[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: 7CFR4279.78]

[Page 570-571]
 
                          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. 4279.78  Repurchase from holder.

    (a) Repurchase by lender. A lender has the option to repurchase the 
unpaid guaranteed portion of the loan from a holder within 30 days of 
written demand by the holder when the borrower is in default not less 
than 60 days on principal or interest due on the loan; or the lender has 
failed to remit to the holder its pro rata share of any payment made by 
the borrower within 30 days of the lender's receipt thereof. The 
repurchase by the lender will be for an amount equal to the unpaid 
guaranteed portion of principal and accrued interest less the lender's 
servicing fee. The holder must concurrently send a copy of the demand 
letter to the Agency. The guarantee will not cover the note interest to 
the holder on the guaranteed loan accruing after 90 days from the date 
of the demand letter to the lender requesting the repurchase. The lender 
will accept an assignment without recourse from the holder upon 
repurchase. The lender is encouraged to repurchase the loan to 
facilitate the accounting of funds, resolve the problem, and prevent 
default, where and when reasonable. The lender will notify the holder 
and the Agency of its decision.
    (b) Agency purchase. (1) If the lender does not repurchase the 
unpaid guaranteed portion of the loan as provided in paragraph (a) of 
this section, the Agency will purchase from the holder the unpaid 
principal balance of the guaranteed portion together with accrued 
interest to date of repurchase, less the lender's servicing fee, within 
30 days after written demand to the Agency from the holder. (This is in 
addition to the copy of the written demand on the lender.) The guarantee 
will not cover the note interest to the holder on the guaranteed loan 
accruing after 90 days from the date of the original demand letter of 
the holder to the lender requesting the repurchase.
    (2) The holder's demand to the Agency must include a copy of the 
written demand made upon the lender. The holder must also include 
evidence of its right to require payment from the Agency. Such evidence 
will consist of either the original of the Loan Note Guarantee properly 
endorsed to the Agency or the original of the Assignment Guarantee 
Agreement properly assigned to the Agency without recourse including all 
rights, title, and interest in the loan. The holder must include in its 
demand the amount due including unpaid principal, unpaid interest to 
date of demand, and interest subsequently accruing from date of demand 
to proposed payment date. The Agency will be subrogated to all rights of 
the holder.
    (3) The Agency will notify the lender of its receipt of the holder's 
demand for payment. The lender must promptly provide the Agency with the 
information necessary for the Agency to determine the appropriate amount 
due the holder. Upon request by the Agency, the lender will furnish a 
current statement certified by an appropriate authorized officer of the 
lender of the unpaid principal and interest then owed by the borrower on 
the loan and the amount then owed to any holder. Any discrepancy between 
the amount claimed by the holder and the information submitted by the 
lender must be resolved between the lender and the holder before payment 
will be approved. Such conflict will suspend the running of the 30 day 
payment requirement.
    (4) Purchase by the Agency neither changes, alters, nor modifies any 
of the lender's obligations to the Agency arising from the loan or 
guarantee nor does it waive any of Agency's rights against the lender. 
The Agency will have the right to set-off against the lender all rights 
inuring to the Agency as the holder of the instrument against the 
Agency's obligation to the lender under the guarantee.
    (c) Repurchase for servicing. If, in the opinion of the lender, 
repurchase of the guaranteed portion of the loan is necessary to 
adequately service the loan, the holder must sell the guaranteed portion 
of the loan to the lender for an amount equal to the unpaid principal 
and interest on such portion less the lender's servicing fee. The 
guarantee will not cover the note interest to the holder on the 
guaranteed loan accruing

[[Page 571]]

after 90 days from the date of the demand letter of the lender or the 
Agency to the holder requesting the holder to tender its guaranteed 
portion. The lender must not repurchase from the holder for arbitrage or 
other purposes to further its own financial gain. Any repurchase must 
only be made after the lender obtains the Agency's written approval. If 
the lender does not repurchase the portion from the holder, the Agency 
may, at its option, purchase such guaranteed portion for servicing 
purposes.