Modeling the Credit Risk in Agricultural Mortgages: A Critical Review of the Farm Credit Administration's Credit Risk Model for Farmer Mac

30 Pages Posted: 26 Jul 2004

See all articles by Austin Kelly

Austin Kelly

Federal Housing Finance Agency (FHFA)

Date Written: September 2004

Abstract

Farmer Mac is the GSE charged with creating a secondary market in loans backed by agricultural real estate. As part of its risk based capital regulation of Farmer Mac, the Farm Credit Administration (FCA) has estimated a credit risk model for agricultural mortgages. The output of this model is a key determinant of Farmer Mac's risk based capital requirement. This paper reviews both the structure of FCA's credit risk model, and the data used by FCA's contractors to estimate the model. Serious concerns are raised about both data quality and the econometric specification in use.

Keywords: mortgage, default, credit risk, GSE, risk based capital

JEL Classification: G21, G38, Q14, C41

Suggested Citation

Kelly, Austin J., Modeling the Credit Risk in Agricultural Mortgages: A Critical Review of the Farm Credit Administration's Credit Risk Model for Farmer Mac (September 2004). Available at SSRN: https://ssrn.com/abstract=553121 or http://dx.doi.org/10.2139/ssrn.553121

Austin J. Kelly (Contact Author)

Federal Housing Finance Agency (FHFA) ( email )

1700 G St. NW
Washington, DC 20552
United States
202 414-1336 (Phone)

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