[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: 7CFR1779.63]

[Page 1018-1019]
 
                          TITLE 7--AGRICULTURE
 
    CHAPTER XVII--RURAL UTILITIES SERVICE, DEPARTMENT OF AGRICULTURE
 
PART 1779--WATER AND WASTE DISPOSAL PROGRAMS GUARANTEED LOANS--Table of Contents
 
Sec. 1779.63  Conditions precedent to issuance of the Loan Note Guarantee.

    The Loan Note Guarantee will not be issued until:
    (a) The lender certifies that:
    (1) No changes have been made in the lender's loan conditions and 
requirements since the issuance of the Conditional Commitment for 
Guarantee except those approved in the interim by the Agency in writing.
    (2) All planned property acquisition has been completed and all 
development has been substantially completed in accordance with plans, 
specifications, and applicable building codes. No costs have exceeded 
the amounts approved by the lender and the Agency.
    (3) Required insurance is in effect.
    (4) The loan has been properly closed and the required security 
instruments have been obtained on any after-acquired property that 
cannot be covered initially under State statutory provisions.
    (5) The borrower has marketable title to the collateral then owned 
by the borrower, subject to the instrument securing the loan to be 
guaranteed and subject to any other exceptions approved, in writing, by 
the Agency.
    (6) When required, the entire amount of the loan for working capital 
has been disbursed except in cases where the Agency has approved 
disbursement over an extended time.
    (7) All other requirements of the Conditional Commitment for 
Guarantee have been met.
    (8) Lien priorities are consistent with requirements of the 
Conditional Commitment for Guarantee.
    (9) The loan proceeds have been disbursed for purposes and in 
amounts consistent with the Conditional Commitment for Guarantee and as 
specified on the application for the guaranteed loan. A copy of a 
detailed statement by

[[Page 1019]]

the lender detailing the use of loan funds will be attached to support 
this certification.
    (10) There has been no substantive adverse change in the borrower's 
financial condition nor any other adverse change in the borrower during 
the period of time from the Agency's issuance of the Conditional 
Commitment for Guarantee to issuance of the Loan Note Guarantee. The 
lender's certification must address all adverse changes of the borrower 
and the guarantors. For purposes of this paragraph (a)(10), the term 
borrower includes any parent, affiliate, or subsidiary of the borrower.
    (11) All Federal, State, and local design and construction 
requirements have been met.
    (12) The lender understands and will meet the requirements of the 
Debt Collection Act (31 U.S.C. Chapter 37).
    (13) The lender would not make the loan without an Agency guarantee.
    (b) The lender has executed and delivered the Lender's Agreement and 
closing report for the guaranteed loan along with the appropriate 
guarantee fee.
    (c) The lender has advised the Agency of plans to sell or assign any 
part of the loan as provided in the Lender's Agreement.
    (d) Where applicable, the lender must certify that the borrower has 
obtained:
    (1) A legal opinion relative to the title to rights-of-way and 
easements. Lenders are responsible for ensuring that borrowers have 
obtained valid, continuous, and adequate rights-of-way and easements 
needed for the construction, operation, and maintenance of a facility.
    (2) A title opinion or title insurance showing ownership of the land 
and all mortgages or other lien defects, restrictions, or encumbrances, 
if any. It is the responsibility of the lender to ensure that the 
borrower has obtained and recorded such releases, consents, or 
subordinations to such property rights from holders of outstanding liens 
or other instruments as may be necessary for the construction, 
operation, and maintenance of the facility and to provide the required 
security. For example, when a site is for major structures and the 
lender and borrower are able to obtain only a right-of-way or easement 
on such a site rather than a fee simple title, such a title opinion must 
be requested.
    (e) If the Loan Note Guarantee cannot be issued before the 
Conditional Commitment expires, the lender must submit a written request 
for an extension of the expiration date. The lender must document and 
certify to paragraph (a)(1) and (a)(11) of this section specifically 
identifying any modifications.
    (f) Coincident with, or immediately after, loan closing, the lender 
will contact the Agency and provide those documents and certifications 
required in this section. For loans to public bodies, lenders may 
require an opinion from recognized bond counsel regarding the adequacy 
of the preparation and issuance of the debt instruments. Only when the 
Agency is satisfied that all conditions for the guarantee have been met 
will the Loan Note Guarantee be executed.