[Code of Federal Regulations]
[Title 7, Volume 14]
[Revised as of January 1, 2003]
From the U.S. Government Printing Office via GPO Access
[CITE: 7CFR1965.16]

[Page 331-332]
 
                          TITLE 7--AGRICULTURE
 
   CHAPTER XVIII--RURAL HOUSING SERVICE, RURAL BUSINESS--COOPERATIVE 
SERVICE, RURAL UTILITIES SERVICE, AND FARM SERVICE AGENCY, DEPARTMENT OF 
                         AGRICULTURE (CONTINUED)
 
PART 1965--REAL PROPERTY--Table of Contents
 
  Subpart A--Servicing of Real Estate Security for Farm Loan Programs 
                    Loans and Certain Note-Only Cases
 
Sec.  1965.16  Consent to junior liens.

    As a general policy, FmHA or its successor agency under Public Law 
103-354 borrowers will be discouraged from giving other creditors junior 
liens on real estate securing an FmHA or its successor agency under 
Public Law 103-354 loan. (For Sections 502 and 504 loans, see Sec.  
1965.111 of Subpart C of Part 1965 of this chapter).
    (a) Processing request. When consent to a junior lien is requested 
by a borrower, the County Supervisor may consent by executing Form FmHA 
or its successor agency under Public Law 103-354 465-1 or other form 
approved by OGC for use in the state provided:
    (1) The terms of the junior lien debt are such that repayment is not 
likely to jeopardize payment of the FmHA or its successor agency under 
Public Law 103-354 loan;
    (2) Operating plans made with the junior lienholder are consistent 
with plans made with FmHA or its successor agency under Public Law 103-
354;
    (3) Total debt against the security will not exceed its market 
value; and
    (4) The junior lienholder agrees in writing not to foreclose the 
mortgage before a discussion with the County Supervisor and after giving 
a reasonable specified period of written notice to FmHA or its successor 
agency under Public Law 103-354.
    (b) Consent not requested or granted. When a junior lien is placed 
on any property without FmHA or its successor agency under Public Law 
103-354 consent and consent cannot be granted under this section, FmHA 
or its successor agency under Public Law 103-354 may continue with the 
loan as long as the borrower pays FmHA or its successor agency under 
Public Law 103-354 loans as agreed, maintains the security, and meets 
all other conditions of the loan. The existence of a junior lien cannot 
be treated as a default. The County Supervisor will continue to

[[Page 332]]

service the loan to protect the Government's security interest.