The Code of Federal Regulations of the United States of America Having ...

in 39 Stat. 376, 377, as amended; 12 U. This colS. C. and Sup., 857, 875-899, lateral is deposited or pledged with the farm loan registrars who are public officials appointed for each district by the Farm Credit Administration. Federal farm loan bonds are not guaranteed by the United States either as to principal or interest.

Such bonds intended for sale to the investing public are generally advertised and a prospectus is prepared as to the details of a particular issue. Further information as to such issues may be obtained from the Fiscal Agent of the Federal Land Banks, 31 Nassau Street, New York City.

(e) Surplus property disposal. The services and facilities of the Federal land banks are utilized further by the Federal Farm Mortgage Corporation in discharging its functions as disposal agency for surplus agricultural and forest real property under the Surplus Property Act of 1944. A separate Surplus Property Disposal Manual has been issued to cover this work, Part 5 of this chapter.

[Preceding paragraph, in small type, superseded by following paragraph during period covered by his Supplement]

The

(e) Surplus property disposal. services and facilities of the Federal land banks are utilized further by the Federal Farm Mortgage Corporation in discharging its functions as disposal agency for surplus real property under the Surplus Property Act of 1944. A separate Surplus Property Disposal Manual has been issued to cover this work, Part 5 of this chapter. [Paragraph (e) amended Nov. 7, 1947, 12 F.R. 7315]

§ 10.3 Definitions. For the purposes of section 12 (Fourth) of the Federal Farm Loan Act, as amended (39 Stat. 370; 12 U. S. C. 771 (4)), the terms "equipment" and "improvement" are defined as follows:

(a) Equipment. The term equipment shall include implements appropriate for the operation of a farm, and may consist of teams as well as machinery, tools, and like articles.

(b) Improvement. The term improvement shall include any beneficial structure or any useful, permanent physical change tending to increase the productive value of the farm, such as clearing, tiling, drainage, fencing, building, and preparations for irrigation.

§ 10.9 Security standards. To be acceptable security for a loan, a property

must meet each of the following minimum standards:

(a) It must be capable of producing, under typical operation, sufficient normal agricultural earnings to pay farm operating expenses, including taxes and other fixed charges, maintain the property, and meet installments on a loan that would be proper to a typical owner of the property.

(b) It must be sufficiently desirable to be readily salable or rentable under normal agricultural conditions.

(d) It must have sufficient stability of value to assure that, on a loan that would be proper to a typical owner of the property, the bank could recover its investment if unforeseen difficulties should result in acquirement of the property.

While the normal agricultural earnings must be sufficient to meet the expenses specified in paragraph (a) of this section, it is not necessary that they also be adequate in all cases to meet family living expenses. When it is necessary to rely on income other than farm earnings for family living expenses, such supplemental income must be available to the applicant and to a typical owner from dependable sources and in an amount sufficient to support customary living standards. [Reg., Nov. 7, 1947, 12 F.R. 7315]

§ 10.10 Security standards for Federal land bank loans. To be acceptable security for a bank loan, a property must meet each of the following minimum standards:

(a) It must be capable of producing, under typical operation, sufficient normal agricultural earnings to pay farm operating expenses, including taxes and other fixed charges, maintain the property, and meet installments on a bank loan that would be proper to a typical owner of the property.

(b) It must be sufficiently desirable to be readily salable or rentable under normal agricultural conditions.

While the normal agricultural earnings must be sufficient to meet the expenses specified in paragraph (a) of this section, it is not necessary that they also be adequate in all

cases to meet family living expenses. When it is necessary to rely on income other than farm earnings for family living expenses, such supplemental income must be available to the applicant and to a typical owner from dependable sources and in an amount sufficient to support customary living standards.

CODIFICATION: § 10.10 was revoked by Order, Land Bank Commissioner, Nov. 7, 1947, 12 F.R. 7313.

§ 10.10-50 Security standards for first mortgage Commissioner loans. To be acceptable security for a first mortgage Commissioner loan based on normal agricultural value, a property may be somewhat lacking with respect to the minimum standards for bank loans or be subject to some uncertainty as to future conditions, provided there is reasonable assurance that a loan in a proper amount would prove to be satisfactory. The same requirements are applicable to security for a first mortgage Commissioner loan based on prudent investment value except that, as a minimum, the normal agricultural earnings of the property need be sufficient only to constitute a material contribution to the income or living of the operator.

CODIFICATION: 10.10-50 was revoked by Order, Land Bank Commissioner, Nov. 7, 1947, 12 F.R. 7313.

§ 10.21 Normal agricultural value. The normal agricultural value of a farm shall be the basis of appraisal for loans. This value may be defined as the amount a typical purchaser would, under usual conditions, be willing to pay and be justified in paying for the property for customary agricultural uses, including farm home advantages, with the expectation of obtaining average production and of receiving normal prices for farm commodities. For appraisal purposes, the earning power of farms shall be determined by using normal commodity prices based on those prevailing in the period 1909-14, with appropriate adjustment for changes in the economic position of particular commodities, and using the related farm operating costs. The normal commodity prices used in making appraisals shall be approved by the Farm Credit Administration. [Reg., Nov. 7, 1947, 12 F.R. 7315]

§ 10.22 Interest rates on loans made through an association or by a branch bank. Approval is hereby given to an interest rate of 4 per centum per annum on loans by banks through associations, except loans on the security of the classes specified in § 10.23, and to an interest rate of 42 per centum per annum on loans made pursuant to section 672, Title 12, United States Code, not

withstanding that the interest rate on the Federal farm loan bonds of the last series issued prior to the making of any such loans may be less than 3 per centum per annum. [Reg., Nov. 7, 1947, 12 F.R. 7315]

§ 10.23 Special interest rates. For bank loans secured by first mortgages on the following farm property in the continental United States:

(a) Land that is employed primarily in the production of naval stores as defined by section 2 of the Naval Stores Act (Sec. 2, 42 Stat. 1435; 7 U. S. C. 92);

(b) Land used for the raising of livestock, in estimating the earning power and in establishing the value of which leases or permits for the use of other lands were taken into consideration and were a factor in determining the amount of the loan; and

approval is hereby given to the following interest rates:

(1) For loans through associations, one-half of 1 per centum per annum in excess of the interest rate on loans through associations not secured by mortgages on the foregoing classes of farm property, such interest rate not to exceed 6 per centum per annum;

(2) For direct loans, one-half of 1 per centum per annum in excess of the interest rate approved for loans through associations under subparagraph (1) of this paragraph; and

(3) For loans under section 25 (b) of the Farm Credit Act of 1937 (50 Stat. 711; 12 U. S. C. Sup. 724) through associations, the capital stock of which is impaired, one-fourth of 1 per centum per annum less than the interest rate approved for direct loans under subparagraph (2) of this paragraph. [Reg., Nov. 7, 1947, 12 F.R. 7315]

§ 10.25 Normal agricultural value basis. * The normal value of farms for agricultural purposes shall be the basis of appraisal for loans. For the purpose of such appraisal, commodity prices received by farmers during the period from 1909 to 1914, with such adjustment as may be necessary because of the change in the economic position of particular products, shall be the basis for determining the earning power of farm land. The normal agricultural value of a farm may be defined as the amount a typical purchaser would, under usual conditions, be

willing to pay and be justified in paying for the property for customary agricultural uses, including farm home advantages, with the expectation of obtaining average production and of receiving normal prices for farm commodities.

CODIFICATION: § 10.25 Normal agricultural value basis was revoked by Order, Land Bank Commissioner, Nov. 7, 1947, 12 F.R. 7313.

§ 10.25 Special payments. A bank may accept special payments on a bank loan or payment in full thereof either before or after 5 years from the date the loan was made. Where payment arises from the refinancing of the loan from a non-Government lending source and the loan has not been in force for at least 5 years, the bank may collect from the borrower such a sum as will reimburse it for the expense of making the loan. In all other cases of special principal payments or full payment of bank loans, the bank should not charge a prepayment fee nor should it ordinarily charge interest beyond the date the funds are received. [Reg., Nov. 7, 1947, 12 F.R. 7315]

§ 10.27 Conditional payments. Conditional payments shall be held for subsequent credit upon indebtedness to the bank or the Corporation, except in cases of unusual circumstances where the release of the funds is justified. Interest shall be allowed on such payments held for more than 1 month at the effective interest rate applicable to the indebtedness in connection with which such conditional payment is held. [Reg., Nov. 7, 1947, 12 F.R. 7315)

§ 10.27-50 Interest rates on loans made through an association or by a branch bank. Approval is hereby given to an interest rate of 4 per centum per annum on loans by banks through associations, except loans on the security of the classes specified in § 10.28, and to an interest rate of 42 per centum per annum on loans made pursuant to section 672, Title 12, United States Code, notwithstanding that the interest rate on the Federal farm loan bonds of the last series issued prior to the making of any such loans may be less than 3 per centum per annum. CODIFICATION: 10.27-50 was revoked by Order, Land Bank Commissioner, Nov. 7, 1947, 12 FR. 7313.

10.28 Special interest rates. For bank loans secured by first mortgages on the following farm property in the continental United States:

(a) Land that is employed primarily in the production of naval stores as defined by section 2 of the Naval Stores Act (Sec. 2, 42 Stat. 1435; 7 U.S.C. 92);

approval has been given to the following interest rates:

(1) For loans through associations, onehalf of 1 per centum per annum in excess of the interest rate on loans through associations not secured by mortgages on the foregoing classes of farm property, such interest rate not to exceed 6 per centum per annum;

(2) For direct loans, one-half of 1 per centum per annum in excess of the interest rate approved for loans through associations under subparagraph (1) of this section; and

(3) For loans under section 25 (b) of the Farm Credit Act of 1937 (50 Stat. 711; 12 U.S.C. Sup. 724) through associations, the capital stock of which is impaired, onefourth of 1 per centum per annum less than the interest rate approved for direct loans under Subparagraph (2) of this section.

CODIFICATION: 10.28 was revoked by Order, Land Bank Commissioner, Nov. 7, 1947, 12 F.R. 7313.

§ 10.29 Special payments. A bank may accept special payments on a bank loan or payment in full thereof either before or after 5 years from the date the loan was made. Where payment arises from the refinancing of the loan from a non-Government lending source and the loan has not been in force for at least 5 years, the bank may collect from the borrower such a sum as will reimburse it for the expense of making the loan. In all other cases of special principal payments or full payment of bank loans, the bank should not charge a prepayment fee nor should it ordinarily charge interest beyond the date the funds are received.

CODIFICATION: § 10.29 was revoked by Order, Land Bank Commissioner, Nov. 7, 1947, 12 F.R. 7313.

§ 10.101 Executors and administrators (including temporary administrators). Bank loans may be made. to executors and administrators (including temporary administrators) when (a) either some individual beneficiary of the decedent's estate, or the executor, administrator, or any coexecutor or coadministrator of the estate, independently of his representative capacity, is (1) eligible as a borrower, and (2) owns, or is about to become the owner of, an interest in the property on which the loan is sought, and (3) can and will incur personal liability for the loan and assume the obligations of national farm loan association membership; and (b) a valid lien can and will be given on the property on which the loan is sought. As used in this section, the term "eligible as a borrower" means a person who is engaged in farming operations, or who is shortly to become engaged in farming operations, or who derives the principal part of his income from farming operations.

[Preceding section, in small type, superseded by following section during period covered by this Supplement]

§ 10.101 Executors and administrators (including temporary administrators). Loans may be made to executors and administrators (including temporary administrators) when (a) either some individual beneficiary of the decedent's estate, or the executor, administrator, or any coexecutor or coadministrator of the estate, independently of his representative capacity, is (1) eligible as a borrower, and (2) owns, or is about to become the owner of, an interest in the property on which the loan is sought, and (3) can and will incur personal liability for the loan and assume the obligations of national farm loan association membership; and (b) a valid lien can and will be given on the property on which the loan is sought. As used in this section, the term "eligible as a borrower" means a person who is engaged in farming operations, or who is shortly to become engaged in farming operations, or who derives the principal part of his income from farming operations. [Reg., Nov. 7, 1947, 12 F.R. 7315]

§ 10.103 Heirs (including a sole heir taking without administration), devisees, and grantees of a deceased owner of farm' land. Loans may be made to heirs (including a sole heir taking without administration), devisees and grantees of a deceased owner of farm land under the same conditions as will permit a loan's being made to any other owner of farm land.

§ 10.104 Trustees (whether appointed by will or deed), and other fiduciaries. Bank loans may be made to trustees (whether appointed by will or deed) when (a) the trustee in his fiduciary capacity is engaged, or shortly to become engaged, in farming operations, or the beneficiaries of the trust are engaged in farming operations or derive the principal part of their income from farming operations; and (b) a valid lien can and will be given on the property on which the loan is sought; and (c) the trustee, or any cotrustee, or some individual beneficiary of the trust can and will incur personal liability for the loan, and assume the obligations of national farm loan association membership.

[Preceding section, in small type, superseded by following section during period covered by this Supplement]

§ 10.104 Trustees (whether appointed by will or deed), and other fiduciaries. Loans may be made to trustees (whether appointed by will or deed) when (a) the trustee in his fiduciary capacity is engaged, or shortly to become engaged, in farming operations, or the beneficiaries of the trust are engaged in farming operations or derive the principal part of their income from farming operations; and (b) a valid lien can and will be given on the property on which the loan is sought; and (c) the trustee, or any cotrustee, or some individual beneficiary of the trust can and will incur personal liability for the loan, and assume the obligations of national farm loan association membership. [Reg., Nov. 7, 1947, 12 F.R. 7315]

§ 10.105 Guardians. Bank loans may be made to guardians when (a) the guardian in his fiduciary capacity is engaged, or shortly to become engaged, in farming operations, or the wards are engaged in farming operations or derive the principal part of their income from farming operations; and (b) a valid lien can and will be given on the property on which the loan is sought; and (c) the guardian, or any coguardian, independently of his fiduciary capacity owns an interest in the property, and can and will incur personal liability for the loan and assume the obligations of national farm loan association membership.

[Preceding section, in small type, superseded by following section during period covered by this Supplement]

§ 10.105 Guardians. Loans may be made to guardians when (a) the guardian in his fiduciary capacity is engaged, or shortly to become engaged, in farming operations, or the wards are engaged in farming operations or derive the prin

cipal part of their income from farming operations; and (b) a valid lien can and will be given on the property on which the loan is sought; and (c) the guardian, or any coguardian, independently of his fiduciary capacity owns an interest in the property, and can and will incur personal liability for the loan and assume the obligations of national farm loan association membership. [Reg., Nov. 7, 1947, 12 F.R. 7315]

§ 10.107 Persons not legally competent (including infants, insane persons, and incompetents) when not represented by a guardian. Loans may not be made to persons not legally competent (including infants, insane persons, and incompetents) when not represented by a guardian; and property in which such a person, not represented by a guardian, owns an interest, is ineligible as security for a loan.

§ 10.108 Landlords. Loans may be made to landlords when (a) the landlord has the right to and does exercise substantial control over the management of the farm on which the loan is sought; or (b) he is engaged, or shortly to become engaged, in farming operations, independently of his capacity as landlord of the farm on which the loan is sought; or (c) the principal part of his income is derived from farming operations.

§ 10.109 Owners of future interests. Loans may be made to owners of future interests when (a) all interests necessary to the creation of a fee simple estate in the land on which the loan is sought are included in the mortgage; and (b) the owner of the future interest is engaged, or shortly to become engaged, in farming operations independently of his capacity as owner of a future interest in the farm on which the loan is sought, or derives the principal part of his income from farming operations.

§ 10.110 Tenants for years. Bank loans may not be made to tenants for years. [Preceding section, in small type, superseded by following section during period covered by this Supplement]

10.110 Tenants for years. Loans may not be made to tenants for years ordinarily, although in certain circumstances a perpetual leasehold might constitute legally satisfactory security. [Reg., Nov. 7, 1947, 12 F.R. 7315]

§ 10.112

Life tenants. Loans may be made to life tenants when (a) all interests necessary to the creation of a fee simple estate in the land on which the loan is sought are included in the mortgage; and (b) the life tenant, by reason of farming operations conducted by him on the land covered by his life interest, or otherwise, is eligible as a borrower. As used in this section, the term "eligible as a borrower" means a person who is engaged in farming operations, or who is shortly to become engaged in farming operations, or who derives the principal part of his income from farming operations.

§ 10.114 Husband and wife. Loans may be made on their respective lands to a husband and wife owning land in severalty.

§ 10.115 Aliens. To the extent that State laws do not restrict the right of aliens to hold and convey real estate, loans may be made to aliens upon the same basis as to citizens: Provided, however, That such loans are not prohibited by and are made in conformity with the provisions of the Trading with the Enemy Act, as amended, (40 Stat. 411, as amended; 50 U. S. C. App. and Sup. 1–31), the foreign Funds Control regulations, and any other applicable laws and regulations relating to transactions with or property of enemy or other aliens.

CROSS REFERENCE: For Foreign Funds Control regulations, see 31 CFR Parts 130 and 131.

§ 10.116 Individuals taking title from a corporation (bona fide ownership required). Loans which are otherwise qualified may be made to individuals who have taken title from a corporation in which they were interested as stockholders, provided the transfer is in good faith and not a mere temporary expedient for the purpose of evading the provisions of the Federal Farm Loan Act (39 Stat. 360, as amended; 12 U. S. C. 641), which preclude loans to corporations other than corporations engaged in the raising of livestock.

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