§ 1980.109 - Promissory notes, line of credit agreements, security instruments, and financing statements.

(a) Promissory notes, line of credit agreements, mortgages, and security agreements. The lender will use its own promissory notes, line of credit agreements, real estate mortgages (including deeds of trust and similar instruments), and security agreements (including chattel mortgages in Louisiana and Puerto Rico), provided such forms do not contain any provisions that are in conflict or are inconsistent with the provisions of this subpart or Subpart A of this part.

(1) Repayment Schedules—In order for notes to be acceptable, the principal and interest repayment schedules will be clearly shown in the note(s). Use of a note with a “payment on demand” feature is not permissible unless it is modified by a supplemental agreement in the form of an allonge to the note or other legally effective amendment which waives the demand feature and sets forth the repayment schedule.

(2) Signatures—Except in those unusual circumstances where an exemption is obtained in accordance with § 1980.108 of this subpart the promissory note will be signed as follows:

(i) Individuals. Only one person will sign the note as a borrower. If a cosigner is needed, the cosigner will also sign the note.

(ii) Partnerships or joint operations. The note will be executed by the partner or joint operator authorized to sign for the entity, and all partners in the partnership or joint operators in the joint operation, as individuals.

(iii) Corporations or cooperatives. The promissory note(s) or Line of Credit Agreement will be executed so as to evidence liability of the entity as well as individual liability of all member(s) or stockholder(s) in the entity.

(b) Financing statements. Commercial financing statement forms that comply with state laws and regulations may be used. If the financing statement does not already contain the following provisions, they must be inserted to meet Agency requirements:

(1) Covering the “proceeds and products” of the collateral described, and

(2) Stating that “disposition of the collateral is not authorized hereby.”