[Code of Federal Regulations]

[Title 7, Volume 14]

[Revised as of January 1, 2007]

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

[CITE: 7CFR1965.16]



[Page 296-297]

 

                          TITLE 7--AGRICULTURE

 

   CHAPTER XVIII--RURAL HOUSING SERVICE, RURAL BUSINESS--COOPERATIVE 

SERVICE, RURAL UTILITIES SERVICE, AND FARM SERVICE AGENCY, DEPARTMENT OF 

                         AGRICULTURE (CONTINUED)

 

PART 1965_REAL PROPERTY--Table of Contents

 

Subpart A_Servicing of Real Estate Security for Farm Loan Programs Loans 

                       and Certain Note-Only Cases

 

Sec.  1965.16  Consent to junior liens.



    As a general policy, FmHA or its successor agency under Public Law 

103-354 borrowers will be discouraged from giving other creditors junior 

liens on real estate securing an FmHA or its successor agency under 

Public Law 103-354 loan. (For Sections 502 and 504 loans, see Sec.  

1965.111 of Subpart C of Part 1965 of this chapter).



[[Page 297]]



    (a) Processing request. When consent to a junior lien is requested 

by a borrower, the County Supervisor may consent by executing Form FmHA 

or its successor agency under Public Law 103-354 465-1 or other form 

approved by OGC for use in the state provided:

    (1) The terms of the junior lien debt are such that repayment is not 

likely to jeopardize payment of the FmHA or its successor agency under 

Public Law 103-354 loan;

    (2) Operating plans made with the junior lienholder are consistent 

with plans made with FmHA or its successor agency under Public Law 103-

354;

    (3) Total debt against the security will not exceed its market 

value; and

    (4) The junior lienholder agrees in writing not to foreclose the 

mortgage before a discussion with the County Supervisor and after giving 

a reasonable specified period of written notice to FmHA or its successor 

agency under Public Law 103-354.

    (b) Consent not requested or granted. When a junior lien is placed 

on any property without FmHA or its successor agency under Public Law 

103-354 consent and consent cannot be granted under this section, FmHA 

or its successor agency under Public Law 103-354 may continue with the 

loan as long as the borrower pays FmHA or its successor agency under 

Public Law 103-354 loans as agreed, maintains the security, and meets 

all other conditions of the loan. The existence of a junior lien cannot 

be treated as a default. The County Supervisor will continue to service 

the loan to protect the Government's security interest.