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has determined (a) the fair and reasonable value of the farm, (b) that the farm is of such character that there is a reasonable likelihood that the making of a loan will carry out the purposes of Title I, and (c) that the applicant is eligible to receive the benefits of Title I of the Bankhead-Jones Farm Tenant Act, as amended.

(Sec. 2, 50 Stat. 523, as amended; 7 U. S. C. 1002) [21 F.R. 10446, Dec. 29, 1956] § 331.14 Loan approval authority.

The State Director is authorized to approve or disapprove Farm Ownership loans in accordance with this chapter. However, no initial or subsequent Farm Ownership loan may be approved by the State Director without prior consent of the National Office if the amount of the proposed Farm Ownership loan plus the principal amount of any real estate liens of the applicant will exceed $50,000 when the loan is closed, or if the proposed Farm Ownership loan, together with the principal balance owed on other Farmers Home Administration loans, would cause the total indebtedness to Farmers Home Administration to exceed $50,000. The loan docket and the State Director's recommendation should be submitted with any request for authority to approve a loan in excess of these limitations. The State Director may redelegate loan approval authority in writing to qualified State Office employees other than Area Supervisors.

[26 F.R. 7122, Aug. 9, 1961]

§ 331.15 Loan funds impressed with

trust.

The proceeds of loans made pursuant to Title I of the Bankhead-Jones Farm Tenant Act, as amended, shall be impressed with a trust for the purposes for which loans may be made under that Title, and may be used only for the purposes stated in the application therefor, and such trust shall continue, and the proceeds shall be free from garnishment, attachment, or the levy of an execution, until such proceeds have been used by the borrower for such purposes. Failure of the borrower to use the proceeds of such loans for such purposes, and in accordance with the purposes stated in the application therefor, shall be deemed grounds for the cancellation of the loan or for declaring the amount unpaid immediately due and payable.

(Sec. 44, 50 Stat. 530, as amended; 7 U. S. C. 1018) [21 F.R. 10446, Dec. 29, 1956]

in

§ 331.16 Territorial subdivisions Alaska, Puerto Rico, and the Virgin Islands.

In Alaska, Puerto Rico, and the Virgin Islands, for the purposes of Title I, Title II, and the related provisions of Title IV of the Bankhead-Jones Farm Tenant Act, as amended, each of the areas identified below is designated a subdivision to be deemed synonymous with the term "county," as the term is used in said Titles. Each such subdivision consists of, and is coextensive with the geographical limits of, the area set forth opposite the name of the subdivision.

ALASKA

Name of Subdivision and Divisions or Precinct Comprising Subdivision Anchorage: Recording Precincts of Anchorage, Kenal-Anchorage, Seward, Whittier. Fairbanks: Fourth Division.

Homer: Recording Precincts of Seldovia, Kodiak, Kvichak, Iliamna, Bristol Bay. Palmer: Recording Precincts of Palmer, Wasilla, Talkeetna, Chitna.

PUERTO RICO

Name of Subdivision and Municipalities Comprising Subdivision

Adjuntas: Adjuntas.

Aguadilla: Aguada, Aguadilla, Isabela, Moca, Rincon.

Arroyo: Arroyo, Guayama, Maunabo, Patillas, Salinas.

Barranquitas: Aibonito, Barranquitas,

Orocovis.

Bayamon: Bayamon, Catano, Dorado, Guaynabo, San Juan, Toa Alta, Toa Baja. Caguas: Aguas Buenas, Caguas, Gurabo. Camuy: Arecibo, Camuy, Hatillo, Quebradillas.

Carolina: Carolina, Rio Piedras, Trujillo

Alto.

Cayey: Cayey, Cidra, Comerio.

Ciales: Ciales.

Corozal: Corozal, Morovis, Naranjito.

Humacao: Ceiba, Humacao, Naguabo, Yabucoa.

Jayuya: Jayuya.

Juana Diaz: Coamo, Juana Diaz, Santa Isabel, Villalba.

Juncos: Juncos, Las Piedras, San Lorenzo. Lares: Lares.

Manati: Barceloneta, Manati, Vega Alta, Vega Baja.

Mayaguez: Anasco, Hormigueros, Las Marias, Mayaguez.

Ponce: Penuelas, Ponce.

Rio Grande: Rio Grande, Canovanas, Luquillo, Fajardo, Culebra, Vieques.

San German: Cabo Rojo, Lajas, San German, Sabana Grande.

§ 322.3 Long-time commodity prices, costs, and other basic appraisal data. Long-time prices for farm commodities, long-time farm operating and family living costs, and other basic appraisal data will be used in the preparation of Form FHA-596.

(a) Long-time commodity price schedules. A State schedule of long-time farm commodity prices will be prepared by the State Director. Each State schedule will be submitted to the National Office for approval before issuance.

(b) Cost schedules. A State schedule of cost items will be prepared by the State Director.

(c) Other basic appraisal data. The State Director will assemble other basic appraisal data for use of employees authorized to appraise farms as an aid to securing greater consistency in appraisals. All available sources of materials, such as publications of Agricultural Experiment Stations, Agricultural Colleges, United States Department of Agriculture, and so forth, should be utilized in developing and assembling the data. Such data will include to the extent practicable:

(1) A listing of recognized systems of farming, and the areas in the State where applicable.

(2) Standard crop rotations for various soils, conditions, and enterprises. (3) Approved feed tables.

(4) Hired labor cost figures. (5) Machinery requirements and depreciation rates.

(6) Tractor expense data.

(7) Values of buildings and depreciation rates.

(8) Method of determining the cash expense for family living.

(9) Capitalization rates.

(10) Other items which will be helpful to appraisers.

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This part outlines the policies and authorities for making insured and direct Farm Ownership loans under Title I of the Bankhead-Jones Farm Tenant Act, as amended (7 U.S.C. 1000 et seq.). As used in this part, the term “insured loan" means a loan made from funds furnished by lenders and insured by the Government at the time of closing, or a loan made from the insurance fund pursuant to Public Law 85-748, 85th Congress (7 U.S.C. 1006e), and insured by the Government subsequent to closing, or both, as appropriate. "Direct loan" means a loan made from funds authorized annually by the Congress. The making of Farm Ownership loans to Indians is subject to the additional policies and procedures contained in Part 392 of this chapter.

[24 F.R. 10941, Dec. 30, 1959] § 331.2

Objectives.

The basic objectives of Farm Ownership loans are to enable farm families to become soundly established in a successful system of farming and to qualify for credit from other sources within a reasonable period, to promote more secure Occupancy of farms and farm homes, and to correct economic instability resulting from changing conditions and some forms of farm tenancy. Primary emphasis will be given to assisting farm families who will conduct a familytype farming operation. Supervision will be provided borrowers to the extent necessary to achieve the objectives of the loan and to protect the interests of the Government in accordance with Part 302 of this chapter. These objectives will be accomplished by extending credit and supervisory assistance to:

(a) Individuals who will be owneroperators of family-type farms that will provide adequate income to meet living and operating expenses and amounts due on their loans.

(b) Disabled veterans who will be owner-operators of less than family-type farms that, together with their pensions, will provide adequate income to meet living and operating expenses and amounts due on their loans.

(c) Individuals who are established bona fide farmers and owner-operators of less than family-type farms that, with income from other sources, will enable the family to meet living and operating expenses and amounts due on their loans. (Secs. 1, 41, 50 Stat. 522, as amended, 528, as amended, sec. 18, 72 Stat. 840; 7 U.S.C. 1001, 1015, 1006e; Order of Acting Sec. of Agr., 19 F.R. 74, 22 F.R. 8188) [26 F.R. 7121, Aug. 9, 1961]

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(a) Family-type farm. A family-type farm is defined as a farm (1) that is of sufficient size and productivity to furnish income that will enable a farm family to have a reasonable standard of living, pay operating expenses, including maintenance of necessary livestock, farm and home equipment, land and buildings, pay their debts, and have a reasonable reserve to meet unforseen emergencies, (2) for which the management is furnished by the operator and his immediate family, and (3) for which the labor is furnished primarily by such operator and family except during seasonal peakload periods. It is not intended to include in this definition farms which require large amounts of seasonal hired labor.

(b) Less than family-type farm. A less than family-type farm is defined as a farm on which the applicant's income from the land he owns will be insufficient to meet the requirements of a familytype farm as defined in paragraph (a) of this section. In any case, to be suitable for a Farm Ownership loan, a less than family-type farm is one (1) that will produce agricultural commodities in sufficient quantities that the proceeds from their sale will be a substantial portion of the operator's total cash income, (2) that will provide farm income which together with any income from other sources, including income from rented land or grazing permits, will enable the family to have a reasonable standard of living, pay operating expenses, pay their debts, and have a reasonable reserve for unforeseen emergencies, (3) on which the management is furnished by the operator and his immediate family, (4) for which the labor is furnished primarily by the

operator and his immediate family except during seasonable peak-load periods, and (5) that will be recognized in the community as a farm rather than a rural residence. It is not intended to include in this definition farms which require large amounts of seasonal hired labor.

(c) Farm. The word "farm" as used in regulations relating to Farm Ownership loans includes the land, buildings, fences, water, water stock, water facilities, and other improvements which customarily pass with the farm in the change of ownership.

(1) In some states, certain improvement items or appurtenances which ordinarily would be considered a part of the real estate may, by agreement between the owner of the land and the person furnishing or using such appurtenances, remain personal property. Such an agreement would be binding on a Farm Ownership borrower who purchases the land. In all cases where funds are included in a Farm Ownership loan to purchase such improvement or appurtenances, the County Supervisor, with the advice of the designated attorney, title insurance company, or the Office of the General Counsel, will ascertain that such appurtenances are free from any liens or encumbrances and are covered adequately by a first real estate or chattel mortgage.

(2) In some areas, facilities or improvement items not generally considered to be a part of the real estate, however, ordinarily do pass with the land when such a farm changes ownership. If it is administratively determined that certain such items customarily do pass with the land in the area, Farm Ownership loan funds may be included for the acquisition of such items necessary to the efficient operation of the farm. The advice of the designated attorney, title insurance company, or the Office of the General Counsel should be obtained in such cases. Where such facilities or improvement items do not commonly pass with the land when such a farm changes ownership, Farm Ownership loan funds will not be used for acquisition of the facilities even though such facilities may be necessary to the efficient operation of the farm.

(d) Average value. The term "average value" for a county, parish, or locality means the average value efficient family-type farm-management

of

units situated in the county or parish as shown in § 331.17 of this part.

(e) Fair and reasonable value. The term "fair and reasonable value of the farm" means the amount certified by the County Committee on Form FHA 440-2, "County Committee Certification," to be the value of the farm after planned improvements are made.

(Secs. 1, 2, 3, 41, 50 Stat. 522, as amended, 523, as amended, 528, as amended, sec. 18, 72 Stat. 840; 7 U.S.C. 1001, 1002, 1003, 1015, 1006e; Order of Acting Sec. of Agr., 19 F.R. 74, 22 F.R. 8188) [26 F.R. 7121, Aug. 9, 1961] § 331.5 Eligibility and preference.

(a) To be eligible for a Farm Ownership loan, each applicant must:

(1) Be a citizen of the United States. (2) Possess legal capacity to contract for the loan.

(3) If he is applying for a loan on a family-type farm, be a farm owner, farm tenant, farm laborer, sharecropper, or other individual who obtains, or recently obtained, a substantial portion of his income from farming operations, or be a veteran with previous farming experience or training.

(4) If he is applying for a loan on a less than family-type farm, be (i) an owner-operator who is an established bona fide farmer conducting substantial farming operations and who, for a substantial portion of his life, has resided on a farm and depended on a farm income for his livelihood, or (ii) disabled veteran with a pensionable disability and who has previous farming experience or training.

a

(Secs. 1, 3, 41, 50 Stat. 522, as amended, 523, as amended, 528, as amended, sec. 18, 72 Stat. 840; 7 U.S.C. 1001, 1003, 1015, 1006e; Order of Acting Sec. of Agr., 19 F.R. 74, 22 F.R. 8188)

(5) Possess the character, ability, industry, and experience necessary to carry out successfully the proposed farming operations and will honestly endeavor to carry out the undertakings and obligations required of him in connection with the loan.

(6) Be unable to obtain credit sufficient in amount to finance his actual needs at rates (but not exceeding five percent per annum) and terms prevailing in or near his community for loans of similar size and character from responsible sources.

(7) Plan to live on and operate the farm.

(i) An applicant who owns or plans to acquire a family-type farm will not be

considered eligible for a loan if he plans to devote a substantial portion of his time to off-farm employment. An applicant who plans to devote a substantial part of his time to off-farm employment will be considered as the owner of a less than family-type farm even though the farm he owns ordinarily would be considered a family-type farm.

(ii) An applicant who owns a less than family-type farm will not be eligible if he plans to hire labor, other than during seasonal peak-load periods, to assist his family in operating the farm because the applicant intends to be engaged in nonfarm employment.

(8) Have or be able to obtain the operating capital, including livestock, machinery, and equipment, essential for the successful operation of the proposed system of farming.

(b) Preference will be given to:

(1) Veterans as defined in Subpart B of Part 301 of this chapter. When it appears that available funds will be inadequate to meet the needs of all applicants, the applications on hand from veterans will be processed first.

(2) Those applicants who are:

(i) Owners of livestock and farm implements necessary to carry on successful farming operations.

(ii) Able to make an initial down payment in addition to owning necessary livestock and equipment.

(iii) Married or have families.

dependent

(Secs. 1, 2, 3, 50 Stat. 522, as amended, 523, as amended; 7 U.S.C. 1001, 1002, 1003) [21 F.R. 10444, Dec. 29, 1956 as amended at 26 F.R. 7121, Aug. 9, 1961]

§ 331.6 Loan purposes.

(a) Farm Ownership loans may be made for the purpose of:

(1) Buying a family-type farm or buying land to enlarge a farm that will be a family-type farm. In the case of a disabled veteran with a pensionable disability, the farm acquired or enlarged may be less than a family-type farm. Loans to buy land may include funds to purchase the interest of other heirs or joint owners of property in which the applicant holds a legal interest. Funds may also be used in such a case to satisfy the applicant's share of any liens or encumbrances against the farm.

(2) Developing or improving a farm. This includes building improvements, land development, and water facilities necessary for the operation of the farm.

(3) Refinancing secured and unsecured debts of an applicant who owns or will own a family-type farm.

(i) When the loan is made primarily for refinancing, it will be subject to the provisions of Part 334 of this chapter.

(ii) When the loan is made primarily for purposes other than refinancing, any debts to be refinanced must comply with the special requirements of § 334.4 of this chapter.

(4) Refinancing secured and unsecured debts incurred for agricultural purposes of an applicant who owns less than a family-type farm. Debts for agricultural purposes are debts such as those incurred for the acquisition or improvement of farm land and buildings, farm operating expenses, livestock, farm machinery, and equipment, and family living expenses.

(i) When the loan is made primarily for refinancing, it will be subject to the provisions of Part 334 of this chapter.

(ii) When the loan is made primarily for purposes other than refinancing, any debts to be refinanced must comply with the special requirements of § 334.4 of this chapter.

(5) Paying of fees including a $20 appraisal fee in case of an insured loan, costs of technical services, and expenses incurred in making and closing the loan.

(b) Farm Ownership loans may not be made for the purpose of:

(1) Purchasing land when (i) the farm will be "less than family-type farm," as defined in § 331.3 (b) of this part, except for a qualified disabled veteran, (ii) the applicant will be spending a substantial portion of his time during the year in off-farm employment, (iii) the applicant will be renting land which will be a substantial part of his total farming operation, or (iv) a major portion of the income-producing acreage will be in the conservation reserve under the Soil Bank Program. However, if the land under a conservation reserve contract will be available for use by the first full crop year after the date of loan approval, the land may be purchased with loan funds.

(2) Financing any farm development not located on the property covered by the mortgage.

(3) Purchasing machinery, tools, equipment, livestock, and similar items not considered a part of the farm.

(4) Paying real property insurance premiums.

(5) [Reserved]

(6) Carrying on any Government landpurchase or land-leasing program, or for organizing, promoting, or managing homestead associations, land-purchasing associations, or cooperative landpurchasing for colonies of rehabilitants and tenant purchasers, or any other type of collective or cooperative farming.

(7) Making loans to two or more persons, other than husband and wife, for the purpose of maintaining or establishing a joint ownership in a farm or the joint operation of a farm except upon approval of the Administrator or his delegate.

(8) Constructing dwellings or other farm buildings which are considered to be in excess of the needs of the farm or would be significantly more expensive than similar buildings on family-type farms in the area.

or improving

a

(9) Constructing dwelling to be occupied by persons other than the borrower's family or labor hired to assist in operating the farm.

(10) Paying debts for farm development work incurred after the docket is prepared but prior to closing of the loan unless the County Supervisor determines that the development conforms to that shown on Form FHA-643, "Farm Development Plan." The County Supervisor, not later than the time of planning farm improvements, will advise each applicant that the development work should not be started and debts for such work or materials should not be incurred before the loan is closed.

(11) Acquiring land or developing a farm which is located in an area designated for retirement from agriculture by Federal, state, or county land use planning agencies, or an area that is likely to be so designated.

(12) Refinancing Farmers Home Administration debts except when necessary to secure the lien required when a Farm Ownership loan is made.

(c) Within the policies and regulations applicable to the making of Farmers Home Administration loans, the following will be observed in considering applications for loans involving poultry production:

(1) Farmers Home Administration loans will not be made to establish new operators in large commercial poultry enterprises for the production of meat birds or eggs.

(2) Farmers Home Administration loans may be made to establish or expand small poultry enterprises needed

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