conclusions and attaching a copy of Part I of the Environmental
Review Report or (y) conduct Phase II of an Environmental Review (as such
terms are defined in the Securities Guide).
(iii) If the Environmental Review Report or Phase II of the
Environmental Review discloses the presence, disposal, escape, seepage,
leakage, spillage, discharge, emission, release or threatened release of
any Hazardous Materials on, from or affecting the Mortgaged Property and
if the cost of eliminating such Hazardous Materials exceeds the potential
recovery upon liquidation of the related Qualified Loan the Central
Servicer shall not allow such Qualified Loan to become an REO Qualified
Loan and shall take such action as it deems to be in the best interest of
Farmer Mac, including, if the Central Servicer deems it so appropriate,
and after making reasonable efforts to locate a purchaser, the release of
all or a portion of the lien of the related Mortgage.
(b) In the event that title to any Mortgaged Property is acquired for the
benefit of Farmer Mac (or Farmer Mac's assignee or designee) in foreclosure, by
delivery of a deed-in-lieu of foreclosure or otherwise, the named grantee of the
deed or certificate of sale shall be "First Trust National Association, as
Custodian/Trustee" or such successor custodian/trustee as identified by Farmer
Mac. The Central Servicer, on behalf of Farmer Mac, shall use its best efforts
to dispose of any REO Property in a reasonably expeditious manner and otherwise
in accordance with any applicable Environmental Statute.
(c) The Central Servicer shall separately account for all funds collected
and received in connection with the operation of any REO Property in the REO
Account. The aggregate of the amounts deposited in the REO Account during a
Collection Period in respect of an REO Property pursuant to this Section shall
be allocated first to all amounts payable to the Central Servicer with respect
to such REO Property or the related Qualified Loan pursuant to this Section and
remaining unpaid, second to all interest accrued and unpaid thereon from the
last date to which interest was paid by the Borrower (or deemed to have been
paid through previous applications to interest pursuant to this clause second)
and third to any REO Principal Amortization Amount. Interest and earnings on
funds deposited in the REO Account shall accrue to the benefit of Farmer Mac.
(d) The Central Servicer shall have full power and authority, subject only
to the specific requirements and prohibitions of this Agreement, to do any and
all things in connection with any REO Property as are consistent with the manner
in which the Central Servicer manages and operates similar property owned by the
Central Servicer or any of its Affiliates, all on such terms and for such period
as the Central Servicer deems to be in the best interests of Farmer Mac. In
connection therewith, the Central Servicer shall deposit, or cause to be
deposited, on a daily basis in the REO Account all revenues received by it with
respect to the related REO Property and shall withdraw therefrom funds necessary
for the proper operation, management and maintenance of the related REO Property
including:
(i) all insurance premiums due and payable in
respect of any REO Property;
(ii)all real estate taxes and assessments in respect of any REO
Property that may result in the imposition of a lien thereon; and
(iii)all costs and expenses necessary to maintain and operate such
REO Property.
To the extent that amounts on deposit in the REO Account are insufficient
for the purposes set forth in (i) through (iii) above with respect to any REO
Property, the Central Servicer shall advance from its own funds such amount as
is necessary for such purposes if, but only if, the Central Servicer would make
such advances if the Central Servicer owned such REO Property and if, in the
Central Servicer's good faith business judgment, the payment of such amounts
will be recoverable from the operation or sale of that REO Property.
(e) The Central Servicer on behalf of Farmer Mac may contract with any
Independent contractor for the operation and management of any REO Property,
provided that:
(i) the terms and conditions of any such contract shall not be
inconsistent with the terms of this Agreement;
(ii) any such contract shall require, or shall be administered to
require, that the Independent contractor pay all costs and expenses
incurred in connection with the operation and management of such REO
Property, including those listed above, and remit all related revenues
(net of such costs and expenses) to the Central Servicer as soon as
practicable, but in no event later than thirty days following the receipt
thereof by such Independent contractor;
(iii) none of the provisions of this Section 3.07(e) relating to any such
contract or to actions taken through any such Independent contractor shall
be deemed to relieve the Central Servicer of any of its duties and
obligations to Farmer Mac with respect to the operation and management of
any such REO Property; and
(iv) the Central Servicer shall be obligated with respect thereto to
the same extent as if it alone were performing all duties and obligations
in connection with the operation and management of such REO Property.
The Central Servicer shall be entitled to enter into any agreement with
any Independent contractor performing services for it related to its duties and
obligations hereunder for indemnification of the Central Servicer by such
Independent contractor, and nothing in this Agreement shall be deemed to limit
or modify such indemnification. The Central Servicer (provided it act as an
independent contractor with respect to properties held by other entities) or any
Independent contractor shall be entitled to a fee, based on the prevailing
market rate (determined after consultation with Farmer Mac), for the operation
and management of any REO Property. If such fee is not covered by gross revenues
from the related REO Property, the Central Servicer or other Independent
contractor shall be paid by Farmer Mac for all fees owed it.
(f) On or before each Remittance Date, the Central Servicer shall withdraw
from the REO Account and deposit into the Collection Account Net REO Proceeds
received or collected during the related Collection Period less amounts
reasonably anticipated to be needed to pay recurring expenses relating to REO
Properties in the next twelve months.
(g) Notwithstanding anything in this Agreement to the contrary, the
Central Servicer shall have the right but not the obligation to purchase any
Qualified Loan from Farmer Mac at such time as such Qualified Loan comes into
and continues in default for a period of at least 90 days. If the Central
Servicer exercises its right so to purchase, the Central Servicer shall deposit
the Purchase Price with respect to such defaulted Qualified Loan into the
Collection Account not later than the Remittance Date next succeeding the
Collection Period during which the Central Servicer notifies Farmer Mac of its
intention to purchase such defaulted Qualified Loan.
(h) If applicable state law permits an action for a deficiency judgment,
the Central Servicer shall have the right to determine whether to seek a
deficiency judgment or enforce any applicable additional security documents
following foreclosure, exercising its good faith business judgment in the same
manner as it would if it had been the owner of the related Qualified Loan.
(i) The Central Servicer shall neither be required to take nor to omit to
take any action in any case where such action or omission, in its good faith
business judgment, would cause it to be liable under an Environmental Statute.
If the Central Servicer determines that any action or omission would so subject
it to such liability, it shall promptly notify Farmer Mac.
Section 3.08. Farmer Mac to Cooperate; Release of
Mortgage Files.
(a) Upon receipt of the payment in full of any Qualified Loan, or upon the
receipt by the Central Servicer of a notification that payment in full will be
escrowed in a manner customary for such purposes, the Central Servicer shall
immediately notify Farmer Mac (or its designee) by a certification of a
Servicing Officer in form reasonably acceptable to Farmer Mac (which
certification shall include a statement to the effect that all amounts received
or to be received in connection with such payment required to be deposited in
the Collection Account pursuant to Section 3.02 have been or will be so
deposited) and shall request delivery to it of the Mortgage File. Upon receipt
of such certification and request, Farmer Mac shall cause the related Mortgage
File to be released to the Central Servicer and the request for reconveyance,
deed of reconveyance or release or satisfaction of mortgage or such instrument
releasing or reassigning the lien of the Mortgage prepared by the Central
Servicer, together with the Mortgage Note with written evidence of cancellation
thereon to be executed and delivered to the Central Servicer. Farmer Mac shall
cause the Mortgage File to be released and such other documents or instruments
in accordance with this Section 3.08 to be executed and delivered promptly
(generally within 2 Business Days) after receipt by Farmer Mac of the foregoing
request. No expenses incurred in connection with recording any instrument of
satisfaction or deed of reconveyance shall be chargeable to the Collection
Account.
(b) From time to time as is appropriate for the servicing or foreclosure
of any Qualified Loan, Farmer Mac shall cause the related Mortgage File or any
document therein to be delivered to the Central Servicer upon Farmer Mac's
receipt of a request for release (in form satisfactory to Farmer Mac) from the
Central Servicer requesting delivery of such file or document. Farmer Mac shall
cause such release promptly (generally within 2 Business Days after receipt by
Farmer Mac of the foregoing request for release. The Central Servicer shall
return each Mortgage File or any document therein so released to Farmer Mac when
the need therefor by the Central Servicer no longer exists, unless (i) the
Qualified Loan has been liquidated and the Liquidation Proceeds relating to the
Qualified Loan have been deposited in the Collection Account or (ii) the
Mortgage File or such document has been delivered to any attorney, or to a
public trustee or other public official as required by law, for purposes of
initiating or pursuing legal action or other proceedings for the foreclosure of
the Mortgaged Property either judicially or nonjudicially, and the Central
Servicer has delivered to Farmer Mac a certificate of a Servicing Officer
certifying as to the name and address of the Person to which such Mortgage File
or such document was delivered and the purpose or purposes of such delivery. In
the event of the liquidation of a Qualified Loan, Farmer Mac shall cause the
request for release with respect thereto to be delivered to the Central Servicer
upon deposit of the related Liquidation Proceeds in the Collection Account and
the Central Servicer's request for delivery of the request for release.
(c) Farmer Mac shall cause the execution and delivery to the Central
Servicer of any court pleadings, requests for trustee's sale or other documents
prepared by the Central Servicer and necessary to the foreclosure or Farmer
Mac's sale, bankruptcy sale or work out settlement in respect of a Mortgaged
Property or to any legal action brought to obtain judgment against any Borrower
on the Mortgage Note, Mortgage or Additional Collateral Documents or to obtain a
deficiency judgment, or to enforce any other remedies or rights provided by the
Mortgage Note, Mortgage or Additional Collateral Documents or otherwise
available at law or in equity. Together with such documents or pleadings, the
Central Servicer shall deliver to Farmer Mac a certificate of a Servicing
Officer requesting that such pleadings or documents be caused to be executed by
Farmer Mac and certifying as to the reason such documents or pleadings are
required and that the execution and delivery thereof will not invalidate any
insurance coverage under any required insurance policy or invalidate or
otherwise affect the lien of the Mortgage, except for the termination of such a
lien upon completion of the foreclosure or trustee's sale.
Section 3.09. Servicing and Other Compensation.
(a) The Central Servicer, as compensation for its activities and
obligations hereunder, shall be entitled to withhold (i) from each payment on
account of interest on a Qualified Loan (x) the amount of interest calculated at
the Servicing Fee Rate to the extent, if any, that the interest component of the
payment received is in excess of interest calculated at the Net Mortgage Rate
and (y) the amount, if any, of each such payment representing interest accruing
on any delinquent Installment Payment with respect to which a Central Servicer
Advance has been made by and not reimbursed to the Central Servicer, (ii) from
Net REO Proceeds, the amount, if any, by which the portion thereof allocable to
interest is in excess of interest at the Net Mortgage Rate but not to exceed
interest at the Servicing Fee Rate for the period deemed to be covered thereby,
and (iii) from Net Liquidation Proceeds the amount, if any, by which such Net
Liquidation Proceeds are in excess of the sum of (x) the unpaid principal
balance of the related Qualified Loan together with accrued and unpaid interest
thereon at the Net Mortgage Rate to the date of the final liquidation thereof
and (y) any applicable Yield Maintenance Amount, but not in excess of interest
calculated at the Servicing Fee Rate from the date of the last payment of fees
to the Central Servicer with respect to each related Liquidated Qualified Loan.
The Central Servicer shall also be entitled to additional servicing compensation
in the form of assumption fees, late payment charges, interest calculated at a
penalty rate (but only with respect to Installment Payments for which a Central
Servicer Advance is outstanding) and other service charges imposed upon
Borrowers in connection with servicing the Qualified Loans.
(b) The Central Servicer shall be required to pay all expenses incurred by
it in connection with its servicing activities hereunder and shall not be
entitled to reimbursement therefor except as specifically provided in this
Agreement or the applicable Central Servicing Supplement.
Section 3.10. Access to Certain Documentation
Regarding the Qualified Loans.
(a) Upon the prior written request of Farmer Mac received reasonably in
advance, the Central Servicer shall provide reasonable access to representatives
of Farmer Mac (including its assignee or designee) to documentation regarding
the Qualified Loans during normal business hours at the offices of the Central
Servicer designated by it. The Central Servicer shall permit such
representatives to photocopy any such documentation and shall provide equipment
for that purpose. The Central Servicer shall forward to Farmer Mac such reports
as may be required by Farmer Mac with respect to delinquent Qualified Loans,
which reports shall include information broken down by aging of delinquency,
specifying the Qualified Loans included in each category.
(b) The Central Servicer shall maintain or cause to be maintained adequate
books and records pertaining to each Qualified Loan serviced hereunder
including, but not limited to, copies of all Mortgage Servicing Documents and
any additional documentation customarily contained in an agricultural loan
servicing file. The Central Servicer agrees that such documents shall be
maintained until the earlier of (a) seven years after the maturity of the
Qualified Loan; and (b) the date such documentation is transferred to a
successor servicer that shall have assumed the Central Servicer's
responsibilities and obligations in accordance with this Agreement. Such
documentation may be in the form of microfilm, microfiche, ledger cards,
magnetic media or other "machine readable" records, or any combination thereof.
Section 3.11. Annual Statement as to Compliance. The Central Servicer will
deliver to Farmer Mac, on or before March 31 of each year, beginning with the
first March 31 that occurs at least six months after the Cut-Off Date, an
Officers' Certificate stating, as to each signer thereof, that (i) a review of
the activities of the Central Servicer during the preceding calendar year and of
its performance under this Agreement has been made under such officer's
supervision; (ii) to the best of such officer's knowledge, based on such review,
the Central Servicer has fulfilled all its obligations under this Agreement
throughout such year, or, if there has been a default in the fulfillment of any
such obligation, specifying each such default known to such officer and the
nature and status thereof; and (iii) with respect to each Mortgaged Property,
except as identified in writing to Farmer Mac, all Hazard Insurance Premiums,
assessments, taxes and other charges that may become liens having precedence
over the related Mortgage have been paid current.
Section 3.12. Submission of Independent Public
Accountants' Reports.
(a) Within 120 days after the close of each fiscal year of the Central
Servicer, beginning with the fiscal year ending in 199_, the Central Servicer
shall deliver to Farmer Mac a copy of the report of Independent accountants
respecting the Central Servicer's, or the Central Servicer's parent
corporation's, consolidated financial statements for the preceding fiscal year.
(b) On or before September 1 of each year, beginning September 1, 1997,
the Central Servicer shall cause a firm of Independent accountants (who may also
render other services to the Central Servicer) to furnish an agreed upon
procedures report to Farmer Mac indicating that such firm has performed the
procedures set forth as Exhibit A hereto and detailing any findings.
Notwithstanding the foregoing, the Central Servicer shall cause such reports to
be delivered at such less frequent as Farmer Mac, in its sole discretion,
consents to in writing.
Section 3.13. Inspections of the Mortgaged Properties. The Central
Servicer shall cause each Mortgaged Property to be physically inspected at least
annually to determine that (a) the Mortgaged Property has not been abandoned and
(b) the agricultural activities conducted thereon appear to be conducted in
accordance with customary and reasonable farming practices. Such inspections
shall be conducted (i) at no expense to Farmer Mac, (ii) by a Person
knowledgeable regarding good farming practices for the agriculture being
conducted on the Mortgaged Property and (iii) during the production season for
the particular type of agricultural product being produced thereon. If either of
the foregoing conditions set forth in clauses (a) and (b) above is not present
with respect to any Mortgaged Property, the Central Servicer shall promptly
notify Farmer Mac and shall take such action with respect thereto as may be
permitted by the related Mortgage and as may be reasonably determined by the
Central Servicer to be in the best interests of Farmer Mac.
Section 3.14. Partial Releases. At the request of a Borrower, the Central
Servicer may release a portion of any Mortgaged Property from the lien of the
related Mortgage provided that: (i) the remaining portion of the Mortgaged
Property is reappraised by an appraiser in accordance with the Appraisal
Standards, (ii) the Borrower makes a prepayment in part (and pays any applicable
Yield Maintenance Amount), if necessary, such that the loan-to-value ratio of
the remaining principal amount of the related Qualified Loan outstanding after
such partial prepayment to the reappraised value of the remaining portion of the
Mortgaged Property is no greater than the maximum loan-to-value ratio provided
for similar loans in the Securities Guide, (iii) the cash flow from the
remaining portion of the Mortgaged Property is sufficient to service the
remaining indebtedness under the related Mortgage Note, and (iv) the Central
Servicer delivers to Farmer Mac prior to any such partial release a Servicing
Officer's certificate certifying that such partial release meets the foregoing
conditions of this Section 3.14 and, subsequent to such partial release, a copy
of the executed partial release with appropriate recording information noted
thereon. At the Borrower's request, the Central Servicer will reschedule the
repayment of the remaining payments on the Qualified Loan to provide for the
amortization of the remaining principal balance of the Qualified Loan, after
taking into account the prepayment related to the partial release, over the
remaining term of the Qualified Loan. Any prepayments (and any applicable Yield
Maintenance Amounts) received by the Central Servicer pursuant to a partial
release shall be deposited in the Collection Account and the prepayments shall
be treated for all purposes of this Agreement as partial prepayments on the
Qualified Loans.
Section 3.15. Servicing Agreements between Central Servicer and Field
Servicers. The Central Servicer may enter into Servicing Agreements with Field
Servicers who satisfy the requirements set forth in the Securities Guide for a
portion of the servicing of some or all of the Qualified Loans. References in
this Agreement to actions taken or to be taken by the Central Servicer in
servicing the Qualified Loans include actions taken or to be taken by a Field
Servicer on behalf of the Central Servicer. Each Servicing Agreement will be
upon such terms and conditions as are permitted by the Securities Guide and are
not inconsistent with this Agreement and as the Central Servicer and the Field
Servicer have agreed. The Central Servicer and the Field Servicer may enter into
amendments thereto or different forms of Servicing Agreements and nothing herein
shall be deemed to limit in any respect the discretion of the Central Servicer
to modify or enter into different Servicing Agreements; provided, however, that
any such amendments or different forms shall not violate the provisions of this
Agreement or the Securities Guide.
Section 3.16. Successor Field Servicers. The Central Servicer shall be
entitled to terminate any Servicing Agreement in accordance with the terms and
conditions of such Servicing Agreement and without any limitation by virtue of
this Agreement; provided, however, that in the event of termination of any
Servicing Agreement by the Central Servicer or the Field Servicer, the Central
Servicer shall either act as Field Servicer of the related Qualified Loan or
enter into a Servicing Agreement with a successor Field Servicer which will be
bound by the terms of a Servicing Agreement entered into with such successor
Field Servicer. The Central Servicer shall notify Farmer Mac of any termination
of any Field Servicer.
Section 3.17. Liability of the Central Servicer. Notwithstanding any
Servicing Agreement, any of the provisions of this Agreement relating to
agreements or arrangements between the Central Servicer or a Field Servicer or
reference to actions taken through a Field Servicer or otherwise, the Central
Servicer shall remain obligated and liable to Farmer Mac for the servicing of
the Qualified Loans in accordance with the provisions of Section 3.01 without
diminution of such obligation or liability by virtue of such Servicing
Agreements or arrangements or by virtue of indemnification from the Field
Servicer and to the same extent and under the same terms and conditions as if
the Central Servicer alone were servicing and administering the Qualified Loans.
For purposes of the foregoing, amounts received by a Field Servicer in
connection with a Qualified Loan or REO Property shall be deemed to have been
received by the Central Servicer. The Central Servicer shall be entitled to
enter into any agreement with a Field Servicer for indemnification of the
Central Servicer and nothing contained in this Agreement shall be deemed to
limit or modify such indemnification.
Section 3.18. No Contractual Relationship Between Field Servicer and
Farmer Mac . Any Servicing Agreement that may be entered into and any other
transactions or services relating to the Qualified Loans involving a Field
Servicer in its capacity as such shall be deemed to be between the Field
Servicer and the Central Servicer alone. Farmer Mac shall not be deemed a party
thereto and shall have no claims, rights, obligations, duties or liabilities
with respect to the Central Servicer or any Field Servicer under such Servicing
Agreements except as set forth in Section 3.19.
Section 3.19. Assumption or Termination of
Servicing Agreements by Farmer Mac.
(a) In the event that the Central Servicer shall for any reason no longer
be acting as such hereunder (including by reason of an Event of Default) and
Farmer Mac or its designee shall have assumed the duties of the Central
Servicer, Farmer Mac or such designee may, at Farmer Mac's sole discretion,
thereupon assume all of the rights and obligations of the Central Servicer under
each Servicing Agreement that may have been entered into. Each Servicing
Agreement shall contain provisions allowing Farmer Mac to rescind such agreement
without penalty in the event the Central Servicer shall no longer be acting as
such. Farmer Mac, its designee or the successor servicer for Farmer Mac shall be
deemed to have assumed all of the Central Servicer's interest therein and to
have replaced the Central Servicer as a party to each Servicing Agreement to the
same extent as if such agreement had been assigned to the assuming party, except
that the Central Servicer shall not thereby be relieved of any liability or
obligations under any Servicing Agreement which arose prior to the date each
Servicing Agreement is deemed so assigned and assumed.
(b) The Central Servicer shall, upon request of Farmer Mac but at the
expense of the Central Servicer: (i) deliver to the assuming party all documents
and records held by the Central Servicer relating to each Servicing Agreement
and the Qualified Loans then being serviced and an accounting of amounts
collected and held by it; (ii) prepare, execute and deliver all documents and
instruments and take all actions reasonably requested by Farmer Mac or its
designee to effect the succession by Farmer Mac or its designee hereunder and
the transfer of each Servicing Agreement to the assuming party; and (iii) and
otherwise use its best efforts to effect the orderly and efficient succession
hereunder and transfer of each Servicing Agreement to the assuming party.
ARTICLE IV
PAYMENTS TO FARMER MAC AND REPORTS
Section 4.01. Central Servicer's Report; Remittance
Reconciliation Report; Loan Servicing Report.
(a) Not later than the third Business Day of each calendar month, the
Central Servicer shall deliver to Farmer Mac and Farmer Mac's designee, a
Central Servicer's Report. Such Central Servicer's Report shall be in a
machine-readable format in accordance with the tape specifications and other
requirements set forth in Exhibit C hereto or in such other format or conform to
such other specifications or requirements as Farmer Mac and the Central Servicer
may agree.
(b) In addition to the information required under Section 4.01(a), the
Central Servicer's Report shall contain such information as is reasonably
requested by Farmer Mac, including, but not limited to the information described
below.
(i) a listing of all previously unadvanced Installment Payments
(with the interest components thereof adjusted to interest at the related
Net Mortgage Rates) on the Qualified Loans due on or prior to the
preceding Due Date that were delinquent on the preceding Remittance Date;
(ii) Central Servicer Advances made on the
preceding Remittance Date;
(iii) the compensation retained by the Central
Servicer with respect to the previous Collection Period,
itemized by category (e.g., type of fees);
(iv) the amount of reimbursement for Central
Servicer Advances withdrawn from the Collection Account
during the preceding Collection Period;
(v) an itemization of unreimbursed Central
Servicer Advances (exclusive of Nonrecoverable Advances) as
of the preceding Due Date;
(vi) an itemization of any Central Servicer
Advances which became Nonrecoverable Advances during the
previous Collection Period;
(vii) a reconciliation of each custodial account (e.g., any
Collection Accounts and REO Accounts) for the second preceding Collection
Period;
(viii) a reconciliation of Scheduled Balances
to actual balances of the Qualified Loans; and
(xi) such other information as Farmer Mac may
from time to time request.
(c) On or before the tenth day of each calendar month (or if such tenth
day is not a Business Day, the next succeeding Business Day), the Central
Servicer will provide to Farmer Mac and its designee a Loan Servicing Report
substantially in the form of Exhibit D hereto, which Loan Servicing Report will
provide information (including proposed remedial action to be taken by the
Central Servicer) with respect to: Qualified Loans which have been identified by
Farmer Mac as "watch-listed" loans; delinquent Qualified Loans; Qualified Loans
in foreclosure; REO Qualified Loans; and bankruptcy proceedings involving
Borrowers.
(d) On a timely basis each month, the Central Servicer shall prepare, and
make available to Farmer Mac or its designee upon request, a remittance
reconciliation report.
Section 4.02. Remittance Account.
(a) On or before the Closing Date, Farmer Mac shall establish the
Remittance Account and provide the Central Servicer with information concerning
its location. The Central Servicer, on or before 10:00 A.M. Central Servicer's
local time on each Remittance Date, shall deposit in same day funds an amount
equal to the Qualified Loan Receipts for the preceding Collection Period.
Section 4.03. Reports of Foreclosures and Abandonment
of Mortgaged Property.
(a) Each year, beginning in 1997, the Central Servicer shall make the
reports of foreclosures and abandonments of any Mortgaged Property required by
Section 6050J of the Internal Revenue Code and provide copies of such reports to
Farmer Mac. In order to facilitate this reporting process, the Central Servicer,
on or before the date required by law, shall provide to the Internal Revenue
Service and Farmer Mac reports relating to each instance occurring during the
previous calendar year in which the Central Servicer (i) on behalf of Farmer Mac
acquires an interest in a Mortgaged Property through foreclosure or other
comparable conversion in full or partial satisfaction of a Qualified Loan, or
(ii) knows or has reason to believe that a Mortgaged Property has been
abandoned. The reports from the Central Servicer shall be in form and substance
sufficient to meet the reporting requirements imposed by such Section 6050J.
(b) Within 30 days after disposition of any REO Property, the Central
Servicer shall provide to Farmer Mac a statement of accounting for the related
Mortgaged Property and REO Account, including without limitation (i) each
category of deposit to, withdrawal from and investment earnings within such REO
Account, (ii) the loan number of the related Qualified Loan, (iii) the date such
Qualified Loan became a REO Qualified Loan by foreclosure, or by deed in lieu of
foreclosure or otherwise, (iv) the date of such disposition, (v) the gross sales
price and the related selling and other expenses, (vi) accrued interest,
calculated from the date of acquisition to the disposition date, and (vii) such
other information as Farmer Mac may reasonably request.
ARTICLE V
DEFAULT
Section 5.01. Events of Default. Event of Default,
wherever used herein, means one of the following events:
(i) the Central Servicer shall fail to make any deposit (A) to
the Remittance Account required by Section 4.02 or (B) to the Collection
Account required by Section 3.02(a) and such failure shall continue
unremedied for a period of one Business Day after the date upon which
written notice of such failure, requiring the same to be remedied, shall
have been given to the Central Servicer by Farmer Mac (or Farmer Mac's
designee); or
(ii) the Central Servicer shall fail to observe or perform in
any material respect any other of the covenants or agreements on the part
of the Central Servicer contained in this Agreement and such failure shall
continue unremedied for a period of 30 days after the date on which
written notice of such failure, requiring the same to be remedied, shall
have been given to the Central Servicer by Farmer Mac; or
(iii) a decree or order of a court or agency or supervisory
authority having jurisdiction in the premises in an involuntary case under
any present or future federal or state bankruptcy, insolvency or similar
law or appointing a conservator or receiver or liquidator in any
insolvency, readjustment of debt, marshaling of assets and liabilities or
similar proceedings, or for the winding-up or liquidation of its affairs,
shall have been entered against the Central Servicer and such decree or
order shall have remained in force undischarged or unstayed for a period
of 90 days; or
(iv) the Central Servicer shall consent to the appointment of a
conservator or receiver or liquidator in any insolvency, readjustment of
debt, marshaling of assets and liabilities, or similar proceedings of, or
relating to, the Central Servicer or of, or relating to, all or
substantially all of the property of the Central Servicer; or
(v) the Central Servicer shall admit in writing its inability
to pay its debts generally as they become due, file a petition to take
advantage of, or commence a voluntary case under, any applicable
insolvency or reorganization statute, make an assignment for the benefit
of its creditors, or voluntarily suspend payment of its obligations; or
(vi) the Central Servicer shall fail at any time to meet
Farmer Mac's standards for eligible agricultural real estate mortgage
central servicers so that, in Farmer Mac's sole discretion, the Central
Servicer's ability to comply with this Agreement, any Central Servicing
Supplement or the Securities Guide within a reasonable period of time is
adversely affected; or
(vii) a court of competent jurisdiction shall have found that
the Central Servicer or any of its principal officers has committed an act
of civil fraud or the Central Servicer or any of its principal officers
shall have been convicted of any criminal act related to the Central
Servicer's lending or mortgage selling or servicing activities or that, in
Farmer Mac's sole discretion, adversely affects the Central Servicer's
reputation or Farmer Mac's reputation or interests.
If an Event of Default shall occur, then, and in each and every case, so
long as such Event of Default shall not have been remedied, Farmer Mac may, by
notice in writing to the Central Servicer, terminate all of the rights and
obligations of the Central Servicer under this Agreement and in and to the
Qualified Loans and the proceeds thereof; provided, that any liability of the
Central Servicer under this Agreement arising prior to such termination shall
survive such termination. On or after the receipt by the Central Servicer of
such written notice, all authority and power of the Central Servicer under this
Agreement shall pass to and be vested in Farmer Mac; and, without limitation,
Farmer Mac is hereby authorized and empowered to execute and deliver, on behalf
of the Central Servicer, as attorney-in-fact or otherwise, any and all documents
and other instruments, and to do or accomplish all other acts or things
necessary or appropriate to effect the purposes of such notice of termination,
whether to complete the transfer and endorsement or assignment of the Qualified
Loans and related documents, or otherwise. If an Event of Default shall occur
and be continuing, the Central Servicer agrees to cooperate with Farmer Mac in
effecting the termination of the Central Servicer's responsibilities and rights
hereunder, including, without limitation, the transfer to Farmer Mac (or its
designee) for administration by it of all cash amounts which shall at the time
be on deposit in the Collection Account or the REO Account or thereafter be
received with respect to the Qualified Loans, the delivery to Farmer Mac (or its
designee) of all documents and records requested by it to enable it to assume
the Central Servicer's obligations hereunder and the reconciliation of all of
the Qualified Loans, the Collection Account and the REO Account, all at the cost
of the Central Servicer. Farmer Mac or its designee shall pay over to the
Central Servicer that portion of any future proceeds of the Qualified Loans,
which, if the Central Servicer were at the time acting hereunder, it would be
permitted to receive in consideration of, or in reimbursement for, previous
services performed, or advances made, by it, net of any amounts owing from the
Central Servicer to Farmer Mac.
ARTICLE VI
MISCELLANEOUS
Section 6.01 Central Servicing Supplements. A Central Servicing Supplement
identifying the Qualified Loans to be assigned to the Central Servicer for
servicing on each Closing Date and establishing the terms of such servicing
shall be substantially in the form annexed hereto as Exhibit B (with such
changes thereto as Farmer Mac and the Central Servicer shall agree to), shall
have attached thereto a Schedule of Qualified Loans dated as of the date thereof
and shall be executed by Farmer Mac and the Central Servicer as of the related
Closing Date. Each Central Servicing Supplement shall identify and relate only
to the particular Qualified Loans identified in the attached Schedule of
Qualified Loans. Such Schedule of Qualified Loans shall list all Qualified Loans
assigned to the Central Servicer for servicing on and after the related Closing
Date and shall show as to each Qualified Loan the information provided for in
Attachment 1 to Exhibit B hereto. The Central Servicing Supplement together with
this Master Central Servicing Agreement shall constitute the Central Servicing
Agreement with respect to the related Qualified Loans.
Section 6.02 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of Farmer Mac, any right, remedy, power or
privilege hereunder, shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege. The rights, remedies, powers and privileges herein provided
are cumulative and not exclusive or any rights, remedies, powers or privileges
provided by law.
Section 6.03 Counterparts. This Agreement may be executed in any number of
separate counterparts and all of such counterparts taken together shall be
deemed to constitute one and the same instrument.
Section 6.04 Governing Law. THIS AGREEMENT AND THE RIGHTS
AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, FEDERAL LAW.
TO THE EXTENT FEDERAL LAW INCORPORATES STATE LAW, THAT STATE LAW
SHALL BE THE LAWS OF THE STATE OF NEW YORK.
Section 6.05 Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given (a) when delivered by
hand, (b) two business days after it is mailed, certified or registered, return
receipt requested, with postage prepaid, (c) when sent by telex, telegram or
telecopy (with receipt confirmed) or (d) one business day after it is sent by
Express Mail, FedEx or other express delivery service, as follows:
(a) if to the Central Servicer, to it at:
[Central Servicer]
[Address]
Attention:
Telecopy Number:
(b) if to Farmer Mac, to it at:
Federal Agricultural Mortgage Corporation
919 Eighteenth St., N.W.
Suite 200
Washington, DC 20006
Attention: Vice President - Mortgage-Backed
Securities
Telecopy Number: 202-872-7713
or to such other persons, addresses and telecopier numbers as a party shall
specify as to itself by notice in writing to the other party.
Section 6.06 Survival and Termination of Agreement. All covenants,
agreements, representations and warranties made herein and in any certificate,
document or statement delivered pursuant hereto or in connection herewith shall
survive the execution and delivery of this Agreement until the later of the
receipt by Farmer Mac or its assignee of payment in full in respect of all
Qualified Loans and the satisfaction of all of the Mortgages.
Section 6.07 Entire Agreement. This Agreement (which, for this purpose,
includes the Central Servicing Supplement) sets forth the entire agreement of
the parties hereto with respect to its subject matter, and supersedes all
previous understandings, written or oral, with respect thereto.
Section 6.08 Waiver of Jury Trial. The Central Servicer and Farmer Mac
hereby irrevocably and unconditionally waive trial by jury in any legal action
or preceding relating to this Agreement or the Central Servicing Supplement.
Section 6.09 Severability. Any provision of this Agreement or the Central
Servicing Supplement which is prohibited, unenforceable or not authorized in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition, unenforceability or non-authorization without invalidating the
remaining provisions hereof or thereof or affecting the validity, enforceability
or legality of any such provision in any other jurisdiction.
Section 6.10 Assignability. Except as herein contemplated, neither this
Agreement nor the Central Servicing Supplement shall be assigned by either of
the parties hereto without the prior written consent of the other party;
provided, however, that Farmer Mac may assign this Agreement to any affiliate of
Farmer Mac or the holder of the Qualified Loans without prior notice or consent
of the Central Servicer.
Section 6.11 Third Party Beneficiaries. Any assignee or designee of Farmer
Mac, including an assignee holding the Qualified Loans for the benefit of
holders of securities guaranteed by Farmer Mac, is a third party beneficiary to
this Agreement and the Central Servicing Supplement entitled to enforce any
representations and warranties, indemnities and obligations of the parties.
Except as otherwise provided, the parties to this Agreement hereby manifest
their intent that no third party other than such assignee or designee, including
an assignee for the benefit of such holders of securities, shall be deemed a
third party beneficiary of this Agreement or the Central Servicing Supplement,
and specifically that the Borrowers are not third party beneficiaries of this
Agreement or the Central Servicing Supplement.
<PAGE>
IN WITNESS WHEREOF, Farmer Mac and the Central Servicer have caused their
names to be signed hereto by their respective officers, duly authorized and
their respective corporate seals, duly attested, to be hereunto affixed, all as
of the 1st day of ___, 199_.
FEDERAL AGRICULTURAL MORTGAGE CORPORATION
By:
Name: Henry D. Edelman
Title: President and Chief Executive Officer
[CENTRAL SERVICER]
By:
Name:
Title:
===================================================================
MASTER LOAN SALE AGREEMENT
===================================================================
between
[SELLER]
and
===================================================================
FEDERAL AGRICULTURAL MORTGAGE CORPORATION
===================================================================
dated as of
[Date]
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C> <C>
SECTION 1. DEFINITIONS 1
1.1 Defined Terms 1
1.2 Other Definitional Provisions 5
SECTION 2. SALE AND PURCHASE OF LOANS 7
2.1 Agreement to Sell and Purchase 7
2.2 Conveyance of Qualified Loans
72.3 Conveyance of Mortgage Servicing Documents 9
2.4 Delivery of Payment; Place of Closing 10
SECTION 3. CONDITIONS PRECEDENT 10
3.1 Conditions Precedent to Obligations of Parties 10
3.2 Conditions Precedent to Obligations of Seller 10
3.3 Conditions Precedent to Obligations of Farmer Mac 11
SECTION 4. REPRESENTATIONS AND WARRANTIES 11
4.1 Representations and Warranties of Farmer Mac 11
4.2 Representations and Warranties of the Seller 12
4.3 Replacement of Defective Loans 18
4.4 Absolute and Unconditional Obligations 18
SECTION 5. COVENANTS 19
5.1 Affirmative Covenants of the Seller 19
SECTION 6. INDEMNIFICATION 20
6.1 General 20
6.2 Breaches of Representations and Warranties 20
SECTION 7. MISCELLANEOUS 21
7.1 Loan Sale Supplements 21
7.2 No Waiver; Cumulative Remedies 21
7.3 Counterparts 21
7.4 Governing Laws 21
7.5 Notices 21
7.6 Survival and Termination of Agreement 22
7.7 Entire Agreement 22
7.8 Waiver of Jury Trial 22
7.9 Severability 22
7.10 Assignability 22
7.11 Third Party Beneficiaries 22
</TABLE>
EXHIBITS
LOAN SALE SUPPLEMENT Exhibit A
SECRETARY'S CERTIFICATE OF FARMER MAC Exhibit B
SECRETARY'S CERTIFICATE OF SELLER Exhibit C
FORM OF OPINION OF COUNSEL TO WESTERN FARM CREDIT BANK Exhibit D
<PAGE>
MASTER LOAN SALE AGREEMENT
MASTER LOAN SALE AGREEMENT, dated as of June 1, 1996 (this "Agreement"),
between [Seller] (the "Seller") and the Federal Agricultural Mortgage
Corporation, a federally chartered institution of the Farm Credit System
("Farmer Mac").
W I T N E S S E T H:
WHEREAS, the Seller owns or will own certain agricultural real estate
mortgage loans (the "Qualified Loans") to be identified on the Schedule of
Qualified Loans (as hereinafter defined) attached to each Loan Sale Supplement.
WHEREAS, the Seller desires to sell and Farmer Mac desires to purchase the
Qualified Loans upon the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties to this Agreement hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the terms defined in the
caption or in the recitals hereto shall have the meanings set forth therein, and
the following terms shall have the following meanings:
"Act": Title VIII of the Farm Credit Act of 1971, as
amended.
"Additional Collateral Documents": As to any Qualified Loan, any security
documents (including any UCC-1, UCC-2 or UCC-3 Financing Statement) other than
those listed in clauses (i) through (v) of Section 2.2(b), that are delivered to
Farmer Mac or its designee and evidence rights or interests in the related
Mortgaged Property.
"Agricultural Real Estate": As defined in the Act and the
Securities Guide.
"Appraisal Standards": The appraisal standards established
by Farmer Mac and set forth in the Securities Guide.
"Appraised Value": The appraised value of a Mortgaged Property, which is
the appraised value based upon the appraisal conducted in accordance with the
Appraisal Standards less than six months prior to the Seller's approval for
purchase or the Seller's origination of the Qualified Loan, which approval or
origination shall have occurred not more than six months prior to the Cut-Off
Date.
"Assignment": An assignment of a Mortgage, notice of transfer or
equivalent instrument, in recordable form, sufficient under the laws of the
jurisdiction wherein the related Mortgaged Property is located to reflect of
record the sale of the Mortgage to Farmer Mac or its designee.
"Borrower": The obligor under a Qualified Loan.
"Business Day": Any other day than (i) a Saturday or a Sunday, (ii) a day
on which banking institutions in the States of Minnesota, New York or [Seller's
jurisdiction] are required or authorized by law to be closed, (iii) a day on
which the wire transfer system of the Federal Reserve Bank of New York is closed
or (iv) a day on which Farmer Mac is closed.
"Closing Date": As defined in the Loan Sale Supplement.
"Collection Period": As defined in the Loan Sale Supplement.
"Contractual Obligations": As to any Person, any provision of any security
issued by such person or of any agreement, instrument or undertaking to which
such person is a party or by which it or any of the property owned by it is
bound.
"Custodian": First Trust National Association or its successor in
interest, including any corporation, association or bank that purchases
substantially all of the corporate trust business of the Custodian, or its
permitted successor as custodian for Farmer Mac or its designee.
"Cut-Off Date": As defined in the Loan Sale Supplement.
"Cut-Off Date Principal Balance": As to any Qualified Loan other than an
Eligible Substitute Qualified Loan, the unpaid principal balance thereof at the
Cut-Off Date after giving effect to all installments of principal due on or
prior thereto, whether or not received. As to any Eligible Substitute Qualified
Loan, the unpaid principal balance thereof as of the beginning of the Collection
Period during which such Eligible Substitute Qualified Loan was assigned to
Farmer Mac or its designee.
"Defective Qualified Loan": A Qualified Loan as to which a representation
or warranty made by the Seller under Section 4.2 has been breached and that
consequently is required to be replaced with an Eligible Substitute Qualified
Loan by such Seller or repurchased by such Seller pursuant to Section 2.2 (g) or
4.3.
"Due Date": As to any Qualified Loan, any date upon which a scheduled
installment of principal and interest on such Qualified Loan is due in
accordance with the terms of the related Mortgage Note.
"Eligible Substitute Qualified Loan": A Qualified Loan that is substituted
for a Defective Qualified Loan pursuant to Section 2.2 (g) or 4.3 and that has
characteristics that are acceptable to Farmer Mac, in its sole discretion.
"Environmental Statute": Any Federal, state or local law, ordinance, rule
or regulation including, but not limited to, the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended; the Hazardous
Materials Transportation Act, as amended; the Resource Conservation and Recovery
Act, as amended; and any regulations adopted and publications promulgated
pursuant to each of the foregoing.
"Farmer Mac": The Federal Agricultural Mortgage Corporation, a federally
chartered institution of the Farm Credit System and instrumentality of the
United States, or any successor corporation or entity. The term Farmer Mac, when
used to refer to the entity purchasing or holding the Qualified Loans, shall
also include any entity designated by Farmer Mac to be the holder of the
Qualified Loans.
"Governmental Authority": Any nation or government, any state or other
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
"Hazardous Materials": Any flammable explosives, radioactive materials or
any other materials, wastes or substances defined as hazardous materials,
hazardous wastes or hazardous or toxic substances by any Environmental Statute
or by any Federal, state or local governmental authority having or claiming
jurisdiction over the Mortgaged Property.
"Installment Payment": As to any Qualified Loan and any Due Date, any
payment of principal and/or interest thereon in accordance with the amortization
schedule of such Qualified Loan (after adjustment for any curtailments occurring
prior to the Due Date but before any adjustment to such amortization schedule by
reason of any bankruptcy or similar proceeding or any moratorium or similar
waiver or grace period).
"Loan Sale Supplement": An instrument substantially in the form of Exhibit
A hereto executed by Farmer Mac and the Seller pursuant to Section 2.2 hereof
which supplements this Master Loan Sale Agreement and identifies the Qualified
Loans being sold to Farmer Mac by the Seller on the Closing Date identified
therein and sets forth the terms of the sale.
"Loan-to-Value Ratio": As of any date, the fraction, expressed as a
percentage, the numerator of which is the principal balance of the related
Qualified Loan at the date of determination and the denominator of which is the
Appraised Value of the related Mortgaged Property as of the date of the
appraisal performed in accordance with the Appraisal Standards.
"Mortgage": A mortgage, deed of trust or other instrument that constitutes
a first lien on an interest in real property securing a Mortgage Note.
"Mortgage File": The mortgage documents listed in
subsection 2.2(b) pertaining to the particular Qualified Loan.
"Mortgage Note": The originally executed note or other evidence of
indebtedness evidencing the indebtedness of a Borrower under a Qualified Loan.
"Mortgage Rate": As to any Qualified Loan, the rate of
interest borne by the related Mortgage Note.
"Mortgaged Property": The property securing a Qualified
Loan.
"Mortgage Servicing Documents": The custodial documents, servicing
documents, escrow documents, if any, the original appraisal, including any
updates thereto, which was the basis for the Appraised Value, and all other
documents, records, and tapes necessary for prudent servicing in accordance with
the Seller's standards for mortgage loan servicing, and such other papers and
documents, tax receipts, insurance policies, insurance premium receipts, water
stock certificates, ledger sheets, payment records, insurance claim files and
correspondence, foreclosure files and correspondence, current and historical
computerized data files and other papers and records of whatever kind or
description, whether developed or originated by the Seller.
"Officers' Certificate": As to any Person, a certificate signed by the
Chairman of the Board, the Vice Chairman of the Board, the President, any
Executive Vice President, Senior Vice President, Vice President or Second Vice
President, and any of the Treasurer, the Secretary, or one of the Assistant
Treasurers or Assistant Secretaries of such Person delivered pursuant to this
Agreement.
"Opinion of Counsel": A written opinion of counsel
acceptable to Farmer Mac.
"Person": An individual, partnership, corporation, business trust, joint
stock company, trust, unincorporated association, joint venture, Governmental
Authority or any other entity of whatever nature.
"Qualified Loans": As defined in the recitals.
"Purchase Price": As specified in the Loan Sale Supplement.
"Repurchase Price": With respect to any Qualified Loan required to be
purchased on any date pursuant to Section 4.2, an amount equal to the sum of (i)
100% of the unpaid principal balance thereof as shown on the Schedule of
Qualified Loans less any principal payments made in respect of such Qualified
Loan and (ii) the unpaid accrued interest at the Net Mortgage Rate on the unpaid
principal balance thereof from the Due Date to which interest was last paid by
the Borrower to the next Due Date for such Qualified Loan; and (iii) if the date
of repurchase by the Seller occurs after the Qualified Loan has been
securitized, any Yield Maintenance Amount that would be payable under the terms
of the related Mortgage Note as if a Principal Prepayment in Full were made on
the date of repurchase by the Seller and such Yield Maintenance Amount were
calculated based on interest accruing at the Net Mortgage Rate less the sum of
(x) the Guarantee Fee Rate and (y) the Trustee Fee Rate (each of the Guarantee
Fee Rate and the Trustee Fee Rate having the meaning given such term in the
applicable securitization documents).
"Schedule of Qualified Loans": The list of Qualified Loans transferred to
Farmer Mac or its designee on the Closing Date and attached to and made part of
the Loan Sale Supplement in the form and containing the information set forth in
Attachment I thereto, which list may be amended pursuant to Section 4.3 upon
conveyance of an Eligible Substitute Qualified Loan. Such schedule, which shall
be in hard copy and in machine readable format to Farmer Mac and the Custodian,
may consist of multiple reports that collectively set forth all of the
information requested.
"Scheduled Principal Balance": As to any Qualified Loan and any Due Date,
the principal balance of such Qualified Loan as of such Due Date, as specified
in the amortization schedule at the time relating thereto (after adjustments for
curtailments occurring prior to such Due Date but before any adjustment to such
amortization schedule by reason of any bankruptcy or similar proceeding or any
moratorium or similar waiver or grace period) after giving effect to the payment
of principal due prior to such Due Date, whether or not received from the
related Borrower.
"Securities Guide": The publication entitled "Federal Agricultural
Mortgage Corporation Securities Guide," release dated April 10, 1992, as
modified by any guide update or bulletin or as replaced by any other publication
of Farmer Mac identified by Farmer Mac as a "Selling Guide" or as a "Servicing
Guide."
"Servicing Officer": Any officer of the Seller involved in, or responsible
for, the administration and servicing of the Qualified Loans whose name and
specimen signature appears on a list of servicing officers furnished to Farmer
Mac or its designee by the Seller on the applicable Closing Date, as such list
may from time to time be amended by delivery of written notice by an existing
Servicing Officer.
"Substitution Adjustment Principal Amount": As of any date of
substitution, the amount, if any, by which the unpaid principal balance of any
Defective Qualified Loan for which one or more Eligible Substitute Qualified
Loans are substituted on such date of substitution exceeds the aggregate
Scheduled Principal Balances of the related Eligible Substitute Qualified Loans.
1.2 Other Definitional Provisions
(a) The words "hereof", "herein" and "hereunder" and words of similar
import when used herein shall refer to this Agreement as a whole and not
to any particular provision of this Agreement, and section, subsection,
attachment, schedule and exhibit references are to this Agreement unless
otherwise specified.
(b) The meaning given to terms defined herein shall be equally
applicable to the singular and plural forms of such terms.
(c) Capitalized terms not otherwise defined herein shall have the
meanings assigned to such terms in the Securities Guide.
SECTION 2. SALE AND PURCHASE OF LOANS
2.1 Agreement to Sell and Purchase. Upon the basis of the representations,
warranties and agreements herein contained and upon the terms and subject to the
conditions set forth herein, Seller agrees to sell to Farmer Mac and Farmer Mac
agrees to purchase from Seller on each Closing Date, the Qualified Loans
identified in the related Schedule of Qualified Loans for the applicable
Purchase Price.
2.2 Conveyance of Qualified Loans.
(a) On each Closing Date, concurrently with the execution and
delivery of each Loan Sale Supplement and the payment to the Seller of the
Purchase Price, the Seller shall sell, transfer, assign, set-over and
convey to Farmer Mac or its designee (as Farmer Mac shall designate in
writing prior to such Closing Date) all the right, title and interest of
the Seller in and to the Qualified Loans. The parties hereto agree that
the delivery to the Custodian of any Assignment as contemplated in
paragraph (b)(iii) shall be deemed to have taken place immediately after
the vesting of title in and to the Qualified Loans in the Custodian on
behalf of Farmer Mac, which vesting will have occurred by virtue of the
execution by Seller and Farmer Mac of the Loan Sale Supplement, dated the
Closing Date, and the delivery of the Mortgage Notes endorsed as described
in paragraph (b)(i).
(b) In connection with such transfer and assignment described in
clause (a) above, Seller will deliver to, or deposit with, the Custodian
on behalf of Farmer Mac, the following documents or instruments with
respect to each Qualified Loan so assigned:
(i) The Mortgage Note, endorsed in the following form: "Pay to
the order of First Trust National Association, as Custodian/Trustee
without recourse" and showing an unbroken chain of endorsements from
the original lender thereof to the Person endorsing it to the
Custodian;
(ii) The Mortgage with evidence of recording indicated thereon
or, if (x) the public recording office retains the original of the
Mortgage or (y) the Custodian receives a certificate of a Servicing
Officer certifying that the original of the Mortgage is lost, missing
or destroyed, a copy of the Mortgage certified by the public
recording office in which such Mortgage has been recorded to be a
true and complete copy of the original Mortgage;
(iii) A copy of the original Assignment in the form "First Trust
National Association, as Custodian/Trustee" which assignment or
equivalent instrument may be in the form of one or more blanket
assignments covering Mortgages secured by Mortgaged Properties
located in the same county, if permitted by law and accompanied by an
Opinion of Counsel to that effect (a copy of such blanket assignment
to be delivered in each applicable Mortgage File) and any intervening
assignments in original recorded form evidencing an unbroken chain of
assignments from the initial assignor to the Custodian. If the
Assignment is not complete due to the lack of necessary recording
information for insertion in the Assignment as of the applicable
Closing Date, the original Assignment shall be retained by the Seller
until such time as the necessary information becomes available, at
which time the Seller shall promptly complete the Assignment and
forward it to the appropriate office for recordation. Upon completion
of recordation, the Seller will forward the original documents (or
cause the original documents to be forwarded) to the Custodian;
(iv) Evidence of title to the Mortgaged Property (either in the
form of an original opinion from an attorney or firm of attorneys or
an original or certified copy of a lender's title insurance policy or
binding title insurance commitment issued by a title insurance
company);
(v) Either (1) the original of each modification agreement and
each assumption agreement, if any, relating to such Qualified Loan
or, if (x) the public recording office retains the original of the
modification or assumption agreement or (y) the Custodian receives a
certificate of a Servicing Officer certifying that the original of
the modification or assumption agreement is lost, missing or
destroyed, a copy of the modification (with respect to the Mortgage)
or assumption agreement certified by the public recording office in
which such Mortgage was recorded to be a true and complete copy of
the original modification or assumption agreement, or (2) a signed
statement of the Seller that there is no modification agreement or
assumption agreement relating to such Qualified Loan (such statement
may be part of a list of Qualified Loans as to which no modification
agreement or assumption agreement exists); and
(vi) Any Additional Collateral Documents relating to such
Qualified Loan or a signed statement of the Seller that there is no
Additional Collateral Document relating to such Qualified Loan (such
statement may be part of a list of Qualified Loans as to which no
Additional Collateral Document exists).
(c) (i) The Seller acknowledges and understands that ownership of
each document comprising a Mortgage File subsequent to the Closing
Date is vested in the Custodian on behalf of Farmer Mac. The Seller
hereby agrees not to take any action inconsistent with such
ownership.
(ii) In the event that, in connection with any Qualified Loan,
the Seller cannot deliver or cause the delivery of the Mortgage or
any modification or assumption agreement with evidence of recording
thereon solely because of a delay caused by the public recording
office where such Mortgage or modification or assumption agreement
has been delivered for recordation, the Seller shall deliver or cause
to be delivered to the Custodian a photocopy, certified to be true
and correct, of such Mortgage or modification or assumption
agreement, as the case may be. The Seller shall promptly deliver or
cause to be delivered to the Seller such Mortgage or modification or
assumption agreement, as the case may be, with evidence of recording
indicated thereon upon receipt thereof from the public recording
official.
(d) Documents taken as security instruments relating to any of the
Qualified Loans and not delivered to the Custodian as part of the Mortgage
File shall be held by the Seller in trust for the benefit of Farmer Mac.
(e) In the event that, in connection with any Qualified Loan, the
Seller cannot deliver or cause to be delivered the Assignment (or blanket
Assignment, if applicable) or intervening assignment with evidence of
recording indicated thereon, the Seller shall deliver or cause to be
delivered to the Custodian a photocopy, certified to be true and correct,
of such Assignment. The Seller shall deliver or cause to be delivered to
the Custodian such Assignment or intervening assignment with evidence of
recording indicated thereon promptly upon receipt thereof from the public
recording official or, in the event the original recorded Assignment or
intervening assignment is retained by the public recording office or, if
the Seller certifies that the original recorded Assignment or intervening
assignment, as applicable, is lost, a copy of such recorded Assignment or
intervening assignment, as applicable, certified by the public recording
office.
(f) The Seller shall execute, acknowledge and deliver all other
documents furnished it by Farmer Mac as may be necessary to effectuate the
transfer to Farmer Mac or its designee of all right, title and interest in
and to the Qualified Loans and the Mortgages.
(g) If the Custodian finds any document or documents constituting a
part of a Mortgage File to be missing, mutilated, torn, damaged or
defective on its face, the Custodian shall notify the Seller in writing.
The Seller shall then correct or cure such omission or defect or cause
such omission or defect to be corrected or cured within 90 days from the
date of such notification. If (x) the Seller does not correct or cure such
omission or defect or cause such omission or defect to be corrected or
cured within such period and (y) such omission or defect relates to any
document identified in Section 2.2(b), the Seller shall either (A) replace
the related Qualified Loan or cause the related Qualified Loan to be
replaced with one or more Eligible Substitute Qualified Loans in the
manner and subject to the conditions set forth in Section 4.3 or (B)
purchase such Qualified from Farmer Mac by remitting the Repurchase Price
with respect to such Qualified Loan to Farmer Mac on date of such
purchase. Upon receipt of such Repurchase Price or Eligible Substitute
Qualified Loan, Farmer Mac shall promptly release to the Seller or its
designee or assignee the related Mortgage File, and shall also execute and
deliver such instruments of transfer or assignment prepared or caused to
be prepared by the Seller, in each case without recourse, as shall be
necessary to vest in the Seller or its designee any Qualified Loan
released pursuant thereto. The foregoing remedy shall not be deemed to
restrict or limit any right available to Farmer Mac against the Seller or
the Originator of the related Qualified Loan.
2.3 Conveyance of Mortgage Servicing Documents. In connection with the
transfer and assignment described in Section 2.2 (a) above and the delivery
described in Section 2.2 (b) above, the Seller does hereby agree to deliver to,
or deposit with, Farmer Mac or its designee, all of the Mortgage Servicing
Documents on or before each applicable Closing Date.
2.4 Delivery and Payment; Place of Closing. Subject to satisfaction of the
conditions precedent set forth in Section 3 hereof, on each Closing Date, the
Seller shall deliver to Farmer Mac or its designee, all of the documents
referred to in Section 2.2 (b), together with all interest and principal
received on or with respect to the Qualified Loans from and after the Cut-Off
Date (other than payments due on such Qualified Loans on or before the Cut-Off
Date and other than that portion of any payment of interest received after the
Cut-Off Date that represents interest accruing on or prior to the Cut-Off Date).
Such delivery shall be made against payment by Farmer Mac of the cash portion,
if any, of the Purchase Price to the Seller on the Closing Date by wire transfer
in immediately available funds to an account designated by the Seller or by
delivery to the Seller of any securities to be received by the Seller.
SECTION 3. CONDITIONS PRECEDENT
3.1 Conditions Precedent to Obligations of Parties. The respective
obligations of Farmer Mac and the Seller hereunder are subject to the
satisfaction, at or prior to each Closing Date, of the following conditions:
(a) No Injunction, etc. No preliminary or permanent injunction or
other order issued by any Federal or state court of competent jurisdiction
in the United States or by any United States Federal or state governmental
or regulatory body nor any statute, rule, regulation or executive order
promulgated or enacted by any Governmental Authority which restrains,
enjoins or otherwise prohibits the transactions contemplated hereby shall
be in effect.
(b) No Proceeding or Litigation. No suit, action or governmental
proceeding before any court or any Governmental Authority shall have been
commenced and be pending by any Governmental Authority against Farmer Mac,
the Seller or any of their respective affiliates, associates, officers,
directors or agents seeking to restrain, prevent or change, in any
material respect, the transactions contemplated hereby or seeking damages
in any amount material to such transactions.
3.2 Conditions Precedent to Obligation of Seller. The obligation of the
Seller to consummate the transactions contemplated by this Agreement is subject
to the satisfaction at or prior to each Closing Date of the following additional
conditions:
(a) Accuracy of Representations and Warranties. The representations
and warranties of Farmer Mac contained herein shall be true and correct in
all material respects at and as of the Closing Date, with the same force
and effect as though made at and as of the Closing Date, except for
changes permitted or contemplated by this Agreement and except to the
extent that any representation or warranty is made as of a specified date,
in which case such representation or warranty shall be true and correct in
all material respects as of such date.
(b) Secretary's Certificate. At or prior to the first Closing Date
under this Agreement (the "initial Closing Date"), the Seller shall have
received from Farmer Mac a certificate, dated the initial Closing Date, of
Farmer Mac's Secretary, in the form of Exhibit B, certifying the
incumbency of those officers of Farmer Mac executing this Agreement, the
Loan Sale Supplement or any closing documents delivered hereunder or
thereunder, together with certified copies of the resolutions of the Board
of Directors of Farmer Mac authorizing the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated herein.
3.3 Conditions Precedent to Obligation of Farmer Mac. The obligation of
Farmer Mac to consummate the transactions contemplated by this Agreement is
subject to the satisfaction at or prior to each Closing Date of the following
additional conditions:
(a) Accuracy of Representation and Warranties. The representations
and warranties of the Seller contained herein shall be true and correct in
all material respects at and as of the Closing Date, with the same force
and effect as though made at and as of the Closing Date, except for
changes permitted or contemplated by this Agreement and except to the
extent that any representation or warranty is made as of a specified date,
in which case such representation or warranty shall be true and correct in
all material respects as of such date.
(b) Performance of Agreements. The Seller shall have performed and
complied with, in all material respects, all obligations, agreements and
covenants contained in this Agreement to be performed or complied with by
it prior to or at the Closing Date.
(c) Secretary's Certificate. At or prior to the initial Closing Date,
Farmer Mac shall have received from the Seller a Certificate of Authority,
dated the initial Closing Date, of the Seller's Secretary, in the form of
Exhibit C, certifying the incumbency of those officers of the Seller
executing this Agreement, the Loan Sale Supplement or any closing
documents delivered hereunder or thereunder, and certifying that the
Seller is authorized to execute, deliver and perform this Agreement this
Agreement and the consummation of the transactions contemplated herein.
(d) Opinions of Counsel. Prior to the initial Closing Date, Farmer Mac
shall have received Opinions of Counsel from counsel to the Seller,
covering the matters set forth in Exhibit D.
(e) Payment of Fees and Expenses. If specified therein, the Seller shall
have made all payments of fees and expenses to Farmer Mac as set forth in
the Loan Sale Supplement.
<PAGE>
SECTION 4. REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of Farmer Mac. Farmer
Mac represents and warrants to the Seller as follows:
(a) armer Mac is a federally chartered instrumentality of the United
States duly organized, validly existing and in good standing under the
laws governing its creation and existence and with corporate power and
authority to conduct its business as it is currently being conducted;
Farmer Mac holds all licenses, certificates and permits necessary for the
conduct of its business as it is currently being conducted.
(b) Farmer Mac has the requisite power and authority to execute and
deliver this Agreement and the related Loan Sale Supplement, to accept the
transfer, assignment and delivery of all of the Qualified Loans and to take
all other actions and execute and deliver all other documents which are
requisite or pertinent to the transactions described in this Agreement and
the Loan Sale Supplement; the persons signing such documents and taking
such actions on behalf of Farmer Mac have been duly authorized to do so and
such documents and actions are valid, legally binding and enforceable
against Farmer Mac in accordance with their terms.
(c) No action, suit or proceeding is pending or, to the best of
Farmer Mac's knowledge, threatened against Farmer Mac that would prohibit
its entering into this Agreement or performing its obligations under this
Agreement and the Loan Sale Supplement.
4.2 Representations and Warranties of the Seller. The
Seller hereby represents and warrants to Farmer Mac as follows:
(a) It is a federally chartered instrumentality of the United States
duly organized, validly existing and in good standing under the laws
governing its creation and existence and with corporate power and
authority to conduct its business as it is currently being conducted; the
Seller holds all licenses, certificates and permits necessary for the
conduct of its business as it is currently being conducted.
(b) It has the requisite power and authority to execute and deliver
this Agreement and the Loan Sale Supplement, to transfer, assign and
deliver all the Qualified Loans to Farmer Mac and to take all other
actions and execute and deliver all other documents which are requisite or
pertinent to the transactions described in this Agreement and the Loan
Sale Supplement. The persons signing such documents and taking such
actions on behalf of the Seller have been duly authorized to do so and
such documents and actions are valid, legally binding and enforceable
against the Seller in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and other
laws affecting the enforcement of creditors' rights generally or the
rights of creditors of an institution of the Farm Credit System and by
general principles of equity (regardless of whether such enforcement is
considered in a proceeding in equity or at law).
(c) No action, suit or proceeding is pending or, to the best of its
knowledge, threatened against it that would prohibit its entering into
this Agreement or performing its obligations under this Agreement and the
Loan Sale Supplement.
(d) The Seller hereby represents and warrants to Farmer Mac that as
of each Closing Date (or, if otherwise specified below, as of the date so
specified) with respect to the Qualified Loans:
The information set forth in the Schedule of Qualified
Loans is true and correct.
Each Mortgage File contains the documents required by
Section 2.2(b) of this Agreement.
Each Qualified Loan conforms in all material respects to
the provisions of the Securities Guide, including, but not by way of
limitation, the following:
(A) Each Qualified Loan was originated by an "Originator"
as that term is defined in the Securities Guide.
(B) The Borrowers under each Qualified Loan are "Eligible
Borrowers" as that term is defined in the Securities Guide.
(C) Except as otherwise identified in writing by the
Seller, none of the Borrowers under any Qualified Loan are "Related
Borrowers" as that term is defined in the Securities Guide with
respect to any Borrowers under any other Qualified Loan sold by the
Seller pursuant to this Agreement.
(D) Each Qualified Loan is a "Qualified Loan" as that term
is defined in the Securities Guide.
The Qualified Loan:
(A) is principally secured by real property (i.e., had a
loan-to-value ratio at origination not in excess of 125% and, as of
the Cut-Off Date, the Loan-to-Value Ratio is not in excess of 70%);
and
(B) is not secured by any collateral having material value
other than the Mortgage and any Additional Collateral Documents that
evidence rights or interests in the Mortgaged Property.
(A) Any security agreement, chattel mortgage or
equivalent document that is related to the Mortgage has been
delivered to Farmer Mac or its designee and is a valid and subsisting
lien on the property described in such document.
(B) The related Mortgage is a valid first lien on the fee
title to the related Mortgaged Property. The Mortgaged Property is
free and clear of all mechanics' liens, materialmen's liens or
similar types of liens. There are no rights outstanding that could
result in any of such liens being imposed on the Mortgaged Property.
(C) Appropriate UCC filing statements on fixtures and
personal property have been filed and a UCC search has been conducted
indicating a security interest in such fixtures and personal
property.
In connection with the origination of the Qualified Loan,
a lender's title insurance policy was issued by a title insurance
company acceptable to Farmer Mac, or, if such policy is unavailable,
an opinion of counsel was delivered by an attorney or firm of
attorneys rated at least "BV" by Martindale-Hubbell (or approved by
Farmer Mac if no such rating is available). The title insurance
insures (or the title opinion assures) that a lien of the priority
described in clause (v)(B) of this subsection secures the Mortgage
Note, and that the property is not subject to encumbrances except
those taken into account in the appraisal which established the
Appraised Value or which are customarily acceptable to lenders in the
area and do not materially impair the value of the property.
Each of the Mortgage Note and Mortgage (including any
amendments or modifications to either such document) and each
additional security document that evidences rights or interests in
the Mortgaged Property has been properly signed, and is the legal,
valid and binding obligation of the Borrower, enforceable by Farmer
Mac and its successors and assigns in accordance with its terms.
The Mortgage contains customary and enforceable
provisions that permit the holder of the Mortgage to obtain
marketable title to the Mortgaged Property upon the Borrower's
default under the Mortgage Loan. There is no exemption available to
the Borrower that would interfere with the right to sell the
Mortgaged Property or to foreclose the Mortgage, except for state
statutes or regulations respecting rights of redemption or mediation
or rights to cure defaults or require restructuring of loans,
moratoria on foreclosures or payments, rights of first refusal or
homestead rights; provided that no homestead rights exempt from
foreclosure any portion of the Mortgaged Property if the value of the
remainder of such property would result in a loan-to-value ratio of
more than 70% at the Cut-Off Date.
The Mortgage contains a provision for the acceleration of
the payment of the unpaid principal balance of the Qualified Loan in
the event that the Mortgaged Property is sold or transferred without
the prior written consent of the mortgagee thereunder.
The Mortgage Note is payable in monthly, quarterly,
semi-annual or annual installments (as specified in the Schedule of
Qualified Loans), so as to result in complete amortization (after a
final payment of principal that may be substantially disproportionate
to the other scheduled payments of principal) of the Mortgage Loan
over the stated or calculated term. The Qualified Loans do not
provide for negative amortization of interest.
Neither the Mortgage nor the Mortgage Note is usurious
and each meets or is exempt from any applicable usury laws or
regulations.
All relevant material requirements of federal, state and
local laws, rules and regulations then applicable to the making,
servicing and assigning of the Qualified Loan were complied with,
including, without limitation, equal credit opportunity, disclosure
and truth-in-lending laws.
There are no tax or insurance escrow deposits or escrow
payments relating to the Qualified Loan.
The Mortgage provides that the holder may make advances
under the Mortgage to protect the holder's interest in the Mortgaged
Property and to protect the Mortgaged Property from loss. Repayment
of such advances (including reasonable costs and attorney's fees)
plus interest at a default rate of interest is an obligation of the
Borrower, secured by the Mortgage.
The Mortgage Note provides either that: (i) any
Installment Payment not received by the fifteenth day of the month in
which it is due shall accrue interest at a default rate; or (ii) a
late charge equal to a percentage of the delinquent Installment
Payment must be paid as a penalty if such Installment Payment is not
received by the fifteenth day of the month in which it is due.
The Qualified Loan is not subject to any right of
rescission, set-off, counterclaim or defense.
The Mortgage has not been satisfied, canceled or
subordinated. There have been no material modifications or amendments
to the Mortgage or other principal mortgage documents except as
contained in the Mortgage File delivered to Farmer Mac or its
designee.
There are no defaults under the Mortgage or Mortgage Note
and all taxes, governmental assessments, insurance premiums, water,
sewer, and municipal charges relating to the Mortgaged Property that
previously became due and owing have been paid.
The Qualified Loan has been either not more than: (x) 30
days delinquent in payment of principal or interest during the twelve
months preceding the Cut-Off Date or (y) 60 days delinquent in
payment of principal or interest during the three years preceding the
Cut-Off Date; and
The Seller has not advanced funds to, or induced,
solicited or knowingly received any advance of funds (nor will the
Seller advance funds, or induce, solicit or knowingly receive any
advance of funds) from a party other than the Borrower, directly or
indirectly, for the payment of any amount required under the
Qualified Loan other than short term loans made in the ordinary
course of business.
An appraisal to establish the Appraised Value of the
related Mortgaged Property has been conducted in accordance with the
Appraisal Standards.
All of the improvements on the Mortgaged Property that
were included for the purpose of determining the Appraised Value are
within the boundaries and building restriction lines of such
property, and no improvements on adjoining properties encroach upon
the Mortgaged Property.
The structures included in the appraisal establishing the
Appraised Value of the Mortgaged Property are free of material damage
and are in good repair.
All improvements on the Mortgaged Property included in
the Appraised Value are insured against loss by a Standard Hazard
Insurance Policy that conforms to the requirements of the Securities
Guide.
Any applicable zoning laws or regulations or any
inspections, licenses or certificates required with respect to the
use and occupancy of the related Mortgaged Property were complied
with, duly made or issued, as the case may be.
The Seller or its agent has physically inspected the
related Mortgaged Property and observed its main activities within
180 days prior to the Cut-Off Date and has observed that activities
on such Mortgaged Property appeared to have been conducted in a
manner conforming to sound environmental practices as currently
understood and, to the best of Seller's knowledge:
(A) the Borrower has handled on the property only
Hazardous Materials customarily used in the operation of a farm or
ranch, including ordinary cleaning fluids, fuel oil, fertilizers and
pesticides, and only in accordance with any applicable Environmental
Statute;
(B) the Borrower has not otherwise produced
or disposed of Hazardous Materials on the Mortgaged
Property;
(C) there has been no discharge of Hazardous Materials into
waters on or adjacent to the Mortgaged Property, or onto lands from
which such substances might seep, flow or drain into such waters in a
manner which violates any Environmental Statute; and
(D) there has been no event that could give rise to a claim
under any Environmental Statute or under common law, pertaining to
Hazardous Materials on or originating from the Mortgaged Property or
any other real property owned or occupied by the Borrower or arising
out of the conduct of the Borrower, including pursuant to any
Environmental Statute.
There is no proceeding pending, currently occurring or,
to the best of Seller's knowledge threatened, for the total or
partial condemnation of the Mortgaged Property.
The Seller knows of nothing involving the Mortgage, the
Mortgaged Property, the Borrower, or the Borrower's credit standing
that can reasonably be expected to: (a) cause private institutional
investors to regard the Mortgage as an unacceptable investment (b)
cause the Mortgage to become delinquent or (c) adversely affect the
Mortgage's value or marketability.
The Qualified Loan is not
cross-collateralized with any other mortgaged
properties not subject to this Agreement and there are
no lenders who own a participation interest in the
Qualified Loan.
To the extent necessary to preserve the value of the
Mortgaged Property, a security interest has been properly perfected
in any water rights and entitlements associated with the Mortgaged
Property and such documentation has been obtained as may be necessary
to insure the delivery of water to the Mortgaged Property.
The Mortgaged Property is contiguous to a public
thoroughfare, or includes such rights-of-way or easements so that a
public thoroughfare provides for reasonable ingress and egress to
such property.
The proceeds of the Qualified Loan have been fully
disbursed, there is no requirement for future advances thereunder and
any and all requirements as to completion of any on-site or off-site
improvements and as to disbursement of any escrow funds therefor have
been complied with. All costs, fees, transfer taxes, and expenses
incurred in making, closing or recording the Qualified Loan have been
paid.
Upon discovery by either the Seller or Farmer Mac (including a designee of
Farmer Mac) of a breach of any of the representations and warranties set forth
in this section 4.2 (b), the Person discovering such breach shall give prompt
written notice to the other party. Within 90 days of its discovery or its
receipt of notice of any such breach, the Seller shall either (i) cure such
breach in all material respects, (ii) purchase the related loan from Farmer Mac
by the deposit of the Repurchase Price into an account designated by Farmer Mac,
or (iii) replace such Qualified Loan with one or more Eligible Substitute
Qualified Loans (but only if such replacement will not have adverse tax or other
economic consequences to Farmer Mac or its assignee) in the manner and subject
to the conditions set forth in Section 4.3.
It is understood and agreed by the parties hereto that the representations
and warranties set forth in this subsection 4.2 shall survive delivery of the
respective Mortgage Files to Farmer Mac, and delivery thereof by Farmer Mac to
its designee, and that all representations and warranties are made by Seller for
the express benefit of Farmer Mac and its designee, and that such parties are
expressly authorized by Seller to rely on such representations and warranties.
4.3 Replacement of Defective Loans. If the Seller elects to replace a
Defective Qualified Loan pursuant to Section 2.2(g) or the penultimate paragraph
of Section 4.2, the Seller shall on the date of substitution:
(a) convey one or more Eligible Substitute Qualified Loans and
deliver the related Mortgage Files to Farmer Mac or its designee as
provided in subsection 2.2; and
(b) deposit or cause to be deposited in an account designated by
Farmer Mac no later than the date of substitution the related Substitution
Adjustment Principal Amount, if any, plus (i) interest on such
Substitution Adjustment Principal Amount at the Mortgage Rate of the
related Defective Qualified Loan from the previous Due Date for such
Defective Qualified Loan (or, if there has been no Due Date for such
Defective Qualified Loan subsequent to the Cut-Off Date, from the Cut-Off
Date) to the date of substitution and (ii) interest on the unpaid
principal balance of the related Defective Qualified Loan at the Mortgage
Rate thereof from the Cut-Off Date or any Due Date as to which the related
Installment Payment had been made to any Due Date prior to the date of
substitution as to which the related Installment Payment remains
delinquent as of the date of substitution; and
(c) deliver to Farmer Mac an Officer's Certificate certifying that
the requirements of this Agreement with respect to the replacement of
Defective Qualified Loans have been met.
4.4 Absolute and Unconditional Obligation. The Seller agrees that its
obligation to cure, repurchase or substitute a Qualified Loan pursuant to
Section 4.2 is absolute and unconditional and that it will make any such cure,
repurchase or substitution irrespective of any defense, claim, set-off,
recoupment, abatement or other right that it may have against Farmer Mac or any
other Person, or of any amendment, supplement, waiver or other circumstance,
whether similar or dissimilar, which in any manner would constitute a legal or
equitable excuse for non-performance by it of such obligation to cure, purchase
or substitute.
<PAGE>
SECTION 5. COVENANTS
5.1 Affirmative Covenants of the Seller.
(a) Further Assurances. The Seller agrees, from time to time, at its
expense, to execute and deliver promptly to Farmer Mac all further
instruments and documents, and take all further action, that may be
reasonably necessary, or that Farmer Mac may reasonably request, in order
to effectuate the purposes of this Agreement or the Loan Sale Supplement.
(b) Access to Documentation. Upon the prior written request of Farmer
Mac received reasonably in advance, the Seller shall provide
representatives of Farmer Mac reasonable access to documentation regarding
the Qualified Loans during normal business hours at the offices of the
Seller designated by it. The Seller shall permit such representatives to
photocopy any such documentation and shall provide equipment for that
purpose.
<PAGE>
SECTION 6. INDEMNIFICATION
6.1 General. Each party agrees to pay the reasonable costs of the other
party if such other party prevails in an action to enforce or remedy the breach
or violation of this Agreement by such party.
6.2 Breaches of representations and warranties. The remedy set forth in
Section 4.2 with respect to breaches of representations and warranties by the
Seller shall not be deemed to restrict or limit any right available to Farmer
Mac against the Seller with respect to the Qualified Loans. The Seller agrees to
hold Farmer Mac and any assignee of Farmer Mac harmless against any loss or
expense (including any incidental or indirect cost) incurred (or to be incurred,
as such costs are incurred) to the extent that such loss or expense can
reasonably be determined by Farmer Mac to have been (or to be) the result of
such breach.
<PAGE>
SECTION 7. MISCELLANEOUS
7.1 Loan Sale Supplements. A Loan Sale Supplement identifying the
Qualified Loans to be sold to Farmer Mac by the Seller on each Closing Date and
establishing the terms of such sale shall be substantially in the form annexed
hereto as Exhibit A (with such changes thereto as Farmer Mac and the Seller
shall agree to), shall have attached thereto a Schedule of Qualified Loans dated
as of the date thereof and shall be executed by Farmer Mac and the Seller as of
the related Closing Date. Each Loan Sale Supplement shall identify and relate to
the particular Qualified Loans. Such Schedule of Qualified Loans shall list all
Qualified Loans sold to Famer mac by Seller on the related Closing Date and
shall show as to each Qualified Loan the information provided for in Exhibit 2
to the Loan Sale Supplement. The Loan Sale Supplement together with this Master
Loan Sale Agreement shall constitute the Loan Sale Agreement with respect to the
related Qualified Loans.
7.2 No Waiver; Cumulative Remedies. No failure to exercise and no delay in
exercising, on the part of Farmer Mac, any right, remedy, power or privilege
hereunder, shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges herein provided are
cumulative and not exclusive or any rights, remedies, powers or privileges
provided by law.
7.3 Counterparts. This Agreement may be executed in any number of separate
counterparts and all of such counterparts taken together shall be deemed to
constitute one and the same instrument.
7.4 Governing Law. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, FEDERAL LAW. TO
THE EXTENT FEDERAL LAW INCORPORATES STATE LAW, THAT STATE LAW
SHALL BE THE LAWS OF THE STATE OF NEW YORK.
7.5 Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given (a) when delivered by
hand, (b) two business days after it is mailed, certified or registered, return
receipt requested, with postage prepaid, (c) when sent by telex, telegram or
telecopy (with receipt confirmed) or (d) one business day after it is sent by
Express Mail, FedEx or other express delivery service, as follows:
(a) if to the Seller, to it at:
[Seller]
[Address]
Attention:
Telecopy Number:
(b) if to Farmer Mac, to it at:
Federal Agricultural Mortgage Corporation
919 Eighteenth St., N.W.
Suite 200
Washington, DC 20006
Attention: Vice President - Mortgage-Backed
Securities
Telecopy Number: 202-872-7713
or to such other persons, addresses and telecopier numbers as a party shall
specify as to itself by notice in writing to the other party.
7.6 Survival and Termination of Agreement. All covenants, agreements,
representations and warranties made herein and in any certificate, document or
statement delivered pursuant hereto or in connection herewith shall survive the
execution and delivery of this Agreement until the later of the receipt by
Farmer Mac or its assignee of payment in full in respect of all Qualified Loans
and the satisfaction of all of the Mortgages.
7.7 Entire Agreement. This Agreement (which, for this purpose, includes
the Loan Sale Supplement) sets forth the entire agreement of the parties hereto
with respect to its subject matter, and supersedes all previous understandings,
written or oral, with respect thereto.
7.8 Waiver of Jury Trial. The Seller and Farmer Mac hereby irrevocably and
unconditionally waive trial by jury in any legal action or preceding relating to
this Agreement or the Loan Sale Supplement.
7.9 Severability. Any provision of this Agreement or the Loan Sale
Supplement which is prohibited, unenforceable or not authorized in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition, unenforceability or non-authorization without invalidating the
remaining provisions hereof or thereof or affecting the validity, enforceability
or legality of any such provision in any other jurisdiction.
7.10 Assignability. Except as herein contemplated, neither this Agreement
nor the Loan Sale Supplement shall be assigned by either of the parties hereto
without the prior written consent of the other party; provided, however, that
Farmer Mac may assign this Agreement to any affiliate of Farmer Mac without
prior notice or consent of the Seller.
7.11 Third Party Beneficiaries. Any assignee or designee of Farmer Mac,
including an assignee holding the Qualified Loans for the benefit of holders of
securities guaranteed by Farmer Mac, is a third party beneficiary to this
Agreement or the Loan Sale Supplement entitled to enforce the representations
and warranties, indemnities and obligations of the parties hereto. Except as
otherwise provided, the parties to this Agreement hereby manifest their intent
that no third party other than such assignee or designee, including an assignee
for the benefit of such holders of securities, shall be deemed a third party
beneficiary of this Agreement or the Loan Sale Supplement, and specifically that
the Borrowers are not third party beneficiaries of this Agreement or the Loan
Sale Supplement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
[SELLER]
By:
Name:
Title:
FEDERAL AGRICULTURAL MORTGAGE
CORPORATION,
By:
Name:Henry D. Edelman
Title: President and Chief
Executive Officer
<PAGE>
EXHIBIT A
===================================================================
LOAN SALE SUPPLEMENT
between
[SELLER]
and
FEDERAL AGRICULTURAL MORTGAGE CORPORATION
dated as of
June 1, 1996
===================================================================
<PAGE>
EXHIBIT B
FEDERAL AGRICULTURAL MORTGAGE CORPORATION
Secretary's Certificate of Farmer Mac
I, Michael T. Bennett, hereby certify that I am the duly elected or appointed
Secretary of the Federal Agricultural Mortgage Corporation ("Farmer Mac"), and
further certify as follows:
1. Attached hereto as Exhibits A, B and C, respectively, are true and correct
copies of the Charter and Bylaws of Farmer Mac and the resolutions of the Board
of Directors of Farmer Mac authorizing the execution, performance and delivery
of the Master Loan Sale Agreement dated as of June 1, 1996 (the "Master Loan
Sale Agreement") and the Loan Sale Supplement dated as of June 1, 1996 (the
"Loan Sale Supplement"), each between [Seller] ("[Seller]"), as seller and
Farmer Mac, each of which is in full force and effect on the date hereof.
2. Each person purporting to execute, either manually or by facsimile signature,
on behalf of Farmer Mac (a) the Master Loan Sale Agreement and the Loan Sale
Supplement and (b) any other document delivered in connection with the sale and
purchase of the Qualified Loans and the closing related thereto was, at the
respective times of such signing and delivery, and is, as of the date hereof,
duly appointed, qualified and acting as such officer, and was and is duly
authorized to accept the duties and make the statements provided for in such
documents. The signature of each such person as it appears on any such document
is the genuine signature of such person.
3. Farmer Mac has the full power and authority to enter into and consummate all
transactions contemplated by the Master Loan Sale Agreement and the Loan Sale
Supplement, has duly authorized the execution, delivery and performance of the
Master Loan Sale Agreement and the Loan Sale Supplement and has duly executed
and delivered the Master Loan Sale Agreement and the Loan Sale Supplement.
4. At the date hereof, each of the Master Loan Sale Agreement and the Loan Sale
Supplement is in full force and effect as regards Farmer Mac, and the
representations and warranties of Farmer Mac set forth in Section 4.1 of the
Master Loan Sale Agreement are accurate and complete.
Capitalized terms used and not otherwise defined herein shall have the meanings
specified in the Master Loan Sale Agreement and the Loan Sale Supplement.
<PAGE>
IN WITNESS WHEREOF, I have hereunto signed my name on behalf Farmer Mac on and
as of this 6th day of June, 1996.
FEDERAL AGRICULTURAL MORTGAGE
CORPORATION
By:
Name: Michael T. Bennett
Title: Secretary
I, Christopher A. Dunn, a Vice President of the Federal Agricultural Mortgage
Corporation, hereby certify that Michael T. Bennett is the duly appointed,
qualified and acting Secretary of the Federal Agricultural Mortgage Corporation
and that the signature appearing above is his genuine signature.
By:
Name: Christopher A. Dunn
Title: Vice President-
Mortgage-Backed Securities
<PAGE>
EXHIBIT C
[SELLER]
Secretary's Certificate of Seller
I, [ ], hereby certify that I am the duly elected or appointed Secretary of
[Seller], and further certify as follows:
1. Attached hereto as Exhibits A and B, respectively, are true and correct
copies of the Charter and Bylaws of [Seller] each of which is in full force and
effect on the date hereof.
2. Each person purporting to execute, either manually or by facsimile signature,
on behalf of [Seller] (a) the Master Loan Sale Agreement dated as of June 1,
1996 (the "Master Loan Sale Agreement") and the Loan Sale Supplement dated as of
June 1, 1996 (the "Loan Sale Supplement"), each between [Seller], as seller, and
the Federal Agricultural Mortgage Corporation, as purchaser, and (b) any other
document delivered in connection with the sale and purchase of the Qualified
Loans and the closing related thereto was, at the respective times of such
signing and delivery, and is, as of the date hereof, duly appointed, qualified
and acting as such officer, and was and is duly authorized to accept the duties
and make the statements provided for in such documents. The signature of each
such person as it appears on any such document is the genuine signature of such
person.
3. [Seller] has the full power and authority to enter into and consummate all
transactions contemplated by the Master Loan Sale Agreement and the Loan Sale
Supplement, has duly authorized the execution, delivery and performance of the
Master Loan Sale Agreement and the Loan Sale Supplement and has duly executed
and delivered the Master Loan Sale Agreement and the Loan Sale Supplement.
4. At the date hereof, each of the Master Loan Sale Agreement and the Loan Sale
Supplement is in full force and effect as regards [Seller], and the
representations and warranties of [Seller] set forth in Section 4.2 of the
Master Loan Sale Agreement are accurate and complete.
Capitalized terms used and not otherwise defined herein shall have the meanings
specified in the Master Loan Sale Agreement and the Loan Sale Supplement.
<PAGE>
IN WITNESS WHEREOF, I have hereunto signed my name on behalf [Seller] on and as
of this _th day of ____, 199_.
[SELLER]
By:
Name:
Title: Secretary
I, ,
a of [Seller, hereby certify
that _______________ is the duly appointed, qualified and acting
Secretary of [Seller] and that the signature appearing above is
[his/her] genuine signature.
By:
Name:
Title:
<PAGE>
EXHIBIT D
[FORM OF OPINION OF COUNSEL TO THE SELLER]
[Letterhead of [ ]Esq.]
, 1996
Federal Agricultural Mortgage Corporation
919 18th Street, N.W.
Suite 200
Washington, DC 20006
Re: Sale of Qualified Loans
Dear Sir or Madam:
I have acted as counsel to [Seller], a [ ] (the "Seller") in connection
with the sale of Qualified Loans (the "Qualified Loans") to Farmer Mac pursuant
to the Master Loan Sale Agreement dated as of June 1, 1996 (the "Master Loan
Sale Agreement") and the Loan Sale Supplement dated as of June 1, 1996, each
between [the Seller], as Seller and Farmer Mac. Unless indicated otherwise, all
capitalized terms used herein shall have the meanings assigned to them in the
Loan Sale Supplement.
In that connection, I have examined originals, or copies certified or
otherwise identified to my satisfaction, of such documents, corporate records
and other instruments as I have deemed necessary or appropriate for the purposes
of this opinion.
As to matters of fact, I have examined and relied upon representations of
the parties contained in each of the Master Loan Sale Agreement and the Loan
Sale Supplement and, where I have deemed appropriate, representations or
certifications of officers of [Seller] or public officials. I have assumed the
authenticity of all documents submitted to me as originals, the genuineness of
all signatures, the legal capacity of natural persons and the conformity to the
originals of all documents submitted to me as copies. I have assumed that all
parties, except for [Seller], had the corporate power and authority to enter
into and perform all obligations under such documents, and, as to such parties,
I also have assumed the due authorization by all requisite corporate action, the
due execution and delivery and the validity, binding effect and enforceability
of such documents. I have further assumed the conformity of the Qualified Loans
and related documents to the requirements of each of the Master Loan Sale
Agreement and the Loan Sale Supplement.
In rendering this opinion letter, I do not express any opinion concerning
the securities laws of any jurisdiction. I do not express any opinion on any
issue not expressly addressed below.
Based upon the foregoing, I am of the opinion that:
(a) [Seller] is an instrumentality duly organized, validly existing and in
good standing under the laws of the United States, with corporate power
and authority to conduct its business as it is currently being conducted.
(b) [Seller] has the requisite power and authority to execute and deliver
each of the Master Loan Sale Agreement and the Loan Sale Supplement and to
perform its obligations under such Agreements.
(c) Each of the Master Loan Sale Agreement and the Loan Sale Supplement
has been duly authorized, executed and delivered by [Seller] and
constitutes a valid and binding agreement of [Seller], enforceable against
[Seller] in accordance with its terms, subject to (i) applicable
bankruptcy, insolvency, reorganization, moratorium and other similar laws
affecting creditors' rights generally and (ii) general principles of
equity (regardless of whether enforcement is sought in a proceeding in
equity or at law).
(d) There are no actions, proceedings or investigations pending, or to
the best of my knowledge, threatened against [Seller] before any court,
administrative agency or other tribunal (a) asserting the invalidity of
either of the Master Loan Sale Agreement or the Loan Sale Supplement, (b)
seeking to prevent the consummation of any of the transactions
contemplated by the Master Loan Sale Agreement and the Loan Sale
Supplement, or (c) that might reasonably be expected to materially and
adversely affect the performance by [Seller] of its obligations under, or
the validity or enforceability of, either of the Master Loan Sale
Agreement or the Loan Sale Supplement.
(e) Neither the consummation of any other of the transactions
contemplated by the Master Loan Sale Agreement and the Loan Sale
Supplement nor the compliance by [Seller] with any of the provisions
thereof will conflict with, constitute a default under or violate any
applicable [Seller's state] or federal laws or regulations.
(f) No consent, approval, authorization or order of any court,
regulatory or supervisory authority or governmental agency or body is
required for the consummation by [the Seller] of the transactions
contemplated in each of the Master Loan Sale Agreement and the Loan Sale
Supplement or for the performance by [the Seller] of the transactions or
obligations contemplated in therein.
(g) [the Seller] is not in default with respect to any order or decree
of any court or any order, regulation or demand of any federal, state,
county or municipal agency, which default might have consequences that
would materially and adversely affect its condition (financial or other),
operations or properties or might have consequences that would materially
and adversely affect its performance under each of the Master Loan Sale
Agreement and the Loan Sale Supplement.
I am a member of the bar of the State of [ ] and express no opinion as to the
laws of any jurisdiction other than those of the State of [ ] and the laws of
the United States of America.
I am furnishing this opinion letter to you solely for your benefit. This opinion
is not to be used, circulated, quoted or otherwise referred to for any other
purpose.
Very Truly yours,
FEDERAL AGRICULTURAL MORTGAGE CORPORATION
GUARANTEED GRANTOR TRUST AGRICULTURAL MORTGAGE-BACKED
SECURITIES PROGRAM
FORM OF TRUST AGREEMENT
THIS TRUST AGREEMENT made, executed and published as of the first day of
June 1996, at Washington, D.C., among the Federal Agricultural Mortgage
Corporation (herein called "Farmer Mac"), a federally chartered instrumentality
of the United States, Farmer Mac Mortgage Securities Corporation (herein called
"FMMSC"), a corporation organized and existing under the laws of the State of
Delaware, and First Trust National Association, a national banking association
(the "Trustee");
W I T N E S S E T H
WHEREAS, Farmer Mac is authorized pursuant to Title VIII of the Farm
Credit Act of 1971, as amended (the "Act"), to guarantee the timely payment of
principal and interest in respect of securities evidencing undivided beneficial
interests in trust funds comprised of agricultural mortgage loans conforming to
the Act ("Qualified Loans");
WHEREAS, FMMSC has purchased and intends to purchase
Qualified Loans;
WHEREAS, FMMSC intends to assemble groups of such Qualified Loans and to
transfer and assign the same to the Trustee in exchange for securities
evidencing undivided beneficial interests in the related trust fund or trust
funds (each a "Trust Fund");
WHEREAS, Farmer Mac intends to service the Qualified Loans held in each
such Trust Fund and, pursuant to the Act, to guarantee to the holders of
securities evidencing undivided beneficial interests in each such Trust Fund the
timely distribution of all amounts of principal and interest required to be
distributed thereon;
NOW, THEREFORE, the parties to this Trust Agreement, in the several
capacities hereinabove set forth, do hereby declare and establish this Trust
Agreement and do hereby undertake and otherwise agree as follows:
ARTICLE I
Defined Terms
Section 1.01. General Definitions. Whenever used in this
Trust Agreement, the following words and phrases shall have the
following meanings:
Act: Title VIII of the Farm Credit Act of 1971, as amended
(12 U.S.C. ss.2279aa).
Advance: As to any Distribution Date and Trust Fund, any amount advanced
with respect to such Distribution Date by the related Central Servicer or
Central Servicers as required by the applicable Servicing Contract.
Agreement: With respect to any Series, the collective
provisions of this Trust Agreement and the related Issue
Supplement.
Aggregate Certificate Principal Balance: The aggregate of
the Certificate Principal Balances of all Certificates of a
Series as of the date of determination.
Amounts Held for Future Distribution: With respect to any Series and
Distribution Date, the total of all amounts held in the Collection Account on
the preceding Certificate Account Deposit Date on account of (i) Principal
Prepayments, Liquidation Proceeds and REO Proceeds received subsequent to the
preceding Prepayment Period, (ii) Installment Payments due subsequent to the
preceding Due Date and (iii) if such Series is comprised of two or more Classes
having different Distribution Dates, all proceeds of the related Qualified Loans
for the Class or Classes as to which such Distribution Date is not a
Distribution Date.
Appraisal Standards: With respect to any Series, the
updated appraisal/reappraisal standards at the time of the
related Issue Supplement acceptable to Farmer Mac.
Appraised Value: The appraised value of a Mortgaged Property, which is the
appraised value based upon the appraisal conducted in accordance with the
Appraisal Standards.
Authorized Officer: The Chairman of the Board, the
President or any Vice President of Farmer Mac or FMMSC, as the
context requires.
Balloon Payment: With respect to any Qualified Loan that provides for the
principal portion of the Installment Payments due thereon based on an
amortization schedule more than one year longer than the remaining term to
stated maturity of such Qualified Loan, the principal amount due on the stated
maturity date of such Qualified Loan.
Balloon Qualified Loan: Any Qualified Loan having a Balloon
Payment.
Borrower: With respect to any Qualified Loan, the obligor
or obligors thereon.
Business Day: Any day other than (i) a Saturday or a Sunday, (ii) a day on
which the Federal Reserve Bank of New York authorizes banking institutions in
the Second Federal Reserve District to be closed, (iii) a day on which banking
institutions in the State of Minnesota or New York are required or authorized by
law to be closed, or (iv) a day on which the offices of Farmer Mac are closed.
Central Servicer: With respect to any Trust Fund, the Person or Persons
which shall at the time be directly servicing the Qualified Loans included
therein pursuant to a Servicing Contract.
Central Servicer Fee Rate: With respect to any Qualified Loan, a
percentage per annum rate (inclusive of any sub-servicer fee rate) specified in
or calculated as described in the related Issue Supplement.
Certificate: A Guaranteed Grantor Trust Agricultural Mortgage-Backed
Security which is issued in book-entry form and is maintained in the name of a
record owner as an entry on the books of a Reserve Bank under a designation
specifying the Series, Class and denomination thereof.
Certificate Account: As to any Series, the account created
and maintained pursuant to Section 5.01.
Certificate Account Deposit Date: With respect to a Series, the fifteenth
day of each month (or if such fifteenth day is not a Business Day, the Business
Day next succeeding such fifteenth day), beginning with the month following the
month of the Cut-off Date.
Certificate Distribution Amount: With respect to a
particular Series and Distribution Date, the sum of
(a) all interest accrued on the then outstanding Certificates for the
Interest Accrual Period immediately preceding such Distribution Date
(other than interest accrued on any Class as to which such date is not a
Distribution Date);
(b) the Principal Distribution Amount for such
Distribution Date; and
(c) to the extent specified in the related Issue Supplement, all
Prepayment Premiums collected (as opposed to due) during the preceding
Prepayment Period.
Certificate Distribution Amount Determination Date: With respect to a
Series and Distribution Date, a date on or before the fifth Business Day during
the month of such Distribution Date.
Certificate Interest Rate: With respect to any Class, the annual rate at
which interest accrues on the Certificates of such Class, as specified or
described in the related Issue Supplement.
Certificate Principal Balance: As to any Certificate (other than an
Interest Only Certificate) prior to the initial Distribution Date for the
related Trust Fund, the denomination thereof and, as to any Certificate
subsequent to such initial Distribution Date, the denomination thereof
multiplied by the applicable Certificate Principal Factor.
Certificate Principal Factor: As of any date of determination and as to
any Class of Certificates (other than an Interest Only Class), a fraction the
numerator of which is (i) the aggregate of the denominations of all Certificates
of such Class less (ii) the aggregate amount of all Principal Distribution
Amounts, if any, allocable thereto prior to such date of determination and the
denominator of which is the aggregate of the denominations of all Certificates
of such Class. As to any Interest Only Class, a fraction calculated in the
manner described in the related Issue Supplement.
Certificateholder or Holder: As to any Certificate, the
record owner on the appropriate Reserve Bank's books.
Class: With respect to any Series, all Certificates of such
Series with the same terms.
Class Certificate Principal Balance: With respect to any
Class at any time, the aggregate of the Certificate Principal
Balances of all Certificates of such Class.
Class Notional Principal Balance: With respect to any
Interest Only Class at any time, the aggregate of the Notional
Principal Balance of all Certificates of such Class.
Closing Date: As to any Series, the date specified in the
related Issue Supplement.
Code: The Internal Revenue Code of 1986, including any
successor or amendatory provisions.
Collection Account: As to any Series, the account created
and maintained pursuant to Section 4.05.
Curtailment: Either (i) any Principal Prepayment made by a Borrower that
is not a Principal Prepayment in Full, (ii) any amount deemed to be such in
connection with a substitution pursuant to Section 4.03, (iii) any REO Principal
Amortization Amount or (iv) any Insurance Proceeds or other recoveries that are
not Liquidation Proceeds and were applied to reduce the principal balance of the
related Qualified Loan.
Custodial Agreement: The agreement dated of even date herewith between the
Trustee, as custodian, and Farmer Mac, pursuant to which the Trustee acts as
custodian for the Required Documents on behalf of the related Trust Fund.
Cut-Off Date: As to any Series, the first day of the month
during which Certificates of such Series are initially issued.
Cut-Off Date Principal Balance: With respect to any Qualified Loan, the
unpaid principal balance thereof at the Cut-Off Date after giving effect to all
amounts payable on or prior thereto, whether or not paid. With respect to any
Substitute Qualified Loan the unpaid principal balance, thereof at the date of
substitution thereof after giving effect to all amounts payable on or prior
thereto, whether or not paid.
Distribution Date: As to any Class, the 25th day (or if such 25th day is
not a Business Day, the Business Day immediately following) of each month
specified in the related Issue Supplement as a month for a Distribution Date for
the Certificates of such Class.
Due Date: With respect to any Qualified Loan, each date upon which an
installment of interest and principal, if any, is due in accordance with the
amortization schedule initially applicable thereto.
Due Period: With respect to any Class and Distribution Date, the period
beginning immediately following the preceding Due Period (or immediately
following the Cut-Off Date in the case of the initial Distribution Date) and
ending on and including the Due Date in the month of such Distribution Date.
Eligible Depository: Any Reserve Bank, the Trustee or any other depository
institution or trust company approved in writing by an Authorized Officer of
Farmer Mac incorporated under the laws of the United States of America or any
state thereof and subject to supervision and examination by federal or state
banking authorities.
Eligible Investments: Any one or more of the following
obligations or securities:
(i) direct obligations of, and obligations fully guaranteed by, the
United States of America, Farmer Mac, or any other agency or
instrumentality of the United States of America;
(ii) as to any Collection Account, any other obligation
or security specified in the related Servicing Contract; and
(iii)as to any Series, any other obligation or security
specified in the related Issue Supplement.
Event of Default: An event as described in Section 7.03.
Farmer Mac: Federal Agricultural Mortgage Corporation, a
federally chartered instrumentality of the United States, or its
successor in interest or any successor appointed as herein
provided.
Farmer Mac Guarantee: With respect to any Series, the guarantee
obligations of Farmer Mac with respect to the Certificates of such Series
pursuant to Section 5.05 hereof.
Final Distribution Date: As to any Class, the Distribution Date specified
in the related Issue Supplement as being the Distribution Date on or before
which the Certificate Principal Balance or, in the case of an Interest Only
Class, Notional Principal Balance of each Certificate within such Class shall
have been reduced to zero.
FMMSC: Farmer Mac Mortgage Securities Corporation, a
corporation organized and existing under the laws of the State of
Delaware, or its successor in interest.
Guarantee Fee: With respect to any Series, the fee payable
to Farmer Mac pursuant to Section 5.03 and calculated in the
manner described in the related Issue Supplement.
Guarantee Reimbursement Amount: With respect to any Trust Fund, the
excess, if any of amounts paid by Farmer Mac pursuant to Section 5.05 to Holders
of Certificates evidencing beneficial interests therein, over amounts received
by Farmer Mac (other than Guarantee Fees or other fees or expenses otherwise
payable to it) in reimbursement therefor.
Holders: With respect to any Trust Fund, all of the Holders
of Certificates evidencing beneficial ownership interests therein.
Installment Payment: As to any Qualified Loan (including any REO Qualified
Loan) and any Due Date, the payment of principal and/or interest due thereon in
accordance with the amortization schedule provided at the time applicable
thereto (after adjustment, if any, for any Curtailments occurring prior to such
Due Date but before any other adjustment to such amortization schedule by reason
of any bankruptcy or similar proceeding or any moratorium or similar waiver or
grace period).
Interest Accrual Period: With respect to any Class and
Distribution Date, the period prior thereto specified in the
related Issue Supplement.
Interest Only Certificate: Any Certificate evidencing all
or part of an Interest Only Class.
Interest Only Class: Any Class identified as such in the
related Issue Supplement.
Issue Supplement: An instrument executed by the parties hereto pursuant to
Section 2.01 which supplements this Trust Agreement and identifies and
establishes, among other things, a particular Trust Fund and a particular Series
of Certificates related to such Trust Fund.
Liquidated Qualified Loan: Any defaulted Qualified Loan as to which Farmer
Mac has determined that all amounts it expects to recover from or on account of
such Qualified Loan have been recovered, provided, however, that a defaulted
Balloon Qualified Loan shall be deemed to be a Liquidated Qualified Loan in the
absence of any such determination on the second anniversary of the Due Date for
the related Balloon Payment.
Liquidation Expenses: Expenses incurred by or on behalf of Farmer Mac in
connection with the liquidation of any defaulted Qualified Loan, including,
without limitation, legal fees and expenses, brokerage commissions paid to third
parties, any premiums for hazard insurance policies maintained with respect to
any related REO Property, any fees to third parties hired to issue environment
reports with respect to or to manage any related REO Property and any related
and unreimbursed expenditures for real estate and conveyance taxes or for
property restoration or preservation.
Liquidation Proceeds: Cash received in connection with the liquidation of
defaulted Qualified Loans and REO Qualified Loans, whether through trustee's
sale, foreclosure sale or otherwise.
Loan Sale Agreement: The agreement between a Seller and Farmer Mac
pursuant to which the Seller conveys Qualified Loans to FMMSC, as Farmer Mac's
designee, and makes certain representations and warranties to Farmer Mac, FMMSC
and their respective successors and assigns.
Master Trustee Agreement: The agreement, as the same may be
amended from time to time, between Farmer Mac and the Trustee.
Mortgage Rate: As to any Qualified Loan, the per annum rate
of interest borne thereby.
Net Liquidation Proceeds: With respect to any Liquidated
Qualified Loan, Liquidation Proceeds net of Liquidation Expenses
not previously reimbursed out of REO Proceeds or otherwise.
Net Mortgage Rate: As to any Qualified Loan, the Mortgage
Rate borne thereby net of the Central Servicer Fee Rate.
Opinion of Counsel: A written opinion of counsel, who may be
counsel for Farmer Mac.
Officer's Certificate: A certificate signed by an
Authorized Officer of Farmer Mac or FMMSC, as the context
requires.
Nonrecoverable Advance: Any portion of an Advance previously made or
proposed to be made in respect of a Qualified Loan which has not been previously
reimbursed to the Central Servicer and which, in the good faith judgment of the
Central Servicer, will not or, in the case of a proposed Advance, would not be
ultimately recoverable from future Borrower payments or from Net Liquidation
Proceeds, REO Proceeds or other recoveries in respect of the related Qualified
Loan. The determination by the Central Servicer that it has made a
Nonrecoverable Advance or that any proposed advance, if made, would constitute a
Nonrecoverable Advance shall be evidenced by a written notification by the
Central Servicer delivered to the Trustee, with a copy to Farmer Mac, stating
(i) the amount of such Nonrecoverable Advance and (ii) that the Central Servicer
has determined in good faith that such advance is or would be a Nonrecoverable
Advance in accordance with the terms hereof.
Notional Principal Balance: As to any Interest Only Certificate prior to
the initial Distribution Date therefor, the denomination thereof, and as to any
Interest Only Certificate subsequent to such initial Distribution Date, the
denomination thereof multiplied by the then applicable Certificate Principal
Factor.
Participation Certificate: An instrument evidencing an
interest in one or more Qualified Loans.
Person: Any legal person, including any individual, corporation,
partnership, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
Prepayment Period: With respect to any Class and Distribution Date, the
period beginning immediately following the preceding Prepayment Period (or
immediately following the calendar month next preceding the Cut-Off Date in the
case of the initial Distribution Date) and ending on the last day of the
calendar month next preceding the month of such Distribution Date.
Prepayment Premium: With respect to any Qualified Loan, any premium or
yield maintenance payment paid or payable, as the context requires, by the
related Borrower in connection with any Principal Prepayment.
Principal Distribution Amount: With respect to a particular
Class and Distribution Date, the sum of
(a) all Curtailments received with respect to the
Related Qualified Loans during the previous Prepayment
Period;
(b) the Scheduled Principal Balance of each Related Qualified Loan
which was the subject of a Principal Prepayment in Full during the
preceding Prepayment Period or which became a Liquidated Qualified Loan
during such preceding Prepayment Period;
(c) the principal component of each Installment Payment due in
respect of each Related Qualified Loan during the preceding Due Period
(other than any Balloon Payment); and
(d) if such Distribution Date is a Final Distribution Date for a
Class, any amount by which the Class Certificate Principal Balance
therefor would be greater than zero after distribution in accordance with
the applicable priorities of the amounts specified in (a) - (c) above.
With respect to a particular Special Distribution Date, the amount allocable to
principal which is distributed by Farmer Mac under the circumstances and subject
to the conditions set forth in Section 5.06 and the related Issue Supplement.
Principal Prepayment: Any payment or other recovery of principal on a
Qualified Loan that is received in advance of its scheduled Due Date and is not
accompanied by an amount as to interest representing scheduled interest due on
any date or dates in any period subsequent to the Prepayment Period in which
such prepayment occurs.
Principal Prepayment in Full: Any payment received on a Qualified Loan
that is in excess of the installment of principal and interest due thereon in an
amount sufficient to pay the entire principal balance of such Qualified Loan.
Purchase Price: As to any Qualified Loan, the unpaid principal balance
thereof together with accrued and unpaid interest thereon at the Net Mortgage
Rate to the Due Date next preceding the Distribution Date upon which the net
proceeds of such Purchase Price are to be distributed to Certificateholders.
Qualified Loan: With respect to any Trust Fund, any
mortgage loan included therein.
Qualified Loan Schedule: With respect to any Trust Fund,
the loan file set-up portion of the Farmer Mac tape
specifications attached as Schedule I hereto.
Record Date: As to any Distribution Date, the last day of
the month next preceding the month of such Distribution Date.
Related Qualified Loan: With respect to any Class included in a Series
comprised of two or more Classes, any Qualified Loan identified in the related
Qualified Loan Schedule as pertaining to such Class.
REO Principal Amortization Amount: With respect to any REO Qualified Loan
and Prepayment Period, any amount, as determined by Farmer Mac, by which
aggregate related REO Proceeds received during a Prepayment Period are in excess
of interest that would have accrued during such period on the related REO
Qualified Loan and expenses payable in respect of such REO Property during such
Prepayment Period.
REO Proceeds: Proceeds, other than Liquidation Proceeds, received in
respect of any REO Qualified Loan (including, without limitation, proceeds from
the rental of the related Mortgaged Property).
REO Property: Any Mortgaged Property that has been acquired by a Trust
Fund by foreclosure, deed-in-lieu of foreclosure or otherwise.
REO Qualified Loan: Any Qualified Loan (whether or not the related
indebtedness has been extinguished) that is not a Liquidated Qualified Loan and
as to which the related Mortgaged Property is held as part of the Trust Fund.
Required Documents: As to each Qualified Loan (other than a
Qualified Loan represented by a Participation Certificate) the
documents specified in Section 2.05.
Reserve Bank: Any Federal Reserve Bank, including its
branches.
Responsible Officer: When used with respect to the Trustee, any officer of
the Trustee, including any Chairman or any President, any Vice President, any
Assistant Vice President, any Assistant Treasurer, any Trust Officer, any
Assistant Secretary or any other officer of the Trustee customarily performing
functions similar to those performed by the persons who at the time shall be
such officers and also, with respect to a particular corporate trust matter, any
other officer to whom such matter is referred because of his knowledge of and
familiarity with the particular subject.
Scheduled Principal Balance: As to any Qualified Loan and any Distribution
Date, the principal balance of such Qualified Loan as of the beginning of the
related Due Period, as specified in the amortization schedule at the time
relating thereto (after adjustment, if any, for Curtailments occurring prior to
the related Prepayment Period but before any other adjustment to such
amortization schedule by reason of any bankruptcy or similar proceeding or any
moratorium or similar waiver or grace period), after giving effect to the
payment of principal due prior to such Due Period whether or not received from
the related Borrower (other than any Balloon Payment).
Seller: Any entity that sold Qualified Loans to FMMSC and
that is identified as a Seller in the Qualified Loan Schedule.
Series: A separate series of Certificates issued pursuant
to this Agreement and the related Issue Supplement.
Servicing Contract: The agreement between Farmer Mac and any Central
Servicer relating to the direct servicing by such Central Servicer of Qualified
Loans for a particular Trust Fund.
Special Distribution Date: Any date on which Farmer Mac elects or is
required to make a distribution under the circumstances and subject to the
conditions set forth in Section 5.06 and the related Issue Supplement, any such
date for a Series being the 25th day (or if such 25th day is not a Business Day,
the Business Day immediately following) of any month (other than any month in
which a Distribution Date for the related Class occurs).
Special Record Date: As to any Special Distribution Date, the date as of
which Certificateholders entitled to a special distribution are determined, any
such date being the last day of the month next preceding the month of such
Special Distribution Date.
Substitute Qualified Loan: Any loan substituted for a
defective Qualified Loan pursuant to Section 4.03.
Trust Agreement: This Trust Agreement, dated as of June 1, 1996, by and
among the Trustee, Farmer Mac and FMMSC, as the same is originally executed, or
as modified, amended or supplemented in accordance with the applicable
provisions hereof.
Trust Fund: As to any particular Series of Certificates, the corpus of the
trust created by this Trust Agreement and the Issue Supplement applicable
thereto, consisting of (a) the Qualified Loans and all proceeds thereof, (b) the
Collection Account, the Certificate Account and all cash and investments held
therein and (c) the Farmer Mac Guarantee applicable to the related Certificates
pursuant to Section 5.05.
Trustee: First Trust National Association, a national
banking association, or its successor in interest in such
capacity, or any successor trustee appointed as herein provided.
ARTICLE II
Applicable Documentation; Conveying of Qualified Loans
Section 2.01. Issue Supplement. An Issue Supplement establishing a Trust
Fund and creating the Certificates evidencing beneficial ownership interests
therein shall be executed by the Trustee, Farmer Mac and FMMSC.
Each Issue Supplement shall identify and relate to a particular Series of
Certificates evidencing beneficial ownership interests in the related Trust
Fund. Farmer Mac shall prepare and maintain for each such Trust Fund a Qualified
Loan Schedule conforming, except as set forth in such Issue Supplement, to the
definition thereof in Article I hereof.
Section 2.02. Issue Supplement and Trust Agreement. With respect to each
Trust Fund established by an Issue Supplement and the related Certificates, the
collective terms of this Trust Agreement and such Issue Supplement shall govern
the issuance and administration of all Certificates related to such Trust Fund,
and all matters related thereto, and shall have no applicability to any other
Trust Fund or Certificates. As applied to each Trust Fund established by an
Issue Supplement, and the related Certificates, the collective terms of such
instruments shall constitute an agreement relating exclusively to such Trust
Fund and Certificates to like effect as if the collective terms of all such
instruments were set forth in a separate instrument, duly executed and delivered
by the respective signatories to this Trust Agreement.
Section 2.03. Authorized Officers. The manual or facsimile signature of
any individual appearing on an Issue Supplement, designated as the signature of
an Authorized Officer of Farmer Mac or FMMSC, shall constitute conclusive
evidence that such individual is, in fact, authorized by Farmer Mac or FMMSC, as
the case may be, to execute such Issue Supplement, notwithstanding that such
authorization may have lapsed prior to the effective date of such Issue
Supplement.
Section 2.04. Delivery of Instruments. The Trustee shall furnish to each
Certificateholder, upon request, copies of this Trust Agreement and the related
Issue Supplement, without attachments, applicable to the Certificate or
Certificates held by such Holder.
Section 2.05. Conveyance of Qualified Loans. (a) Concurrently with the
execution and delivery of an Issue Supplement, FMMSC shall transfer, assign, set
over and otherwise convey to the Trustee, on behalf of Holders of Certificates
evidencing beneficial interests therein, all of FMMSC's right, title and
interest in and to the Qualified Loans identified in the attached Qualified Loan
Schedule, including all payments of principal and interest thereon received
after the respective date or dates on which the Cut-Off Date Principal Balance
was determined (other than payments permitted to be retained by FMMSC by the
terms hereof, including payments of principal and interest due on or before the
Cut-Off Date). In connection with any such conveyance, Farmer Mac shall be
deemed to have assigned to the Trustee for the benefit of Certificateholders all
of Farmer Mac's rights under each applicable Loan Sale Agreement, including, but
not limited to, the right to enforce the representations and warranties therein
against the related Seller.
(b) In connection with any such transfer (other than pursuant to a
Participation Certificate) of a Qualified Loan, FMMSC shall cause to be
delivered to the Trustee:
(i) The related Mortgage Note endorsed to the order of "First Trust
National Association, as Custodian/Trustee" by the Seller thereof,
together with such other related documents as shall be specified in the
Custodial Agreement. In the case of Qualified Loans evidenced by a
Participation Certificate, FMMSC shall denote on the face of such
Participation Certificate that it has been assigned to the Trustee for the
exclusive benefit of Holders of Certificates evidencing beneficial
interests in the related Trust Fund;
(ii) The Mortgage with evidence of recording indicated thereon or, if
(x) the public recording office retains the original of the Mortgage or
(y) the Trustee receives a certificate executed by two officers of the
Seller certifying that the original of the Mortgage is lost, missing or
destroyed, a copy of the Mortgage certified by the public recording office
in which such Mortgage has been recorded to be a true and complete copy of
the original Mortgage;
(iii)A copy of the original assignment in the form "First Trust
National Association, as Custodian/Trustee", which assignment or
equivalent instrument may be in the form of one or more blanket
assignments covering Mortgages secured by Mortgaged Properties located in
the same county, if permitted by law and accompanied by an Opinion of
Counsel to that effect (a copy of such blanket assignment to be delivered
in each applicable loan file) and any intervening assignments in original
recorded form evidencing an unbroken chain of assignments from the initial
assignor to the Trustee. If the assignment is not complete due to the lack
of necessary recording information for insertion in the assignment as of
the applicable Closing Date, the original assignment will be retained by
FMMSC until such time as the necessary information becomes available, at
which time FMMSC shall promptly complete, or cause the Seller to complete,
the Assignment and forward, or cause the Seller to forward, it to the
appropriate office for recordation. Upon completion of recordation, FMMSC
will forward the original documents (or cause the original documents to be
forwarded) to the Trustee;
(iv) Evidence of title to the Mortgaged Property (either in the form
of an original opinion from an attorney or firm of attorneys or an
original or certified copy of a lender's title insurance policy or binding
title insurance commitment issued by a title insurance company); and
(v) Either (1) the original of each modification agreement and each
assumption agreement, if any, relating to such Qualified Loan or, if (x)
the public recording office retains the original of the modification or
assumption agreement or (y) the Trustee receives a certificate executed by
two officers of the Seller certifying that the original of the
modification or assumption agreement is lost, missing or destroyed, a copy
of the modification (with respect to the Mortgage) or assumption agreement
certified by the public recording office in which such Mortgage was
recorded to be a true and complete copy of the original modification or
assumption agreement, or (2) a signed statement of the Seller that there
is no modification agreement or assumption agreement relating to such
Qualified Loan (such statement may be part of a list of Qualified Loans as
to which no modification agreement or assumption agreement exists).
Section 2.06. Review and Certification of Required Documents and
Safekeeping of Documents. The Trustee shall review the completeness of the
Required Documents, certify as to such review as provided in the Custodial
Agreement and otherwise conform to the applicable provisions of the Custodial
Agreement.
ARTICLE III
The Certificates
Section 3.01. Certificates Issuable in Series and Classes; General
Provisions with Respect to Principal and Interest Distributions. Each Series of
Certificates may consist of only one Class or may be divided into two or more
Classes and shall be designated generally as Guaranteed Grantor Trust
Agricultural Mortgage-Backed Securities, with such particular designations added
or incorporated in such title for the Certificates of any particular Series or
Class as shall be specified in the related Issue Supplement.
The aggregate amount of principal of and interest distributable on the
Certificates of any Series on any Distribution Date shall be equal to the
Certificate Distribution Amount for such Series on such Distribution Date with
the principal component of such amount being equal to the related Principal
Distribution Amount. Distributions of any such Principal Distribution Amount
shall be made in such amounts as among Classes of Certificates, and subject to
such other conditions, as are provided in the Issue Supplement with respect to
such Series. All distributions of such Principal Distribution Amount for any
such Distribution Date which are made with respect to a particular Class of
Certificates shall be made pro rata among all Certificates of such Class in
proportion to their respective principal denominations, with no preference or
priority of any kind. All distributions made with respect to any Certificate on
any Distribution Date shall be applied first to the interest, if any,
distributable thereon on such Distribution Date and then to the principal, if
any, thereof. All computations of interest accrued on any Certificate shall be
made as if each year consisted of twelve months of thirty days each.
Interest accrued on any Certificate of a Series during any Interest
Accrual Period shall be distributable on the following Distribution Date for
such Series at the Certificate Interest Rate applicable to such Certificate
applied to the Certificate Principal Balance or, in the case of an Interest Only
Certificate, the Notional Principal Balance thereof.
Section 3.02. Issuance of Certificates. The Certificates of any Series
shall be issued in book-entry form and shall be maintained in the names of the
record owners thereof as entries on the books of a Reserve Bank. The
Certificates of any Series shall be in such authorized denominations as shall be
specified in the applicable Issue Supplement and may be transferred or pledged
in accordance with and subject to then applicable regulations governing Farmer
Mac's use of the book-entry system (as the same shall be in effect at the time
of any such transfer or pledge), Federal Reserve Bank of New York Operating
Circulars 21 and 21A and procedures that are followed generally for book-entry
securities.
If an Issue Supplement for a Series so provides, a Series or Class or
Classes of Certificates may be issued in definitive or temporary form.
Certificates issued in such form shall be subject to the provisions of the
related Issue Supplement, including, without limitation, provisions regarding
denominations, registration, transfer, exchange, and, if applicable, conversion
to book-entry form.
ARTICLE IV
Servicing of Qualified Loans
Section 4.01. General. Farmer Mac shall service the Qualified Loans
comprising each Trust Fund, and shall have full power and authority to do or
cause to be done any and all things in connection therewith as it may deem
necessary or appropriate in its sole discretion; provided, however, that Farmer
Mac shall have no authority to sell or hypothecate, or, subject to Section 4.03,
make any substitution for any Qualified Loan.
Farmer Mac in its discretion shall foreclose upon or otherwise comparably
convert the ownership of the Mortgaged Property securing any Qualified Loan as
to which a default occurs. To the extent consistent with then-current policies
of Farmer Mac or customary practices in the agricultural real estate mortgage
servicing industry, Farmer Mac in its discretion may enforce or waive
enforcement of any of the terms of any Qualified Loan or enter into an agreement
for the modification of any of the terms of any Qualified Loan (other than,
except as may be required by terms of the Mortgage Note, a reduction in the
Mortgage Interest Rate), or take any action or refrain from taking any action in
servicing any Qualified Loan. In such connection, Farmer Mac may waive, except
as may be provided in the related Issue Supplement, any Prepayment Premium,
assumption fee or late payment charge.
Although Farmer Mac will conduct such servicing through the facilities of
Central Servicers pursuant to Servicing Contracts it shall not thereby be
released from any of its duties or responsibilities hereunder or under the
applicable Issue Supplement.
Any Servicing Contract and any other transactions or services relating to
the Qualified Loans involving a Central Servicer shall be deemed to be between
the Central Servicer and Farmer Mac alone and the Trustee and Certificateholders
shall not be deemed parties thereto and shall have no claims, rights,
obligations, duties or liabilities with respect to any Central Servicer.
Section 4.02. Transfers of Mortgaged Property. In connection with the
transfer, or prospective transfer, of title to a Mortgaged Property, Farmer Mac
may, but shall not be required to, accelerate the maturity of the related
Qualified Loan where such Qualified Loan contains a due-on-sale clause
permitting acceleration under such a circumstance. In the event that, for any
reason, Farmer Mac does not accelerate the maturity of a Qualified Loan upon the
transfer, or prospective transfer of title to the underlying Mortgaged Property,
Farmer Mac may enter into a transaction by which the obligor is released from
liability on the related Qualified Loan and the transferee assumes such
liability; provided, however, that no such transaction shall provide for
reduction of the Mortgage Interest Rate or, to the extent adverse to the
interests of Certificateholders, provide for a change in any interest rate
adjustment provision or provision governing the calculation of scheduled
payments.
Section 4.03. Optional Purchase of Delinquent Qualified Loans or Mortgaged
Property; Substitution or Repurchase of Defective Qualified Loans. Farmer Mac
shall have the right and option, without obligation and in its discretion, to
purchase from the related Trust Fund, upon payment of the Purchase Price, any
Qualified Loan at any time after such Qualified Loan becomes and remains
delinquent in the payment of any Installment Payment or portion thereof for a
period of ninety days. Farmer Mac shall likewise have the right and option,
without obligation and in its discretion, to purchase from the related Trust
Fund, upon payment of the Purchase Price, any REO Property received in
connection with the foreclosure or comparable conversion of any Qualified Loan.
Farmer Mac may, in the case of a breach of warranty by a Seller of any
Qualified Loan or a defect in documentation, (i) purchase, or cause the related
Seller to purchase, at the Purchase Price such Qualified Loan from the Trust
Fund or (ii) substitute, or cause the related Seller to substitute, an
additional Qualified Loan or Qualified Loans for such Qualified Loan as long as
any such substitution takes place within two years of the original issuance of
Certificates evidencing beneficial interests in the related Trust Fund. Any
Substitute Qualified Loan shall (i) have a Cut-Off Date Principal Balance which
is not greater than the Scheduled Principal Balance of the replaced defective
Qualified Loan (the amount of any difference being deemed to be a Curtailment),
(ii) have an original final maturity not later than the original final maturity
of any Qualified Loan in the Trust Fund and not earlier than two years prior to
the original final maturity of the related replaced defective Qualified Loan,
(iii) have a Mortgage Interest Rate which, on the date of substitution, is not
less than the interest rate borne by the replaced defective Qualified Loan; (iv)
have similar Due Dates as the replaced defective Qualified Loan; and (v) conform
to such other criteria for Substitute Mortgage Loans as shall be set forth in
the related Issue Supplement. In connection with any such substitution, Farmer
Mac shall amend the Qualified Loan Schedule to reflect the withdrawal of the
replaced defective Qualified Loan and the assignment to the Trustee of the
Substitute Qualified Loan. If the Trustee's interest in a replaced defective
Qualified Loan is evidenced by a Participation Certificate, the assignment to
the Trustee of the Substitute Qualified Loan may be evidenced by a Participation
Certificate.
Section 4.04. Servicing Compensation; Payment of Certain Expenses by
Farmer Mac. As compensation for its activities and obligations hereunder, Farmer
Mac or any Central Servicer acting on its behalf shall be entitled to retain
such amounts as shall be specified herein and in the related Issue Supplement.
Farmer Mac shall pay the Trustee's fee and all other expenses incurred by it
hereunder in connection with its servicing activities and shall, except for
Liquidation Expenses and any such other reimbursable expenses as may be set
forth in the related Issue Supplement, not be entitled to reimbursement
therefor.
Unless otherwise provided in the applicable Issue Supplement, additional
servicing compensation in the form of Prepayment Premiums, assumption fees, late
payment charges or otherwise shall be retained by Farmer Mac or, to the extent
provided in the related Servicing Contract, by the related Central Servicer.
Section 4.05. Collection of Certain Qualified Loan Payments; Collection
Account. Farmer Mac shall require the Central Servicer in the related Servicing
Contract to establish and maintain a Collection Account (which Collection
Account may be the Collection Account for one or more Trust Funds) with an
Eligible Depository in the name of the Trustee in which the Central Servicer
shall deposit upon receipt on a daily basis, except as otherwise specifically
provided herein or in the related Issue Supplement, the following payments and
collections received by it subsequent to the Cut-Off Date (other than in respect
of principal and interest on the Qualified Loans due on or before the Cut-Off
Date):
(i) All payments on account of principal on the
Qualified Loans;
(ii) All payments on account of interest on the Qualified Loans
adjusted, in each case, to interest at the applicable Net Mortgage Rate;
(iii)Net Liquidation Proceeds, REO Proceeds (net of any related
expenses) and Insurance Proceeds (other than Insurance Proceeds to be
applied to the restoration or repair of the related Mortgaged Property or
released to the Borrower in accordance with the Central Servicer's normal
servicing procedures) net of any amounts permitted to be withheld by the
Central Servicer as servicing compensation pursuant to the Servicing
Contract or permitted to be paid to the Central Servicer pursuant to such
Servicing Contract; except that any such Advance made on the related
Qualified Loan shall be deposited directly into the related Certificate
Account on the Certificate Account Deposit Date in the month of the
related Distribution Date;
(iv) Any Advance by the Central Servicer pursuant to
the related Servicing Contract; and
(v) Any other amounts of the nature specified in the related
Servicing Contract or Issue Supplement.
The foregoing requirements for deposit in the Collection Account shall be
exclusive, it being understood and agreed that, without limiting the generality
of the foregoing, payments on the Qualified Loans that are not part of the Trust
Fund (including payments in respect of principal and interest on the Qualified
Loans due on or before the Cut-Off Date) and, unless otherwise specified in the
related Issue Supplement, payments or collections in the nature of Prepayment
Premiums, late payment charges or assumption fees may but need not be deposited
by the Central Servicer in the Collection Account. In the event the Central
Servicer shall deposit in the Collection Account any amount not required to be
deposited therein, it may at any time withdraw such amount from the Collection
Account, any provision herein to the contrary notwithstanding.
All amounts held in the Collection Account may be invested by the Central
Servicer in Eligible Investments maturing prior to the applicable Certificate
Account Deposit Date.
Section 4.06. Permitted Withdrawals from the Collection Account. The
Central Servicer may, from time to time as provided herein, make withdrawals
from the Collection Account for the following purposes:
(i) to reimburse itself for previously unreimbursed Advances, the
Central Servicer's right to withdraw amounts pursuant to this clause (i)
being limited to amounts received on particular Qualified Loans which
represent late recoveries of Installment Payments respecting which any
such Advance was made;
(ii) to reimburse itself for any Nonrecoverable Advance, and to pay
to itself or to any other person or entity designated in the related
Servicing Contract any income from Eligible Investments in the Collection
Account;
(iii)to pay to Farmer Mac on or before each Certificate Account
Deposit Date for deposit in the Certificate Account all amounts at the
time held in the Collection Account other than amounts held therein which
are in the nature of Amounts Held for Future Distribution;
(iv) to pay to Farmer Mac on a daily basis any amounts held in the
Collection Account which are allocable to a Certificate Distribution
Amount and which were delinquent as of the related Certificate Account
Deposit Date and were not represented by any related Advance; and
(v) to withdraw such other amounts for such other purposes as shall
be specified in the related Issue Supplement, Servicing Contract or Loan
Sale Agreement.
ARTICLE V
Certificate Account; Distributions; Farmer Mac Guarantee
Section 5.01. Certificate Account. On or before the issuance of a Series
of Certificates, Farmer Mac shall either (i) open with an Eligible Depository
one or more trust accounts in the name of the Trustee applicable to the related
Trust Fund that shall collectively be the "Certificate Account" or (ii) in lieu
of maintaining any such account or accounts, maintain the Certificate Account
for the related Trust Fund by means of appropriate entries on its books and
records designating all amounts credited thereto in respect of the related
Qualified Loans as being held by it for the benefit of the Holders of
Certificates evidencing beneficial ownership of such Trust Fund. To the extent
that the Certificate Account for any Trust Fund is maintained by Farmer Mac in
the manner provided in clause (ii) above, all references herein to deposits and
withdrawals from the Certificate Account shall be deemed to refer to credits and
debits to the related books of Farmer Mac.
Farmer Mac shall deposit in the Certificate Account all amounts remitted
to it by the Central Servicer representing withdrawals from the Collection
Account pursuant to Section 4.05, together with the Purchase Price for each
Qualified Loan or REO Property purchased pursuant to Section 4.03. Farmer Mac
shall also deposit in the Certificate Account the amount of any Curtailments in
connection with any Substitute Qualified Loans as described in Section 4.03. All
amounts deposited by Farmer Mac from time to time in a Certificate Account for a
Trust Fund, and all investments made with such moneys, including all income or
other gain from such investments, shall be held by Farmer Mac in the Certificate
Account as part of the Trust Fund as herein provided, subject to withdrawal by
Farmer Mac for the purposes set forth in Section 5.03.
All or a portion of amounts on deposit in a Certificate Account shall be
invested and reinvested by Farmer Mac in one or more Eligible Investments
bearing interest or sold at a discount. No such investment shall mature later
than the Business Day immediately preceding the next applicable Distribution
Date except that (i) if Farmer Mac shall have determined to make a special
distribution on the related Series of Certificates pursuant to Section 5.06, no
such Eligible Investment purchased subsequent to such determination shall mature
subsequent to the Business Day next preceding such Special Distribution Date and
(ii) any investment on which the Eligible Depository, in its commercial
capacity, or Farmer Mac is the obligor, may mature on the related Distribution
Date or Special Distribution Date, as the case may be. No Eligible Investment
may be sold while in the Certificate Account except to the extent that (i)
Farmer Mac believes that a sale of an Eligible Investment is desirable because
of the possibility of a default by the obligor thereon or (ii) Farmer Mac has
determined to make a special distribution on the related Series of Certificates
and amounts will not be on deposit in the Certificate Account on the related
Special Distribution Date sufficient to make the special distribution to be made
thereon, in which case Eligible Investments may be sold in the smallest amount
practicable to cure any such insufficiency.
Section 5.02. Calculation of Certificate Distribution Amount; Publication
of Certificate Principal Factors. On or before each Certificate Distribution
Amount Determination Date for a Series, Farmer Mac shall calculate the
Certificate Distribution Amount for the following Distribution Date. Immediately
following each such calculation, Farmer Mac shall notify the Trustee in writing
as to the amount so calculated and the allocation thereof as between principal
and interest. As soon as practicable thereafter, Farmer Mac shall make available
generally to financial publications on electronic services the Certificate
Principal Factor (carried to eight decimal places) for each Class of
Certificates after giving effect to the distribution of the Principal
Distribution Amount on the following Distribution Date.
Section 5.03. Withdrawals from the Certificate Account. Amounts on deposit
in the Certificate Account on the Distribution Date for a Series shall be
withdrawn by Farmer Mac, in the amounts required, to the extent funds are
available therefor, for application as follows:
first, towards the distribution to Certificateholders of the
Certificate Distribution Amount for such Distribution Date;
second, to the payment of any Guarantee Reimbursement Amount;
third, to the payment of any portion of the Guarantee Fee for such
Distribution Date or any prior Distribution Date which has not otherwise been
paid; and
fourth, to the payment to Farmer Mac of any amounts remaining in the
Certificate Account after the withdrawals referred to in clauses first through
third above, any such amounts being deemed to be payable to Farmer Mac as
compensation for its servicing activities hereunder and to the reimbursement of
expenses incurred by it in connection herewith.
In addition, on any Special Distribution Date for a Series Farmer Mac
shall withdraw from the related Certificate Account such amount as it shall have
determined to distribute to Certificateholders on such Special Distribution
Date.
Section 5.04. Distributions on Certificates. On each Distribution Date for
a Series, Farmer Mac shall withdraw from the Certificate Account for such
Series, to the extent of funds available therefor, the Certificate Distribution
Amount for such Distribution Date previously calculated by it pursuant to
Section 5.02. In the event that the Certificate Distribution Amount may not be
paid from amounts in the Certificate Account, Farmer Mac shall, pursuant to its
guarantee obligations set forth in Section 5.05 hereof, provide from its own
funds the amount of any insufficiency and shall distribute in Federal Funds to
each Certificateholder of record on the preceding Record Date the amount
distributable on such Certificateholder's Certificate(s) as determined pursuant
to Section 3.01. Concurrently therewith, in the event the Certificate Account
shall not be maintained with the Trustee, Farmer Mac shall furnish to the
Trustee an Officer's Certificate (which may also relate to other Series
comprised of Classes having a similar Distribution Date) to the effect that
distribution of the Certificate Distribution Amount for such Series and
Distribution Date has been made by it.
As promptly as practicable following each Certificate Account Deposit
Date, in the month of a Distribution Date, Farmer Mac shall, in the event the
amount on deposit in the Certificate Account shall be less than the Certificate
Distribution Amount for such following Distribution Date, provide to the Trustee
an Officer's Certificate stating (i) the amount of such insufficiency, (ii)
whether Farmer Mac is certain that funds will be available to it on such
Distribution Date in an amount sufficient to cure such insufficiency without the
necessity of borrowing from the United States Treasury and (iii) in the event
that the response to (ii) is in the negative, attaching to such Officer's
Certificate a copy of the certification furnished to the Secretary of the
Treasury requesting that funds in the necessary amount be made available to
Farmer Mac on or before such Distribution Date for purposes of satisfying its
guarantee obligations in respect of the related Series of Certificates.
Section 5.05. Farmer Mac Guarantee. Farmer Mac agrees to pay to the
Holders of Certificates of each Series on each Distribution Date therefor the
entire Certificate Distribution Amount for such Distribution Date irrespective
of whether amounts on deposit in the related Certificate Account shall be
sufficient therefor, any insufficiency being provided by Farmer Mac from its own
funds whether internally generated, borrowed from the United States Treasury or
otherwise available.
Farmer Mac's obligations hereunder shall inure to the benefit of and shall
be enforceable by any Holder of a Certificate through the Trustee (or
individually by any such Holder in the event the Trustee shall have failed to
make prompt demand upon Farmer Mac after due notification from any such Holder)
if, for any reason beyond the control of such Holder, such Holder shall have
failed to receive on any Distribution Date such Holder's interest in the
Certificate Distribution Amount for such Distribution Date. Farmer Mac hereby
agrees that its obligations hereunder shall be unconditional, irrespective of
the validity, legality or enforceability of, or any change in or amendment to,
this Agreement, or any breach with respect to any Guarantee Fee payable to
Farmer Mac in consideration of its guarantee, the absence of any action to
enforce the same, the waiver or consent by the Holder of any Certificate or by
the Trustee with respect to any provisions of this Agreement, or any action to
enforce the same or any other circumstance that might otherwise constitute a
legal or equitable discharge or defense of a guarantor. Farmer Mac hereby waives
diligence, presentment, demand of payment, protest or notice with respect to
each Certificate or the interest represented thereby, and all demands
whatsoever, and covenants that this guarantee will not be discharged except upon
complete irrevocable payment of the principal and interest obligations
represented by the Certificates.
Farmer Mac shall be subrogated to all rights of the Holders of
Certificates of any Series against the related Trust Fund and the proceeds of
the Trust Fund in respect of any amounts paid by Farmer Mac pursuant to the
provisions of its guarantee; provided, however, that Farmer Mac's entitlement
thereto on any Distribution Date shall be limited to the amount, if any, of any
Guarantee Reimbursement Amount and shall be further subject to the priorities
set forth in Section 5.03 hereof.
No reference herein shall alter or impair the guarantee of Farmer Mac,
which is absolute and unconditional, of the due and punctual distribution to
Holders of Certificates of each Series on each Distribution Date of the
Certificate Distribution Amount therefor.
The Farmer Mac Guarantee is not an obligation of, and is not guaranteed as
to principal or interest by the Farm Credit Administration, the United States or
any other agency or instrumentality of the United States (other than Farmer
Mac).
Section 5.06. Special Distributions. To the extent specified in the Issue
Supplement for a Series, Farmer Mac may elect to make, or, if so specified,
shall be required to make under circumstances described in such Issue Supplement
a special distribution with respect to such Series on a Special Distribution
Date selected by it.
All payments of principal pursuant to any special distribution shall be
made in the same priority and manner as distributions of principal on any
Distribution Date. Any such special distribution shall be made to the Holders of
Certificates of the applicable Class or Classes as of the Special Record Date
pertaining thereto and shall include accrued interest at the applicable
Certificate Interest Rate or Certificate Interest Rates on the principal amount
so distributed to the Special Distribution Date or to such earlier date as shall
be specified in the related Issue Supplement.
As soon as practicable after Farmer Mac has determined to make a special
distribution as provided in this Section 5.06, Farmer Mac will make available
generally to financial publications and electronic services notice of such
special distribution which shall include the Special Record Date and Special
Distribution Date applicable thereto, and the Certificate Principal Factor for
each Class of such Series after giving effect to such special distribution on
the related Special Distribution Date.
ARTICLE VI
Limitation of Liability
Section 6.01. General Limitation. Farmer Mac and FMMSC shall be liable
under the terms of the Certificates, this Trust Agreement and any related Issue
Supplement only to the extent of faithful performance of the duties and
responsibilities imposed by the terms of this Trust Agreement and any related
Issue Supplement.
Section 6.02. Measure of Liability. Neither Farmer Mac nor FMMSC nor any
of their respective directors, officers, employees or agents shall be under any
liability for any action taken or for refraining from the taking of any action
in good faith pursuant to the terms of this Trust Agreement and any related
Issue Supplement, or for errors in judgment; provided, however, that this
provision shall not protect Farmer Mac or FMMSC or any such person against any
liability for action or inaction by reason of willful misfeasance, bad faith or
gross negligence, or by reason of willful disregard of obligations and duties.
Neither Farmer Mac nor FMMSC shall have any obligation to appear in,
prosecute or defend any legal action which is not incidental to their respective
duties under this Trust Agreement and any related Issue Supplement and which in
their opinion may involve either of them in expense or liability; provided,
however, that either Farmer Mac or FMMSC in their discretion may undertake any
such legal action which they may deem necessary or desirable in the interests of
Holders of Certificates.
In the event that either Farmer Mac or FMMSC in their discretion so
determine to undertake any such legal action, the party taking such action for
its own account shall pay and defray the expense of any such action, including
attorneys, fees. Such expense resulting from any such legal action shall be
reimbursable only to the extent amounts are available for withdrawals from the
Certificate Account pursuant to clause fourth of Section 5.03.
ARTICLE VII
Farmer Mac
Section 7.01. Resignation. Farmer Mac shall not resign
from the duties imposed upon it by the terms of this Trust
Agreement and any Issue Supplement.
Section 7.02. Merger or Consolidation. Any corporation or other entity
into which Farmer Mac is merged or consolidated, or any corporation or other
entity resulting from any merger, conversion or consolidation to which Farmer
Mac shall be a party, or any corporation or other entity succeeding to the
business of Farmer Mac, shall succeed to and assume all duties imposed upon
Farmer Mac by the terms of this Trust Agreement and all Issue Supplements,
without the filing of any instrument or the performance of any further act by
Farmer Mac or any Certificateholder. Farmer Mac promptly shall furnish written
notice of such succession to all Certificateholders.
Section 7.03. Succession Upon Default. With respect to any
Trust Fund, each of the following events shall constitute an
Event of Default by Farmer Mac:
(a) any failure by Farmer Mac to distribute to Holders of
Certificates of any Class in such Trust Fund any distribution required to
be made under the terms of this Trust Agreement and the related Issue
Supplement (including, for this purpose, pursuant to the Farmer Mac
Guarantee) which continues unremedied for a period of five days after the
date upon which written notice of such failure, requiring the same to be
remedied, shall have been given to Farmer Mac by the Trustee or to Farmer
Mac and the Trustee by the Holders of Certificates of such Class having
Certificate Principal Balances or Notional Principal Balances aggregating
not less than 5% of the aggregate of the Certificate Principal Balances or
Notional Principal Balances of all of the Certificates of such Class; or
(b) failure on the part of Farmer Mac duly to observe or perform in
any material respect any other of the covenants or agreements on the part
of Farmer Mac in this Trust Agreement and the related Issue Supplement
which continues unremedied for a period of 60 days after the date on which
written notice of such failure, requiring the same to be remedied, shall
have been given to Farmer Mac and the Trustee by the Holders of
Certificates of any Class in the related Trust Fund having Certificate
Principal Balances or Notional Principal Balances aggregating not less
than 25% of the aggregate of the Certificate Principal Balances or
Notional Principal Balances of all of the Certificates of such Class; or
(c) a decree or order of a court or agency or supervisory authority
having jurisdiction in the premises for the appointment of a conservator,
receiver or liquidator in any insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings, or for the
winding-up or liquidation of its affairs, shall have been entered against
Farmer Mac and such decree or order shall have remained in force
undischarged or unstayed for a period of 60 days; or
(d) Farmer Mac shall consent to the appointment of a conservator,
receiver or liquidator in any insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings relating to
Farmer Mac or to all or substantially all of its property; or
(e) Farmer Mac shall admit in writing its inability to pay its debts
generally as they become due, file a petition to invoke any applicable
insolvency or reorganization statute, make an assignment for the benefit
of its creditors, or voluntarily suspend payment of its obligations.
With respect to any Trust Fund, upon the occurrence of an Event of
Default, and so long as such Event of Default shall not have been remedied, the
Trustee or the Holders of Certificates of any Class in the related Trust Fund
having Certificate Principal Balances or Notional Principal Balances aggregating
not less than 25% of the aggregate of the Certificate Principal Balances or
Notional Principal Balances of all of the Certificates of such Class may (a)
terminate all obligations and duties imposed upon Farmer Mac (other than its
obligations under the Farmer Mac Guarantee pursuant to Section 5.05) under this
Trust Agreement and the related Issue Supplement, and (b) name and appoint a
successor or successors to succeed to and assume all of such obligations and
duties. Such actions shall be effected by notice in writing to Farmer Mac and
shall become effective upon receipt of such notice by Farmer Mac and the
acceptance of such appointment by such successor or successors.
On and after the receipt by Farmer Mac of such written notice and the
acceptance by the successor or successors to Farmer Mac, all obligations (other
than its continuing obligations under the Farmer Mac Guarantee) and duties
imposed upon Farmer Mac under this Trust Agreement and the related Issue
Supplement shall pass to and vest in the successor or successors named in the
notice, and such successor or successors shall be authorized, and hereby are
authorized, to take all such action and execute and deliver all such instruments
and documents on behalf of Farmer Mac, as attorney in fact or otherwise, as may
be necessary and appropriate to effect the purposes of such written notice.
Section 7.04. Farmer Mac as Holder. Farmer Mac shall have the right to
purchase and hold for its own account any Certificate issued pursuant to the
terms of this Trust Agreement and any Issue Supplement, notwithstanding the
rights and duties conferred and imposed upon Farmer Mac by this Trust Agreement
and any such applicable Issue Supplement. In determining whether the Holders of
the requisite amount of Certificates have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, any Certificate
evidencing a beneficial ownership interest in the related Trust Fund held by
Farmer Mac shall be disregarded and deemed not to be outstanding.
ARTICLE VIII
Concerning the Trustee
Section 8.01. Duties of Trustee.
(a) The Trustee, prior to the occurrence of an Event of Default and
after the curing of all Events of Default that may have occurred, undertakes to
perform such duties and only such duties as are specifically set forth in this
Agreement. If an Event of Default occurs and is continuing, the Trustee shall
exercise such of the rights and powers vested in it by this Agreement, and use
the same degree of care and skill in their exercise as a prudent investor would
exercise or use under the circumstances in the conduct of such investor's own
affairs. Any permissive right of the Trustee contained in this Agreement shall
not be construed as a duty.
(b) The Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to the Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
conform to the requirements of this Agreement. If any such instrument is found
not to conform to the requirements of this Agreement in a material manner, the
Trustee shall take action as it deems appropriate to have the instrument
corrected and if the instrument is not corrected to the Trustee's satisfaction,
the Trustee will provide notice thereof to the Certificateholders.
(c) No provision of this Agreement shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own misconduct; provided, however, that:
(i) Prior to the occurrence of an Event of Default, and after
the curing of all such Events of Default that may have occurred, the
duties and obligations of the Trustee shall be determined solely by
the express provisions of this Agreement, the Trustee shall not be
liable except for the performance of such duties and obligations as
are specifically set forth in this Agreement, no implied covenants or
obligations shall be read into this Agreement against the Trustee
and, in the absence of bad faith on the part of the Trustee, the
Trustee may conclusively rely, as to the truth of the statements and
the correctness of the opinions expressed therein, upon any
certificates or opinions furnished to the Trustee and conforming to
the requirements of this Agreement;
(ii) The Trustee shall not be personally liable for an error of
judgment made in good faith by a Responsible officer or Responsible
Officers of the Trustee, unless it shall be proved that the Trustee
was negligent in ascertaining the pertinent facts;
(iii)The Trustee shall not be personally liable with respect to
any action taken, suffered or omitted to be taken by it in good faith
in accordance with the direction of Farmer Mac as to the time, method
and place of conducting any proceeding for any remedy available to
the Trustee, or exercising any trust or power conferred upon the
Trustee, under this Agreement; and
(iv) No provision of this Agreement shall require the Trustee to
expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder, or in
the exercise of any of its rights or powers, if it shall have
reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably
assured to it.
(d) For all purposes of this Agreement, the Trustee shall not be
deemed to have knowledge of any Event of Default or event that, with notice or
lapse of time, or both, would become an Event of Default, unless a Responsible
Officer of the Trustee shall have received written notice thereof from the
Central Servicer or Farmer Mac or a Responsible Officer of the Trustee shall
have actual knowledge thereof, and in the absence of such written notice or
knowledge no provision hereof requiring the taking of any action or the
assumption of any duties or responsibility by the Trustee following the
occurrence of any Event of Default or event which, with notice or lapse of time,
or both, would become an Event of Default, shall be effective as to the Trustee.
Section 8.02. Certain Matters Affecting the Trustee.
(a) Except as otherwise provided in Section 8.01:
(i) The Trustee may request and rely and shall be protected in
acting or refraining from acting upon any resolution, Officers'
Certificate, certificate of auditors or any other certificate,
statement, instrument, opinion, report, notice, request, consent,
order, appraisal, bond or other paper or document prima facie in
proper form and believed by it to be genuine and to have been signed
or presented by the proper party or parties;
(ii) The Trustee may consult with counsel (including counsel for
Farmer Mac), and any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken or
suffered or omitted by it hereunder in good faith and in accordance
with such Opinion of Counsel;
(iii)The Trustee shall be under no obligation to exercise any of
the trusts or powers vested in it by this Agreement or to institute,
conduct or defend any litigation hereunder or in relation hereto at
the request, order or direction of any of the Certificateholders or
Farmer Mac, pursuant to the provisions of this Agreement, unless such
Certificateholders or Farmer Mac shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and
liabilities that may be incurred therein or thereby; nothing
contained herein shall, however, relieve the Trustee of the
obligation, upon the occurrence of an Event of Default (which has not
been cured), to exercise such of the rights and powers vested in it
by this Agreement, and to use the same degree of care and skill in
their exercise as a prudent investor would exercise or use under the
circumstances in the conduct of such investor's own affairs;
(iv) The Trustee shall not be personally liable for any action
taken, suffered or omitted by it in good faith and believed by it to
be authorized or within the discretion or rights or powers conferred
upon it by this Agreement;
(v) Prior to the occurrence of an Event of Default hereunder and
after the curing of all Events of Default that may have occurred, the
Trustee shall not be bound to make any investigation into the facts
or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order,
approval, bond or other paper or document, unless requested in
writing so to do by Farmer Mac or by the Holders of Certificates of
the related series evidencing not less than 25% of the Aggregate
Certificate Principal Balance (together with the total of all Class
Notional Principal Balances if such Series includes one or more
Interest Only Classes); provided, however, that if the payment within
a reasonable time to the Trustee of the costs, expenses or
liabilities likely to be incurred by it in the making of such
investigation is, in the opinion of the Trustee, not reasonably
assured to the Trustee by the security afforded to it by the terms of
this Agreement, the Trustee may require reasonable indemnity against
such expense or liability as a condition to so proceeding. The
reasonable expense of every such investigation shall be paid by
Farmer Mac; and
(vi) The Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys.
(b) It is understood and agreed that, in exercising any right to
direct the Trustee in the performance of its duties under this Agreement prior
to the occurrence of an Event of Default and after the curing of all Events of
Default, Farmer Mac shall be acting for the benefit of the Certificateholders of
the related Series; provided, that nothing in this Agreement shall be construed
to require Farmer Mac to exercise any such right or to impose any liability on
Farmer Mac for its election, in its sole discretion, in any instance to exercise
or to refrain from exercising any such right. No failure by Farmer Mac to
exercise such right in any instance shall be deemed a waiver of such right in
any other instance. The Trustee shall be entitled to rely on any such direction
rendered to it by Farmer Mac without inquiry as to the propriety or validity
thereof, and shall be protected in acting on such direction.
Section 8.03. Trustee Not Liable for Certificates or Qualified Loans.
Except as otherwise expressly provided herein, the Trustee shall not be
accountable for the use or application by the Central Servicer or Farmer Mac of
any funds paid to the Central Servicer or Farmer Mac, in respect of the
Qualified Loans or deposited in or withdrawn from the Collection Account or the
Certificate Account by the Central Servicer or Farmer Mac, as the case may be.
The Trustee makes no representations or warranties as to the validity or
sufficiency of the Certificates or of any Qualified Loan or related document,
except that the Trustee represents that this Agreement has been duly authorized,
executed and delivered by it and, assuming due execution and delivery by the
other parties hereto, constitutes its valid and binding obligation, enforceable
against it in accordance with its terms except that such enforceability may be
subject to (i) applicable bankruptcy and insolvency laws and other similar laws
affecting the enforcement of the rights of creditors generally, and (ii) general
principles of equity regardless of whether such enforcement is considered in a
proceeding in equity or at law.
Section 8.04. Trustee May Own Certificates. The Trustee in its individual
or any other capacity may become the owner or pledgee of Certificates of any
series with the same rights it would have if it were not Trustee.
Section 8.05. Indemnification of the Trustee. Each Trust Fund shall
indemnify the Trustee its individual capacity and as Trustee and any director,
officer, employee or agent of the Trustee in its individual capacity and as
Trustee for, and hold them harmless against, any loss or liability incurred by
any of them without negligence or bad faith on the part of the Trustee in its
individual capacity and as Trustee or any such director, officer, employee or
agent of the Trustee in its individual capacity and as Trustee and arising out
of or in connection with the acceptance or administration of the trusts created
herewith, including the costs and expenses of defending the Trustee in its
individual capacity and as Trustee or any such director, officer, employee or
agent of the Trustee in its individual capacity and as Trustee against any claim
or liability incurred by any of them in connection with the exercise or
performance of any of their powers or duties hereunder, but not including any
expenses incurred in the ordinary course of performing the Trustee's duties as
set forth herein.
Section 8.06. Eligibility Requirements for Trustee. The Trustee hereunder
shall at all times be a corporation having its principal office in a state and
city acceptable to Farmer Mac and organized and doing business under the laws of
such state or the United States of America, authorized under such laws to
exercise corporate trust powers, having a combined capital and surplus of at
least $50,000,000 and subject to supervision or examination by federal or state
authority. If such corporation publishes reports of condition at least annually,
pursuant to law or to the requirements of the aforesaid supervising or examining
authority, then for the purposes of this Section the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. In
case at any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section, the Trustee shall resign immediately in the manner
and with the effect specified in Section 8.07.
Section 8.07. Resignation and Removal of the Trustee.
(a) The Trustee may at any time resign and be discharged from the
trusts hereby created by giving written notice thereof to Farmer Mac. Upon
receiving such notice of resignation, Farmer Mac shall promptly appoint a
successor trustee by written instrument, in duplicate, one copy of which
instrument shall be delivered to the resigning Trustee and one copy to the
successor trustee. If no successor trustee shall have been so appointed and have
accepted appointment within 90 days after giving of such notice of resignation,
the resigning Trustee may petition any court of competent jurisdiction for the
appointment of a successor trustee.
(b) If at any time the Trustee shall cease to be eligible in
accordance with the provisions of Section 8.06 and shall fail to resign after
written request therefor by Farmer Mac or if at any time the Trustee shall
become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a
receiver of the Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, then
Farmer Mac may remove the Trustee and appoint a successor trustee by written
instrument, in duplicate, one copy of which instrument shall be delivered to the
Trustee so removed and one copy to the successor trustee and Farmer Mac shall
give written notice thereof to the Central Servicer. Notwithstanding the
foregoing, any liability of the Trustee under this Agreement arising prior to
such termination shall survive such termination.
(c) Farmer Mac may at any time remove the Trustee solely pursuant to
the Master Trustee Agreement and appoint a successor trustee by written
instrument or instruments within 90 days of such predecessor Trustee's removal.
If no successor trustee shall have been so appointed and have accepted
appointment within 90 days after the giving of such notice of removal, the
predecessor trustee may petition any court of competent jurisdiction for the
appointment of a successor trustee.
(d) Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section shall become
effective upon acceptance of appointment by the successor trustee as provided in
Section 8.08 but in no event shall become effective until a successor has been
appointed and has accepted the duties of the Trustee.
Section 8.08. Successor Trustee.
(a) Any successor trustee appointed as provided in Section 8.07 shall
execute, acknowledge and deliver to Farmer Mac and to its predecessor trustee an
instrument accepting such appointment hereunder, and the successor trustee shall
secure an Opinion of Counsel (which shall be an expense of such successor
trustee) to the effect that, to the extent that the Trust Fund is exempt from
Federal income taxation, the Trust Fund is not subject to state and local
taxation in the jurisdiction where the successor trustee is located, whereupon
the resignation or removal of the predecessor trustee shall become effective and
such successor trustee, without any further act, deed or conveyance, shall
become fully vested with all the rights, powers, duties and obligations of its
predecessor hereunder, with the like effect as if originally named as trustee
herein. The predecessor trustee shall execute and deliver such instruments and
do such other things as may reasonably be required for more fully and certainly
vesting and confirming in the successor trustee all such rights, powers, duties
and obligations.
(b) No successor trustee shall accept appointment as provided in this
Section unless at the time of such acceptance such successor trustee shall be
eligible under the provisions of Section 8.06.
Section 8.09. Merger or Consolidation of Trustee. Any corporation into
which the Trustee may be merged or converted or with which it may be
consolidated or any corporation resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any corporation
succeeding to the business of the Trustee, shall be the successor of the Trustee
hereunder, provided such corporation shall be eligible under the provisions of
Section 8.06, without the execution or filing of any paper or any further act on
the part of any of the parties hereto, anything herein to the contrary
notwithstanding.
Section 8.10. Appointment of Co-Trustee or Separate Trustee.
(a) Notwithstanding any other provisions hereof, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Trust Fund or property securing the same may at the time be located,
Farmer Mac and the Trustee acting jointly shall have the power to execute and
deliver all instruments to appoint one or more Persons approved by the Trustee
to act as co-trustee or co-trustees, jointly with the Trustee, or separate
trustee or separate trustees, of all or any part of the related Trust Fund, and
to vest in such Person or Persons, in such capacity, such title to such Trust
Fund, or any part thereof, and, subject to the other provisions of this Section
8.10, such powers, duties, obligations, rights and trusts as Farmer Mac and the
Trustee may consider necessary or desirable. No co-trustee or separate trustee
hereunder shall be required to meet the terms of eligibility as a successor
trustee under Section 8.06 hereunder. Except as specifically provided in the
first sentence of this paragraph, the Trustee shall have no other rights to
appoint a co-trustee.
(b) In the case of any appointment of a co-trustee or separate
trustee pursuant to this Section 8.10, all rights, powers, duties and
obligations conferred or imposed upon the Trustee shall be conferred or imposed
upon and exercised or performed by the Trustee and such separate trustee or
co-trustee jointly, except to the extent that under any law of any jurisdiction
in which any particular act or acts are to be performed, the Trustee shall be
incompetent or unqualified to perform such act or acts, in which event such
rights, powers, duties and obligations (including the holding of title to the
Trust Fund or any portion thereof in any such jurisdiction) shall be exercised
and performed by such separate trustee or co-trustee at the direction of the
Trustee.
(c) Any notice, request or other writing given to the Trustee shall
be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee and co-trustee shall refer to this Agreement and
the conditions of this Article VIII. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Trustee or separately, as may be provided therein, subject to all the provisions
of this Agreement, specifically including every provision of this Agreement
relating to the conduct of, affecting the liability of, or affording protection
to, the Trustee. Every such instrument shall be filed with the Trustee.
(d) Any separate trustee and co-trustee may, at any time constitute
the Trustee its agent or attorney-in-fact, with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in an be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor trustee.
Section 8.11. Controlling Provisions. In the event of any
conflict between the provisions of the Master Trustee Agreement
and this Agreement, the provisions of this Agreement shall be
deemed controlling.
Section 8.12. Trustee Fees. As compensation for its services hereunder,
the Trustee shall be entitled to receive from Farmer Mac fees at such times, and
in such amounts, as shall be specified for the related Trust Fund in the Master
Trustee Agreement. The Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust.
ARTICLE IX
Termination
Section 9.01. Termination Upon Repurchase by Farmer Mac of All Qualified
Loans. The respective obligations and responsibilities of Farmer Mac created
hereby and by an Issue Supplement shall terminate as to the related Trust Fund
upon the distribution by Farmer Mac to all Holders of Certificates evidencing
beneficial ownership interests in such Trust Fund of all amounts required to be
distributed hereunder and thereunder upon (i) the repurchase by Farmer Mac of
all Qualified Loans and REO Property remaining in the related Trust Fund at a
price computed in the manner specified in the related Issue Supplement, (ii) the
final payment of the last Qualified Loan and/or REO Property remaining in the
related Trust Fund; or (iii) distribution by Farmer Mac pursuant to the Farmer
Mac Guarantee on the Final Distribution Date for the latest maturing Class of
the Related Series of an amount sufficient to reduce the Class Certificate
Principal Balance of such Class to zero; provided, however, that in no event
shall any trust created hereby and by the related Issue Supplement continue
beyond the expiration of 21 years from the death of the survivor of the
descendants of Joseph P. Kennedy, the late ambassador of the United States of
America to the Court of St. James', living on the Cut-Off Date of the related
Series of Certificates.
The right of Farmer Mac to repurchase all Qualified Loans and REO Property
in a Trust Fund pursuant to (i) above shall be subject to such conditions as
shall be set forth in the related Issue Supplement. Any such repurchase shall
take place on a Distribution Date, and the proceeds of any such repurchase shall
be distributed to Holders of Certificates on such Distribution Date in the
respective proportions specified in the related Issue Supplement.
In connection with any such termination, Farmer Mac shall make available
to financial publications notice for the benefit of Holders of Certificates in
the related Trust Fund to the effect that the final distribution will be made on
the Distribution Date therein specified to Certificateholders of record on the
applicable Record Date.
ARTICLE X
Supplemental Agreements
Section 10.01. Permissible Without Action by Certificateholders. Farmer
Mac, FMMSC and the Trustee, from time to time and at any time, may, without the
consent of or notice (other than in the case of any instrument supplemental
thereto pursuant to clause (b) below) to any Holder of a Certificate, enter into
an agreement or other instrument supplemental hereto and which thereafter shall
form a part hereof, for any one or more of the following purposes:
(a) to add to the covenants of Farmer Mac, whether
applicable to one or more Trust Funds;
(b) to evidence the succession pursuant to Article VII of another
Person or Persons to Farmer Mac and the assumption by such successor or
successors of the obligations of Farmer Mac hereunder;
(c) to eliminate any right reserved to or conferred
upon Farmer Mac;
(d) to take such action to cure any ambiguity or correct or
supplement any provision in this Trust Agreement or in any Issue
Supplement as Farmer Mac may deem necessary or desirable; or
(e) to modify, eliminate or add to the provisions of this Trust
Agreement and any related Issue Supplement to such extent as shall be
necessary to maintain the tax exempt status of the Trust Fund under
Federal and State law; provided that (i) there shall have been delivered
to the Trustee an Opinion of Counsel to the effect that such action is
necessary or advisable to maintain such status, and (ii) such amendment
shall not have any of the effects described in paragraphs (a) and (b) of
the proviso to Section 10.02.
Section 10.02. Waivers and Supplemental Agreements With Consent of
Holders. With the consent of the Holders of Certificates of each Class in the
related Trust Fund having Certificate Principal Balances and Notional Principal
Balances aggregating not less than 66% of the aggregate of the Certificate
Principal Balances or Notional Principal Balances, as applicable, of all of the
Certificates of such Class, (i) compliance by Farmer Mac with any of the terms
of this Trust Agreement or the related Issue Supplement may be waived or (ii)
Farmer Mac may enter into any Supplemental Agreement for the purpose of adding
any provisions to or changing in any manner or eliminating any of the provisions
of this Trust Agreement or the related Issue Supplement or of modifying in any
manner the rights of the Holders of the Certificates issued under this Trust
Agreement and the related Issue Supplement; provided that no such waiver or
Supplemental Agreement shall:
(a) without the consent of all Certificateholders affected thereby
reduce in any manner the amount of, or delay the timing of, distributions
which are required to be made on any Certificate; or
(b) without the consent of all Certificateholders (i) terminate or
modify the Farmer Mac Guarantee with respect to the Certificates of such
Series, or (ii) reduce the aforesaid percentages of Certificates, the
Holders of which are required to consent to any waiver or any Supplemental
Agreement.
It shall not be necessary for Holders to approve the particular form of
any proposed Supplemental Agreement, but it shall be sufficient if such Holders
shall approve the substance thereof.
Promptly after the execution of any Supplemental Agreement pursuant to
this Section, Farmer Mac shall give notice thereof to Holders of Certificates.
Any failure of Farmer Mac to give such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such Supplemental
Agreement.
ARTICLE XI
Miscellaneous
Section 11.01. Holders. The death or incapacity of any Holder of a
Certificate shall not operate to terminate this Trust Agreement or any Issue
Supplement, nor entitle such Holder's legal representative or heirs to claim an
accounting or to take any action or proceeding in any court for a partition or
winding up of the affairs of the related Trust Fund, nor otherwise affect the
rights, duties and obligations of any of the parties to this Trust Agreement or
any such Issue Supplement.
No Holder shall have any right to control or to participate in the control
and administration of any Trust Fund, nor shall any of the terms of this Trust
Agreement or any such Issue Supplement be construed to constitute the Holders
and Farmer Mac as partners or members of an association, nor shall any Holder
have any duty or liability to any third person by reason of any action taken by
the parties to this Trust Agreement or any such Issue Supplement pursuant to the
provisions hereof and thereof.
No Holder shall have any right by virtue of any provision of this Trust
Agreement or any Issue Supplement to institute any suit, action or proceeding in
equity or at law upon or under or with respect to this Trust Agreement or any
Issue Supplement unless an Event of Default shall have occurred and be
continuing in respect of the Trust Agreement and related Issue Supplement. For
the protection and enforcement of the provisions of this Section, each and every
Holder and the Trustee shall be entitled to such relief as can be given either
at law or in equity.
Section 11.02. Reserve Banks as Agent. For each Certificate, the
appropriate Reserve Bank shall be considered to be acting as the agent of Farmer
Mac in providing to and conferring upon the owners of the Certificate, as such
owners shall appear on the records of such Reserve Bank, the substantive rights
and benefits which are provided for herein for Holders of Certificates.
Accordingly, the substantive effect of all provisions herein providing rights
and benefits to Holders of Certificates, including, without limitation,
provisions relating to distributions, voting and notices, shall apply to such
record owners on the books of the Reserve Bank, through the appropriate Reserve
Bank acting as agent for Farmer Mac.
Section 11.03. Governing Law. The terms of this Trust
Agreement and any Issue Supplement shall be construed in
accordance with the laws of the District of Columbia.
Section 11.04. Demands, Notices, Communications. All formal demands,
notices and communications by and between Farmer Mac, the Trustee and the Holder
of any Certificate shall be in writing and delivered in person or by first class
mail, postage prepaid (a) if to Farmer Mac or the Depositor, to 919 18th Street,
N.W., Washington, D.C. 20006, or to such other address as shall be set forth in
a notification to Holders, or (b) if to the Trustee to First Trust Center, 180
East Fifth Street, St. Paul, MN 55101; Attention: Vice President-Structured
Finance or (c) if to the Holder of a Certificate, to the appropriate Holder in
care of the Reserve Bank at the address provided to Farmer Mac by such Reserve
Bank. Any notice so mailed within the time prescribed in this Trust Agreement or
any Issue Supplement shall be conclusively presumed to have been duly given
whether or not the Holder receives such notice.
Section 11.05. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Trust Agreement or any Issue
Supplement shall be for any reason whatsoever held invalid, then such covenants,
agreements, provisions or terms shall be deemed severable from the remaining
covenants, agreements, provisions or terms of this Trust Agreement or any Issue
Supplement and shall in no way affect the validity or enforceability of the
other provisions of this Trust Agreement or any Issue Supplement or of the
Certificates or the rights of the Holders thereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto hereby execute this Trust
Agreement, as of the day and year first above written.
FEDERAL AGRICULTURAL MORTGAGE
CORPORATION
[SEAL]
By: __________________________
Attest: _________________________
FARMER MAC MORTGAGE SECURITIES
CORPORATION
[SEAL]
By: __________________________
Attest: _________________________
FIRST TRUST NATIONAL
ASSOCIATION, as Trustee
[SEAL]
By: __________________________
Attest: ________________________
FEDERAL AGRICULTURAL MORTGAGE CORPORATION
GUARANTEED REMIC AGRICULTURAL MORTGAGE-BACKED
SECURITIES PROGRAM
FORM OF TRUST AGREEMENT
THIS TRUST AGREEMENT made, executed and published as of the first day of
June 1996, at Washington, D.C., among the Federal Agricultural Mortgage
Corporation (herein called "Farmer Mac"), a federally chartered instrumentality
of the United States, Farmer Mac Mortgage Securities Corporation (herein called
"FMMSC"), a corporation organized and existing under the laws of the State of
Delaware, and First Trust National Association, a national banking association
(the "Trustee");
W I T N E S S E T H
WHEREAS, Farmer Mac is authorized pursuant to Title VIII of the Farm
Credit Act of 1971, as amended (the "Act"), to guarantee the timely payment of
principal and interest in respect of securities evidencing undivided beneficial
interests in trust funds comprised of agricultural mortgage loans conforming to
the Act ("Qualified Loans");
WHEREAS, FMMSC has purchased and intends to purchase
Qualified Loans;
WHEREAS, FMMSC intends to assemble groups of such Qualified Loans and to
transfer and assign the same to the Trustee in exchange for multiple classes of
securities evidencing beneficial ownership interests in the Qualified Loans in
the related trust fund or trust funds (each a "Trust Fund");
WHEREAS, Farmer Mac and FMMSC, by the execution and delivery of an Issue
Supplement hereto, will have elected to treat each Trust Fund created hereby and
thereby as a "real estate mortgage investment conduit" ("REMIC") within the
meaning of Section 860D of the Internal Revenue Code of 1986; and
WHEREAS, Farmer Mac intends to service the Qualified Loans held in each
such Trust Fund and, pursuant to the Act, to guarantee to the holders of
securities evidencing undivided beneficial interests in each such Trust Fund the
timely distribution of all amounts of principal and interest required to be
distributed thereon;
NOW, THEREFORE, the parties to this Trust Agreement, in the several
capacities hereinabove set forth, do hereby declare and establish this Trust
Agreement and do hereby undertake and otherwise agree as follows:
ARTICLE I
Defined Terms
Section 1.01. General Definitions. Whenever used in this
Trust Agreement, the following words and phrases shall have the
following meanings:
Act: Title VIII of the Farm Credit Act of 1971, as amended
(12 U.S.C. ss.2279aa).
Advance: As to any Distribution Date and Trust Fund, any amount advanced
with respect to such Distribution Date by the related Central Servicer or
Central Servicers as required by the applicable Servicing Contract.
Agreement: With respect to any Series, the collective
provisions of this Trust Agreement and the related Issue
Supplement.
Aggregate Certificate Principal Balance: The aggregate of
the Certificate Principal Balances of all Certificates of a
Series as of the date of determination.
Amounts Held for Future Distribution: With respect to any Series and
Distribution Date, the total of all amounts held in the Collection Account on
the preceding Certificate Account Deposit Date on account of (i) Principal
Prepayments, Liquidation Proceeds and REO Proceeds received subsequent to the
preceding Prepayment Period, (ii) Installment Payments due subsequent to the
preceding Due Date and (iii) if such Series is comprised of two or more Classes
having different Distribution Dates, all proceeds of the related Qualified Loans
for the Class or Classes as to which such Distribution Date is not a
Distribution Date.
Appraisal Standards: With respect to any Series, the
updated appraisal/reappraisal standards at the time of the
related Issue Supplement acceptable to Farmer Mac.
Appraised Value: The appraised value of a Mortgaged Property, which is the
appraised value based upon the appraisal conducted in accordance with the
Appraisal Standards.
Authorized Officer: The Chairman of the Board, the
President or any Vice President of Farmer Mac or FMMSC, as the
context requires.
Authorized Signatory: With respect to any Residual Certificate, any
individual authorized to execute or authenticate the same on behalf of the
Trustee in its capacity as trustee or, in the case of authentication, in its
capacity as Certificate Registrar.
Balloon Payment: With respect to any Qualified Loan that provides for the
principal portion of the Installment Payments due thereon based on an
amortization schedule more than one year longer than the remaining term to
stated maturity of such Qualified Loan, the principal amount due on the stated
maturity date of such Qualified Loan.
Balloon Qualified Loan: Any Qualified Loan having a Balloon
Payment.
Borrower: With respect to any Qualified Loan, the obligor
or obligors thereon.
Business Day: Any day other than (i) a Saturday or a Sunday, (ii) a day on
which the Federal Reserve Bank of New York authorizes banking institutions in
the Second Federal Reserve District to be closed, (iii) a day on which banking
institutions in the State of Minnesota or New York are required or authorized by
law to be closed or (iv) a day on which the offices of Farmer Mac are closed.
Central Servicer: With respect to any Trust Fund, the Person or Persons
which shall at the time be directly servicing the Qualified Loans included
therein pursuant to a Servicing Contract.
Central Servicer Fee Rate: With respect to any Qualified Loan, a
percentage per annum rate (inclusive of any sub-servicer fee rate) specified in
or calculated as described in the related Issue Supplement.
Certificate: A Guaranteed REMIC Agricultural Mortgage-Backed Security, in
the case of all Certificates other than Residual Certificate, issued in
book-entry form and maintained in the name of a record owner as an entry on the
books of a Reserve Bank under a designation specifying the Series, Class and
denomination thereof; and in the case of a Residual Certificate, issued in fully
registered certificated form as provided in Article II hereof.
Certificate Account: As to any Series, the account created
and maintained pursuant to Section 5.01.
Certificate Account Deposit Date: With respect to a Series, the fifteenth
day of each month (or if such fifteenth day is not a Business Day, the Business
Day next succeeding such fifteenth day) beginning with the month following the
month of the Cut-Off Date.
Certificate Distribution Amount: With respect to a
particular Series and Distribution Date, the sum of
(a) all interest accrued on the then outstanding Certificates for the
Interest Accrual Period immediately preceding such Distribution Date
(other than interest accrued on any Class as to which such date is not a
Distribution Date);
(b) the Principal Distribution Amount for such
Distribution Date; and
(c) to the extent specified in the related Issue Supplement, all
Prepayment Premiums collected (as opposed to due) during the preceding
Prepayment Period.
Certificate Distribution Amount Determination Date: With respect to a
Series and Distribution Date, a date on or before the fifth Business Day during
the month of such Distribution Date.
Certificate Interest Rate: With respect to any Class,, the annual rate at
which interest accrues on the Certificates of such Class, as specified or
described in the related Issue Supplement.
Certificate Principal Balance: As to any Certificate (other than an
Interest Only Certificate) prior to the initial Distribution Date for the
related Trust Fund, the denomination thereof and, as to any Certificate
subsequent to such initial Distribution Date, the denomination thereof
multiplied by the applicable Certificate Principal Factor.
Certificate Principal Factor: As of any date of determination and as to
any Class of Certificates (other than an Interest Only Class), a fraction the
numerator of which is (i) the aggregate of the denominations of all Certificates
of such Class less (ii) the aggregate amount of all Principal Distribution
Amounts, if any, allocable thereto prior to such date of determination and the
denominator of which is the aggregate of the denominations of all Certificates
of such Class. As to any Interest Only Class, a fraction calculated in the
manner described in the related Issue Supplement.
Certificateholder or Holder: As to any Regular Certificate, the record
owner on the appropriate Reserve Bank's books. As to any Residual Certificate,
the registered owner in the Certificate Register maintained by the Certificate
Registrar pursuant to Section 3.03 hereto.
Certificate Registrar: With respect to any Series, the entity acting as
certificate registrar and transfer agent pursuant to Section 3.03 unless
otherwise specified in an Issue Supplement. The Certificate Registrar for the
related Series shall be the Trustee.
Class: With respect to any Series, all Certificates of such
Series with the same terms.
Class Certificate Principal Balance: With respect to any
Class at any time, the aggregate of the Certificate Principal
Balances of all Certificates of such Class.
Class Notional Principal Balance: With respect to any
Interest Only Class at any time, the aggregate of the Notional
Principal Balance of all Certificates of such Class.
Closing Date: As to any Series, the date specified in the
related Issue Supplement.
Code: The Internal Revenue Code of 1986, including any
successor or amendatory provisions.
Collection Account: As to any Series, the account created
and maintained pursuant to Section 4.05.
Corporate Trust Officer: The principal office of the Trustee, at which of
any particular time its corporate trust business shall be administered, which
office at the date of the execution of this Trust Agreement is
_____________________.
Curtailment: Either (i) any Principal Prepayment made by a Borrower that
is not a Principal Prepayment in Full, (ii) any amount deemed to be such in
connection with a substitution pursuant to Section 4.03, (iii) any REO Principal
Amortization Amount or (iv) any Insurance Proceeds or other recoveries that are
not Liquidation Proceeds and were applied to reduce the principal balance of the
related Qualified Loan.
Custodial Agreement: The agreement dated of even date herewith between the
Trustee, as custodian, and Farmer Mac, pursuant to which the Trustee acts as
custodian for the Required Documents on behalf of the related Trust Fund.
Cut-Off Date: As to any Series, the first day of the month
during which Certificates of such Series are initially issued.
Cut-Off Date Principal Balance: With respect to any Qualified Loan, the
unpaid principal balance thereof at the Cut-Off Date after giving effect to all
amounts payable on or prior thereto, whether or not paid. With respect to any
Substitute Qualified Loan the unpaid principal balance thereof at the date of
substitution thereof after giving effect to all amounts payable on or prior
thereto, whether or not paid.
Disqualified Organization: A disqualified organization as
defined in Section 860E(e)5 of the Code.
Distribution Date: As to any Class, the 25th day (or if such 25th day is
not a Business Day, the Business Day immediately following) of each month
specified in the related Issue Supplement as a month for a Distribution Date for
the Certificates of such Class.
Due Date: With respect to any Qualified Loan, each date upon which an
installment of interest and principal, if any, is due in accordance with the
amortization schedule initially applicable thereto.
Due Period: With respect to any Class and Distribution Date, the period
beginning immediately following the preceding Due Period (or immediately
following the Cut-Off Date in the case of the initial Distribution Date) and
ending on and including the Due Date in the month of such Distribution Date.
Eligible Depository: Any Reserve Bank, the Trustee or any other depository
institution or trust company approved in writing by an Authorized Officer of
Farmer Mac incorporated under the laws of the United States of America or any
state thereof and subject to supervision and examination by federal or state
banking authorities.
Eligible Investments: Any one or more of the following
obligations or securities:
(i) direct obligations of, and obligations fully guaranteed by, the
United States of America, Farmer Mac, or any other agency or
instrumentality of the United States of America;
(ii) as to any Collection Account, any other obligation
or security specified in the related Servicing Contract; and
(iii)as to any Series, any other obligation or security
specified in the related Issue Supplement.
Event of Default: An event as described in Section 7.03.
Farmer Mac: Federal Agricultural Mortgage Corporation, a
federally chartered instrumentality of the United States, or its
successor in interest or any successor appointed as herein
provided.
Farmer Mac Guarantee: With respect to any Series, the guarantee
obligations of Farmer Mac with respect to the Certificates of such Series
pursuant to Section 5.05 hereof.
Final Distribution Date: As to any Class, the Distribution Date specified
in the related Issue Supplement as being the Distribution Date on or before
which the Certificate Principal Balance or, in the case of an Interest Only
Class, Notional Principal Balance of each Certificate within such Class shall
have been reduced to zero.
FMMSC: Farmer Mac Mortgage Securities Corporation, a
corporation organized and existing under the laws of the State of
Delaware, or its successor in interest.
Guarantee Fee: With respect to any Series, the fee payable
to Farmer Mac pursuant to Section 5.03 and calculated in the
manner described in the related Issue Supplement.
Guarantee Reimbursement Amount: With respect to any Trust Fund, the
excess, if any of amounts paid by Farmer Mac pursuant to Section 5.05 to Holders
of Certificates evidencing beneficial interests therein, over amounts received
by Farmer Mac (other than Guarantee Fees or other fees or expenses otherwise
payable to it) in reimbursement therefor.
Holders: With respect to any Trust Fund, all of the Holders
of Certificates evidencing beneficial ownership interests therein.
Installment Payment: As to any Qualified Loan (including any REO Qualified
Loan) and any Due Date, the payment of principal and/or interest due thereon in
accordance with the amortization schedule provided at the time applicable
thereto (after adjustment, if any, for any Curtailments occurring prior to such
Due Date but before any other adjustment to such amortization schedule by reason
of any bankruptcy or similar proceeding or any moratorium or similar waiver or
grace period).
Interest Accrual Period: With respect to any Class and
Distribution Date, the period prior thereto specified in the
related Issue Supplement.
Interest Only Certificate: Any Certificate evidencing all
or part of an Interest Only Class.
Interest Only Class: Any Class identified as such in the
related Issue Supplement.
Issue Supplement: An instrument executed by the parties hereto pursuant to
Section 2.01 which supplements this Trust Agreement and identifies and
establishes, among other things, a particular Trust Fund and a particular Series
of Certificates related to such Trust Fund.
Liquidated Qualified Loan: Any defaulted Qualified Loan as to which Farmer
Mac has determined that all amounts it expects to recover from or on account of
such Qualified Loan have been recovered, provided, however, that a defaulted
Balloon Qualified Loan shall be deemed to be a Liquidated Qualified Loan in the
absence of any such determination on the second anniversary of the Due Date for
the related Balloon Payment.
Liquidation Expenses: Expenses incurred by or on behalf of Farmer Mac in
connection with the liquidation of any defaulted Qualified Loan, including,
without limitation, legal fees and expenses, brokerage commissions paid to third
parties, any premiums for hazard insurance policies maintained with respect to
any related REO Property, any fees to third parties hired to issue environment
reports with respect to or to manage any related REO Property and any related
and unreimbursed expenditures for real estate and conveyance taxes or for
property restoration or preservation.
Liquidation Proceeds: Cash received in connection with the liquidation of
defaulted Qualified Loans and REO Qualified Loans, whether through trustee's
sale, foreclosure sale or otherwise.
Loan Sale Agreement: The agreement between a Seller and Farmer Mac
pursuant to which the Seller conveys Qualified Loans to FMMSC and makes certain
representations and warranties to Farmer Mac, FMMSC, as Farmer Mac's designee,
and their respective successors and assigns.
Master Trustee Agreement: The agreement, as the same may be
amended from time to time, between Farmer Mac and the Trustee.
Mortgage Rate: As to any Qualified Loan, the per annum rate
of interest borne thereby.
Net Liquidation Proceeds: With respect to any Liquidated
Qualified Loan, Liquidation Proceeds net of Liquidation Expenses
not previously reimbursed out of REO Proceeds or otherwise.
Net Mortgage Rate: As to any Qualified Loan, the Mortgage
Rate borne thereby net of the Central Servicer Fee Rate.
Opinion of Counsel: A written opinion of counsel, who may
be counsel for Farmer Mac.
Officer's Certificate: A certificate signed by an
Authorized Officer of Farmer Mac or FMMSC, as the context
requires.
Nonrecoverable Advance: Any portion of an Advance previously made or
proposed to be made in respect of a Qualified Loan which has not been previously
reimbursed to the Central Servicer and which, in the good faith judgment of the
Central Servicer, will not or, in the case of a proposed Advance, would not be
ultimately recoverable from future Borrower payments or from Net Liquidation
Proceeds, REO Proceeds or other recoveries in respect of the related Qualified
Loan. The determination by the Central Servicer that it has made a
Nonrecoverable Advance or that any proposed advance, if made, would constitute a
Nonrecoverable Advance shall be evidenced by a written notification by the
Central Servicer delivered to the Trustee, with a copy to Farmer Mac, stating
(i) the amount of such Nonrecoverable Advance and (ii) that the Central Servicer
has determined in good faith that such advance is or would be a Nonrecoverable
Advance in accordance with the terms hereof.
Non-United States Person: Any person that is not a United
States Person.
Notional Principal Balance: As to any Interest Only Certificate prior to
the initial Distribution Date therefor, the denomination thereof, and as to any
Interest Only Certificate subsequent to such initial Distribution Date, the
denomination thereof multiplied by the then applicable Certificate Principal
Factor.
Participation Certificate: An instrument evidencing an
interest in one or more Qualified Loans.
Permitted Transferee: Any Transferee of a Residual
Certificate, other than a Disqualified Organization or Non-United
States Person.
Person: Any legal person, including any individual, corporation,
partnership, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
Prepayment Period: With respect to any Class and Distribution Date, the
period beginning immediately following the preceding Prepayment Period (or
immediately following the calendar month next preceding the Cut-Off Date in the
case of the initial Distribution Date) and ending on the last day of the
calendar month next preceding the month of such Distribution Date.
Prepayment Premium: With respect to any Qualified Loan, any premium or
yield maintenance payment paid or payable, as the context requires, by the
related Borrower in connection with any Principal Prepayment.
Principal Distribution Amount: With respect to a particular
Class and Distribution Date, the sum of
(a) all Curtailments received with respect to the
Related Qualified Loans during the previous Prepayment
Period;
(b) the Scheduled Principal Balance of each Related Qualified Loan
which was the subject of a Principal Prepayment in Full during the
preceding Prepayment Period or which became a Liquidated Qualified Loan
during such preceding Prepayment Period;
(c) the principal component of each Installment Payment due in
respect of each Related Qualified Loan during the preceding Due Period
(other than any Balloon Payment); and
(d) if such Distribution Date is a Final Distribution Date for a
Class, any amount by which the Class Certificate Principal Balance
therefor would be greater than zero after distribution in accordance with
the applicable priorities of the amounts specified in (a) - (c) above.
With respect to a particular Special Distribution Date, the amount allocable to
principal which is distributed by Farmer Mac under the circumstances and subject
to the conditions set forth in Section 5.06 and the related Issue Supplement.
Principal Prepayment: Any payment or other recovery of principal on a
Qualified Loan that is received in advance of its scheduled Due Date and is not
accompanied by an amount as to interest representing scheduled interest due on
any date or dates in any period subsequent to the Prepayment Period in which
such prepayment occurs.
Principal Prepayment in Full: Any payment received on a Qualified Loan
that is in excess of the installment of principal and interest due thereon in an
amount sufficient to pay the entire principal balance of such Qualified Loan.
Purchase Price: As to any Qualified Loan, the unpaid principal balance
thereof together with accrued and unpaid interest thereon at the Net Mortgage
Rate to the Due Date next preceding the Distribution Date upon which the net
proceeds of such Purchase Price are to be distributed to Certificateholders.
Qualified Loan: With respect to any Trust Fund, any
mortgage loan included therein.
Qualified Loan Schedule: With respect to any Trust Fund,
the loan file set-up portion of the Farmer Mac tape
specifications attached as Schedule I hereto.
Record Date: As to any Distribution Date, the last day of
the month next preceding the month of such Distribution Date.
Regular Certificate: Any Certificate other than a Residual
Certificate.
Related Qualified Loan: With respect to any Class included in a Series
comprised of two or more Classes, any Qualified Loan identified in the related
Qualified Loan Schedule as pertaining to such Class.
REMIC Administrator: With respect to a Trust Fund, the entity identified
as such in the related Issue Supplement.
REMIC: A "real estate mortgage investment conduit" within
the meaning of Section 860D of the Code.
REMIC Provisions: Provisions of the federal income tax law relating to
real estate mortgage investment conduits, which appear at Sections 860A through
86OG of Subchapter M of Chapter 1 of the Code, and related provisions, and
temporary and final regulations (or, to the extent not inconsistent with such
temporary or final regulations, proposed regulations) and published rulings,
notices and announcements promulgated thereunder, as the foregoing may be in
effect from time to time.
REO Principal Amortization Amount: With respect to any REO Qualified Loan
and Prepayment Period, any amount, as determined by Farmer Mac, by which
aggregate related REO Proceeds received during a Prepayment Period are in excess
of interest that would have accrued during such period on the related REO
Qualified Loan and expenses payable in respect of such REO Property during such
Prepayment Period.
REO Proceeds: Proceeds, other than Liquidation Proceeds, received in
respect of any REO Qualified Loan (including, without limitation, proceeds from
the rental of the related Mortgaged Property).
REO Property: Any Mortgaged Property that has been acquired by a Trust
Fund by foreclosure, deed-in-lieu of foreclosure or otherwise.
REO Qualified Loan: Any Qualified Loan (whether or not the related
indebtedness has been extinguished) that is not a Liquidated Qualified Loan and
as to which the related Mortgaged Property is held as part of the Trust Fund.
Required Documents: As to each Qualified Loan (other than a
Qualified Loan represented by a Participation Certificate) the
documents specified in Section 2.05.
Reserve Bank: Any Federal Reserve Bank, including its
branches.
Responsible Officer: When used with respect to the Trustee, any officer of
the Trustee, including any Chairman or any President, any Vice President, any
Assistant Vice President, any Assistant Treasurer, any Trust Officer, any
Assistant Secretary or any other officer of the Trustee customarily performing
functions similar to those performed by the persons who at the time shall be
such officers and also, with respect to a particular corporate trust matter, any
other officer to whom such matter is referred because of his knowledge of and
familiarity with the particular subject.
Residual Certificate: The Certificate or Certificates comprising the Class
designated in the related Issue Supplement as the sole "residual interest" in
the Trust Fund for purposes of the REMIC Provisions.
Scheduled Principal Balance: As to any Qualified Loan and any Distribution
Date, the principal balance of such Qualified Loan as of the beginning of the
related Due Period, as specified in the amortization schedule at the time
relating thereto (after adjustment, if any, for Curtailments occurring prior to
the related Prepayment Period but before any other adjustment to such
amortization schedule by reason of any bankruptcy or similar proceeding or any
moratorium or similar waiver or grace period), after giving effect to the
payment of principal due prior to such Due Period whether or not received from
the related Borrower (other than any Balloon Payment).
Seller: Any entity that sold Qualified Loans to FMMSC and
that is identified as a Seller in the Qualified Loan Schedule.
Series: A separate series of Certificates issued pursuant
to this Agreement and the related Issue Supplement.
Servicing Contract: The agreement between Farmer Mac and any Central
Servicer relating to the direct servicing by such Central Servicer of Qualified
Loans for a particular Trust Fund.
Special Distribution Date: Any date on which Farmer Mac elects or is
required to make a distribution under the circumstances and subject to the
conditions set forth in Section 5.06 and the related Issue Supplement, any such
date for a Series being the 25th day (or if such 25th day is not a Business Day,
the Business Day immediately following) of any month (other than any month in
which a Distribution Date for the related Class occurs).
Special Record Date: As to any Special Distribution Date, the date as of
which Certificateholders entitled to a special distribution are determined, any
such date being the last day of the month next preceding the month of such
Special Distribution Date.
Substitute Qualified Loan: Any loan substituted for a
defective Qualified Loan pursuant to Section 4.03.
Transfer Agent: With respect to any Series, the entity
acting as Certificate Registrar under the related Agreement.
Tax Returns: The federal income tax return on Internal Revenue Service
Form 1066, U.S. Real Estate Mortgage Investment Conduit Income Tax Return,
including Schedule Q thereto, Quarterly Notice to Residual Interest Holders of
REMIC Taxable Income or Net Loss Allocation, or any successor forms, to be filed
on behalf of a Trust Fund due to its classification as a REMIC under the REMIC
Provisions, together with any and all other information, reports or returns that
may be required to be furnished to the Certificateholders or filed with the
Internal Revenue Service or any other governmental taxing authority under any
applicable provisions of federal, state or local tax laws.
Trust Agreement: This Trust Agreement, dated as of June 1, 1996, by and
among the Trustee, Farmer Mac and FMMSC, as the same is originally executed, or
as modified, amended or supplemented in accordance with the applicable
provisions hereof.
Trust Fund: As to any particular Series of Certificates, the corpus of the
trust created by this Trust Agreement and the Issue Supplement applicable
thereto, consisting of (a) the Qualified Loans and all proceeds thereof, (b) the
Collection Account, the Certificate Account and all cash and investments held
therein and (c) the Farmer Mac Guarantee applicable to the related Certificates
pursuant to Section 5.05.
Trustee: First Trust National Association, a national
banking association, or its successor in interest in such
capacity, or any successor trustee appointed as herein provided.
United States Person: A citizen or resident of the United States, a
corporation, partnership or other entity created or organized in, or under the
laws of, the United States or any political subdivision thereof, or an estate or
trust whose income is includible in gross income for United States federal
income tax purposes regardless of its connection with the conduct of a trade or
business within the United States.
ARTICLE II
Applicable Documentation; Conveying of Qualified Loans
Section 2.01. Issue Supplement. An Issue Supplement establishing a Trust
Fund and creating the Certificates evidencing beneficial ownership interests
therein shall be executed by the Trustee, Farmer Mac and FMMSC.
Each Issue Supplement shall identify and relate to a particular Series of
Certificates evidencing beneficial ownership interests in the related Trust
Fund. Farmer Mac shall prepare and maintain for each such Trust Fund a Qualified
Loan Schedule conforming, except as set forth in such Issue Supplement, to the
definition thereof in Article I hereof.
Section 2.02. Issue Supplement and Trust Agreement. With respect to each
Trust Fund established by an Issue Supplement and the related Certificates, the
collective terms of this Trust Agreement and such Issue Supplement shall govern
the issuance and administration of all Certificates related to such Trust Fund,
and all matters related thereto, and shall have no applicability to any other
Trust Fund or Certificates. As applied to each Trust Fund established by an
Issue Supplement, and the related Certificates, the collective terms of such
instruments shall constitute an agreement relating exclusively to such Trust
Fund and Certificates to like effect as if the collective terms of all such
instruments were set forth in a separate instrument, duly executed and delivered
by the respective signatories to this Trust Agreement.
Section 2.03. Authorized Officers. The manual or facsimile signature of
any individual appearing on an Issue Supplement, designated as the signature of
an Authorized Officer of Farmer Mac or FMMSC, shall constitute conclusive
evidence that such individual is, in fact, authorized by Farmer Mac or FMMSC, as
the case may be, to execute such Issue Supplement, notwithstanding that such
authorization may have lapsed prior to the effective date of such Issue
Supplement.
Section 2.04. Delivery of Instruments. The Trustee shall furnish to each
Certificateholder, upon request, copies of this Trust Agreement and the related
Issue Supplement, without attachments, applicable to the Certificate or
Certificates held by such Holder.
Section 2.05. Conveyance of Qualified Loans. (a) Concurrently with the
execution and delivery of an Issue Supplement, FMMSC shall transfer, assign, set
over and otherwise convey to the Trustee, on behalf of Holders of Certificates
evidencing beneficial interests therein, all of FMMSC's right, title and
interest in and to the Qualified Loans identified in the attached Qualified Loan
Schedule, including all payments of principal and interest thereon received
after the respective date or dates on which the Cut-Off Date Principal Balance
was determined (other than payments permitted to be retained by FMMSC by the
terms hereof, including payments of principal and interest due on or before the
Cut-Off Date). In connection with any such conveyance, Farmer Mac shall be
deemed to have assigned to the Trustee for the benefit of Certificateholders all
of Farmer Mac's rights under each applicable Loan Sale Agreement, including, but
not limited to, the right to enforce the representations and warranties therein
against the related Seller.
(b) In connection with any such transfer (other than pursuant to a
Participation Certificate) of a Qualified Loan, FMMSC shall cause to be
delivered to the Trustee:
(i) The related Mortgage Note endorsed to the order of "First Trust
National Association, as Custodian/Trustee" by the Seller thereof,
together with such other related documents as shall be specified in the
Custodial Agreement. In the case of Qualified Loans evidenced by a
Participation Certificate, FMMSC shall denote on the face of such
Participation Certificate that it has been assigned to the Trustee for the
exclusive benefit of Holders of Certificates evidencing beneficial
interests in the related Trust Fund;
(ii) The Mortgage with evidence of recording indicated thereon or, if
(x) the public recording office retains the original of the Mortgage or
(y) the Trustee receives a certificate executed by two officers of the
Seller certifying that the original of the Mortgage is lost, missing or
destroyed, a copy of the Mortgage certified by the public recording office
in which such Mortgage has been recorded to be a true and complete copy of
the original Mortgage;
(iii)A copy of the original assignment in the form "First Trust
National Association, as Custodian/Trustee" which assignment or equivalent
instrument may be in the form of one or more blanket assignments covering
Mortgages secured by Mortgaged Properties located in the same county, if
permitted by law and accompanied by an Opinion of Counsel to that effect
(a copy of such blanket assignment to be delivered in each applicable loan
file) and any intervening assignments in original recorded form evidencing
an unbroken chain of assignments from the initial assignor to the Trustee.
If the assignment is not complete due to the lack of necessary recording
information for insertion in the assignment as of the applicable Closing
Date, the original assignment will be retained by FMMSC until such time as
the necessary information becomes available, at which time FMMSC shall
promptly complete, or cause the Seller to complete, the Assignment and
forward, or cause the Seller to forward, it to the appropriate office for
recordation. Upon completion of recordation, FMMSC will forward the
original documents (or cause the original documents to be forwarded) to
the Trustee;
(iv) Evidence of title to the Mortgaged Property (either in the form
of an original opinion from an attorney or firm of attorneys or an
original or certified copy of a lender's title insurance policy or binding
title insurance commitment issued by a title insurance company); and
(v) Either (1) the original of each modification agreement and each
assumption agreement, if any, relating to such Qualified Loan or, if (x)
the public recording office retains the original of the modification or
assumption agreement or (y) the Trustee receives a certificate executed by
two officers of the Seller certifying that the original of the
modification or assumption agreement is lost, missing or destroyed, a copy
of the modification (with respect to the Mortgage) or assumption agreement
certified by the public recording office in which such Mortgage was
recorded to be a true and complete copy of the original modification or
assumption agreement, or (2) a signed statement of the Seller that there
is no modification agreement or assumption agreement relating to such
Qualified Loan (such statement may be part of a list of Qualified Loans as
to which no modification agreement or assumption agreement exists).
Section 2.06. Review and Certification of Required Documents and
Safekeeping of Documents. The Trustee shall review the completeness of the
Required Documents, certify as to such review as provided in the Custodial
Agreement and otherwise conform to the applicable provisions of the Custodial
Agreement.
ARTICLE III
Regular Certificates; Residual Certificates
Section 3.01. Certificates Issuable in Series and Classes; General
Provisions with Respect to Principal and Interest Distributions. Each Series of
Certificates shall be divided into two or more Classes and shall be designated
generally as Guaranteed REMIC Agricultural Mortgage-Backed Securities, with such
particular designations added or incorporated in such title for the Certificates
of any particular Series or Class as shall be specified in the related Issue
Supplement. One Class of each such Series shall be designated in the applicable
Issue Supplement as the "Residual Interest" in the related Trust Fund for
purposes of the REMIC Provisions.
The aggregate amount of principal of and interest distributable on the
Certificates of any Series on any Distribution Date shall be equal to the
Certificate Distribution Amount for such Series on such Distribution Date with
the principal component of such amount being equal to the related Principal
Distribution Amount. Distributions of any such Principal Distribution Amount
shall be made in such amounts as among Classes of Certificates, and subject to
such other conditions, as are provided in the Issue Supplement with respect to
such Series. All distributions of such Principal Distribution Amount for any
such Distribution Date which are made with respect to a particular Class of
Certificates shall be made pro rata among all Certificates of such Class in
proportion to their respective principal denominations, with no preference or
priority of any kind. All distributions made with respect to any Certificate on
any Distribution Date shall be applied first to the interest, if any,
distributable thereon on such Distribution Date and then to the principal, if
any, thereof. All computations of interest accrued on any Certificate shall be
made as if each year consisted of twelve months of thirty days each.
Interest accrued on any Certificate of a Series during any Interest
Accrual Period shall be distributable on the following Distribution Date for
such Series at the Certificate Interest Rate applicable to such Certificate
applied to the Certificate Principal Balance or, in the case of an Interest Only
Certificate, the Notional Principal Balance thereof.
Section 3.02. Issuance of Regular Certificates. The Certificates of any
Series shall be issued in book-entry form and shall be maintained in the names
of the record owners thereof as entries on the books of a Reserve Bank. The
Regular Certificates of any Series shall be in such authorized denominations as
shall be specified in the applicable Issue Supplement and may be transferred or
pledged in accordance with and subject to then applicable regulations governing
Farmer Mac's use of the book-entry system (as the same shall be in effect at the
time of any such transfer or pledge), Federal Reserve Bank of New York Operating
Circulars 21 and 21A and procedures that are followed generally for book-entry
securities.
If an Issue Supplement for a Series so provides, the Regular Certificates
comprising a Series or the Regular Certificates comprising a Class or Classes of
Certificates of such Series may be issued in definitive or temporary form.
Certificates issued in such form shall be subject to the provisions of the
related Issue Supplement, including, without limitation, provisions regarding
denominations, registration, transfer, exchange, and, if applicable, conversion
to book-entry form.
Section 3.03. Execution, Authentication, Availability and Dating of the
Residual Certificates. The Residual Certificates of a Series shall be definitive
Certificates substantially in the form set forth in an exhibit to the related
Issue Supplement and shall be executed by an Authorized Signatory of the Trustee
under its corporate seal which may be in facsimile form and be imprinted or
otherwise reproduced thereon. The signature of any Authorized Signatory on a
Residual Certificate may be manual or facsimile.
A Residual Certificate bearing the manual or facsimile signature of an
individual who was at any time an Authorized Signatory shall be binding,
notwithstanding that such individual may have ceased to hold the relevant office
or title prior to the authentication and delivery of such Certificate or did not
hold such relevant office or title at the date of authentication and delivery of
such Certificate.
No Residual Certificate shall be entitled to any benefit under an
Agreement or be valid for any purpose, unless there appears on such Residual
Certificate a certificate of authentication substantially in the form provided
for herein, executed by the Certificate Registrar by the manual or facsimile
signature of an Authorized Signatory, and such certificate upon any Residual
Certificate shall be conclusive evidence, and the only evidence, that such
Residual Certificate has been duly authenticated and made available hereunder.
Each Residual Certificate shall be dated the date of its authentication.
Section 3.04. Registration and Registration of Transfer of Residual
Certificates. (a) The Trustee shall cause to be kept to the Corporate Trust
Office which, subject to such reasonable regulations as it may prescribe, the
Trustee shall provide for the registration of the Residual Certificates and the
registration of transfers of the Residual Certificates. Unless otherwise
provided in an Issue Supplement for a Series, the Trustee shall act as
Certificate Registrar and Transfer Agent for the purpose of registration of the
Residual Certificates of such Series and transfers thereof, as provided herein.
Upon any resignation of any Certificate Registrar or Transfer Agent, Farmer Mac
shall promptly appoint a successor or, in the absence of such appointment,
assume the duties of Certificate Registrar or Transfer Agent, as the case may
be.
(b) Upon surrender for registration of transfer of any Residual
Certificate in accordance with this Section 3.04 at the Corporate Trust Office,
the Trustee shall execute, and the Certificate Registrar shall authenticate and
make available, in the name of the designated transferee, one or more new
Residual Certificates of the appropriate Class and aggregate denomination. A
Residual Certificate presented or surrendered for registration of transfer shall
(if so required by the Trustee or the Certificate Registrar) be duly endorsed
by, or be accompanied by a written instrument of transfer in form satisfactory
to the Certificate Registrar duly executed by, the Holder thereof or such
Holder's attorney duly authorized in writing, and shall be accompanied by such
other documents as the Trustee may require.
(c) Any purported transfer of record or beneficial ownership, direct
or indirect (whether pursuant to a purchase, a default under a secured lending
agreement or otherwise), to a Disqualified Organization of any Residual
Certificate, or any beneficial interest therein, shall be void and of no effect.
In no event shall the Certificate Registrar accept surrender for transfer,
registration of transfer, or register the transfer of any Residual Certificate
nor authenticate and make available any new Residual Certificate unless the
Certificate Registrar has received a properly executed United States Internal
Revenue Service Form W-9 together with an affidavit from the proposed transferee
in the form attached to the related Issue Supplement. The foregoing restrictions
that are applicable to prevent the transfer of a Residual Certificate to a
Disqualified Organization shall cease to have any further effect (and the
applicable portions of the legend to the Residual Certificate may be deleted) in
the event that the Trustee determines, upon the advice of its tax counsel, that
such restrictions are not necessary to preclude the imposition of a tax on the
Trust Fund or upon the transferor of a Residual Certificate, or to maintain the
qualification of each Trust Fund as a REMIC and, as a result of such
determination, each related Agreement is amended to declare such restrictions to
be of no further effect.
(d) Under the REMIC Provisions, any purported transfer to a U.S.
Person of record or beneficial ownership, direct or indirect (whether pursuant
to a purchase, a default under a secured lending agreement or otherwise), of a
Residual Certificate that is a "noneconomic residual interest" within the
meaning of the REMIC Provisions for the purpose of avoiding or impeding the
assessment or collection of tax shall be disregarded for all U.S. federal tax
purposes. The affidavit required to be supplied by each transferee of a Residual
Certificate pursuant to Section 3.04(c) also shall contain a statement that no
purpose of the transfer of the Residual Certificate is to avoid or impede the
assessment or collection of tax, that the proposed transferee understands that
it may incur tax liabilities in excess of any cash flows generated by a Residual
Certificate and that it intends to pay taxes associated with holding a Residual
Certificate as they become due.
(e) Any purported transfer of record or beneficial ownership, direct
or indirect (whether pursuant to a purchase, a default under a secured lending
agreement or otherwise), to a person that is not a U.S. Person, of any Residual
Certificate, or any beneficial interest therein, shall be void and of no effect.
The foregoing restriction shall cease to have any effect with respect to a
transfer of a Residual Certificate to a person that is not a U.S. Person only if
the Trustee has consented to such transfer expressly in writing.
(f) A Residual Certificate issued upon any registration of transfer
thereof shall be entitled to the same benefits under the related Agreement as
the Residual Certificate surrendered upon such registration of transfer.
(g) A service charge in an amount determined by the Trustee (such
amount being based on a service charge schedule on file in the Corporate Trust
Office of the Certificate Registrar and in the office of the Corporate Secretary
of Farmer Mac) shall be made for any registration of transfer of a Residual
Certificate, and the Trustee may require payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in connection with any
registration of transfer of a Residual Certificate, other than exchanges
pursuant to Section 3.05 hereof not involving any transfer.
Section 3.05. Mutilated, Destroyed, Lost or Stolen Residual Certificates.
If (i) any mutilated Residual Certificate is surrendered to the Trustee or the
Certificate Registrar or (ii) the Trustee receives evidence to its satisfaction
of the destruction, loss or theft of any Residual Certificate, and there is
delivered to the Trustee such security or indemnity as may be required by it to
save it harmless, then, in the absence of notice to the Trustee that such
Residual Certificate has been acquired by a bona fide purchaser, the Trustee
shall execute and the Certificate Registrar shall authenticate and make
available, in exchange for or in lieu of any such mutilated, destroyed, lost or
stolen Residual Certificate, a new Certificate of the appropriate Class. Upon
the issuance of any new Residual Certificate under this Section 3.05, the
Trustee may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Certificate Registrar)
connected therewith. Any duplicate Residual Certificate issued pursuant to this
Section 3.05 shall constitute complete and indefeasible evidence of ownership in
the Trust Fund as if originally issued, whether or not the lost or stolen
Residual Certificate shall be found at any time.
Section 3.06. Persons Deemed Owners of Residual Certificates. Prior to due
presentation of a Residual Certificate for registration of transfer, Farmer Mac,
the Trustee, the Certificate Registrar and any agent of Farmer Mac or the
Trustee may treat the person in whose name the Residual Certificate is
registered as the owner of the Residual Certificate for the purpose of receiving
distributions, if any, pursuant hereto and for all other purposes whatsoever,
and neither Farmer Mac nor the Trustee, the Certificate Registrar or any agent
of Farmer Mac or the Trustee shall be affected by notice to the contrary.
Section 3.07. Reference in the Residual Certificates to Supplemental
Agreements. A Residual Certificate authenticated and made available after the
execution of any Supplemental Agreement pursuant to Article X of this Trust
Agreement may, and if required by the Trustee shall, bear a notation as to any
matter provided for in such Supplemental Agreement. If the Trustee shall so
determine, new Residual Certificates so modified as to conform, in the opinion
of the Trustee, to any such Supplemental Agreement may be prepared and executed
by the Trustee and authenticated and made available by the Certificate Registrar
in exchange for the outstanding Residual Certificates, as applicable.
Section 3.08. Amendment Relating to Transfers to Disqualified
Organizations. Farmer Mac, FMMSC and the Trustee may, without the consent of any
Holders of the Certificates, upon notice to the Holders of the Residual
Certificates, notwithstanding any provisions hereof to the contrary, amend this
Trust Agreement in such manner as they may choose; provided, however, that any
such amendment shall be limited to such matters as, in the judgment of the
parties hereto, based upon the written advice of tax counsel, are reasonably
necessary (i) to ensure that the record ownership of, or any beneficial interest
in, any Residual Certificate is not transferred, directly or indirectly, to a
Disqualified Organization; and (ii) to provide for a means to compel the
transfer of any Residual Certificate which is held by a Disqualified
Organization.
ARTICLE IV
Servicing of Qualified Loans
Section 4.01. General. Farmer Mac shall service the Qualified Loans
comprising each Trust Fund, and shall have full power and authority to do or
cause to be done any and all things in connection therewith as it may deem
necessary or appropriate in its sole discretion; provided, however, that Farmer
Mac shall have no authority to sell or hypothecate, or, subject to Section 4.03,
make any substitution for any Qualified Loan.
Farmer Mac in its discretion shall foreclose upon or otherwise comparably
convert the ownership of the Mortgaged Property securing any Qualified Loan as
to which a default occurs. To the extent consistent with then-current policies
of Farmer Mac or customary practices in the agricultural real estate mortgage
servicing industry, Farmer Mac in its discretion may enforce or waive
enforcement of any of the terms of any Qualified Loan or enter into an agreement
for the modification of any of the terms of any Qualified Loan (other than,
except as may be required by terms of the Mortgage Note, a reduction in the
Mortgage Interest Rate), or take any action or refrain from taking any action in
servicing any Qualified Loan. In such connection, Farmer Mac may waive, except
as may be provided in the related Issue Supplement, any Prepayment Premium,
assumption fee or late payment charge.
Although Farmer Mac will conduct such servicing through the facilities of
Central Servicers pursuant to Servicing Contracts it shall not thereby be
released from any of its duties or responsibilities hereunder or under the
applicable Issue Supplement.
Any Servicing Contract and any other transactions or services relating to
the Qualified Loans involving a Central Servicer shall be deemed to be between
the Central Servicer and Farmer Mac alone and the Trustee and Certificateholders
shall not be deemed parties thereto and shall have no claims, rights,
obligations, duties or liabilities with respect to any Central Servicer.
Section 4.02. Transfers of Mortgaged Property. In connection with the
transfer, or prospective transfer, of title to a Mortgaged Property, Farmer Mac
may, but shall not be required to, accelerate the maturity of the related
Qualified Loan where such Qualified Loan contains a due-on-sale clause
permitting acceleration under such a circumstance. In the event that, for any
reason, Farmer Mac does not accelerate the maturity of a Qualified Loan upon the
transfer, or prospective transfer of title to the underlying Mortgaged Property,
Farmer Mac may enter into a transaction by which the obligor is released from
liability on the related Qualified Loan and the transferee assumes such
liability; provided, however, that no such transaction shall provide for
reduction of the Mortgage Interest Rate or, to the extent adverse to the
interests of Certificateholders, provide for a change in any interest rate
adjustment provision or provision governing the calculation of scheduled
payments.
Section 4.03. Optional Purchase of Delinquent Qualified Loans or Mortgaged
Property; Substitution or Repurchase of Defective Qualified Loans. Farmer Mac
shall have the right and option, without obligation and in its discretion, to
purchase from the related Trust Fund, upon payment of the Purchase Price, any
Qualified Loan at any time after such Qualified Loan becomes and remains
delinquent in the payment of any Installment Payment or portion thereof for a
period of ninety days. Farmer Mac shall likewise have the right and option,
without obligation and in its discretion, to purchase from the related Trust
Fund, upon payment of the Purchase Price, any REO Property received in
connection with the foreclosure or comparable conversion of any Qualified Loan.
Farmer Mac may, in the case of a breach of warranty by a Seller of any
Qualified Loan or a defect in documentation, (i) purchase, or cause the related
Seller to purchase, at the Purchase Price such Qualified Loan from the Trust
Fund or (ii) substitute, or cause the related Seller to substitute, an
additional Qualified Loan or Qualified Loans for such Qualified Loan as long as
any such substitution takes place within two years of the original issuance of
Certificates evidencing beneficial interests in the related Trust Fund and
otherwise conforms to the REMIC Provisions. Any Substitute Qualified Loan shall
(i) have a Cut-Off Date Principal Balance which is not greater than the
Scheduled Principal Balance of the replaced defective Qualified Loan (the amount
of any difference being deemed to be a Curtailment), (ii) have an original final
maturity not later than the original final maturity of any Qualified Loan in the
Trust Fund and not earlier than two years prior to the original final maturity
of the related replaced defective Qualified Loan, (iii) have a Mortgage Interest
Rate which, on the date of substitution, is not less than the interest rate
borne by the replaced defective Qualified Loan; (iv) have similar Due Dates as
the replaced defective Qualified Loan; and (v) conform to such other criteria
for Substitute Mortgage Loans as shall be set forth in the related Issue
Supplement. In connection with any such substitution, Farmer Mac shall amend the
Qualified Loan Schedule to reflect the withdrawal of the replaced defective
Qualified Loan and the assignment to the Trustee of the Substitute Qualified
Loan. If the Trustee's interest in a replaced defective Qualified Loan is
evidenced by a Participation Certificate, the assignment to the Trustee of the
Substitute Qualified Loan may be evidenced by a Participation Certificate.
Section 4.04. Servicing Compensation; Payment of Certain Expenses by
Farmer Mac. As compensation for its activities and obligations hereunder, Farmer
Mac or any Central Servicer acting on its behalf shall be entitled to retain
such amounts as shall be specified herein and in the related Issue Supplement.
Farmer Mac shall pay the Trustee's fee and all other expenses incurred by it
hereunder in connection with its servicing activities and shall, except for
Liquidation Expenses and any such other reimbursable expenses as may be set
forth in the related Issue Supplement, not be entitled to reimbursement
therefor.
Unless otherwise provided in the applicable Issue Supplement, additional
servicing compensation in the form of Prepayment Premiums, assumption fees, late
payment charges or otherwise shall be retained by Farmer Mac or, to the extent
provided in the related Servicing Contract, by the related Central Servicer.
Section 4.05. Collection of Certain Qualified Loan Payments; Collection
Account. Farmer Mac shall require the Central Servicer in the related Servicing
Contract to establish and maintain a Collection Account (which Collection
Account may be the Collection Account for one or more Trust Funds) with an
Eligible Depository in the name of the Central Servicer in which the Central
Servicer shall deposit upon receipt on a daily basis, except as otherwise
specifically provided herein or in the related Issue Supplement, the following
payments and collections received by it subsequent to the Cut-Off Date (other
than in respect of principal and interest on the Qualified Loans due on or
before the Cut-Off Date):
(i) All payments on account of principal on the
Qualified Loans;
(ii) All payments on account of interest on the Qualified Loans
adjusted, in each case, to interest at the applicable Net Mortgage Rate;
(iii)Net Liquidation Proceeds, REO Proceeds (net of any related
expenses) and Insurance Proceeds (other than Insurance Proceeds to be
applied to the restoration or repair of the related Mortgaged Property or
released to the Borrower in accordance with the Central Servicer's normal
servicing procedures) net of any amounts permitted to be withheld by the
Central Servicer as servicing compensation pursuant to the Servicing
Contract or permitted to be paid to the Central Servicer pursuant to such
Servicing Contract;
(iv) Any Advance by the Central Servicer pursuant to the related
Servicing Contract (except that any such Advance made on the related
Qualified Loan shall be deposited directly into the related Certificate
Account on the Certificate Account Deposit Date in the month of the
related Distribution Date); and
(v) Any other amounts of the nature specified in the related
Servicing Contract or Issue Supplement.
The foregoing requirements for deposit in the Collection Account shall be
exclusive, it being understood and agreed that, without limiting the generality
of the foregoing, payments on the Qualified Loans that are not part of the Trust
Fund (including payments in respect of principal and interest on the Qualified
Loans due on or before the Cut-Off Date) and, unless otherwise specified in the
related Issue Supplement or Servicing Contract, payments or collections in the
nature of Prepayment Premiums, late payment charges or assumption fees may but
need not be deposited by the Central Servicer in the Collection Account. In the
event the Central Servicer shall deposit in the Collection Account any amount
not required to be deposited therein, it may at any time withdraw such amount
from the Collection Account, any provision herein to the contrary
notwithstanding.
All amounts held in the Collection Account may be invested by the Central
Servicer in Eligible Investments maturing prior to the applicable Certificate
Account Deposit Date.
Section 4.06. Permitted Withdrawals from the Collection Account. The
Central Servicer may, from time to time as provided herein, make withdrawals
from the Collection Account for the following purposes:
(i) to reimburse itself for previously unreimbursed Advances, the
Central Servicer's right to withdraw amounts pursuant to this clause (i)
being limited to amounts received on particular Qualified Loans which
represent late recoveries of Installment Payments respecting which any
such Advance was made;
(ii) to reimburse itself for any Nonrecoverable Advance, and to pay
to itself or to any other person or entity designated in the related
Servicing Contract any income from Eligible Investments in the Collection
Account;
(iii)to pay to Farmer Mac on or before each Certificate Account
Deposit Date for deposit in the Certificate Account all amounts at the
time held in the Collection Account other than amounts held therein which
consist of Amounts held for Future Distribution;
(iv) to pay to Farmer Mac on a daily basis any amounts held in the
Collection Account which are allocable to a Certificate Distribution
Amount and which were delinquent as of the Certificate Account Deposit
Date next preceding the related Distribution Date and were not represented
by any related Advance; and
(v) to withdraw such other amounts for such other purposes as shall
be specified in the related Issue Supplement, Servicing Contract or Loan
Sale Agreement.
ARTICLE V
Certificate Account; Distributions; Farmer Mac Guarantee
Section 5.01. Certificate Account. On or before the issuance of a Series
of Certificates, Farmer Mac shall either (i) open with an Eligible Depository
one or more trust accounts in the name of the Trustee applicable to the related
Trust Fund that shall collectively be the "Certificate Account" or (ii) in lieu
of maintaining any such account or accounts, maintain the Certificate Account
for the related Trust Fund by means of appropriate entries on its books and
records designating all amounts credited thereto in respect of the related
Qualified Loans as being held by it for the benefit of the Holders of
Certificates evidencing beneficial ownership of such Trust Fund. To the extent
that the Certificate Account for any Trust Fund is maintained by Farmer Mac in
the manner provided in clause (ii) above, all references herein to deposits and
withdrawals from the Certificate Account shall be deemed to refer to credits and
debits to the related books of Farmer Mac.
Farmer Mac shall deposit in the Certificate Account all amounts remitted
to it by the Central Servicer representing withdrawals from the Collection
Account pursuant to Section 4.05, together with the Purchase Price for each
Qualified Loan or REO Property purchased pursuant to Section 4.03. Farmer Mac
shall also deposit in the Certificate Account the amount of any Curtailments in
connection with any Substitute Qualified Loans as described in Section 4.03. All
amounts deposited by Farmer Mac from time to time in a Certificate Account for a
Trust Fund, and all investments made with such moneys, including all income or
other gain from such investments, shall be held by Farmer Mac in the Certificate
Account as part of the Trust Fund as herein provided, subject to withdrawal by
Farmer Mac for the purposes set forth in Section 5.03.
All or a portion of amounts on deposit in a Certificate Account shall be
invested and reinvested by Farmer Mac in one or more Eligible Investments
bearing interest or sold at a discount. No such investment shall mature later
than the Business Day immediately preceding the next applicable Distribution
Date except that (i) if Farmer Mac shall have determined to make a special
distribution on the related Series of Certificates pursuant to Section 5.06, no
such Eligible Investment purchased subsequent to such determination shall mature
subsequent to the Business Day next preceding such Special Distribution Date and
(ii) any investment on which the Eligible Depository, in its commercial
capacity, or Farmer Mac is the obligor, may mature on the related Distribution
Date or Special Distribution Date, as the case may be. No Eligible Investment
may be sold while in the Certificate Account except to the extent that (i)
Farmer Mac believes that a sale of an Eligible Investment is desirable because
of the possibility of a default by the obligor thereon or (ii) Farmer Mac has
determined to make a special distribution on the related Series of Certificates
and amounts will not be on deposit in the Certificate Account on the related
Special Distribution Date sufficient to make the special distribution to be made
thereon, in which case Eligible Investments may be sold in the smallest amount
practicable to cure any such insufficiency.
Section 5.02. Calculation of Certificate Distribution Amount; Publication
of Certificate Principal Factors. On or before each Certificate Distribution
Amount Determination Date for a Series, Farmer Mac shall calculate the
Certificate Distribution Amount for the following Distribution Date. Immediately
following each such calculation, Farmer Mac shall notify the Trustee in writing
as to the amount so calculated and the allocation thereof as between principal
and interest. As soon as practicable thereafter, Farmer Mac shall make available
generally to financial publications or electronic services the Certificate
Principal Factor (carried to eight decimal places) for each Class of
Certificates after giving effect to the distribution of the Principal
Distribution Amount on the following Distribution Date.
Section 5.03. Withdrawals from the Certificate Account. Amounts on deposit
in the Certificate Account on the Distribution Date for a Series shall be
withdrawn by Farmer Mac, in the amounts required, to the extent funds are
available therefor, for application as follows:
first, towards the distribution to Certificateholders of the
Certificate Distribution Amount for such Distribution Date;
second, to the payment of any Guarantee Reimbursement Amount;
third, to the payment of any portion of the Guarantee Fee for such
Distribution Date or any prior Distribution Date which has not otherwise been
paid; and
fourth, to the payment to Farmer Mac of any amounts remaining in the
Certificate Account after the withdrawals referred to in clauses first through
third above any such amounts being deemed to be payable to Farmer Mac as
compensation for its servicing activities hereunder and to the reimbursement of
expenses incurred by it in connection herewith.
In addition, on any Special Distribution Date for a Series Farmer Mac
shall withdraw from the related Certificate Account such amount as it shall have
determined to distribute to Certificateholders on such Special Distribution
Date.
Section 5.04. Distributions on Certificates. On each Distribution Date for
a Series, Farmer Mac shall withdraw from the Certificate Account for such
Series, to the extent of funds available therefor, the Certificate Distribution
Amount for such Distribution Date previously calculated by it pursuant to
Section 5.02. In the event that the Certificate Distribution Amount may not be
paid from amounts in the Certificate Account, Farmer Mac shall, pursuant to its
guarantee obligations set forth in Section 5.05 hereof, provide from its own
funds the amount of any insufficiency and shall distribute in Federal Funds to
each Certificateholder of record on the preceding Record Date the amount
distributable on such Certificateholder's Certificate(s) as determined pursuant
to Section 3.01. Concurrently therewith, in the event the Certificate Account
shall not be maintained with the Trustee, Farmer Mac shall furnish to the
Trustee an Officer's Certificate (which may also relate to other Series
comprised of Classes having a similar Distribution Date) to the effect that
distribution of the Certificate Distribution Amount for such Series and
Distribution Date has been made by it.
As promptly as practicable following each Certificate Account Deposit Date
in the month of a Distribution Date, Farmer Mac shall, in the event the amount
on deposit in the Certificate Account shall be less than the Certificate
Distribution Amount for such Distribution Date, provide to the Trustee an
Officer's Certificate stating (i) the amount of such insufficiency, (ii) whether
Farmer Mac is certain that funds will be available to it on such Distribution
Date in an amount sufficient to cure such insufficiency without the necessity of
borrowing from the United States Treasury and (iii) in the event that the
response to (ii) is in the negative, attaching to such Officer's Certificate a
copy of the certification furnished to the Secretary of the Treasury requesting
that funds in the necessary amount be made available to Farmer Mac on or before
such Distribution Date for purposes of satisfying its guarantee obligations in
respect of the related Series of Certificates.
Section 5.05. Farmer Mac Guarantee. Farmer Mac agrees to pay to the
Holders of Certificates of each Series on each Distribution Date therefor the
entire Certificate Distribution Amount for such Distribution Date irrespective
of whether amounts on deposit in the related Certificate Account shall be
sufficient therefor, any insufficiency being provided by Farmer Mac from its own
funds whether internally generated, borrowed from the United States Treasury or
otherwise available.
Farmer Mac's obligations hereunder shall inure to the benefit of and shall
be enforceable by any Holder of a Certificate through the Trustee (or
individually by any such Holder in the event the Trustee shall have failed to
make prompt demand upon Farmer Mac after due notification from any such Holder)
if, for any reason beyond the control of such Holder, such Holder shall have
failed to receive on any Distribution Date such Holder's interest in the
Certificate Distribution Amount for such Distribution Date. Farmer Mac hereby
agrees that its obligations hereunder shall be unconditional, irrespective of
the validity, legality or enforceability of, or any change in or amendment to,
this Agreement, or any breach with respect to any Guarantee Fee payable to
Farmer Mac in consideration of its guarantee, the absence of any action to
enforce the same, the waiver or consent by the Holder of any Certificate or by
the Trustee with respect to any provisions of this Agreement, or any action to
enforce the same or any other circumstance that might otherwise constitute a
legal or equitable discharge or defense of a guarantor. Farmer Mac hereby waives
diligence, presentment, demand of payment, protest or notice with respect to
each Certificate or the interest represented thereby, and all demands
whatsoever, and covenants that this guarantee will not be discharged except upon
complete irrevocable payment of the principal and interest obligations
represented by the Certificates.
Farmer Mac shall be subrogated to all rights of the Holders of
Certificates of any Series against the related Trust Fund and the proceeds of
the Trust Fund in respect of any amounts paid by Farmer Mac pursuant to the
provisions of its guarantee; provided, however, that Farmer Mac's entitlement
thereto on any Distribution Date shall be limited to the amount, if any, of any
Guarantee Reimbursement Amount and shall be further subject to the priorities
set forth in Section 5.03 hereof.
No reference herein shall alter or impair the guarantee of Farmer Mac,
which is absolute and unconditional, of the due and punctual distribution to
Holders of Certificates of each Series on each Distribution Date of the
Certificate Distribution Amount therefor.
The Farmer Mac Guarantee is not an obligation of, and is not guaranteed as
to principal or interest by the Farm Credit Administration, the United States or
any other agency or instrumentality of the United States (other than Farmer
Mac).
Section 5.06. Special Distributions. To the extent specified in the Issue
Supplement for a Series, Farmer Mac may elect to make, or, if so specified,
shall be required to make under circumstances described in such Issue Supplement
a special distribution with respect to such Series on a Special Distribution
Date selected by it.
All payments of principal pursuant to any special distribution shall be
made in the same priority and manner as distributions of principal on any
Distribution Date. Any such special distribution shall be made to the Holders of
Certificates of the applicable Class or Classes as of the Special Record Date
pertaining thereto and shall include accrued interest at the applicable
Certificate Interest Rate or Certificate Interest Rates on the principal amount
so distributed to the Special Distribution Date or to such earlier date as shall
be specified in the related Issue Supplement.
As soon as practicable after Farmer Mac has determined to make a special
distribution as provided in this Section 5.06, Farmer Mac will make available
generally to financial publications or electronic services notice of such
special distribution which shall include the Special Record Date and Special
Distribution Date applicable thereto, and the Certificate Principal Factor for
each Class of such Series after giving effect to such special distribution on
the related Special Distribution Date.
ARTICLE VI
Limitation of Liability
Section 6.01. General Limitation. Farmer Mac and FMMSC shall be liable
under the terms of the Certificates, this Trust Agreement and any related Issue
Supplement only to the extent of faithful performance of the duties and
responsibilities imposed by the terms of this Trust Agreement and any related
Issue Supplement.
Section 6.02. Measure of Liability. Neither Farmer Mac nor FMMSC nor any
of their respective directors, officers, employees or agents shall be under any
liability for any action taken or for refraining from the taking of any action
in good faith pursuant to the terms of this Trust Agreement and any related
Issue Supplement, or for errors in judgment; provided, however, that this
provision shall not protect Farmer Mac or FMMSC or any such person against any
liability for action or inaction by reason of willful misfeasance, bad faith or
gross negligence, or by reason of willful disregard of obligations and duties.
Neither Farmer Mac nor FMMSC shall have any obligation to appear in,
prosecute or defend any legal action which is not incidental to their respective
duties under this Trust Agreement and any related Issue Supplement and which in
their opinion may involve either of them in expense or liability; provided,
however, that either Farmer Mac or FMMSC in their discretion may undertake any
such legal action which they may deem necessary or desirable in the interests of
Holders of Certificates.
In the event that either Farmer Mac or FMMSC in their discretion so
determine to undertake any such legal action, the party taking such action for
its own account shall pay and defray the expense of any such action, including
attorneys' fees. Such expense resulting from any such legal action shall be
reimbursable only to the extent amounts are available for withdrawals from the
Certificate Account pursuant to clause fourth of Section 5.03.
ARTICLE VII
Farmer Mac
Section 7.01. Resignation. Farmer Mac shall not resign
from the duties imposed upon it by the terms of this Trust
Agreement and any Issue Supplement.
Section 7.02. Merger or Consolidation. Any corporation or other entity
into which Farmer Mac is merged or consolidated, or any corporation or other
entity resulting from any merger, conversion or consolidation to which Farmer
Mac shall be a party, or any corporation or other entity succeeding to the
business of Farmer Mac, shall succeed to and assume all duties imposed upon
Farmer Mac by the terms of this Trust Agreement and all Issue Supplements,
without the filing of any instrument or the performance of any further act by
Farmer Mac or any Certificateholder. Farmer Mac promptly shall furnish written
notice of such succession to all Certificateholders.
Section 7.03. Succession Upon Default. With respect to any
Trust Fund, each of the following events shall constitute an
Event of Default by Farmer Mac:
(a) any failure by Farmer Mac to distribute to Holders of
Certificates of any Class in such Trust Fund any distribution required to
be made under the terms of this Trust Agreement and the related Issue
Supplement (including, for this purpose, pursuant to the Farmer Mac
Guarantee) which continues unremedied for a period of five days after the
date upon which written notice of such failure, requiring the same to be
remedied, shall have been given to Farmer Mac by the Trustee or to Farmer
Mac and the Trustee by the Holders of Certificates of such Class having
Certificate Principal Balances or Notional Principal Balances aggregating
not less than 5% of the aggregate of the Certificate Principal Balances or
Notional Principal Balances of all of the Certificates of such Class; or
(b) failure on the part of Farmer Mac duly to observe or perform in
any material respect any other of the covenants or agreements on the part
of Farmer Mac in this Trust Agreement and the related Issue Supplement
which continues unremedied for a period of 60 days after the date on which
written notice of such failure, requiring the same to be remedied, shall
have been given to Farmer Mac and the Trustee by the Holders of
Certificates of any Class in the related Trust Fund having Certificate
Principal Balances or Notional Principal Balances aggregating not less
than 25% of the aggregate of the Certificate Principal Balances or
Notional Principal Balances of all of the Certificates of such Class; or
(c) a decree or order of a court or agency or supervisory authority
having jurisdiction in the premises for the appointment of a conservator,
receiver or liquidator in any insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings, or for the
winding-up or liquidation of its affairs, shall have been entered against
Farmer Mac and such decree or order shall have remained in force
undischarged or unstayed for a period of 60 days; or
(d) Farmer Mac shall consent to the appointment of a conservator,
receiver or liquidator in any insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings relating to
Farmer Mac or to all or substantially all of its property; or
(e) Farmer Mac shall admit in writing its inability to pay its debts
generally as they become due, file a petition to invoke any applicable
insolvency or reorganization statute, make an assignment for the benefit
of its creditors, or voluntarily suspend payment of its obligations.
With respect to any Trust Fund, upon the occurrence of an Event of
Default, and so long as such Event of Default shall not have been remedied, the
Trustee or the Holders of Certificates of any Class in the related Trust Fund
having Certificate Principal Balances or Notional Principal Balances aggregating
not less than 25% of the aggregate of the Certificate Principal Balances or
Notional Principal Balances of all of the Certificates of such Class may (a)
terminate all obligations and duties imposed upon Farmer Mac (other than its
obligations under the Farmer Mac Guarantee pursuant to Section 5.05) under this
Trust Agreement and the related Issue Supplement, and (b) name and appoint a
successor or successors to succeed to and assume all of such obligations and
duties. Such actions shall be effected by notice in writing to Farmer Mac and
shall become effective upon receipt of such notice by Farmer Mac and the
acceptance of such appointment by such successor or successors.
On and after the receipt by Farmer Mac of such written notice and the
acceptance by the successor or successors to Farmer Mac, all obligations (other
than its continuing obligations under the Farmer Mac Guarantee) and duties
imposed upon Farmer Mac under this Trust Agreement and the related Issue
Supplement shall pass to and vest in the successor or successors named in the
notice, and such successor or successors shall be authorized, and hereby are
authorized, to take all such action and execute and deliver all such instruments
and documents on behalf of Farmer Mac, as attorney in fact or otherwise, as may
be necessary and appropriate to effect the purposes of such written notice.
Section 7.04. Farmer Mac as Holder. Farmer Mac shall have the right to
purchase and hold for its own account any Certificate issued pursuant to the
terms of this Trust Agreement and any Issue Supplement, notwithstanding the
rights and duties conferred and imposed upon Farmer Mac by this Trust Agreement
and any such applicable Issue Supplement. In determining whether the Holders of
the requisite amount of Certificates have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, any Certificate
evidencing a beneficial ownership interest in the related Trust Fund held by
Farmer Mac shall be disregarded and deemed not to be outstanding.
ARTICLE VIII
Concerning the Trustee
Section 8.01. Duties of Trustee.
(a) The Trustee, prior to the occurrence of an Event of Default and
after the curing of all Events of Default that may have occurred, undertakes to
perform such duties and only such duties as are specifically set forth in this
Agreement. If an Event of Default occurs and is continuing, the Trustee shall
exercise such of the rights and powers vested in it by this Agreement, and use
the same degree of care and skill in their exercise as a prudent investor would
exercise or use under the circumstances in the conduct of such investor's own
affairs. Any permissive right of the Trustee contained in this Agreement shall
not be construed as a duty.
(b) The Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to the Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
conform to the requirements of this Agreement. If any such instrument is found
not to conform to the requirements of this Agreement in a material manner, the
Trustee shall take action as it deems appropriate to have the instrument
corrected and if the instrument is not corrected to the Trustee's satisfaction,
the Trustee will provide notice thereof to the Certificateholders.
(c) No provision of this Agreement shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own misconduct; provided, however, that:
(i) Prior to the occurrence of an Event of Default, and after the
curing of all such Events of Default that may have occurred, the duties
and obligations of the Trustee shall be determined solely by the express
provisions of this Agreement, the Trustee shall not be liable except for
the performance of such duties and obligations as are specifically set
forth in this Agreement, no implied covenants or obligations shall be read
into this Agreement against the Trustee and, in the absence of bad faith
on the part of the Trustee, the Trustee may conclusively rely, as to the
truth of the statements and the correctness of the opinions expressed
therein, upon any certificates or opinions furnished to the Trustee and
conforming to the requirements of this Agreement;
(ii) The Trustee shall not be personally liable for an error of
judgment made in good faith by a Responsible Officer or Responsible
Officers of the Trustee, unless it shall be proved that the Trustee was
negligent in ascertaining the pertinent facts;
(iii)The Trustee shall not be personally liable with respect to any
action taken, suffered or omitted to be taken by it in good faith in
accordance with the direction of Farmer Mac as to the time, method and
place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred upon the Trustee,
under this Agreement; and
(iv) No provision of this Agreement shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder, or in the exercise of any
of its rights or powers, if it shall have reasonable grounds for believing
that repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it.
(d) For all purposes of this Agreement, the Trustee shall not be
deemed to have knowledge of any Event of Default or event that, with notice or
lapse of time, or both, would become an Event of Default, unless a Responsible
Officer of the Trustee shall have received written notice thereof from the
Central Servicer or Farmer Mac or a Responsible Officer of the Trustee shall
have actual knowledge thereof, and in the absence of such written notice or
knowledge no provision hereof requiring the taking of any action or the
assumption of any duties or responsibility by the Trustee following the
occurrence of any Event of Default or event which, with notice or lapse of time,
or both, would become an Event of Default, shall be effective as to the Trustee.
Section 8.02. Certain Matters Affecting the Trustee.
(a) Except as otherwise provided in Section 8.01:
(i) The Trustee may request and rely and shall be protected in
acting or refraining from acting upon any resolution, Officers'
Certificate, certificate of auditors or any other certificate,
statement, instrument, opinion, report, notice, request, consent,
order, appraisal, bond or other paper or document prima facie in
proper form and believed by it to be genuine and to have been signed
or presented by the proper party or parties;
(ii) The Trustee may consult with counsel (including counsel for
Farmer Mac), and any opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken or
suffered or omitted by it hereunder in good faith and in accordance
with such Opinion of Counsel;
(iii)The Trustee shall be under no obligation to exercise any of
the trusts or powers vested in it by this Agreement or to institute,
conduct or defend any litigation hereunder or in relation hereto at
the request, order or direction of any of the Certificateholders or
Farmer Mac, pursuant to the provisions of this Agreement, unless such
Certificateholders or Farmer Mac shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and
liabilities that may be incurred therein or thereby; nothing
contained herein shall, however, relieve the Trustee of the
obligation, upon the occurrence of an Event of Default (which has not
been cured), to exercise such of the rights and powers vested in it
by this Agreement, and to use the same degree of care and skill in
their exercise as a prudent investor would exercise or use under the
circumstances in the conduct of such investor's own affairs;
(iv) The Trustee shall not be personally liable for any action
taken, suffered or omitted by it in good faith and believed by it to
be authorized or within the discretion or rights or powers conferred
upon it by this Agreement;
(v) Prior to the occurrence of an Event of Default hereunder and
after the curing of all Events of Default that may have occurred, the
Trustee shall not be bound to make any investigation into the facts
or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order,
approval, bond or other paper or document, unless requested in
writing so to do by Farmer Mac or by the Holders of Certificates of
the related series evidencing not less than 25% of the Aggregate
Certificate Principal Balance (together with the total of all Class
Notional Principal Balances if such Series includes one or more
Interest Only Classes); provided, however, that if the payment within
a reasonable time to the Trustee of the costs, expenses or
liabilities likely to be incurred by it in the making of such
investigation is, in the opinion of the Trustee, not reasonably
assured to the Trustee by the security afforded to it by the terms of
this Agreement, the Trustee may require reasonable indemnity against
such expense or liability as a condition to so proceeding. The
reasonable expense of every such investigation shall be paid by
Farmer Mac; and
(vi) The Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys.
(b) It is understood and agreed that, in exercising any right to
direct the Trustee in the performance of its duties under this Agreement prior
to the occurrence of an Event of Default and after the curing of all Events of
Default, Farmer Mac shall be acting for the benefit of the Certificateholders of
the related Series; provided, that nothing in this Agreement shall be construed
to require Farmer Mac to exercise any such right or to impose any liability on
Farmer Mac for its election, in its sole discretion, in any instance to exercise
or to refrain from exercising any such right. No failure by Farmer Mac to
exercise such right in any instance shall be deemed a waiver of such right in
any other instance. The Trustee shall be entitled to rely on any such direction
rendered to it by Farmer Mac without inquiry as to the propriety or validity
thereof, and shall be protected in acting on such direction.
Section 8.03. Trustee Not Liable for Certificates or Qualified Loans.
Except as otherwise expressly provided herein, the Trustee shall not be
accountable for the use or application by the Central Servicer or Farmer Mac of
any funds paid to the Central Servicer or Farmer Mac, in respect of the
Qualified Loans or deposited in or withdrawn from the Collection Account or the
Certificate Account by the Central Servicer or Farmer Mac, as the case may be.
The Trustee makes no representations or warranties as to the validity or
sufficiency of the Certificates or of any Qualified Loan or related document,
except that the Trustee represents that this Agreement has been duly authorized,
executed and delivered by it and, assuming due execution and delivery by the
other parties hereto, constitutes its valid and binding obligation, enforceable
against it in accordance with its terms except that such enforceability may be
subject to (i) applicable bankruptcy and insolvency laws and other similar laws
affecting the enforcement of the rights of creditors generally, and (ii) general
principles of equity regardless of whether such enforcement is considered in a
proceeding in equity or at law.
Section 8.04. Trustee May Own Certificates. The Trustee in its individual
or any other capacity may become the owner or pledgee of Certificates of any
series with the same rights it would have if it were not Trustee.
Section 8.05. Indemnification of the Trustee. Each Trust Fund shall
indemnify the Trustee in its individual capacity and as Trustee and any
director, officer, employee or agent of the Trustee in its individual capacity
and as Trustee for, and hold them harmless against, any loss or liability
incurred by any of them without negligence or bad faith on the part of the
Trustee in its individual capacity and as Trustee or any such director, officer,
employee or agent of the Trustee in its individual capacity and as Trustee and
arising out of or in connection with the acceptance or administration of the
trusts created herewith, including the costs and expenses of defending the
Trustee in its individual capacity and as Trustee or any such director, officer,
employee or agent of the Trustee in its individual capacity and as Trustee
against any claim or liability incurred by any of them in connection with the
exercise or performance of any of their powers or duties hereunder, but not
including any expenses incurred in the ordinary course of performing the
Trustee's duties as set forth herein.
Section 8.06. Eligibility Requirements for Trustee. The Trustee hereunder
shall at all times be a corporation having its principal office in a state and
city acceptable to Farmer Mac and organized and doing business under the laws of
such state or the United States of America, authorized under such laws to
exercise corporate trust powers, having a combined capital and surplus of at
least $50,000,000 and subject to supervision or examination by federal or state
authority. If such corporation publishes reports of condition at least annually,
pursuant to law or to the requirements of the aforesaid supervising or examining
authority, then for the purposes of this Section the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. In
case at any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section, the Trustee shall resign immediately in the manner
and with the effect specified in Section 8.07.
Section 8.07. Resignation and Removal of the Trustee.
(a) The Trustee may at any time resign and be discharged from the
trusts hereby created by giving written notice thereof to Farmer Mac. Upon
receiving such notice of resignation, Farmer Mac shall promptly appoint a
successor trustee by written instrument, in duplicate, one copy of which
instrument shall be delivered to the resigning Trustee and one copy to the
successor trustee. If no successor trustee shall have been so appointed and have
accepted appointment within 90 days after giving of such notice of resignation,
the resigning Trustee may petition any court of competent jurisdiction for the
appointment of a successor trustee.
(b) If at any time the Trustee shall cease to be eligible in
accordance with the provisions of Section 8.06 and shall fail to resign after
written request therefor by Farmer Mac or if at any time the Trustee shall
become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a
receiver of the Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, then
Farmer Mac may remove the Trustee and appoint a successor trustee by written
instrument, in duplicate, one copy of which instrument shall be delivered to the
Trustee so removed and one copy to the successor trustee and Farmer Mac shall
give written notice thereof to the Central Servicer. Notwithstanding the
foregoing, any liability of the Trustee under this Agreement arising prior to
such termination shall survive such termination.
(c) Farmer Mac may at any time remove the Trustee solely pursuant to
the Master Trustee Agreement and appoint a successor trustee by written
instrument or instruments within 90 days of such predecessor Trustee's removal.
If no successor trustee shall have been so appointed and have accepted
appointment within 90 days after the giving of such notice of removal, the
predecessor trustee may petition any court of competent jurisdiction for the
appointment of a successor trustee.
(d) Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section shall become
effective upon acceptance of appointment by the successor trustee as provided in
Section 8.08 but in no event shall become effective until a successor has been
appointed and has accepted the duties of the Trustee.
Section 8.08. Successor Trustee.
(a) Any successor trustee appointed as provided in Section 8.07 shall
execute, acknowledge and deliver to Farmer Mac and to its predecessor trustee an
instrument accepting such appointment hereunder, and the successor trustee shall
secure an Opinion of Counsel (which shall be an expense of such successor
trustee) to the effect that, to the extent that the Trust Fund is exempt from
Federal income taxation, the Trust Fund is not subject to state and local
taxation in the jurisdiction where the successor trustee is located, whereupon
the resignation or removal of the predecessor trustee shall become effective and
such successor trustee, without any further act, deed or conveyance, shall
become fully vested with all the rights, powers, duties and obligations of its
predecessor hereunder, with the like effect as if originally named as trustee
herein. The predecessor trustee shall execute and deliver such instruments and
do such other things as may reasonably be required for more fully and certainly
vesting and confirming in the successor trustee all such rights, powers, duties
and obligations.
(b) No successor trustee shall accept appointment as provided in this
Section unless at the time of such acceptance such successor trustee shall be
eligible under the provisions of Section 8.06.
Section 8.09. Merger or Consolidation of Trustee. Any corporation into
which the Trustee may be merged or converted or with which it may be
consolidated or any corporation resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any corporation
succeeding to the business of the Trustee, shall be the successor of the Trustee
hereunder, provided such corporation shall be eligible under the provisions of
Section 8.06, without the execution or filing of any paper or any further act on
the part of any of the parties hereto, anything herein to the contrary
notwithstanding.
Section 8.10. Appointment of Co-Trustee or Separate Trustee.
(a) Notwithstanding any other provisions hereof, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Trust Fund or property securing the same may at the time be located,
Farmer Mac and the Trustee acting jointly shall have the power to execute and
deliver all instruments to appoint one or more Persons approved by the Trustee
to act as co-trustee or co-trustees, jointly with the Trustee, or separate
trustee or separate trustees, of all or any part of the related Trust Fund, and
to vest in such Person or Persons, in such capacity, such title to such Trust
Fund, or any part thereof, and, subject to the other provisions of this Section
8.10, such powers, duties, obligations, rights and trusts as Farmer Mac and the
Trustee may consider necessary or desirable. No co-trustee or separate trustee
hereunder shall be required to meet the terms of eligibility as a successor
trustee under Section 8.06 hereunder. Except as specifically provided in the
first sentence of this paragraph, the Trustee shall have no other rights to
appoint a co-trustee.
(b) In the case of any appointment of a co-trustee or separate
trustee pursuant to this Section 8.10, all rights, powers, duties and
obligations conferred or imposed upon the Trustee shall be conferred or imposed
upon and exercised or performed by the Trustee and such separate trustee or
co-trustee jointly, except to the extent that under any law of any jurisdiction
in which any particular act or acts are to be performed, the Trustee shall be
incompetent or unqualified to perform such act or acts, in which event such
rights, powers, duties and obligations (including the holding of title to the
Trust Fund or any portion thereof in any such jurisdiction) shall be exercised
and performed by such separate trustee or co-trustee at the direction of the
Trustee.
(c) Any notice, request or other writing given to the Trustee shall
be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee and co-trustee shall refer to this Agreement and
the conditions of this Article VIII. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Trustee or separately, as may be provided therein, subject to all the provisions
of this Agreement, specifically including every provision of this Agreement
relating to the conduct of, affecting the liability of, or affording protection
to, the Trustee. Every such instrument shall be filed with the Trustee.
(d) Any separate trustee and co-trustee may, at any time constitute
the Trustee its agent or attorney-in-fact, with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor trustee.
Section 8.11. Controlling Provisions. In the event of any
conflict between the provisions of the Master Trustee Agreement
and this Agreement, the provisions of this Agreement shall be
deemed controlling.
Section 8.12. Trustee Fees. As compensation for its services hereunder,
the Trustee shall be entitled to receive from Farmer Mac fees at such times, and
in such amounts, as shall be specified for the related Trust Fund in the Master
Trustee Agreement. The Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust.
ARTICLE IX
Termination
Section 9.01. Termination Upon Repurchase by Farmer Mac of All Qualified
Loans. The respective obligations and responsibilities of Farmer Mac created
hereby and by an Issue Supplement shall terminate as to the related Trust Fund
upon the distribution by Farmer Mac to all Holders of Certificates evidencing
beneficial ownership interests in such Trust Fund of all amounts required to be
distributed hereunder and thereunder upon (i) the repurchase by Farmer Mac of
all Qualified Loans and REO Property remaining in the related Trust Fund at a
price computed in the manner specified in the related Issue Supplement, (ii) the
final payment of the last Qualified Loan and/or REO Property remaining in the
related Trust Fund; or (iii) distribution by Farmer Mac pursuant to the Farmer
Mac Guarantee on the Final Distribution Date for the latest maturing Class of
the Related Series of an amount sufficient to reduce the Class Certificate
Principal Balance of such Class to zero; provided, however, that in no event
shall any trust created hereby and by the related Issue Supplement continue
beyond the expiration of 21 years from the death of the survivor of the
descendants of Joseph P. Kennedy, the late ambassador of the United States of
America to the Court of St. James', living on the Cut-Off Date of the related
Series of Certificates.
The right of Farmer Mac to repurchase all Qualified Loans and REO Property
in a Trust Fund pursuant to (i) above shall be subject to such conditions as
shall be set forth in the related Issue Supplement. Any such repurchase shall
take place on a Distribution Date, and the proceeds of any such repurchase shall
be distributed to Holders of Certificates on such Distribution Date in the
respective proportions specified in the related Issue Supplement.
In connection with any such termination, Farmer Mac shall make available
to financial publications notice for the benefit of Holders of Certificates in
the related Trust Fund to the effect that the final distribution will be made on
the Distribution Date therein specified to Certificateholders of record on the
applicable Record Date.
ARTICLE X
Supplemental Agreements
Section 10.01. Permissible Without Action by Certificateholders. Farmer
Mac, FMMSC and the Trustee, from time to time and at any time, may, without the
consent of or notice (other than in the case of any instrument supplemental
thereto pursuant to clause (b) below) to any Holder of a Certificate, enter into
an agreement or other instrument supplemental hereto and which thereafter shall
form a part hereof, for any one or more of the following purposes:
(a) to add to the covenants of Farmer Mac, whether
applicable to one or more Trust Funds;
(b) to evidence the succession pursuant to Article VII of another
Person or Persons to Farmer Mac and the assumption by such successor or
successors of the obligations of Farmer Mac hereunder;
(c) to eliminate any right reserved to or conferred
upon Farmer Mac;
(d) to take such action to cure any ambiguity or correct or
supplement any provision in this Trust Agreement or in any Issue
Supplement as Farmer Mac may deem necessary or desirable; or
(e) to modify, eliminate or add to the provisions of this Trust
Agreement and any related Issue Supplement to such extent as shall be
necessary to maintain the qualification of the Trust Fund as a REMIC under
the Code; provided that (i) there shall have been delivered to the Trustee
an Opinion of Counsel to the effect that such action is necessary or
advisable to maintain such qualification, and (ii) such amendment shall
not have any of the effects described in paragraphs (a) through (c) of the
proviso to Section 10.02.
Section 10.02. Waivers and Supplemental Agreements With Consent of
Holders. With the consent of the Holders of Certificates of each Class in the
related Trust Fund having Certificate Principal Balances and Notional Principal
Balances aggregating not less than 66% of the aggregate of the Certificate
Principal Balances or Notional Principal Balances, as applicable, of all of the
Certificates of such Class, (i) compliance by Farmer Mac with any of the terms
of this Trust Agreement or the related Issue Supplement may be waived or (ii)
Farmer Mac may enter into any Supplemental Agreement for the purpose of adding
any provisions to or changing in any manner or eliminating any of the provisions
of this Trust Agreement or the related Issue Supplement or of modifying in any
manner the rights of the Holders of the Certificates issued under this Trust
Agreement and the related Issue Supplement; provided that no such waiver or
Supplemental Agreement shall:
(a) without the consent of all Certificateholders affected thereby
reduce in any manner the amount of, or delay the timing of, distributions
which are required to be made on any Certificate;
(b) without the consent of all Certificateholders (i) terminate or
modify the Farmer Mac Guarantee with respect to the Certificates of such
Series, or (ii) reduce the aforesaid percentages of Certificates, the
Holders of which are required to consent to any waiver or any Supplemental
Agreement; or
(c) without the consent of the Holder of each Residual Certificate,
adversely effect materially the rights of each such Holder, including,
without limitation, which might have the effect of increasing any taxes
payable by such Holders.
It shall not be necessary for Holders to approve the particular form of
any proposed Supplemental Agreement, but it shall be sufficient if such Holders
shall approve the substance thereof.
Promptly after the execution of any Supplemental Agreement pursuant to
this Section, Farmer Mac shall give notice thereof to Holders of Certificates.
Any failure of Farmer Mac to give such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such Supplemental
Agreement.
ARTICLE XI
REMIC Provisions
Section 11.01. REMIC Administration.
(a) Unless otherwise specified in the Issue Supplement for a Series,
the Closing Date shall be deemed to have been designated as the "startup day" of
the related Trust fund within the meaning of Section 860(a)(9) of the Code.
(b) The Holder of Certificates in a Series evidencing the largest
percentage interest in the Class designated as the "residual interest" in the
related REMIC shall be deemed to have designated the REMIC Administrator as the
fiduciary in the performance of all the duties required of, or permitted to be
taken by, the tax matters person for such REMIC and, if necessary, to execute a
power of attorney to such effect. The REMIC Administrator, in such capacity,
shall (i) act on behalf of the REMIC in relation to any tax matter or
controversy involving the Trust Fund and (ii) represent the Trust Fund in any
administrative or judicial proceeding relating to an examination or audit by any
governmental taxing authority with respect thereto. The legal expenses,
including without limitation attorneys' or accountants' fees, and costs of any
such proceeding and any liability resulting therefrom shall be expenses of the
Trust Fund and the REMIC Administrator shall be entitled to reimbursement
therefor from _____________ unless such legal expenses and costs are incurred by
reason of the REMIC Administrator's willful misfeasance, bad faith or gross
negligence.
(c) The REMIC Administrator shall prepare or cause to be prepared all
of the Tax Returns that it determines are required with respect to the REMIC and
deliver such Tax Returns in a timely manner to the Trustee and the Trustee shall
sign and file such Tax Returns in a timely manner. The expenses of preparing
such returns shall be borne by the REMIC Administrator without any right of
reimbursement therefor. The REMIC Administrator agrees to indemnify and hold
harmless the Trustee with respect to any tax or liability arising from the
Trustee's signing of Tax Returns that contain errors or omissions. The Trustee
and Farmer Mac shall promptly provide the REMIC Administrator with such
information as the REMIC Administrator may from time to time request for the
purpose of enabling the REMIC Administrator to prepare Tax Returns.
(d) The REMIC Administrator shall provide (i) to any Transferor of a
Residual Certificate such information as is necessary for the application of any
tax relating to the transfer of a Certificate to any Person who is not a
Permitted Transferee and, (ii) to the Trustee and the Trustee shall forward to
the Certificateholders such information or reports as are required by the Code
or the REMIC Provisions including reports relating to interest, original issue
discount and market discount or premium.
(e) The Farmer Mac and the REMIC Administrator shall take such
actions and shall cause the REMIC created hereunder and the related Issue
Supplement to take such actions as are reasonably within Farmer Mac's or the
REMIC Administrator's control and the scope of its duties more specifically set
forth herein as shall be necessary or desirable to maintain the status thereof
as a REMIC under the REMIC Provisions (and the Trustee shall assist the Farmer
Mac and the REMIC Administrator, to the extent reasonably requested by the
Farmer Mac's and the REMIC Administrator to do so). Farmer Mac and the REMIC
Administrator shall not knowingly or intentionally take any action, cause the
REMIC to take any action or fail to take (or fail to cause to be taken) any
action reasonably within its control and the scope of duties more specifically
set forth herein, that, under the REMIC Provisions, if taken or not taken, as
the case may be, could (i) endanger the status of the related REMIC as a REMIC
or (ii) result in the imposition of a tax upon the REMIC (including but not
limited to the tax on prohibited transactions as defined in Section 860(a)(2) of
the Code and the tax on contributions to a REMIC set forth in Section 86OG(d) of
the Code) (either such event, an "Adverse REMIC Event") unless Farmer Mac or the
REMIC Administrator, as applicable, has received an Opinion of Counsel (at the
expense of the party seeking to take such action) to the effect that the
contemplated action will not, with respect to the REMIC created hereunder and
the related Issue Supplement, endanger such status or, unless Farmer Mac or the
REMIC Administrator, as applicable, determines in its sole discretion to
indemnify the Trust Fund against such tax, result in the imposition of such a
tax. The Trustee shall not take or fail to take any action (whether or not
authorized hereunder) as to which Farmer Mac or the REMIC Administrator, as
applicable, has advised it in writing that it has received an Opinion of Counsel
to the effect that an Adverse REMIC Event could occur with respect to such
action. In addition, prior to taking any action with respect to the REMIC or its
assets, or causing the REMIC to take any action, which is not expressly
permitted under the terms of this Agreement, the Trustee will consult with
Farmer Mac or the REMIC Administrator, as applicable, or its designee, in
writing, with respect to whether such action could cause an Adverse REMIC Event
to occur with respect to the REMIC, and the Trustee shall not take any such
action or cause the REMIC to take any such action as to which Farmer Mac or the
REMIC Administrator, as applicable, has advised it in writing that an Adverse
REMIC Event could occur. Farmer Mac or the REMIC Administrator, as applicable,
may consult with counsel to make such written advice, and the cost of same shall
be borne by the party seeking to take the action not expressly permitted by this
Agreement. At all times as may be required by the Code, Farmer Mac will to the
extent within its control and the scope of its duties more specifically set
forth herein, maintain substantially all of the assets of the REMIC as
"qualified mortgages" as defined in Section 86OG(a)(3) of the Code and
"permitted investments" as defined in Section 86OG(a)(5) of the Code.
(f) In the event that any tax is imposed on "prohibited transactions"
of the REMIC created hereunder and the related Issue Supplement as defined in
Section 86OF(a)(2) of the Code, on "net income from foreclosure property" of the
REMIC as defined in Section 86OG(c) of the Code, on any contributions to the
REMIC after the Startup Day therefor pursuant to Section 86OG(d) of the Code, or
any other tax laws, such tax shall be charged (i) to Farmer Mac, if such tax
arises out of or results from a breach by Farmer Mac of any of its obligations
under this Agreement or Farmer Mac has in its sole discretion determined to
indemnify the Trust Fund against such tax or (ii) to the Trustee, if such tax
arises out of or results from a breach by the Trustee of any of its obligations
under this Article VIII.
(g) The Trustee and Farmer Mac shall, for federal income tax
purposes, maintain books and records with respect to the REMIC on a calendar
year and on an accrual basis or as otherwise may be required by the REMIC
Provisions.
(h) Following the Startup Day, neither Farmer Mac nor the Trustee
shall accept any contributions of assets to the REMIC unless Farmer Mac and the
Trustee shall have received an Opinion of Counsel (at the expenses of the party
seeking to make such contribution) to the effect that the inclusion of such
assets in the REMIC will not cause the REMIC to fail to qualify as a REMIC at
any time that any Certificates are outstanding or subject the REMIC to any tax
under the REMIC Provisions or other applicable provisions of federal, state and
local law or ordinances.
(i) Neither Farmer Mac nor the Trustee shall enter into any
arrangement by which the REMIC will receive a fee or other compensation for
services nor permit the REMIC to receive any income from assets other than
"qualified mortgages" as defined in Section 86OG(a)(3) of the Code or "permitted
investments" as defined in Section 86OG(a)(5) of the Code.
(j) Solely for the purposes of Section 1.86OG-l(a)(4)(iii) of the
Treasury Regulations, the "latest possible maturity date" by which the Class
Certificate Principal Balance of each Class comprising a Series shall be reduced
to zero shall be the Distribution Date immediately following the second
anniversary of the latest scheduled maturity of any Qualified Loan in the
related Trust Fund.
(k) Within 30 days after the Closing Date, the REMIC Administrator
shall prepare and file with the Internal Revenue Service Form 8811, "Information
Return for Real Estate Mortgage Investment Conduits (REMIC) and Issuers of the
Collateralized
Debt Obligations" for the REMIC.
Section 11.02. Indemnification.
(a) The REMIC Administrator agrees to indemnify the Trust Fund,
Farmer Mac and the Trustee for any taxes and costs (including, without
limitation, any reasonable attorneys' fees) imposed on or incurred by the Trust
Fund, Farmer Mac or the Trustee, as a result of a breach of the REMIC
Administrator's covenants set forth in this Article XI with respect to
compliance with the REMIC Provisions, including without limitation, any
penalties arising from the Trustee's execution of Tax Returns prepared by the
REMIC Administrator that contain errors or omissions; provided, however, that
such liability will not be imposed to the extent such breach is a result of an
error or omission in information provided to the REMIC Administrator by Farmer
Mac in which case Section 11.02(b) will apply.
(b) Farmer Mac agrees to indemnify the Trust Fund, the REMIC
Administrator and the Trustee for any taxes and costs (including, without
limitation, any reasonable attorneys' fees) imposed on or incurred by the Trust
Fund or the Trustee as a result of a breach of Farmer Mac's covenants set forth
in this Trust Agreement or the related Issue Supplement, including without
limitation, any penalties arising from the Trustee's execution of Tax Returns
prepared by Farmer Mac that contain errors or omissions.
(c) Farmer Mac agrees to hold harmless and indemnify the Holder of
any Residual Certificate against any liability on account of any federal income
tax (including interest and penalties) imposed on the related Trust Fund to the
extent any such tax shall be paid or payable by it.
ARTICLE XII
Miscellaneous
Section 12.01. Holders. The death or incapacity of any Holder of a
Certificate shall not operate to terminate this Trust Agreement or any Issue
Supplement, nor entitle such Holder's legal representative or heirs to claim an
accounting or to take any action or proceeding in any court for a partition or
winding up of the affairs of the related Trust Fund, nor otherwise affect the
rights, duties and obligations of any of the parties to this Trust Agreement or
any such Issue Supplement.
No Holder shall have any right to control or to participate in the control
and administration of any Trust Fund, nor shall any of the terms of this Trust
Agreement or any such Issue Supplement be construed to constitute the Holders
and Farmer Mac as partners or members of an association, nor shall any Holder
have any duty or liability to any third person by reason of any action taken by
the parties to this Trust Agreement or any such Issue Supplement pursuant to the
provisions hereof and thereof.
No Holder shall have any right by virtue of any provision of this Trust
Agreement or any Issue Supplement to institute any suit, action or proceeding in
equity or at law upon or under or with respect to this Trust Agreement or any
Issue Supplement unless an Event of Default shall have occurred and be
continuing in respect of the Trust Agreement and related Issue Supplement. For
the protection and enforcement of the provisions of this Section, each and every
Holder and the Trustee shall be entitled to such relief as can be given either
at law or in equity.
Section 12.02. Reserve Banks as Agent. For each Regular Certificate, the
appropriate Reserve Bank shall be considered to be acting as the agent of Farmer
Mac in providing to and conferring upon the owners of the Regular Certificates,
as such owners shall appear on the records of such Reserve Bank, the substantive
rights and benefits which are provided for herein for Holders of Certificates.
Accordingly, the substantive effect of all provisions herein providing rights
and benefits to Holders of Regular Certificates, including, without limitation,
provisions relating to distributions, voting and notices, shall apply to such
record owners on the books of the Reserve Bank, through the appropriate Reserve
Bank acting as agent for Farmer Mac.
Section 12.03. Governing Law. The terms of this Trust
Agreement and any Issue Supplement shall be construed in
accordance with the laws of the District of Columbia.
Section 12.04. Demands, Notices, Communications. All formal demands,
notices and communications by and between Farmer Mac, the Trustee and the Holder
of any Certificate shall be in writing and delivered in person or by first class
mail, postage prepaid (a) if to Farmer Mac or the Depositor, to 919 18th Street,
N.W., Washington, D.C. 20006, or to such other address as shall be set forth in
a notification to Holders, or (b) if to the Trustee, the Certificate Registrar
or the Transfer Agent to First Trust Center, 180 East Fifth Street, St. Paul, MN
55101, Attn: Vice President-Structured Finance or (c) if to the Holder of a
Regular Certificate, to the appropriate Holder in care of the Reserve Bank at
the address provided to Farmer Mac by such Reserve Bank or (d) if to the Holder
of a Residual Certificate, to such Holder at the address shown in the
Certificate Register. Any notice so mailed within the time prescribed in this
Trust Agreement or any Issue Supplement shall be conclusively presumed to have
been duly given whether or not the Holder receives such notice.
Section 11.05. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Trust Agreement or any Issue
Supplement shall be for any reason whatsoever held invalid, then such covenants,
agreements, provisions or terms shall be deemed severable from the remaining
covenants, agreements, provisions or terms of this Trust Agreement or any Issue
Supplement and shall in no way affect the validity or enforceability of the
other provisions of this Trust Agreement or any Issue Supplement or of the
Certificates or the rights of the Holders thereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto hereby execute this Trust
Agreement, as of the day and year first above written.
FEDERAL AGRICULTURAL MORTGAGE
CORPORATION
[SEAL]
By:
-------------------------------
Attest: ____________________
FARMER MAC MORTGAGE
SECURITIES CORPORATION
[SEAL]
By: ______________________________
Attest: __________________
FIRST TRUST NATIONAL
ASSOCIATION, as Trustee
[SEAL]
By: _____________________________
Attest: ___________________
May 20, 1997
Farmer Mac Mortgage Securities Corporation
919 18th Street, N.W., Suite 200
Washington, D.C. 20006
Re: Form S-3 Registration Statement; File No. 33-
Ladies and Gentleman:
I am the Vice President and General Counsel of the Federal Agricultural
Mortgage Corporation, a federally chartered instrumentality of the United States
("Farmer Mac"), and, in that capacity, I have acted as counsel to Farmer Mac
Mortgage Securities Corporation ("FMMSC"), a wholly owned subsidiary of Farmer
Mac, in connection with the preparation and filing with the Securities and
Exchange Commission of a registration statement on Form S-3 (the "Registration
Statement") relating to the registration under the Securities Act of 1933 (the
"1933 Act") of Guaranteed Agricultural Mortgage-Backed Securities (the
"Securities"). The Securities are to be issued from time to time in series
pursuant to a trust agreement dated as of June 1, 1996 (the "Trust Agreement")
and entered into between Farmer Mac, FMMSC and First Trust National Association,
as Trustee, as supplemented by an issue supplement thereto each time a series of
Securities is issued (each, an "Issue Supplement").
In arriving at the opinions expressed below, I have made such legal and
factual examinations and inquiries, and have examined and relied upon the forms
of prospectus and prospectus supplement (collectively, the "Prospectus")
contained in the Registration Statement and originals or copies, certified or
otherwise identified to my satisfaction, of such other certificates, corporate
records, agreements and other instruments and documents, as I have deemed
advisable or necessary for the purpose of rendering this opinion.
In rendering the opinions expressed below, I have assumed and have not
verified that the signatures on all documents that I have examined are genuine,
that all copies of documents that I have examined conform to the originals
thereof and that the originals thereof are authentic.
Based upon the foregoing, it is my opinion that:
1. The Trust Agreement constitutes a legal, valid and binding
obligation of Farmer Mac and FMMSC, the enforcement of which will be
subject to general principles of equity regardless of whether
enforcement is sought in a proceeding in equity or at law.
2. When an Issue Supplement has been duly authorized by all necessary
action and duly executed and delivered by Farmer Mac, FMMSC and the
Trustee, and when the Securities of the related series have been
duly executed, countersigned, issued and sold as contemplated in the
Registration Statement, such Securities will be legally and validly
issued, fully paid and nonassessable, and the holders of such
Securities will be entitled to the benefits of the Trust Agreement
and the Issue Supplement.
3. Pursuant to the Farmer Mac Guarantee, which is set forth in Article
V of the Trust Agreement, Farmer Mac will guarantee payments on the
Securities as and to the extent described in the Prospectus under
"FARMER MAC GUARANTEE". The obligation of Farmer Mac under the
Farmer Mac Guarantee will not carry the full faith and credit of the
United States.
I express no opinion other than as to the laws of the United States of
America and the laws of the State of New York. I hereby consent to the
filing of this opinion as an exhibit to the Registration Statement.
Very truly yours,
Michael T. Bennett
Vice President and General Counsel
MTB/lrh
OPINION OF FRIED, FRANK, HARRIS,
SHRIVER & JACOBSON AS TO TAX MATTERS
May 20, 1997
Farmer Mac Mortgage Securities Corporation
919 18th Street, N.W.
Washington, D.C. 20006
Re: Farmer Mac Mortgage Securities Corporation
Registration Statement on Form S-3
Ladies and Gentlemen:
We are acting as special counsel to the Federal Agricultural Mortgage
Corporation, a federally chartered instrumentality of the United States ("Farmer
Mac"), and Farmer Mac Mortgage Securities Corporation, a Delaware corporation
and a wholly owned subsidiary of Farmer Mac (the "Registrant"), in connection
with the preparation of a Registration Statement on Form S-3 (the "Registration
Statement"), filed with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act"), for
registration of certain Guaranteed Agricultural Mortgage-Backed Securities (the
"Certificates") issued pursuant to a Trust Agreement among Farmer Mac, the
Registrant and the trustee named therein. With your permission, all assumptions
and statements of reliance herein have been made without any independent
investigation or verification on our part except to the extent otherwise
expressly stated, and we express no opinion with respect to the subject matter
or accuracy of such assumptions or items relied upon.
In connection with this opinion, we have (i) investigated such questions
of law, (ii) examined originals or certified, conformed or reproduction copies
of such agreements, instruments, documents and records of Farmer Mac and the
Registrant, (iii) examined such certificates of public officials, officers or
other representatives of Farmer Mac and the Registrant, and other persons, and
such other documents, and (iv) reviewed such information from officers and
representatives of Farmer Mac and the Registrant and others, as we have deemed
necessary or appropriate for the purposes of this opinion.
We have advised the Registrant with respect to certain federal income tax
consequences of an investment in the Certificates. This advice is summarized
under the caption "CERTAIN FEDERAL INCOME TAX CONSEQUENCES" in the Prospectus,
which is part of the Registration Statement. Such statements do not address the
federal income tax consequences of an investment in the Certificates applicable
to all categories of investors, but with respect to those tax consequences which
are discussed, in our opinion, such statements fairly summarize those federal
income tax consequences in all material respects.
The opinion expressed herein is limited to the federal laws of the United
States of America. We assume no obligations to supplement this letter if any
applicable laws change after the date hereof or if we become aware of any facts
herein after the date hereof.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to a reference to this firm under the heading
"CERTAIN FEDERAL INCOME TAX CONSEQUENCES" in the Prospectus forming a part of
the Registration Statement, without implying or admitting that we are "experts"
within the meaning of the Act or the rules and regulations of the Commission
issued thereunder, with respect to any part of the Registration Statement,
including this exhibit.
Very truly yours,
FRIED, FRANK, HARRIS, SHRIVER & JACOBSON
May 20, 1997
The Board of Directors
Farmer Mac Mortgage Securities Corporation
We consent to the use of our report incorporated herein by reference to
the reference to our firm as experts on page S-3 in Amendment No. 1 to the
Registration Statement on Form S-3 dated May 20, 1997.
Washington, D.C.
May 20, 1997
