[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: 7CFR762.146]

[Page 436-437]
 
                          TITLE 7--AGRICULTURE
 
                            CHAPTER VII--FARM
                SERVICE AGENCY, DEPARTMENT OF AGRICULTURE
 
PART 762--GUARANTEED FARM LOANS--Table of Contents
 
Sec. 762.146  Other servicing procedures.

    (a) Additional loans and advances. (1) Notwithstanding any provision 
of this section, the PLP lender may make additional loans or advances in 
accordance with the lender's agreement with the Agency.
    (2) SEL and CLP lenders must not make additional loans or advances 
without prior written approval of the Agency, except as provided in the 
borrower's loan or line of credit agreement.
    (3) In cases of a guaranteed line of credit, lenders may make an 
emergency advance when a line of credit has reached its ceiling. The 
emergency advance will be made as an advance under the line and not as a 
separate note. The lender's loan documents must contain sufficient 
language to provide that any emergency advance will constitute a debt of 
the borrower to the lender and be secured by the security instrument. 
The following conditions apply:
    (i) The loan funds to be advanced are for authorized operating loan 
purposes;
    (ii) The financial benefit to the lender and the Government from the 
advance will exceed the amount of the advance; and
    (iii) The loss of crops or livestock is imminent unless the advance 
is made.
    (4) Protective advance requirements are found in Sec. 762.149.
    (b) Release of liability upon withdrawal. An individual who is 
obligated on a guaranteed loan may be released from liability by a 
lender, with the written consent of the Agency, provided the following 
conditions have been met:
    (1) The individual to be released has withdrawn from the farming or 
ranching operation;
    (2) A divorce decree or final property settlement does not hold the 
withdrawing party responsible for the loan payments;
    (3) The withdrawing party's interest in the security is conveyed to 
the individual or entity with whom the loan will be continued;
    (4) The ratio of the amount of debt to the value of the remaining 
security is less than or equal to .75, or the withdrawing party has no 
income or assets from which collection can be made; and
    (5) Withdrawal of the individual does not result in legal 
dissolution of the entity to which the loans are made. Individually 
liable members of a general or limited partnership may not be released 
from liability.
    (6) The remaining liable party projects a feasible plan (see 
Sec. 762.102(b)).
    (c) Release of liability after liquidation. After a final loss claim 
has been paid on the borrower's account, the lender may release the 
borrower or guarantor from liability if;
    (1) The Agency agrees to the release in writing;
    (2) The lender documents its consideration of the following factors 
concerning the borrower or guarantors:
    (i) The likelihood that the borrower or guarantor will have a 
sufficient level of income in the reasonably near

[[Page 437]]

future to contribute to a meaningful reduction of the debt;
    (ii) The prospect that the borrower or guarantor will inherit assets 
in the near term that may be attached by the Agency for payment of a 
significant portion of the debt;
    (iii) Whether collateral has been properly accounted for, and 
whether liability should be retained in order to take action against the 
borrower or a third party for conversion of security;
    (iv) The availability of other income or assets which are not 
security;
    (v) The possibility that assets have been concealed or improperly 
transferred;
    (vi) The effect of other guarantors on the loan; and
    (vii) Cash consideration or other collateral in exchange for the 
release of liability.
    (3) The lender will use its own release of liability documents.
    (d) Interest rate changes. (1) The lender may change the interest 
rate on a performing (nondelinquent) loan only with the borrower's 
consent.
    (2) If the loan has been sold on the secondary market, the lender 
must repurchase the loan or obtain the holder's written consent.
    (3) To change a fixed rate of interest to a variable rate of 
interest or vice versa, the lender and the borrower must execute a 
legally effective allonge or amendment to the existing note.
    (4) If a new note is taken, it will be attached to and refer to the 
original note.
    (5) The lender will inform the Agency of the rate change.
    (e) Consolidation. Two or more Agency guaranteed loans may be 
consolidated, subject to the following conditions:
    (1) The borrower must project a feasible plan after the 
consolidation. See Sec. 762.102(b) for definition of feasible plan.
    (2) Only OL may be consolidated.
    (3) Existing lines of credit may only be consolidated with a new 
line of credit if the final maturity date and conditions for advances of 
the new line of credit are made the same as the existing line of credit.
    (4) Guaranteed OL may not be consolidated with a line of credit, 
even if the line of credit has been rescheduled.
    (5) Guaranteed loans made prior to October 1, 1991, cannot be 
consolidated with those loans made on or after October 1, 1991.
    (6) OL secured by real estate or with an outstanding interest 
assistance agreement or shared appreciation agreement cannot be 
consolidated.
    (7) A new note or line of credit agreement will be taken. The new 
note or line of credit agreement must describe the note or line of 
credit agreement being consolidated and must state that the indebtedness 
evidenced by the note or line of credit agreement is not satisfied. The 
original note or line of credit agreement must be retained.
    (8) The interest rate for a consolidated OL loan is the negotiated 
rate agreed upon by the lender and the borrower at the time of the 
action, subject to the loan limitations for each type of loan.
    (9) The Agency approves the consolidation by executing a 
modification of guarantee. The modification will indicate the 
consolidated loan amount, new terms, and percentage of guarantee, and 
will be attached to the originals of the guarantees being consolidated. 
If loans with a different guarantee percentage are consolidated, the new 
guarantee will be at the lowest percentage of guarantee being 
consolidated
    (10) Any holders must consent to the consolidation, or the 
guaranteed portion must be repurchased by the lender.

[64 FR 7378, Feb. 12, 1999, as amended at 66 FR 7567, Jan. 24, 2001]