[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: 7CFR762.146]



[Page 157-158]

 

                          TITLE 7--AGRICULTURE

 

       CHAPTER VII--FARM SERVICE AGENCY, DEPARTMENT OF AGRICULTURE

 

PART 762_GUARANTEED FARM LOANS--Table of Contents

 

Sec. 762.146  Other servicing procedures.



    (a) Additional loans and advances. (1) Notwithstanding any provision 

of this section, the PLP lender may make additional loans or advances in 

accordance with the lender's agreement with the Agency.

    (2) SEL and CLP lenders must not make additional loans or advances 

without prior written approval of the Agency, except as provided in the 

borrower's loan or line of credit agreement.

    (3) In cases of a guaranteed line of credit, lenders may make an 

emergency advance when a line of credit has reached its ceiling. The 

emergency advance will be made as an advance under the line and not as a 

separate note. The lender's loan documents must contain sufficient 

language to provide that any emergency advance will constitute a debt of 

the borrower to the lender and be secured by the security instrument. 

The following conditions apply:

    (i) The loan funds to be advanced are for authorized operating loan 

purposes;

    (ii) The financial benefit to the lender and the Government from the 

advance will exceed the amount of the advance; and

    (iii) The loss of crops or livestock is imminent unless the advance 

is made.

    (4) Protective advance requirements are found in Sec. 762.149.

    (b) Release of liability upon withdrawal. An individual who is 

obligated on a guaranteed loan may be released from liability by a 

lender, with the written consent of the Agency, provided the following 

conditions have been met:

    (1) The individual to be released has withdrawn from the farming or 

ranching operation;

    (2) A divorce decree or final property settlement does not hold the 

withdrawing party responsible for the loan payments;

    (3) The withdrawing party's interest in the security is conveyed to 

the individual or entity with whom the loan will be continued;

    (4) The ratio of the amount of debt to the value of the remaining 

security is less than or equal to .75, or the withdrawing party has no 

income or assets from which collection can be made; and

    (5) Withdrawal of the individual does not result in legal 

dissolution of the entity to which the loans are made. Individually 

liable members of a general or limited partnership may not be released 

from liability.

    (6) The remaining liable party projects a feasible plan (see Sec. 

762.102(b)).

    (c) Release of liability after liquidation. After a final loss claim 

has been paid on the borrower's account, the lender may release the 

borrower or guarantor from liability if;

    (1) The Agency agrees to the release in writing;

    (2) The lender documents its consideration of the following factors 

concerning the borrower or guarantors:

    (i) The likelihood that the borrower or guarantor will have a 

sufficient level of income in the reasonably near future to contribute 

to a meaningful reduction of the debt;

    (ii) The prospect that the borrower or guarantor will inherit assets 

in the near term that may be attached by the Agency for payment of a 

significant portion of the debt;

    (iii) Whether collateral has been properly accounted for, and 

whether liability should be retained in order to take action against the 

borrower or a third party for conversion of security;

    (iv) The availability of other income or assets which are not 

security;

    (v) The possibility that assets have been concealed or improperly 

transferred;

    (vi) The effect of other guarantors on the loan; and

    (vii) Cash consideration or other collateral in exchange for the 

release of liability.

    (3) The lender will use its own release of liability documents.

    (d) Interest rate changes. (1) The lender may change the interest 

rate on a performing (nondelinquent) loan only with the borrower's 

consent.



[[Page 158]]



    (2) If the loan has been sold on the secondary market, the lender 

must repurchase the loan or obtain the holder's written consent.

    (3) To change a fixed rate of interest to a variable rate of 

interest or vice versa, the lender and the borrower must execute a 

legally effective allonge or amendment to the existing note.

    (4) If a new note is taken, it will be attached to and refer to the 

original note.

    (5) The lender will inform the Agency of the rate change.

    (e) Consolidation. Two or more Agency guaranteed loans may be 

consolidated, subject to the following conditions:

    (1) The borrower must project a feasible plan after the 

consolidation. See Sec. 762.102(b) for definition of feasible plan.

    (2) Only OL may be consolidated.

    (3) Existing lines of credit may only be consolidated with a new 

line of credit if the final maturity date and conditions for advances of 

the new line of credit are made the same as the existing line of credit.

    (4) Guaranteed OL may not be consolidated with a line of credit, 

even if the line of credit has been rescheduled.

    (5) Guaranteed loans made prior to October 1, 1991, cannot be 

consolidated with those loans made on or after October 1, 1991.

    (6) OL secured by real estate or with an outstanding interest 

assistance agreement or shared appreciation agreement cannot be 

consolidated.

    (7) A new note or line of credit agreement will be taken. The new 

note or line of credit agreement must describe the note or line of 

credit agreement being consolidated and must state that the indebtedness 

evidenced by the note or line of credit agreement is not satisfied. The 

original note or line of credit agreement must be retained.

    (8) The interest rate for a consolidated OL loan is the negotiated 

rate agreed upon by the lender and the borrower at the time of the 

action, subject to the loan limitations for each type of loan.

    (9) The Agency approves the consolidation by executing a 

modification of guarantee. The modification will indicate the 

consolidated loan amount, new terms, and percentage of guarantee, and 

will be attached to the originals of the guarantees being consolidated. 

If loans with a different guarantee percentage are consolidated, the new 

guarantee will be at the lowest percentage of guarantee being 

consolidated

    (10) Any holders must consent to the consolidation, or the 

guaranteed portion must be repurchased by the lender.



[64 FR 7378, Feb. 12, 1999, as amended at 66 FR 7567, Jan. 24, 2001]