7 USC 1935 – Down payment loan program
(a) In general
(1) Establishment
Notwithstanding any other section of this subchapter, the Secretary shall establish, within the farm ownership loan program established 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 coordinator of credit supervision for the down payment loan program established under this section, in consultation with the commercial or cooperative lender and, if applicable, the contracting 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 permission 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 borrower to the down payment on the farm or ranch will be less than 5 percent of the purchase 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 beginning 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 ranchers;
(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 provide 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 arrangements 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
Terms Used In 7 USC 1935
- beginning farmer or rancher: means such term as defined by the Secretary. See 7 USC 1991
- borrower: means any farm borrower who has outstanding obligations to the Secretary under any farmer program loan, without regard to whether the loan has been accelerated, but does not include any farm borrower all of whose loans and accounts have been foreclosed on or liquidated, voluntarily or otherwise. See 7 USC 1991
- farmer: includes a person who is engaged in, or who, with assistance afforded under this chapter, intends to engage in, fish farming. See 7 USC 1991
- Interest rate: The amount paid by a borrower to a lender in exchange for the use of the lender's money for a certain period of time. Interest is paid on loans or on debt instruments, such as notes or bonds, either at regular intervals or as part of a lump sum payment when the issue matures. Source: OCC
- State: shall include each of the several States, the Commonwealth of Puerto Rico, the Virgin Islands of the United States, Guam, American Samoa, the Commonwealth of the Northern Mariana Islands, and, to the extent the Secretary determines it to be feasible and appropriate, the Trust Territory of the Pacific Islands. See 7 USC 1991
In this section, the term “eligible farmer or rancher” means—
(1) a qualified beginning farmer or rancher;
(2) a socially disadvantaged farmer or rancher, 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.