§ 1823.414 - Title to security property.

The applicant will provide evidence of title satisfactory to the FmHA or its successor agency under Public Law 103-354 for all property that will serve as security for the loan.

(a) Real estate security. (1) Trust property. The applicant will request BIA to furnish Title Status Reports to the County Supervisor. The County Supervisor will review the reports in accordance with subpart B of part 1927 of this chapter. Form FmHA or its successor agency under Public Law 103-354 1927-13, “Waiver of Encumbrances, Exceptions, and Reservations,” will be used as appropriate. The County Supervisor will ask the State Director for advice if necessary.

(i) If administrative closing requirements can be met, BIA will prepare the deeds and obtain the needed signatures. The County Supervisor will supply BIA with Forms 1927-1, “Real Estate Mortgage for (State)”, and FmHA or its successor agency under Public Law 103-354 440-22, “Promissory Note (Association or Organization).” BIA will insert the appropriate land descriptions.

(ii) The partly completed real estate mortgage and note will be returned to the County Supervisor. The loan check can then be ordered and the loan closed. The mortgage and note will be completed and signed, but no funds will be disbursed.

(iii) A conformed copy of the note with the original mortgage and two copies will be forwarded to BIA. They will insert a certification on the mortgage and return it to the County Supervisor. BIA will also indicate that the deeds have been recorded and the priority of the Government's lien in a continuation of the Title Status Report. However, the certification about the lien priority may be made on the old Status Report if BIA prefers this.

(iv) The certified original mortgage will then be recorded by the County Supervisor in the county where the land is located if OGC determines that such recordation is necessary. Funds can be disbursed as soon as the mortgage is recorded or the determination is made that recordation is not necessary.

(2) Nontrust land. Title clearance will be obtained in accordance with subpart B of part 1927 of this chapter.

(b) Rights of way. The applicant will be responsible for obtaining adequate, continuous, and valid rights-of-way for operation, and maintenance of its property. The following documentary evidence will be furnished FmHA or its successor agency under Public Law 103-354.

(1) A copy of the form of right-of-way instrument to be used if it differs from Form FmHA or its successor agency under Public Law 103-354 442-20, “Right-of-Way Easement.” Rights-of-way with restrictive provisions should be accepted only in very unusual circumstances. Whenever the form of the instrument differs from Form FHA or its successor agency under Public Law 103-354 442-20 or contains special provisions that are required by either the applicant or the grantor, copies of such instruments will be submitted to the FHA or its successor agency under Public Law 103-354 for review prior to acceptance and recording. Either specific rights-of-way containing a legal property description of a centerline description of the rights-of-way or general rights-of-way containing only a description of the tract or parcel of land affected, may be used.

(2) A certificate by a duly authorized official of the applicant that it has obtained and presently holds adequate and sufficient legal title to all rights-of-way, permits and other authorizations deemed necessary by the applicant and its attorney for an uninterrupted right-of-way for the operation and maintenance of the property. Use Form FmHA or its successor agency under Public Law 103-354 442-21, “Right-of-Way Certificate.”

(3) An opinion by the applicant's attorney relating to the adequacy and legality of the rights-of-way covered by the right-of-way certificate. Use Form FmHA or its successor agency under Public Law 103-354 442-22, “Opinion of Counsel Relative to Rights-of-Way,” to the extent possible.

(c) Lien on water rights. When a mortgage or an assignment will be taken on water rights, the applicant's attorney will furnish a statement regarding the nature of the water rights owned such as convenance of title, appropriation and decree, application and permit, public notice of appropriation and use, and so forth.

(d) Lien on chattel property. When liens will be taken on chattel property, the following will be furnished:

(1) Description of the property for use in preparing security instruments.

(2) Form FmHA or its successor agency under Public Law 103-354 440-13, “Report of Lien Search,” or similar form prepared in accordance wiith the State requirements prescribing the use of such form for Operating loans.

(e) Disposition of title evidence. All title evidence other than the opinion of title, mortgage title insurance policy, and water stock certificates will be returned to the borrower when the loan has been closed. The opinion of title or title insurance policy and any water stock certificates will be retained in the borrower's county office case folder.