RD 4279-5 Loan Note Guarantee

UNITED STATES DEPARTMENT OF AGRICULTURE
RURAL DEVELOPMENT

Form RD 4279-5
(Rev. 07-05)

LOAN NOTE GUARANTEE
(Business and Industry and Section 9006 Program)

7 CFR Part 4279
7 CFR Part 4280

Date of Note

County

State
Borrower

USDA Loan Identification Number

Lender

Lender's IRS Tax ID Number

Lender's Address

Principal Amount of Loan

$
0.00 which is

The guaranteed portion of the loan is $

(

%)

percent of loan principal. The principal amount of loan is evidenced by

notes (includes
bonds as appropriate) described below. The guaranteed portion of each note is indicated below. This instrument is attached to note
in the face amount of $
Lender's
Identifying Number

Face Amount

and is number
Percent of Total
Face Amount

$

TOTAL

$

of

%

0.00 100%

Amount Guaranteed

$

$

0.00

In consideration of the making of the subject loan by the above named Lender, the United States of America, acting through the United States
Department of Agriculture (''USDA''), pursuant to the Consolidated Farm and Rural Development Act (7 U.S.C. 1921 et seq), does hereby agree
that in accordance with and subject to the conditions and requirements herein, it will pay to:
A.

Any Holder 100 percent of any loss sustained by such Holder on the guaranteed portion and on interest due on such portion.

B.

The Lender the lesser of paragraph 1 or 2 below:
1.

Any loss sustained by such Lender on the guaranteed portion including:
a. Principal and interest indebtedness as evidenced by said notes or by assumption agreements, and
b. Principal and interest indebtedness on secured protective advances for protection and preservation of collateral made with
USDA's authorization, including but not limited to, advances for taxes, annual assessments, any ground rents, and hazard or flood
insurance premiums affecting the collateral, or
2. The guaranteed principal advanced to or assumed by the Borrower under said notes or assumption agreements and any interest
due thereon.
If USDA conducts the liquidation of the loan, loss occasioned to a Lender by accruing interest after the date USDA accepts
responsibility for liquidation will not be covered by this Loan Note Guarantee. If Lender conducts the liquidation of the loan, accruing
interest shall be covered by this Loan Note Guarantee to 30 days after liquidation of collateral when the lender conducts the liquidation
expeditiously in accordance with the liquidation plan approved by USDA.
Definition of Holder.
The Holder is the person or organization (''investor'') other than the Lender who owns all or part of the guaranteed portion of the loan with no
servicing responsibilities. Holders are prohibited from obtaining any parts of the guaranteed portion of the loan with proceeds from any
obligation, the interest on which is excludable from income, under section 103 of the Internal Revenue Code of 1954, as amended (IRC). When
the single note option is used and the Lender assigns a part of the guaranteed loan to an assignee, the assignee becomes a Holder only when
USDA receives notice and the transaction is completed through use of Form 4279-6, ''Assignment Guarantee Agreement.''

Definition of Lender.
The Lender is the person or organization making and servicing the loan which is guaranteed under the provisions of 7 C.F.R. part 4279
or C.F.R. part 4280, subpart B, as applicable . The Lender is also the party requesting a loan guarantee.

1.

CONDITIONS OF GUARANTEE
Loan Servicing.
Lender will be responsible for servicing the entire loan, and Lender will remain mortgagee and secured party of record not withstanding
the fact that another party may hold a portion of the loan. When multiple notes are used to evidence a loan, Lender will structure
repayments as provided in the loan agreement.

2.

Priorities.
The entire loan will be secured by the same security with equal lien priority for the guaranteed and unguaranteed portions of the loan.
The unguaranteed portion of the loan will not be paid first nor given any preference or priority over the guaranteed portion.
3.

Full Faith and Credit.
The Loan Note Guarantee constitutes an obligation supported by the full faith and credit of the United States and is incontestable
except for fraud or misrepresentation of which Lender or any Holder has actual knowledge at the time it became such Lender or Holder or
which Lender or any Holder participates in or condones. The guarantee will be unenforceable to the extent that any loss is occasioned by a
provision for interest on interest. In addition, the Loan Note Guarantee will be unenforceable by Lender to the extent any loss is occasioned
by the violation of usury laws, negligent servicing, or failure to obtain the required security regardless of the time at which USDA acquires
knowledge of the foregoing. Any losses occasioned will be unenforceable to the extent that loan funds are used for purposes other than
those specifically approved by USDA in its Conditional Commitment for Guarantee. Negligent servicing is defined as the failure to
perform those services which a reasonably prudent lender would perform in servicing (including liquidation) its own portfolio of loans that
are not guaranteed. The term includes not only the concept of a failure to act but also not acting in a timely manner or acting in a manner
contrary to the manner in which a reasonably prudent lender would act up to the time of loan maturity or until a final loss is paid.
4.

Rights and Liabilities.
The guarantee and right to require purchase will be directly enforceable by Holder notwithstanding any fraud or misrepresentation by
Lender or any unenforceability of this Loan Note Guarantee by Lender except for fraud or misrepresentation of which the Holder had actual
knowledge at the time it became the Holder or in which the Holder participates or condones. Nothing contained herein will constitute any
waiver by USDA of any rights it possesses against the Lender. Lender will be liable for and will promptly pay to USDA any payment made
by USDA to Holder which, if such Lender had held the guaranteed portion of the loan, USDA would not be required to make.
5.

Payments.
Lender will receive all payments of principal or interest, on account of the entire loan and will promptly remit to Holder its pro rata
share thereof determined according to its respective interest in the loan, less only Lender's servicing fee.

6.

Protective Advances.
Protective advances made by Lender pursuant to the regulations will be guaranteed against a percentage of loss to the same extent as
provided in this Loan Note Guarantee notwithstanding the guaranteed portion of the loan that is held by another.

7.

Repurchase by Lender.
The Lender has the option to repurchase the unpaid guaranteed portion of the loan from the Holder within 30 days of written demand by
the Holder when: (a) the borrower is in default not less than 60 days on principal or interest due on the loan or (b) the Lender has failed to
remit to the Holder its pro rata share of any payment made by the Borrower within 30 days of its receipt thereof. The repurchase by the
Lender will be for an amount equal to the unpaid guaranteed portion of principal and accrued interest less the Lender's servicing fee. The
Loan Note Guarantee will not cover the note interest to the Holder on the guaranteed loan accruing after 90 days from the date of the demand
letter to the Lender requesting the repurchase. Holder will concurrently send a copy of demand to USDA. The Lender will accept an
assignment without recourse from the Holder upon repurchase. The Lender is encouraged to repurchase the loan to facilitate the accounting
for funds, resolve the problem, and to permit the borrower to cure the default, where reasonable. The Lender will notify the Holder and
USDA of its decision.
8.

USDA Purchase.
If Lender does not repurchase as provided by paragraph 7 USDA will purchase from Holder the unpaid principal balance of the
guaranteed portion together with accrued interest to date of repurchase less Lender's servicing fee, within thirty (30) days after written
demand to USDA from Holder. The Loan Note Guarantee will not cover the note interest to the Holder on the guaranteed loans accruing
after 90 days from the date of the original demand letter of the Holder to the Lender requesting the repurchase. Such demand will include a
copy of the written demand made upon the Lender. The Holder or its duly authorized agent will also include evidence of its right to require
payment from USDA. Such evidence will consist of either the original of the Loan Note Guarantee properly endorsed to USDA or the
original of the Assignment Guarantee Agreement properly assigned to USDA without recourse including all rights, title, and interest in the
loan. USDA will be subrogated to all rights of Holder. The Holder will include in its demand the amount due including unpaid principal,
unpaid interest to date of demand and interest subsequently accruing from date of demand to proposed payment date. Unless otherwise
agreed to by USDA, such proposed payment will not be later than 30 days from the date of demand.

The USDA will promptly notify the Lender of its receipt of the Holder's demand for payment. The Lender will promptly provide the USDA
with the information necessary for USDA determination of the appropriate amount due the Holder. Any discrepancy between the amount
claimed by the Holder and the information submitted by the Lender must be resolved before payment will be approved. USDA will notify
both parties who must resolve the conflict before payment by USDA will be approved. Such conflict will suspend the running of the 30 day
payment requirement. Upon receipt of the appropriate information, USDA will review the demand for verification. After receiving the
demand, USDA will review the demand and remit the appropriate payment to the Holder.
9.

Lender's Obligations.
Lender consents to the purchase by USDA and agrees to furnish on request by USDA a current statement certified by an appropriate
authorized officer of the Lender of the unpaid principal and interest then owed by Borrowers on the loan and the amount then owed to any
Holder. Lender agrees that any purchase by USDA does not change, alter or modify any of the Lender's obligations to USDA arising from
said loan or guarantee nor does it waive any of USDA's rights against Lender, and that USDA will have the right to set-off against Lender
all rights inuring to USDA as the Holder of this instrument against USDA's obligation to Lender under the Loan Note Guarantee.
10. Repurchase by Lender for Servicing.
If, in the opinion of the Lender, repurchase of the guaranteed portion of the loan is necessary to adequately service the loan, the Holder will sell
the portion of the loan to the Lender for an amount equal to the unpaid principal and interest on such portion less Lender's servicing fee. The Loan
Note Guarantee will not cover the note interest to the Holder on the guaranteed loan accruing after 90 days from the date of the demand letter of the
Lender or USDA to the Holder requesting the Holder to tender its guaranteed portion.
a. The Lender will not repurchase from the Holder for arbitrage purposes or other purposes to further its own financial gain.
b. Any repurchase will only be made after the Lender obtains USDA written approval.
c. If the Lender does not repurchase the portion from the Holder, USDA at its option may purchase such guaranteed portions for
servicing purposes.
11. Custody of Unguaranteed Portion.
The Lender may retain, or sell the unguaranteed portion of the loan only through participation. Participation, as used in this instrument,
means the sale of an interest in the loan wherein the Lender retains the note, collateral securing the note, and all responsibility for loan
servicing and liquidation.
12. When Guarantee Terminates.
This Loan Note Guarantee will terminate automatically (a) upon full payment of the guaranteed loan; or (b) upon full payment of any
loss obligation hereunder; or (c) upon written notice from the Lender to USDA that the guarantee will terminate 30 days after the date of
notice, provided the Lender holds all of the guaranteed portion and the Loan Note Guarantee is returned to be cancelled by USDA.
13. Settlement.
The amount due under this instrument will be determined and paid as provided in the applicable USDA regulations in effect on the date
of settlement unless such regulations are in direct conflict with this agreement.
14. Notices.
All notices will be initiated through the USDA
for

(State) with mailing address at the day of this instrument:

UNITED STATES OF AMERICA
Department of Agriculture
By:

Title:
(Date)
Assumption Agreement by

Dated

Assumption Agreement by

Dated
Position 2

Form 4279-5 (07-05)