La. Admin. Code tit. 7 § III-119

Current through Register Vol. 50, No. 11, November 20, 2024

Section III-119 - Required Terms and Conditions for Loans Funded with Proceeds of LAFA Bonds

A. The terms and conditions of each loan, except as required under this rule, shall be determined by the lender and the borrower, but are subject to LAFA approval prior to acceptance of the offer.

B. Each loan must be secured by a promissory note (the loan note) in the full principal amount of the loan and such other security as may be required by the lender.

C. The maximum loan term shall be the lesser of 30 years or 100 percent of the average reasonably expected economic life of personal property to be financed with the proceeds of the LAFA bond, using IRS Asset Depreciation Guidelines provided by LAFA in the loan terms schedule. The minimum average life of the bonds shall not be less than five years.

D. The agreement between lender and borrower must require payments sufficient to meet the debt service requirements of the bond (i.e., in principal and interest). The loan repayment schedule (amount and due date of each payment) must be approved by LAFA prior to acceptance of the offer.

E. The lender and the borrower will determine the rate of interest to be charged on the agricultural loan subject to §119 F, but such rate of interest must be approved by LAFA prior to acceptance of the offer. The interest rate agreed on by the lender and the borrower must be stated in the offer.

F. Interest rates on loans may be either fixed or variable.

1. A variable interest rate may not exceed 85 percent of the prime interest rate, as defined in §101:

a. on the date of disbursement of loan proceeds; or

b. on any subsequent date when the interest rate for the loan is established for a subsequent period.

2. Loans with fixed interest rates are subject to LAFA review and approval on a case-by-case basis and must comply with the goals of the program.

3. If a borrower defaults on a loan and the loan is repurchased by the lender, the interest rate for the loan may be increased in accordance with the terms and provisions of the loan note executed at origination of the loan.

4. The lender may impose interest on payments which are not timely made by the borrower, but only if the loan note provides therefor and only in accordance with provisions relative to late payments expressed in the loan note.

G. All loans must be prepayable in whole, without a prepayment penalty.

H. Loans may be assumed by a third party, with the prior approval of the lender, if:

1. in the opinion of nationally recognized bond counsel or special tax counsel, such assumption does not adversely affect the tax-exempt status of the LAFA bond; and

2. the third party assuming the loan meets the qualifications of a borrower as set forth in these regulations.

La. Admin. Code tit. 7, § III-119

Promulgated by the Department of Agriculture, Agricultural Finance Authority, LR 10:870 (November 1984).

AUTHORITY NOTE: Promulgated in accordance with R.S. 3:266, R.S. 3:270 and Section 103(b)(6) of the Internal Revenue Code of 1954, as amended.