PART 772—SERVICING MINOR PROGRAM LOANS Authority: 5 U.S.C. 301, 7 U.S.C. 1989, and 25 U.S.C. 490. Source: 68 FR 69949, Dec. 16, 2003, unless otherwise noted. § 772.1 Policy. (a) Purpose. (b) Appeals. § 772.2 Abbreviations and Definitions. (a) Abbreviations. AMP CFR FO FSA IMP OL USDA (b) Definitions. Association-Type Minor Program loans (AMP): Entity: Graduation: Individual-type Minor Program loans (IMP): Member: Minor Program: Review official: § 772.3 Compliance. (a) Requirements. (b) Reviews. (c) Frequency and timing. (d) Violations. § 772.4 Environmental requirements. Link to an amendment published at 91 FR 56775, Sept. 4, 2026. Servicing activities such as transfers, assumptions, subordinations, sale or exchange of security property, and leasing of security will be reviewed for compliance with 7 CFR part 799. [68 FR 69949, Dec. 16, 2003, as amended at 81 FR 51285, Aug. 3, 2016] § 772.5 Security maintenance. Link to an amendment published at 91 FR 56775, Sept. 4, 2026. (a) General. (b) Security inspection. (c) Violations. (1) For chattel security, service the account according to part 765 of this chapter. If any normal income security as defined in that subpart secures a Minor Program loan, the reporting, approval and release provisions in that subpart shall apply. (2) For real estate security for AMP loans, contact the Regional Office of General Counsel for advice on the appropriate servicing including liquidation if warranted. (3) For real estate security for IMP loans, service the account according to part 765 of this chapter. [68 FR 69949, Dec. 16, 2003, as amended at 78 FR 65541, Nov. 1, 2013] § 772.6 Subordination of security. Link to an amendment published at 91 FR 56775, Sept. 4, 2026. (a) Eligibility. (1) The loan will still be adequately secured after the subordination, or the value of the loan security will be increased by the amount of advances to be made under the terms of the subordination. (2) The borrower can document the ability to pay all debts including the new loan. (3) The action does not change the nature of the borrower's activities to the extent that they would no longer be eligible for a Minor Program loan. (4) The subordination is for a specific amount. (5) The borrower is unable, as determined by the Agency, to refinance its loan and graduate in accordance with this subpart. (6) The loan funds will not be used in such a way that will contribute to erosion of highly erodible land or conversion of wetlands for the production of an agricultural commodity according to part 799 of this chapter. (7) The borrower has not been convicted of planting, cultivating, growing, producing, harvesting or storing a controlled substance under Federal or state law. “Borrower,” for purposes of this subparagraph, specifically includes an individual or entity borrower and any member of an entity borrower. “Controlled substance,” for the purpose of this subparagraph, is defined at 21 CFR part 1308. The borrower will be ineligible for a subordination for the crop year in which the conviction occurred and the four succeeding crop years. An applicant must attest on the Agency application form that it, and its members if an entity, have not been convicted of such a crime. (b) Application. (1) The specific amount of debt for which a subordination is needed; (2) An appraisal prepared in accordance with § 761.7 of this chapter, if the request is for a subordination of more than $10,000, unless a sufficient appraisal report, as determined by the Agency, that is less than one year old, is on file with the Agency; and (3) Consent and subordination, as necessary, of all other creditors' security interests. [68 FR 69949, Dec. 16, 2003, as amended at 81 FR 51285, Aug. 3, 2016] § 772.7 Leasing minor program loan security. (a) Eligibility. (1) Leasing is the only feasible way to continue to operate the enterprise and is a customary practice; (2) The lease will not interfere with the purpose for which the loan was made; (3) The borrower retains ultimate responsibility for the operation, maintenance and management of the facility or service for its continued availability and use at reasonable rates and terms; (4) The lease prohibits amendments to the lease or subleasing arrangements without prior written approval from the Agency; (5) The lease terms provide that the Agency is a lienholder on the subject property and, as such, the lease is subordinate to the rights and claims of the Agency as lienholder; and (6) The lease is for less than 3 years and does not constitute a lease/purchase arrangement, unless the transfer and assumption provisions of this subpart are met. (b) Application. § 772.8 Sale or exchange of security property. Link to an amendment published at 91 FR 56775, Sept. 4, 2026. (a) For AMP loans. (1) Sale of all or a portion of the security property may be approved when all of the following conditions are met: (i) The property is sold for market value based on a current appraisal prepared in accordance with § 761.7 of this chapter. (ii) The sale will not prevent carrying out the original purpose of the loan. The borrower must execute an Assurance Agreement as prescribed by the Agency. The covenant involved will remain in effect as long as the property continues to be used for the same or similar purposes for which the loan was made. The instrument of conveyance will contain the following nondiscrimination covenant: The property described herein was obtained or improved with Federal financial assistance and is subject to the non-discrimination provisions of title VI of the Civil Rights Act of 1964, title IX of the Education Amendments of 1972, section 504 of the Rehabilitation Act of 1973, and other similarly worded Federal statutes, and the regulations issued pursuant thereto that prohibit discrimination on the basis of race, color, national origin, handicap, religion, age, or sex in programs or activities receiving Federal financial assistance. Such provisions apply for as long as the property continues to be used for the same or similar purposes for which the Federal assistance was extended, or for so long as the purchaser owns it, whichever is later. (iii) The remaining security for the loan is adequate or will not change after the transaction. (iv) Sale proceeds remaining after paying any reasonable and necessary selling expenses are applied to the Minor Program loan according to lien priority. (2) Exchange of all or a portion of security property for an AMP loan may be approved when: (i) The Agency will obtain a lien on the property acquired in the exchange; (ii) Property more suited to the borrower's needs related to the purposes of the loan is to be acquired in the exchange; (iii) The AMP loan will be as adequately secured after the transaction as before; and (iv) It is necessary to develop or enlarge the facility, improve the borrower's debt-paying ability, place the operation on a more sound financial basis or otherwise further the loan objectives and purposes, as determined by the Agency. (b) For IMP loans, a sale or exchange of real estate or chattel that is serving as security must be done as specified in part 765 of this chapter. [68 FR 69949, Dec. 16, 2003, as amended at 69 FR 18741, Apr. 8, 2004; 78 FR 65533, Nov. 1, 2013] § 772.9 Releases. (a) Security. (1) The debt is paid in full; (2) Security property is sold for market value and sale proceeds are received and applied to the borrower's creditors according to lien priority; or (3) An exchange in accordance with § 772.8 has been concluded. (b) Borrower liability. (c) Servicing of debt not satisfied through liquidation. [68 FR 69949, Dec. 16, 2003, as amended at 69 FR 7679, Feb. 19, 2004; 72 FR 64121, Nov. 15, 2007; 85 FR 36713, June 17, 2020] § 772.10 Transfer and assumption—AMP loans. (a) Eligibility. (1) The present borrower is unable or unwilling to accomplish the objectives of the loan; (2) The transfer will not harm the Government or adversely affect the Agency's security position; (3) The transferee will continue with the original purpose of the loan; (4) The transferee will assume an amount at least equal to the present market value of the loan security; (5) The transferee documents the ability to pay the AMP loan debt as provided in the assumption agreement and has the legal capacity to enter into the contract; (6) If there is a lien or judgment against the Agency security being transferred, the transferee is subject to such claims. The transferee must document the ability to repay the claims against the land; and (7) If the transfer is to one or more members of the borrower's organization and there is no new member, there must not be a loss to the Government. (b) Withdrawal. (1) The entire unpaid balance of the withdrawing member's share of the AMP loan must be assumed by the new member; (2) In accordance with the Association's governing articles, the required number of remaining members must agree to accept any new member; and (3) The transfer will not adversely affect collection of the AMP loan. (c) Requesting a transfer and assumption. (1) The written consent of any other lienholder, if applicable. (2) A current balance sheet and cash flow statement. (d) Terms. (e) Release of liability. (1) The full amount of the loan is assumed; or (2) Less than the full amount of the debt is assumed, and the balance remaining will be serviced in accordance with § 772.9(c). § 772.11 Transfer and assumption—IMP loans. Transfers and assumptions for IMP loans are processed in accordance with 7 CFR part 765. Any remaining transferor liability will be serviced in accordance with § 772.9(c) of this subpart. [68 FR 69949, Dec. 16, 2003, as amended at 72 FR 64121, Nov. 15, 2007] § 772.12 Graduation. (a) General. (b) Graduation reviews. (1) AMP loans shall be reviewed at least every two years. In the year to be reviewed, each borrower must submit, at a minimum, a year-end balance sheet and cash flow projection for the current year. (2) All IMP borrowers classified as “commercial” or “standard” by the agency must be reviewed at least every 2 years. In the year to be reviewed, each borrower must submit a year-end balance sheet, actual financial performance for the most recent year, and a projected budget for the current year. (c) Criteria. (1) Borrowers with IMP loans that are classified as “commercial” or “standard” must apply for private financing within 30 days from the date the borrower is notified of lender interest, if an application is required by the lender. For good cause, the Agency may grant the borrower a reasonable amount of additional time to apply for refinancing. (2) Borrowers with AMP loans will be considered for graduation at least every two years or more frequently if the Agency determines that the borrower's financial condition has significantly improved. [68 FR 69949, Dec. 16, 2003, as amended at 72 FR 64121, Nov. 15, 2007] § 772.13 Delinquent account servicing. (a) AMP loans. (b) IMP loans. [85 FR 36713, June 17, 2020] § 772.14 Reamortization of AMP loans. The Agency may approve reamortization of AMP loans provided: (a) There is no extension of the final maturity date of the loan; (b) No intervening lien exists on the security for the loan which would jeopardize the Government's security position; (c) If the account is delinquent, it cannot be brought current within one year and the borrower has presented a cash flow budget which demonstrates the ability to meet the proposed new payment schedule; and (d) If the account is current, the borrower will be unable to meet the annual loan payments due to circumstances beyond the borrower's control. § 772.15 Protective advances. (a) The Agency may approve, without regard to any loan or total indebtedness limitation, vouchers to pay costs, including insurance and real estate taxes, to preserve and protect the security, the lien, or the priority of the lien securing the debt owed to the Agency if the debt instrument provides that the Agency may voucher the account to protect its lien or security. (b) The Agency may pay protective advances only when it determines it to be in the Government's best financial interest. (c) Protective advances are immediately due and payable. § 772.16 Liquidation. When the Agency determines that continued servicing will not accomplish the objectives of the loan and the delinquency or financial distress cannot be cured by the options in § 772.13, or the loan is in non-monetary default, the borrower will be encouraged to dispose of the Agency security voluntarily through sale or transfer and assumption in accordance with this part. If such a transfer or voluntary sale is not carried out, the loan will be liquidated according to 7 CFR part 766. For AMP loans, appeal rights under 7 CFR part 11 are provided in the notice of acceleration. For IMP loans, appeal rights must be exhausted before acceleration, and the notice of acceleration is not appealable. [68 FR 69949, Dec. 16, 2003, as amended at 72 FR 64121, Nov. 15, 2007] § 772.17 Equal opportunity and non-discrimination requirements. With respect to any aspect of a credit transaction, the Agency will comply with the requirements of the Equal Credit Opportunity Act and the Department's civil rights policy in 7 CFR part 15d. [72 FR 64121, Nov. 15, 2007] § 772.18 Exception authority. Exceptions to any requirement in this subpart can be approved in individual cases by the Administrator if application of any requirement or failure to take action would adversely affect the Government's financial interest. Any exception must be consistent with the authorizing statute and other applicable laws.