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SUBPART-LOANS TO INDIVIDUALS FOR RURAL REHABILITATION
303.21 General policies. It is the policy of the Farm Security Administration:
To make farm families self-supporting on a basis consistent with acceptable standards and local conditions by means of loans based upon Farm and Home Management Plans approved by the Farm Security Administration.
To require all applicants for loans to obtain their necessary financing or refinancing from agencies other than the Farm Security Administration whenever they can obtain such financing or refinancing and can get it on reasonable terms.
To take a first lien on property which is adequate to secure all new loans made, including renewal of existing loans. It is not the policy of the Farm Security Administration to subordinate new or existing loans to liens of other creditors. Exceptions to this policy will be made only upon the approval of the regional director on individual
To make loans under this subpart to eligible persons only on the basis of regular Farm and Home Management Plans accepted by the Farm Security Administration. This policy requires that all active cases now or hereafter to be on the rolls of the Farm Security Administration for whom regular Farm and Home Management Plans have not been accepted by the Farm Security Administration, will, until further notice, be treated as emergency rehabilitation cases in conformity with §§ 321.1-321.4, and Administration Instruction 57 (Revision 1), August 13, 1936.
Not to make loans to individual borrowers for the purpose of refinancing real property mortgages. This policy is not to be construed as modifying the purposes for which loans may be made to individuals for participation in community and cooperative services, as set forth in § 303.71. [Par. 2]
*§§ 303.21 to 303.160, inclusive, issued under the authority contained in the Emergency Relief Appropriation Act in effect at the time of issuance, sec. 6, 49 Stat. 118, 49 Stat. 1609, sec. 2 (a), 50 Stat. 354; 15 U.S.C., Sup., 728. The authority delegated to the President by these statutes has been redelegated by him in the Executive orders listed in note to § 301.1.
†The source of §§ 303.21 to 303.30, inclusive, (except for the amendments noted in the text,) is Administration order 41, rev. 1, Resettlement Administration, Dec. 21, 1935.
303.22 Persons eligible. Farm owners, farm tenants, sharecroppers, farm laborers, or persons who, when last employed, obtained the major portion of their livelihood from farming operations, who are or may hereafter be certified as eligible for public aid and referred to the Farm Security Administration by Central Application Bureaus or other agencies authorized to determine need for public aid (including county rural rehabilitation advisory committees in areas not otherwise adequately served), and persons now on the official rolls of the Farm Security Administration as standard rehabilitation and emergency rehabilitation cases classified in accordance with Administration Instruction 138, February 8, 1938, will be eligible to receive loans under this subpart, subject to the following conditions: (a) Loans may be made to such persons, as far as allotted funds per
mit, if they evidence an acceptable initiative and resourcefulness, managerial capacity, and promise of ability to profit from instruction and guidance; (b) if the soil resources available to them, or which are to be made available, promise a satisfactory return on human labor intelligently applied; and (c) if there is a reasonable probability of the successful outcome of regular Farm and Home Management Plans designed for them in accordance with the following policies: Farm and Home Management Plans will be designed so that the farm will make the largest possible contribution to the family living throughout the year in vegetables and fruits, dairy products, eggs and poultry, meats and cereals, and fuel; Farm and Home Management Plans will be designed to incorporate an economy which promises sufficient cash income to provide economic stability and liquidation of obligations to the Farm Security Administration and to other creditors.** [Par. 4a]
303.23 Special cases. Authority is hereby given to regional directors of the Farm Security Administration to make loans for rural rehabilitation to other persons who are heads of farm families, provided that such loans are consistent with the purpose of this subpart, and within the limitations of Executive Order 7143, August 19, 1935, and subsequent amendments thereto.** [Par. 4b]
303.24 Purposes for which loans may be made and periods of such loans. Loans may be made for the following purposes for a period not to exceed 5 years: (Goods acquired by purchase, or retained by refinancing, from the proceeds of loans made under these purposes will be construed as "recoverable goods" for the purpose of this subpart.)
Purchase of horses, mules, cattle, sows, sheep, or other livestock and poultry whose useful life is expected to exceed 2 years.
Construction and major repairs of buildings and fences.
Refinancing of chattel mortgages and other liens on personal property, when it is found impossible to make other equitable adjustments and when the amount is more than should be considered an annual instalment.
Other farm improvements essential to the successful operation of the approved Farm and Home Management Plan and the rehabilitation of the family.
The purchase of lime or fertilizers or the seeding of land to permanent pasture or meadow, the benefits of which will be spread over a number of years but the cost of which may reasonably be expected to be repaid within 5 years out of the increased productivity of the land; Provided, That no such loan shall be made to any tenant whose lease will expire before the date of the repayment of the loan unless said tenant has a contract with his landlord under the terms of which he will be adequately compensated for the unaccrued residual value of the fertilizer applied or seeding to pasture or meadow. (Loans for the purchase of feed, seed, fertilizer and other seasonal farm supplies, the benefits of which will largely accrue within a 2-year period, should be repayable in a period less than 2 years.)
**For statutory and source citations, see note to § 303.21.
Loans may be made for the following purposes for a period less than two years: (Goods acquired by purchase, or retained by refinancing, from the proceeds of loans made under these purposes will be construed as "nonrecoverable goods" for the purpose of this subpart.)
Purchase of feed, seed, fertilizer, and other seasonal farm supplies. Minor repairs to buildings and fences, repairs to farm machinery and household equipment, and the purchase of farm tools.
Payment of rent on land and buildings.
Payment of recording and filing fees, labor, professional and transportation services, and other fees and services, including utility services.
Purchase of baby chicks, feeder pigs, or other livestock of a character that will be consumed or marketed in less than 2 years.
Purchase of food, fuel, clothing, and other subsistence goods for human needs, and payment of indispensable medical services. Payment of premiums for property insurance.
Payment of interest on chattel mortgages or other liens on personal property.
Payment of annual instalments on chattel mortgages or other liens against personal property.
Payment of taxes on real and personal property.
Loans will be made for the shortest period consistent with the purpose of this subpart, considering the use to which the proceeds of the loan are to be put, the useful life of the goods to be purchased, and the resources and earning capacity of the borrower.* [Par. 4c, A.O. 41, rev. 1, Dec. 21, 1935, as amended by Supp. 6, May 25, 1937]
303.25 Amortization and rate of interest. Interest will be charged at the rate of 5 percent per annum on all new loans and renewals granted under the provisions of this subpart.
Loans for nonrecoverable goods will be repayable in less than 2 years in such instalments as the regional director will determine to be in accordance with the anticipated maximum ability of the borrower to repay, or in accordance with the provisions of the Farm and Home Management Plan approved for the borrower.
Loans for recoverable goods will be repayable within a period not to exceed 5 years. Provisions may be made for repayments in such instalments as the regional director may determine to be in accordance with the anticipated maximum ability of the borrower to repay or in accordance with the provisions of the Farm and Home Management Plan approved for the borrower, Provided only That the total repayments required during each year will be the same for each of the years for which such loan is made. However, when the borrower is subject to one or more of the conditions of financial stress listed below and the loan is made for a period of 5 years, the first two annual payments on the principal may be deferred in case of: (Interest, however, will be payable during the first 2 years. During the third, fourth, and fifth years the loan will be amortized by payments of principal with interest, Provided only That the total repayments required during each of the three years will be the same for each of the 3 years, during which such repayments are made.)
*For statutory citation, see note to § 303.21.
(a) A heavy repayment schedule arising during the first two years as a result of funds advanced for the purchase of nonrecoverable goods.
(b) The necessity of meeting heavy repayments of old debts during the first 2 years.
(c) The beginning of the borrower's farm operations under the Farm and Home Management Plan at a season of the year when cash income therefrom will be largely deferred for a period in excess of 12 months.
(d) The necessity of devoting the first year to soil improvement or other activities on which the major returns to the borrower will be deferred.* [Pars. 4d, 4e]
303.26 Notes and security. All loans made under this subpart will be evidenced by one or more promissory notes payable to the United States of America: Either by one or more notes in the full amount of the approved Loan Agreement, if said amount is to be paid in one advance; or by one or more notes in the amount of each advance, if the amount of the approved Loan Agreement is to be paid in two or more advances. The terms of repayment of each note shall be made to coincide with the schedule of repayments in the Loan Agreement. Advances to a client may be made in one payment or in a series of payments not to exceed four in number, timed as nearly as is practicable to the date(s) when the money will be actually needed by him. In those instances in which the full amount of the loan or a portion thereof is paid to a client in advance of the date actually needed by him, the county rural rehabilitation supervisor may, when he deems it necessary to provide assurance that the funds will be used for the purposes set forth in the Loan Agreement, require that the unused portion of the check be deposited in a bank to the credit of the borrower, subject to withdrawal with countersignature by the county rural rehabilitation supervisor. Banks in which such funds are deposited shall have their deposits insured by the Federal Deposit Insurance Corporation. In such cases, agreements of joint control shall be entered into by the client, the bank, and the county rural rehabilitation supervisor on Form FSA-RR 167, Deposit Agreement. Upon the approval of the Solicitor this form may be modified by the regional attorney to meet local conditions.
Loans for recoverable goods will be secured in the full amount of the loan by a chattel mortgage or similar lien on the property to be acquired by the borrower from the proceeds of the loan, and may be further secured by an assignment of the proceeds from the sale of farm, dairy or other livestock products, and/or by a chattel mortgage, crop lien or other similar lien on all or any part of the other chattels owned by the borrower, and/or by a mortgage or similar lien on all or any part of any real property owned by the borrower. (When the proceeds from a loan for recoverable goods are to be used in minor part for purposes to acquire property which, by reason
2 These purposes concern the construction and major repairs of buildings and fences or other farm improvements essential to the successful operation of the approved Farm and Home Management Plan and the rehabilitation of the family.
**For statutory and source citations, see note to § 303.21.
of local law or by reason of the use to which such property is put, becomes real property, the regional director may waive the requirement of a mortgage on such real property so acquired in cases where the full amount of the loan can be adequately secured by a chattel mortgage or similar lien on the other property to be acquired by the borrower from the proceeds of the loan and by any or all of the following types of security: An assignment of the proceeds from the sale of farm, dairy or other livestock products; a chattel mortgage, crop lien or other similar lien on all or any part of the other chattels owned by the borrower.)
Loans for nonrecoverable goods will be secured in the full amount of the loan by a chattel mortgage or similar lien on all chattels owned by the borrower or to be acquired by him from the proceeds of the loan, or by an assignment of the proceeds from the sale of farm, dairy, or other livestock products and/or crops or any part of such chattels or crops, and/or by a mortgage or similar lien on all or any part of any real property owned by the borrower.
Where the local law or the individual situation of the borrower makes a different form or type of security more desirable, the regional director may, upon the advice of the Solicitor and approval of the Administrator, prescribe a different type or form of security.
It is the policy of the Farm Security Administration to take a first lien on property which is adequate to secure all new loans and renewals of loans, but in those areas where local statutes make it impossible to secure a first lien on crops, the best lien obtainable will be taken. Where it is possible to segregate crops by definition or description to insure subsequent identification, a first lien will be taken on a part of the crops if legally permissible.
Where loans are to be made for purposes such that local statutes require taking a mortgage on real estate instead of on chattels, and where all the real estate of the borrower is encumbered by a first mortgage, a second mortgage on real estate may be taken provided this real estate is a mortgageable equity which will provide adequate security.* [Par. 4f, A.Ö. 41, rev. 1, Dec. 21, 1935, as amended by Supp. 2, June 8, 1936, and Supp. 7, Sept. 7, 1937]
CROSS REFERENCE: For Federal Deposit Insurance Corporation, see 12 CFR Chapter III.
303.27 Recording and filing of securing documents. Borrowers from the Farm Security Administration are required to pay costs incident to the recording or filing of mortgages, liens or other legal instruments given by them to secure loans made to them under the provisions of this subpart. Rural rehabilitation supervisors, at the time of delivery of checks covering advances made on loans to borrowers of the Farm Security Administration, will collect from such borrowers the cost of recording or filing mortgages, liens or other legal instruments given by the borrowers to secure loans made to them. Rural rehabilitation supervisors will be responsible for recording and filing legal documents within the time limitations set forth under prevailing local statutes.** [Par. 5]
303.28 Encumbrances and creditors. When any of a borrower's personal property is encumbered in an amount and at interest rates
**For statutory and source citations, see note to § 303.21.