§ 1945.167 - Insurance, loan limitations and special provisions.

(a) EM loan funds cannot be used for physical loss purposes unless that physical property lost was covered by general hazard insurance at the time that the damage caused by the natural disaster occurred. The level of coverage in effect at the time of the disaster must have been the tax or cost depreciated value, whichever is less. Chattel property must have been covered at the tax or cost depreciated value, whichever is less, when such insurance was readily available and the benefit of the coverage (the lesser of the property's tax or cost depreciated value) was greater than the cost of the insurance..

(b) Applicants must comply with the CAT insurance requirement no later than loan closing by either:

(1) Obtaining at least the CAT level of coverage, if available, for each crop of economic significance as defined by the Federal Crop Insurance Corporation, or,

(2) By waiving eligibility for emergency crop loss assistance in connection with the uninsured crop. FSA EM loan assistance is not considered emergency crop loss assistance for the purpose of the crop insurance waiver on the uninsured crop.

(c) Relationship between EM loans and other Agency loans. An eligible EM loan applicant's total credit needs will be first considered through use of EM loan authorities in the maximum amount of entitlement, before other regular (FO, OL, SW) Farm Credit Programs loan authorities are considered and used as a means of assisting the applicant/borrower.

(d) Use of EM loan funds is not authorized for expansion purposes beyond a family size farm. EM loan funds will not be used to expand an applicant's farming, ranching, or aquaculture operation beyond that which constitutes a family size farming/ranching operation. This limitation is not intended to prohibit minor changes in crop or livestock enterprises, provided:

(1) Any new or changed crop or livestock system is proven for the area; and

(2) The applicant has the knowledge and ability to manage the changed operation; and

(3) Substantial new or additional capital investment is not required.

EM applicants who operate family farms (as defined in § 1941.4 of subpart A of part 1941 of this chapter) may, if eligible, receive regular FmHA or its successor agency under Public Law 103-354 farm ownership (FO), and/or operating (OL) loans simultaneously with their initial (EM) loan to help finance their farming operations. If a borrower expands the farming operation beyond a family size farm after receiving an EM loan, no further EM loan assistance will be given even though the borrower may suffer qualifying losses under a new declared/designated/authorized disaster.

(e) Applicants involved in more than one operation. Loans to applicants involved in more than one farming operation will be considered so long as the loan limit set out in § 1945.163 (e) of this subpart is not exceeded.

(f) Refinancing guaranteed loans. An EM loan will not be made to refinance a guaranteed loan, except when the following conditions are met:

(1) The circumstances causing the need to refinance were beyond the borrower's control.

(2) Refinancing is in the best interest of the Government.

(g) New appraisals. New “Appraisal of Real Estate Reports” are not required if the appraisal report in the file is not over one year old, unless the approval official requests a new appraisal report, or unless significant changes in the market value of real estate have occurred in an area within the one-year period. Any changes in the value of real estate or chattel security will be recorded, dated and initialed by the certified appraiser on the appropriate appraisal reports in the file.

(h) [Reserved]

(i) Prohibition on guaranteeing repayment of advances from other credit sources. Agency or its successor agency under Public Law 103-354 employees will not guarantee repayment of advances from other credit sources, either personally or on behalf of applicants, borrowers, or Agency or its successor agency under Public Law 103-354.

(j) Highly erodible land and conversion of wetland. Loans may not be made for any purpose that will contribute to excessive erosion of highly erodible land or to the conversion of wetlands for the production of an agricultural commodity, as further explained in exhibit M to subpart G of part 1940 of this chapter.