[Code of Federal Regulations]
[Title 7, Volume 10]
[Revised as of January 1, 2007]
From the U.S. Government Printing Office via GPO Access
[CITE: 7CFR1436.8]

[Page 583-584]
 
                          TITLE 7--AGRICULTURE
 
  CHAPTER XIV--COMMODITY CREDIT CORPORATION, DEPARTMENT OF AGRICULTURE
 
PART 1436_FARM STORAGE FACILITY LOAN PROGRAM REGULATIONS--Table of Contents
 
Sec.  1436.8  Security for loan.

    (a) Except as agreed to by CCC, all loans shall be secured by a 
promissory note and security agreement covering the farm storage 
facility. The promissory note and security agreement shall grant CCC a 
security interest in the collateral and shall be perfected in the manner 
specified in the laws of the state where the collateral is located. 
CCC's security interest in the collateral shall constitute the sole 
security

[[Page 584]]

interest in such collateral except for prior liens on the underlying 
realty that by operation of law attach to the collateral if it is or 
will become a fixture. If any such prior lien on the realty will attach 
to the collateral, a severance agreement must be obtained in writing 
from each holder of such a lien, including all government or USDA 
agencies. No additional liens or encumbrances may be placed on the 
storage facility after the loan is approved unless CCC approves 
otherwise in writing.
    (b) For loan amounts exceeding $50,000, or where the aggregate 
outstanding loan balance will exceed $50,000 or for loans where the 
approving committee determines as a result of financial analysis that 
additional security is required, a lien on the real estate parcel on 
which the farm storage facility is located will be required in the form 
of a real estate mortgage, deed of trust, or other security instrument 
approved by the United States Department of Agriculture's Office of 
General Counsel. CCC's interest in the real estate shall be superior to 
all other liens and is the first lien that secures the amount of the 
loan. A loan will be considered to be adequately secured when the real 
estate security for the loan is at least equal to the loan amount. If 
the real estate is covered by a prior lien, a lien waiver may be 
obtained by means of a subordination agreement approved for use in the 
State by USDA's Office of General Counsel. CCC will not require such an 
agreement from any agency of the Department of Agriculture. Loans may be 
secured by a junior lien on real estate when the loan is adequately 
secured and a severance agreement is obtained from prior lien holders.
    (c) Title insurance or a title opinion is required for loans secured 
by real estate.
    (d) Real estate liens may cover land separate from the collateral if 
a lien on the underlying real estate is not feasible and if:
    (1) The borrower owns the separate acreage; and
    (2) the acreage has sufficient value based on the fair market value 
of the acreage at the time of the application as determined by the 
county committee, to insure repayment of the loan.
    (e) Notwithstanding the preceding subsections of this section, a 
borrower, in lieu of such liens as are otherwise required by those 
subsections, may provide a letter of credit, bond, or other form of 
security, as approved by CCC.
    (f) If an existing structure is remodeled and an addition becomes an 
attached, integral part of the existing storage structure, CCC's 
security interest shall include the existing storage structure.
    (g) The cost of loan closings by attorneys, title opinions, title 
insurance, title searches, filing and recording all real estate liens, 
fixture filings and later subordinations will be paid by the borrower. 
CCC shall pay such costs relating to credit reports, collateral lien 
searches, and filing and recording financing statements for the 
collateral.
    (h) For sugar-related facility loans, in addition to the above 
requirements, additional security, including real estate, chattels, 
crops in storage, and other assets owned by the applicant, is required 
if necessary to adequately secure the loan. A sugar-related loan will be 
considered to be adequately secured when the CCC determined value of 
security for the loan is at least equal to 125 percent of the loan 
amount.
    (i) For sugar-related facility loans, paragraph (g) is not 
applicable. The borrower shall pay all loan making fees and closing 
costs. This includes, but is not limited to, attorney fees for loan 
closings, environmental assessments and studies, chattel and real estate 
appraisals, title opinions, title insurance, title searches, filing and 
recording all real estate liens, fixture filings, subordinations, credit 
reports, collateral lien searches, and filing and recording financing 
statements for the collateral.

[66 FR 4612, Jan. 18, 2001, as amended at 67 FR 54939, Aug. 26, 2002]