PART 1950—GENERAL Subparts A-B [Reserved] Subpart C—Servicing Accounts of Borrowers Entering the Armed Forces Authority: 5 U.S.C. 301; 7 U.S.C. 1989; and 42 U.S.C. 1480. § 1950.101 Purpose. Borrowers with accounts serviced by the Rural Development who have entered or who are entering military service will require special treatment. This subpart prescribes the authorities, policies, and routines for servicing such cases in addition to those contained in other Rural Development regulations. This subpart is inapplicable to Farm Service Agency, Farm Loan Programs. [45 FR 43152, June 26, 1980, as amended at 72 FR 64122, Nov. 15, 2007; 80 FR 9890, Feb. 24, 2015] § 1950.102 General. (a) Rural Development will do everything possible to assist borrowers entering the armed forces to adjust their affairs in contemplation of military service. It is not the policy of Rural Development to renew, postpone, or modify annual installments due under a promissory note because of the borrower's entry into the armed services. However, under the Soldiers' and Sailors' Civil Relief Act of 1940, the property of a borrower in the armed forces cannot validly be seized or sold by foreclosure or otherwise during the borrower's tenure of service, or for three months thereafter, except (1) pursuant to an agreement entered into by the borrower after having been accepted for service, or (2) by order of the Court. Any person causing an invalid sale to be made is guilty of a misdemeanor. Regardless of the foregoing, the long-time interest of the borrower can best be served by prompt and satisfactory arrangements for the use and protection, or disposition, of the security property in accordance with the policies expressed herein. Upon request, OGC will inform the State Director with respect to relief which may be secured by a borrower under the Soldiers' and Sailors' Civil Relief Act of 1940. (b) In connection with Multiple Housing loans to individuals, references to County Supervisor and County Office in this subpart will be read as District Director and District Office. [50 FR 45763, Nov. 1, 1985, as amended at 80 FR 9890, Feb. 24, 2015] § 1950.103 Borrower owing Rural Development loans which are secured by chattels. (a) Policy. other than (2) Borrowers who owe FO, SW, RL, OL, EE, EM, SL, EO, and/or RHF loans. (b) Methods of handling. (1) Voluntary sale of security. This will be accomplished in accordance with § 1962.41 of subpart A of part 1962 of this chapter. Any necessary forms will be signed: (i) Before being accepted for service in the armed forces, if the sale is to be completed before the borrower is accepted for service, or (ii) After being accepted for service, if the sale cannot be completed before the borrower is so accepted. For this purpose, an individual will be considered as accepted for service after being ordered to report for induction, or, if in the enlisted reserve, after being ordered to report for service in the armed forces. (2) Assumption of indebtedness. This will be accomplished in accordance with § 1962.34 of subpart A of part 1962 of this chapter. (3) Arrangements with third persons. When the borrower arranges with a relative or other reliable person to maintain the security in a satisfactory manner and to make scheduled payments, the State Director is authorized to approve the arrangement. In such a case, the borrower will be required to execute a power of attorney, prepared or approved by OGC, authorizing an attorney-in-fact to act for the borrower during the latter's absence. (4) Possible legal actions. If the borrower fails or refuses to cooperate in the servicing of the loan indebtedness secured by chattels in accordance with one of the methods set forth in this section, the borrower's case folder will be forwarded to the State Director for referral to OGC for legal advice as to the steps to be taken in protecting the Government's interest. (c) Statements of accounts and transfers. [45 FR 43152, June 26, 1980, as amended at 50 FR 45763, Nov. 1, 1985; 52 FR 26133, July 13, 1987; 55 FR 40646, Oct. 4, 1990; 80 FR 9890, Feb. 24, 2015] § 1950.104 Borrower owing Rural Development loans which are secured by real estate. County Supervisors, to the greatest extent possible, should keep themselves informed of the plans of borrowers with Rural Development loans secured by real estate who may enter the armed forces. They should encourage any borrower who is definitely entering the armed forces to consult with them before the borrower's military service begins concerning the most advantageous arrangements that can be made regarding the security. County Supervisors will assist these borrowers in working out mutually satisfactory arrangements. Borrowers who owe FO, SW, RL, OL, EE, EM, SL, EO, ST, and/or RHF loans and who are delinquent or otherwise in default must be sent exhibit A and the appropriate attachments, as outlined in subpart S of part 1951 of this chapter. The County Supervisor will follow the directions in subpart A of part 1965 of this chapter for liquidating real estate security. FO, SW, RL, OL, EE, EM, SL, EO, ST and/or RHF borrowers who are not delinquent will have their accounts handled as set out in the following paragraphs. (a) Power of attorney. (b) Borrower retains ownership of the security. (1) Leasing. (2) Operation by family. (c) Borrower does not retain ownership of the security. (d) Borrower abandons the security or fails to make satisfactory arrangements. not (e) Statement of account. [45 FR 43152, June 26, 1980, as amended at 50 FR 45764, Nov. 1, 1985; 52 FR 26134, July 13, 1987; 55 FR 40646, Oct. 4, 1990; 80 FR 9890, Feb. 24, 2015] § 1950.105 Interest rate. (a) The Soldiers and Sailors Relief Act requires that the effective interest rate charged a borrower who enters active military duty after a loan is closed will not exceed 6 percent. This applies only to full-time active military duty and does not include military reserve status or National Guard participation. (b) As soon as the County Supervisor verifies that a borrower is on active duty, the County Supervisor will send the borrower a letter which states that the interest rate on the borrower's Rural Development loans will not exceed 6 percent. At the same time, the County Supervisor will send the Finance Office a memorandum which states that the borrower is on active duty and that interest of not more than 6 percent should accrue on the borrower's loans, effective as of the date of the memorandum or as of the date of the last payment, whichever is later, until further notice. If a borrower's interest rate on any loan is less than 6 percent, the loan will continue to accrue interest at the lower rate. The assistance under this section may not be retroactively applied. (c) As soon as the County Supervisor verifies that a borrower is no longer on active duty, the County Supervisor will send the Finance Office a memorandum advising them to terminate the 6 percent interest rate. The rate will revert to the note rate (or the payment assistance rate), effective with the next scheduled payment. The 6 percent interest rate will not be cancelled retroactively. (d) Additional directions for handling Single Family Housing Loans are contained in 7 CFR part 3550. [52 FR 26134, July 13, 1987, as amended at 60 FR 55122, Oct. 27, 1995; 67 FR 78329, Dec. 24, 2002; 80 FR 9890, Feb. 24, 2015]