[Code of Federal Regulations]
[Title 7, Volume 7, Parts 700 to 899]
[Revised as of January 1, 2001]
From the U.S. Government Printing Office via GPO Access
[CITE: 7CFR762.160]

[Page 445-446]
 
                          TITLE 7--AGRICULTURE
 
                            CHAPTER VII--FARM
                SERVICE AGENCY, DEPARTMENT OF AGRICULTURE
 
PART 762--GUARANTEED FARM LOANS--Table of Contents
 
Sec. 762.160  Sale, assignment and participation.

    (a) The following general requirements apply to selling, assigning 
or participating guaranteed loans.
    (1) Subject to Agency concurrence, the lender may sell, assign or 
participate all or part of the guaranteed portion of the loan to one or 
more holders at or after loan closing, only if the loan is not in 
default. However, a line of credit can be participated, but not sold or 
assigned.
    (2) The Agency may refuse to execute the Assignment of Guarantee and 
prohibit the sale in case of the following:
    (i) The Agency purchased and is holder of a loan that was sold by 
the lender that is requesting the assignment.
    (ii) The lender has not complied with the reimbursement requirements 
of Sec. 762.144(c)(7), except when the 180 day

[[Page 446]]

reimbursement or liquidation requirement has been waived by the Agency.
    (3) The lender will provide the Agency with copies of all 
appropriate forms used in the sale or assignment.
    (4) The guaranteed portion of the loan may not be sold or assigned 
by the lender until the loan has been fully disbursed to the borrower, 
except a line of credit may be participated prior to being fully 
advanced.
    (5) The lender is not permitted to sell, assign or participate any 
amount of the guaranteed or unguaranteed portion of loan to the loan 
applicant or borrower, or members of their immediate families, their 
officers, directors, stockholders, other owners, or any parent, 
subsidiary, or affiliate.
    (6) Upon the lender's sale or assignment of the guaranteed portion 
of the loan, or participation of the line of credit, the lender will 
remain bound to all obligations indicated in the Guarantee, lender's 
agreement, the Agency program regulations, and to future program 
regulations not inconsistent with the provisions of the Lenders 
agreement. The lender retains all rights under the security instruments 
for the protection of the lender and the United States.
    (b) The following will occur upon the lender's sale or assignment of 
the guaranteed portion of the loan:
    (1) The holder will succeed to all rights of the Guarantee 
pertaining to the portion of the loan purchased.
    (2) The lender will send the holder the borrower's executed note 
attached to the Guarantee.
    (3) The holder, upon written notice to the lender and the Agency, 
may assign the unpaid guaranteed portion of the loan. The holder must 
sell the guaranteed portion back to the original lender if requested for 
servicing or liquidation of the account.
    (4) The guarantee or assignment of guarantee in the holder's 
possession does not cover:
    (i) Interest accruing 90 days after the holder has demanded 
repurchase by the lender, except as provided in the assignment of 
guarantee and Sec. 762.144(c)(3)(iii).
    (ii) Interest accruing 90 days after the lender or the Agency has 
requested the holder to surrender evidence of debt repurchase, if the 
holder has not previously demanded repurchase.
    (c) In a participation, the lender sells an interest in a loan but 
retains the note, the collateral securing the note, and all 
responsibility for loan servicing and liquidation. The guarantee does 
not encompass the participant.
    (1) The lender must retain at least 10 percent of the total 
guaranteed loan amount from the unguaranteed portion of the loan in its 
portfolio, except when the loan guarantee exceeds 90 percent, the lender 
must retain the total unguaranteed portion.
    (2) Participation with a lender by any entity does not make that 
entity a holder or a lender as defined in this part.
    (d) Negotiations concerning premiums, fees, and additional payments 
for loans are to take place between the holder and the lender. The 
Agency will participate in such negotiations only as a provider of 
information.

[64 FR 7358, Feb. 12, 1999; 64 FR 38298, July 16, 1999]