Current through Register Vol. 54, No.43, October 26, 2024
Section 138a.7 - Conditions on interest deferrals(a) Interest deferrals shall continue for up to the first 3 years of a loan, except in the case of a loan for working capital when interest deferrals will be provided for only the first year of the loan.(b) The borrower shall fully reimburse the Department through the lender over a term not to exceed the length of the remaining term of the loan. Interest may not be charged on interest deferrals. The Secretary will specify the date on which the interest deferral payments will cease and the date on which repayments of interest deferred will commence.(c) An interest deferral will not be permitted as part of a general refinancing of a current loan from the lender to the borrower unless the current loan was made for a permissible use as set forth in § 138a.4 (relating to permissible uses of loan proceeds and maximum terms of loans) and one of the following exists: (1) The refinancing is necessary due to a natural disaster suffered by the borrower.(2) If it is needed to avoid the foreclosure of a mortgage on the borrower's farm, where the foreclosure is due to serious financial hardship not the fault of the borrower and the borrower has a reasonable prospect of resuming full payment of principle and interest on the farm mortgage.(3) The primary purpose of the refinancing is to facilitate the implementation of a business plan reasonably designed to improve the operating results of the borrower's family farm through substantial changes in the operations of the farm.(d) Interest deferrals may not be made on loans or portions of loans which exceed the dollar limitations in § 138a.6(a) (relating to condition of loan guarantees).(e) The lender shall hold adequate security or collateral on the interest deferred and shall collect the repayments of interest deferred on behalf of the Commonwealth according to a schedule agreed to by the Commonwealth and the lender. No less than a second lien position on assets and collateral may be taken to secure repayment, unless a lower position is necessary and is approved by the Secretary.(f) Interest deferrals may be granted for a working capital loan for up to 1 year. The borrower shall fully reimburse the Department through the lender for the amount of the interest deferred by a one time payment to be made on the last day of the 1 year loan.