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copy to the regional office and the original to such superior officer (state rural rehabilitation director or district rural rehabilitation supervisor) as has been authorized to execute the release. One copy will be given to the client and the remaining copy will be retained by the county rural rehabilitation supervisor. If the county rural rehabilitation supervisor is authorized to execute the release, he will prepare and execute the same and dispose of the various copies in accordance with § 303.160 (d).* [Par. 5, A.O. 161, rev. 1, Oct. 8, 1937, 2 F.R. 2169]

303.160 Execution of release form and delegation of authority to execute the same. (a) All releases must be in writing, in a form approved by the Office of the Solicitor. No form will be used for any of the purposes set forth in § 303.158 unless the regional attorney has approved in writing the use of said form for such purposes in the state concerned.

(b) Regional directors are authorized to execute releases as agents of the Secretary of Agriculture, or as agents of the Administrator of the Farm Security Administration, or as agents of the Farm Security Administration for the purposes and subject to the terms and conditions set forth in this subpart. Such authority may be delegated to assistant regional directors in charge of rural rehabilitation, who may in turn redelegate to regional collection advisers or chiefs of the regional Loan and Collections section, loan approval advisers, state rural rehabilitation directors, and district rural rehabilitation supervisors.

(c) Regional directors may delegate and assistant regional directors in charge of rural rehabilitation, state rural rehabilitation directors, and district rural rehabilitation supervisors may redelegate authority to execute releases for the purposes set forth in § 303.158 (a) (1), (b) (1), and (b) (2), to county rural rehabilitation supervisors.

(d) If the regional director or other officer to whom the authority to execute releases has been delegated, or redelegated, using the information contained in the Application for Release and such other information as he may have in his office, is satisfied that, in accordance with the terms and conditions set forth in this subpart, the property, or any part thereof, should be released, he will prepare in quintuple and execute the original and one copy of a release form (as approved for the State), for the release of part or all of the mortgaged property. The original, the executed copy, and one other copy will be forwarded directly to the county rural rehabilitation supervisor in charge. The fourth copy of the release form must be forwarded on the day of execution, together with the appropriate copy of the Application for Release, to the regional Loan and Collections section to be filed with the mortgage, and the fifth copy of the release will be forwarded to the district rural rehabilitation supervisor. The original and two copies forwarded to the county rural rehabilitation supervisor will be used as follows: Original signed copy will be recorded or filed if in the opinion of the regional attorney the local law requires the mortgagee to record or file releases. If in the opinion of the regional attorney the local law does not require the mortgagee to record or file releases, the original copy will be delivered to the

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*For statutory citation, see note to § 303.21.

client, and the unsigned copy will be placed in the files of the county rural rehabilitation supervisor. Nothing contained in this paragraph shall be construed to prevent any official of the Farm Security Administration from withholding the delivery of a release in order to assure the use of the released property for the purposes intended. The regional director will consult the regional attorney as to the matters set forth in paragraph (a) of this section, and as to all matters of local law required to be decided by this subpart including the necessity for recording and filing releases, and as to the best method of proceeding pursuant to this subpart and in accordance with the law of the state where the property is situated.

(e) All delegations and redelegations of authority made hereunder must be made in writing, designating by name, title, and address the delegatee and specifying the authority granted, and the same will be made a matter of record.* [Par. 6, A.O. 161, rev. 1, Oct. 8, 1937, 2 F.R. 2169]

Sec.

304.1

PART 304—LOANS TO ORGANIZATIONS

Sec.

SUBPART-Loans to community 304.7 Amortization.
and cooperative associations 304.8
Subclasses of loans.

Rate of interest. 304.9 Reports.

304.2 General policies concerning co- 304.10 Bonding of employees of borrow

operatives.

[blocks in formation]

ing associations.
304.11 Control over expenditures.
304.12 Control over construction.
304.13 Final inspection.
304.14 Inspection costs.

SUBPART-LOANS TO COMMUNITY AND COOPERATIVE

ASSOCIATIONS

Section 304.1 Subclasses of loans. Loans to community and cooperative associations, organized or operated in furtherance of rural rehabilitation or relief in stricken agricultural areas and/or organized or operated in connection with approved resettlement community projects are divided into two subclasses as follows: (a) Loans to proposed new associations or organizations to establish cooperative services; and (b) loans to already existing cooperative associations for purposes of refinancing or extending facilities or services.** [Par. 2a I]

**88 304.1 to 304.14, inclusive, issued under the authority contained in the Emergency Relief Appropriation Act in effect at the time of issuance, sec. 6, 49 Stat. 118, 49 Stat. 1609, sec. 2 (a), 50 Stat. 354; 15 U.S.C., Sup., 728. The authority delegated to the President by these statutes has been redelegated by him in the Executive orders listed in note to § 301.1.

†The source of §§ 304.1 to 304.14, inclusive, (except for the amendments noted in the text,) is Administration order 40, rev. 2, Resettlement Administration, Sept. 26, 1936.

304.2 General policies concerning cooperatives. The cooperative organization shall be an association or other bona fide group agency, incorporated or unincorporated, which is engaged or proposes to engage in bona fide cooperative activities for the mutual

*For statutory citation, see note to § 303.21.

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benefit of its members. Its charter, constitution, or partnership agreement shall be in accordance with the laws of the state and shall specifically authorize the conduct of the cooperative enterprise or service.

The cooperative association shall impose no inequitable restrictions upon membership or participation therein, and its bylaws shall provide that each member shall have only one vote and that, except as the Administrator may rule otherwise with regard to associations to which loans are made, there shall be no voting by proxy.

Assurance of satisfactory management of the cooperative enterprise or service shall be given the Farm Security Administration. Policies and operations shall conform to principles set forth by the Farm Security Administration. Records and books of the cooperative enterprise or service shall be open for inspection and audit by representatives of the Farm Security Administration during the period of the Farm Security Administration loan. At least the majority of the participation members shall be clients of the Farm Security Administration and/or low-income farm families.

The loan shall be justified on the basis of its contribution to the rehabilitation or relief of destitute or low-income farm families or individuals within stricken agricultural areas.

The enterprise or service shall be economically sound. Each unit shall be assured an adequate volume of business to provide sufficient income to maintain the service, pay all operating costs, provide for amortization, and allow for depreciation and reserves.

Duplication of available existing cooperative facilities shall be avoided.

Cooperative enterprises or services will be established only in communities where a cooperative spirit is evident.

There shall be evidence in the facts submitted or in written authoritative statement made that the association is unable to secure a loan from the Farm Credit Administration.

Loans for relief in stricken agricultural areas include those for the establishment of medical care cooperatives which provide certain benefits to participating members. Beneficial memberships in cooperatives for medical care shall be restricted to Farm Security Administration clients and to persons eligible to become Farm Security Administration clients. Persons may become members of medical care cooperatives if their official duties so require but shall not be entitled to medical care benefits when their membership is granted solely to enable them to exercise supervisory activities.

All loan agreements entered into by the Farm Security Administration and cooperative associations organized or operated in connection with approved resettlement community projects must provide that cooperative associations, insofar as they engage in the cooperative production of goods or performance of services which are to be sold in competition with the goods or services of private enterprises, or insofar as they employ nonmembers in production or in the performance of services, will maintain standards of wages, hours, and conditions of employment, at least equal to those prevailing for similar occupations in private enterprises with which they

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are in direct competition as determined from time to time by the Administrator acting for the Secretary of Agriculture upon the recommendation of the Directors of the Labor Relations and Resettlement Divisions of the Farm Security Administration. Such conditions will be set forth in Notice of Labor Standards which may be authorized from time to time by the Administrator acting for the Secretary of Agriculture, and which will be effective for the duration of the Farm Security Administration's supervision of the cooperative activities. These requirements will not apply to medical and dental cooperatives which do not maintain hospital facilities or which are not located on community projects of the Farm Security Administration.* [Par. 3, A.O. 40, rev. 2, Sept. 26, 1936, as amended by pars 1, 2, Supp. 3, Jan. 14, 1937, and par. 1, Supp. 6, Jan. 18, 1938]

CROSS REFERENCE: For requirements for loans from the Farm Credit Administration to cooperative associations, see Part 44.

304.3 Eligibility for receiving loans. Any community and cooperative association, incorporated or unincorporated, organized or operated, in furtherance of rural rehabilitation or relief in stricken agricultural areas, or in connection with approved resettlement community projects, is eligible for a loan under this subpart, provided that: (a) It is a bona fide agency or cooperative association, and (b) it fulfills the other requirements of this subpart.*t [Par. 4a]

304.4 Purposes for which loans may be used. (a) Loans may be made to approved community and cooperative associations, either to those which further rural rehabilitation or relief in stricken agricultural areas or to those organized in connection with approved resettlement community projects; or to individuals to participate in such associations or to acquire property or services jointly or individually for joint benefit, for the following purposes: (1) To acquire property, real or personal, or any interest therein, necessary for the proper conduct of the enterprise; (2) to construct buildings, install equipment, and purchase goods and services necessary for the proper conduct of the enterprise; (3) to provide necessary operating capital; (4) to refinance or re-establish existing cooperative associations; and (5) to conduct any cooperative activity for the rural rehabilitation or relief of its members, including the making of advances to producers of products handled by the association under marketing agreements.

(b) The following is a partial list of facilities, services, or cooperative activities which are acceptable, provided they can be justified in accordance with the policies set forth in this subpart:

(1) Home conveniences: facilities, not feasible economically in individual low-income homes, for laundering, for the making and repairing of wearing apparel, furniture, and other household and home needs.

(2) Food conservation and processing: facilities for canning, preserving, and dehydrating fruits and vegetables; for curing and processing meats for home use.

(3) General farm needs: facilities for farm machinery repairing, mixing of fertilizers, terracing, feed grinding and mixing, seed cleaning and treatment, spraying, and other general farm needs.

**For statutory and source citations, see note to § 304.1.

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[723]

(4) Crop harvesting: facilities for threshing, hulling, baling, ensilage cutting, and other crop harvesting needs.

(5) Processing: facilities for the processing of agricultural and other products for marketing purposes.

(6) Handicrafts: facilities for the making and marketing of handicraft products.

(7) Grading, packing and storing: facilities for the grading, packing, and storing of perishable commodities, including cold storage and warehousing.

(8) Marketing and purchasing: facilities for the purchase or sale of raw or processed materials and goods, including the general merchandising of goods and services.

(9) Livestock improvement: facilities for livestock improvement, such as the acquisition of purebred sires, and so forth.

(10) Medical and health services.

(c) Requests for loans for participation in facilities or services other than those listed above may be submitted, and may be approved, if the facilities or services are determined by the Administrator to be proper purposes for which the Farm Security Administration is authorized to make loans.*t [Par. 5]

304.5 Security. Where a loan made to an association for the purpose of acquiring specific property or for the purpose of producing a crop, such loan shall be secured by a mortgage, chattel mortgage, or lien on the property or crop so acquired or produced, and may be further secured by a mortgage, chattel mortgage, or lien on any other property or crop of the association, and/or by an assignment of fees, tolls, and rights under marketing and service agreements.

Where local law or the individual situation of the association makes a different type of security more desirable, a different form of security may be used on approval of the Solicitor. The Farm Security Administration will not in any case waive its rights as a general creditor.

Loans for purposes other than to acquire specific property or produce a crop shall be secured by such security as may be approved by the Administrator.*+ [Par. 7a]

304.6 Period of loan. Loans will be for the shortest period consistent with the purpose and policies of this subpart, considering the use to which the proceeds thereof are to be put, the financial resources and earning capacity of the borrower, and, in the case of loans to finance the purchase of specific property, the probable rate of depreciation, the estimated life thereof, and the amount of the loan as compared with the total purchase price, but in no case will the period exceed 40 years. When a loan is made for purposes which dictate different maximum periods of payment, repayment will be computed and will be required for each type of loan in accordance with this section.*t [Par. 8]

304.7 Amortization. Loans which have a maturity of less than 2 years will be repaid in such instalments of principal and interest as the Administrator may determine. Efforts will be made, however, to have such loans repayable in quarterly, semiannual, or annual equal instalments of principal and interest.

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**For statutory and source citations, see note to § 304.1.

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