§ 1980.123 - Transfer and assumption of Farmer Program loans.

(a) All transfers and assumptions must be approved in writing by FmHA or its successor agency under Public Law 103-354. Such transfers and assumptions must be to an eligible applicant. EM actual loss loans may only be transferred to a co-obligor. All transfers and assumptions must meet the requirements of exhibit M of subpart G of part 1940 of this chapter.

(b) The transferee will submit Form FmHA or its successor agency under Public Law 103-354 1980-25 and other needed information to the lender for evaluation.

(c) In accordance with the Food Security Act of 1985 (Pub. L. 99-198), after December 23, 1985, if an individual transferee or any member, stockholder, partner, or joint operator of an entity transferee is convicted under Federal or State law of planting, cultivating, growing, producing, harvesting or storing a controlled substance (see 21 CFR part 1308, which is exhibit C to subpart A of part 1941 of this chapter and is available in any FmHA or its successor agency under Public Law 103-354 office, for the definition of “controlled substance”) prior to the approval of the transfer and assumption in any crop year, the individual or entity shall be ineligible for a transfer and assumption for the crop year in which the individual or member, stockholder, partner, or joint operator of the entity was convicted and the four succeeding years. Applicants will attest on Form FmHA or its successor agency under Public Law 103-354 1980-25 that as individuals or that its members, if an entity, have not been convicted of such crime after December 23, 1985.

(d) When a transfer and assumption occurs and the transferee has an outstanding insured or guaranteed FO, SW or RL loan, the borrower's total unpaid principal insured and guaranteed indebtedness for these loans may not exceed the lesser of $300,000 or the market value of the farm or other security. When the transferee is indebted for an OL loan/line of credit, the transferee's total insured and guaranteed OL principal balance may not exceed $400,000 at the time of the transfer and assumption.

(e) Available transfer and assumption options to eligible applicants include transferring the total indebtedness to another borrower on the same terms, or on different terms not to exceed those terms for which an initial loan/line of credit can be made.

(f) In any transfer and assumption case, the transferor, including any guarantor(s), may be released from liability by the lender with FmHA or its successor agency under Public Law 103-354 written concurrence only when the value of the collateral being transferred is at least equal to the amount of the loan or the line of credit ceiling for Contracts of Guarantee. If the transfer is for less than this:

(1) FmHA or its successor agency under Public Law 103-354 must determine that the transferor has no reasonable debt-paying ability considering assets and income at the time of the transfer.

(2) FmHA or its successor agency under Public Law 103-354 County Committee must certify that the transferor has cooperated in good faith, used due diligence to maintain the collateral against loss, and has otherwise fulfilled all of the regulations of this subpart to the best of the transferor's ability.

(g) Any proceeds received from the sale of security before a transfer and assumption will be credited to the transferor's guaranteed loan debt in inverse order of maturity before the transfer and assumption transaction is closed.

(h) The lender is responsible for getting an appraisal of the fair market value of all the collateral securing the loan/line of credit. Subject to the approval of the transferor and transferee, an appraisal can be made by either independent fee appraisers or qualified appraisers on the lender's staff. Appraisers must meet the qualifications outlined in § 1980.113(a)(8)(ii) of this subpart. The appraisal report fee and other related costs will be paid by the transferor and the transferee, as they agree.

(i) The market value of the security being acquired by the transferee, plus any additional security the transferee proposes to give, must be adequate to secure the balance of the total guaranteed loan/line of credit ceiling for Contracts of Guarantee, plus any prior liens.

(j) If any cash downpayment is made, it may be paid directly to the transferor as payment for the transferor's equity in the project provided:

(1) The lender recommends and FmHA or its successor agency under Public Law 103-354 approves the cash downpayment be released to the transferor.

(2) Any downpayment that is made by the transferee to the transferor does not suspend the transferee's obligation to continue to make the guaranteed loan/line of credit payments as they come due under the terms of the assumption.

(3) The transferor agrees not to take any actions against the transferee in connection with such transfer in the future without first obtaining the approval of FmHA or its successor agency under Public Law 103-354 and the lender.

(4) The lender determines that the transferee has the ability to repay the guaranteed debt assumed and any other indebtedness.

(k) The lender will issue a statement to FmHA or its successor agency under Public Law 103-354 that the debt can be properly transferred and the conveyance instruments must be filed, registered, or recorded, as appropriate, and must be legally sufficient.

(l) FmHA or its successor agency under Public Law 103-354 will not guarantee any additional loans to provide equity funds for a transfer and assumption.

(m) The assumption will be made on the lender's form of assumption agreement.

(n) The assumption agreement must contain the FmHA or its successor agency under Public Law 103-354 case number of the transferor and transferee.

(o) The assumption agreement may change loan terms and/or interest rates only if a new Loan Note Guarantee or Contract of Guarantee will be executed.

(p) In the case of a transfer and assumption at the same rates and terms the lender must give any holder(s) notice of the transfer and notice that future payments will be made under a different name and case number. It is the lender's responsibility to see that the transfer and assumption is noted on all originals of the Loan Note Guarantee or Contract of Guarantee. The lender must provide FmHA or its successor agency under Public Law 103-354 with a copy of the transfer and assumption agreement.

(q) Before allowing a transfer and assumption at different rates and terms, the lender must consult with any holder(s). If the holder(s) consents in writing to the change in rates and terms, the lender must provide FmHA or its successor agency under Public Law 103-354 with documentation of the holders concurrence and a copy of the transfer and assumption agreement and must note the transfer and assumption on all originals of the Loan Note Guarantee or Contract of Guarantee.