As a result of that situation, Farm Credit changed its ways. Its officers now look at the farmer's ability to repay from farm operations, not property value.
"There is no doubt that the current credit crisis has shaken everyone's trust in our nation's financial institutions, as well as in our government," Ken Auer, president of the Farm Credit Council in Washington, said in a recent publication sent to farmer members of the cooperative.
"But it is important to remember that not all lenders are alike," he continued. "I'd like to suggest that Farm Credit is one of the few successes in lending, and we should look to our structure and safeguards as models for our industry."
He said the agriculture industry has been relatively strong and that has added to the cooperative's level of stability.
In the Farm Credit cooperative structure, the borrowers are also stockholders, or members. These borrowers elect the cooperative's board of directors, and they share in the cooperative's profits.
Many of the regulatory tools that are only now being implemented for Fannie Mae and Freddie Mac have been part of Farm Credit's regulatory framework for many years, including a strong central regulator - the Farm Credit Administration - which oversees Farm Credit's risk-management tools, capital levels, adherence to the mission and compliance with regulations and laws.
Freddie Mac and Fannie Mae are two huge housing lenders that were recently taken over by the federal government.
In a letter to borrowers last month, Frazee told them that MidAtlantic had prepared for the credit crisis the best that it could.
"We've watched our capital position," he said. "We've made sure we're efficient, we've paid attention to our net income and we've managed our credit quality."
MidAtlantic is the largest agriculture lender in the Mid-Atlantic region, accounting for about 60 percent of all regional agriculture loans. Its influence on the market will grow.
MidAtlantic Farm Credit and Valley Farm Credit have received approval from their stockholders to merge by year's end.
The resulting organization will still be MidAtlantic Farm Credit, and it will have combined assets of more than $2.3 billion, making it one of the largest rural lending organizations on the East Coast.
The co-op's headquarters will be in Westminster.
