[Code of Federal Regulations]
[Title 7, Volume 15]
[Revised as of January 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 7CFR4279.29]

[Page 563-564]
 
                          TITLE 7--AGRICULTURE
 
  CHAPTER XLII--RURAL BUSINESS-COOPERATIVE SERVICE AND RURAL UTILITIES 
                   SERVICE, DEPARTMENT OF AGRICULTURE
 
PART 4279_GUARANTEED LOANMAKING--Table of Contents
 
                            Subpart A_General
 
Sec. 4279.29  Eligible lenders.

    (a) Traditional lenders. An eligible lender is any Federal or State 
chartered bank, Farm Credit Bank, other Farm Credit System institution 
with direct lending authority, Bank for Cooperatives, Savings and Loan 
Association, or mortgage company that is part of a bank-holding company. 
These entities must be subject to credit examination and supervision by 
either an agency of the United States or a State. Eligible lenders may 
also include credit unions provided, they are subject to credit 
examination and supervision by either the National Credit Union 
Administration or a State agency, and insurance companies provided they 
are regulated by a State or National insurance regulatory agency. 
Eligible lenders include the National Rural Utilities Cooperative 
Finance Corporation.
    (b) Other lenders. Rural Utilities Service borrowers and other 
lenders not meeting the criteria of paragraph (a) of this section may be 
considered by the Agency for eligibility to become a guaranteed lender 
provided, the Agency determines that they have the legal authority to 
operate a lending program and sufficient lending expertise and financial 
strength to operate a successful lending program.
    (1) Such a lender must:
    (i) Have a record of successfully making at least three commercial 
loans annually for at least the most recent 3 years, with delinquent 
loans not exceeding 10 percent of loans outstanding and historic losses 
not exceeding 10 percent of dollars loaned, or when the proposed lender 
can demonstrate that it has personnel with equivalent previous 
experience and where the commercial loan portfolio was of a similar 
quantity and quality; and
    (ii) Have tangible balance sheet equity of at least seven percent of 
tangible assets and sufficient funds available to disburse the 
guaranteed loans it proposes to approve within the first 6 months of 
being approved as a guaranteed lender.
    (2) A lender not eligible under paragraph (a) of this section that 
wishes consideration to become a guaranteed lender must submit a request 
in writing to the State Office for the State where the lender's lending 
and servicing activity takes place. The National Office will notify the 
prospective lender, through the State Director, whether the lender's 
request for eligibility is approved or rejected. If rejected, the 
reasons for the rejection will be indicated to the prospective lender in 
writing. The lender's written request must include:
    (i) Evidence showing that the lender has the necessary capital and 
resources to successfully meet its responsibilities.
    (ii) Copy of any license, charter, or other evidence of authority to 
engage in the proposed loanmaking and servicing activities. If licensing 
by the State is not required, an attorney's opinion to this effect must 
be submitted.
    (iii) Information on lending experience, including length of time in 
the

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lending business; range and volume of lending and servicing activity; 
status of loan portfolio including delinquency rate, loss rate as a 
percentage of loan amounts, and other measures of success; experience of 
management and loan officers; audited financial statements not more than 
1 year old; sources of funds for the proposed loans; office location and 
proposed lending area; and proposed rates and fees, including loan 
origination, loan preparation, and servicing fees. Such fees must not be 
greater than those charged by similarly located commercial lenders in 
the ordinary course of business.
    (iv) An estimate of the number and size of guaranteed loan 
applications the lender will develop.
    (c) Expertise. Loan guarantees will only be approved for lenders 
with adequate experience and expertise to make, secure, service, and 
collect B&I loans.