Executives of Farmer Mac, which has tried unsuccessfully for several years to create and support a secondary market for farm mortgages, say it finally has the firepower to get the job done.

Under legislation that President Clinton signed last week, Farmer Mac - formally known as the Federal Agricultural Mortgage Corp. - expects to roll out a securitization program to make it easier for rural banks to achieve liquidity in their loan portfolios.

The legislation lifted a structural restriction that had stymied securitization efforts, said Thomas R. Clark, chief lobbyist at Farmer Mac.

As originally chartered, Farmer Mac could guarantee just 90% of the loan amounts that were presented for securitization. This restriction made the loan pools less appealing to Wall Street and less economical for rural banks to sell as securities, Mr. Clark said.

Now, , Mr. Clark said, the agency will be able to offer 100% backing - an implied government guarantee of the securities' full face value. This backing, he said, will let banks reduce loan rates by at least 50 basis points.

Fannie Mae and Freddie Mac - more familiar on Wall Street as secondary market agencies - have used securitization to bring $1.5 trillion of mortgages to market.

Farmer Mac wants to emulate that success, Mr. Clark said. "It's certainly our intention for this to follow the pattern of Fannie and Freddie."

But industry observers say Farmer Mac has a long way to go.

To win credibility on Wall Street, Farmer Mac must demonstrate that it has adopted procedures to oversee the farm loan program, investment bankers said.

Farmer Mac must give an indication of what size pools it will form, who the originators are, what underwriting standards they must meet, and what kind of backing the loans have, said Joseph C. Hu, director of mortgage research at Oppenheimer & Co., New York.

"It takes a lot," Mr. Hu said, "but it's not an insurmountable effort."

The farm agency's track record so far is spotty. Farmer Mac has spent the past five years promising - but not delivering - a plan to create a vehicle through which banks could securitize their loans. It has been able to offer just $100 million of public securities for sale and has placed another $400 million with private investors.

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