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§ 10.41

Subpart-Interest Rates

Interest rates on loans.

On loans made through associations each bank shall charge interest at the rate approved by the Administration. [28 F.R. 5557, June 6, 1963]

§ 10.42 Special interest rates.

Subject to the maximum interest rate of 6 percent per annum prescribed by law, approval is given to an interest rate one-half of 1 percent per annum in excess of the interest rate otherwise authorized for bank loans through associations 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

(c) Land, a substantial part of the earnings from which is derived from orchard crops.

Subpart-Repayment Plans

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(a) General. Loans ordinarily should be made on an amortization plan requiring a fixed number of one or more principal payments each year sufficient to liquidate the loan during the specified term of years (referred to in this part as being "fully amortized"). If indicated by the special circumstances of a borrower, a loan may be made on an unamortized or partially amortized basis as hereinafter provided.

(b) Security requirements. Unamortized or partially amortized loans may be made only on security which is deemed acceptable for a fully amortized maximum loan for the term which usually would be allowed under the policy followed by the bank for the type of farm involved. If the characteristics of a particular security make it subject to more than the usual hazards for that type of property, it should be considered ineligible for an unamortized or partially amortized loan.

(c) Limitation on amount of loan and repayment schedule. If a fully amortized maximum loan for a term of 30 years or more would be allowed on the security offered, an unamortized loan or a partially amortized loan may be made up to that amount. In all other circumstances, the outstanding balance of an unamortized or partially amortized loan should not at any time substantially exceed the amount which would be outstanding under a fully amortized maximum loan for the term which usually would be allowed under the policy followed by the bank for the type of farm involved. In applying this limitation, however, the balance may be that which would be outstanding on a maximum new loan which is fully amortized after an initial 5-year period during which no principal payments are scheduled.

(d) Term limitations. An unamortized loan may not be made for a term of more than 10 years. On partially amortized loans, the term may not exceed that for which a fully amortized loan would be made on the type of farm involved and the period during which no principal payments are scheduled may not exceed 10 years.

[27 F.R. 877, Jan. 31, 1962, as amended at 27 F.R. 8611, Aug. 29, 1962]

Subpart-Payments

§ 10.47 Future payment funds.

Future payment funds shall be held for subsequent credit upon indebtedness to the bank except in cases of unusual circumstances where the release of the funds is justified.

§ 10.48 Same; terms and conditions.

Future payment funds accepted prior to January 1, 1954, for subsequent credit upon indebtedness to the bank shall continue to be held under such terms and conditions as were agreed upon at the time of their acceptance. As to future payment funds accepted on or after January 1, 1954, the agreement with the borrower shall specify the rate of interest to be allowed on such funds at a rate determined by the board of directors of the bank, and such agreement shall inIclude and be consistent with the terms and conditions prescribed by statute for such funds (12 U.S.C. 781 Eighteenth). The form of such agreement, its conformity with the terms and conditions prescribed by statute, and the procedure for making it effective with the borrower

shall have the approval of the district general counsel.

§ 10.52 Release of personal liability.

In case of the sale of land mortgaged to the bank and the assumption of the mortgage by the purchaser, a former owner or other person liable for the mortgage debt may be released from personal liability therefor: Provided:

(a) In the opinion of the bank, there is reasonable assurance that the assumptor of the mortgage will pay the loan in accordance with its terms; and

(b) The applicant for the release has transferred to the assumptor all his interests, if any, in the stock issued in connection with a bank loan from which he desires to be released of liability; and (c) The endorsing association, if active, consents to the release; and

(d) Such title or other requirements are met as the bank or the bank's counsel may consider necessary or advisable for the protection of the mortgagee's interests.

Subpart-Retirement of Stock

§ 10.53 General policy.

It is the general policy of the Administration that the bank stock issued in connection with a loan made through an association shall not be retired in whole or in part until the loan has been paid in full except in individual cases where unusual circumstances are involved. Within the limitations and restrictions of section 7 (12 U.S.C. 722) and section 14 (12 U.S.C. 791 Fourth) of the Federal Farm Loan Act and applicable regulations of the Administration, and subject to authorization being given by the bank's board of directors by appropriate resolution, the Administration approves, under section 7 of the Federal Farm Loan Act (12 U.S.C. 721), the retirement of bank stock held as collateral for the payment of a loan, in the following cases or circumstances:

(a) Where the amount of bank stock held as security for a loan is substantially in excess of 5 percent of the unpaid balance of the loan and the bank determines that retirement of the excess stock is advisable;

(b) If the terms and conditions under which a bank holds future payment funds so permit, then, when the amount of stock and the future payment funds held in connection with a loan are sufficient to pay off the loan in full, they

may be so applied and the stock may be retired for that purpose;

(c) When the amount of bank stock held as security for a loan is sufficient to complete payment of the loan, the bank may retire its stock and, with the consent of the association, credit an amount equal to the par value thereof as a last payment on the retiring borrower's loan;

(d) When a loan is called for foreclosure, or when a loan has been declared due and payable for the purpose of accepting deed, the bank may retire the related stock and apply the proceeds to the indebtedness concurrently with the transfer of the loan to the loans called for foreclosure account or at any time thereafter, not later than the date of recording the acquisition of the underlying security on the books of the bank;

(e) Where the mortgaged security for a land bank loan is transferred and the present owner thereof assumes the mortgage indebtedness, but either fails to acquire ownership of the stock interest on such loan or does not qualify for membership in the association endorsing the loan;

(f) Where the mortgaged security for a land bank loan is transferred and the present owner thereof assumes the mortgage indebtedness, is or becomes a member of the association endorsing the loan, and owns or acquires stock therein to the extent of 5 percent of the unpaid balance of the loan to be held as collateral for such loan;

(g) The bank stock may be retired so that the proceeds thereof may be applied to the related bank loan in any case where the bank finds that there is not sufficient equity in the security or probability of recovery from the borrower to justify further expenditure in connection therewith.

Subpart-Servicing Loans
Deferments.

§ 10.55-50

On outstanding loans the total period of deferment for purposes other than to pay off a junior lien shall not exceed 5 years during the life of the loan, although the deferment may be for a longer period if the purpose is to pay off a junior lien. Only in exceptional cases should deferments be granted which would extend the repayment of the loan for more than 40 years from its making or beyond the term for which the appraiser stated the security is suitable.

Deferments exceeding the limitations indicated herein may be granted in certain circumstances when necessary to work out a delinquency situation. [27 F.R. 8611, Aug. 29, 1962]

§ 10.55-51 Rescheduling loans on unamortized or partially amortized basis.

The payment of existing loans may be rescheduled on an unamortized or partially amortized basis subject to the same limitations as those applicable to new loans. In applying such limitations, unless an existing appraiser's report on the identical security can be utilized as permitted in connection with a new loan, a current appraisal report should be obtained.

[27 F.R. 8611, Aug. 29, 1962]

Subpart-Mineral Rights

§ 10.64 Holding mineral rights for more than 5 years.

In cases where, in connection with a sale of bank-owned real estate, the bank has retained royalty or other rights in or to minerals, and desires to hold such rights for a period in excess of 5 years, it is not considered that the bank has both "title and possession" of real estate within the meaning of section 13 Fourth (b) of the Federal Farm Loan Act (12 U.S.C. 781 Fourth (b)). However, retention of such minerals and mineral rights for periods in excess of 5 years, when in the bank's opinion it is in the bank's interest to do so, has the approval of the Administration.

Subpart-Bonds

§ 10.119 Method of calling consolidated Federal farm loan bonds.

When any Federal land bank shall desire to call for redemption any consolidated Federal farm loan bonds outstanding on its behalf, it shall, pursuant to appropriate authorization of the 12 Federal land banks, file with the Administration, at least 20 days prior to the date on which the call is to become effective, a certified copy of a resolution of its board of directors authorizing such call. The Administration shall, at least 15 days prior to the date on which the call is to become effective, approve or disapprove the call and, if the call is approved, shall cause formal notice thereof to be published, at least 15 days prior to the effective date of the call, in the FEDERAL REGISTER and through any

other facilities that the Administration may elect. Such notice shall describe the bonds so called for redemption and shall designate the place or places where and the date on and after which they will be payable. Approval of the call and publication of notice as herein required shall be deemed a complete call. From the date of redemption designated in any such notice, interest on the bonds called for redemption shall cease.

§ 10.120 Same; less than entire issue.

In any case in which it is desired to call for redemption less than all of the outstanding bonds of any issue or issues, the bonds to be so called shall be selected in such manner as the Administration shall prescribe.

§ 10.120a Exchanges and assignments of consolidated bonds.

(a) Consolidated bonds issued by the 12 Federal land banks dated before 1959 may be exchanged for bonds of the same issue, and assignments of registered consolidated bonds of all such issues may be effected, under and in accordance with the regulations of the United States Treasury Department governing exchanges and transfers of United States bonds.

(b) Consolidated bonds issued by the 12 Federal land banks dated after 1958 may be exchanged for bonds of the same issue, and assignments of registered consolidated bonds of all such issues may be effected, under and in accordance with the regulations of the United States Treasury Department governing exchanges and transfers of United States bonds, with the following exceptions: Denominational exchanges of coupon bonds may be effected at the Federal Reserve Bank of New York only. Exchanges as between coupon bonds and registered bonds and changes of registration may be effected at the Division of Loans and Currency, Treasury Department, Washington, D.C., or through the Federal Reserve Bank of New York.

§ 10.120b Basis of relief on account of lost, stolen, destroyed, mutilated, or defaced consolidated bonds or

coupons.

The statutes of the United States, now or hereafter in force, and the regulations of the Treasury Department, now or hereafter in force, governing relief on account of the loss, theft, destruction, mutilation, or defacement of United

States securities, and the regulations of the Treasury Department, now or hereafter in force, governing the payment of mutilated or defaced coupons of United States securities, so far as such statutes and regulations may be applicable, and as modified to relate to consolidated Federal farm loan bonds, and coupons of such bonds, shall govern the granting of relief on account of lost, stolen, destroyed, mutilated, or defaced consolidated Federal farm loan bonds, and mutilated or defaced coupons of such bonds.

§ 10.120c

Claims and proof for lost, stolen, destroyed, mutilated, or defaced consolidated bonds or coupons. Claims shall be presented, and proof shall be made, by applicants for relief on account of the loss, theft, destruction, mutilation, or defacement of consolidated Federal farm loan bonds, and the mutilation or defacement of coupons of such bonds, in accordance with the statutes of the United States, now or hereafter in force, and the regulations of the Treasury Department, now or hereafter in force, with respect to securities of the United States, and coupons of such securities.

§ 10.120d

Restrictive endorsements of bearer securities.

When consolidated coupon bonds issued by the 12 Federal land banks are being presented to Federal Reserve Banks or Branches, or to the Treasurer of the United States, by or through banks (including Federal land banks) for payment, redemption, or exchange pursuant to an optional exchange offering, such bonds may be restrictively endorsed. The restrictive endorsement shall be placed thereon in substantially the same manner and with the same effects as prescribed in United States Treasury Department regulations, now or hereafter in force, governing like transactions in United States bonds; and consolidated coupon bonds so endorsed shall be prepared for shipment and shipped in the manner prescribed in such regulations for United States bonds.

§ 10.121 Lost or stolen bonds and cou

pons issued by a bank individually. Whenever it appears by clear and satisfactory evidence that any interestbearing bond or any coupon thereof issued by any Federal land bank has,

without bad faith on the part of the owner, been lost, stolen, or destroyed, and is not lawfully held by any person as his own property, or has been so mutilated or defaced as to impair its value to the owner, and is identified by number and description, the bank of issue may make payment (upon approval of the proofs of loss, etc., bonds of indemnity and related papers filed with the banks of issue in such cases, detailed information as to which has been furnished the banks) without requiring the issuance of any new bonds for record purposes. § 10.122 Same; bond of indemnity.

The owner of any such lost, stolen, or destroyed bond or coupon shall file with the bank of issue a bond of indemnity in a penal sum equal to the face amount of the bond or coupon, plus an amount sufficient to protect the bank from any loss on account of interest which may be payable on such lost, stolen, or destroyed bond. A corporate surety to be approved by the bank of issue shall be required for the bond of indemnity when the penal sum exceeds $50.

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Sec.

11.1038 Farming corporations.

11.1039 Voting by proxy.

CONDUCT OF EMPLOYEES

11.1074 Prohibition against fee splitting. 11.1075 Prohibition against officers, directors, and employees acquiring certain stock or claims based thereon. Prohibition against managers making farm loans for any other company or agency. Administrative interpretation of provision.

11.1076

11.1077 11.1078

11.1079

11.1080

Manager should not divert to
other agencies business accept-
able to land bank.

Political activity of employees.
Other restrictions on activities.

AUTHORITY: The provisions of this Part 11 issued under sec. 6, 47 Stat. 14, as amended; 12 U.S.C. 665.

NOTE: Where the word "bank" appears alone, it refers to a Federal land bank; the word "association" refers to a Federal land bank association; the word “Administration" refers to the Farm Credit Administration. [27 F.R. 10929, Nov. 9, 1962]

CLASSIFICATION OF ASSOCIATIONS

§ 11.163 Classification.

The banks shall make such review of the financial condition of associations as is necessary to ascertain when the capital stock of an association becomes impaired. The stock of an association shall be considered impaired, and the association shall be classified as "impaired," if the total of its liabilities (including estimated losses on contingent liabilities) and capital stock is in excess of its total assets and such excess may not reasonably be regarded, under all circumstances, as negligible in amount or percentage, as apparent rather than real, or as temporary only.

[21 F.R. 8647, Nov. 9, 1956, as amended as 27 F.R. 10931, Nov. 9, 1962]

CONSOLIDATION OF ASSOCIATIONS

§ 11.1010 Action by directors.

The board of directors of each association to be consolidated shall take appropriate action to authorize the execution of a consolidation agreement and articles of association for each association to be created as a result of the agreement. The board may designate one or more of its members to serve with representatives of each of the boards of the other associations involved as an organization committee for the for

mation of the new association or associations. Each board of directors, or the representatives of each association on the organization committee pursuant to authority by the association board of directors, shall execute on behalf of such associations the agreement of consolidation and articles of association on forms prescribed by the Administration. Also, they shall appoint not less than five nor more than seven qualified persons to serve as directors for each association to be created as a result of the agreement. Such persons will constitute the board of directors for the period intervening from the date of organization to the date fixed in the bylaws for the first annual meeting of stockholders or until their successors are elected and have qualified.

[21 F.R. 8647, Nov. 9, 1956]

§ 11.1011 Action by members.

Meetings of association members shall be called in accordance with the provisions of the bylaws of the association. Notices of the meetings, containing a brief statement of the proposal, shall be mailed to each stockholder of record. A favorable vote of a majority of the members present and voting at each separate meeting shall be necessary for the approval of the proposed consolidation, and such members shall adopt resolutions ratifying and approving the execution of the agreement of the consolidation and articles of association in the name of the association. The manager shall certify to the action taken at the meeting of members, and his certificate shall set out the resolution adopted by the members ratifying the execution of the consolidation agreement.

[21 F. R. 8647, Nov. 9, 1956, as amended at 27 F.R. 10930, Nov. 9, 1962]

§ 11.1012 Completing consolidation.

Upon completion of the association action, one set of organization papers for each association being organized, with the bank's recommendation, and a flnancial statement for each constituent association and a tentative financial statement for each consolidated association being created as a result of the agreement, shall be submitted to the Farm Credit Administration for consideration. Upon approval by the Administration, notice of such approval and the effective date of the consolidation will be sent to the bank and each consolidated association, and a charter will be

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