[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: 7CFR1779.83]

[Page 1024-1025]
 
                          TITLE 7--AGRICULTURE
 
    CHAPTER XVII--RURAL UTILITIES SERVICE, DEPARTMENT OF AGRICULTURE
 
PART 1779--WATER AND WASTE DISPOSAL PROGRAMS GUARANTEED LOANS--Table of Contents
 
Sec. 1779.83  Protective advances.

    Protective advances can only be added to the loan account for 
purposes of requirements to preserve the value of the security. 
Protective advances constitute an indebtedness of the borrower to the 
lender and must be secured by collateral to the same extent as principal 
and interest. Protective advances include, but are not limited to, 
advances made for taxes, annual assessments, ground rent, hazard and 
flood insurance premiums affecting the

[[Page 1025]]

collateral (including any other expenses necessary to protect the 
collateral). Attorney fees are not a protective advance.
    (a) Agency approval.The Agency must approve, in writing, all 
protective advances on loans within its loan approval authority which 
exceed a total cumulative advance amount of $5,000 to the same borrower. 
Protective advances must be reasonable when associated with the value of 
the collateral being preserved.
    (b) Preserving collateral.When considering protective advances, 
sound judgment must be exercised in determining that the additional 
funds advanced will actually preserve collateral and recovery is 
actually enhanced by making the advance.