[Federal Register Volume 60, Number 198 (Friday, October 13, 1995)]
[Rules and Regulations]
[Pages 53253-53265]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-24179]
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[[Page 53254]]
DEPARTMENT OF AGRICULTURE
Rural Housing and Community Development Service
Rural Business and Cooperative Development Service
Rural Utilities Service
Consolidated Farm Service Agency
7 CFR Part 1980
RIN 0575-AB70
Removal of the Prohibition Against Capitalizing Accrued Interest
When Restructuring CFSA Guaranteed Loans
AGENCIES: Rural Housing and Community Development Service, Rural
Business and Cooperative Development Service, Rural Utilities Service,
and Consolidated Farm Service Agency, USDA.
ACTION: Final rule.
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SUMMARY: The issuing agencies amend their guaranteed farm credit
programs loan making and servicing regulations to remove the
restriction against lenders capitalizing accrued interest when
restructuring loans. The intended effect is to reduce barriers which
inhibit lenders from restructuring loans of delinquent guaranteed
borrowers.
EFFECTIVE DATE: October 13, 1995.
FOR FURTHER INFORMATION CONTACT: Phillip Elder, Senior Loan Officer,
Farm Credit Programs Loan Servicing and Property Management Division,
Guaranteed Loans Branch, Consolidated Farm Service Agency (CFSA), USDA,
South Agriculture Building, Room 5446, 14th and Independence Avenue
SW., Washington, DC 20250-0774, Telephone (202) 690-4012.
SUPPLEMENTARY INFORMATION:
Classification
This rule has been determined to be not significant for the
purposes of Executive Order 12866 and therefore has not been reviewed
by the Office of Management and Budget (OMB).
Intergovernmental Consultation
1. For the reasons set forth in the final rule related to Notice 7
CFR Part 3015, Subpart V (48 FR 29115, June 24, 1983) and FmHA
Instruction 1940-J, Farm Ownership Loans, Farm Operating Loans, and
Emergency Loans are excluded from the scope of Executive Order 12372,
which requires intergovernmental consultation with state and local
officials.
2. The Soil and Water Loan Program is subject to and has met the
provisions of Executive Order 12372 and FmHA Instruction 1940-J.
Programs Affected
These changes affect the following CFSA programs as listed in
the Catalog of Federal Domestic Assistance:
10.406--Farm Operating Loans
10.407--Farm Ownership Loans
10.416--Soil and Water Loans
Environmental Impact Statement
This document has been reviewed in accordance with 7 CFR Part 1940,
Subpart G, ``Environmental Program.'' It is the determination of the
issuing agencies that this action does not constitute a major Federal
action significantly affecting the quality of the human environment,
and in accordance with the National Environmental Policy Act of 1969,
Pub. L. 91-190, an Environmental Impact Statement is not required.
Civil Justice Reform
This final rule has been reviewed in accordance with Executive
Order (E.O.) 12778, Civil Justice Reform. In accordance with this rule:
(1) All state and local laws and regulations that are in conflict with
this rule will be preempted; (2) no retroactive effect will be given to
this rule; and (3) administrative proceedings in accordance with the
regulations of the agency at 7 CFR, part 1900, subpart B, or those
regulations published by the Department of Agriculture to implement the
provisions of the National Appeals Division as mandated by the
Department of Agriculture Reorganization Act of 1994, must be exhausted
before bringing suit in court challenging action taken under this rule
unless those regulations specifically allow bringing suit at an earlier
time.
Paperwork Reduction Act
The information collection requirements contained in these
regulations have been approved by the Office of Management and Budget
(OMB) under the provisions of 44 U.S.C. Chapter 35 and have been
assigned OMB control number 0575-0024 and 0575-0079 in accordance with
the Paperwork Reduction Act of 1980 (44 U.S.C. 3507). This final rule
does not revise or impose any new information collection requirement
from those approved by OMB.
Discussion of Final Rule
This final rule relieves the restriction prohibiting lenders from
charging interest on interest when restructuring guaranteed Farm Credit
Programs loans (formerly Farmer Program loans). It also eliminates the
requirement that principal payments be made which are at least equal to
the amount of the depreciation of the security. This policy was
proposed in 59 FR 14769-79 published on March 30, 1994. This proposed
rule provided a 15 day comment period ending April 14, 1994. These
policy changes affect the Farmers Home Administration (FmHA) Farmer
Programs loans now administered as Farm Credit Programs by the
Consolidated Farm Service Agency (CFSA). This reorganization was
authorized by Federal Crop Insurance Reform and Department of
Agriculture Reorganization Act of 1994 (Public Law 103-354, 108 stat.
3178, October 13, 1994). Other guaranteed loan programs formerly
administered by FmHA will only be affected by conforming administrative
revisions made to subpart A of part 1980. These programs include: Water
and Waste disposal facility loans administered by the Rural Utilities
Service (RUS), Community Programs loans administered by the Rural
Housing and Community Development Service (RHCDS), and Business and
Industrial loans and Nonprofit National Corporations loans now
administered by the Rural Business and Cooperative Development Service
(RBCDS). CFSA, RUS, RHCDS, and RBCDS are jointly issuing this final
rule since substantial administrative revisions have been made to
regulations affecting their programs in an effort to reduce agency
regulations. The agency received eight comment letters prior to the
deadline for public comment to the proposed rule. Comments were
received from lenders that participate in the program, a Rural Economic
and Community Development (RECD) (formerly FmHA) State Director, the
USDA Office of the Inspector General and others.
The majority of the comments were in support of the proposed
changes. The commenters agreed that removal of the prohibition of
charging interest on interest would result in more farmers being
allowed the opportunity to continue farming after their loans become
delinquent.
One commenter agreed that the proposed changes would result in
lenders being less reluctant to restructure debts. The same commenter,
however, raised concerns about the increased costs of the changes to
the government and the farmer. This effect was noted by the Agency in
the proposed rule. It was determined that the increased costs would be
offset by the benefit of enhancing the likelihood of the farmer's
success. This goes directly to the goals of CFSA's guaranteed loan
program. The same commenter raised a concern about the proposal
increasing profits to the lender.
[[Page 53255]]
The Agency determined a regulation change that increases private
industry profit should not be avoided for that reason. The increase in
profits possible from the change would be negligible and not cause for
concern.
Another commenter suggested that late payment charges and interest
accrued on these charges be covered by the guarantee. The commenter
indicates that allowing these charges to be capitalized into a
restructured loan, but not allowing them to be covered by the guarantee
will result in a continued administrative burden to the lender. If
allowed to be capitalized, these charges, and the interest that accrues
on them, will have to be maintained separately from the rest of the
restructured loan. The Agency has not adopted this commenter's
recommendations. If the guaranteed percentage of late payment fees were
paid by the Government, it would reduce the lender's motivation to act
expediently in resolving a delinquent account and result in
significantly higher losses to the Government.
Another commenter similarly indicated that loss claim preparation
will be more difficult as the late payment charges will have to be
separated from the other debt. This commenter recommended that only
debt covered by the guarantee be allowed to be restructured. In
response to the above comments, Sec. 1980.11 and the applicable forms
have been revised to prohibit the capitalization of late payment fees.
A provision has also been added to Sec. 1980.124 to allow only interest
that has accrued at the note rate to be capitalized. This will reduce
confusion and administrative costs.
This commenter also pointed out that current agency regulations
require loss payments as a result of a guaranteed loan writedown be
applied to principal first then interest, to avoid charging interest on
interest after the writedown. Removal of the prohibition against
charging interest on interest would cause this reference to be
unnecessary. The final rule has revised subpart B of part 1980 by
removing Sec. 1980.125 (a)(10).
The same commenter also pointed out that the proposed rule
indicated the County Supervisor would approve restructuring actions, as
long as the amount did not exceed statutory loan limitations. The
commenter suggested that the determination of the CFSA approval
official should be based on the authorities outlined in exhibit C of
subpart A of part 1901 (available in any CFSA office) and the combined
unpaid principal and interest to be restructured. To avoid the
possibility of County Supervisors exceeding their approval authority,
the Agency has adopted the commenter's recommendations.
As part of this final rule, the agencies are also removing some
administrative provisions from the Federal Register and are changing
references from ``FmHA'' to ``the agency,'' ``the Agency,'' ``The
Agency,'' ``the government,'' ``Government,'' or ``The Government.''
Also references to ``Farmer Programs'' are revised to ``Farm Credit
Programs'' to reflect agency reorganization. Other minor wording
changes are being made.
List of Subjects in 7 CFR Part 1980
Administrative practice and procedure, Agriculture, Business and
industry, Community facilities, Credit, Loan programs--Agriculture,
Loan programs--Business and industry, Loan programs--Housing and
community development, Low and moderate income housing, Reporting and
recordkeeping requirements, Rural areas.
Therefore, chapter XVIII, title 7, Code of Federal Regulations is
amended as follows:
PART 1980--GENERAL
1. The authority citation for part 1980 is revised to read as
follows:
Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 42 U.S.C. 1480; 7 CFR
2.23 and 2.70.
Subpart A--General
2. Section 1980.11 is revised to read as follows:
Sec. 1980.11 Full faith and credit.
The Loan Note Guarantee and Contract of Guarantee constitute
obligations supported by the full faith and credit of the United States
and are incontestable except for fraud or misrepresentation of which
the lender or holder has actual knowledge at the time it becomes such
lender or holder or which lender or holder participates in or condones.
Generally, any Loan Note Guarantee, Contract of Guarantee or Assignment
Guarantee Agreement attached to or relating to a note which provides
for payment of interest on interest is void. In the case of Farm Credit
Programs loans, however, a Loan Note Guarantee, Contract of Guarantee
or Assignment Guarantee Agreement attached to a note that provides for
the capitalization of interest is not void. The guarantee and right to
require purchase will be directly enforceable by holder notwithstanding
any fraud or misrepresentation by the lender or any unenforceability of
the Loan Note Guarantee by the lender. The Loan Note Guarantee or
Contract of Guarantee will be unenforceable by the lender to the extent
any loss is occasioned by violation of usury laws, negligent servicing
or failure to obtain the required security regardless of the time at
which the Agency acquires knowledge of the foregoing. Any losses
occasioned will be unenforceable by the lender to the extent that loan
funds are used for purposes other than those specifically approved by
the Agency in its Form FmHA 1980-15 (available in any Agency office).
Negligent servicing is defined as the failure to perform those services
which a reasonably prudent lender would perform in servicing its own
portfolio of loans that are not guaranteed. The term includes not only
the concept of a failure to act but also not acting in a timely manner
or acting in a manner contrary to the manner in which a reasonably
prudent lender would act up to the time of loan maturity or until a
final loss is paid. The Loan Note Guarantee or Assignment Guarantee
Agreement in the hands of a holder shall not cover interest accruing 90
days after the holder has demanded repurchase by the lender, nor shall
the Loan Note Guarantee or Assignment Guarantee Agreement in the hands
of a holder cover interest accruing 90 days after the lender or the
Agency has requested the holder to surrender the evidence of debt for
repurchase.
Sec. 1980.12 [Removed and Reserved]
3. Section 1980.12 is removed and reserved.
4. Section 1980.13 is amended by removing the phrase ``on Form FmHA
or its successor agency under Public Law 103-354 1980-25, `Farmer
Programs Application,' '' from paragraph (b)(2); by removing the second
sentence of paragraph (b)(4); by revising the words ``and/or'' to read
``and'' in the fifth sentence of the introductory text of paragraph
(b); by revising ``FmHA'' to read ``the Agency'' in the second sentence
of the introductory text of paragraph (a), paragraphs (a)(2), (b)(2),
the second sentence of paragraph (b)(4), and paragraph (c); by revising
``FmHA'' to read ``The Agency'' in the sixth and seventh sentences of
the introductory text of paragraph (a) and the first sentence of
paragraph (b)(4); by revising ``FmHA'' to read ``Agency'' in paragraph
(b)(5); and by revising the words ``Farmer Programs loans'' to read
``Farm Credit Programs loans'' in the fourth sentence of the
introductory text of paragraph (b) and in paragraph (b)(4)(ii).
5. Section 1980.20 is amended by revising the word ``FmHA'' to read
``the Agency's'' in paragraph (a)(1); by revising ``FmHA'' to read
``The Agency''
[[Page 53256]]
in the introductory text of paragraph (b); and by revising the
introductory text of paragraph (a) to read as follows:
Sec. 1980.20 Loan guarantee limits.
(a) Lenders and applicants will propose the percentage of
guarantee. The Agency will set the percentage of guarantee. The maximum
percentage of guarantee (as opposed to the maximum loss covered by the
guarantee) on a Business and Industrial loan is defined in
Sec. 1980.420. The maximum percentage of guarantee for DARBE guaranteed
loans in excess of $2,000,000 will be calculated so that the guaranteed
portion of the principal amount of the loan cannot exceed $2,000,000.
The maximum percentage of guarantee for all other loans covered by this
section will be ninety percent. Also, except in regards to D&D and
DARBE guaranteed loans (see subpart E of this part) or as modified for
Farm Credit Programs guaranteed loans (see subpart B of this part), the
maximum loss covered by Form FmHA 449-34 or Form FmHA 1980-27 (both
available in any Agency office) can never exceed the lesser of:
* * * * *
Sec. 1980.83 [Removed and Reserved]
6. Section 1980.83 (b) is removed and reserved.
7. Section 1980.84 is amended by removing and reserving paragraph
(a) and by revising the section heading and introductory text of
paragraph (b) to read as follows:
Sec. 1980.84 Replacement of guaranteed loan or line of credit
documents.
(a) [Reserved]
(b) Requirements. When a Loan Note Guarantee, Contract of
Guarantee, or Assignment Guarantee Agreement is lost, stolen,
destroyed, mutilated, or defaced while in the custody of the lender or
holder, the lender will coordinate the activities of the party who
seeks the replacement documents and will submit the required documents
to the Agency for processing. The requirements for replacement are as
follows:
* * * * *
8. Section 1980.100 is revised to read as follows:
Sec. 1980.100 OMB control number.
The reporting requirements contained in this subpart have been
approved by the Office of Management and Budget (OMB) and have been
assigned OMB control number 0575-0024. Public reporting burden for this
collection of information is estimated to vary from 15 minutes to 28
hours per response, with an average of 2.08 hours per response,
including time for reviewing instructions, searching existing data
sources, gathering and maintaining the data needed, and completing and
reviewing the collection of information. Send comments regarding this
burden estimate or any other aspect of this collection of information,
including suggestions for reducing this burden, to the Department of
Agriculture, Clearance Officer, OIRM, Ag Box 7630, Washington, D.C.
20250; and to the Office of Management and Budget, Paperwork Reduction
Project (OMB #0575-0024), Washington, D.C. 20503.
9. Appendix A to subpart A is revised to read as follows:
Appendix A--Loan Note Guarantee
USDA
Form FmHA 449-34
(Rev. 10-95)
Type of Loan-----------------------------------------------------------
Applicable 7 C.F.R. part 1980
subpart----------------------------------------------------------------
State------------------------------------------------------------------
County-----------------------------------------------------------------
Date of Note-----------------------------------------------------------
Borrower---------------------------------------------------------------
Government Loan Identification Number----------------------------------
Lender-----------------------------------------------------------------
Lender's IRS ID Tax Number---------------------------------------------
Lender's Address-------------------------------------------------------
Principal Amount of Loan-----------------------------------------------
The guaranteed portion of the loan is $______ which is ______
(______ %)
percent of loan principal. The principal amount of loan is evidenced
by ______ note(s) (includes bonds as appropriate) described below.
The guaranteed portion of each note is indicated below. This
instrument is attached to note
______ in the face amount of $______
and is number ______ of ______.
Percent
of total Amount
Lender's identifying No. Face amount face guaranteed
amount
$________ ________ $________
----------------------------------------
Total........................ $________ 100 $________
In consideration of the making of the subject loan by the above
named Lender, the United States of America, acting through the
Consolidated Farm Service Agency, Rural Business and Cooperative
Development Service, Rural Utilities Service, or Rural Housing and
Community Development Service (herein called ``Government''),
pursuant to the Consolidated Farm and Rural Development Act (7
U.S.C. 1921 et seq.), the Emergency Livestock Credit Act of 1974 (7
U.S.C. note preceding 1961 Pub. L. 93-357 as amended), the Emergency
Agricultural Credit Adjustment Act of 1978 (7 U.S.C. note preceding
1921, Pub. L. 95-334), or Title V of the Housing Act of 1949 (42
U.S.C. 1471 et seq.) does hereby agree that in accordance with and
subject to the conditions and requirements herein, it will pay to:
A. Any Holder 100 percent of any loss sustained by such Holder
on the guaranteed portion and on interest due (including any loan
subsidy) on such portion and any capitalized interest on such
portion resulting from the restructuring of a Guaranteed Farm Credit
Program loans but not exceeding statutory loan limits.
B. The Lender the lesser of 1. or 2. below:
1. Any loss sustained by such Lender on the guaranteed portion
including:
a. principal and interest indebtedness as evidenced by said
note(s) or by assumption agreement(s), and
b. Any loan subsidy due and owing, and
c. Principal and interest indebtedness on secured protective
advances for protection and preservation of collateral made with
Government's authorization, including but not limited to, advances
for taxes, annual assessments, any ground rents, and hazard or flood
insurance premiums affecting the collateral, or
d. and, Capitalized interest on such portion resulting from the
restructuring of a Guaranteed Farm Credit Programs Loans and not
exceeding statutory loan limits, or
2. The guaranteed principal advanced to or assumed by the
Borrower under said note(s) or assumption agreement(s) and any
interest due (including any loan subsidy) thereon and any
capitalized interest resulting from the restructuring of a
Guaranteed Farm Credit Programs loans and not exceeding statutory
loan limits.
If Government conducts the liquidation of the loan, loss
occasioned to a Lender by accruing interest (including any loan
subsidy) after the date Government accepts responsibility for
liquidation will not be covered by this Loan Note Guarantee. If
Lender conducts the liquidation of the loan accruing interest
(including any loan subsidy) shall be covered by this Loan Note
Guarantee to date of final settlement when the lender conducts the
liquidation expeditiously in accordance with the liquidation plan
approved by Government.
Definition of Holder
The Holder is the person or organization other than the Lender
who holds all or part of the guaranteed portion of the loan with no
servicing responsibilities. Holders are prohibited from obtaining
any part(s) of the Guaranteed portion of the loan with proceeds from
any obligation, the interest on which is excludable from income,
under Section 103 of the Internal Revenue Code of 1954, as amended
(IRC). When the Lender assigns a part(s) of the guaranteed loan to
an assignee, the assignee becomes a Holder only when Form FmHA 449-
36, ``Assignment Guarantee Agreement,'' is used.
Definition of Lender
The Lender is the person or organization making and servicing
the loan which is guaranteed under the provisions of the applicable
subpart of 7 C.F.R. part 1980. The Lender is also the party
requesting a loan guarantee.
Conditions of Guarantee
1. Loan Servicing
Lender will be responsible for servicing the entire loan, and
Lender will remain mortgagee and/or secured party of record not
[[Page 53257]]
withstanding the fact that another party may hold a portion of the
loan. When multiple notes are used to evidence a loan, Lender will
structure repayments as provided in the loan agreement. In the case
of Farm Ownership, Soil and Water, or Operating Loans, the Lender
agrees that if liquidation of the account becomes imminent, the
Lender will consider the Borrower for an Interest Rate Buydown under
Exhibit C of subpart B of 7 C.F.R., part 1980, and request a
determination of the Borrower's eligibility by Government. The
Lender may not initiate foreclosure action on the loan until 60 days
after a determination has been made with respect to the eligibility
of the Borrower to participate in the Interest Rate Buydown Program.
2. Priorities
The entire loan will be secured by the same security with equal
lien priority for the guaranteed and unguaranteed portions of the
loan. The unguaranteed portion of the loan will not be paid first
nor given any preference or priority over the guaranteed portion.
3. Full Faith and Credit
The Loan Note Guarantee constitutes an obligation supported by
the full faith and credit of the United States and is incontestable
except for fraud or misrepresentation of which Lender or any Holder
has actual knowledge at the time it became such Lender or Holder or
which Lender or any Holder participates in or condones. If the note
to which this is attached or relates provides for the payment of
interest on interest, then this Loan Note Guarantee is void.
However, in the case of the Farm Credit Programs loans, the
capitalization of interest when restructuring loans will not void
this Loan Note Guarantee. In addition, the Loan Note Guarantee will
be unenforceable by Lender to the extent any loss is occasioned by
the violation of usury laws, negligent servicing, or failure to
obtain the required security regardless of the time at which
Government acquires knowledge of the foregoing. Any losses
occasioned will be unenforceable to the extent that loan funds are
used for purposes other than those specifically approved by
Government in its Conditional Commitment for Guarantee. Negligent
servicing is defined as the failure to perform those services which
a reasonably prudent lender would perform in servicing its own
portfolio of loans that are not guaranteed. The term includes not
only the concept of a failure to act but also not acting in a timely
manner or acting in a manner contrary to the manner in which a
reasonably prudent lender would act up to the time of loan maturity
or until a final loss is paid.
4. Rights and Liabilities
The guarantee and right to require purchase will be directly
enforceable by Holder notwithstanding any fraud or misrepresentation
by Lender or any unenforceability of this Loan Note Guarantee by
Lender. Nothing contained herein will constitute any waiver by
Government of any rights it possesses against the Lender. Lender
will be liable for and will promptly pay to Government any payment
made by Government to Holder which if such Lender had held the
guaranteed portion of the loan, Government would not be required to
make.
5. Payments
Lender will receive all payments of principal, or interest, and
any loan subsidy on account of the entire loan and will promptly
remit to Holder(s) its pro rata share thereof determined according
to its respective interest in the loan, less only Lender's servicing
fee.
6. Protective Advances
Protective advances made by Lender pursuant to the regulations
will be guaranteed against a percentage of loss to the same extent
as provided in this Loan Note Guarantee notwithstanding the
guaranteed portion of the loan that is held by another.
7. Repurchase by Lender
The Lender has the option to repurchase the unpaid guaranteed
portion of the loan from the Holder(s) within 30 days of written
demand by the Holder(s) when: (a) the borrower is in default not
less than 60 days on principal or interest due on the loan or (b)
the Lender has failed to remit to the Holder(s) its pro rata share
of any payment made by the borrower or any loan subsidy within 30
days of its receipt thereof. The repurchase by the Lender will be
for an amount equal to the unpaid guaranteed portion of principal
and accrued interest (including any loan subsidy) less the Lender's
servicing fee. The Loan Note Guarantee will not cover the note
interest to the Holder on the guaranteed loan(s) accruing after 90
days from the date of the demand letter to the Lender requesting the
repurchase. Holder(s) will concurrently send a copy of demand to
Government. The Lender will accept an assignment without recourse
from the Holder(s) upon repurchase. The Lender is encouraged to
repurchase the loan to facilitate the accounting for funds, resolve
the problem, and to permit the borrower to cure the default, where
reasonable. The Lender will notify the Holder(s) and Government of
its decision.
8. Government Purchase
If Lender does not repurchase as provided by paragraph 7 hereof,
Government will purchase from Holder the unpaid principal balance of
the guaranteed portion together with accrued interest (including any
loan subsidy) to date of repurchase less Lender's servicing fee,
within thirty (30) days after written demand to Government from
Holder. The Loan Note Guarantee will not cover the note interest to
the Holder on the guaranteed loan(s) accruing after 90 days from the
date of the original demand letter of the Holder to the Lender
requesting the repurchase. Such demand will include a copy of the
written demand made upon the Lender. The Holder(s) or its duly
authorized agent will also include evidence of its right to require
payment from Government. Such evidence will consist of either the
original of the Loan Note Guarantee properly endorsed to Government
or the original of the Assignment Guarantee Agreement properly
assigned to Government without recourse including all rights, title,
and interest in the loan. Government will be subrogated to all
rights of Holder(s). The Holder(s) will include in its demand the
amount due including unpaid principal, unpaid interest (including
any loan subsidy) to date of demand and interest (including any loan
subsidy) subsequently accruing from date of demand to proposed
payment date. Unless otherwise agreed to by Government, such
proposed payment will not be later than 30 days from the date of
demand.
The Government will promptly notify the Lender of its receipt of
the Holder(s)'s demand for payment. The Lender will promptly provide
the Government with the information necessary for Government
determination of the appropriate amount due the Holder(s). Any
discrepancy between the amount claimed by the Holder(s) and the
information submitted by the Lender must be resolved before payment
will be approved. Government will notify both parties who must
resolve the conflict before payment by Government will be approved.
Such conflict will suspend the running of the 30 day payment
requirement. Upon receipt of the appropriate information. Government
will review the demand and submit it to the State Director for
verification. After reviewing the demand the State Director will
transmit the request to the Government Finance Office for issuance
of the appropriate check. Upon issuance, the Finance Office will
notify the office servicing the borrower and State Director and
remit the check(s) to the Holder(s).
9. Lender's Obligations
Lender consents to the purchase by Government and agrees to
furnish on request by Government a current statement certified by an
appropriate authorized officer of the Lender of the unpaid principal
and interest then owed by Borrowers on the loan and the amount
including any loan subsidy then owed to any Holder(s). Lender agrees
that any purchase by Government does not change, alter or modify any
of the Lender's obligations to Government arising from said loan or
guarantee nor does it waive any of Government's rights against
Lender, and that Government will have the right to set-off against
Lender all rights inuring to Government as the Holder of this
instrument against Government's obligation to Lender under the Loan
Note Guarantee.
10. Repurchase by Lender for Servicing
If, in the opinion of the Lender, repurchase of the guaranteed
portion of the loan is necessary to adequately service the loan, the
Holder will sell the portion of the loan to the Lender for an amount
equal to the unpaid principal and interest (including any loan
subsidy) on such portion less Lender's servicing fee. The Loan Note
Guarantee will not cover the note interest to the Holder on the
guaranteed loans accruing after 90 days from the date of the demand
letter of the Lender or Government to the Holder(s) requesting the
Holder(s) to tender their guaranteed portion(s).
a. The Lender will not repurchase from the Holder(s) for
arbitrage purposes or other purposes to further its own financial
gain.
b. Any repurchase will only be made after the Lender obtains
Government written approval.
[[Page 53258]]
c. If the Lender does not repurchase the portion from the
Holder(s), Government at its option may purchase such guaranteed
portions for servicing purposes.
11. Custody of Unguaranteed Portion
The Lender may retain, or sell the unguaranteed portion of the
loan only through participation. Participation, as used in this
instrument, means the sale of an interest in the loan wherein the
Lender retains the note, collateral securing the note, and all
responsibility for loan servicing and liquidation.
12. When Guarantee Terminates
This Loan Note Guarantee will terminate automatically (a) upon
full payment of the guaranteed loan; or (b) upon full payment of any
loss obligation hereunder; or (c) upon written notice from the
Lender to Government that the guarantee will terminate 30 days after
the date of notice, provided the Lender holds all of the guaranteed
portion and the Loan Note Guarantee(s) are returned to be cancelled
by Government.
13. Settlement
The amount due under this instrument will be determined and paid
as provided in the applicable subpart of 7 CFR part 1980 in effect
on the date of this instrument.
14. Loan Subsidy
* In addition to the interest rate of the note attached hereto,
Government will pay a loan subsidy of ______ percent per year.
Payments will be made annually.
15. Interest Capitalization
In the case of Farm Credit Programs loans, the Lender/Holder(s)
may capitalize interest only when the note is restructured. When
delinquent interest is so treated as principal, the new principal
amount may exceed the principal amount of the loan listed herein,
but may not exceed statutory loan limits. The new principal amount
and new guaranteed portion will be identified at restructuring in an
addendum to this Loan Note Guarantee. Such capitalized interest will
be covered by this loan Note Guarantee. References to ``principal
and interest'' and ``principal advanced'' herein, therefore, shall
include any capitalized interest on the guaranteed portion of the
loan resulting from the restructuring of a Guaranteed Farm Credit
Programs loans and not exceeding statutory loan limits.
Position 5
16. Notices
All notices will be initiated through the
Government-------------------------------------------------------------
for ________ (State) with mailing address at the day of this
instrument:
----------------------------------------------------------------------
----------------------------------------------------------------------
* If not applicable delete paragraph prior to execution of this
instrument.
UNITED STATES OF AMERICA
----------------------------------------------------------------------
(insert applicable agency)
By---------------------------------------------------------------------
Title------------------------------------------------------------------
(Date)-----------------------------------------------------------------
Assumption Agreement by------------------------------------------------
dated ________, 19____
Assumption Agreement by------------------------------------------------
dated ________, 19____
10. Appendix C to subpart A is revised to read as follows:
Appendix C--Assignment Guarantee Agreement
Position 5
USDA
Form FmHA 449-36
(Rev. 10-95)
Type of Loan-----------------------------------------------------------
Government Loan Identification
Number-----------------------------------------------------------------
Applicable 7 CFR part 1980 subpart-------------------------------------
________ of ________
(Lender) has made a loan to--------------------------------------------
in the principal amount of $______________as evidenced by a note(s)
dated____________.
The United States of America, acting through the Consolidated Farm
Service Agency, Rural Business and Cooperative Development Service,
Rural Utilities Service, or Rural Housing and Community Development
Service (herein called ``Government'') entered into a Loan Note
Guarantee (Form FmHA 449-34) with the Lender applicable to such loan
to guarantee the loan not to exceed ______% of the amount of the
principal advanced and any interest (including any loan subsidy) due
thereon and any capitalized interest, resulting from the
restructuring of a Guaranteed Farm Credit Programs loan and not
exceeding statutory loan limits, as provided therein.
______________ of ______________
(Holder) desires to purchase from Lender ______% of the guaranteed
portion of such loan. Copies of Borrower's note(s) and the Loan Note
Guarantee are attached hereto as a part hereof.
NOW, THEREFORE, THE PARTIES AGREE:
1. The principal amount of the loan now outstanding is $______.
Lender hereby assigns to Holder ______% of the guaranteed portion of
the loan representing $______ of such loan now outstanding in
accordance with all of the terms and conditions hereinafter set
forth. The Lender and Government certify to the Holder that the
Lender has paid and Government has received the Guarantee Fee in
exchange for the issuance of the Loan Note Guarantee.
2. Loan Servicing. The Lender will be responsible for servicing
the entire loan and will remain mortgagee and/or secured party of
record. The entire loan will be secured by the same security with
equal lien priority for the guaranteed and unguaranteed portions of
the loan. The Lender will receive all payments on account of
principal of, or interest (including any loan subsidy and any
capitalized interest, resulting from the restructuring of a
Guaranteed Farm Credit Programs loans and not exceeding statutory
loan limits) on, the entire loan and shall promptly remit to the
Holder its pro rata share thereof determined according to their
respective interests in the loan, less only the Lender's servicing
fee.
3. Servicing Fee. Holder agrees that Lender will retain a
servicing fee of ______ percent per annum of the unpaid balance of
the guaranteed portion of the loan assigned hereunder.
4. Purchase by Holder. The guaranteed portion purchased by the
Holder will always be a portion of the loan which is guaranteed. The
Holder will hereby succeed to all rights of the Lender under the
Loan Note Guarantee to the extent of the assigned portion of the
loan. The Lender, however, will remain bound by all obligations
under the Loan Note Guarantee and the program regulations found in
the applicable subpart of 7 CFR part 1980 now in effect and future
regulations not inconsistent with the provisions hereof.
5. Full Faith and Credit. The Loan Note Guarantee constitutes an
obligation supported by the full faith and credit of the United
States and is incontestable except for fraud or misrepresentation of
which the Holder has actual knowledge at the time of this
assignment, or which it participates in or condones. Any Assignment
Guarantee Agreement attached to or relating to a note which provides
for capitalization of interest is void. Except in the case of Farm
Credit Program loans, a note which provides for the payment of
interest on interest as a result of restructuring the loan and not
exceeding statutory loan limits, and any Assignment Guarantee
Agreement attached to or related to such note is not void.
6. Rights and Liabilities. The guarantee and right to require
purchase will be directly enforceable by Holder not withstanding any
fraud or misrepresentations by Lender or any unenforceability of the
Loan Note Guarantee by Lender. Nothing contained herein shall
constitute any waiver by Government of any rights its possesses
against the Lender, and the Lender agrees that Lender will be liable
and will promptly reimburse Government for any payment made by
Government to Holder which, if such Lender had held the guaranteed
portion of the loan, Government would not be required to make. The
Holder(s) upon written notice to the Lender may resell the unpaid
balance of the guaranteed portion of the loan assigned hereunder. An
endorsement may be added to the Form FmHA 449-36 to effectuate the
transfer.
7. Repurchase by the Lender (Defaults). The Lender has the
option to repurchase the unpaid guaranteed portion of the loan from
the Holder(s) within 30 days of written demand by the Holder(s)
when: (a) the borrower is in default not less than 60 days on
principal or interest due on the loan or (b) the Lender has failed
to remit to the Holder(s) its pro rata share of any payment made by
the borrower or any loan subsidy within 30 days of its receipt
thereof. The repurchase by the Lender will be for an amount equal to
the unpaid guaranteed portion of principal and accrued interest
(including any loan subsidy), less the Lender's servicing fee. The
loan note guarantee will not cover the note interest to the Holder
on the guaranteed loan(s) accruing after 90 days from the date of
the demand letter to the lender requesting the repurchase. Holder(s)
will concurrently send a copy of demand to Government. The Lender
will accept an assignment without recourse from the Holder(s) upon
repurchase. The Lender in encouraged to repurchase the loan to
[[Page 53259]]
facilitate the accounting for funds, resolve the problem, and to
permit the borrower to cure the default, where reasonable. The
Lender will notify the Holder(s) and Government of its decision.
8. Purchase by Government. If Lender does not repurchase as
provided by paragraph 7, Government will purchase from Holder the
unpaid principal balance of the guaranteed portion together with
accrued interest (including any loan subsidy) to date of repurchase,
less Lender's servicing fee, within 30 days after written demand to
Government from the Holder. The Loan Note Guarantee will not cover
the note interest to the Holder on the guaranteed loans accruing
after 90 days from the date of the original demand letter of the
holder to the lender requesting the repurchase. Such demand will
include a copy of the written demand made upon the Lender. The
Holder(s) or its duly authorized agent will also include evidence of
its right to require payment from Government. Such evidence will
consist of each the original of the Loan Note Guarantee properly
endorsed to Government or the original of the Assignment Guarantee
Agreement properly assigned to Government without recourse including
all rights, title, and interest in the loan. Government will be
subrogated to all rights of Holder(s). The Holder will include in
its demand the amount due including unpaid principal, unpaid
interest (including any loan subsidy) to date of demand and interest
(including any loan subsidy) subsequently accruing from date of
demand to proposed payment date. Unless otherwise agreed to by
Government, such proposed payment will not be later than 30 days
from the date of demand.
The Government will promptly notify the Lender of its receipt of
the Holder(s)'s demand for payment. The Lender will promptly provide
the Government with the information necessary for Government's
determination of the appropriate amount due the Holder(s). Any
discrepancy between the amount claimed by the Holder(s) and the
information submitted by the Lender must be resolved before payment
will be approved. Government will notify both parties who must
resolve the conflict before payment will be approved. Such a
conflict will suspend the running of the 30 day payment requirement.
Upon receipt of the appropriate information. Government will review
the demand and submit it to the State Director for verification.
After reviewing the demand the State Director will transmit the
request to the Government Finance Office of issuance of the
appropriate check. Upon issuance, the Finance Office will notify the
office servicing the borrower and the State Director and remit the
check(s) to the Holder(s).
9. Lender's Obligations. Lender consents to the purchase by
Government and agrees to furnish on request by Government a current
statement certified by an appropriate authorized officer of the
Lender of the unpaid principal and interest then owned by Borrowers
on the loan and the amount then owed to any Holder(s). Lender agrees
that any purchase by Government does not change, alter or modify any
of the Lender's obligations to Government arising from said loan or
guarantee nor does it waive any of Government's right against
Lender, and that Government shall have the right to set-off against
Lender all rights inuring to Government as the Holder of this
instrument against Government's obligation to Lender under the Loan
Note Guarantee.
10. Repurchase by Lender for Servicing. If, in the opinion of
the Lender, repurchase of the assigned portion of the loan is
necessary to adequately service the loan, the Holder will sell the
assigned portion of the loan to the Lender for an amount equal to
the unpaid principal and interest (including any loan subsidy) on
such portion less Lender's servicing fee. The loan note guarantee
will not cover the note interest to the Holder on the guaranteed
loans accruing after 90 days from the date of the demand letter of
the lender or Government to the Holder(s) requesting the Holder(s)
to tender their, guaranteed portion(s).
a. The Lender will not repurchase from the Holder(s) for
arbitrage purpose or other purposes to further its own financial
gain.
b. Any repurchase will only be made after the Lender obtains
Government written approval.
c. If the Lender does not repurchase the portion from the
Holder(s), Government at its option may purchase such guaranteed
portions for servicing purposes.
11. Foreclosure. The parties owning the guaranteed portions and
unguaranteed portion of the loan will join to institute foreclosure
action, or in lieu of foreclosure, take a deed of conveyance to such
parties.
12. Reassignment. Holder upon written notice to Lender and
Government may reassign the unpaid guaranteed portion of the loan
sold hereunder. Upon such notification, the assignee will succeed to
all rights and obligations of the Holder hereunder.
13. Interest Capitalization. In the case of Farm Credit Programs
loans, the Lender may capitalize interest only when the note is
restructured. When delinquent interest is so treated as principal,
the new principal amount may exceed the line of credit listed
herein, buy may not exceed statutory loan limits. The new principal
amount and new guaranteed portion will be identified at
restructuring in an addendum to this agreement. Such capitalized
interest will be covered by this Assignment Guarantee Agreement.
References to principal and interest herein, therefore, shall
include any capitalized interest on the guaranteed portion of the
loan resulting from the restructuring of a Farm Credit Programs
loans and not exceeding statutory loan limits.
14. Notices. All notices and actions will be initiated through
the Government ________ for ________ (state) with mailing address at
the date of this assignment: ________
----------------------------------------------------------------------
Dated this ______ day ______, 19____.
LENDER:
ADDRESS:
ATTEST:
________(SEAL)
By---------------------------------------------------------------------
Title------------------------------------------------------------------
HOLDER:
ADDRESS:
ATTEST:
________(SEAL)
By---------------------------------------------------------------------
Title------------------------------------------------------------------
UNITED STATES OF AMERICA
----------------------------------------------------------------------
(insert applicable agency)
ADDRESS----------------------------------------------------------------
----------------------------------------------------------------------
By---------------------------------------------------------------------
Title------------------------------------------------------------------
11. Appendix D to subpart A is revised to read as follows:
Appendix D--Contract of Guarantee (Line of Credit)
USDA-CFSA
Form FmHA 1980-27
(Rev. 10-95)
Type of Loan-----------------------------------------------------------
{time} OL
Case No.---------------------------------------------------------------
State------------------------------------------------------------------
County-----------------------------------------------------------------
Lender-----------------------------------------------------------------
Lender's Address-------------------------------------------------------
Borrower's Name and Address--------------------------------------------
Lender's IRS Tax No.---------------------------------------------------
Date of Line of Credit Agreement/Note----------------------------------
Line of Credit Ceiling
$----------------------------------------------------------------------
The guaranteed portion of this line of credit is ______% of the
principal balance owed at any one time on advances made within an
approved line of credit by the above-named Lender to the above-named
Borrower.
In consideration of making advance(s) by the Lender within the
line of credit ceiling pursuant to the Line of Credit Agreement, the
United States of America acting through the Consolidated Farm
Service Agency (herein called ``Government''), pursuant to the
Consolidated Farm and Rural Development Act (7 U.S.C. 1921 et seq.),
agrees that in accordance with and subject to the conditions and
requirements in this agreement, it will pay to the Lender who holds
the line of agreement(s) (and note(s), if any exist) for said
advance(s) (or assumption agreement) covered by this contract the
lesser of 1, or 2, below:
1. Any loss sustained by such Lender on the guaranteed portion
including:
a. Principal and interest indebtedness as evidenced by said line
of credit agreement(s) (and note(s), if any exist) or by assumption
agreement(s), and any capitalized interest on such portion resulting
from the restructuring of an Operating loan and not exceeding
statutory loan limits, and
b. Principal and interest indebtedness on secured protective
advances for protection and preservation of collateral made with
Government's authorization, including but not limited to, advances
for delinquent taxes, annual assessments, any ground rents, and
hazard or flood insurance premiums affecting the collateral; or
2. The guaranteed principal advances to or assumed by the
Borrower under said line of credit agreement(s) (and note(s), if any
exist) or assumption agreement(s), and any interest due thereon,
including any capitalized interest on such portion resulting from
the restructuring of an Operating loan and not exceeding statutory
loan limits. If an
[[Page 53260]]
Operating Loan Line of Credit is involved, advances under the line of
credit must be made within three years (five for Certified Lenders)
from the date of this Contract. Advances made after that date will
be covered by this Contract. If Government conducts the liquidation
of the line of credit, loss occasioned to a Lender by accruing
interest after the date Government accepts responsibility for
liquidation will not be covered by this Contract of Guarantee. If
Lender conducts the liquidation of the line of credit, accruing
interest shall be covered by this Contract of Guarantee to date of
final settlement when the Lender conducts the liquidation
expeditiously in accordance with the liquidation plan approved by
Government.
Conditions of Guarantee
1. Line of Credit Servicing
Lender will be responsible for serving the entire line of
credit, and Lender will remain mortgagee and/or secured party of
record. The Lender agrees that, if liquidation of the account
becomes imminent, the Lender, will consider the Borrower of an
Operating Loan Line of Credit for an Interest Rate Buydown under
Exhibit C of subpart B of 7 C.F.R., part 1980, and request a
determination of the Borrower's eligibility by Government. The
Lender may not initiate foreclosure action on the line of credit
until 60 days after a determination has been made with respect to
the eligibility of the Borrower to participate in the Interest Rate
Buydown Program.
2. Priorities
The entire line of credit will be secured by the same security
with equal lien priority for the guaranteed and unguaranteed
portions of the line of credit. The unguaranteed portion of the line
of credit will not be paid first nor given any preference or
priority over the guaranteed portion.
3. Full Faith and Credit
The Contract of Guarantee constitutes an obligation supported by
the full faith and credit of the United States and is incontestable
except for fraud or misrepresentation of which Lender has actual
knowledge at the time it became such Lender or which Lender
participates in or condones. If the line of credit agreement or note
to which this Contract of Guarantee is attached provides for the
payment of interest on interest, this Contract of Guarantee is void.
However, in the case of Farm Credit Programs loans, the
capitalization of interest when restructuring loans will not void
this Contract of Guarantee.
Position 2
In addition, the Contract of Guarantee will be unenforceable by
the Lender to the extent any loss is occasioned by the violation of
usury laws, negligent servicing, or failure to obtain the required
security regardless of the time at which Government acquires
knowledge of the foregoing. Any losses occasioned will be
unenforceable to the extent that loan funds are used for purposes
other than those specifically approved by Government in its
Conditional Commitment for Guarantee. Negligent servicing is defined
as the failure to perform those services which a reasonably prudent
lender would perform in servicing its own portfolio of loans that
are not guaranteed. The term includes not only the concept of a
failure to act but also not acting in a timely manner or acting in a
manner contrary to the manner in which a reasonably prudent lender
would act up to the time of loan maturity or until a final loss is
paid.
4. Protective Advances
Protective advances made by Lender pursuant to the regulations
will be guaranteed against a percentage of loss to the extent as
provided in this Contract of Guarantee.
5. Custody of Unguaranteed Portion
The Lender may retain or sell the unguaranteed portion of the
line of credit only through participation. Participation, as used in
this instrument, means the sale of an interest in the line of credit
in which the Lender retains the line of credit agreement (and note
if one exists) collateral securing the line of credit and all
responsibility for servicing and liquidation of the line of credit.
6. When Guarantee Terminates
This Contract of Guarantee will terminate automatically (a) upon
full payment of the guaranteed line of credit occurring after the
advance period has expired; or (b) upon full payment of any loss
obligation under this Contract, or (c) upon written notice from the
Lender to Government that the guarantee will terminate 30 days after
the date of notice, provided the Contract is returned to Government
to be cancelled.
7. Settlement
The amount due under this instrument will be determined and paid
as provided in the applicable subpart of 7 C.F.R. part 1980 in
effect on the date of this instrument.
8. Interest Capitalization
In the case of Operating loans, the Lender may capitalize
interest only when the note is restructured. When delinquent
interest is so treated as principal, the new principal amount may
exceed the line of credit listed herein, but may not exceed
statutory loan limits. The new principal amount and new guaranteed
portion will be identified at restructuring in an addendum to this
Contract of Guarantee. Such capitalized interest will be covered by
this Contract of Guarantee. References to principal and interest
herein, therefore, shall include any capitalized interest on the
guaranteed portion of the loan resulting from the restructuring of
an Operating loan and not exceeding statutory loan limits.
9. Notices
All notices and actions will be initiated through the County
Supervisor for ______ (County) ________ (State) with mailing address
at the date of this instrument:
----------------------------------------------------------------------
----------------------------------------------------------------------
UNITED STATES OF AMERICA
CONSOLIDATED FARM SERVICE AGENCY
By---------------------------------------------------------------------
----------------------------------------------------------------------
Title------------------------------------------------------------------
(Date)-----------------------------------------------------------------
Assumption Agreement by------------------------------------------------
dated ________, 19____
Assumption Agreement by------------------------------------------------
dated ________, 19____
12. Appendix E to subpart A is revised to read as follows:
Appendix E--Agreement for Participation in Farm Credit Programs
Guaranteed Loan Programs of the United States Government
USDA-CFSA
Form FmHA 1980-38
(Rev. 6-95)
The purpose of this Agreement is to establish the Lender as an
approved participant in the Farm Credit Programs Guaranteed Loan
Programs of the Consolidated Farm Service Agency (CFSA), U.S.
Department of Agriculture (herein called ``Government''). This
Agreement provides the terms and conditions for originating and
servicing such loans, including lines of credit.
Participating Lender (``Lender''):
----------------------------------------------------------------------
----------------------------------------------------------------------
Tax Identification Number:
----------------------------------------------------------------------
Business Address:
----------------------------------------------------------------------
----------------------------------------------------------------------
Telephone Number:
----------------------------------------------------------------------
Complete the appropriate section indicating participation/non-
participation in the Certified Lender Program.
Participating in the Certified Lender Program (``CLP'')
Offices Affected by Agreement
All {time} As listed below {time}
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
States Affected by Agreement
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
Not participating in the Certified Lender Program
Offices Affected by Agreement
All {time} As listed below {time}
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
States Affected by Agreement
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
Read this Agreement in its entirety and sign in the space on the
last page. Your signature indicates consent with this Agreement.
Position 2
Part I--General Requirements
A. Duties and Responsibilities of the Government
1. Payment on Claims. Government agrees to make payment on its
claims in accordance
[[Page 53261]]
with the terms of the guarantee and Agency regulations in 7 C.F.R.
1980, subparts A and B. The maximum loss payment may not exceed the
amount determined in the guarantee, including the percentage of
principal and any accrued interest. The guarantee is supported by
the full faith and credit of the United States and is incontestable
except under the circumstances of fraud or misrepresentation of
which the Lender has actual knowledge at the execution of the
guarantee or which the Lender participates in or condones. (See 7
C.F.R. 1980.107.)
2. Personnel Available for Consultation. The Government shall
make personnel available for consultation on interpretations of
Agency regulations and guidelines. The Lender may consult with
Agency personnel regarding unusual underwriting, loan closing, and
loan liquidation questions.
B. General Requirements for the Lender
1. Eligibility to Participate. The Lender must meet the
requirements set forth in 7 C.F.R. 1980.13 and be approved by
Government to be a participant in the Farm Credit Programs
Guaranteed Loan Programs.
2. Knowledge of Program Requirements. The Lender is required to
obtain and keep itself informed of all program regulations and
guidelines, including all amendments and revisions. The Lender must
establish and maintain adequate and written internal policies for
loan origination and servicing to meet these requirements. These
policies will be subject to review upon the request by Government.
3. Notification. The Lender shall immediately notify Government
in writing if the Lender:
Becomes insolvent;
Has filed for any type of bankruptcy protection, has
been forced into involuntary bankruptcy, or has requested an
assignment for the benefit of creditors;
Has taken any action to cease operations, or to
discontinue servicing or liquidating any or all of its portfolio
guaranteed by Government;
Has changed its name, location, address, tax
identification number, or corporate structure;
Has been debarred, suspended, or sanctioned in
connection with its participation in any Federal guaranteed program;
or
Has been debarred, suspended, or sanctioned by any
Federal or State licensing or certification authority.
4. Employee Qualifications. The Lender shall maintain a staff
that is well trained and experienced in origination and loan
servicing functions, as necessary, to ensure the capability of
performing all the acts within its authority.
5. Conflict of Interest. The Lender certifies that its officers
or directors, principal stockholders (except stockholders in a Farm
Credit Bank or other Farm Credit System (FCS) institutions with
direct lending authority that have normal stock/share requirements
for participating), or other principal owners do not have, or will
not have, a substantial financial interest in, or business dealings
with, any guaranteed loan borrower. The Lender also certifies that
neither any borrower nor its officers or directors, stockholders, or
other owners have a substantial financial interest in the Lender. If
the borrower is a member of the Board of Directors of a Farm Credit
Bank or other FCS institution with direct lending authority, the
Lender certifies that an FCS institution on the next highest level
with independently process the loan request and will act as the
Lender's agent with servicing the account.
6. Facilities. The Lender shall operate its facilities and
branch offices in a prudent and businesslike manner.
7. Reporting Requirements. The Lender recognizes that
Government, as guarantor, has a vital interest in ensuring that all
acts performed by the Lender regarding the subject loans are
performed in compliance with this Agreement and Agency regulations.
Information on the status of guaranteed loans is necessary for this
purpose, as well as to satisfy budget and accounting reporting
required by the Department of the Treasury and the Office of
Management and Budget. The Lender agrees to provide Government with
all the data required under Agency regulations and any additional
information necessary for Government to monitor the health of its
guaranteed loan portfolio, and to satisfy external reporting
requirements.
The Lender also agrees to provide to Government, as requested by
the Government or as required by regulation, copies of audited
financial statements, reports on internal controls, copies of
compliance audits, and such other information that may be required
for Government to properly monitor the Lender's performance.
C. Underwriting Requirements
1. Responsibility. The Lender is responsible for originating,
servicing, and collecting all guaranteed Farm Credit Programs loans
in accordance with Government regulations.
2. Origination Process.
a. General Eligibility. The Lender shall make a preliminary
determination whether loan applicants meet the general eligibility
requirements of the Farm Credit Programs Guaranteed Loan Programs.
The Government will make the final determination.
b. Delinquency on Federal Debt. The Lender shall determine
whether the loan applicant is delinquent on any Federal debt. The
Lender shall use credit reports and any other credit history to make
this determination. If the loan applicant is delinquent on a federal
debt, processing of the application may only continue in accordance
with Government regulations.
c. Appraisals of Collateral. The Lender shall ensure that the
value of any collateral property or property to be purchased is
determined by a qualified appraiser, including a State licensed or
certified appraiser when required by law or regulation.
d. Change in Borrower's Condition. Before the Government issues
a loan guarantee, the Lender will certify that there has been no
adverse change(s) in the borrower's condition, financial or
otherwise, during the time period from issuance of a Conditional
Commitment to issuance of the guarantee of the loan. This
certification by the Lender must address all adverse changes and be
supported by financial statements of the borrower and its guarantors
which are not more than 90 days old at the time of certification.
For use in this provision alone, the term ``Borrower'' includes any
member, joint operator, partner or stockholder. (See 7 C.F.R.
1980.117.)
e. Limitation on Guarantee. Any note requiring the payment of
interest on interest will not be guaranteed. Default charges, late
charges of any kind, and/or interest accrued on interest charges
will not be covered by the guarantee.
3. Loan Closing.
a. Lender's Fee. The Lender will submit the required guarantee
fee with the Guaranteed Loan Closing Report.
b. Lender's Use of Funds. The Lender agrees funds for the
particular loan or line of credit will be used only for the purposes
authorized in 7 C.F.R. 1980, subparts A and B as set forth in Form
FmHA 1980-15.
c. Loan Closing. All loans guaranteed by the Government shall be
closed by attorneys, escrow companies, escrow departments of lending
institutions, or other person(s) or entities skilled and experienced
in conducting loan closings. The Lender shall:
Ensure that documents, including the mortgage and any
security agreements, chattel mortgages or equivalent documents
relating to it have been properly signed, are valid and contain
terms enforceable by the Lender;
Ensure that all security with appropriate lien
priorities is obtained in accordance with Form FmHA 1980-15, and
Government regulations;
Ensure that all closing documents required to be
recorded are recorded accurately, in the appropriate offices, and in
a timely and accurate manner;
Ensure that security interests are perfected in
collateral according to applicable regulatory requirements and
procedures;
Ensure that all required hazard insurance is obtained
in accordance with Government regulations;
Collect all fees and costs due and payable by the
borrower in the course of the loan transaction and disburse payment
directly to the parties for services rendered; and
Ensure that all loan proceeds are used as authorized.
The entire loan will be secured equally with the same security
and the same lien priority for both the guaranteed and unguaranteed
portions of the loan, under the assurance that the unguaranteed
portion of the loan will not be paid first nor given any preference
or priority over the guaranteed portion of the loan.
4. Lender's Sale or Assignment of Guaranteed Loan.
The Lender may retain all of any guaranteed loan. The Lender is
not permitted to sell or participate any amount of the guaranteed or
unguaranteed portion(s) of loan(s) to the applicant or borrower or
members of their immediate families, their officers, directors,
stockholders, other owners, or any parent, subsidiary, or affiliate.
The Lender may market all or part of the guaranteed portion of the
loan at or after loan
[[Page 53262]]
closing only if the loan is not in default as set forth in the terms of
the note. A line of credit may only be marketed by participation.
Refer to 7 C.F.R. 1980.119 for further guidelines.
D. Servicing Requirements
1. Responsibilities. The Lender will service the entire loan as
mortgagee and/or secured party of record in a reasonable and prudent
manner, notwithstanding the fact that another (Holder) may hold a
portion of the loan. The Lender will obtain compliance with the
covenants and provisions in the note, security instruments, and any
other agreements, and notify Government and the borrower of any
violations. Specific responsibilities are described in 7 C.F.R.
1980.130.
2. Negligent Servicing. The guarantee cannot be enforced by the
Lender to the extent a loss results from a violation of usury laws
or negligent servicing regardless of when Government discovers such
violation or negligence. Negligent servicing is defined as the
failure to perform services which a reasonably prudent lender would
perform in servicing its own portfolio of loans that are not
guaranteed. The term includes both a failure to act and also not
acting in a timely manner to include actions taken up to the time of
loan maturity or until a final loss is paid. (See 7 C.F.R. 1980.11.)
3. Payments. Payments from the borrower shall be processed upon
receipt according to 7 C.F.R. 1980.119, and may include escrow
premiums for hazard insurance and real estate taxes. The Lender
shall promptly disburse to any Holder(s) their pro rata share
thereof which has been determined according to their respective
interests in the loan, less only the Lender's servicing fee.
4. Collateral.
a. Insurance. The Lender shall ensure that adequate insurance is
maintained in accordance with Agency regulations, including the
maintenance of hazard insurance containing a loss payable clause in
favor of the Lender as the mortgagee or secured party.
b. Escrow Accounts. The Lender may establish separate escrow
accounts. All escrow accounts must meet applicable Federal and State
laws and regulations, and must be fully insured by the FDIC.
c. Inspection. The Lender shall inspect the collateral as often
as necessary to properly service the loan and ensure the collateral
is being properly maintained.
d. Taxes. The Lender shall ensure that taxes, assessments, or
ground rents against or affecting collateral are paid.
5. Delinquent Accounts.
a. The Lender will notify Government using Form FmHA 1980-44,
``Guaranteed Loan Borrower Default Status,'' when a borrower is 30
days past due on a payment or if the borrower has not provided the
required financial statements to the Lender or is otherwise in
default. The Lender will continue to submit Form FmHA 1980-44 every
60 days until the default is resolved, and will notify the Agency
when the default is resolved. A meeting will be arranged by the
Lender with the borrower and Government to resolve the problem.
Actions taken by the Lender, with written concurrence of Government,
may include but are not limited to, any curative actions contained
in subpart B or 7 C.F.R. part 1980 or liquidation.
b. The loan may be reamortized, rescheduled, or written down
only with the agreement of any Holder(s) of the guaranteed portion
of the loan, and only with Government's written agreement.
c. The Lender will negotiate in good faith to resolve any
problem in order to allow the borrower to cure default, where
reasonable. The Lender agrees that if liquidation of the account
becomes imminent, the Lender will consider the borrower for Interest
Assistance under Exhibit D of subpart B of 7 C.F.R. part 1980, and
request a determination of the borrower's eligibility by Government.
The Lender may not initiate foreclosure action on the loan until 60
days after eligibility of the borrower to participate in the
Interest Assistance Program has been established.
d. Debt Writedown. (Refer to 7 C.F.R. Part 1980 subpart B,
1980.125.) The maximum amount of loss payment associated with a
loan/line of credit agreement which has been written down will not
exceed the percent of the guarantee multiplied by the difference
between the outstanding principal and interest balance of the loan
before the writedown and the outstanding balance of the loan after
the writedown. The Lender will use Form FmHA 449-30, ``Loan Note
Guarantee Report of Loss,'' to request an estimated loss payment to
receive its pro rate share of any loss sustained. Interest will be
paid to the date of the check on all debt writedown claims.
e. The Lender must participate in any mediation program of any
State in accordance with the rules of that system and 7 C.F.R. Part
1980 subpart B, 1980.126.
f. When the borrower has not made payment of principal or
interest due on the loan for 60 days or more or the Lender has
failed to give the Holder(s) its pro rata share of any payment made
by the borrower within 30 days of receipt of the payment, the Holder
may request the lender to repurchase the unpaid guaranteed portion
of the guaranteed loan. If the Lender chooses not to repurchase,
Government will purchase the unpaid principal balance. Upon
Government's repurchase, the lender will liquidate the account or
reimburse Government the amount of the repurchase within 180 days of
Government's repurchase. See 7 C.F.R. 1980.119 for further guidance
on repurchasing loans from Holder(s).
6. Default/Liquidation.
a. Protective Advances. Protective advances must constitute a
debt of the borrower to the Lender and be secured by the security
instrument(s). Government written authorization is required on all
protective advances in excess of $3,000 made by a CLP Lender. For
non-CLP Lenders, the amount is $500. Refer to 7 C.F.R. 1980.136.
b. Additional Loan or Advances. Except as provided for in each
Borrower's loan agreement, the Lender will not make additional
expenditures or new loans without first obtaining the written
approval of Government even though such expenditures or loans will
not be guaranteed.
c. Future Recovery. After a loan has been liquidated and a final
loss has been paid by Government, any future funds which may be
recovered by the Lender will be pro-rated between Government and the
Lender. Government will be paid the amount recovered in proportion
to the percentage it guaranteed for the loan.
d. Transfer and Assumption Cases. Refer to 7 C.F.R. 1980.123. If
a loss occurs upon the completion of a transfer and assumption for
less than the full amount of the debt and transferor debtor
(including Guarantors) is released from personal liability, the
Lender, if it holds the guaranteed portion, may file an estimated
Report of Loss on Form FmHA 449-30, ``Loan Note Guarantee Report of
Loss,'' to recover its pro rata share of the actual loss at that
time. In completing Form FmHA 449-30, the amount of the debt assumed
will be entered as Net Collateral (Recovery). Approved protective
advances and accrued interest thereon made during the arrangement of
transfer and assumption, if not assumed by the transferee, will be
entered in the appropriate space on Form FmHA 449-30.
e. Bankruptcy. The Lender is responsible for protecting the
guaranteed loan debt and all collateral securing the loan in
bankruptcy proceedings. Loss payments on bankruptcy cases will be
processed according to the terms described in 7 C.F.R. 1980.144.
f. Liquidation. If the Lender concludes that liquidation of a
guaranteed loan account is necessary due to default or third party
actions which the borrower cannot or will not cure or eliminate
within a reasonable period of time, a meeting will be arranged by
the Lender with Government. All liquidations must receive prior
concurrence by the appropriate Government official. Refer to 7
C.F.R. 1980.146 for specific guidance on the procedures for
liquidation.
7. Servicer.
If the Lender contracts for servicing of guaranteed Farm Credit
Programs loans, the Lender is not relieved of responsibility for
proper servicing of the loans.
E. Agency Reviews of Lender's Operations
The Government shall have the right to conduct reviews,
including on-site reviews, of the Lender's operations and the
operations of any agent of the Lender, for the purpose of verifying
compliance with this Agreement and Government regulations and
guidelines. These reviews may include, but are not limited to:
audits of case files; interviews with owners, managers, and staff;
audits of collateral; and inspections of the Lender's and/or its
agents underwriting, servicing, and liquidation guidelines. The
Lender and/or its agents shall provide access to all pertinent
information to allow the Government, or any party authorized by the
Government, to conduct such reviews.
F. Conformance to Standards
1. Standards. The Lender shall conform to the standards outlined
in this Agreement and Government regulations for participation in
Farm Credit Programs Guaranteed Loan Programs. CLP Lenders must
maintain compliance with the criteria set forth in 7 C.F.R.
1980.190. The Government shall determine Lender adherence to the
standards based on:
Adequacy in meeting requirements for origination,
servicing, and liquidation of
[[Page 53263]]
loans and lines of credit, including protection of collateral;
Satisfaction of the reporting requirements of the
Government;
Success in operating in a sound and prudent
businesslike manner;
Portfolio performance compared to overall performance
of the Farm Credit Program Guaranteed Loan Programs; and
Results of on-site reviews of the underwriting and/or
servicing performed by the Lender.
2. Determination of Non-Conformance. The Government shall
carefully consider the circumstances and available facts in
determining whether there is a pattern of Lender non-conformance
with applicable standards. The Government shall determine the
propriety of any decision made by the Lender based on the facts
available at the time the specific action was taken. It is
understood by the Government and intended by this Agreement that the
Lender has the authority to exercise reasonable judgment in
performing acts within its authority. However, the Government
reserves the right to question any act performed or conclusion drawn
that is inconsistent with this Agreement or Government regulations.
3. Government Action. If the Lender is determined to be in non-
conformance with any Federal law, State law, Agency regulation or
guideline, or the terms of this Agreement, the Government reserves
the right to take action in accordance with its laws and
regulations.
4. Lender Right of Appeal. The Government shall provide the
Lender an opportunity to appeal, in accordance with Agency
regulations at 7 C.F.R. Part 1980, subpart A, adverse actions taken
by the Government.
Part II--List of Agency Regulations and Guidelines and Designation of
Lender Authority To Perform Certain Acts
A. List of Agency Regulations
The following is a list of Government regulations which, along
with any future amendments consistent with this Agreement, contain
the information necessary for the Lender to be in compliance with
Government requirements.
1. 7 C.F.R. 1980 subpart A--General
2. 7 C.F.R. 1980 subpart B--Farm Credit Program Loans
B. Authority To Perform Certain Acts
Lenders participating in the CLP may be granted special
authority to certify compliance with certain statutory or regulatory
requirements. 7 C.F.R. 1980.190 describes authorities and
responsibilities for CLP Lenders.
Part III--Duration and Modification
A. Duration and Termination
1. Duration of Agreement. For CLP Lenders, this Agreement is
valid for five years unless terminated by the Lender or Government
as described below or revoked according to 7 C.F.R. 1980.190. For
non-CLP Lenders, this Agreement will be valid indefinitely unless
terminated by the Lender or the Government as described below.
2. Modification of Agreement. This Agreement may be modified or
extended only in writing and by consent of all parties.
3. Termination by the Government. This Agreement may be
terminated by the Government in accordance with Government
regulations.
4. Termination by the Lender. This Agreement may be terminated
by the Lender by providing 30 days written notice to the Government.
5. Effect of Termination on Responsibilities and Liabilities.
Responsibilities or liabilities that existed before the termination
of the Agreement with regard to outstanding guarantees will continue
to exist after termination unless the Government expressly releases
the Lender from such responsibilities or liabilities in writing. The
Lender shall remain obligated to service and liquidate the
guaranteed loans remaining in the portfolio unless and until the
Government or the Lender transfers the loans. These requirements
concerning loan management by the Lender and rights of the
Government under this Agreement shall remain in effect whether the
Agreement is terminated by the Lender or the Government.
B. Entire Agreement
This Agreement, Parts I through IV inclusive, and any
regulations or guidelines incorporated by reference, shall
constitute the entire Agreement. There are no other agreements,
written or oral, regarding the terms in this Agreement which are or
shall be binding on the parties.
Part IV--Endorsement
The undersigned certifies that they have read and understand the
requirements in this Agreement, and in 7 C.F.R. part 1980, subparts
A and B, and agree to the participation requirements and other
provisions of this Agreement.
Notice. Requests for Guarantee and any notices or actions are
expected to be initiated through the following County Offices:
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
Lender: Complete this block of Section IV.
XXI. LENDER------------------------------------------------------------
(Name)
----------------------------------------------------------------------
(IRS I.D. Tax No.)
By---------------------------------------------------------------------
(Signature)
----------------------------------------------------------------------
(Name Typed or Printed)
Title------------------------------------------------------------------
Date-------------------------------------------------------------------
ATTEST-----------------------------------------------------------------
This block of Section IV will be completed by the Government.
The effective date of this Agreement
is---------------------------------------------------------------------
The expiration date of this Agreement
is---------------------------------------------------------------------
UNITED STATES OF AMERICA
Consolidated Farm Service Agency
By---------------------------------------------------------------------
(Signature)
Title------------------------------------------------------------------
----------------------------------------------------------------------
(Name Typed or Printed)
Date-------------------------------------------------------------------
13. Appendix K to subpart A is added to read as follows:
Appendix K--Modification of New Contract Relating to Farm Credit
Programs Guaranteed Loan/Line of Credit
United States Department of Agriculture
Modification of New Contract Relating to Farm Credit Programs
Guaranteed Loan/Line of Credit
The Lender's Agreement or Agreement For Participation in Farmer
Programs Guaranteed Loan Programs of the United States Government
executed with the Lender dated ______ and the attached Loan Note
Guarantee or Contract of Guarantee (Line of Credit) executed with
the Lender dated ______ relating to the loan to ______ in the amount
of ______ is hereby modified to reflect a new principal amount of
______ as a result of the capitalization of interest at the
restructuring of the Farm Credit Programs Loan. This amount does not
exceed statutory limits. The new guaranteed portion of the loan is
______.
UNITED STATES OF AMERICA
CONSOLIDATED FARM SERVICE AGENCY
Date-------------------------------------------------------------------
By---------------------------------------------------------------------
Title------------------------------------------------------------------
14. Appendix L to subpart A is added to read as follows:
Appendix L--Modification of Existing Contract Relating to Farm Credit
Programs Guaranteed Loan/Line of Credit
United States Department of Agriculture
Modification of Existing Contract Relating to Farm Credit Programs
Guaranteed Loan/Line of Credit
The Lender's Agreement or Agreement For Participation in Farmer
Programs Guaranteed Loan Programs of the United States Government
executed with the Lender dated ______ and the attached Loan Note
Guarantee or Contract of Guarantee (Line of Credit) executed with
the Lender dated ______ relating to the loan to ______ in the amount
of ______ is hereby modified to permit the capitalization of
interest when restructuring the Farm Credit Programs loan PROVIDED
that the new principal amount of ______ does not exceed statutory
limits. Such capitalized interest on the guaranteed portion of the
loan will be covered by the CFSA guarantee and will not void the
contract when the capitalized interest result from restructuring.
The new guaranteed portion of the loan is ______.
UNITED STATES OF AMERICA
CONSOLIDATED FARM SERVICE AGENCY
Date-------------------------------------------------------------------
By---------------------------------------------------------------------
Title
[[Page 53264]]
Subpart B--Farmer Program Loans
15. Section 1980.124 is amended by revising the word ``plan(s)'' to
read ``plan'' in the third sentence of paragraph (b)(10); by removing
paragraph (d)(1); by redesignating paragraph (a)(8) as paragraph (a)(9)
and paragraphs (d)(2) and (d)(3) as paragraphs (d)(1) and (d)(2),
respectively; by revising the word ``FmHA'' to read ``the Agency'' in
newly redesignated paragraph (d)(2); by revising the word ``FmHa'' to
read ``Agency'' each place it appears in paragraphs (b)(8) and (c)(3);
by revising the word ``FmHa'' to read ``the Agency'' in paragraph (f);
by revising paragraphs (a)(4), (a)(6), (a)(7), (b)(6), (b)(12), and
(e); and by adding new paragraph (a)(8) to read as follows:
Sec. 1980.124 Consolidation, rescheduling, reamortizing and deferral.
(a) * * *
(4) The borrower has acted in good faith demonstrating sincerity
and honesty in meeting agreements with, and promises made to the lender
and the Agency. This means cooperating in servicing the account and
maintaining the security, and satisfactorily completing the Borrower
Training program if required.
* * * * *
(6) Any holder agrees in writing to the rescheduling,
reamortization or deferral. The holder must understand that it will not
receive any payments from the lender or from the Agency during any
deferral period.
(7) The lender may capitalize the outstanding interest when
restructuring the loan. The restructuring proposal will be reviewed by
the appropriate agency loan approval official in accordance with loan
approval authorities based on the total outstanding principal and
interest at the time of the proposal. Approval of servicing actions on
guaranteed loans will be based on the new principal and guaranteed
amounts and the authorities set forth in exhibit C of FmHA Instruction
1901-A (available in any Agency office). Approved capitalized interest
will be treated as part of the principal and interest indebtedness in
calculating the maximum loss amount under Sec. 1980.20.
(8) Only interest that has accrued at the rate indicated on the
borrower's original promissory notes may be capitalized. Late payment
fees or default interest penalties that have accrued due to the
borrower's failure to make payments as agreed may not be capitalized.
* * * * *
(b) * * *
(6) There is no limit on the number of times a consolidation or
rescheduling action may take place.
* * * * *
(12) When a consolidation occurs, the new note or line of credit
agreement will describe the notes or line of credit agreements being
consolidated and will state that the indebtedness evidenced by such
notes or line of credit agreements is not satisfied. The original notes
or line of credit agreements will be retained for identification
purposes.
* * * * *
(e) Principal limit. As a result of the capitalization of interest,
a rescheduled/reamortized note or line of credit agreement may increase
the amount of principal which the borrower is required to pay above
what would have been payable had the rescheduling, reamortization, or
consolidation not occurred. However, in no case will such principal
amount exceed the statutory loan limits set out in this subpart.
* * * * *
Sec. 1980.125 [Amended]
16. Section 1980.125 is amended by removing paragraph (a)(10); by
revising the words ``and/or'' in the first sentence of the introductory
text of paragraph (a) to read ``and''; by revising ``FmHA'' to read
``the Agency'' in the introductory text of paragraph (a) and paragraph
(b)(1)(i) each place it appears; by revising ``FmHA'' to read
``Agency'' in the introductory text of paragraph (a)(8); and by
revising ``FmHA'' to read ``the Agency's'' in paragraph (a)(4).
17. Section 1980.191 is amended by revising paragraph (e) to read
as follows:
Sec. 1980.191 Borrower training program.
* * * * *
(e) Vendor monitoring. Borrowers will complete course and
instructor evaluations provided by the instructor when the borrowers
complete the course.
18. Section 1980.200 is revised to read as follows:
Sec. 1980.200 OMB control number.
The reporting requirements contained in this subpart have been
approved by the Office of Management and Budget (OMB) and have been
assigned OMB control number 0575-0079. Public reporting burden for this
collection of information is estimated to vary from 15 minutes to 4
hours per response, with an average of 1.32 hours per response,
including time for reviewing instructions, searching existing data
sources, gathering and maintaining the data needed, and completing and
reviewing the collection of information. Send comments regarding this
burden estimate or any other aspect of this collection of information,
including suggestions for reducing this burden, to the Department of
Agriculture, Clearance Officer, OIRM, Ag Box 7630, Washington, D.C.
20250; and to the Office of Management and Budget, Paperwork Reduction
Project (OMB #0575-0079), Washington, D.C. 20503.
19. Exhibit D of subpart B is amended by revising the word
``holder(s)'' to read ``holder'' in the first sentence of paragraph
XVI; by removing the second sentence of paragraph XVI, and by revising
paragraphs XIII.D., F. and G. to read as follows:
Exhibit D--Interest Assistance Program
* * * * *
XIII. Servicing of Loans/Lines of Credit Covered by an Interest
Assistance Agreement
* * * * *
D. In the event of reamortization, rescheduling or deferral of
loans with Interest Assistance, Interest Assistance will remain
available for that loan under the terms of the existing Interest
Assistance Agreement. If additional Interest Assistance is needed to
produce a positive cash flow throughout the life of the rescheduled/
reamortized loan and funds are not available for the additional
Interest Assistance, then the rescheduling/reamortization will not
be approved by the agency. In no case, will the subsidy be extended
more than ten years from the initial effective date of the original
Interest Assistance Agreement.
E. * * *
F. For Loan Note Guarantees held by holders, Agency purchase of
the guaranteed portion of the loan will stop Interest Assistance
payments on that portion. Interest Assistance payments will cease
upon termination of the Loan Note Guarantee or Contract of Guarantee
by expiration of the document or cancellation by the Government.
G. A lender will notify the Agency when a borrower who is not
receiving maximum Interest Assistance is 30 days past due on a
payment and is unable to bring the account current within 30 days.
The lender will request that the Agency make a determination as to
the borrower's eligibility for Interest Assistance. The lender will
submit a plan of operation for the farm projecting the repayment
ability of the borrower with and without Interest Assistance. Upon
receipt of the agency's determination, the lender may request
Interest Assistance. If the lender declines Interest Assistance, the
lender will notify the Agency in writing within 30 days.
* * * * *
[[Page 53265]]
Dated: September 14, 1995.
Eugene Moos,
Under Secretary of Agriculture, Farm and Foreign Agricultural Services.
Dated: September 15, 1995.
Jill Long Thompson,
Under Secretary of Agriculture, Rural Economic and Community
Development.
[FR Doc. 95-24179 Filed 10-12-95; 8:45 am]
BILLING CODE 3410-07-U
