[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: 7CFR762.147]



[Page 158-159]

 

                          TITLE 7--AGRICULTURE

 

       CHAPTER VII--FARM SERVICE AGENCY, DEPARTMENT OF AGRICULTURE

 

PART 762_GUARANTEED FARM LOANS--Table of Contents

 

Sec. 762.147  Servicing shared appreciation agreements.



    (a) Lender responsibilities. The lender is responsible for:

    (1) Monitoring the borrower's compliance with the shared 

appreciation agreement;

    (2) Notifying the borrower of the amount of recapture due; and,

    (3) Beginning October 1, 1999, a notice of the agreement's 

provisions not later than 12 months before the end of the agreement; and

    (4) Reimbursing the Agency for its pro-rata share of recapture due.

    (b) Recapture. (1) Recapture of any appreciation of real estate 

security will take place at the end of the term of the agreement, or 

sooner if the following occurs:

    (i) On the conveyance of the real estate security (or a portion 

thereof) by the borrower.

    (A) If only a portion of the real estate is conveyed, recapture will 

only be triggered against the portion conveyed. Partial releases will be 

handled in accordance with Sec. 762.141(b).

    (B) Transfer of title to the spouse of the borrower on the death of 

such borrower will not be treated as a conveyance under the agreement.

    (ii) On repayment of the loan; or

    (iii) If the borrower ceases farming.

    (2) Calculating recapture.

    (i) The amount of recapture will be based on the difference between 

the value of the security at the time recapture is triggered and the 

value of the security at the time of writedown, as shown on the shared 

appreciation agreement.



[[Page 159]]



    (ii) Security values will be determined through appraisals obtained 

by the lender and meeting the requirements of Sec. 762.127.

    (iii) All appraisal fees will be paid by the lender.

    (iv) The amount of recapture will not exceed the amount of writedown 

shown on the shared appreciation agreement.

    (v) If recapture is triggered within 4 years of the date of the 

shared appreciation agreement, the lender shall recapture 75 percent of 

any positive appreciation in the market value of the property securing 

the loan or line of credit agreement.

    (vi) If recapture is triggered after 4 years from the date of the 

shared appreciation agreement, the lender shall recapture 50 percent of 

any positive appreciation in the market value of the property securing 

the loan or line of credit agreement.

    (3) Servicing recapture debt.

    (i) If recapture is triggered under the shared appreciation 

agreement and the borrower is unable to pay the recapture in a lump sum, 

the lender may:

    (A) Reschedule the recapture debt with the consent of the Agency, 

provided the lender can document the borrower's ability to make 

amortized payments on the recapture debt, plus pay all other 

obligations. In such case, the recapture debt will not be covered by the 

guarantee;

    (B) Pay the Agency its pro rata share of the recapture due. In such 

case, the recapture debt of the borrower will be covered by the 

guarantee; or

    (C) Service the account in accordance with Sec. 762.149.

    (ii) If recapture is triggered, and the borrower is able but 

unwilling to pay the recapture in a lump sum, the lender will service 

the account in accordance with Sec. 762.149.

    (4) Paying the Agency. Any shared appreciation recaptured by the 

lender will be shared on a pro-rata basis between the lender and the 

Agency.