Title 7
SECTION 1782.13
1782.13 Transfer of security and assumption of loans.
§ 1782.13 Transfer of security and assumption of loans.It is the Agency's policy to approve transfers and assumptions to transferees that will continue the original purpose of the loan. Assistant Administrator written concurrence is required when the transfer exceeds the State Director's loan approval authority. The transfer will be approved in accordance with the following requirements:
(a) General requirements for transferees. The fulfillment of the following requirements for transfers will be determined by the approval official, in his or her discretion:
(1) The transferees must meet the eligibility requirements of 7 CFR part 1780 and provide the same information required in 7 CFR part 1780, subpart B, for application processing.
(2) The transfer will not be disadvantageous to the Government as determined by the approval official.
(3) If the Agency debt(s) exceeds the present market value of the security as determined by an appraisal, the transferee will assume an amount at least equal to the present market value.
(4) The Agency must concur in plans for disposition of funds in any reserve account, including project construction bank accounts. A reserve account may be considered as a transferable asset.
(5) The transferee will assume all of the borrower's responsibilities regarding loans. The transferee will also agree to accept the original loan conditions plus any conditions set forth by the Agency with regard to the transfer.
(6) A current appraisal will be completed to establish the present market value of the security when the full debt is not being assumed.
(7) There must be no lien, judgement, or similar claims of other parties against the Agency security being transferred unless the transferee is willing to accept such claims. The Agency must also determine that the claims will not prevent the transferee from repaying the Agency debt, meeting all operating and maintenance costs, and maintaining required reserves. The written consent of any other lienholder will be obtained where required.
(8) A letter of conditions establishing requirements to be met in connection with the transfer will be issued, and the transferee will be required to execute Form RD 1942-46, “Letter of Intent to Meet Conditions,” prior to closing of the transfer.
(9) The transferee will obtain insurance according to Agency requirements.
(10) The effective date of the transfer is the date the transfer is closed, which is the same date Form RD 1951-15, “Community Programs Assumption Agreement,” or other appropriate assumption agreement which is executed and delivered by all necessary parties.
(11) Title to all assets will be conveyed from the transferor to the transferee unless all parties concerned, including the Agency, agree upon other arrangements. All instruments of conveyance will contain the necessary nondiscrimination covenant as referred to in § 1782.5.
(12) 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.
(13) The State Director is authorized to approve transfers to eligible transferees at the same interest rate as on the borrower's note(s) or bond(s). The maturity of the debt instrument for the assumed debt may not exceed the lesser of the repayment period authorized in 7 CFR part 1780 for a “new” loan or the expected life of the facility.
(14) Agency National Office concurrence is required for transfers not in compliance with paragraphs (a)(1) through (13) of this section.
(b) Loan requirements for eligible transferees. If a loan is evidenced and secured by a note and lien on real or chattel property, Form RD 1951-15, or other appropriate assumption agreement will be executed by the transferee. If a bond secures a loan, transfer documents will be developed by bond counsel and approved by the Office of the General Counsel (OGC), USDA.
(1) 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, 7 CFR part 1780 will govern the preparation of any new debt instruments required.
(2) 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.
(3) Any development funds remaining in a bank account that are not refunded to the Agency will be transferred to a bank account for the transferee. This will occur simultaneously with the closing of the transfer, and the funds will be used in completing planned development.
(c) Release from liability. Transferors may be released from liability when their debt is paid in full or when the debt is settled in accordance with § 1782.20 of this part.
(d) Transfer of facility financed with Agency grants. The requirements for the sale or disposition of assets financed with Agency grants are determined by the terms of the grant agreement, 7 CFR parts 3015, 3016, and 3019, and E.O. 12803, as applicable.