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the rehabilitation of the client: Provided, That such a release will not jeopardize the ultimate collection of the loan; the same is permitted by the laws of the state in which the property is situated; and the accomplishment of the said purpose will not render the mortgage void by reason of the law of the State where the property is situated. Mortgaged property, or any part thereof, may be released from the lien of such mortgage to accomplish the purposes set forth in § 303.158 (c): Provided, That such a release will not jeopardize the lien held by the Farm Security Administration or a state rural rehabilitation corporation on any property which has at the time of the release not as yet been released for the accomplishment of the purposes set forth in § 303.158 (c), and the same is permitted by the laws of the State in which the property is situated.

No property will be released from the lien of a mortgage when the indebtedness secured by such a lien has not been fully repaid, except subject to the terms and conditions of this subpart and any supplement, revision, or modification thereto.* [Par. 3, A.O. 161, rev. 1, Oct. 8, 1937, 2 F.R. 2168]

303.158 Purposes for which property may be released. (a) Mortgaged property, or any part thereof, may be released from the lien of a mortgage in order to further the rehabilitation of the client, by enabling the client:

(1) To sell the property, or such part thereof, as will be released from the lien of the mortgage and to apply the proceeds in payment of the indebtedness secured by the mortgage. (Release of property for this purpose contemplates the normal sale of such property in connection with farming operations and is to be distinguished from release of property contemplated in paragraph (c) of this section for the purpose of liquidating a client's indebtedness.)

(2) To sell the property, or such part thereof as will be released from the lien of the mortgage, and to apply the proceeds of such sale to the purchase of other property which will be more suitable to his needs and will assist in his rehabilitation, Provided: That the new property to be purchased is inspected by the county rural rehabilitation supervisor or district rural rehabilitation supervisor, and found to be suitable to the client's needs; that any excess of proceeds of sale above the cost of the new property be transmitted immediately and applied to the indebtedness; and that such new property is made subject to a first mortgage executed and delivered to the United States of America or to the state rural rehabilitation corporation.

(3) To exchange the property, or such part thereof as will be released from the lien of the mortgage, for other property which will be more suitable to his needs and will more adequately contribute in his rehabilitation, Provided: That the property for which exchange is to be made is inspected by the county rural rehabilitation supervisor or district rural rehabilitation supervisor and found to be suitable to the client's needs; that any cash remitted by the new owner be transmitted immediately and applied to the indebtedness; and that such new property is made subject to a first mortgage executed and delivered to the United States of America or to the state rural rehabilitation corporation.

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*For statutory citation, see note to § 303.21.

(4) To sell the property, or such part thereof, as will be released from the lien of the mortgage, to meet farming or harvesting expenses when such expenses are determined by the county rural rehabilitation supervisor to be justifiable and proper.

(5) To use, sell, or exchange property, or such part thereof, as will be released from the lien of the mortgage, to meet subsistence and emergency needs of the debtor and his family, when such expenses are determined by the county rural rehabilitation supervisor to be justifiable and proper.

(6) To sell the property, or such part thereof as will be released from the lien of the mortgage, to preserve the remainder of the mortgaged property or other mortgaged property from deterioration or spoilage.

(b) Crops, livestock products, and other farm products may be released from a lien:

(1) When, at seasonable time, crops, livestock products, and other farm products are to be marketed and the proceeds of such sales are to be applied as a payment on the client's indebtedness.

(2) When the instalment of indebtedness due to the Farm Security Administration, United States Department of Agriculture, or to the state rural rehabilitation corporation during the year in which a crop matures or agricultural products are ready for market has been paid, such crops or agricultural products may be released from the lien of the mortgage to enable the client to sell and apply the proceeds of such sale to the expenditures contemplated in the approved farm plan of the client.

(3) To sell crops, livestock products, or other farm products for the purpose of meeting justifiable expenses which were contemplated in the farm plan.

(c) Mortgaged property or any part thereof may be released from the lien of said mortgage for liquidation of the client's account by enabling him to sell the property or such part thereof as will be released from the lien of the mortgage pursuant to this Subpart and to apply the proceeds in payment of his indebtedness to the Farm Security Administration, United States Department of Agriculture, or to the State rural rehabilitation corporation.* [Par. 4, A.O. 161, rev. 1, Oct. 8, 1937, 2 F.R. 2168]

303.159 Application for release. Any debtor may apply for a release of mortgaged property, or any part thereof, by applying to the county rural rehabilitation supervisor, and filling out Form FSA-LE 90, Application for Release of Mortgaged Property, in triplicate where the authority to execute a release has not been delegated to the State rural rehabilitation director or district rural rehabilitation supervisor, and in quadruplicate where such authority to execute releases has been delegated to these officers.

After filling in his recommendations, as provided in the Application form, the county rural rehabilitation supervisor will (if unauthorized to execute the release) forward the original of the Application form to the regional office (where the authority to execute the release has not been delegated to the State rural rehabilitation director or district rural rehabilitation supervisor) or forward the one

*For statutory citation, see note to § 303.21.

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copy to the regional office and the original to such superior officer (state rural rehabilitation director or district rural rehabilitation supervisor) as has been authorized to execute the release. One copy will be given to the client and the remaining copy will be retained by the county rural rehabilitation supervisor. If the county rural rehabilitation supervisor is authorized to execute the release, he will prepare and execute the same and dispose of the various copies in accordance with § 303.160 (d).* [Par. 5, A.O. 161, rev. 1, Oct. 8, 1937, 2 F.R. 2169]

303.160 Execution of release form and delegation of authority to execute the same. (a) All releases must be in writing, in a form approved by the Office of the Solicitor. No form will be used for any of the purposes set forth in § 303.158 unless the regional attorney has approved in writing the use of said form for such purposes in the state concerned.

(b) Regional directors are authorized to execute releases as agents of the Secretary of Agriculture, or as agents of the Administrator of the Farm Security Administration, or as agents of the Farm Security Administration for the purposes and subject to the terms and conditions set forth in this subpart. Such authority may be delegated to assistant regional directors in charge of rural rehabilitation, who may in turn redelegate to regional collection advisers or chiefs of the regional Loan and Collections section, loan approval advisers, state rural rehabilitation directors, and district rural rehabilitation supervisors.

(c) Regional directors may delegate and assistant regional directors in charge of rural rehabilitation, state rural rehabilitation directors, and district rural rehabilitation supervisors may redelegate authority to execute releases for the purposes set forth in § 303.158 (a) (1), (b) (1), and (b) (2), to county rural rehabilitation supervisors.

(d) If the regional director or other officer to whom the authority to execute releases has been delegated, or redelegated, using the information contained in the Application for Release and such other information as he may have in his office, is satisfied that, in accordance with the terms and conditions set forth in this subpart, the property, or any part thereof, should be released, he will prepare in quintuple and execute the original and one copy of a release form (as approved for the State), for the release of part or all of the mortgaged property. The original, the executed copy, and one other copy will be forwarded directly to the county rural rehabilitation supervisor in charge. The fourth copy of the release form must be forwarded on the day of execution, together with the appropriate copy of the Application for Release, to the regional Loan and Collections section to be filed with the mortgage, and the fifth copy of the release will be forwarded to the district rural rehabilitation supervisor. The original and two copies forwarded to the county rural rehabilitation supervisor will be used as follows: Original signed copy will be recorded or filed if in the opinion of the regional attorney the local law requires the mortgagee to record or file releases. If in the opinion of the regional attorney the local law does not require the mortgagee to record or file releases, the original copy will be delivered to the

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*For statutory citation, see note to § 303.21.

client, and the unsigned copy will be placed in the files of the county rural rehabilitation supervisor. Nothing contained in this paragraph shall be construed to prevent any official of the Farm Security Administration from withholding the delivery of a release in order to assure the use of the released property for the purposes intended. The regional director will consult the regional attorney as to the matters set forth in paragraph (a) of this section, and as to all matters of local law required to be decided by this subpart including the necessity for recording and filing releases, and as to the best method of proceeding pursuant to this subpart and in accordance with the law of the state where the property is situated.

(e) All delegations and redelegations of authority made hereunder must be made in writing, designating by name, title, and address the delegatee and specifying the authority granted, and the same will be made a matter of record.* [Par. 6, A.O. 161, rev. 1, Oct. 8, 1937, 2 F.R. 2169]

Sec.

304.1

PART 304—LOANS TO ORGANIZATIONS

Sec.

SUBPART-Loans to community 304.7 Amortization.
and cooperative associations 304.8
Subclasses of loans.

Rate of interest. 304.9 Reports.

304.2 General policies concerning co- 304.10 Bonding of employees of borrow

operatives.

[blocks in formation]

ing associations.
304.11 Control over expenditures.
304.12 Control over construction.
304.13 Final inspection.
304.14 Inspection costs.

SUBPART-LOANS TO COMMUNITY AND COOPERATIVE

ASSOCIATIONS

Section 304.1 Subclasses of loans. Loans to community and cooperative associations, organized or operated in furtherance of rural rehabilitation or relief in stricken agricultural areas and/or organized or operated in connection with approved resettlement community projects are divided into two subclasses as follows: (a) Loans to proposed new associations or organizations to establish cooperative services; and (b) loans to already existing cooperative associations for purposes of refinancing or extending facilities or services.** [Par. 2a I]

**88 304.1 to 304.14, 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 §§ 304.1 to 304.14, inclusive, (except for the amendments noted in the text,) is Administration order 40, rev. 2, Resettlement Administration, Sept. 26, 1936.

304.2 General policies concerning cooperatives. The cooperative organization shall be an association or other bona fide group agency, incorporated or unincorporated, which is engaged or proposes to engage in bona fide cooperative activities for the mutual

*For statutory citation, see note to § 303.21.

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benefit of its members. Its charter, constitution, or partnership agreement shall be in accordance with the laws of the state and shall specifically authorize the conduct of the cooperative enterprise or service.

The cooperative association shall impose no inequitable restrictions upon membership or participation therein, and its bylaws shall provide that each member shall have only one vote and that, except as the Administrator may rule otherwise with regard to associations to which loans are made, there shall be no voting by proxy.

Assurance of satisfactory management of the cooperative enterprise or service shall be given the Farm Security Administration. Policies and operations shall conform to principles set forth by the Farm Security Administration. Records and books of the cooperative enterprise or service shall be open for inspection and audit by representatives of the Farm Security Administration during the period of the Farm Security Administration loan. At least the majority of the participation members shall be clients of the Farm Security Administration and/or low-income farm families.

The loan shall be justified on the basis of its contribution to the rehabilitation or relief of destitute or low-income farm families or individuals within stricken agricultural areas.

The enterprise or service shall be economically sound. Each unit shall be assured an adequate volume of business to provide sufficient income to maintain the service, pay all operating costs, provide for amortization, and allow for depreciation and reserves.

Duplication of available existing cooperative facilities shall be avoided.

Cooperative enterprises or services will be established only in communities where a cooperative spirit is evident.

There shall be evidence in the facts submitted or in written authoritative statement made that the association is unable to secure a loan from the Farm Credit Administration.

Loans for relief in stricken agricultural areas include those for the establishment of medical care cooperatives which provide certain benefits to participating members. Beneficial memberships in cooperatives for medical care shall be restricted to Farm Security Administration clients and to persons eligible to become Farm Security Administration clients. Persons may become members of medical care cooperatives if their official duties so require but shall not be entitled to medical care benefits when their membership is granted solely to enable them to exercise supervisory activities.

All loan agreements entered into by the Farm Security Administration and cooperative associations organized or operated in connection with approved resettlement community projects must provide that cooperative associations, insofar as they engage in the cooperative production of goods or performance of services which are to be sold in competition with the goods or services of private enterprises, or insofar as they employ nonmembers in production or in the performance of services, will maintain standards of wages, hours, and conditions of employment, at least equal to those prevailing for similar occupations in private enterprises with which they

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