[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: 12CFR617.7015]



[Page 204]

 

                       TITLE 12--BANKS AND BANKING

 

                 CHAPTER VI--FARM CREDIT ADMINISTRATION

 

PART 617_BORROWER RIGHTS--Table of Contents

 

                            Subpart A_General

 

Sec. 617.7015  What happens to borrower rights when a loan is sold?



    (a) What happens when a qualified lender sells a loan to another 

qualified lender? A loan made by a qualified lender and subsequently 

sold, in whole or in part, to another qualified lender is subject to the 

borrower rights provisions of title IV of the Act.

    (b) What happens when a qualified lender sells a loan into the 

secondary market?

    (1) Except as provided in paragraph (b)(2) of this section, the 

borrower rights provisions of sections 4.14, 4.14A, 4.14B, 4.14C, 4.14D, 

and 4.36 of the Act do not apply to a loan made on or after February 10, 

1996, and designated for sale into a secondary market at the time the 

loan was made.

    (2) Borrower rights apply to a loan designated for sale under 

paragraph (b)(1) of this section but not sold into a secondary market 

during the 180-day period that begins on the date of designation. The 

provisions of paragraph (b)(1) of this section will subsequently apply 

on the date of sale if the loan is later sold into a secondary market.

    (c) What happens when a qualified lender sells a loan to a 

nonqualified lender?

    (1) Except for loans sold to another qualified lender or designated 

for sale into a secondary market, a qualified lender must comply with 

one of the following requirements before selling a loan or interest in a 

loan subject to borrower rights:

    (i) The qualified lender and borrower must agree to include 

provisions in the loan contract with the borrower, or a written 

modification thereto, that ensure that the buyer of the loan will be 

obligated to provide the borrower the same rights a qualified lender 

must provide; or

    (ii) The qualified lender must obtain from the borrower a signed 

written consent to the sale, which clearly states the borrower waives 

statutory borrower rights.

    (2) Before the qualified lender obtains the borrower's consent to 

the sale of the loan and the waiver of borrower rights under paragraph 

(c)(1)(ii) of this section, the qualified lender must disclose in 

writing to the borrower:

    (i) A complete description of the statutory rights the borrower will 

waive;

    (ii) Any changes in the loan terms or conditions that will occur if 

the qualified lender does not sell the loan;

    (iii) That waiving borrower rights will not become effective unless 

the qualified lender sells the loan; and

    (iv) That borrower rights will become effective again if any 

qualified lender repurchases the loan or any interest in the loan.

    (3) The consent to the loan sale and waiver of borrower rights shall 

have no effect until the qualified lender sells the loan. Borrower 

rights become effective again if any qualified lender repurchases the 

loan or any interest in the loan.

    (4) A qualified lender may not make a loan conditioned on the 

borrower consenting to the loan's sale and a waiver of borrower rights.