vance will be the date of loan closing. The date entered for each subsequent advance will be the estimated date on which it will be needed by the borrower. The date on which each subsequent advance was made will be the date of the loan check.

(4) For insured loans, other than those made from the insurance fund, the promissory note will be assigned to the lender simultaneously with loan closing. This will be done by endorsing the note over to the lender, using the form of endorsement on the reverse of the note. Form FHA-250, "Insurance Endorsement (Insured FO or SW Loan)," also will be executed simultaneously with loan closing for delivery to the lender with the note. The rate of the annual charge to be inserted in Form FHA-250 at the time of loan closing is one-half of one percent.

(Sec. 6, 50 Stat. 870, sec. 10, 68 Stat. 735, secs. 308, 339, 341, Public Law 87-128; 16 U.S.C. 590w, 16 U.S.C. 590x-3; Orders of Sec. of Agr., 19 F.R. 74, 22 F.R. 8188, 26 F.R. 7888, 8403)

(5) Each County Supervisor and each State Director is authorized to sign the endorsement on the reverse of the note and to execute Form FHA-250. The insurance endorsement constitutes the Government's contract of insurance of the loan.

(6) For loans from the insurance fund, the note will not be endorsed and the insurance endorsement will not be executed until the loan is assigned from the insurance fund to a lender. In such cases, the Director, Finance Office, will sign the endorsement on the reverse of the note and will execute the insurance endorsement in accordance with Part 375 of this chapter.

(d) Property insurance. When there are insurable buildings on the real estate given as security for a Soil and Water Conservation loan, the County Supervisor will see that adequate insurance is provided, effective as of the time of loan closing, in accordance with Part 306 of this chapter.

(e) When liens on real estate, interest in real estate, or water rights are to be taken as security for the loan. When liens on real estate, interest in real estate, or water rights are to be taken as security for a loan, the loan will be closed in accordance with Part 307 of this chapter with the assistance of the designated attorney, title insurance company, or the closing instructions of the Attorney in Charge.

(1) If water stock certificates are taken as security, they should be reissued in the name of the Government, or the borrower and the Government, in accordance with the rules of the company.

(2) If, at the time of loan closing, any changes affecting the title appear since the date of the previous title opinion, the loan will not be closed until all necessary corrections have been made and it is determined that the proposed loan can be made properly.

(3) When the loan is closed, the mortgage recorded, and all legal requirements have been met, the loan funds may be disbursed.

(f) When chattel liens are taken as security. When a chattel lien is taken as security for a Soil and Water Conservation loan, the loan will be closed in accordance with § 342.6 of this chapter except that Soil and Water Conservation promissory notes will be used and Form FHA-293, "Chattel Mortgage (Insured SW Loans)," for the appropriate state will be used for insured Soil and Water Conservation Loans and Form FHA-30, "Crop and Chattel Mortgage," will be adapted for direct loans. Whenever Form FHA-30 is used, the words "but not exceeding the rate of five per centum per annum" will be deleted in the refinancing clause. The provisions designed to create a crop lien also will be deleted in Form FHA-30. All such deletions will be initialed by the borrower before the mortgage is executed.

(g) When both real estate and chattel liens are taken as security. When both real estate security and chattel security are taken for a Soil and Water Conservation loan, separate security instruments will be used.

[24 F.R. 10943, Dec. 30, 1959, as amended at 26 F.R. 9307, Oct. 3, 1961] § 352.8

ing.

Actions subsequent to loan clos

(a) The real estate or chattel mortgage will be delivered to the recording office for recordation or filing, as appropriate. A conformed copy of the mortgage will be delivered to the borrower and the original will be retained in the borrower's County Office case folder, unless the original is retained by the filing official for the county records.

(b) For an insured loan by a private lender, immediately after loan closing, the original note properly endorsed and the original insurance endorsement will

be given or sent to the lender. If for any reason it is not possible for the same County Supervisor who signed Form FHA-971 to endorse the note and sign the insurance endorsement, the note and insurance endorsement will be sent to the State Office instead of directly to the lender. In such a case, the State Director or other authorized state official will attest on Form FHA-250 the signature of the different County Supervisor before sending the note and the insurance endorsement to the lender. This will not be necessary when a local lender has no objection to a different signature on the endorsement of the note and the insurance endorsement than that which appeared on Form FHA-971. § 352.9 Loans to homestead entrymen.

This section provides additional policies and procedures applicable to the making of insured and direct Soil and Water Conservation loans to homestead entrymen whose loans are to be secured by real estate.

(a) Authority. Public Law 361, 81st Congress (63 Stat. 883), authorizes the insuring and making of Soil and Water Conservation loans to eligible homestead entrymen on unpatented public lands including public lands within Federal reclamation projects and in Alaska in accordance with the provisions of the Water Facilities Act of 1937, as amended.

(b) Cooperation between the Department of Agriculture and the Department of the Interior. The extension of financial assistance authorized in paragraph (a) of this section will be facilitated through the cooperation of the Farmers Home Administration, the Bureau of Land Management, and the Bureau of Reclamation.

(c) Special policies applicable to Soil and Water Conservation loans. Soil and Water Conservation loans will not be made to applicants who lack the capital or credit resources necessary to provide a habitable dwelling within the statutory period prescribed for the establishment of residence and to make the other farm improvements essential to a sound farming operation. Soil and Water Conservation loans will not be made to applicants who expect to apply for a Farm Ownership loan to make additional farm improvements.

(d) Patent requirements. All homestead entrymen will be expected to comply promptly and fully with pertinent laws and regulations of the Department

of the Interior relating to the issuance of a patent for a homestead entry. When applicable, reclamation proof must be filed by the borrower at the earliest possible date.

(1) Residence requirements. The entryman must establish residence upon the land entered within six months from the date of allowance of entry. When he has established residence, he should notify the Manager of the District Land Office by mail or otherwise. Under certain conditions additional time, not exceeding six months, may be allowed by the Bureau of Land Management. Residence must be maintained for a period of at least seven months during each of the first three years, except where credit is allowed for residence on account of military or naval service.

(2) Final homestead proof. Final proof must be filed within five years from the date of allowance of entry issued to the entryman by the Bureau of Land Management. A patent will not be issued by the United States until the entryman has submitted final proof. Final proof must show that a habitable house is on the land at the time proof is submitted, that residence requirements have been met, that the improvements are of such character as to show good faith, and that the entryman is a citizen of the United States. A habitable dwelling within the meaning of the homestead laws is any permanent building or structure erected on the land entered which is suitable for, and actually occupied as, a dwelling as distinguished from other buildings. When the entryman borrower is ready to submit final proof, he should notify the District Land Office and request instructions regarding the procedure to be followed.

(3) Reclamation proof. Reclamation proof may be submitted with, or at any time after, the submission of homestead proof. In addition to the final homestead proof mentioned in subparagraph (2) of this paragraph, the filing of reclamation proof is required as a condition in obtaining a patent to any entry within a reclamation project. Reclamation proof must show reclamation and cultivation of at least one-half of the irrigable area in the entry for two years immediately preceding the date of submission of proof and the payment of all reclamation charges due at that time. Reclamation proof, in proper form, must be submitted to the District Land Office

accompanied by the payment of final homestead commissions.

(e) Loan processing. Existing Soil and Water Conservation policies, procedures, and loan authorities will be followed, except as follows:

(1) Applications—(i) Applications from homestead entrymen not in a Federal reclamation project. An application for a Soil and Water Conservation loan from a homestead entryman entering public land not within a Federal reclamation project will be considered only after the entryman has selected a farm and received his allowance of entry from the Bureau of Land Management. The original document showing allowance of entry must be attached to Form FHA-197, "Application for FHA Services."

(ii) Applications from homestead entrymen in a Federal reclamation project. An application for a Soil and Water Conservation loan from a homestead entryman entering public land within a Federal reclamation project will not be considered until after the entryman has received a certificate of eligibility from the Bureau of Reclamation and has selected a farm. If at the time of making application the entryman has received his allowance of entry from the Bureau of Land Management, he will attach the original of such document to Form FHA-197. If the entryman has not received his allowance of entry, a copy of his certificate of eligibility must be attached to Form FHA197. However, the docket will not be approved until the original document showing allowance of entry has been received from the applicant and placed in the loan docket.

(iii) Supplemental information on applicant. At the time of making application for a Soil and Water Conservation loan, the homestead entryman may be requested to authorize the Farmers Home Administration to secure from the Bureau of Land Management or the Bureau of Reclamation any available information concerning his application for homestead or reclamation entry which may be used by the Farmers Home Administration in determining his eligibility for the loan.

(2) Special items in development of Soil and Water Conservation loan dockets. Loan dockets for loans to homestead entrymen will be prepared in accordance with §§ 352.1 to 352.8 except

that when the entryman's farm is located in a Federal reclamation project, any development items listed on Form FHA-643, "Farm Development Plan," must be consistent with the over-all plans for development of the reclamation project. If the development plans for the unit conflict with the over-all plans for the development of the Federal reclamation project, officials of the Bureau of Reclamation will so advise the County Supervisor. The processing of the loan will not be delayed while awaiting such advice from the Bureau of Reclamation.

(3) Title clearance. The entryman applicant will be required to furnish and pay for a certified statement prepared by a qualified title examiner (including designated attorneys) or abstracter which will include findings with respect to any outstanding land leveling contracts and any other claims of any kind on record against the entry.

§ 352.10 Loans to contract purchasers on reclamation projects.

(a) General. This section outlines the policies and procedures to be followed on the Columbia Basin Reclamation project in Washington and on the Wellton-Mohawk Division of the Gila Project in Arizona in making insured and direct Soil and Water Conservation loans which are to be secured by real estate to individuals who are contract purchasers of land from the Bureau of Reclamation.

(1) Cooperation between the Department of Agriculture and the Department of the Interior. The making of loans pursuant to this section will be facilitated through the cooperation of the Farmers Home Administration and the Bureau of Reclamation.

(2) National Office consideration. A loan application within the intent of, but not specifically covered by, this section will be submitted to the National Office for consideration.

(b) Policies. Existing Soil and Water Conservation policies and loan approval authorities will be followed in processing loans to such contract purchasers with the following modifications: Soil and Water Conservation loans may be made to contract purchasers from the Bureau of Reclamation for all authorized purposes even though a deed to the farm has not been obtained, provided:

(1) The applicant is not in default under his purchase contract, including, but not limited to:

(i) Delinquency on either principal or interest on the purchase contract, or delinquency on taxes, assessments, or irrigation district charges or assessments against his farm unit.

(ii) Default by reason of his failure to meet the residence requirements stated in his purchase contract, or his failure to be in a position to meet such residence requirements within the period prescribed in his purchase contract, either because he lacks the funds, a satisfactory source of credit, or the prospective farm income necessary to make the improvements in order to fulfill the residence requirements.

(2) His credit needs for farm development purposes, in order to place his farm unit in an operable and livable condition can be met adequately under the Soil and Water Conservation and the Operating loan programs.

(c) Loan processing. Soil and Water Conservation loan dockets will be prepared and processed in accordance with the provisions of the applicable procedures with the following modifications:

(1) Consent by Bureau of Reclamation. Written consent of the Bureau of Reclamation will be obtained prior to the making of the proposed loan.

(2) Supplemental information on applicant. At the time of making application for a Soil and Water Conservation loan, the contract purchaser may be required to authorize the Farmers Home Administration to secure from the Bureau of Reclamation any available information concerning his purchase contract or application for a purchase contract and which may be used by the Farmers Home Administration in determining his eligibility and qualifications for the loan.

(3) Land leveling contracts. When there is an outstanding land leveling contract, a copy of such contract will be included in the loan docket and marked for return to the County Supervisor.

(4) Purchase contracts. The County Supervisor will obtain from the applicant a copy of the purchase contract. (d) Loan closing. Existing Soil and Water Conservation procedures will be followed in the closing of these loans, except that the applicant will have filed for record in the County Recorder's office the purchase contract entered into with the Bureau of Reclamation.

AUTHORITY: §§ 353.1 to 353.5 issued under secs. 2, 5, 6, 50 Stat. 869, as amended, 870, secs. 9, 10, 68 Stat. 735, sec. 11, 72 Stat. 841; 16 U.S.C. 590s, 590v, 590w, 590x-2, 590x-3, 590x-4; Order of Acting Sec. of Agr., 19 F.R. 74, 22 F.R. 8188.

SOURCE: §§ 353.1 to 353.5 appear at 26 F.R. 2708, Mar. 31, 1961.

Loans to individuals to participate in a group service will be processed in accordance with authorities applicable to Soil and Water Conservation loans to individuals except that plans and cost estimates will be based on the entire group service and loans to individuals to participate in the unincorporated group service will not be approved until the State Director has reviewed the preliminary plans and has concurred in the proposal to make Soil and Water Conservation loans to participate in the group service.

§ 353.2 Operating agreement.

An operating agreement will be prepared which will outline the decisions of the group regarding the conditions of ownership and use of the facility, the rights and responsibilities of the users, and any other details needed to guide the management and operation of the group service. A simple written agreement usually will be sufficient; however, if the group service involves a complex operation, an agreement approved by the Farmers Home Administration may be used.

§ 353.3 Ownership and other rights.

All property to be acquired by the group should be owned jointly by all members. Title will be obtained to sites for such structures as buildings, pumps, wells, and storage reservoirs or tanks owned, or to be owned, by the group

whenever possible. When title to the sites for such structures cannot be obtained, an easement, permit, lease, franchise, or other appropriate tenure agreement which will permit continued use of the site for the period of the loan may be substituted for title. Easements conveying rights-of-way upon which other structures and pipelines or ditches will be located, will be obtained from the owners of land traversed by the facility. Partial releases or consent to easements, leases, permits, licenses, or other agreements will be obtained from the holders of outstanding liens on lands on which such rights will be acquired. § 353.4 Approval or disapproval of loan dockets.

(a) The group service docket, consisting of plans, cost estimates, a conformed copy of the operating agreement, an estimate of the individual Soil and Water Conservation loan funds that will be needed by the members of the group, and a statement regarding the property or rights owned or to be owned by the group, will be forwarded, with the County Supervisor's recommendations, to the State Director. The State Director will review the docket and:

(1) Refer any legal questions to the Office of the General Counsel.

(2) If the aggregate amount of all Soil and Water Conservation loans to participate in the group service, including the unpaid principal balance of any prior Water Facilities loans for that purpose, exceeds $50,000, the group service docket, together with the recommendations of the County Supervisor and the State Director, will be forwarded to the National Office for review.

(3) If the State Director approves the group service, he will prepare an approval memorandum, including his recommendations and approval conditions, and send it with the group service docket to the County Supervisor.

(b) Upon receipt of the group service approval memorandum, the County Supervisor will assemble the individual Soil and Water Conservation loan dockets for participating members who apply for Soil and Water Conservation loans. It will not be necessary to include in the loan dockets of individuals information on the group service that is included in the group service docket.

(c) The Soil and Water Conservation loans to participators in the group serv

(a) The County Supervisor and the group service will follow the State Director's memorandum of approval and the instructions issued by the Office of the General Counsel for completing actions to be taken by the group service as a condition to the use of loan funds.

(b) Individual loans will be closed in accordance with the regulations applicable to Soil and Water Conservation loans to individuals including an opinion of title by the designated attorney if required by the Office of the General Counsel.

(c) The loan checks may be endorsed to one member of the group and deposited in a single supervised bank account subject to withdrawal on the signatures of the County Supervisor and a person designated by the group to sign checks.

354.8 354.9 354.10

recommenda

Later actions before loan approval. Loan approval and issuance of closing instructions and loan rejection. Actions between approval and closing of loan.

Loan closing.

Actions subsequent to loan closing. Loans to governmental or quasi-governmental organization.

AUTHORITY: §§ 354.1 to 354.10 issued under R. S. 161, sec. 6, 50 Stat. 870, sec. 10, 68 Stat. 735; 5 U. S. C. 22, 16 U. S. C. 590w, 590x-3. Interpret or apply secs. 2, 5, 50 Stat. 869, as amended, 870, sec. 9, 68 Stat. 735; 16 U. S. C. 590s, 590v, 590x-2.