RD Instruction 1901-K

## TITLE 7 - AGRICULTURE

## 

## CHAPTER XVIII -- RURAL DEVELOPMENT DEPARTMENT OF AGRICULTURE

## 

## SUBCHAPTER H - GENERAL

## 

## PART 1901 - PROGRAM RELATED INSTRUCTIONS

## 

## SUBPART K - CERTIFICATES OF BENEFICIAL OWNERSHIP AND INSURED NOTES

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

1901.501 Purpose. 1

1901.502 Policy. 1

1901.503 Definitions. 1

1901.504 Authorities and responsibilities. 4

1901.505 Certificates of beneficial ownership in

Rural Development loans. 4

\(a\) Special trusts of loans. 4

\(b\) Sale of certificates. 4

1901.506 Book-entry procedure for Rural Development securities -

issuance and redemption of certificate

by Reserve bank. 5

\(a\) Authority of Reserve bank. 5

\(b\) Scope and effort of book-entry procedure. 5

\(c\) Transfer or pledge. 7

\(d\) Withdrawal of Rural Development securities. 9

\(e\) Delivery of Rural Development securities. 9

\(f\) Registered securities. 9

\(g\) Securing book-entry Rural Development securities payment

of interest, payment at maturity or on call. 9

\(h\) Issuance and redemption. 10

1901.507 Certificates of beneficial ownership

issued by the Rural Development Finance Office. 10

\(a\) Orders and payments. 11

\(b\) Registration. 11

\(c\) Transfers and exchanges - closed periods. 11

\(d\) Redemption or payment. 12

\(e\) Assignments. 13

\(f\) Death of certificate holder. 14

\(g\) Replacement. 14

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RD Instruction 1901-K

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

1901.508 Servicing of insured notes outstanding

with investors. 14

\(a\) Assignments. 15

\(b\) Sale of insured notes by private holders

to private buyers. 15

\(c\) Assignment of insured notes to Rural Development. 16

\(d\) Replacement of called or fully paid notes. 17

\(e\) Death of a noteholder. 17

1901.509 Loss, theft, destruction, mutilation,

or defacement of insured notes,

insurance contracts, and certificates

of beneficial ownership. 17

\(a\) Block sale insurance contracts. 17

\(b\) Notes and certificates of beneficial

ownership sold by County Office and

Finance Office. 18

\(c\) Other cases. 20

\(d\) Replacement of notes. 20

1901.510 -1901.550 \[Reserved\] 20

RD Instruction 1901-K

Part 1901 - LOAN AND GRANT MAKING

SUBPART K - CERTIFICATES OF BENEFICIAL OWNERSHIP AND INSURED NOTES

§1901.501 [Purpose]{.underline}.

This subpart prescribes policies and procedures for Rural Development
certificates of beneficial ownership and insured notes. This subpart is
inapplicable to Farm Service Agency, Farm Loan Programs. (Revised
01-09-08, PN 417.)

§1901.502 [Policy]{.underline}.

It is the current policy to sell all certificates of beneficial
ownership to the Federal Financing Bank for financing activities from
the Agricultural Credit Insurance Fund and the Rural Development
Insurance Fund. Sales from the Rural Housing Insurance Fund will be made
to the Federal Financing Bank to the extent necessary to service
certificates of beneficial ownership held by the Federal Financing Bank.
Sales in excess of those needed for servicing requirements will be made
to the public. In addition to sales, this subpart provides policy for
the servicing of outstanding certificates of beneficial ownership,
insurance contracts, and insured notes held by investors. (Revised
7-23-86, PN 18.).

§1901.503 [Definitions]{.underline}.

\(a\) As used in §§1901.505, 1901.507, 1901.508, and 1901.509 the
following definitions will apply:

\(1\) [Announcement of sale]{.underline}. Any notice of terms and
conditions respecting a sale of certificates.

\(2\) [Certificate]{.underline}. A certificate of beneficial ownership
issued by Rural Development under this subpart.

\(3\) [Director, Finance Office]{.underline}. The Director or the
Insured Loan Officer of the Finance Office of Rural Development.

\(4\) [Rural Development]{.underline}. The United States acting through
Rural Development.

\(5\) [Finance Office]{.underline}. The office which maintains the Rural
Development finance records. It is located at 1520 Market Street, St.
Louis, Missouri 63103. (Phone: 314-425-4400)

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

DISTRIBUTION: WSAL Loan and Grant Making

General

## 1

## (Revision 2)

(11-24-76) PN 545

RD Instruction 1901-K

§1901.503 (a) (Con.)

\(6\) [Fixed period]{.underline}. Any time interval (preceding an option
period) during which the insured holder is not entitled to require Rural
Development to purchase the insured note, as specified in the insurance
agreement.

\(7\) [Insurance agreement]{.underline}. The entire contract evidencing
and setting forth the terms and conditions of Rural Development
insurance of the payment for the insured note. The insurance agreement
with respect to any particular loan may be evidenced by Form RD 440-5,
\"Insurance Endorsement (Insured Loan),\" RD 440-30, \"Insurance
Endorsement (Insured Loans),\" or any other form or forms prescribed by
the National Office and executed by an authorized official of Rural
Development. It may include such provisions as, for example, an
agreement of Rural Development to purchase or repurchase the loan, or to
make supplementary payments from the insurance fund.

\(8\) [Insurance Fund]{.underline}. The Agricultural Credit Insurance
Fund authorized by section 309 of the Consolidated Farm and Rural
Development Act, the Rural Development Insurance Fund authorized by
section 309A of the Consolidated Farm and Rural Development Act, or the
Rural Housing Insurance Fund authorized by section 517 of Title V of the
Housing Act of 1949.

\(9\) [Insured holder]{.underline}. The current owner of an insured note
other than Rural Development, according to the records of Rural
Development as insurer of the note.

\(10\) [Insured note]{.underline}. Any promissory note or bond
evidencing an insured loan regardless of whether it is held by Rural
Development in the insurance fund, by a private holder, or by Rural
Development as trustee.

\(11\) [Loans]{.underline}. Loans made and held in the Agricultural
Credit Insurance Fund, Rural Development Insurance Fund, or the Rural
Housing Insurance Fund.

\(12\) [National office]{.underline}. The Administrator or other
authorized officer of the Rural Development in Washington, D.C.

\(13\) [Option period]{.underline}. Any period during which the insured
holder has the optional right to require the Rural Development to
purchase the insured note, as specified in the insurance agreement.

\(14\) [Par value]{.underline}. The total amount to which the insured
holder is entitled under the terms of the insurance agreement.

\(15\) [Private buyer]{.underline}. A buyer of an insured note other
than Rural Development.

## 2

## (Revision 2) 

RD Instruction 1901-K

§1901.503 (a) (Con.)

\(16\) [Private holder]{.underline}. An insured holder other than Rural
Development.

\(17\) [Repurchase agreement]{.underline}. A provision in the insurance
agreement obligating Rural Development to buy the insured note at the
option of the holders.

\(18\) [Sale, or seller, and buyer]{.underline}. The transfer of
ownership (including possession or the right of possession), the
transferor, and the transferee respectively.

\(19\) [State Director]{.underline}. The State Director of Rural
Development for the State in which is located the real estate improved,
purchased, or refinanced with the loan evidenced by the insured note.

\(b\) As used in §1901.506 the following definitions will apply:

\(1\) [Reserve bank]{.underline}. The Federal Reserve Bank of New York
(and any other Federal Reserve Bank which agrees to issue securities in
book-entry form) as fiscal agent of the United States acting on behalf
of Rural Development and, when indicated, acting in its individual
capacity.

\(2\) [Rural Development security]{.underline}. A certificate
representing beneficial ownership of notes, bonds, debentures, or other
similar obligations held by Rural Development under the Consolidated
Farm and Rural Development Act and Title V of the Housing Act of 1949,
issued in the form of a definitive Rural Development security or a
book-entry Rural Development security.

\(3\) [Definitive Rural Development security]{.underline}. A Rural
Development security in engraved on printed form.

\(4\) [Book-entry Rural Development security]{.underline}. A Rural
Development security in the form of an entry made as prescribed in this
subpart on the records of a Reserve bank.

\(5\) [Pledge]{.underline}. A pledge of, or any other security interest
in, Rural Development securities as collateral for loans or advances, or
to secure deposits of public moneys or the performance of an obligation.

\(6\) [Date of call]{.underline}. The date fixed in the official notice
of call published in the Federal Register on which Rural Development
will make payment of the security before maturity in accordance with its
terms.

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RD Instruction 1901-K

§1901.503 (b) (Con.)

\(7\) [Member bank]{.underline}. Any national bank, state bank, or bank
or trust company which is a member of a Reserve bank.

§1901.504 [Authorities and responsibilities]{.underline}.

The Administrator will approve all methods of Rural Development
financing and major changes in existing methods. The Director, Finance
Office, is responsible for servicing of all certificates of beneficial
ownership and insured notes issued by the Finance Office, the Federal
Reserve Bank of New York for the servicing of insurance contracts, and
the Federal Reserve banks for certificates of beneficial ownership for
which the Reserve banks are Rural Development\'s fiscal agents.

§1901.505 [Certificates of Beneficial Ownership in Rural Development
loans]{.underline}.

\(a\) [Special trust of loans]{.underline}.

\(1\) [Establishment of special trusts]{.underline}. From time to time
Rural Development will place in special trusts unmature loans evidenced
by notes or other instruments. Loans may be placed into or removed from
a special trust, but there will always be maintained in such trusts
loans on which the unpaid amount is at least equal to the face value of
the outstanding unmature certificates evidencing beneficial ownership in
such special trust as provided in paragraph (a) (2) of this section.

\(2\) [Beneficial ownership of special trusts]{.underline}. To permit
interested persons to acquire a beneficial ownership of loans comprising
a special trust established under paragraph (a) (1) of this section,
Rural Development will sell certificates which will evidence beneficial
ownership of an interest in the special trust to the extent of the face
value of such certificates. Rural Development will own an interest in
special trusts equal to the amount by which the unpaid principal amount
of loans comprising the trusts exceeds the face value of all outstanding
certificates evidencing beneficial ownership in such trusts.

\(b\) [Sale of certificates]{.underline}. Rural Development will offer
certificates for sale from time to time on such terms and conditions it
may deem appropriate. Sales made by the Finance Office shall be made by
it\'s Director. No sale in excess of \$1 million will be made to any one
investor without prior approval of the Associate Administrator or his
designee. The terms and limitations of sales are subject to change from
time to time, and may be obtained from the Finance Office.

## 4

§1901.505 (b) (Con.) RD Instruction 1901-K

\(1\) [Form of certificates]{.underline}. The certificates may be
interest-bearing or non-interest-bearing. The certificates may be made
payable to the bearer or registered holder thereof, and will be
negotiable. The certificates will be issued in denominations specified
in the invitations for bid or other announcement of sale.

\(2\) [Issue date and maturity date of certificates]{.underline}. The
certificates will be issued on such dates and mature on such dates as
specified in the invitation for bid or other announcement of sale. Such
dates will appear on the face of the certificates.

§1901.506 [Book-entry procedure for Rural Development securities -
issuance and redemption of certificate by Reserve bank]{.underline}.

\(a\) [Authority of Reserve bank]{.underline}. Each Reserve bank is
hereby authorized in accordance with the provisions of this subpart to:

\(1\) Issue book-entry Rural Development securities by means of entries
on its records which shall include the name of the depositor, the
amount, the securities title (or series) and maturity date.

\(2\) Effect conversions between book-entry Rural Development securities
and definitive Rural Development securities.

\(3\) Otherwise service and maintain book-entry Rural Development
securities.

\(4\) Issue a confirmation of transaction in the form of a written
advice (serially numbered or otherwise) which specifies the amount and
description of any securities (that is, the securities title (or series)
and the maturity date) sold or transferred and the date of the
transaction.

\(b\) [Scope and effect of book-entry procedure]{.underline}.

\(1\) A Reserve bank as fiscal agent of the United States acting on
behalf of Rural Development may apply the book-entry procedure provided
for in this subpart to any Rural Development securities which have been
or are hereafter deposited for any purpose in accounts with it in its
individual capacity under terms and conditions which indicate that the
Reserve bank will continue to maintain such deposit accounts in its
individual capacity, notwithstanding application of the book-entry
procedure to such securities. This paragraph shall be applicable but not
limited to Rural Development securities deposited:

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RD Instruction 1901-K

§1901.506 (b) (1) (Con.)

\(i\) As collateral pledged to a Reserve bank (in its individual
capacity) for advances by it.

\(ii\) By a member bank for its sole account.

\(iii\) By a member bank held for the account of its customers.

\(iv\) In connection with deposits in a member bank of funds of States,
Municipalities, or other political subdivisions.

\(v\) In connection with the performance of an obligation or duty under
Federal, State, Municipal, or local law, or judgments or decrees of
courts.

\(2\) The application of the book-entry procedure under paragraph (b)
(1) of this section shall not detract from or adversely affect the
relationships that would otherwise exist between a Reserve bank in its
individual capacity and its depositors concerning any deposit under this
paragraph. Whenever the book-entry procedure is applied to such Rural
Development securities, the Reserve bank is authorized to take all
action necessary in respect of the book-entry procedure to enable such
Reserve bank in its individual capacity to perform its obligation as
depository with respect to such Rural Development securities.

\(3\) A Reserve bank as fiscal agent of the United States acting on
behalf of Rural Development may apply the book-entry procedure to Rural
Development securities deposited as collateral pledged to the United
States under Treasury Department Circular Nos. 92 and 176, both as
revised and amended, and may apply the book-entry procedure, with the
approval of the Secretary of the Treasury, to any other Rural
Development securities deposited with a Reserve bank as fiscal agent of
the United States.

\(4\) Any person having an interest in Rural Development securities
which are deposited with a Reserve bank (in either its individual
capacity or as fiscal agent of the United States) for any purpose shall
be deemed to have consented to their conversion to book-entry Rural
Development securities pursuant to the provisions of this subpart and in
the manner and under the procedure prescribed by the Reserve bank.

\(5\) No deposits shall be accepted under this section on or after the
date of maturity or call of Rural Development securities.

## 6

##  

§1901.506 (Con.) RD Instruction 1901-K

\(c\) [Transfer or pledge]{.underline}.

\(1\) A transfer or pledge of book-entry Rural Development securities to
a Reserve bank (in its individual capacity or as fiscal agent of the
United States), or to the United States, or to any transferee or pledgee
eligible to maintain an appropriate book-entry account in its name with
a Reserve bank under this subpart is effected and perfected,
notwithstanding any provision of law to the contrary, by a Reserve bank
making an appropriate entry in its records of the securities transferred
or pledged. The making of such an entry in the records of a Reserve bank
shall:

\(i\) Have the effect of a delivery in bearer form of definitive Rural
Development securities.

\(ii\) Have the effect of a taking of delivery by the transferee or
pledgee.

\(iii\) Constitute the transferee or pledgee a holder.

\(iv\) If a pledge, effect a perfected security interest therein in
favor of the pledgee. A transfer or pledge of book-entry Rural
Development securities effected under this paragraph shall have priority
over any transfer, pledge, or other interest, theretofore or thereafter
effected or perfected under paragraph (c) (2) of this section or any
other manner.

\(2\) A transfer or pledge of transferable Rural Development securities,
or any interest therein, which is maintained by a Reserve bank (in its
individual capacity or as fiscal agent of the United States) in a
book-entry account under this subpart, including securities in
book-entry form under §1901.506 (b) (1) (iii) is effected, and a pledge
is perfected by any means that would be effective under applicable law
to effect a transfer or to effect and perfect a pledge of Rural
Development securities, or any interest therein, if the securities were
maintained by the Reserve bank in bearer definitive form. For purposes
of transfer or pledge hereunder, book-entry Rural Development securities
maintained by a Reserve bank shall, notwithstanding any provision of law
to the contrary, be deemed to be maintained in bearer definitive form. A
Reserve bank maintaining book-entry Rural Development securities, either
in its individual capacity or as fiscal agent of the United States, is
not a bailee for the purposes of notification of pledges of these
securities under this paragraph, or a third person in possession for the
purposes of acknowledgment of transfers

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RD Instruction 1901-K

§1901.506 (c) (2) (Con.)

thereof under this paragraph. Where transferable Rural Development
securities are recorded on the books of a depository (a bank, banking
institution, financial firm, or similar party, which regularly accepts
in the course of its business Rural Development securities as a
custodial service for customers, and maintains accounts in the names of
such customers reflecting ownership of or interest in such securities)
for account of the pledgor or transferor thereof and such securities are
on deposit with a Reserve bank in a book-entry account hereunder, such
depository shall, for purposes of perfecting a pledge of such securities
or effecting delivery of such securities to a purchaser under applicable
provisions of law, be the bailee to which notification of the pledge of
the securities may be given or the third person in possession from which
acknowledgment of the holding of the securities for the purchaser may be
obtained. A Reserve bank will not accept notice or advice of a transfer
or pledge effected or perfected under this paragraph and any such notice
or advice shall have no effect. A Reserve bank may continue to deal with
its depositor in accordance with the provisions of this subpart,
notwithstanding any transfer or pledge effected or perfected under this
paragraph.

\(3\) No filing or recording with a public recording office or officer
shall be necessary or effective with respect to any transfer or pledge
of book-entry Rural Development securities or any interest therein.

\(4\) A Reserve bank shall, upon receipt of appropriate instructions,
convert book-entry Rural Development securities into definitive Rural
Development securities and deliver them in accordance with such
instructions. No such conversion shall affect existing interest in such
Rural Development securities.

\(5\) A transfer of book-entry Rural Development securities within a
Federal Reserve Bank shall be made in accordance with procedures
established by the Reserve bank not inconsistent with this subpart. The
transfer of book-entry Rural Development securities by a Reserve bank
may be made through a telegraphic transfer procedure.

\(6\) All requests for transfer or withdrawal must be made prior to the
maturity or date of call of the securities.

8

§1901.506 (Con.) RD Instruction 1901-K

\(d\) [Withdrawal of Rural Development securities]{.underline}.

\(1\) A depositor of book-entry Rural Development securities may
withdraw them from a Reserve bank by requesting delivery of like
definitive Rural Development securities to itself or on its order to a
transferee.

\(2\) Rural Development securities which are actually to be delivered
upon withdrawal may be issued in bearer or registered form.

\(e\) [Delivery of Rural Development securities]{.underline}. A Reserve
bank which has received Rural Development securities and effected
pledges, made entries regarding them, or transferred or delivered them
according to the instructions of its depositor is not liable for
conversion or for participation in breach of fiduciary duty even though
the depositor had no right to dispose of or take other action in respect
of the securities. A Reserve bank shall be fully discharged of its
obligations under this subpart by the delivery of Rural Development
securities in definitive form to its depositor or upon the order of such
depositor. Customers of a member bank or other depository (other than a
Reserve bank) may obtain Rural Development securities in definitive form
only by causing the depositor of the Reserve bank to order the
withdrawal thereof from the Reserve bank.

\(f\) [Registered securities]{.underline}.

\(1\) No formal assignment shall be required for the conversion to
book-entry Rural Development securities of registered Rural Development
securities held by a Reserve bank (in either its individual capacity or
as fiscal agent of the United States) on the effective date of this
subpart for any purpose specified in section 1901.506 (b) (1).
Registered Rural Development securities deposited thereafter with a
Reserve bank for any purpose specified in section 1901.506 (b) shall be
assigned for conversion to book-entry Rural Development securities.

\(2\) The assignment which shall be executed in accordance with the
provisions of Subpart F of 31 CFR Part 306, so far as applicable, shall
be to Federal Reserve Bank of \_\_\_\_\_\_\_\_\_, as fiscal agent of the
United States acting on behalf of Rural Development, United States
Department of Agriculture, for conversion to book-entry Rural
Development securities.

\(g\) [Servicing book-entry Rural Development securities, payment of
interest, payment at maturity or upon call]{.underline}. Interest
becoming due on book-entry Rural Development securities shall be charged
to the general account of the Treasurer of the United States on the
interest due date and remitted or credited in accordance with the
depositor\'s instructions. Such securities

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RD Instruction 1901-K

§1901.506 (g) (Con.)

shall be redeemed and charged to the same account on the date of
maturity or call, and the redemption proceeds, principal, and interest
shall be disposed of in accordance with the depositor\'s instructions.

\(h\) [Issuance and redemption]{.underline}.

\(1\) In those instances where the Reserve bank is acting as fiscal
agent of the United States acting on behalf of Rural Development, the
following subparts of Treasury Department Circular No. 300 (31 CFR Part
306), so far as applicable, shall apply to such certificates.

\(i\) Subpart B, Registration.

\(ii\) Subpart C, Transfers, Exchanges and Reissues.

\(iii\) Subpart D, Redemption or Payment.

\(iv\) Subpart E, Interest.

\(v\) Subpart G, Assignments of Registered Securities - General.

\(vi\) Subpart F, Assignments by or in Behalf of Individuals.

\(vii\) Subpart H, Assignments in Behalf of Estates of Deceased Owners.

\(viii\) Subpart I, Assignments by or in Behalf of Trustees and Similar
Fiduciaries.

\(ix\) Subpart J, Assignments in Behalf of Private or Public
Organizations.

\(x\) Subpart K, Attorneys in Fact.

\(xi\) Subpart L, Transfer Through Judicial Proceedings.

\(xii\) Subpart M, Requests for Suspension of Transactions.

\(xiii\) Subpart N, Relief for Loss, Theft, Destruction, Mutilation, or
Defacement of Securities.

§1901.507 [Certificates of beneficial ownership issued by the Rural
Development Finance Office]{.underline}.

## 10

§1901.507 (Con.) RD Instruction 1901-K

\(a\) [Orders and payment]{.underline}. Orders for investment in
certificates may be placed with the Finance Office by mail, telephone,
or in person. Payment for purchase of certificates may be made by a wire
transfer to the Federal Reserve Bank of St. Louis for credit to Rural
Development, by a certified check or bank draft payable to the Rural
Development. The rate of interest paid on the certificate will be the
rate in effect on the date the Finance Office receives the payment.

\(b\) [Registration]{.underline}.

\(1\) The registration used must express the actual ownership of a
certificate and may not restrict the authority of the owner to dispose
of it in any manner. Rural Development reserves the right to treat the
registration as conclusive ownership. Request for registration must be
clear, accurate, and complete, and include the appropriate taxpayer
identifying number or social security number.

\(2\) The registration of all certificates owned by the same person,
organization, or fiduciary should be uniform with respect to the name of
the owner and, in case of fiduciary, the description of the fiduciary
capacity. Individual owners should be designated by the names by which
they are ordinarily known or under which they do business, preferably
including at least one full given name. The name of an individual may be
preceded by an applicable title, as, for example \"Mrs.\" \"Mr.\",
\"Miss\" \"Ms.\". \"Dr.\" or \"Rev.\" or followed by a designation such
as \"M.D.\" \"D.D.\" \"Sr.\" or \"Jr.\" Any other similar suffix should
be included when ordinarily used or when necessary to distinguish the
owner from another member of his family. The address should include,
where appropriate, the name and street, route, or any other location
feature, and zip code.

\(3\) If an erroneously inscribed certificate is received, it should not
be altered in any respect. Rural Development should be given full
particulars about the error and asked to furnish instructions.

\(c\) [Transfers and exchanges - closed periods]{.underline}.

\(1\) [General]{.underline}. Transfer of registered certificates should
be made by assignment in accordance with this section. Registered
securities are eligible for denominational exchange. Specific
instructions for issuance and delivery of new certificates signed by the
owner or the owner\'s authorized representative must

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RD Instruction 1901-K

§1901.507 (c) (1) (Con.)

accompany the certificates presented. Certificates presented for
transfer must be received by Rural Development not less than 1 full
month before the date on which they mature. Any certificates so
presented which are received too late to comply with this provision will
be accepted for payment only.

\(2\) [Closing of transfer books]{.underline}. The transfer books are
closed for 1 full month preceding interest payment dates. If the date
set for closing falls on Saturday, Sunday, or a legal holiday, the books
will be closed as of the close of business on the last business day
preceding that date. The books are reopened on the first business day
following the date on which interest falls due. Registered certificates
which have not matured, or have been submitted for transfer and are
received when the books are closed for that certificate, will be
processed on or after the date such books are reopened. If certificates
are received for transfer when the books are closed for payment of final
interest at maturity, the following action will be taken in the absence
of different instructions:

\(i\) Payment of final interest will be made to the registered owner of
record on the date the books were closed.

\(ii\) Payment of principal will be made to the assignee under a proper
assignment of the certificate.

\(d\) [Redemption or payment]{.underline}.

\(1\) [General]{.underline}. Certificates are payable in regular course
of business at maturity. Rural Development may provide for the exchange
of maturing certificates. The registered certificates should be
presented and surrendered for redemption at the Rural Development
Finance Office. No assignments or evidence in support of them will be
required by or on behalf of the registered owner or assignee for
redemption for his or its account, or for redemption-exchange if the new
certificates are to be registered in exactly the same names and forms as
in the registrations or assignments of the certificates surrendered.

\(2\) [Redemption at maturity]{.underline}. Registered certificates
presented and surrendered for redemption at maturity need not be
assigned unless the owner desires that payment be made to some other
person. Should the owner so desire assignments should be made

## 12

§1901.507 (d) (2) (Con.) RD Instruction 1901-K

to the \"Farmers Home Administration for redemption for the account of
(inserting name and address of person to whom payment is to be made).\"
Specific instructions for the issuance and delivery of the redemption
check signed by the owner or the owner\'s authorized representative must
accompany the certificates unless included in the assignment. Payment of
the principal and interest will be made by a check drawn on the
Treasurer of the United States to the order of the person entitled and
mailed in accordance with the instructions received. If instructions are
not received concerning interest, interest will be paid to the
registered owner.

\(3\) [Interest]{.underline}. The interest on Rural Development
certificates accrues and is payable annually. A full interest period
does not include the day on which the last preceding interest became
due, but does include the day on which the next succeeding interest
payment is due. Certificates will cease to bear interest on the date of
their maturity. The interest on registered certificates is payable by
checks drawn on the Treasurer of the United States to the order of the
registered owners, except as otherwise provided in this section. Rural
Development prepares the interest checks in advance of the interest
payment date and ordinarily mails them in time to reach the addressees
on that date. Interest on a registered certificate which has not matured
and which is presented for any transaction when the books for that
certificate are closed will be paid by check drawn to the order of the
registered owner of record. On receipt of notice of the death or
incompetency of an individual named as registered owner, a change in the
name or in the status of a partnership, corporation, or unincorporated
association, the removal, resignation, succession, or death of a
fiduciary or trustee, delivery of interest checks will be withheld
pending receipt and approval of evidence showing who is entitled to
receive the interest checks. If the inscriptions on certificates do not
clearly identify the owners, delivery of interest checks may be withheld
pending reissue of the certificates in the correct registration, except
as provided in this section. The final installment of interest will be
paid by check drawn to the order of the registered owner of record on
presentation and surrender of the certificate for redemption. To assure
timely delivery of interest checks, owners should promptly notify Rural
Development of any change of address.

\(e\) [Assignments]{.underline}. Assignments of certificates should be
executed by the owner or the owner\'s authorized representative in the
presence of an officer authorized to certify assignments. Assignments
shall

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RD Instruction 1901-K

§1901.507 (e) (Con.)

be made on the back of the certificate. Registered certificates may be
assigned to a specified transferee or to Rural Development for
redemption or for exchange for other certificates offered at maturity.
Assignments to \"United States, Rural Development,\" \"Farmers Home
Administration for Transfer,\" or Rural Development for Exchange\" will
not be accepted unless supplemented by specific instructions by or in
behalf of the owner. If an alteration or erasure has been made in an
assignment, a new assignment from the assignor should be obtained.
Otherwise, an affidavit or explanation by the person responsible for the
alteration or erasure should be submitted for consideration.

\(f\) [Death of certificate holder]{.underline}. The Finance Office
should be notified of the death of the registered owner of a
certificate. The following documents should be forwarded with the notice
if available.

\(1\) A certified copy of the death certificate.

\(2\) A certified copy of the court order appointing the Administrator
or Executor (include the mailing address of the Administrator or
Executor). The Finance Office will notify the person submitting such
notice and/or documentation if any other records or documents are
needed. Legal opinions and advice will be obtained by the Finance Office
as needed from the Regional Attorney. After all legal requirements are
met, the certificate should be reissued in the name of the current
owner.

\(g\) [Replacement]{.underline}. Lost, stolen, destroyed, or mutilated
certificates will be replaced by the Finance Office on the registered
owner\'s compliance with the requirements of §1901.509.

§1901.508 [Servicing of insured notes outstanding with
investors]{.underline}.

The Director, or the insured loan officer of the Finance Office, is
authorized in connection with the sale of any insured note to execute
required documents on behalf of Rural Development and to take other
appropriate action, including, but not limited to, acknowledging notice
of sale of an insured note, or requiring an insured holder to sell an
insured note to Rural Development in connection with any voluntary
conveyance or foreclosure, or transfer related to liquidation of the
borrower\'s account or any other servicing action so related. Upon
recommendation by the State Director that purchase of an insured note is
necessary for any servicing action not related to liquidation of the
borrower\'s account, authorization may be given by the National Office
to request the Director, Finance Office, to require a holder to sell an
insured note to Rural Development.

## 14

§1901.508 (Con.) RD Instruction 1901-K

\(a\) [Assignments]{.underline}.

\(1\) [Effective date of assignment]{.underline}. When an insured note
is sold by a private holder to a private buyer, notice of such sale
executed by the seller must be given to and acknowledged by Rural
Development in order for the sale to be binding on Rural Development, as
to Rural Development, the effective date of the sale will be the
acknowledgment date specified in the acknowledgment of notice executed
by Rural Development.

\(2\) [Assignment to Rural Development at request of Rural
Development]{.underline}. At any time Rural Development considers it
necessary nor proper servicing of the loan, Rural Development may
require, in writing, a private holder to sell an insured note to Rural
Development.

\(3\) [Assignment to Rural Development at option of holder]{.underline}.
A private holder at any time during the option period may require, in
writing, Rural Development to purchase an insured note.

\(4\) [Price]{.underline}. If Rural Development is the buyer of an
insured note, the price will be the par value as of the effective date
of the sale. In other cases, the price will be determined by an
agreement between the parties.

\(b\) [Sale of insured notes by private holders to private
buyers]{.underline}.

\(1\) On receipt of notice from a private holder of intention to assign
an insured note, the Director, Finance Office, will send the holder:

\(i\) Form RD 471-7 \"Notice and Acknowledgment of Sale of Insured or
Guaranteed Loan.\"

\(ii\) A statement of the unpaid principal. If requested the Director,
Finance Office, will furnish a statement of account instead of or in
addition to a statement of the unpaid principal.

\(iii\) Appropriate information on how to complete the assignment.

\(2\) If the Director, Finance Office, is informed that an insured note
has been assigned and Rural Development is requested to recognize the
assignment, the Director, Finance Office, will send the assignor Form RD
471-7, with directions for its execution.

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RD Instruction 1901-K

§1901.508 (b) (Con.)

\(3\) On receipt of Form RD 471-7 properly executed by the assignor, the
Director, Finance Office, will complete and execute the acknowledgment
section of the form. The Director, Finance Office, will retain the
original of the form, have two facsimile copies made and send one to the
assignor, and one to the assignee. For any correction or other change to
be made in the record of the name or address of a private holder, or of
a designated agent of a private holder, a request will be made to Rural
Development in writing.

\(4\) As of the date of the acknowledgment, executed by the Director,
Finance Office, on Form RD 471-7 the Director, Finance Office, will
transfer the insured note from the assignor to the assignee as the
insured holder on the records of Rural Development. The name and address
of the assignee will be recorded by Rural Development exactly as they
appear on Form RD 471-7.

\(5\) Payments transmitted by Rural Development on or after the
acknowledgment date shown on Form RD 471-7 will be transmitted to the
assignee. The Director, Finance Office, will give notice to the assignor
and the assignee of any payments transmitted by Rural Development to the
assignor before the acknowledgment date and after either the date of
sale, or the date of the statement of account, whichever is earlier,
However, Rural Development will not be liable for any failure to give
such notice.

\(c\) [Assignment of insured notes to Rural Development]{.underline}.

\(1\) [Assignment at the request of the holder]{.underline}. For
assignment of an insured note to Rural Development during the option
period at the request of the holder, the following procedure will apply:

\(i\) The holder will endorse the insured note as follows: \"Pay to the
order of the United States of America. Without recourse.\" The holder
will then deliver the endorsed note, together with the insurance
agreement, to the Director, Finance Office.

\(ii\) On receipt of the endorsed note with the accompanying insurance
agreement, the Director, Finance Office, will acknowledge receipt of the
note and process payment to the assignor of the par value of the note as
of the date of the Treasury check.

## 16

§1901.508 (c) (Con.) RD Instruction 1901-K

\(2\) [Assignment at the request of Rural Development]{.underline}. The
procedure for assigning an insured note at the request of Rural
Development will be the same as that prescribed in paragraph (c) (1) of
this section, except that the Director, Finance Office, will send a
written request to the holder requiring that the insured note be
assigned to Rural Development and delivered to the Director, Finance
Office, with the accompanying insurance agreement. The Director, Finance
Office, will explain that the assignment is necessary to enable Rural
Development to service the account properly and will give the holder all
necessary information as to the manner of making the assignment and the
amount to be paid by Rural Development.

\(d\) [Replacement of called or fully paid notes]{.underline}. Certain
insurance endorsements contain a clause or rider providing for a
replacement note when the original note is paid in full, or is called by
Rural Development. This provision applies to loans sold for a fixed
period of 10 years or longer for loans sold on or after December 1,
1969, and a fixed period of 15 years or longer for loans sold before
December 1, 1969. If a note is paid in full or called by the Government
and the lender is entitled to a replacement note, the lender may obtain
a certificate of beneficial ownership in lieu of the replacement note.
The certificate will carry the rates and terms applicable to the
replacement note.

\(e\) [Death of a noteholder]{.underline}. The Finance Office should be
notified of the death of a holder of an insured note. The following
documents should be forwarded with the notice if available:

\(1\) A certified copy of the death certificate.

\(2\) A certified copy of the court order appointing the Administrator
or Executor (include the mailing address of the Administrator or
Executor). The Finance Office will notify the person submitting the
notice and/or documentation if any other records or documents are
needed, and will provide any additional instructions that are needed.
Legal opinions and advice will be obtained by the Finance Office as
needed from the Regional Attorney.

§1901.509 [Loss, theft, destruction, mutilation, or defacement of
insured notes, insurance contracts, and certificates of beneficial
ownership]{.underline}.

\(a\) [Block sale insurance contracts]{.underline}. The Associate
Administrator is authorized in connection with block sale insurance
contracts to authorize the Rural Development\'s fiscal agent to
establish requirements for

## 17

(11-24-76) PN 545

RD Instruction 1901-K

§1901.509 (a) (Con.)

issuance of a replacement insurance contract when the original issued by
the Federal Reserve Bank of New York (Rural Development\'s fiscal agent)
is lost, stolen, destroyed, mutilated, or defaced. When a block sale
insurance contract is lost, stolen, or destroyed, a duplicate may be
issued to the registered holder upon receipt of an acceptable
certificate of loss and an indemnity bond without surety. The
certificate of loss should include the legal name and present address of
the owner and address when issued, if different from the present
address; the capacity of person certifying, if other than owner; the
identity of the insurance contract, including series number, contract
number, denomination, issue date, and form of inscription of registry,
and the full statement of circumstances of loss. All available portions
of an insurance contract that is mutilated, defaced, or partially
destroyed should be submitted to the Federal Reserve Bank of New York
(Rural Development\'s fiscal agent) for determination as to whether a
duplicate insurance contract can be issued without a certificate of loss
and posting of an indemnity bond. In the event the holder of a block
sales insurance contract obtains possession of the underlying notes, the
requirements of paragraph (b) of this section apply.

\(b\) [Notes and certificates of beneficial ownership sold by County
Office and Finance Office]{.underline}. The Director, or the insured
loan officer of the Finance Office, is authorized on behalf of the
Government, in connection with insured notes or certificates of
beneficial ownership sold through the Rural Development Finance Office
to require indemnity bonds from a noteholder when a note or certificate
is lost, stolen, destroyed, mutilated, or defaced while in the custody
of the holder or his designee. When a note or certificate of beneficial
ownership is lost, stolen, or destroyed while in the custody of the
holder or his designee, the following will apply:

\(1\) A certificate of loss should be filed with Rural Development
Finance Office. The certificate should include:

\(i\) Legal name and present address of owner when issued, if different
from present address.

\(ii\) Capacity of person certifying, if other than the owner.

## 18

##  

§1901.509 (b) (1) (Con.) RD Instruction 1901-K

\(iii\) Identity of the note or certificate of beneficial ownership,
including the name and Rural Development case number of the maker
thereof, issue date, interest rate of obligation, face amount of note or
certificate of beneficial ownership, and a full description of any
assignment, endorsement, or any other writing.

\(iv\) A full statement of circumstances of the loss, theft, or
destruction of the note.

\(2\) An indemnity bond in the amount of the unpaid principal and
interest will be required except in the following instances:

\(i\) Substantially the entire note or certificate of beneficial
ownership is presented and surrendered by the owner or holder, and the
Director, Finance Office, is satisfied as to the identity of the
instruments and that any missing portions are not sufficient to form the
basis of a valid claim against the United States or the borrower; or

\(ii\) The owner or holder is the United States, a Federal Reserve Bank,
a Federal Government Corporation, a State or territory, or the District
of Columbia.

\(3\) An indemnity bond without surety will be provided in the following
cases:

\(i\) Cases involving registered unassigned obligations held by banks,
trust companies, savings and loan associations, or companies holding
certificates of authority from Secretary of the Treasury as acceptable
sureties on Federal Bonds (companies listed on Treasury Department
Circular 570) where the financial responsibilities of such claimants are
well known or readily ascertainable.

\(ii\) Cases involving registered unassigned obligations where the
evidence reasonably justifies a conclusion that the obligations were
destroyed and the unpaid principal and interest amount does not exceed
\$1,000.

\(4\) An indemnity bond posted with a qualified surety is required in
all cases involving registered unassigned obligations other than those
cited in paragraphs (b) (2) (i), (b) (2) (ii), (b)

## 19

(11-24-76) PN 545

RD Instruction 1901-K

§1901.509 (b) (4) (Con.)

\(3\) (i) and (b) (3) (ii) of this section. A qualified surety is a
company holding a certificate of authority from the Secretary of the
Treasury as acceptable sureties on Federal Bonds, and listed in Treasury
Department Circular 570.

\(5\) All indemnity bonds for notes must be payable to both the borrower
and Rural Development. All indemnity bonds for certificates of
beneficial ownership must be payable to Rural Development. The bond may
be posted at the time the note or certificate of beneficial ownership
becomes eligible for repurchase by Rural Development. If the holder
desires to continue to hold the note for the life of the note, an
indemnity bond will not be required.

\(6\) An assignment of the note or certificate of beneficial ownership
shall be made to the United States of America, acting through Rural
Development, United States Department of Agriculture. An acceptable form
of assignment is available from the Director, Finance Office.

\(c\) [Other cases]{.underline}. Cases involving bearer obligations and
other cases not discussed in this section will be forwarded to the
Director, Finance Office, for requirements.

\(d\) [Replacement of notes]{.underline}. Rural Development will not
attempt to obtain replacement notes from borrowers.

§§1901.510-1901.550 \[Reserved\]

## oOo

## 20