[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: 7CFR1965.19]

[Page 333-334]
 
                          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.  1965.19  Severance agreement.

    Form FmHA or its successor agency under Public Law 103-354 440-26, 
``Consent and Subordination Agreement,'' will be completed when a 
borrower requests FmHA or its successor agency under Public Law 103-
354's consent to a severance agreement, or other instrument of similar 
effect, so that items to be acquired by the borrower through other 
credit and subject to a chattel lien will not become a part of the real 
estate securing the FmHA or its successor agency under Public Law 103-
354 debt. Some examples of items which may be acquired subject to a 
chattel lien are silos, storage bins, bulk milk tanks, irrigation or 
income producing facilities, non-farm enterprise facilities, and 
recreational equipment. County Supervisors are authorized to give FmHA 
or its successor agency under Public Law 103-354 consent by executing 
Form FmHA or its successor agency under Public Law 103-354 440-26 and 
any necessary severance agreements, provided that the following 
determinations are made:
    (a) The financing arrangements are in the best interest of the 
Government and the borrower.
    (b) The transaction will not adversely affect FmHA or its successor 
agency under Public Law 103-354's security position and will be within 
the borrower's debt-paying ability, and
    (c) The facility does not exceed the borrower's needs, is modest in 
cost and design; and is otherwise in line with FmHA or its successor 
agency under Public Law 103-354 financing policies. OGC will be 
requested to approve any severance agreement submitted by a

[[Page 334]]

borrower that is of a type not previously approved for use in the State 
and, when necessary, to issue closing instructions. The State Director 
may request the OGC to prepare a severance agreement instrument for use 
in the State.