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structures and equipment and initial working capital for such services. Production credit associations may make loans to farm-related businesses for any working capital, equipment and operating needs incident to the operation of farm-related businesses. Any such loans shall be confined to the financing of those assets or business activities directly related to the custom-type services performed on the farm. Such financing is subject to the provisions of § 616.6040 of this chapter.

Subpart C-Eligibility of Financial Institutions To Borrow From the Federal Intermediate Credit Bank § 613.3060 Institutions eligible.

The Federal intermediate credit banks may make loans to and discount agricultural paper for production credit associations and other financial institutions in accordance with provisions in Part 614 of this chapter.

Subpart D-Eligibility of Cooperatives To Borrow From a Bank for Cooperatives 613.3070

Cooperative.

The term cooperative means any association of farmers, ranchers, producers or harvesters of aquatic products, or any federation of such associations, or a combination of such associations and farmers, which is operated on a cooperative basis, is engaged in processing, preparing for market, handling or marketing farm or aquatic products; or purchasing, testing, grading, processing, distributing or furnishing farm or aquatic supplies; or furnishing farm business services or services to eligible cooperatives.

§ 613.3080 Federated cooperative.

A federated cooperative is a cooperative whose membership includes farmers' cooperative associations and in which at least 80 percent of the voting control is vested in farmers and eligible associations.

§ 613.3090 Cooperative basis.

Cooperative basis means the conduct of business for the mutual benefit of the members as patrons.

§ 613.3100 Farm or aquatic supplies and farm business services.

Farm or aquatic supplies and farm business services are any economic goods,

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To be eligible to borrow from a bank for cooperatives, a cooperative shall meet the following requirements.

(a) At least 80 percent of the voting control, or such higher percent applied uniformly and consistently to all applicants and borrowers in the district as may be established by resolution of the bank board shall be held by farmers or ranchers, or producers or harvesters of aquatic products, who are eligible under § 613.3020 or § 613.3030, or by eligible cooperatives.

(b) It deals in farm products or aquatic products or products therefrom, farm or aquatic supplies, or farm business services with or for members in an amount at least equal in value to the total amount of such business transacted by it with or for nonmembers, excluding from the total of member and nonmember business transactions with the United States or any agencies or instrumentalities thereof or services or supplies furnished as a public utility.

(c) No member of the cooperative shall have more than one vote because of the amount of stock or membership capital he owns therein; or, the cooperative must restrict dividends on stock or membership capital to 10 percent per year or the maximum percentage per year permitted by the applicable State statutes, whichever is less.

(d) A cooperative or a federated cooperative which was otherwise eligible and was a borrower on the effective date of these regulations and which does not materially change its entity structure or ownership and control will continue to be eligible for further borrowing. § 613.3120 Scope of financing.

A bank for cooperatives may make loans to meet any credit need which will enable a cooperative to perform those functional powers prescribed in sections 3070 through 3100 which will benefit its members. A bank may also make loans, to a cooperative otherwise eligible to borrow, for purposes not directly related to such primary functions or

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The Federal Farm Credit Board, at its February 1969 meeting, adopted the following resolution:

Resolved, that it is confirmed to be the policy of the Federal Farm Credit Board that there shall be no discrimination because of race, color, religion, or national origin by the banks and associations which operate under the supervision of the Farm Credit Administration, i.e., Federal land banks and Federal land bank associations, Federal intermediate credit banks and production credit associations, and banks for cooperatives, either as is now proscribed for the financing of housing by section 805 of the Civil Rights Act of 1968 or with respect to the availability of loans generally from such banks and associations.

[37 F.R. 16932, Aug. 23, 1972]

§ 613.3150 Nondiscrimination in lend. ing and other services.

No Farm Credit institution shall, because of the race, color, religion, or national origin of an eligible person deny a loan, whether it is for the purpose of purchasing, constructing, improving, repairing, or maintaining a rural residence or is for other eligible purposes, or refuse to allow, receive, or consider any application, request, or inquiry with respect to a loan, or refuse to perform any other service it customarily makes available to borrowers, applicants, and members, or discriminate in fixing the amount, interest rate, duration, application procedures, collection or enforcement procedures, or other terms or conditions of a loan or other service.

(37 F.R. 16932, Aug. 23, 1972]

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(a) Each Farm Credit institution that makes rural residence loans shall post and maintain one or more Equal Housing Lender Posters in the lobby of each of its offices in a prominent place or places readily apparent to all persons seeking such loans.

(b) The poster shall be at least 11 by 14 inches in size, and shall bear the logotype and legend set forth in § 613.3160 (b), and the following text:

We do business in accordance with the Federal "Fair Housing Law".

It is illegal, because of race, color, religion, or national origin, to:

Deny a loan for the purpose of purchasing, constructing, improving, repairing, or maintaining a dwelling, or

Discriminate in fixing the amount, interest rate, duration, application procedures, or other terms or conditions of such a loan. If you believe you have been discriminated against you may discuss the matter with the management of this institution. You may also send a complaint to:

Assistant Secretary for Equal Opportunity, Department of Housing and Urban Development, Washington, D.C. 20410.

or call your local HUD office. [37 F.R. 16933, Aug. 23, 1972]

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614.4610 Filing and recording assignments of security instruments.

614.4620 Suspension of right to borrow and discount.

614.4630 Credit to other financing institutions in special circumstances. 614.4631 Alternate method.

614.4632 Limitation on alternate method. 614.4640 Insolvency of other financing institutions.

614.4660 General discount agreement.

AUTHORITY: The provisions of this Part 614 issued under secs. 5.9, 5.18, 5.26, 85 Stat. 619, 621, 624; 12 U.S.C. 2243, 2252, 2001 nt.

SOURCE: The provisions of this Part 614 appear at 37 F.R. 11424, June 7, 1972, unless otherwise noted.

Subpart A-General

§ 614.4000

Basic responsibilities.

The Act (sections 1.1(b), 5.18(5) and 5.19) vests certain responsibilities with the Farm Credit System and the Farm Credit Administration which pertain to the development of a credit system responsive to the credit needs of all types of eligible applicants having a basis for credit.

§ 614.4010 Supervision by the Farm Credit Administration.

The Farm Credit Administration is empowered to exercise general supervision over the administration of credit; to coordinate the activities of the banks in making studies of lending standards, including appraisal and credit standards; approve national and district standards and procedures; and to supplement the work of the districts under the foregoing where necessary to accomplish the purposes of the Act. $614.4020

Delegation.

The Act authorizes and directs the delegation and redelegation of such of the duties, powers, and authority of the Farm Credit Administration as may be determined to be in the interest of effective administration.

§ 614.4030 Intent of delegation.

The banks shall provide for the exercise of loan making authority by the associations commensurate with their demonstrated ability to extend and administer credit soundly on condition that adequate control and supervisory measures are developed and exercised.

§ 614.4031 Policies for delegation of authority.

It shall be the responsibility of each bank board to adopt a policy authorizing the bank to delegate loan making authority to bank personnel and associations. Such policy shall require the bank to define authorities to be delegated, provide for documented evaluation of the capability and responsibility of individuals or associations where authority is delegated, provide for reporting of actions taken under delegated authority, provide procedures for periodic review and enforcement of accountability for actions taken under delegated authority, and for withdrawal of authority where appropriate. Where associations are authorized to redelegate loan making authority to employees, bank procedure shall provide for associations to utilize similar control measures.

[37 F.R. 28492, Dec. 27, 1972] § 614.4040

ties.

Bank guideline responsibili

Under policies of its board, each bank shall conduct studies and make and adopt standards for lending and develop and issue adequate credit manuals, operating procedures, and control mechanisms for guidance in the extension and administration of sound and constructive credit. The definition of a sound loan, and the five specific credit factors, along with the total provisions of these regulations on loan policies and operations shall constitute the guidelines under which district policies and procedures shall be constructed. The credit manuals setting forth policies and procedures shall prescribe the forms to be used, including a loan application and an adequate credit file; the minimum supporting credit information and verification required in relation to loan size, complexity and risk exposure; the format and procedures to be followed in loan analysis, minimum standards for loan disbursement, servicing and collections; and such other standards as are necessary for the safe and professional conduct of a lending organization. § 614.4050

Bank supervision of associa

tions. Where credit decisions are vested in associations by law or through delegated authority, district policies, and procedures shall be designed to regulate, control, and review the extension of credit. District policies and procedures shall

$ 614.4051

Title 12-Banks and Banking

include guidelines with respect to particular enterprise financing, and limitations with respect to lending in specialized or hazardous areas. The banks shall supervise the credit operations, monitor association performance and take corrective action when deficiencies occur. District banks shall also assist and supervise associations in the credit training of employees and loan committees.

§ 614.4051

Federal land bank and Federal intermediate credit bank credit review.

(a) It shall be the duty of the supervising bank to adequately review and evaluate annually the credit quality of loans and related loan assets and the quality of credit administration in each land bank association and each production credit association. Each bank board shall adopt a policy prescribing credit review criteria and providing for the issuance of a report to the association board. The adequacy and reliability of bank reviews and the completeness of reporting will be major considerations by Farm Credit Administration examiners in determining the scope of their audit and examination of associated and banks. Bank policies shall be subject to approval by the Farm Credit Admastration and need to include at least the following

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1 Evaluation and reparting shall at all times be under the supervision of a bank creat officer, properir trained and with proven capability in analyzing loans, credit administration, and personnel performance.

A credit review program shall be prepared zonually which will designate the scope of review to be made in each avocam The extent of review may range from & minimum sampling in String 350ciations to full review m wesker $5sociations. All associations shall be sube a comprehensive review st tonervais a no more than 3 Fears

1 Some rucu-production credit associations. The scope of review shall include a review of loans acquired property, sales caracts bouidating assets, and the total area of crear admmistraLion which w be predicted primarily apon the capacity and responsibility of the association as referted in the bank's

and amount of losses estimated in ther
loan portfolio.

(ii) Scope of review Federal land
bank associations. The scope of renew
shall include new loans made, partial re-
lease and subordination functions, for-
bearance cases, overall loan servicing
the total area of credit administration
including appraisal accuracy which
be predicated primarily upon the capa-
bility and responsibility of the associa
tion as reflected in the bank's rating c
associations for the purpose of delega-
tion of authority and general super-
vision, and a report from the association
board at year end as to the number and
amount of losses estimated in their lat
portfolio.

(3) An annual written report shall be
prepared on each land bank associa
tion and production credit association
detailing:

The quality of credit,

The quality of credit administra

tion, and

1) An evaluation of management and compliance with law, regulations and association and bank policies.

(4) Loans shall be classified in acordance with the following systemwide loan classification standards:

(1) Acceptable loans. Loans of highest quality, ranging down to and including those having significant credit weak

nesses.

(ii) Problem loans. Loans having seri-
ous credit weaknesses requiring more
than normal supervision but believed to
be collectible in full.

(iii) Vulnerable loans. High risk loara
still considered collectible but involving
sources does not
probability of loss in the event repayment
available
from
materialize.

(iv) Loss loans. Loans on which all or
(5) Statistical reporting shall comply
with minimum uniformity requirements
prescribed by Farm Credit Administra-
any portion is deemed uncollectible.
tion.

(6) Credit review procedures will be
issued to bank personnel to facilitate the
making of credit reviews and the
suance of reports. Where the bank and,
or association have adopted special lend
ing programs (ie., specialized enterprise
financing, young farmer programs, etc.
bank procedures will provide that such
loans be classified in accordance with
standards prescribed in paragraph a
(4) of this section but that the report
also contain a specific and separate
614

ating of assocaus ir the purpose of Celegation of subimy and general supervision and a report on the associaLion board at year end as to the number

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