[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: 7CFR762.121]



[Page 139-140]

 

                          TITLE 7--AGRICULTURE

 

       CHAPTER VII--FARM SERVICE AGENCY, DEPARTMENT OF AGRICULTURE

 

PART 762_GUARANTEED FARM LOANS--Table of Contents

 

Sec. 762.121  Loan purposes.



    (a) Operating Loan purposes. (1) Loan funds disbursed under an OL 

guarantee may only be used for the following purposes:

    (i) Payment of costs associated with reorganizing a farm or ranch to 

improve its profitability;

    (ii) Purchase of livestock, including poultry, and farm or ranch 

equipment or fixtures, quotas and bases, and cooperative stock for 

credit, production, processing or marketing purposes;

    (iii) Payment of annual farm or ranch operating expenses, examples 

of which include feed, seed, fertilizer, pesticides, farm or ranch 

supplies, repairs and improvements which are to be expensed, cash rent 

and family subsistence;

    (iv) Payment of scheduled principal and interest payments on term 

debt provided the debt is for authorized FO or OL purposes;

    (v) Other farm and ranch needs;

    (vi) Payment of costs associated with land and water development for 

conservation or use purposes;

    (vii) Refinancing indebtedness incurred for any authorized OL 

purpose, when the lender and loan applicant can demonstrate the need to 

refinance;

    (viii) Payment of loan closing costs;



[[Page 140]]



    (ix) Payment of costs associated with complying with Federal or 

State-approved standards under the Occupational Safety and Health Act of 

1970 (29 U.S.C. 655, 667). This purpose is limited to applicants who 

demonstrate that compliance with the standards will cause them 

substantial economic injury; and

    (x) Payment of training costs required or recommended by the Agency.

    (2) Loan funds under a line of credit may be advanced only for the 

following purposes:

    (i) Payment of annual operating expenses, family subsistence, and 

purchase of feeder animals;

    (ii) Payment of current annual operating debts advanced for the 

current operating cycle; (Under no circumstances can carry-over 

operating debts from a previous operating cycle be refinanced);

    (iii) Purchase of routine capital assets, such as replacement of 

livestock, that will be repaid within the operating cycle;

    (iv) Payment of scheduled, non-delinquent, term debt payments 

provided the debt is for authorized FO or OL purposes.

    (v) Purchase of cooperative stock for credit, production, processing 

or marketing purposes; and

    (vi) Payment of loan closing costs.

    (b) Farm ownership loan purposes. Guaranteed FO are authorized only 

to:

    (1) Acquire or enlarge a farm or ranch; examples include, but are 

not limited to, providing down payments, purchasing easements for the 

loan applicant's portion of land being subdivided, and participating in 

the beginning farmer downpayment FO program under part 1943, subpart A, 

of this title;

    (2) Make capital improvements; examples include, but are not limited 

to, the construction, purchase, and improvement of a farm dwelling, 

service buildings and facilities that can be made fixtures to the real 

estate, (Capital improvements to leased land may be financed subject to 

the limitations in Sec. 762.122);

    (3) Promote soil and water conservation and protection; examples 

include the correction of hazardous environmental conditions, and the 

construction or installation of tiles, terraces and waterways;

    (4) Pay closing costs, including but not limited to, purchasing 

stock in a cooperative and appraisal and survey fees; and

    (5) Refinancing indebtedness incurred for authorized FO and OL 

purposes, provided the lender and loan applicant demonstrate the need to 

refinance the debt.

    (c) Highly erodible land or wetlands conservation. Loans may not be 

made for any purpose which contributes to excessive erosion of highly 

erodible land or to the conversion of wetlands to produce an 

agricultural commodity. A decision by the Agency to reject an 

application for this reason may be appealable. An appeal questioning 

whether the presence of a wetland, converted wetland, or highly erodible 

land on a particular property must be filed directly with the USDA 

agency making the determination in accordance with the agency's appeal 

procedures.

    (d) Judgment debts. Loans may not be used to satisfy judgments 

obtained in the United States District courts. However, Internal Revenue 

Service judgment liens may be paid with loan funds.