RD Instruction 1927-B

Table of Contents

Page 1

PART 1927 - TITLE CLEARANCE AND LOAN CLOSING

Subpart B - Real Estate Title Clearance and Loan Closing

## [TABLE OF CONTENTS]{.underline}

[Sec]{.underline}. [Page]{.underline}

1927.51 General. 1

\(a\) Types of loans covered by this subpart. 1

\(b\) Programs not covered by this subpart. 1

\(c\) Review by the Office of the\
General Counsel (OGC). 1

\(d\) Agency forms. 1

1927.52 Definitions. 1

Agency. 1

Approval official. 2

Approved attorney. 2

Approved title insurance company. 2

Borrower. 2

Certificate of title. 2

Closed loan. 2

Closing agent. 2

Closing protection letter. 3

Cosigner. 3

Credit sale. 3

Deed of trust. 3

Exceptions. 3

Fee simple. 3

FSA. 3

General warranty deed. 3

Indemnification agreement. 3

Issuing agent. 4

Land purchase contract (contract for deed). 4

Mortgage. 4

National Office. 4

OGC. 4

Program regulations. 4

Quitclaim deed. 4

RHS. 4

Seller. 4

Special warranty deed. 5

State Office. 5

(04-22-96) SPECIAL PN

RD Instruction 1927-B

Table of Contents

Page 2

[Sec]{.underline}. [Page]{.underline}

1927.52 (Con.)

Title clearance. 5

Title company. 5

Title defects. 5

Trust deed. 5

Voluntary conveyance. 5

Warranty deed. 5

1927.53 Costs of title clearance and closings of\
transactions. 5

1927.54 Requirements for closing agents. 6

\(a\) Form of title certification. 6

\(b\) Approval of closing agent. 6

\(c\) Approval of attorneys. 7

\(d\) Approval of title companies. 7

\(e\) Approval of title insurance companies. 8

\(f\) Responsibility of approval official. 8

\(g\) Conflict of interest. 9

\(h\) Debarment or suspension. 9

\(i\) Special provisions. 9

\(j\) Rejecting closing agents or title

insurance companies. 9

1927.55 Title clearance services. 10

\(a\) Responsibilities of closing agents. 10

\(b\) Initial responsibility of approval\
official. 10

\(c\) Ordering title services. 10

\(d\) Use of title opinion. 10

\(e\) Use of title insurance. 11

\(f\) Approval official\'s responsibilities after\
receipt of preliminary title opinion or\
title insurance binder. 12

RD Instruction 1927-B

Table of Contents

Page 3

[Sec]{.underline}. [Page]{.underline}

1927.56 Scheduling loan closing. 13

1927.57 Preparation of closing documents. 13

\(a\) Preparation of deeds. 13

\(b\) Preparation of mortgages. 14

\(c\) Preparation of the promissory note. 17

\(d\) Preparation of protective instruments. 18

\(e\) Correction of errors in recorded\
security instruments. 21

1927.58 Closing the transaction. 21

\(a\) Disbursement of loan funds. 21

\(b\) Title examination and liens or claims\
against borrowers. 21

\(c\) Taxes and assessments. 22

\(d\) Affidavit regarding work of improvement. 22

\(e\) Completion of closing documents. 23

\(f\) Assignment of future income. 23

\(g\) Return of loan documents to approval\
official after loan closing. 23

\(h\) Final title opinion or mortgage title policy. 23

\(i\) Other services of the closing agent. 24

1927.59 Subsequent loans and transfers with assumptions. 25

\(a\) Loans closed using title insurance or

title opinions. 25

\(b\) Title services required in connection\
with assumptions. 26

1927.60 - 1927.61 \[Reserved\] 26

1927.62 Voluntary conveyances. 26

1927.63 - 1927.64 \[Reserved\] 26

1927.65 Additional requirements in connection with\
loans to homestead entrymen, contract\
purchasers of farm units from the Bureau of\
Reclamation, and certain American Indians. 26

1927.66 Cancellation of loan, assumption, or credit sale. 26

1927.67 - 1927.89 \[Reserved\] 26

1927.90 State Supplements. 27

1927.91 Exception authority. 27

1927.92 - 1927.99 \[Reserved\] 27

1927.100 OMB control number. 27

## o0o

(04-22-96) SPECIAL PN

RD Instruction 1927-B

PART 1927 - TITLE CLEARANCE AND LOAN CLOSING

Subpart B - Real Estate Title Clearance and Loan Closing

§1927.51 [General]{.underline}.

\(a\) [Types of loans covered by this subpart]{.underline}. This subpart
sets forth the authorities, policies, and procedures for real estate
title clearance and closing of loans, assumptions, voluntary conveyances
and credit sales in connection with the following types of Rural Housing
Service (RHS) and Rural Housing (RH), Farm Labor Housing (LH), Rural
Rental Housing (RRH), Rural Cooperative Housing (RCH), and NonProgram
(NP) loans. This subpart does not apply to guaranteed loans. This
subpart is inapplicable to Farm Service Agency, Farm Loan Programs.
(Revised 01-09-08, PN 417.)

\(b\) [Programs not covered by this subpart]{.underline}. Title
clearance and closing for all other types of agency loans and
assumptions will be handled as provided in the applicable program
instructions or as provided in special authorizations from the National
Office.

\(c\) [Review by the Office of the General Counsel (OGC)]{.underline}.
When required by applicable program regulations, such as for
Multi-Family Housing (MFH) organizations or other complex cases as
determined by the State Office, the State Office will request OGC to
review the docket and issue closing instructions.

> \(d\) [Agency forms]{.underline}. Copies of all agency forms
> referenced in this regulation and the agency's internal administrative
> procedures for title clearance and loan closing are available upon
> request from the agency's State Office. Forms and title clearance and
> loan closing requirements which are specific for any individual state
> must be obtained from the agency State Office for that state.

§1927.52 [Definitions]{.underline}.

> [Agency]{.underline}. The Rural Housing Service (RHS) and Farm Service
> Agency (FSA) and their successor agencies.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

DISTRIBUTION: WSAL Real Property

Title Clearance and

Loan Closing

## 1

## (Revision 1)

(04-22-96) SPECIAL PN

RD Instruction 1927-B

§1927.52 (Con.)

[Approval official]{.underline}. The agency employee who has been
delegated the authority to approve, close, and service the particular
kind of loan will approve an attorney or title company as closing agent
for the loans. If a loan must be approved at a higher level, the
initiating office may approve the closing agent.

[Approved attorney]{.underline}. A duly licensed attorney, approved by
the agency, who provides title opinions directly to the agency and the
borrower or upon whose certification of title an approved title
insurance company issues a policy of title insurance. Approved attorneys
also close loans, assumptions, credit sales, and voluntary conveyances
and disburse funds in connection with agency loans. Approved attorney is
further defined in §1927.54(c).

[Approved title insurance company]{.underline}. A title insurance
company, approved by the agency, (including its local representatives,
employees, agents, and attorneys) that issues a policy of title
insurance. Depending on the local practice, an approved title insurance
company may also close loans, assumptions, credit sales, and voluntary
conveyances and disburse funds in connection with agency loans. If the
approved title insurance company does not close the loan itself, the
loan closing functions may be performed by approved attorneys or closing
agents authorized by the approved title insurance company.

[Borrower]{.underline}. The party indebted to the agency after the loan,
assumption, or credit sale is closed.

[Certificate of title]{.underline}. A certified statement as to land
ownership, based upon examination of record title.

[Closed loan]{.underline}. A loan is considered to be closed when the
mortgage is filed for record and the appropriate lien has been obtained.

[Closing agent]{.underline}. The approved attorney or title company
selected by the applicant and approved by the agency to provide closing
services for the proposed loan. Unless a title insurance company also
provides loan closing services, the term \"title company\" does not
include \"title insurance company.\"

## 2

## (Revision 1)

##  

RD Instruction 1927-B

§ 1927.52 (Con.)

[Closing protection letter]{.underline}. An agreement issued by an
approved title insurance company which is an American Land Title
Association (ALTA) form closing protection letter or which is otherwise
acceptable to the agency and which protects the agency against damage,
loss, fraud, theft, or injury as a result of negligence by the issuing
agent, approved attorney, or title company when title clearance is done
by means of a policy of title insurance. Depending on the area, closing
protection letters may also be known as \"Insured Closing Letters,\"
\"Indemnification Agreements,\" \"Insured Closing Service Agreements,\"
or \"Statements of Settlement Service Responsibilities.\"

[Cosigner]{.underline}. A party who joins in the execution of a
promissory note or assumption agreement to guarantee repayment of the
debt.

[Credit sale]{.underline}. A sale in which the agency provides credit to
the purchasers of agency inventory property. Title clearance and closing
of a credit sale are the same as for an initial loan, except the
property is conveyed by quitclaim deed.

[Deed of trust]{.underline}. See trust deed.

[Exceptions]{.underline}. Exceptions include, but are not limited to,
recorded covenants; conditions; restrictions; reservations; liens;
encumbrances; easements; taxes and assessments; rights-of-way; leases;
mineral, oil, gas, and geothermal rights (with or without the right of
surface entry); timber and water rights; judgments; pending court
proceedings in Federal and State courts (including bankruptcy); probate
proceedings; and agreements which limit or affect the title to the
property.

[Fee simple]{.underline}. An estate in land of which the owner has
unqualified ownership and power of disposition.

[FSA]{.underline}. The Farm Service Agency, an agency of the United
States Department of Agriculture (and any successor agency). FSA is the
successor agency for farm program loans of the former Farmers Home
Administration.

[General warranty deed]{.underline}. A deed containing express covenants
by the grantor or seller as to good title and right to possession.

[Indemnification agreement]{.underline}. An agreement that protects
agency against damage, loss, fraud, theft, or injury as a result of
useful conduct or negligence on behalf of the issuing agent, approved
attorney, or title company. This agreement may also be entitled closing
protection letter, insured closing letter, insured closing service
agreement, statement of settlement service responsibilities, or letters
which provide similar protection.

## 3

## (Revision 2)

(04-22-96) SPECIAL PN

RD Instruction 1927-B

§ 1927.52 (Con.)

[Issuing agent]{.underline}. An individual or entity who is authorized
to issue title insurance for an approved title insurance company.

[Land purchase contract (contract for deed)]{.underline}. An agreement
between the buyer and seller of land in which the buyer has the right to
possession and use of the land over a period of time (usually in excess
of 1 year) and makes periodic payments of a portion of the purchase
price to the seller. The seller retains legal title to the property
until the final payment is made, at which time the buyer will receive a
deed to the land vesting fee title in the buyer.

[Mortgage]{.underline}. Real estate security instrument which pledges
land as security for the performance of an obligation such as repayment
of a loan. For the purpose of this regulation the term "mortgage"
includes deed of trust and deed to secure debt. Form RD 1927-7 (State),
\"Real Estate Mortgage or Deed of Trust for (Rural Housing),\" or Form
RD 3550-14, "Real Estate Mortgage or Deed of Trust for (State),"will be
used to secure a mortgage to the agency. (Revised 06-21-06,\
PN 399.)

[National Office]{.underline}. The National Headquarters Office of FSA
or RHS depending on the loan program involved.

[OGC]{.underline}. The Office of the General Counsel, United States
Department of Agriculture.

[Program regulations]{.underline}. The agency regulations for the
particular loan program involved (e.g., 7 CFR part 3550 for single
family housing (SFH) loans). (Revised 01-23-03, SPECIAL PN.)

[Quitclaim deed]{.underline}. A transfer of the seller's interest in the
title, without warranties or covenants. This type of deed is used by the
agency to convey title to purchasers of inventory property.

[RHS]{.underline}. The Rural Housing Service, an agency of the United
States Department of Agriculture, or its successor agency. RHS is the
successor agency to the Rural Housing and Community Development Service
(RHCDS) which was, in turn, the successor agency to the Farmers Home
Administration.

[Seller]{.underline}. Individual or other entity which convey ownership
in real property to an applicant for an agency loan or to the agency
itself.

## 4

## (Revision 2) 

RD Instruction 1927-B

§ 1927.52 (Con.)

[Special warranty deed]{.underline}. A deed containing a covenant
whereby the grantor agrees to protect the grantee against any claims
arising during the grantor\'s period of ownership.

[State Office]{.underline}. For FSA, this term refers to the FSA State
Office. For RHS, this term refers to the Rural Development State
Director.

(Revised 01-23-03, SPECIAL PN.)

[Title clearance]{.underline}. Examination of a title and its exceptions
to assure the agency that the loan is legally secured and has the
required priority.

[Title company]{.underline}. A company that may abstract title, act as
an issuing agent of title insurance for a title insurance company, act
as a loan closing agent, and perform other duties associated with real
estate title clearance and loan closing.

[Title defects]{.underline}. Any exception or legal claim of ownership
(through deed, lien, judgment, or other recorded document), on behalf of
a third party, which would prevent the seller from conveying a
marketable title to the entire property.

[Trust deed]{.underline}. A three party security instrument conveying
title to land as security for the performance of an obligation, such as
the repayment of a loan. For the purpose of this regulation a trust deed
is covered by the term "mortgage." A trust deed is the same as a deed of
trust.

[Voluntary conveyance]{.underline}. A method of liquidation by which
title to agency security is transferred by a borrower to the agency by
deed in lieu of foreclosure.

[Warranty deed]{.underline}. A deed in which the grantor warrants that
he or she has the right to convey the property, the title is free from
encumbrances, and the grantor shall take further action necessary to
perfect or defend the title.

§ 1927.53 [Costs of title clearance and closing of
transactions]{.underline}.

The borrower or the seller, or both, in compliance with the terms of the
sales contract or option will be responsible for payment of all costs of
title clearance and closing of the transaction and will arrange for
payment before the transaction is closed. In voluntary conveyance cases
to the agency, these costs will be paid as provided in 7 CFR part 3550,
subpart E.

## 5

(Revision 1)

(04-22-96) SPECIAL PN

RD Instruction 1927-B

§ 1927.53 (Con.)

In a case involving the purchase or sale of real estate, the option or
sales contract must state who will pay the title clearance and closing
costs. These costs will include any costs of abstracts of title, land
surveys, attorney\'s fees, owner\'s and lender\'s policies of title
insurance, obtaining curative material, notary fees, documentary stamps,
recording costs, tax monitoring service, and other expenses necessary to
complete the transaction. (Revised 01-23-03, SPECIAL PN.)

§ 1927.54 [Requirements for closing agents]{.underline}.

\(a\) [Form of title certification]{.underline}. State Offices are
directed to require title insurance for all loan closings unless the
agency determines that the use of title insurance is not available or is
economically not feasible for the type of loan involved or the area of
the state where the loan will be closed. If title insurance is used,
State Offices are authorized to require a closing protection letter
issued by an approved title insurance company to cover the closing
agent, if available. A closing protection letter need not be furnished
when the closing is conducted by the title insurance company. When a
closing protection letter is provided, Form RD 1927-20, "Certification
of Title Insurance Company," is not required. The State Office\'s
determination to require the use of title insurance will be based on the
commercial and residential loan closing practices of the State and the
economic and legal feasibility of obtaining title insurance. The State
Office may also determine if a title insurance policy survey coverage is
an acceptable substitute for a survey.

\(b\) [Approval of closing agent]{.underline}. An attorney or title
company may act as a closing agent and close agency real estate loans,
provide necessary title clearance, and perform such other duties as
required in this subpart. A closing agent will be responsible for
closing agency loans and disbursing both agency loan funds and funds
provided by the borrower in connection with the agency loan so as to
obtain title and security position as required by the agency. The
closing agent must be covered by a fidelity bond which will protect the
agency unless a closing protection letter is provided to the agency. The
borrower will select the approved closing agent. Agency employees will
not recommend the use of any particular closing agent or title insurance
company, although as provided in paragraph (a) of this section the
borrower may be required by a State Supplement to provide title
clearance with either a title insurance policy or an attorney\'s
opinion. If title clearance is by an attorney\'s opinion, the approval
official will approve the attorney who will perform the closing in
accordance with paragraph (c) of this section. The attorney will be
approved after submitting Form\
RD 1927-19, \"Certification of Attorney.\" If title certification is by

## 6

## (Revision 1) 

RD Instruction 1927-B

§1927.53 (Con.)

this chapter. In a case involving the purchase or sale of real estate,
the option or sales contract must state who will pay the title clearance
and closing costs. These costs will include any costs of abstracts of
title, land surveys, attorney\'s fees, owner\'s and lender\'s policies
of title insurance, obtaining curative material, notary fees,
documentary stamps, recording costs, tax monitoring service, and other
expenses necessary to complete the transaction.

§1927.54 [Requirements for closing agents]{.underline}.

\(a\) [Form of title certification]{.underline}. State Offices are
directed to require title insurance for all loan closings unless the
agency determines that the use of title insurance is not available or is
economically not feasible for the type of loan involved or the area of
the state where the loan will be closed. If title insurance is used,
State Offices are authorized to require a closing protection letter
issued by an approved title insurance company to cover the closing
agent, if available. A closing protection letter need not be furnished
when the closing is conducted by the title insurance company. When a
closing protection letter is provided, Form RD 1927-20, "Certification
of Title Insurance Company," is not required. The State Office\'s
determination to require the use of title insurance will be based on the
commercial and residential loan closing practices of the State and the
economic and legal feasibility of obtaining title insurance. The State
Office may also determine if a title insurance policy survey coverage is
an acceptable substitute for a survey.

\(b\) [Approval of closing agent]{.underline}. An attorney or title
company may act as a closing agent and close agency real estate loans,
provide necessary title clearance, and perform such other duties as
required in this subpart. A closing agent will be responsible for
closing agency loans and disbursing both agency loan funds and funds
provided by the borrower in connection with the agency loan so as to
obtain title and security position as required by the agency. The
closing agent must be covered by a fidelity bond which will protect the
agency unless a closing protection letter is provided to the agency. The
borrower will select the approved closing agent. Agency employees will
not recommend the use of any particular closing agent or title insurance
company, although as provided in paragraph (a) of this section the
borrower may be required by a State Supplement to provide title
clearance with either a title insurance policy or an attorney\'s
opinion. If title clearance is by an attorney\'s opinion, the approval
official will approve the attorney who will perform the closing in
accordance with paragraph (c) of this section. The attorney will be
approved after submitting Form\
RD 1927-19, \"Certification of Attorney.\" If title certification is by

## 6

##  

RD Instruction 1927-B

§1927.54(b) (Con.)

means of a policy of title insurance, the title company which will issue
the policy must have been approved in accordance with paragraph (d) of
this section. A closing agent's delay in providing services without
justification, in connection with agency loans, may be a basis for not
approving the closing agent in future cases.

\(c\) [Approval of attorneys]{.underline}. Any attorney selected by an
applicant, who will be providing title clearance where the certificate
of title will be an attorney\'s opinion, must submit a completed Form RD
1927-19 certifying to professional liability insurance coverage. If the
attorney is also the closing agent, fidelity coverage for the attorney
and any employee having access to the funds must be provided. The State
Office will determine the appropriate level of such insurance. Required
insurance will, as a minimum, cover the amount of the loan to be closed.
The State Office will approve the form stipulating the bond coverage.
The approval official will approve any attorney who is duly licensed to
practice law in the state where the real estate security is located and
who complies with the bonding and insurance requirements in this
section. If the certification of title will be by means of title
insurance, any attorney or closing agent designated as an approved
attorney or closing agent by the approved title insurance company which
will issue the policy of title insurance will be acceptable, and when
covered by a closing protection letter, will not be required to obtain
professional liability insurance or a fidelity bond, if the closing
protection letter is the ALTA form closing protection letter or provides
at least equivalent protection to the agency. Each approved title
insurance company may provide a master list of their approved attorneys
that are covered by its closing protection letters to the State Office
and, in such cases the attorneys are approved for closings for that
insurance company. Delay in providing closing services without
justification may be a basis for not approving the attorney in future
cases.

\(d\) [Approval of title companies]{.underline}. A title company acting
as a closing agent, or as an issuing agent for a title insurance
company, must be covered by a title insurance company closing protection
letter or submit Form RD 1927-20, "Certification of Title Company,"
certifying to fidelity coverage to cover all employees having access to
the loan funds. The State Office will determine the appropriate level of
such coverage and will approve the form stipulating the bond coverage.
Delay in providing closing services without justification may be a basis
for not approving the company in future cases. Each approved title
insurance company may provide a master list of their approved title
companies that are covered by its closing protection letter to the State
Office and, in such cases, the title companies on the list are approved
for closings for that title insurance company.

## 7

## 

(04-22-96) SPECIAL PN

RD Instruction 1927-B

§1927.54 (Con.)

\(e\) [Approval of title insurance companies]{.underline}. State Offices
are encouraged to solicit discounts on title insurance premiums from
title insurance companies due to the high volume of agency loan
transactions. The agency will approve any title insurance company which
issues policies of title insurance in the State where the security
property is located if:

\(1\) The form of the owner\'s and lender\'s policies of title insurance
(including required endorsements) to be used in closing agency loans are
acceptable to the State Office, and will contain only standard types of
exceptions and exclusions approved in advance by the approval official
with the advice of OGC;

\(2\) The title insurance company is licensed to do business in the
State (if a license is required), and

\(3\) The title insurance company is regulated by a State Insurance
Commission, or similar regulator, or if not, the title insurance company
submits copies of audited financial statements, or other approved
financial statements satisfactory to the State Office, which show that
the company has the financial ability to cover losses arising out of its
activities as a title insurance company and under any closing protection
letters issued by the title insurance company. The financial statements
must also demonstrate that the title insurance company has sufficient
resources to reimburse the agency for any losses caused by fraud or
dishonesty by the company and its authorized agents, or failure of the
company or its authorized agents to follow or comply with agency\'s
written closing instructions.

\(4\) Delay in providing services without justification may be a basis
for not approving the company.

\(5\) A title insurance company is not regulated by the State, the above
listed approval process will be repeated at least every 5 years, or more
often if adverse information becomes available, to insure continued
compliance by the title insurance company.

\(f\) [Responsibility of approval official]{.underline}. In addition to
approving closing agents, the approval official will inform all closing
agents used in connection with agency closing of their duties and
responsibilities under this subpart, applicable State Supplements, and
any changes or additional requirements which may be imposed. A package
containing a copy of this subpart, applicable forms, State Supplements,
and other pertinent material will be provided to the closing agent as
needed.

## 8

##  

RD Instruction 1927-B

§1927.54 (Con.)

\(g\) [Conflict of interest]{.underline}. A closing agent who has, or
whose spouse, children, or business associates have, a financial
interest in the real estate which will secure the agency debt shall not
be involved in the title clearance or loan closing process. Financial
interest includes having either an equity, creditor, or debtor interest
in any corporation, trust, or partnership with a financial interest in
the real estate which will secure the agency debt.

\(h\) [Debarment or suspension]{.underline}. No attorney, title company,
title insurance company, or closing agent, currently debarred or
suspended from participating in Federal programs, may participate in any
aspect of the agency loan closing and title clearance process, in
accordance with RD Instruction 1940-M.

\(i\) [Special provisions]{.underline}. Closing agents are responsible
for having current knowledge of the requirements of State laws in
connection with loan closing and title clearance and should advise the
State Office of any changes in State law which necessitate changes in
the agency's State mortgage forms and State Supplements.

\(j\) [Rejecting closing agents or title insurance
companies]{.underline}. If the approval official (or the State Office
for title insurance companies) cannot approve the closing agent selected
by the applicant in accordance with paragraphs (c) or (d) of this
section, the following actions will be taken:

\(1\) The attorney or closing agent will be notified within 5 business
days of the specific reasons for rejection.

\(2\) The applicant will be notified within 5 business days of the
rejection. It is the applicant\'s responsibility to decide whether to
continue with the rejected closing agent or attorney, if the reasons for
rejection can be removed before any legal costs are incurred, or if
another closing agent or attorney will be selected.

\(3\) If a title insurance company has requested approval, the title
insurance company will be notified within 30 days after all relevant
information requested by the State Office in connection with the
approval decision has been received. If the title insurance company is
rejected, it will be notified at that time of the specific reasons for
rejection.

## 9

## 

(04-22-96) SPECIAL PN

RD Instruction 1927-B

§1927.55 [Title clearance services]{.underline}.

\(a\) [Responsibilities of closing agents]{.underline}. Services to be
provided to the agency and the borrower by a closing agent in connection
with the transaction vary depending on whether a title insurance policy
or title opinion is being furnished. The closing agent is expected to
perform these services without unnecessary delay.

\(b\) [Initial responsibility of approval official]{.underline}. The
approval official will furnish the closing agent with Form RD 1927-4,
\"Transmittal of Title Information,\" all the information and documents
called for therein (including waivers, easements, and agency forms), and
any information not contained in this subpart regarding agency policies
and procedures applicable to the type of transaction involved.

\(c\) [Ordering title services]{.underline}. The approval official will
notify the borrower and seller, if applicable, that an attorney or title
company must be employed to examine the title and perform other services
in connection with the closing of the transaction. Application for title
examination or insurance will be made by the borrower to a title company
or attorney. The lender policy will be for at least the amount of the
loan. The United States of America will be named as the insured lender.
RD Guide Letter 1927-B-1 (available in any agency office), may be used
to request attorney title examination, loan closing and related legal
services.

\(d\) [Use of title opinion]{.underline}. If a title opinion will be
issued, a title examination will include searches of all relevant land
title and other records, so as to express an opinion as to the title of
the property and the steps necessary to obtain the appropriate title and
security position to issue a title opinion as required by this subpart.
A Form RD 1927-9, \"Preliminary Title Opinion,\" Form RD 1927-10,
\"Final Title Opinion,\" or a certificate of title will be issued to the
approval official. If either form is not legally sufficient in a
particular State, an OGC approved State form will be used. The closing
agent or approved attorney will determine:

\(1\) The legal description and all owners of the real property;

\(2\) Whether there are any exceptions affecting the property and advise
the approval official and borrower of the nature and effect of
outstanding interests or exceptions, prior sales of part of the
property, judgments, or interests to assist in determining which
exceptions must be corrected in order for the borrowers to obtain good
and marketable title of record in accordance with prevailing title
examination standards, and for the agency to obtain a valid lien of the
required priority;

## 10

##  

RD Instruction 1927-B

§1927.55(d) (Con.)

\(3\) Whether there are outstanding Federal, State, or local tax claims
(including taxes which under State law may become a lien superior to a
previously attaching mortgage lien) or homeowner's association
assessment liens;

\(4\) Whether outstanding judgments of record, bankruptcy, insolvency,
divorce, or probate proceedings involving any part of the property,
whether already owned by the borrower, or to be acquired by assumption
or with loan funds, or involving the borrower or the seller exist;

\(5\) If a water right is to be included in the security for the loan,
and if so, the full legal description of the water right;

\(6\) In addition to paragraph(d)(2) of this section, if wetlands
easements or other conservation easements have been placed on the
property;

\(7\) What measures are required for preparing, obtaining, or approving
curative material, conveyances, and security instruments, and

\(8\) That sufficient copies of these interests and exceptions are
provided as requested by the approval official.

\(e\) [Use of title insurance]{.underline}. When title insurance is to
be obtained, the approval official will be furnished with a title
insurance binder disclosing any defects in, exceptions to, and
encumbrances against, the title, the conditions to be met to make the
title insurable and in the condition required by the agency, and the
curative or other actions to be taken before closing of the transaction.
The binder must include a commitment to issue a lender policy in an
amount at least equal the amount of the loan, except in instances where
there may be an outstanding owner\'s policy in favor of the borrower.
Not withstanding the provisions of this section, the instances of an
assumption without a subsequent loan, the existing policy may be
continued if the coverage meets or exceeds the assumption balance and
the title company agrees in writing to extend coverage in full force and
effect.

## 11

## 

(04-22-96) SPECIAL PN

RD Instruction 1927-B

§1927.55 (Con.)

\(f\) [Approval official\'s responsibilities after receipt of
preliminary title opinion or title insurance binder]{.underline}. Upon
receipt of the

preliminary title opinion or title insurance binder, the approval
official will:

\(1\) Check the opinion or binder carefully. If any required information
is omitted, or if the standard form of opinion or binder is amended,
return it for completion or correction. If the closing agent is unable
or unwilling to comply, the approval official will send the opinion or
binder with a full explanation to OGC through the State Office for
advice.

\(2\) Check the legal description of the land, water rights,
rights-of-way, easements, and other security involved, to determine that
the description covers all of the property rights intended to be taken
as security.

\(3\) Review all exceptions to title shown in the preliminary title
opinion or title insurance binder. The approval official will determine
which exceptions must be modified, eliminated, or waived, or whether an
agreement with prior lienholders is necessary or advisable to protect
the agency\'s interests. If prior encumbrance(s) will remain, the
approval official should obtain and review a copy of each to insure that
its terms are acceptable to the agency. If an option or sales contract
which lists acceptable exceptions is involved, the approval official
will determine whether the exceptions in the preliminary title opinion
or title insurance binder are the same as those in the option or sales
contract and inform the applicant of discrepancies. If the approval
official has any doubt as to the acceptability or effect of any
exception, the applicant will be requested to obtain a clarification.
The approval official will consult with the closing agent and/or the
State Office when necessary to determine the acceptability of any
exception. If the approval official determines that any defects cannot
be corrected, or the effect of certain exceptions on the title,
suitability, security value, or successful operation of the property is
not clear, and they cannot be corrected or eliminated without undue
expense, the approval official will forward the preliminary title
opinion or title insurance binder to the State Office together with
comments regarding the objectionable features and copies of the
exceptions when needed.

## 12

##  

RD Instruction 1927-B

§ 1927.55(f)(3) (Con.)

\(i\) If, with the advice of OGC, the State Office determines that the
exceptions will not adversely affect the title to the property or its
suitability, security value, or successful operation, the State Office
will advise the approval official. The approval official will then
arrange for closing.

\(ii\) If the State Office, with the advice of OGC, finds that these
exceptions will adversely affect the title to the property, its
suitability, security value, or successful operation, the State Office
may waive them conditionally and instruct the approval official as to
how the conditions may be met, or instruct the approval official that
the loan cannot be closed because of the defect.

§ 1927.56 [Scheduling loan closing]{.underline}.

The approval official may arrange a closing when he or she determines
that exceptions shown in the preliminary title opinion or title
insurance binder (if any) will not adversely affect the suitability,
security value, or successful operation of the property and all other
agency conditions to closing have been satisfied.

\(a\) The approval official will make sure that all requirements of
subpart I of part 1940 of this chapter have been met before the loan is
closed.

\(b\) In arranging for loan closing, the approval official will send
Form RD 1927-15, \"Loan Closing Instructions and Loan Closing
Statement,\" or Form RD 3550-25, "Loan Closing Instructions and Loan
Closing Statement" to the closing agent. When a title insurance
commitment is involved, the \"loan closing instructions\" will include
any corrections required by the commitment. Therefore, the title
insurance commitment must be received before the final closing
instructions are transmitted. At the same time, send written
notification of loan closing to the applicant. (Revised 08-18-04, PN
378.)

§ 1927.57 [Preparation of closing documents]{.underline}.

\(a\) [Preparation of deeds]{.underline}. The closing agent, unless
prohibited by law, will prepare, complete, or approve documents,
including deeds, necessary for title clearance and closing of the
transaction and provide the agency with the policy of title insurance or
final title opinion providing the lien priority required by the agency
and subject only to exceptions approved by the agency. Form RD 1927-11,
"Warranty Deed\
( )" (State), or Form RD 1927-12, "Warranty Deed" (State), will be used
when required by this part.

## 13

## (Revision 1)

(04-22-96) SPECIAL PN

RD Instruction 1927-B

§ 1927.57(a) (Con.)

\(1\) [Types of estates for married borrowers]{.underline}. If the
borrowers are married, the agency prefers, but will not require, that
title to the real estate will be held in such a way that, upon the death
of a borrower, it will pass to the surviving spouse by law to prevent
the real estate from being tied up in probate proceedings. Title may be
held in any manner that permits obtaining the required mortgage.

\(2\) [Deeds will be prepared as follows]{.underline}. Conveyances of
title to borrowers by parties other than the agency will be by the form
of deed in use in the state where the property is located that the
entity providing title clearance determines will vest in the borrower a
good and marketable title of record. All conveyances by the agency will
be by quitclaim deed.

\(b\) [Preparation of mortgages]{.underline}. The closing agent will
insure that all mortgages are properly prepared, completed, executed,
and filed for record. Where applicable, the mortgages should recite that
it is a purchase money mortgage. The following requirements will be
observed in preparing agency mortgages:

\(1\) [Real estate mortgage forms]{.underline}. Agency mortgage forms
will be used. Form RD 1927-1 (State), \"Real Estate Mortgage or Deed of
Trust For \_\_\_\_\_\_\_\_,\" will be used for all direct loans except
where Form RD 1927-7 (State), is used for all RH loans. These forms will
be prepared and distributed in accordance with State Supplements. When a
loan is made to a homestead entryman or to a contract purchaser of a
farm unit from the Bureau of Reclamation, a rider to Form RD 1927-1
(State), will be used per State Supplement.

\(2\) [Number of copies]{.underline}.

\(i\) The original recorded mortgage is to be retained in the
borrower\'s case file unless the original mortgage is retained by the
recorder, and a conformed copy will be provided to the borrower.

## 14

## (Revision 1) 

RD Instruction 1927-B

§ 1927.57(b)(2) (Con.)

\(ii\) When the original is to be retained by the recorder, an original
and two conformed copies will be prepared. One conformed copy will be
retained in the borrower\'s case file and one conformed copy will be
provided to the borrower.

\(iii\) Extra copies of mortgages may be needed in individual cases in
some participation loans, loans on reclamation projects, when security
is taken on trust or restricted property involving loans to Native
American, and other similar situations.

\(iv\) The closing agent will distribute copies to appropriate parties
at loan closing or as soon as possible thereafter.

\(3\) [Persons required to execute mortgage]{.underline}. The mortgage
will be executed by all persons and entities the title insurance company
or attorney providing the title opinion determines necessary (including,
for example, any spouse with a right of dower or curtesy) for the title
insurance policy or final title opinion to provide that the agency has
the required lien priority so that, in the event of default, the
mortgage will be enforced by the agency against all such interests.

\(4\) [Date of execution]{.underline}. The mortgage will be dated and
executed on the date the title insurance company or attorney providing
the final title opinion determines is necessary to provide the agency
with a title insurance policy or final title opinion showing the agency
has required lien priority and is subject to exceptions approved by the
agency.

\(5\) [Title exceptions]{.underline}. The mortgage will generally or
specifically describe all exceptions it will be subject to, depending on
what is customary under local practice or required by State law or State
Supplement.

> \(6\) [Releasing or retaining existing mortgages in refinancing
> cases]{.underline}. When there is an outstanding agency real estate
> mortgage against the property and the loan secured by the mortgage is
> being refinanced with the current loan, the mortgage for the
> outstanding loan will be superseded and will be released at the time
> of loan closing, unless it is necessary under State law to keep the
> existing mortgage in effect to retain a valid lien of the same
> priority for the obligation being refinanced.

## 15

## (Revision 1)

## (04-22-96) SPECIAL PN 

RD Instruction 1927-B

§ 1927.57(b) (Con.)

> \(7\) [Describing notes in mortgages]{.underline}. In most cases, only
> the note(s) for the new loan(s) needs to be described when a
> subsequent loan is made and a subsequent mortgage is taken unless the
> title insurance company or attorney providing the final title opinion
> determines it necessary to describe existing agency notes in the
> subsequent mortgage.

\(8\) [Determining due date of final installments]{.underline}. The
\"Due Date of Final Installment\" as shown in the mortgage, is
determined by adding the number of years over which the loan is payable
to the date of the promissory note: for example, if the note is dated
March 30, 1987, and the final payment is due and payable 20 years from
that date, the \"Due Date of Final Installment\" is March 30, 2007.

\(9\) [Alteration of mortgage form]{.underline}. An agency mortgage form
may be altered pursuant to a State Supplement having prior approval of
the National Office, or in a special case, to comply with the terms of
loan approval prescribed in accordance with program instructions. No
other alterations in the printed mortgage forms will be made without
prior approval of the National Office. Any changes made by deletion,
substitution, or addition (excluding filling in blanks) will be
initialed in the margin by all persons signing the mortgage.

\(10\) [Special requirements imposed by program
instructions]{.underline}. Some program instructions require that the
mortgage forms be modified. In such cases, either OGC or the approval
official will modify the agency mortgage form as specified. The closing
agent will make sure that the modification has been made prior to
execution of the mortgage.

\(11\) [Mortgages on leasehold estates]{.underline}. When the agency's
security interest is a leasehold estate, unless State law or State
Supplement otherwise provides, the Form RD 1927-1 (State) or Form RD
1927-7 (State), or Form RD 3550-14 will be modified as follows: (Revised
06-21-06, PN 399.)

\(i\) In the space provided on the mortgage for the description of the
real property security, the leasehold estate and the land covered by the
lease must be described. The following language must be used unless
modified by a State Supplement:

## 16

## (Revision 1) 

RD Instruction 1927-B

§ 1927.57(b)(11)(i) (Con.)

\"All of borrower\'s right, title, and interest in and to a leasehold
estate for an original term of \_\_\_years, commencing on
\_\_\_\_\_\_\_\_, 19 \_\_, created and established by and between
\_\_\_\_\_\_\_\_\_\_\_\_as lessor and owner and \_\_\_\_\_\_\_\_\_\_\_
as lessee, including any extensions and renewals thereof, a copy of
which lease was recorded or filed in book \_\_\_\_, page \_\_\_\_, as
instrument number \_\_\_\_\_\_, in the Office of the (e.g., County
Clerk), for the aforesaid county and State and covering the following
real property: \_\_\_\_\_\_\_\_.\"

\(ii\) Immediately preceding the covenant starting with the words
\"should default,\" the following covenant will be added:

\"( ) Borrower covenants and agrees to pay when due all rents and any
and all other charges required by said lease, to comply with all other
requirements of said lease, and not to surrender or relinquish, without
the Government\'s prior written consent, any of borrower\'s right,
title, or interest in or to said leasehold estate or under said lease
while this mortgage remains of record.\"

\(12\) [Mortgages on land purchase contract]{.underline}. When the
agency security interest is on a borrower\'s interest in a land purchase
contract, OGC will provide language used to modify the Form RD 1927-1
(State) or Form RD 1927-7 (State), or Form RD 3550-14. (Revised
06-21-06, PN 399.)

\(13\) [Legal description]{.underline}. The legal description on the
mortgage should be taken directly from the title insurance commitment or
the title abstract to insure accuracy of the legal description.

\(c\) [Preparation of the promissory note]{.underline}. The closing
agent will make sure that Form RD 1940-16, "Promissory Note," for agency
originated loans (or assumption agreement) is completed in accordance
with the Forms Manual Insert (FMI) and executed. The approval official
will determine who is to execute the promissory note, including
cosigners, if necessary, in accordance with program instructions and
provide the closing agent with the names of these individuals. If the
applicant is a corporation, partnership, or trust, the approval official
will provide the name(s) and title(s) of the individual(s) executing the
promissory note on behalf of the entity. The closing agent will
determine if any additional signatures are required on the promissory
note or assumption agreement in order for the policy of title insurance
or final title opinion to provide that the agency has the required lien
priority subject only to exceptions approved by the agency.

## 17

## (Revision 1)

(04-22-96) SPECIAL PN

RD Instruction 1927-B

§1927.57 (Con.)

\(d\) [Preparation of protective instruments]{.underline}. The closing
agent will properly prepare, complete, and approve releases and curative
documents necessary for title clearance and closing, in recordable form
and record them if required.

\(1\) [Prior lienholder\'s agreement]{.underline}. If any liens (other
than agency liens or tax liens to local governmental authorities) or
security agreements (hereafter called \"liens\"), with priority over the
agency\'s mortgage will remain against the real property securing the
loan, the lienholders must execute, in recordable form, agreements
containing all of the following provisions unless prior approval for
different provisions has been obtained from the National Office:

\(i\) The prior lienholder shall agree not to declare the lien in
default or accelerate the indebtedness secured by the prior lien for a
specific period of time after notice to the agency. The agreement must:

\(A\) Provide that the specified period of time will not commence until
the lienholder gives written notice of the borrower\'s default and the
prior lienholder\'s intention to accelerate the indebtedness to the
agency office servicing the loan,

\(B\) Include the address of the agency servicing office,

\(C\) Give the agency the option to cure any monetary default by paying
the amount of the borrower\'s delinquent payments to the prior
lienholder, or pay the obligation in full and have the lien assigned to
the agency, and

\(D\) Provide that the prior lienholder will not declare the lien in
default for any nonmonetary reason if the agency commences liquidation
proceedings against the property and thereafter acquires the property.

## 18

## (Revision 1) 

RD Instruction 1927-B

§1927.57(d)(1) (Con.)

\(ii\) When the prior lien secures future advances, including the
lienholder\'s costs for borrower liquidation or bankruptcy, which under
State law have priority over the mortgage being taken (or an agency
mortgage already held), the prior lienholder shall agree not to make
advances for purposes other than taxes, insurance or payments on other
prior liens without written consent of the agency.

\(iii\) The prior lienholder shall consent to the agency making (or
transferring) the loan and taking (or retaining) the related mortgage if
the prior lien instrument prohibits a loan or mortgage (or transfer)
without the prior lienholder\'s consent.

\(iv\) The prior lienholder shall consent to the agency transferring the
property subject to the prior lien after the agency has obtained title
to the property either by foreclosure or voluntary conveyance if the
prior lien instrument prohibits such transfer without the prior
lienholder\'s consent.

\(2\) [Notice of foreclosure agreements]{.underline}. These agreements
will be obtained only when required by a State Supplement. As a
precautionary measure, the State Supplement will require notice
agreements when OGC determines that State law permits junior liens of
private parties to be extinguished by foreclosure of a prior lien
without the junior lienholder being made parties or being given actual
notice. The State Supplement will specify the number of days within
which notice of foreclosure is required by the agreement.

\(3\) [Leaseholds]{.underline}. When the agency security interest is on
a leasehold, the approval official must review the lease to make sure
that it meets the security and duration requirements of the program
instructions. If not, it will be necessary for the landlord and tenant
to amend the lease to meet these requirements at closing.

\(4\) [Agreement by holder of seller\'s interest under land purchase
contract]{.underline}. If the buyer\'s interest in the security property
is that of a buyer under a land purchase contract, it will be necessary
for the seller to execute, in recordable form, an agreement containing
all of the following provisions:

\(i\) The seller shall agree not to sell or voluntarily transfer the
seller\'s interest under the land purchase contract without the prior
written consent of the State Office.

\(ii\) The seller shall agree not to encumber or cause any liens to be
levied against the property.

## 19

## 

## (04-22-96) SPECIAL PN 

RD Instruction 1927-B

§1927.57(d)(4) (Con.)

\(iii\) The seller shall agree not to commence or take any action to
accelerate, forfeit, or foreclose the buyer\'s interest in the security
property until a specified period of time after notifying the State
Office of intent to do so. This period of time will be 90 days unless a
State Supplement provides otherwise. The agreement shall give the agency
the option to cure any monetary default by paying the amount of the
buyer\'s delinquent payments to the seller, or paying the seller in full
and having the contract assigned to the agency.

\(iv\) The seller shall consent to the agency making the loan and taking
a security interest in the borrower\'s interest under the land purchase
contract as security for the agency loan.

\(v\) The seller shall agree not to take any actions to foreclose or
forfeit the interest of the buyer under the land purchase contract
because the agency has acquired the buyer\'s interest under the land
purchase contract by foreclosure or voluntary conveyance, or because the
agency has subsequently sold or assigned the buyer\'s interest to a
third party who will assume the buyer\'s obligations under the land
purchase contract.

\(vi\) When the agency acquires a buyer\'s interest under a land
purchase contract by foreclosure or deed in lieu of foreclosure, the
agency will not be deemed to have assumed any of the buyer\'s
obligations under the contract, provided that the failure of the agency
to perform any such obligations while it holds the buyer\'s interest is
a ground to commence an action to terminate the land purchase contract.

\(5\) [Form of agreement]{.underline}. The form of prior lienholder\'s
agreement, forbearance agreement, notice of foreclosure or assignment,
and agreement by holder of seller\'s interest under land purchase
contract will be prescribed in a State Supplement with the concurrence
of OGC. When only forbearance agreements are needed, they will be
obtained on Form RD 1927-8, \"Agreement with Prior Lienholder,\" or, if
that form is not legally satisfactory, on a State form having the same
title. When only notice of foreclosure or assignment are required, a
separate form for this purpose will be used. When both forbearance
agreements and notices of foreclosure or assignment are required, Form
RD 1927-8 may be amended in order to serve both purposes, a substitute
State form may be used for both purposes, or Form RD 1927-8 may be used
and the notice agreement obtained on a separate State form.

## 20

##  

RD Instruction 1927-B

§1927.57(d) (Con.)

\(6\) [Executing, acknowledging, and recording]{.underline}. When an
agreement is required by paragraph (d)(1), (d)(2), (d)(3), or (d)(4) of
this section, the closing agent will determine at the time of closing
that the agreement is properly completed, executed, sealed, witnessed,
acknowledged, and recorded as required by State law or State Supplement.

\(e\) [Correction of errors in recorded security
instruments]{.underline}. A State Supplement, subject to OGC\'s review
and approval, will be issued to provide guidance in correcting error(s)
in recorded security instruments.

§1927.58 [Closing the transaction]{.underline}.

The closing agent will cooperate with the approval official, borrower,
seller, and other necessary parties to arrange the time and place of
closing. The transaction may be closed when the agency determines the
agency requirements for the loan have been satisfied and the closing
agent or approved attorney can issue or cause to be issued a policy of
title insurance or final title opinion as of the date of closing showing
title vested as required by the agency, the lien of the agency's
mortgage in the priority required by the agency, and title to the
mortgaged property subject only to those exceptions approved in writing
by the agency. The loan will be considered closed when the mortgage is
filed for record and the required lien is obtained.

\(a\) [Disbursement of loan funds]{.underline}. When the closing agent
indicates that the conditions necessary to close the loan have been met,
loan funds will be forwarded to the closing agent. Loan funds will not
be disbursed prior to filing of the mortgage for record; however, when
necessary, loan funds may be placed in escrow before the mortgage is
filed for record and disbursed after it is filed. No development funds
will be kept in escrow by the closing agent after loan closing, unless
approved by the agency. Loan funds for the payment of a lien may be
disbursed only upon the recording of a discharge, satisfaction, or
release of prior lien interests (or assignment where necessary to
protect the interests of the agency).

\(b\) [Title examination and liens or claims against
borrowers]{.underline}. If there are other exceptions or recorded items
which have arisen since the preliminary title opinion, the transaction
will not be closed until these entries have been cleared of record or
approved, by the agency. The closing agent will advise the approval
official of the nature of such intervening instruments and the effect
they may have on obtaining a valid mortgage of the priority required or
the title insurance policy to be issued.

## 21

## 

(04-22-96) SPECIAL PN

RD Instruction 1927-B

§1927.58 (Con.)

\(c\) [Taxes and assessments]{.underline}. The closing agent will
determine if all taxes and assessments against the property which are
due and payable are paid at or before the time of loan closing. If the
seller and the borrower have agreed to prorate any taxes or assessments
which are not yet due and payable for the year in which the closing of
the transaction takes place, the seller\'s proportionate share of the
taxes and assessments will be deducted from the proceeds to be paid to
seller at closing and will be added to the amount required to be paid by
borrower at closing. Certificates or receipts should be produced from
the taxing authorities to show that taxes or assessments which are due
and payable have been paid and, if possible, the certificates or
receipts, or copies, will be kept in the borrower\'s County or District
Office case file. Appropriate prorations as agreed upon between the
borrower and seller may also be made for taxes paid by the seller which
are applicable to a period after the closing date, and for common area
maintenance fees, prepaid rentals, insurance (unless the borrower is to
obtain a new policy of insurance), and growing crops.

\(d\) [Affidavit regarding work of improvement]{.underline}.

\(1\) [Execution by borrower]{.underline}. If required by State
Supplement, the closing agent will require that a Form RD 1927-5,
\"Affidavit Regarding Work of Improvement,\" be completed and executed
when a loan is being made to a borrower who already owns the real estate
to be mortgaged. This affidavit will be executed by the borrower at
closing.

\(2\) [Execution by seller]{.underline}. If required by State
Supplement, the closing agent will require that Form RD 1927-5 be
completed and executed by the seller when the agency is making a loan to
a borrower to enable the borrower to acquire the property (including
transfers). This affidavit will be executed by the seller at closing.

\(3\) [Legal insufficiency of affidavit form]{.underline}. If Form RD
1927-5 is not legally sufficient in a particular State, a State form
approved by OGC will be used. A similar form that may be required by a
title insurance company may be substituted for Form RD 1927-5.

\(4\) [Recording]{.underline}. The affidavit will not be recorded unless
the closing agent deems it necessary and State law permits.

## 22

##  

RD Instruction 1927-B

§ 1927.58(d) (Con.)

\(5\) [Delay in closing]{.underline}. The loan will not be closed if, at
the loan closing, the seller (in a sale transaction) or the borrower (in
a nonpurchase money loan situation) indicates that construction, repair,
or remodeling has been commenced or completed on the property, or
related materials or services have been delivered to or performed on the
property within the time limit specified in the affidavit, unless a
State Supplement provides otherwise. The closing agent will notify the
approval official, who will determine if the work of improvement could
result in a lien prior to the agency lien. The State Office will, with
the advice and concurrence of OGC, provide in a State Supplement the
period of time to be used in completing the affidavit.

\(e\) [Completion of closing documents]{.underline}. The closing agent
will determine that deeds, promissory notes, mortgages, releases, and
other curative instruments are completed (sealed and witnessed if
required by State law) and, if necessary, acknowledged and filed for
record at the proper time.

\(f\) [Assignment of future income]{.underline}. If Form RD 443-16,
\"Assignment of Income from Real Estate Security,\" is required in a
particular case, the approval official will prepare the form and have it
available for execution by the borrower when the transaction closes. The
closing agent will see that the form is properly completed, executed
(sealed and witnessed if required by State law), and acknowledged by the
borrower.

\(g\) [Return of loan documents to approval official after loan
closing]{.underline}. Within 1 day after loan closing, the closing agent
will return completed and executed copies of Forms RD 1927-15 or
3550-25, the executed original promissory note, and all other documents
required for loan closing (except the mortgage), to the approval
official. If the recorded mortgage is customarily returned to the
borrower or closing agent after recording, then it must be forwarded to
the approval official immediately. (Revised 08-18-04, PN 378.)

\(h\) [Final title opinion or title insurance policy]{.underline}. As
soon as possible after the transaction has been closed.

\(1\) [Final title opinion]{.underline}. The attorney will issue a final
title opinion to the agency and the borrower on Form RD 1927-10. If that
form is not legally sufficient in a particular State, a State form
approved by OGC may be used. Issuance of the final title opinion should
not be held up pending the return of recorded instruments. If it is not
possible for the final title opinion to show the book and page of
recording of the agency security instrument, the words

## 23

## (Revision 1)

## (04-22-96) SPECIAL PN 

RD Instruction 1927-B

§ 1927.58(h)(1) (Con.)

\"and is recorded\" in paragraph II B of Form RD 1927-10 may be deleted
and the following blank space completed to show the filing office and
the filing instrument number, if available. Attached to the final title
opinion will be required documents then available, including any which
the approval official has furnished to the attorney which were not
previously returned. The attorney will ensure that all recorded
instruments are forwarded or delivered to the proper parties after
recording. The certification of title will be forwarded for a voluntary
conveyance.

\(2\) [Title insurance policy]{.underline}. The closing agent will send
or deliver the title insurance policy, with the United States listed as
mortgage holder, to the approval official. The policy will be subject
only to standard exceptions and those outstanding encumbrances, and
exceptions approved by the approval official. If an owner\'s policy of
title insurance is requested, the closing agent will send or deliver it
to the borrower. The closing agent will ensure that all recorded
instruments are delivered or sent to the proper parties after recording.

\(3\) [Responsibilities of the approval official]{.underline}. The
approval official will check the final title opinion or lender title
policy to make sure that the lien priority required in the loan approval
has been obtained. Forms RD 1927-15 or 3550-25 will be checked to see
that funds were disbursed as authorized. If these conditions have not
been met, the approval official will report it to the State Office for
advice. (Revised 08-18-04, PN 378.)

\(i\) [Other services of the closing agent]{.underline}.

\(1\) The closing agent will assist the approval official in preparing,
completing, obtaining execution and acknowledgment, and recording the
required documents when necessary. The closing agent will keep the
approval official advised as to the progress of title clearance and
preparation of material for closing the transaction.

> \(2\) The closing agent will provide services for deeds in lieu of
> foreclosure as set forth in § 1927.62 of this subpart, and § 1955.10
> of subpart A of part 1955 of this chapter.

## 24

## (Revision 1) 

RD Instruction 1927-B

§ 1927.59 [Subsequent loans and transfers with assumptions]{.underline}.

Title services and closing for subsequent loans to an existing borrower
will be done in accordance with previous instructions in this subpart,
except that:

\(a\) [Loans closed using title insurance or title
opinions]{.underline}.

\(1\) Title insurance or title opinions will be obtained unless:

\(i\) The cost of title services is excessive in relationship to the
size of the loan;

\(ii\) The agency currently has a first mortgage security interest;

\(iii\) The applicant has sufficient income to service the additional
loan;

\(iv\) The borrower is current on the existing agency loan; and

\(v\) The best mortgage obtainable adequately protects agency security
interests.

\(2\) Title insurance or a title opinion will not be obtained if a
subsequent Section 504 loan is being made where the previous Section 504
loan was unsecured or secured for less than \$7,500 and the outstanding
debt amount plus the new loan is less than \$7,500.

\(3\) Loans closed using a new title insurance policy:

\(i\) Will cover the entire real property which is to secure the loan,
including the real property already owned and any additional real
property being acquired by the borrower with the loan proceeds.

\(ii\) Will cover the entire amount of any subsequent loan plus the
amount of any existing loan being refinanced (if the existing loan is
not being refinanced, the new lender policy will insure only the amount
of the subsequent loan).

## 25

## (Revision 1)

(04-22-96) SPECIAL PN

RD Instruction 1927-B

§ 1927.59 (Con.)

\(b\) [Title services required in connection with
assumptions]{.underline}. These requirements are contained in part 1965,
subpart A, B, and C, of this chapter and 7 CFR part 3550 as appropriate
for the loan type. (Revised 01-23-03, SPECIAL PN.)

§§ 1927.60 - 1927.61 \[Reserved\]

§ 1927.62 [Voluntary conveyances]{.underline}.

When a borrower offers to convey security, the approval official will
process and close the transaction according to § 1955.10 of subpart A of
part 1955 of this chapter. The closing agent will issue or cause to be
issued a final title opinion or policy of title insurance indicating
that title is vested in the United States of America subject only to the
agency liens or prior liens previously approved by the agency in
accordance with § 1955.10 of subpart A of part 1955 of this chapter.

§§ 1927.63 - 1927.64 \[Reserved\]

§ 1927.65 [Additional requirements in connection with loans to homestead
entrymen, contract purchasers of farm units from the Bureau of
Reclamation, and certain American Indians]{.underline}.

Whenever loans or assumptions are subject to agreements with other
agencies (e.g., loans to or assumptions by homestead entrymen, American
Indians, or contract purchasers from the Bureau of Reclamation), the
title clearance and closing of the transaction will be handled in
accordance with special instructions issued by the agency and/or other
parties involved applicable to the type of transaction, as well as those
of this subpart. The special instructions may be in the form of a
Memorandum of Understanding with the advice and approval of OGC.

§ 1927.66 [Cancellation of loan, assumption, or credit
sale]{.underline}.

If it is determined that the transaction will not be closed, the
approval official will promptly notify the borrower and the following
parties who are involved in the case at the time the determination is
made: the seller, attorney(s), OGC, and the title company.

§§ 1927.67 - 1927.89 \[Reserved\]

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RD Instruction 1927-B

§1927.90 [State Supplements]{.underline}.

The State Supplement issued pursuant to this subpart will have prior
National Office approval and will be the minimum necessary to comply
with state laws. The State Supplement will cover loan closings, where
the agency is obtaining the best lien obtainable and there will be no
title clearance for such loan provided by a title insurance company or
attorney.

§1927.91 [Exception authority]{.underline}.

The Administrator may, in individual cases, make an exception to any
requirement or provision of this subpart which is not inconsistent with
applicable law or opinion of the Comptroller General. The Administrator
may exercise this authority upon written request from the State Office
or Deputy Administrator, provided the Administrator determines that
application of the requirement or provision would adversely affect the
Government\'s interest. Request for exception must be supported with
documentation to explain adverse effect on the Government\'s interest,
proposed alternative courses of actions, and show how the adverse effect
will be eliminated or minimized if the exception is granted.

§§1927.92 - 1927.99 \[Reserved\]

§1927.100 [OMB control number]{.underline}.

The reporting requirements contained in this regulation have been
approved by the Office of Management and Budget and have been assigned
OMB control number 0575-0147. Public reporting burden for this
collection of information is estimated to vary from 5 minutes to 1.5
hours per response, with an average of .38 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 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# 0575-0147),
Washington, D.C. 20503.

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## (04-22-96) SPECIAL PN