12 C.F.R. Subpart E—Loan Terms and Conditions
Title 12 - Banks and Banking
Source: 55 FR 24884, June 19, 1990, unless otherwise noted.
(a) Terms and conditions. (1) The terms and conditions of each loan made by a Farm Credit bank or association shall be set forth in a written document or documents, such as a loan agreement, promissory note, or other instrument(s) appropriate to the type and amount of the credit extension, in order to establish loan conditions and performance requirements. Copies of all documents executed by the borrower in connection with the closing of a loan made under titles I or II of the Act shall be provided to the borrower at the time of execution and at any time thereafter that the borrower requests additional copies. (2) The terms and conditions of all loans shall be adequately disclosed in writing to the borrower not later than loan closing. For loans made under titles I and II of the Act, the institution shall provide prompt written notice of the approval of the loan. (3) Applicants shall be provided notification of the action taken on each credit application in compliance with the requirements of 12 CFR 202.9. (b) Security. (1) Long-term real estate mortgage loans must be secured by a first lien interest in real estate, except that the loans may be secured by a second lien interest if the institution also holds the first lien on the property. No funds shall be advanced, under a legally binding commitment or otherwise, if the outstanding loan balance after the advance would exceed 85 percent (or 97 percent as provided in section 1.10(a) of the Act) of the appraised value of the real estate, except that a loan on which private mortgage insurance is obtained may exceed 85 percent of the appraised value of the real estate to the extent that the loan amount in excess of 85 percent is covered by such insurance. The real estate that is used to satisfy the loan-to-value limitation must be comprised primarily of agricultural or rural property, including agricultural land and improvements thereto, a farm-related business, a marketing or processing operation, a rural residence, or real estate used as an integral part of an aquatic operation. (2) Notwithstanding the requirements of paragraph (b)(1) of this section, the lending institution may advance funds for the payment of taxes or insurance premiums with respect to the real estate, reschedule loan payments, grant partial releases of security interests in the real estate, and take other actions necessary to protect the lender's collateral position. Any action taken that results in exceeding the loan-to-value limitation shall be in accordance with a policy of the institution's board of directors and adequately documented in the loan file. (3) Short- and intermediate-term loans may be secured or unsecured as the documented creditworthiness of the borrower warrants. (4) In addition to the requirements in paragraph (b)(1) of this section, a long-term, non-farm rural home loan, including a revolving line of credit, shall be secured by a first lien on the property, except that it may be secured by a second lien if the institution also holds the first lien on the property. A short- or intermediate-term loan on a rural home, including a revolving line of credit, must be secured by a lien on the property unless the financing is provided exclusively for repairs, remodeling, or other improvements to the rural home, in which case the loan may be secured by other property or unsecured if warranted by the documented creditworthiness of the borrower. (5) Except as provided in §614.4231, loans made under title III of the Act may be secured or unsecured, as appropriate for the purpose of the loan and the documented creditworthiness of the borrower. [62 FR 51014, Sept. 30, 1997] Loans on certain commodities that are part of government programs shall comply with the criteria established for those programs. Security taken on program commodities shall be consistent with prudent lending practices and ensure compliance with the government program. The bank shall provide for periodic review by bank officials of any custodial activities and shall provide notice to the custodians that their activities are subject to review and examination by the Farm Credit Administration. [62 FR 51015, Sept. 30, 1997] Loans and financial assistance extended by banks for cooperatives and agricultural credit banks to domestic lessors to finance equipment or facilities leased by a stockholder of the bank shall be subject to the following terms and conditions: (a) The term of the loan shall not be longer than the total period of the lease; (b) The contract between the lessor and lessee shall establish that the leased assets are effectively under the control of the lessee and that such control shall continue in effect for essentially all of the term of the lease; (c) The lessee must hold at least one share of stock or one participation certificate; and (d) The leased equipment and facilities must be primarily for use in the lessee's operations in the United States. [55 FR 24884, June 19, 1990, as amended at 64 FR 34517, June 28, 1999] Term loans made by banks for cooperatives and agricultural credit banks under the authority of section 3.7(b) of the Act and §613.3200 of this chapter to foreign or domestic parties who are not shareholders of the bank shall be subject to the following conditions: (a) The loan shall be denominated in a currency to eliminate foreign exchange risk on repayment. (b) The borrower's obligations shall be guaranteed or insured against default under such policies as are available in the United States and other countries. Exceptions may be made where a prospective borrower has had a longstanding successful business relationship with an eligible cooperative borrower or an eligible cooperative which is not a borrower if the prospective borrower has a high credit rating as determined by the bank. (c) For a borrower in which a voting stockholder of the bank has a majority ownership interest, financing may be extended for the full value of the transaction; otherwise, financing may be extended only to approximate the percent of ownership. [55 FR 24884, June 19, 1990, as amended at 55 FR 28886, July 16, 1990; 55 FR 50544, Dec. 7, 1990; 56 FR 5927, Feb. 14, 1991; 62 FR 4445, Jan. 30, 1997]
Title 12: Banks and Banking
PART 614—LOAN POLICIES AND OPERATIONS
Subpart E—Loan Terms and Conditions
§ 614.4200 General requirements.
§ 614.4231 Certain seasonal commodity loans to cooperatives.
§ 614.4232 Loans to domestic lessors.
§ 614.4233 International loans.
