[Code of Federal Regulations]
[Title 7, Volume 11]
[Revised as of January 1, 2003]
From the U.S. Government Printing Office via GPO Access
[CITE: 7CFR1779.4]

[Page 1010-1011]
 
                          TITLE 7--AGRICULTURE
 
    CHAPTER XVII--RURAL UTILITIES SERVICE, DEPARTMENT OF AGRICULTURE
 
PART 1779--WATER AND WASTE DISPOSAL PROGRAMS GUARANTEED LOANS--Table of Contents
 
Sec. 1779.4  Conditions of guarantee.

    A loan guarantee under this part will be evidenced by a Loan Note 
Guarantee issued by the Agency. Each lender will also execute a Lender's 
Agreement.
    (a) The entire loan will be secured by the same security with equal 
lien priority for the guaranteed and non-guaranteed portions of the 
loan. The non-guaranteed portion of the loan will not be paid first nor 
given any preference or priority over the guaranteed portion.
    (b) The lender will be responsible for servicing the entire loan and 
will remain mortgagee or secured party of record notwithstanding the 
fact that another party may hold a portion of the loan.
    (c) When a guaranteed portion of a loan is sold to a holder, the 
holder shall have all rights of the lender under the Loan Note Guarantee 
to the extent of the portion purchased. The lender will remain bound by 
all the obligations under the Loan Note Guarantee, Lender's Agreement, 
and Agency program regulations. If the Agency makes a payment to a 
holder, then the lender must reimburse the Agency.
    (d) A lender will receive all payments of principal and interest on 
the account of the entire loan and will promptly remit to each holder a 
pro rata share, less any lender servicing fee.
    (e) The lender may retain all of the unguaranteed portion of the 
loan or may sell part of the unguaranteed portion of the loan through 
participation. However, the lender is required to retain 5 percent of 
the loan amount from

[[Page 1011]]

the unguaranteed portion in their portfolio.