As filed with the Securities and Exchange Commission on June 19, 1996
Registration No. 33-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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 Jurisdiction of (I.R.S. Employer 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:
John Arnholz Michael T. Bennett
Brown & Wood Federal Agricultural Mortgage
815 Connecticut Avenue, N.W. Corporation
Suite 701 919 18th Street, N.W.
Washington, D.C. 20006 Washington, D.C. 20006
_____________
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>
CALCULATION OF REGISTRATION FEE
Proposed Proposed
Maximum Maximum
Amount Offering Aggregate Amount of
Title of Securities Being Price Per Offering Registration
Being Registered Registered Unit(1) Price(1) Fee
<S> <C> <C> <C> <C>
Guaranteed $250,000,000 100% $250,000,000 $86,206.90
Agricultural
Mortgage-Backed
Securities
(Issuable in Series)
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
_________________________________________
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, as amended, or until the
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 supplement 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.
SUBJECT TO COMPLETION, DATED JUNE 19, 1996
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED _____________, 199 )
$____________
(Approximate)
Guaranteed Agricultural Mortgage-Backed Securities
Guaranteed by
Farmer Mac
Federal Agricultural Mortgage Corporation
Farmer Mac Pool(s) ____
The Guaranteed Agricultural Mortgage-Backed Securities
offered hereby (the "Certificates" or the "AMBS Certificates")
evidence beneficial ownership interests in Farmer Mac Pool(s)
_____ (the "Trust Fund"). Substantially all of the assets of the
Trust Fund will consist of [[fixed rate] agricultural real estate
mortgage loans ("Qualified Loans")][Farmer Mac Guaranteed
Agricultural Mortgage-Backed Securities ("Trust Fund AMBS"), each
of which will represent a beneficial interest a Pool of fixed
rate agricultural real estate mortgage loans (the "Qualified
Loans")]. As described herein, timely payment of interest on the
Certificates and the Principal Distribution Amount 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. [Farmer Mac will not guarantee the collection from
borrowers of any Prepayment Premiums or Yield Maintenance
Charges.] 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>
Original Proceeds to Final
Principal Pass-Through Price to Underwriting the Distribution
Amount(1) Rate Public Discount Depositor(2) Date(3)
<S> <C> <C> <C> <C> <C>
</TABLE>
____________________
(1) Subject to a permitted variance of plus or minus 5%.
(2) The aggregate proceeds (excluding accrued interest
adjustments) from the sale of the Certificates, before
deducting expenses estimated to be $___________, are
estimated to be approximately $______________. See "METHOD
OF DISTRIBUTION" herein.
(3) Determined based on the Modeling Assumptions stated under
"YIELD, PREPAYMENT AND MATURITY CONSIDERATIONS," assuming,
among other things, [no prepayments].
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 available through the
book-entry system of the Federal Reserve Banks on or about the
"Closing Date"). It is expected that the Certificates in registered
certificated form will be available for delivery at the offices of
_________________ of ___________ on or about____________________.
<PAGE>
[Underwriter]
The date of this Prospectus Supplement is ________, 199_.
Interest will accrue on each Class of the Certificates
offered hereby at the respective Pass-Through Rates set forth on
the cover hereof. Interest will be distributable on the
Certificates offered hereby on each Distribution Date (as defined
herein) commencing in _____________, 199 . On each Distribution
Date, the amount of interest distributable on each Certificate
offered hereby will equal __ days' of interest at the applicable
Pass-Through Rate on the Certificate Balance thereof immediately
prior to such Distribution Date.
Principal of the Certificates offered hereby will be
distributable on each Distribution Date to the extent and in the
manner described herein.
The yields to maturity on the Certificates will be affected,
in varying degrees, by the rate and timing of principal payments
(including voluntary prepayments and prepayments resulting from
liquidated Qualified Loans) on the Qualified Loans, 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 prepayments on the Qualified
Loans could result in an extension of the weighted average lives
of such Certificates and actual yields to investors that are
lower than the anticipated yields and, in the case of any
Certificates purchased at a premium, the risk that a faster than
anticipated rate of principal prepayments on the Qualified Loans
could result in a reduction of the weighted average lives of such
Certificates and actual yields to investors that are
significantly lower than the anticipated yields.
The Certificates offered hereby constitute a [part of a]
series of Pass-Through Certificates being offered by the
Depositor (as defined herein) from time to time pursuant to its
Prospectus dated _____________, 199 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.
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.
[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 Certificate 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 Certificate will be
designated as the residual interests in the REMIC. Prospective
investors are cautioned that the Class R Certificateholders'
REMIC taxable income and the tax liability thereon 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 Certificate (the
"Residual Certificate") 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.]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-
ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE
MARKET PRICES OF THE CERTIFICATES AT LEVELS ABOVE THOSE WHICH
MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
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.
<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.
<TABLE>
<S> <C>
Securities Offered The Guaranteed Agricultural Mortgage-Backed
Securities ("AMBS"), Farmer Mac Pool(s)__ (the
"Certificates" or the "AMBS Certificates"), in
the Classes and aggregate principal amounts set
forth on the cover hereto (subject to a permitted
variance of plus or minus 5%).
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 "Depos-
itor") under the Trust Agreement. See "THE
DEPOSITOR" herein.
The Guarantee As described herein, the timely payment to
Certificateholders of interest on the
Certificates and the Principal Distribution
Amount (as defined herein) is guaranteed by
Farmer Mac. Farmer Mac's obligations under
Farmer Mac Guarantee are not backed by the full
faith and credit of the United States. See
"FARMER MAC GUARANTEE" herein.
Not an Obligation of the
United States Farmer Mac's obligations under the Farmer 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 ___
______, a _________, (the "Central Servicer")
which will be acting on behalf of Farmer Mac
pursuant to a Servicing Contract between it and
Farmer Mac. See "DESCRIPTION OF THE AGREEMENTS
--Servicing and Other Compensation and Payment of
Expenses" herein.
The Trustee [Trustee].
The Trust Agreement The Trust Agreement dated ___________, 1996 as
supplemented by an Issue Supplement dated the
Cut-off Date (collectively, the "Trust
Agreement"), each among Farmer Mac, the Depositor
and the Trustee.
Cut-off Date _____________.
Closing Date On or about __________________.
Distribution Date The __ day of each month, or if such day is not a
Business Day, the next succeeding Business Day,
beginning ____________.
Distributions on Interest. Interest will accrue on each Class of
the Certificates Certificates offered hereby at the respective
Pass-Through Rate set forth on the cover hereof
during each [__-month period ending on the last
day of the month preceding the month in which a
Distribution Date occurs] (each, an "Interest
Accrual Period"). On each Distribution Date,
interest will be distributable on each Class in
an aggregate amount equal to the Accrued
Certificate Interest for such Class and
Distribution Date. The "Accrued Certificate
Interest" for any Distribution Date and Class
will equal the interest accrued at the
applicable Pass-Through Rate during the related
Interest Accrual Period on the Certificate
Balance thereof immediately prior to such
Distribution Date. See "DESCRIPTION OF THE
CERTIFICATES--Distributions--Interest" herein.
Principal. Principal will be distributed
[quarterly, semiannually, annually] on each
Class of Certificates on each Distribution Date
in an aggregate amount equal to the Principal
Distribution Amount for such Distribution Date.
See "DESCRIPTION OF THE CERTIFICATES--
Distributions--Principal" herein.
Premiums. The amount of any Prepayment Premium
or Yield Maintenance Charge (as each term is
defined herein) to the extent collected by the
Central Servicer will be distributed to the [ ]
Certificates on each Distribution Date in the
manner described herein. See "DISTRIBUTION OF
THE CERTIFICATES -- Distributions -- Premiums"
herein.
Record Date The Record Date of each Distribution Date 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 Each Certificate represents a beneficial
ownership interest in the Trust Fund. The Trust
Fund corpus consists of: (i) [[fixed rate]
agricultural real estate mortgage loans
(collectively, the "Qualified Loans" )] [Farmer
Mac Guaranteed Agricultural Mortgage- Backed
Securities ("Trust Fund AMBS"), each of which
will represent a beneficial interest a Pool of
fixed rate agricultural real estate mortgage
loans (the "Qualified Loans")], (ii) the Farmer
Mac Guarantee and (iii) the Collection Account
and Certificate Account(each as defined herein).
See "DESCRIPTION OF THE QUALIFIED LOANS" herein.
Advances The Central Servicer will be obligated to
advance delinquent installments of principal and
interest on Qualified Loans to the extent
described herein. See "DESCRIPTION OF THE
CERTIFICATES--Advances" herein.
Central Servicing Fee Rate [TO COME]
Guarantee Fee Rate [TO COME]
[Optional Termination On any Distribution Date when the aggregate
[principal balance] of the Certificates is less
than __ % thereof as of the Cut-off Date, the
Central Servicer may purchase from the Trust
Fund all remaining Qualified Loans [AMBS] held
by the Trust Fund and thereby effect an early
retirement of the Certificates. See "DESCRIPTION
OF CERTIFICATES, Termination" herein and in the
Prospectus.]
Certain Federal Income [An election will be made to treat the Trust
Tax Consequences Fund as a real estate mortgage investment
conduit (the "REMIC") for federal income tax
purposes. The 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 Certificate will be
designated as the residual interest 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. [The Class __ Certificates
will be issued without original issue discount
for federal income tax purposes.] [It is
anticipated that the Class ___ Certificates will
be issued with original issue discount in an
amount equal to the excess of the initial
principal balances thereof over its issue price
(including accrued interest) for federal income
tax purposes.] [It is anticipated that the
Class ___ Certificates will be issued with
de minimis original issue discount for federal
income tax purposes.] [It is anticipated that
the Class___Certificates will be issued at a
premium for federal income tax purposes.] See
"CERTAIN FEDERAL INCOME TAX CONSEQUENCES" herein
and in the Prospectus.
ERISA Considerations 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. [Discussion of exemptions]. 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 to what extent specific Classes of the
Certificates constitute legal investments for
them. See "LEGAL INVESTMENT" herein and in the
Prospectus.
</TABLE>
<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 Prepayment Premiums and Yield Maintenance
Charges. Farmer Mac will not guarantee the payment to
Certificateholders of any premium (a "Prepayment Premium") or
yield maintenance charge ("Yield Maintenance Charge") payable in
connection with a principal prepayment on a Qualified Loan.
Generally, a principal prepayment resulting from the condemnation
of, or casualty on, the related Mortgage Property will not be
accompanied by a Prepayment Premium or Yield Maintenance Charge.
The Central Servicer may not be required to collect Prepayment
Premiums or Yield Maintenance Charges from a borrower to the
extent the Central Servicer determines that attempting such
collection would not be economical or advantageous. See "FARMER
MAC GUARANTEE" and "YIELD, PREPAYMENT AND MATURITY CONSIDERATIONS"
herein.
[TO COME]
DESCRIPTION OF THE QUALIFIED LOANS
GENERAL
The Trust Fund will consist of (i) [[fixed rate]
agricultural real estate mortgage loans (collectively, the
"Qualified Loans")][Farmer Mac Guaranteed Mortgage-Backed
Securities ("Trust Fund AMBS") each of which represents
beneficial interest in a pool of [fixed rate] agricultural real
estate mortgage loans ("Qualified Loans")]; (ii) the Farmer Mac
Guarantee; and (iii) the Collection Account and Certificate
Account. The Certificates will be entitled to payment only from
the assets of the Trust Fund and will not be entitled to payments
in respect of the assets of any other trust fund established by
the Depositor.
[DESCRIPTION OF AMBS
The Trust Fund will include Trust Fund AMBS that have the
characteristics as described herein.]
DESCRIPTION OF QUALIFIED LOANS
The Trust Fund will include a pool (the "Pool") of
approximately _____________ Qualified Loans [which underlie the
AMBS][assigned to the Trust Fund by the Depositor. The aggregate
outstanding principal balance of the Qualified Loans [underlying
the AMBS] as of the Cut-off Date is $___________ (subject to a
permitted variance of plus or minus 5%). Each Qualified Loan is
secured by a first-lien on Agricultural Real Estate (the
"Mortgaged Properties"). "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 principal amount of a
Qualified Loan secured by Agricultural Real Estate may not exceed
$3,500,000, as adjusted for inflation as of December 31, 1995.
The Qualified Loans [underlying the AMBS] have original
terms to maturity ranging from ___ to ____ years and current loan-
to-value ratios of not more than 70% and meet Farmer Mac's
Underwriting and Appraisal Standards (the "Underwriting
Standards") with respect to [existing][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 Trust Fund. See "DESCRIPTION OF
THE TRUST FUNDS,Mortgage Loans,General" in the Prospectus.
The weighted average current loan-to-value ratio of the
Qualified Loans in the Pool [underlying the AMBS] as of the Cut-
off Date will be __ %. The weighted average mortgage interest
rate (each, a "Mortgage Interest Rate") of the Qualified Loans in
the Pool as of the Cut-off Date is approximately ___% per
annum.
The Qualified Loans [underlying the AMBS] will have had
individual principal balances at origination of not less than $
and not more than $________. None of the Qualified Loans [in
the Pool] [underlying the AMBS] will have been originated prior
to __________ or will have a scheduled maturity later than
___. No Qualified Loan [in the Pool] [underlying the AMBS] will
have an unexpired term at the Cut-off Date of less than
_____. The weighted average remaining term to stated maturity of the
Qualified Loans [in the Pool] [underlying the AMBS] as of the Cut-
off Date is approximately ______________.
Approximately ____ of the Qualified Loans do not provide for
any lockout period in which prepayments are prohibited and
approximately ____ of the Qualified Loans do not provide for any
Prepayment Premiums or Yield Maintenance Charges in connection
with the prepayment thereof. ______ of the Qualified Loans also
contain "due-on-sale" clauses. Such a clause permits the lender
to accelerate the maturity of a loan if the Borrower sells,
transfers or conveys the Mortgaged Property or the Borrower's
interest in the Mortgaged Property. [The Servicing Contract
obligates the Central Servicer to determine, in accordance with
the applicable provisions of such agreement, whether to enforce
such "due-on-sale" clauses. See "CERTAIN LEGAL ASPECTS OF
QUALIFIED LOANS AND OTHER MATTERS -- Enforceability of Certain
Provisions -- Due-on-Sale Clauses" in the Prospectus.]
The Mortgage Interest Rates borne by the Qualified Loans as
of the Cut-off Date ranged from approximately __ % per annum to
approximately __ % per annum. As of the Cut-off Date, the
weighted average Mortgage Interest Rate of the Qualified Loans
was approximately __ % per annum.
Based on the aggregate outstanding principal balance of the
Qualified Loans as of the Cut-off Date, approximately __ % of
the Qualified Loans provide for the [quarterly][semi-annual]
payment of principal and interest on a level basis to fully
amortize such Qualified Loan over its stated term. The remaining
__% of the Qualified Loans (by Cut-off Date Principal Balance) are
balloon loans which provide for regular [quarterly][semi-annual]
payments of principal and interest computed on the basis of an
amortization term of __ months 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 [quarterly][semi-annual] payments
(each, a "Qualified Balloon Loan").
The following table sets forth the range of Mortgage
Interest Rates with respect to the Qualified Loans:
[ TO COME ]
The following table sets forth information with respect to
the remaining years to maturity of the Qualified Loans, the
current loan-to-value ratios of the Qualified Loans and the
Balloon Amounts of those Qualified Loans that are Balloon Loans:
[ TO COME ]
The following table sets forth the payment frequencies of
the Qualified Loans:
[ TO COME ]
The following table sets forth the distribution of the
Qualified Loans according to the states in which the respective
Mortgaged Properties are located and the commodities produced on
the respective Mortgaged Properties:
[ TO COME ]
The following table sets forth information with respect to
lock-out periods affecting certain Qualified Loans:
[ TO COME ]
The description of the AMBS, Qualified Loans and the
Mortgaged Properties is based upon the 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, [AMBS] Qualified Loans may be
removed from the 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 [AMBS] may be included in the
Pool prior to the issuance of the Certificates unless including
such Qualified Loans [AMBS] would materially alter the
characteristics of the Pool as described herein. The Depositor
believes that the information set forth herein will be
representative of the characteristics of the Pool as it will be
constituted at the time the Certificates are issued although the
range of Mortgage Interest Rates [Pass-Through Rates] and
maturities and certain other characteristics of the Qualified
Loans in the Pool may vary. Pursuant to the Trust Agreement, the
related Seller will make certain representations and warranties
with respect to the Qualified Loans and their origination in
accordance with the Underwriting and Appraisal Standards. See
"DESCRIPTION OF THE AGREEMENTS -- Assignment of Assets;
Repurchases" in the Prospectus.
As described herein the composition of the Qualified Loans
[AMBS] is subject to adjustment, with the amount of such variance
restricted to no more than 5% of the aggregate principal balance
of the Qualified Loans [AMBS] as stated herein. The information
set forth as to the Qualified Loans [AMBS] will be revised to
reflect such differences and included on a Form 8-K to be filed
with the Commission within 15 days after the Closing Date and be
available to Holders of Certificates promptly thereafter through
the facilities of the Commission as described under "AVAILABLE
INFORMATION" in the Prospectus.
<PAGE>
DESCRIPTION OF THE CERTIFICATES
GENERAL
The Certificates will be issued pursuant to a Trust
Agreement to be dated _______, 1996 as supplemented by an Issue
Supplement dated 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. The Certificates will be
issued in the ______ Classes offered hereby[, together with the
_______ Certificates, none of which are offered hereby], and in
the aggregate original Certificate Balance of approximately
$____________ (subject to a permitted variance of plus or minus
5%). Any such variance will be allocated so as to approximate
the material characteristics of the Classes of Certificates
described herein.
As described below, each Class of Certificates offered
hereby, [other than the Class R Certificate (the "Residual
Certificate"),] 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], in minimum
denominations in the Certificate Balance of $___________ and
integral multiples of $___________ in excess thereof. [The
Residual Certificate will be issued in certificated form as a
single Certificate representing the entire Certificate Balance
thereof.] Notwithstanding the minimum denominations of the
Certificates described herein, one Certificate of each Class
[other than the Residual Certificate] may evidence an additional
amount equal to the remaining Certificate Balance thereof.
BOOK-ENTRY CERTIFICATES
[Each Class of the Certificates offered hereby [other than
the Residual Certificate] (collectively, the "Book-Entry
Certificates") will be issued and maintained and may be
transferred by Certificateholders only on the book-entry system
of 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 "Certificateholders" or "Holders." A
Holder is not necessarily the beneficial owner of a Book-Entry
Certificate. beneficial owners will ordinarily hold Book-Entry
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 Book-Entry Certificates in book-entry form
may reduce the liquidity of such Certificates in the secondary
market since certain potential 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 Certificate] (the "Non-Book-Entry
Certificates") will be issued in 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 Certificate will be subject to certain restrictions on
transfer. See "Restrictions on Transfer of the Residual
Certificate" 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
Certificateholder to the Trustee, by wire transfer to a United
States depository institution designated by such
Certificateholder and acceptable to the Trustee or by such other
means of payment as such Certificateholder 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 thereof of such final distribution.
DISTRIBUTIONS
General. Distributions of principal and interest on the
Certificates will be made on the ___ day of each month, or, if
any such day is not a Business Day (that is, a day other than
Saturday, Sunday or a day in which banking institutions in New
York or __________ are authorized or obligated by law to be
closed), the next succeeding Business Day (each, a "Distribution
Date") to 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").
Interest. Interest on each Class of Certificates will be
paid [quarterly, semi-annually, annually] on each Distribution
Date in an aggregate amount equal to the Accrued Certificate
Interest for each Class and Distribution Date. With respect to
each Class of Certificates, "Accrued Certificate Interest" will
be equal to interest accrued during the calendar month
immediately preceding such Distribution Date (each, an "Interest
Accrual Period") at the Pass-Through Rate for such Class set
forth on the cover hereof on the Certificate Balance thereof
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.
Principal. Principal will be distributable [quarterly, semi-
annually, annually] on each Distribution Date in an aggregate
amount equal to the Principal Distribution Amount for such
Distribution Date. On each Distribution Date, the "Principal
Distribution Amount" will equal the [sum of (i) the principal
portion of all scheduled monthly payments (including any
scheduled Balloon Payments) on the Qualified Loans due during the
related Due Period, (ii) the Scheduled Principal Balance of each
Qualified Loan which was repurchased or became a Liquidated
Qualified Loan during the related due period, and (iii) all full
or partial principal prepayments received during the related
prepayment period (as defined herein)][amounts of any
distributions received in respect of principal on the AMBS].
[Description of Prepayment Period - transaction specific]
[Definition of Scheduled Principal Balance - transaction
specific]
[Definition of Due Period - transaction specific]
On each Distribution Date, the Principal Distribution Amount
will be distributed in the following order of priority among the
Certificates:
[Transaction Specific]
[Premiums. In the event a Borrower is required to pay a
Yield Maintenance Charge or any Prepayment Premium, to the extent
such payments are collected, the Master Servicer will distribute
such payments in the following manner: [transaction specific].
The distribution of any Prepayment Premium or Yield
Maintenance Charge to Certificateholders will not reduce the
Certificate Balance of the related Class of Certificates.
Farmer Mac will not guarantee the collection from any
borrower of any Yield Maintenance Charge or Prepayment Premium
unless such amounts are actually collected by the Central
Servicer. See "FARMER MAC GUARANTEE" herein.]
ADVANCES
On or prior to each Certificate Account Deposit Date (as
defined herein), the Central Servicer will be required to advance
its own funds in an amount equal to the aggregate of principal
payments and interest (net of Servicing Fees) that were due on
the Qualified Loans during the related Due Period and were
delinquent on such Certificate Account Deposit Date (each such
payment, an "Advance"), subject to the Central Servicer's good
faith determination that such advances are recoverable from
related late collections or liquidation proceeds thereof.
Because Farmer Mac guarantees timely distributions of
interest on the Certificates and the Principal Distribution
Amount to Holders, the failure of the Central Servicer to make
any Advance will not affect distributions of interest and
principal to such Holders.
[Additional Rights of Residual Certificateholders
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]
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 Distribution Date. In addition, Farmer Mac is
obligated to distribute on a timely basis 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. The Farmer Mac Guarantee
will not cover the timely payment of any uncollected Prepayment
Premiums or Yield Maintenance Charges. 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
"FEDERAL AGRICULTURAL MORTGAGE CORPORATION" in the Prospectus.
OUTSTANDING GUARANTEES
As of _____________, Farmer Mac had outstanding guarantees
on approximately $__________ aggregate principal amount of
Farmer Mac Securities.
The Act 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. See "FEDERAL AGRICULTURAL MORTGAGE CORPORATION" in
the Prospectus. As of ________ , the amount of all outstanding
borrowings by Farmer Mac from the Secretary of the Treasury
totalled $_______________, leaving $____________ remaining
thereunder.
<PAGE>
YIELD, PREPAYMENT AND MATURITY CONSIDERATIONS
The rate of payment of principal on the Certificates and the
yield to maturity of the Certificates will be directly related to
the rate of payments of principal on the [underlying] Qualified
Loans. The rate of payments of principal of the Qualified Loans
will in turn be affected by the rate of principal prepayments
thereon by borrowers, by liquidations of defaulted Qualified
Loans repurchased as a result of defective documentation,
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 Agricultural Real Estate generally or the Qualified
Loans particularly.
In the case of Agricultural Real Estate Loans, a number of
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 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 Certificates of amounts which would otherwise be distributed
over the remaining terms of the Qualified Loans.
[Virtually all] of the Qualified Loans contain lock-out
periods in which prepayments are prohibited or impose prepayment
penalties or charges and/or other restrictions on prepayments.
[Although some of the lockout periods have expired,] most of the
Qualified Loans continue to be subject to prepayment penalties
and other restrictions on prepayments that, if enforced by the
Central Servicer, could be a deterrent to prepayments. In the
normal course of its business, the Central Servicer generally
enforces such prepayment penalties and restrictions unless the
enforcement thereof is deemed by the Central Servicer to be
inappropriate.]
[ ] of the Qualified Loans require the payment of a Yield
Maintenance Charge or Prepayment Premium in connection with the
prepayment of the related Qualified Loan. 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 varying 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.
[In addition, a [substantial portion] of the Qualified Loans
include "due-on-sale" clauses; however, it is generally the
policy of the Central Servicer not to enforce such clauses unless
the related obligor assuming such Qualified Loan does not meet
the Underwriting Standards of Farmer Mac. The Servicing Contract
(as defined herein) does not require any such enforcement. The
remaining Qualified Loans are assumable by persons meeting the
Underwriting Standards of Farmer Mac. In addition, at the
request of the borrower, the 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 the
loan-to-value ratio as of the Cut-off Date and the cash flows
from the remaining property are sufficient to service the
remaining debt. Such partial release will be treated as a
prepayment in part and the related Qualified Loan will remain in
the Trust.]
The yield to investors in the Certificates will be sensitive
in varying degrees to the rate and timing of principal payments
(including prepayments) of the Qualified Loans, 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.
Holders of the Certificates 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 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 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
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 effective yield to the holders of the Certificates 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 the [__]th 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).]
Weighted Average Lives of the Certificates
"Weighted average life" refers to the average amount of time
from the date of issuance of a security until each dollar of
principal of such security will be repaid to the investor. The
weighted average lives of the Certificates will be influenced by
the rate at which principal payments (including prepayments) on
the Qualified Loans are made. Principal payments on the
Qualified Loans may be in the form of scheduled amortization or
prepayments (for this purpose, the term "prepayment" includes
prepayments and liquidations due to a default or other
dispositions of the Qualified Loans). Prepayments on mortgage
loans are commonly measured by a prepayment standard or model.
The model used in this Prospectus Supplement (the "Prepayment
Model" or "CPR") represents an assumed constant rate of
prepayments, expressed as an annual percentage rate, relative to
the then outstanding principal balance of a pool of mortgage
loans for the life of such mortgage loans.
The tables set forth below have been based on the
assumptions, among others, that (i) [TO COME] (collectively, the
"Modeling Assumptions").
There may be discrepancies between the characteristics of
the actual Qualified Loans included in the Pool and those of the
Qualified Loans in the Pool as constituted for purposes of the
Modeling Assumptions. Any such discrepancies may have an effect
upon the percentages of the original Certificate Balances
outstanding and the weighted average lives of the Certificates
set forth in the tables. There can be no assurance as to how or
whether any such discrepancies may affect the rate of prepayments
of the Qualified Loans.
In addition, to the extent that the actual Qualified Loans
included in the Pool have characteristics which differ from those
assumed in preparing the tables set forth below, each such
Certificate may mature earlier or later than indicated by the
tables.
Based on the foregoing assumptions, the tables indicate the
weighted average lives of the Certificates and set forth the
percentages of the original Certificate Balance of each such
Certificate that would be outstanding after each of the
Distribution Dates indicated, at various CPR percentages.
Neither CPR nor any other prepayment model or assumption purports
to be a historical description of prepayment experience or a
prediction of the anticipated rate of prepayment of any pool of
mortgage loans, including the Qualified Loans included in the
Pool. Variations in the actual prepayment experience and the
balance of the Qualified Loans that prepay may increase or
decrease the percentage of the original Certificate Balances (and
weighted average lives) shown in the following tables. Such
variations may occur even if the average prepayment experience of
all such Qualified Loans equals any of the specified CPR
percentages.
[WEIGHTED AVERAGE LIFE TABLES]
DESCRIPTION OF THE AGREEMENTS
The Certificates will be issued pursuant to the Trust
Agreement. Farmer Mac will act as Master Servicer (the "Master
Servicer") of the Qualified Loans. The Qualified Loans will be
directly serviced by ________, a _________, (the "Central
Servicer") that will be acting on behalf of Farmer Mac pursuant
to a Servicing Contract between it and Farmer Mac (the "Servicing
Contract"). In addition, each Seller of Qualified Loans to the
Depositor will transfer and assign such Qualified Loans to the
Depositor pursuant to a separate Loan Sale Agreement (each, a
"Sale Agreement"). Each such Sale Agreement will include certain
representations and warranties of the Seller respecting the
related Qualified Loans which representations and warranties and
the remedies for their breach will be assigned by the Depositor
to the Trustee for the benefit of Certificateholders pursuant to
the Trust Agreement.
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 receive an amount (the "Central
Servicing Fee"), calculated on a Qualified Loan-by-Qualified Loan
basis, equal to the product of the outstanding principal balance
of a Qualified Loan in any given month and one-twelfth of ____%.
Additional servicing compensation in the form of assumption fees
or late payment charges will 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.
[Guarantee Fee Rate]
[Termination
The Central Servicer may effect an early termination of the
Trust Fund on any Distribution Date after the date on which the
aggregate principal balance of the Certificates is reduced to
less than ____% thereof as of the Cut-off Date by repurchasing
all the Qualified Loans [AMBS] at a price equal to 100% of the
principal balance of the Qualified Loans [AMBS] plus accrued
interest thereon at the applicable Mortgage Interest Rate [Pass-
Through Rate] to the next due date; determined as provided in the
Trust Agreement. The Master Servicer will distribute the
proceeds thereof to Certificateholders on the final Distribution
Date. See "DESCRIPTION OF CERTIFICATES,Termination" in the
Prospectus.]
[Sale Agreement and Servicing Contract Summary To Come]
THE DEPOSITOR
Farmer Mac Mortgage Securities Corp., the Depositor, is a
wholly-owned subsidiary of Farmer Mac and was incorporated in the
State of Delaware in May 1992. The principal executive offices of
the Depositor are located at 919 18th Street, N.W., Washington,
D.C. 20006.
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
[TO COME]
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. [Discussion of exemptions]. See
"ERISA CONSIDERATIONS" in the Prospectus.
LEGAL INVESTMENT
The Certificates will constitute securities guaranteed by
Farmer Mac for purposes of the Act 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
constitute legal investments for them.
METHOD OF DISTRIBUTION
[Subject to the terms and conditions set forth in the
Underwriting Agreement among the Depositor, Farmer Mac and
[Underwriter] (the "Underwriter"), the Depositor has agreed to
sell to the Underwriter and the Underwriter has agreed to
purchase the entire aggregate principal amount of the
Certificates. The Underwriting Agreement provides that the
obligation of the Underwriter is subject to certain conditions
precedent and that the Underwriter will be obligated to purchase
all of the Certificates if any are purchased.
The Underwriter proposes to offer each Class of Certificates
in whole or in part to purchasers at the initial public offering
prices set forth on the cover page of this Prospectus Supplement,
or in part to certain securities dealers at such prices less a
concession of ____% for each such Class. After the Certificates
are released for sale to the public, the offering prices and
other selling terms may from time to time be varied by the
Underwriter.
The Underwriting Agreement provides that Farmer Mac and the
Depositor will indemnify the Underwriter against certain civil
liabilities under the 1933 Act or contribute to payments the
Underwriter may be required to make in respect thereof.]
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The consolidated financial statements of Farmer Mac for
the year ended December 31, 1995 included as an exhibit to
its Annual Report on Form 10-K for the year ended December 31,
1995, and the unaudited financial statements of Farmer Mac for
the three month period ended March 31, 1996 included as an
exhibit to its Quarterly Report on Form 10-Q for the period
ended March 31, 1996, each of which has been filed with the
Commission by Farmer Mac, are hereby incorporated by reference
in this Prospectus Supplement.
All financial statements of Farmer Mac included in
included in documents filed by Farmer Mac pursuant to Section
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 the offering of the Certificates shall be
deemed to be incorporated by reference into this Prospectus
Supplement and to be a part hereof.
EXPERTS
The consolidated balance sheets of Farmer Mac as of
December 31, 1995 and 1994 and related consolidated statements
of operations and cash flows for each of the years in the
three-year period ended December 31, 1995, 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.
The report of KPMG Peat Marwick LLP, covering December 31, 1995
financial statements contains an explanatory paragraph regarding
regulatory capital as described in Note 3 to such financial
statements.
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 Brown & Wood, Washington, D.C. and for the Underwriter
by ____________________ . Brown & Wood 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:
Accrued Certificate Interest..............................S-5, S-13
Advance....................................................... S-14
Agricultural Real Estate...................................... S-9
AMBS.......................................................... S-4
AMBS Certificates....................................... cover, S-4
Balloon Payment............................................... S-10
Book-Entry Certificate.........................................S-12
CPR........................................................... S-17
Central Servicer......................................... S-4, S-18
Central Servicing Fee.................................... S-5, S-18
Certificate Account............................................ S-5
Certificate Account Deposit Date.............................. S-14
Certificates............................................ cover, S-4
Certificateholders............................................ S-12
Closing Date..................................................cover
Collection Account............................................. S-6
Depositor...................................................... S-4
Distribution Date............................................. S-13
Due Period.................................................... S-13
ERISA.................................................... S-7, S-19
Farmer Mac...............................................cover, S-4
Farmer Mac Charter............................................ S-4
Farmer Mac Guarantee.......................................... S-14
Holders........................................................S-12
IRA...................................................... S-7, S-19
Interest Accrual Period.................................. S-5, S-13
Master Servicer.......................................... S-4, S-18
Modeling Assumptions........................................ S-17
Mortgage Interest Rate........................................ S-10
Mortgaged Properties.......................................... S-9
Non-Book-Entry Certificates................................... S-12
Prepayment.................................................... S-17
Prepayment Model.............................................. S-17
Prepayment Premium............................................ S-9
Principal Distribution Amount................................. S-13
Pool......................................................... S-9
Qualified Balloon Loan....................................... S-10
Qualified Loan......................................cover, S-6, S-9
Record Date................................................... S-13
REMIC......................................................S-2, S-7
Residual Certificate......................................S-2, S-12
Sale Agreement............................................... S-18
Servicing Contract........................................... S-18
Trust Agreement.......................................... S-5, S-12
Trust Fund...............................................cover, S-3
Trust Fund AMBS.................................... cover, S-6, S-9
Trustee....................................................... S-3
Underwriter................................................... S-19
Underwriting Standards......................................... S-9
Weighted average life......................................... S-17
Yield Maintenance Charge........................................S-9
<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.
[Agricultural Loan Prospectus]
SUBJECT TO COMPLETION, DATED JUNE 19, 1996
PROSPECTUS
Guaranteed Agricultural Mortgage-Backed Securities ("AMBS")
(Issuable in Series)
Federal Agricultural Mortgage Corporation
Guarantor
Farmer Mac Mortgage Securities Corporation
Depositor
________
The Certificates offered hereby and by Supplements to this
Prospectus (the "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 (the "Qualified Loans"), the portions of loans
guaranteed by the United States Secretary of Agriculture (the
"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 (collectively, the "QMBS") or a combination
of Guaranteed Portions and/or QMBS (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.
(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 OR THE RELATED PROSPECTUS SUPPLEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
________
Prospective investors should review the information appearing on
page 13 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 publish and regularly update infromation 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.
____________, 199
<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 Premiums and Yield Maintenance Charges (each term 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 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, any Seller, any
Central Servicer 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.
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.
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 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
assets comprising the Trust Fund, including the general
characteristics of the assets included therein, including the
Qualified 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 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) whether and to what extent, if any, the Farmer Mac Guarantee
will cover the timely payment of the related Balloon Payment on
any Qualified Balloon Loan.
AVAILABLE INFORMATION
The Depositor has filed with the Securities and Exchange
Commission (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 Depositor will mail or caused to be mailed to holders of
Definitive Certificates (as defined herein) of each Series
periodic unaudited reports concerning the related Trust Fund.
Unless and until Definitive Certificates are issued such reports
will be sent on behalf of the related Trust Fund to the office
identified for such purpose in the related Prospectus Supplement.
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).
See "DESCRIPTION OF THE CERTIFICATES -- Reports to
Certificateholders" and "DESCRIPTION OF THE AGREEMENTS -- Evidence
as to Compliance" herein.
The Depositor will file or cause to be filed with the Commission
such periodic reports with respect to each Trust Fund as are
required under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and the rules and regulations of the
Commission thereunder. The Depositor intends to make a written
request to the staff of the Commission that the staff either (i)
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 or (ii) state
that the staff will not recommend that the Commission take
enforcement action if the Depositor fulfills its reporting
obligations as described in its written request. If such request
is granted, the Depositor will file or cause to be filed with the
Commission as to each Trust Fund the periodic unaudited reports to
holders of the Certificates referenced in the preceding paragraph.
In addition, because of the limited number of Certificateholders
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.
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 or an offer of
the Certificates to any person in any state or other jurisdiction
in which such offer would be unlawful. The delivery of this
Prospectus at any time does not imply that information 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 publish and regularly update for the benefit of
AMBS investors information about the Certificates and Qualified
Loan 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 Section 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, 1995 and Farmer Mac's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1996
each filed with the Commission pursuant to the Exchange Act shall
also be deemed to be incorporated by reference in this Prospectus
and to be a part hereof. All documents filed by Farmer Mac
pursuant to 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. 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., Suite200, Washington, D.C. 20006, Attention:
Corporate Secretary. 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 Definitions is included
at the end of this Prospectus.
<TABLE>
<CAPTION>
<S> <C>
Title of Guaranteed Agricultural Mortgage-Backed
Certificates 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
(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.
Depositor Farmer Mac Mortgage Securities
Corporation, a wholly-owned subsidiary of
Farmer Mac. See "THE DEPOSITOR" herein.
The Master Farmer Mac will act as the Master Servicer
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."
The Trust Assets Each Series of Certificates will represent
in the aggregate the entire beneficial
ownership interest in a Trust Fund
consisting primarily of:
(a) Qualified The Qualified Assets with respect to each
Assets Series of Certificates will consist of (i)
[agricultural real estate mortgage loans
(collectively, the "Qualified Loans") (ii)
the portions of loans guaranteed by the
United States Secretary of Agriculture
pursuant to the Consolidated Farm and
Rural Development Act (7 U.S.C. 1921 et
seq.) (the "ConAct") (the "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 Guaranteed Portions
and QMBS. AMBS refers to Certificates
issued and offered pursuant to this
Registration Statement. 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"). No Qualified Loan
may have a loan-to-value ratio in excess
of 70 percent. 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 farming experience or
other training 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 annual receipts of at
least $5,000. The principal amount of a
Qualified Loan secured by Agricultural
Real Estate may not exceed $3,500,000, as
adjusted for inflation as of December 31,
1995.
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 --
Assets."
(b) Farmer Mac
Guarantee The Certificates of each Series will be
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 Balloon 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 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 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 sheet filed with the
Commission and incorporated by reference
herein. See, INCORPORATION OF CERTAIN
INFORMATION BY REFERENCE" herein.
If this 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.
</TABLE>
<TABLE>
<CAPTION>
<S> <S>
(c) Collection
Account;
Certificate
Account Each Trust Fund will include one or more
accounts established and maintained on
behalf of the Certificateholders 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 and other 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. Approximately ten
days 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. In
addition, 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 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." 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 Certificateholders 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 flow 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 may be
Groups 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 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 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. 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.
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 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) "regular interests"
("REMIC Regular Certificates") or
"residual interests" ("REMIC Residual
Certificates") in a Trust Fund treated as
a real estate mortgage investment conduit
("REMIC") under Sections 860A through 860G
of the Internal Revenue Code of 1986, as
amended (the "Code"), or (ii) interests
("Grantor Trust Certificates") in a Trust
Fund treated as a grantor trust within the
meaning under subpart E, Part I of
subchapter J of the Code.
(a) REMIC REMIC Regular Certificates generally will
be treated as debt obligations of the
applicable REMIC 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
CONSEQUENCES" in the related Prospectus
Supplement.
The Certificates will be treated as (i)
"qualifying real property loans" within
the meaning of section 593(d)(1) of the
Code, (ii) assets described in section
7701(a)(19)(C) of the Code and (iii) "real
estate assets" within the meaning of
section 856(c)(5)(A) of the Code, in each
case to the extent described herein and in
the related Prospectus Supplement. See
"CERTAIN FEDERAL INCOME TAX CONSEQUENCES"
herein and in the related Prospectus
Supplement.
(b) 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 of Certificates will be
treated as the owners of undivided pro
rata interest 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.
ERISA 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. 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.
</TABLE>
<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). The failure to
raise capital to the required level in accordance with the
1996 Amendment would result in the suspension of Farmer Mac's
ability to purchase new Qualified Loans or issue or guarantee
new securities and could adversely affect the liquidity of any
outstanding Certificates of any Class or Series. As of March
31, 1996, Farmer Mac's capital as reported on its unaudited
financial statements for the three month period ended
March 31, 1996 included as an exhibit to its Quarterly Report
on Form 10-Q was $11.373 million. Since that date, Farmer
Mac issued additional stock, which generated $2.56 million in
capital. See Farmer Mac's Annual Report on Form 10-K for the
year ended December 31, 1995 and Quarterly Report on Form 10-Q
for the three month period ended March 31, 1996, each 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, Certificateholders 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. Farmer Mac
intends that the primary 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 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. 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 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. Holders of Certificates 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, 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
varying 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 "Certificateholders" (as
that term is to be used in the Trust Agreement). Hence, until
such time, Beneficial Owners will be able to exercise the
rights of Certificateholders 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 and Definitive
Certificates" herein.
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 on-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 inclusion if it is at least three years old, has
a loan-to-value ratio (based on an updated appraisal) of 70%
or less if the loan is at least five years old (60% 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 for credit reasons 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 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 to
prospective investors.
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 (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 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. 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 underlying trust agreement or pooling and servicing
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 Participant's Trust Company.
GUARANTEED PORTIONS
The participation in a loan guaranteed (each such
participation in the related whole 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. 1921 et seq.) (the
"ConAct") 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 assumed 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 the 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 sold or swapped to it by Sellers. In
such instances, the net proceeds of the sale of Certificates
will be paid directly to such Sellers who, presumably, will
apply the same towards general business purposes.
YIELD CONSIDERATIONS
GENERAL
The yield on any Certificate will depend on the price
paid by the Certificateholder, 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,
which may be affected by prepayments, defaults, liquidations
or repurchases. See "RISK FACTORS" 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.
The effective yield to maturity to each holder of
Certificates 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 may accrue on each Qualified Asset during a certain
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 "_The 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 the holders of such Certificates 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 Mortgagors,
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
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 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.
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 Qualified Assets, 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 Qualified Assets, 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 next succeeding
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 of Certificates for each
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 QMBS. 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 publicly
available 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 May 1992. The
principal executive offices of the Depositor are located at
919 18th Street, N.W., Washington, D.C. 20006.
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. Section 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 the portion of
loans guaranteed by the Secretary of Agriculture.
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 core 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 within two years
after the enactment of the 1996 Amendment.
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. The
debt must be repaid within a reasonable time.
Public offerings of Farmer Mac Guaranteed Securities
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 and
annual reports of condition with the FCA, as well as copies
of all documents filed with the Commission under the 1933 and
Exchange Acts.
The Farmer Mac Charter requires the Comptroller General
to perform a financial audit of Farmer Mac on whatever basis
the Comptroller General determines to be necessary.
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.
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 Agreement. 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
Premiums and Yield Maintenance Charges (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 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 "RISK FACTORS -- Book-Entry Registration" and
"DESCRIPTION OF THE CERTIFICATES -- Book-Entry Registration
and Definitive Certificates" 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 as of the close of business
on the date specified 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 Certificateholder at a
bank or other entity having appropriate facilities therefor,
if such Certificateholder 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 Certificateholders 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 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.
DISTRIBUTIONS OF INTETEST 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 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, reduced as described below. 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,
reduced as described below. 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 ON 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 evidencing an
interest in a Trust Fund, the Central Servicer or another
entity described therein will 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 distributions of
interest and principal on the Certificates to Holders, the
failure of the Central Servicer to make any required Advance
will not affect distributions of interest and principal to
such Holders.
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 CERTIFICATEHOLDERS; 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 each such holder, to the Trustee,
the Depositor and to such other parties as may be specified
in the related Agreement, a statement setting forth, in each
case to the extent applicable and available:
(i) the amount of such distribution to holders of
Certificates of such Class 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) the amount of such distribution to holders of
Certificates of such Class 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 Balance 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.
As soon as practicable following the fifth Business Day
of each month during which a Distribution Date for a Series
of Certificates occurs, Farmer Mac will calculate the
Certificate Distribution Amount for such Distribution Date
and will publish or otherwise make available for each 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 forward or cause to be forwarded
to each holder, to the Depositor and to such other parties as
may be specified in the Agreements, a copy of any statements
or reports received by the Master Servicer or the Trustee, as
applicable, with respect to any QMBS. The Prospectus
Supplement for each Series of Certificates will describe any
additional information to be included in reports to the
holders of such Certificates.
Within a reasonable period of time after the end of each
calendar year, the Master Servicer, shall furnish to each
person who at any time during the calendar year was a holder
of a Certificate a statement containing the information set
forth in subclauses (i) and (ii) above, aggregated for such
calendar year or the applicable portion thereof during which
such person was a Certificateholder. 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, such statements or reports 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 or reports may be available to Beneficial
Owners upon request. In addition, the Trustee shall furnish
a copy of any such statement or report to any Beneficial
Owner which requests such copy and certifies 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 and Definitive
Certificates" herein. Communication among beneficial owners
may be conducted through the facilities of the related
depository or financial intermediary.
TERMINATION
The obligations created by the Trust Agreement for each
Series of Certificates will terminate upon the payment to
Certificateholders of that Series of all amounts required to
be paid to them pursuant to such Trust Agreement following
the earlier of (i) the final payment or other liquidation 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 and
(iii) distribution by Farmer Mac pursuant to the Farmer Mac
Guarantee on the Final Distribution Date of the latest
maturing Class of such Series 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', living on the Cut-off Date for the
related Series. Written notice of termination of the
Agreements will be given to each Certificateholder and 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 AND DEFINITIVE CERTIFICATES
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" or "Certificateholders". A Holder is not
necessarily the Beneficial Owner of a book-entry Certificate.
Beneficial Owners will ordinarily hold book-entry
Certificates through one or more financial intermediaries,
such as banks, brokerage firms and securities clearing
organizations. A Holder 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 such Certificate. The Trustee 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 the Certificate. The Federal Reserve Banks will act only
upon the instructions of the Holder in recording transfers of
a book-entry Certificate.
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 Bank.
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 Uniform Commercial Code ("UCC") and
a "clearing agency" registered pursuant to the provisions of
Section 17A of the Securities Exchange Act of 1934, as
amended. 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 include securities brokers and dealers, banks,
trust companies and clearing corporations and may include
certain other organizations. Indirect access to a Depository
system also is 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 "Certificateholder" (as such
term is used in the Agreement) will be the nominee for the
Depository, and the Beneficial Owners will not be recognized
by the Trustee as Certificateholders under the Agreements.
Beneficial Owners will be permitted to exercise the rights of
Certificateholders 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
is required to make book-entry transfers among Participants
on whose behalf it acts with respect to the Book-Entry
Certificates and is 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 are required to make
book-entry transfers and receive and transmit such payments
on behalf of their respective Beneficial Owners.
Because the Depository can act only on behalf of
Participants, who in turn 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.
The Depository has advised the Depositor that it will
take any action permitted to be taken by a Certificateholder
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. Under the
Depository's procedures, the Depository will take actions
permitted to be taken by Holders of any class of Book-Entry
Certificates only at the direction of one or more
Participants to whose account the Book-Entry Certificates are
credited and whose aggregate holdings represent no less than
any minimum amount of Voting Rights required therefor.
Therefore, Beneficial Owners will only be able to exercise
their Voting Rights 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 with respect to any action of
Certificateholders of any Class to the extent that
Participants authorize such actions. Neither of the Master
Servicer, the Depositor, the Trustee or 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 is
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 reregistration,
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 holders of such
Definitive Certificates as Certificateholders under the Trust
Agreement.
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
Servicing Contracts between the Central Servicer and Farmer
Mac. In addition, each Seller of Qualified Assets to the
Depositor for the purpose of depositing such Qualified Assets
into the Trust Fund 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 Certificateholders pursuant to the Trust Agreement
for the related Series of Certificates. The Trust Agreement,
any 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 an exhibit
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 to, 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 written request of a holder
of a Certificate of such Series addressed to the Trustee
specified 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 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
Certificateholders. If any such document is found to be
missing or defective in any material respect, the Trustee (or
such custodian) shall immediately notify Farmer Mac and the
Seller. 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
or substitute for such 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 Certificateholders. 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 Certificateholders. 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 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 Act and
its conformity in all material respects with the Guides and
(vi) the existence of customary provisions in the related
Mortgage Note and Mortgage to permit realization against the
Mortgaged Property of the benefit of the security of the
Mortgage.
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 cure such breach or repurchase or replace
the affected Qualified Loan as described below. Since the
representations and warranties may not 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 obligations 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 Certificateholders. 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 will not include payment of any
Prepayment Premium or Yield Maintenance Charge. A Seller,
rather than repurchase a Qualified Loan as to which a breach
has occurred, will have the option, 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 designed 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 Certificateholders will be covered by the
Farmer Mac Guarantee. As such, Certificateholders 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
In each Servicing Contract, Farmer Mac will require the
related Central Servicer to establish and maintain one or
more separate accounts in the name of the Trustee for the
collection of payments on the related Qualified Assets
(collectively, the "Collection Account"), which must be an
account or accounts with the Trustee or with 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 Distribution 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
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 retained by a Central
Servicer as its 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 of the property or released to the Mortgagor 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 as described under "DESCRIPTION
OF THE CERTIFICATES -- Advances in Respect of Delinquencies";
(v) to the extent required to be distributed to
Certificateholders, any amounts representing Prepayment
Premiums and Yield Maintenance Charges; 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 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 (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 Certificate
Distribution Amount for the related Distribution Date
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 has determined 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 Certificateholders in
Federal Funds of the Certificate Distribution Amount for 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 (the method of calculating
each such Guarantee Fee being set forth in the related
Prospectus Supplement); 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, 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 then current policies
of Farmer Mac or customary practice in the agriculture real
estate mortgage servicing industry. 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 the
Certificateholders. 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 take reasonable steps in conformity with applicable law to
assure 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 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 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 deed in lieu of foreclosure,
the deed or certificate of sale will be issued to the Trustee
or to its nominee on behalf of Certificateholders.
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 is required to dispose of any Mortgaged
Property in accordance with applicable local and
environmental laws and, to the extent applicable, consistent
with the status of the Trust as a REMIC.
Compensation and Payment of Expenses
The Central Servicer will receive an annualized fee (the
"Central Servicing Fee") payable out of the interest payments
received on each Qualified Loan equal to the Central
Servicing Fee Rate described in the related Prospectus
Supplement multiplied by the outstanding principal balance of
each Qualified Loan on which a payment is made with respect
to the related Distribution Date. The Trustee will receive a
fee for services rendered in its capacity as Trustee, payable
by Farmer Mac. Accordingly, the amount of such compensation
with respect to the Certificates will decrease as the
Qualified Loans amortize, and will be affected by principal
prepayments on the Qualified Loans.
The Central Servicer will be entitled to retain all
assumption fees, late payment charges and other charges
(other than, to the extent required to be distributed to
Certificateholders, Prepayment Premiums or Yield Maintenance
Charges), to the extent collected from borrowers and as
described in the Servicing Contract, as well as any earnings
on the investment of funds held by it pending remittance to
Farmer Mac for deposit in the Certificate Account unless
otherwise 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 will also provide 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 gross 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 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 Certificateholders thereunder.
EVENTS OF DEFAULT
Events of Default 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
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 of similar proceedings regarding Farmer Mac
and certain actions by the Master Servicer 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 Balance 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.
AMENDMENT
The Trust Agreement may be amended by the respective
parties thereto without the consent of any of the holders of
Certificates (i) to cure any ambiguity, (ii) to correct or
supplement any provision therein which may be defective or
inconsistent with any other provision therein or (iii) to
make any other provisions with respect to matters or
questions arising under the Trust Agreement which are not
materially inconsistent with the provisions thereof, provided
that any such amendment described in this clause (iii) will
not adversely affect in any material respect the interests of
any Certificateholder.
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 of the
Certificates issued under such Trust Agreement; 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.
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 Certificates or the
Trust Assets, 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.
CERTAIN MATTERS REGARDING THE TRUSTEE
The Trustee and any director, officer, employee or agent
of the Trustee shall be entitled to indemnification out of
the Trust Fund for any loss or liability incurred 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 from its obligations
and duties under an 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.
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. Courts with federal bankruptcy
jurisdiction have also indicated that the terms of a mortgage
loan secured by property of the debtor may be modified.
These courts have suggested that such modifications may
include reducing the amount of each monthly payment, changing
the rate of interest, altering the repayment schedule, and
reducing the lender's security interest to the value of the
residence, thus leaving the lender a general unsecured
creditor for the difference between the value of the
residence 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 Code 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 and 4.37 of the Farmer Mac Charter.
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 Farmer Mac
Charter provides that the right as conferred under such
Sections 4.14, 4.14A, 4.14B, 4.14C and 4.37 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(d)(7) of the Farmer Mac
Charter specifically provides that such rights apply to
Qualified Loans. Section 8.6(d)(7) 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 Sales 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 LEGISLATION
Under the federal Comprehensive Environmental Response
Compensation and Liability Act, as amended, and under state
law in certain states, a secured party which takes a deed in
lieu of foreclosure, purchases a mortgaged property at a
foreclosure sale or is deemed to have participated in the
management or operation of a mortgage property may become
liable in certain circumstances for the costs of remedial
action ("Cleanup Costs") if hazardous wastes or hazardous
substances have been released or disposed of on the property.
Such Cleanup Costs may be substantial. It is possible that
such Cleanup Costs could become a liability of the Trust Fund
and reduce the amounts otherwise distributable to the
Certificateholders if a Mortgaged Property securing a
Qualified Loan became the property of the Trust Fund in
certain circumstances or if the Trust Fund is deemed to have
participated in the management or operation of such property
and if such Cleanup Costs were incurred. Moreover, 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 due-on-encumbrance provisions contained in the Qualified
Loan.
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 all Qualified Loans 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
Brown & Wood, counsel to the Depositor. This summary is
based on laws, regulations, including the REMIC regulations
promulgated by the Treasury Department (the "REMIC
Regulations"), rulings and decisions now in effect or (with
respect to regulations) proposed, all of which are subject to
change either prospectively or retroactively. Brown & Wood
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
Certificateholders 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, Brown & Wood will
deliver its opinion that the Trust Fund will not be
classified as an association taxable as a corporation and
that each such Trust Fund will be classified as a grantor
trust under subpart E, Part I of subchapter J of the Code.
In this case, owners of Certificates will be treated for
federal income tax purposes as owners of a portion of the
Trust Fund's assets as described below.
A. SINGLE CLASS OF GRANTOR TRUST CERTIFICATES
Characterization. The Trust Fund may be created with
one class of Grantor Trust Certificates. In this case, each
Grantor Trust Certificateholder will be treated as the owner
of a pro rata undivided interest in the interest and
principal portions of the Trust Fund represented by the
Grantor Trust Certificates and will be considered the
equitable owner of a pro rata undivided interest in each of
the Qualified Assets in the Pool. Any amounts received by a
Grantor Trust Certificateholder in lieu of amounts due with
respect to any Qualified Asset because of a default or
delinquency in payment will be treated for federal income tax
purposes as having the same character as the payments they
replace.
Each Grantor Trust Certificateholder will be required to
report on its federal income tax return in accordance with
such Grantor Trust Certificateholder's method of accounting
its pro rata share of the entire income from the Qualified
Loans in the Trust Fund represented by Grantor Trust
Certificates, including interest, original issue discount
("OID"), if any, prepayment fees, assumption fees, any gain
recognized upon an assumption and late payment charges
received by the Central Servicer. Under Code Sections 162 or
212 each Grantor Trust Certificateholder will be entitled to
deduct its pro rata share of servicing fees, prepayment fees,
assumption fees, any loss recognized upon an assumption and
late payment charges retained by the Central Servicer,
provided that such amounts are reasonable compensation for
services rendered to the Trust Fund. Grantor Trust
Certificateholders that are individuals, estates or trusts
will be entitled to deduct their share of expenses as
itemized deductions only to the extent such expenses plus all
other Code Section 212 expenses exceed two percent of its
adjusted gross income. In addition, the amount of itemized
deductions otherwise allowable for the taxable year for an
individual whose adjusted gross income exceeds the applicable
amount (which amount will be adjusted for inflation) will be
reduced by the lesser of (i) 3% of the excess of adjusted
gross income over the applicable amount or (ii) 80% of the
amount of itemized deductions otherwise allowable for such
taxable year. A Grantor Trust Certificateholder using the
cash method of accounting must take into account its pro rata
share of income and deductions as and when collected by or
paid to the Central Servicer. A Grantor Trust
Certificateholder using an accrual method of accounting must
take into account its pro rata share of income and deductions
as they become due or are paid to the Central Servicer,
whichever is earlier. If the servicing fees paid to the
Central Servicer are deemed to exceed reasonable servicing
compensation, the amount of such excess could be considered
as an ownership interest retained by the Central Servicer (or
any person to whom the Central Servicer assigned for value
all or a portion of the servicing fees) in a portion of the
interest payments on the Qualified Assets. The Qualified
Assets would then be subject to the "coupon stripping" rules
of the Code discussed below.
As to each Series of Certificates Brown & Wood will have
advised the Depositor that:
(i) a Grantor Trust Certificate owned by a
"domestic building and loan association" within the
meaning of Code Section 7701(a)(19) representing
principal and interest payments on Qualified Assets will
be considered to represent "loans . . . secured by an
interest in real property which is . . . residential
property" within the meaning of Code Section
7701(a)(19)(C)(v), to the extent that the Qualified
Assets represented by that Grantor Trust Certificate are
of a type described in such Code section;
(ii) a Grantor Trust Certificate owned by a
financial institution described in Code Section 593(a)
representing principal and interest payments on
Qualified Assets will be considered to represent
"qualifying real property loans" within the meaning of
Code Section 593(d) and the Treasury regulations under
Code Section 593, to the extent that the Qualified
Assets represented by that Grantor Trust Certificate are
of a type described in such Code section;
(iii) a Grantor Trust Certificate owned by a real
estate investment trust representing an interest in
Qualified Assets will be considered to represent "real
estate assets" within the meaning of Code Section
856(c)(5)(A), and interest income on the Qualified
Assets 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 Assets represented by that Grantor Trust
Certificate are of a type described in such Code
section; and
(iv) a Grantor Trust 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).
Stripped Bonds and Coupons. Certain Trust Funds may
consist of Farmer Mac Guaranteed Securities which constitute
"stripped bonds" or "stripped coupons" as those terms are
defined in section 1286 of the Code, and, as a result, such
assets would be subject to the stripped bond provisions of
the Code. Under these rules, such Government Securities are
treated as having original issue discount based on the
purchase price and the stated redemption price at maturity of
each Security. As such, Grantor Trust Certificateholders
would be required to include in income their pro rata share
of the original issue discount on each Government Security
recognized in any given year on an economic accrual basis
even if the Grantor Trust Certificateholder is a cash method
taxpayer. Accordingly, the sum of the income includible to
the Grantor Trust Certificateholder in any taxable year may
exceed amounts actually received during such year.
Premium. The price paid for a Grantor Trust Certificate
by a holder will be allocated to such holder's undivided
interest in each Qualified Asset based on each Qualified
Asset's relative fair market value, so that such holder's
undivided interest in each Qualified Asset will have its own
tax basis. A Grantor Trust Certificateholder that acquires
an interest in Qualified Assets at a premium may elect to
amortize such premium under a constant interest method,
provided that the underlying mortgage loans with respect to
such Qualified Assets were originated after September 27,
1985. Premium allocable to mortgage loans originated on or
before September 27, 1985 should be allocated among the
principal payments on such mortgage loans and allowed as an
ordinary deduction as principal payments are made.
Amortizable bond premium will be treated as an offset to
interest income on such Grantor Trust Certificate. The basis
for such Grantor Trust Certificate will be reduced to the
extent that amortizable premium is applied to offset interest
payments. It is not clear whether a reasonable prepayment
assumption should be used in computing amortization of
premium allowable under Code Section 171. A
Certificateholder 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 with respect to all debt
instruments having amortizable bond premium that such
Certificateholder acquires during the year of the election or
thereafter.
If a premium is not subject to amortization using a
reasonable prepayment assumption, the holder of a Grantor
Trust Certificate acquired at a premium should recognize a
loss if a Qualified Loan (or an underlying mortgage loan with
respect to a Qualified Asset) prepays in full, equal to the
difference between the portion of the prepaid principal
amount of such Qualified Loan (or underlying mortgage loan)
that is allocable to the Certificate and the portion of the
adjusted basis of the Certificate that is allocable to such
Qualified Loan (or underlying mortgage loan). If a
reasonable prepayment assumption is used to amortize such
premium, it appears that such a loss would be available, if
at all, only if prepayments have occurred at a rate faster
than the reasonable assumed prepayment rate. It is not clear
whether any other adjustments would be required to reflect
differences between an assumed prepayment rate and the actual
rate of prepayments.
Original Issue Discount. The Internal Revenue Service
(the "IRS") has stated in published rulings that, in
circumstances similar to those described herein, the special
rules of the Code relating to original issue discount ("OID")
(currently Code Sections 1271 through 1273 and 1275) and
Treasury regulations issued on January 27, 1994, under such
Sections (the "OID Regulations"), will be applicable to a
Grantor Trust Certificateholder's interest in those Qualified
Assets meeting the conditions necessary for these sections to
apply. Rules regarding periodic inclusion of OID income are
applicable to mortgages of corporations originated after May
27, 1969, mortgages of noncorporate Mortgagors (other than
individuals) originated after July 1, 1982, and mortgages of
individuals originated after March 2, 1984. Such OID could
arise by the financing of points or other charges by the
originator of the mortgages in an amount greater than a
statutory de minimis exception to the extent that the points
are not currently deductible under applicable Code provisions
or are not for services provided by the lender. OID
generally must be reported as ordinary gross income as it
accrues under a constant interest method. See "_Multiple
Classes of Grantor Trust Certificates_Accrual of Original
Issue Discount" below.
Market Discount. A Grantor Trust Certificateholder that
acquires an undivided interest in Qualified Assets may be
subject to the market discount rules of Code Sections 1276
through 1278 to the extent an undivided interest in a
Qualified Asset is considered to have been purchased at a
"market discount." Generally, the amount of market discount
is equal to the excess of the portion of the principal amount
of such Qualified Asset allocable to such holder's undivided
interest over such holder's tax basis in such interest.
Market discount with respect to a Grantor Trust Certificate
will be considered to be zero if the amount allocable to the
Grantor Trust Certificate is less than 0.25% of the Grantor
Trust Certificate's stated redemption price at maturity
multiplied by the weighted average maturity remaining after
the date of purchase. Treasury regulations implementing the
market discount rules have not yet been issued; therefore,
investors should consult their own tax advisors regarding the
application of these rules and the advisability of making any
of the elections allowed under Code Sections 1276 through
1278.
The Code provides that any principal payment (whether a
scheduled payment or a prepayment) or any gain on disposition
of a market discount bond acquired by the taxpayer after
October 22, 1986 shall be treated as ordinary income to the
extent that it does not exceed the accrued market discount at
the time of such payment. The amount of accrued market
discount for purposes of determining the tax treatment of
subsequent principal payments or dispositions of the market
discount bond is to be reduced by the amount so treated as
ordinary income.
The Code also grants the Treasury Department authority
to issue regulations providing for the computation of accrued
market discount on debt instruments, the principal of which
is payable in more than one installment. While the Treasury
Department has not yet issued regulations, rules described in
the relevant legislative history will apply. Under those
rules, the holder of a market discount bond may elect to
accrue market discount either on the basis of a constant
interest rate or according to one of the following methods.
If a Grantor Trust Certificate is 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. For Grantor Trust Certificates issued
without 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. For purposes of calculating
market discount under any of the above methods in the case of
instruments (such as the Grantor Trust Certificates) that
provide for payments that may be accelerated by reason of
prepayments of other obligations securing such instruments,
the same prepayment assumption applicable to calculating the
accrual of OID will apply. Because the regulations described
above have not been issued, it is impossible to predict what
effect those regulations might have on the tax treatment of a
Grantor Trust Certificate purchased at a discount or premium
in the secondary market.
A holder who acquired a Grantor Trust 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 Grantor Trust Certificate purchased with market
discount. For these purposes, the de minimis rule referred
above applies. Any such deferred interest expense would not
exceed the market discount that accrues during such taxable
year and is, in general, allowed as a deduction not later
than the year in which such market discount is includible in
income. If such holder elects to include market discount in
income currently as it accrues on all market discount
instruments acquired by such holder in that taxable year or
thereafter, the interest deferral rule described above will
not apply.
Election to Treat All Interest as OID. The OID
Regulations permit a Certificateholder 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 for Certificates acquired on or after
April 4, 1994. If such an election were to be made with
respect to a Grantor Trust Certificate with market discount,
the Certificateholder would be deemed to have made an
election to include in income currently market discount with
respect to all other debt instruments having market discount
that such Certificateholder acquires during the year of the
election or thereafter. Similarly, a Certificateholder 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 with respect to all debt instruments having
amortizable bond premium that such Certificateholder owns or
acquires. See "_Regular Certificates_Premium" herein. The
election to accrue interest, discount and premium on a
constant yield method with respect to a Certificate is
irrevocable.
Prepayment Premiums and Yield Maintenance Charges. The
portion of any Prepayment Premium or Yield Maintenance Charge
received by any Holder in excess of the Holder's basis
allocable to the Qualified Loan which is being prepaid may be
treated as short-term or long-term capital gain. Generally,
prepayment premiums, to the extent passed through as
distributions, are treated as producing capital gain rather
than ordinary income for investors that hold a debt security
as a capital asset. The holding period for long-term capital
gain is one year for the Certificates. Holders should
consult their tax advisors regarding the taxable status of
such Prepayment Premiums or Yield Maintenance Charges.
B. MULTIPLE CLASSES OF GRANTOR TRUST CERTIFICATES
1. Stripped Bonds and Stripped Coupons
Pursuant to 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 results in the
creation of "stripped bonds" with respect to principal
payments and "stripped coupons" with respect to interest
payments. For purposes of Code Sections 1271 through 1288,
Code Section 1286 treats a stripped bond or a stripped coupon
as an obligation issued on the date that such stripped
interest is created. If a Trust Fund is created with two
classes of Grantor Trust Certificates, one class of Grantor
Trust Certificates may represent the right to principal and
interest, or principal only, on all or a portion of the
Qualified Assets (the "Stripped Bond Certificates"), while
the second class of Grantor Trust Certificates may represent
the right to some or all of the interest on such portion (the
"Stripped Coupon Certificates").
Servicing fees in excess of reasonable servicing fees
("excess servicing") will be treated under the stripped bond
rules. If the excess servicing fee is less than 100 basis
points (i.e., 1% interest on the Qualified Asset principal
balance) or the Certificates are initially sold with a de
minimis discount (assuming no prepayment assumption is
required), any non-de minimis discount arising from a
subsequent transfer of the Certificates should be treated as
market discount. The IRS appears to require that reasonable
servicing fees be calculated on a Qualified Asset by
Qualified Asset basis, which could result in some Qualified
Assets being treated as having more than 100 basis points of
interest stripped off. See "_Non-REMIC Certificates" and
"Multiple Classes of Grantor Trust Certificates_Stripped
Bonds and Stripped Coupons" herein.
Although not entirely clear, a Stripped Bond Certificate
generally should be treated as an interest in Qualified
Assets issued on the day such Certificate is purchased for
purposes of calculating any OID. Generally, if the discount
on a Qualified Asset is larger than a de minimis amount (as
calculated for purposes of the OID rules) a purchaser of such
a Certificate will be required to accrue the discount under
the OID rules of the Code. See "_Non-REMIC Certificates" and
"_Single Class of Grantor Trust Certificates_Original Issue
Discount" herein. However, a purchaser of a Stripped Bond
Certificate will be required to account for any discount on
the Qualified Assets as market discount rather than OID if
either (i) the amount of OID with respect to the Qualified
Assets is treated as zero under the OID de minimis rule when
the Certificate was stripped or (ii) no more than 100 basis
points (including any amount of servicing fees in excess of
reasonable servicing fees) is stripped off of the Trust
Fund's Qualified Assets. Pursuant to Revenue Procedure
91-49, issued on August 8, 1991, purchasers of Stripped Bond
Certificates using an inconsistent method of accounting must
change their method of accounting and request the consent of
the IRS to the change in their accounting method on a
statement attached to their first timely tax return filed
after August 8, 1991.
The precise tax treatment of Stripped Coupon
Certificates is substantially uncertain. The Code could be
read literally to require that OID computations be made for
each payment from each Qualified Asset. However, based on
the recent IRS guidance, it appears that all payments from a
Qualified Asset underlying a Stripped Coupon Certificate
should be treated as a single installment obligation subject
to the OID rules of the Code, in which case, all payments
from such Qualified Asset would be included in the Qualified
Asset's stated redemption price at maturity for purposes of
calculating income on such certificate under the OID rules of
the Code.
It is unclear under what circumstances, if any, the
prepayment of Qualified Assets will give rise to a loss to
the holder of a Stripped Bond Certificate purchased at a
premium or a Stripped Coupon Certificate. If such
Certificate is treated as a single instrument (rather than an
interest in discrete mortgage loans) and the effect of
prepayments is taken into account in computing yield with
respect to such Grantor Trust Certificate, it appears that no
loss will be available as a result of any particular
prepayment unless prepayments occur at a rate faster than the
assumed prepayment rate. However, if such Certificate is
treated as an interest in discrete Qualified Assets, or if no
prepayment assumption is used, then when a Qualified Asset is
prepaid, the holder of such Certificate should be able to
recognize a loss equal to the portion of the adjusted issue
price of such Certificate that is allocable to such Qualified
Asset.
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.
Treatment of Certain Owners. Several Code sections
provide beneficial treatment to certain taxpayers that invest
in Qualified Assets of the type that make up the Trust Fund.
With respect to these Code sections, no specific legal
authority exists regarding whether the character of the
Grantor Trust Certificates, for federal income tax purposes,
will be the same as that of the underlying Qualified Assets.
While Code Section 1286 treats a stripped obligation as a
separate obligation for purposes of the Code provisions
addressing OID, it is not clear whether such characterization
would apply with regard to these other Code sections.
Although the issue is not free from doubt, based on policy
considerations, each class of Grantor Trust Certificates,
should be considered to represent "qualifying real property
loans" within the meaning of Code Section 593(d), "real
estate assets" within the meaning of Code Section
856(c)(5)(A) and "loans . . . secured by, an interest in
real property which is . . . residential real property"
within the meaning of Code Section 7701(a)(19)(C)(v), and
interest income attributable to Grantor Trust Certificates
should be considered to 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. Grantor Trust Certificates will be
"obligation[s] ... which [are] principally secured, directly
or indirectly, by an interest in real property" within the
meaning of Code Section 860G(a)(3).
2. Grantor Trust Certificates Representing Interests in
Loans Other Than ARM Loans
The original issue discount rules of Code Sections 1271
through 1275 will be applicable to a Certificateholder's
interest in those Qualified Assets as to which the conditions
for the application of those sections are met. Rules
regarding periodic inclusion of original issue discount in
income are applicable to mortgages of corporations originated
after May 27, 1969, mortgages of noncorporate Mortgagors
(other than individuals) originated after July 1, 1982, and
mortgages of individuals originated after March 2, 1984.
Under the OID Regulations, such original issue discount could
arise by the charging of points by the originator of the
mortgage in an amount greater than the statutory de minimis
exception, including a payment of points that is currently
deductible by the borrower under applicable Code provisions,
or under certain circumstances, by the presence of "teaser"
rates on the Qualified Assets. OID on each Grantor Trust
Certificate must be included in the owner's ordinary income
for federal income tax purposes as it accrues, in accordance
with a constant interest method that takes into account the
compounding of interest, in advance of receipt of the cash
attributable to such income. The amount of OID required to
be included in an owner's income in any taxable year with
respect to a Grantor Trust Certificate representing an
interest in Qualified Assets other than Qualified Assets with
interest rates that adjust periodically ("ARM Loans") likely
will be computed as described below under "_Accrual of
Original Issue Discount." The following discussion is based
in part on the OID Regulations and in part on the provisions
of the Tax Reform Act of 1986 (the "1986 Act"). The OID
Regulations generally are effective for debt instruments
issued on or after April 4, 1994, but may be relied upon as
authority with respect to debt instruments, such as the
Grantor Trust Certificates, issued after December 21, 1992.
The holder of a Certificate should be aware, however, that
the OID Regulations adequately address certain issues
relevant to prepayable securities.
Under the Code, the Qualified Assets underlying the
Grantor Trust Certificate will be treated as having been
issued on the date they were originated with an amount of OID
equal to the excess of such Qualified Asset's stated
redemption price at maturity over its issue price. The issue
price of a Qualified Asset is generally the amount lent to
the mortgagee, which may be adjusted to take into account
certain loan origination fees. The stated redemption price
at maturity of a Qualified Asset is the sum of all payments
to be made on such Qualified Asset other than payments that
are treated as qualified stated interest payments. The
accrual of this OID, as described below under "_Accrual of
Original Issue Discount," will utilize the original yield to
maturity of the Grantor Trust Certificate calculated based on
a reasonable assumed prepayment rate for the mortgage loans
underlying the Grantor Trust Certificates (the "Prepayment
Assumption"), and will take into account events that occur
during the calculation period. The Prepayment Assumption
will be determined in the manner prescribed by regulations
that have not yet been issued. The legislative history of
the 1986 Act (the "Legislative History") provides, however,
that the regulations will require that the Prepayment
Assumption be the prepayment assumption that is used in
determining the offering price of such Certificate. No
representation is made that any Certificate will prepay at
the Prepayment Assumption or at any other rate. The
prepayment assumption contained in the Code literally only
applies to debt instruments collateralized by other debt
instruments that are subject to prepayment rather than direct
ownership interests in such debt instruments, such as the
Certificates represent. However, no other legal authority
provides guidance with regard to the proper method for
accruing OID on obligations that are subject to prepayment,
and, until further guidance is issued, the Master Servicer
intends to calculate and report OID under the method
described below.
Accrual of Original Issue Discount. Generally, the
owner of a Grantor Trust Certificate must include in gross
income the sum of the "daily portions," as defined below, of
the OID on such Grantor Trust Certificate for each day on
which it owns such Certificate, including the date of
purchase but excluding the date of disposition. In the case
of an original owner, the daily portions of OID with respect
to each component generally will be determined as set forth
under the OID Regulations. A calculation will be made by the
Master Servicer or such other entity specified in the related
Prospectus Supplement of the portion of OID that accrues
during each successive accrual period (or shorter period from
the date of original issue) that ends on the day in the
calendar year corresponding to each of the Distribution Dates
on the Grantor Trust Certificates (or the day prior to each
such date). This will be done, in the case of each full
accrual period, by (i) adding (a) the present value at the
end of the accrual period (determined by using as a discount
factor the original yield to maturity of the respective
component under the Prepayment Assumption) of all remaining
payments to be received under the Prepayment Assumption on
the respective component and (b) any payments included in the
state redemption price at maturity received during such
accrual period, and (ii) subtracting from that total the
"adjusted issue price" of the respective component at the
beginning of such accrual period. The adjusted issue price
of a Grantor Trust Certificate at the beginning of the first
accrual period is its issue price; the adjusted issue price
of a Grantor Trust 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 allocable to that accrual period reduced by
the amount of any payment other than a payment of qualified
stated interest made at the end of or during that accrual
period. The OID accruing during such accrual period will
then be divided by the number of days in the period to
determine the daily portion of OID for each day in the
period. With respect to an initial accrual period shorter
than a full accrual period, the daily portions of OID must be
determined according to an appropriate allocation under any
reasonable method.
Original issue discount generally must be reported as
ordinary gross income as it accrues under a constant interest
method that takes into account the compounding of interest as
it accrues rather than when received. However, the amount of
original issue discount includible in the income of a holder
of an obligation is reduced when the obligation is acquired
after its initial issuance at a price greater than the sum of
the original issue price and the previously accrued original
issue discount, less prior payments of principal.
Accordingly, if such Qualified Assets acquired by a
Certificateholder are purchased at a price equal to the then
unpaid principal amount of such Qualified Asset, no original
issue discount attributable to the difference between the
issue price and the original principal amount of such
Qualified Asset (i.e. points) will be includible by such
holder. Other original issue discount on the Qualified
Assets (e.g., that arising from a "teaser" rate) would still
need to be accrued.
3. Grantor Trust Certificates Representing Interests in
ARM Loans
The OID Regulations do not address the treatment of
instruments, such as the Grantor Trust Certificates, which
represent interests in ARM Loans. Additionally, the IRS has
not issued guidance under the Code's coupon stripping rules
with respect to such instruments. In the absence of any
authority, the Master Servicer will report OID on Grantor
Trust Certificates attributable to ARM Loans ("Stripped ARM
Obligations") to holders in a manner it believes is
consistent with the rules described above under the heading
"_Grantor Trust Certificates Representing Interests in Loans
Other Than ARM Loans" and with the OID Regulations. In
general, application of these rules may require inclusion of
income on a Stripped ARM Obligation in advance of the receipt
of cash attributable to such income. Further, the addition
of interest deferred by reason of negative amortization
("Deferred Interest") to the principal balance of an ARM Loan
may require the inclusion of such amount in the income of the
Grantor Trust Certificateholder when such amount accrues.
Furthermore, the addition of Deferred Interest to the Grantor
Trust Certificate's principal balance will result in
additional income (including possibly OID income) to the
Grantor Trust Certificateholder over the remaining life of
such Grantor Trust Certificates.
Because the treatment of Stripped ARM Obligations is
uncertain, investors are urged to consult their tax advisors
regarding how income will be includible with respect to such
Certificates.
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
owner's adjusted basis in the Grantor Trust Certificate.
Such adjusted basis generally will equal the seller's
purchase price for the Grantor Trust Certificate, increased
by the OID included in the seller's gross income with respect
to the Grantor Trust Certificate, and reduced by principal
payments on the Grantor Trust Certificate previously received
by the seller. Such gain or loss will be capital gain or
loss to an owner for which a Grantor Trust Certificate is a
"capital asset" within the meaning of Code Section 1221, and
will be long-term or short-term depending on whether the
Grantor Trust Certificate has been owned for the long-term
capital gain 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, to the extent that a Grantor Trust
Certificate evidences ownership in underlying Qualified
Assets that were issued on or before July 18, 1984, interest
or OID paid by the person required to withhold tax under Code
Section 1441 or 1442 to (i) an owner that is not a U.S.
Person (as defined below) or (ii) a Grantor Trust
Certificateholder holding on behalf of an owner that is not a
U.S. Person will be subject to federal income tax, collected
by withholding, at a rate of 30% or such lower rate as may be
provided for interest by an applicable tax treaty. Accrued
OID recognized by the owner on the sale or exchange of such a
Grantor Trust Certificate also will be subject to federal
income tax at the same rate. Generally, such payments would
not be subject to withholding to the extent that a Grantor
Trust Certificate evidences ownership in Qualified Assets
issued after July 18, 1984, by natural persons if such
Grantor Trust Certificateholder complies with certain
identification requirements (including delivery of a
statement, signed by the Grantor Trust Certificateholder
under penalties of perjury, certifying that such Grantor
Trust Certificateholder is not a U.S. Person and providing
the name and address of such Grantor Trust
Certificateholder). Additional restrictions apply to
Qualified Assets of where the Mortgagor is not a natural
person in order to qualify for the exemption from
withholding.
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 from sources outside the United States is
includible in gross income for federal income tax purposes
regardless of its connection with the conduct of a trade or
business within the United States.
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 who was a Certificateholder at any time during
such year, such information as may be deemed necessary or
desirable to assist Certificateholders 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 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 "_Taxation of Owners of REMIC Residual
Certificates" and "_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 a REMIC as
described below under "Taxation of Owners of REMIC Residual
Certificates," the Code provides that a 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 in which the requirements for
such status are not satisfied. With respect to each Trust
Fund that elects REMIC status, Brown & Wood will deliver its
opinion generally to the effect that, under then existing law
and assuming compliance with all provisions of the related
Pooling and Servicing Agreement, such Trust Fund will qualify
as a REMIC, and the related Certificates will be considered
to be regular interests ("REMIC Regular Certificates") or a
sale class of 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 whether
a class of Certificates will be treated as a regular or
residual interest in the REMIC.
A "qualified mortgage" for REMIC purposes is any
obligation (including certificates of participation in such
an obligation) that is principally secured by an interest in
real property and that is transferred to the REMIC within a
prescribed time period in exchange for 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 thrift institution taxed as a "mutual savings bank" or
"domestic building and loan association" will represent
interests in "qualifying real property loans" within the
meaning of Code Section 593(d)(1); (ii) Certificates held by
a thrift institution taxed as a "domestic building and loan
association" will constitute assets described in Code Section
7701(a)(19)(C); (iii) Certificates held by a real estate
investment trust will constitute "real estate assets" within
the meaning of Code Section 856(c)(5)(A); and (iv) interest
on Certificates 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). If less than 95% of the REMIC's assets are
assets qualifying under any of the foregoing Code sections,
the Certificates will be qualifying assets only to the extent
that the REMIC's assets are qualifying assets. In addition,
payments on Qualified Assets held pending distribution on the
REMIC Certificates will be considered to be qualifying real
property loans for purposes of Code Section 593(d)(1) and
real estate assets for purposes of Code Section 856(c).
Tiered REMIC Structures. For certain Series of
Certificates, two separate elections may be made to treat
designated portions of the related Trust Fund as REMICs
(respectively, the "Subsidiary REMIC" and the "Master REMIC")
for federal income tax purposes. Upon the issuance of any
such Series of Certificates, Brown & Wood, counsel to the
Depositor, will deliver its opinion generally to the effect
that, assuming compliance with all provisions of the related
Agreement, the Master REMIC as well as any Subsidiary REMIC
will each qualify as a REMIC, and the REMIC Certificates
issued by the Master REMIC and the Subsidiary REMIC,
respectively, will be considered to evidence ownership of
REMIC Regular Certificates or REMIC Residual Certificates in
the related REMIC within the meaning of the REMIC provisions.
Only REMIC Certificates issued by the Master REMIC and
the residual interest in the Subsidiary REMIC will be offered
hereunder. The Subsidiary REMIC and the Master REMIC will be
treated as one REMIC solely for purposes of determining
whether the REMIC Certificates will be (i) "qualifying real
property loans" under Section 593(d) of the Code; (ii) "real
estate assets" within the meaning of Section 856(c)(5)(A) of
the Code; (iii) "loans secured by an interest in real
property" under Section 7701(a)(19)(C) of the Code; and (iv)
whether the income on such Certificates is interest described
in Section 856(c)(3)(B) of the Code.
A. TAXATION OF OWNERS OR 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 and Premium. The REMIC Regular
Certificates may be issued with OID. Generally, such OID, if
any, will equal the difference between the "stated redemption
price at maturity" of a REMIC Regular Certificate and its
"issue price." Holders of any class of 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 interest method based on the compounding of
interest as it accrues rather than in accordance with receipt
of the interest payments. The following discussion is based
in part on the OID Regulations and in part on the provisions
of the 1986 Act. Holders of REMIC Regular Certificates (the
"REMIC Regular Certificateholders") should be aware, however,
that the OID Regulations do not adequately address certain
issues relevant to prepayable securities, such as the REMIC
Regular Certificates.
Rules governing OID are set forth in Code Sections 1271
through 1273 and 1275. These rules require that the amount
and rate of accrual of OID be calculated based on the
Prepayment Assumption and the anticipated reinvestment rate,
if any, relating to the REMIC Regular Certificates and
prescribe a method for adjusting the amount and rate of
accrual of such discount where the actual prepayment rate
differs from the Prepayment Assumption. Under the Code, the
Prepayment Assumption must be determined in the manner
prescribed by regulations, which regulations have not yet
been issued. The Legislative History provides, however, that
Congress intended the regulations to require that the
Prepayment Assumption be the prepayment assumption that is
used in determining the initial offering price of such REMIC
Regular Certificates. The Prospectus Supplement for each
Series of REMIC Regular Certificates will specify the
Prepayment Assumption to be used for the purpose of
determining the amount and rate of accrual of OID. No
representation is made that the REMIC Regular Certificates
will prepay at the Prepayment Assumption or at any other
rate.
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 issue price of
a REMIC Regular Certificate is 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). If less than a
substantial amount of a particular class of REMIC Regular
Certificates is sold for cash on or prior to the date of
their initial issuance (the "Closing Date"), the issue price
for such class will be treated as the fair market value of
such class on the Closing Date. The issue price of a REMIC
Regular Certificate also includes the amount paid by an
initial Certificateholder for accrued interest that relates
to a period prior to the issue date of the REMIC Regular
Certificate. The stated redemption price at maturity of a
REMIC Regular Certificate includes the original principal
amount of the REMIC Regular Certificate, but generally will
not include distributions of interest if such distributions
constitute "qualified stated interest." Qualified stated
interest generally means interest payable at a single fixed
rate or qualified variable rate (as described below) provided
that such interest payments are unconditionally payable at
intervals of one year or less during the entire term of the
REMIC Regular Certificate. Interest is payable at a single
fixed rate only if the rate appropriately takes into account
the length of the interval between payments. Distributions
of interest on REMIC Regular Certificates with respect to
which Deferred Interest will accrue will not constitute
qualified stated interest payments, and the stated redemption
price at maturity of such REMIC Regular Certificates includes
all distributions of interest as well as principal thereon.
Where the interval between the issue date and the first
Distribution Date on a REMIC Regular Certificate is longer
than the interval between subsequent Distribution Dates, the
greater of any original issue discount (disregarding the rate
in the first period) and any interest foregone during the
first period is treated as the amount by which the stated
redemption price at maturity of the Certificate exceeds its
issue price for purposes of the de minimis rule described
below. The OID Regulations suggest that all interest on a
long first period REMIC Regular Certificate that is issued
with non-de minimis OID, as determined under the foregoing
rule, will be treated as OID. 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 would be added to the Certificates stated redemption
price at maturity. REMIC Regular Certificateholders should
consult their own tax advisors to determine the issue price
and stated redemption price at maturity of a REMIC Regular
Certificate.
Under the de minimis rule, OID on a REMIC Regular
Certificate will be considered to be zero if such OID is less
than 0.25% of the stated redemption price at maturity of the
REMIC Regular Certificate multiplied by the weighted average
maturity of the REMIC Regular Certificate. For this purpose,
the weighted average maturity of the REMIC Regular
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 each distribution included in the stated redemption
price at maturity of the REMIC Regular Certificate and the
denominator of which is the stated redemption price at
maturity of the REMIC Regular Certificate. Although
currently unclear, it appears that the schedule of such
distributions should be determined in accordance with the
Prepayment Assumption. The Prepayment Assumption with
respect to a Series of REMIC Regular Certificates will be set
forth in the related Prospectus Supplement. 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.
However, accrual method holders may elect to accrue all de
minimis OID as well as market discount under a constant
interest method.
The Prospectus Supplement with respect to a Trust Fund
may provide for certain REMIC Regular Certificates to be
issued at prices significantly exceeding their principal
amounts or based on notional principal balances (the "Super-
Premium Certificates"). The income tax treatment of such
REMIC Regular 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 REMIC Regular Certificates is the sum of all
payments to be made on such REMIC Regular Certificates
determined under the Prepayment Assumption, with the result
that such REMIC Regular Certificates would be issued with
OID. The calculation of income in this manner could result
in negative original issue discount (which delays future
accruals of OID rather than being immediately deductible)
when prepayments on the Qualified Assets exceed those
estimated under the Prepayment Assumption. The IRS might
contend, however, that certain contingent payment rules
contained in regulations proposed on April 8, 1986, with
respect to original issue discount should apply to such
Certificates. Under those rules, a Super-Premium Certificate
would not be required to report income on the basis of a
yield based on the Prepayment Assumption, but rather would
use a yield equal to the applicable Federal rate (which is an
average yield on Treasury obligations), until the initial
price of the respective Super-Premium Certificate is fully
recovered. The IRS recently proposed and then withdrew a
revised set of proposed contingent payment regulations which
differed substantially from the contingent payment
regulations proposed in 1986. The proposed regulations
regarding contingent interest have not been adopted in final
form and may not currently be relied upon. If the Super
Premium Certificates were treated as contingent payment
obligations, it is unclear how holders of those Certificates
would report income or recover their basis. In the
alternative, the IRS could assert that the stated redemption
price at maturity of such REMIC Regular Certificates should
be limited to their principal amount (subject to the
discussion below under "_Accrued Interest Certificates"), so
that such REMIC Regular Certificates would be considered for
federal income tax purposes to be issued at a premium. If
such a position were to prevail, the rules described below
under "_Taxation of Owners of REMIC Regular
Certificates_Premium" would apply. It is unclear when a loss
may be claimed for any unrecovered basis for a Super-Premium
Certificate. It is possible that a holder of a Super-Premium
Certificate may only claim a loss when its remaining basis
exceeds the maximum amount of future payments, assuming no
further prepayments or when the final payment is received
with respect to such Super-Premium Certificate.
Under the REMIC Regulations, if the issue price of a
REMIC Regular Certificate (other than any REMIC Regular
Certificate based on a notional amount) does not exceed 125%
of its actual principal amount, the interest rate is not
considered disproportionately high. Accordingly, such REMIC
Regular Certificate generally should not be treated as a
Super-Premium Certificate and the rules described below under
"_REMIC Regular Certificates_Premium" should apply. However,
it is possible that holders of REMIC Regular Certificates
issued at a premium, even if the premium is less than 25% of
such Certificate's actual principal balance, will be required
to amortize the premium under an original issue discount
method or contingent interest method even though no election
under Code Section 171 is made to amortize such premium.
Generally, a REMIC Regular Certificateholder must
include in gross income the "daily portions," as determined
below, of the OID that accrues on a REMIC Regular Certificate
for each day a Certificateholder holds the REMIC Regular
Certificate, including the purchase date but excluding the
disposition date. In the case of an original holder of a
REMIC Regular Certificate, a calculation will be made of the
portion of the OID that accrues during each successive period
("an accrual period") that ends on the day in the calendar
year corresponding to a Distribution Date (or if Distribution
Dates are on the first day or first business day of the
immediately preceding month, interest may be treated as
payable on the last day of the immediately preceding month)
and begins on the day after the end of the immediately
preceding accrual period (or on the issue date in the case of
the first accrual period). This will be done, in the case of
each full accrual period, by (i) adding (a) the present value
at the end of the accrual period (determined by using as a
discount factor the original yield to maturity of the REMIC
Regular Certificates as calculated under the Prepayment
Assumption) of all remaining payments to be received on the
REMIC Regular Certificates under the Prepayment Assumption
and (b) any payments included in the stated redemption price
at maturity received during such accrual period, and (ii)
subtracting from that total the adjusted issue price of the
REMIC Regular Certificates at the beginning of such accrual
period. 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
allocable to that accrual period and reduced by the amount of
any payment other than a payment of qualified stated interest
made at the end of or during that accrual period. The OID
accrued during an accrual period will then be divided by the
number of days in the period to determine the daily portion
of OID for each day in the accrual period. The calculation
of OID under the method described above will cause the
accrual of OID to either increase or decrease (but never
below zero) in a given accrual period to reflect the fact
that prepayments are occurring faster or slower than under
the Prepayment Assumption. With respect to an initial
accrual period shorter than a full accrual period, the daily
portions of OID may be determined according to an appropriate
allocation under any reasonable method.
A subsequent purchaser of a REMIC Regular Certificate
issued with OID who purchases the REMIC Regular Certificate
at a cost less than the remaining stated redemption price at
maturity will also be required to include in gross income the
sum of the daily portions of OID on that REMIC Regular
Certificate. In computing the daily portions of OID for such
a purchaser (as well as an initial purchaser that purchases
at a price higher than the adjusted issue price but less than
the stated redemption price at maturity), however, the daily
portion is reduced by the amount that would be the daily
portion for such day (computed in accordance with the rules
set forth above) multiplied by a fraction, the numerator of
which is the amount, if any, by which the price paid by such
holder for that REMIC Regular Certificate exceeds the
following amount: (a) the sum of the issue price plus the
aggregate amount of OID that would have been includible in
the gross income of an original REMIC Regular
Certificateholder (who purchased the REMIC Regular
Certificate at its issue price), less (b) any prior payments
included in the stated redemption price at maturity, and the
denominator of which is the sum of the daily portions for
that REMIC Regular Certificate for all days beginning on the
date after the purchase date and ending on the maturity date
computed under the Prepayment Assumption. A holder who pays
an acquisition premium instead may elect to accrue OID by
treating the purchase as a purchase at original issue.
Variable Rate REMIC Regular Certificates. REMIC Regular
Certificates may provide for interest based on a variable
rate. Interest based on a variable rate will constitute
qualified stated interest and not contingent interest if,
generally, (i) such interest is unconditionally payable at
least annually, (ii) the issue price of the debt instrument
does not exceed the total noncontingent principal payments
and (iii) interest is based on a "qualified floating rate,"
an "objective rate," a combination of a single fixed rate and
one or more "qualified floating rates," one "qualified
inverse floating rate," or a combination of "qualified
floating rates " that do not operate in a manner that
significantly accelerates or defers interest payments on such
REMIC Regular Certificate.
The amount of OID with respect to a REMIC Regular
Certificate bearing a variable rate of interest will accrue
in the manner described above under "_Original Issue Discount
and Premium" by assuming generally that the index used for
the variable rate will remain fixed throughout the term of
the Certificate. Appropriate adjustments are made for the
actual variable rate.
Although unclear at present, the Depositor intends to
treat interest on a REMIC Regular Certificate that is a
weighted average of the net interest rates on Qualified Loans
as qualified stated interest. In such case, the weighted
average rate used to compute the initial pass-through rate on
the REMIC Regular Certificates will be deemed to be the index
in effect through the life of the REMIC Regular Certificates.
It is possible, however, that the IRS may treat some or all
of the interest on REMIC Regular Certificates with a weighted
average rate as taxable under the rules relating to
obligations providing for contingent payments. Such
treatment may effect the timing of income accruals on such
REMIC Regular Certificates.
Election to Treat All Interest as OID. The OID
Regulations permit a Certificateholder 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 Certificateholder would be deemed to have made
an election to include in income currently market discount
with respect to all other debt instruments having market
discount that such Certificateholder acquires during the year
of the election or thereafter. Similarly, a
Certificateholder 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 with respect to all debt
instruments having amortizable bond premium that such
Certificateholder owns or acquires. See "_REMIC Regular
Certificates_Premium" herein. The election to accrue
interest, discount and premium on a constant yield method
with respect to a Certificate is irrevocable.
Market Discount. A purchaser of a REMIC Regular
Certificate may also be subject to the market discount
provisions of Code Sections 1276 through 1278. Under these
provisions and the OID Regulations, "market discount" equals
the excess, if any, of (i) the REMIC Regular Certificate's
stated principal amount or, in the case of a REMIC Regular
Certificate with OID, the adjusted issue price (determined
for this purpose as if the purchaser had purchased such REMIC
Regular Certificate from an original holder) over (ii) the
price for such REMIC Regular Certificate paid by the
purchaser. A Certificateholder that purchases a REMIC
Regular Certificate at a market discount will recognize
income upon receipt of each distribution representing amounts
included in such certificate's stated redemption price at
maturity. In particular, under Section 1276 of the Code such
a holder generally will be required to allocate each such
distribution first to accrued market discount not previously
included in income, and to recognize ordinary income to that
extent. A Certificateholder may elect to include market
discount in income currently as it accrues rather than
including it on a deferred basis in accordance with the
foregoing. If made, such election will apply to all market
discount bonds acquired by such Certificateholder on or after
the first day of the first taxable year to which such
election applies.
Market discount with respect to a REMIC Regular
Certificate will be considered to be zero if the amount
allocable to the REMIC Regular Certificate is less than 0.25%
of such REMIC Regular Certificate's stated redemption price
at maturity multiplied by such REMIC Regular Certificate's
weighted average maturity remaining after the date of
purchase. If market discount on a REMIC Regular Certificate
is considered to be zero under this rule, the actual amount
of market discount must be allocated to the remaining
principal payments on the REMIC Regular Certificate, and gain
equal to such allocated amount will be recognized when the
corresponding principal payment is made. Treasury
regulations implementing the market discount rules have not
yet been issued; therefore, investors should consult their
own tax advisors regarding the application of these rules and
the advisability of making any of the elections allowed under
Code Sections 1276 through 1278.
The Code provides that any principal payment (whether a
scheduled payment or a prepayment) or any gain on disposition
of a market discount bond acquired by the taxpayer after
October 22, 1986, shall be treated as ordinary income to the
extent that it does not exceed the accrued market discount at
the time of such payment. The amount of accrued market
discount for purposes of determining the tax treatment of
subsequent principal payments or dispositions of the market
discount bond is to be reduced by the amount so treated as
ordinary income.
The Code also grants authority to the Treasury
Department to issue regulations providing for the computation
of accrued market discount on debt instruments, the principal
of which is payable in more than one installment. Until such
time as regulations are issued by the Treasury, rules
described in the Legislative History will apply. Under those
rules, the holder of a market discount bond may elect to
accrue market discount either on the basis of a constant
interest method rate or according to one of the following
methods. For REMIC Regular Certificates 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
OID accruing during the period and the denominator of which
is the total remaining OID at the beginning of the period.
For REMIC Regular Certificates issued without OID, the amount
of market discount that accrues during a period is equal to
the product of (a) the total remaining market discount and
(b) 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 period. For
purposes of calculating market discount under any of the
above methods in the case of instruments (such as the REMIC
Regular Certificates) that provide for payments that may be
accelerated by reason of prepayments of other obligations
securing such instruments, the same Prepayment Assumption
applicable to calculating the accrual of OID will apply.
A holder who acquired 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 purchased with market discount. For these
purposes, the de minimis rule referred to above applies. Any
such deferred interest expense would not exceed the market
discount that accrues during such taxable year and is, in
general, allowed as a deduction not later than the year in
which such market discount is includible in income. If such
holder elects to include market discount in income currently
as it accrues on all market discount instruments acquired by
such holder in that taxable year or thereafter, the interest
deferral rule described above will not apply.
Premium. A purchaser of a REMIC Regular Certificate
that purchases the REMIC Regular Certificate at a cost (not
including accrued qualified stated interest) greater than its
remaining stated redemption price at maturity will be
considered to have purchased the REMIC Regular Certificate at
a premium and may elect to amortize such premium under a
constant yield method. A Certificateholder 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
with respect to all debt instruments having amortizable bond
premium that such Certificateholder acquires during the year
of the election or thereafter. It is not clear whether the
Prepayment Assumption would be taken into account in
determining the life of the REMIC Regular Certificate for
this purpose. However, the Legislative History states that
the same rules that apply to 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 Code
Section 171. The Code provides that amortizable bond premium
will be allocated among the interest payments on such REMIC
Regular Certificates and will be applied as an offset against
such interest payment.
Deferred Interest. Certain classes of REMIC Regular
Certificates may provide for the accrual of Deferred Interest
with respect to one or more ARM Loans. Any Deferred Interest
that accrues with respect to a class of REMIC Regular
Certificates will constitute income to the holders of such
Certificates prior to the time distributions of cash with
respect to such Deferred Interest are made. It is unclear,
under the OID Regulations, whether any of the interest on
such Certificates will constitute qualified stated interest
or whether all or a portion of the interest payable on such
Certificates must be included in the stated redemption price
at maturity of the Certificates and accounted for as OID
(which could accelerate such inclusion). Interest on REMIC
Regular Certificates must in any event be accounted for under
an accrual method by the holders of such Certificates and,
therefore, applying the latter analysis may result only in a
slight difference in the timing of the inclusion in income of
interest on such REMIC Regular Certificates.
Sale, Exchange or Redemption. If a REMIC Regular
Certificate is sold, exchanged, redeemed or retired, the
seller will recognize gain or loss equal to the difference
between the amount realized on the sale, exchange,
redemption, or retirement and the seller's adjusted basis in
the REMIC Regular Certificate. Such adjusted basis generally
will equal the cost of the REMIC Regular Certificate to the
seller, increased by any OID and market discount included in
the seller's gross income with respect to the REMIC Regular
Certificate, and reduced (but not below zero) by payments
included in the stated redemption price at maturity
previously received by the seller and by any amortized
premium. Similarly, a holder who receives a payment that is
part of the stated redemption price at maturity of a REMIC
Regular Certificate will recognize gain equal to the excess,
if any, of the amount of the payment over the holder's
adjusted basis in the REMIC Regular Certificate. A REMIC
Regular Certificateholder who receives a final payment that
is less than the holder's adjusted basis in the REMIC Regular
Certificate will generally recognize a loss. Except as
provided in the following paragraph 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" (generally, property
held for investment) within the meaning of Code Section 1221.
Gain from the sale or other disposition of a REMIC Regular
Certificate that might otherwise be capital gain will 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 AFR as defined in Code Section 1274(d) 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.
The REMIC Regular Certificate information reports 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. Because exact
computation of the accrual of market discount on a constant yield
method would require information relating to the holder's
purchase price which the REMIC may not have, it appears that the
information reports will only require information pertaining to
the appropriate proportionate method of accruing market discount.
Accrued Interest Certificates. Certain of the REMIC Regular
Certificates ("Payment Lag Certificates") may provide for
payments of interest based on a period that corresponds to the
interval between Distribution Dates but that ends prior to each
such Distribution Date. The period between the Closing Date for
Payment Lag Certificates and their first Distribution Date may or
may not exceed such interval. Purchasers of Payment Lag
Certificates for which the period between the Closing Date and
the first Distribution Date does not exceed such interval could
pay upon purchase of the REMIC Regular Certificates accrued
interest in excess of the accrued interest that would be paid if
the interest paid on the Distribution Date were interest accrued
from Distribution Date to Distribution Date. If a portion of the
initial purchase price of a REMIC Regular Certificate is
allocable to interest that has accrued prior to the issue date
("pre-issuance accrued interest") and the REMIC Regular
Certificate provides for a payment of stated interest on the
first payment date (and the first payment date is within one year
of the issue date) that equals or exceeds the amount of the pre-
issuance accrued interest, then the REMIC Regular Certificates'
issue price may be computed by subtracting from the issue price
the amount of pre-issuance accrued interest, rather than as an
amount payable on the REMIC Regular Certificate. However, it is
unclear under this method how the OID Regulations treat interest
on Payment Lag Certificates. Therefore, in the case of a Payment
Lag Certificate, the Trust Fund intends to include accrued
interest in the issue price and report interest payments made on
the first Distribution Date as interest to the extent such
payments represent interest for the number of days that the
Certificateholder has held such Payment Lag Certificate during
the first accrual period.
Investors should consult their own tax advisors concerning
the treatment for federal income tax purposes of Payment Lag
Certificates.
Non-Interest Expenses of the REMIC. Under temporary
Treasury regulations, 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 REMIC Regular Certificateholders that are "pass-
through interest holders." Certificateholders that are pass-
through interest holders should consult their own tax advisors
about the impact of these rules on an investment in the REMIC
Regular Certificates. See "Pass-Through of Non-Interest Expenses
of the REMIC" under "Taxation of Owners of REMIC Residual
Certificates" below.
Prepayment Premiums and Yield Maintenance Charges. The
portion of any Prepayment Premium or Yield Maintenance Charge
received by any Holder in excess of the Holder's basis allocable
to the Qualified Loan which is being prepaid may be treated as
short-term or long-term capital gain. Generally, prepayment
premiums, to the extent passed through as distributions, are
treated as producing capital gain rather than ordinary income for
investors that hold a debt security as a capital asset. It is
unclear under the REMIC Regulations whether such portion will be
treated as capital gain or additional interest. The holding
period for long-term capital gain is one year for the
Certificates. Holders should consult their tax advisors
regarding the taxable status of such Prepayment Premiums or Yield
Maintenance Charges.
Non-U.S. Persons. Generally, payments of interest
(including any payment with respect to accrued OID) on the REMIC
Regular Certificates to a REMIC Regular Certificateholder who is
not a U.S. Person and is not engaged in a trade or business
within the United States will not be subject to federal
withholding tax if (i) such REMIC Regular Certificateholder does
not actually or constructively own 10 percent or more of the
combined voting power of all classes of equity in the Issuer;
(ii) such REMIC Regular Certificateholder is not a controlled
foreign corporation (within the meaning of Code Section 957)
related to the Issuer; and (iii) such REMIC Regular
Certificateholder complies with certain identification
requirements (including delivery of a statement, signed by the
REMIC Regular Certificateholder under penalties of perjury,
certifying that such REMIC Regular Certificateholder is a foreign
person and providing the name and address of such REMIC Regular
Certificateholder). If a REMIC Regular Certificateholder is not
exempt from withholding, 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.
Further, a REMIC Regular Certificate will not be included in
the estate of a non-resident alien individual and will not be
subject to United States estate taxes. However,
Certificateholders who are non-resident alien individuals should
consult their tax advisors concerning this question.
REMIC Regular Certificateholders who are not U.S. Persons
and persons related to such holders should not acquire any REMIC
Residual Certificates, and holders of REMIC Residual Certificates
(the "REMIC Residual Certificateholder") and persons related to
REMIC Residual Certificateholders should not acquire any REMIC
Regular Certificates without consulting their tax advisors as to
the possible adverse tax consequences of doing so.
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 who was a
REMIC Regular Certificateholder at any time during such year,
such information as may be deemed necessary or desirable to
assist REMIC Regular Certificateholders 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 REMIC Regular Certificates 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
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 OWNERS OF REMIC RESIDUAL CERTIFICATES
Allocation of the Income of the REMIC to the REMIC Residual
Certificates. The REMIC will not be subject to federal income
tax except with respect to income from prohibited transactions
and certain other transactions. See "_Prohibited Transactions
and Other Taxes" below. Instead, each original holder of a REMIC
Residual Certificate will report on its federal income tax
return, as ordinary income, its share of the taxable income of
the REMIC for each day during the taxable year on which such
holder owns any REMIC Residual Certificates. The taxable income
of the REMIC for each day will be determined by allocating the
taxable income of the REMIC for each calendar quarter ratably to
each day in the quarter. Such a holder's share of the taxable
income of the REMIC for each day will be based on the portion of
the outstanding REMIC Residual Certificates that such holder owns
on that day. The taxable income of the REMIC will be determined
under an accrual method and will be taxable to the holders of
REMIC Residual Certificates without regard to the timing or
amounts of cash distributions by the REMIC. Ordinary income
derived from REMIC Residual Certificates will be "portfolio
income" for purposes of the taxation of taxpayers subject to the
limitations on the deductibility of "passive losses." As residual
interests, the REMIC Residual Certificates will be subject to tax
rules, described below, that differ from those that would apply
if the REMIC Residual Certificates were treated for federal
income tax purposes as direct ownership interests in the
Certificates or as debt instruments issued by the REMIC.
A REMIC Residual Certificateholder may be required to
include taxable income from the REMIC Residual Certificate in
excess of the cash distributed. For example, a structure where
principal distributions are made serially on regular interests
(that is, a fast-pay, slow-pay structure) may generate such a
mismatching of income and cash distributions (that is, "phantom
income"). This mismatching may be caused by the use of certain
required tax accounting methods by the REMIC, variations in the
prepayment rate of the underlying Qualified Assets and certain
other factors. Depending upon the structure of a particular
transaction, the aforementioned factors may significantly reduce
the after-tax yield of a REMIC Residual Certificate to a REMIC
Residual Certificateholder. Investors should consult their own
tax advisors concerning the federal income tax treatment of a
REMIC Residual Certificate and the impact of such tax treatment
on the after-tax yield of a REMIC Residual Certificate.
A subsequent REMIC Residual Certificateholder also will
report on its federal income tax return amounts representing a
daily share of the taxable income of the REMIC for each day that
such REMIC Residual Certificateholder owns such REMIC Residual
Certificate. Those daily amounts generally would equal the
amounts that would have been reported for the same days by an
original REMIC Residual Certificateholder, as described above.
The Legislative History 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 REMIC
Residual Certificate at a price greater than (or less than) the
adjusted basis such REMIC Residual Certificate would have in the
hands of an original REMIC Residual Certificateholder. See
"_Sale or Exchange of REMIC Residual Certificates" below. It is
not clear, however, whether such adjustments will in fact be
permitted or required and, if so, how they would be made. The
REMIC Regulations do not provide for any such adjustments.
Taxable Income of the REMIC Attributable to Residual
Interests. The taxable income of the REMIC will reflect a
netting of (i) the income from the Qualified Assets and the
REMIC's other assets and (ii) the deductions allowed to the REMIC
for interest and OID on the REMIC Regular Certificates and,
except as described above under "_Taxation of Owners of REMIC
Regular Certificates_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, except that (i) the limitations on
deductibility of investment interest expense and expenses for the
production of income do not apply, (ii) all bad loans will be
deductible as business bad debts, and (iii) the limitation on the
deductibility of interest and expenses related to tax-exempt
income will apply. The REMIC's gross income 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, plus any cancellation of
indebtedness income upon allocation of realized losses to the
REMIC Regular Certificates. Note that the timing of cancellation
of indebtedness income recognized by REMIC Residual
Certificateholders resulting from defaults and delinquencies on
Qualified Assets may differ from the time of the actual loss on
the Qualified Asset. The REMIC's deductions 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 requirement that REMIC Residual
Certificateholders report their pro rata share of taxable income
or net loss of the REMIC will continue until there are no
Certificates of any class of the related Series outstanding.
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 (or, if a class of Certificates
is not sold initially, its fair market value). Such aggregate
basis will be allocated among the Qualified Assets and other
assets of the REMIC in proportion to their respective fair market
value. A Qualified Asset will be deemed to have been acquired
with discount or premium to the extent that the REMIC's basis
therein is less than or greater than its principal balance,
respectively. Any such discount (whether market discount or OID)
will be includible in the income of the REMIC as it accrues, in
advance of receipt of the cash attributable to such income, under
a method similar to the method described above for accruing OID
on the REMIC Regular Certificates. The REMIC expects to elect
under Code Section 171 to amortize any premium on the Qualified
Assets. Premium on any Qualified Asset to which such election
applies would be amortized under a constant yield method. It is
not clear whether the yield of a Qualified Asset would be
calculated for this purpose based on scheduled payments or taking
account of the Prepayment Assumption. Additionally, such an
election would not apply to the yield with respect to any
underlying mortgage loan originated on or before September 27,
1985. Instead, premium with respect to such a mortgage loan
would be allocated among the principal payments thereon and would
be deductible by the REMIC as those payments become due.
The REMIC will be allowed a deduction for interest and OID
on the REMIC Regular Certificates. The amount and method of
accrual of OID will be calculated for this purpose in the same
manner as described above with respect to REMIC Regular
Certificates except that the 0.25% per annum de minimis rule and
adjustments for subsequent holders described therein will not
apply.
A REMIC Residual Certificateholder will not be permitted to
amortize the cost of the REMIC Residual Certificate as an offset
to its 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. See "_Sale or Exchange of REMIC Residual
Certificates" below. For a discussion of possible adjustments to
income of a subsequent holder of a REMIC Residual Certificate to
reflect any difference between the actual cost of such REMIC
Residual Certificate to such holder and the adjusted basis such
REMIC Residual Certificate would have in the hands of an original
REMIC Residual Certificateholder, see "_Allocation of the Income
of the REMIC to the REMIC Residual Certificates" above.
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 would be allocated among the REMIC
Residual Certificateholders 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 basis in such
REMIC Residual Certificate. Any net loss that is not currently
deductible by reason of this limitation may only be used by such
REMIC Residual Certificateholder to offset its share of the
REMIC's taxable income in future periods (but not otherwise).
The ability of REMIC Residual Certificateholders that are
individuals or closely held corporations to deduct net losses may
be subject to additional limitations under the Code.
Mark to Market Rules. Prospective purchasers of a REMIC
Residual Certificate should be aware that the IRS recently
released proposed regulations (the "Proposed Mark-to-Market
Regulations") which provide that a REMIC Residual Certificate
acquired after January 3, 1995 cannot be marked-to-market. The
Proposed Mark-to-Market Regulations change the temporary
regulations which allowed a Residual Certificate 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.
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, under
temporary Treasury regulations, among the REMIC Regular
Certificateholders and the REMIC Residual Certificateholders on a
daily basis in proportion to the relative amounts of income
accruing to each Certificateholder on that day. In general
terms, a single class REMIC is one that either (i) would qualify,
under existing Treasury regulations, as a grantor trust if it
were not a REMIC (treating all interests as ownership interests,
even if they would be classified as debt for federal income tax
purposes) or (ii) is similar to such a trust and is structured
with the principal purpose of avoiding the single class REMIC
rules. The expenses of the REMIC will be allocated to holders of
the related REMIC Residual Certificates in their entirety and not
to holders of the related REMIC Regular Certificates.
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 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 for an
individual whose adjusted gross income exceeds a certain 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 REMIC Residual
Certificateholders who are subject to the limitations of either
Code Section 67 or Code Section 68 may be substantial. Further,
holders (other than corporations) subject to the alternative
minimum tax may not deduct miscellaneous itemized deductions in
determining such holders' alternative minimum taxable 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 refers to individuals, entities taxed
as individuals and certain pass-through entities, but does not
include real estate investment trusts. REMIC Residual
Certificateholders that are pass-through interest holders should
consult their own tax advisors about the impact of these rules on
an investment in the REMIC Residual Certificates.
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 will, with an exception
discussed below for certain thrift institutions, be subject to
federal income tax in all events. Thus, for example, an excess
inclusion (i) may not, except as described below, be offset by
any unrelated losses, deductions or loss carryovers of a REMIC
Residual Certificateholder; (ii) will be treated as "unrelated
business taxable income" within the meaning of Code Section 512
if the REMIC Residual Certificateholder is a pension fund or any
other organization that is subject to tax only on its unrelated
business taxable income (see "_Tax-Exempt Investors" below); and
(iii) is not eligible for any reduction in the rate of
withholding tax in the case of a REMIC Residual Certificateholder
that is a foreign investor. See "_Non-U.S. Persons" below. The
exception for thrift institutions is available only to the
institution holding the REMIC Residual Certificate and not to any
affiliate of the institution, unless the affiliate is a
subsidiary all the stock of which, and substantially all the
indebtedness of which, is held by the institution, and which is
organized and operated exclusively in connection with the
organization and operation of one or more REMICs.
Except as discussed in the following paragraph, with respect
to any REMIC Residual Certificateholder, the excess inclusions
for any calendar quarter is the excess, if any, of (i) the income
of such REMIC Residual Certificateholder for that calendar
quarter from its REMIC Residual Certificate over (ii) the sum of
the "daily accruals" (as defined below) for all days during the
calendar quarter on which the REMIC Residual Certificateholder
holds such REMIC Residual 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" (as
defined below) of the REMIC Residual Certificate at the beginning
of the calendar quarter and 120 percent of the "Federal long-term
rate" in effect at the time the REMIC Residual 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 REMIC Residual Certificate,
increased by the amount of daily accruals for all prior quarters,
and decreased (but not below zero) by the aggregate amount of
payments made on the REMIC Residual 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 that would
treat the entire amount of income accruing on a REMIC Residual
Certificate as excess inclusions if the REMIC Residual
Certificates in the aggregate are considered not to have
"significant value." Under the REMIC Regulations, REMIC Residual
Certificateholders that are thrift institutions described in Code
Section 593 can offset excess inclusions with unrelated
deductions, losses and loss carryovers provided the REMIC
Residual Certificates have "significant value". For purposes of
applying this rule, thrift institutions that are members of an
affiliated group filing a consolidated return, together with
their subsidiaries formed to issue REMICs, are treated as
separate corporations. REMIC Residual Certificates have
"significant value" if: (i) the REMIC Residual 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 and (ii) the
anticipated weighted average life of the REMIC Residual
Certificates is at least 20% of the anticipated weighted average
life of the REMIC based on the anticipated principal payments to
be received with respect thereto (using the Prepayment Assumption
and any required or permitted clean up calls or required
liquidation provided for in the REMIC's organizational
documents), except that all anticipated distributions are to be
used to calculate the weighted average life of REMIC Regular
Certificates that are not entitled to any principal payments or
are entitled to a disproportionately small principal amount
relative to interest payments thereon and all anticipated
distributions are to be used to calculate the weighted average
life of the REMIC Residual Certificates. The principal amount
will be considered disproportionately small if the issue price of
the REMIC Residual Certificates exceeds 125% of their initial
principal amount. Finally, an ordering rule under the REMIC
Regulations provides that a thrift institution may only offset
its excess inclusion income with deductions after it has first
applied its deductions against income that is not excess
inclusion income.
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.
Payments. Any distribution made on a REMIC Residual
Certificate to a REMIC Residual Certificateholder will be treated
as a non-taxable return of capital to the extent it does not
exceed the REMIC Residual Certificateholder's adjusted basis in
such REMIC Residual Certificate. To the extent a distribution
exceeds such adjusted basis, it will be treated as gain from the
sale of the REMIC Residual Certificate.
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
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 basis in a REMIC Residual
Certificate generally equals the cost of such REMIC Residual
Certificate to such REMIC Residual Certificateholder, increased
by the taxable income of the REMIC that was included in the
income of such REMIC Residual Certificateholder 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 REMIC Residual Certificateholder with respect to such REMIC
Residual Certificate and by the distributions received thereon by
such REMIC Residual Certificateholder. 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 REMIC Residual Certificateholder
on the sale will not be deductible, but, instead, will increase
such REMIC Residual Certificateholder's adjusted basis in the
newly acquired asset.
PROHIBITED TRANSACTIONS AND OTHER TAXES
The Code imposes a tax on REMICs 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 means 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 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 Trust Fund as to
which an election has been made to treat such Trust Fund as a
REMIC made after the day on which such Trust Fund issues all of
its interests could result in the imposition of a tax on the
Trust Fund equal to 100% of the value of the contributed property
(the "Contributions Tax"). No Trust Fund for any Series of
Certificates will accept contributions that would subject it to
such tax.
In addition, a Trust Fund as to which an election has been
made to treat such Trust Fund as 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 such 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.
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 Regular and
REMIC Residual Certificates within the 90-day period.
The REMIC will terminate shortly following the retirement of
the REMIC Regular Certificates. If a REMIC Residual
Certificateholder's adjusted basis in the REMIC Residual
Certificate exceeds the amount of cash distributed to such REMIC
Residual Certificateholder in final liquidation of its interest,
then it would appear that the REMIC Residual Certificateholder
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.
ADMINISTRATIVE MATTERS
Solely for the purpose of the administrative provisions of
the Code, the REMIC generally will be treated as a partnership
and the REMIC Residual Certificateholders will be treated as the
partners. Certain information will be furnished quarterly to
each REMIC Residual Certificateholder who held a REMIC Residual
Certificate on any day in the previous calendar quarter.
Each REMIC Residual Certificateholder is required to treat
items on its return consistently with their treatment on the
REMIC's return, unless the REMIC Residual Certificateholder
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.
TAX-EXEMPT INVESTORS
Any REMIC Residual Certificateholder 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. See "_Taxation of Owners of
REMIC Residual Certificates_Excess Inclusions" above.
RESIDUAL CERTIFICATE PAYMENTS-NON-U.S. PERSONS
Amounts paid to REMIC Residual Certificateholders who are
not U.S. Persons (see "_Taxation of Owners of REMIC Regular
Certificates_Non-U.S. Persons" above) 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 in "_Taxation of Owners of
REMIC Regular Certificates" above, but only to the extent that
the underlying mortgage loans were originated after July 18,
1984. Furthermore, the rate of withholding on any income on a
REMIC Residual Certificate that is excess inclusion income will
not be subject to reduction under any applicable tax treaties.
See "_Taxation of Owners of REMIC Residual Certificates_Excess
Inclusions" above. If the portfolio interest exemption is
unavailable, such amount will be subject to United States
withholding tax when paid or otherwise distributed (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 requiring that those amounts be
taken into account earlier than otherwise provided where
necessary to prevent avoidance of tax (for example, where the
REMIC Residual Certificates do not have significant value). See
"_Taxation of Owners of REMIC Residual Certificates_Excess
Inclusions" above. If the amounts paid to REMIC Residual
Certificateholders that are not U.S. persons are effectively
connected with their conduct of a trade or business within the
United States, the 30% (or lower treaty rate) withholding will
not apply. Instead, the amounts paid to such non-U.S. Person
will be subject to U.S. federal income taxation at regular
graduated rates. For special restrictions on the transfer of
REMIC Residual Certificates, see "_Tax-Related Restrictions on
Transfers of REMIC Residual Certificates" below.
REMIC Regular Certificateholders and persons related to such
holders should not acquire any REMIC Residual Certificates, and
REMIC Residual Certificateholders and persons related to REMIC
Residual Certificateholders should not acquire any REMIC Regular
Certificates, without consulting their tax advisors as to the
possible adverse tax consequences of such acquisition.
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). Further, 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 (A) an amount (as determined under the REMIC
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 shall be relieved of liability for
the tax if the transferee furnished 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. 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 taxes 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 (A) the amount
of excess inclusions for the taxable year allocable to the
interest held by the disqualified organization and (B) 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 (i) a regulated investment
company, real estate investment trust or common trust fund, (ii)
a partnership, trust or estate and (iii) 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. The tax on pass-through
entities is generally effective for periods after March 31, 1988,
except that in the case of regulated investment companies, real
estate investment trusts, common trust funds and publicly-traded
partnerships the tax shall apply only to taxable years of such
entities beginning after December 31, 1988. Under proposed
legislation, large partnerships (generally with 250 or more
partners) will be taxable on excess inclusion income as if all
partners were disqualified organizations.
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 Master Servicer. The 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
Regulations disregard, for federal income tax purposes, any
transfer of a Noneconomic REMIC Residual Certificate to a "U.S.
Person," as defined above, 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 exists 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 (i) the transferor conducted a reasonable investigation of the
transferee and (ii) the transferee acknowledges to the transferor
that the residual interest may generate tax liabilities in excess
of the cash flow and the transferee represents that it intends to
pay such taxes associated with the residual interest 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 REMIC Residual Certificate and would
continue to be subject to tax on its allocable portion of the net
income of the REMIC.
Foreign Investors. The REMIC Regulations provide that the
transfer of a REMIC Residual Certificate that has a "tax
avoidance potential" to a "foreign 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 Sates 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 provisions in the REMIC
Regulations regarding transfers of REMIC Residual Certificates
that have tax avoidance potential to foreign persons are
effective for all transfers after June 30, 1992. 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 with a duly completed IRS Form 4224 and the Trustee
consents to such transfer in writing.
Any attempted transfer or pledge in violation of the
transfer restrictions shall 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 tax which
may be imposed on a pass-through entity.
STATE TAX CONSIDERATIONS
In addition to the federal income tax consequences described
in "CERTAIN FEDERAL INCOME TAX CONSEQUENCES," potential investors
should consider the state income tax consequences of the
acquisition, ownership, and disposition of the Certificates.
State income tax law may differ substantially from the
corresponding federal law, and this discussion does not purport
to describe any aspect of the income tax laws of any state.
Therefore, potential investors should consult their own tax
advisors with respect to the various tax consequences of
investments in the Certificates.
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 the Trust 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 and
(ii) transactions involving the assets of the Trust 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.
PLANS 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 that where a Plan
acquires a guaranteed government 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. Although the Certificates may satisfy
the governmental mortgage pool exemption set forth in the Final
Regulations, no assurance can be given 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
Guaranteed Certificate by a Plan subject to ERISA or Code Section
4975 could 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 Guaranteed Certificate.
Prohibited Transaction Class Exemption 83-1 ("PTCE 83-1")
generally exempts from the application of the prohibited
transaction rules transactions relating to the operation of a
"mortgage pool" and the purchase, sale, and holding of "mortgage
pool pass-through certificates," provided that certain conditions
set forth in PTCE 83-1 are satisfied. The term "mortgage pool
pass-through certificate" is defined in PTCE 83-1 as "a
certificate representing a beneficial undivided fractional
interest in a mortgage pool and entitling the holder of such a
certificate to pass-through payments of principal and interest
from the pooled mortgage loans, less any fees retained by the
pool sponsor." The term "mortgage pool" is defined as an
investment pool the corpus of which is held in trust and consists
solely of (i) interest bearing obligations secured by either
first or second mortgages or deeds of trust on single-family
residential property, (ii) property which had secured such
obligations and which had been acquired by foreclosure, and (iii)
undistributed cash. Single-family, residential property is non-
farm property comprising one to four dwelling units, including
condominiums. It appears that, for purposes of PTCE 83-1, the
term "mortgage pool pass-through certificate" would not include
Certificates.
If for this or any other reasons PTCE 83-1 does not provide
an exemption for a particular Plan desiring to invest in the
Certificates, one of three other prohibited transaction class
exemptions issued by the Department of Labor might apply, i.e.,
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 Professional Asset Managers), PTCE 80-51
(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 Pool.
Before purchasing any Certificates, a Plan fiduciary should
determine whether any ERISA prohibited transaction exemption is
applicable.
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, or
the Trustee 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. 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.
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.
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 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. 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 such investors.
<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:
1933 Act........................................................ 23
1986 Act........................................................ 47
1991 Act........................................................ 22
1996 Amendment................................................ 5, 23
Accounts........................................................ 32
Accrual Certificates.......................................... 9, 24
Accrual Period.................................................. 53
Accrued Certificate Interest.................................... 25
Adjusted Issue Price............................................ 48
Advance...................................................... 11, 26
Agreements...................................................... 30
Agricultural Real Estate........................................ 6
AMBS............................................................ 5
AMBS Information................................................ 4
Applicable Amount............................................... 61
Appraisal Standards............................................. 15
ARM Loans.................................................... 17, 47
Balloon Payments................................................ 17
Beneficial Owners............................................... 28
Book-Entry Certificates......................................... 24
Borrower........................................................ 18
Central Servicer................................................ 5
Central Servicing Fee........................................... 35
Certificate Account............................................. 33
Certificate Account Deposit Date................................ 34
Certificate Balance........................................... 9, 25
Certificateholders........................................... 15, 28
Certificates.................................................. 1, 5
Class........................................................... 2
Cleanup Costs................................................... 39
Closing Date.................................................... 51
Code............................................................ 11
Code Section 4975 Plan.......................................... 68
Collection Account.............................................. 32
Commission...................................................... 3
ConAct.........................................................6, 18
Contributions Tax............................................... 63
CPR............................................................. 21
Cut-off Date.................................................... 10
Deferred Interest............................................... 48
Definitive Certificates.......................................24, 29
Depository...................................................... 28
Determination Date.............................................. 24
Disqualified Organizations...................................... 65
Distribution Date............................................... 9
Eligible Depository............................................. 32
Eligible Investment............................................. 32
ERISA.........................................................12, 67
Excess inclusion................................................ 61
Excess servicing................................................ 45
Exchange Act.................................................... 3
Farmer Mac................................................. 1, 5, 22
Farmer Mac Charter.............................................. 5
Farmer Mac Guarantee...........................................1, 22
FCA............................................................. 23
Fed System...................................................... 28
Final Regulations............................................... 68
Grantor Trust Certificates...................................... 11
Guaranteed Governmental Mortgage Pool Certificate............... 68
Guaranteed Portion..........................................1, 6, 18
Guides.......................................................... 6
Holders......................................................... 28
Indirect Participants........................................... 28
Insurance Proceeds.............................................. 33
IRA.......................................................... 12, 68
IRS............................................................. 43
Legislative History............................................. 47
Liquidation Proceeds............................................ 33
Master REMIC.................................................... 50
Master Servicer................................................. 5
Mortgage Interest Rate.......................................... 6
Mortgaged Notes................................................. 38
Mortgaged Pool.................................................. 69
Mortgaged Properties............................................ 6
OID.......................................................... 41, 43
OID Regulations................................................. 43
Originator...................................................... 22
Owner........................................................... 18
Participants.................................................... 28
Parties in interest............................................. 67
Pass-Through entity............................................. 66
Pass-Through Rate............................................. 9, 25
Payment Lag Certificates......................................... 57
Phantom income.................................................. 59
Plans........................................................... 67
Pool............................................................ 1
pre-issuance accrued interest................................... 57
Prepayment...................................................... 21
Prepayment Assumption........................................... 47
Prepayment Premiums............................................7, 13
Prohibited Transactions Tax..................................... 63
Proposed Mark-to-Market Regulations............................. 61
PTCE 83-169..................................................... 71
Publicly-Offered Security....................................... 68
Purchase Price.................................................. 31
QMBS........................................................... 1, 6
QMBS Agreement................................................... 17
QMBS Issuer...................................................... 17
QMBS Servicer.................................................... 17
QMBS Trustee..................................................... 17
Qualified Assets................................................. 1
Qualified Loans................................................ 1, 6
Qualified Mortgage............................................... 50
Qualified Plan................................................... 68
Record Date...................................................... 24
Related Proceeds................................................. 26
REMIC............................................................ 11
REMIC Certificates............................................... 50
REMIC Regular Certificateholders................................. 51
REMIC Regular Certificates................................... 11, 50
REMIC Regulations............................................... 41
REMIC Residual Certificateholder................................ 58
REMIC Residual Certificates.................................. 11, 50
REO Proceeds.................................................... 33
Sale Agreement.................................................. 8
Secretary's Guarantee........................................... 18
Sellers......................................................... 8
Series.......................................................... 1
State Environmental Lien........................................ 40
Stripped ARM Obligations........................................ 48
Stripped Bond Certificates...................................... 45
Stripped Coupon Certificates.................................... 45
Stripped Interest Certificates................................ 9, 24
Stripped Principal Certificates............................... 9, 23
Subsidiary REMIC................................................ 50
Super-Premium Certificates...................................... 52
System Institution.............................................. 23
Trust Assets.................................................... 3
Trust Fund...................................................... 1
Trust Fund AMBS................................................. 6
Trustee......................................................... 5
UCC............................................................. 28
Underwriting Standards.......................................... 15
Unguaranteed Portion............................................ 19
U.S. Person..................................................... 49
Yield Maintenance Charge...................................... 7, 13
<PAGE>
No person has been authorized to give any information or to
make any representations other than those not contained in this
Prospectus Supplement or the Prospectus and, if given or made,
such information or representations must not be relied upon as
having been authorized by the Depositor or by the Underwriter.
This Prospectus Supplement and the Prospectus do not constitute
an offer to sell, 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 authorized or in which the
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 shall, under any
circumstances, create an implication that information herein or
therein is correct as of any time since the date of this
Prospectus Supplement or the Prospectus.
______________
<PAGE>
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
Page
Summary of Terms......................................... S-4
Risk Factors............................................. S-9
Description of the Qualified Loans....................... S-9
Description of the Certificates.......................... S-12
Farmer Mac Guarantee..................................... S-14
Outstanding Guarantees................................... S-14
Yield, Prepayment and Maturity Considerations............ S-15
Description of the Agreements............................ S-18
The Depositor............................................ S-18
Certain Federal Income Tax Consequences.................. S-19
ERISA Considerations..................................... S-19
Legal Investment......................................... S-19
Method of Distribution................................... S-19
Legal Matters............................................ S-19
Index of Principal Terms................................. S-20
PROSPECTUS
Prospectus Supplement...................................... 2
Available Information...................................... 3
Incorporation of Certain Documents by Reference............ 4
Summary of Prospectus...................................... 5
Risk Factors............................................... 13
Description of the Trust Funds............................. 15
Use of Proceeds............................................ 19
Yield Considerations....................................... 19
The Depositor.............................................. 22
Federal Agricultural Mortgage Corporation.................. 22
Description of the Certificates............................ 23
Description of the Agreements.............................. 30
Certain Legal Aspects of Qualified Loans and Other Matters. 38
Certain Federal Income Tax Consequences.................... 41
State Tax Considerations................................... 67
ERISA Considerations....................................... 67
Method of Distribution..................................... 70
Legal Investment........................................... 70
Index of Principal Terms................................... 72
______________
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
<PAGE>
FarmerMac
Acceptance Corporation
(Depositor)
$__________
(Approximate)
Guaranteed Agricultural
Mortgage
Pass-Through Certificates
Guaranteed by
FARMER MAC
Federal Agricultural
Mortgage Corporation
__________________
PROSPECTUS SUPPLEMENT
__________________
[Underwriter]
_______________, 1996
<PAGE>
PART II INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRUBITION
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
compensation, are as follows:
SEC Registration Fee................................. $86,206.90
Trustee's Fees and Expenses (including counsel fees).. 25,000.00
Printing and Engraving Costs.......................... 40,000.00
Legal Fees and Expenses............................ 150,000.00
Accounting Fees and Expenses.......................... 40,000.00
Miscellaneous......................................... 8,793.10
Total............................................... 350,000.00
_________________________
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The registrant's articles of incorporation provide
that directors and officers of the registrant will be indemnified
as permitted by Delaware law. Section 145 of the Delaware
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 indemnification of the Registrant and other
persons.
ITEM 16. EXHIBITS.
1.1 Proposed Form of Underwriting Agreement
4.1 Proposed Form of Servicing Contract
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 Brown & Wood 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 Brown & Wood 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-3 of this Registration
Statement).
_____________________________________
<PAGE>
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 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.
B. Undertaking in respect of filings incorporating subsequent
Exchange Act documents by reference.
The undersigned Registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act of 1933,
each filing of the Registrant's annual report pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act
of 1934) that is incorporated by reference in the registration
statement 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.
C. 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.
D. 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 the form of prospectus
filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act of 1933 shall be deemed to be
part of this Registration Statement as of the time it was
declared effective; and
(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 19th day of June, 1996.
FARMER MAC MORTGAGE SECURITIES CORPORATION
By:/s/ Henry D. Edelman
_________________________________________
Henry D. Edelman
President
Pursuant to the requirements of the Securities Act of 1933,
as amended, this Registration Statement on Form S-3 has been
signed below by the following persons in the capacities and on
the dates indicated. Each person whose signature appears below
constitutes and appoints Henry D. Edelman and Nancy E. Corsiglia,
and each of them his or her true and lawful attorney-in-fact and
agent, acting together or alone, with full powers of substitution
and resubstitution, for them and in their name, place and stead,
to sign any or all amendments to this Registration Statement
(including any pre-effective or post-effective amendment), and to
file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents,
acting together or alone, full power and authority to do and
perform each and every act and thing requisite and necessary to
be done in and about the premises, as fully to all intents and
purposes as they might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, acting
together or alone, or other substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Signature Title Date
Henry D. Edelman President and Director June 19, 1996
(Principal Executive Officer)
Christopher A. Dunn Vice President and Director June 19, 1996
Nancy E. Corsiglia Vice President, Treasurer June 19, 1996
and Director
(Principal Financial and
Accounting Officer)
<PAGE>
EXHIBITS INDEX
Sequential
Exhibit Page
No. Description of Exhibits Number
1.1 Proposed Form of Underwriting Agreement
4.1 Proposed Form of Servicing Contract
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 Brown & Wood 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 Brown & Wood 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-3 of this Registration
Statement).
<PAGE>
EXHIBIT 1.1 PROPOSED FROM OF UNDERWRITING AGREEMENT
<PAGE>
FARMER MAC MORTGAGE SECURITIES CORPORATION
GUARANTEED AGRICULTURAL MORTGAGE-BACKED SECURITIES
(Issuable in Series)
GUARANTEED BY
FEDERAL AGRICULTURAL MORTGAGE CORPORATION
UNDERWRITING AGREEMENT
[Name of 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 cut-
off 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.
(e) 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 _____________,____
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
[Name of Underwriter] (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 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 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 1(a):
Principal Interest Class Purchase
Class Balance Rate Price Percentage
(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]
[Underwriter]
Re: Farmer Mac Guaranteed Agricultural
Mortgage-Backed Securities
Series
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,
<PAGE>
EXHIBIT 4.1 PROPOSED FORM OF SERVICING CONTRACT
<PAGE>
MASTER CENTRAL SERVICING AGREEMENT
between
FEDERAL AGRICULTURAL MORTGAGE CORPORATION,
as Owner/Master Servicer
and
[NAME OF CENTRAL SERVICER],
as Central Servicer
dated as of
June 1, 1996
<PAGE>
MASTER CENTRAL SERVICING AGREEMENT
THIS MASTER CENTRAL SERVICING AGREEMENT (this "Agreement")
entered into as of June 1, 1996, 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:
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
(i) 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.
(j) 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 1996, 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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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
June, 1996.
FEDERAL AGRICULTURAL MORTGAGE CORPORATION
By: __________________________________________
Name: Henry D. Edelman
Title: President and Chief Executive Officer
[CENTRAL SERVICER]
By: _________________________________________
Name:
Title:
<PAGE>
EXHIBIT 4.2 PROPOSED FORM OF LOAN SALE AGREEMENT
<PAGE>
MASTER LOAN SALE AGREEMENT
between
[SELLER]
and
FEDERAL AGRICULTURAL MORTGAGE CORPORATION
dated as of
[Date]
<PAGE>
TABLE OF CONTENTS
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 7
2.3 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
(i)
<PAGE>
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
(ii)
<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.
SECTION 4. REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of Farmer Mac.
Farmer Mac represents and warrants to the Seller as follows:
(a) Farmer 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:
(i) The information set forth in the Schedule of Qualified
Loans is true and correct.
(ii) Each Mortgage File contains the documents required by
Section 2.2(b) of this Agreement.
(iii) 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.
(iv) 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.
(v) (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.
(vi) 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.
(vii) 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.
(viii) 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.
(ix) 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.
(x) 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.
(xi) Neither the Mortgage nor the Mortgage Note is usurious
and each meets or is exempt from any applicable usury laws or
regulations.
(xii) 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.
(xiii) There are no tax or insurance escrow deposits or escrow
payments relating to the Qualified Loan.
(xiv) 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.
(xv) 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.
(xvi) The Qualified Loan is not subject to any right of
rescission, set-off, counterclaim or defense.
(xvii) 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.
(xviii) 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.
(xix) 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
(xx) 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.
(xxi) An appraisal to establish the Appraised Value of the
related Mortgaged Property has been conducted in accordance with
the Appraisal Standards.
(xxii) 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.
(xxiii) The structures included in the appraisal establishing
the Appraised Value of the Mortgaged Property are free of material
damage and are in good repair.
(xxiv) 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.
(xxv) 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.
(xxvi) 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.
(xxvii) 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.
(xxviii) 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.
(xxix) 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.
(xxx) 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.
(xxxi) 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.
(xxxii) 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.
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.
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.
(h) [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,
<PAGE>
EXHIBIT 4.3 PROPOSED FROM OF TRUST AGREEMENT-GRANTOR TRUSTS
<PAGE>
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:
<PAGE>
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. 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 FMSSC, 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.
<PAGE>
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 FMSSC.
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 FMSSC, shall constitute conclusive evidence that such
individual is, in fact, authorized by Farmer Mac or FMSSC, 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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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 by the
Trustee or 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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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:_______________________
<PAGE>
EXHIBIT 4.3 PROPOSED FORM OF TRUST AGREEMENT-REMIC TRUSTS
<PAGE>
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 FMMCS, 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. 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 FMSSC, 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 860G 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 of 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 FMSSC.
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 FMSSC, shall constitute conclusive evidence that such
individual is, in fact, authorized by Farmer Mac or FMSSC, 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, FMMSI 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 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
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.
<PAGE>
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 860G(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 860G(a)(3) of the Code and "permitted investments" as
defined in Section 860G(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 860F(a)(2) of the Code, on
"net income from foreclosure property" of the REMIC as defined in
Section 860G(c) of the Code, on any contributions to the REMIC
after the Startup Day therefor pursuant to Section 860G(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 860G(a)(3) of the Code or "permitted investments" as
defined in Section 860G(a)(5) of the Code.
(j) Solely for the purposes of Section 1.860G-1(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.
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:_______________________
<PAGE>
EXHIBIT 5.1 OPINION OF GENERAL COUNSEL OF THE REGISTRANT
<PAGE>
Farmer Mac
Federal Agricultural Mortgage Corporation
919 18th Street, N.W., Suite 200
Washington, D.C. 20006
June 19, 1996
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 to be 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 inquires, 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:
Farmer Mac Mortgage Securities Corporation
June 19, 1996
<PAGE>
Page 2 of 2
1. When the Trust Agreement has been duly authorized by
all necessary action and duly executed and delivered by Farmer
Mac, FMMSC and the Trustee, the Trust Agreement will constitute 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/als
<PAGE>
EXHIBIT 8.1 OPINION OF BROWN & WOOD AS TO TAX MATTERS
June 19, 1996
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 have acted 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 wholly owned subsidiary of Farmer Mac
(the "Registrant"), in connection with 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 (the "Act")
for registration of certain Guaranteed Agricultural Mortgage -
Backed Securities (the "Securities") issued pursuant to a Trust
Agreement entered into among Farmer Mac, the Registrant and the
trustee named therein.
We have advised the Registrant with respect to certain
federal income tax consequences of the proposed guarantee and
sale of the Certificates. This advice is summarized under the
headings "Summary of Terms - Certain Federal Income Tax
Consequences: and "CERTAIN FEDERAL INCOME TAX CONSEQUENCES" in
the Prospectus, which is part of the Registration Statement.
Such description does not address the federal income tax
consequences of the proposed guarantee and sale applicable to all
categories of investors, but with respect to those tax
consequences which are discussed, in our opinion, the description
is accurate in all material respects.
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,
EXHIBIT 23.1 CONSENT OF THE GENERAL COUNSEL OF THE REGISTRANT
<PAGE>
The consent of the General Counsel of the Registrant is contained in the
opinion file as Exhibit 5.1 hereto.
EXHIBIT 23.2 CONSENT OF BROWN & WOOD
<PAGE>
The consent of Brown & Wood is contained in the opinion filed as Exhibit
8.1 hereto.
EXHIBIT 23.3 CONSENT OF KPMG PEAT MARWICK LLP
<PAGE>
The Board of Directors
Federal Agricultural Mortgage Corporation
We consent to the use of our report incorporated herein by reference and to
the reference to our firm under the heading "Experts" in the Prospectus
Supplement.
Our report dated February 12, 1996, excpet as to Note 11, which is as of
March 14, 1996, contains an explanatory paragraph regarding regulatory
capital as described in Note 3 to the December 31, 1995 financial statements.
KPMG Peat Marwick LLP
Washington, D.C.
June 19, 1996
EXHIBIT 24.1 POWER OF ATTORNEY (INCLUDE IN II-3 OF THIS REGISTRATION
STATEMENT
