Source: http://ecfr.io/Title-07/pt7.7.766
Timestamp: 2019-04-25 17:56:35+00:00

Document:
§766.53 Disaster Set-Aside amount limitations.
§766.57 Borrower acceptance of Disaster Set-Aside.
§766.58 Installment to be set aside.
§766.59 Payments toward set-aside installments.
§766.60 Canceling a Disaster Set-Aside.
§766.61 Reversal of a Disaster Set-Aside.
§766.101 Initial Agency notification to borrower of loan servicing programs.
§766.103 Borrower does not respond or does not submit a complete application.
§766.105 Agency consideration of servicing requests.
§766.106 Agency notification of decision regarding a complete application.
§766.112 Additional security for restructured loans.
§766.113 Buyout of loan at current market value.
§766.114 State-certified mediation or voluntary meeting of creditors.
§766.115 Challenging the Agency appraisal.
§766.151 Applying for Homestead Protection.
§766.155 Conflict with State law.
§766.202 Determining the shared appreciation due.
§766.205 Shared Appreciation Payment Agreement rates and terms.
§766.206 Net Recovery Buyout Recapture Agreement.
§766.251 Repayment of unauthorized assistance.
§766.252 Unauthorized assistance resulting from submission of false information.
§766.253 Unauthorized assistance resulting from submission of inaccurate information by borrower or Agency error.
§766.301 Notifying borrower in bankruptcy of loan servicing.
§766.302 Loan servicing application requirements for borrowers in bankruptcy.
§766.303 Processing loan servicing requests from borrowers in bankruptcy.
§766.352 Voluntary sale of real property and chattel.
§766.353 Voluntary conveyance of real property.
§766.354 Voluntary conveyance of chattel.
§766.356 Acceleration of loans to American Indian borrowers.
§766.357 Involuntary liquidation of real property and chattel.
§766.358 Acceleration and foreclosure moratorium.
Authority: 5 U.S.C. 301, 7 U.S.C. 1989, and 1981d(c).
Source: 72 FR 63316, Nov. 8, 2007, unless otherwise noted.
(5) Have loan security being liquidated voluntarily or involuntarily.
(b) The Agency services direct FLP loans under the policies contained in this part.
(ii) Will only be considered for rescheduling according to §766.107 and deferral according to §766.109.
(2) The Agency does not service Non-program loans under this part except where noted.
(c) The Agency requires the borrower to make every reasonable attempt to make payments and comply with loan agreements before the Agency considers special servicing.
Abbreviations and definitions for terms used in this part are provided in §761.2 of this chapter.
(a) DSA is available to borrowers with program loans who suffered losses as a result of a natural disaster.
(b) DSA is not intended to circumvent other servicing available under this part.
(c) Non-program loans may be serviced under this subpart for borrowers who also have program loans.
(1) The borrower must have operated the farm in a county designated or declared a disaster area or a contiguous county at the time of the disaster. Farmers who have rented out their land base for cash are not operating the farm.
(2) The borrower must have acted in good faith, and the borrower's inability to make the upcoming scheduled loan payments must be for reasons not within the borrower's control.
(3) The borrower cannot have more than one installment set aside on each loan.
(iv) Increased expenses incurred because of the natural disaster.
(5) For the next production cycle, the borrower must develop a feasible plan showing that the borrower will at least be able to pay all operating expenses and taxes due during the year, essential family living expenses, and meet scheduled payments on all debts, including FLP debts. The borrower must provide any documentation required to support the farm operating plan.
(6) The borrower must not be in non-monetary default.
(7) The borrower must not be ineligible due to disqualification resulting from Federal crop insurance violation according to 7 CFR part 718.
(8) The borrower must not become 165 days past due before the appropriate Agency DSA documents are executed.
(b) Loan eligibility. (1) Any FLP loan to be considered for DSA must have been outstanding at the time the natural disaster occurred.
(2) All of the borrower's program and non-program loans must be current after the Agency completes a DSA of the scheduled installment.
(3) All FLP loans must be current or less than 90 days past due at the time the application for DSA is complete.
(4) The Agency has not accelerated or applied any special servicing action under this part to the loan since the natural disaster occurred.
(5) For any loan that will receive a DSA, the remaining term of the loan must equal or exceed 2 years from the due date of the installment set-aside.
(6) The loan must not have a DSA in place.
(2) The amount the borrower is unable to pay the Agency due to the disaster. Borrowers are required to pay any portion of an installment they are able to pay.
(b) The amount set aside will be the unpaid balance remaining on the installment at the time the DSA is complete. This amount will include the unpaid interest and any principal that would be credited to the account as if the installment were paid on the due date, taking into consideration any payments applied to principal and interest since the due date.
(c) Recoverable cost items may not be set aside.
(a) Requests for DSA. (1) A borrower must submit a request for DSA in writing within eight months from the date the natural disaster was designated.
(2) All borrowers must sign the DSA request.
(b) Required financial information. (1) The borrower must submit actual production, income, and expense records for the production cycle in which the disaster occurred unless the Agency already has this information.
(2) The Agency may request other information needed to make an eligibility determination.
Within 30 days of a complete DSA application, the Agency will determine if the borrower meets the eligibility requirements for DSA.
If, prior to executing the appropriate DSA Agency documents, the borrower is not current on all FLP loans, the borrower must execute and provide to the Agency a best lien obtainable on all of their assets except those listed under §766.112(b).
The borrower must execute the appropriate Agency documents within 45 days after the borrower receives notification of Agency approval of DSA.
(a) The Agency will set-aside the first installment due immediately after the disaster occurred.
(b) If the borrower has already paid the installment due immediately after the disaster occurred, the Agency will set-aside the next annual installment.
(a) Interest accrual. (1) Interest will accrue on any principal portion of the set-aside installment at the same rate charged on the balance of the loan.
(2) If the borrower's set-aside installment is for a loan with a limited resource rate and the Agency modifies that limited resource rate, the interest rate on the set-aside portion will be modified concurrently.
(b) Due date. The amount set-aside, including interest accrued on the principal portion of the set-aside, is due on or before the final due date of the loan.
(c) Applying payments. The Agency will apply borrower payments toward set-aside installments first to interest and then to principal.
(c) The borrower pays the set-aside installment.
If the Agency determines that the borrower received an unauthorized DSA, the Agency will reverse the DSA after all appeals are concluded.
(8) Are subject to any other collection action, except when such action is a result of failure to graduate. Borrowers who fail to graduate when required and are able to do so, will be accelerated without providing notification of loan servicing options.
(5) Notification to a borrower who files bankruptcy will be provided in accordance with subpart G of this part.
(c) Mailing. Notices to delinquent borrowers or borrowers in non-monetary default will be sent by certified mail to the last known address of the borrower. If the certified mail is not accepted, the notice will be sent immediately by first class mail to the last known address. The appropriate response time will begin three days following the date of the first class mailing. For all other borrowers requesting the notices, the notices will be sent by regular mail or hand-delivered.
(3) In non-monetary default with or without monetary default must submit a complete application within 60 days from receipt of FSA-2514.
(8) Verification of all debts and collateral.
(b) In addition to the requirements contained in paragraph (a) of this section, the borrower must submit an aerial photo delineating any land to be considered for a conservation contract.
(c) To be considered for debt settlement, the borrower must provide the appropriate Agency form, and any additional information required under subpart B of 7 CFR part 1956.
(d) If a borrower who submitted a complete application while current or financially distressed is renotified as a result of becoming 90 days past due, the borrower must only submit a request for servicing in accordance with paragraph (a)(1) of this section, provided all other information is less than 90 days old and is based on the current production cycle. Any information 90 or more days old or not based on the current production cycle must be updated.
(e) The borrower need not submit any information under this section that already exists in the Agency's file and is still current as determined by the Agency.
(4) The withdrawing individual does not have repayment ability and does not own any non-essential assets.
Editorial Note: At 81 FR 51285, Aug. 3, 2016, §766.102, in paragraph (b)(3)(ii), the words “subpart G of 7 CFR part 1940” were removed and the words “part 799 of this chapter” were added in their place. However, paragraph (b)(3)(ii) does not exist, and this amendment could not be incorporated.
(a) If a borrower, who is financially distressed or current, requested loan servicing and received FSA-2512, but fails to respond timely and subsequently becomes 90 days past due, the Agency will notify the borrower in accordance with §766.101(a)(2).
(2) The borrower's right to request reconsideration, mediation and appeal in accordance with 7 CFR parts 11 and 780.
(v) Loss of, or reduction in, the borrower or spouse's essential non-farm income.
(2) The borrower does not have non-essential assets for which the net recovery value is sufficient to resolve the financial distress or pay the delinquent portion of the loan.
(3) If the borrower is in non-monetary default, the borrower will resolve the non-monetary default prior to closing the servicing action.
(4) The borrower has acted in good faith.
(5) Financially distressed or current borrowers requesting servicing must pay a portion of the interest due on the loans.
(6) The borrower must not be ineligible due to disqualification resulting from Federal crop insurance violation according to 7 CFR part 718.
(2) Have acted in good faith.
(5) Current market value buyout.
(b) Debt service margin. (1) The Agency will attempt to achieve a 110 percent debt service margin for the servicing options listed in paragraphs (a)(2) through (4) of this section.
(2) If the borrower cannot develop a feasible plan with the 110 percent debt service margin, the Agency will reduce the debt service margin by one percent and reconsider all available servicing authorities. This process will be repeated until a feasible plan has been developed or it has been determined that a feasible plan is not possible with a 100 percent margin.
(3) The borrower must be able to develop a feasible plan with at least a 100 percent debt service margin to be considered for the servicing options listed in paragraphs (a)(1) through (4) of this section.
(ii) The borrower will be offered current market value buyout.
(2) The borrower's non-essential assets when their net recovery value may be adequate to bring the delinquent loans current.
The Agency will send the borrower notification of the Agency's decision within 60 calendar days after receiving a complete application for loan servicing.
(a) Notification to financially distressed or current borrowers. (1) If the borrower can develop a feasible plan and is eligible for primary loan servicing, the Agency will offer to service the account.
(i) The borrower will have 45 days to accept the offer of servicing. After accepting the Agency's offer, the borrower must execute loan agreements and security instruments, as appropriate.
(ii) If the borrower does not accept the offer, the Agency will send the borrower another notification of the availability of loan servicing if the borrower becomes 90 days past due in accordance with §766.101(a)(2).
(2) If the borrower cannot develop a feasible plan, or is not eligible for loan servicing, the Agency will send the borrower the calculations used and the reasons for the adverse decision.
(i) The borrower may request reconsideration, mediation and appeal in accordance with 7 CFR parts 11 and 780 of this title.
(ii) The Agency will send the borrower another notification of the availability of loan servicing if the borrower becomes 90 days past due in accordance with §766.101(a)(2).
(b) Notification to borrowers 90 days past due or in non-monetary default. (1) If the borrower can develop a feasible plan and is eligible for primary loan servicing, the Agency will offer to service the account.
(ii) If the borrower does not timely accept the offer, or fails to respond, the Agency will notify the borrower of its intent to accelerate the account.
(i) The borrower may request reconsideration, mediation or voluntary meeting of creditors, or appeal in accordance with 7 CFR parts 11 and 780.
(ii) The borrower may request negotiation of appraisal within 30 days in accordance with §766.115.
(iii) If the net recovery value of non-essential assets is sufficient to pay the account current, the borrower has 90 days to pay the account current.
(iv) The borrower, if eligible in accordance with §766.113, may buy out the loans at the current market value within 90 days.
(v) The borrower may request homestead protection if the borrower's primary residence was pledged as security by providing the information required under §766.151.
(9) The loan is not currently deferred, as described in §766.109, or set-aside, as described in subpart B of this part. The Agency may consolidate loans upon cancellation of the deferral or DSA.
(6) The loan is not currently deferred, as described in §766.109, or set-aside, as described in subpart B of this part. The Agency may reschedule loans upon cancellation of the deferral or DSA.
(c) Consolidated and rescheduled loan terms. (1) The Agency determines the repayment schedule for consolidated and rescheduled loans according to the borrower's repayment ability.
(2) Except for CL and RL loans, the repayment period cannot exceed 15 years from the date of the consolidation and rescheduling.
(3) The repayment schedule for RL loans may not exceed 7 years from the date of rescheduling.
(4) The repayment schedule for CLs may not exceed 20 years from the date of the original note or assumption agreement.
(iii) The lowest original loan note rate on any of the original notes being consolidated and rescheduled.
(ii) A feasible plan cannot be developed at the regular interest rate and maximum terms permitted in this section.
(4) Loans consolidated and rescheduled at the limited resource interest rate will be subject to annual limited resource review in accordance with §765.51 of this chapter.
(e) Capitalizing accrued interest and adding protective advances to the loan principal. (1) The Agency capitalizes the amount of outstanding accrued interest on the loan at the time of consolidation and rescheduling.
(2) The Agency adds protective advances for the payment of real estate taxes to the principal balance at the time of consolidation and rescheduling.
(3) The borrower must resolve all other protective advances not capitalized prior to closing the servicing actions.
(f) Installments. If there are no deferred installments, the first installment payment under the consolidation and rescheduling will be at least equal to the interest amount which will accrue on the new principal between the date the promissory note is executed and the next installment due date.
(6) The loan is not currently deferred, as described in §766.109, or set-aside, as described in subpart B of this part. The Agency may reamortize loans upon cancellation of the deferral or DSA.
(b) Reamortized loan terms. (1) Except as provided in paragraph (b)(2), the Agency will reamortize loans within the remaining term of the original loan or assumption agreement unless a feasible plan cannot be developed or debt forgiveness will be required to develop a feasible plan.
(2) If the Agency extends the loan term, the repayment period from the original loan date may not exceed the maximum number of years for the type of loan being reamortized in paragraphs (2)(i) through (iv), or the useful life of the security, whichever is less.
(i) FO, SW, RL, EE real estate-type, and EM loans made for real estate purposes may not exceed 40 years from the date of the original note or assumption agreement.
(ii) EE real estate-type loans secured by chattels only may not exceed 20 years from the date of the original note or assumption agreement.
(iii) RHF loans may not exceed 33 years from the date of the original note or assumption agreement.
(iv) SA loans may not exceed 25 years from the date of the original Shared Appreciation note.
(v) CLs may not exceed 20 years from the date of the original note or assumption agreement.
(iii) The original loan note rate of the note being reamortized.
(4) Loans reamortized at the limited resource interest rate will be subject to annual limited resource review in accordance with §765.51 of this chapter.
(5) SA payment agreements will be reamortized at the current SA amortization rate in effect on the date of approval or the rate on the original payment agreement, whichever is less.
(d) Capitalizing accrued interest and adding protective advances to the loan principal. (1) The Agency capitalizes the amount of outstanding accrued interest on the loan at the time of reamortization.
(2) The Agency adds protective advances for the payment of real estate taxes to the principal balance at the time of reamortization.
(3) The borrower must resolve all other protective advances not capitalized prior to closing the reamortization.
(e) Installments. If there are no deferred installments, the first installment payment under the reamortization will be at least equal to the interest amount which will accrue on the new principal between the date the promissory note is executed and the next installment due date.
(i) The deferral will not create excessive net cash reserves beyond that necessary to develop a feasible plan.
(ii) The Agency will consider a partial deferral if deferral of the total Agency payment would result in the borrower developing more cash availability than necessary to meet debt repayment obligations.
(ii) The shortest possible deferral period.
(2) The Agency will distribute interest accrued on the deferred principal portion of the loan equally to payments over the remaining loan term after the deferral period ends.
(c) Agency actions when borrower's repayment ability improves. (1) If during the deferral period the borrower's repayment ability has increased to allow the borrower to make payments on the deferred loans, the borrower must make supplemental payments, as determined by the Agency. If the borrower agrees to make supplemental payments, but does not do so, the borrower will be considered to be in non-monetary default.
(2) If the Agency determines that the borrower's improved repayment ability will allow graduation, the Agency will require the borrower to graduate in accordance with part 765, subpart C of this chapter.
(d) Associated loan servicing. (1) The Agency must cancel an existing deferral if the Agency approves any new primary loan servicing action.
(2) Loans deferred will also be serviced in accordance with §§766.107, 766.108 and 766.111, as appropriate.
(a) General. (1) A debtor with only SA or Non-program loans is not eligible for a Conservation Contract. However, an SA or Non-program loan may be considered for a Conservation Contract if the borrower also has program loans.
(2) A current or financially distressed borrower may request a Conservation Contract at any time prior to becoming 90 days past due.
(3) A delinquent borrower may request a Conservation Contract during the same 60-day time period in which the borrower may apply for primary loan servicing. The borrower eligibility requirements in §766.104 will apply.
(4) A Conservation Contract may be established for conservation, recreation, and wildlife purposes.
(5) The land under a Conservation Contract cannot be used for the production of agricultural commodities during the term of the contract.
(6) Only loans secured by the real estate that will be subject to the Conservation Contract may be considered for debt reduction under this section.
(viii) Areas within or adjacent to Federal, State, tribal, or locally administered conservation areas.
(3) The Conservation Contract review team determines that the land is not suitable for conservation, wildlife, or recreational purposes.
(7) The tract, including any buffer areas, to be included in a Conservation Contract is less than 10 acres.
(d) Conservation Contract terms. The borrower selects the term of the contract, which may be 10, 30, or 50 years.
(2) A description of the conservation, wildlife, or recreation benefits to be realized.
(f) Management authority. The Agency has enforcement authority over the Conservation Contract. The Agency, however, may delegate contract management to another entity if doing so is in the Agency's best interest.
(3) Improve the borrower's ability to repay the remaining balance of the loan.
(1) Divide the contract acres by the total acres that secure the borrower's FLP loans to determine the contract acres percentage.
(2) Multiply the borrower's total unpaid FLP loan balance (principal, interest, and recoverable costs already paid by the Agency) by the percentage calculated under paragraph (h)(1) of this section to determine the amount of FLP debt that is secured by the contract acreage.
(3) Multiply the borrower's total unpaid FLP loan balance (principal, interest, and recoverable costs already paid by the Agency) by 33 percent.
(4) The lesser of the amounts calculated in paragraphs (h)(2) and (h)(3) of this section is the maximum amount of debt reduction for a 50-year contract.
(5) The borrower will receive 60 percent of the amount calculated in paragraph (h)(4) of this section for a 30-year contract.
(6) The borrower will receive 20 percent of the amount calculated in paragraph (h)(4) of this section for a 10-year contract.
(2) Multiply the borrower's total unpaid FLP loan balance (principal, interest, and recoverable costs already paid by the Agency) by the percentage calculated in paragraph (i)(1) of this section to determine the amount of FLP debt that is secured by the contract acreage.
(3) Multiply the market value of the total acres, less contributory value of any structural improvements, that secure the borrower's FLP loans by the percent calculated in paragraph (i)(1) of this section to determine the current value of the acres in the contract.
(4) Subtract the market value of the contract acres calculated in paragraph (i)(3) of this section from the FLP debt secured by the contract acres as calculated in paragraph (i)(2) of this section.
(5) Select the greater of the amounts calculated in either paragraphs (i)(3) and (i)(4) of this section.
(6) The lesser of the amounts calculated in paragraphs (i)(2) and (i)(5) of this section will be the maximum amount of debt reduction for a 50-year contract term.
(7) The borrower will receive 60 percent of the amount calculated in paragraph (i)(6) of this section for a 30-year contract term.
(8) The borrower will receive 20 percent of the amount calculated in paragraph (i)(6) of this section for a 10-year contract term.
(j) Conservation Contract Agreement. The borrower must sign the Conservation Contract Agreement establishing the contract's terms and conditions.
(k) Transferring title to land under Conservation Contract. If the borrower or any subsequent landowner transfers title to the property, the Conservation Contract will remain in effect for the duration of the contract term.
(l) Borrower appeals of technical decisions. Borrower appeals of the Natural Resources Conservation Service's (NRCS) technical decisions made in connection with a Conservation Contract, will be handled in accordance with applicable NRCS regulations. Other aspects of the denial of a conservation contract may be appealed in accordance with 7 CFR parts 11 and 780.
(1) Subordination will be required for all liens that are in a prior lien position to the Conservation Contract.
(2) The Agency will not subordinate Conservation Contracts to liens of other lenders or other Governmental entities.
(2) Subsequent landowners who breach the Conservation Contract must pay the Agency the amount of the debt cancelled when the contract was executed, plus interest at the non-program interest rate to the date of payment, plus liquidated damages in the amount of 25 percent of the cancelled debt, plus any actual expenses incurred by the Agency in enforcing the terms of the Conservation Contract.
(4) Complies with the Highly Erodible Land and Wetland Conservation requirements of 7 CFR part 12.
(b) Conditions. (1) Rescheduling, consolidation, reamortization, deferral or some combination of these options on all of the borrower's loans would not result in a feasible plan with a 110 percent debt service margin. If a feasible plan, including writedown is achieved with a debt service margin of 101 percent or more, the Agency will determine if a feasible plan can be achieved without a writedown. If a feasible plan is achieved with and without a writedown and the borrower meets all the eligibility requirements, both options will be offered and the borrower may choose one option.
(2) The present value of the restructured loan must be greater than or equal to the net recovery value of Agency security and any non-essential assets.
(3) The writedown amount, excluding debt reduction received through Conservation Contract, does not exceed $300,000.
(4) A borrower who owns real estate must execute an SAA in accordance with §766.201.
(c) Associated loan servicing. Loans written down will also be serviced in accordance with §§766.107 and 766.108, as appropriate.
(a) If the borrower is delinquent prior to restructuring, the borrower, and all entity members in the case of an entity, must execute and provide to the Agency a lien on all of their assets, except as provided in paragraph (b) of this section, when the Agency is servicing a loan.
(5) When a contractor holds title to a livestock or crop enterprise, or the borrower manages the enterprise under a share lease or share agreement.
Editorial Note: At 81 FR 51285, Aug. 3, 2016, §766.112, in paragraph (a)(6), the words “subpart G of 7 CFR part 1940” were removed and the words “part 799 of this chapter” were added in their place. However, paragraph (b)(3)(ii) does not exist, and this amendment could not be incorporated.
(7) The amount of debt forgiveness does not exceed $300,000.
(b) Buyout time frame. After the Agency offers current market value buyout of the loan, the borrower has 90 days from the date of Agency notification to pay that amount.
(2) Voluntary meeting of creditors when a State does not have a certified mediation program.
(b) Any negotiation of the Agency's appraisal must be completed before State-certified mediation or voluntary meeting of creditors.
(ii) Choose which appraisal will be used in Agency calculations, if the difference between the two appraisals is five percent or less.
(3) Negotiate the Agency's appraisal by obtaining a second appraisal.
(i) If the difference between the two appraisals is five percent or less, the borrower will choose the appraisal to be used in Agency calculations.
(ii) If the difference between the two appraisals is greater than five percent, the borrower may request a third appraisal. The Agency and the borrower will share the cost of the third appraisal equally. The average of the two appraisals closest in value will serve as the final value.
(iii) A borrower may request a negotiated appraisal only once in connection with an application for primary loan servicing.
(iv) The borrower may not appeal a negotiated appraisal.
(b) If the appraised value of the borrower's assets change as a result of the challenge, the Agency will reconsider its previous primary loan servicing decision using the new appraisal value.
(c) If the appeal process results in a determination that the borrower is eligible for primary loan servicing, the Agency will use the information utilized to make the appeal decision, unless stated otherwise in the appeal decision letter.
(a) Pre-acquisition—(1) Notification. If the borrower requested primary loan servicing but cannot develop a feasible plan, the Agency will notify the borrower of any additional information needed to process the homestead protection request. The borrower must provide this information within 30 days of Agency notification.
(2) Borrower does not respond. If the borrower does not timely provide the information requested, the Agency will deny the homestead protection request and provide appeal rights.
(iii) Identification of land and buildings to be considered.
(b) Post-acquisition—(1) Notification. After the Agency acquires title to the real estate property, the Agency will notify the borrower of the availability of homestead protection. The borrower must submit a complete application within 30 days of Agency notification.
(2) Borrower does not respond. If the borrower does not respond to the Agency notice, the Agency will dispose of the property in accordance with 7 CFR part 767.
(ii) Identification of land and buildings to be considered.
(a) Property. (1) The principal residence and the adjoining land of up to 10 acres, must have served as real estate security for the FLP loan and may include existing farm service buildings. Homestead protection does not apply if the FLP loans were secured only by chattels.
(2) The applicant may propose a homestead protection site. Any proposed site is subject to Agency approval.
(3) The proposed homestead protection site must meet all State and local requirements for division into a separate legal lot.
(4) Where voluntary conveyance of the property to the Agency is required to process the homestead protection request, the Agency will process any request for voluntary conveyance according to §766.353.
(6) Must not be ineligible due to disqualification resulting from Federal crop insurance violation according to 7 CFR part 718.
Homestead protection rights are not transferable or assignable, unless the eligible party dies or becomes legally incompetent, in which case the homestead protection rights may be transferred to the spouse only, upon the spouse's agreement to comply with the terms and conditions of the lease.
(a) General. (1) The Agency may approve a lease-purchase agreement on the appropriate Agency form subject to obtaining title to the property.
(ii) The Agency will not implement any outstanding lease-purchase agreement.
(3) The borrower may request homestead protection for property subject to third party redemption rights. In such case, homestead protection will not begin until the Agency obtains title to the property.
(b) Lease terms and conditions. (1) The amount of rent will be based on equivalent rents charged for similar residential properties in the area in which the dwelling is located.
(2) All leases will include an option to purchase the homestead protection property as described in paragraph (c) of this section.
(3) The lease term will not be less than 3 years and will not exceed 5 years.
(4) The lessee must agree to make lease payments on time and maintain the property.
(5) The lessee must cooperate with Agency efforts to sell the remaining portion of the farm.
(c) Lease-purchase options. (1) The lessee may exercise in writing the purchase option and complete the homestead protection purchase at any time prior to the expiration of the lease provided all lease payments are current.
(2) If the lessee is a member of a socially disadvantaged group, the lessee may designate a member of the lessee's immediate family (that is, parent, sibling, or child) (designee) as having the right to exercise the option to purchase.
(3) The purchase price is the market value of the property when the option is exercised as determined by a current appraisal obtained by the Agency.
(4) The lessee or designee may purchase homestead protection property with cash or other credit source.
(iv) The lessee or designee is otherwise eligible for the FLP loan.
(d) Lease terminations. The Agency may terminate the lease if the lessee does not cure any lease defaults within 30 days of Agency notification.
(e) Appraisal of homestead protection property. The Agency will use an appraisal obtained within six months from the date of the application for considering homestead protection. If a current appraisal does not exist, the applicant will select an independent real estate appraiser from a list of appraisers approved by the Agency.
If there is a conflict between a borrower's homestead protection rights and any provisions of State law relating to redemption rights, the State law prevails.
(2) Accepts a writedown in accordance with §766.111.
(4) The Agency accelerates the borrower's loans.
(1) Prior to completion of the appraisal, the borrower will identify any capital improvements that have been added to the real estate security since the execution of the SAA.
(2) The appraisal must specifically identify the contributory value of capital improvements made to the real estate security during the term of the SAA to make deductions for that value.
(i) It is the borrower's primary residence. If the new residence is affixed to the real estate security as a replacement for a residence which existed on the security property when the SAA was originally executed, or, the living area square footage of the original residence was expanded, only the value added to the real property by the new or expanded portion of the original residence (if it added value) will be deducted from the market value.
(A) The item must have been capitalized and not taken as an annual operating expense on the borrower's Federal income tax returns. The borrower must provide copies of appropriate tax returns to verify that capital improvements claimed for shared appreciation recapture reduction are capitalized.
(B) If the new item is affixed to the real estate as a replacement for an item that existed on the real estate at the time the SAA was originally executed, only the value added by the new item will be deducted from the market value.
(b) In the event of a partial sale, an appraisal of the property being sold may be required to determine the market value at the time the SAA was signed if such value cannot be obtained through another method.
(2) Fifty percent of such appreciation if the agreement is triggered more than 4 years from the date of the writedown or when the agreement matures.
(b) If the borrower sells a portion of the security, the borrower must pay shared appreciation only on the portion sold. Shared appreciation on the remaining portion will be due in accordance with paragraph (a) of this section.
(c) The amount of recapture cannot exceed the amount of the debt written off through debt writedown.
(6) Signs loan agreements and security instruments as required.
(b) If the borrower later becomes delinquent or financially distressed, reamortization of the Shared Appreciation Payment Agreement can be considered under subpart C of this part.
(a) The interest rate for Shared Appreciation Payment Agreements is the Agency's SA amortization rate.
(b) The term of the Shared Appreciation Payment Agreement is based on the borrower's repayment ability and the useful life of the security. The term will not exceed 25 years.
(a) Servicing existing Net Recovery Buyout Recapture Agreements. Prior to July 3, 1996, the Agency was authorized to offer borrowers buy out their loans at the net recovery value. A Net Recovery Buyout Agreement was required for borrowers who bought out their loans at the net recovery value. The Agency services existing Net Recovery Buyout Recapture Agreements as described in this section.
(b) Requirements and terms. (1) The term of a Net Recovery Buyout Recapture Agreement is 10 years. Net Recovery Buyout Recapture Agreements are secured by a lien on the former borrower's real estate.
(iii) The total amount of the FLP debt the Agency wrote off for loans secured by real estate.
(3) If the former borrower does not pay the amount due, the Agency will liquidate the Net Recovery Buyout account in accordance with subpart H of this part.
(4) If the former borrower does not sell or convey the real estate within the 10-year term, no recapture is due.
(a) Except where otherwise specified, the borrower is responsible for repaying any unauthorized assistance in full within 90 days of Agency notice. The Agency may reverse any unauthorized loan servicing actions, when possible.
(b) The borrower has the opportunity to meet with the Agency to discuss or refute the Agency's findings.
A borrower is ineligible for continued Agency assistance if the borrower, or a third party on the borrower's behalf, submits information to the Agency that the borrower knows to be false.
(a) Borrower options. (1) The borrower may repay the amount of the unauthorized assistance in a lump sum within 90 days of Agency notice.
(2) If the borrower is unable to repay the entire amount in a lump sum, the Agency will accept partial repayment of the unauthorized assistance within 90 days of Agency notice to the extent of the borrower's ability to repay.
(C) The life of the security for chattel loans.
(b) Borrower refusal to pay. If the borrower is able to pay the unauthorized assistance amount but refuses to do so, the Agency will notify the borrower of the availability of loan servicing in accordance with subpart C of this part.
(a) Borrower not previously notified. The Agency will provide notice of all loan servicing options available under subpart C of this part, if the borrower has not been previously notified of these options.
(b) Borrower with prior notification. If the borrower received notice of all loan servicing options available under subpart C of this part prior to the time of bankruptcy filing but all loan servicing was not completed, the Agency will provide notice of any remaining loan servicing options available.
(a) Borrower not previously notified. To be considered for loan servicing, the borrower or borrower's attorney must sign and return the appropriate response form and any forms or information requested by the Agency within 60 days of the date of receipt of Agency notice on loan servicing options.
(2) The remaining time from the Agency's previous notification of all servicing options that the Agency suspended when the borrower filed bankruptcy.
(c) Court approval. The borrower is responsible for obtaining court approval prior to exercising any available servicing rights.
(a) Considering borrower requests for servicing. Any request for servicing is the borrower's acknowledgment that the Agency will not interfere with any rights or protections under the Bankruptcy Code and its automatic stay provisions.
(b) Borrowers with confirmed bankruptcy plans. If a plan is confirmed before servicing and any appeal is completed under 7 CFR part 11, the Agency will complete the servicing or appeals process and may consent to a post-confirmation modification of the plan if it is consistent with the Bankruptcy Code and subpart C of this part, as appropriate.
(c) Chapter 7 borrowers. A borrower filing for bankruptcy under chapter 7 of the Bankruptcy Code may not receive primary loan servicing unless the borrower reaffirms the entire FLP debt. A borrower who filed chapter 7 does not have to reaffirm the debt in order to be considered for homestead protection.
(a) General. (1) When a borrower cannot or will not meet a loan obligation, the Agency will consider liquidating the borrower's account in accordance with this subpart.
(2) The Agency will charge protective advances against the borrower's account as necessary to protect the Agency's interests during liquidation in accordance with §765.203 of this chapter.
(3) When no surviving family member or third party assumes or repays a deceased borrower's loan in accordance with part 765, subpart J, of this chapter, or when the estate does not otherwise fully repay or sell loan security to repay a deceased borrower's FLP loans, the Agency will liquidate the security as quickly as possible in accordance with State and local requirements.
(b) Liquidation for Program borrowers. (1) If the borrower does not apply, does not accept, or is not eligible for primary loan servicing, conservation contract, market value buyout or homestead protection, and all administrative appeals are concluded, the Agency will accelerate the borrower's account in accordance with §§766.355 and 766.356, as appropriate.
(i) Not delay involuntary liquidation action.
(ii) Notify the borrower in accordance with subpart C of this part, prior to acting on the request for voluntary liquidation, if the conditions of paragraph (b)(1) of this section have not been met.
(1) The Agency may delay involuntary liquidation actions when in the Agency's financial interest for a period not to exceed 60 days.
(2) The borrower must obtain the Agency's consent prior to the sale of the property.
(3) If the borrower will not pay the Agency in full, the minimum sales price must be the market value of the property as determined by the Agency.
(4) The Agency will accept a conveyance offer only when it is in the Agency's financial interest.
(5) If a Non-program borrower does not cure the default, or cannot or will not voluntarily liquidate, the Agency will accelerate the loan.
(a) General. A borrower may voluntarily sell real property or chattel security to repay FLP debt in lieu of involuntary liquidation if all applicable requirements of this section are met. Partial dispositions are handled in accordance with part 765, subparts G and H, of this chapter.
(1) The borrower must sell all real property and chattel that secure FLP debt until the debt is paid in full or until all security has been liquidated.
(2) The Agency must approve the sale and approve the use of proceeds.
(iv) Costs are not for postage and insurance of the note while in transit when required for the Agency to present the promissory note to the recorder to obtain a release of a portion of the real property from the mortgage.
(ii) The sale is in the Agency's financial interest.
(5) If an unpaid loan balance remains after the sale, the Agency will continue to service the loan in accordance with subpart B of 7 CFR part 1956.
(iv) Obtains the Agency's agreement for the sale.
(9) Any other documentation required by the Agency to evaluate the request.
(3) The borrower has received prior notification of the availability of loan servicing in accordance with subpart C of this part.
(c) Prior and junior liens. (1) The Agency will pay prior liens to the extent consistent with the Agency's financial interest.
(2) Before conveyance, the borrower must pay or obtain releases of all junior liens, real estate taxes, judgments, and other assessments. If the borrower is unable to pay or obtain a release of the liens, the Agency may attempt to negotiate a settlement with the lienholder if it is in the Agency's financial interest.
(d) Charging and crediting the borrower's account. (1) The Agency will charge the borrower's account for all recoverable costs incurred in connection with a conveyance.
(2) The Agency will credit the borrower's account for the amount of the market value of the property less any prior liens, or the debt, whichever is less. In the case of an American Indian borrower whose loans are secured by real estate located within the boundaries of a Federally recognized Indian reservation, however, the Agency will credit the borrower's account with the greater of the market value of the security or the borrower's FLP debt.
(e) Right of possession. After voluntary conveyance, the borrower or former owner retains no statutory, implied, or inherent right of possession to the property beyond those rights under an approved lease-purchase agreement executed according to §766.154 or required by State law.
(6) Complete debt settlement application in accordance with subpart B of 7 CFR part 1956 before or in conjunction with the voluntary conveyance offer if the value of the property to be conveyed is less than the debt.
(5) The borrower has received prior notification of the availability of loan servicing in accordance with subpart C of this part.
(c) Charging and crediting the borrower's account. (1) The Agency will charge the borrower's account for all recoverable costs incurred in connection with the conveyance.
(2) The Agency will credit the borrower's account in the amount of the market value of the chattel.
(ii) The borrower is American Indian, whose real estate is located on an Indian reservation.
(2) The Agency accelerates all of the borrower's loans at the same time, regardless of whether each individual loan is delinquent or not.
(3) All borrowers must receive prior notification in accordance with subpart C of this part, except for borrowers who fail to graduate in accordance with §766.101(a)(8).
(b) Time limitations. The borrower has 30 days from the date of the Agency acceleration notice to pay the Agency in full.
(4) Voluntarily convey the security to the Agency in accordance with §§766.353 and 766.354, as appropriate.
(d) Partial payments. The Agency may accept a payment that does not cover the unpaid balance of the accelerated loan if the borrower is in the process of selling security, unless acceptance of the payment would reverse the acceleration.
(e) Failure to satisfy the debt. The Agency will liquidate the borrower's account in accordance with §766.357 if the borrower does not pay the account in full within the time period specified in the acceleration notice.
(a) General. (1) The Agency accelerates loans to American Indian borrowers whose real estate is located on an Indian reservation in accordance with this section, unless State law imposes separate restrictions on accelerations.
(iii) Transfer of acquired property to the Secretary of the Interior if the priority of purchase of the property established under paragraph (a)(4)(ii) of this section is not exercised.
(i) The Tribe will have 30 calendar days after the Agency notification of such request to accept the assignment of the loan.
(ii) The Tribe must pay the Agency the lesser of the outstanding Agency indebtedness secured by the real estate or the market value of the property.
(B) Such loan may not be considered for debt writedown under 7 CFR part 770.
(iv) The Tribe's failure to respond to the request for assignment of the loan or to finalize the assignment transaction within the time provided, shall be treated as the Tribe's denial of the request.
(i) The Agency will conduct a environmental review before accepting voluntary conveyance.
(ii) The Agency will credit the account with the greater of the market value of the real estate or the amount of the debt.
(i) The buyer must have the financial ability to buy the property.
(ii) The sale of the property must be completed within 90 calendar days of the Agency's notification.
(iii) The loan can be transferred and assumed by an eligible buyer.
(5) Pay the FLP debt in full.
(6) Consult with the Tribe that has jurisdiction over the Indian reservation to determine if State or Tribal law provides rights and protections that are more beneficial than those provided under this section.
(3) Amount the Tribe would be required to pay the Agency for assignment of the loan.
(3) Neither the Tribe nor the Secretary of the Interior accepts assignment of the borrower's loan.
(2) The involuntary liquidation is in the Agency's financial interest.
(b) Foreclosure on loans secured by real property. (1) The Agency will charge the borrower's account for all recoverable costs incurred in connection with the foreclosure and sale of the property.
(2) If the Agency acquires the foreclosed property, the Agency will credit the borrower's account in the amount of the Agency's bid except when incremental bidding was used, in which case the amount of credit will be the maximum bid that was authorized. If the Agency does not acquire the foreclosed property, the Agency will credit the borrower's account in accordance with State law and guidance from the Regional OGC.
(ii) The amount of the FLP debt against the property.
(4) After the date of foreclosure, the borrower or former owner retains no statutory, implied, or inherent right of possession to the property beyond those rights granted by State law.
(5) If an unpaid balance on the FLP loan remains after the foreclosure sale of the property, the Agency may debt settle the account in accordance with subpart B of 7 CFR part 1956.
(c) Foreclosure of loans secured by chattel. (1) The Agency will charge the borrower's account for all recoverable costs incurred by the Agency as a result of the repossession and sale of the property.
(2) The Agency will apply the proceeds from the repossession sale to the borrower's account less prior liens and all authorized liquidation costs.
(3) If an unpaid balance on the FLP loan remains after the sale of the repossessed property, the Agency may debt settle the account in accordance with subpart B of 7 CFR part 1956.
(a) Notwithstanding any other provisions of this subpart, borrowers who file or have filed a program discrimination complaint that is accepted by USDA Office of Adjudication or successor office (USDA), and have been serviced to the point of acceleration or foreclosure on or after May 22, 2008, will not have their account accelerated or liquidated until such complaint has been resolved by USDA or closed by a court of competent jurisdiction. This moratorium applies only to program loans made under subtitle A, B, or C of the Act (for example, CL, FO, OL, EM, SW, or RL). Interest will not accrue and no offsets will be taken on these loans during the moratorium. Interest accrual and offsets will continue on all other loans, including, but not limited to, non-program loans.
(1) If the Agency prevails on the program discrimination complaint, the interest that would have accrued during the moratorium will be reinstated on the account when the moratorium terminates, and all offsets and servicing actions will resume.
(2) If the borrower prevails on the program discrimination complaint, the interest that would have accrued during the moratorium will not be reinstated on the account unless specifically required by the settlement agreement or court order.
(2) The date after May 22, 2008, when the borrower has a program discrimination claim accepted by USDA as valid and the borrower's account is at the point of acceleration or foreclosure.
(4) Any other time when, because of litigation, third party action, or other unforeseen circumstance, acceleration is the next step for the Agency in servicing and liquidating the account.
(d) A borrower is considered to be in foreclosure status under this section anytime after acceleration of the account.
(2) The date that a court of competent jurisdiction renders a final decision on the program discrimination claim if the borrower appeals the decision of USDA.
(b) The Agency's financial interest would be adversely affected by acting in accordance with published regulations or policies and granting the exception would resolve or eliminate the adverse effect upon its financial interest.

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