[Code of Federal Regulations]
[Title 7, Volume 7]
[Revised as of January 1, 2002]
From the U.S. Government Printing Office via GPO Access
[CITE: 7CFR762.103]

[Page 413]
 
                          TITLE 7--AGRICULTURE
 
                            CHAPTER VII--FARM
                SERVICE AGENCY, DEPARTMENT OF AGRICULTURE
 
PART 762--GUARANTEED FARM LOANS--Table of Contents
 
Sec. 762.103  Full faith and credit.

    (a) Fraud and misrepresentation. The loan guarantee constitutes an 
obligation supported by the full faith and credit of the United States. 
The Agency may contest the guarantee only in cases of fraud or 
misrepresentation by a lender or holder, in which:
    (1) The lender or holder had actual knowledge of the fraud or 
misrepresentation at the time it became the lender or holder, or
    (2) The lender or holder participated in or condoned the fraud or 
misrepresentation.
    (b) Lender violations. The loan guarantee cannot be enforced by the 
lender, regardless of when the Agency discovers the violation, to the 
extent that the loss is a result of:
    (1) Violation of usury laws;
    (2) Negligent servicing;
    (3) Failure to obtain the required security; or,
    (4) Failure to use loan funds for purposes specifically approved by 
the Agency.
    (c) Enforcement by holder. The guarantee and right to require 
purchase will be directly enforceable by the holder even if:
    (1) The loan guarantee is contestable based on the lender's fraud or 
misrepresentation; or
    (2) The loan note guarantee is unenforceable by the lender based on 
a lender violation.