7 U.S.C. § 1935 — Down payment loan program

Page 1100 TITLE 7—AGRICULTURE § 1934 the Housing Act of 1949 [42 U.S.C. 1487(a)(2)], (2) are made by other lenders approved by the Sec- retary to provide dwellings in rural areas for the applicants’ own use, and (3) bear interest and other charges at rates not above the maximum rates prescribed by the Secretary of Housing and Urban Development for loans made by private lenders for similar purposes and guaranteed by the Secretary of Housing and Urban Develop- ment under the National Housing Act [12 U.S.C. 1701 et seq.] or superseding legislation shall not be subject to sections 501(c) and 502(b)(3) of the Housing Act of 1949 [42 U.S.C. 1471(c) and 1472(b)(3)]. (b) For the purposes of title V of the Housing Act of 1949 [42 U.S.C. 1471 et seq.] or this chap- ter, a guarantee of payment given under the color of law by the Department of Hawaiian Home Lands (or its successor in function) shall be found by the Secretary reasonably to assure repayment of any indebtedness so guaranteed. (Pub. L. 87–128, title III, § 310C, as added Pub. L. 92–419, title I, § 119, Aug. 30, 1972, 86 Stat. 664; amended Pub. L. 101–624, title XVIII, § 1804, Nov. 28, 1990, 104 Stat. 3819.) Editorial Notes REFERENCES IN TEXT Section 517(a) of the Housing Act of 1949 [42 U.S.C. 1487(a)], referred to in subsec. (a), was amended by Pub. L. 98–181, title I [title V, § 514(a)(1)], Nov. 30, 1983, 98 Stat. 1247, and, as so amended, does not contain a par. (2). The National Housing Act, referred to in subsec. (a), is act June 27, 1934, ch. 847, 48 Stat. 1246, which is classi- fied principally to chapter 13 (§ 1701 et seq.) of Title 12, Banks and Banking. For complete classification of this Act to the Code, see References in Text note set out under section 1701 of Title 12 and Tables. Title V of the Housing Act of 1949, referred to in sub- sec. (b), is title V of act July 15, 1949, ch. 338, 63 Stat. 432, which is classified generally to subchapter III (§ 1471 et seq.) of chapter 8A of Title 42, The Public Health and Welfare. For complete classification of this Act to the Code, see References in Text note set out under section 1441 of Title 42 and Tables. This chapter, referred to in subsec. (b), was in the original ‘‘this title’’, meaning title III of Pub. L. 87–128, Aug. 8, 1961, 75 Stat. 307, known as the Consolidated Farm and Rural Development Act, which is classified principally to this chapter. For complete classification of title III to the Code, see Short Title note set out under section 1921 of this title and Tables. AMENDMENTS 1990—Subsec. (b). Pub. L. 101–624 substituted ‘‘or this chapter’’ for ‘‘, as amended’’. § 1934. Low-income farm ownership loan pro- gram; eligibility; repayment requirements (a) The Secretary is authorized to make and insure loans for any of the purposes referred to in section 1923(a) of this title, or paragraphs (1) through (5) of section 1924(a) of this title, to farmers and ranchers in the United States who (1) are citizens of the United States, (2) meet the requirements of paragraphs (2) through (4) of section 1922 of this title, (3) are unable to obtain sufficient credit under section 1922 of this title to finance their actual needs, (4) are owners or operators of small or family farms (including new owners or operators), (5) are farmers or ranchers with a low income, and (6) demonstrate a need to maximize their income from farming or ranching operations. The Secretary is also authorized to make such loans to any farm co- operative or private domestic corporation or partnership, or such other legal entities as the Secretary considers appropriate, that is con- trolled by farmers and ranchers and engaged pri- marily and directly in farming or ranching in the United States if all of its members, stock- holders, partners, or owners, as applicable, are citizens of the United States and the entity and all such members, stockholders, partners, or owners meet the requirements of paragraphs (2) through (6) of the preceding sentence. (b) Each loan made or insured under this sec- tion shall be repayable in such installments as the Secretary determines will provide for re- duced payments during the initial repayment period of the loan and larger payments during the remainder of the repayment period of the loan. (Pub. L. 87–128, title III, § 310D, as added Pub. L. 95–334, title I, § 113, Aug. 4, 1978, 92 Stat. 424; amended Pub. L. 101–624, title XVIII, § 1802(b), Nov. 28, 1990, 104 Stat. 3818; Pub. L. 102–552, title V, § 516(e)(1), Oct. 28, 1992, 106 Stat. 4137; Pub. L. 104–127, title VI, § 661(e), Apr. 4, 1996, 110 Stat. 1107; Pub. L. 113–79, title V, § 5001(c)(2), Feb. 7, 2014, 128 Stat. 833.) Editorial Notes AMENDMENTS 2014—Subsec. (a). Pub. L. 113–79 inserted ‘‘, or such other legal entities as the Secretary considers appro- priate,’’ after ‘‘partnership’’ and substituted ‘‘partners, or owners’’ for ‘‘or partners’’ in two places. 1996—Subsec. (a). Pub. L. 104–127 substituted ‘‘section 1923(a) of this title, or paragraphs (1) through (5) of sec- tion 1924(a) of this title’’ for ‘‘paragraphs (1) through (5) of section 1923(a) of this title, or subparagraphs (A) through (E) of section 1924(a)(1) of this title’’. 1992—Subsec. (a). Pub. L. 102–552 substituted ‘‘1924(a)(1)’’ for ‘‘1924(d)(1)’’. 1990—Subsec. (a). Pub. L. 101–624 substituted ‘‘para- graphs (1) through (5) of section 1923(a) of this title, or subparagraphs (A) through (E) of section 1924(d)(1) of this title,’’ for ‘‘clauses (1) through (5) of section 1923(a) of this title’’, substituted ‘‘paragraphs’’ for ‘‘clauses’’ before ‘‘(2) through (4) of section’’, made technical amendment to reference to section 1922 of this title which required no change in text, and substituted ‘‘paragraphs’’ for ‘‘clauses’’ before ‘‘(2) through (6) of the’’. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1992 AMENDMENT Pub. L. 102–552, title V, § 516(e)(2), Oct. 28, 1992, 106 Stat. 4137, provided that: ‘‘The amendment made by paragraph (1) of this subsection [amending this section] shall take effect at the same time as the amendments made by section 501(a) of the Food, Agriculture, Con- servation, and Trade Act Amendments of 1991 (Public Law 102–237; 105 Stat. 1865) [amending section 1924 of this title] took effect.’’ § 1935. Down payment loan program (a) In general (1) Establishment Notwithstanding any other section of this subchapter, the Secretary shall establish, Page 1101 TITLE 7—AGRICULTURE § 1935 1 So in original. within the farm ownership loan program es- tablished under this subchapter, a program under which loans shall be made under this section to eligible farmers or ranchers for down payments on farm ownership loans. (2) Administration The Secretary shall be the primary coordi- nator of credit supervision for the down pay- ment loan program established under this sec- tion, in consultation with the commercial or cooperative lender and, if applicable, the con- tracting credit counseling service selected under section 2006b(c) of this title. (b) Loan terms (1) Principal Each loan made under this section shall be in an amount that does not exceed 45 percent of the least of— (A) the purchase price of the farm or ranch to be acquired; (B) the appraised value of the farm or ranch to be acquired; or (C) $667,000. (2) Interest rate The interest rate on any loan made by the Secretary under this section shall be a rate equal to the greater of— (A) the difference obtained by subtracting 4 percent from the interest rate for farm ownership loans under this subchapter; or (B) 1.5 percent. (3) Duration Each loan under this section shall be made for a period of 20 years or less, at the option of the borrower. (4) Repayment Each borrower of a loan under this section shall repay the loan to the Secretary in equal annual installments. (5) Nature of retained security interest The Secretary shall retain an interest in each farm or ranch acquired with a loan made under this section that shall— (A) be secured by the farm or ranch; (B) be junior only to such interests in the farm or ranch as may be conveyed at the time of acquisition to the person (including a lender) from whom the borrower obtained a loan used to acquire the farm or ranch; and (C) require the borrower to obtain the per- mission of the Secretary before the borrower may grant an additional security interest in the farm or ranch. (c) Limitations (1) Borrowers required to make minimum down payment The Secretary shall not make a loan under this section to any borrower with respect to a farm or ranch if the contribution of the bor- rower to the down payment on the farm or ranch will be less than 5 percent of the pur- chase price of the farm or ranch. (2) Prohibited types of financing The Secretary shall not make a loan under this section with respect to a farm or ranch if the farm or ranch is to be acquired with other financing that contains any of the following conditions: (A) The financing is to be amortized over a period of less than 30 years. (B) A balloon payment will be due on the financing during the 20-year period begin- ning on the date the loan is to be made by the Secretary. (d) Administration In carrying out this section, the Secretary shall, to the maximum extent practicable— (1) facilitate the transfer of farms and ranches from retiring farmers and ranchers to persons eligible for insured loans under this subchapter; (2) make efforts to widely publicize the availability of loans under this section among— (A) potentially eligible farmers or ranch- ers; (B) retiring farmers and ranchers; and (C) applicants for farm ownership loans under this subchapter; (3) encourage retiring farmers and ranchers to assist in the sale of their farms and ranches to eligible farmers or ranchers by providing seller financing; (4) coordinate the loan program established by this section with State programs that pro- vide farm ownership or operating loans for— (A) beginning farmers or ranchers; (B) socially disadvantaged farmers or ranchers, as defined in section 2003(e) of this title; or (C) veteran farmers or ranchers, as defined in section 2279(a) of this title; and; and 1 (5) establish annual performance goals to promote the use of the down payment loan program and other joint financing arrange- ments as the preferred choice for direct real estate loans made by any lender to an eligible farmer or rancher. (e) Definition of eligible farmer or rancher In this section, the term ‘‘eligible farmer or rancher’’ means— (1) a qualified beginning farmer or rancher; (2) a socially disadvantaged farmer or ranch- er, as defined in section 2003(e) of this title; and (3) a veteran farmer or rancher, as defined in section 2279(a) of this title. (Pub. L. 87–128, title III, § 310E, as added Pub. L. 102–554, § 7(a), Oct. 28, 1992, 106 Stat. 4144; amend- ed Pub. L. 107–171, title V, § 5005, May 13, 2002, 116 Stat. 342; Pub. L. 110–234, title V, § 5004, May 22, 2008, 122 Stat. 1144; Pub. L. 110–246, § 4(a), title V, § 5004, June 18, 2008, 122 Stat. 1664, 1905; Pub. L. 113–79, title V, § 5005, Feb. 7, 2014, 128 Stat. 834; Pub. L. 115–334, title XII, § 12306(c), Dec. 20, 2018, 132 Stat. 4969.) Editorial Notes CODIFICATION Pub. L. 110–234 and Pub. L. 110–246 made identical amendments to this section. The amendments by Pub. Page 1102 TITLE 7—AGRICULTURE § 1936 L. 110–234 were repealed by section 4(a) of Pub. L. 110–246. AMENDMENTS 2018—Subsec. (a)(1). Pub. L. 115–334, § 12306(c)(1), sub- stituted ‘‘eligible farmers or ranchers’’ for ‘‘qualified beginning farmers or ranchers and socially disadvan- taged farmers or ranchers’’. Subsec. (d)(2)(A). Pub. L. 115–334, § 12306(c)(2)(A), sub- stituted ‘‘farmers or ranchers’’ for ‘‘recipients of the loans’’. Subsec. (d)(3). Pub. L. 115–334, § 12306(c)(2)(B), added par. (3) and struck out former par. (3) which read as fol- lows: ‘‘encourage retiring farmers and ranchers to as- sist in the sale of their farms and ranches to qualified beginning farmers and ranchers and socially disadvan- taged farmers or ranchers by providing seller financ- ing;’’. Subsec. (d)(4). Pub. L. 115–334, § 12306(c)(2)(C), sub- stituted ‘‘for—’’ for ‘‘for beginning farmers or ranchers or socially disadvantaged farmers or ranchers’’, added subpars. (A) and (B) and subpar. (C) designation, and in- serted ‘‘veteran farmers or ranchers, as defined in sec- tion 2279(a) of this title; and’’ before ‘‘; and’’ in subpar. (C). Subsec. (d)(5). Pub. L. 115–334, § 12306(c)(2)(D), sub- stituted ‘‘an eligible farmer or rancher’’ for ‘‘a quali- fied beginning farmer or rancher or socially disadvan- taged farmer or rancher’’. Subsec. (e). Pub. L. 115–334, § 12306(c)(3), added subsec. (e) and struck out former subsec. (e). Prior to amend- ment, text read as follows: ‘‘In this section, the term ‘socially disadvantaged farmer or rancher’ has the meaning given that term in section 2003(e)(2) of this title.’’ 2014—Subsec. (b)(1)(C). Pub. L. 113–79, § 5005(a), sub- stituted ‘‘$667,000’’ for ‘‘$500,000’’. Subsec. (b)(2). Pub. L. 113–79, § 5005(b), struck out sec- ond par. (2) which read as follows: ‘‘The interest rate on any loan made by the Secretary under this section shall be 4 percent.’’ 2008—Subsec. (a)(1). Pub. L. 110–246, § 5004(1), sub- stituted ‘‘or ranchers and socially disadvantaged farm- ers or ranchers’’ for ‘‘and ranchers’’. Subsec. (b)(1), (2). Pub. L. 110–246, § 5004(2)(A), added par. (1) and par. (2) consisting of subpars. (A) and (B) and struck out former par. (1). Prior to amendment, text of par. (1) read as follows: ‘‘Each loan made under this section shall be in an amount equal to 40 percent of the purchase price or appraisal value, whichever is lower, of the farm or ranch to be acquired, unless the borrower requests a lesser amount.’’ Subsec. (b)(3). Pub. L. 110–246, § 5004(2)(B), substituted ‘‘20’’ for ‘‘15’’. Subsec. (c)(1). Pub. L. 110–246, § 5004(3)(A), substituted ‘‘5’’ for ‘‘10’’. Subsec. (c)(2), (3). Pub. L. 110–246, § 5004(3)(B), (C), re- designated par. (3) as (2), in subpar. (B), substituted ‘‘20-year’’ for ‘‘15-year’’, and struck out former par. (2). Prior to amendment, text read as follows: ‘‘The Sec- retary shall not make a loan under this section with re- spect to a farm or ranch for which the purchase price or appraisal value, whichever is lower, exceeds $250,000.’’ Subsec. (d)(3). Pub. L. 110–246, § 5004(4)(A)(ii), struck out ‘‘and’’ at end. Pub. L. 110–246, § 5004(4)(A)(i), which directed the in- sertion of ‘‘and socially disadvantaged farmers or ranchers’’ after ‘‘ranchers’’, was executed by making the insertion after ‘‘ranchers’’ the second place it ap- peared to reflect the probable intent of Congress. Subsec. (d)(4). Pub. L. 110–246, § 5004(4)(B), substituted ‘‘or ranchers or socially disadvantaged farmers or ranchers; and’’ for ‘‘and ranchers.’’ Subsec. (d)(5). Pub. L. 110–246, § 5004(4)(C), added par. (5). Subsec. (e). Pub. L. 110–246, § 5004(5), added subsec. (e). 2002—Subsec. (b)(1). Pub. L. 107–171, § 5005(1)(A), sub- stituted ‘‘40 percent’’ for ‘‘30 percent’’. Subsec. (b)(3). Pub. L. 107–171, § 5005(1)(B), substituted ‘‘15 years’’ for ‘‘10 years’’. Subsec. (c)(3)(B). Pub. L. 107–171, § 5005(2), substituted ‘‘15-year’’ for ‘‘10-year’’. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2008 AMENDMENT Amendment of this section and repeal of Pub. L. 110–234 by Pub. L. 110–246 effective May 22, 2008, the date of enactment of Pub. L. 110–234, see section 4 of Pub. L. 110–246, set out as an Effective Date note under section 8701 of this title. § 1936. Beginning farmer or rancher and socially disadvantaged farmer or rancher contract land sales program (a) In general The Secretary shall, in accordance with this section, guarantee a loan made by a private sell- er of a farm or ranch to a qualified beginning farmer or rancher or socially disadvantaged farmer or rancher (as defined in section 2003(e)(2) of this title) on a contract land sales basis. (b) Eligibility In order to be eligible for a loan guarantee under subsection (a)— (1) the qualified beginning farmer or rancher or socially disadvantaged farmer or rancher shall— (A) on the date the contract land sale that is subject of the loan is complete, own and operate the farm or ranch that is the subject of the contract land sale; (B) have a credit history that— (i) includes a record of satisfactory debt repayment, as determined by the Sec- retary; and (ii) is acceptable to the Secretary; and (C) demonstrate to the Secretary that the farmer or rancher, as the case may be, is un- able to obtain sufficient credit without a guarantee to finance any actual need of the farmer or rancher, as the case may be, at a reasonable rate or term; and (2) the loan shall meet applicable under- writing criteria, as determined by the Sec- retary. (c) Limitations (1) Down payment The Secretary shall not provide a loan guar- antee under subsection (a) if the contribution of the qualified beginning farmer or rancher or socially disadvantaged farmer or rancher to the down payment for the farm or ranch that is the subject of the contract land sale would be less than 5 percent of the purchase price of the farm or ranch. (2) Maximum purchase price The Secretary shall not provide a loan guar- antee under subsection (a) if the purchase price or the appraisal value of the farm or ranch that is the subject of the contract land sale is greater than $500,000. (d) Period of guarantee The period during which a loan guarantee under this section is in effect shall be the 10- year period beginning with the date the guar- antee is provided.