[Code of Federal Regulations]

[Title 12, Volume 6]

[Revised as of January 1, 2006]

From the U.S. Government Printing Office via GPO Access

[CITE: 12CFR616.6100]



[Page 199-200]

 

                       TITLE 12--BANKS AND BANKING

 

                 CHAPTER VI--FARM CREDIT ADMINISTRATION

 

PART 616_LEASING--Table of Contents

 

Sec. 616.6100  Purchase and sale of interests in leases.



    (a) Authority to buy interests in leases. A Farm Credit System 

institution may buy leases and interests in leases.

    (b) Policies. Each Farm Credit System institution that sells or buys 

interests in leases must do so only under a policy adopted by its board 

of directors that addresses the following:

    (1) The types of leases in which the institution may buy or sell an 

interest and the types of interests which may be bought or sold;

    (2) The underwriting standards for the purchase of interests in 

leases;

    (3) Such limits on the aggregate lease payments and residual amount 

of interests in leases that the institution may buy from a single 

institution as are necessary to diversify risk, and such limits on the 

aggregate amounts the institution may buy from all institutions as are 

necessary to assure that service to the territory is not impeded;

    (4) Identification and reporting of leases in which interests are 

sold or bought;

    (5) Requirements for securing from the selling lessor in a timely 

manner adequate financial and other information about the lessee needed 

to make an independent judgment; and

    (6) Any limits or conditions to which sales or purchases are subject 

that the board considers appropriate, including arbitration.

    (c) Purchase and sale agreements. Each agreement to buy or sell an 

interest in a lease must, at a minimum:

    (1) Identify the particular lease(s) to be covered by the agreement;

    (2) Provide for the transfer of lessee information on a timely and 

continuing basis;

    (3) Identify the nature of the interest(s) sold or bought;



[[Page 200]]



    (4) Specify the rights and obligations of the parties and the terms 

and conditions of the sale;

    (5) Contain any terms necessary for the appropriate administration 

of the lease, including lease servicing and monitoring of the servicer 

and authorization and conditions for action in the event of lessee 

distress or default;

    (6) Provide for a method of resolution of disagreements arising 

under the agreement;

    (7) Specify whether the contract is assignable by either party; and

    (8) In the case of lease transactions through agents, comply with 

Sec. 614.4325(h) of this chapter, reading the term ``lease'' or 

``leases'' in place of the term ``loan'' or ``loans,'' as applicable.

    (d) Independent judgment. Each institution that buys an interest in 

a lease must make a judgment on the payment ability of the lessee that 

is independent of the originating or lead lessor and any intermediary 

seller or broker. This must occur before the purchase of the interest 

and before any servicing action that alters the terms of the original 

agreement. The institution must not delegate such judgment to any 

person(s) not employed by the institution. A Farm Credit System 

institution that buys a lease or any interest in a lease may use 

information, such as appraisals or inspections, provided by the 

originating or lead lessor, or any intermediary seller or broker; 

however, the buying Farm Credit System institution must independently 

evaluate such information when exercising its judgment. The independent 

judgment must be documented by a payment analysis that considers factors 

set forth in Sec. 616.6300. The payment analysis must consider such 

financial and other lessee information as would be required by a prudent 

lessor and must include an evaluation of the capacity and reliability of 

the servicer. Boards of directors of jointly managed institutions must 

adopt procedures to ensure the interests of their respective 

shareholders are protected in participation between such institutions.

    (e) Sales with recourse. When a lease or interest in a lease is sold 

with recourse:

    (1) For the purpose of determining the lending and leasing limit in 

subpart J of part 614 of this chapter, the lease must be considered, to 

the extent of the recourse or guaranty, a lease by the buyer to the 

seller, and in addition, the seller must aggregate the lease with other 

obligations of the lessee; and

    (2) The lease subject to the recourse agreement must be considered 

an asset sold with recourse for the purpose of computing capital ratios.

    (f) Similar entity lease transactions. The provisions of Sec. 

613.3300 of this chapter that apply to interests in loans made to 

similar entities apply to interests in leases made to similar entities. 

In applying these provisions, the term ``loan'' shall be read to include 

the term ``lease'' and the term ``principal amount'' shall be read to 

include the term ``lease amount.''