Removal of the Prohibition Against Capitalizing Accrued Interest When Restructuring CFSA Guaranteed Loans

[[Page 53254]]

DEPARTMENT OF AGRICULTURE

Rural Housing and Community Development Service

Rural Business and Cooperative Development Service

Rural Utilities Service

Consolidated Farm Service Agency

7 CFR Part 1980

RIN 0575-AB70

Removal of the Prohibition Against Capitalizing Accrued Interest

When Restructuring CFSA Guaranteed Loans

AGENCIES: Rural Housing and Community Development Service, Rural

Business and Cooperative Development Service, Rural Utilities Service,

and Consolidated Farm Service Agency, USDA.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The issuing agencies amend their guaranteed farm credit

programs loan making and servicing regulations to remove the

restriction against lenders capitalizing accrued interest when

restructuring loans. The intended effect is to reduce barriers which

inhibit lenders from restructuring loans of delinquent guaranteed

borrowers.

EFFECTIVE DATE: October 13, 1995.

FOR FURTHER INFORMATION CONTACT: Phillip Elder, Senior Loan Officer,

Farm Credit Programs Loan Servicing and Property Management Division,

Guaranteed Loans Branch, Consolidated Farm Service Agency (CFSA), USDA,

South Agriculture Building, Room 5446, 14th and Independence Avenue

SW., Washington, DC 20250-0774, Telephone (202) 690-4012.

SUPPLEMENTARY INFORMATION:

Classification

This rule has been determined to be not significant for the

purposes of Executive Order 12866 and therefore has not been reviewed

by the Office of Management and Budget (OMB).

Intergovernmental Consultation

1. For the reasons set forth in the final rule related to Notice 7

CFR Part 3015, Subpart V (48 FR 29115, June 24, 1983) and FmHA

Instruction 1940-J, Farm Ownership Loans, Farm Operating Loans, and

Emergency Loans are excluded from the scope of Executive Order 12372,

which requires intergovernmental consultation with state and local

officials.

2. The Soil and Water Loan Program is subject to and has met the

provisions of Executive Order 12372 and FmHA Instruction 1940-J.

Programs Affected

These changes affect the following CFSA programs as listed in

the Catalog of Federal Domestic Assistance:

10.406--Farm Operating Loans

10.407--Farm Ownership Loans

10.416--Soil and Water Loans

Environmental Impact Statement

This document has been reviewed in accordance with 7 CFR Part 1940,

Subpart G, ``Environmental Program.'' It is the determination of the

issuing agencies that this action does not constitute a major Federal

action significantly affecting the quality of the human environment,

and in accordance with the National Environmental Policy Act of 1969,

Pub. L. 91-190, an Environmental Impact Statement is not required.

Civil Justice Reform

This final rule has been reviewed in accordance with Executive

Order (E.O.) 12778, Civil Justice Reform. In accordance with this rule:

(1) All state and local laws and regulations that are in conflict with

this rule will be preempted; (2) no retroactive effect will be given to

this rule; and (3) administrative proceedings in accordance with the

regulations of the agency at 7 CFR, part 1900, subpart B, or those

regulations published by the Department of Agriculture to implement the

provisions of the National Appeals Division as mandated by the

Department of Agriculture Reorganization Act of 1994, must be exhausted

before bringing suit in court challenging action taken under this rule

unless those regulations specifically allow bringing suit at an earlier

time.

Paperwork Reduction Act

The information collection requirements contained in these

regulations have been approved by the Office of Management and Budget

(OMB) under the provisions of 44 U.S.C. Chapter 35 and have been

assigned OMB control number 0575-0024 and 0575-0079 in accordance with

the Paperwork Reduction Act of 1980 (44 U.S.C. 3507). This final rule

does not revise or impose any new information collection requirement

from those approved by OMB.

Discussion of Final Rule

This final rule relieves the restriction prohibiting lenders from

charging interest on interest when restructuring guaranteed Farm Credit

Programs loans (formerly Farmer Program loans). It also eliminates the

requirement that principal payments be made which are at least equal to

the amount of the depreciation of the security. This policy was

proposed in 59 FR 14769-79 published on March 30, 1994. This proposed

rule provided a 15 day comment period ending April 14, 1994. These

policy changes affect the Farmers Home Administration (FmHA) Farmer

Programs loans now administered as Farm Credit Programs by the

Consolidated Farm Service Agency (CFSA). This reorganization was

authorized by Federal Crop Insurance Reform and Department of

Agriculture Reorganization Act of 1994 (Public Law 103-354, 108 stat.

3178, October 13, 1994). Other guaranteed loan programs formerly

administered by FmHA will only be affected by conforming administrative

revisions made to subpart A of part 1980. These programs include: Water

and Waste disposal facility loans administered by the Rural Utilities

Service (RUS), Community Programs loans administered by the Rural

Housing and Community Development Service (RHCDS), and Business and

Industrial loans and Nonprofit National Corporations loans now

administered by the Rural Business and Cooperative Development Service

(RBCDS). CFSA, RUS, RHCDS, and RBCDS are jointly issuing this final

rule since substantial administrative revisions have been made to

regulations affecting their programs in an effort to reduce agency

regulations. The agency received eight comment letters prior to the

deadline for public comment to the proposed rule. Comments were

received from lenders that participate in the program, a Rural Economic

and Community Development (RECD) (formerly FmHA) State Director, the

USDA Office of the Inspector General and others.

The majority of the comments were in support of the proposed

changes. The commenters agreed that removal of the prohibition of

charging interest on interest would result in more farmers being

allowed the opportunity to continue farming after their loans become

delinquent.

One commenter agreed that the proposed changes would result in

lenders being less reluctant to restructure debts. The same commenter,

however, raised concerns about the increased costs of the changes to

the government and the farmer. This effect was noted by the Agency in

the proposed rule. It was determined that the increased costs would be

offset by the benefit of enhancing the likelihood of the farmer's

success. This goes directly to the goals of CFSA's guaranteed loan

program. The same commenter raised a concern about the proposal

increasing profits to the lender.

[[Page 53255]]

The Agency determined a regulation change that increases private

industry profit should not be avoided for that reason. The increase in

profits possible from the change would be negligible and not cause for

concern.

Another commenter suggested that late payment charges and interest

accrued on these charges be covered by the guarantee. The commenter

indicates that allowing these charges to be capitalized into a

restructured loan, but not allowing them to be covered by the guarantee

will result in a continued administrative burden to the lender. If

allowed to be capitalized, these charges, and the interest that accrues

on them, will have to be maintained separately from the rest of the

restructured loan. The Agency has not adopted this commenter's

recommendations. If the guaranteed percentage of late payment fees were

paid by the Government, it would reduce the lender's motivation to act

expediently in resolving a delinquent account and result in

significantly higher losses to the Government.

Another commenter similarly indicated that loss claim preparation

will be more difficult as the late payment charges will have to be

separated from the other debt. This commenter recommended that only

debt covered by the guarantee be allowed to be restructured. In

response to the above comments, Sec. 1980.11 and the applicable forms

have been revised to prohibit the capitalization of late payment fees.

A provision has also been added to Sec. 1980.124 to allow only interest

that has accrued at the note rate to be capitalized. This will reduce

confusion and administrative costs.

This commenter also pointed out that current agency regulations

require loss payments as a result of a guaranteed loan writedown be

applied to principal first then interest, to avoid charging interest on

interest after the writedown. Removal of the prohibition against

charging interest on interest would cause this reference to be

unnecessary. The final rule has revised subpart B of part 1980 by

removing Sec. 1980.125 (a)(10).

The same commenter also pointed out that the proposed rule

indicated the County Supervisor would approve restructuring actions, as

long as the amount did not exceed statutory loan limitations. The

commenter suggested that the determination of the CFSA approval

official should be based on the authorities outlined in exhibit C of

subpart A of part 1901 (available in any CFSA office) and the combined

unpaid principal and interest to be restructured. To avoid the

possibility of County Supervisors exceeding their approval authority,

the Agency has adopted the commenter's recommendations.

As part of this final rule, the agencies are also removing some

administrative provisions from the Federal Register and are changing

references from ``FmHA'' to ``the agency,'' ``the Agency,'' ``The

Agency,'' ``the government,'' ``Government,'' or ``The Government.''

Also references to ``Farmer Programs'' are revised to ``Farm Credit

Programs'' to reflect agency reorganization. Other minor wording

changes are being made.

List of Subjects in 7 CFR Part 1980

Administrative practice and procedure, Agriculture, Business and

industry, Community facilities, Credit, Loan programs--Agriculture,

Loan programs--Business and industry, Loan programs--Housing and

community development, Low and moderate income housing, Reporting and

recordkeeping requirements, Rural areas.

Therefore, chapter XVIII, title 7, Code of Federal Regulations is

amended as follows:

PART 1980--GENERAL

1. The authority citation for part 1980 is revised to read as

follows:

Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 42 U.S.C. 1480; 7 CFR

2.23 and 2.70.

Subpart A--General

2. Section 1980.11 is revised to read as follows:

Sec. 1980.11 Full faith and credit.

The Loan Note Guarantee and Contract of Guarantee constitute

obligations supported by the full faith and credit of the United States

and are incontestable except for fraud or misrepresentation of which

the lender or holder has actual knowledge at the time it becomes such

lender or holder or which lender or holder participates in or condones.

Generally, any Loan Note Guarantee, Contract of Guarantee or Assignment

Guarantee Agreement attached to or relating to a note which provides

for payment of interest on interest is void. In the case of Farm Credit

Programs loans, however, a Loan Note Guarantee, Contract of Guarantee

or Assignment Guarantee Agreement attached to a note that provides for

the capitalization of interest is not void. The guarantee and right to

require purchase will be directly enforceable by holder notwithstanding

any fraud or misrepresentation by the lender or any unenforceability of

the Loan Note Guarantee by the lender. The Loan Note Guarantee or

Contract of Guarantee will be unenforceable by the lender to the extent

any loss is occasioned by violation of usury laws, negligent servicing

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

which the Agency acquires knowledge of the foregoing. Any losses

occasioned will be unenforceable by the lender to the extent that loan

funds are used for purposes other than those specifically approved by

the Agency in its Form FmHA 1980-15 (available in any Agency office).

Negligent servicing is defined as the failure to perform those services

which a reasonably prudent lender would perform in servicing its own

portfolio of loans that are not guaranteed. The term includes not only

the concept of a failure to act but also not acting in a timely manner

or acting in a manner contrary to the manner in which a reasonably

prudent lender would act up to the time of loan maturity or until a

final loss is paid. The Loan Note Guarantee or Assignment Guarantee

Agreement in the hands of a holder shall not cover interest accruing 90

days after the holder has demanded repurchase by the lender, nor shall

the Loan Note Guarantee or Assignment Guarantee Agreement in the hands

of a holder cover interest accruing 90 days after the lender or the

Agency has requested the holder to surrender the evidence of debt for

repurchase.

Sec. 1980.12 [Removed and Reserved]

3. Section 1980.12 is removed and reserved.

4. Section 1980.13 is amended by removing the phrase ``on Form FmHA

or its successor agency under Public Law 103-354 1980-25, `Farmer

Programs Application,' '' from paragraph (b)(2); by removing the second

sentence of paragraph (b)(4); by revising the words ``and/or'' to read

``and'' in the fifth sentence of the introductory text of paragraph

(b); by revising ``FmHA'' to read ``the Agency'' in the second sentence

of the introductory text of paragraph (a), paragraphs (a)(2), (b)(2),

the second sentence of paragraph (b)(4), and paragraph (c); by revising

``FmHA'' to read ``The Agency'' in the sixth and seventh sentences of

the introductory text of paragraph (a) and the first sentence of

paragraph (b)(4); by revising ``FmHA'' to read ``Agency'' in paragraph

(b)(5); and by revising the words ``Farmer Programs loans'' to read

``Farm Credit Programs loans'' in the fourth sentence of the

introductory text of paragraph (b) and in paragraph (b)(4)(ii).

5. Section 1980.20 is amended by revising the word ``FmHA'' to read

``the Agency's'' in paragraph (a)(1); by revising ``FmHA'' to read

``The Agency''

[[Page 53256]]

in the introductory text of paragraph (b); and by revising the

introductory text of paragraph (a) to read as follows:

Sec. 1980.20 Loan guarantee limits.

(a) Lenders and applicants will propose the percentage of

guarantee. The Agency will set the percentage of guarantee. The maximum

percentage of guarantee (as opposed to the maximum loss covered by the

guarantee) on a Business and Industrial loan is defined in

Sec. 1980.420. The maximum percentage of guarantee for DARBE guaranteed

loans in excess of $2,000,000 will be calculated so that the guaranteed

portion of the principal amount of the loan cannot exceed $2,000,000.

The maximum percentage of guarantee for all other loans covered by this

section will be ninety percent. Also, except in regards to D&D and

DARBE guaranteed loans (see subpart E of this part) or as modified for

Farm Credit Programs guaranteed loans (see subpart B of this part), the

maximum loss covered by Form FmHA 449-34 or Form FmHA 1980-27 (both

available in any Agency office) can never exceed the lesser of:

* * * * *

Sec. 1980.83 [Removed and Reserved]

6. Section 1980.83 (b) is removed and reserved.

7. Section 1980.84 is amended by removing and reserving paragraph

(a) and by revising the section heading and introductory text of

paragraph (b) to read as follows:

Sec. 1980.84 Replacement of guaranteed loan or line of credit

documents.

(a) [Reserved]

(b) Requirements. When a Loan Note Guarantee, Contract of

Guarantee, or Assignment Guarantee Agreement is lost, stolen,

destroyed, mutilated, or defaced while in the custody of the lender or

holder, the lender will coordinate the activities of the party who

seeks the replacement documents and will submit the required documents

to the Agency for processing. The requirements for replacement are as

follows:

* * * * *

8. Section 1980.100 is revised to read as follows:

Sec. 1980.100 OMB control number.

The reporting requirements contained in this subpart have been

approved by the Office of Management and Budget (OMB) and have been

assigned OMB control number 0575-0024. Public reporting burden for this

collection of information is estimated to vary from 15 minutes to 28

hours per response, with an average of 2.08 hours per response,

including time for reviewing instructions, searching existing data

sources, gathering and maintaining the data needed, and completing and

reviewing the collection of information. Send comments regarding this

burden estimate or any other aspect of this collection of information,

including suggestions for reducing this burden, to the Department of

Agriculture, Clearance Officer, OIRM, Ag Box 7630, Washington, D.C.

20250; and to the Office of Management and Budget, Paperwork Reduction

Project (OMB #0575-0024), Washington, D.C. 20503.

9. Appendix A to subpart A is revised to read as follows:

Appendix A--Loan Note Guarantee

USDA

Form FmHA 449-34

(Rev. 10-95)

Type of Loan-----------------------------------------------------------

Applicable 7 C.F.R. part 1980

subpart----------------------------------------------------------------

State------------------------------------------------------------------

County-----------------------------------------------------------------

Date of Note-----------------------------------------------------------

Borrower---------------------------------------------------------------

Government Loan Identification Number----------------------------------

Lender-----------------------------------------------------------------

Lender's IRS ID Tax Number---------------------------------------------

Lender's Address-------------------------------------------------------

Principal Amount of Loan-----------------------------------------------

The guaranteed portion of the loan is $______ which is ______

(______ %)

percent of loan principal. The principal amount of loan is evidenced

by ______ note(s) (includes bonds as appropriate) described below.

The guaranteed portion of each note is indicated below. This

instrument is attached to note

______ in the face amount of $______

and is number ______ of ______.

Percent

of total Amount

Lender's identifying No. Face amount face guaranteed

amount

$________ ________ $________

----------------------------------------

Total........................ $________ 100 $________

In consideration of the making of the subject loan by the above

named Lender, the United States of America, acting through the

Consolidated Farm Service Agency, Rural Business and Cooperative

Development Service, Rural Utilities Service, or Rural Housing and

Community Development Service (herein called ``Government''),

pursuant to the Consolidated Farm and Rural Development Act (7

U.S.C. 1921 et seq.), the Emergency Livestock Credit Act of 1974 (7

U.S.C. note preceding 1961 Pub. L. 93-357 as amended), the Emergency

Agricultural Credit Adjustment Act of 1978 (7 U.S.C. note preceding

1921, Pub. L. 95-334), or Title V of the Housing Act of 1949 (42

U.S.C. 1471 et seq.) does hereby agree that in accordance with and

subject to the conditions and requirements herein, it will pay to:

A. Any Holder 100 percent of any loss sustained by such Holder

on the guaranteed portion and on interest due (including any loan

subsidy) on such portion and any capitalized interest on such

portion resulting from the restructuring of a Guaranteed Farm Credit

Program loans but not exceeding statutory loan limits.

B. The Lender the lesser of 1. or 2. below:

1. Any loss sustained by such Lender on the guaranteed portion

including:

a. principal and interest indebtedness as evidenced by said

note(s) or by assumption agreement(s), and

b. Any loan subsidy due and owing, and

c. Principal and interest indebtedness on secured protective

advances for protection and preservation of collateral made with

Government's authorization, including but not limited to, advances

for taxes, annual assessments, any ground rents, and hazard or flood

insurance premiums affecting the collateral, or

d. and, Capitalized interest on such portion resulting from the

restructuring of a Guaranteed Farm Credit Programs Loans and not

exceeding statutory loan limits, or

2. The guaranteed principal advanced to or assumed by the

Borrower under said note(s) or assumption agreement(s) and any

interest due (including any loan subsidy) thereon and any

capitalized interest resulting from the restructuring of a

Guaranteed Farm Credit Programs loans and not exceeding statutory

loan limits.

If Government conducts the liquidation of the loan, loss

occasioned to a Lender by accruing interest (including any loan

subsidy) after the date Government accepts responsibility for

liquidation will not be covered by this Loan Note Guarantee. If

Lender conducts the liquidation of the loan accruing interest

(including any loan subsidy) shall be covered by this Loan Note

Guarantee to date of final settlement when the lender conducts the

liquidation expeditiously in accordance with the liquidation plan

approved by Government.

Definition of Holder

The Holder is the person or organization other than the Lender

who holds all or part of the guaranteed portion of the loan with no

servicing responsibilities. Holders are prohibited from obtaining

any part(s) of the Guaranteed portion of the loan with proceeds from

any obligation, the interest on which is excludable from income,

under Section 103 of the Internal Revenue Code of 1954, as amended

(IRC). When the Lender assigns a part(s) of the guaranteed loan to

an assignee, the assignee becomes a Holder only when Form FmHA 449-

36, ``Assignment Guarantee Agreement,'' is used.

Definition of Lender

The Lender is the person or organization making and servicing

the loan which is guaranteed under the provisions of the applicable

subpart of 7 C.F.R. part 1980. The Lender is also the party

requesting a loan guarantee.

Conditions of Guarantee

1. Loan Servicing

Lender will be responsible for servicing the entire loan, and

Lender will remain mortgagee and/or secured party of record not

[[Page 53257]]

withstanding the fact that another party may hold a portion of the

loan. When multiple notes are used to evidence a loan, Lender will

structure repayments as provided in the loan agreement. In the case

of Farm Ownership, Soil and Water, or Operating Loans, the Lender

agrees that if liquidation of the account becomes imminent, the

Lender will consider the Borrower for an Interest Rate Buydown under

Exhibit C of subpart B of 7 C.F.R., part 1980, and request a

determination of the Borrower's eligibility by Government. The

Lender may not initiate foreclosure action on the loan until 60 days

after a determination has been made with respect to the eligibility

of the Borrower to participate in the Interest Rate Buydown Program.

2. Priorities

The entire loan will be secured by the same security with equal

lien priority for the guaranteed and unguaranteed portions of the

loan. The unguaranteed portion of the loan will not be paid first

nor given any preference or priority over the guaranteed portion.

3. Full Faith and Credit

The Loan Note Guarantee constitutes an obligation supported by

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

except for fraud or misrepresentation of which Lender or any Holder

has actual knowledge at the time it became such Lender or Holder or

which Lender or any Holder participates in or condones. If the note

to which this is attached or relates provides for the payment of

interest on interest, then this Loan Note Guarantee is void.

However, in the case of the Farm Credit Programs loans, the

capitalization of interest when restructuring loans will not void

this Loan Note Guarantee. In addition, the Loan Note Guarantee will

be unenforceable by Lender 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

Government acquires knowledge of the foregoing. Any losses

occasioned will be unenforceable to the extent that loan funds are

used for purposes other than those specifically approved by

Government in its Conditional Commitment for Guarantee. Negligent

servicing is defined as the failure to perform those services which

a reasonably prudent lender would perform in servicing its own

portfolio of loans that are not guaranteed. The term includes not

only the concept of a failure to act but also not acting in a timely

manner or acting in a manner contrary to the manner in which a

reasonably prudent lender would act up to the time of loan maturity

or until a final loss is paid.

4. Rights and Liabilities

The guarantee and right to require purchase will be directly

enforceable by Holder notwithstanding any fraud or misrepresentation

by Lender or any unenforceability of this Loan Note Guarantee by

Lender. Nothing contained herein will constitute any waiver by

Government of any rights it possesses against the Lender. Lender

will be liable for and will promptly pay to Government any payment

made by Government to Holder which if such Lender had held the

guaranteed portion of the loan, Government would not be required to

make.

5. Payments

Lender will receive all payments of principal, or interest, and

any loan subsidy on account of the entire loan and will promptly

remit to Holder(s) its pro rata share thereof determined according

to its respective interest in the loan, less only Lender's servicing

fee.

6. Protective Advances

Protective advances made by Lender pursuant to the regulations

will be guaranteed against a percentage of loss to the same extent

as provided in this Loan Note Guarantee notwithstanding the

guaranteed portion of the loan that is held by another.

7. Repurchase by Lender

The Lender has the option to repurchase the unpaid guaranteed

portion of the loan from the Holder(s) within 30 days of written

demand by the Holder(s) when: (a) the borrower is in default not

less than 60 days on principal or interest due on the loan or (b)

the Lender has failed to remit to the Holder(s) its pro rata share

of any payment made by the borrower or any loan subsidy within 30

days of its receipt thereof. The repurchase by the Lender will be

for an amount equal to the unpaid guaranteed portion of principal

and accrued interest (including any loan subsidy) less the Lender's

servicing fee. The Loan Note Guarantee will not cover the note

interest to the Holder on the guaranteed loan(s) accruing after 90

days from the date of the demand letter to the Lender requesting the

repurchase. Holder(s) will concurrently send a copy of demand to

Government. The Lender will accept an assignment without recourse

from the Holder(s) upon repurchase. The Lender is encouraged to

repurchase the loan to facilitate the accounting for funds, resolve

the problem, and to permit the borrower to cure the default, where

reasonable. The Lender will notify the Holder(s) and Government of

its decision.

8. Government Purchase

If Lender does not repurchase as provided by paragraph 7 hereof,

Government will purchase from Holder the unpaid principal balance of

the guaranteed portion together with accrued interest (including any

loan subsidy) to date of repurchase less Lender's servicing fee,

within thirty (30) days after written demand to Government from

Holder. The Loan Note Guarantee will not cover the note interest to

the Holder on the guaranteed loan(s) accruing after 90 days from the

date of the original demand letter of the Holder to the Lender

requesting the repurchase. Such demand will include a copy of the

written demand made upon the Lender. The Holder(s) or its duly

authorized agent will also include evidence of its right to require

payment from Government. Such evidence will consist of either the

original of the Loan Note Guarantee properly endorsed to Government

or the original of the Assignment Guarantee Agreement properly

assigned to Government without recourse including all rights, title,

and interest in the loan. Government will be subrogated to all

rights of Holder(s). The Holder(s) will include in its demand the

amount due including unpaid principal, unpaid interest (including

any loan subsidy) to date of demand and interest (including any loan

subsidy) subsequently accruing from date of demand to proposed

payment date. Unless otherwise agreed to by Government, such

proposed payment will not be later than 30 days from the date of

demand.

The Government will promptly notify the Lender of its receipt of

the Holder(s)'s demand for payment. The Lender will promptly provide

the Government with the information necessary for Government

determination of the appropriate amount due the Holder(s). Any

discrepancy between the amount claimed by the Holder(s) and the

information submitted by the Lender must be resolved before payment

will be approved. Government will notify both parties who must

resolve the conflict before payment by Government will be approved.

Such conflict will suspend the running of the 30 day payment

requirement. Upon receipt of the appropriate information. Government

will review the demand and submit it to the State Director for

verification. After reviewing the demand the State Director will

transmit the request to the Government Finance Office for issuance

of the appropriate check. Upon issuance, the Finance Office will

notify the office servicing the borrower and State Director and

remit the check(s) to the Holder(s).

9. Lender's Obligations

Lender consents to the purchase by Government and agrees to

furnish on request by Government a current statement certified by an

appropriate authorized officer of the Lender of the unpaid principal

and interest then owed by Borrowers on the loan and the amount

including any loan subsidy then owed to any Holder(s). Lender agrees

that any purchase by Government does not change, alter or modify any

of the Lender's obligations to Government arising from said loan or

guarantee nor does it waive any of Government's rights against

Lender, and that Government will have the right to set-off against

Lender all rights inuring to Government as the Holder of this

instrument against Government's obligation to Lender under the Loan

Note Guarantee.

10. Repurchase by Lender for Servicing

If, in the opinion of the Lender, repurchase of the guaranteed

portion of the loan is necessary to adequately service the loan, the

Holder will sell the portion of the loan to the Lender for an amount

equal to the unpaid principal and interest (including any loan

subsidy) on such portion less Lender's servicing fee. The Loan Note

Guarantee will not cover the note interest to the Holder on the

guaranteed loans accruing after 90 days from the date of the demand

letter of the Lender or Government to the Holder(s) requesting the

Holder(s) to tender their guaranteed portion(s).

a. The Lender will not repurchase from the Holder(s) for

arbitrage purposes or other purposes to further its own financial

gain.

b. Any repurchase will only be made after the Lender obtains

Government written approval.

[[Page 53258]]

c. If the Lender does not repurchase the portion from the

Holder(s), Government at its option may purchase such guaranteed

portions for servicing purposes.

11. Custody of Unguaranteed Portion

The Lender may retain, or sell the unguaranteed portion of the

loan only through participation. Participation, as used in this

instrument, means the sale of an interest in the loan wherein the

Lender retains the note, collateral securing the note, and all

responsibility for loan servicing and liquidation.

12. When Guarantee Terminates

This Loan Note Guarantee will terminate automatically (a) upon

full payment of the guaranteed loan; or (b) upon full payment of any

loss obligation hereunder; or (c) upon written notice from the

Lender to Government that the guarantee will terminate 30 days after

the date of notice, provided the Lender holds all of the guaranteed

portion and the Loan Note Guarantee(s) are returned to be cancelled

by Government.

13. Settlement

The amount due under this instrument will be determined and paid

as provided in the applicable subpart of 7 CFR part 1980 in effect

on the date of this instrument.

14. Loan Subsidy

* In addition to the interest rate of the note attached hereto,

Government will pay a loan subsidy of ______ percent per year.

Payments will be made annually.

15. Interest Capitalization

In the case of Farm Credit Programs loans, the Lender/Holder(s)

may capitalize interest only when the note is restructured. When

delinquent interest is so treated as principal, the new principal

amount may exceed the principal amount of the loan listed herein,

but may not exceed statutory loan limits. The new principal amount

and new guaranteed portion will be identified at restructuring in an

addendum to this Loan Note Guarantee. Such capitalized interest will

be covered by this loan Note Guarantee. References to ``principal

and interest'' and ``principal advanced'' herein, therefore, shall

include any capitalized interest on the guaranteed portion of the

loan resulting from the restructuring of a Guaranteed Farm Credit

Programs loans and not exceeding statutory loan limits.

Position 5

16. Notices

All notices will be initiated through the

Government-------------------------------------------------------------

for ________ (State) with mailing address at the day of this

instrument:

----------------------------------------------------------------------

----------------------------------------------------------------------

* If not applicable delete paragraph prior to execution of this

instrument.

UNITED STATES OF AMERICA

----------------------------------------------------------------------

(insert applicable agency)

By---------------------------------------------------------------------

Title------------------------------------------------------------------

(Date)-----------------------------------------------------------------

Assumption Agreement by------------------------------------------------

dated ________, 19____

Assumption Agreement by------------------------------------------------

dated ________, 19____

10. Appendix C to subpart A is revised to read as follows:

Appendix C--Assignment Guarantee Agreement

Position 5

USDA

Form FmHA 449-36

(Rev. 10-95)

Type of Loan-----------------------------------------------------------

Government Loan Identification

Number-----------------------------------------------------------------

Applicable 7 CFR part 1980 subpart-------------------------------------

________ of ________

(Lender) has made a loan to--------------------------------------------

in the principal amount of $______________as evidenced by a note(s)

dated____________.

The United States of America, acting through the Consolidated Farm

Service Agency, Rural Business and Cooperative Development Service,

Rural Utilities Service, or Rural Housing and Community Development

Service (herein called ``Government'') entered into a Loan Note

Guarantee (Form FmHA 449-34) with the Lender applicable to such loan

to guarantee the loan not to exceed ______% of the amount of the

principal advanced and any interest (including any loan subsidy) due

thereon and any capitalized interest, resulting from the

restructuring of a Guaranteed Farm Credit Programs loan and not

exceeding statutory loan limits, as provided therein.

______________ of ______________

(Holder) desires to purchase from Lender ______% of the guaranteed

portion of such loan. Copies of Borrower's note(s) and the Loan Note

Guarantee are attached hereto as a part hereof.

NOW, THEREFORE, THE PARTIES AGREE:

1. The principal amount of the loan now outstanding is $______.

Lender hereby assigns to Holder ______% of the guaranteed portion of

the loan representing $______ of such loan now outstanding in

accordance with all of the terms and conditions hereinafter set

forth. The Lender and Government certify to the Holder that the

Lender has paid and Government has received the Guarantee Fee in

exchange for the issuance of the Loan Note Guarantee.

2. Loan Servicing. The Lender will be responsible for servicing

the entire loan and will remain mortgagee and/or secured party of

record. The entire loan will be secured by the same security with

equal lien priority for the guaranteed and unguaranteed portions of

the loan. The Lender will receive all payments on account of

principal of, or interest (including any loan subsidy and any

capitalized interest, resulting from the restructuring of a

Guaranteed Farm Credit Programs loans and not exceeding statutory

loan limits) on, the entire loan and shall promptly remit to the

Holder its pro rata share thereof determined according to their

respective interests in the loan, less only the Lender's servicing

fee.

3. Servicing Fee. Holder agrees that Lender will retain a

servicing fee of ______ percent per annum of the unpaid balance of

the guaranteed portion of the loan assigned hereunder.

4. Purchase by Holder. The guaranteed portion purchased by the

Holder will always be a portion of the loan which is guaranteed. The

Holder will hereby succeed to all rights of the Lender under the

Loan Note Guarantee to the extent of the assigned portion of the

loan. The Lender, however, will remain bound by all obligations

under the Loan Note Guarantee and the program regulations found in

the applicable subpart of 7 CFR part 1980 now in effect and future

regulations not inconsistent with the provisions hereof.

5. Full Faith and Credit. The Loan Note Guarantee constitutes an

obligation supported by the full faith and credit of the United

States and is incontestable except for fraud or misrepresentation of

which the Holder has actual knowledge at the time of this

assignment, or which it participates in or condones. Any Assignment

Guarantee Agreement attached to or relating to a note which provides

for capitalization of interest is void. Except in the case of Farm

Credit Program loans, a note which provides for the payment of

interest on interest as a result of restructuring the loan and not

exceeding statutory loan limits, and any Assignment Guarantee

Agreement attached to or related to such note is not void.

6. Rights and Liabilities. The guarantee and right to require

purchase will be directly enforceable by Holder not withstanding any

fraud or misrepresentations by Lender or any unenforceability of the

Loan Note Guarantee by Lender. Nothing contained herein shall

constitute any waiver by Government of any rights its possesses

against the Lender, and the Lender agrees that Lender will be liable

and will promptly reimburse Government for any payment made by

Government to Holder which, if such Lender had held the guaranteed

portion of the loan, Government would not be required to make. The

Holder(s) upon written notice to the Lender may resell the unpaid

balance of the guaranteed portion of the loan assigned hereunder. An

endorsement may be added to the Form FmHA 449-36 to effectuate the

transfer.

7. Repurchase by the Lender (Defaults). The Lender has the

option to repurchase the unpaid guaranteed portion of the loan from

the Holder(s) within 30 days of written demand by the Holder(s)

when: (a) the borrower is in default not less than 60 days on

principal or interest due on the loan or (b) the Lender has failed

to remit to the Holder(s) its pro rata share of any payment made by

the borrower or any loan subsidy within 30 days of its receipt

thereof. The repurchase by the Lender will be for an amount equal to

the unpaid guaranteed portion of principal and accrued interest

(including any loan subsidy), less the Lender's servicing fee. The

loan note guarantee will not cover the note interest to the Holder

on the guaranteed loan(s) accruing after 90 days from the date of

the demand letter to the lender requesting the repurchase. Holder(s)

will concurrently send a copy of demand to Government. The Lender

will accept an assignment without recourse from the Holder(s) upon

repurchase. The Lender in encouraged to repurchase the loan to

[[Page 53259]]

facilitate the accounting for funds, resolve the problem, and to

permit the borrower to cure the default, where reasonable. The

Lender will notify the Holder(s) and Government of its decision.

8. Purchase by Government. If Lender does not repurchase as

provided by paragraph 7, Government will purchase from Holder the

unpaid principal balance of the guaranteed portion together with

accrued interest (including any loan subsidy) to date of repurchase,

less Lender's servicing fee, within 30 days after written demand to

Government from the Holder. The Loan Note Guarantee will not cover

the note interest to the Holder on the guaranteed loans accruing

after 90 days from the date of the original demand letter of the

holder to the lender requesting the repurchase. Such demand will

include a copy of the written demand made upon the Lender. The

Holder(s) or its duly authorized agent will also include evidence of

its right to require payment from Government. Such evidence will

consist of each the original of the Loan Note Guarantee properly

endorsed to Government or the original of the Assignment Guarantee

Agreement properly assigned to Government without recourse including

all rights, title, and interest in the loan. Government will be

subrogated to all rights of Holder(s). The Holder will include in

its demand the amount due including unpaid principal, unpaid

interest (including any loan subsidy) to date of demand and interest

(including any loan subsidy) subsequently accruing from date of

demand to proposed payment date. Unless otherwise agreed to by

Government, such proposed payment will not be later than 30 days

from the date of demand.

The Government will promptly notify the Lender of its receipt of

the Holder(s)'s demand for payment. The Lender will promptly provide

the Government with the information necessary for Government's

determination of the appropriate amount due the Holder(s). Any

discrepancy between the amount claimed by the Holder(s) and the

information submitted by the Lender must be resolved before payment

will be approved. Government will notify both parties who must

resolve the conflict before payment will be approved. Such a

conflict will suspend the running of the 30 day payment requirement.

Upon receipt of the appropriate information. Government will review

the demand and submit it to the State Director for verification.

After reviewing the demand the State Director will transmit the

request to the Government Finance Office of issuance of the

appropriate check. Upon issuance, the Finance Office will notify the

office servicing the borrower and the State Director and remit the

check(s) to the Holder(s).

9. Lender's Obligations. Lender consents to the purchase by

Government and agrees to furnish on request by Government a current

statement certified by an appropriate authorized officer of the

Lender of the unpaid principal and interest then owned by Borrowers

on the loan and the amount then owed to any Holder(s). Lender agrees

that any purchase by Government does not change, alter or modify any

of the Lender's obligations to Government arising from said loan or

guarantee nor does it waive any of Government's right against

Lender, and that Government shall have the right to set-off against

Lender all rights inuring to Government as the Holder of this

instrument against Government's obligation to Lender under the Loan

Note Guarantee.

10. Repurchase by Lender for Servicing. If, in the opinion of

the Lender, repurchase of the assigned portion of the loan is

necessary to adequately service the loan, the Holder will sell the

assigned portion of the loan to the Lender for an amount equal to

the unpaid principal and interest (including any loan subsidy) on

such portion less Lender's servicing fee. The loan note guarantee

will not cover the note interest to the Holder on the guaranteed

loans accruing after 90 days from the date of the demand letter of

the lender or Government to the Holder(s) requesting the Holder(s)

to tender their, guaranteed portion(s).

a. The Lender will not repurchase from the Holder(s) for

arbitrage purpose or other purposes to further its own financial

gain.

b. Any repurchase will only be made after the Lender obtains

Government written approval.

c. If the Lender does not repurchase the portion from the

Holder(s), Government at its option may purchase such guaranteed

portions for servicing purposes.

11. Foreclosure. The parties owning the guaranteed portions and

unguaranteed portion of the loan will join to institute foreclosure

action, or in lieu of foreclosure, take a deed of conveyance to such

parties.

12. Reassignment. Holder upon written notice to Lender and

Government may reassign the unpaid guaranteed portion of the loan

sold hereunder. Upon such notification, the assignee will succeed to

all rights and obligations of the Holder hereunder.

13. Interest Capitalization. In the case of Farm Credit Programs

loans, the Lender may capitalize interest only when the note is

restructured. When delinquent interest is so treated as principal,

the new principal amount may exceed the line of credit listed

herein, buy may not exceed statutory loan limits. The new principal

amount and new guaranteed portion will be identified at

restructuring in an addendum to this agreement. Such capitalized

interest will be covered by this Assignment Guarantee Agreement.

References to principal and interest herein, therefore, shall

include any capitalized interest on the guaranteed portion of the

loan resulting from the restructuring of a Farm Credit Programs

loans and not exceeding statutory loan limits.

14. Notices. All notices and actions will be initiated through

the Government ________ for ________ (state) with mailing address at

the date of this assignment: ________

----------------------------------------------------------------------

Dated this ______ day ______, 19____.

LENDER:

ADDRESS:

ATTEST:

________(SEAL)

By---------------------------------------------------------------------

Title------------------------------------------------------------------

HOLDER:

ADDRESS:

ATTEST:

________(SEAL)

By---------------------------------------------------------------------

Title------------------------------------------------------------------

UNITED STATES OF AMERICA

----------------------------------------------------------------------

(insert applicable agency)

ADDRESS----------------------------------------------------------------

----------------------------------------------------------------------

By---------------------------------------------------------------------

Title------------------------------------------------------------------

11. Appendix D to subpart A is revised to read as follows:

Appendix D--Contract of Guarantee (Line of Credit)

USDA-CFSA

Form FmHA 1980-27

(Rev. 10-95)

Type of Loan-----------------------------------------------------------

{time} OL

Case No.---------------------------------------------------------------

State------------------------------------------------------------------

County-----------------------------------------------------------------

Lender-----------------------------------------------------------------

Lender's Address-------------------------------------------------------

Borrower's Name and Address--------------------------------------------

Lender's IRS Tax No.---------------------------------------------------

Date of Line of Credit Agreement/Note----------------------------------

Line of Credit Ceiling

$----------------------------------------------------------------------

The guaranteed portion of this line of credit is ______% of the

principal balance owed at any one time on advances made within an

approved line of credit by the above-named Lender to the above-named

Borrower.

In consideration of making advance(s) by the Lender within the

line of credit ceiling pursuant to the Line of Credit Agreement, the

United States of America acting through the Consolidated Farm

Service Agency (herein called ``Government''), pursuant to the

Consolidated Farm and Rural Development Act (7 U.S.C. 1921 et seq.),

agrees that in accordance with and subject to the conditions and

requirements in this agreement, it will pay to the Lender who holds

the line of agreement(s) (and note(s), if any exist) for said

advance(s) (or assumption agreement) covered by this contract the

lesser of 1, or 2, below:

1. Any loss sustained by such Lender on the guaranteed portion

including:

a. Principal and interest indebtedness as evidenced by said line

of credit agreement(s) (and note(s), if any exist) or by assumption

agreement(s), and any capitalized interest on such portion resulting

from the restructuring of an Operating loan and not exceeding

statutory loan limits, and

b. Principal and interest indebtedness on secured protective

advances for protection and preservation of collateral made with

Government's authorization, including but not limited to, advances

for delinquent taxes, annual assessments, any ground rents, and

hazard or flood insurance premiums affecting the collateral; or

2. The guaranteed principal advances to or assumed by the

Borrower under said line of credit agreement(s) (and note(s), if any

exist) or assumption agreement(s), and any interest due thereon,

including any capitalized interest on such portion resulting from

the restructuring of an Operating loan and not exceeding statutory

loan limits. If an

[[Page 53260]]

Operating Loan Line of Credit is involved, advances under the line of

credit must be made within three years (five for Certified Lenders)

from the date of this Contract. Advances made after that date will

be covered by this Contract. If Government conducts the liquidation

of the line of credit, loss occasioned to a Lender by accruing

interest after the date Government accepts responsibility for

liquidation will not be covered by this Contract of Guarantee. If

Lender conducts the liquidation of the line of credit, accruing

interest shall be covered by this Contract of Guarantee to date of

final settlement when the Lender conducts the liquidation

expeditiously in accordance with the liquidation plan approved by

Government.

Conditions of Guarantee

1. Line of Credit Servicing

Lender will be responsible for serving the entire line of

credit, and Lender will remain mortgagee and/or secured party of

record. The Lender agrees that, if liquidation of the account

becomes imminent, the Lender, will consider the Borrower of an

Operating Loan Line of Credit for an Interest Rate Buydown under

Exhibit C of subpart B of 7 C.F.R., part 1980, and request a

determination of the Borrower's eligibility by Government. The

Lender may not initiate foreclosure action on the line of credit

until 60 days after a determination has been made with respect to

the eligibility of the Borrower to participate in the Interest Rate

Buydown Program.

2. Priorities

The entire line of credit will be secured by the same security

with equal lien priority for the guaranteed and unguaranteed

portions of the line of credit. The unguaranteed portion of the line

of credit will not be paid first nor given any preference or

priority over the guaranteed portion.

3. Full Faith and Credit

The Contract of Guarantee constitutes an obligation supported by

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

except for fraud or misrepresentation of which Lender has actual

knowledge at the time it became such Lender or which Lender

participates in or condones. If the line of credit agreement or note

to which this Contract of Guarantee is attached provides for the

payment of interest on interest, this Contract of Guarantee is void.

However, in the case of Farm Credit Programs loans, the

capitalization of interest when restructuring loans will not void

this Contract of Guarantee.

Position 2

In addition, the Contract of Guarantee will be unenforceable by

the Lender 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 Government acquires

knowledge of the foregoing. Any losses occasioned will be

unenforceable to the extent that loan funds are used for purposes

other than those specifically approved by Government in its

Conditional Commitment for Guarantee. Negligent servicing is defined

as the failure to perform those services which a reasonably prudent

lender would perform in servicing its own portfolio of loans that

are not guaranteed. The term includes not only the concept of a

failure to act but also not acting in a timely manner or acting in a

manner contrary to the manner in which a reasonably prudent lender

would act up to the time of loan maturity or until a final loss is

paid.

4. Protective Advances

Protective advances made by Lender pursuant to the regulations

will be guaranteed against a percentage of loss to the extent as

provided in this Contract of Guarantee.

5. Custody of Unguaranteed Portion

The Lender may retain or sell the unguaranteed portion of the

line of credit only through participation. Participation, as used in

this instrument, means the sale of an interest in the line of credit

in which the Lender retains the line of credit agreement (and note

if one exists) collateral securing the line of credit and all

responsibility for servicing and liquidation of the line of credit.

6. When Guarantee Terminates

This Contract of Guarantee will terminate automatically (a) upon

full payment of the guaranteed line of credit occurring after the

advance period has expired; or (b) upon full payment of any loss

obligation under this Contract, or (c) upon written notice from the

Lender to Government that the guarantee will terminate 30 days after

the date of notice, provided the Contract is returned to Government

to be cancelled.

7. Settlement

The amount due under this instrument will be determined and paid

as provided in the applicable subpart of 7 C.F.R. part 1980 in

effect on the date of this instrument.

8. Interest Capitalization

In the case of Operating loans, the Lender may capitalize

interest only when the note is restructured. When delinquent

interest is so treated as principal, the new principal amount may

exceed the line of credit listed herein, but may not exceed

statutory loan limits. The new principal amount and new guaranteed

portion will be identified at restructuring in an addendum to this

Contract of Guarantee. Such capitalized interest will be covered by

this Contract of Guarantee. References to principal and interest

herein, therefore, shall include any capitalized interest on the

guaranteed portion of the loan resulting from the restructuring of

an Operating loan and not exceeding statutory loan limits.

9. Notices

All notices and actions will be initiated through the County

Supervisor for ______ (County) ________ (State) with mailing address

at the date of this instrument:

----------------------------------------------------------------------

----------------------------------------------------------------------

UNITED STATES OF AMERICA

CONSOLIDATED FARM SERVICE AGENCY

By---------------------------------------------------------------------

----------------------------------------------------------------------

Title------------------------------------------------------------------

(Date)-----------------------------------------------------------------

Assumption Agreement by------------------------------------------------

dated ________, 19____

Assumption Agreement by------------------------------------------------

dated ________, 19____

12. Appendix E to subpart A is revised to read as follows:

Appendix E--Agreement for Participation in Farm Credit Programs

Guaranteed Loan Programs of the United States Government

USDA-CFSA

Form FmHA 1980-38

(Rev. 6-95)

The purpose of this Agreement is to establish the Lender as an

approved participant in the Farm Credit Programs Guaranteed Loan

Programs of the Consolidated Farm Service Agency (CFSA), U.S.

Department of Agriculture (herein called ``Government''). This

Agreement provides the terms and conditions for originating and

servicing such loans, including lines of credit.

Participating Lender (``Lender''):

----------------------------------------------------------------------

----------------------------------------------------------------------

Tax Identification Number:

----------------------------------------------------------------------

Business Address:

----------------------------------------------------------------------

----------------------------------------------------------------------

Telephone Number:

----------------------------------------------------------------------

Complete the appropriate section indicating participation/non-

participation in the Certified Lender Program.

Participating in the Certified Lender Program (``CLP'')

Offices Affected by Agreement

All {time} As listed below {time}

----------------------------------------------------------------------

----------------------------------------------------------------------

----------------------------------------------------------------------

----------------------------------------------------------------------

States Affected by Agreement

----------------------------------------------------------------------

----------------------------------------------------------------------

----------------------------------------------------------------------

----------------------------------------------------------------------

Not participating in the Certified Lender Program

Offices Affected by Agreement

All {time} As listed below {time}

----------------------------------------------------------------------

----------------------------------------------------------------------

----------------------------------------------------------------------

----------------------------------------------------------------------

States Affected by Agreement

----------------------------------------------------------------------

----------------------------------------------------------------------

----------------------------------------------------------------------

----------------------------------------------------------------------

Read this Agreement in its entirety and sign in the space on the

last page. Your signature indicates consent with this Agreement.

Position 2

Part I--General Requirements

A. Duties and Responsibilities of the Government

1. Payment on Claims. Government agrees to make payment on its

claims in accordance

[[Page 53261]]

with the terms of the guarantee and Agency regulations in 7 C.F.R.

1980, subparts A and B. The maximum loss payment may not exceed the

amount determined in the guarantee, including the percentage of

principal and any accrued interest. The guarantee is supported by

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

except under the circumstances of fraud or misrepresentation of

which the Lender has actual knowledge at the execution of the

guarantee or which the Lender participates in or condones. (See 7

C.F.R. 1980.107.)

2. Personnel Available for Consultation. The Government shall

make personnel available for consultation on interpretations of

Agency regulations and guidelines. The Lender may consult with

Agency personnel regarding unusual underwriting, loan closing, and

loan liquidation questions.

B. General Requirements for the Lender

1. Eligibility to Participate. The Lender must meet the

requirements set forth in 7 C.F.R. 1980.13 and be approved by

Government to be a participant in the Farm Credit Programs

Guaranteed Loan Programs.

2. Knowledge of Program Requirements. The Lender is required to

obtain and keep itself informed of all program regulations and

guidelines, including all amendments and revisions. The Lender must

establish and maintain adequate and written internal policies for

loan origination and servicing to meet these requirements. These

policies will be subject to review upon the request by Government.

3. Notification. The Lender shall immediately notify Government

in writing if the Lender:

Becomes insolvent;

Has filed for any type of bankruptcy protection, has

been forced into involuntary bankruptcy, or has requested an

assignment for the benefit of creditors;

Has taken any action to cease operations, or to

discontinue servicing or liquidating any or all of its portfolio

guaranteed by Government;

Has changed its name, location, address, tax

identification number, or corporate structure;

Has been debarred, suspended, or sanctioned in

connection with its participation in any Federal guaranteed program;

or

Has been debarred, suspended, or sanctioned by any

Federal or State licensing or certification authority.

4. Employee Qualifications. The Lender shall maintain a staff

that is well trained and experienced in origination and loan

servicing functions, as necessary, to ensure the capability of

performing all the acts within its authority.

5. Conflict of Interest. The Lender certifies that its officers

or directors, principal stockholders (except stockholders in a Farm

Credit Bank or other Farm Credit System (FCS) institutions with

direct lending authority that have normal stock/share requirements

for participating), or other principal owners do not have, or will

not have, a substantial financial interest in, or business dealings

with, any guaranteed loan borrower. The Lender also certifies that

neither any borrower nor its officers or directors, stockholders, or

other owners have a substantial financial interest in the Lender. If

the borrower is a member of the Board of Directors of a Farm Credit

Bank or other FCS institution with direct lending authority, the

Lender certifies that an FCS institution on the next highest level

with independently process the loan request and will act as the

Lender's agent with servicing the account.

6. Facilities. The Lender shall operate its facilities and

branch offices in a prudent and businesslike manner.

7. Reporting Requirements. The Lender recognizes that

Government, as guarantor, has a vital interest in ensuring that all

acts performed by the Lender regarding the subject loans are

performed in compliance with this Agreement and Agency regulations.

Information on the status of guaranteed loans is necessary for this

purpose, as well as to satisfy budget and accounting reporting

required by the Department of the Treasury and the Office of

Management and Budget. The Lender agrees to provide Government with

all the data required under Agency regulations and any additional

information necessary for Government to monitor the health of its

guaranteed loan portfolio, and to satisfy external reporting

requirements.

The Lender also agrees to provide to Government, as requested by

the Government or as required by regulation, copies of audited

financial statements, reports on internal controls, copies of

compliance audits, and such other information that may be required

for Government to properly monitor the Lender's performance.

C. Underwriting Requirements

1. Responsibility. The Lender is responsible for originating,

servicing, and collecting all guaranteed Farm Credit Programs loans

in accordance with Government regulations.

2. Origination Process.

a. General Eligibility. The Lender shall make a preliminary

determination whether loan applicants meet the general eligibility

requirements of the Farm Credit Programs Guaranteed Loan Programs.

The Government will make the final determination.

b. Delinquency on Federal Debt. The Lender shall determine

whether the loan applicant is delinquent on any Federal debt. The

Lender shall use credit reports and any other credit history to make

this determination. If the loan applicant is delinquent on a federal

debt, processing of the application may only continue in accordance

with Government regulations.

c. Appraisals of Collateral. The Lender shall ensure that the

value of any collateral property or property to be purchased is

determined by a qualified appraiser, including a State licensed or

certified appraiser when required by law or regulation.

d. Change in Borrower's Condition. Before the Government issues

a loan guarantee, the Lender will certify that there has been no

adverse change(s) in the borrower's condition, financial or

otherwise, during the time period from issuance of a Conditional

Commitment to issuance of the guarantee of the loan. This

certification by the Lender must address all adverse changes and be

supported by financial statements of the borrower and its guarantors

which are not more than 90 days old at the time of certification.

For use in this provision alone, the term ``Borrower'' includes any

member, joint operator, partner or stockholder. (See 7 C.F.R.

1980.117.)

e. Limitation on Guarantee. Any note requiring the payment of

interest on interest will not be guaranteed. Default charges, late

charges of any kind, and/or interest accrued on interest charges

will not be covered by the guarantee.

3. Loan Closing.

a. Lender's Fee. The Lender will submit the required guarantee

fee with the Guaranteed Loan Closing Report.

b. Lender's Use of Funds. The Lender agrees funds for the

particular loan or line of credit will be used only for the purposes

authorized in 7 C.F.R. 1980, subparts A and B as set forth in Form

FmHA 1980-15.

c. Loan Closing. All loans guaranteed by the Government shall be

closed by attorneys, escrow companies, escrow departments of lending

institutions, or other person(s) or entities skilled and experienced

in conducting loan closings. The Lender shall:

Ensure that documents, including the mortgage and any

security agreements, chattel mortgages or equivalent documents

relating to it have been properly signed, are valid and contain

terms enforceable by the Lender;

Ensure that all security with appropriate lien

priorities is obtained in accordance with Form FmHA 1980-15, and

Government regulations;

Ensure that all closing documents required to be

recorded are recorded accurately, in the appropriate offices, and in

a timely and accurate manner;

Ensure that security interests are perfected in

collateral according to applicable regulatory requirements and

procedures;

Ensure that all required hazard insurance is obtained

in accordance with Government regulations;

Collect all fees and costs due and payable by the

borrower in the course of the loan transaction and disburse payment

directly to the parties for services rendered; and

Ensure that all loan proceeds are used as authorized.

The entire loan will be secured equally with the same security

and the same lien priority for both the guaranteed and unguaranteed

portions of the loan, under the assurance that the unguaranteed

portion of the loan will not be paid first nor given any preference

or priority over the guaranteed portion of the loan.

4. Lender's Sale or Assignment of Guaranteed Loan.

The Lender may retain all of any guaranteed loan. The Lender is

not permitted to sell or participate any amount of the guaranteed or

unguaranteed portion(s) of loan(s) to the applicant or borrower or

members of their immediate families, their officers, directors,

stockholders, other owners, or any parent, subsidiary, or affiliate.

The Lender may market all or part of the guaranteed portion of the

loan at or after loan

[[Page 53262]]

closing only if the loan is not in default as set forth in the terms of

the note. A line of credit may only be marketed by participation.

Refer to 7 C.F.R. 1980.119 for further guidelines.

D. Servicing Requirements

1. Responsibilities. The Lender will service the entire loan as

mortgagee and/or secured party of record in a reasonable and prudent

manner, notwithstanding the fact that another (Holder) may hold a

portion of the loan. The Lender will obtain compliance with the

covenants and provisions in the note, security instruments, and any

other agreements, and notify Government and the borrower of any

violations. Specific responsibilities are described in 7 C.F.R.

1980.130.

2. Negligent Servicing. The guarantee cannot be enforced by the

Lender to the extent a loss results from a violation of usury laws

or negligent servicing regardless of when Government discovers such

violation or negligence. Negligent servicing is defined as the

failure to perform services which a reasonably prudent lender would

perform in servicing its own portfolio of loans that are not

guaranteed. The term includes both a failure to act and also not

acting in a timely manner to include actions taken up to the time of

loan maturity or until a final loss is paid. (See 7 C.F.R. 1980.11.)

3. Payments. Payments from the borrower shall be processed upon

receipt according to 7 C.F.R. 1980.119, and may include escrow

premiums for hazard insurance and real estate taxes. The Lender

shall promptly disburse to any Holder(s) their pro rata share

thereof which has been determined according to their respective

interests in the loan, less only the Lender's servicing fee.

4. Collateral.

a. Insurance. The Lender shall ensure that adequate insurance is

maintained in accordance with Agency regulations, including the

maintenance of hazard insurance containing a loss payable clause in

favor of the Lender as the mortgagee or secured party.

b. Escrow Accounts. The Lender may establish separate escrow

accounts. All escrow accounts must meet applicable Federal and State

laws and regulations, and must be fully insured by the FDIC.

c. Inspection. The Lender shall inspect the collateral as often

as necessary to properly service the loan and ensure the collateral

is being properly maintained.

d. Taxes. The Lender shall ensure that taxes, assessments, or

ground rents against or affecting collateral are paid.

5. Delinquent Accounts.

a. The Lender will notify Government using Form FmHA 1980-44,

``Guaranteed Loan Borrower Default Status,'' when a borrower is 30

days past due on a payment or if the borrower has not provided the

required financial statements to the Lender or is otherwise in

default. The Lender will continue to submit Form FmHA 1980-44 every

60 days until the default is resolved, and will notify the Agency

when the default is resolved. A meeting will be arranged by the

Lender with the borrower and Government to resolve the problem.

Actions taken by the Lender, with written concurrence of Government,

may include but are not limited to, any curative actions contained

in subpart B or 7 C.F.R. part 1980 or liquidation.

b. The loan may be reamortized, rescheduled, or written down

only with the agreement of any Holder(s) of the guaranteed portion

of the loan, and only with Government's written agreement.

c. The Lender will negotiate in good faith to resolve any

problem in order to allow the borrower to cure default, where

reasonable. The Lender agrees that if liquidation of the account

becomes imminent, the Lender will consider the borrower for Interest

Assistance under Exhibit D of subpart B of 7 C.F.R. part 1980, and

request a determination of the borrower's eligibility by Government.

The Lender may not initiate foreclosure action on the loan until 60

days after eligibility of the borrower to participate in the

Interest Assistance Program has been established.

d. Debt Writedown. (Refer to 7 C.F.R. Part 1980 subpart B,

1980.125.) The maximum amount of loss payment associated with a

loan/line of credit agreement which has been written down will not

exceed the percent of the guarantee multiplied by the difference

between the outstanding principal and interest balance of the loan

before the writedown and the outstanding balance of the loan after

the writedown. The Lender will use Form FmHA 449-30, ``Loan Note

Guarantee Report of Loss,'' to request an estimated loss payment to

receive its pro rate share of any loss sustained. Interest will be

paid to the date of the check on all debt writedown claims.

e. The Lender must participate in any mediation program of any

State in accordance with the rules of that system and 7 C.F.R. Part

1980 subpart B, 1980.126.

f. When the borrower has not made payment of principal or

interest due on the loan for 60 days or more or the Lender has

failed to give the Holder(s) its pro rata share of any payment made

by the borrower within 30 days of receipt of the payment, the Holder

may request the lender to repurchase the unpaid guaranteed portion

of the guaranteed loan. If the Lender chooses not to repurchase,

Government will purchase the unpaid principal balance. Upon

Government's repurchase, the lender will liquidate the account or

reimburse Government the amount of the repurchase within 180 days of

Government's repurchase. See 7 C.F.R. 1980.119 for further guidance

on repurchasing loans from Holder(s).

6. Default/Liquidation.

a. Protective Advances. Protective advances must constitute a

debt of the borrower to the Lender and be secured by the security

instrument(s). Government written authorization is required on all

protective advances in excess of $3,000 made by a CLP Lender. For

non-CLP Lenders, the amount is $500. Refer to 7 C.F.R. 1980.136.

b. Additional Loan or Advances. Except as provided for in each

Borrower's loan agreement, the Lender will not make additional

expenditures or new loans without first obtaining the written

approval of Government even though such expenditures or loans will

not be guaranteed.

c. Future Recovery. After a loan has been liquidated and a final

loss has been paid by Government, any future funds which may be

recovered by the Lender will be pro-rated between Government and the

Lender. Government will be paid the amount recovered in proportion

to the percentage it guaranteed for the loan.

d. Transfer and Assumption Cases. Refer to 7 C.F.R. 1980.123. If

a loss occurs upon the completion of a transfer and assumption for

less than the full amount of the debt and transferor debtor

(including Guarantors) is released from personal liability, the

Lender, if it holds the guaranteed portion, may file an estimated

Report of Loss on Form FmHA 449-30, ``Loan Note Guarantee Report of

Loss,'' to recover its pro rata share of the actual loss at that

time. In completing Form FmHA 449-30, the amount of the debt assumed

will be entered as Net Collateral (Recovery). Approved protective

advances and accrued interest thereon made during the arrangement of

transfer and assumption, if not assumed by the transferee, will be

entered in the appropriate space on Form FmHA 449-30.

e. Bankruptcy. The Lender is responsible for protecting the

guaranteed loan debt and all collateral securing the loan in

bankruptcy proceedings. Loss payments on bankruptcy cases will be

processed according to the terms described in 7 C.F.R. 1980.144.

f. Liquidation. If the Lender concludes that liquidation of a

guaranteed loan account is necessary due to default or third party

actions which the borrower cannot or will not cure or eliminate

within a reasonable period of time, a meeting will be arranged by

the Lender with Government. All liquidations must receive prior

concurrence by the appropriate Government official. Refer to 7

C.F.R. 1980.146 for specific guidance on the procedures for

liquidation.

7. Servicer.

If the Lender contracts for servicing of guaranteed Farm Credit

Programs loans, the Lender is not relieved of responsibility for

proper servicing of the loans.

E. Agency Reviews of Lender's Operations

The Government shall have the right to conduct reviews,

including on-site reviews, of the Lender's operations and the

operations of any agent of the Lender, for the purpose of verifying

compliance with this Agreement and Government regulations and

guidelines. These reviews may include, but are not limited to:

audits of case files; interviews with owners, managers, and staff;

audits of collateral; and inspections of the Lender's and/or its

agents underwriting, servicing, and liquidation guidelines. The

Lender and/or its agents shall provide access to all pertinent

information to allow the Government, or any party authorized by the

Government, to conduct such reviews.

F. Conformance to Standards

1. Standards. The Lender shall conform to the standards outlined

in this Agreement and Government regulations for participation in

Farm Credit Programs Guaranteed Loan Programs. CLP Lenders must

maintain compliance with the criteria set forth in 7 C.F.R.

1980.190. The Government shall determine Lender adherence to the

standards based on:

Adequacy in meeting requirements for origination,

servicing, and liquidation of

[[Page 53263]]

loans and lines of credit, including protection of collateral;

Satisfaction of the reporting requirements of the

Government;

Success in operating in a sound and prudent

businesslike manner;

Portfolio performance compared to overall performance

of the Farm Credit Program Guaranteed Loan Programs; and

Results of on-site reviews of the underwriting and/or

servicing performed by the Lender.

2. Determination of Non-Conformance. The Government shall

carefully consider the circumstances and available facts in

determining whether there is a pattern of Lender non-conformance

with applicable standards. The Government shall determine the

propriety of any decision made by the Lender based on the facts

available at the time the specific action was taken. It is

understood by the Government and intended by this Agreement that the

Lender has the authority to exercise reasonable judgment in

performing acts within its authority. However, the Government

reserves the right to question any act performed or conclusion drawn

that is inconsistent with this Agreement or Government regulations.

3. Government Action. If the Lender is determined to be in non-

conformance with any Federal law, State law, Agency regulation or

guideline, or the terms of this Agreement, the Government reserves

the right to take action in accordance with its laws and

regulations.

4. Lender Right of Appeal. The Government shall provide the

Lender an opportunity to appeal, in accordance with Agency

regulations at 7 C.F.R. Part 1980, subpart A, adverse actions taken

by the Government.

Part II--List of Agency Regulations and Guidelines and Designation of

Lender Authority To Perform Certain Acts

A. List of Agency Regulations

The following is a list of Government regulations which, along

with any future amendments consistent with this Agreement, contain

the information necessary for the Lender to be in compliance with

Government requirements.

1. 7 C.F.R. 1980 subpart A--General

2. 7 C.F.R. 1980 subpart B--Farm Credit Program Loans

B. Authority To Perform Certain Acts

Lenders participating in the CLP may be granted special

authority to certify compliance with certain statutory or regulatory

requirements. 7 C.F.R. 1980.190 describes authorities and

responsibilities for CLP Lenders.

Part III--Duration and Modification

A. Duration and Termination

1. Duration of Agreement. For CLP Lenders, this Agreement is

valid for five years unless terminated by the Lender or Government

as described below or revoked according to 7 C.F.R. 1980.190. For

non-CLP Lenders, this Agreement will be valid indefinitely unless

terminated by the Lender or the Government as described below.

2. Modification of Agreement. This Agreement may be modified or

extended only in writing and by consent of all parties.

3. Termination by the Government. This Agreement may be

terminated by the Government in accordance with Government

regulations.

4. Termination by the Lender. This Agreement may be terminated

by the Lender by providing 30 days written notice to the Government.

5. Effect of Termination on Responsibilities and Liabilities.

Responsibilities or liabilities that existed before the termination

of the Agreement with regard to outstanding guarantees will continue

to exist after termination unless the Government expressly releases

the Lender from such responsibilities or liabilities in writing. The

Lender shall remain obligated to service and liquidate the

guaranteed loans remaining in the portfolio unless and until the

Government or the Lender transfers the loans. These requirements

concerning loan management by the Lender and rights of the

Government under this Agreement shall remain in effect whether the

Agreement is terminated by the Lender or the Government.

B. Entire Agreement

This Agreement, Parts I through IV inclusive, and any

regulations or guidelines incorporated by reference, shall

constitute the entire Agreement. There are no other agreements,

written or oral, regarding the terms in this Agreement which are or

shall be binding on the parties.

Part IV--Endorsement

The undersigned certifies that they have read and understand the

requirements in this Agreement, and in 7 C.F.R. part 1980, subparts

A and B, and agree to the participation requirements and other

provisions of this Agreement.

Notice. Requests for Guarantee and any notices or actions are

expected to be initiated through the following County Offices:

----------------------------------------------------------------------

----------------------------------------------------------------------

----------------------------------------------------------------------

----------------------------------------------------------------------

----------------------------------------------------------------------

----------------------------------------------------------------------

Lender: Complete this block of Section IV.

XXI. LENDER------------------------------------------------------------

(Name)

----------------------------------------------------------------------

(IRS I.D. Tax No.)

By---------------------------------------------------------------------

(Signature)

----------------------------------------------------------------------

(Name Typed or Printed)

Title------------------------------------------------------------------

Date-------------------------------------------------------------------

ATTEST-----------------------------------------------------------------

This block of Section IV will be completed by the Government.

The effective date of this Agreement

is---------------------------------------------------------------------

The expiration date of this Agreement

is---------------------------------------------------------------------

UNITED STATES OF AMERICA

Consolidated Farm Service Agency

By---------------------------------------------------------------------

(Signature)

Title------------------------------------------------------------------

----------------------------------------------------------------------

(Name Typed or Printed)

Date-------------------------------------------------------------------

13. Appendix K to subpart A is added to read as follows:

Appendix K--Modification of New Contract Relating to Farm Credit

Programs Guaranteed Loan/Line of Credit

United States Department of Agriculture

Modification of New Contract Relating to Farm Credit Programs

Guaranteed Loan/Line of Credit

The Lender's Agreement or Agreement For Participation in Farmer

Programs Guaranteed Loan Programs of the United States Government

executed with the Lender dated ______ and the attached Loan Note

Guarantee or Contract of Guarantee (Line of Credit) executed with

the Lender dated ______ relating to the loan to ______ in the amount

of ______ is hereby modified to reflect a new principal amount of

______ as a result of the capitalization of interest at the

restructuring of the Farm Credit Programs Loan. This amount does not

exceed statutory limits. The new guaranteed portion of the loan is

______.

UNITED STATES OF AMERICA

CONSOLIDATED FARM SERVICE AGENCY

Date-------------------------------------------------------------------

By---------------------------------------------------------------------

Title------------------------------------------------------------------

14. Appendix L to subpart A is added to read as follows:

Appendix L--Modification of Existing Contract Relating to Farm Credit

Programs Guaranteed Loan/Line of Credit

United States Department of Agriculture

Modification of Existing Contract Relating to Farm Credit Programs

Guaranteed Loan/Line of Credit

The Lender's Agreement or Agreement For Participation in Farmer

Programs Guaranteed Loan Programs of the United States Government

executed with the Lender dated ______ and the attached Loan Note

Guarantee or Contract of Guarantee (Line of Credit) executed with

the Lender dated ______ relating to the loan to ______ in the amount

of ______ is hereby modified to permit the capitalization of

interest when restructuring the Farm Credit Programs loan PROVIDED

that the new principal amount of ______ does not exceed statutory

limits. Such capitalized interest on the guaranteed portion of the

loan will be covered by the CFSA guarantee and will not void the

contract when the capitalized interest result from restructuring.

The new guaranteed portion of the loan is ______.

UNITED STATES OF AMERICA

CONSOLIDATED FARM SERVICE AGENCY

Date-------------------------------------------------------------------

By---------------------------------------------------------------------

Title

[[Page 53264]]

Subpart B--Farmer Program Loans

15. Section 1980.124 is amended by revising the word ``plan(s)'' to

read ``plan'' in the third sentence of paragraph (b)(10); by removing

paragraph (d)(1); by redesignating paragraph (a)(8) as paragraph (a)(9)

and paragraphs (d)(2) and (d)(3) as paragraphs (d)(1) and (d)(2),

respectively; by revising the word ``FmHA'' to read ``the Agency'' in

newly redesignated paragraph (d)(2); by revising the word ``FmHa'' to

read ``Agency'' each place it appears in paragraphs (b)(8) and (c)(3);

by revising the word ``FmHa'' to read ``the Agency'' in paragraph (f);

by revising paragraphs (a)(4), (a)(6), (a)(7), (b)(6), (b)(12), and

(e); and by adding new paragraph (a)(8) to read as follows:

Sec. 1980.124 Consolidation, rescheduling, reamortizing and deferral.

(a) * * *

(4) The borrower has acted in good faith demonstrating sincerity

and honesty in meeting agreements with, and promises made to the lender

and the Agency. This means cooperating in servicing the account and

maintaining the security, and satisfactorily completing the Borrower

Training program if required.

* * * * *

(6) Any holder agrees in writing to the rescheduling,

reamortization or deferral. The holder must understand that it will not

receive any payments from the lender or from the Agency during any

deferral period.

(7) The lender may capitalize the outstanding interest when

restructuring the loan. The restructuring proposal will be reviewed by

the appropriate agency loan approval official in accordance with loan

approval authorities based on the total outstanding principal and

interest at the time of the proposal. Approval of servicing actions on

guaranteed loans will be based on the new principal and guaranteed

amounts and the authorities set forth in exhibit C of FmHA Instruction

1901-A (available in any Agency office). Approved capitalized interest

will be treated as part of the principal and interest indebtedness in

calculating the maximum loss amount under Sec. 1980.20.

(8) Only interest that has accrued at the rate indicated on the

borrower's original promissory notes may be capitalized. Late payment

fees or default interest penalties that have accrued due to the

borrower's failure to make payments as agreed may not be capitalized.

* * * * *

(b) * * *

(6) There is no limit on the number of times a consolidation or

rescheduling action may take place.

* * * * *

(12) When a consolidation occurs, the new note or line of credit

agreement will describe the notes or line of credit agreements being

consolidated and will state that the indebtedness evidenced by such

notes or line of credit agreements is not satisfied. The original notes

or line of credit agreements will be retained for identification

purposes.

* * * * *

(e) Principal limit. As a result of the capitalization of interest,

a rescheduled/reamortized note or line of credit agreement may increase

the amount of principal which the borrower is required to pay above

what would have been payable had the rescheduling, reamortization, or

consolidation not occurred. However, in no case will such principal

amount exceed the statutory loan limits set out in this subpart.

* * * * *

Sec. 1980.125 [Amended]

16. Section 1980.125 is amended by removing paragraph (a)(10); by

revising the words ``and/or'' in the first sentence of the introductory

text of paragraph (a) to read ``and''; by revising ``FmHA'' to read

``the Agency'' in the introductory text of paragraph (a) and paragraph

(b)(1)(i) each place it appears; by revising ``FmHA'' to read

``Agency'' in the introductory text of paragraph (a)(8); and by

revising ``FmHA'' to read ``the Agency's'' in paragraph (a)(4).

17. Section 1980.191 is amended by revising paragraph (e) to read

as follows:

Sec. 1980.191 Borrower training program.

* * * * *

(e) Vendor monitoring. Borrowers will complete course and

instructor evaluations provided by the instructor when the borrowers

complete the course.

18. Section 1980.200 is revised to read as follows:

Sec. 1980.200 OMB control number.

The reporting requirements contained in this subpart have been

approved by the Office of Management and Budget (OMB) and have been

assigned OMB control number 0575-0079. Public reporting burden for this

collection of information is estimated to vary from 15 minutes to 4

hours per response, with an average of 1.32 hours per response,

including time for reviewing instructions, searching existing data

sources, gathering and maintaining the data needed, and completing and

reviewing the collection of information. Send comments regarding this

burden estimate or any other aspect of this collection of information,

including suggestions for reducing this burden, to the Department of

Agriculture, Clearance Officer, OIRM, Ag Box 7630, Washington, D.C.

20250; and to the Office of Management and Budget, Paperwork Reduction

Project (OMB #0575-0079), Washington, D.C. 20503.

19. Exhibit D of subpart B is amended by revising the word

``holder(s)'' to read ``holder'' in the first sentence of paragraph

XVI; by removing the second sentence of paragraph XVI, and by revising

paragraphs XIII.D., F. and G. to read as follows:

Exhibit D--Interest Assistance Program

* * * * *

XIII. Servicing of Loans/Lines of Credit Covered by an Interest

Assistance Agreement

* * * * *

D. In the event of reamortization, rescheduling or deferral of

loans with Interest Assistance, Interest Assistance will remain

available for that loan under the terms of the existing Interest

Assistance Agreement. If additional Interest Assistance is needed to

produce a positive cash flow throughout the life of the rescheduled/

reamortized loan and funds are not available for the additional

Interest Assistance, then the rescheduling/reamortization will not

be approved by the agency. In no case, will the subsidy be extended

more than ten years from the initial effective date of the original

Interest Assistance Agreement.

E. * * *

F. For Loan Note Guarantees held by holders, Agency purchase of

the guaranteed portion of the loan will stop Interest Assistance

payments on that portion. Interest Assistance payments will cease

upon termination of the Loan Note Guarantee or Contract of Guarantee

by expiration of the document or cancellation by the Government.

G. A lender will notify the Agency when a borrower who is not

receiving maximum Interest Assistance is 30 days past due on a

payment and is unable to bring the account current within 30 days.

The lender will request that the Agency make a determination as to

the borrower's eligibility for Interest Assistance. The lender will

submit a plan of operation for the farm projecting the repayment

ability of the borrower with and without Interest Assistance. Upon

receipt of the agency's determination, the lender may request

Interest Assistance. If the lender declines Interest Assistance, the

lender will notify the Agency in writing within 30 days.

* * * * *

[[Page 53265]]

Dated: September 14, 1995.

Eugene Moos,

Under Secretary of Agriculture, Farm and Foreign Agricultural Services.

Dated: September 15, 1995.

Jill Long Thompson,

Under Secretary of Agriculture, Rural Economic and Community

Development.

[FR Doc. 95-24179 Filed 10-12-95; 8:45 am]

BILLING CODE 3410-07-U