[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: 7CFR1822.266]

[Page 1172-1173]
 
                          TITLE 7--AGRICULTURE
 
    CHAPTER XVIII--RURAL HOUSING SERVICE, RURAL BUSINESS-COOPERATIVE 
SERVICE, RURAL UTILITIES SERVICE, AND FARM SERVICE AGENCY, DEPARTMENT OF 
                               AGRICULTURE
 
PART 1822--RURAL HOUSING LOANS AND GRANTS--Table of Contents
 
      Subpart G--Rural Housing Site Loan Policies, Procedures, and 
                             Authorizations
 
Sec. 1822.266  Limitations.

    (a) Loan limits. No RHS loan(s) will be made to any applicant which 
will result in the applicant's owning an unpaid principal balance of 
more than $100,000 on such loan(s) unless prior authorization for a 
larger loan is obtained from the national office. No such loan will 
exceed the development cost as defined in Sec. 1822.263(d), or the value 
of the property as improved with the loan. These limitations also apply 
to cases in which the same persons hold a majority of the membership 
interests or constitute a majority of the directors of two or more 
applicants.
    (b) Limitations of use of loan funds. Loans will not be made for:
    (1) The purchase of land in excess of the immediate and identified 
needs in the locality.
    (2) The purchase of land from a member of an applicant-organization, 
or from another organization in which any member of the applicant-
organization has an interest, without prior consent of the national 
office.
    (3) Refinancing of debts, except in accordance with paragraph (e) of 
this section.
    (4) Payment of any fee, charge, or commission to any broker, 
negotiator, or other person for the referral of a prospective applicant 
or solicitation of a loan.
    (5) Payment of any fee, salary, commission, profit, or compensation 
to an applicant, or to any officer, director, trustee, stockholder, 
member or agent of an applicant, except as provided in Sec. 1822.265(b). 
No contract or agreement for services to be paid for with loan funds 
should be executed by the applicant without prior approval by the State 
director.
    (c) Sale of developed sites. The sites developed with a section 524 
loan must be for housing low- and moderate-income families and may be 
sold to families, nonprofit organizations, public agencies, and 
cooperatives eligible for assistance under any section of title V of the 
Housing Act of 1949, or under any other law which provides financial 
assistance. For example, this may include:
    (1) Individuals with low and moderate incomes eligible for HUD 
mortgages.
    (2) Individuals with low and moderate incomes eligible for VA 
guaranteed loans.
    (3) Individuals with low or moderate incomes eligible for a loan 
from any private lender which is authorized by law to provide financial 
assistance for housing.
    (4) Nonprofit organizations funded by Federal, State, or local 
governments carrying out programs for low- and moderate-income families 
to obtain housing.
    (5) State or local public agencies such as a housing authority or a 
housing finance development agency carrying out programs for low- and 
moderate-income families to obtain housing.
    (d) Suitability of sites. Sites will meet the requirements of the 
planned use; for example, individual housing or multiple housing or any 
combination thereof. Building sites must be well located and designed to 
provide a desirable living environment. Generally a loan will not be 
made for the development of less than 10 units, but they need not be 
contiguous.
    (e) Obligations incurred before loan closing. When an applicant 
files an application for a loan, the county supervisor will advise the 
applicant that development work must not be started and obligations for 
work, materials, or land purchase must not be incurred before the loan 
is closed. If, nevertheless, the applicant incurs obligations for work, 
materials, or land purchase before the loan is closed, the State 
director may authorize the use of loan funds to pay such obligations 
only when he

[[Page 1173]]

finds that all the following conditions exist:
    (1) The obligations were incurred after the applicant filed a 
written application for a loan.
    (2) The applicant is unable to pay such obligations from its own 
resources or to obtain credit from other sources, and failure to 
authorize the use of loan funds to pay such debts would impair the 
applicant's financial position.
    (3) The obligations were incurred for authorized loan purposes.
    (4) Contracts, materials, development and any land purchase meet 
FmHA or its successor agency under Public Law 103-354 standards and 
requirements.
    (5) Payment of the obligations will remove any liens which have 
attached, and any basis for liens that may attach, to the property on 
account of such obligations or such work, materials, or land purchase.

[35 FR 10687, July 1, 1970, as amended at 40 FR 6951, Feb. 18, 1975]