[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: 7CFR1779.78]

[Page 1022-1023]
 
                          TITLE 7--AGRICULTURE
 
    CHAPTER XVII--RURAL UTILITIES SERVICE, DEPARTMENT OF AGRICULTURE
 
PART 1779--WATER AND WASTE DISPOSAL PROGRAMS GUARANTEED LOANS--Table of Contents
 
Sec. 1779.78  Repurchase of loan.

    (a) Repurchase by lender. The lender has the option to repurchase 
the loan from a holder within 30 days of written demand from the holder 
when the borrower is in default not less than 60 days on payment. The 
repurchase will be for an amount equal to the unpaid guaranteed portion 
of principal and accrued interest less the lender's servicing fee. The 
guarantee does not cover the note interest to the holder on the 
guaranteed loan accruing after 90 days from the date of the demand 
letter to the lender. The holder will concurrently send a copy of the 
demand to the Agency. The lender will accept an assignment without 
recourse from the holder upon repurchase. The lender is encouraged to 
repurchase the loan to facilitate the accounting of funds, resolve the 
problem, and permit the borrower to cure the default, where reasonable. 
The lender will notify the holder and the Agency of its decision within 
30 days of receipt of demand from the holder.
    (b) Agency repurchase. (1) If the lender does not repurchase as 
provided in paragraph (a) of this section, the Agency will purchase from 
the holder the unpaid principal balance of the guaranteed portion 
together with accrued interest to date of repurchase (less the lender's 
servicing fee) within 30 days after a specific written demand directed 
to the Agency. The copy of the demand on the lender is not sufficient. 
The guarantee will not cover the note interest to the holder on the 
guaranteed loan accruing after 90 days from the date of the original 
demand letter. The lender shall not charge the Agency any servicing fees 
nor are any such fees collectible from the Agency.
    (2) The holder's demand to the Agency must include a copy of the 
written demand made upon the lender. The holder or duly authorized agent 
must also include evidence of the right to require payment from the 
Agency. Such evidence will consist of either the original of the Loan 
Note Guarantee properly endorsed to the Agency or the original of the 
Assignment Guarantee Agreement properly assigned to the Agency without 
recourse including all rights, title, and interest in the loan. The 
Agency will be subrogated to all rights of the holder. The holder must 
include in the demand the amount due including unpaid principal, unpaid 
interest to date of demand, and interest subsequently accruing from the 
date of demand to the proposed payment date. Unless otherwise agreed to 
by the Agency, such proposed payment will not be later than 30 days from 
the date of demand.
    (3) The lender must promptly provide the Agency with the information 
necessary for the Agency's determination of the appropriate amount due 
the holder upon the Agency's notification to the lender of the holder's 
demand for payment. This information must be certified by an authorized 
officer of the lender. Any discrepancy between the amount claimed by the 
holder and the information submitted by the lender must be resolved 
before payment will be approved. The Agency will notify both parties and 
such conflict will suspend the running of the 30-day payment 
requirement.
    (4) Any purchase by the Agency does not change, alter, or modify any 
of the lender's obligations to the Agency arising from the loan or 
guarantee nor does it waive any of the Agency's rights against the 
lender. The Agency may set off against the lender all rights inuring to 
the Agency as the holder of the instrument against the Agency's 
obligation to the lender under the Loan Note Guarantee.
    (c) Repurchase for servicing.When the lender determines that 
repurchase of the guaranteed portion of the loan is necessary to service 
the loan, the holder must sell the guaranteed portion to

[[Page 1023]]

the lender for the unpaid principal and interest balance (less the 
lender's servicing fee). The guarantee does not cover interest accruing 
after 90 days from the date the lender's or Agency's letter requesting 
the holder to tender its guaranteed portion. The lender must not 
repurchase from the holder for arbitrage purposes to further its own 
financial gain. Any repurchase must be made only after the lender 
obtains the Agency written approval. If the lender does not repurchase 
the portion from the holder, the Agency may, at its option, purchase 
such guaranteed portion for servicing purposes.