on their applications for settlement. For rejected applications, the letter will set forth the reasons therefor. § 364.13 Preparation and processing of Form FHA-859. Form FHA-859 will be used to cancel or charge-off debts without application of the debtor. The form will be prepared in an original and two copies. The final action taken with respect to the cancellation or charge-off of debts without application will be indicated by the approving official who will sign and date the original of Form FHA-859. § 364.14 Disposition of promissory notes. All notes evidencing debts settled under this part, except those evidencing charged-off judgment debts, will be attached to Form FHA-869, "Journal Voucher for Write-Off or Judgment," and returned by the Finance Office to the appropriate County Office. Notes evidencing charged-off judgment debts will be retained in the Finance Office. Notes returned to the County Office will be disposed of in the following manner: (a) Notes evidencing debts settled upon application will be returned to the debtor. (b) Notes evidencing debts canceled without application will be placed in the debtor's County Office case folder or, upon request, delivered to him. If the debtor is deceased, the notes may, upon request, be delivered to his legal representative or to some other person directly interested in the estate, preferably the surviving spouse. Undelivered notes will be disposed of three years after the settlement is completed. § 364.15 Delinquent adjustment agree ments. When a debtor defaults under his adjustment agreement, the State Director may void the agreement. When an adjustment agreement is voided, the State Director will notify the debtor giving the reasons therefor. Any payments made under the voided agreement will be retained as payments on the debt owed at the time of the application. Such payments may not be used as any part of a subsequent compromise or adjustment offer. § 364.16 Finance Office handling. (a) All payments evidenced by Form FHA-37, except payments in restrictive notation cases described in § 364.12 (a) will be held in Special Deposits by the Finance Office until notification is received from the State Office of the approval or rejection of the offer. Upon notification of the rejection of a debtor's offer and receipt of a request from the State Director for a refund, the Finance Office will refund to the debtor, in care of the appropriate County Supervisor, the amount held in Special Deposits representing a rejected compromise or adjustment offer. In restrictive notation cases the check or other payment media will be returned through the same channels. (b) When a debtor's adjustment offer is approved, the accounts involved will not be adjusted in the records of the Finance Office until all payments have been made. In such cases, Form FHA858 will be held in a suspense file pending payment of the full amount of the approved offer. (c) When an approved compromise or cancellation settlement is processed, or when an approved adjustment offer is satisfied and processed, the Finance Office will stamp the notes satisfied which evidence the debts covered in the offer, provided all the amounts due under such notes are satisfied by the approved settlement. Such promissory notes will then be handled as provided in § 364.14. 365.5 Action when borrower fails to graduate by refinancing AUTHORITY: §§ 365.1 to 365.5 issued under R.S. 161, secs. 41, 6, 50 Stat. 528, as amended, 870, sec. 510, 63 Stat. 437, sec. 10, 68 Stat. 735, sec. 4, 64 Stat. 100; 5 U.S.C. 22, 7 U.S.C. 1015, 16 U.S.C. 590w, 42 U.S.C. 1480, 16 U.S.C. 590x-3. Interpret or apply secs. 1, 3, 21, 44, 2, 50 Stat. 522, as amended, 523, as amended, 524 as amended, 530, as amended, 869, as amended, sec. 5, 54 Stat. 1122, as amended, secs. 2, 12, 14, 60 Stat. 1062, as amended, 1076, as amended, 1078, as amended, secs. 1, 2, 1, 501, 502, 503, 504, 509, 1, 63 Stat. 43, as amended, 44, as amended, 82, 432, 433, 434, 436, 883, 1038, sec. 2, 64 Stat. 98, secs. 9, 10, 1, 2, 68 Stat. 735, 999, as amended, sec. 16, 69 Stat. 553 as amended, secs. 1, 8, 70 Stat. 525, 1090, secs. 18, 11, 72 Stat. 840, 841; 7 U.S.C. 1001, 1003, 1007, 1018, 16 U.S.C. 590s, 590z-3, 7 U.S.C. 1001 Note, 1005b, 1005d, 12 U.S.C. 1148a-1 and Note, 1148a-2, 42 U.S.C. 1471, 1472, 1473, 1474, 1479, 7 U.S.C. 1006a, 40 U.S.C. 440, 16 U.S.C. 590x-2, 590x-3, 12 U.S.C. 1148a-1 Note, 7 U.S.C. 1006c, 16 U.S.C. 1006a, 7 U.S.C. 1006e, 16 U.S.C. 590x-4. Other statutory provisions interpreted or applied are cited to text in parentheses. SOURCE: §§ 365.1 to 365.5 appear at 24 F.R. 753, Feb. 4, 1959, except as otherwise noted. § 365.1 Scope. This part prescribes the policies to be followed (a) when counseling with applicants and other persons making inquiry at Farmers Home Administration offices concerning agricultural credit assistance, (b) when counseling with Farmers Home Administration borrowers concerning the use of Farmers Home Administration and other credit, and (c) in the graduation of such borrowers to other sources of suitable credit, as soon as they have progressed to the point where such credit is available to them. § 365.2 Policy. The Farmers Home Administration credit programs will be administered in a manner to assure that they will not supplant or compete with suitable credit available to farmers from other reliable sources. § 365.3 Credit counseling. (a) Responsibilities of the County Supervisor. The County Supervisor is responsible for counseling with applicants and borrowers concerning (1) the manner in which credit should be used to make sound and profitable adjustments and improvements in their farming operations, (2) the other credit sources available to farmers in the area and the general conditions under which credit from such sources is available, and (3) how farmers and ranchers should present their requests for credit services to other lenders. (b) Credit counseling with farmers and ranchers inquiring about Farmers Home Administration credit sources. Inquiries and applications are received in County Offices periodically from individuals who either (1) should be able to obtain suitable credit from other sources because of the resources available to them or (2) are unable to qualify for Farmers Home Administration credit assistance, due to lack of resources or for some other valid reason, but may be able to obtain some credit from another source to enable them to continue in business if their proposed farm and home operations and requests for credit can be properly adjusted. County Supervisors will provide credit counseling assistance to such individuals, as well as to applicants who appear to qualify for Farmers Home Administration credit service. They will also offer to assist such individuals in adjusting their plans of operations and their requests for credit if this appears to be needed to enable them to obtain credit from another source. (c) Credit counseling with Farmers Home Administration borrowers concerning use of Farmers Home Administration and other credit. County Supervisors will assist borrowers in planning for a proper use of Farmers Home Administration and other credit when loans are being made. They will also advise with borrowers concerning the use of such credit at other appropriate times such as during farm and home visits, year-end analysis discussions, and office contacts. Effective credit counseling in the following situations will help assure the early graduation of successful borrowers to other sources of credit. (1) Borrowers indebted for loans secured by chattels who have made reasonable progress and are in a financial position to obtain annual recurring operating credit from other sources on the basis of crop liens, unsecured notes or open accounts ordinarily should be encouraged to do so even though they cannot refinance the Farmers Home Administration indebtedness secured by liens on livestock or equipment. When necessary the County Supervisor will assist the borrower in discussing his proposed farming operations and credit needs with local lenders for this purpose. Mutual understanding must be reached in such cases concerning the amount of credit to be advanced during the year and the sources of income from which debt payments will be made. (2) Borrowers indebted for loans secured by chattels who need to purchase additional major items of equipment such as tractors, trucks, and harvesting equipment or replace such items and who are able to make satisfactory arrangements for such purchases from other sources ordinarily should be encouraged to do so. County Supervisors should thoroughly analyze with these borrowers the need for such equipment and their ability to meet the additional debt payments required. The borrowers' plans of operation for the year should include the expenditures for such items and provide for meeting the payments due the Farmers Home Administration and other creditors. § 365.4 Graduation of Farmers Home Administration borrowers to other sources of credit by voluntary means. (a) Reaching understandings with applicants and borrowers concerning graduation to other sources of credit. To properly implement the policies set forth in this part, the conditions with respect to graduation to other sources of credit under which Farmers Home Administration credit assistance is made available must be (1) thoroughly discussed with applicants for Farmers Home Administration loans at the outset, (2) re-emphasized periodically with borrowers during farm visits and office contacts, and (3) reviewed with borrowers during year-end analysis or contacts for collection purposes by relating their progress to the possibility of graduating to other sources of credit. Experience shows that where these three steps are properly carried out borrowers fully understand why they are expected to obtain other suitable credit as soon as possible, and there ordinarily is a continuous graduation of borrowers to other sources of credit on a voluntary basis. (b) When borrowers should be advised to refinance their Farmers Home Administration indebtedness. Ordinarily borrowers indebted for loans other than for annual operating expenses only, will be advised to obtain credit from other sources to refinance their Farmers Home Administration indebtedness when they have acquired sufficient equity in their property to enable them to obtain credit for this purpose from other reliable sources at rates and terms generally available to other farmers in the same area. Borrowers indebted for both Farmers Home Administration chattel and real estate loans are expected to refinance their chattel indebtedness when they are able to do so even though they are unable at that time to refinance their real estate indebtedness. The converse of this situation also is true. No further loans of the type that a borrower has been advised to refinance will be made to such borrower unless it becomes clearly evident that he will be unable to obtain credit needed from other sources. [24 F.R. 753, Feb. 4, 1959, as amended at 25 F.R. 2611, Mar. 29, 1960] § 365.5 Action when borrower fails to graduate by refinancing. (a) Review by County Supervisor and County Committee. At least once each year during the period designated by the State Director, each County Supervisor will review the status of those borrowers who have been advised to refinance their Farmers Home Administration indebtedness with other credit but have failed to do so within a reasonable period. The County Supervisor will submit the names of such borrowers to the County Committee along with sufficient information concerning their financial situation, progress, and availability of credit to enable the Committee to arrive at a recommendation as to what further action should be taken. The minutes of the committee meeting will include the names submitted by the County Supervisor and the recommendations in each case by the Committee. The County Supervisor, after considering the recommendations of the Committee, will determine the further action to be taken in each case. (b) Notice to borrowers who fail to graduate by refinancing. Each borrower who the County Supervisor determines should seek refinancing will be reminded in writing of the previous discussions with respect to refinancing and that it appears he has progressed to the point where he can refinance the Farmers Home Administration debt involved. At the same time, the borrower will be asked to inform the County Supervisor within 60 days of the progress he is making in refinancing his indebtedness and if he is unsuccessful in refinancing his Farmers Home Administration debt, he should also be asked to inform the County Supervisor of the credit sources contacted. (c) Action when borrower fails to respond to advice and written notice regarding refinancing. (1) Borrowers indebted for any Farm Ownership loans approved after October 31, 1946, or Operating loans, who appear to be able to obtain suitable credit to refinance their Farmers Home Administration indebtedness at rates not exceeding five percent per annum and borrowers indebted for Farm Housing loans and Soil and Water Conservation loans (not coded J) who appear to be able to obtain suitable credit at rates and terms they could reasonably be expected to fulfill: (i) Action by County Supervisor. At the expiration of the 60-day period, the County Supervisor will determine what action should be taken with respect to those borrowers who have not made arrangements to refinance their Farmers Home Administration indebtedness. In order to determine in individual cases whether credit is available, it may be necessary for the County Supervisor to contact the sources of credit approached by the borrower and any other suitable sources of agricultural credit available in the area. (a) If the investigation by the County Supervisor establishes the fact that suitable credit as described in this subparagraph is not available to the borrower to refinance his indebtedness, such borrower will be considered as falling within either of the categories referred to in subparagraph (2) or (3) of this paragraph, depending upon the individual's situation. (b) For each borrower who the County Supervisor determines could have refinanced his indebtedness at the rates and terms described in this subparagraph but failed to do so, the County Supervisor will prepare a report on Form FHA-133, "Request for Legal Action." (ii) Action by State Director. The State Director will review each case submitted to him and determine, on the basis of the facts and recommendations and other information available to him, what action should be taken. (a) The State Director will advise the County Supervisor of the names of those borrowers he has determined have not defaulted in their refinancing agreements. These cases will then be handled in accordance with either of the categories referred to in subparagraph (2) or (3) of this paragraph, depending upon the individual's situation. (b) Each of the remaining borrowers will be informed in writing by the State Director that, on the basis of available information, it appears that credit is available to refinance his Farmers Home Administration indebtedness and that he will be expected to make arrangements to obtain credit for that purpose or to submit additional facts regarding his failure to do so within 30 days. (c) If the borrower fails to comply with the request or fails to furnish satisfactory evidence within 30 days of his inability to obtain the necessary credit, the State Director will refer the case to the Attorney in Charge with his recommendations for foreclosure. (2) Borrowers who are indebted for Farm Ownership loans approved after October 31, 1946, or Operating loans, who can obtain suitable credit to refinance their Farmers Home Administration indebtedness but only at rates exceeding five percent per annum and borrowers indebted for other types of Farmers Home Administration loans (except Farm Housing loans and Soil and Water Conservation loans (not coded J)), who can obtain suitable credit to refinance their Farmers Home Administration loans: County Supervisors will continue to encourage borrowers during farm and home visits, office contacts, year-end analysis discussions, or collection contacts to refinance their Farmers Home Administration indebtedness. (3) Borrowers who were requested to refinance their Farmers Home Administration indebtedness but were in fact unable to do so: County Supervisors will notify these borrowers in writing that the Farmers Home Administration will not require them to make further efforts toward refinancing for at least the remainder of that year. (Sec. 42, 50 Stat. 529, as amended, sec. 508, 63 Stat. 426; 7 U.S.C. 1016, 42 U.S.C. 1478) PART 366-PAYMENT-IN-FULL Subpart A-Direct Farm Ownership, Other Real Estate and Farm Housing Accounts; and Insured Farm Ownership Accounts Held by the Insurance Fund Sec. 366.1 General. 366.2 Authorization. 366.3 Determining balance to be collected. Subpart B-Soil and Water Conservation 366.21 366.22 General. Payment in full of insured Soil and Water Conservation loan with borrower funds including refinancing by new lender and sale of farm. 366.23 Payment in full of insured Soil and Water Conservation loan by refinancing with holder of insured note on a noninsured basis. 366.24 Payment in full of all direct Soil and Water Conservation loans except loans coded J. Subpart C-Insured Farm Ownership Loans 366.41 General. 366.42 Payment in full from borrower's funds, refinancing by a new lender on a noninsured basis, and sale of farm outside program except when holder finances purchaser. Sec. 366.43 Payment in full by refinancing with holder on a noninsured basis, or by sale of farm outside the program to person obtaining a noninsured loan from holder. Subpart A-Direct Farm Ownership, Other Real Estate and Farm Housing Accounts; and Insured Farm Ownership Accounts Held by the Insurance Fund AUTHORITY: §§ 366.1 to 366.5 issued under secs. 3, 41, 50 Stat. 523, as amended, 528, as amended, sec. 12, 60 Stat. 1076, as amended, sec. 510, 63 Stat. 437, sec. 18, 72 Stat. 840; 7 U.S.C. 1003, 1015, 1005b, 42 U.S.C. 1480, 7 U.S.C. 1006e; Order of Acting Sec. of Agri., 19 F.R. 74, 22 F.R. 8188. SOURCE: §§ 366.1 to 366.5 appear at 24 F.R. 9074, Nov. 7, 1959, except as otherwise noted. § 366.1 General. Sections 366.1 to 366.5 set forth the authorizations, policies, and procedures for processing final payments on direct Farm Ownership accounts, Other Real Estate accounts, and Farm Housing accounts which are paid in full at any time after loan closing. Final payment on an insured Farm Ownership account which is held by the insurance fund will be processed generally in the same manner as a direct Farm Ownership account, except that the borrower will be required to pay any loan insurance charges, any other amounts owed the loan insurance account, and any annual charge, as shown on the statement of account prepared in accordance with the applicable provisions of Subpart C of this part. In every case where a loan has been closed, including those where the entire principal of the loan is refunded before any of it has been previously disbursed from the supervised bank account, the borrower will be required to pay interest from the date of the note to the date final payment is received by the County Supervisor. necessary releases and satisfactions in connection with the indebtedness. When a borrower who has not had his loan five years proposes to sell his farm and pay the Farm Ownership loan in full, and profit making seems to be the only significant motive for the sale, the County Supervisor will advise the State Director of the circumstances. The State Director is authorized to approve or disapprove the transaction and will inform the County Supervisor of the action to be taken. (b) The State Director will issue a State Instruction which will instruct County Supervisors regarding the release or satisfaction of Farm Ownership, Other Real Estate, and Farm Housing mortgages when the loan is paid in full. A form of release or satisfaction prepared or approved by the Attorney in Charge will be used. may be (c) Escrow arrangements used provided the escrow agent is properly bonded. No escrow arrangements will be initiated by the Farmers Home Administration and no part of the expense for an escrow arrangement will be paid by the Government. § 366.3 Determining balance to be collected. (a) When a borrower has indicated his desire to pay his account in full, the County Supervisor will prepare and forward to the Finance Office Form FHA995, "Request for Certified Statement of Account," in order to obtain the unpaid balance of principal and interest on the borrower's account and the daily rate of accrual of interest. (b) Upon receipt of Form FHA-835, "Certified Statement of Account," from the Finance Office, the County Supervisor will notify the borrower that he is prepared to accept final payment. § 366.4 Delivery of satisfactions, notes, and other documents. Usually, the County Supervisor will transmit the final payment to the Finance Office with a request for the return of the promissory note for delivery to the borrower; however, if circumstances require delivery of the note at the time final payment is received by the County Supervisor, he will request the Finance Office to forward the note along with the statement of account on Form FHA835. (a) Delivery of documents after note stamped "paid in full" is received from the Finance Office. The Finance Office, |