[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: 7CFR1965.19]



[Page 298-299]

 

                          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.  1965.19  Severance agreement.



    Form FmHA or its successor agency under Public Law 103-354 440-26, 

``Consent and Subordination Agreement,''



[[Page 299]]



will be completed when a borrower requests FmHA or its successor agency 

under Public Law 103-354's consent to a severance agreement, or other 

instrument of similar effect, so that items to be acquired by the 

borrower through other credit and subject to a chattel lien will not 

become a part of the real estate securing the FmHA or its successor 

agency under Public Law 103-354 debt. Some examples of items which may 

be acquired subject to a chattel lien are silos, storage bins, bulk milk 

tanks, irrigation or income producing facilities, non-farm enterprise 

facilities, and recreational equipment. County Supervisors are 

authorized to give FmHA or its successor agency under Public Law 103-354 

consent by executing Form FmHA or its successor agency under Public Law 

103-354 440-26 and any necessary severance agreements, provided that the 

following determinations are made:

    (a) The financing arrangements are in the best interest of the 

Government and the borrower.

    (b) The transaction will not adversely affect FmHA or its successor 

agency under Public Law 103-354's security position and will be within 

the borrower's debt-paying ability, and

    (c) The facility does not exceed the borrower's needs, is modest in 

cost and design; and is otherwise in line with FmHA or its successor 

agency under Public Law 103-354 financing policies. OGC will be 

requested to approve any severance agreement submitted by a borrower 

that is of a type not previously approved for use in the State and, when 

necessary, to issue closing instructions. The State Director may request 

the OGC to prepare a severance agreement instrument for use in the 

State.