[Code of Federal Regulations]
[Title 49, Volume 4]
[Revised as of October 1, 2002]
From the U.S. Government Printing Office via GPO Access
[CITE: 49CFR260.51]

[Page 698-699]
 
                        TITLE 49--TRANSPORTATION
 
       CHAPTER II--FEDERAL RAILROAD ADMINISTRATION, DEPARTMENT OF 
                             TRANSPORTATION
 
PART 260--REGULATIONS GOVERNING LOANS AND LOAN GUARANTEES UNDER THE RAILROAD REHABILITATION AND IMPROVEMENT FINANCING PROGRAM--Table of Contents
 
                   Subpart F--Loan Guarantees--Lenders
 
Sec. 260.51  Conditions of guarantee.


    (a) The percentage of the obligation for which Applicant seeks a 
guarantee is a matter of negotiation between the Lender and the 
Applicant, subject to the Administrator's approval. The maximum 
percentage of the total obligation that the Administrator will guarantee 
is 80 percent. The amount of guarantee allowed will depend on the total 
credit quality of the transaction and the level of risk believed to be 
assumed by the Administrator.
    (b) A guarantee under this part constitutes an obligation supported 
by the full faith and credit of the United States and is incontestable 
except for fraud or misrepresentation of which a Lender or Holder has 
actual knowledge at the time it becomes such Lender or Holder or which a 
Lender or Holder participates in or condones. In addition, the guarantee 
will be unenforceable by the Lender or the Holder 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 
the Administrator acquires knowledge thereof. Any losses occasioned will 
be unenforceable to the extent that loan funds are used for purposes 
other than those specifically approved by FRA in its guarantee.
    (c) The Administrator may guarantee an Applicant's obligation to any 
Lender provided such Lender can establish to the satisfaction of the 
Administrator that it has the legal authority and sufficient expertise 
and financial strength to operate a successful lending program. Loan 
guarantees will only be approved for Lenders with adequate experience 
and expertise to make, secure, service, and collect the loans.
    (d) The Lender may sell all of the guaranteed portion of the loan on 
the secondary market, provided the loan is

[[Page 699]]

not in default, or retain the entire loan.
    (e) When a guaranteed portion of a loan is sold to a Holder, the 
Holder shall succeed to all rights of the Lender under the loan 
guarantee to the extent of the portion purchased. The Lender will remain 
bound to all obligations under the loan guarantee and the provisions of 
this part. In the event of material fraud, negligence or 
misrepresentation by the Lender or the Lender's participation in or 
condoning of such material fraud, negligence or misrepresentation, the 
Lender will be liable for payments made by the Agency to any Holder.