RD Instruction 1951-E

Table of Contents

Page 1

(Revision 2)

PART 1951 - SERVICING AND COLLECTIONS

Subpart E - Servicing of Community and Direct Business Programs

Loans and Grants

## Table of Contents

Sec. Page

1951.201 Purposes. 1

1951.202 Objectives. 1

1951.203 Definitions. 2

\(a\) Approval official. 2

\(b\) Assumption of debt. 2

\(c\) CONACT. 2

\(d\) Eligible applicant. 2

\(e\) Ineligible applicant. 2

\(f\) Nonprogram (NP) loan. 2

\(g\) Servicing office. 2

\(h\) Transfer fee. 2

1951.204 Nondiscrimination. 2

1951.205 Redelegation of authority. 2A

1951.206 Forms. 2A

1951.207 State supplements. 3

1951.208 - 1951.209 \[Reserved\] 3

1951.210 Environmental requirements. 3

1951.211 Refinancing requirements. 3

1951.212 Unauthorized financial assistance. 3

1951.213 Debt settlement. 4

1951.214 Care, management, and disposal of acquired property. 4

1951.215 Grants. 4

\(a\) Applicability of requirements. 4

\(b\) Authorities. 4A

1951.216 Nonprogram (NP) loans. 4A

1951.217 Public bodies. 4A

1951.218 Use of Rural Development loans and grants for\
other purposes. 4B

1951.219 \[Reserved\] 5

## 

(08-05-98) PN 294

RD Instruction 1951-E

Table of Contents

Page 2

(Revision 2)

Sec. Page

1951.220 General servicing actions. 5

\(a\) Payment in full. 5

\(b\) Loan summary statements. 5

\(c\) Insurance. 6

\(d\) Property taxes. 6

\(e\) Changes in borrower\'s legal organization. 6

\(f\) Membership liability. 7

\(g\) Other security. 8

\(h\) Correcting errors in security instruments. 8

\(i\) Present market value determination. 8

1951.221 Collections, payments and refunds. 8

\(a\) Community and Insured Business Programs. 8

\(b\) Soil and Water Conservation Loans. 10

1951.222 Subordination of security. 10

\(a\) General. 10

\(b\) Authorities. 11

\(c\) Processing. 11

\(d\) Closing. 12

1951.223 Reamortization. 12

\(a\) State Director authorization. 12

\(b\) Requests requiring National Office approval. 12A

\(c\) Processing. 13

\(d\) Reamortization with interest rate adjustment - 14A

Water and Waste borrowers only.

1951.224 Third party agreements. 15

\(a\) Leases. 15

\(b\) Mineral leases. 16

\(c\) Management agreements. 17

\(d\) Affiliation agreements. 17

\(e\) Processing. 17

1951.225 Liquidation of security. 18

RD Instruction 1951-E

Table of Contents

Page 3

(Revision 1)

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

1951.226 Sale or exchange of security property. 18

\(a\) Authorities. 18

\(b\) General. 18

\(c\) Processing. 19

\(d\) Release from liability. 20

1951.227 Protective advances. 21

1951.228 - 1951.229 \[Reserved\] 21

1951.230 Transfer of security and assumption of loans. 21

\(a\) General. 21

\(b\) Authorities. 23

\(c\) Eligible applicants. 23

\(d\) Ineligible applicants. 24

\(e\) Release from liability. 25

\(f\) Processing. 25

1951.231 Special provisions applicable to Economic

Opportunity (EO) Cooperative loans. 27

\(a\) Withdrawal of member and transfer to and assumption

by new members of Unincorporated Cooperatives. 27

\(b\) Withdrawal of members from Unincorporated

Cooperatives when new member not available. 28

\(c\) Addition of new members (no withdrawing member or

transfer involved) for both Incorporated and

Unincorporated Cooperatives. 29

\(d\) Deceased members of Unincorporated Cooperatives. 29

\(e\) Action which affects individual members of

Unincorporated EO Cooperative security. 29

\(f\) Debt Settlement. 30

1951.232 Water and waste disposal systems which have become

part of an urban area. 30

\(a\) Curtailment or limitation of service. 30

\(b\) Sale or transfer and assumption. 30

\(c\) Lease-purchase arrangement. 30

\(d\) Processing. 31

1951.233 - 1951.239 \[Reserved\] 31

(08-05-98) PN 294

RD Instruction 1951-E

Table of Contents

Page 4

(Revision 1)

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

1951.240 State Director\'s additional authorizations and

guidance. 31

\(a\) Promote financing purposes and improve or maintain

collectibility. 31

\(b\) Referrals to National Office. 32

\(c\) Defeasance of Rural Development indebtedness. 32

1951.241 Special provision for interest rate change. 32

\(a\) General. 32

\(b\) Notification to borrower and borrower selection

of interest rate. 33

\(c\) Processing loan interest rate change. 33

1951.242 Servicing delinquent Community Facility loans. 34

\(a\) Definition of a delinquent Community Facility loan. 34

\(b\) Workout agreement. 34

\(c\) Requirement for submission of monthly financial

information. 35

\(d\) Servicing requirements. 35

\(e\) Referral for treasury offset. 36

\(f\) Revision or cancellation of workout agreement. 36

1951.243 - 1951.249 \[Reserved\] 36

1951.250 OMB control number. 36

Exhibit A - Report on Servicing Action

Exhibit B - Agreement for New Member (With or

Without Withdrawing Member)

Exhibit C - Agreement for Withdrawal of Member

(Without New Member)

Exhibit D - Items to be Included in Transfer and

Assumption Dockets (if applicable)

Exhibit E - Interest Rate Requirements and

Effective Dates

Exhibit F - Instruction to Rural Development Personnel to

Implement Public Law 100-233

Exhibit G - Letter to Borrower Notifying of

Choice of Interest Rate

Exhibit H - Rescheduling Agreement - Public Bodies

## oOo 

RD Instruction 1951-E

PART 1951\--SERVICING AND COLLECTIONS

Subpart E - Servicing of Community and Direct Business Programs Loans
and Grants

§ 1951.201 [Purposes]{.underline}.

This subpart prescribes the Rural Development mission area policies,
authorizations, and procedures for servicing the following programs:
Community Facility loans and grants, Rural Business
Enterprise/Television Demonstration grants; loans for Grazing and other
shift-in-land-use projects; Association Recreation loans; Association
Irrigation and Drainage loans; Direct Business loans; Economic
Opportunity Cooperative loans; Rural Renewal loans; Energy Impacted Area
Development Assistance Program grants; National Nonprofit Corporation
grants; System for Delivery of Certain Rural Development Programs panel
grants; in part 4284 of this title, Rural and Cooperative Development
Grants, Value-Added Producer Grants, and Agriculture Innovation Center
Grants. Rural Development State Offices act on behalf of the Rural
Business-Cooperative Service and the Farm Service Agency as to loan and
grant programs formerly administered by the Farmers Home Administration
and the Rural Development Administration. Loans sold without insurance
to the private sector will be serviced in the private sector and will
not be serviced under this subpart. The provisions of this subpart are
not applicable to such loans. Future changes to this subpart will not be
made applicable to such loans. This subpart does not apply to Water and
Waste Programs of the Rural Utilities Service, Watershed loans, and
Resource Conservation and Development Loans, which are serviced under
part 1782 of this title. (Revised 10-29-07, SPECIAL PN.)

§ 1951.202 [Objectives]{.underline}.

The purpose of loan and grant servicing functions is to assist
recipients to meet the objectives of loans and grants, repay loans on
schedule, comply with agreements, and protect Rural Development\'s
financial interest. Supervision by Rural Development includes, but is
not limited to, review of budgets, management reports, audits and
financial statements; performing security inspections and providing,
arranging for, or recommending technical assistance; evaluating
environmental impacts of proposed actions by the borrower; and
performing civil rights compliance reviews.

[\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_]{.underline}

Distribution: WSAL Account Servicing

> Servicing and Collections

## 1

## (Revision 13)

## (02-08-90) SPECIAL PN 

RD Instruction 1951-E

§ 1951.203 [Definitions]{.underline}.

\(a\) [Approval official]{.underline}. An official who has been
delegated loan and/or grant approval authorities within applicable
programs, subject to the dollar limitations of Exhibits A and B of RD
Instruction 1901-A (available in any Rural Development office). (Revised
01-07-05, SPECIAL PN.)

\(b\) [Assumption of debt]{.underline}. The agreement by one party to
legally bind itself to pay the debt incurred by another.

\(c\) [CONACT]{.underline}. The Consolidated Farm and Rural Development
Act, as amended.

\(d\) [Eligible applicant]{.underline}. An entity that would be legally
qualified for financial assistance under the loan or grant program
involved in the servicing action.

\(e\) [Ineligible applicant]{.underline}. An entity or individual that
would not be considered eligible for financial assistance under the loan
or grant program involved in the servicing action.

\(f\) [Nonprogram (NP) loan]{.underline}. An NP loan exists when credit
is extended to an ineligible applicant and/or transferee in connection
with loan assumptions or sale of inventory property; any recipient in
cases of unauthorized assistance; or a recipient whose legal
organization has changed as set forth in § 1951.220(e) of this subpart
resulting in the borrower being ineligible for program benefits.

\(g\) [Servicing office]{.underline}. The State, District, or County
Office responsible for immediate servicing functions for the borrower or
grantee.

\(h\) [Transfer fee]{.underline}. A one-time nonrefundable application
fee, charged to ineligible applicants for Rural Development services
rendered in the processing of a transfer and assumption.

§ 1951.204 [Nondiscrimination]{.underline}.

Each instrument of conveyance required for a transfer, assumption, or
other servicing action under this subpart will contain the following
covenant:

## 2

## (Revision 13) 

RD Instruction 1951-E

§ 1951.204 (Con.)

\"The property described herein was obtained or improved with Federal
financial assistance and is subject to the nondiscrimination provisions
of Title VI of the Civil Rights Act of 1964, Title IX of the Education
Amendments of 1972, section 504 of the Rehabilitation Act of 1973, and
other similarly worded Federal statutes, and the regulations issued
pursuant thereto that prohibit discrimination on the basis of race,
color, national origin, handicap, religion, age, or sex in programs or
activities receiving Federal financial assistance. Such provisions apply
for as long as the property continues to be used for the same or similar
purposes for which the Federal assistance was extended, for so long as
the purchaser owns it, whichever is later.\"

§1951.205 [Redelegation of authority]{.underline}.

Servicing functions under this subpart which are specifically assigned
to the State Director may be redelegated in writing to an appropriate
sufficiently trained designee.

§1951.206 [Forms]{.underline}.

Forms utilized for actions under this subpart are to be modified
appropriately where necessary to adapt the forms for use by corporate
recipients rather than individuals.

2A

(Added 02-02-96, SPECIAL PN)

(02-08-90) SPECIAL PN

RD Instruction 1951-E

§ 1951.207 [State supplements]{.underline}.

State supplements developed to carry out the provisions of this subpart
will be prepared in accordance with Subpart B of Part 2006 of this
chapter (available in any Rural Development office) and applicable State
laws and regulations. State supplements are to be used only when
required by National Instructions or necessary to clarify the impact of
State laws or regulations, and not to restate the provisions of National
Instructions. Advice and guidance will be obtained as needed from the
Office of the General Counsel (OGC).

§§ 1951.208 - 1951.209 \[Reserved\]

§ 1951.210 [Environmental requirements]{.underline}.

Servicing activities such as transfers, assumptions, subordinations,
sale or exchange of security property, and leasing of security will be
reviewed for compliance with Subpart G of Part 1940 of this chapter. The
appropriate environmental review will be completed prior to approval of
the servicing action. When National Office approval is required, the
completed environmental review will be included with other information
submitted.

§ 1951.211 [Refinancing requirements]{.underline}.

In accordance with the CONACT, Agency requires for most loans covered by
this subpart that if at any time it shall appear to the Government that
the borrower is able to refinance the amount of the indebtedness then
outstanding, in whole or in part, by obtaining a loan for such purposes
from responsible cooperative or private credit sources, at reasonable
rates and terms for loans for similar purposes and periods of time, the
borrower will, upon request of the Government, apply for and accept such
loan in sufficient amount to repay the Government and will take all such
actions as may be required in connection with such loan. Applicable
requirements are set forth in Subpart F of

Part 1951 of this chapter. A civil rights impact analysis is required.\
(Revised 04-02-98, SPECIAL PN.)

§ 1951.212 [Unauthorized financial assistance]{.underline}.

Subpart O of Part 1951 of this chapter prescribes policies for servicing
the loans and grants covered under this subpart when it is determined
that a borrower or grantee was not eligible for all or part of the
financial assistance received in the form of a loan, grant, subsidy, or
any other direct financial assistance.

## 3

## (Revision 1)

(02-08-90) SPECIAL PN

RD Instruction 1951-E

§ 1951.213 [Debt settlement]{.underline}.

Subpart C of Part 1956 of this chapter prescribes policies and
procedures for debt settlement actions for loans covered under this
subpart when it is determined that a debt is eligible for settlement
except as provided in

§§ 1951.216 and 1951.231.

§ 1951.214 [Care, management, and disposal of acquired
property]{.underline}.\
(Revised 04-02-98, SPECIAL PN.)

Property acquired by Government will be handled according to\
Subparts B and C of Part 1955 of this chapter.

§ 1951.215 [Grants]{.underline}.

No monitoring action by the Agency is required after grant closeout.
Grant closeout is when all required work is completed, administrative
actions relating to the completion of work and expenditure of funds have
been accomplished, and the Agency accepts final expenditure information.
However, grantees remain responsible in accordance with the terms of the
grant for property acquired with grant funds.

\(a\) [Applicability of requirements]{.underline}. Servicing actions
relating to Agency grants are governed by the provisions of this
subpart, the terms of the Grant Agreement and, if applicable, the
provisions of 7 CFR 3015, 3016, and 3017.

\(1\) Servicing actions will be carried out in accordance with the terms
of the \"Association Water or Sewer System Grant Agreement," and RUS
Bulletin 1780-12, "Water and Waste Grant Agreement." Grant agreements
with a revision date on or after January 29, 1979, require that the
grantee request disposition instructions from the Agency before
disposing of property which is no longer needed for original grant
purposes. (Revised 04-02-98, SPECIAL PN.)

\(2\) When facilities financed in part by grants are transferred or
sold, repayment of all or a portion of the grant is not required if the
facility will be used for the same purposes and the new owner provides a
written agreement to abide by the terms of the grant agreement. (Revised
04-02-98, SPECIAL PN.)

\(3\) 7 CFR 3015 first became effective on November 10, 1981; 7 CFR 3016
on October 1, 1988; and 7 CFR 3017 on March 18, 1989. Grants made on or
after those dates are subject to the provisions of those regulations
except to the extent of the express provisions of the Grant Agreement.

## 4

## (Revision 1) 

RD Instruction 1951-E

§ 1951.215 (Con.)

\(b\) [Authorities]{.underline}. Subject to the requirements of §
1951.215(a), authority to approve servicing actions is as follows:

\(1\) For water and waste disposal grants, the State Director is
authorized to approve any servicing actions needed, except that prior
approval of the Administrator is required when property acquired with
grant funds is disposed of in accordance with\
§§ 1951.227, 1951.230, or 1951.232 of this subpart and the buyer or
transferee refuses to assume all terms of the grant agreement. (Revised
01-07-05, SPECIAL PN.)

\(2\) All other grants will be serviced in accordance with the Grant
Agreement and this subpart. Prior approval of the Administrator is
required except for actions covered in the preceding paragraph.

§ 1951.216 [Nonprogram (NP) loans]{.underline}.

Borrowers with NP loans are not eligible for any program benefits,
including appeal rights. However, Agency may use any servicing tool
under this subpart necessary to protect the Government\'s security
interest, including reamortization or rescheduling. The refinancing
requirements of Subpart F of Part 1951 of this chapter do not apply to
NP loans. Debt settlement actions relating to NP loans must be handled
under the Federal Claims Collection Act; proposals will be submitted to
the National Office for review and approval. Any exception to the
servicing requirements of NP loans under this subpart must have prior
concurrence of the National Office.

§1951.217 [Public bodies]{.underline}.

Servicing actions involving public bodies will be carried out to the
extent feasible according to the provisions of this subpart. With prior
National Office approval, the State Director is authorized to vary from
such provisions if necessary and approved by OGC, provided such
variation will not violate other regulatory or statutory provisions. To
request approval, the case file, including copies of applicable
documents, recommendations, and OGC comments, will be forwarded to the
Administrator, Attention: (appropriate program division).

## 4A

## (Revision 2)

(02-08-90) SPECIAL PN

RD Instruction 1951-E

§1951.218 [Use of Rural Development loans and grants for other
purposes.]{.underline}

\(a\) If, after making a loan or a grant, the Administrator determines
that the circumstances under which the loan or grant was made have
sufficiently changed to make the project or activity for which the loan
or grant was made available no longer appropriate, the Administrator may
allow the loan borrower or grant recipient to use property (real and
personal) purchased or improved with the loan or grant funds, or
proceeds from the sale of property (real and personal) purchased with
such funds, for another project or activity that:

\(1\) Will be carried out in the same area as the original project or
activity;

\(2\) Meets the criteria for a loan or grant described in section
381E(d) of the Consolidated Farm and Rural Development Act, as amended;
and

\(3\) Satisfies such additional requirements as are established by the
Administrator.

\(b\) For the purpose of this section, Administrator means the
Administrator of the Rural Housing Service or Rural Business-Cooperative
Service that has the delegated authority to administer the loan or grant
program that covers the property or the proceeds from the sale property
proposed to be used in another way.

\(c\) If the new use of the property is under the authority of another
Administrator, the other Administrator will be consulted on whether the
new use will meet the criteria of the other program. Since the new
project or activity must be carried out in the same area as the original
project or activity, a new rural area determination will not be
necessary.

\(d\) Borrowers and grantees that wish to take advantage of this option
may make their request through the appropriate Rural Development State
Office. Permission to use this option will be exercised on a
case-by-case-basis on applications submitted through the State Office to
the Administrator for consideration. If the proposal is approved, the
Administrator will issue a memorandum to the State Director outlining
the conditions necessary to complete the transaction.

## 4B

## (Added 10-29-07, SPECIAL PN)

(02-08-90) SPECIAL PN

RD Instruction 1951-E

§1951.219 \[Reserved\]

§1951.220 [General servicing actions]{.underline}.

\(a\) [Payment in full]{.underline}. Payment in full of a loan is
handled according to Subpart D of Part 1951 of this chapter. When a loan
is paid in full, the servicing official will: (Revised 02-10-92, SPECIAL
PN.)

\(1\) Notify the company providing fidelity bond coverage in writing
that the government no longer has an interest in the bond if the
government is named co-obligee on the bond.

\(2\) Release Rural Development\'s interest in insurance policies
according to applicable provisions of Subpart A of Part 1806 (RD
Instruction 426.1).

\(3\) Release Rural Development\'s interest in any other security as
appropriate, consulting with OGC if necessary.

\(b\) [Loan summary statements]{.underline}. Upon request of a borrower,
Rural Development will issue a loan summary statement showing account
activity for each loan made or insured under the CONACT. Field offices
will post a notice on the bulletin board informing borrowers of the
availability of loan summary statements. See Exhibit A of Subpart A of
this part for a sample of the required notice.

\(1\) The loan summary statement period is from January 1 through
December 31. The Finance Office forwards to field offices a copy of Form
RD 1951-9, \"Annual Statement of Loan Account,\" to be retained in
borrower files as a permanent record of account activity for the year.

## 5

## (Revision 4)

(02-08-90) SPECIAL PN

RD Instruction 1951-E

§1951.220 (b) (Con.)

\(2\) Quarterly Forms RD 1951-9 are retained in the Finance Office on
microfiche. These statements reflect cumulative data from the beginning
of the current year through the end of the most recent quarter.
Servicing offices may request copies of these quarterly or annual
statements by sending Form RD 1951-57, \"Request for Loan Summary
Statement,\" to the Finance Office.

\(3\) The servicing office will provide a copy of the applicable loan
summary statement to the borrower on request. A copy of Form RD 1951-9
and, for loans with unamortized installments, a printout of future
installments owed obtained using the borrower status screen option in
the Automated Discrepancy Processing System (ADPS), will constitute the
loan summary statement to be provided to the borrower.

\(c\) [Insurance]{.underline}. Rural Development borrowers shall
maintain insurance coverage as follows:

\(1\) Community and Insured Business Programs borrowers shall
continuously maintain adequate insurance coverage as required by the
loan agreement and §1942.17(j)(3) of Subpart A of Part 1942 of this
chapter. Insurance coverage must be monitored in accordance with the
above-referenced section to determine that adequate policies and bonds
are in force.

\(2\) For all other types of loans covered by this subpart, property
insurance will be serviced according to Subpart A of Part 1806 of this
chapter (RD Instruction 426.1) in real estate mortgage cases, and
according to the loan agreement in other cases.

\(d\) [Property taxes]{.underline}. Real property taxes are serviced
according to Subpart A of Part 1925 of this chapter. If State statutes
permit a personal property tax lien to have priority over Rural
Development\'s lien, such taxes are serviced according to §§1925.3 and
1925.4 of Subpart A of Part 1925 of this chapter. (Revised 08-13-92,
SPECIAL PN.)

\(e\) [Changes in borrower\'s legal organization]{.underline}.

\(1\) The State Director may approve, with OGC\'s concurrence, changes
in a recipient\'s legal organization, including revisions of articles of
incorporation or charter and bylaws, when:

\(i\) The change does not provide for a sole member type of
organization;

\(ii\) The borrower retains control over its assets and the operation,
management, and maintenance of the facility, and continues to carry out
its responsibilities as set forth in §1942.17(b)(4) of Subpart A of Part
1942 of this chapter; and (Revised 05-19-92, SPECIAL PN.)

## 6

## (Revision 4) 

RD Instruction 1951-E

§ 1951.220(e)(1) (Con.)

\(iii\) The borrower retains significant local ties with the rural
community.

\(2\) The State Director may approve, with prior concurrence of the
Administrator, changes in a recipient\'s legal organization which result
in a sole member type of organization, or any other change which results
in a recipient\'s loss of control over its assets and/or the operation,
management and maintenance of the facility, provided all of the
following have been or will be met:

\(i\) The change is in the best interest of the Government;

\(ii\) The State Director determines and documents that other servicing
options under this subpart, such as sale or transfer and assumption,
have been explored and are not feasible;

\(iii\) The loan is classified as a nonprogram loan;

\(iv\) The borrower is notified that it is no longer eligible for any
program benefits, but will remain responsible under the loan agreement;
and

\(v\) Prior concurrence of the Administrator is obtained. Requests will
be forwarded to the Administrator: Attention (appropriate program
division), and will include the case file; Exhibit A of this subpart
(available in any RD office), appropriately completed; the proposed
changes; OGC comments; and any other necessary supporting information.

\(f\) [Membership liability]{.underline}. As a loan approval
requirement, some borrowers may have special agreements with members for
the purchase of shares of stock or for payment of a pro rata share of
the loan in the event of default, or they may have authority in their
corporate instruments to make special assessments in that event. Such
agreements may be referred to as individual liability agreements and may
be assigned to and held by Rural Development as additional security. In
other cases the borrower\'s note may be endorsed by individuals. The
liability instruments will be serviced in a manner indicated by their
contents and the advice of OGC to adequately protect Rural Development
interest. Servicing actions necessary due to such provisions will be
tracked in Multi-Family Housing Information System (MFIS).\
(Revised 02-24-05, SPECIAL PN.)

## 7

## (Revision 1)

(02-08-90) SPECIAL PN

RD Instruction 1951-E

§ 1951.220 (Con.)

\(g\) [Other security]{.underline}. Other security such as collateral
assignments, water stock certificates, notices of lienholder interest
(Bureau of Land Management grazing permits) and waivers of grazing
privileges (Forest Service grazing permits) will be serviced to protect
the interest of Rural Development, and in compliance with any special
servicing actions developed by the State Director with OGC assistance.
Evidence of the security will be filed in the servicing office case
file. Necessary servicing actions will be noted in MFIS. (Revised
02-24-05, SPECIAL PN.)

\(h\) [Correcting errors in security instruments]{.underline}. Land,
buildings, or chattels included in a mortgage through mutual mistake may
be released from the mortgage by the State Director when substantiated
by the factual situation. The release is contingent on the State
Director determining, with OGC advice, that the property was included
due to mutual error.

\(i\) [Present market value determination]{.underline}. For purposes of
this subpart, the value of security is determined by the approval
official as follows:

\(1\) [Security representing a relatively small portion of the total
value of the security property]{.underline}. The approval official will
determine that the real estate and chattels are disposed of at a
reasonable price. A current appraisal report may be required.

\(2\) [Security representing a relatively large portion of the total
value of the security property]{.underline}. The approval official will
require a current appraisal report, and the sale prices of the real
estate and chattels disposed of will at least equal the present market
value as determined by this appraisal.

\(3\) [Appraisal report]{.underline}. If required, a current appraisal
report will be completed in accordance with § 1942.3 of Subpart A of
Part 1942 of this chapter. The appraisal will be completed by a
qualified Rural Development employee or an independent appraiser as
determined appropriate by the approval official.

§ 1951.221 [Collections, payments and refunds]{.underline}. Collections
are processed in accordance with Subpart B of Part 1951 of this chapter.
Payments and refunds are handled in accordance with the following:

\(a\) [Community and Insured Business Programs]{.underline}.

\(1\) Field offices can obtain data on principal installments due for
Community and Insured Business Programs loans with unamortized
installments using the borrower status screen option in the ADPS.

## 8

## (Revision 1) 

RD Instruction 1951-E

§ 1951.221(a) (Con.)

\(2\) Regular payments for Community and Insured Business Programs
borrowers are all payments other than extra payments and refunds. Such
payments are usually derived from facility revenues, and do not include
proceeds from the sale of security. They also include payments derived
from sources which do not decrease the value of Rural Development
security.

\(i\) Distribution of such payments is made as follows:

\(A\) First, to the Rural Development loan(s) in proportion to the
delinquency existing on each. Any excess will be distributed in
accordance with paragraphs (a)(2)(i)(B) and (C) of this section.

## 8A

## (Added 02-24-05, SPECIAL PN) 

RD Instruction 1951-E

§ 1951.221(a)(2)(i) (Con.)

\(B\) Second, to the Rural Development loan or loans in proportion to
the approximate amounts due on each. Any excess will be distributed
according to paragraph (a)(2)(i)(C) of this section.

\(C\) Third, as advance payments on Rural Development loans. In making
such distributions, consider the principal balance outstanding on each
loan, the security position of the liens securing each loan, the
borrower\'s request, and related circumstances.

\(ii\) Unless otherwise established by the debt instrument, regular
payments will be applied as follows:

\(A\) For amortized loans, first to interest accrued (as of the date of
receipt of the payment), and then to principal.

\(B\) For principal-plus-interest loans, first to the interest due
through the date of the next scheduled installment of principal and
interest and then to principal due, with any balance applied to the next
scheduled principal installment.

\(3\) Extra payments are derived from sale of basic chattel or real
estate security; refund of unused loan funds; cash proceeds of property
insurance as provided in § 1806.5(b) of Subpart A of Part 1806
(paragraph V. B. of RD Instruction 426.1); and similar actions which
reduce the value of basic security. At the option of the borrower,
regular facility revenue may also be used as extra payments when regular
payments are current. Unless otherwise established in the note or bond,
extra payments will be distributed and applied as follows:

\(i\) First to the account secured by the lowest priority of lien on the
property from which the extra payment was obtained. Any balance will be
applied to other Rural Development loans in ascending order of priority.

\(ii\) For amortized loans, first to interest accrued to the date
payment is received, and then to principal. For debt instruments with
installments of principal plus interest, such payments will be applied
to the final unpaid principal installment.

## 9

(Revision 3)

(02-08-90) SPECIAL PN

RD Instruction 1951-E

§ 1951.221 (Con.)

\(b\) [Soil and Water Conservation Loans]{.underline}. (Revised
04-07-04, PN 373.)

\(1\) Regular payments for such loans are defined in § 1951.8(a) of
Subpart A of Part 1951 of this chapter, and are distributed according to
§ 1951.9(a) of that subpart unless otherwise established by the note or
bond.

\(2\) Extra payments are defined in § 1951.8(b) of Subpart A of Part
1951 of this chapter, and are distributed according to § 1951.9(b) of
that subpart.

§ 1951.222 [Subordination of security]{.underline}.

When a borrower requests Rural Development to subordinate a security
instrument so that another creditor or lender can refinance, extend,
reamortize, or increase the amount of a prior lien; be on parity with;
or place a lien ahead of the Rural Development lien, it will submit a
written request to the servicing office as provided below. For purposes
of this subpart, subordination is defined to include cases where a
parity security position is being considered.

\(a\) [General]{.underline}. The following requirements must normally be
met:

\(1\) The request must be for subordination of a specific amount of the
Rural Development indebtedness, and the amount must be within the
approval official\'s authority as set forth in Exhibits A and B of RD
Instruction 1901-A (available in any Rural Development office). (Revised
01-07-05, SPECIAL PN.)

\(2\) It must be determined that the borrower cannot refinance its Rural
Development debt in accordance with Subpart F of Part 1951 of this
chapter.

\(3\) The transaction will further the purposes for which the Rural
Development loan was made, not adversely affect the borrower\'s
debt-paying ability, and result in the Rural Development debt being
adequately secured.

\(4\) The terms and conditions of the prior lien will be such that the
borrower can reasonably be expected to meet them as well as the
requirements of all other debts.

## 10

## (Revision 3) 

§ 1951.222(a)(8) (Con.) RD Instruction 1951-E

\(5\) Any proposed development work will be planned and performed
according to § 1942.18 of Subpart A of Part 1942 of this chapter or in a
manner directed by the creditor which reasonably attains the objectives
of that section.

\(6\) All contracts, pay estimates, and change orders will be reviewed
and concurred in by the State Director.

\(7\) In cases involving land purchase, the Rural Development will
obtain a mortgage on the purchased land.

\(8\) When the transaction involves more than \$10,000 or the approval
official considers it necessary, a present market value appraisal report
will be obtained. However, a new report need not be obtained if there is
an appraisal report not over one year old which permits a proper
determination of the present market value of the total property after
the transaction.

\(9\) The proposed action must not change the nature of the borrower\'s
activities so as to make it ineligible for Rural Development loan
assistance.

\(10\) Necessary consent and subordination of all other outstanding
security interests must be obtained.

\(b\) [Authorities]{.underline}. Proposals not meeting one or more of
the above requirements will be submitted to the Administrator, Attention
(appropriate program division) for prior concurrence. All other
proposals may be approved by the official with loan approval authority
under Subpart A of Part 1901 of this chapter.

\(c\) [Processing]{.underline}. The case file is to include:

\(1\) The borrower\'s written request on Form RD 465-1, \"Application
for Partial Release, Subordination, or Consent,\" if appropriate, or in
other acceptable format. The request must contain the purpose of the
subordination; exact amount of money or property involved; description
of security property involved; type of security instrument; name,
address, line of business and other general information pertaining to
the party in favor of which the request is made; and other pertinent
information to evaluate the need for the request;

\(2\) Current balance sheet;

## 11

## (Revision 2)

(02-08-90) SPECIAL PN

RD Instruction 1951-E

§ 1951.222(c) (Con.)

\(3\) If development work is involved, an operating budget on Form\
RD 442-7, \"Operating Budget,\" or similar form which projects income
and expenses through the first full year of operation following
completion of planned improvements; or if no development work is
involved, an income statement and budget on Form RD 442-2, \"Statement
of Budget, Income, and Equity,\" schedules 1 and 2, or similar form;

\(4\) Copy of proposed security instrument;

\(5\) Appraisal report, when applicable;

\(6\) OGC opinion on the request;

\(7\) Exhibit A of this subpart (available in any Rural Development
office), appropriately completed;

\(8\) Appropriate environmental review; and

\(9\) Any other necessary supporting information.

\(d\) [Closing]{.underline}. All requests for subordination will be
closed according to instructions from OGC except those which affect only
chattel liens other than pledges of revenue. Rural Development consent
on Form\
RD 465-1 will be signed concurrently with Form RD 460-2, \"Subordination
by the Government,\" when applicable.

§ 1951.223 [Reamortization]{.underline}.

\(a\) [State Director authorization]{.underline}. The State Director is
authorized to approve reamortization of loans under the following
conditions:

\(1\) The account is delinquent and cannot be brought current within one
year while maintaining a reasonable reserve;

\(2\) The borrower has demonstrated for at least one year by actual
performance or has presented a budget which clearly indicates that it is
able to meet the proposed payment schedule;

\(3\) The amount being reamortized is within the State Director\'s loan
approval authorization; and

\(4\) There is no extension of the final maturity date.

## 12

## (Revision 2) 

RD Instruction 1951-E

§ 1951.223(a) (Con.)

\(b\) [Requests requiring National Office approval]{.underline}.
Reamortizations not meeting the above conditions require prior National
Office approval. Requests will be forwarded to the National Office with
the case file, including:

\(1\) Current budget and cash flow prepared on Form RD 442-2, schedules
1 and 2, or similar form;

\(2\) Current balance sheet and income statement;

\(3\) Exhibit A of this subpart, appropriately completed;

\(4\) Form RD 1951-33, \"Reamortization Request,\" completed in
accordance with § 1951.223(c)(3) of this subpart, when applicable; and
(Revised 03-19-08, SPECIAL PN.)

\(5\) Any other necessary supporting information.

## 12A

## (Revision 2) 

§ 1951.223 (Con.) RD Instruction 1951-E

\(c\) [Processing]{.underline}. When legally permissible and
administratively acceptable, the total outstanding principal and
interest balances will be reamortized rather than only the delinquent
amount. Accrued interest will be at the rate currently reflected in
Finance Office records.

\(1\) Reamortizations will be perfected in accordance with OGC closing
instructions.

\(2\) When debt instruments are being modified or new debt instruments
executed, bond counsel or local counsel, as appropriate, must provide an
opinion indicating any effect on Rural Development security position.
The Rural Development approval official must determine that the
government\'s interest will remain adequately protected if the security
position will be affected.

\(3\) [Notes]{.underline}. Except as provided in § 1951.223(c)(4), loans
evidenced by notes will be reamortized through a new evidence of debt
unless OGC recommends that the terms of the existing document be
modified. Form RD 1951-33 may be used to effect such modifications, if
legally adequate, or other forms may be used if acceptable to Rural
Development. The original of a new note or any endorsement required by
OGC is to be attached to the existing note, filed in the servicing
office, and retained until the account is paid in full or otherwise
satisfied. A copy will be forwarded to the Finance Office. (Revised
03-19-08, SPECIAL PN.)

\(4\) [Bonds and notes with other than real or chattel security pledged
to Rural Development]{.underline}. Loans evidenced by bonds, or by notes
with other than real or chattel security pledged to Rural Development,
may be reamortized using procedures acceptable to the State Director and
legally permissible under State statutes in the opinion of the
borrower\'s counsel and the OGC.

\(i\) The procedure may consist of a new debt instrument or agreement
for the total Rural Development indebtedness, including the delinquency,
or a new instrument or agreement whereby the borrower agrees to repay
the delinquency plus interest. If a new instrument or agreement for only
the delinquent amount is used, a new loan number will be assigned to the
delinquent amount, and the borrower will be required to pay the amounts
due under both the original and the new instruments.

\(ii\) When a delinquent or problem loan cannot be reamortized by
issuing a new debt instrument due to State statutes, or the cost of
preparation and closing is prohibitive, the rescheduling agreement
provided as Exhibit H of this subpart (available in any Rural
Development office), may be used.

## 13

## (Revision 3)

(02-08-90) SPECIAL PN

RD Instruction 1951-E

§ 1951.223(c)(4) (Con.)

\(iii\) Section 1942.19 of Subpart A of Part 1942 of this chapter
applies to any new bonds issued unless precluded by State statutes or an
exception is approved by the National Office.

\(iv\) If State statutes do not require the release of existing bonds,
they will be retained with the new bond instrument or agreement in the
Rural Development office authorized to store such documents. If State
statutes require release of existing bonds, the exchange will be
accomplished by the District Director, and the new bond and/or agreement
will be retained in the appropriate office.

\(5\) [New debt instruments or agreements]{.underline}.

\(i\) A copy will be sent to the Finance Office after execution, except
that if serial bonds are used, the original bond(s) will be submitted to
the Finance Office.

\(ii\) Any agreement used will contain:

\(A\) The amount delinquent, which must equal the total delinquency on
the account and net advances (the unpaid principal on any advance and
the accrued interest on any advance through the date of reamortization,
less interest payments credited on the advance account);

\(B\) The effective date of the reamortization;

\(C\) The number of years over which the delinquency will be amortized;

\(D\) The repayment schedule; and

\(E\) The interest rate.

\(iii\) A payment will be due on the next scheduled due date. Deferment
of interest and/or principal payments is not authorized.

\(iv\) A separate new instrument will be required for each loan being
reamortized.

\(v\) If amortized payments are not used, the schedule of principal
installments developed will be such that combined payments of principal
and interest closely approximate an amortized payment.

## 14

## (Revision 3) 

§ 1951.223 (Con.) RD Instruction 1951-E

\(d\) [Reamortization with interest rate adjustment - Water and Waste
borrowers only]{.underline}. A borrower that is seriously delinquent in
loan payments may be eligible for loan reamortization with interest rate
adjustment. The purpose of loan reamortization with interest rate
adjustment is to provide relief for a borrower that is unable to service
the outstanding loan in accordance with its existing terms and to
enhance recovery on the loan. A borrower must meet the conditions of
this subpart to be considered eligible for this provision.\
(Added 08-05-98, PN 294.)

\(1\) [Eligibility determination]{.underline}. The State Director, Rural
Development, may submit to the Administrator for approval an adjustment
in the rate of interest charged on outstanding loans only for those
borrowers who meet the following requirements:

\(i\) The borrower has exhausted all other servicing provisions
contained in this subpart;

\(ii\) The borrower is experiencing severe financial problems;

\(iii\) Any management deficiencies must have been corrected or the
borrower must submit a plan acceptable to the State office to correct
any deficiencies before an interest rate adjustment may be considered;

\(iv\) Borrower user rates must be comparable to similar systems. In
addition, the operating expenses reported by the borrower must appear
reasonable in relation to similar system expenses;

\(v\) The borrower has cooperated with Rural Development in exploring
alternative servicing options and has acted in good faith with regard to
eliminating the delinquency and complying with its loan agreements and
agency regulations; and

\(vi\) The borrower's account must be delinquent at least one annual
debt payment for 180 days.

\(2\) [Conditions of approval]{.underline}. All borrowers approved for
an adjustment in the rate of interest by the Administrator shall agree
to the following conditions:

\(i\) The borrower shall agree not to maintain cash or cash reserves
beyond what is reasonable at the time of interest rate adjustment to
meet debt service, operating, and reserve requirements.

## 14A

## (Added 08-05-98, PN 294)

(02-08-90) SPECIAL PN

RD Instruction 1951-E

§ 1951.223(d)(2) (Con.)

\(ii\) A review of the borrower's management and business operations may
be required at the discretion of the State Director. This review shall
be performed by an independent expert who has been recommended by the
State Director and approved by the National office. The borrower must
agree to implement all recommendations made by the State Director as a
result of the review.

\(iii\) If requested, a copy of the latest audited financial statements
or management report must be submitted to the Administrator.

\(3\) [Reamortization]{.underline}. At the discretion of the
Administrator, the interest rate charged on outstanding loans of
eligible borrowers may be adjusted to no less than the poverty interest
rate and the term of the loans may be extended up to a new 40 year term
or the remaining useful life of the facility, whichever is less.

## 14B

## (Added 08-05-98, PN 294) 

RD Instruction 1951-E

§1951.224 [Third party agreements]{.underline}.

The State Director may authorize all or part of a facility to be
operated, maintained or managed by a third party under a contract,
management agreement, written lease, or other third party agreement as
follows:

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

\(1\) [Lease of all or part of a facility (except when liquidation
action is pending)]{.underline}. The State Director may consent to the
leasing of all or a portion of security property when:

\(i\) Leasing is the only feasible way to provide the service and is the
customary practice as required under §1942.17(b)(4) of Subpart A of Part
1942 of this chapter; (Revised 05-19-92, SPECIAL PN.)

\(ii\) The borrower retains ultimate responsibility for operating,
maintaining, and managing the facility and for its continued
availability and use at reasonable rates and terms as required under
§1942.17(b)(4) of Subpart A of Part 1942 of this chapter. The lease
agreement must clearly reflect sufficient control by the borrower over
the operation, maintenance, and management of the facility to assure
that the borrower maintains this responsibility; (Revised 05-19-92,
SPECIAL PN.)

\(iii\) The lease agreement contains provisions prohibiting any
amendments to the lease or any subleasing arrangements without prior
written approval from Rural Development;

\(iv\) The lease document contains nondiscrimination requirements as set
forth in §1951.204 of this subpart;

\(v\) The lease contains a provision which recognizes that Rural
Development is a lienholder on the subject facility and, as such, the
lease is subordinate to the rights and claims of Rural Development as
lienholder; and

\(vi\) The lease does not constitute a lease/purchase arrangement,
unless permitted under §1951.232 of this subpart.

\(2\) [Lease of all or part of a facility (pending liquidation
action)]{.underline}. The State Director may consent to the leasing of
all or a portion of security property when:

\(i\) The lease will not adversely affect the repayment of the loan or
the Government\'s rights under the security or other instruments;

## 15

## (Revision 1)

(02-08-90) SPECIAL PN

RD Instruction 1951-E

§1951.224 (a)(2) (Con.)

\(ii\) The State Director has determined that liquidation will likely be
necessary and the lease is necessary until liquidation can be
accomplished;

\(iii\) Leasing is not an alternative to, or means of delaying,
liquidation action;

\(iv\) The lease and use of any proceeds from the lease will further the
objective of the loan;

\(v\) Rental income is assigned to Rural Development in an amount
sufficient to make regular payments on the loan and operate and maintain
the facility unless such payments are otherwise adequately secured;

\(vi\) The lease is advantageous to the borrower and is not
disadvantageous to the Government;

\(vii\) If foreclosure action has been approved and the case has been
submitted to OGC, consent to lease and use of proceeds will be granted
only with OGC\'s concurrence; and

\(viii\) The lease does not exceed a one-year period. The property may
not be under lease more than two consecutive years without authorization
from the National Office. Long-term leases may be approved, with prior
authorization from the National Office, if necessary to ensure the
continuation of services for which the loan was made and if other
servicing options contained in this subpart have been determined
inappropriate for servicing the loan.

\(b\) [Mineral leases]{.underline}. Unless liquidation is pending, the
State Director is authorized to approve mineral leases when:

\(1\) The lessee agrees, or is liable without any agreement, to pay
adequate compensation for any damage to the real estate surface and
improvements. Damage compensation will be assigned to Rural Development
or the prior lienholder by the use of Form RD 443-16, \"Assignment of
Income from Real Estate Security,\" or other appropriate instrument;

\(2\) Royalty payments are adequate and are assigned to Rural
Development on Form RD 443-16 in an amount determined by the State
Director to be adequate to protect the government\'s interest;

\(3\) All or a portion of delay rentals and bonus payments may be
assigned on Form RD 443-16 if needed for protection of the Government\'s
interest;

## 16

## (Revision 1) 

§1951.224 (b) (Con.) RD Instruction 1951-E

\(4\) The lease, subordination, or consent form is acceptable to OGC;

\(5\) The lease will not interfere with the purpose for which the loan
or grant was made; and

\(6\) When Rural Development consent is required, the borrower submits a
completed Form RD 465-1. The form will include the terms of the proposed
agreement and specify the use of all proceeds, including any to be
released to the borrower.

\(c\) [Management agreements]{.underline}. Management agreements should
contain the minimum suggested contents contained in Guide 24 of Part
1942, Subpart A of this chapter (available in any Rural Development
office).

\(d\) [Affiliation agreements]{.underline}. An affiliation agreement
between the borrower and a third party may be approved by the State
Director, with OGC concurrence, if it provides for shared services
between the parties and does not result in changes to the borrower\'s
legal organizational structure which would result in its loss of control
over its assets and/or over the operation, management, and maintenance
of the facility to the extent that it cannot carry out its
responsibilities as set forth in §1942.17(b)(4) of Subpart A of Part
1942 of this chapter. However, affiliation agreements which result in a
loss of borrower control may be approved with prior concurrence of the
Administrator if the loan is reclassified as a nonprogram loan and the
borrower is notified that it is no longer eligible for any program
benefit. Requests forwarded to the Administrator will contain the case
file, the proposed affiliation agreement, and necessary supporting
information. (Revised 05-19-92, SPECIAL PN.)

\(e\) [Processing]{.underline}. The consent of other lienholders will be
obtained when required. When National Office approval is required, or if
the State Director wishes to have a transaction reviewed prior to
approval, the case file will be forwarded to the National Office and
will include:

\(1\) A copy of the proposed agreement;

\(2\) Exhibit A of this subpart (available in any Rural Development
office), appropriately completed.

\(3\) Any other necessary supporting information.

## 17

## (Revision 1)

(02-08-90) SPECIAL PN

RD Instruction 1951-E

§1951.225 [Liquidation of security]{.underline}.

When the District Director believes that continued servicing will not
accomplish the objectives of the loan, he or she will complete Exhibit A
of this subpart (available in any Rural Development office), and submit
it with the District Office file to the State Office. If the State
Director determines the account should be liquidated, he or she will
encourage the borrower to dispose of the Rural Development security
voluntarily through a sale or transfer and assumption, and establish a
specified period, not to exceed 180 days, to accomplish the action. If a
transfer or voluntary sale is not carried out, the loan will be
liquidated according to Subpart A of Part 1955 of this chapter.

§1951.226 [Sale or exchange of security property]{.underline}.

A cash sale of all or a portion of a borrower\'s assets or an exchange
of security property may be approved subject to the conditions set forth
below.

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

\(1\) The District Director is authorized to approve actions under this
section involving only chattels.

\(2\) The State Director is authorized to approve real estate
transactions except as noted in the following paragraph.

\(3\) Approval of the Administrator must be obtained when a substantial
loss to the Government will result from a sale; one or more members of
the borrower\'s organization proposes to purchase the property; it is
proposed to sell the property for less than the appraised value; or the
buyer refuses to assume all the terms of the Grant Agreement. It is not
Rural Development policy to sell security property to one or more
members of the borrower\'s organization at a price which will result in
a loss to the Government.

\(b\) [General]{.underline}. Approval may be given when the approval
official determines and documents that:

\(1\) The consideration is adequate;

\(2\) The release will not prevent carrying out the purpose of the loan;

\(3\) The remaining property is adequate security for the loan or the
transaction will not adversely affect Rural Development\'s security
position;

\(4\) If the property to be sold or exchanged is to be used for the same
or similar purposes for which the loan or grant was made, the purchaser
will:

## 18

## (Revision 1) 

RD Instruction 1951-E

§ 1951.226(b)(4) (Con.)

\(i\) Execute Form RD 400-4, \"Assurance Agreement.\" The covenants
involved will remain in effect as long as the property continues to be
used for the same or similar purposes for which the loan or grant was
made. The instrument of conveyance will contain the covenant referenced
in § 1951.204 of this subpart; and

\(ii\) Provide to Rural Development a written agreement assuming all
rights and obligations of the original grantee if grant funds were
provided. See § 1951.215 of this subpart for additional guidance on
grant agreements. (Revised 01-07-05, SPECIAL PN.)

\(5\) The proceeds remaining after paying any reasonable and necessary
selling expenses are used for one or more of the following purposes:

\(i\) To pay on Rural Development debts according to §1951.221 of this
subpart; on debts secured by a prior lien; and on debts secured by a
subsequent lien if it is to Rural Development\'s advantage.

## 18A

## (Revision 1)

(02-08-90) SPECIAL PN

RD Instruction 1951-E

§1951.226 (b) (5) (Con.)

\(ii\) To purchase or acquire through exchange property more suited to
the borrower\'s needs, if the Rural Development debt will be as well
secured after the transaction as before.

\(iii\) To develop or enlarge the facility if necessary to improve the
borrower\'s debt-paying ability; place the operation on a sounder basis;
or otherwise further the loan objectives and purposes.

\(6\) Disposition of property acquired in whole or part with Rural
Development grant funds will be handled in accordance with the grant
agreement.

\(c\) [Processing]{.underline}.

\(1\) The case file will contain the following:

\(i\) Except for actions approved by the District Director, Exhibit A of
this subpart (available in any Rural Development office), appropriately
completed;

\(ii\) The appraisal report, if appropriate;

\(iii\) Name of purchaser, anticipated sales price, and proposed terms
and conditions;

\(iv\) Form RD 1965-8, \"Release from Personal Liability,\" including
the County Committee memorandum and the State Director\'s
recommendations;

\(v\) An executed Form RD 400-4, if applicable;

\(vi\) An executed Form RD 465-1, if applicable;

\(vii\) Form RD 460-4, \"Satisfaction,\" if a debt has been paid in full
or satisfied by debt settlement action. For cases involving real estate,
a similar form may be used if approved by OGC; and

\(viii\) Written approval of the Administrator when required under
§1951.226(a)(3) of this subpart;

\(2\) [Releasing security]{.underline}.

\(i\) The District Director is authorized to satisfy or terminate
chattel security instruments when §1951.226(b) of this subpart and
§1962.17 and §1962.27 of Subpart A of Part 1962 of this chapter have
been complied with. Partial release may be made by using Form RD 460-1,
\"Partial Release,\" or Form RD 462-12, \"Statements of Continuation,
Partial Release, Assignment, Etc.\"

## 19

(02-08-90) SPECIAL PN

RD Instruction 1951-E

§1951.226 (c) (2) (Con.)

\(ii\) Subject to §1951.226(b) of this subpart, the State Director is
authorized to release part or all of an interest in real estate security
by approving Form RD 465-1. Partial release of real estate security may
be made by use of Form RD 460-1 or other form approved by OGC.

\(3\) Rural Development liens will not be released until the sale
proceeds are received for application on the Government\'s claim. In
states where it is necessary to obtain the insured note from the lender
to present to the recorder before releasing a portion of the land from
the mortgage, the borrower must pay any cost for postage and insurance
of the note while in transit. The District Director will advise the
borrower when it requests a partial release that it must pay these
costs. If the borrower is unable to pay the costs from its own funds,
the amounts shown on the statement of actual costs furnished by the
insured lender may be deducted from the sale proceeds.

\(d\) [Release from liability]{.underline}.

\(1\) When an Rural Development debt is paid in full from the proceeds
of a sale, the borrower will be released from liability by use of Form
RD 1965-8.

\(2\) When sale proceeds are not sufficient to pay the Rural Development
debt in full, any balance remaining will be handled in accordance with
procedures for debt settlement actions set forth in Subpart C of Part
1956 of this chapter.

\(i\) In determining whether a borrower should be released from
liability, the State Director will consider the borrower\'s debt-paying
ability based on its assets and income at the time of the sale.

\(ii\) Release from liability will be accomplished by using Form RD
1965-8 and obtaining from the County Committee a memorandum recommending
the release which contains the following statement:

\"\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ in our opinion does

not have reasonable debt-paying ability to pay

the balance of the debt after considering its

assets and income at the time of the sale.

The borrower has cooperated in good faith, used

due diligence to maintain the security against

loss, and otherwise fulfilled the covenants

incident to the loan to the best of its ability.

Therefore, we recommend that the borrower be

released from liability upon the completion of

the sale.\"

## 20 

RD Instruction 1951-E

§1951.227 [Protective advances]{.underline}.

The State Director is authorized to approve, without regard to any loan
or total indebtedness limitation, vouchers to pay costs, including
insurance and real estate taxes, to preserve and protect the security,
the lien, or the priority of the lien securing the debt owed to or
insured by Rural Development if the debt instrument provides that Rural
Development may voucher the account to protect its lien or security. The
State Director must determine that authorizing a protective advance is
in the best interest of the government. For insurance, factors such as
the amount of advance, occupancy of the structure, vulnerability to
damage and present value of the structure and contents will be
considered.

\(a\) Protective advances are considered due and payable when advanced.
Advances bear interest at the rate specified in the most recent debt
instrument authorizing such an advance.

\(b\) Protective advances are not to be used as a substitute for a loan.

\(c\) Vouchers are prepared in accordance with applicable procedures set
forth in RD Instruction 2024-A (available in any Rural Development
office). (Revised 08-13-92, SPECIAL PN.)

§§1951.228 - §1951.229 \[Reserved\]

§1951.230 [Transfer of security and assumption of loans]{.underline}.

\(a\) [General]{.underline}. It is Rural Development policy to approve
transfers and assumptions to transferees which will continue the
original purpose of the loan in accordance with the following and
specific requirements relating to eligible and ineligible borrowers set
forth below:

\(1\) The present borrower is unable or unwilling to accomplish the
objectives of the loan.

\(2\) The transfer will not be disadvantageous to the Government or
adversely affect either Rural Development\'s security position or the
Rural Development program in the area.

\(3\) Transfers to eligible applicants will receive preference over
transfers to ineligible applicants if recovery to Rural Development is
not less than it would be if the transfer were to an ineligible
applicant.

\(4\) If the Rural Development debt(s) exceed the present market value
of the security as determined by the State Director, the transferee will
assume an amount at least equal to the present market value.

\(5\) If the transfer and assumption is to one or more members of the
borrower\'s organization, there must not be a loss to the government.

## 21

## (Revision 1)

(02-08-90) SPECIAL PN

RD Instruction 1951-E

§1951.230 (a) (Con.)

\(6\) Rural Development concurs in plans for disposition of funds in the
transferor\'s debt service, reserve, operation and maintenance, and any
other project account, including supervised bank accounts.

\(7\) When the property to be transferred is to be used for the same or
similar purposes for which the loan was made, the transferee will
execute Form RD 400-4 to continue nondiscrimination covenants and
provide to Rural Development a written certification assuming all terms
of the Grant Agreement executed by the transferor. All instruments of
conveyance will contain the covenant referenced in §1951.204 of this
subpart.

\(8\) This subpart does not preclude the transferor from receiving
equity payments when the full amount of the Rural Development debt is
assumed. However, equity payments will not be made on more favorable
terms than those on which the balance of the Rural Development debt will
be paid.

\(9\) Transferees must have the ability to pay the Rural Development
debt as provided in the assumption agreement and the legal capacity to
enter into the contract. The applicant will submit a current balance
sheet using Form RD 442-3, \"Balance Sheet,\" and budget and cash flow
information using Form RD 442-2, or similar forms. For ineligible
applicants, such information may be supplemented by a credit report from
an independent source or verified by an independent certified public
accountant.

\(10\) For purposes of this subpart, transfers to eligible applicants
will include mergers and consolidations. Mergers occur when two or more
corporations combine in such a manner that only one remains in
existence. In a consolidation, two or more corporations combine to form
a new, consolidated corporation, with all of the original corporations
ceasing to exist. In both mergers and consolidations, the surviving or
emerging corporation takes the assets and assumes the liabilities of the
corporation(s) which ceased to exist. Such transactions must be
distinguished from transfers and assumptions, in which a transferor will
not necessarily go out of existence and the transferee will not always
take all assets or assume all liabilities of the transferor.

\(11\) A current appraisal report to establish the present market value
of the security will be completed in accordance with §1951.220(i) of
this subpart when the full debt is not being assumed.

## 22

## (Revision 1) 

RD Instruction 1951-E

§ 1951.230 (a) (Con.)

\(12\) There must be no lien, judgement, or similar claims of other
parties against the Rural Development security being transferred unless
the transferee is willing to accept such claims and the Rural
Development approval official determines that they will not prevent the
transferee from repaying the Rural Development debt, meeting all
operating and maintenance costs, and maintaining required reserves. The
written consent of any other lienholder will be obtained where required.

\(b\) [Authorities]{.underline}. The State Director is authorized to
approve transfers and assumptions of Rural Development loans in
accordance with the provisions of paragraphs (c) and (d) of this
section, except for the following, which require prior approval of the
Administrator:

\(1\) Proposals which will involve a loss to the Government;

\(2\) Proposals involving a transfer to one or more members of the
present borrower\'s organization;

\(3\) Proposals involving rates and terms which are more liberal than
those set forth in § 1951.230(c) of this subpart;

\(4\) Proposals involving a cash payment to the present borrower which
exceeds the actual sales expenses;

\(5\) The transferee refuses to assume all terms of the Grant Agreement
for a project financed in part with Rural Development grant funds; and
(Revised 10-31-01, PN 337)

\(6\) Proposed transfers to ineligible applicants when there is no
significant downpayment and/or the repayment period is to exceed 25
years. (Revised 10-31-01, PN 337)

\(c\) [Eligible applicants]{.underline}. Except as noted in §
1951.230(b) of this subpart, the State Director is authorized to approve
transfers of security property to and assumptions of Rural Development
debts by transferees who would be eligible for financial assistance
under the loan program involved for the type of loan being transferred.
The State Director must determine and document that eligibility
requirements have been satisfied.

## 23

## (Revision 2)

(02-08-90) SPECIAL PN

RD Instruction 1951-E

§ 1951.230 (c) (Con.)

\(1\) If a loan is evidenced and secured by a note and lien on real or
chattel property, Form RD 1951-15, \"Community Programs Assumption
Agreement,\" will be executed by the transferee. When the terms of the
loan are changed, the new repayment period may not exceed the lesser of
the repayment period for a new loan of the type involved or the expected
life of the facility. Interest will accrue at the rate currently
reflected in Finance Office records.

\(2\) If the loan is evidenced and secured by a bond, procedures will be
followed which are acceptable to the State Director and legally
permissible under State law in the opinion of the borrower\'s counsel
and OGC. The interest rate will be the rate currently reflected in
Finance Office records. Any new repayment period provided may not exceed
the lesser of the repayment period for a new loan of the type involved
or the expected life of the facility.

\(3\) Loans being transferred and assumed may be combined when the
security is the same, new terms are being provided, a new debt
instrument will be issued, and the loans have the same interest rate and
are for the same purpose. If applicable, § 1942.19(h)(11) will govern
the preparation of any new debt instruments required.

\(4\) A loan may be made in connection with a transfer if the transferee
meets all eligibility and other requirements for the kind of loan being
made. Such a loan will be considered as a separate loan, and must be
evidenced by a separate debt instrument. However, it is permissible to
have one authorizing loan resolution or ordinance if permitted by State
statutes.

\(5\) Any development funds remaining in a supervised bank account which
are not to be refunded to Rural Development will be transferred to a
supervised bank account for the transferee simultaneously with the
closing of the transfer for use in completing planned development.

\(d\) [Ineligible applicants]{.underline}. Except as noted in §
1951.230(b) of this subpart, the State Director is authorized to approve
transfer and assumptions to transferees who would not be eligible for
financial assistance under the loan program involved for the type of
loan being transferred. However, the State Director is authorized to
approve all transfers of incorporated Economic Opportunity Cooperative
loans to ineligible applicants without regard to the requirements set
forth in\
§ 1951.230 (b). Such transfers are considered only when an eligible
transferee is not available or when the recovery to Rural Development

## 24

## (Revision 2) 

RD Instruction 1951-E

§ 1951.230 (d) (Con.)

from a transfer to an available eligible transferee would be less.
Transfers are not to be considered as a means by which members of the
transferor\'s governing body can obtain an equity or as a method of
providing a source of easy credit for purchasers.

\(1\) Ineligible applicants must pay a one-time nonrefundable transfer
fee when they submit an application or proposal.

\(i\) The National Office will issue a directive annually advising the
field of the amount of the fee. Any cost for appraisals performed by
non-Rural Development personnel will be handled in accordance with RD
Instruction 2024-A (available in any Rural Development office), and will
be added to the basic fee. (Revised 08-13-92, SPECIAL PN.)

\(ii\) Transfer fees will be deposited in accordance with current
instructions governing the handling of collections. The fees will be
identified as transfer fees on Form RD 451-2, \"Schedule of
Remittances,\" and will be included on the Daily Activity Report. The
amount will be credited to the Rural Development Insurance Fund.

\(iii\) If the State Director determines waiver of the transfer fee is
in the best interest of the government, he or she will request prior
approval by submitting the

## 24A

## (Revision 1)

(02-08-90) SPECIAL PN

RD Instruction 1951-E

§ 1951.230(d)(1)(iii) (Con.)

transfer case file established in accordance with processing
requirements set forth below to the National Office, Attention
(appropriate program division).

\(2\) Any funds remaining in a supervised bank account will be refunded
to Rural Development and applied to the debt as a condition of transfer.

\(3\) The interest rate will be the greater of the rate specified for
the note in current Finance Office records or the market rate for
Community Programs as of the transfer closing date.

\(4\) The transferred loan will be identified as an NP loan and serviced
in accordance with § 1951.216 of this subpart.

\(5\) Form RD 465-5, \"Transfer of Real Estate Security,\" will be used,
and will be modified as appropriate before execution.

\(6\) Consideration will be given to obtaining individual liability
agreements from members of the transferee organization.

\(e\) [Release from liability]{.underline}. Except when nonprogram loans
or Economic Opportunity Cooperative loans are involved, transferors may
be released from liability in accordance with the following:

\(1\) If the full amount of the debt is assumed, the State Director may
approve the release from liability by use of Form RD 1965-8.

\(2\) If less than the full amount of the debt is assumed, any balance
remaining will be handled in accordance with procedures for debt
settlement actions set forth in Subpart C of Part 1956 of this chapter.

\(i\) In determining whether a borrower should be released from
liability, the State Director will consider the borrower\'s debt-paying
ability based on its assets and income at the time of the sale.

\(ii\) Release from liability will be accomplished by using Form RD
1965-8 and obtaining from the County Committee a memorandum recommending
the release which contains the statement set forth in §
1951.226(d)(2)(ii) of this subpart.

\(f\) [Processing]{.underline}. Transfers and assumptions will be
processed in accordance with the following:

\(1\) A transfer case file organized in accordance with RD Instruction
2033-A (available in any Rural Development office) will be established,
and will contain all documents and correspondence relating to the
transfer. The forms utilized for transfers and assumptions are listed in
Exhibit D (available in any Rural

## 25

## (Revision 1)

(02-08-90) SPECIAL PN

RD Instruction 1951-E

§ 1951.230(f)(1) (Con.)

Development office). All forms listed must be completed and included in
the case file unless inappropriate for the particular situation.

\(2\) A letter of conditions establishing requirements to be met in
connection with the transfer and assumption will be issued, and the
transferee will be required to execute Form RD 1942-46, \"Letter of
Intent to Meet Conditions,\" prior to the closing of the transfer.
(Revised 01-07-05, SPECIAL PN.)

\(3\) Both the transferee and transferor are responsible for obtaining
the legal services necessary to accomplish the transfer.

\(4\) Transfers will be closed in accordance with instructions provided
by OGC.

\(5\) When the transferee is a public body and Form RD 1951-15 is not
suitable, the transferee\'s attorney will prepare the documents
necessary to effect the transfer and assumption and submit them for
approval by Rural Development and OGC.

\(6\) Accrued interest to be entered in either Table I of Form RD
1951-15 or other appropriate assumption agreement is to be obtained
using the status screen option in ADPS. (Revised 01-07-05, SPECIAL PN.)

\(7\) The following forms, if utilized, will be sent immediately to the
Finance Office:

\(i\) Form RD 1951-15 or other appropriate assumption agreement;

\(ii\) A conformed copy of Form RD 1965-8.

\(8\) If an Rural Development grant was made in conjunction with the
loan being transferred, the transferee must agree in writing to assume
all rights and obligations of the original grantee. See\
§ 1951.215 for additional guidance on grant agreements.

\(9\) The transferee will obtain insurance according to requirements for
the loan(s) being transferred unless the approval official requires
additional insurance. When the entire Rural Development debt is being
assumed and an amount has been advanced for insurance premiums or any
other purposes, the transfer will not be completed until the Finance
Office has charged the advance to the transferor\'s account.

\(10\) [Rates and terms]{.underline}.

\(i\) If the transfer will be closed at the same rates and terms, the
transferee will be informed of the amount needed to be on schedule by
the next installment due date.

## 26

## (Revision 1) 

RD Instruction 1951-E

§1951.230 (f) (10) (Con.)

\(ii\) If the transfer will be closed at new rates and terms, the
transferee will be informed of the amount of principal and interest owed
based on information obtained using the ADPS status screen option.

\(11\) The effective date of a transfer is the actual date the transfer
is closed, which is the same date Form RD 1951-15 or other appropriate
assumption agreement is signed.

\(12\) Title to all assets will be conveyed from the transferor to the
transferee unless other arrangements are agreed upon by all parties
concerned, including Rural Development. All instruments of conveyance
will contain the covenant referenced in §1951.204 of this subpart.

\(13\) If an insured loan being held by an investor is involved, the
Finance Office will have to repurchase the note prior to processing the
assumption agreement.

\(14\) When National Office approval is required, the transfer case file
will be submitted to the Administrator, Attention: (appropriate program
division), with Exhibit A of this subpart (available in any Rural
Development office), appropriately completed, and a cover memorandum
which denotes any unusual circumstances.

\(15\) The District Director must review Form RD 1910-11, \"Applicant
Certification, Federal Collection Policies for Consumer or Commercial
Debts,\" with the applicant, and the form must be signed by the
applicant and included in the file.

§1951.231 [Special provisions applicable to Economic Opportunity (EO)
Cooperative loans]{.underline}.

\(a\) [Withdrawal of member and transfer to and assumption by new
members of Unincorporated Cooperatives]{.underline}.

\(1\) Withdrawal of a member who is no longer utilizing the services of
an association and transfer of withdrawing member interest in the
association to a new member who will assume the entire unpaid balance of
the indebtedness of the withdrawing member may be permitted, if the
remaining members agree to accept the new member and the transfer will
not adversely affect collection of the loan. The servicing office will
submit to the State Office the borrower case file and the following:

\(i\) Form RD 1951-15 executed by the proposed new member;

\(ii\) Statement of the current amount of the indebtedness involved;

\(iii\) A description and statement of the value of the security
property;

## 27

(02-08-90) SPECIAL PN

RD Instruction 1951-E

§1951.231 (a) (1) (Con.)

\(iv\) A memorandum to justify the transaction;

\(v\) Form RD 440-2, \"County Committee Certification or
Recommendation;\"

\(vi\) Exhibit B of this subpart, \"Agreement for New Member (With or
Without Withdrawing Member),\" (available in any Rural Development
office), executed by the remaining members of the association, the
proposed new member, and the withdrawing member; and

\(vii\) Form RD 450-12, \"Bill of Sale (Transfer by Withdrawing
Member),\" executed by the withdrawing member.

\(2\) If the State Director determines after review of the above
information that the proposed new member is eligible and the transfer is
justified, the State Director may approve the transfer and assumption by
executing Form RD 1951-15.

\(3\) Upon completion of the above actions, the State Director may
release the outgoing member from personal liability using Form RD
1965-8.

\(4\) If Finance Office records must be changed due to changes in
borrower name, address and/or case number, necessary documents,
including Form RD 1951-15 and, if applicable, Form RD 1965-8, will be
forwarded to the Finance Office immediately with a memorandum indicating
that the purpose of the submission is only to establish liability for a
new member and release an old member from liability.

\(b\) [Withdrawal of members from Unincorporated Cooperatives when new
member not available]{.underline}. Withdrawal of a member who no longer
utilizes the services of an association may be permitted even though a
new member is not available, provided:

\(1\) The State Director determines that the remaining members have
sufficient need for the property, and that the withdrawal of the member
will not adversely affect collection of the loan; and

\(2\) The remaining members obtain from the outgoing member an agreement
conveying his or her interest in the cooperative property to them. They
may also wish to agree to protect the outgoing member against liability
on the debt owed to Rural Development as well as any other debts.
Exhibit C of this subpart, \"Agreement for Withdrawal of Member (Without
New Member),\" (available in any Rural Development office), may be used
by the cooperative. Rural Development will not be a party to the
agreement.

## 28 

§1951.231 (Con.) RD Instruction 1951-E

\(c\) [Addition of new members (no withdrawing member or transfer
involved) for both Incorporated and Unincorporated
Cooperatives]{.underline}.

\(1\) A new member may be admitted to the association even though there
is no withdrawing member, if:

\(i\) The members of the association agree to accept the proposed new
member, and

\(ii\) The State Director determines that the association owns adequate
facilities to provide service to the new member.

\(2\) The servicing office will submit to the State Office the case file
and items (i) through (vi) of §1951.231(a)(1).

\(3\) If the State Director determines after the review of the above
information that the proposed new member is eligible and the transaction
is justified, the State Director may approve the transaction by
executing Form RD 1951-15.

\(4\) Form RD 1951-15 will be forwarded immediately to the Finance
Office with a memorandum indicating that the form is intended only to
establish liability for a new member.

\(d\) [Deceased members of Unincorporated Cooperatives]{.underline}.
Form RD 442-24, \"Operating Agreement,\" (now obsolete) was executed by
recipients of these loans. Paragraph 10 of that form provides that in
case of the death of any member, the heirs or personal representative of
the deceased member shall take the deceased member\'s place in the
association. This provision also covers sale of the decedent\'s interest
in the association if the sale is necessary to pay debts of the estate.

\(1\) If the heirs or personal representative do not wish to continue
membership in the association, the remaining members may be permitted to
continue to operate the property if Rural Development\'s financial
interest will not be jeopardized. The remaining members should obtain
from the deceased member\'s estate an agreement conveying the estate\'s
interest in the cooperative property to them. The remaining members may
wish to agree to protect the estate against liability on the debt to
Rural Development as well as any other debts of the cooperative.

\(2\) The requirement of §1962.46(h) of Subpart A of Part 1962 will also
be followed.

\(e\) [Action which affects individual members of Unincorporated EO
Cooperative security]{.underline}. The borrower will be expected to
protect its own interest in condemnation, trespass, quiet title, and
other cases affecting the security. The servicing office will
immediately furnish the complete facts concerning any action taken
against individual members of Unincorporated Cooperatives to the State
Director together with the case file.

29

(Revision 1)

(02-08-90) SPECIAL PN

RD Instruction 1951-E

§1951.231 (Con.)

\(f\) [Debt Settlement]{.underline}. Debt settlement actions for
Economic Opportunity Cooperative loans must be handled under the Federal
Claims Collection Act; proposals will be submitted to the National
Office for review and approval.

§1951.232 [Water and waste disposal systems which have become part of an
urban area]{.underline}.

A water and/or waste disposal system serving an area which was formerly
a rural area as defined in §1942.17(b)(2)(iii) and (iv) of Subpart A of
Part 1942 of this chapter, but which has become in its entirety part of
an urban area, will be serviced in accordance with this section.
(Revised 05-19-92, SPECIAL PN.)

\(a\) [Curtailment or limitation of service]{.underline}. Service may
not be curtailed or limited by the inclusion of a system within an urban
area.

\(b\) [Sale or transfer and assumption]{.underline}.

\(1\) The urban community or another entity may purchase the facility
involved and immediately pay the Rural Development debt in full; or

\(2\) The urban community or another entity may accept a transfer of the
Rural Development debt on an ineligible applicant basis.

\(3\) When a grant is involved, the entity will agree in writing to
assume all rights and obligations of the original grantee. See §1951.215
for additional guidance on grant agreements.

\(c\) [Lease-purchase arrangement]{.underline}. If §1951.232(b)(1) and
(2) of this section are not practicable, the urban community may, with
prior approval of the National Office, operate and maintain the system
under a lease-purchase arrangement which provides that:

\(1\) The urban community will:

\(i\) Assume responsibility for operation and maintenance of the
facility, subject to nondiscrimination and all other requirements which
are applicable to the borrower, which are to be specified in the
agreement between the parties; and

\(ii\) Pay the association annually an amount sufficient to enable it to
meet all its obligations, including reserve account requirements.

\(2\) The Rural Development borrower will:

\(i\) Meet its debt service and reserve account requirements to Rural
Development;

\(ii\) Retain its corporate existence until Rural Development has been
paid in full; and

## 30

## (Revision 1) 

RD Instruction 1951-E

§ 1951.232(c)(2) (Con.)

\(iii\) If agreed upon by both parties, convey title to the facility to
the urban community when the Rural Development debt has been paid in
full.

\(d\) [Processing]{.underline}.

\(1\) Sale of a borrower\'s assets will be handled in accordance with
§1951.226 of this subpart.

\(2\) Transfer and assumption of a borrower\'s assets and indebtedness
will be handled in accordance with § 1951.230 of this subpart.

\(3\) Lease-option-to-purchase arrangements are not permitted.

\(4\) When a lease-purchase arrangement is proposed, the State Director
will obtain a proposed agreement drafted by either the borrower or the
urban community. The following will be forwarded to the Administrator,
Attention: Water and Waste Disposal Division, for review and approval
authorization:

\(i\) A copy of the proposed agreement;

\(ii\) Exhibit A of this subpart (available in any Rural Development
office), appropriately completed;

\(iii\) OGC comments;

\(iv\) The case file, including all documentation appropriate for the
type of servicing action involved.

§§ 1951.233 - 1951.239 \[Reserved\]

§ 1951.240 [State Director\'s additional authorizations and
guidance]{.underline}.

\(a\) [Promote financing purposes and improve or maintain
collectibility]{.underline}. The State Director is authorized to perform
the following functions when the action is determined likely to promote
the loan or grant purposes without jeopardizing collectibility of the
loan or impairing the adequacy of the security; will strengthen the
security; or will facilitate, improve, or maintain the orderly
collection of the loan:

\(1\) Approve requests for permission to modify bylaws, articles of
incorporation, or other rules and regulations of recipients, including
changes in rate or fee schedules. Changes affecting the recipient\'s
legal organizational structure must be approved by OGC.

\(2\) Consent to requests by the recipient to incur additional
indebtedness, subject to applicable Rural Development Instructions and
covenants in the loan or grant agreement.

\(3\) Renew existing security instruments.

## 31

## 

(02-08-90) SPECIAL PN

RD Instruction 1951-E

§ 1951.240(a) (Con.)

\(4\) Approve the extension or expansion of facilities and services.

\(5\) Require additional security when:

\(i\) Existing security is inadequate and the loan or security
instruments obligate the borrower to give additional security; or

\(ii\) The loan is in default and additional security is acceptable in
lieu of other servicing actions.

\(6\) Release properties being sold by the borrower from mortgages
securing Rural Renewal loans if the amount of the notes and mortgages
given by the purchaser to the borrower equal the present market value
and are assigned and pledged to Rural Development, and any money payable
to the borrower is applied as an extra payment on the Rural Renewal
loan.

\(7\) Approve requests for rights-of-way and easements and any
subordination necessary in connection with such requests.

\(b\) [Referrals to National Office]{.underline}. All proposed servicing
actions which the State Director is not authorized by this subpart to
approve will be referred to the National Office.

\(c\) [Defeasance of Rural Development indebtedness]{.underline}.
Defeasance is the use of invested proceeds from a new bond issue to
repay outstanding bonds in accordance with the repayment schedule of the
outstanding bonds. The new issue supersedes the contractual agreements
the borrower agreed to in the prior issue. Defeasance, or amending
outstanding loan instruments and agreements to permit defeasance, of
Rural Development debt instruments is not authorized, since defeasance
limits, or eliminates entirely, the borrower\'s ability to comply with
statutory refinancing requirements implemented by Subpart F of Part 1951
of this chapter.

§ 1951.241 [Special provision for interest rate change]{.underline}.

\(a\) [General]{.underline}. Effective October 1, 1981, and thereafter,
upon request of the borrower, the interest rate charged by Rural
Development to water and waste disposal and community facility borrowers
shall be the lower of the rates in effect at either the time of loan
approval or loan closing. Pub.L. 99-88 provides that any Rural
Development grant funds associated with such loans shall be set in the
amount based on the interest rate in effect at the time of loan
approval. Loans closed October 1, 1981, through October 25, 1985, were
closed at the interest rate in effect at the time of loan approval and
that interest rate is reflected in the borrower\'s debt instrument. For
community facility and water and waste disposal loans closed on or after
October 1, 1981, and for which the interest rate in effect at the time
of loan closing is lower than the interest rate in effect at the time of
loan approval, the borrower may request to be charged the lower interest
rate. The loan

## 32

##  

RD Instruction 1951-E

§ 1951.241(a) (Con.)

closing interest rate will be determined by Rural Development based upon
requirements in effect at the date of loan closing. Exhibit E of this
subpart (available in any Rural Development office) contains a summary
of interest rate requirements for specific time periods. Exhibit C of
Subpart O of this part (available in any Rural Development office) will
be used to determine the interest rate and effective dates by category
of poverty, intermediate, and market rates. Exhibit F of this subpart
(available in any Rural Development office) contains the instructions on
how to process a change of interest rate. Loans meeting the criteria of
this section that have been paid in full are eligible for the borrower
to request the lower interest rate. For loan(s) that involved multiple
advances of Rural Development funds using temporary debt instruments,
wherein the borrower requests the interest rate in effect at loan
closing, the interest rate charged shall be the rate in effect on the
date when the first temporary debt instrument was issued.

\(b\) [Notification to borrower and borrower selection of interest
rate]{.underline}.

\(1\) Rural Development servicing officials will notify each borrower
meeting the provisions of this section of the availability of a choice
of interest rate. The notification will be made in writing at the
earliest possible date, utilizing Exhibit G of this subpart (available
in any Rural Development office), and sent by certified mail, return
receipt requested. Borrowers will be advised at the time of notification
that if a change of interest rate is requested, the change will be
accomplished administratively by Rural Development. The effect of the
change on the loan account will also be fully explained to the borrower.

\(2\) Borrowers must notify Rural Development within 90 calendar days of
the date of Rural Development notification indicating their election to
retain the rate in effect at loan approval or to change the rate to the
rate in effect at the time of loan closing. If the borrower does not
respond within the 90-day period, Rural Development will not consider a
future request for a lower interest rate under the provisions of this
subpart.

\(3\) The borrower is responsible for assuring that the official
executing the letter requesting the change of interest rate is duly
authorized and any action(s) necessary for this authorization have been
taken as required. Any costs associated with a change of interest rate
will be the responsibility of the borrower.

\(c\) [Processing loan interest rate change]{.underline}. The State
Director is authorized to approve loan interest rate changes which meet
the requirements of this section. Loan interest rate changes will be
accomplished as follows:

\(1\) All loan payments already applied to the account(s) will be
reversed and reapplied by Rural Development utilizing the changed
interest rate. The balance remaining after the completion of the

## 33

(Revision 1)

(02-08-90) SPECIAL PN

RD Instruction 1951-E

§ 1951.241(c)(1) (Con.)

reversal and reapplication procedures will be applied first to any
delinquency on the account and then to principal.

\(2\) For paid-in-full accounts which meet the criteria of\
§ 1951.241(a) of this subpart, the balance of loan payments after
completion of the reversal and reapplication procedures will be returned
to the borrower unless the borrower is delinquent on another Rural
Development loan of the same type. In those cases the amount will be
applied to the delinquent amount owed, with any balance refunded to the
borrower.

\(3\) The Finance Office will administratively change the interest rate
on a borrower\'s account in accordance with notification from the
servicing official. The installment schedule set forth in each
borrower\'s debt instrument will not change. The original principal
schedule for principal-plus-interest accounts where principal
[only]{.underline} is stipulated will continue to be used for payment
calculation by the Finance Office. Amortized accounts will adhere to the
original payment schedule and amount. The last scheduled principal
installment will be reduced by the amount of the balance previously
generated by the reversal and reapplication of payments.

\(4\) When Rural Development has processed a change of interest rate for
an amortized loan and a reduction in installment amounts is needed to
provide for a sound operation, the borrower may request reamortization
in accordance with § 1951.224 of this subpart. (Revised 01-07-05,
SPECIAL PN.)

\(5\) The borrower will be notified in writing of the new interest rate
as changed.

§ 1951.242 [Servicing delinquent Community Facility loans.]{.underline}
(Added 01-07-05, SPECIAL PN.)

When borrowers fail to make payment in accordance with the terms of
their debt instrument, the servicing office will contact the borrower
and document the reason for the delinquency.

\(a\) [Definition of a delinquent Community Facility loan]{.underline}.
For the purpose of this section, a loan is delinquent when a borrower
fails to make all or part of a payment by the due date.

\(b\) [Workout agreement]{.underline}. The delinquent loan borrower and
the Agency; at its discretion, may enter into a written workout
agreement. When a workout agreement is negotiated, the servicing
official will use Form RD 1951-10, "Workout Agreement" to commit the
agreement to writing.

## 34

(Revision 1)

RD Instruction 1951-E

§ 1951.242 (Con.)

\(c\) [Requirement for submission of monthly financial
information]{.underline}. For loans that are delinquent, the borrower
must provide, monthly comparative financial statements in a format that
is acceptable to the Agency by the 15th day of the following month. The
Agency may waive this requirement if it would cause a hardship for the
borrower or the borrower is actively marketing the security property.

\(d\) [Servicing requirements]{.underline}. The following actions must
be taken if the borrower is unable to pay the delinquent amount within
90 days of its due date:

\(1\) The servicing official may negotiate a Workout Agreement with the
borrower using Form RD 1951-10.

\(2\) For loans that are less than 90 days delinquent, the servicing
official will request the borrower to provide monthly financial
statements on Agency-approved forms or in a form that is acceptable to
the Agency. Financial statements will include the following:

\(i\) End of month balance sheet;

\(ii\) Budget for the current operating year;

\(iii\) Cash flow statement for the previous month;

\(iv\) Cash flow statement for the year to date; and

\(v\) Cash flow reconciliation.

\(3\) For loans that are more than 90 days delinquent, the following
actions will be taken:

\(i\) The servicing official will obtain and evaluate the monthly
financial statements required by paragraph (d)(2) of this section to
determine if the borrower has the ability to correct the default. The
borrower will continue providing the monthly financial statements until
the delinquency is resolved. The servicing official may waive this
requirement if it would cause a hardship for the borrower or the
borrower is actively marketing the security property.

## 35

(Added 01-07-05, SPECIAL PN)

(02-08-90) SPECIAL PN

RD Instruction 1951-E

§ 1951.242(d)(3) (Con.)

\(ii\) When the servicing official determines that the borrower has the
ability to correct the default, the servicing official will meet with
the borrower to negotiate a Workout Agreement using Form RD 1951-10.

\(iii\) If the borrower does not pay the delinquency or refuses to
negotiate a Workout Agreement, the servicing official will advise the
borrower, in writing, that the Agency will transfer the delinquent debt
for treasury offset when it becomes 180 days delinquent unless the
delinquent amount is paid before that date or a Workout Agreement is
negotiated.

\(e\) [Referral for treasury offset]{.underline}. Loans that are
delinquent more than 180 days will be referred for treasury offset in
accordance with the Debt Collection Improvement Act of 1996 when all
efforts to bring the account current have failed. Loans that are being
serviced under a current Workout Agreement will not be referred for
treasury offset while the Workout Agreement is in effect.

\(f\) [Revision or cancellation of workout agreement]{.underline}. If a
borrower fails to complete the agreed actions of the workout agreement
by the agreed completion date, the servicing official will determine if
it is in the best interest of the Government to revise or cancel the
workout agreement.

§§ 1951.243 - 1951.249 \[Reserved\]

§ 1951.250 [OMB control number]{.underline}.

The reporting and recordkeeping requirements contained in this
regulation have been approved by the Office of Management and Budget and
have been assigned OMB Control Number 0575-0066. Public reporting burden
for this collection of information is estimated to vary from fifteen
minutes to three 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. (Revised 01-07-05, SPECIAL PN.)

Attachments: Exhibits A, B, C, D, E, F, G, and H.

## oOo

## 36

## (Added 01-07-05, SPECIAL PN) 

RD Instruction 1951-E

Exhibit A

## [REPORT ON SERVICING ACTION]{.underline}

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

Name of Borrower: \|State County Case No.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\|\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Address: \|Type of_Assistance \_\_ \_\_

\| Loan /\_/\_ Insured /\_/ Direct /\_/

\|\_[Grant /
/]{.underline}\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\|Date Facility

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\|\_[Placed
in Operation]{.underline}\_\_\_\_\_\_\_\_\_\_\_\_\_\_

[Section I]{.underline} (Complete for all financial assistance)

1\. [Rural Development Financial Assistance History]{.underline}

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

Loan Amounts \| Date \|Int.\|No.\|Principal\|Interest\|Ahead (Behind)
Schedule

(initial first)\|Closed\|Rate\|Yrs\| Balance \|Accrued \|Principal \|
Interest

\| \| \| \| \| \| \|

\$ \_\_\_\_\_\_\_\_\_\_\_ \| \_\_\_\_ \| \_\_ \| \_ \| \$\_\_\_\_\_\_ \|
\$\_\_\_\_\_ \| \$\_\_\_\_\_\_\_ \| \$\_\_\_\_\_\_\_\_

\| \| \| \| \| \| \|

\$ \_\_\_\_\_\_\_\_\_\_\_ \| \_\_\_\_ \| \_\_ \| \_ \| \$\_\_\_\_\_\_ \|
\$\_\_\_\_\_ \| \$\_\_\_\_\_\_\_ \| \$\_\_\_\_\_\_\_\_

\| \| \| \| \| \| \|

\$ \_\_\_\_\_\_\_\_\_\_\_ \| \_\_\_\_ \| \_\_ \| \_ \| \$\_\_\_\_\_\_ \|
\$\_\_\_\_\_ \| \$\_\_\_\_\_\_\_ \| \$\_\_\_\_\_\_\_\_

\| \| \| \| \| \| \|

\$ \_\_\_\_\_\_\_\_\_\_\_ \| \_\_\_\_ \| \_\_ \| \_ \| \$\_\_\_\_\_\_ \|
\$\_\_\_\_\_ \| \$\_\_\_\_\_\_\_ \| \$\_\_\_\_\_\_\_\_

\| \| \| \| \| \| \|

Grant Amounts \| Date \|

\_[(initial first)]{.underline}\_\|\_[Closed]{.underline}\_\_\|

\| \|

\$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \| \_\_\_\_\_\_\_ \| Principal &
interest balances as of\_\_\_\_\_\_\_\_

\| \| \_\_ \_\_

\$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \| \_\_\_\_\_\_\_ \| Annual /\_/
Monthly /\_/ Payment \$\_\_\_\_\_\_\_

\| \|

\$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \| \_\_\_\_\_\_\_ \| Membership or
Connection fee \$\_\_\_\_\_\_\_\_\_\_\_\_\_

\| \|

\$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \| \_\_\_\_\_\_\_ \| Monthly dues or
user rate \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\| \|

2\. [Debts Owed - Non Rural Development]{.underline}

\_\_

To Whom Owed Amount Annual /\_/\_ Amt. Ahead Purpose of How Secured

Monthly /\_/ (Delinquent) Loan

Payment

\_\_\_\_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_ \$\_\_\_\_\_\_\_\_\_\_
\$\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_\_

Were Outside Debts Authorized by Rural Development?
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(11-3-82) PN 855

RD Instruction 1951-E

Exhibit A

page 2

3\. [Present Market Value]{.underline}: (required for subordination,
sales, transfers,

exchanges, assumptions & mergers)

Land \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ [Value determined
by]{.underline}:\_\_

Building \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Appraisal report
/\_/

Equipment \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ (enclose copy) \_\_

Other \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Estimate /\_/

Total \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Other /\_/

4\. [Memberships Users]{.underline} (Recreation, Water & Waste)

\(a\) Number required at closing \_\_\_\_\_\_

\(b\) Actual at closing \_\_\_\_\_\_

\(c\) Members-Users, last 5 years \_\_\_\_\_\_\_ \_\_\_\_\_\_
\_\_\_\_\_\_ \_\_\_\_\_\_ \_\_\_\_\_\_

year ( ) ( ) ( ) ( ) ( )

\(d\) Explain lower than required membership at loan closing and

decreases in recent years.
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

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

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

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

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

\(e\) Amount of delinquency in dues or charges
\$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

as of \_\_\_\_\_\_\_\_\_\_\_\_\_\_. Number of members-users delinquent
\_\_\_\_\_

\(f\) Past steps taken to increase
members-users.\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

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

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

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

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

\(g\) Can members be assessed?\_\_\_\_\_\_\_\_\_\_\_ If yes, when?
\_\_\_\_\_\_\_\_\_\_\_\_\_

5\. [Occupancy, Patient Days, Clinic Visits]{.underline} (Health Care)

(as appropriate)

\(a\) at loan closing \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\(b\) past 5 years \_\_\_\_\_\_\_ \_\_\_\_\_\_\_ \_\_\_\_\_\_\_
\_\_\_\_\_\_\_ \_\_\_\_\_\_

( ) ( ) ( ) ( ) ( )

\(c\) reasons for decreases in recent
years.\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

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

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

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

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

[Section II]{.underline}

[Complete The Following, As Appropriate, For All Servicing Actions
Except Subordination & Lease Of Security]{.underline}

1\. [Type of action requested]{.underline}: \_\_ \_\_

/\_/ Reamortization /\_/ Liquidation /\_/ Sale or Exchange

/\_/ Transfer & Assumption /\_/ Merger

RD Instruction 1951-E

Exhibit A

page 3

2\. Description of the facility.

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

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

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

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

3\. Describe the problem.

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

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

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

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

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

4\. [Condition of Facilities]{.underline}

\(a\) building
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\(b\) equipment
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\(c\) land
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\(d\) Water Systems (well-lines, treatment plant-storage, etc.)
\_\_\_\_\_\_

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

\(e\) Sewer System (lines, manholes, lagoons, treatment facilities) \_\_

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

5\. Is Board of Directors carrying out responsibilities? (Explain
No\'s)\_\_

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

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

6\. Is management adequate? (Explain No\'s)
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

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

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

7\. Explain the condition and adequacy of records, financial data and

reports.
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

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

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

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

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

8\. Explain the general attitude of community leaders, civic clubs,

Mayor, industry, etc. toward the facility.

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

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

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

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

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

9\. Is there any general consensus among those interviewed on the need
for

any specific changes in the policies or practices of the project? For

example, do they think the charges are too high or too low, certain

phases should be eliminated, or certain services added? (Explain)

(11-3-82) PN 855

RD Instruction 1951-E

Exhibit A

page 4

10\. Comments on other like facilities in the area.
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

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

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

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

11\. Is the Board willing to close out enterprise which is losing money
or

causing unsavory reputation?
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Explain:
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

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

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

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

12\. Action requested to solve the problem.

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

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

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

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

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

13\. If liquidation is initiated, what are the alternative uses of the

project?
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

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

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

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

14\. [Reamortization Only]{.underline}

\(a\) Total amount to be reamortized \$
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\(b\) New monthly /\_/ annual /\_/ payment
\$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\(c\) Rate & terms
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

15\. [Sales, Transfers, Liquidations, Mergers, etc.]{.underline}

Complete as appropriate:

\(a\) Sale or transfer price
\$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\(b\) Estimate selling expense
\$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\(c\) Anticipated loss to government
\$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\(d\) Proposed transaction date
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\(e\) Terms & conditions:

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

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

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

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

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

RD Instruction 1951-E

Exhibit A

page 5

16\. Comments and Recommendations: [All three must be
completed]{.underline}

\(a\) District Director

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

Date District Director

\(b\) Program Chief

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

Date Chief, Community Programs

\(c\) State Director

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

Date State Director

## oOo

(11-3-82) PN 855

RD Instruction 1951-E

Exhibit B

## AGREEMENT FOR NEW MEMBER

## (With or Without Withdrawing Member)

THIS AGREEMENT, entered into this \_\_\_\_\_\_\_\_\_ day of
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_, 19\_\_\_\_\_.

WITNESSETH THAT,

WHEREAS,
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(Names of Members except any Withdrawing Member)

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
,

herein called \"present members\", who comprise all the members
\*\[except the withdrawing member indicated below\] of
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(Name of

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_, an
unincorporated cooperative association,

Association)

herein called \"Association\", are indebted jointly and severally to the
United States of America, acting through Rural Development, United
States Department of Agriculture, herein called the \"Government\", for
a loan under section 303 of the Economic Opportunity Act of 1964, as
amended (42 U.S.C. 2852), as evidenced by a promissory note dated
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ 19 \_\_\_\_, in the face amount
of \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_; and

WHEREAS, the members of the Association executed an Operating Agreement
dated \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_, 19\_\_\_\_, herein
called \"Operating Agreement\", describing the organizational structure
of the Association, the rights and obligations of the members and the
manner in which the affairs of the Association are to be conducted; and

WHEREAS, with the proceeds of said loan the Association purchased

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

(Kind of Property Purchased)

to be used jointly by the members; and

WHEREAS, the members are jointly and severally liable as partners for
all debts of the Association, and each member has an equal undivided
interest in all property and assets of the Association; and

\*\[WHEREAS,\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_,
herein called \"with-

(Name of Withdrawing Member)

drawing member\", is no longer utilizing the services of the Association
and desires to withdraw his/her membership therein; and\]

WHEREAS,\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_,
herein called \"new member\".

(Name of New Member)

desires to become a member of the Association and the present members
have agreed to accept him/her as a member;

(11-3-82) PN 855

RD Instruction 1951-E

Exhibit B

page 2

NOW THEREFORE, in consideration of the mutual agreements contained
herein, the parties hereto covenant and agree as follows:

1\. The present members agree to and hereby accept the new member as a
member of the Association from the date hereof, with all the rights,
duties, and obligations appertaining to such membership as provided in
the Operating Agreement.

2\. The business of the Association shall be carried on in the same
manner and subject to the same agreements and provisions as provided in
the Operating Agreement, as fully and effectually as if the same were
contained in this Agreement.

3\. The new member hereby agrees to, and agrees to be bound by, all
agreements and provisions of the Operating Agreement, the same as if
he/she had executed the same as of the date thereof, and hereby assumes
and agrees to be jointly and severally liable for all present and future
debts and obligations of the Association, and he/she agrees specifically
to assume liability on a promissory note in the face amount of
\$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_, dated
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_, 19\_\_\_\_, made by the
Association to the Government, and to execute such instrument(s) as the
Government may require in connection with such assumption.

4\. The new member further agrees to and assumes all obligations and
agreements contained in any instruments executed by the Association as
security for or supplementary to said promissory note, including but not
limited to the Assignment of Income dated
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_, 19\_\_\_, and the
Security Agreement \*\*(Chattel Mortgage dated
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_, 19\_\_\_\_, executed by the
Association in favor of the Government, the same as if he/she had signed
the same as of the date thereof.

5\. This agreement is subject to the approval of the Government, acting
through the County Supervisor of Rural Development.

\*\[6. The withdrawing member hereby agrees and acknowledges that he/she
will no longer have any property right or other interest in the
Association or the property of the Association, and that he/she will
simultaneously herewith execute and deliver a bill of sale transferring
and assigning to the new member his/her interest in the property of the
Association.\]

\*\[7. The present members hereby jointly and severally agree to pay and
save harmless the withdrawing member as to all past, present and future
debts and obligations of the Association, including but not limited to
that certain indebtedness to the Government evidenced by the aforesaid
promissory note.\]

RD Instruction 1951-E

Exhibit B

page 3

Approved:
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(Present Member)

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

(Present Member)

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

County Supervisor

Rural Development

United State Department of Agriculture
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(Present Member)

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

(New Member)

\*\[\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\]

(Withdrawing Member)

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

\*(Omit material in brackets when no withdrawing member is involved)

\*\*(Use \"Chattel Mortgage\" in lieu of \"Security Agreement\" in any
state

where he UCC has not been adopted.)

## oOo

(11-3-82) PN 855

RD Instruction 1951-E

Exhibit C

## AGREEMENT FOR WITHDRAWAL OF MEMBER

## (Without New Member)

## 

THIS AGREEMENT, entered into by and between
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(Name of

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_, party of the first
part, and \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Withdrawing Member) (Names of

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
,

Remaining Members)

parties of the second part,

WITNESSETH THAT, in consideration of the mutual agreements contained
herein, the parties hereto agree as follows:

1\. Party of the first part hereby grants, bargains and sells to parties
of the second part all his/her right, title and interest in

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_,
herein called the

(Name of Association)

\"Association\", and in the partnership property and assets of the
Association.

2\. Parties of the second part hereby jointly and severally agree to pay
and save harmless the withdrawing member as to all past, present and
future debts and obligations of the Association, including but not
limited to that certain indebtedness to Rural Development, United States
Department of Agriculture, evidenced by a promissory note dated
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ , 19 \_\_\_, in the face amount
of \$\_\_\_\_\_\_\_\_\_\_\_\_ .

Executed this \_\_\_\_\_\_\_\_\_\_ day
of\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_, 19\_\_\_\_\_.

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

(Party of the First Part)

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

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

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

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

(Parties of the Second Part)

## oOo

(11-03-82) PN 855

RD Instruction 1951-E

Exhibit D

Page 1

[ITEMS TO BE INCLUDED IN TRANSFER AND]{.underline}

[ASSUMPTION DOCKETS (IF APPLICABLE)]{.underline}

RD Form Number

[Item/Form Name (if applicable)]{.underline}

Account Status Information Automated

Discrepancy

Processing

System (ADPS) or

appropriate form

Applicant Certification - Federal Collection Policies

for Consumer or Commercial Debts 1910-11

Appraisal information appropriate for facility type:

Appraisal Report - Farm Tract 1922-1

Uniform Residential Appraisal Report 1922-8

Valuation of Buildings 426-1

Appraisal Report - Water and Waste Disposal Systems 442-10

Assurance Agreement 400-4

Community Programs Assumption Agreement or

other assumption agreement approved by

Office of General Counsel (OGC) 1951-15

Consent of other lienholders N/A

County Committee Certification or Recommendation 440-2

Environmental Review documentation RD

Instruction 1940-G

(08-25-93) PN 211

RD Instruction 1951-E

Exhibit D

Page 2

RD Form Number

[Item/Form Name (if applicable)]{.underline}

Financial Information (use of RD forms optional):

Statement of Budget, Income and Equity 442-2

Balance Sheet 442-3

Credit Report (ineligibles only) N/A

Insurance and fidelity bond - evidence transferee has

or will obtain required coverage N/A

Letter of Conditions N/A

Letter of Intent to Meet Conditions 1942-46

National Office approval memorandum N/A

OGC closing instructions N/A

Proposal by transferee N/A

Release from Personal Liability 1965-8

Report on Servicing Action Exhibit A (1951-E)

Supplementary Payment Agreement 440-9

Transfer of Real Estate Security 465-5

Transfer Fee Payment documentation N/A

Transferee\'s written agreement to abide by covenants

in the grant agreement if an Rural Development grant was involved N/A

## oOo

RD Instruction 1951-E

Exhibit E

## [Interest Rate Requirements and Effective Dates]{.underline}

## 

1\. Poverty Line Guidelines.

a\. Effective October 1, 1981, through April 14, 1982, poverty line was
\$8,450 per year for all States except Alaska and Hawaii. The applicable
poverty line was \$10,570 for Alaska and \$9,720 for Hawaii.

b\. Effective April 15, 1982, through March 17, 1983, poverty line was
\$9,300 per year for all States except Alaska and Hawaii. The applicable
poverty line was \$11,630 for Alaska and \$10,700 for Hawaii.

c\. Effective March 17, 1983, through March 6, 1984, poverty line was
\$9,900 per year for all States except Alaska and Hawaii. The applicable
poverty line was \$12,380 for Alaska and \$11,390 for Hawaii.

d\. Effective March 7, 1984, through April 2, 1985, poverty line was
\$10,200 per year for all States except Alaska and Hawaii. The
applicable poverty line was \$12,750 for Alaska and \$11,730 for Hawaii.

e\. Effective April 3, 1985, through March 11, 1986, poverty line was
\$10,650 per year for all States except Alaska and Hawaii. The
applicable poverty line was \$13,310 for Alaska and \$12,250 for Hawaii.

f\. Effective March 12, 1986, through March 18, 1987, poverty line was
\$11,000 per year for all States except Alaska and Hawaii. The
applicable poverty line was \$13,750 for Alaska and \$12,650 for Hawaii.

g\. Effective March 18, 1987, through March 10, 1988, poverty line was
\$11,200 per year for all States except Alaska and Hawaii. The
applicable poverty line was \$14,000 for Alaska and \$12,880 for Hawaii.

h\. Effective March 11, 1987, until further notice by Rural Development
Administrative Notice (AN), poverty line is \$11,650 per year for all
States except Alaska and Hawaii. The applicable poverty line is \$14,560
for Alaska and \$13,400 for Hawaii.

2\. Median Income of Service Area.

Income determination for the service area utilized median family income
until October 3, 1984. For loan closed on or after October 3, 1984, the
median household income of the service area should be considered in
making the interest rate determination.

3\. Poverty Line Rate.

a\. For purposes of determining the interest rate at loan closing under
§1951.221 of RD Instruction 1951-E, loans closed on or after October 1,
1981, through December 22, 1985, should consider the appropriate poverty
line and median income of the service area as set forth in paragraphs
(1) and (2) above. Depending on the date of loan closing and taking into

(5-4-88) PN 84

RD Instruction 1951-E

Exhibit E

Page 2

account the poverty line and median income requirements in effect at
that time, the poverty line rate category could be met if (i) the
primary purpose of the loan is to upgrade existing facilities, or
construct new facilities required to meet applicable health and sanitary
standards; and, (ii) the median household (family) income of the service
area is below the poverty line for a family of four, as prescribed by
the Office of Management and Budget (OMB), as adjusted under section 624
of the Economic Opportunity Act of 1964 (42 U.S.C. 2971d).

b\. For loans closed on or after December 23, 1985, and before March 25,
1986, the poverty line rate category is met if (i) the primary purpose
of the loan is to upgrade existing facilities, or construct new
facilities required to meet applicable health and sanitary standards;
and, (ii) the median household income of the service area is below the
poverty line as set forth in paragraph (1) above for a family of four,
as defined in section 673 (2) of Community Service Block grant Act (42
U.S.C. 9902 (2)), or below 80 percent of the Statewide nonmetropolitan
median household income.

4\. Intermediate Rate.

a\. Loans closed on or after July 9, 1982, through October 2, 1984,
should be considered under the following criteria: \"The intermediate
interest rate will be set at the poverty line rate plus one-half of the
difference between the poverty line and the market rate. It will apply
to loans that do not meet the requirements of the poverty line rate and
for which the median family income of the service area is not more than
85 percent of the nonmetropolitan median family income of the State.\"

b\. Loans closed on or after October 3, 1984, through April 1, 1985,
should be considered under the following criteria: \"The intermediate
interest rate will be set at the poverty line rate plus one-half of the
difference between the poverty line rate and the market rate. It will
apply to loans that do not meet the requirements for the poverty line
rate and for which the median household income of the service area is
not more than 85 percent of the nonmetropolitan median household income
of the State.\"

c\. Loans closed on or after April 2, 1985, through December 22, 1985,
should be considered under the following criteria: \"The intermediate
interest rate will be set at the poverty line rate plus one-half of the
difference between the poverty line rate and the market rats. It will
apply to the loans that do not meet the requirements for the poverty
line rate and for which the median household income of the service area
is below the poverty line as set forth in paragraph (1) above or not
more than 85 percent of the nonmetropolitan median household income as
set forth in paragraph (1) above of the State.\"

RD Instruction 1951-E

Exhibit E

Page 3

d\. Loans closed on or after December 23, 1985, through March 24, 1986,
the intermediate rate category requirement is: \"The intermediate
interest rate will be set at the poverty line rate plus one-half of the
difference between the poverty line rate and the market rate, not to
exceed seven percent per annum. It will apply to loans that do not meet
the requirements for the poverty line rate and for which the median
household income of the service area is below the poverty line as set
forth in paragraph (1) above or not more than 100 percent of the
nonmetropolitan median household income of the State.\"

5\. Market Rate.

The market rate will apply to all loans that do not qualify for a
different rate under the provisions set forth under paragraphs (3) and
(4) above.

## oOo

(5-4-88) PN 84

RD Instruction 1951-E

Exhibit F

## [Instruction to Rural Development Personnel to]{.underline}

## 

## [Implement Public Law 100-233]{.underline}

## 

The Rural Development servicing official must determine the borrowers to
be notified of the option to change a loan interest rate. All Community
Facility and Water and Waste Disposal borrowers with loans closed on or
after October 1, 1981, [that have not previously been given a choice of
interest rate and whose loans were closed at a date when the interest
rate was lower than the loan approval rate will be notified that they
may request to be charged the lower interest rate]{.underline}. To
determine the borrowers eligible for this choice of a lower interest
rate, the Rural Development servicing official should utilize Form RD
1940-1, \"Request for Obligation of Funds,\" note, bond, or recorded
debt instrument as appropriate; Form RD 2033-33, \"Management System
Card - Community Programs;\" RCFTS; and any other appropriate
documentation.

The Rural Development servicing official must also determine the loan
closing interest rate based upon the interest rate requirements in
effect at the date of loan closing. RD Instruction 1951-0, Exhibit C,
contains interest rates and effective dates by category of poverty,
intermediate, and market rates. RD Instruction 1951-E, Exhibit E,
contains applicable information affecting interest rate requirements,
i.e., change of median family income to median household income, and
poverty line guidelines. Based upon interest rate requirements in effect
at the time of loan approval and any changes in interest rate
requirements in effect at loan closing, a loan in the market interest
rate category at loan approval may fall in a poverty line rate category
at the time of loan closing. Or the reverse may apply.

(5-4-88) PN 84

RD Instruction 1951-E

Exhibit F

Page 2

Borrowers who have paid-in-full accounts are eligible to request a lower
interest rate. One of the following paragraphs should be inserted in
Exhibit G of this subpart as appropriate:

\"Your loan was paid in full on ([enter date]{.underline}). If you
request change of interest rate, Rural Development will reverse and
reapply loan payments made to the loan account utilizing the changed
interest rate. The balance of loan payments, after completion of this
procedure, will be refunded to you.\"

\"Your loan was paid in full on ([enter date]{.underline}). If you
request a change of interest rate, Rural Development will reverse and
reapply all loan payments made to the loan account utilizing the changed
interest rate. You are delinquent on a ([Community Facility or Water and
Waste Disposal, as appropriate]{.underline}) loan of the same type in
the amount of \$([Enter amount of delinquency]{.underline}). The case
number, loan number, and fund code of the delinquent loan are:

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

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

Therefore, the balance of loan payments, after completion of the
reversal and reapplication procedure, will be applied to the delinquent
account. Any funds remaining, after the amount needed to bring the
delinquent account current, will be returned to you as a refund.\"

For loans that involved multiple advances of Rural Development funds
using temporary debt instruments, wherein the borrower requests the
interest rate in effect at loan closing, the loan closing date used for
the purpose of interest rate determination shall be the rate in effect
on the date when the first temporary debt instrument was issued. (A
borrower who closed a loan with the first temporary debt instrument
issued before October 1, 1981, is not eligible for the choice of
interest rate).

The Rural Development servicing official will use Exhibit G of this
subpart to document the borrower\'s choice to change or retain an
interest rate and to notify the Finance Office to administratively
change a borrower\'s interest rate in the loan account.

Exhibit G of this subpart must be sent to the borrower by certified
mail, return receipt requested. The receipt should be maintained in the
borrower\'s case file. If the borrower does not respond within the
90-day period, the borrower will no longer have the option to request a
lower interest rate.

Exhibit G of this subpart will be used as the official document for
recording the borrower\'s election to change or to retain the original
interest rate. If a borrower requests a lower interest rate, the Finance
Office will utilize the executed Exhibit G of this subpart as
appropriate, as the official notification to change the loan account
interest rate. The original executed Exhibit G of this subpart should be
retained with the original debt

RD Instruction 1951-E

Exhibit F

Page 3

instrument. If the debt instrument is retained in the Finance Office,
the servicing official should send the original executed Exhibit G of
this subpart to the Finance Office and keep a copy in the borrower case
file. If the debt instrument is retained in the servicing office, a copy
of the executed Exhibit G of this subpart should be sent to the Finance
Office and the original Exhibit G of this subpart attached to the debt
instrument.

If the borrower requests a change of interest rate to the lower rate,
the change will be accomplished administratively by Rural Development.
The Finance Office will adjust the loan account to reflect the new lower
interest and reverse and reapply previous payments utilizing the new
interest rate, pay any delinquency on the loan account, and apply the
balance of loan payments after completion of the reversal and
reapplication procedure to principal. For principal plus interest bonds,
the balance of the loan payments will be applied to the principal
installments in reverse chronological order. Future loan payments after
the reversal and reapplication process will be in accordance with the
original debt instrument. Amortized accounts will retain the original
installment amount. A larger amount of the installment will be applied
toward principal, resulting in the loan being paid off sooner. Accounts
will principal-plus-interest bonds where principal only is stipulated,
will be billed by the Finance Office at the reduced interest rate,
resulting in lower installments due.

If a borrower with an amortized account is delinquent or is having
cash-flow problems and needs a reduced instalment to provide a sound
operation, the account can be considered for reamortization under the
provisions of RD Instruction 1951-E, section 1951.207(f). However, the
account must be administratively changed to reflect the lower interest
rate before the reamortization of the account under RD Instruction
1951-E, section 1951.207(f).

(5-4-88) PN 84

RD Instruction 1951-E

Exhibit G

## UNITED STATES DEPARTMENT OF AGRICULTURE

## Rural Development

## (Insert Address)

(Borrower\'s Name) (Date)

(Address)

Dear \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_:

Public Law 100-233 contained a provision that gives you the option to
select the lower interest rate in effect at either the time your
\$([enter original loan amount]{.underline}) ([Community Facility or
Water and Waste Disposal]{.underline}) loan(s) was(were) approved or
closed. Prior to Public Law 100-233, the interest rate in effect at loan
approval was the interest rate charged by Rural Development. The
interest rate at loan approval for your loan(s) was
\_\_\_\_\_\_\_\_\_\_. The interest rate in effect at your loan
closing(s) was \_\_\_\_\_\_\_\_\_\_. Any change in interest rate(s) will
be processed [administratively]{.underline} by Rural Development.

The following information is descriptive of the affected loan(s).

Borrower\'s Name:

Case Number: (Enter State and County Codes and Borrower\'s ID)

Fund Code:

Loan Number:

Original Principal Amount:

Present Interest Rate:

Installment Amount:

Revised Interest Rate:

(Enter paragraph concerning refund on paid-in-full account or refunds to
be applied to other delinquent accounts of loans of the same type, if
appropriate)

Please check the appropriate block below and sign, date, and return to
(address of District Office) within 90 calendar days from the date of
this letter.

\_\_\_\_\_ Yes. I hereby request that the interest rate on our loan(s)
be lowered to the above-listed loan closing interest rate. I understand
that all loan payments already made to the loan account(s) will be
reversed and reapplied by Rural Development and the balance of payments
after completion of this procedure will be applied to principal. (For
principal-plus-interest accounts, the balance will be applied to
outstanding principal installments in reverse chronological order.) I
also understand that the installment schedule in the debt installment
will not change.

\_\_\_\_\_ No. We do not want our interest rate changed. We understand
that we will have no future choice of interest rate for this(these)
loan(s) under the provisions of Public Law 100-233.

(5-4-88) PN 84

RD Instruction 1951-E

Exhibit G

Page 2

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

Authorized Borrower Signature (Date)

If you have any questions concerning this matter, please let us know.

Sincerely,

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

(District Director)

## oOo 

RD Instruction 1951-E

Exhibit H

Page 1

## UNITED STATES DEPARTMENT OF AGRICULTURE

## RURAL DEVELOPMENT

## 

## RESCHEDULING AGREEMENT

## (Public Bodies)

Effective Date: \_\_\_-\_\_\_-\_\_\_

State: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ County:
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Case No.: \_\_\_\_\_-\_\_\_\_\_-\_\_\_\_\_\_\_\_\_\_\_\_ Fund Code:
\_\_\_\_\_\_\_\_ Loan No.:\_\_\_\_

Amount Rescheduled: \$\_\_\_,\_\_\_,\_\_\_.\_\_\_ Interest Rate:
\_\_\_\_.\_\_\_\_\_\_

The undersigned, a public body entity (herein called \"Borrower\"),
being indebted for a loan made by Rural Development, United States
Department of Agriculture, (herein called \"Government\"), as evidenced
by a bond or other debt instrument (herein called the \"bond\") dated

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_, 19\_\_\_\_, with an outstanding
balance in the principal sum of \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
plus accrued interest as of \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_,
19\_\_\_\_, in the sum of \$ \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_, and
being in default under that bond, hereby agrees with the Government as
follows:

1\. [AMOUNT]{.underline}. The amount of the debt rescheduled is
\$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_,

consisting of \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ principal plus
\$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

accrued interest. This amount represents:

\_\_\_ the delinquent amount [only]{.underline}

\_\_\_ the amount of the outstanding debt [plus]{.underline} the
delinquent amount.

2\. [REPAYMENT SCHEDULE]{.underline}: The first installment of the
rescheduled amount, including interest at the bond rate shown above, in
the amount of \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ will be due
and payable on

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_, 19\_\_\_\_; thereafter,
\_\_\_\_\_\_\_ regular installments, each in the amount of \$
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_, will be due and payable on
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ of each
\_\_\_\_\_\_\_\_\_\_\_ until the rescheduled amount or, if the entire
debt is being rescheduled, the entire indebtedness due under the bond,
has been fully repaid. The final

(02-08-90) SPECIAL PN

RD Instruction 1951-E

Exhibit H

Page 2

installment, if not sooner paid, shall be due and payable as stated in
the bond. Regular payments due in accordance with the bond \_\_\_are
\_\_\_\_are not required in addition to the payments specified above.

3\. The Government, as consideration for this agreement, will not
enforce the remedies available to it by reason of any payment default
occurring prior to the effective date of the agreement.

4\. This agreement establishes a revised payment schedule to bring the
delinquent loan account involved current, and nothing herein shall be
construed as affecting any of the terms or conditions of the bond other
than the payment schedule or suggest the satisfaction of the outstanding
bond.

5\. Upon default by the borrower on any terms or conditions of this
agreement or other agreement, or violation of other rights of the
Government as a lender, the Government at its option may declare the
entire indebtedness immediately due and payable and exercise any and all
rights and remedies available to it.

By resolution duly adopted on the\_\_\_\_\_\_\_\_\_ day of
\_\_\_\_\_\_\_\_\_\_\_\_\_\_, 19\_\_, the Borrower has authorized its
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ to
execute

this agreement and its
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ to affix
its corporate seal.

ATTEST: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Name of Borrower

BY \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
BY\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

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

(Title) (Title)

RD Instruction 1951-E

Exhibit H

Page 3

## [INSTRUCTIONS]{.underline}

A separate exhibit will be used for each loan. When legally permissible
and administratively acceptable, the entire amount of the outstanding
indebtedness should be rescheduled rather than only delinquent amounts.

1\. When entering the borrower\'s case number, use leading zeroes where
necessary. For example, 11 - 12 - 123456 must be entered as:

## [\|1\|1\|0\|1\|2\|0\|0\|0\|0\|1\|2\|3\|4\|5\|6\|]{.underline} 

2\. Enter the total amount of principal and interest being rescheduled.
If the entire outstanding indebtedness is being rescheduled, the amount
must reflect balances for the original debt as well as delinquent
amounts.

3\. Use the rate of interest reflected in current Finance Office
records.

4\. When only the delinquent amount is being rescheduled for serial
bonds or principal-plus-interest bonds, include the following amounts:

\-- Unpaid interest on scheduled installments as of the last installment
due date.

\-- Interest accrued from date(s) due to the effective date of the
rescheduling on past due principal installments.

\-- Past due principal installments.

5\. At the end of item 1, enter an \"X\" in the appropriate blank based
on whether the full amount of the debt or only the delinquent amount is
being rescheduled.

6\. At the end of item 2, enter an \"X\" in the appropriate blank and
strike through the inappropriate response based on whether the full
amount of the debt or only the delinquent amount is being rescheduled.

## oOo

(02-08-90) SPECIAL PN