§ 1965.81 - Severance agreements.

(a) General policies. Severance agreements or other instruments of similar effect under which a borrower may acquire through other credit, items such as laundry equipment, air conditioning units, and basic household furnishings that will not become part of real estate security, may be approved by the State Director, provided:

(1) The transaction will not adversely effect the FmHA or its successor agency under Public Law 103-354's security position and any additional obligations incurred will be within the borrower's repayment ability.

(2) The items covered by the severance agreement are needed in the successful operation of the security property.

(3) The financing arrangements are otherwise sound and proper.

(b) Handling requests. Requests will be made on Form FmHA or its successor agency under Public Law 103-354 465-1. The District Director will forward to the State Director a properly completed and executed Form FmHA or its successor agency under Public Law 103-354 465-1, any proposed severance agreement, the case file, and specific recommendations regarding the request.

(c) Consent and approval. The State Director will indicate approval or disapproval on Form FmHA or its successor agency under Public Law 103-354 465-1. The OGC will be requested to prepare or approve the form of severance agreement and issue any special instructions when necessary.