Farm Credit Act of 1987

Farm Credit Act of 1987 - Title I: Farm Credit Revolving Fund; Franchise Taxes; Purchase of Stock - Amends the Farm Credit Act of 1971 to repeal provisions governing: (1) the central reserve maintained by the Farm Credit Administration (FCA) for the Farm Credit System (FCS); (2) mergers of similar FCS banks; (3) the authority of the Secretary to purchase obligations issued by the Farm Credit System Capital Corporation (Capital Corporation); (4) the initial capitalization of the Capital Corporation; (5) the tax status of obligations issued jointly by the Capital Corporation and FCS banks; and (6) certain limitations on sales by FCS institutions of tracts of real estate.

Directs the FCA to purchase stock to: (1) prevent impairment of FCS institution stock; (2) restore any impairment to such stock; or (3) provide collateral for obligations issued by an FCS bank to finance its lending operations. Identifies the resulting resource as the Farm Credit Revolving Fund.

Requires the FCA, beginning in 1993, to mandate the retirement of such stock when the need for Government-owned stock is reduced or nonexistent.

Mandates the availability of revolving fund monies to purchase obligations of the Farm Credit Banks Insurance Corporation and to make loans to the Loan Restructuring Corporation.

Directs the FCA to make payments to holders of certain FCS associations placed in liquidation to ensure that they receive par value for the stock.

Empowers the FCA, through the FCA Board, to make and issue non interest-bearing notes to the Secretary of the Treasury (Secretary) to obtain funds for the revolving fund as necessary to permit the FCA to carry out required stock purchases, as well as loan and payment obligations. Requires the Secretary to purchase these notes, up to a maximum total of $6,000,000,000. Prohibits the issue of obligations to obtain funds to purchase stock of FCS institutions after 1992.

Imposes a franchise tax, earmarked for the revolving fund, on each FCS bank and production credit association. Forgives such tax to the extent it would result in an impairment of the institution's stock.

Imposes an additional franchise tax, effective in 1993, on FCS banks or associations in which the FCA holds stock. Reduces this tax to the extent of any amount the institution either paid to the United States for the retirement of any of its FCA-held stock or contributed to another FCS bank or association to permit it to retire FCA-held stock.

Directs the FCA, after notice and an opportunity for a hearing, to suspend the charter of any institution that fails to comply with franchise tax obligations.

Permits the issuance of nonvoting Federal land bank stock to the FCA for this Act's purposes. Prohibits: (1) the payment of dividends on such FCA-held stock; and (2) patronage refunds in a year during which the FCA holds stock in the land bank. Applies corresponding prohibitions to Federal land bank associations.

Fixes minimum funding requirements for reserves maintained by Federal land banks and Federal land bank associations. Establishes obligation contribution percentages with respect to these reserves.

Grants to the FCA the first lien on stock and participation certificates it holds in Federal land banks and land bank associations.

Permits the issuance of nonvoting Federal intermediate credit bank stock to the FCA for this Act's purposes. Prohibits: (1) the payment of dividends, unless authorized by the FCA Board, in any year when the FCA holds stock in the bank; and (2) the retirement of stock or of participation certificates if the FCA holds stock in the bank.

Establishes a framework and procedures to govern: (1) the annual application of the net earnings of an intermediate credit bank in which the FCA holds stock; and (2) the absorption of its net losses. Includes provisions for the establishment of a reserve account. Exempts allocations to such an account from Federal income taxes.

Prohibits a Federal intermediate credit bank from paying patronage refunds in a year when the FCA holds stock in the bank. Grants priority to FCA-owner stock (after liabilities are paid) for purposes of distribution of assets on liquidation.

Permits the issuance to the FCA of nonvoting stock of a production credit association (PCA) for this Act's purposes. Prohibits: (1) the payment of dividends (other than preferred stock) in any year when the FCA holds stock in the PCA; and (2) patronage refunds in a year during which the FCA holds stock in the PCA. Grants to the FCA the first lien on stock and participation certificates it holds in a PCA. Grants a limited tax exemption to PCAs and their property, funds, and income.

Permits the issuance to the FCA of nonvoting stock of banks for cooperatives for this Act's purposes. Grants to the FCA first lien on stock it holds in the bank.

Establishes a framework and procedures to govern the annual application of the net earnings of a bank for cooperatives in which the FCA holds stock. Includes provision for the creation of a surplus account. Grants a limited tax exemption to banks for cooperatives, their property, funds, and income

Empowers the FCA expressly to invest in the stock of FCS banks and associations out of the pertinent revolving fund and to require the stocks' retirement.

Title II: Loan Restructuring - Amends the Farm Credit Act of 1971 to repeal the December 31, 1987, sunset review of the Farm Credit System Capital Corporation. Changes the name of the Capital Corporation to the Loan Restructuring Corporation (LRC). Requires the FCA board to revoke the charter of the LRC on December 31, 1990, unless it unanimously adopts a one-year extension.

Directs the LRC to: (1) hold, restructure, collect, sell, and otherwise administer nonperforming assets participated in or acquired from other FCS institutions; and (2) provide technical assistance to FCS institutions in connection with borrower loan restructing activities.

Provides for an LRC Board of Directors. Transfers generally the corporate powers of the Capital Corporation to the LRC. Adds the power to: (1) carry out a loan restructuring program; and (2) grant forbearance on, restructure, or liquidate any loan participated in or acquired from an FCS institution. Repeals a number of powers relating to the issuance and sale of obligations, the administration of financial assistance, the purchase of nonaccrual loans and assets, and the purchase of certain assets from associations undergoing liquidation.

Rescinds any required Capital Corporation purchase or assessment taken between July 31, 1986, and the date of this Act's enactment. Orders a refund of such funds, as well as contributions under loss-sharing agreements, to contributor institutions.

Requires the LRC and each farm credit district to have in place within 60 days of this Act's enactment a policy that includes: (1) a case-by-case review of nonaccrual loans to determine whether they should be considered for forbearance, restructuring, or liquidation; and (2) a case-by-case review of all high-risk loans to determine appropriate measures to prevent them from becoming nonaccrual loans. Describes required policy contents, including mandatory provisions indicating that forbearance will be granted to the maximum extent possible to avoid losses to the institution, and that restructuring will be effected in ways that would enable borrower repayments without impairing the borrower's standard of living if specified conditions are met.

Requires each farm credit district board to establish a Special Credit Team to help the district's banks and associations in dealing with nonaccrual and high-risk loans.

Mandates that each district plan establish an appeals procedure with respect to loans determined to be ineligible for restructuring. Describes criteria to be met by the appeal process.

Prohibits an FCS institution from requiring a borrower to provide additional collateral or from foreclosing certain loans as a result of the borrower's failure to do so.

Permits a borrower, upon application, to retain possession and occupancy of qualified homestead property for between three and five years, in certain cases of foreclosure, bankruptcy, or involuntary liquidation. Describes the eligibility requirements to be met by affected borrowers. Grants to the borrower the right of first refusal with respect to the homestead property at the end of the prescribed occupancy period. Makes homestead provisions inapplicable in cases when appraisal indicates that the value of the acquired real estate prior to the separation of the homestead would exceed the sum of the values of each component property.

Prohibits an FCS institution from: (1) selling any agricultural land acquired as a result of loan foreclosure, bankruptcy, or voluntary loan liquidation if the sale would have a substantial adverse effect on the agricultural land values in the area where the real estate in question is located; or (2) combining for sale or lease acquired real estate tracts when the size of the resulting tract substantially exceeds that of an average farming or ranching operation in the area where the tracts are located.

Requires FCS institutions to subdivide tracts that are larger than the average family farming or ranching operation before offering them for sale or lease.

Mandates that: (1) offers to sell or lease property acquired by an FCS institution (other than offers to another FCS institution) be public offers; and (2) the sale or lease of such property be based on competitive bidding. Directs the FCA to issue regulations to govern such bidding, including provisions to ensure: (1) actual notice to the previous owner of the availability of the property; and (2) sale or lease to the highest bidder, subject to the previous owner's right of first refusal.

Sets forth similar but distinct provisions to govern leases of property for terms of between five and ten years to family farmers or ranchers. Requires that each of these leases contain an option to buy the property when the lease term expires.

Requires persons (beginning in 1990) who enter into installment sales agreements or similar financing arrangements, to purchase FCS acquired property to buy stock or participation certificates in the pertinent institution.

Requires each FCS institution holding acquired property on the date of this Act's enactment to sell or lease the property within four years. Applies the same four-year requirement to subsequently acquired property, with the reference date being that on which the institution acquires the property.

Transfers the functions and role of the Federal Farm Credit Capital Corporation to the Loan Restructuring Corporation.

Lists documents and information that FCS institutions must provide to borrowers, including interest rate data and corporate materials.

States that any person who suffers legal wrong or who is aggrieved or adversely affected by the violation in question has the right to sue: (1) an FCS institution for violations of duty, standard, or limitation or of corollary FCA orders; or (2) the FCA for failure to perform duties. Grants jurisdiction in such cases to Federal district courts, without regard to the amount in controversy.

Title III: Insurance of Obligations of Farm Credit Banks; Liability of Banks on Obligations - Amends the Farm Credit Act of 1971 to create a Farm Credit Banks Insurance Corporation, under the direction of the FCA Board, having as its duty to insure the notes, bonds, and similar obligations of eligible FCS banks. Enumerates corporate powers.

Requires each FCS bank to apply for insurance within 90 days of this Act's enactment. Describes required contents for such applications. Directs the Corporation to reject the application of any bank having unsafe financial policies or management.

Prescribes: (1) the extent of insurance to be provided; (2) the assessment of premiums to be paid (not to exceed two-tenths of one percent of the proceeds of the obligation); (3) the establishment of a reserve; (4) procedures for terminating insurance; and (5) actions to be taken against banks that violate duties or engage in unsafe or unsound practices.

Mandates that, beginning in 1993, any minimum capital adequacy requirement in connection with the aggregate obligations of a bank or banks be established at a level to reduce, to the extent practicable, the risk of loss to the Corporation.

Prohibits a bank from participating in a joint issuance of obligations due and payable after 1992 unless it is insured by the Corporation.

Sets forth the order of liability of affected banks with respect to certain consolidated or system-wide obligations issued between January 1, 1988, and December 31, 1992.

Title IV: Real Estate Lending; Interest Rates - Amends the Farm Credit Act of 1971 to prohibit Federal land banks from making agricultural real estate mortgage loans to persons who are not bona fide farmers or ranchers, an defined by this Act.

Requires each Federal land bank to make available to eligible borrowers long-term real estate mortgage loans having terms of at least 15 years at a fixed interest rate. Caps the permissible interest rate on such loans at two percent above the average interest rate on the bank's obligations of comparable maturities during the preceding 12 months.

Provides for differential interest rate programs for loans of Federal land bank association members.

Caps the permissible interest rate on all the agricultural loans of a bank at two percent above the average interest rate on obligations issued by the bank during the preceding 12 months. Permits the FCA to authorize a higher interest rate under certain circumstances.

Restricts loans to no more than 75 percent of the appraised value to the real estate security (the current general restrictions is 85 percent). Permits an 85 percent limitation in case of young or beginning farmers or ranchers. Sets standards for determining appraised value.

Directs each Federal land bank to: (1) require borrower financial statements at least triennially; (2) establish a future payment plan into which participating borrowers could pay amounts to be offset against indebtedness.

Caps the permissible interest rate on short- and intermediate-term loans of production credit associations at two percent above their discount rate. Allows a differential interest rate program for member loans only upon stockholder approval.

Requires FCA approval for certain loans.

Title V: Service Organizations - Amends the Farm Credit Act of 1971 to direct the FCA to revoke the charter issued to the Farm Credit Corporation of America as of FY 1990, unless a majority of the members of the boards of directors of each Federal land bank association, production credit association, farm credit district, and the Central Bank for Cooperatives votes to permit its continuation.

Bars from the charter of the Federal Farm Credit Banks Funding Corporation (Funding Corporation) provisions that would permit the Funding Corporation to set policy or otherwise assume responsibilities of other FCS institutions with regard to member-borrower services.

Directs the FCA, within 30 days of this Act's enactment, to amend the charter of the Funding Corporation to provide for a board of directors.

Requires the Funding Corporation to report annually to each FCS bank and association and to specified congressional committees detailing its bond placements, budget, costs, and expenses.

Prohibits the FCA from issuing a charter to any new service corporation unless specifically authorized by an Act of Congress.

Title VI: Mergers - Amends the Farm Credit Act of 1971 with respect to mergers of various FCS institutions. Provides for a mandatory 60-day cooling off period before a voluntary merger of FCS associations becomes effective.

Requires association seeking voluntary merger: (1) to notify stockholders of the meeting date before any meeting at which they will vote on the merger; and (2) to provide a statement of the advantages and disadvantages associated with the merger.

Conditions mergers of similar FCS banks on the unanimous approval of the FCA Board.

Shifts from the FCA to the FCA Board the responsibility for assuring nondiscriminatory treatment of associations that disapprove mergers.

Directs the FCA to issue regulations to provide for and govern reconsideration by stockholders of voluntary mergers of associations between January 1, 1986, and the date of this Act's enactment.

Title VII: Boards of Directors - Amends the Farm Credit Act of 1971 to revise membership provisions with respect to the boards of directors of Federal land bank associations, production credit associations, the Central Bank for Cooperatives, and farm credit districts. Permits outside directors for the first two entities and requires them for the latter two.

Establishes procedures by which FCS bank stockholders may establish or abolish a separate board of directors. Sets forth membership requirements applicable to such a board.

Title VIII: Amendments to Title V of the Farm Credit Act of 1971; Miscellaneous - Amends the Farm Credit Act of 1971 to limit the annual compensation of a farm credit district director to $15,000.

Revises membership provisions applicable to the FCA Board, as well as provisions relating to its internal operation and to the responsibilities of the Chairman.

Subjects certain of the Chairman's personnel appointments and the Chairman's establishment of advisory committees to Board approval.

Grants to the Board additional powers with regard to bank mergers and the salary scale or rate of compensation of certain FCS institution employees.

Empowers the FCA to appoint a farm credit appraiser for each farm credit district.

Shifts: (1) from the Chairman of the FCA board to the Board itself various determinations affecting examinations of FCS institutions; and (2) from the FCA to the FCA Board certain decision and appointments in connection with receiverships or conservatorships of FCS institutions.

Prohibits any farm credit district board, bank board, or bank officer or employee from removing any director or officer of any production credit association or Federal land bank association.

Sets forth provisions with respect to FCA examinations of Federal land bank associations, requiring them at least once every five years.

Prohibits FCS institutions from contracting for an independent audit of FCS institutions or certain other financial institutions unless the agreement covers no more than two years and is entered into under competitive bidding procedures.

Directs each Federal land bank financing all or part of the stock of a Federal land bank association to charge a loan origination fee, to a maximum of two percent of the loan amount, in connection with loans made by a bank to a borrower. Prohibits the financing of such a fee.

Prohibits the requirement of Federal land bank association stock prior to full payment of the loan. Excepts loans in default from this prohibition.

Requires that Federal land bank or production credit association loan applications clearly state specified information concerning the amount of stock required to be purchased and its retirement.

Title IX: Farmers Home Administration Loan Restructuring - Amends the Consolidated Farm and Rural Development Act to direct the Secretary of Agriculture to: (1) implement within 60 days of this Act's enactment a policy under which all nonaccrual farm ownership and operating loans held by the Farmers Home Administration (FmHA) and loans made by a Federal or State chartered bank, savings and loan association, or other legally organized lending agency that have been guaranteed by the Secretary are to be reviewed on a case-by-case basis to determine whether they should be considered for forbearance, restructuring, or liquidation; and (2) provide for a case-by-case review of all high-risk loans held by the FmHA to determine appropriate measures to prevent such loans from becoming nonaccrual loans.

Authorizes the Secretary to pursue to final connection all loan-related claims against third parties assigned to the Secretary.

Directs the Secretary to: (1) grant forbearance on nonaccrual and high-risk loans to the maximum extent possible to avoid FmHA losses; and (2) to restructure loans in ways that would enable borrower repayments without impairing the borrower's standard of living if specified conditions are met.

Requires that the Secretary establish an appeals procedure with respect to loans determined to be ineligible for restructuring. Describes criteria to be met by the appeal process.

Prohibits the Secretary from requiring any borrower to provide additional collateral or from foreclosing certain loans as a result of the borrower's failure to do so.

Permits a borrower, upon application, to retain possession and occupancy of qualified homestead property for between three and five years in certain cases of foreclosure, bankruptcy, or involuntary liquidation. Describes the eligibility requirements to be met by affected borrowers. Grants to the borrower the right of first refusal with respect to the homestead property at the end of the prescribed occupancy period.

Directs the Secretary to permit a borrower to redeem real property acquired through legal process during the year following the date of judgment or the period prescribed under State law, whichever is longer. Applies State law to the redemption process. Fixes priorities as to borrower preference for redemption purchases.

Revises farmland disposition provisions to give previous owners or operators the right of first refusal with respect to a lease of a property and preference with respect to the awarding to management contracts governing the property. Authorizes the Secretary to sign a contract to lease land to its owner before the Secretary actually acquires the property. Requires that previous owners be given written notice of the potential sale or lease of property. Applies appeals procedures to denials of applications or disputes with respect to leases or purchase agreements.

Directs the Secretary to release from the sale of any loan-securing property an amount sufficient both to assure the borrower's family a reasonable standard of living and to pay all necessary farm operating expenses.

Title X: State Mediation Program - Establishes guidelines for State farm loan mediation programs. Enumerates criteria to be met by a State in order to qualify for the matching grant program instituted in this title. Lists the requirements to be met by the farm loan mediation program of a State, including provisions with respect to mediator training and duties and applications for mediation.

Creates a program of matching grants to the States under which the Secretary must provide financial assistance to a qualifying State for the operation and administration of its farm loan mediation program. Limits the amount of such a grant to: (1) no more than 50 percent of the costs of the operation and administration of the State's program; and (2) $1,000,000 per year per State.

Directs the Secretary to prescribe rules requiring each guarantee or insurance program under the Secretary's jurisdiction to: (1) cooperate in good faith with requests for information or for analysis; and (2) present and explore debt restructuring proposals advanced during the course of any farm loan mediation program. Mandates corresponding rulemaking by the FCA with respect to FCS institutions.

Authorizes FY 1988 through 1991 appropriations.