[Code of Federal Regulations]

[Title 49, Volume 4]

[Revised as of October 1, 2006]

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

[CITE: 49CFR260.51]



[Page 835-836]

 

                        TITLE 49--TRANSPORTATION

 

       CHAPTER II--FEDERAL RAILROAD ADMINISTRATION, DEPARTMENT OF 

                             TRANSPORTATION

 

PART 260_REGULATIONS GOVERNING LOANS AND LOAN GUARANTEES UNDER THE 

 

                    Subpart F_Loan Guarantees_Lenders

 

Sec.  260.51  Conditions of guarantee.





    (a) The percentage of the obligation for which Applicant seeks a 

guarantee is a matter of negotiation between the Lender and the 

Applicant, subject to the Administrator's approval. The maximum 

percentage of the total obligation that the Administrator will guarantee 

is 80 percent. The amount of guarantee allowed will depend on the total 

credit quality of the transaction and the level of risk believed to be 

assumed by the Administrator.

    (b) A guarantee under this part constitutes an obligation supported 

by the



[[Page 836]]



full faith and credit of the United States and is incontestable except 

for fraud or misrepresentation of which a Lender or Holder has actual 

knowledge at the time it becomes such Lender or Holder or which a Lender 

or Holder participates in or condones. In addition, the guarantee will 

be unenforceable by the Lender or the Holder to the extent any loss is 

occasioned by the violation of usury laws, negligent servicing, or 

failure to obtain the required security regardless of the time at which 

the Administrator acquires knowledge thereof. Any losses occasioned will 

be unenforceable to the extent that loan funds are used for purposes 

other than those specifically approved by FRA in its guarantee.

    (c) The Administrator may guarantee an Applicant's obligation to any 

Lender provided such Lender can establish to the satisfaction of the 

Administrator that it has the legal authority and sufficient expertise 

and financial strength to operate a successful lending program. Loan 

guarantees will only be approved for Lenders with adequate experience 

and expertise to make, secure, service, and collect the loans.

    (d) The Lender may sell all of the guaranteed portion of the loan on 

the secondary market, provided the loan is not in default, or retain the 

entire loan.

    (e) When a guaranteed portion of a loan is sold to a Holder, the 

Holder shall succeed to all rights of the Lender under the loan 

guarantee to the extent of the portion purchased. The Lender will remain 

bound to all obligations under the loan guarantee and the provisions of 

this part. In the event of material fraud, negligence or 

misrepresentation by the Lender or the Lender's participation in or 

condoning of such material fraud, negligence or misrepresentation, the 

Lender will be liable for payments made by the Agency to any Holder.