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vided prior approval in writing has first been obtained from the Administrator. Under no circumstances may the total of the original and supplemental loans made to a client exceed the maximum per farmstead previously fixed by the Secretary of Agriculture. The same documents will be required for a supplemental loan as for the original loan and they will be processed in the same manThe requirements for construction loans concerning deposit and expenditure of the proceeds of the loans will also apply. All documents incidental to the supplemental loan, that is, Loan Agreement, Note and Supplemental Lease and Purchase Contract must be prepared, executed and processed at the same time. The client will execute Form FSA-LE 171 (Supp. 1), Supplemental Lease and Purchase Contract, in the same number of copies as required for the original Contract. This Form will be a supplement to the original Lease and Purchase Contract but will combine the amount of the original and supplemental loans, and will further provide for single payments of principal and interest on the consolidated loans.* [A.O. 226, rev. 1, pars. 1, 2, 3 of Supp. 8, Apr. 22, 1938]

SUBPART-COLLECTION OF RURAL REHABILITATION LOANS

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303.136 General policies. If the circumstances are such that the borrower cannot repay in full on the due date, the borrower will provide satisfactory explanation and justification, and the county rural rehabilitation supervisor will transmit a report thereon, using the Forms prescribed in Administration Order 178 (Revision 1), March 18, 1937.

Each case of delinquency will be considered on its individual merits. Except in cases where prompt action is necessary to preserve the security held by, or otherwise to protect the interests of, the Farm Security Administration or state rural rehabilitation corporations, collection work shall follow the procedure prescribed in Administration Order 178 (Revision 1), March 18, 1937.

All ordinary means of collection shall be exhausted before legal proceedings shall be instituted.

No official of the Farm Security Administration shall take possession of or sell mortgaged property in case of default either with or without legal process except in accordance with the procedure formulated by the regional attorney.

No official of the Farm Security Administration shall institute legal proceedings to take possession of, or foreclose on, property mortgaged to the Farm Security Administration or to a State rural rehabilitation corporation which has transferred its assets. All such proceedings will be instituted by the appropriate United States attorney, after submission of the case to him, in the manner prescribed by Administration Order 178 (Revision 1), March 18, 1937.

No official of the Farm Security Administration shall threaten criminal proceedings for the purpose of facilitating the collection of any indebtedness due to the Farm Security Administration or a

3 "Rural rehabilitation loans" include loans to individuals for rural rehabilitation or for emergency rehabilitation needs.

*For statutory citation, see note to § 303.21.

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State rural rehabilitation corporation, notwithstanding the fact that a reasonable basis for criminal action in the particular case may exist. Nothing herein contained shall be understood to prevent the institution of criminal proceedings in accordance with the terms of Administration Order 178 (Revision 1), March 18, 1937, or prevent the compromise or adjustment of a criminal action in a manner permitted or authorized by local law.* [Pars. 2d, 2e, 2f, 2g, 2h, 2i, A.O. 178, rev. 1, Mar. 18, 1937]

303.137 Death of borrower. In the event of the death of the borrower where the surviving spouse or other heir has facilities adequate to continue the Farm and Home Management Plan, consideration will be given to continuing the loan program to such surviving spouse or heir.* [Par. 3c IV G (1), AO. 178, rev. 1, Mar. 18, 1937]

303.138 Sale of produce or other encumbered property. Clients whose sources of income are mortgaged, may dispose of such produce or property to obtain proceeds to apply on their loans, in accordance with 88 303.155–303.160 through the use of Form FSA-LE 90, Application for Release of Mortgaged Property.* [Par. 3c, IV H (1), A.O. 178, rev. 1, Mar. 18, 1937, as amended by par. 1j of Supp. 1, July 24, 1937]

303.139 Final settlement, cancelation and surrender of rates. When it is determined that a note has been paid in full, including all interest due thereon, plus all charges, such note will be turned over to the regional director, or his delegatee, who will effect the cancelation and surrender of notes and other related documents, in accordance with local law.* [Par. 3c IV K (2), A.O. 178, rev. 1, Mar. 18, 1937, as amended by par. 1k of Supp. 1, July 24, 1937]

303.140 Administrative authorization. In regard to loans made by both the Farm Security Administration and by state rural rehabilitation corporations, whether before or after a transfer of assets, regional directors are authorized to execute all documents necessary or appropriate in collecting such loans, in repossessing, foreclosing and disposing of personal property, including growing crops, on which a chattel mortgage or other lien has been taken, and in providing for the care of such property pending its ultimate disposition by the mortgagee; and they are further authorized to perform all such other acts as are necessary or appropriate in the proper execution of the policies and procedures prescribed in Administration Order 178 (Revision 1), March 18, 1937. [Par. 7a, A.O. 178, rev. 1, Mar. 18, 1937]

303.141 Delegation of authority. (a) Each Farm Security Administration official hereinafter specified is authorized to receive delegation of the authority, or part thereof, given to regional directors in Administration Order 178 (Revision 1), March 18, 1937, and, if such authority or part thereof, is delegated to him, may in turn delegate it to his immediate subordinate or subordinates; provided, however, that authority to compromise, adjust or settle corporation claims may be delegated only to assistant regional directors in charge of rural rehabilitation, regional collection advisers, regional custodians and regional chiefs of Loan and Collections secPage 38

*For statutory citation, see note to § 303.21.

tions; and Provided further That county rural rehabilitation supervisors are not authorized to delegate authority to their subordinates except as specifically permitted by paragraph (d). The specified Farm Security Administration officials are: Assistant regional director in charge of rural rehabilitation, regional collection advisers, regional chief of Loan and Collections section (loan officer), loan approval adviser (loan adviser), assistant loan approval advisers (assistant loan advisers), State rural rehabilitation directors, district rural rehabilitation supervisors and county rural rehabilitation supervisors.

(b) All delegation of authority made hereunder must be made in writing, designating the name, title and address of the delegatee, and specifying the authority granted, and the same will be made a matter of record in the office of the regional director and the regional Finance and Control manager.

(c) All authority hereafter delegated, under the provisions of this subpart will be exercised by delegatees subject to the limitations and conditions contained in Administration Order 178 (Revision 1), March 18, 1937, and in other applicable orders and instructions.

(d) County rural rehabilitation supervisors are authorized to act as collection agents for the Farm Security Administration for the collection of all rural rehabilitation loans and all corporation loans, and to issue and sign receipts therefor on Form FSA-FI 37, Temporary Receipt. County rural rehabilitation supervisors are further authorized to delegate this authority to assistant county rural rehabilitation supervisors, to county home supervisors and to their office secretaries. When authority to act as collection agent for the Farm Security Administration is delegated, the customary surety bond will be required.* [Par. 7b, A.O. 178, rev. 1, Mar. 18, 1937, as amended by pars. 1ff, 1gg, 1hh, Supp. 1, July 24, 1937]

SUBPART-RELEASE OF PROPERTY SUBJECT TO A LIEN

303.155 Purpose. This subpart prescribes the procedure to be followed and the terms and conditions upon which property subject to a lien to the Farm Security Administration, United States Department of Agriculture, or a State rural rehabilitation corporation may be released in whole or in part when the indebtedness secured by such a lien has not been fully repaid." [Par. 1, A.O. 161, rev. 1, Oct. 8, 1937, 2 F.R. 2168]

303.156 Definition. The term mortgage as used herein will mean a chattel mortgage, chattel deed of trust, conditional sales contract, crop mortgage, crop lien, or other similar instrument, except a mortgage on real property, given to secure a loan made by the Farm Security Administration, United States Department of Agriculture, or a State rural rehabilitation corporation." [Par. 2, A.O. 161, rev. 1, Oct. 8, 1937, 2 F.R. 2168]

303.157 Conditions upon which property may be released. Mortgaged property, or any part thereof, may be released from the lien of such mortgage to accomplish any of the purposes set forth under 303.158 (a) and (b) of this subpart in order to further

*For statutory citation, see note to § 303.21.

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the rehabilitation of the client: Provided, That such a release will not jeopardize the ultimate collection of the loan; the same is permitted by the laws of the state in which the property is situated; and the accomplishment of the said purpose will not render the mortgage void by reason of the law of the State where the property is situated. Mortgaged property, or any part thereof, may be released from the lien of such mortgage to accomplish the purposes set forth in § 303.158 (c): Provided, That such a release will not jeopardize the lien held by the Farm Security Administration or a state rural rehabilitation corporation on any property which has at the time of the release not as yet been released for the accomplishment of the purposes set forth in § 303.158 (c), and the same is permitted by the laws of the State in which the property is situated.

No property will be released from the lien of a mortgage when the indebtedness secured by such a lien has not been fully repaid, except subject to the terms and conditions of this subpart and any supplement, revision, or modification thereto.* [Par. 3, A.O. 161, rev. 1, Oct. 8, 1937, 2 F.R. 2168]

303.158 Purposes for which property may be released. (a) Mortgaged property, or any part thereof, may be released from the lien of a mortgage in order to further the rehabilitation of the client, by enabling the client:

(1) To sell the property, or such part thereof, as will be released from the lien of the mortgage and to apply the proceeds in payment of the indebtedness secured by the mortgage. (Release of property for this purpose contemplates the normal sale of such property in connection with farming operations and is to be distinguished from release of property contemplated in paragraph (c) of this section for the purpose of liquidating a client's indebtedness.)

(2) To sell the property, or such part thereof as will be released from the lien of the mortgage, and to apply the proceeds of such sale to the purchase of other property which will be more suitable to his needs and will assist in his rehabilitation, Provided: That the new property to be purchased is inspected by the county rural rehabilitation supervisor or district rural rehabilitation supervisor, and found to be suitable to the client's needs; that any excess of proceeds of sale above the cost of the new property be transmitted immediately and applied to the indebtedness; and that such new property is made subject to a first mortgage executed and delivered to the United States of America or to the state rural rehabilitation corporation.

(3) To exchange the property, or such part thereof as will be released from the lien of the mortgage, for other property which will be more suitable to his needs and will more adequately contribute in his rehabilitation, Provided: That the property for which exchange is to be made is inspected by the county rural rehabilitation supervisor or district rural rehabilitation supervisor and found to be suitable to the client's needs; that any cash remitted by the new owner be transmitted immediately and applied to the indebtedness; and that such new property is made subject to a first mortgage executed and delivered to the United States of America or to the state rural rehabilitation corporation.

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*For statutory citation, see note to § 303.21.

(4) To sell the property, or such part thereof, as will be released from the lien of the mortgage, to meet farming or harvesting expenses when such expenses are determined by the county rural rehabilitation supervisor to be justifiable and proper.

(5) To use, sell, or exchange property, or such part thereof, as will be released from the lien of the mortgage, to meet subsistence and emergency needs of the debtor and his family, when such expenses are determined by the county rural rehabilitation supervisor to be justifiable and proper.

(6) To sell the property, or such part thereof as will be released from the lien of the mortgage, to preserve the remainder of the mortgaged property or other mortgaged property from deterioration or spoilage.

(b) Crops, livestock products, and other farm products may be released from a lien:

(1) When, at seasonable time, crops, livestock products, and other farm products are to be marketed and the proceeds of such sales are to be applied as a payment on the client's indebtedness.

(2) When the instalment of indebtedness due to the Farm Security Administration, United States Department of Agriculture, or to the state rural rehabilitation corporation during the year in which a crop matures or agricultural products are ready for market has been paid, such crops or agricultural products may be released from the lien of the mortgage to enable the client to sell and apply the proceeds of such sale to the expenditures contemplated in the approved farm plan of the client.

(3) To sell crops, livestock products, or other farm products for the purpose of meeting justifiable expenses which were contemplated in the farm plan.

(c) Mortgaged property or any part thereof may be released from the lien of said mortgage for liquidation of the client's account by enabling him to sell the property or such part thereof as will be released from the lien of the mortgage pursuant to this Subpart and to apply the proceeds in payment of his indebtedness to the Farm Security Administration, United States Department of Agriculture, or to the State rural rehabilitation corporation.* [Par. 4, A.O. 161, rev. 1, Oct. 8, 1937, 2 F.R. 2168]

303.159 Application for release. Any debtor may apply for a release of mortgaged property, or any part thereof, by applying to the county rural rehabilitation supervisor, and filling out Form FSA-LE 90, Application for Release of Mortgaged Property, in triplicate where the authority to execute a release has not been delegated to the State rural rehabilitation director or district rural rehabilitation supervisor, and in quadruplicate where such authority to execute releases has been delegated to these officers.

After filling in his recommendations, as provided in the Application form, the county rural rehabilitation supervisor will (if unauthorized to execute the release) forward the original of the Application form to the regional office (where the authority to execute the release has not been delegated to the State rural rehabilitation director or district rural rehabilitation supervisor) or forward the one

*For statutory citation, see note to § 303.21.

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