[Code of Federal Regulations]

[Title 7, Volume 7]

[Revised as of January 1, 2006]

From the U.S. Government Printing Office via GPO Access

[CITE: 7CFR762.120]



[Page 137-139]

 

                          TITLE 7--AGRICULTURE

 

       CHAPTER VII--FARM SERVICE AGENCY, DEPARTMENT OF AGRICULTURE

 

PART 762_GUARANTEED FARM LOANS--Table of Contents

 

Sec. 762.120  Loan applicant eligibility.



    Loan applicants must meet all of the following requirements to be 

eligible for a guaranteed OL or a guaranteed FO:

    (a) Agency loss. (1) Except as provided in paragraph (a)(2) of this 

section, the applicant, and anyone who will execute the promissory note, 

has not caused



[[Page 138]]



the Agency a loss by receiving debt forgiveness on all or a portion of 

any direct or guaranteed loan made under the authority of the CONACT by 

debt write-down or write-off; compromise, adjustment, reduction, or 

charge-off under the provisions of section 331 of the CONACT; discharge 

in bankruptcy; or through payment of a guaranteed loss claim on:

    (i) More than three occasions on or prior to April 4, 1996; or

    (ii) Any occasion after April 4, 1996.

    (2) The applicant may receive a guaranteed OL to pay annual farm and 

ranch operating and family living expenses, provided the applicant meets 

all other requirements for the loan, if the applicant and anyone who 

will execute the promissory note:

    (i) Received a write-down under section 353 of the CONACT;

    (ii) Is current on payments under a confirmed reorganization plan 

under chapter 11, 12, or 13 of title 11 of the United States Code; or

    (iii) Received debt forgiveness on not more than one occasion after 

April 4, 1996, resulting directly and primarily from a Presidentially-

designated emergency for a county or contiguous county in which the 

applicant operates. Only applicants who were current on all existing 

direct and guaranteed FSA loans prior to the beginning date of the 

incidence period for a Presidentially-designated emergency and received 

debt forgiveness on that debt within three years after the designation 

of such emergency meet this exception.

    (b) Delinquent Federal debt. The loan applicant, and anyone who will 

execute the promissory note, is not delinquent on any Federal debt, 

other than a debt under the Internal Revenue Code of 1986. (Any debt 

under the Internal Revenue Code of 1986 may be considered by the lender 

in determining cash flow and creditworthiness.)

    (c) Outstanding judgments. The loan applicant, and anyone who will 

execute the promissory note, have no outstanding unpaid judgment 

obtained by the United States in any court. Such judgments do not 

include those filed as a result of action in the United States Tax 

Courts.

    (d) Citizenship. (1) The applicant must be a citizen of the United 

States, a United States non-citizen national, or a qualified alien under 

applicable Federal immigration laws. For an entity applicant, the 

majority interest of the entity must be held by members who are United 

States citizens, United States non-citizen nationals, or qualified 

aliens under applicable Federal immigration laws.

    (2) United States non-citizen nationals and qualified aliens must 

provide the appropriate documentation as to their immigration status as 

required by the United States Department of Homeland Security, Bureau of 

Citizenship and Immigration Services.

    (e) Legal capacity. The loan applicant and all borrowers on the loan 

must possess the legal capacity to incur the obligations of the loan.

    (f) False or misleading information. The loan applicant, in past 

dealings with the Agency, must not have provided the Agency with false 

or misleading documents or statements.

    (g) Credit history. (1) The individual or entity loan applicant and 

all entity members must have acceptable credit history demonstrated by 

debt repayment.

    (2) A history of failures to repay past debts as they came due when 

the ability to repay was within their control will demonstrate 

unacceptable credit history.

    (3) Unacceptable credit history will not include:

    (i) Isolated instances of late payments which do not represent a 

pattern and were clearly beyond their control; or,

    (ii) Lack of credit history.

    (h) Test for credit. (1) The loan applicant is unable to obtain 

sufficient credit elsewhere without a guarantee to finance actual needs 

at reasonable rates and terms.

    (2) The potential for sale of any significant nonessential assets 

will be considered when evaluating the availability of other credit.

    (3) Ownership interests in property and income received by an 

individual or entity loan applicant, and any entity members as 

individuals will be considered when evaluating the availability of other 

credit to the loan applicant.

    (i) For OLs:



[[Page 139]]



    (1) The individual or entity loan applicant must be an operator of 

not larger than a family farm after the loan is closed.

    (2) In the case of an entity borrower:

    (i) The entity must be authorized to operate, and own if the entity 

is also an owner, a farm in the State or States in which the farm is 

located; and

    (ii) If the entity members holding a majority interest are related 

by marriage or blood, at least one member of the entity must operate the 

family farm; or,

    (iii) If the entity members holding a majority interest are not 

related by marriage or blood, the entity members holding a majority 

interest must also operate the family farm.

    (j) For FOs:

    (1) The individual must be the operator and owner of not larger than 

a family farm after the loan is closed.

    (2) In the case of an entity borrower:

    (i) The entity must be authorized to own and operate a farm in the 

state or states in which the farm is located; and

    (ii) If the entity members holding a majority interest are related 

by marriage or blood, at least one member of the entity also must 

operate the family farm and at least one member of the entity or the 

entity must own the family farm; or,

    (iii) If the entity members holding a majority interest are not 

related by marriage or blood, the entity members holding a majority 

interest must operate the family farm and the entity members holding a 

majority interest or the entity must own the family farm.

    (k) For entity loan applicants. Entity loan applicants must meet the 

following additional eligibility criteria:

    (1) Each entity member's ownership interest may not exceed the 

family farm definition limits;

    (2) The collective ownership interest of all entity members may 

exceed the family farm definition limits only if the following 

conditions are met:

    (i) All of the entity members are related by blood or marriage;

    (ii) All of the members are or will be operators of the entity; and,

    (iii) The majority interest holders of the entity must meet the 

requirements of paragraphs (d), (f), (g), and (i) through (j) of this 

section;

    (3) The entity must be controlled by farmers or ranchers engaged 

primarily and directly in farming or ranching in the United States after 

the loan is made; and

    (4) The entity members are not themselves entities.

    (l) Neither the applicant nor any entity member has been convicted 

of planting, cultivating, growing, producing, harvesting, or storing a 

controlled substance under Federal or state law within the last five 

crop years. ``Controlled substance'' is defined at 21 CFR 1308. 

Applicants must certify on the application that it and its members, if 

an entity, have not been convicted of such a crime within the relevant 

period. If the lender uses the lender's Agency approved forms, the 

certification may be an attachment to the form.



[64 FR 7378, Feb. 12, 1999, as amended at 68 FR 62223, Nov. 3, 2003; 69 

FR 5262, Feb. 4, 2004]