(1) The applicant is not in default under his purchase contract, including, but not limited to: (i) Delinquency on either principal or interest on the purchase contract, or delinquency on taxes, assessments, or irrigation district charges or assessments against his farm unit. (ii) Default by reason of his failure to meet the residence requirements stated in his purchase contract, or his failure to be in a position to meet such residence requirements within the period prescribed in his purchase contract, either because he lacks the funds, a satisfactory source of credit, or the prospective farm income necessary to make the improvements in order to fulfill the residence requirements. (2) His credit needs for farm development purposes, in order to place his farm unit in an operable and livable condition can be met adequately under the Soil and Water Conservation and the Operating loan programs. (c) Loan processing. Soil and Water Conservation loan dockets will be prepared and processed in accordance with the provisions of the applicable procedures with the following modifications: (1) Consent by Bureau of Reclamation. Written consent of the Bureau of Reclamation will be obtained prior to the making of the proposed loan. (2) Supplemental information on applicant. At the time of making application for a Soil and Water Conservation loan, the contract purchaser may be required to authorize the Farmers Home Administration to secure from the Bureau of Reclamation any available information concerning his purchase contract or application for a purchase contract and which may be used by the Farmers Home Administration in determining his eligibility and qualifications for the loan. (3) Land leveling contracts. When there is an outstanding land leveling contract, a copy of such contract will be included in the loan docket and marked for return to the County Supervisor. (4) Purchase contracts. The County Supervisor will obtain from the applicant a copy of the purchase contract. (d) Loan closing. Existing Soil and Water Conservation procedures will be followed in the closing of these loans, except that the applicant will have filed for record in the County Recorder's office the purchase contract entered into with the Bureau of Reclamation. (e) Property insurance. Property insurance will cover the interests of the United States as they may appear under the Soil and Water Conservation mortgage and the purchase contract. PART 353--PROCESSING LOANS TO PARTICIPATE IN GROUP SERVICES Sec. 353.1 General. 353.2 Operating agreement. 353.3 353.4 353.5 Ownership and other rights. Approval or disapproval of loan dock ets. AUTHORITY: §§ 353.1 to 353.5 issued under secs. 2, 5, 6, 50 Stat. 869, as amended, 870, secs. 9, 10, 68 Stat. 735, sec. 11, 72 Stat. 841; 16 U.S.C. 590s, 590v, 590w, 590x-2, 590x-3, 590x-4; Order of Acting Sec. of Agr., 19 F.R. 74, 22 F.R. 8188. SOURCE: §§ 353.1 to 353.5 appear at 26 F.R. 2708, Mar. 31, 1961. § 353.1 General. Loans to individuals to participate in a group service will be processed in accordance with authorities applicable to Soil and Water Conservation loans to individuals except that plans and cost estimates will be based on the entire group service and loans to individuals to participate in the unincorporated group service will not be approved until the State Director has reviewed the preliminary plans and has concurred in the proposal to make Soil and Water Conservation loans to participate in the group service. § 353.2 Operating agreement. An operating agreement will be prepared which will outline the decisions of the group regarding the conditions of ownership and use of the facility, the rights and responsibilities of the users, and any other details needed to guide the management and operation of the group service. A simple written agreement usually will be sufficient; however, if the group service involves a complex operation, an agreement approved by the Farmers Home Administration may be used. § 353.3 Ownership and other rights. All property to be acquired by the group should be owned jointly by all members. Title will be obtained to sites for such structures as buildings, pumps, wells, and storage reservoirs or tanks owned, or to be owned, by the group whenever possible. When title to the sites for such structures cannot be obtained, an easement, permit, lease, franchise, or other appropriate tenure agreement which will permit continued use of the site for the period of the loan may be substituted for title. Easements conveying rights-of-way upon which other structures and pipelines or ditches will be located, will be obtained from the owners of land traversed by the facility. Partial releases or consent to easements, leases, permits, licenses, or other agreements will be obtained from the holders of outstanding liens on lands on which such rights will be acquired. § 353.4 Approval or disapproval of loan dockets. (a) The group service docket, consisting of plans, cost estimates, a conformed copy of the operating agreement, an estimate of the individual Soil and Water Conservation loan funds that will be needed by the members of the group, and a statement regarding the property or rights owned or to be owned by the group, will be forwarded, with the County Supervisor's recommendations, to the State Director. The State Director will review the docket and: (1) Refer any legal questions to the Office of the General Counsel. (2) If the aggregate amount of all Soil and Water Conservation loans to participate in the group service, including the unpaid principal balance of any prior Water Facilities loans for that purpose, exceeds $50,000, the group service docket, together with the recommendations of the County Supervisor and the State Director, will be forwarded to the National Office for review. (3) If the State Director approves the group service, he will prepare an approval memorandum, including his recommendations and approval conditions, and send it with the group service docket to the County Supervisor. (b) Upon receipt of the group service approval memorandum, the County Supervisor will assemble the individual Soil and Water Conservation loan dockets for participating members who apply for Soil and Water Conservation loans. It will not be necessary to include in the loan dockets of individuals information on the group service that is included in the group service docket. (c) The Soil and Water Conservation loans to participators in the group serv (a) The County Supervisor and the group service will follow the State Director's memorandum of approval and the instructions issued by the Office of the General Counsel for completing actions to be taken by the group service as a condition to the use of loan funds. (b) Individual loans will be closed in accordance with the regulations applicable to Soil and Water Conservation loans to individuals including an opinion of title by the designated attorney if required by the Office of the General Counsel. (c) The loan checks may be endorsed to one member of the group and deposited in a single supervised bank account subject to withdrawal on the signatures of the County Supervisor and a person designated by the group to sign checks. PART 354-PROCESSING LOANS TO ASSOCIATIONS Sec. 354.1 354.2 354.3 354.4 354.5 354.6 354.7 354.8 354.9 354.10 Actions subsequent to loan closing. Loans to governmental or quasi-governmental organization. AUTHORITY: §§ 354.1 to 354.10 issued under R. S. 161, sec. 6, 50 Stat. 870, sec. 10, 68 Stat. 735; 5 U. S. C. 22, 16 U. S. C. 590w, 590x-3. Interpret or apply secs. 2, 5, 50 Stat. 869, as amended, 870, sec. 9, 68 Stat. 735; 16 U. S. C. 590s, 590v, 590x-2. § 354.1 General. Sections 354.1 to 354.10 set forth the procedures for making insured and direct Soil and Water Conservation loans to associations. The general policies and authorities are contained in Part 351 of this Chapter. The term "private lender" means any source of insured funds other than the insurance fund and funds made available under agreements entered into Each group applying for an association loan will make a request for assistance in a letter to the County Supervisor. The County Supervisor will forward this letter to the State Director who will decide whether further consideration should be given to the application. The letter should state the kind and amount of assistance needed; state what attempts have been made to obtain financing elsewhere; give a brief description of the proposed facility or service; indicate the number of members; when applicable, contain pertinent information about the water supply and water rights; state whether or not the applicant is a company, district, incorporated association, or is unorganized; and state what technical work has been or is being done on the applicant's proposed project. If the group is incorporated, the application letter will be signed by the president. If the group is not yet incorporated, the members of the organizing committee will sign the letter. [20 F.R. 7213, Sept. 28, 1955] § 354.3 Report on application. If the State Director acts favorably on the application, the County Supervisor will, with such help as the State Director may provide, prepare a Report on Association Application. [20 F.R. 7213, Sept. 28, 1955] § 354.4 County committee recommen dations. When adequate information has been assembled on the association's application to enable the County Committee to make its recommendations, it will be presented to the Committee by the County Supervisor. Unless it appears during the investigation that the association would be ineligible, the Report on Association Application will be completed before the Committee acts on the application. [20 F.R. 7213, Sept. 28, 1955] § 354.5 Later actions before loan approval. (a) The State Director will review the loan application and related papers, and take one of the following actions: (1) If he concurs in the proposed loan and is authorized to approve such a loan, he will prepare a memorandum to the County Supervisor indicating any conditions that must be met. The points. covered in the memorandum will include any recommendations with respect to the (i) amount of the loan, (ii) répayment schedule, (iii) amount and form of contributions by members, (iv) security requirements, (v) evidence of titleto the association's assets, (vi) organization or change in organization, (vii) improvement of business and operation. methods, (viii) insurance and fidelity bonds, and (ix) plans and specifications.. (2) [Reserved] (3) Whenever the County Supervisor is notified that favorable action will not. be taken on an application, he will notify the association immediately. (b) Upon receipt of the State Director's memorandum indicating favorable action provided certain conditions can. be met by the association, the County Supervisor will: (1) Deliver to the association a copy of the State Director's memorandum setting forth the conditions under which the application will receive further consideration, a copy of Exhibit B of FHA Instruction 442.4, and necessary copies: of required forms. (2) Inform the association of the technical services it must provide. (c) The association, with the help and advice of the County Supervisor, will: (1) Prepare and execute Form FHA28, "Association Proposal and Request for Funds." (2) Prepare and execute the documents necessary to: (i) Support a determination that the association has legal authority and appropriate operating regulations necessary for it to contract for and secure the repayment of the loan, and to operate successfully and to maintain adequately services, the proposed facilities or (ii) Set forth the cost estimates and construction or installation plans of the proposed facility or development, (iii) Set forth the operating budget. and repayment ability of the association, and (iv) Verify the title to assets which will serve as security for the loan. (d) Ordinarily, loan funds should be disbursed in one advance; however, provision may be made for more than one advance of loan funds when there is a justification for multiple advances. The State Director may authorize disbursement of the loan in not to exceed four advances, provided none of the advances will be scheduled for disbursement later than two years from the date of loan closing. (e) When a direct loan or a loan from the insurance fund will be made, Form FHA-5, "Loan Authorization," will be prepared as follows: An original and one copy of Form FHA-5 will be prepared for each advance in the amounts as indicated on Form FHA-28. The originals of each Form FHA-5 will be signed by the association officials on the same date. On each Form FHA-5, in the space for "Number of Installments," will be entered the number of installments in which the advance will be disbursed. In the space “First Installment Due" the next January 1 following the date of each particular advance as indicated on Form FHA28 will be entered. [20 F.R. 7213, Sept. 28, 1955, as amended at 24 F.R. 8785, Oct. 29, 1959; 25 F.R. 76, Jan. 6, 1960] § 354.6 Loan approval and issuance of closing instructions, and loan rejection. (a) When the State Director has again reviewed the loan papers submitted as a docket, and determines that the loan can be approved, he will draft a memorandum of approval to the County Supervisor specifying any conditions under which the loan will be made, including any necessary modifications of previous conditions prescribed by the State Director. The proposed memorandum, the loan docket, and the State Office copy of the Report on Association Application will be forwarded to the Attorney in Charge for legal examination and issuance of loan closing instructions. The closing instructions will cover, but need not be limited to, the continuation of lien searches and abstracts, the execution and recording or filing of security instruments, curative requirements, and, if advisable, requirements that certain legal documents or matters be legally reviewed before the loan is closed. The Attorney in Charge will prepare and transmit to the State Director, with the closing instructions, the security instruments and other special documents needed to close the loan. (b) Rejection of the loan: If the State Director determines at any time during the processing of a loan that the loan should not be made, he will record the reasons for such action on Form FHA476 and return the loan docket to the County Supervisor. The County Supervisor will notify the applicant of the disapproval of the loan and the reasons therefor. (c) Cancellation of loan: Soil and Water Conservation loans may be cancelled before loan closing by request. made on Form FHA-903, "Request for Cancellation of Loan.” [20 F. R. 7213, Sept. 28, 1955, as amended at 21 F. R. 9760, Dec. 11, 1956] § 354.7 Actions between approval and closing of loan. (a) Loan approval conditions. When the County Supervisor receives the loan approval memorandum and loan closing instructions, he will deliver a copy of these two documents to the association. An understanding will be reached with the association regarding compliance with the conditions set forth in the memorandum and the loan closing instructions. (b) Change in amount of loan. If it becomes evident on or before loan closing that the amount of the loan should be increased or decreased, the County Supervisor will request that all distributed docket forms be returned to him for revision. (c) Requesting loan check from private lender. (1) For an insured loan by a private lender, the County Supervisor will prepare Form FHA-971, "Request for Check," and submit it to the State Director. If the lender does not require attestation of the County Supervisor'ssignature, Form FHA-971 may be delivered direct to the lender. Whenever the bank handling a supervised bank account will require the lender's personal check to clear before disbursing funds, the lender should be requested to furnish a certified or cashier's check. When suitable arrangements can be made with the lender, a bank draft may be used to obtain insured loan funds. (2) For a loan with more than one advance, the County Supervisor will request the check for each subsequent advance by submitting Form FHA-971 in sufficient time so that the check will be issued on or about the proposed date of the advance. The County Supervisor will remind the lender, by appropriate notation on Form FHA-971 submitted for each subsequent advance, to insert the date of the loan check in the column for be given or sent to the lender. If for any reason it is not possible for the same County Supervisor who signed Form FHA-971 to endorse the note and sign the insurance endorsement, the note and insurance endorsement will be sent to the State Office instead of directly to the lender. In such a case, the State Director or other authorized state official will attest on Form FHA-250 the signature of the different County Supervisor before sending the note and the insurance endorsement to the lender. This will not be necessary when a local lender has no objection to a different signature on the endorsement of the note and the insurance endorsement than that which appeared on Form FHA-971. $ 352.9 Loans to homestead entrymen. This section provides additional policies and procedures applicable to the making of insured and direct Soil and Water Conservation loans to homestead entrymen whose loans are to be secured by real estate. (a) Authority. Public Law 361, 81st Congress (63 Stat. 883), authorizes the insuring and making of Soil and Water Conservation loans to eligible homestead entrymen on unpatented public lands including public lands within Federal reclamation projects and in Alaska in accordance with the provisions of the Water Facilities Act of 1937, as amended. (b) Cooperation between the Department of Agriculture and the Department of the Interior. The extension of financial assistance authorized in paragraph (a) of this section will be facilitated through the cooperation of the Farmers Home Administration, the Bureau of Land Management, and the Bureau of Reclamation. (c) Special policies applicable to Soil and Water Conservation loans. Soil and Water Conservation loans will not be made to applicants who lack the capital or credit resources necessary to provide a habitable dwelling within the statutory period prescribed for the establishment of residence and to make the other farm improvements essential to a sound farming operation. Soil and Water Conservation loans will not be made to applicants who expect to apply for a Farm Ownership loan to make additional farm improvements. (d) Patent requirements. All homestead entrymen will be expected to comply promptly and fully with pertinent laws and regulations of the Department of the Interior relating to the issuance of a patent for a homestead entry. When applicable, reclamation proof must be filed by the borrower at the earliest possible date. (1) Residence requirements. The entryman must establish residence upon the land entered within six months from the date of allowance of entry. When he has established residence, he should notify the Manager of the District Land Office by mail or otherwise. Under certain conditions additional time, not exceeding six months, may be allowed by the Bureau of Land Management. Residence must be maintained for a period of at least seven months during each of the first three years, except where credit is allowed for residence on account of military or naval service. (2) Final homestead proof. Final proof must be filed within five years from the date of allowance of entry issued to the entryman by the Bureau of Land Management. A patent will not be issued by the United States until the entryman has submitted final proof. Final proof must show that a habitable house is on the land at the time proof is submitted, that residence requirements have been met, that the improvements are of such character as to show good faith, and that the entryman is a citizen of the United States. A habitable dwelling within the meaning of the homestead laws is any permanent building or structure erected on the land entered which is suitable for, and actually occupied as, a dwelling as distinguished from other buildings. When the entryman borrower is ready to submit final proof, he should notify the District Land Office and request instructions regarding the procedure to be followed. (3) Reclamation proof. Reclamation proof may be submitted with, or at any time after, the submission of homestead proof. In addition to the final homestead proof mentioned in subparagraph (2) of this paragraph, the filing of reclamation proof is required as a condition in obtaining a patent to any entry within a reclamation project. Reclamation proof must show reclamation and cultivation of at least one-half of the irrigable area in the entry for two years immediately preceding the date of submission of proof and the payment of all reclamation charges due at that time. Reclamation proof, in proper form, must be submitted to the District Land Office |