La. Admin. Code tit. 7 § III-123

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

Section III-123 - Program Description; Procedures Required for Funding of Loans with LAFA Bond Proceeds

A. Loan applicants (i.e., borrowers) will initially apply for a loan to a participating lender and must be approved by the lender. Borrowers must meet all eligibility criteria established by these regulations and by individual lenders for conventional agricultural loans.

B. After a lender approves a borrower for a loan, the lender will apply to LAFA for a determination of the project's eligibility for tax-exempt bond proceeds and, if the project is approved by LAFA, for issuance of a bond. To apply for LAFA approval of a loan, the lender shall submit the following documents to LAFA, each to be submitted on the form provided by LAFA in fully-executed form:

1. the offer, to be executed by the lender, which must contain the lender's commitment to originate a loan to each eligible borrower;

2. the loan terms schedule, which must specify the principal amount, the interest rate, and the amortization schedule of the loan to be funded;

3. the borrower's certificate, to be executed by the borrower;

4. a letter from lender's credit or loan committee or an authorized officer that lender has completed a satisfactory review of each borrower's credit-worthiness; and

5. the borrower's application fee, payable to LAFA.

C. After submission of the above documents to LAFA, the lender may issue a commitment to fund the loan, but lender's commitment shall in no way represent a commitment by LAFA to issue bonds or cause any specific loan to be funded.

D. Upon receipt of the lender's offer, LAFA will officially accept or reject the offer. Upon acceptance of the offer, LAFA will adopt a resolution stating its intention to issue the bond (the intent resolution), a copy of which shall be provided to lender and conduct the hearing required under TEFRA prior to issuing the bond.

E. No lender may permit interim financing prior to receipt of written notification of LAFA's acceptance of the offer and adoption of the intent resolution. Funding a loan prior to LAFA approval of the offer and adoption of the intent resolution may disqualify the borrower and jeopardize the tax-exempt status of the bonds.

F. LAFA will signify acceptance of the offer by signature of an authorized LAFA representative in the acceptance section of the offer. Upon receipt of written notification of LAFA's approval of the offer and adoption of the intent resolution, the lender may originate the loan. However, any funding of a loan by a lender prior to delivery of the bond is strictly at lender's risk, there being no assurance by LAFA that bond proceeds will be sufficient to fund any or all such loans.

G. From time to time, as the demand warrants and at LAFA's sole discretion, LAFA will issue and deliver bonds, pursuant to a bond resolution, to the lender. The proceeds from sale of the bond will be deposited with and invested by the trustee in accordance with the bond resolution prior to the purchase of the loan from the lender.

H. During the origination period after delivery of the bond, the lender shall:

1. originate the loan; and

2. sell the loan to LAFA. To help defray the costs of issuing the bonds, each loan will be funded to the borrower and purchased by LAFA in an amount equal to 97.5 percent of the original principal amount of the loan (i.e., principal amount less the cost of issue fee). If the lender fails to originate and sell the loan prior to expiration of the origination period, LAFA will redeem the bond held by lender at 97.5 percent of the outstanding principal amount of the bond plus any accrued interest thereon.

I. Prior to the loan closing, the lender must enter into a loan purchase agreement with LAFA, whereby the lender must agree in addition to other provisions to repurchase the loan in the event of default on the loan by the borrower.

J. No later than 15 days prior to the date scheduled for each loan closing, the lender must deliver the loan file to the trustee consisting of the following instruments in the form required by LAFA:

1. the loan purchase agreement, executed by the lender;

2. a copy of the executed loan submission voucher (Exhibit A attached to agreement), which shall request the purchase of the loan by LAFA at a price equal to 97.5 percent of the principal amount of the loan;

3. an executed opinion of lender's counsel (Exhibit B attached to the agreement), to be dated the date of the bond closing;

4. a copy of the executed officer's closing certificate (Exhibit C attached to agreement), to be dated the date of the loan closing;

5. a copy of the executed loan note, post-dated to loan closing date;

6. a certified or other copy of the mortgage or other evidence of security (the mortgage) securing the borrower's obligations under the loan note, if any, showing recordation information;

7. an executed certificate of economic life; and

8. an executed assignment of loan note (Exhibit D attached to the agreement), to be dated the date of loan closing.

K. The trustee shall review the loan file solely to determine:

1. whether the loan file contains all required documents; and

2. whether such documents relate to the loan identified in the offer. The trustee is not required to make any further examination of any document in any loan file. The trustee shall notify LAFA and the lender of its approval of the documents in the loan file prior to the date scheduled for closing the loan.

L. Subsequent to issuance of a bond, the loan purchase agreement may not be amended, changed, modified, altered, or terminated without the written consent of LAFA and the bondholder.

M. If any provisions of the loan purchase agreement is breached by either party and thereafter waived by the other party, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other provisions of the loan purchase agreement.

N. Simultaneously with the closing of the loan, or at such other time as the trustee and the lender may mutually agree upon, the lender shall sell and LAFA shall purchase the loan. Under the required loan purchase agreement, the lender will service the loan.

O. If a lender fails to maintain its eligibility under the program after the issue and delivery of the bond, but before sale of the loan to LAFA, LAFA will redeem the bond held by the lender in an amount equal to 97.5 percent of the aggregate principal amount of the bond plus any accrued interest thereon.

P. Upon default on a loan and repurchase of the loan pursuant to the provisions of the loan purchase agreement, the corresponding bond shall be redeemed by LAFA at 100 percent of the outstanding principal amount thereof together with any accrued interest thereon.

La. Admin. Code tit. 7, § III-123

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.